Ricardo Reis, LSE:
Is something really wrong with macroeconomics? To conclude with the most important message, yes, economics models do a
poor job forecasting macroeconomic variables. This deserves to be exposed,
discussed, and even sometimes ridiculed. Critics like Haldane (2016) are surely
right, and the alternatives that they propose for improvement are definitely
worth exploring. If nothing else, this may help the media and the public to
start reporting and reading forecasts as probabilistic statements where the confidence
bands or fan charts are as or more important than the point forecasts. But,
before jumping to the conclusion that this is a damning critique of the state
of macroeconomics, this section asked for an evaluation of forecasting
performance in relative terms. Relative to other conditional predictions on the effectiveness of
policies, relative to other forecasts for large diverse populations also made
many years out, and relative to their accuracy per dollar of funding. From
these perspectives, I am less convinced that economics forecasting is all that
far behind other scientific fields.
David Autor et al.
NBER: The Fall of the Labor Share and the Rise of Superstar Firms. In this paper, we analyze micro panel data from the
U.S. Economic Census since 1982 and international sources and document
empirical patterns to assess a new interpretation of the fall in the labor
share based on the rise of “superstar firms.” If globalization or technological changes advantage the
most productive firms in each industry, product market concentration will rise
as industries become increasingly dominated by superstar firms with high
profits and a low share of labor in firm value-added and sales. As the
importance of superstar firms increases, the aggregate labor share will tend to
fall. Our hypothesis offers several testable predictions: industry sales
will increasingly concentrate in a small number of firms; industries where
concentration rises most will have the largest declines in the labor share; the
fall in the labor share will be driven largely by between-firm reallocation
rather than (primarily) a fall in the unweighted mean labor share within firms;
the between-firm reallocation component of the fall in the labor share will be
greatest in the sectors with the largest increases in market concentration; and
finally, such patterns will be observed not only in U.S. firms, but also
internationally. We find support for all of these
predictions
Giuseppe
Berlingieri, Patrick Blanchenay, Chiara Criscuolo, VOX: Great Divergences: The
growing dispersion of wages and productivity in OECD countries. Some firms pay well while others don’t; and some are
highly productive while many aren’t. This column presents new firm-level data
on the increasing dispersion of wages and productivity in both the
manufacturing and services sectors in 16 OECD countries. Wage inequalities are growing
between firms, even those operating in the same sector – and they are linked to
growing differences between high and low productivity firms. Both globalisation
and technological progress (notably information and communications technologies)
influence these outcomes – as do policies and institutions such as
minimum wages, employment protection legislation, unions, and processes of
wage-setting.
Johannes Geyer,
Clara Welteke, IZA: Closing Routes to Retirement: How Do People Respond? We present quasi-experimental evidence on the
employment effects of an unprecedented large increase in the early retirement
age (ERA). Raising the ERA has the potential to extend contribution periods and
to reduce the number of pension beneficiaries at the same time, if employment
exits are successfully delayed. However, workers may not be able to work longer
or may choose other social support programs as exit routes from employment. We
study the effects of the ERA increase on employment and potential program
substitution in a regression-discontinuity framework. Germany abolished an
important early retirement program for women born after 1951, effectively
raising the ERA for women by three years. We analyze the effects of this huge
increase on employment, unemployment, disability pensions, and inactivity
rates. Our results suggest that the reform increased both employment and unemployment rates of women age 60
and over. However, we do not find evidence for active program substitution from
employment into alternative social support programs. Instead employed women
remained employed and unemployed women remained unemployed. The results
suggest an increase in inequality within the affected cohorts.
Erling Barth, Sari
Pekkala Kerr, Claudia Olivetti, NBER: The Dynamics of Gender Earnings
Differentials: Evidence from Establishment Data. We use a unique match between the 2000 Decennial Census of the United
States and the Longitudinal Employer Household Dynamics (LEHD) data to analyze
how much of the increase in the gender earnings gap over the lifecycle comes
from shifts in the sorting of men and women across high- and low-pay
establishments and how much is due to differential earnings growth within
establishments. We find that for
the college educated the increase is substantial and, for the most part, due to
differential earnings growth within establishment by gender. The between
component is also important. Differential mobility between establishments by
gender can explain 27 percent of the widening of the pay gap for this group.
For those with no college, the, relatively small, increase of the gender gap
over the lifecycle can be fully explained by differential moves by gender
across establishments. The evidence suggests that, for both education groups,
the between-establishment component of the increasing wage gap is due almost
entirely to those who are married.
William J.
Collins, Marianne H. Wanamaker, NBER: Up from Slavery? African American
Intergenerational Economic Mobility Since 1880. We document the intergenerational mobility of black and white American
men from 1880 through 2000 by building new datasets to study the late 19th and
early 20th century and combining them with modern data to cover the mid- to
late 20th century. We find
large disparities in intergenerational mobility, with white children having far
better chances of escaping the bottom of the distribution than black children
in every generation. This mobility gap was more important than the gap
in parents’ status in proximately determining each new generation’s racial
income gap. Evidence suggests that human capital disparities underpinned the
mobility gap
Branko Milanovic,
Globalinequality: The unknown Tocqueville in America. “Quinze jours dans le désert” is written by Alexis de
Tocqueville in 1831 on his travel to the then extreme confines of
“civilization”. “The
desert” in the title does not refer to the physical “desert” but to the civilizational
desert. The level of development (if that term has some meaning in the context
of these areas in 1831) is so low, the amount of physical difficulties that
beset the traveler on all sides is so huge, the forests almost impenetrable,
the mosquitoes omnipresent, the log cabins so few and so uncomfortable, the
people barely existent, that the story reads like the adventure of explorers
penetrating the deep Amazon. Indeed, the landscape offers, at the rare
times when the traveler can relax, some astonishing sights of beauty.
Tocqueville mentions, there was absolutely nothing similar in Europe and the
Mediterranean at the time.
Anna Vlasits,
WIRED: Moms: Your Kids Hijacked Your Brain for Life. Those aspects of how pregnancy changes the brain
might not be too surprising, but this where things get weird. During pregnancy, the developing
baby sloughs off cells, which take a ride through the placenta to a mother’s
bloodstream. And then those cells are there, hanging out in the brain, bones,
pancreas, wherever—some of them until mom dies. In rodents, scientists
dyed some of those fetal-derived cells and saw that they had turned into
fully-fledged neurons and integrated into parts of mom’s brain. For rodent
mothers who’ve had boys, that means there were neurons with Y chromosomes in
there.
Dan Nixon, BoE:
Mind over matter: is scarcity as much about psychology as it is economics? Scarcity – and hence the very core of “the economic
problem” – at root relates to the question of whether or not we feel we have
“enough”. My focus here is on what scarcity means in the context of people who
have already achieved a certain level of affluence and whose basic needs have
been met (and not, therefore, cases of poverty). Scarcity construed as a
subjective sense of “not having enough” opens the door to an interesting
possibility: that, at a psychological
level, scarcity could be absent entirely.
We could call this condition an “abundance” mindset.
Johannes Moenius,
ISEA: Future job automation to hit hardest in low wage metropolitan areas like
Las Vegas, Orlando and Riverside-San Bernardino. New research finds that job automation will hit
certain metropolitan areas significantly harder than others. Low-wage cities
like Las Vegas, NV, Orlando, FL, and Riverside-San Bernardino, CA are expected
to be among the hardest-hit metros in terms of total job losses. The impact of automation on jobs
is likely to be more severe than previously anticipated. Based on recent
advances in machine learning and mobile robotics, even non-routine jobs like
truck driving, healthcare diagnostics, or even education can be affected.
“The replacement of jobs by machines has been happening continuously since the
Industrial Revolution, but it’s expected to significantly accelerate in the
coming 10 or 20 years,” according to Professor Johannes Moenius, founding
director of ISEA. “Pretty much everyone will be affected, but some metropolitan
areas will see a lot more jobs vanish than others.”
Bruno Caprettini,
Joachim Voth, VOX: Rage against the machines: New technology and violent unrest
in industrialising Britain. Over the
last 200 years, new machines have increasingly replaced humans, and even
advanced tasks like speech recognition and translation can now be performed by
relatively cheap computers and smartphones. This column describes how labour-saving technology
appeared to play a key role in one of the most dramatic cases of labour unrest
in recent history – the Swing riots in England during the 1830s – serving as a
reminder of how disruptive new, labour-saving technologies can be in economic, social,
and political terms.
William Emmons,
Lowell Ricketts, FED St. Louis: The Link between Family Structure and Wealth Is
Weaker Than You Might Think. The bottom
line is that links between family structure and wealth are weak, inconsistent
and mostly spurious. We
conclude that the deeper causes of differences in both family structure and
wealth are structural or systemic or due to other unobservable factors related
to race or ethnicity in complicated ways. These underlying causes of different
opportunities, choices and peer-group norms facing individuals and families are
undoubtedly difficult or impossible to change. But it is important to
recognize what our symposium research found: only by addressing these deep
causes can we hope to meaningfully affect racial and ethnic wealth gaps.
Benjamin U.
Friedrich, Martin B. Hackmann, NBER: The Returns to Nursing: Evidence from a
Parental Leave Program. Nurses comprise
the largest health profession. In this paper, we measure the effect of nurses
on health care delivery and patient health outcomes across sectors. Our
empirical strategy takes advantage of a parental leave program, which led to a
sudden, unintended, and persistent 12% reduction in nurse employment. Our findings indicate
detrimental effects on hospital care delivery as indicated by an increase in
30-day readmission rates and a distortion of technology utilization. The
effects for nursing home care are more drastic. We estimate a persistent
13% increase in nursing home mortality among the elderly aged 85 and older. Our
results also highlight an unintended negative consequence of parental leave
programs borne by providers and patients.
Antonio Cabrales
et a., VOX: Trust me, even against your instinct, I have reflected upon my
decision. Trust in our partners is
important for economic transactions, but time pressure might affect the level
of trust we place in others. This column reports the results of an experimental
game in which individuals choose how much trust to place in partners who either
must respond instinctively, or have time to reflect. Less-reflective personality types incorrectly
trusted their partners least when those partners had time to think. This has
implications for policies which, for example, impose cooling-off periods on
negotiations.
Christopher House,
Christian Proebsting, Linda Tesar, VOX: Austerity in the aftermath of the Great
Recession. Austerity policies
implemented during the Great Recession have been blamed for the slow recovery
in several European countries. Using data from 29 advanced economies, this column shows that austerity
policies negatively affect economic performance by reducing GDP, inflation,
consumption, and investment. It also warns that efforts to reduce debt
through austerity in the depths of the economic recession were
counterproductive.
Enrico Rubolino,
Daniel Waldenström, IZA: Tax Progressivity and Top Incomes: Evidence from Tax
Reforms. We study the link between tax
progressivity and top income shares. Using variation from large-scale Western
tax reforms in the 1980s and 1990s and the novel synthetic control method, we find large and lasting
boosting impacts on top income shares from the progressivity reductions.
Effects are largest in the very top groups while earners in the bottom half of
the top decile were almost unaffected by the reforms. Cuts in top marginal
tax rates account for most of this outcome whereas reduced overall
progressivity contributed less. Searching for mechanisms, real income responses
as measured by growth in aggregate GDP per capita, registered patents and tax
revenues were unaffected by the reforms. By contrast, tax avoidance behavior
related to the management of capital incomes in the very income top appears to
lie behind the observed effects.
John N. Friedman,
Ithai Lurie, Magne Mogstad, Raj Chetty, NBER: Long-Run Drivers of Disability
Insurance Rates. Much recent
research has focused on the proximate forces that drive an individual to claim
disability benefits, such as economic conditions, local allowance rates, and
age. This paper instead studies the long-term factors that shift an
individual’s chances of DI receipt. We use administrative tax data to link
young adults (ages 24-32) to their parents and generate three key findings.
First, DI receipt is
strongly linked to the income of the recipient’s parents, with rates for young
adults from the poorest families roughly six times higher than those from the
richest families. Second, children from low income families display sharply
varying probabilities of receiving DI depending on the place where they grew up,
while those from rich families show no similar differences. Evidence suggests
that roughly 50% of these place-based differences are causal. Third, places
where poor children grow up to have the highest rates of DI receipt tend to be
“good” areas based on many standard characteristics, including lower
inequality, lower segregation, higher school quality, and higher social
capital.
Maya Rossin-Slater,
Miriam Wüst, IZA: What is the Added Value of Preschool? Long-Term Impacts and
Interactions with a Health Intervention. We study the impact of targeted high quality preschool over the life
cycle and across generations, and examine its interaction with a health
intervention during infancy. Using administrative data from Denmark together
with variation in the timing of program implementation between 1933 and 1960, we find lasting benefits of
access to preschool at age 3 on outcomes through age 65 – educational
attainment increases, income rises (for men), and the probability of survival
increases (for women). Further, the benefits persist to the next
generation, who experience higher educational attainment by age 25. However,
exposure to a nurse home visiting program in infancy reduces the added value of
preschool. The positive effect of preschool is lowered by 85 percent for years
of schooling (of the first generation) and by 86 percent for adult income among
men.
Christina
Starmans, Mark Sheskin, Paul Bloom, Nature: Why people prefer unequal
societies. There is immense concern
about economic inequality, both among the scholarly community and in the
general public, and many insist that equality is an important social goal.
However, when people are asked about the ideal distribution of wealth in their
country, they actually prefer unequal societies. We suggest that these two
phenomena can be reconciled by noticing that, despite appearances to the
contrary, there is no evidence that people are bothered by economic inequality
itself. Rather, they are
bothered by something that is often confounded with inequality: economic
unfairness. Drawing upon laboratory studies, cross-cultural research, and experiments
with babies and young children, we argue that humans naturally favour fair
distributions, not equal ones, and that when fairness and equality clash,
people prefer fair inequality over unfair equality. Both psychological
research and decisions by policymakers would benefit from more clearly
distinguishing inequality from unfairness.
Jon Kleinberg et
al., NBER: Human Decisions and Machine Predictions. We examine how machine learning can be used to
improve and understand human decision-making. Millions of times each year,
judges must decide where defendants will await trial—at home or in jail. This
is a promising machine learning application because it is a concrete prediction
task for which there is a large volume of data available. Yet comparing the
algorithm to the judge proves complicated. We deal with these problems using
different econometric strategies, such as quasi-random assignment of cases to
judges. Our results
suggest potentially large welfare gains: a policy simulation shows crime can be
reduced by up to 24.8% with no change in jailing rates, or jail populations can
be reduced by 42.0% with no increase in crime rates. Moreover, we see
reductions in all categories of crime, including violent ones.
Ali Alichi, Kory
Kantenga, Juan Solé, IMF: Income Polarization in the United States. Since the turn of the current century, most of
polarization has been towards lower incomes. This result is striking and in
contrast with findings of other recent contributions. In addition, the paper finds
evidence that, after conditioning on income and household characteristics, the marginal
propensity to consume from permanent changes in income has somewhat fallen in
recent years. We assess the potential impacts of these trends on private
consumption. During
1998-2013, the rise in income polarization and lower marginal propensity to
consume have suppressed the level of real consumption at the aggregate level,
by about 3½ percent—equivalent to more than one year of consumption
R. Jason Faberman
et al., FED NY: How Do People Find Jobs? We have found that “on‑the‑job” search is common among employed workers, and that
the job search process is
more effective for currently employed workers than for the unemployed. In the
paper cited as the source of our table estimates, we also show that offers
received by employed workers are better than those received by the unemployed,
both in terms of the wage associated with them and in terms of their nonwage
benefits. This is true even after controlling for detailed worker
characteristics and prior work history.
Markus Gehrsitz,
Martin Ungerer, IZA: Jobs, Crime, and Votes: A Short-run Evaluation of the
Refugee Crisis in Germany. Millions of
refugees made their way to Europe between 2014 and 2015, with over one million
arriving in Germany alone. Yet, little is known about the impact of this inflow
on labor markets, crime, and voting behavior. This article uses administrative
data on refugee allocation and provides an evaluation of the short-run
consequences of the refugee inflow. Our identification strategy exploits that a
scramble for accommodation determined the assignment of refugees to German
counties resulting in exogeneous variations in the number of refugees per
county within and across states. Our estimates suggest that migrants have not displaced
native workers but have themselves struggled to find gainful employment. We
find very small increases in crime in particular with respect to drug offenses
and fare-dodging. Our analysis further suggests that counties which
experience a larger influx see neither more nor less support for the main
anti-immigrant party than counties which experience small migrant inflows
Raj Chetty,
Nathaniel Hendren, NBER: The Impacts of Neighborhoods on Intergenerational
Mobility II: County-Level Estimates. We estimate the causal effect of each county in the U.S. on children's
earnings and other outcomes in adulthood using a fixed effects model that is
identified by analyzing families who move across counties with children of
different ages. For children growing up in low-income families, each year of
childhood exposure to a one standard deviation (SD) better county increases
income in adulthood by 0.5%. Hence, growing up in a one SD better county from
birth increases a child's income by approximately 10%. There is substantial
local area variation in children's outcomes: for example, growing up in the western
suburbs of Chicago (DuPage county) would increase a given child's earnings by
30% relative to growing up in Cook county. Counties with less
concentrated poverty, less income inequality, better schools, a larger share of
two-parent families, and lower crime rates tend to produce greater upward
mobility. One-fifth of the black-white earnings gap can be explained by
differences in the counties in which black and white children grow up.
Michael L. Anderson,
Justin Gallagher, Elizabeth Ramirez Ritchie, NBER: School Lunch Quality and
Academic Performance. Medical and
nutrition literature has long argued that a healthy diet can have a second
important impact: improved cognitive function. In this paper, we test whether
offering healthier lunches affects student achievement as measured by test
scores. Our sample includes all California (CA) public schools over a five-year
period. We estimate difference-in-difference style regressions using variation
that takes advantage of frequent lunch vendor contract turnover. Students at schools that
contract with a healthy school lunch vendor score higher on CA state
achievement tests, with larger test score increases for students who are
eligible for reduced price or free school lunches. We do not find any evidence
that healthier school lunches lead to a decrease in obesity rates.
Daron Acemoglu,
Leopoldo Fergusson, Simon Johnson, NBER: Population and Civil War. Medical and public health innovations in the 1940s
quickly resulted in significant health improvements around the world. Countries
with initially higher mortality from infectious diseases experienced greater
increases in life expectancy, population, and - over the following 40 years -
social conflict. This result is robust across alternative measures of conflict
and is not driven by differential trends between countries with varying
baseline characteristics. At
least during this time period, a faster increase in population made social
conflict more likely, probably because it increased competition for scarce
resources in low income countries.
Mai Chi Dao et
al., IMF: Drivers of Declining Labor Share of Income. After being largely stable in many countries for
decades, the share of national income paid to workers has been falling since
the 1980s. Chapter 3 of the April 2017 World Economic Outlook finds that this
trend is driven by rapid progress in technology and global integration. In advanced economies, about half
of the decline in labor shares can be traced to the impact of technology. The
decline was driven by a combination of rapid progress in information and
telecommunication technology, and a high share of occupations that could be
easily be automated. Global integration—as captured by trends in final
goods trade, participation in global value chains, and foreign direct
investment—also played a role. Its contribution is estimated at about half that
of technology
Andreas Lichter,
IZA: Benefit Duration and Job Search Effort: Evidence from a Natural
Experiment. The results of this study
provide substantial
support for strategic job search behavior in response to the generosity of the
benefit scheme: the extension of the benefit duration caused job search effort
to significantly decrease, lowering the number of filed applications and the
probability of applying for a job that requires moving. In line with
theory, it is shown that the reduction in search effort is accompanied by a
significant decrease in the short-run job-finding rate. Instrumental variables
estimates further provide causal evidence on the direct relationship between
search effort and unemployment duration: a 10 percent increase in the number of
filed job applications is found to increase the short-run job-finding
probability by 1.3 percentage points.
Edwin Leuven,
Sturla Andreas Løkken, IZA: Long Term Impacts of Class Size in Compulsory
School. How does class size in
compulsory school affect peoples' long run education and earnings? We use
maximum class size rules and Norwegian administrative registries allowing us to
observe outcomes up to age 48. We do not find any indication of beneficial effects of class size
reduction in compulsory school. For a 1 person reduction in class size
we can rule out effects on income as small as 0.087 percent in primary school
and 0.12 percent in middle school. Population differences in parental
background, school size or competitive pressure do not appear to reconcile our
findings with previous studies.
Fatih Guvenen, Greg Kaplan, University of Chicago: Top Income
Inequality in the 21st Century: Some Cautionary Notes. Since 2000, different measures of top income
inequality have exhibited very different trends. Top income shares based on
measures of total income show a continued rise, whereas top income shares based
on wage and salary income show no increase in inequality post-2000. The most
important difference between these two measures of income is the income that
accrues to S-corporations…But interpreting trends in the S-corporation
component is extremely difficult. Feenberg and Poterba (1993), Gordon and
Slemrod (2002), and Cooper et al. (2016) warn that much of the recent increase
in S-corporation income is income that previously accrued to C-corporations. Such income is not “new”
income earned by top earners but is simply income that was previously labeled
as corporate income rather than household income.
Jon Kleinberg,
NBER: Human Decisions and Machine Predictions. We examine how machine learning can be used to improve and understand
human decision-making. We focus on when judges must decide where defendants
will await trial—at home or in jail. Our results suggest potentially large welfare gains: a policy
simulation shows crime can be reduced by up to 24.8% with no change in jailing
rates, or jail populations can be reduced by 42.0% with no increase in crime
rates. Moreover, we see reductions in all categories of crime, including
violent ones. Importantly, such gains can be had while also significantly
reducing the percentage of African-Americans and Hispanics in jail. We find
similar results in a national dataset as well.
Alan Krueger, AEI:
What Makes a Terrorist. The available evidence is nearly
unanimous in rejecting either material deprivation or inadequate education as
important causes of support for terrorism or participation in terrorist
activities. Such explanations have been embraced almost entirely on
faith, not scientific evidence.I studied 311 combatants, representing 27
countries, who were captured in Iraq. Although the vast majority of insurgents
are native Iraqis, motivated by domestic issues, foreigners are alleged to have
been involved in several significant attacks. I looked at the characteristics
of the countries insurgents came from, and, importantly, of the countries with
no citizens captured in Iraq. It turned out that countries with a higher GDP
per capita were actually more likely to have their citizens involved in the
insurgency than were poorer countries.
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.
Global Terrorism
Index, Institute for Economics and Peace: Excluding the September 11 attack, only 0.5 per cent of deaths from
terrorism have occurred in the West since 2000. Lone wolf attackers are the main perpetrators of terrorist
activity in the West. Seventy per cent of all deaths from terrorism in the West
since 2006 were by lone wolf terrorists with the rest being unknown or group
attacks by more than three attackers. Islamic fundamentalism was not the main
cause of terrorism in the West over the last nine years. Eighty per cent
of deaths by lone wolf terrorists in the West were driven by right wing
extremism, nationalism, antigovernment sentiment and political extremism and
other forms of supremacy. Terrorist activity is a significant driver of refugee
activity and internal displacement. The countries which are the greatest source
of refugees and internally displaced people also suffer the most deaths from terrorism.
Ten of the 11 countries that had more than 500 deaths from terrorism in 2014
had the highest levels of refugees and IDPs in the world.
Kenneth Rogoff,
Project Syndicate: Growing Out of Populism? The threat to
globalism seems to have waned in Europe, with populist candidates having lost
elections in Austria, the Netherlands, and now Germany. But a populist turn in
upcoming elections in either France or Italy could still tear apart the
European Union, causing massive collateral damage to the rest of the world. The outlook for global growth is
improving, and, with sensible policies, the next several years could be quite a
bit better than the last – certainly for advanced economies, and perhaps for
most others as well. But populism remains a wildcard, and only if growth picks
up fast enough is it likely to be kept out of play.
Daveed
Gartenstein-Ross, Foreign affairs: Lone Wolves No More. The Decline of a Myth. Over the past nine months, however, the public
understanding of the strikes has demonstrably shifted. There is growing
awareness that individuals
labeled lone wolves are often in communication with other militants, sometimes
using encrypted services. In several prominent cases, the lone attackers
communicated with “virtual planners”—ISIS operatives, often based in Syria, who
offer would-be terrorists all the services once provided by physical networks.
Enabled by a combination of social media and the recent boom in end-to-end
encryption, virtual planners scout for recruits, work to radicalize and spur
them to action, provide operational guidance, and even give operatives critical
technical assistance, such as advice on the construction of explosives.
Philipp Ager,
Leonardo Bursztyn, Hans-Joachim Voth, NBER: Killer Incentives: Status
Competition and Pilot Performance during World War II. A growing theoretical and empirical literature shows
that public recognition can lead employees to exert greater effort. However,
status competition is also associated with excessive expenditure on status
goods, greater likelihood of bankruptcy, and more risk taking by money
managers. This paper examines the effects of recognition and status competition
jointly. In particular, we focus on the spillover effects of public recognition
on the performance and risk taking of peers. Using newly collected data on monthly
“victory” scores of more than 5,000 German pilots during World War II, we find
that status competition had important effects: After the German armed forces
bulletin mentioned the accomplishments of a particular fighter pilot, his
former peers performed considerably better. This outperformance varied across
skill groups. When a
former squadron peer was mentioned, the best pilots tried harder, scored more,
and died no more frequently; in contrast, average pilots won only a few
additional victories but died at a significantly higher rate. Hence our
results show that the overall efficiency effect of nonfinancial rewards can be
ambiguous in settings where both risk and output affect aggregate performance.
Alex Tuckett, BoE:
Does productivity drive wages? Evidence from sectoral data. Since 2008, aggregate productivity performance in
the UK has been substantially worse than in the preceding eight years. Over the
same period, aggregate real wage growth has also been significantly lower – it
has averaged -0.4% per annum from 2009-16, compared with 2.3% per annum from
2000-08. Rather than a simple and clean link from productivity to wages, the industry level data point to
a richer and more multi-directional relationship between productivity and
wages. Productivity growth is linked to wages, but the relationship may go both
ways, and the link between productivity and real wages may operate
through prices as much as nominal wages.
Matthew C Klein,
FT: How America made Scandinavian social
democracy possible. The researchers
suggest the migration flows, which were small relative to the native population
of America but equivalent to about 25 per cent of the total population of
Scandinavia, changed the character of Norwegian and Swedish society by removing
the most ambitious and independently-minded people. In other words, Scandinavian social democracy
might not be possible without America’s historic willingness to absorb those
who refused to follow the “Law of Jante”. The methodology centres on
names. Psychologists have long found that people with relatively rare names are
more likely to be “unique”, presumably because parents who consciously choose
rare names for their children would be more likely to raise them to be
nonconformists.
Thomas Piketty, Emmanuel
Saez, Gabriel Zucman, VOX: Economic growth in the US: A tale of two countries. One major problem is the disconnect between
macroeconomics and the study of economic inequality. In a recent paper, we
attempt to create inequality statistics for the US that overcome the
limitations of existing data by creating distributional national accounts. First,
our data show that the bottom half of the income distribution in the US has
been completely shut off from economic growth since the 1970s. Because the
pre-tax incomes of the bottom 50% stagnated while average national income per
adult grew, the share of
national income earned by the bottom 50% collapsed from 20% in 1980 to 12.5% in
2014. Over the same period, the share of incomes going to the top 1% surged
from 10.7% in 1980 to 20.2% in 2014.
Bruce Sacerdote,
NBER: Fifty Years of Growth in American Consumption, Income, and Wages. Nearly every week Americans are greeted with
headlines such as “Millennials Earn Less Than Their Parents,” “America’s
Productivity Climbs But Wages Stagnate,” and “For Most Workers, Real Wages Have
Barely Budged For Decades.” Despite
the large increase in U.S. income inequality, consumption for families at the
25th and 50th percentiles of income has grown steadily over the time period
1960-2015. Among households with below median incomes, the number of cars per
household has risen from 1 to 1.6 during 1970-2015. And median square footage
in these families’ homes has risen about 8%. Consider consumption
measured in 2015 dollars among two person households with below median income.
I find a 62 percent increase in consumption during 1960 to 2015. This
calculation uses the CPI and almost surely does not fully include increases in
the quality of goods and services. After adjusting CPI for the bias estimated by Hamilton
(1998) and Costa (2001), I calculate a 164% increase in consumption for these
households.
Nikolai Stähler,
Deutsche Bundesbank: A model-based analysis of the macroeconomic impact of the
refugee migration to Germany. In
summary, this paper finds that measures that cause the migrant qualification structure to closely
match that of the native population over the long term do not lead to GDP and
consumption losses, which seems to be a useful reference point, while a partial
or total failure to close the skills gap can very well have negative economic
consequences in terms of wage and consumption losses as well as higher
unemployment. A failure to integrate about 800,000 migrants (equivalent
to 1% of initial German population) could reduce per capita output and
consumption by 0.43% and 0.48%, respectively, while integration measures that
improve the qualification structure in Germany could even yield per capita output
and consumption gains of 0.34% and 0.38%, respectively.
Andrea Guariso,
Thorsten Rogall, VOX: About ethnic conflicts, inequality, and rainfall in
Africa. There is a lively debate about the role of
inequality as a trigger of ethnic conflicts. This column reports groundbreaking
research into the effect of the amount of regional rainfall on crops, which is
used to measure inequality between ethnic groups. Inequality caused by the weather's effect on crops has a
large and significant impact on the prevalence of ethnic conflict. This
effect is strongest when a lack of rainfall penalises ethnic groups with no
access to power.
Indra de Soysa,
Ann Kristin de Soysa, Journal of International Interactions: Do Globalization
& Free Markets Drive Obesity Among Children and Youth? An
Empirical Analysis, 1990-2013. Scholars of public health identify globalization as a major cause of
obesity. Free markets are blamed for spreading high calorie, nutrient-poor
diets and sedentary lifestyles across the globe. Global trade and investment
agreements apparently curtail government action in the interest of public
health. Globalization is also blamed for raising income inequality and social
insecurities, which contribute to ‘obesogenic’ environments. Contrary to recent
empirical studies, this
study demonstrates that globalization and several component parts, such as
trade openness, FDI flows, and an index of economic freedom reduce weight gain
and obesity among children and youth, the most likely age cohort to be affected
by the past three decades of globalization and attendant lifestyle changes.
The results suggest strongly that local-level factors possibly matter much more
than do global-level factors for explaining why some people remain thin and
others put on weight.
Stacy Liberatore,
Dailymail: 'Pooper-scooper' drone cleans up dog poo so you don't step in it. A Dutch startup is set to release a fleet of
'drones' to combat the 220 million pounds of dog droppings left on the
Netherlands' streets each year. Called Dogdrones, the vehicles will work
together as a team to detect and scoop up the poop. The aerial drone is fitted with cameras and
thermal energy technology that transmits GPS coordinates of the feces to a
rolling robot on the ground that immediately leaves its hub to clean up the
waste.
