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.