NOVEMBER 23 2017

Kurt G. Lunsford, Cleveland Fed: Productivity Growth and Real Interest Rates in the Long Run. Despite the unemployment rate's return to low levels, inflation-adjusted or "real" interest rates have remained negative. One popular explanation for persistently negative real interest rates is that long-run productivity growth has slowed. I study the long-run relationship between real interest rates and productivity growth from 1914 to 2016 and find a negative correlation between these two variables. Hence, low productivity growth has been historically associated with high real interest rates. Since World War II, the correlation between these variables has been near zero. This suggests that slow long-run productivity growth is not driving real interest rates to be persistently negative.

Jonathan Rothwell, NYT: Myths of the 1 Percent: What Puts People at the Top. Dispelling misconceptions about what’s driving income inequality in the U.S. In the United States, the richest 1 percent have seen their share of national income roughly double since 1980, to 20 percent in 2014 from 11 percent. No other nation in the 35-member Organization for Economic Cooperation and Development is as unequal among those with comparable tax data, and none have experienced such a sharp rise in inequality. In Denmark, the share of income going to the top 1 percent rose to 6 percent from just 5 percent. In the Netherlands, there was essentially no increase from 6 percent levels. Britain (6 percent to 14 percent) and Canada (9 percent to 14 percent) had notable increases in top-income earnings, but not as large as those in the United States. The United States imports only a small fraction of the value of its total economy, whereas Denmark and the Netherlands are highly dependent on imports. Tech industries in the United States have contributed just a tiny bit to the rise of the 1 percent, and the salaries of engineers and software developers rarely reach the 1 percent threshold of an annual income of $390,000. There is no correlation between changing immigration shares since 1990 and rising top-income shares. In fact, the countries that have absorbed the most immigrants — on a per-capita basis — have seen overall income inequality (measured by the Gini coefficient) fall.

Ghazala Azmat, Rosa Ferrer, Microeconomic Insights: Gender gaps among high-skilled professionals: the case of US lawyers. Given that there are gender gaps in career outcomes even for individuals with similar educational background and training, to what extent are they attributable to differences in measured performance? The legal profession assesses performance using two measures that are widely used and comparable across law firms: the annual number of hours billed to clients; and the annual amount of new client revenue generated. Using data on a representative cohort of young lawyers in the United States who graduated from law school in 2000, we study gender gaps in hours worked, performance, earnings and promotion to partner. Simple descriptive analysis shows that male lawyers bill 10% more hours to clients and bring in more than twice as much new business than female lawyers. We find that the difference in hours billed is largely explained by the difference in hours worked. In other words, per hour worked, women bill as many hours as men, but client revenue per hour worked is lower for women than men. Performance gaps explain a substantial share of the gender gaps in earnings.

Peter Lindert, VOX. The rise and future of progressive redistribution. There has been a blossoming of research into fiscal incidence by income class. This column combines century-long histories for Britain and South American countries with previous research to offer a global history of government income redistribution. Contrary to some allegations, the shift towards progressivity in government budgets over the last 100 years has not been reversed since the 1970s. Among democratic welfare states, the closest thing to a demonstrable reversal was Sweden’s partial retreat since the 1980s. The rise in inequality since the 1970s therefore appears to owe nothing to a net shift government redistribution toward the rich.

Leander Heldring, James Robinson, Sebastian Vollmer, VOX: The origins of the Industrial Revolution. The Industrial Revolution is arguably the most important economic event in world history, and successful industrialisation continues to elude many developing countries today. This column argues that an important driver of industrialisation in England was the development of markets that allowed division of labour, innovation and, ultimately, social change. Institutional change, rather than advantageous geography, is the main driver of successful industrialisation in England.

Johnathan Watkins et al., BMJ Open: Effects of health and social care spending constraints on mortality in England: a time trend analysis. Time trend analyses were conducted to compare the actual mortality rates in 2011–2014 with the counterfactual rates expected based on trends before spending constraints. Spending constraints between 2010 and 2014 were associated with an estimated 45 368 higher than expected number of deaths compared with pre-2010 trends. Deaths in those aged ≥60 and in care homes accounted for the majority. Spending constraints, especially PES, are associated with a substantial mortality gap.

Josh Angrist, Pierre Azoulay, Glenn Ellison, Ryan Hill, Susan Feng Lu, VOX. Economics gets out more often: Using extramural citations to assess economic scholarship. Economics, and economists, are often accused of insularity and hubris, and of talking primarily to themselves in their research. This column uses a recent analysis of citations to and from other disciplines to show that this is no longer the case. Economics papers increasingly cite non-economic research, and other disciplines cite economists more often too. The data suggest that the rising quantity and quality of empirical research in economics has increased the relevance of the field to non-Economists.

David Grimm, Science: These may be the world’s first images of dogs—and they’re wearing leashes. Carved into a sandstone cliff on the edge of a bygone river in the Arabian Desert, a hunter draws his bow for the kill. He is accompanied by 13 dogs, each with its own coat markings; two animals have lines running from their necks to the man’s waist. The engravings likely date back more than 8000 years, making them the earliest depictions of dogs, a new study reveals. And those lines are probably leashes, suggesting that humans mastered the art of training and controlling dogs thousands of years earlier than previously thought.