Carmen Reinhart,
Project Syndicate: The Persistence of Global Imbalances. The US has recorded external surpluses in only three
of the 38 years since 1980. Tax policy has favored debt accumulation by
households at the expense of saving, and a significant productivity slowdown is
affecting US international competitiveness. As Ethan Ilzetzky, Kenneth Rogoff,
and I document, because of the absence of alternatives, the dollar’s status as the world’s major reserve
currency remains unchallenged, making it easy for the US to continue to finance
current-account deficits. But the fact that it is easy does not make it a good
idea.
Gordon Hanson,
Chen Liu, Craig McIntosh, NBER: The Rise and Fall of U.S. Low-Skilled
Immigration. From the 1970s to the early
2000s, the United States experienced an epochal wave of low-skilled
immigration. Since the Great Recession, however, U.S. borders have become a far
less active place when it comes to the net arrival of foreign workers. The number
of undocumented immigrants has declined in absolute terms, while the overall
population of low-skilled, foreign-born workers has remained stable. We examine
how the scale and composition of low-skilled immigration in the United States
have evolved over time, and how relative income growth and demographic shifts
in the Western Hemisphere have contributed to the recent immigration slowdown. Because major source countries
for U.S. immigration are now seeing and will continue to see weak growth of the
labor supply relative to the United States, future immigration rates of young,
low-skilled workers appear unlikely to rebound, whether or not U.S. immigration
policies tighten further.
Richard Florida,
NYT: The Urban Revival Is Over. While many, if not most, large cities grew faster than their suburbs
between 2000 and 2015, in the last two years the suburbs outgrew cities in
two-thirds of America’s large metropolitan areas. Several factors have come together to potentially stymie
the urban revival. Foremost is a recent uptick in violent crime. And, of
course, the most desirable cities have become incredibly expensive places to
live. Finally, the anti-urban mood in Washington and many state
legislatures is making things worse for cities at the worst possible time.
Badly needed investments in transit, bridges and tunnels, affordable housing
and job upgrading and training are not being made. Stopping or reversing the
urban revival would not just be bad for cities. It would be a disaster for all
of us.
Naci H. Mocan, Han
Yu, NBER: Can Superstition Create a Self-Fulfilling Prophecy? School Outcomes
of Dragon Children of China. In Chinese
culture those who are born in the year of the Dragon under the zodiac calendar
are believed to be destined for good fortune and greatness, and parents prefer
their kids to be born in a Dragon year. Using province level panel data we show
that the number of marriages goes up during the two years preceding a Dragon
year and that births jump up in a Dragon year. Using three recently collected
micro data sets from China we show that those born in a Dragon year are more
likely to have a college education, and that they obtain higher scores at the
university entrance exam. Similarly, Chinese middle school students have higher
test scores if they are born in a Dragon year. We show that these results are
not because of family background, student cognitive ability, self-esteem or
students’ expectations about their future. We find, however, that the “Dragon”
effect on test scores is eliminated when we account for parents’ expectations
about their children’s educational and professional success. We find that parents of Dragon
children have higher expectations for their children in comparison to other
parents, and that they invest more heavily in their children in terms of time
and money. Even though neither the Dragon children nor their families are
inherently different from other children and families, the belief in the
prophecy of success and the ensuing investment become self-fulfilling.
Ellyn Terry, Atlanta
Fed: Is Poor Health Hindering Economic Growth? So how might poor health hinder economic growth? Health factors
account for a significant part of the decline in labor force participation
since at least the late 1990s. After controlling for demographic changes, the
share of people too sick or disabled to work is about 1.6 percentage points
higher today than it was two decades ago. Other things equal, if this trend reversed itself
during the next year, it could increase the workforce by up to 4 million
people, and add around 2.6 percentage points to gross domestic product.
Quoctrung Bui,
NYT: Why Some Men Don’t Work: Video Games Have Gotten Really Good. If innovations in housework helped free women to
enter the labor force in the 1960s and 1970s, could innovations in leisure —
like League of Legends — be taking men out of the labor force today? By 2015,
American men 31 to 55 were working about 163 fewer hours a year than that same
age group did in 2000. Men 21 to 30 were working 203 fewer hours a year. One
puzzle is why the working hours for young men fell so much more than those of their
older counterparts. The gap between the two groups grew by about 40 hours a
year, or a full workweek on average. Between 2004 and 2015, young men’s leisure time grew by 2.3 hours a
week. A majority of that increase — 60 percent — was spent playing video games,
according to government time use surveys. In contrast, young women’s leisure
time grew by 1.4 hours a week. A negligible amount of that extra time was spent
on video games.
Larry Summers,
Blog: Issues under discussion at Jackson Hole. The fatal flaw here is failure to recognize the importance of
fluctuations in the neutral rate and market perceptions of its future
level. Suppose as has been true in
recent years that the neutral rate falls.
That reflects a decrease in investment demand relative to saving supply
and so is a reason other things equal for easier money. What will happen to some financial conditions
index? Stock prices will rise because of
a lower discount factor. The dollar will
fall because of lower rates. Long rates
will fall because of reduced real rate expectations. Financial conditions indices will show great ease even when
developments call for more easing.
Kenneth Rogoff,
Project Syndicate: Protectionism Will Not Protect Jobs Anywhere. Countries that go too far in closing themselves off
to foreign competition eventually lose their edge, with innovation, jobs, and
growth suffering. Brazil and India, for example, have historically suffered
from inward-looking trade policies, though both have become more open in recent
years. Another problem is that most Western economies have long since become
deeply intertwined in global supply chains. Even the Trump administration had to reconsider its plan
to pull out of the North American Free Trade Agreement when it finally realized
that a lot of US imports from Mexico have substantial US content. Erecting high
tariff barriers might cost as many US jobs as Mexican jobs. And, of course, if
the US were to raise its import tariffs sharply, a large part of the costs
would be passed on to consumers in the form of higher prices.
Matthew C Klein,
FT: The myth of the German jobs miracle. Germany’s jobs growth is more myth than miracle. Yes, the number of Germans
listed as having a job has grown by about 15 per cent since the lows in the
mid-1990s. But the total number of hours worked is less than 2 per cent higher
over the same period and still significantly lower than in the early 1990s.
This wouldn’t necessarily be a problem if an employment boom happened to
coincide with a widespread desire to spend less time on the job. But this is
unlikely, since the disconnect between jobs and hours worked went hand in hand
with a large increase in the share of Germans at risk of poverty. German taxes
on low-paid workers were among the highest in the world when the data began in
2000 and they’ve stayed that way ever since. No wonder German consumers have
been so miserly! This isn’t just bad for German workers, but for the whole
world.
Paolo Pinotti,
Microeconomic Insights: Opportunity and access: how legal work status affects
immigrant crime rates. Immigrants in
Italy represent less than 10 percent of the country’s population, but 34
percent of its people in prison. When taking a closer look at the immigrant
prison population, it becomes apparent that the over-representation is
attributed to irregular immigrants lacking legal work status. In fact, regular immigrants – those who
have been granted a legal work permit – exhibit crime rates in line with those
of the native population. By comparing the outcomes of immigrants who were
randomly assigned legal work permits in Italy, I show that a lack of legal
access to the official labor market increases the likelihood that immigrants
will engage in criminal activity. Immigrant males, who were randomly
granted legal access to work in Italy, reduced their rate of criminal behavior
by 0.7 percent after receiving resident status compared to similar immigrants, who
were randomly denied a work permit.
Per-Anders Edin,
Peter Fredriksson, Martin Nybom, Björn Öckert, IZA: The Rising Return to
Non-Cognitive Skill. We examine the
changes in the relative rewards to cognitive and non-cognitive skill during the
time period 1992–2013. Using unique administrative data for Sweden, we document
a secular increase in the returns to non-cognitive skill, which is particularly
pronounced in the private sector and at the upper-end of the wage distribution.
Workers with an abundance
of non-cognitive skill were increasingly sorted into occupations that were
intensive in: cognitive skill; as well as abstract, non-routine, social,
non-automatable and offshorable tasks. Such occupations were also the types of
occupations which saw greater increases in the relative return to non-cognitive
skill. Moreover, we show that greater emphasis is placed on noncognitive
skills in the promotion to leadership positions over time. These pieces of
evidence are consistent with a framework where non-cognitive, inter-personal,
skills are increasingly required to coordinate production within and across
workplaces.
Alex Tuckett, BoE:
Imports and the composition of expenditure. A fall in the real exchange rate can increase demand for domestic
output in two main ways. The volume of exports – which become cheaper – is
boosted. And goods and services that were previously imported can instead be
supplied by domestic producers, which become more competitive as the price of
imports rises. Economists call the second effect ‘import substitution’. Using
data from Supply-Use tables can help us better understand the process of import
substitution, in particular by examining how the composition of expenditure has influenced imports.
Doing so shows that the import substitution effect of the 2008-09 depreciation
was partly masked by other, co-incident factors.
American Economic
Association: The resource curse in action. In a study appearing in this month’s issue of the American Economic
Review, the authors look at geocoded data on violent incidents and note the
proximity of each incident to mining clusters. In theory, productive mines
could potentially lead to violence for a number of reasons – profitable mines
are a natural target for warring factions, and a captured mine can provide
financial support to a rebel group looking to expand its reach. The researchers
find that rising commodity
prices did lead to greater violence, especially near sites where the profitable
minerals like platinum and nickel were being extracted. The map below
indicates regions where conflict would have been less likely to occur in 2010
if commodity prices had remained at their lower 1990s levels.
William R. Emmons
, Lowell R. Ricketts, FED St.Louis: College Inadvertently Increases Racial and
Ethnic Disparity in Income and Wealth. Growing gaps in college-attainment rates, together with large
differences in the economic and financial returns associated with any given
level of education, suggest that racial and ethnic income and wealth gaps are
likely to grow larger in the future.Successive generations of Hispanics and
blacks are falling further behind their white and Asian counterparts in
obtaining four-year college degrees. Second, the payoffs for increasing levels of education obtained
by Hispanics and blacks generally are lower than those for whites and Asians.
As a consequence of these quantity and quality gaps, higher education
unintentionally has become an engine for widening disparities rather than for
accelerating the convergence of economic and financial opportunities across
races and ethnicities.
Laura Tyson,
Project Syndicate:Labor Markets in the Age of Automation. Advances in artificial intelligence and robotics are
powering a new wave of automation, with machines matching or outperforming
humans in a fast-growing range of tasks, including some that require complex
cognitive capabilities and advanced degrees. This process has outpaced the
expectations of experts; not surprisingly, its possible adverse effects on both
the quantity and quality of employment have raised serious concerns. Winner-take-all effects that
bring massive benefits to superstars and the luckiest few, as well as rents
from imperfect competition and first-mover advantages in networked systems.
Returns to digital capital
tend to exceed the returns to physical capital and reflect power-law
distributions, with an outsize share of returns again accruing to relatively
few actors.
Emmanuel Saez,
NBER: Taxing the Rich More: Preliminary Evidence from the 2013 Tax Increase. This paper provides preliminary evidence on
behavioral responses to taxation around the 2013 tax increase that raised top
marginal tax rates on capital income by about 9.5 points and on labor income by
about 6.5 points. Using published tabulated tax statistics from the Statistics
of Income division of the IRS, we find that reported top 1% incomes were
significantly higher in 2012 than in 2013, implying a large short-run
elasticity of reported income with respect to the net-of-tax rate in excess of
one. This large short-run elasticity is due to income retiming for tax
avoidance purposes and is particularly high for realized capital gains and
dividends, and highest at the very top of the income distribution. However,
comparing 2011 and 2015 top incomes uncovers only a small medium-term response
to the tax increase as top income shares resumed their upward trend after 2013. Overall, we estimate that at
most 20% of the projected tax revenue increase from the 2013 tax reform is lost
through behavioral responses. This implies that the 2013 tax increase was an
efficient way to raise revenue.
Paul A. Gompers, Sophie
Q. Wang, Harvard
University: And the Children Shall Lead: Gender Diversity and Performance in
Venture Capital. With an overall
lack of gender and ethnic diversity in the innovation sector documented in Gompers
and Wang (2017), we ask the natural next question: Does increased diversity
lead to better firm performances? In this paper, we attempt to answer this
question using a unique dataset of the gender of venture capital partners’
children. First, we find
strong evidence that parenting more daughters leads to an increased propensity
to hire female partners by venture capital firms. Second, using an instrumental
variable set-up, we also show that improved gender diversity, induced by
parenting more daughters, improves deal and fund performances. These effects
concentrate overwhelmingly on the daughters of senior partners than junior
partners. Taken together, our findings have profound implications on how the
capital markets could function better with improved diversity.
Simen Markussen,
Knut Røed, IZA: Egalitarianism under Pressure: Toward Lower Economic Mobility
in the Knowledge Economy? Based on complete
population data, with the exact same definitions of family class background and
economic outcomes for a large number of birth cohorts, we examine post-war
trends in intergenerational economic mobility in Norway. Despite only mild
fluctuations in standard rank-based summary statistics, we show that men and
women born into the lowest parts of the parental earnings rank distribution
have fallen considerably behind in terms of several quality-of-life outcomes,
such as earnings rank, earnings share, employment propensity, educational
attainment, and the establishment of a family. In particular, the prime-age employment rates
of lower class sons have declined spectacularly, both because their rank
outcomes have deteriorated and because the lowest ranks to an increasing extent
have become associated with non-employment rather than low-wage employment.
We provide suggestive evidence that higher educational requirements in the
labor market has increased the importance of parental encouragement and support
and thus enlarged the handicap of being born into a less resourceful family.
There is no evidence whatsoever of a relative decline in the lower classes'
cognitive abilities.
Arthur Waldron,
SupChina: There is no Thucydides Trap. Since the attack on Scarborough Shoal, now six years ago, my own
opinion is that China expected to have occupied a lot more. Her slightly
delusional view of her claims, first made explicit in ASEAN’s winter meeting of
2010 in Hanoi, was that “small” countries would all bow respectfully to China’s
new pre-eminence. This has failed to occur. All of China’s neighbors are now building up strong
military capabilities. Japanese and South Korean nuclear weapons are even a
possibility. Over-relying on their traditional concept of awesomeness (威 wēi), the
Chinese expected a cake walk. They have got instead an arms race with neighbors
including Japan and other American allies and India too. With so much firepower now in place the danger of accident, pilot
error, faulty command and control, etc. must be considered.
Alix Spiegel, NPR:
Eager To Burst His Own Bubble, A Techie Made Apps To Randomize His Life. In San Francisco, the life Max Hawkins lived was
arguably perfect. He was employed by Google, surrounded by friends and had his
routine nailed down. He woke to artisanal coffee, biked to work along the
beautiful Embarcadero waterfront roadway, lunched on Google's famed free food
("like four different kinds of kale" level) and — possibly the true
mark of a successful millennial — got invited to many happy hours. But
something was missing. Max started small, with an app that integrated Uber.
He would press a button in the app and a car would arrive. But then, a twist: He couldn't select a drop-off
location; the app would choose a spot within a range without disclosing it. The
only thing the rider had to do was enjoy the journey — and hope for a good
destination. From there, Max's applications became more complex. He built an
app that used a Facebook search function for public events to find ones near
him. Then the app would randomly choose which event Max would attend.
Jan Kabátek, David
C. Ribar, IZA: Not Your Lucky Day: Romantically and Numerically Special Wedding
Date Divorce Risks. Characteristics
of couples on or about their wedding day and characteristics of weddings have
been shown to predict marital outcomes. Little is known, however, about how the
dates of the weddings predict marriage durability. Using Dutch marriage and
divorce registries from 1999-2013, this study compares the durations of
marriages that began on Valentine's Day and numerically special days (dates
with the same or sequential number values, e.g., 9.9.99, 1.2.03) with marriages
on other dates. In the Netherlands, the incidence of weddings was 137-509%
higher on special dates than ordinary dates, on an adjusted basis, and the
hazard odds of divorce for special-date marriages were 18-36% higher. Sorting on couples' observable
characteristics accounts for part of this increase, but even after controlling
for these characteristics, special-date marriages were more vulnerable, with
11-18% higher divorce odds compared to ordinary dates. This relation is even
stronger for couples who have not married before.
Mitch Prinstein,
NYT: Popular People Live Longer. Julianne Holt-Lunstad, a psychologist at Brigham Young University,
consolidated data from 148 investigations published over 28 years on the
effects of social relationships, collectively including over 308,000
participants between the ages of 6 and 92 from all over the world. The results revealed that being
unpopular — feeling isolated, disconnected, lonely — predicts our life span.
More surprising is just how powerful this effect can be. Dr. Holt-Lunstad found
that people who had larger networks of friends had a 50 percent increased
chance of survival by the end of the study they were in. And those who
had good-quality relationships had a 91 percent higher survival rate. This
suggests that being unpopular increases our chance of death more strongly than
obesity, physical inactivity or binge drinking. In fact, the only comparable
health hazard is smoking.
Cecchetti &
Schoenholtz, Banking&Finance: Labor's Declining Share: A Primer. Does
the global decline in labor’s share in recent decades reflect a general shift
of activity away from industries or sectors that have higher labor shares? The
answer generally is no. Conventional analysis of the data shows that
most of the decline occurs within-industry or within-sector, rather than
resulting from a compositional shift of activity. So, after decades of apparent
stability, what has been causing the recent decline of the aggregate labor
share? Will the decline continue? And how is it affecting welfare? A truly
compelling explanation (and prediction) must be consistent with the timing of
the measured decline (especially the larger drop in the past two decades), with
its geographic breadth (including both advanced and emerging economies), with
its sectoral and geographic diversity, and with the within-industry pattern
observed. This is a very tall challenge to which researchers are beginning to
respond.
Nicholas Bloom, Erik Brynjolfsson et al. IZA: What Drives
Differences in Management? Partnering with
the Census we implement a new survey of "structured" management
practices in 32,000 US manufacturing plants. We find an enormous dispersion of management practices
across plants, with 40% of this variation across plants within the same firm.
This management variation accounts for about a fifth of the spread of
productivity, a similar fraction as that accounted for by R&D, and twice as
much as explained by IT. We find evidence for four "drivers"
of management: competition, business environment, learning spillovers and human
capital. Collectively, these drivers account for about a third of the
dispersion of structured management practices.
Derek Thompson,
The Atlantic: So, Where Are All Those Robots? Lots of people think that the robots are coming to steal everybody’s
jobs. But another story is emerging from several recent papers and columns by
economists and economic writers. Instead of a world without work, they say, there is currently more
evidence for a world with too much work—and not enough humans to do it all.
Rather than high-flying investment in machines and similarly high unemployment,
there is strangely low investment and happily low joblessness. How can
anybody say robots are killing jobs when the killer is nowhere to be seen and
the supposed victim isn’t even dead?
Jonathan M.V.
Davis, Sara B. Heller, NBER: Rethinking the Benefits of Youth Employment
Programs: The Heterogeneous Effects of Summer Jobs. This
paper reports the results of two randomized field experiments, each offering
different populations of youth a supported summer job in Chicago. In both
experiments, the program dramatically reduces violent-crime arrests, even after
the summer. It does so without improving employment, schooling, or other types
of crime; if anything, property crime increases over 2-3 post-program
years. To explore mechanisms, we implement a machine learning method that
predicts treatment heterogeneity using observables. The method identifies a
subgroup of youth with positive employment impacts, whose characteristics
differ from the disconnected youth served in most employment programs. We find
that employment benefiters commit more property crime than their control
counterparts, and non-benefiters also show a decline in violent crime.
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.
David Autor,
Andreas Ravndal Kostol, Magne Mogstad, Bradley Setzler, NBER: Disability
Benefits, Consumption Insurance, and Household Labor Supply.We comprehensively assess these missing margins in
the context of Norway's DI system, drawing on two strengths of the Norwegian
environment. First, Norwegian register data allow us to characterize the
household impacts and fiscal costs of disability receipt by linking employment,
taxation, benefits receipt, and assets at the person and household level.
Second, random assignment of DI applicants to Norwegian judges who differ
systematically in their leniency allows us to recover the causal effects of DI
allowance on individuals at the margin of program entry. Accounting for the total effect
of DI allowances on both household labor supply and net payments across all
public transfer programs substantially alters our picture of the consumption
benefits and fiscal costs of disability receipt. While DI allowance causes a
significant increase in household income and consumption on average, it has
little impact on income or consumption of married applicants because spousal
earnings responses (via the added worker effect) and benefit substitution
entirely offset DI benefit payments among those who are allowed relative to
those who are denied.
Yannis
Paschalidis, Harvard Business Review: How Machine Learning Is Helping Us
Predict Heart Disease and Diabetes. In an ongoing effort with Boston-area hospitals, including the Boston
Medical Center and the Brigham and Women’s Hospital, we found that we could predict hospitalizations
due to these two chronic diseases about a year in advance with an accuracy rate
of as much as 82%. This will give care providers the chance to intervene
much earlier and head off hospitalizations. Our team is also working with the
Department of Surgery at the Boston Medical Center and can predict readmissions
within 30 days of general surgery; the hope is to guide postoperative care in order
to prevent them.
Kevin J. Lansing,
San Francisco FED: R-star, Uncertainty, and Monetary Policy. Investors’ demand for safe assets tends to increase
when there’s more uncertainty, as in recessions. Consistent with this idea,
short-term movements in the natural rate of interest, or r-star, are negatively
correlated with an index of macroeconomic uncertainty. This relationship may be
relevant for assessing monetary policy. An estimated policy rule that incorporates both r-star
and the uncertainty index can largely reproduce the path of the federal funds
rate since 1988, except during periods when policy was constrained by the zero
lower bound.
Alan J. Auerbach
et al. NBER: How the Growing Gap in Life Expectancy May Affect Retirement
Benefits and Reforms. Older Americans
have experienced dramatic gains in life expectancy in recent decades, but an
emerging literature reveals that these gains are accumulating mostly to those
at the top of the income distribution. We explore how growing inequality in
life expectancy affects lifetime benefits from Social Security, Medicare, and
other programs and how this phenomenon interacts with possible program reforms.
We first project that life expectancy at age 50 for males in the two highest
income quintiles will rise by 7 to 8 years between the 1930 and 1960 birth
cohorts, but that the two lowest income quintiles will experience little to no
increase over that time period. This divergence in life expectancy will cause the gap between average
lifetime program benefits received by men in the highest and lowest quintiles
to widen by $130,000 (in $2009) over this period. Finally we simulate
the effect of Social Security reforms such as raising the normal retirement age
and changing the benefit formula to see whether they mitigate or enhance the
reduced progressivity resulting from the widening gap in life expectancy.
Roberto Bonfatti,
Kevin O'Rourke, VOX: Growth, import dependence, and war in the context of
international trade. Classical models
suggest that shifts in the balance of power can lead to conflict, where the
established power has the incentive to trigger war to deter the threat to its
dominance. This column argues that this changes if international trade is taken
into account. Industrialisation
requires the import of natural resources, potentially leading a smaller nation
to trigger war either against a resource-rich country or the incumbent nation.
The model can help explain the US-Japanese conflict of 1941 and Hitler’s
invasion of Poland, and has implications for US-Chinese relations today.
Michael Jetter,
IZA: Terrorism and the Media: The Effect of US Television Coverage on Al-Qaeda
Attacks. Can media coverage of a
terrorist organization encourage their execution of further attacks? This paper
analyzes the day-to-day news coverage of Al-Qaeda on US television since 9/11
and the group's terrorist strikes. To isolate causality, I use disaster deaths
worldwide as an exogenous variation that crowds out Al-Qaeda coverage in an
instrumental variable framework. The results suggest a positive and
statistically powerful effect of CNN, NBC, CBS, and Fox News coverage on
subsequent Al-Qaeda attacks. This result is robust to a battery of alternative
estimations, extensions, and placebo regressions. One minute of Al-Qaeda coverage in a 30-minute news
segment causes approximately one attack in the upcoming week, equivalent to 4.9
casualties, on average.
Oeindrila Dube, S.P. Harish, NBER: Queens. Are states led by women less prone to conflict than
states led by men? We answer this question by examining the effect of female
rule on war among European polities over the 15th-20th centuries. We utilize
gender of the first born and presence of a female sibling among previous
monarchs as instruments for queenly rule. We find that polities led by queens were more likely to
engage in war than polities led by kings. Moreover, the tendency of queens to
engage as aggressors varied by marital status. Among unmarried monarchs, queens
were more likely to be attacked than kings. Among married monarchs, queens were
more likely to participate as attackers than kings, and, more likely to fight
alongside allies. These results are consistent with an account in which
marriages strengthened queenly reigns because married queens were more likely
to secure alliances and enlist their spouses to help them rule. Married kings,
in contrast, were less inclined to utilize a similar division of labor. These
asymmetries, which reflected prevailing gender norms, ultimately enabled queens
to pursue more aggressive war policies.
Jeremy Chiu,
Richard Harris, Evarist Stoja, BoE: Do core and transitory volatilities matter
for the economy? Financial markets
are intrinsically volatile, constantly fluctuating in response to a wide
variety of news. Often, these shocks to volatility are short-lived, perhaps
reflecting a one-off adjustment in asset prices or the market’s overreaction to
news, and have a tendency to dissipate rapidly. But sometimes they lead to a
sustained increase in market volatility, reflecting a deeper uncertainty over
the future macroeconomy that can take time to resolve itself. Indeed, a considerable body of empirical
evidence suggests that financial
market volatility is made up of two components: a slowly varying ‘core’
component and a ‘transitory’ component that dissipates quickly. We develop a
way to identify each type and estimate how they affect the broader economy.
Larry Summers: Gap
between what is widely believed and market evidence. There is distressingly little evidence in favor of
the proposition that banks that are measured as better capitalized by their
regulators are less likely to fail than other banks. Financial logic embodied
in the celebrated Modigliani Miller theorem and suggested by common sense holds
that substantial reductions in leverage, if achieved, should be associated with
reduced volatility, reduced sensitivity to shocks and lower risk premiums. The data suggest that on a
market value of equity basis, major financial institutions are no less levered
than they were over the period before the crisis.
Dani Rodrik,
Harvard: Is Global Equality the Enemy of National Equality? The bulk of global inequality is accounted for by
income differences across countries rather than within countries. Expanding
trade with China has aggravated inequality in some advanced economies, while
ameliorating global inequality. But the “China shock” is receding and other
low-income countries are unlikely to replicate China’s export-oriented
industrialization experience. Relaxing restrictions on cross-border labor
mobility might have an even stronger positive effect on global inequality.
However it also raises a similar tension. While there would likely be adverse effects on low-skill
workers in the advanced economies, international labor mobility has some
advantages compared to further liberalizing international trade in goods. I
argue that none of the contending perspectives -- national-egalitarian, cosmopolitan,
utilitarian -- provides on its own an adequate frame for evaluating the
consequences.
Peter Dizikes, MIT
News: Darwin visits Wall Street. EMH assumes that individuals always maximize their expected utility —
they find the optimal way to spend and invest, all the time. Lo’s adaptive
markets hypothesis relaxes this dictum on two counts. First, a successful
investing adaptation doesn’t have to be the best of all possible adaptations —
it just has to work fairly well at a given time. Lo’s adaptive markets
hypothesis does not hold that people will constantly be finding the best
possible investments. Instead, as he writes in the book, “consumer behavior is highly
path-dependent,” based on what has worked well in the past. Given those
conditions, the market equivalent of natural selection weeds out poor
investment strategies.
Alberto Alesina,
Bryony Reich, Alessandro Riboni, NBER: Nation-Building, Nationalism and Wars. The increase in army size observed in early modern
times changed the way states conducted wars. Starting in the late 18th century,
states switched from mercenaries to a mass army by conscription. In order for the population to
accept to fight and endure war, the government elites began to provide public
goods, reduced rent extraction and adopted policies to homogenize the
population with nation-building. This paper explores a variety of ways
in which nation-building can be implemented and studies its effects as a
function of technological innovation in warfare.
Markus Gehrsitz,
IZA: Speeding, Punishment, and Recidivism: Evidence from a Regression
Discontinuity Design. This paper
estimates the effects of temporary driver's license suspensions on driving
behavior. A little known rule in the German traffic penalty catalogue maintains
that drivers who commit a series of speeding transgressions within 365 days
should have their license suspended for one month. My regression discontinuity design exploits the
quasi-random assignment of license suspensions caused by the 365-days cut-off
and shows that 1-month license suspensions lower the probability of
recidivating within a year by 20 percent. This is largely a specific
deterrence effect driven by the punishment itself and not by incapacitation,
information asymmetries, or the threat of stiffer future penalties.
