Martin S. Feldstein, NBER: Why is Growth better in the United States than in other Industrial Countries. Although the official statistics imply that the rate of growth of real GDP in the United States has declined in recent years, it has still been substantially higher than the real growth rates in Europe and the other industrial countries, leading to higher real per capita incomes. In 2015, real GDP per capita was $56,000 in the United States. On a purchasing power basis, the real GDP per capita in that same year was only $47,000 in Germany, $41,000 in France and the United Kingdom, and just $36,000 in Italy. I can think of ten different features that distinguish the United States from other industrial economies. Of course, not all of these features are present to a greater extent in the United States than in all other industrial countries. Moreover, I will only list and describe these features but cannot rank them in order of their importance. And I believe that these features interact in contributing to stronger growth and are not merely additive.

Esther Duflo, NBER: The Economist as Plumber. As economists increasingly help governments design new policies and regulations, they take on an added responsibility to engage with the details of policy making and, in doing so, to adopt the mindset of a plumber. Plumbers try to predict as well as possible what may work in the real world, mindful that tinkering and adjusting will be necessary since our models gives us very little theoretical guidance on what (and how) details will matter. This essay argues that economists should seriously engage with plumbing, in the interest of both society and our discipline.

Branko Milanovic, Globalinequality: Why 20th century tools cannot be used to address 21st century income inequality? The remarkable period of reduced income and wealth inequality in the rich countries, roughly from the end of the Second World War to the early 1980s, relied on four pillars: strong trade unions, mass education, high taxes, large government transfers. Since the increase of inequality twenty or more years ago, the failed attempts to stem its further rise have relied on trying, or at least advocating, the expansion of all or some of the four pillars. But neither of them will do the job in the 21st century.

George J. Borjas, NBER: The Earnings of Undocumented Immigrants. Using newly developed methods that impute undocumented status for foreign-born persons sampled in microdata surveys, the study documents a number of findings. First, the age-earnings profile of undocumented workers lies far below that of legal immigrants and of native workers, and is almost perfectly flat during the prime working years. Second, the unadjusted gap in the log hourly wage between undocumented workers and natives is very large (around 40 percent), but half of this gap disappears once the calculation adjusts for differences in observable socioeconomic characteristics, particularly educational attainment. Finally, the adjusted wage of undocumented workers rose rapidly in the past decade. As a result, there was a large decline in the wage penalty associated with undocumented status. The relatively small magnitude of the current wage penalty suggests that a regularization program may only have a modest impact on the wage of undocumented workers.

Mark L. Egan, Gregor Matvos, Amit Seru, NBER: When Harry Fired Sally: The Double Standard in Punishing Misconduct. We examine gender discrimination in the financial advisory industry. We study a less salient mechanism for discrimination, firm discipline following missteps. There are substantial differences in the punishment of misconduct across genders. Although both female and male advisers are disciplined for misconduct, female advisers are punished more severely. Following an incidence of misconduct, female advisers are 20% more likely to lose their jobs, and 30% less likely to find new jobs relative to male advisers. Females face harsher punishment despite engaging in less costly misconduct and despite a lower propensity towards repeat offenses. Evidence suggests that the observed behavior is not driven by productivity differences across advisers. Rather, we find supporting evidence for taste-based discrimination.

Zack Beauchamp, VOX: No easy answers: why left-wing economics is not the answer to right-wing populism. Democrats would only be able to defeat Trump and others like him if they adopted an anti-corporate, unabashedly left-wing policy agenda. The answer to Trump’s right-wing populism, Sanders argued, was for the left to develop a populism of its own. The problem is that a lot of data suggests that countries with more robust welfare states tend to have stronger far-right movements. Providing white voters with higher levels of economic security does not tamp down their anxieties about race and immigration — or, more precisely, it doesn’t do it powerfully enough. For some, it frees them to worry less about what it’s in their wallet and more about who may be moving into their neighborhoods or competing with them for jobs.

Elise Bohan, Big Think: Do Smarter People Look More Intelligent? It Depends on Their Gender. Yes, smarter people look more intelligent. But not all people - just men. Kleisner discovered that “both men and women were able to accurately evaluate the intelligence of men by viewing facial photographs.” But strangely, “no relationship between perceived intelligence and IQ was found for women.” Why would this be? The study suggests that it may be beneficial for men to signal intelligence honestly. Kleisner speculates that such signalling might play well with females' "mixed mating strategy."

MARS 9 2017

Heidi Glenn, NPR: America's 'Complacent Class': How Self-Segregation Is Leading To Stagnation. In a new book, The Complacent Class, economist Tyler Cowen argues that the United States is standing still. People have grown more risk averse and are reluctant to switch jobs or move to another state, he says, and the desire to innovate — to grow and change — has gone away. Cowen says he's worried that more and more communities are self-segregating — by income, education or race. "We're making decisions that are rational and even pleasurable from an individual point of view, but when everyone in society behaves this way — to cement in their own security, their own mobility — social mobility as a whole goes down, inequality goes up, many measures of segregation go up," he says. "And ultimately a bill for this comes due."

Lawrence Summers, FT: Robots are wealth creators and taxing them is illogical. The Microsoft co-founder is right about the gravity of the problem and need for action, but he is profoundly misguided in his proposed solution — and in ways that point up problems with the current public debate.First, I cannot see any logic to singling out robots as job destroyers. What about kiosks that dispense aeroplane boarding passes? Word processing programmes that accelerate the production of documents? Second, much innovative activity, even of a robot-like variety, involves producing better goods and services rather than simply extracting more output from the same input. Third, and perhaps most fundamentally, why tax in ways that reduce the size of the pie rather than ways that assure that the larger pie is well distributed? Imagine that 50 people can produce robots who will do the work of 100. A sufficiently high tax on robots would prevent them from being produced. Surely it would be better for society to instead enjoy the extra output and establish suitable taxes and transfers to protect displaced workers?

Mauricio Armellini, Tim Pike, BoE: Should economists be more concerned about Artificial Intelligence? This post highlights some of the possible economic implications of the so-called “Fourth Industrial Revolution” — whereby the use of new technologies and artificial intelligence (AI) threatens to transform entire industries and sectors. Some economists have argued that, like past technical change, this will not create large-scale unemployment, as labour gets reallocated. However, many technologists are less optimistic about the employment implications of AI.  In this blog post we argue that the potential for simultaneous and rapid disruption, coupled with the breadth of human functions that AI might replicate, may have profound implications for labour markets.  We conclude that economists should seriously consider the possibility that millions of people may be at risk of unemployment, should these technologies be widely adopted.

Eric Figueroa, CBPP: Unauthorized Immigrants Pay Greater Share of Income in State and Local Taxes Than Top Earners. Unauthorized immigrants pay a larger share of their income in state and local taxes than the nation’s top earners, and immigration reform would improve state and local finances across the country, a new report from the Institute on Taxation and Economic Policy (ITEP) finds.

Bernt Bratsberg, Oddbjørn Raaum, Knut Røed, IZA: Immigrant Labor Market Integration across Admission Classes. We examine patterns of labor market integration across immigrant groups. The study draws on Norwegian longitudinal administrative data covering labor earnings and social insurance claims over a 25-year period and presents a comprehensive picture of immigrant-native employment and social insurance differentials by admission class and by years since entry. For refugees and family immigrants from low-income source countries, we uncover encouraging signs of labor market integration during an initial period upon admission, but after just 5-10 years, the integration process goes into reverse with widening immigrant-native employment differentials and rising rates of immigrant social insurance dependency. Yet, the analysis reveals substantial heterogeneity within admission class and points to an important role of host-country schooling for successful immigrant labor market integration.

Robert W. Fairlie, Ariel Kalil, IZA: The Effects of Computers on Children's Social Development and School Participation: Evidence from a Randomized Control Experiment. Concerns over the perceived negative impacts of computers on social development among children are prevalent but largely uninformed by plausibly causal evidence. We provide the first test of this hypothesis using a large-scale randomized control experiment in which more than one thousand children attending grades 6-10 across 15 different schools and 5 school districts in California were randomly given computers to use at home. Children in the treatment group are more likely to report having a social networking site, but also report spending more time communicating with their friends and interacting with their friends in person. There is no evidence that computer ownership displaces participation in after-school activities such as sports teams or clubs or reduces school participation and engagement.

Hannah Devlin, the Guardian: How much pee is in our swimming pools? New urine test reveals the truth.  It is an antisocial act that normally goes under the radar, but many swimmers have long suspected the truth: people are peeing in the pool. Now scientists have been able to confirm the full extent of offending for the first time, after developing a test designed to estimate how much urine has been covertly added to a large volume of water. The test works by measuring the concentration of an artificial sweetener, acesulfame potassium (ACE), that is commonly found in processed food and passes through the body unaltered. After tracking the levels of the sweetener in two public pools in Canada over a three-week period they calculated that swimmers had released 75 litres of urine – enough to fill a medium-sized dustbin – into a large pool (about 830,000 litres, one-third the size of an Olympic pool) and 30 litres into a second pool, around half the size of the first.

MARS 2 2017

Alberto Alesina, Gualtiero Azzalini, Carlo Favero, Francesco Giavazzi, Armando Miano, NBER Is it the "How" or the "When" that Matters in Fiscal Adjustments?: Using data from 16 OECD countries from 1981 to 2014 we find that the composition of fiscal adjustments is much more important than the state of the cycle in determining their effects on output. Adjustments based upon spending cuts are much less costly than those based upon tax increases regardless of whether they start in a recession or not. Our results appear not to be systematically explained by different reactions of monetary policy. However, when the domestic central bank can set interest rates -- that is outside of a currency union -- it appears to be able to dampen the recessionary effects of tax-based consolidations implemented during a recession. This finding could help understand the recessionary effects of European "austerity, which was mostly tax based and implemented within a currency union.

Annie Low, NYT: The Future of Not Working. As automation reduces the need for human labor, some Silicon Valley executives think a universal income will be the answer — and the beta test is happening in Kenya. Silicon Valley has recently become obsessed with basic income for reasons simultaneously generous and self-interested, as a palliative for the societal turbulence its inventions might unleash. Many technologists believe we are living at the precipice of an artificial-intelligence revolution that could vault humanity into a postwork future.

 David Autor, David Dorn, Gordon Hanson, NBER: When Work Disappears: Manufacturing Decline and the Falling Marriage-Market Value of Men. The structure of marriage and child-rearing in U.S. households has undergone two marked shifts in the last three decades: a steep decline in the prevalence of marriage among young adults, and a sharp rise in the fraction of children born to unmarried mothers or living in single-headed households. We exploit large scale, plausibly exogenous labor-demand shocks stemming from rising international manufacturing competition to test how shifts in the supply of young ‘marriageable’ males affect marriage, fertility and children's living circumstances. As predicted by a simple model of marital decision-making under uncertainty, we document that adverse shocks to the supply of `marriageable' men reduce the prevalence of marriage and lower fertility but raise the fraction of children born to young and unwed mothers and living in in poor single-parent households. The falling marriage-market value of young men appears to be a quantitatively important contributor to the rising rate of out-of-wedlock childbearing and single-headed childrearing in the United States.

George Borjas, NYT: The Immigration Debate We Need. I am a refugee, having fled Cuba as a child in 1962. Not only do I have great sympathy for the immigrant’s desire to build a better life, I am also living proof that immigration policy can benefit some people enormously. But I am also an economist, and am very much aware of the many trade-offs involved. Inevitably, immigration does not improve everyone’s well-being. There are winners and losers, and we will need to choose among difficult options. The improved lives of the immigrants come at a price. How much of a price are the American people willing to pay, and exactly who will pay it?

Juanna Schrøter Joensen, Helena Skyt Nielsen, Microeconomic Insigts:  Studying advanced mathematics: the potential boost to women’s career prospects. Our results suggest that neither lack of mathematical abilities nor labour market rewards discourage young women from taking advanced mathematics courses. Instead, it seems that access is deterred in part by too restrictive bundling of courses. This suggests there is a lost pool of mathematical talent among high ability young women that may be accessed by changing the costs embedded in the educational environment and the institutional set-up of mathematics teaching.

Prakash Loungani, Jonathan D. Ostry: The IMF’s Work on Inequality: Bridging Research and Reality. IMF work has made important contributions to the study of inequality. On causes, the finding that economic policies are an important determinant of inequality implies that governments can take steps to reduce inequality when it is deemed excessive. On consequences, inequality has been shown to have a direct economic cost in terms of reduced durability of growth—this puts it with in the remit of the IMF’s core work. On cures, the design of policies should take into account the distributional outcomes. This is increasingly being done in the advice that the IMF gives to it member countries.

Jayson Lusk: Does everybody prefer organic? Demand for organic milk is lower for people that placed a higher relative importance on food safety than it was for people who placed a lower relative importance on food safety.  In these controlled studies, we find that if organic were priced the same as conventional (a price premium of 0%), not everyone would buy organic.  Priced evenly with conventional, organic would pick up only about 60% of the apple market (the remaining 40% going to conventional), and organic would pick up only about 68% of the milk market (the remaining 32% going to conventional). Given differences in yield and production costs, organic is almost surely going to be routinely higher priced than conventional. But, even if this weren't the case and organic could be competitively priced, these survey results show us that not every prefers organic food.

FEBRUARY 23 2017

Lucia Quaglietti, BoE: Is economic uncertainty holding back growth in the euro-area? This blog discusses the impact of economic uncertainty on euro-area activity. To do that, we built on the methodology developed for the UK by Haddow et al. (2013). Our analysis suggests that elevated economic uncertainty has been an important driver of euro-area GDP during the financial and sovereign crisis, detracting (on average) around 0.5 pp from annual euro-area growth in the period between 2008Q3 and 2011Q3.  As the shock unwound, GDP was boosted during the subsequent recovery. This analysis suggests that any further increase in uncertainty could have a materially negative impact on euro-area activity. Therefore, it needs to be carefully monitored by policy makers, particularly in the context of the upcoming political elections in a number of countries.

Gauti B. Eggertsson, Neil R. Mehrotra, Jacob A. Robbins, NBER: A Model of Secular Stagnation: Theory and Quantitative Evaluation. This paper formalizes and quantifies the secular stagnation hypothesis, defined as a persistently low or negative natural rate of interest leading to a chronically binding zero lower bound (ZLB). Output-inflation dynamics and policy prescriptions are fundamentally different than in the standard New Keynesian framework. Using a 56-period quantitative lifecycle model, a standard calibration to US data delivers a natural rate ranging from -1% to -2%, implying an elevated risk of ZLB episodes for the foreseeable future. We decompose the contribution of demographic and technological factors to the decline in interest rates since 1970 and quantify changes required to restore higher rates.

Italo Colantone, Piero Stanig, VOX: Globalisation and economic nationalism. The revival of nationalism in western Europe, which began in the 1990s, has been associated with increasing support for radical right parties. This column uses trade and election data to show that the radical right gets its biggest electoral boost in regions most exposed to Chinese exports. Within these regions communities vote homogenously, whether individuals work in affected industries or not.

John Bound, Gaurav Khanna, Nicolas Morales, NBER: Understanding the Economic Impact of the H-1B Program on the U.S. Over the 1990s, the share of foreigners entering the US high-skill workforce grew rapidly. This migration potentially had a significant effect on US workers, consumers and firms. To study these effects, we construct a general equilibrium model of the US economy and calibrate it using data from 1994 to 2001. Built into the model are positive effects high skilled immigrants have on innovation. Counterfactual simulations based on our model suggest that immigration increased the overall welfare of US natives, and had significant distributional consequences. In the absence of immigration, wages for US computer scientists would have been 2.6% to 5.1% higher and employment in computer science for US workers would have been 6.1% to 10.8% higher in 2001. On the other hand, complements in production benefited substantially from immigration, and immigration also lowered prices and raised the output of IT goods by between 1.9% and 2.5%, thus benefiting consumers. Finally, firms in the IT sector also earned substantially higher profits due to immigration.

Eric A. Hanushek et al, JHR: General Education, Vocational Education, and Labor-Market Outcomes over the Lifecycle. Policy proposals promoting vocational education focus on the school-to-work transition. But with technological change, gains in youth employment may be offset by less adaptability and diminished employment later in life. To test for this tradeoff, we employ a difference-in-differences approach that compares employment rates across different ages for people with general and vocational education. Using microdata for 11 countries from IALS, we find strong and robust support for such a tradeoff, especially in countries emphasizing apprenticeship programs. German Microcensus data and Austrian administrative data confirm the results for within-occupational-group analysis and for exogenous variation from plant closures, respectively.

Marc Piopiunik, Jens Ruhose, IZA: Immigration, Regional Conditions, and Crime: Evidence from an Allocation Policy in Germany. After the collapse of the Soviet Union, more than 3 million people with German ancestors immigrated to Germany under a special law granting immediate citizenship. Exploiting the exogenous allocation of ethnic German immigrants by German authorities across regions upon arrival, we find that immigration significantly increases crime. The crime impact of immigration depends strongly on local labor market conditions, with strong impacts in regions with high unemployment. Similarly, we find substantially stronger effects in regions with high preexisting crime levels or large shares of foreigners.

Robby Berman, Big Think: How About a New Theory of Evolution with Less Natural Selection? The modern synthesis emerged in the 1930s and 1940s, and it’s what’s taught in schools today. It states that evolution is the product of small genetic variations (Mendel’s contribution) that survive, or not (Darwin’s process of natural selection). Some of the scientists at the Royal Society’s “New Trends in Evolutionary Biology” meeting say that this isn’t quite the case, and that there’s a third element that needs to be incorporated: Behavior and environment can also cause evolutionary changes. Carl Zimmer of Quanta, who attended the conference, says, "The researchers don’t argue that the modern synthesis is wrong — just that it doesn’t capture the full richness of evolution.”

Lexington, The Economist: The rise of the Herbal Tea Party. Some years ago David Wasserman, an analyst with the Cook Political Report, spotted a way to predict the political leanings of any given county: check whether it is home to a Whole Foods supermarket, purveyor of heirloom tomatoes and gluten-free dog biscuits to the Subaru-owning classes; or to a Cracker Barrel Old Country Store, a restaurant chain that offers chicken and dumplings and other comfort foods to mostly rural, often southern customers. Mr Trump won 76% of Cracker Barrel counties and 22% of Whole Foods counties, the Cook Political Report calculates. That 54 percentage-point gap is the widest ever: when George W. Bush was elected in 2000 it was 31 points. Eight years later when Barack Obama took office, it was 43. Trump opponents must decide whether they can live with so wide a Whole Foods-Cracker Barrel gap.