JUNE 17 2016

Lawrence H. Summers: The economic consequences of a Trump win would be severe. What I find surprising is that US and global markets and financial policymakers seem much less sensitive to “Trump risk” than they are to “Brexit risk”. Options markets suggest only modestly elevated volatility in the period leading up to the presidential election. While every Fed watcher comments on the implications of Brexit for the central bank, few, if any, comment on the possible consequences of a victory for Mr Trump in November. Yet, as great as the risks of Brexit are to the British economy, I believe the risks to the US and global economies of Mr Trump’s election as president are far greater. If he is elected, I would expect a protracted recession to begin within 18 months. The damage would be felt far beyond the United States.

Chad Syverson, NBER: Challenges to Mismeasurement Explanations for the U.S. Productivity Slowdown. Labor productivity in the United States—defined as total output divided by total hours of labor—has been increasing for over a century and continues to increase today. However, its growth rate has fallen. One explanation for this phenomenon focuses on measurement difficulties, in particular the possibility that current tools for measuring economic growth do not fully capture recent advances in the goods and services associated with digital communications technology. Mismeasurement of the prices and quantities of digital goods and services cannot account for the decline in the growth of labor productivity.

Torben M. Andersen, Silvia Migali, IZA: Migrant Workers and the Welfare State. There is wide concern that migration flows may undermine the financial viability of generous welfare arrangements. The discussion focuses on welfare arrangements as attractors of migrants, suggesting that the issue does not pertain to migrant workers. However, this overlooks how welfare arrangements affect return-migration in case of social events like job loss. Importantly, migrants are shown to be self-selected in a way affecting both migration and return-migration. Two migration regimes prevail. In one, with relatively low benefits, unemployed workers return, while in the other some stay. Importantly, the stay or return migration decision is more sensitive to welfare generosity than the migration decision.

Umut Özek, David N. Figlio, NBER: Cross-Generational Differences in Educational Outcomes in the Second Great Wave of Immigration. We make use of a new data source – matched birth records and longitudinal student records in Florida – to study the degree to which student outcomes differ across successive immigrant generations. We find evidence suggesting that early-arriving first generation immigrants perform better than do second generation immigrants, and second generation immigrants perform better than third generation immigrants. Among first generation immigrants, the earlier the arrival, the better the students tend to perform. These patterns of findings hold for both Asian and Hispanic students, and suggest a general pattern of successively reduced achievement – beyond a transitional period for recent immigrants – in the generations following the generation that immigrated to the United States.

Bjørn Lomborg, Project Syndicate: The Evidence on Education Reforms. It is almost universally agreed that more education is good for society. But it turns out that some popular educational policies achieve very little, while others that are often overlooked can make a huge difference. Whether for Bangladesh or elsewhere, the real lessons to be taken away from this research is that we need to look past trendy policies like adding technology to classrooms. The key to educational progress is to focus on interventions backed by credible scientific evidence.

Chenkai Wu, Michelle C Odden, Gwenith G Fisher, Robert S Stawski, JECH: Association of retirement age with mortality: a population-based longitudinal study among older adults in the USA. On the basis of the Health and Retirement Study, 2956 participants who were working at baseline (1992) and completely retired during the follow-up period from 1992 to 2010 were included. Healthy retirees (n=1934) were defined as individuals who self-reported health was not an important reason to retire. Over the study period, 234 healthy and 262 unhealthy retirees died. Among healthy retirees, a 1-year older age at retirement was associated with an 11% lower risk of all-cause mortality (95% CI 8% to 15%), independent of a wide range of sociodemographic, lifestyle and health confounders. Similarly, unhealthy retirees (n=1022) had a lower all-cause mortality risk when retiring later (HR 0.91, 95% CI 0.88 to 0.94). None of the sociodemographic factors were found to modify the association of retirement age with all-cause mortality.

Efraim Benmelech, Esteban F. Klor, NBER: What Explains the Flow of Foreign Fighters to ISIS? This paper provides the first systematic analysis of the link between economic, political, and social conditions and the global phenomenon of ISIS foreign fighters. We find that poor economic conditions do not drive participation in ISIS. In contrast, the number of ISIS foreign fighters is positively correlated with a country's GDP per capita and Human Development Index (HDI). In fact, many foreign fighters originate from countries with high levels of economic development, low income inequality, and highly developed political institutions. Other factors that explain the number of ISIS foreign fighters are the size of a country's Muslim population and its ethnic homogeneity. Although we cannot directly determine why people join ISIS, our results suggest that the flow of foreign fighters to ISIS is driven not by economic or political conditions but rather by ideology and the difficulty of assimilation into homogeneous Western countries.