SEPTEMBER 7 2017

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.