MARCH 25 2016

David Andolfatto, Macromania: Secular stagnation then and now. Secular stagnation refers to a prolonged and indefinite period of slow growth and high unemployment (or subnormal factor utilization). When was the last time this happened in the United States? Most people are likely to say the 1930s. In fact, it was the 1970s.

Reuven Glick, Andrew K. Rose, San Francisco Fed: How Much Does the EMU Benefit Trade? The economic benefits of sharing a currency like the euro continue to be debated. In theory, countries that use the same currency face lower trade costs and exchange rate risk and are able to compare prices across borders more easily. These advantages should help increase trade among the economies involved. New estimates suggest that this has been the case in Europe, though perhaps to a lesser degree than previously thought.

George J. Borjas, LaborEcon: Employment of Undocumented Immigrants. Using newly developed methods that attempt to identify undocumented status for foreign-born persons sampled in the Current Population Surveys, the empirical analysis documents a number of findings, including the fact that the work propensity of undocumented men is much larger than that of other groups in the population; that this gap has grown over the past two decades; and that the labor supply elasticity of undocumented men is very close to zero, suggesting that their labor supply is almost perfectly inelastic.

OECD: Low-Performing Students. Why They Fall Behind and How To Help Them Succeed. Analyses show that poor performance at age 15 is not the result of any single risk factor, but rather of a combination and accumulation of various barriers and disadvantages that affect students throughout their lives. Who is most likely to be a low performer in mathematics? On average across OECD countries, a socio-economically disadvantaged girl who lives in a single-parent family in a rural area, has an immigrant background, speaks a different language at home from the language. Among low performers the combination of risk factors is more detrimental to disadvantaged than to advantaged students. Low performers tend to have less perseverance, motivation and self-confidence in mathematics than better-performing students, and they skip classes or days of school more. Students whose teachers have low expectations for them and are absent more often are more likely to be low performers in mathematics, even after accounting for the socio-economic status of students and schools.

Erik Bengtsson, Daniel Waldenström, IZA: Capital Shares and Income inequality: Evidence from the Long Run. This paper investigates the relationship between the capital share in national income and personal income inequality over the long run. Using a new historical cross-country database on capital shares in 19 countries and data from the World Wealth and Income Database, we find strong long-run links between the aggregate role of capital in the economy and the size distribution of income. Over time, this dependence varies; it was strong both before the Second World War and in the early interwar era, but has grown to its highest levels in the period since 1980. The correlation is particularly strong in Anglo-Saxon and Nordic countries, in the very top of the distribution and when we only consider top capital incomes. Replacing top income shares with a broader measure of inequality (Gini coefficient), the positive relationship re-mains but becomes somewhat weaker.

Erzo F.P. Luttmer, Andrew A. Samwick, NBER: The Welfare Cost of Perceived Policy Uncertainty: Evidence from Social Security. Policy uncertainty can reduce individual welfare when individuals have limited opportunities to mitigate or insure against consumption fluctuations induced by the policy uncertainty. For this reason, policy uncertainty surrounding future Social Security benefits may have important welfare costs. We field an original survey to measure the degree of policy uncertainty in Social Security and to estimate the impact of this uncertainty on individual welfare. On average, our survey respondents expect to receive only about 60 percent of the benefits they are supposed to get under current law. We document the wide variation around the expectation for most respondents and the heterogeneity in the perceived distributions of future benefits across respondents. This uncertainty has real costs. Our central estimates show that on average individuals would be willing to forego around 6 percent of the benefits they are supposed to get under current law to remove the policy uncertainty associated with their future benefits. This translates to a risk premium from policy uncertainty equal to 10 percent of expected benefits.

Madhumita Murgia, The Telegraph: Algorithm can predict your marital success from your voice. A new computer algorithm can predict whether a married couple's relationship improved or worsened over time, based on their tone of voice when speaking to each other. In fact, the algorithm - which was correct 79 per cent of the time - was more accurate than session notes provided by therapists, when predicting marital success of couples with serious relationship issues.