OCTOBER 5 2017

Larry Summers: Central Bank Independence. It is clear in a way that was not the case prior to the financial crisis that central bank policy is about much more than turning an interest rate dial.  Much of what is new, is by its nature, political and in need of integration with other policies. I suspect that over time we will see some “drawing closer together” of Treasuries and central banks and perhaps more devices like inflation targets where politically accountable officials establish frameworks in which central banks can act. And central bankers will find themselves in closer consultation with governments and engaged in more joint endeavors. The end of debate over central bank mandates, like the debate over the end of history, is destined to go on for a long time.

Stefania Albanesi, Giacomo De Giorgi, Jaromir Nosal, VOX: Mortgage default during the Great Recession came from real estate investors, not subprime credit holders. The Global Crisis narrative has suggested that an expansion of subprime credit was the reason for rising mortgage defaults, leading to the large-scale recession in 2007-09. Taking a closer look at the characteristics of subprime credit holders over the period, this column argues that the growth in mortgage defaults did not occur predominantly amongst subprime credit holders. Instead, it was real estate investors that played a critical role in the rise in mortgage debt, specifically among the middle and the top of the credit score distribution.

Youssef Benzarti, Dorian Carloni, NBER: Who Really Benefits from Consumption Tax Cuts? Evidence from a Large VAT Reform in France. In this paper we evaluate the incidence of a large cut in value-added taxes (VAT) for French sit-down restaurants. In contrast to previous studies that focus on prices only, we estimate its effect on four groups: workers, firm owners, consumers and suppliers of material goods. Using a difference-in-differences strategy on firm-level data we find that: (1) the effect on consumers was limited, (2) employees and sellers of material goods shared 25 and 16 percent of the total benefit, and (3) the reform mostly benefited owners of sit-down restaurants, who pocketed 41 percent of the tax cut.

Brad Hershbein, Lisa B. Kahn, Harvard Business Review: Drastically Changed the Skills Employers Want. Previous research has suggested that a primary driver of this job polarization is something called routine-biased technological change (RBTC). In recent research we investigate how the demand for skills changed over the Great Recession (2007-09). Using nearly all electronically posted job vacancies in 2007 and 2010–2015 collected by the analytics company Burning Glass Technologies, as well as geographic differences in economic conditions, we establish a new fact: the skill requirements of job ads increased in metro areas that suffered larger employment shocks in the Great Recession, relative to the same areas before the shock and to other areas that experienced smaller shocks. Our estimates imply that ads posted in a hard-hit metro area are about 5 percentage points (16%) more likely to contain education and experience requirements and about 2–3 percentage points (8‒12%) more likely to include requirements for analytical and computer skills.

Anne Boschini, Kristin Gunnarsson, Jesper Roine, IZA: Women in Top Incomes: Evidence from Sweden 1974–2013.  Using a large, register-based panel data set we study gender differences in top incomes in Sweden over the period 1974–2013. We find that, while women are still a minority of the top decile group, and make up a smaller share the higher up in the distribution we move, their presence has steadily increased in all top groups over the past four decades. Top income women are wealthier and rely more on capital incomes, but the difference, relative to men, has decreased since the 1970s. Over this period capital incomes have in general become more important in the top, but the share of working-rich women has gone up, while the opposite is true for men.

Jamie Cullen, The Atlantic: When Working From Home Doesn’t Work. The expectation was that information technology would flatten the so-called Allen Curve. But Ben Waber, a visiting scientist at MIT, recently found that it hasn’t. The communications tools that were supposed to erase distance, it turns out, are used largely among people who see one another face-to-face. In one study of software developers, Waber, working alongside researchers from IBM, found that workers in the same office traded an average of 38 communications about each potential trouble spot they confronted, versus roughly eight communications between workers in different locations.

The Optimizing Government Project: This Project draws together researchers from across the University of Pennsylvania and the Philadelphia area to collaborate on studying the implementation of machine learning by government. The project aims to assess the technical, legal, ethical, and political challenges associated with machine learning in government, promoting collaboration between government, the private sector, and the academy.