Martin Wolf, FT:
Monetary policy in a low-rate world. The first concerns what to do now. Above, I assumed that rates will
have risen substantially, before the next recession. Yet this is far more
likely if the economy is allowed to build up a substantial head of steam. Premature rises in interest
rates might trigger a sharper slowdown than people expect and put central banks
in the worst possible situation: tackling recession when rates remain extremely
low. For this reason, as Fed governor Lael Brainard argues, “the costs
to the economy of greater-than-expected strength in demand are likely to be
lower than the costs of significant unexpected weakness”. The riskier policy
is tightening policy too soon, not too late (Vi är många som inte har tillgång till ledande internationella
tidningar, inte ens på jobbet, här ett tips: Kopiera titeln och sök i Google,
klicka länken och ofta kan artikeln läsas utanför ”paywall”).
Robert J.
Samuelson, Washington Post: Are aging and the economic slowdown linked? An aging United States reduces the economy’s growth —
big time. That’s the startling conclusion of a new academic study, and if it
withstands scholarly scrutiny, it could transform our national political and
economic debate. We’ve known for decades, of course, that the retirement of the
huge baby-boom generation — coupled with low birthrates — would make the United
States an older society. But the study goes a giant step further, claiming that
the very fact that the
United States is an aging society weakens economic growth. “The fraction
of the United States population age 60 or over will increase by 21 percent
between 2010 and 2020,” says the study.
George J. Borjas,
Joan Monras, Harvard: The Labor Market Consequences of Refugee Supply Shocks. This paper revisits four historical refugee shocks to
document their labor market impact. We use a common empirical approach, derived
from factor demand theory, and publicly available data to measure the impact of
these shocks. Despite the differences in the political forces that motivated
the various flows, and in economic conditions across receiving countries, the
evidence reveals a common thread that confirms key insights of the canonical
model of a competitive labor market: Exogenous supply shocks adversely affect the labor market opportunities
of competing natives in the receiving countries, and often have a favorable
impact on complementary workers. In short, refugee flows can have large
distributional consequences.
Neil Irwin, NYT:
The Economic Expansion Is Helping the Middle Class, Finally. For years, the standard knock on this economic
expansion has been twofold: Growth has been slow, and big businesses and
wealthy investors have been its major beneficiaries, rather than middle-class
wage earners. And it has been a fair criticism. At least until recently. The
most decisive evidence of improving fortunes is found in new census data
released Tuesday showing that median household income rose a whopping 5.2 percent in 2015, to around
$56,500. According to that data, incomes rose for black families, white
families, Hispanic families and Asian-American families. It rose for
young people and in households headed by middle-aged adults and older people.
In short, the improvement was across the board to a remarkable degree.
Peter Cohen,
Robert Hahn, Jonathan Hall, Steven Levitt, Robert Metcalfe, NBER: Using Big
Data to Estimate Consumer Surplus: The Case of Uber. Estimating consumer surplus is challenging because it
requires identification of the entire demand curve. We rely on Uber’s “surge”
pricing algorithm and the richness of its individual level data to first
estimate demand elasticities at several points along the demand curve. We then
use these elasticity estimates to estimate consumer surplus. Using almost 50
million individual-level observations and a regression discontinuity design, we
estimate that in 2015 the UberX service generated about $2.9 billion in
consumer surplus in the four U.S. cities included in our analysis. For each
dollar spent by consumers, about $1.60 of consumer surplus is generated. Back-of-the-envelope
calculations suggest that the overall consumer surplus generated by the UberX
service in the United States in 2015 was $6.8 billion.
Robert H. Frank,
The Atlantic: Why Luck Matters More Than You Might Think. I have discovered that chance plays a far larger role
in life outcomes than most people realize. And yet, the luckiest among us appear especially unlikely
to appreciate our good fortune. People in higher income brackets are
much more likely than those with lower incomes to say that individuals get rich
primarily because they work hard. Other surveys bear this out: Wealthy people
overwhelmingly attribute their own success to hard work rather than to factors
like luck or being in the right place at the right time. When people see
themselves as self-made, they tend to be less generous and public-spirited.
Stijn Baert, Simon Amez, IZA: No Better Moment to
Score a Goal than Just Before Half Time? A Soccer Myth Statistically Tested. We test the soccer myth suggesting that a
particularly good moment to score a goal is just before half time. To this end,
rich data on 1,179 games played in the UEFA Champions League and UEFA Europa
League are analysed. In contrast to the myth, we find that, conditional on the
goal difference and other game characteristics at half time, the final goal difference at the
advantage of the home team is 0.520 goals lower in case of a goal just before
half time by this team. We show that this finding relates to this team's
lower probability of scoring a goal during the second half.
Michael Spence,
Project Syndicate: How to Fight Secular Stagnation. Much of the world, especially the advanced economies,
has been mired in a pattern of slow and declining GDP growth in recent years,
causing many to wonder whether this is becoming a semi-permanent condition – so-called “secular stagnation.”
The answer is probably yes, but the question lacks precision, and thus has
limited utility. There are, after all, different types of forces that
could be suppressing growth, not all of which are beyond our control.
Antonio Fatás,
Lawrence H. Summers, NBER:The Permanent Effects of Fiscal Consolidations. The global financial crisis has permanently lowered
the path of GDP in all advanced economies. At the same time, and in response to
rising government debt levels, many of these countries have been engaging in
fiscal consolidations that have had a negative impact on growth rates. We
empirically explore the connections between these two facts by extending to longer
horizons the methodology of Blanchard and Leigh (2013) regarding fiscal policy
multipliers. Our results
provide support for the presence of strong hysteresis effects of fiscal policy.
The large size of the effects points in the direction of self-defeating fiscal
consolidations as suggested by DeLong and Summers (2012). Attempts to
reduce debt via fiscal consolidations have very likely resulted in a higher
debt to GDP ratio through their long-term negative impact on output.
Thorvaldur
Gylfason, VOX: Economic performance in two dimensions: How Europe beats the US. One-dimensional indicators such as GNI per capita are
known to be flawed measures of wellbeing. The Human Development Index (HDI)
introduced dimensions of health and education alongside income. This column
argues that an HDI
adjusted for inequality and hours worked gives deeper insight into a country's
economic standing. Using this composite measure, the US falls from first to
seventh among G8 countries.
Eric D. Gould,
Alexander Hijzen, IMF: Growing Apart, Losing Trust? The Impact of Inequality on
Social Capital. There is a
widespread perception that trust and social capital have declined in United
States as well as other advanced economies, while income inequality has tended
to increase. While previous research has noted that measured trust declines as
individuals become less similar to one another, this paper examines whether the
downward trend in social capital is responding to the increasing gaps in
income. The analysis uses data from the American National Election Survey
(ANES) for the United States, and the European Social Survey (ESS) for Europe. The results provide robust
evidence that overall inequality lowers an individual’s sense of trust in
others in the United States as well as in other advanced economies.
These effects mainly stem from residual inequality, which may be more closely
associated with the notion of fairness, as well as inequality in the bottom of
the distribution. Since trust has been linked to economic growth and
development in the existing literature, these findings suggest an important,
indirect way through which inequality affects macro-economic performance.
Seth Gershenson,
Michael S. Hayes, IZA: Short-Run Externalities of Civic Unrest: Evidence from
Ferguson, Missouri. We document externalities
of the civic unrest experienced in Ferguson, MO following the police shooting
of an unarmed black teenager. Difference-in-differences and synthetic control
method estimates compare Ferguson-area schools to neighboring schools in the
greater St. Louis area and find that the unrest led to statistically significant, arguably causal declines
in students' math and reading achievement. Attendance is one mechanism
through which this effect operated, as chronic absence increased by five
percent in Ferguson-area schools. Impacts were concentrated in elementary
schools and at the bottom of the achievement distribution and spilled over into
majority black schools throughout the area.
Noah Smith,
Bloomberg: Data Geeks Are Taking Over Economics. So in recent years, many economists have been turning
to an alternative approach and chucking theory out the window entirely. Instead
of a complicated model about optimization and utility functions and blah blah
blah, just look for a case where some kind of random change in the economy -- a
so-called natural experiment -- offers a window into some important question.
For example, you could study a random influx of refugees to answer the question
of how immigration affects local labor markets. You don’t need a complicated
theory of how workers and companies behave -- all you need is a simple linear
model of how X affects Y. And so far, the revolution is winning. As economists
Matthew Panhans and John Singleton document in a recent paper, quasi-experimental techniques
are an increasingly large piece of academic publishing.
Shekhar Aiyar,
Christian Ebeke, Xiaobo Shao, IMF: The Euro Area Workforce is Aging, Costing
Growth. The euro area’s population is
expected to grow significantly older over the next couple of decades. This has
two components. First, the number of retirees is set to grow compared to the
people of working age (15–64) in the region. Second, and much less examined,
the average age of people within the labor force will rise: the share of
workers aged 55–64 is forecast to increase by a third, from 15 percent to 20
percent, over the next two decades. Aging will take a considerable toll on
productivity growth over the medium- to long-term. Average total factor
productivity growth in the euro area is forecast to be around 0.8 percent per
year. This could be higher by a quarter—that is to say, total factor
productivity could increase to about one percent per year—if we shut down the
effect of workforce aging. The burden of workforce aging will fall unequally
across euro area member states. Worryingly, some of the largest adverse effects
on productivity will fall on countries that can least afford it, such as Greece,
Spain, Portugal, and Italy.
David Halpern,
BoE: It’s time to bring more realistic models of human behaviour into economic
policy and regulation. Behaviour science
has had major impacts on policy in recent years. Introducing a more realistic
model of human behaviour – to replace the ‘rational’ utility-maximizer – has
enabled policymakers to boost savings; increase tax payments; encourage
healthier choices; reduce energy consumption; boost educational attendance;
reduce crime; and increase charitable giving. But there remain important areas
where its potential has yet to be realised, including macroeconomic policy and
large areas of regulatory practice. Businesses, consumers, and even regulators
are subject to similar systematic biases to other humans. These include overconfidence;
being overly influenced by what others are doing; and being influenced by
irrelevant information. The good news is that behavioural science offers the
prospect of helping regulators address some of their most pressing issues. This
includes: anticipating and addressing ‘animal spirits’ that drive bubbles or
sentiment-driven slowdowns; reducing corrupt market practices; and encouraging
financial products that are comprehensible to humans.
Rasmus Landersø,
James J. Heckman, NBER: The Scandinavian Fantasy: The Sources of
Intergenerational Mobility in Denmark and the U.S. This paper examines the sources of differences in
social mobility between the U.S. and Denmark. Measured by income mobility,
Denmark is a more mobile society, but not when measured by educational
mobility. There are pronounced nonlinearities in income and educational
mobility in both countries. Greater Danish income mobility is largely a
consequence of redistributional tax, transfer, and wage compression policies.
While Danish social policies for children produce more favorable cognitive test
scores for disadvantaged children, these do not translate into more favorable
educational outcomes, partly because of disincentives to acquire education
arising from the redistributional policies that increase income mobility.
Jeff Gou,
Washington Post: The clearest proof yet that your job is killing you. For decades now, the modern worker has been urged to
slow down, chill out, de-stress. Doctors link long
shifts and on-the-job anxiety to high blood pressure, heart disease, depression
and stroke. Yet, so far, the connection between job strain and bad health has
mostly been correlational. Recently, economists at Purdue and the University of
Copenhagen made a clever attempt to clear up the question. They looked at
Danish manufacturing companies where overseas sales increased unexpectedly
because of changes in foreign demand or transportation costs between 1996 and
2006. These constituted a set of natural experiments. At firms where exports
spiked, there was suddenly a lot more work to do, a lot more things to sell. Researchers
found that women at companies where there was an export boom were subsequently
more likely to be treated for severe depression, and more likely to take
prescription medication for heart attack or stroke. For both men and women,
there was also an increase in severe on-the-job injuries.
Roland G. Fryer,
Jr, NBER: An Empirical Analysis of Racial Differences in Police Use of Force. This paper explores racial differences in police use
of force. On non-lethal uses of force, blacks and Hispanics are more than fifty
percent more likely to experience some form of force in interactions with
police. Adding controls that account for important context and civilian
behavior reduces, but cannot fully explain, these disparities. On the most
extreme use of force – officer-involved shootings – we find no racial
differences in either the raw data or when contextual factors are taken into
account. We argue that the patterns in the data are consistent with a model in
which police officers are utility maximizers, a fraction of which have a
preference for discrimination, who incur relatively high expected costs of
officer-involved shootings.
Bjorn Lomborg, US
Today: Organic food is great business, but a bad investment. An organic label sends our skepticism and good sense
out the window. Consumers in one study were given two sets of absolutely
identical food items, with one set marked “organic” and one not. They declared
the food they believed to be “organic” to be lower in calories and more
nutritious, and were willing to pay 16% to 23% more. It’s called the “health
halo” effect. Organic food has become the fastest-growing sector of the U.S.
food industry, with sales that increase by double digits annually. But organics are not better for
your health, worse for nature and the planet, and terrible for the world’s
poor. What it boils down to is the world’s richest people spending their cash
to support less efficient farming practices, to feel better about their
choices.
