Shekhar Aiyar,
Christian Ebeke, Xiaobo Shao, IMF: The Euro Area Workforce is Aging, Costing
Growth. The euro area’s population is
expected to grow significantly older over the next couple of decades. This has
two components. First, the number of retirees is set to grow compared to the
people of working age (15–64) in the region. Second, and much less examined,
the average age of people within the labor force will rise: the share of
workers aged 55–64 is forecast to increase by a third, from 15 percent to 20
percent, over the next two decades. Aging will take a considerable toll on
productivity growth over the medium- to long-term. Average total factor
productivity growth in the euro area is forecast to be around 0.8 percent per
year. This could be higher by a quarter—that is to say, total factor
productivity could increase to about one percent per year—if we shut down the
effect of workforce aging. The burden of workforce aging will fall unequally
across euro area member states. Worryingly, some of the largest adverse effects
on productivity will fall on countries that can least afford it, such as Greece,
Spain, Portugal, and Italy.
David Halpern,
BoE: It’s time to bring more realistic models of human behaviour into economic
policy and regulation. Behaviour science
has had major impacts on policy in recent years. Introducing a more realistic
model of human behaviour – to replace the ‘rational’ utility-maximizer – has
enabled policymakers to boost savings; increase tax payments; encourage
healthier choices; reduce energy consumption; boost educational attendance;
reduce crime; and increase charitable giving. But there remain important areas
where its potential has yet to be realised, including macroeconomic policy and
large areas of regulatory practice. Businesses, consumers, and even regulators
are subject to similar systematic biases to other humans. These include overconfidence;
being overly influenced by what others are doing; and being influenced by
irrelevant information. The good news is that behavioural science offers the
prospect of helping regulators address some of their most pressing issues. This
includes: anticipating and addressing ‘animal spirits’ that drive bubbles or
sentiment-driven slowdowns; reducing corrupt market practices; and encouraging
financial products that are comprehensible to humans.
Rasmus Landersø,
James J. Heckman, NBER: The Scandinavian Fantasy: The Sources of
Intergenerational Mobility in Denmark and the U.S. This paper examines the sources of differences in
social mobility between the U.S. and Denmark. Measured by income mobility,
Denmark is a more mobile society, but not when measured by educational
mobility. There are pronounced nonlinearities in income and educational
mobility in both countries. Greater Danish income mobility is largely a
consequence of redistributional tax, transfer, and wage compression policies.
While Danish social policies for children produce more favorable cognitive test
scores for disadvantaged children, these do not translate into more favorable
educational outcomes, partly because of disincentives to acquire education
arising from the redistributional policies that increase income mobility.
Jeff Gou,
Washington Post: The clearest proof yet that your job is killing you. For decades now, the modern worker has been urged to
slow down, chill out, de-stress. Doctors link long
shifts and on-the-job anxiety to high blood pressure, heart disease, depression
and stroke. Yet, so far, the connection between job strain and bad health has
mostly been correlational. Recently, economists at Purdue and the University of
Copenhagen made a clever attempt to clear up the question. They looked at
Danish manufacturing companies where overseas sales increased unexpectedly
because of changes in foreign demand or transportation costs between 1996 and
2006. These constituted a set of natural experiments. At firms where exports
spiked, there was suddenly a lot more work to do, a lot more things to sell. Researchers
found that women at companies where there was an export boom were subsequently
more likely to be treated for severe depression, and more likely to take
prescription medication for heart attack or stroke. For both men and women,
there was also an increase in severe on-the-job injuries.
Roland G. Fryer,
Jr, NBER: An Empirical Analysis of Racial Differences in Police Use of Force. This paper explores racial differences in police use
of force. On non-lethal uses of force, blacks and Hispanics are more than fifty
percent more likely to experience some form of force in interactions with
police. Adding controls that account for important context and civilian
behavior reduces, but cannot fully explain, these disparities. On the most
extreme use of force – officer-involved shootings – we find no racial
differences in either the raw data or when contextual factors are taken into
account. We argue that the patterns in the data are consistent with a model in
which police officers are utility maximizers, a fraction of which have a
preference for discrimination, who incur relatively high expected costs of
officer-involved shootings.
Bjorn Lomborg, US
Today: Organic food is great business, but a bad investment. An organic label sends our skepticism and good sense
out the window. Consumers in one study were given two sets of absolutely
identical food items, with one set marked “organic” and one not. They declared
the food they believed to be “organic” to be lower in calories and more
nutritious, and were willing to pay 16% to 23% more. It’s called the “health
halo” effect. Organic food has become the fastest-growing sector of the U.S.
food industry, with sales that increase by double digits annually. But organics are not better for
your health, worse for nature and the planet, and terrible for the world’s
poor. What it boils down to is the world’s richest people spending their cash
to support less efficient farming practices, to feel better about their
choices.
Yuliya Demyanyk et
al., Cleveland FED: Does Fiscal Stimulus Work When Recessions Are Caused by Too
Much Private Debt? We argue that
fiscal stimulus funded by public debt is effective for increasing economic
activity and employment even in recessions that are caused by overborrowing in
the private sector. We analyze the impact of government spending on local
economies between 2007 and 2009 and find evidence that the fiscal multiplier is
higher in geographical areas characterized by higher individual household debt.
The higher multiplier in those areas might be attributed to a direct increase
in both household consumption and local economic slack.
George J. Borjas,
The Politico: The Case for Extreme Immigrant Vetting. It’s a practice as
American as apple pie—and for good reason. In his major foreign policy speech earlier this week, Donald Trump
explained how he would expand the “ideological” vetting of immigrants who want
to come to the United States. “The time is overdue to develop a new screening
test for the threats we face today,” he said. “I call it extreme vetting. As
with practically all of Trump’s policy statements, the over-the-top commentary
came swiftly. Over at the Washington Post an opinionator opined that Trump’s
ideas were crazier than crazy. At MSNBC a commentator commented that “this is
the single most un-American thing I have ever heard in my life.” If all those
pundits had bothered to do just a couple of minutes of googling before
reacting, they would have discovered that immigrant vetting, and even extreme
immigrant vetting, has a very long tradition in American history. Since before
the founding even, U.S. policies about whom the country chooses to welcome and
reject have changed in response to changing conditions. As early as 1645, the
Massachusetts Bay Colony prohibited the entry of poor or indigent persons. By
the early 20th century, the country was filtering out people who had “undesirable”
traits, such as epileptics, alcoholics and polygamists.
Emily Breza,
Supreet Kaur, Yogita Shamdasani, NBER: The Morale Effects of Pay Inequality. The idea that worker utility is affected by co-worker
wages has potentially broad labor market implications. In a month-long
experiment with Indian manufacturing workers, we randomize whether co-workers
within production units receive the same flat daily wage or different wages
(according to baseline productivity rank). For a given absolute wage, pay
inequality reduces output and attendance by 0.24 standard deviations and 12%,
respectively. These effects strengthen in later weeks. Pay disparity also
lowers co-workers’ ability to cooperate in their self-interest. However, when
workers can clearly observe productivity differences, pay inequality has no
discernible effect on output, attendance, or group cohesion.
Stefan Pichler,
Nicolas R. Ziebarth, NBER: The Pros and Cons of Sick Pay Schemes: Testing for
Contagious Presenteeism and Noncontagious Absenteeism Behavior. This paper provides an analytical framework and uses
data from the US and Germany to test for the existence of contagious
presenteeism and negative externalities in sickness insurance schemes. The
first part exploits high-frequency Google Flu data and the staggered
implementation of U.S. sick leave reforms to show in a reduced-from framework
that population-level influenza-like disease rates decrease after employees
gain access to paid sick leave. Next, a simple theoretical framework provides
evidence on the underlying behavioral mechanisms. The model theoretically
decomposes overall behavioral labor supply adjustments ('moral hazard') into
contagious presenteeism and noncontagious absenteeism behavior and derives
testable conditions. The last part illustrates how to implement the model
exploiting German sick pay reforms and administrative industry-level data on
certified sick leave by diagnoses. It finds that the labor supply elasticity
for contagious diseases is significantly smaller than for noncontagious
diseases. Under the identifying assumptions of the model, in addition to the
evidence from the U.S., this finding provides indirect evidence for the
existence of contagious presenteeism.
Jonathan T.
Rothwell, Gallup: Explaining Nationalist Political Views: The Case of Donald
Trump. The 2016 US presidential nominee Donald Trump has
broken with the policies of previous Republican Party presidents on trade,
immigration, and war, in favor of a more nationalist and populist platform.
Using detailed Gallup survey data for a large number of American adults, I
analyze the individual and geographic factors that predict a higher probability
of viewing Trump favorably and contrast the results with those found for other
candidates. The results show mixed evidence that economic distress has motivated
Trump support. His supporters are less educated and more likely to work in blue
collar occupations, but they earn relative high household incomes, and living
in areas more exposed to trade or immigration does not increase Trump support.
There is stronger evidence that racial isolation and less strictly economic
measures of social status, namely health and intergenerational mobility, are
robustly predictive of more favorable views toward Trump, and these factors
predict support for him but not other Republican presidential candidates.
Melvin Sanicas,
Project Syndicate: Vaccines for an Aging Population. Thanks to child immunization programs, fewer
children die each year from vaccine-preventable diseases. A similar,
concentrated effort is now needed to produce similar benefits for adults,
especially the elderly. By viewing vaccination as a lifelong priority, we can
help people remain active and productive for as long as possible, benefiting
them, their communities, and the world.
Greg Kaplan, Sam
Schulhofer-Wohl, NBER: Inflation at the Household Level. We use scanner data to estimate inflation rates at
the household level. Households' inflation rates are remarkably heterogeneous,
with an interquartile range that varies between 6.2 and 9.0 percentage points
on an annual basis. Most of the heterogeneity comes not from variation in
broadly defined consumption bundles but from variation in prices paid for the
same types of goods — a source of variation that previous research has not
measured. The entire distribution of household inflation rates shifts in
parallel with aggregate inflation. Deviations from aggregate inflation exhibit
only slightly negative serial correlation within each household over time,
implying that the difference between a household's price level and the
aggregate price level is persistent. Together, the large cross-sectional
dispersion and low serial correlation of household-level inflation rates mean
that almost all of the variability in a household's inflation rate over time
comes from variability in household-level prices relative to average prices for
the same goods, not from variability in the aggregate inflation rate. We
provide a characterization of the stochastic process for household inflation
that can be used to calibrate models of household decisions.
Wolfgang Keller,
Hâle Utar, NBER:International Trade and Job Polarization: Evidence at the
Worker-Level. This paper examines the role
of international trade for job polarization, the phenomenon in which employment
for high- and low-wage occupations increases but mid-wage occupations decline.
With employer-employee matched data on virtually all workers and firms in
Denmark between 1999 and 2009, we use instrumental-variables techniques and a
quasi-natural experiment to show that import competition is a major cause of
job polarization. Import competition with China accounts for about 17% of the
aggregate decline in mid-wage employment. Many mid-skill workers are pushed
into low-wage service jobs while others move into high-wage jobs. The direction
of movement, up or down, turns on the skill focus of workers’ education.
Workers with vocational training for a service occupation can avoid moving into
low-wage service jobs, and among them workers with information-technology
education are far more likely to move into high-wage jobs than other workers.
Angus Deaton,
Project Syndicate: Rethinking Robin Hood. Huge strides have undoubtedly been made in reducing global poverty,
more through growth and globalization than through aid from abroad. While
impressive and wholly welcome, poverty reduction has not come without a cost.
The globalization that has rescued so many in poor countries has harmed some
people in rich countries, as factories and jobs migrated to where labor is
cheaper. This seemed to be an ethically acceptable price to pay, because those
who were losing were already so much wealthier (and healthier) than those who
were gaining. Globalization is less splendid for those who not only don’t reap
its benefits, but suffer from its impact. We have long known that less-educated
and lower-income Americans, for example, have seen little economic gain for four
decades, and that the bottom end of the US labor market can be a brutal
environment. But just how badly are these Americans suffering from
globalization? Are they much better off than the Asians now working in the
factories that used to be in their hometowns?
Jonas Helgertz,
Kirk Scott, Christopher D. Smith, IZA:
Parents’ years in Sweden and children’s educational performance. This paper assesses the intergenerational effect of
immigrant parents’ incorporation experiences, measured as time in Sweden, on
the educational performance of their children, using full Swedish population
registry data for 22 cohorts. Employing family fixed-effects, we examine final
course grades and national standardized test scores in Swedish and math by
parents’ country of origin. Results show a positive effect of parents’ time in
Sweden on their children’s performance in Swedish, but not for math
performance. These results demonstrate the importance of parents’ linguistic
acculturation on their children’s educational performance.
OECD: Equations
and Inequalities - Making Mathematics Accessible to All. More than ever, students need to engage with
mathematical concepts, think quantitatively and analytically, and communicate
using mathematics. All these skills are central to a young person’s
preparedness to tackle problems that arise at work and in life beyond the classroom.
But the reality is that many students are not familiar with basic mathematics
concepts and, at school, only practice routine tasks that do not improve their
ability to think quantitatively and solve real-life, complex problems. One way
forward is to ensure that all students spend more “engaged” time learning core
mathematics concepts and solving challenging mathematics tasks. The opportunity
to learn mathematics content – the time students spend learning mathematics
topics and practising maths tasks at school – can accurately predict
mathematics literacy. Differences in students’ familiarity with mathematics
concepts explain a substantial share of performance disparities in PISA between
socio-economically advantaged and disadvantaged students. Widening access to
mathematics content can raise average levels of achievement and, at the same
time, reduce inequalities in education and in society at large.
Valerie Wilson,
EPI: People of color will be a majority of the American working class in 2032. This estimate, based on long-term labor force
projections from the Bureau of Labor Statistics and trends in college
completion by race and ethnicity, is 11 years sooner than the Census Bureau
projection for the overall U.S. population, which becomes “majority-minority”
in 2043. Wage stagnation is a universal problem for the working
class, regardless of race, ethnicity, or gender. This is an area of immense
common ground, because in order to deal with class inequality (a cause of wage
stagnation), we have to deal with racial disparities. At the same time,
reducing racial inequality means also addressing class inequality.
Lawrence H.
Summers: The economic consequences of a Trump win would be severe. What I find surprising is that US and global markets
and financial policymakers seem much less sensitive to “Trump risk” than they
are to “Brexit risk”. Options markets suggest only modestly elevated volatility
in the period leading up to the presidential election. While every Fed watcher
comments on the implications of Brexit for the central bank, few, if any,
comment on the possible consequences of a victory for Mr Trump in November.
Yet, as great as the risks of Brexit are to the British economy, I believe the
risks to the US and global economies of Mr Trump’s election as president are
far greater. If he is elected, I would expect a protracted recession to begin
within 18 months. The damage would be felt far beyond the United States.
Chad Syverson,
NBER: Challenges to
Mismeasurement Explanations for the U.S. Productivity Slowdown. Labor productivity in the United States—defined as
total output divided by total hours of labor—has been increasing for over a
century and continues to increase today. However, its growth rate has fallen.
One explanation for this phenomenon focuses on measurement difficulties, in
particular the possibility that current tools for measuring economic growth do
not fully capture recent advances in the goods and services associated with
digital communications technology. Mismeasurement of the prices and quantities
of digital goods and services cannot account for the decline in the growth of
labor productivity.
Torben M. Andersen, Silvia Migali, IZA: Migrant
Workers and the Welfare State. There is
wide concern that migration flows may undermine the financial viability of
generous welfare arrangements. The discussion focuses on welfare arrangements
as attractors of migrants, suggesting that the issue does not pertain to
migrant workers. However, this overlooks how welfare arrangements affect
return-migration in case of social events like job loss. Importantly, migrants
are shown to be self-selected in a way affecting both migration and
return-migration. Two migration regimes prevail. In one, with relatively low
benefits, unemployed workers return, while in the other some stay. Importantly,
the stay or return migration decision is more sensitive to welfare generosity
than the migration decision.
Umut Özek, David
N. Figlio, NBER: Cross-Generational Differences in Educational Outcomes in the
Second Great Wave of Immigration. We make use of a new data source – matched birth records and
longitudinal student records in Florida – to study the degree to which student
outcomes differ across successive immigrant generations. We find evidence
suggesting that early-arriving first generation immigrants perform better than
do second generation immigrants, and second generation immigrants perform
better than third generation immigrants. Among first generation immigrants, the
earlier the arrival, the better the students tend to perform. These patterns of
findings hold for both Asian and Hispanic students, and suggest a general
pattern of successively reduced achievement – beyond a transitional period for
recent immigrants – in the generations following the generation that immigrated
to the United States.
Bjørn Lomborg,
Project Syndicate: The Evidence on Education Reforms. It is almost universally agreed that more education
is good for society. But it turns out that some popular educational policies
achieve very little, while others that are often overlooked can make a huge
difference. Whether for Bangladesh or elsewhere, the real lessons to be taken
away from this research is that we need to look past trendy policies like
adding technology to classrooms. The key to educational progress is to focus on
interventions backed by credible scientific evidence.
Chenkai Wu,
Michelle C Odden, Gwenith G Fisher, Robert S Stawski, JECH: Association of
retirement age with mortality: a population-based longitudinal study among
older adults in the USA. On the basis of
the Health and Retirement Study, 2956 participants who were working at baseline
(1992) and completely retired during the follow-up period from 1992 to 2010
were included. Healthy retirees (n=1934) were defined as individuals who
self-reported health was not an important reason to retire. Over the study
period, 234 healthy and 262 unhealthy retirees died. Among healthy retirees, a
1-year older age at retirement was associated with an 11% lower risk of
all-cause mortality (95% CI 8% to 15%), independent of a wide range of
sociodemographic, lifestyle and health confounders. Similarly, unhealthy
retirees (n=1022) had a lower all-cause mortality risk when retiring later (HR
0.91, 95% CI 0.88 to 0.94). None of the sociodemographic factors were found to
modify the association of retirement age with all-cause mortality.
Efraim Benmelech,
Esteban F. Klor, NBER: What Explains the Flow of Foreign Fighters to ISIS? This paper provides the first systematic analysis of
the link between economic, political, and social conditions and the global phenomenon
of ISIS foreign fighters. We find that poor economic conditions do not drive
participation in ISIS. In contrast, the number of ISIS foreign fighters is
positively correlated with a country's GDP per capita and Human Development
Index (HDI). In fact, many foreign fighters originate from countries with high
levels of economic development, low income inequality, and highly developed
political institutions. Other factors that explain the number of ISIS foreign
fighters are the size of a country's Muslim population and its ethnic
homogeneity. Although we cannot directly determine why people join ISIS, our
results suggest that the flow of foreign fighters to ISIS is driven not by
economic or political conditions but rather by ideology and the difficulty of
assimilation into homogeneous Western countries.
Gauti B.
Eggertsson, Neil R. Mehrotra, Sanjay R. Singh, Lawrence H. Summers, NBER: A
Contagious Malady? Open Economy Dimensions of Secular Stagnation. Conditions of secular stagnation - low interest
rates, below target inflation, and sluggish output growth - characterize much
of the global economy. We consider an overlapping generations, open economy
model of secular stagnation, and examine the effect of capital flows on the
transmission of stagnation. In a world with a low natural rate of interest,
greater capital integration transmits recessions across countries as opposed to
lower interest rates. In a global secular stagnation, expansionary fiscal
policy carries positive spillovers implying gains from coordination, and fiscal
policy is self-financing. Expansionary monetary policy, by contrast, is
beggar-thy-neighbor with output gains in one country coming at the expense of
the other. Similarly, we find that competitiveness policies including
structural labor market reforms or neomercantilist trade policies are also
beggar-thy-neighbor in a global secular stagnation.
Mikhail Golosov,
Guido Menzio, Princeton University. Agency Business Cycles. We propose a new business cycle theory. Firms need to
randomize over firing or keeping workers who have performed poorly in the past,
in order to give them an ex-ante incentive to exert effort. Firms have an
incentive to coordinate the outcome of their randomizations, as coordination
allows them to load the firing probability on states of the world in which it
is costlier for workers to become unemployed and, hence, allows them to reduce
overall agency costs. In the unique equilibrium, firms use a sunspot to coordinate
the randomization outcomes and the economy experiences endogenous and stochastic
aggregate fluctuations.
Nicola
Fuchs-Schündeln, Paolo Masella, VOX: Long-Lasting effects of socialist
education: Evidence from the German Democratic Republic. There are strong links between the nature of
education in a country and its political institutions, and an individual’s
education can impact their lifetime labour market choices. This column examines
how being educated under a socialist regime impacts individuals in a free
labour market. Using data on students from East and West Germany in the 1970s,
it finds that a socialist regime education led to a larger spread in labour
market outcomes – more of these individuals were not employed, but conditional
on being employed, had higher wages and a higher probability of achieving a
professional status in the East.
Iliev R., Axelrod
R., PubMed.gov:Does Causality Matter More Now? Increase in the Proportion of
Causal Language in English Texts. The vast majority of the work on culture and cognition has focused on
cross-cultural comparisons, largely ignoring the dynamic aspects of culture. In
this article, we provide a diachronic analysis of causal cognition over time.
We hypothesized that the increased role of education, science, and technology
in Western societies should be accompanied by greater attention to causal
connections. To test this hypothesis, we compared word frequencies in English
texts from different time periods and found an increase in the use of causal
language of about 40% over the past two centuries. The observed increase was
not attributable to general language effects or to changing semantics of causal
words. We also found that there was a consistent difference between the 19th
and the 20th centuries, and that the increase happened mainly in the 20th
century.
Ivan G. Lopez
Cruz, Sebastian Galiani, Gustavo Torrens, VOX: Stirring up a hornets’ nest:
Geographic distribution of crime. A large empirical literature has revealed the effects of preventative
and punitive measures on crime. This column examines the effects of police
deployment strategies, comparing geographically concentrated protection with
evenly dispersed protection across a city. The results suggests that when
considering changes in the geographic distribution of police forces, we should
take into account the effects on house prices and on reallocation of the
population, as well as the overall effect on crime in the entire city.
Tim Harford, The
Undercover Economist, The odds are you won’t know when to quit. Do we tend to quit too soon or quit too late? Are we
too stubborn or not determined enough? There has been much excitement recently
around the idea of “grit” — a personality trait representing commitment to and
enthusiasm for long-term goals, championed by psychologist Angela Duckworth.
She argues, plausibly, that grit is more important than talent in predicting a
successful life. The idea is appealing in principle but one must ask what
Duckworth’s brief “grit” questionnaire is really measuring. While Duckworth’s
work suggests that perseverance is vital, other psychological research suggests
that we sometimes persevere when we should not. Nobel laureate Daniel Kahneman,
with the late Amos Tversky, discovered a tendency called “loss aversion”. Loss
aversion is a disproportionate dislike of losses relative to gains, and it can
lead us to cling on pig-headedly to bad decisions because we hate to stop
playing when we’re behind.
Atif Mian, Amir
Sufi, NBER: Who Bears the Cost of Recessions? The Role of House Prices and
Household Debt. This chapter reviews
empirical estimates of differential income and consumption growth across
individuals during recessions. Most existing studies examine the variation in
income and consumption growth across individuals by sorting on ex ante or
contemporaneous income or consumption levels. We build on this literature by
showing that differential shocks to household net worth coming from elevated
household debt and the collapse in house prices play an underappreciated role.
Using zip codes in the United States as the unit of analysis, we show that the
decline in numerous measures of consumption during the Great Recession was much
larger in zip codes that experienced a sharp decline in housing net worth. In
the years prior to the recession, these same zip codes saw high house price
growth, a substantial expansion of debt by homeowners, and high consumption
growth. We discuss what models seem most consistent with this striking pattern
in the data, and we highlight the increasing body of macroeconomic evidence on
the link between household debt and business cycles. Our main conclusion is
that housing and household debt should play a larger role in models exploring
the importance of household heterogeneity on macroeconomic outcomes and
policies.
Roger Backhouse,
Beatrice Cherrier, University of Birmingham: 'It's Computerization, Stupid!'
The Spread of Computers and the Changing Roles of Theoretical and Applied
Economics. This paper
challenges the widely held notion that the developments in computing are
sufficient to explain the recent turn to applied economics. Developments in
computer hardware were undoubtedly important. Yet, economists' appropriation of
the new techniques allowed by computerization were highly selective, and
influenced by the development of software and ties with other scientific
communities, by the availability of business and governmental data, by
salesmanship to policy-makers, and by how epistemologically acceptable these
approaches were made to other economists. In particular, theoretical work was
not be transformed by computers the way it was in physics or biology. We
conjecture that the most profound effect of the increased availability of
computers may have been to challenge the demarcation between theory and applied
work.
Tomi Kyyrä, Juha Tuomala, IZA: Does Experience Rating
Reduce Disability Inflow? This study
explores whether the experience rating of employers’ disability insurance premiums
affects the inflow of older employees to disability benefits in Finland. To
identify the causal effect of experience rating, we exploit a pension reform
that extended the coverage of the experience-rated premiums. The results show
that a new disability benefit claim can cause substantial cost to the former
employer through an increased premium. Nonetheless, we find no evidence of the
significant effects of experience rating on the disability inflow. The lack of
the behavioral effects may be due to the complexity of experience rating
calculations and/or limited employer awareness.
Scott E. Carrell,
Mark Hoekstra, Elira Kuka, NBER: The Long-Run Effects of Disruptive Peers. A large and growing literature has documented the
importance of peer effects in education. However, there is relatively little
evidence on the long-run educational and labor market consequences of childhood
peers. We examine this question by linking administrative data on elementary school
students to subsequent test scores, college attendance and completion, and
earnings. To distinguish the effect of peers from confounding factors, we
exploit the population variation in the proportion of children from families
linked to domestic violence, who were shown by Carrell and Hoekstra (2010,
2012) to disrupt contemporaneous behavior and learning. Results show that
exposure to a disruptive peer in classes of 25 during elementary school reduces
earnings at age 26 by 3 to 4 percent. We estimate that differential exposure to
children linked to domestic violence explains 5 to 6 percent of the rich-poor
earnings gap in our data, and that removing one disruptive peer from a
classroom for one year would raise the present discounted value of classmates' future
earnings by $100,000.
Mark Leonard,
Project Syndicate: Last Man Standing. Much of modern geopolitics seems to be following the plot from Game of
Thrones, with many countries under so much political and economic stress that
their only hope is that their rivals collapse before they do. So their
governments cling to power while exploiting rivals’ internal weaknesses.
Russian President Vladimir Putin is the prime example. His recent campaigns in
Syria and Ukraine may look like the actions of a geopolitical buccaneer. But
the root of his adventurism is domestic weakness. Russia’s annexation of
Crimea, for example, was in large part an attempt to provide Putin’s regime
with renewed legitimacy following a winter of discontent, during which
demonstrators took to the streets to protest his return to the presidency.
Greg Ip WSJ: It’s
Not the Economy, Stupid. Social disarray
or cohesion are not always driven by economic ups and downs, as the 1960s
attest. Economics cannot really explain why rapid growth in living standards
coincided with so much political upheaval, just as it cannot explain why long
periods of stagnation, as Japan has endured since the 1990s, are met with
relative equanimity. Economics can’t explain why Britons may leave the European
Union when the preponderance of evidence is that membership has made them
richer. There is no way to predict the effect of so many different forces on
the political choices that voters make. And even if there were, you would
probably still not predict the rise of Mr. Trump, who got where he is by
breaking every rule of conventional political and economic wisdom. Ultimately,
the best explanation may be that he isn’t the product of larger economic
forces: he’s the product of Donald Trump.
Eileen Moery,
Robert J. Calin-Jageman, Social Psychological and Personality Science (2016):
Direct and Conceptual Replications of Eskine (2013). Organic Food Exposure Has
Little to No Effect on Moral Judgments and Prosocial Behavior. Is there a dark side to organic food? Eskine reported
that participants exposed to organic food became much more morally judgmental
and much less prosocial relative to participants exposed to neutral or comfort
foods. This research sparked tremendous media interest, but was based on one
experiment with a small sample size. We report three attempts to replicate
Eskine using samples conferring high power, preregistered analysis plans, and
original materials. Across two direct replications and an online conceptual
replication, we found that organic food exposure has little to no effect on
moral. Mere exposure to organic food is probably not sufficient to
substantially change moral behavior.
Barry Ritholtz,
The Bic Picture: 10 Cognitive Biases That Affect Your Everyday Decisions. Bandwagon effect, Availability Heuristic….
Kishore Mahbubani,
Lawrence H. Summers, Foreign Affairs: The Fusion of Civilizations. The Case for Global Optimism. To put it simply, the
great world civilizations, which used to have detached and separate identities,
now have increasingly overlapping areas of commonality. Most people around the
world now have the same aspirations as the Western middle classes: they want
their children to get good educations, land good jobs, and live happy,
productive lives as members of stable, peaceful communities. Instead of feeling
depressed, the West should be celebrating its phenomenal success at injecting
the key elements of its worldview into other great civilizations.
Ghazala Azmat et al. IZA: What You Don't Know... Can't
Hurt You? A Field Experiment on Relative Performance Feedback in Higher
Education. This paper studies the
effect of providing feedback to college students on their position in the grade
distribution by using a randomized control experiment. This information was
updated every six months during a three-year period. In the absence of treatment,
students' underestimate their position in the grade distribution. The treatment
significantly improves the students' self-assessment. We find that treated
students experience a significant decrease in their educational performance, as
measured by their accumulated GPA and number of exams passed, and a significant
improvement in their self-reported satisfaction, as measured by survey
responses obtained after information is provided but before students take their
exams. Those effects, however, are short lived, as students catch up in
subsequent periods. Moreover, the negative effect on performance is driven by
those students who underestimate their position in the absence of feedback.
Those students who overestimate initially their position, if anything, respond
positively.
Indivar
Dutta-Gupta et al., Georgetown Center
on Poverty and Inequality: Lessons Learned From 40 Years of Subsidized
Employment Programs. Subsidized
employment programs have a wide range of potential benefits. First, these
programs provide an important source of income to participating workers.
Second, a number of experimentally-evaluated subsidized employment programs
have successfully raised earnings and employment, with some programs providing
lasting labor market impacts.4 Such programs have also decreased family public
benefit receipt, raised school outcomes among the children of workers, boosted
workers’ school completion, lowered criminal justice system involvement among
both workers and their children, improved psychological well-being, and reduced
longer-term poverty. There may be additional positive effects, such as increased
child support.
Jutta
Viinikainen et al., IZA: Born Entrepreneur? Adolescents' Personality Characteristics and
Self-Employment in Adulthood. Is there an
entrepreneurial personality and does it appear early in life? We provide a new
answer on this question by using the so-called Type A behavior traits
(Aggression, Leadership, Responsibility, and Eagerness-Energy), measured in
childhood and adolescence, and examining their relationship to self-employment
propensity in adulthood. Using data from the Young Finns Study linked to the
Finnish Longitudinal Employer-Employee Data and the Longitudinal Population
Census of Statistics, our results show that the early-life Leadership-dimension
is significantly associated with a higher likelihood 1) of becoming
self-employed later in life and 2) of being more successful as an entrepreneur,
as approximated by sales. Our results also reinforce the prior evidence on the
intergenerational transmission of entrepreneurship.
David Andolfatto:
How old were the inventors of major inventions? I came across this fun column the other day listing a number of Famous
Inventions, like the airplane, the camera, electricity, the car, etc, along
with their inventors. A thought crossed my mind: how old were these inventors
when they invented these inventions? Were they young like Marconi, who invented
the radio in his early 20s? Or were they old like Gutenberg, who invented the
printing press in his early 50s? In short, is there an age demographic that is
responsible for producing major innovations? I have to admit, I was a little
surprised--the median age is 40 (I was expecting younger).
Dan Nixon, BoE:
Less is more: what does mindfulness mean for economics? Economic theory generally assumes that more
consumption means greater happiness. This post puts forward an alternative,
“less is more” perspective based around the concept of mindfulness. It argues
that we may achieve greater happiness by seeking to simplify our desires,
rather than satisfy them. The result – less consumption but greater wellbeing –
could be especially important for debates around secular stagnation and
ecological sustainability.
Holger Kirchmann, Lars Bergström,Thomas Kätterer, Rune
Andersson, Fri tanke (2014): Den ekologiska drömmen. Myter och sanningar om
ekologisk odling. Föreställningar om
att ekologisk odling är klimatsmart och ger bättre livsmedel är felaktiga. Hundra
procent ekologisk odling skulle vara en katastrof för framtida
livsmedelsförsörjning och innebär större belastning på miljön till en hög
kostnad. Konsumenterna får varken bättre livsmedel eller en bättre miljö om de
köper ekologiskt odlad mat. Ekologiska livsmedel är inte giftfria. Ekomaten är
inte heller nyttigare än konventionellt odlad mat. Ökad ekologisk odling
försämrar allvarligt livsmedelsförsörjningen, både i Sverige och globalt. Ekoodling
ger inte ett lägre utsläpp av näringsämnen till yt- och grundvatten. Ekoodling
är inte klimatsmart.
Fernando
Eguren-Martin, BoE: Friedman was right: flexible exchange rates do help
external rebalancing. Do exchange rate
regimes matter for the formation of countries’ external imbalances? Economists
have thought so for over sixty years, and policymakers have made countless
recommendations based on that presumption. But this had not been tested
empirically until very recently, so it remained an opinion rather than a
fact. In this post I show that having a
flexible exchange rate regime leads to the correction of external imbalances in
developing countries, offering some empirical support to a widely held belief.
In contrast, this does not seem to be the case for advanced economies.
Yi Che et al.,
NBER: Does Trade Liberalization with China Influence U.S. Elections? This paper examines the impact of trade liberalization on
U.S. Congressional elections. We find that U.S. counties subject to greater
competition from China via a change in U.S. trade policy exhibit relative
increases in turnout, the share of votes cast for Democrats and the probability
that the county is represented by a Democrat. We find that these changes are
consistent with Democrats in office during the period examined being more
likely than Republicans to support legislation limiting import competition or
favoring economic assistance.
Maria De Paola, Giorgio Brunello, IZA: Education as a
Tool for the Economic Integration of Migrants. We examine the role of education in fostering the economic integration
of immigrants. Although immigrants in Europe are – on average – slightly less
educated than native individuals, there is a large heterogeneity across
countries. We discuss evidence on student performance in international tests
showing that children with an immigrant background display worse results than
natives. While in some countries, such as Denmark and France, this gap is almost
entirely explained by differences in socio-economic background, in others
(Finland, Austria, Belgium and Portugal) the factors driving the gap are more
complex and have roots also outside socio-economic conditions. We investigate
how educational policies in the host count can affect the educational outcomes
of immigrants. We focus our attention on pre-school attendance, school
tracking, the combination of students and teacher characteristics, and class
composition.
Maria Caridad Araujo et al., IZA: Teacher Quality and
Learning Outcomes in Kindergarten. We assigned two cohorts of kindergarten students, totaling more than
24,000 children, to teachers within schools with a rule that is
as-good-as-random. We collected data on children at the beginning of the school
year, and applied 12 tests of math, language and executive function (EF) at the
end of the year. All teachers were filmed teaching for a full day, and the
videos were coded using a well-known classroom observation tool, the Classroom
Assessment Scoring System (or CLASS). We find substantial classroom effects: A
one-standard deviation increase in classroom quality results in 0.11, 0.11, and
0.07 standard deviation higher test scores in language, math, and EF,
respectively. Teacher behaviors, as measured by the CLASS, are associated with
higher test scores. Parents recognize better teachers, but do not change their
behaviors appreciably to take account of differences in teacher quality.
GAO: Shorter Life
Expectancy Reduces Projected Lifetime Benefits for Lower Earners. According to studies GAO reviewed, lower-income men
approaching retirement live, on average, 3.6 to 12.7 fewer years than
higher-income men. GAO developed hypothetical scenarios to calculate the
projected amount of lifetime Social Security retirement benefits received, on
average, for men with different income levels born in the same year. In these
scenarios, GAO compared projected benefits based on each income groups' shorter
or longer life expectancy with projected benefits based on average life
expectancy, and found that lower-income groups' shorter-than-average life
expectancy reduced their projected lifetime benefits by as much as 11 to 14
percent. Effects on Social Security retirement benefits are particularly
important to lower-income groups because Social Security is their primary
source of retirement income.
Allison Master et
al., Washington Post: Researchers explain how stereotypes keep girls out of
computer science classes. Despite valiant
efforts to recruit more women, the gender gap in the fields collectively known
as STEM — science, technology, engineering, and math — is not getting any
better. The gaps in computer science and engineering are the largest of any
major STEM discipline. Nationally, less than 20% of bachelor’s degrees in these
fields go to women. Women are missing out on great jobs, and society is missing
out on the innovations women could be making in new technology. Stereotypes are
a powerful force driving girls away from these fields. Even though stereotypes
are often inaccurate, children absorb them at an early age and are affected by
them.
Kacey Deamer,
Livescience: Time to Change Your Sheets? Bedbugs Have Favorite Colors. Do bedbugs prefer their hiding places to be a
certain color? Researchers conducted a series of tests in a lab to see if
bedbugs (Cimex lectularius) would favor different-colored harborages, or places
where pests seek shelter. The scientists found that bedbugs strongly prefer red
and black, and typically avoid colors like green and yellow.
Stanley Fischer,
FED: Reflections on Macroeconomics Then and Now. There is an old joke about our field--not the one
about the one-handed economist, nor the one about "assume you have a can
opener," nor the one that ends, "If I were you, I wouldn't start from
here." Rather it's the one about the Ph.D. economist who returns to his
university for his class's 50th reunion. He asks if he can see the most recent
Ph.D. generals exam. After a while it is brought to him. He reads it carefully,
looking perplexed, and then says, "But this is exactly the same as the
exam I wrote over 50 years ago." "Ah yes," says the professor.
"It is the same, but all the answers are different."
Gabriel
Chodorow-Reich, Loukas Karabarbounis, NBER: The Limited Macroeconomic Effects
of Unemployment Benefit Extensions. By how much does an extension of unemployment benefits affect macroeconomic
outcomes such as unemployment? Answering this question is challenging because
U.S. law extends benefits for states experiencing high unemployment. We use data revisions to decompose the
variation in the duration of benefits into the part coming from actual
differences in economic conditions and the part coming from measurement error
in the real-time data used to determine benefit extensions. Using only the variation coming from
measurement error, we find that benefit extensions have a limited influence on state-level
macroeconomic outcomes. We use our
estimates to quantify the effects of the increase in the duration of benefits
during the Great Recession and find that they increased the unemployment rate
by at most 0.3 percentage point.
Steven D. Levitt,
John A. List, Sally Sadoff, NBER: The Effect of Performance-Based Incentives on
Educational Achievement: Evidence from a Randomized Experiment. We test the effect of performance-based incentives on
educational achievement in a low-performing school district using a randomized field
experiment. High school freshmen were
provided monthly financial incentives for meeting an achievement standard based
on multiple measures of performance including attendance, behavior, grades and
standardized test scores. Within the
design, we compare the effectiveness of varying the recipient of the reward
(students or parents) and the incentive structure (fixed rate or lottery). While the overall effects of the incentives
are modest, the program has a large and significant impact among students on
the threshold of meeting the achievement standard. These students continue to outperform their
control group peers a year after the financial incentives end. However, the program effects fade in longer
term follow up, highlighting the importance of longer term tracking of incentive
programs.
Richard Blundell,
Michael Grabera, Magne Mogstad, JPE: Labor income dynamics and the insurance
from taxes, transfers, and the family. What do labor income dynamics look like over the life-cycle? We use
rich Norwegian population panel data to answer these important questions. We
find that the income processes differ systematically by age, skill level and
their interaction. To accurately describe labor income dynamics over the
life-cycle, it is necessary to allow for heterogeneity by education levels and
account for non-stationarity in age and time. Our findings suggest that the
redistributive nature of the Norwegian tax–transfer system plays a key role in
attenuating the magnitude and persistence of income shocks, especially among
the low skilled. By comparison, spouse's income matters less for the dynamics
of inequality over the life-cycle.
Jeffrey Sparshott,
WSJ: Do Cheaters Ever Prosper? A Lesson
From N.Y. Student Tests. A 2011 analysis
for The Wall Street Journal showed a bulge in New York City students’ test
scores right over the passing mark. The evidence strongly suggested teachers
were manipulating grades on statewide Regents Exams and helped spur changes to
testing procedures. Thomas Dee, a professor at Stanford University, updated the
numbers from his initial analysis after the state took steps to eliminate grade
inflation. The findings: Teachers who manipulated scores appear to have been
motivated by altruism, score manipulation was eliminated by 2012, and the
graduation gap between black and white students is about 5% larger in its
absence.
David Downs,
Scientific American: The Science behind the DEA's Long War on Marijuana. Experts say listing cannabis among the world’s
deadliest drugs ignores decades of scientific and medical data. But attempts to
delist it have met with decades of bureaucratic inertia and political
distortion. Speculation is growing about the possibility that the U.S. Drug
Enforcement Administration (DEA) will review by summer its “Schedule I”
designation of marijuana as equal to heroin among the world’s most dangerous
drugs.
Lawrence Summers,
Washington Post: What’s behind the revolt against global integration? The core of the revolt against global integration,
though, is not ignorance. It is a sense — unfortunately not wholly unwarranted
— that it is a project being carried out by elites for elites, with little
consideration for the interests of ordinary people. They see the globalization
agenda as being set by large companies that successfully play one country
against another. They read the revelations in the Panama Papers and conclude
that globalization offers a fortunate few opportunities to avoid taxes and
regulations that are not available to everyone else. And they see the kind of
disintegration that accompanies global integration as local communities suffer
when major employers lose out to foreign competitors.
Peter Dizikes, MIT
News: How network effects hurt economies. “Relatively small shocks can become magnified and then become shocks
you have to contend with [on a large scale],” says MIT economist Daron
Acemoglu. Study reveals how woes in one industry can harm others, too. The
findings run counter to “real business cycle theory,” which became popular in
the 1970s and holds that smaller, industry-specific effects tend to get swamped
by larger, economy-wide trends. More precisely, Acemoglu and his colleagues
have found cases where industry-specific problems lead to six-fold declines in
production across the U.S. economy as a whole. For example, for every dollar of
value-added growth lost in the manufacturing industries because of competition
from China, six dollars of value-added growth were lost in the U.S. economy as
a whole.
Roland G. Fryer,
Jr, NBER: The Production of Human Capital in Developed Countries: Evidence from
196 Randomized Field Experiments. Randomized field experiments designed to better understand the production
of human capital have increased exponentially over the past several
decades. This chapter summarizes what we
have learned about various partial derivatives of the human capital production function,
what important partial derivatives are left to be estimated, and what -
together - our collective efforts have taught us about how to produce human
capital in developed countries. The chapter
concludes with a back of the envelope simulation of how much of the racial wage
gap in America might be accounted for if human capital policy focused on best
practices gleaned from randomized field experiments.
Simen Markussen,
Knut Roed, IZA: The Market for Paid Sick Leave. In many countries, general practitioners (GPs) are assigned the task
of controlling the validity of their own patients' insurance claims. At the
same time, they operate in a market where patients are customers free to choose
their GP. Are these roles compatible? Can we trust that the gatekeeping
decisions are untainted by private economic interests? Based on administrative
registers from Norway with records on sick pay certification and GP-patient
relationships, we present evidence to the contrary: GPs are more lenient
gatekeepers the more competitive is the physician market, and a reputation for
lenient gatekeeping increases the demand for their services.
Raj Chetty, JAMA:
The Association Between Income and Life Expectancy in the United States. In the United States between 2001 and 2014, higher
income was associated with greater longevity, and differences in life
expectancy across income groups increased over time. However, the association
between life expectancy and income varied substantially across areas;
differences in longevity across income groups decreased in some areas and
increased in others. The differences in life expectancy were correlated with
health behaviors and local area characteristics.
Noah Smith,
Bloombergs: Decline of the U.S. Middle Class. The percentages of Americans who consider themselves working class has
stayed relatively stable. But the self-identified middle class has plunged by
about 10 percentage points, matched by an even larger increase in the
percentage of Americans who label themselves lower class. The self-identified
lower class should probably be included in the working class that gets
discussed in articles about Trump and Sanders.
Osea Giuntella, Fabrizio Mazzonna, IZA: If You Don't
Snooze You Lose: Evidence on Health and Weight. Most economic models consider sleeping as a pre-determined and
homogeneous constraint on individuals' time allocation neglecting its potential
effects on health and human capital. Several medical studies provide evidence
of important associations between sleep deprivation and health outcomes
suggesting a large impact on health care systems and individual productivity.
Yet, there is little causal analysis of the effects of sleep duration. This
paper uses a spatial regression discontinuity design to identify the effects of
sleep on health status, weight, and cognitive abilities. Our results suggest
that delaying morning work schedules and school start times may have
non-negligible effects on Health.
