MAY 18 2017

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.