Michael Anson,
David Bholat, Miao Kang and Ryland
Thomas, BoE: Looking inside the ledgers: the Bank of England as a Lender of
Last Resort. The Bank’s generosity fell unevenly— typically the top
fifth of borrowers received over three-fourths of the amounts lent. However, we
have found no evidence that the Bank preferred lending to its existing
customers i.e. those who held current accounts with the Bank’s Drawing Office,
versus others. In sum, we find that the Bank developed into a
textbook lender of last resort over the course of the three great crises of the
mid-nineteenth century. Strikingly, it did so before Bagehot wrote his
canonical text. But our paper barely scratches the surface of the historical
treasures buried below Threadneedle Street in the Bank’s archives.
John Haltiwanger,
Henry Hyatt, and Erika McEntarfer, NBER Digest: Who Moves Up the Job Ladder? We examine demographic patterns in job ladder
mobility over the business cycle. Upward movement of workers on a "job
ladder" from low-productivity to high-productivity firms is heavily
dependent on the business cycle. During booms, net employment at high-productivity firms grows faster
than at low-productivity firms, resulting in workers moving up the ladder.
During busts, these upward job-to-job changes essentially stop. Net
employment flows are instead driven by layoffs, with low-productivity firms
losing comparatively more workers than their higher-productivity counterparts.
Barry Eichengreen,
Project Syndicate: Two Myths About Automation. While many people believe that technological progress
and job destruction are accelerating dramatically, there is no evidence of
either trend. In reality,
total factor productivity, the best summary measure of the pace of technical
change, has been stagnating since 2005 in the US and across the
advanced-country world.
Katja
Mann, Lukas Püttmann, VOX EU: Benign effects of automation: New evidence from
patent texts. Researchers
disagree over whether automation is creating or destroying jobs. This column
introduces a new indicator of automation constructed by applying a machine learning algorithm to
classify patents, and uses the result to investigate which US regions and
industries are most exposed to automation. This indicator suggests that
automation has created more jobs in the US than it has destroyed.
Thomas Piketty, Le
Monde: Trump, Macron: same fight. It is customary
to contrast Trump and Macron: on one hand the vulgar American businessman with
his xenophobic tweets and global warming scepticism; and on the other, the
well-educated, enlightened European with his concern for dialogue between
different cultures and sustainable development. All this is not entirely false
and rather pleasing to French ears. But if we take a closer look at the policies being implemented, one is
struck by the similarities. In particular, Trump, like Macron, has just had
very similar tax reforms adopted. In both cases, these constitute an incredible
flight in the direction of fiscal dumping in favour of the richest and most
mobile.
James R. Flynn,
Michael Shayer, Science Direct: IQ decline and Piaget: Does the rot start at
the top? The IQ gains of the 20th century have faltered. Losses in Nordic nations after
1995 average at 6.85 IQ points when projected over thirty years. On
Piagetian tests, Britain shows decimation among high scorers on three tests and
overall losses on one. The US sustained its historic gain (0.3 points per year)
through 2014. The Netherlands shows no change in preschoolers, mild losses at
high school, and possible gains by adults. When a later cohort is compared to
an earlier cohort, IQ trends vary dramatically by age. Piagetian trends
indicate that a decimation of top scores may be accompanied by gains in
cognitive ability below the median. They also reveal the existence of factors
that have an atypical impact at high levels of cognitive competence. Scandinavian data from
conventional tests confirm the decimation of top scorers but not factors of
atypical impact. Piagetian tests may be more sensitive to detecting this
phenomenon.
Woodley of Menie,
Michael A., APA PsycNET: What Causes the Anti-Flynn Effect? A Data Synthesis
and Analysis of Predictors. Anti-Flynn
effects (i.e., secular declines in IQ) have been noted in a few countries. Much
speculation exists about the causes of these trends; however, little progress
has been made toward comprehensively testing these. A synthetic literature
search yielded a total of 66 observations of secular IQ decline from 13
countries, with a combined sample size of 302,234 and study midyears spanning
87 years, from 1920.5 to 2007.5. Multilevel modeling (MLM) was used to examine the
effect of study midyear, and (after controlling for this and other factors)
hierarchical general linear modeling (GLM) was used. The MLM revealed that the anti-Flynn effect has
strengthened in more recent years. Index of Biological State was not a significant
predictor; however immigration predicted the decline, indicating that high
levels of immigration promote the anti-Flynn effect.
Almog Adir, Simon Whitaker, BoE: Do rich countries
lend to poor countries? In the last few years there has been a small net
overall flow of capital from advanced to emerging market economies (EMEs), in
contrast to the ‘paradox’ prevailing for much of this century of capital
flowing the ‘wrong’ way, uphill from poor to rich countries. In this post we show the
‘paradox’ in the aggregate flows actually concealed private capital flowing the
‘right’ way for much of the time. And even during recent turbulence,
foreign direct investment (FDI) flows, likely to be particularly beneficial to
growth, have persisted. But EMEs could still benefit more from
harnessing capital from advanced economies and Argentina has set a useful
precedent as it prepares to take over the Presidency of the G20 in 2018.
Amanda Bayer, David Wilcox, FED: The Unequal
Distribution of Economic Education: A Report on the Race, Ethnicity, and Gender
of Economics Majors at US Colleges and Universities. The distribution of economic education among US
college graduates is quite unequal: female and underrepresented minority
undergraduates, collectively, major in economics at 0.36 the rate that white,
non-Hispanic male students do. This paper makes a four-part contribution to address
this imbalance. First and foremost, we provide detailed comparative data at the institution
level to provoke and inform the attention of economists and senior
administrators at colleges and universities, among others. Second, we establish
a definition of full inclusion in economic education on college and university
campuses and use that definition to evaluate the status quo and to compare
institutions. Third, we illuminate the reasons why the need to improve
the distribution of economic education is urgent, including the imperative to
support economic policymaking. Lastly, we point the way forward, identifying
both currently available resources and reasonable next steps for all involved
parties to take.
Joshua Hyman, AEA: Does Money Matter in the Long Run?
Effects of School Spending on Educational Attainment. This paper measures the effect of increased primary
school spending on students’ college enrollment and completion. Using
student-level panel administrative data, I exploit variation in the school
funding formula imposed by Michigan’s 1994 school finance reform, Proposal A. Students exposed to $1,000 (10
percent) more spending were 3 percentage points (7 percent) more likely to
enroll in college and 2.3 percentage points (11 percent) more likely to earn a
postsecondary degree. The effects were concentrated among districts that
were urban and suburban, lower poverty, and higher achieving at baseline.
Districts targeted the marginal dollar toward schools serving less-poor
populations within the district.
Elizabeth Dhuey, David Figlio, Krzysztof Karbownik,
Jeffrey Roth, NBER: School Starting Age and Cognitive Development. We present evidence of a positive relationship between school starting age
and children’s cognitive development from age 6 to 15 using a regression
discontinuity design and large-scale population-level birth and school data
from the state of Florida. We estimate effects of being relatively old
for grade (being born in September versus August) that are remarkably stable –
always just around 0.2 SD difference in test scores – across a wide range of
heterogeneous groups, based on maternal education, poverty at birth,
race/ethnicity, birth weight, gestational age, and school quality. While the
September-August difference in kindergarten readiness is dramatically different
by subgroup, by the time students take their first exams, the heterogeneity in
estimated effects effectively disappears. We document substantial variation in
compensatory behaviors targeted towards young for grade children. While the
more affluent families tend to redshirt their children, young for grade
children from less affluent families are more likely to be retained in grades
prior to testing. School district practices regarding retention and redshirting
are correlated with improved outcomes for the groups less likely to use those
remediation approaches (i.e., retention in the case of more-affluent families
and redshirting in the case of less-affluent families.) We also study college
and juvenile detention outcomes using administrative data from a large Florida
school district, and show that being an older age at school entry increases children’s college
attainment and reduces the likelihood of being incarcerated for juvenile crime.
Matthew Smith et al: US Treasury Department.
Capitalists in the Twenty-First Century. Have passive rentiers replaced the working rich at the top of the U.S.
income distribution? Using administrative data linking 10 million firms to their
owners, this paper shows that private business owners who actively manage their firms are key for top
income inequality. Private business income accounts for most of the rise of top
incomes since 2000 and the majority of top earners receive private business
income most of which accrues to active owner-managers of mid-market firms in
relatively skill-intensive and unconcentrated industries. Profit falls
substantially after premature owner deaths. Top-owned firms are twice as
profitable per worker as other firms despite similar risk, and rising
profitability without rising scale explains most of their profit growth.
Together, these facts indicate that the working rich remain central to rising
top incomes in the twenty-first century.
Federica Liberini, Andrew J. Oswald, Eugenio Proto,
Michela Redoano, IZA: Was Brexit Caused by the Unhappy and the Old? This paper uses newly released information, from the
Understanding Society data set, to examine the characteristics of individuals
who were for and against Brexit. Two key findings emerge. First, unhappy
feelings contributed to Brexit. However, contrary to commonly heard views, the key channel of influence was
not through general dissatisfaction with life. It was through a person's narrow
feelings about his or her own financial situation. Second, despite some
commentators' guesses, Brexit was not caused by old people. Only the very young
were substantially pro-Remain.
Trenton G. Smith, Steven Stillman, Stuart Craig, IZA:
'Rational Overeating' in a Feast-or-Famine World: Economic Insecurity and the
Obesity Epidemic. Obesity rates
have risen dramatically in the US since the 1980s, but well-identified studies
have struggled to explain the magnitude of the observed changes. In this paper,
we estimate the causal impact of economic insecurity on obesity rates.
Specifically, we construct a synthetic panel of demographic groups over the
period 1988 to 2012 by combining the newly developed Economic Security Index
(ESI) with data from the National Health and Nutrition Examination Surveys
(NHANES). According to our
estimates, increased economic insecurity over this time period explains 50% of
the overall population-level increase in obesity.
Olivier J.
Blanchard, NBER: Should we Get rid of the Natural Rate Hypothesis? 50 years ago, Milton Friedman articulated the natural
rate hypothesis. It was composed of two sub-hypotheses: First, the natural rate
of unemployment is independent of monetary policy. Second, there is no long-run
trade-off between the deviation of unemployment from the natural rate and
inflation. Both propositions have been challenged. The paper reviews the
arguments and the macro and micro evidence against each. It concludes that, in each case,
the evidence is suggestive, but not conclusive. Policy makers should keep the
natural rate hypothesis as their null hypothesis, but keep an open mind and put
some weight on the alternatives
Björn Tyrefors
Hinnerich et al., Research Institute of Industrial Economics: Extended right to
vote kick-started the economic development in Sweden: How important are
political rules for economic growth? Recent work supports theories that changes in political institutions
can be key determinants of economic institutions and growth. We examined the impact of Sweden’s
1862 suffrage reform, which extended the voting rights of industrialists. Using
a unique data set they found that the reform was a key factor in Sweden’s
growth miracle because it gave industrialists more political clout,
kick-starting the process.
Emmanuel Saez,
Benjamin Schoefer, David Seim, VOX: The effects of employer payroll tax cuts on
employment, business activity and wages. Cuts to the employer portion of payroll taxes are often discussed as a
policy lever to reduce labour costs for firms. This column examines the effects
of a Swedish experiment which dramatically cut employer payroll taxes for young
workers between 2007 and 2015. The tax cut reduced youth unemployment by 2-3 percentage points,
without any differential increase in wages of young workers. Firms used the tax
windfall to expand employment and business activity, and firms with larger tax
windfalls raised wages for workers – both young and old – collectively.
Lisa A. Robinson,
James K. Hammitt, Harvard: Assessing the Distribution of Impacts in Global
Benefit‐Cost Analysis. There is
widespread agreement that benefit‐cost analyses should be supplemented with
information on how the impacts are distributed across individuals with different
characterics (such as income). Yet reviews of completed analyses suggest that
such information is rarely provided. Conventionally, benefit‐cost analysis
focuses on economic efficiency, summing the values of a policy’s costs and
benefits based on the preferences of those affected. Decision‐makers and other stakeholders typically
find this information useful but insufficient; they
also want to know who is harmed and who is helped and by how much. The goal of
this paper is therefore relatively simple: to encourage analysts to provide
information on the distribution of net benefits throughout the population in
addition to assessing the overall impacts of the policy.
Jon Kristian
Pareliussen, OECD: How self-sorting affects migrants’ labour market outcomes. Assuming that immigrants select destinations
according to absolute returns to their observable and unobservable human
capital, I present a human capital model of migration accounting for taxes,
transfers and limited portability of skills. The model predicts both segmented
sorting of migrants to countries with a compressed income distribution, with
negative sorting increasing with lower portability and positive sorting
increasing with portability. Sorting to countries with greater income
dispersion increases unambiguously with host-country relevant skills. Migrants
to countries with compressed incomes will hence be more likely to be either out
of work or overqualified and low-paid compared to natives with similar
observable skills, and compared to migrants to countries with greater income
dispersion. Regressions results on data for 16 OECD countries from the OECD
Survey of Adult Skills are in line with the model. Controlling for observable skills and
characteristics, including a literacy test score, immigrants from countries
that are less wealthy or further away in geographical and cultural distance are
significantly more likely to be either out of work or overqualified and
low-paid in high-benefit countries. Wage compression, generous transfers and
high taxes, typical traits of the so-called “Nordic” or “Flexicurity” model,
may therefore contribute to making immigrant integration more challenging.
David H. Autor,
Christopher J. Palmer, Parag A. Pathak, NBER: Gentrification and the Amenity
Value of Crime Reductions: Evidence from Rent Deregulation. Gentrification involves large-scale neighborhood
change whereby new residents and improved amenities increase property values.
In this paper, we study whether and how much public safety improvements are
capitalized by the housing market after an exogenous shock to the
gentrification process. We use variation induced by the sudden end of rent
control in Cambridge, Massachusetts in 1995 to examine within-Cambridge
variation in reported crime across neighborhoods with different rent-control
levels, abstracting from the prevailing city-wide decline in criminal activity.
Using detailed location-specific incident-level criminal activity data
assembled from Cambridge Police Department archives for the years 1992 through
2005, we find robust
evidence that rent decontrol caused overall crime to fall by 16
percent—approximately 1,200 reported crimes annually—with the majority of the
effect accruing through reduced property crime. By applying external estimates
of criminal victimization’s economic costs, we calculate that the crime
reduction due to rent deregulation generated approximately $10 million (in 2008
dollars) of annual direct benefit to potential victims. Capitalizing
this benefit into property values, this crime reduction accounts for 15 percent
of the contemporaneous growth in the Cambridge residential property values that
is attributable to rent decontrol. Our findings establish that reductions in
crime are an important part of gentrification and generate substantial economic
value. They also show that standard cost-of-crime estimates are within the
bounds imposed by the aggregate price appreciation due to rent decontrol.
Carrie Arnold,
Quanta Magazine: Choosy Eggs May Pick Sperm for Their Genes, Defying Mendel’s
Law. The oldest law of genetics says that gametes combine
randomly, but experiments hint that sometimes eggs select sperm actively for
their genetic assets. Random fertilization should lead to specific ratios of
gene combinations in offspring, but Nadeau has found two examples just from his
own lab that indicate fertilization can be far from random: Certain pairings of
gamete genes are much more likely than others. After ruling out obvious
alternative explanations, he could only conclude that fertilization wasn’t
random at all. “It’s the gamete equivalent of choosing a partner,” Nadeau said.
His hypothesis – that the
egg could woo sperm with specific genes and vice versa – is part of a growing
realization in biology that the egg is not the submissive, docile cell that
scientists long thought it was. Instead, researchers now see the egg as an
equal and active player in reproduction, adding layers of evolutionary control
and selection to one of the most important processes in life.
