Maurice Obstfeld,
Gian Maria Milesi-Ferretti, Rabah Arezki, IMF: Oil Prices and the Global
Economy: It’s Complicated. Even
though oil is a less important production input than it was three decades ago,
that reasoning should work in reverse when oil prices fall, leading to lower
production costs, more hiring, and reduced inflation. But this channel causes a
problem when central banks cannot lower interest rates. Because the policy
interest rate cannot fall further, the decline in inflation (actual and
expected) owing to lower production costs raises the real rate of interest,
compressing demand and very possibly stifling any increase in output and
employment. Indeed, those aggregates may both actually fall. Something like
this may be going on at the present time in some economies.
Hans-Werner Sinn,
Project Syndicate: Europe’s Emerging Bubbles. But the worst effects of the ECB policy may be yet to come, if the
eurozone’s still-sound economies also become credit junkies. There are already
some worrying signs of this. Property markets in Austria, Germany, and
Luxembourg have practically exploded throughout the crisis, as a result of
banks chasing borrowers with offers of loans at near-zero interest rates,
regardless of their creditworthiness. In Austria, property prices have risen by
nearly half since the Lehman collapse; in Luxembourg, they have risen by almost
one-third. Even Germany, Europe’s largest economy, has been experiencing a
massive property boom since 2010, with average urban property prices having
risen by more than one-third – and by nearly half in large cities. The country
is undergoing a construction boom not seen since reunification. Real estate
agents have only leftovers on offer.
Judd Cramer, Alan
B. Krueger, NBER: Disruptive Change in the Taxi Business: The Case of Uber. In most cities, the taxi industry is highly regulated
and utilizes technology developed in the 1940s. Ride sharing services such as
Uber and Lyft, which use modern internet-based mobile technology to connect
passengers and drivers, have begun to compete with traditional taxis. This
paper examines the efficiency of ride sharing services vis-à-vis taxis by
comparing the capacity utilization rate of UberX drivers with that of
traditional taxi drivers in five cities. The capacity utilization rate is
measured by the fraction of time a driver has a fare-paying passenger in the
car while he or she is working, and by the share of total miles that drivers
log in which a passenger is in their car. The main conclusion is that, in most
cities with data available, UberX drivers spend a significantly higher fraction
of their time, and drive a substantially higher share of miles, with a
passenger in their car than do taxi drivers. Four factors likely contribute to
the higher capacity utilization rate of UberX drivers: 1) Uber’s more efficient
driver-passenger matching technology; 2) the larger scale of Uber than taxi
companies; 3) inefficient taxi regulations; and 4) Uber’s flexible labor supply
model and surge pricing more closely match supply with demand throughout the
day.
Stefan Bender,
Nicholas Bloom, David Card, John Van Reenen, Stefanie Wolter, NBER: Management
Practices, Workforce Selection and Productivity. Recent research suggests that much of the cross-firm
variation in measured productivity is due to differences in use of advanced
management practices. We use a unique data set that combines detailed survey
data on the management practices of German manufacturing firms with
longitudinal earnings records for their employees to study the relationship
between productivity, management, worker ability, and pay. In our preferred TFP estimates only a small
fraction of this correlation is explained by the higher human capital of the
average employee at better-managed firms. Overall, we conclude that workforce selection
and positive pay premiums explain just under 30% of the measured impact of
management practices on productivity in German manufacturing.
Kai Rehwald, Michael Rosholm, Benedicte Rouland, IZA:
Does Activating Sick-Listed Workers Work? Evidence from a Randomized
Experiment. Using data from a large-scale
randomized controlled trial conducted in Danish job centers, this paper
investigates the effects of an intensification of mandatory return-to-work
activities on the subsequent labor market outcomes for sick-listed workers.
Using variations in local treatment strategies, both between job centers and
between randomly assigned treatment and control groups within a given job
center, we compare the relative effectiveness of alternative interventions. Our
results show that the use of partial sick leave increases the length of time
spent in regular employment and non-reliance on benefits, and also reduces the
time spent in unemployment. Traditional active labor market programs and the
use of paramedical care appear to have no effect at all, or even an adverse
effect.
Claudia Olivetti,
M. Daniele Paserman, Laura Salisbury, NBER: Three-generation Mobility in the
United States, 1850-1940: The Role of Maternal and Paternal Grandparents. This paper estimates intergenerational elasticities
across three generations in the United States in the late 19th and early 20th
centuries. We extend the methodology in
Olivetti and Paserman (2015) to explore the role of maternal and paternal
grandfathers for the transmission of economic status to grandsons and
granddaughters. We document three main
findings. First, grandfathers matter for
income transmission, above and beyond their effect on fathers' income. Second,
the socio-economic status of grandsons is influenced more strongly by paternal
grandfathers than by maternal grandfathers. Third, maternal grandfathers are
more important for granddaughters than for grandsons, while the opposite is
true for paternal grandfathers.
Meritkotkas. In Estonia you can on streaming camera follow a sea
eagle couple with eggs in the windy coast, waiting for their chicks to creep
out. Link for Apple
U.S. Department of
Energy: Impact of Extended Daylight Saving Time on National Energy Consumption. The total electricity savings of Extended Daylight
Saving Time were about 1.3 Tera Watt-hour (TWh). This corresponds to 0.5
percent per each day of Extended Daylight Saving Time, or 0.03 percent of
electricity consumption over the year. In reference, the total 2007 electricity
consumption in the United States was 3,900 TWh.
Myriam B.C. Aries,
Guy R. Newsham, Energy Policy: Effect of daylight saving time on lighting
energy use: A literature review. The principal reason for introducing (and extending) daylight saving
time (DST) was, and still is, projected energy savings, particularly for
electric lighting. Simple estimates suggest a reduction in national electricity
use of around 0.5%, as a result of residential lighting reduction. Several
studies have demonstrated effects of this size based on more complex
simulations or on measured data. However, there are just as many studies that
suggest no effect, and some studies suggest overall energy penalties,
particularly if gasoline consumption is accounted for. There is general
consensus that DST does contribute to an evening reduction in peak demand for
electricity, though this may be offset by an increase in the morning.
Nevertheless, the basic patterns of energy use, and the energy efficiency of
buildings and equipment have changed since many of these studies were conducted.
Ryan Kellogg, Hendrik Wolff, IZA: Does Extending
Daylight Saving Time Save Energy? Evidence from an Australian Experiment. Several countries are considering extending Daylight
Saving Time (DST) in order to conserve energy, and the U.S. will extend DST by
one month beginning in 2007. However, projections that these extensions will
reduce electricity consumption rely on extrapolations and simulations rather
than empirical evidence. This paper, in contrast, examines a quasiexperiment in
which parts of Australia extended DST in 2000 to facilitate the Sydney Olympics.
Using detailed panel data and a triple differences specification, we show that
the extension did not conserve electricity, and that a prominent
simulation model overstates electricity savings when it is applied to
Australia.
Christopher M.
Barnes David T. Wagner, NYT: The Economic Toll of Daylight Saving Time. In a study of mining injuries across the U.S., we
found a spike in workplace injuries of nearly 6 percent on the Monday following
the shift to daylight saving time. In a follow-up study we found that workers
tend to “cyberloaf” – that is, they use their computers and internet access to
engage in activities that are not related to work – at a substantially higher
rate on the Monday following the shift to daylight saving time than on other
Mondays. What’s more, we found that for every hour of interrupted sleep the
previous night, participants in our lab cyberloafed for 20 percent of their
assigned task. When extrapolated to a full day’s work, that would mean daylight
saving time and lost sleep can result in substantial productivity losses. In
fact, a recent estimate of this effect put the cost to the American economy at
over $434 million annually, simply from a subtle shift of the clocks.
Mark J. Kamstra,
Lisa A. Kramer, Maurice D. Levi, York University: Losing Sleep at the Market:
The Daylight-Savings Anomaly. We explore
the connection between equity returns and sleep disruptions following
daylight-savings time changes. In international markets, the average
Friday-to-Monday return on daylight-savings weekends is markedly lower than
expected, with a magnitude 200 to 500 percent larger than the average negative
return for other weekends of the year. This ``daylight-savings anomaly'' in
financial markets is consistent with desynchronosis research which has
identified the effects of changes in sleep patterns on judgment, anxiety, reaction
time, problem solving and accidents. This paper suggests sleep effects of
daylight-savings time changes may be impacting market participants
internationally.
Jin, L., Nicolas
Ziebarth, University of York: Sleep and Human Capital: Evidence from Daylight
Saving Time. This paper is one of the
first to test for a causal relationship between sleep and human capital. It
exploits the quasi-experimental nature of Daylight Saving Time (DST), up to 3.4
million BRFSS respondents from the US, and all 160 million hospital admissions
from Germany over one decade. We find evidence of mild negative health effects
when clocks are set forward one hour in spring. When clocks are set back one
hour in fall, effectively extending sleep duration for the sleep deprived by
one hour, sleep duration and selfreported health increase and hospital
admissions decrease significantly for four days.
Daniel Kuehnle,
Christoph Wunder, Friedrich-Alexander-University Erlangen-Nuremberg: Using the
life satisfaction approach to value daylight savings time transitions. Evidence
from Britain and Germany. Daylight savings
time (DST) represents a public good with costs and benefits. We provide the
first comprehensive examination of the welfare effects of the spring and autumn
transitions for the UK and Germany. Using individual-level data and a
regression discontinuity design, we estimate the effect of the transitions on
life satisfaction. Our results show that individuals in both the UK and Germany
experience deteriorations in life satisfaction in the first week after the spring
transition. We find no effect of the autumn transition. We attribute the
negative effect of the spring transition to the reduction in the time endowment
and the process of adjusting to the disruption in circadian rhythms. The
effects are particularly strong for individuals with young children in the
household. We conclude that the higher the shadow price of time, the more difficult
is adjustment. Presumably, an increase in flexibility to reallocate time could
reduce the welfare loss for individuals with binding time constraints.
Stanley Coren,
University of British Columbia: Daylight Savings Time and Traffic Accidents. We used data from a tabulation of all traffic
accidents in Canada as they were reported to the Canadian Ministry of Transport
for the years 1991 and 1992 by all 10 provinces. A total of 1,398,784 accidents
were coded according to the date of occurrence. The spring shift to daylight
savings time, and the concomitant loss of one hour of sleep, resulted in an
average increase in traffic accidents of approximately 8 percent, whereas the
fall shift resulted in a decrease in accidents of approximately the same
magnitude immediately after the time shift.
Tuuli Lahti, Esa
Nysten, Jari Haukka, Pekka Sulander, Timo Partonen, National Institute for
Health and Welfare: Daylight Saving Time Transitions and Road Traffic
Accidents. Circadian rhythm disruptions
may have harmful impacts on health. Circadian rhythm disruptions caused by jet
lag compromise the quality and amount of sleep and may lead to a variety of
symptoms such as fatigue, headache, and loss of attention and alertness. Even a
minor change in time schedule may cause considerable stress for the body.
Transitions into and out of daylight saving time alter the social and
environmental timing twice a year. According to earlier studies, this change in
time-schedule leads to sleep disruption and fragmentation of the circadian
rhythm. Since sleep deprivation decreases motivation, attention, and alertness,
transitions into and out of daylight saving time may increase the amount of
accidents during the following days after the transition.We studied the amount
of road traffic accidents one week before and one week after transitions into
and out of daylight saving time during years from 1981 to 2006. Our results
demonstrated that transitions into and out of daylight saving time did not increase
the number of traffic road accidents.
Cathleen D. Zick,
ISPAH: Does Daylight Savings Time Encourage Physical Activity? Extending Daylight Savings Time (DST) has been
identified as a policy intervention that may encourage physical activity.
However, there has been little research on the question of if DST encourages
adults to be more physically active. Data from residents of Arizona, Colorado,
New Mexico, and Utah ages 18–64 who participated in the 2003–2009 American Time
Use Survey are used to assess whether DST is associated with increased time
spent in moderate-to-vigorous physical activity (MVPA). The analysis
capitalizes on the natural experiment created because Arizona does not observe
DST. Both bivariate and multivariate analyses indicate that shifting 1 hour of
daylight from morning to evening does not impact MVPA of Americans living in
the southwest.
Jennifer L.
Doleac, Nicholas J. Sanders, University of Virginia: Under the Cover of
Darkness: How Ambient Light Influences Criminal Activity. We exploit daylight saving time (DST) as an exogenous
shock to daylight, using both the discontinuous nature of the policy and the
2007 extension of DST, to consider the impact of light on criminal activity.
Regression discontinuity estimates show a 7% decrease in robberies following
the shift to DST. As expected, effects are largest during the hours directly
affected by the shift in daylight. We discuss our findings within the context
of criminal decision making and labor supply, and estimate that the 2007 DST
extension resulted in $59 million in annual social cost savings from avoided
robberies.
Yvonne Harrison,
Sleep Medicine: The impact of daylight saving time on sleep and related
behaviours. Daylight saving time is
currently adopted in over 70 countries and imposes a twice yearly 1 h change in
local clock time. Relative ease in adjustment of sleep patterns is assumed by
the general population but this review suggests that the scientific data
challenge a popular understanding of the clock change periods. The start of
daylight saving time in the spring is thought to lead to the relatively
inconsequential loss of 1 h of sleep on the night of the transition, but data
suggests that increased sleep fragmentation and sleep latency present a cumulative
effect of sleep loss, at least across the following week, perhaps longer. The
autumn transition is often popularised as a gain of 1 h of sleep but there is
little evidence of extra sleep on that night. The cumulative effect of five
consecutive days of earlier rise times following the autumn change again
suggests a net loss of sleep across the week. Indirect evidence of an increase
in traffic accident rates, and change in health and regulatory behaviours which
may be related to sleep disruption suggest that adjustment to daylight saving
time is neither immediate nor without consequence.
Imre Janszky et
al., Sleep Medicine: Daylight saving time shifts and incidence of acute
myocardial infarction – Swedish Register of Information and Knowledge About
Swedish Heart Intensive Care Admissions (RIKS-HIA). Daylight saving time shifts can be looked upon as
large-scale natural experiments to study the effects of acute minor sleep
deprivation and circadian rhythm disturbances. To identify AMI incidence on
specific dates, we used the Register of Information and Knowledge about Swedish
Heart Intensive Care Admission, a national register of coronary care unit
admissions in Sweden. We compared AMI incidence on the first seven days after
the transition with mean incidence during control periods. To assess effect
modification, we calculated the incidence ratios in strata defined by patient
characteristics. Overall, we found an elevated incidence ratio of 1.039 (95%
confidence interval, 1.003–1.075) for the first week after the spring clock
shift forward. The higher risk tended to be more pronounced among individuals
taking cardiac medications and having low cholesterol and triglycerides. There
was no statistically significant change in AMI incidence following the autumn
shift.
Imre Janszky,
Rickard Ljung: Karolinska Institute: Shifts to and from Daylight Saving Time
and Incidence of Myocardial Infarction. The incidence of acute myocardial infarction was significantly
increased for the first 3 weekdays after the transition to daylight saving time
in the spring. The incidence ratio for the first week after the spring shift,
calculated as the incidence for all 7 days divided by the mean of the weekly
incidences 2 weeks before and 2 weeks after, was 1.051 (95% confidence interval
[CI], 1.032 to 1.071). In contrast, after the transition out of daylight saving
time in the autumn, only the first weekday was affected significantly.
Rasmussen Report:
Just 33% See the Purpose of Daylight Saving Time. Only 33% of American Adults think DST is worth the
hassle, according to a 2014 national telephone survey. That is down from 37%
last year at this time and 45% in 2012. Forty-eight percent (48%) do not think
the clock changing ritual is worth it, but 19% are not sure.
Erika Hallhagen, SvD: Våga vägra sommartid. Så är den här.
Morgonmänniskornas högtid nummer ett. Dagen då de får beröva oss ännu en timme
skönhetssömn, trots att vi redan dansar efter deras pipa och börjar jobbet
långt innan vi är vakna. Här är sju argument som klargör varför ett
maktövertagande är det enda rätta. Det enda argumentet du behöver. Donald Trump
är morgonmänniska.
David Andolfatto,
Macromania: Secular stagnation then and now. Secular stagnation refers to a prolonged and indefinite period of slow
growth and high unemployment (or subnormal factor utilization). When was the
last time this happened in the United States? Most people are likely to say the
1930s. In fact, it was the 1970s.
Reuven
Glick, Andrew K. Rose, San Francisco Fed: How Much Does the EMU Benefit Trade? The economic benefits of sharing a currency like the
euro continue to be debated. In theory, countries that use the same currency
face lower trade costs and exchange rate risk and are able to compare prices
across borders more easily. These advantages should help increase trade among
the economies involved. New estimates suggest that this has been the case in
Europe, though perhaps to a lesser degree than previously thought.
George J. Borjas,
LaborEcon: Employment of Undocumented Immigrants. Using newly developed methods that attempt to
identify undocumented status for foreign-born persons sampled in the Current
Population Surveys, the empirical analysis documents a number of findings,
including the fact that the work propensity of undocumented men is much larger
than that of other groups in the population; that this gap has grown over the
past two decades; and that the labor supply elasticity of undocumented men is
very close to zero, suggesting that their labor supply is almost perfectly
inelastic.
OECD:
Low-Performing Students. Why They Fall Behind and How To Help Them Succeed. Analyses show that poor performance at age 15 is not
the result of any single risk factor, but rather of a combination and
accumulation of various barriers and disadvantages that affect students throughout
their lives. Who is most likely to be a low performer in mathematics? On
average across OECD countries, a socio-economically disadvantaged girl who
lives in a single-parent family in a rural area, has an immigrant background,
speaks a different language at home from the language. Among low performers the
combination of risk factors is more detrimental to disadvantaged than to
advantaged students. Low performers tend to have less perseverance,
motivation and self-confidence in mathematics than better-performing students,
and they skip classes or days of school more. Students whose teachers have low
expectations for them and are absent more often are more likely to be low
performers in mathematics, even after accounting for the socio-economic status
of students and schools.
Erik Bengtsson, Daniel Waldenström, IZA: Capital
Shares and Income inequality: Evidence from the Long Run. This paper investigates the relationship between the
capital share in national income and personal income inequality over the long
run. Using a new historical cross-country database on capital shares in 19
countries and data from the World Wealth and Income Database, we find strong
long-run links between the aggregate role of capital in the economy and the
size distribution of income. Over time, this dependence varies; it was strong
both before the Second World War and in the early interwar era, but has grown
to its highest levels in the period since 1980. The correlation is particularly
strong in Anglo-Saxon and Nordic countries, in the very top of the distribution
and when we only consider top capital incomes. Replacing top income shares with
a broader measure of inequality (Gini coefficient), the positive relationship
re-mains but becomes somewhat weaker.
Erzo F.P. Luttmer,
Andrew A. Samwick, NBER: The Welfare Cost of Perceived Policy Uncertainty:
Evidence from Social Security. Policy
uncertainty can reduce individual welfare when individuals have limited
opportunities to mitigate or insure against consumption fluctuations induced by
the policy uncertainty. For this reason, policy uncertainty surrounding future
Social Security benefits may have important welfare costs. We field an original
survey to measure the degree of policy uncertainty in Social Security and to
estimate the impact of this uncertainty on individual welfare. On average, our
survey respondents expect to receive only about 60 percent of the benefits they
are supposed to get under current law. We document the wide variation around
the expectation for most respondents and the heterogeneity in the perceived
distributions of future benefits across respondents. This uncertainty has real
costs. Our central estimates show that on average individuals would be willing
to forego around 6 percent of the benefits they are supposed to get under
current law to remove the policy uncertainty associated with their future
benefits. This translates to a risk premium from policy uncertainty equal to 10
percent of expected benefits.
Madhumita Murgia,
The Telegraph: Algorithm can predict your marital success from your voice. A new computer algorithm can predict whether a
married couple's relationship improved or worsened over time, based on their
tone of voice when speaking to each other. In fact, the algorithm - which was
correct 79 per cent of the time - was more accurate than session notes provided
by therapists, when predicting marital success of couples with serious
relationship issues.
Lizzie Drapper,
Hasdeep Sethi, BoE: Houses: who has stopped buying them? In 2006, 64 English houses in every 1000 changed
hands. Three years and a credit crunch later, this had halved to only 32
transactions per 1000 houses. Since 2009, transactions have recovered, but
remain well below their pre-crisis level. Transactions are a key metric of the
health of the UK housing market and can be seen as a measure of “liquidity”.
The reasons behind low transactions levels may also provide further insight
into people’s behaviour and view of housing in the UK. In the work set out
below, we conclude that it is unlikely that transactions regain their
pre-crisis level any time soon, because of affordability constraints for
first-time buyers and fewer discretionary moves by existing owners.
Valeria
Pellegrini, Alessandra Sanelli, Enrico Tosti, VOX: Unreported assets held
abroad and tax evasion: Hints from external statistics. Balance of payments statistics suggest that assets
held abroad are greatly underestimated – particularly for mutual fund shares
and bank deposits. This column looks into the role played by tax havens and
estimates that unreported financial assets amount to between $6 and $7
trillion. On this figure, the related tax evasion is between $19 and $38
billion a year on capital income, and between $2 and $2.6 trillion on personal
income. Recent policy initiatives such as automatic information exchanges
constitute real progress, but some critical aspects might jeopardise their
effectiveness.
Bruno Van der
Linden, IZA: Do in-work benefits work for low-skilled workers? Permanent in-work benefits (IWB) often increase labor
force participation by single mothers and reduce in-work poverty. In the UK and
the US, these effects appear to be accompanied by improved indicators of health
and life satisfaction for the beneficiaries, as well as some positive effects
detected on their children. There is also a broad consensus that IWB can
improve the redistribution of income. Still, IWB have a negative impact on low
wages in the absence of downward wage rigidities, which reduces their redistribution
effects.
Jane Waldfogel,
Columbia University: The role of preschool in reducing inequality. Preschool improves child outcomes, especially for
disadvantaged children. Evidence on the potential of preschool programs to
reduce inequality in child development is quite strong. It has been clear for
some time that small model preschool programs can lead to substantial
improvements in school readiness for children from disadvantaged backgrounds
who would otherwise have little access to high-quality early childhood care or
education and who have the most to gain from high-quality programs. This early
evidence suggested that preschool might be an effective way to reduce
inequality.
Joao Pedro Jerico
et al., Cornell: When does inequality freeze an economy? Inequality and its consequences are the subject of
intense recent debate. We address the relation between inequality and
liquidity, i.e. the frequency of economic exchanges in the economy. We do that
within an intentionally simplified model of the economy, where all exchanges
that are compatible with agents' budget constraints are possible. Assuming a
Pareto distribution of capital for the agents, that is consistent with
empirical findings, we find an inverse relation between inequality and
liquidity. By quantifying the amount of inequality in the system by the
exponent of the Pareto distribution, we show that an increase in inequality of
capital results in an even sharper concentration of financial resources,
leading to congestion of the flow of goods and the arrest of the economy when
the Pareto exponent reaches one.
Branko Milanovic,
VOX: Introducing Kuznets waves: How income inequality waxes and wanes over the
very long run. The Kuznets
curve was widely used to describe the relationship between growth and
inequality over the second half of the 20th century, but it has fallen out of
favour in recent decades. This column suggests that the current upswing in
inequality can be viewed as a second Kuznets curve. It is driven, like the
first, by technological progress, inter-sectoral reallocation of labour,
globalisation, and policy. The author argues that the US has still not reached
the peak of inequality in this second Kuznets wave of the modern era.
Paul Krugman, NYT:
Return of the Undeserving Poor. When I
was growing up, there was a great deal of alarm over the troubles of the
African-American community, where social disorder was on the rise even as
explicit legal discrimination (although not de facto discrimination) was coming
to an end. What was going on? William Julius Wilson argued that the underlying
cause was economic: good jobs, while still fairly plentiful in America as a
whole, were disappearing from the urban centers where the A-A population was
concentrated. And the social collapse, while real, followed from that
underlying cause. This story contained a clear prediction — namely, that if
whites were to face a similar disappearance of opportunity, they would develop
similar behavior patterns. And sure enough, with the hollowing out of the
middle class, we saw what Kevin Williamson describes as the welfare dependency,
the drug and alcohol addiction, the family anarchy.
Jessica Tyrrell,
BMJ: Height, body mass index, and socioeconomic status: mendelian randomisation
study in UK Biobank. These data
support evidence that height and BMI play an important partial role in
determining several aspects of a person’s socioeconomic status, especially
women’s BMI for income and deprivation and men’s height for education, income,
and job class. These findings have important social and health implications,
supporting evidence that overweight people, especially women, are at a
disadvantage and that taller people, especially men, are at an advantage.
Ian Talley,
WSJ: The IMF Is Sounding the Alarm. Is
Anyone Listening? The
International Monetary Fund is sounding louder and louder alarms about the
state of the global economy. The problem is, few major economies seem to be
hearing them. “The IMF’s latest reading of the global economy shows once again
a weakening baseline,” the fund’s No. 2 official, David Lipton, warned Tuesday
in a speech to the National Association for Business Economics.
Kenneth Rogoff,
Project Syndicate: The Fear Factor in Global Markets. The idea is that investors become so worried about a
recession, and that stocks drop so far, that bearish sentiment feeds back into
the real economy through much lower spending, bringing on the feared downturn.
They might be right, even if the markets overrate their own influence on the
real economy. On the other hand, the fact that the US has managed to move
forward despite global headwinds suggests that domestic demand is robust. But this
doesn’t seem to impress markets. Even those investors who remain cautiously
optimistic about the US economy worry that the US Federal Reserve will view
growth as a reason to continue raising interest rates, creating huge problems
for emerging economies.
Dani Rodrik,
Project Syndicate: The Politics of Anger. The appeal of populists is that they give voice to the anger of the
excluded. They offer a grand narrative as well as concrete, if misleading and
often dangerous, solutions. Mainstream politicians will not regain lost ground
until they, too, offer serious solutions that provide room for hope. They
should no longer hide behind technology or unstoppable globalization, and they
must be willing to be bold and entertain large-scale reforms in the way the
domestic and global economy are run.
Courtney Coile,
Phillip B. Levine, NBER: Recessions and Retirement: How Stock Market and Labor
Market Fluctuations Affect Older Workers. Market fluctuations affect retirement, but the story is nuanced —
weaker long-term stock returns lead more-skilled workers to delay retirement,
while higher unemployment rates lead less-skilled workers to retire earlier. In
one study, we estimated that if the unusual stock and labor market conditions
experienced during the most recent downturn were to gradually return to normal
over a five-year period, there would be a net increase in retirements of about
120,000, or 1.2 percent relative to the estimated 10 million workers retiring
during this period.12 In fact, the stock market has rebounded more quickly and
the labor market more slowly, so the actual net increase in retirements is
likely larger.
Melissa Kearney,
Phillip Levine, Brookings: Income Inequality, Social Mobility, and the Decision
to Drop Out Of High School. We
propose that one channel by which higher rates of income inequality might lead
to lower rates of upward mobility is through lower rates of human capital
investment among low-income individuals. Specifically, we posit that greater
levels of income inequality could lead low-income youth to perceive a lower
return to investment in their own human capital. Such an effect would offset
any potential “aspirational” effect coming from higher educational wage
premiums. The data are consistent with this prediction: low-income youth are
more likely to drop out of school if they live in a place with a greater gap
between the bottom and middle of the income distribution. This finding is
robust to a number of specification checks and tests for confounding factors.
This analysis offers an explanation for how income inequality might lead to a
perpetuation of economic disadvantage and has implications for the types of
interventions and programs that would effectively promote upward mobility among
low-SES youth.
Paul Raeburn,
Kevin Zollman, Scientific American: Game Theory for Parents. Mathematically tested measures to make your kids
cooperate—all on their own. Even kindergartners have a sense of fair play and
will share more with specific groups—family, friends and people who have been
generous with them. Parents can tap this notion of fairness to encourage
children to cooperate with one another and avoid spiteful behavior. Using
classic strategies from game theory, kids can learn to establish fair
agreements on their own, without any intervention from a parent or other
authority figure.
Larry
Summers, Capital Ideas Blog: Four common-sense ideas for economic growth. Let me begin with two facts that I think should be
cause for concern. First, since the summer of 2009, the US economy has grown at
about 2 percent. Two percent isn't a very good growth rate. Second, the 10-year
interest rate at the end of trading today ... was just a bit below 1.8 percent.
...What’s the way to think about these two facts together? I believe that we
are dealing with a situation that goes beyond the usual cyclical issues associated
with recession—and for many years the policy debate has been confounded by
that. The Fed has been substantially too optimistic in its one-year-ahead
forecast every year for the last six, and its forecasts are pretty close to the
consensus forecasts. The prevailing expectation in markets has always been that
significant tightening will take place in nine months. That’s been true for the
last six years. It has not happened yet.
Srdan
Tatomir, BoE: How do firms adjust to falls in demand? One important aspect of adjusting labour costs is via
workers’ pay. When asked which methods of adjustment became more difficult over
time, firms reported the striking result that they were less able to change
wages. During 2010-2013, many firms experienced falls in demand and had to
adjust wages downwards. When wages are
perfectly flexible, the distribution of wage changes should be symmetric. But when there is DNWR, there will be a floor
at 0%. According to the survey, the overall incidence of wage freezes was
relatively high at around 25% of firms in 2010, although by 2014 this had
fallen to around 10%.
Giovanni
Ganelli, Juha Tervala, IMF: The Welfare Multiplier of Public Infrastructure
Investment. We analyze
the welfare multipliers of public spending (the consumption equivalent change
in welfare for one dollar change in public spending) in a DSGE model. The
welfare multipliers of public infrastructure investment are positive if
infrastructure is sufficiently effective. When the medium-term output
multipliers are consistent with the empirical estimates (1-1.4), the welfare
multiplier is 0.8. That is, a dollar spent by the government for investment
raises domestic welfare by equivalent of 0.8 dollars of private consumption.
This suggests that the welfare gains of public infrastructure investment, if
chosen wisely, may be substantial.
Anna
Louie Sussman, WSJ: How a Less-Skilled American Workforce May Be Holding Back
Growth. Theories abound
as to why U.S. productivity growth has stalled. Economists attribute it to
everything from a slowdown in business investment to inadequate measurement
techniques that fail to capture efficiency gains from new technologies. A
recent research note from J.P. Morgan Chase offers another theory: It’s at
least partly because the American workforce as a whole is simply less skilled
than it used to be.
Stephen
B. Billings, David J. Deming, Stephen L. Ross, NBER: Partners in Crime: Schools,
Neighborhoods and the Formation of Criminal Networks. Why do crime rates differ greatly across
neighborhoods and schools? Comparing youth who were assigned to opposite sides
of newly drawn school boundaries, we show that concentrating disadvantaged youth
together in the same schools and neighborhoods increases total crime. We then
show that these youth are more likely to be arrested for committing crimes
together – to be “partners in crime”. Our results suggest that direct peer
interaction is a key mechanism for social multipliers in criminal behavior. As
a result, policies that increase residential and school segregation will – all
else equal – increase crime through the formation of denser criminal networks.
Bernt Bratsberg, Oddbjørn
Raaum, Knut Røed, IZA: Job Loss and Immigrant Labor Market Performance. While integration policies typically focus on labor
market entry, we present evidence showing that immigrants from low-income
countries tend to have more precarious jobs, and face more severe consequences
of job loss, than natives. For immigrant workers in the Norwegian private
sector, the probability of job loss in the near future is twice that of native
workers. Using corporate bankruptcy for identification, we find that the
adverse effects of job loss on future employment and earnings are more than
twice as large for immigrant employees.
Mevlude Akbulut-Yuksel,
Adriana Kugler, IZA: Intergenerational Persistence of Health in the U.S.: Do
Immigrants Get Healthier as They Assimilate? It is well known that a substantial part of income
and education is passed on from parents to children, generating substantial
persistence in socio-economic status across generations. In this paper, we
examine whether another form of human capital, health, is also largely
transmitted from generation to generation, contributing to limited
socio-economic mobility. We find that the longer immigrants remain in the U.S.,
the less intergenerational persistence there is and the more immigrants look
like native children. Unfortunately, the more generations immigrant families
remain in the U.S., the more children of immigrants resemble natives' higher
weights, higher BMI and increased propensity to suffer from asthma.
Alan
Krueger et al.: Letter to Sanders. We are former Chairs of the Council of Economic
Advisers for Presidents Barack Obama and Bill Clinton. For many years, we have
worked to make the Democratic Party the party of evidence-based economic
policy. We are concerned to see the Sanders campaign citing extreme claims by
Gerald Friedman about the effect of Senator Sanders’s economic plan—claims that
cannot be supported by the economic evidence.
Whither
Mortgages et al, NY FED: The Graying of American Debt. The U.S. population is aging and so are its debts.
We find that aggregate debt balances held by younger borrowers have declined
modestly from 2003 to 2015, with a debt portfolio reallocation away from credit
card, auto, and mortgage debt, toward student debt. Debt held by borrowers
between the ages of 50 and 80, however, increased by roughly 60 percent over
the same time period. This shifting of debt from younger to older borrowers is
of obvious relevance to markets fueled by consumer credit. It is also relevant
from a loan performance perspective as consumer debt payments are being made by
older debtors than ever before.
Ben
S. Bernanke Blog: The relationship between stocks and oil prices. In this post we first confirm the positive
correlation between stocks and oil prices, noting that it is not just a recent
phenomenon. We then investigate the hypothesis that underlying changes in
aggregate demand explain the oil-stocks relationship. We find that an
underlying demand factor does account for much of the positive relationship,
and that if, in addition, we account for shifts in market risk preferences, we
can explain still more. However, even with these two factors included, a
significant part of the oil-stocks correlation remains unexplained.
Eduardo
Porter, NYT: Nudges Aren’t Enough for Problems Like Retirement Savings. Why don’t Americans save more for old age? Even when
their employers promise to match their savings, workers often fail to salt away
their earnings for the future, inexplicably leaving money on the table. Psychology
has offered an answer: procrastination. And it has suggested a cure: rather
than giving workers the choice to sign up for a 401(k), sign them up
automatically and give them the choice to opt out.
Alistair
Nolan, Dirk Pilat, OECD Benefiting from the Next Production Revolution: These new production technologies will be able to
significantly boost productivity, particularly if they can be diffused across
less productive firms and support an inclusive growth process. New technologies
could also make production safer, as robots replace humans in the most
dangerous manufacturing tasks. New production technologies also hold the
promise of cleaner production and the creation of an array of products that
could help meet global challenges. But there is still a low level of digital
technology adoption in most businesses, preventing realisation of their full
potential. Benefiting from new technology also rests on the ability of firms,
workers and society to adjust to change, and on government policies that ensure
that this transformation is inclusive and yields broad-based gains across the
population
Wolfgang
Dauth, Sebastian Findeisen, Jens Südekum, VOX: Globalisation and the nature of
German manufacturing jobs.
A common theme of recent trade theory models is that globalisation-related
shocks induce worker sorting across industries, labour markets, and plants.
However, there is little empirical evidence of shocks causing such endogenous
mobility responses. This column explores how rising international trade
exposure affected the job biographies and earnings profiles of German
manufacturing workers since the fall of the Berlin Wall. Individuals are found
to systematically adjust to globalisation, with a notable asymmetry in the
individual labour market responses to positive and negative shocks. Critically,
the push effects out of import-competing manufacturing industries are not
mirrored by comparable pull effects into export-oriented branches.
Edward
Rodrigue, Richard V. Reeves, Brookings: Four ways occupational licensing
damages social mobility.
It is often rather important that somebody knows what they’re doing. Few of us
would board a commercial airplane, for instance, without feeling confident that
the pilot was well trained and accredited. Occupational licenses are a way to
set a clear competence bar in such activities. But licensing also acts to mute
competition by creating barriers to market entry. There are plenty of
activities where licensing is unnecessary, or unnecessarily strict, which
limits market dynamism and possibly social mobility, too.
Danielle
Paquette, Washington Post:The surprising reason why lesbians get paid more than
straight women.
Last year, Marieka Klawitter, professor of public policy at the University of
Washington, examined 29 studies across the Western Hemisphere on wages and
sexual orientation and found a 9 percent earnings premium for lesbians over
heterosexual women. (Gay men, meanwhile, faced an 11 percent penalty, compared
to straight men.) But another study from the University of Nevada, which used
national data from the year 2000, adds a stunning asterisk to Klawitter's
findings: Lesbians who had previously lived with male partners made 20 percent
less than those who’d never cohabitated with a husband figure. Were men
actually the drags on women’s earnings?
Larry
Summers, Summers blog: Increasingly Convinced of the Secular Stagnation
Hypothesis. Unfortunately
since I put forward the argument in late 2013, the data have been all too
supportive. Despite monetary policy
being much more expansionary than was expected and medium term interest rates
falling rapidly, growth and inflation throughout the industrial world have been
much lower than anticipated. This is
exactly what one would expect if structural factors were increasing saving
propensities relative to investment propensities. Bond markets are now saying
that neither inflation rates approaching 2 percent targets or real interest
rates substantially above zero are on the horizon anytime in the foreseeable
future. Growth forecasts are being
revised downwards in most places and there is growing evidence in the United
States that inflation expectations are becoming unanchored to the downside. I would
put the odds of a US recession at about 1/3 over the next year and at over ½
over the next 2 years.
Chad
Syverson, NBER: Challenges to Mismeasurement Explanations for the U.S.
Productivity Slowdown.
The U.S. has been experiencing a slowdown in measured labor productivity growth
since 2004. A number of commentators and researchers have suggested that this
slowdown is at least in part illusory, because real output data have failed to
capture the new and better products of the past decade. I conduct four
disparate analyses, each of which offers empirical challenges to this
“mismeasurement hypothesis.” The complementary facets of evidence suggest that
the reasonable prima facie case for the mismeasurement hypothesis faces real
hurdles when confronted with the data.
Andrea
F. Presbitero, Min Zhu, IMF: The Change in Demand for Debt: The New Landscape
in Low-income Countries.
Many low-income developing countries have joined the group of Eurobond issuers
across the globe— in sub-Saharan Africa (for example, Senegal, Zambia, and
Ghana), Asia (for example, Mongolia) and elsewhere, raising over US$21 billion
cumulatively over the past decade. Tapping these markets provides a new source
of funds, but also exposes borrowers to shifts in investor sentiment and rising
global interest rates. We examined the experience of low-income developing
countries with capital inflows in the last decade and a half in a recent
report. We found that capital inflows have increased sharply since 2004, in two
distinct waves: a first surge from 2.1 percent of GDP in 2004 to 6.9 percent in
2007, and, after a temporary dip during the global financial crisis, a strong
rebound, reaching 6.3 percent of GDP in 2012.
Dani
Rodrik, Project Syndicate: The Return of Public Investment. The idea that public investment in infrastructure –
roads, dams, power plants, and so forth – is an indispensable driver of
economic growth has always held powerful sway over the minds of policymakers in
poor countries. But this kind of public-investment-driven growth model – often
derisively called “capital fundamentalism” – has long been out of fashion among
development experts. It may be time to reconsider that change. If one looks at
the countries that, despite strengthening global economic headwinds, are still
growing very rapidly, one will find public investment is doing a lot of the
work.
David
H. Autor, et al, NBER: School Quality and the Gender Gap in Educational
Achievement. Recent
evidence indicates that boys and girls are differently affected by the quantity
and quality of family inputs received in childhood. We assess whether this is also true for
schooling inputs. Using matched Florida birth and school administrative
records, we estimate the causal effect of school quality on the gender gap in
educational outcomes by contrasting opposite-sex siblings who attend the same
sets of schools--thereby purging family heterogeneity--and leveraging
within-family variation in school quality arising from family moves. Investigating middle school test scores, absences
and suspensions, we find that boys benefit more than girls from cumulative
exposure to higher quality schools.
Larry
Hardesty, MIT News: Automatic contingency planning. Planning algorithms are widely used in logistics and
control. They can help schedule flights and bus routes, guide autonomous
robots, and determine control policies for the power grid, among other things. In
recent years, planning algorithms have begun to factor in uncertainty —
variations in travel time, erratic communication between autonomous robots,
imperfect sensor data, and the like. That causes the scale of the planning
problem to grow exponentially, but researchers have found clever ways to solve
it efficiently. Now, researchers at MIT and the Australian National University
(ANU) have made the problem even more complex, by developing a planning
algorithm that also generates contingency plans, should the initial plan prove
too risky. It also identifies the conditions — say, sensor readings or delays
incurred — that should trigger a switch to a particular contingency plan.
Angus
Foulis, Saleem Bahaj, BoE: Uncertainty is no excuse for not using
macroprudential tools.
These policy tools have not been used systemically in the past, so their impact
and the FPC’s reaction function remain unclear. Moreover, in contrast to
monetary policy, where price stability can be judged against inflation, the
objective of macroprudential policymakers – the stability of the financial
system – is inherently unobservable. Thus macroprudential policymakers face a
high degree of uncertainty over the impact and effectiveness of their tools and
a target variable they cannot perfectly observe.
Eugenio
Cerutti, Stijn Claessens, VOX: The use and effectiveness of macroprudential
policies: New evidence.
Macroprudential policies are meant to reduce procyclicality in financial
markets and associated systemic risks. However, empirical evidence on which
policies are most effective is still preliminary and inconclusive. This column
documents the use of macroprudential policies by a large set of countries over
an extended period, and covering many instruments. It shows which policies are
most effective in reducing the growth rates of overall credit and household and
corporate sector credit, and explores differences across countries, degrees of
avoidance, and whether policies work better during booms or busts.
Glenn
D. Rudebusch, FED San Fransisco: Will the Economic Recovery Die of Old Age? Is the current recovery more likely to end because
it’s lasted so long? Have various imbalances and rigidities accumulated to make
the economy frailer and more susceptible to a recessionary shock? Recent
history suggests the answer is no. Instead, a long recovery appears no more
likely to end than a short one. Like Peter Pan, recoveries appear to never grow
old.
Mathieu
Coutteniery et al, University of Lausanne: The Violent Legacy of Conflict:
Evidence on Asylum Seekers, Crimes and Public Policy in Switzerland. We first document that immigrants originating from
countries with war history are more crime prone. Using a precise measure of
individual war victimization, we find that the effect remains strong and significant,
even when controlling for country-of-origin, times arrival year, fixed effects,
as well as canton times year fixed effects. Cohorts exposed to civil
conflicts/mass killings during childhood are on average 40 percent more prone
to violent crimes than their co-nationals born after the conflict. Using dyadic
data on both the origin of the perpetrator and the victims of all crimes
committed during this period in Switzerland, we are able to say more about
potential mechanisms at work. Further, we display external validity by
replicating the findings on the violent legacy of conflict exposure for all
Swiss immigrants, which account for more than a fifth of Swiss population.
Bob
Davis, WSJ: Immigrants Push Down Wages for Low-Income Workers—But How Much? One of the reasons lower-income workers have taken
such a hit over the past few decades is because of illegal immigration. But how
much of a hit is a matter of great debate among economists. Harvard immigration
specialist George Borjas finds that during the 1980s and 1990s, low-skilled
immigration reduced the wages of U.S. born high-school dropouts by about 10%.
Andrea Albanese, Bart Cockx,
Yannick Thuy, IZA: Working Time Reductions at the End of the Career: Do They
Prolong the Time Spent in Employment? In this paper we study the effects on the survival
rate in employment of a scheme that facilitates gradual retirement through
working time reductions. We use information on the entire labour market career
and other observables to control for selection and take dynamic treatment
assignment into account. We also estimate a competing risks model considering
different (possibly selective) pathways to early retirement. We find that
participation in the scheme initially prolongs employment, as participants keep
accumulating full pension rights. However, as participants become eligible for
early retirement subsequently, these larger financial incentives induce them to
leave the labour force prematurely. These adverse incentives are stronger for
individuals who reduce their working time most. After two (four) years for men
(women), the positive effects reverse. The more favourable effect for women is
likely a consequence of their lower opportunities to enter early retirement.
The gradual retirement scheme fails the cost-benefit test.
Fernando
Eguren-Martin, Karen Mayhew, BoE: How important are interest rates for exchange
rates? Many would say
that when domestic interest rates rise (relative to abroad) the domestic
currency will appreciate. But is it right to think like this? In this blog we
use exchange rate theory to inform this discussion and to assess the importance
of relative interest rates in accounting for past exchange rate moves. We find
that relative interest rates typically move in the same direction as exchange
rates but most of the time they account for a small share of exchange rate
variation. However, academics might question our use of such a theory as its
failure to forecast exchange rates is well documented. We show that this is
somewhat unfair, as even if the framework is not very useful in terms of
forecasting it is still a useful tool for decomposing past moves in exchange
rates.
Robert
Hall, Nicolas Petrosky-Nadeau, FED San Fransisco: Changes in Labor
Participation and Household Income. A decline in labor force participation, particularly
among workers in their prime, is a significant concern for policymakers. Over
the past 15 years, the labor force participation (LFP) rate in the United
States has fallen significantly. Various factors have contributed to this
decline, including the aging of the population (Daly et al., 2013) and changes
in welfare programs (Burkhauser and Daly, 2013). In this Economic Letter, we
look at another potential contribution, the changing relationship between
household income and the decision to participate in the labor force.
Kenneth
Rogoff, Project Syndicate: The Great Escape from China. Since 2016 began, the prospect of a major devaluation
of China’s renminbi has been hanging over global markets like the Sword of
Damocles. No other source of policy uncertainty has been as destabilizing. Few
observers doubt that China will have to let the renminbi exchange rate float
freely sometime over the next decade. The question is how much drama will take
place in the interim, as political and economic imperatives collide.
Lawrence
Summers, Prospects: Will our children really not know economic growth? Not so
fast, Robert Gordon.
While as already noted, I find Gordon persuasive in his claim that the slowdown
in productivity growth is not a figment of mis-measurement, the fact that
measured median incomes will be stagnant does not mean that most people will
not see rising standards of living over time. Incomes rise as people get
further into their careers. And quality improvements and new products are
improving life in ways that do not show up in economic statistics, though
possibly less so than in the past. So it would be a mistake to regard our
children as condemned to economic stasis even before considering Gordon’s
various ideas for accelerating growth.
Ariel
Kalil et al, Demography: Diverging destinies: maternal education and the
developmental gradient in time with children. More highly educated mothers spent more time in all
four parenting categories compared to less-educated mothers. College-educated
mothers spent 67 more minutes in total care time with their children aged 0 to
2 compared to mothers with only a high school diploma. For children aged 3 to
5, the total care time increase was 21 more minutes and 22 minutes more for
children aged 6 to 13. College-educated mothers spent 42 percent more time in
basic care and 94 percent more time in play compared to mothers with a high
school education. Highly educated mothers also invested 130 percent more time
in management activities when their children were 6 to 13 years of age compared
to mothers with a high school education.
Raj
Chetty et al, NBER: Childhood Environment and Gender Gaps in Adulthood. The traditional gender gap in employment rates is
reversed for children growing up in poor families: boys in families in the
bottom quintile of the income distribution are less likely to work than girls.
Second, these gender gaps vary substantially across counties and commuting
zones in which children grow up. The degree of variation in outcomes across
places is largest for boys growing up in poor, single-parent families. Third,
the spatial variation in gender gaps is highly correlated with proxies for
neighborhood disadvantage. Low-income boys who grow up in high-poverty,
high-minority areas work significantly less than girls. These areas also have
higher rates of crime, suggesting that boys growing up in concentrated poverty
substitute from formal employment to crime. Together, these findings
demonstrate that gender gaps in adulthood have roots in childhood, perhaps
because childhood disadvantage is especially harmful for boys.
Jörg Claussen, Eszter
Czibor, Mirjam C. van Praag, IZA: Women Do Not Play Their Aces: The
Consequences of Shying Away. The underrepresentation of women at the top of hierarchies is often
explained by gender differences in preferences. We find support for this claim
by analyzing a large dataset from an online card game community, a stylized yet
natural setting characterized by self-selection into an uncertain, competitive
and male-dominated environment. We observe gender differences in playing
behavior consistent with women being more averse towards risk and competition.
Moreover, we demonstrate how "shying away" makes female players less
successful: despite no gender gap in playing skills, women accumulate lower scores
than men due to their relative avoidance of risky and competitive situations.
Orion
Jones, Big Think: Iceland Is Officially Worshiping Norse Gods Again. For the first time since the Vikings sailed, the
Icelandic publicare worshiping classical Norse gods like Odin, Thor, and Frigg
at a public temple built in their honor. The worship of Odin, Thor, Freya and
the other gods of the old Norse pantheon became an officially recognized
religion exactly 973 years after Iceland’s official conversion to Christianity.
