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Blog aggregator for economics research

2017-08-18

• China's Transition to a Human Capital Economy
  by Matthew Kahn in Environmental and Urban Economics, 2017-08-18 11:30:00 UTC

  The NY Times has published an interesting piece abo ut the rise of Chinese Tech companies . � For decades, China was known to "borrow" Western technology but now this large nation is becoming a producer of intellectual property and I have argued that this will lead this nation to enforce intellectual property laws. As China has invested in its own universities and sent millions of young people to study at Western Universities, the nation's stock of human capital has increased. � In our 2016 Princeton Press book, Siqi Zheng and I argue that the rise of the human capital economy in China has two [...]

2017-08-17

• Foreign-owned firms and productivity
  by bankunderground in Bank Underground, 2017-08-17 08:00:54 UTC

  Sandra Batten and Dena Jacobs Many governments around the world pursued policies to free up capital flows from the late 1970s to early 1990s with the aim of boosting productivity.  There’s now a debate raging about the costs and benefits of globalisation. While detractors highlight concerns about inequality , supporters of capital liberalisation point to the productivity growth it has fostered. Drawing on a unique UK firm-level dataset that merges data from the ONS business and innovation surveys, we show that foreign-owned companies are more productive than domestically owned firms and that [...]

• Thesis Thursday: Estela Capelas Barbosa
  by Chris Sampson in The Academic Health Economists' Blog, 2017-08-17 06:00:01 UTC

  On the third Thursday of every month, we speak to a recent graduate about their thesis and their studies. This month’s guest is Dr Estela Capelas Barbosa who graduated with a PhD from the University of York . If you would like to suggest a candidate for an upcoming Thesis Thursday, get in touch. Title Overall unfair inequality in health care: an application to Brazil Supervisor Richard Cookson Repository link http://etheses.whiterose.ac.uk/16649/ What’s the difference between fair and unfair inequality, and why is it important to distinguish the two? Not all inequality is the same. Whilst most [...]

2017-08-15

• Could Innovations in Democratic Participation Shake Us Out of Our Civil Disillusionment?
  by ? in Pacific Standard. Smart Journalism. Real Solutions., 2017-08-15 23:00:00 UTC

  History proves that, when governments listen, citizens reward them both politically and financially.There are several indications of broad disillusionment with democratic governance. From rising polarization to a growing lack of trust in government institu [...]

• The behavioural economics paradox
  by chris in Stumbling and Mumbling, 2017-08-15 12:25:19 UTC

  People aren’t as daft as some behavioural economists would have us believe. This is the message of a new paper by Olivier Bargain and colleagues. They studied the choices of British workers of how long to work, and found that: People behave on average as if they were maximizing SWB…A majority of individuals actually make decisions that are in line with the maximization of income-leisure satisfaction. Of course, there are exceptions to this. But many of these are because people are constrained by labour market institutions and policies: some people work too much because they can’t find [...]

2017-08-14

• What explains the rise of populism?
  by Johan Fourie in Johan Fourie's Blog, 2017-08-14 14:47:55 UTC

  Consider the following thought experiment: Sibusiso and Thulani each own a firm that competes with the other. In each of the following scenarios, Sibusiso’s firm outcompetes Thulani’s. Which of the four do you consider unfair competition? Sibusiso works hard, saves and invests his profits, and invents new techniques and products, while Thulani’s products change little and he loses market share. Sibusiso finds a higher quality input supplier in the US, which makes his products better and he therefore takes market share from Thulani. Sibusiso outsources some of his services to Bangladesh, wher [...]

• Adverse Selection: A Primer
  by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2017-08-14 12:40:51 UTC

  Information is the basis for our economic and financial decisions. As buyers, we collect information about products before entering into a transaction. As investors, the same goes for information about firms seeking our funds. This is information that sellers and fund-seeking firms typically have. But, when it is too difficult or too costly to collect information, markets function poorly or not at all. This form of asymmetric information ―where two parties to a potential transaction have unequal knowledge―is a particularly serious hindrance to the operation of financial markets. If, for some r [...]

2017-08-11

• Do you take all of your holiday allowance? Maybe not, if you live in these countries
  by ? in Forum:Blog, 2017-08-11 14:23:00 UTC

  Japanese workers are least likely to take their full annual vacation entitlement, according to a new poll. [...]

• Tony Atkinson and his Legacy
  by maximorossi in NEP-LTV blog, 2017-08-11 12:48:42 UTC

  By: A Brandolini  ;  Stephen P Jenkins  ;  John Micklewright Tony Atkinson is universally celebrated for his outstanding contributions to the measurement and analysis of inequality, but he never saw the study of inequality as a separate branch of economics. He was an economist in the classical sense, rejecting any sub-field labelling of his interests and expertise, and he made contributions right across economics. His death on 1 January 2017 deprived the world of both an intellectual giant and a deeply committed public servant in the broadest sense of the term. This collective tribute hi [...]

• The Difficult School-to-Work Transition of High School Dropouts: Evidence from a field experiment
  by maximorossi in NEP-LTV blog, 2017-08-11 12:47:41 UTC

  By: Cahuc, Pierre  ;  Carcillo, Stéphane  ;  Minea, Andreea This paper investigates the effects of the labor market experience of high school dropouts four years after leaving school by sending fictitious resumes to real job postings in France. Compared to those who have stayed unemployed since leaving school, the callback rate is not raised for those with employment experience, whether it is subsidized or non-subsidized, in the market or non-market sector, if there is no training accompanied by skill certification. In particular, we find no stigma effect associated with subsidized o [...]

• Populism and the Economics of Globalization
  by maximorossi in NEP-LTV blog, 2017-08-11 12:46:34 UTC

  By: Rodrik, Dani Populism may seem like it has come out of nowhere, but it has been on the rise for a while. I argue that economic history and economic theory both provide ample grounds for anticipating that advanced stages of economic globalization would produce a political backlash. While the backlash may have been predictable, the specific form it took was less so. I distinguish between left-wing and right-wing variants of populism, which differ with respect to the societal cleavages that populist politicians highlight. The first has been predominant in Latin America, and the seco [...]

• Economics of a good night’s sleep
  by maximorossi in NEP-LTV blog, 2017-08-11 12:45:56 UTC

  By: Joan Costa-i-Font  ;  Sarah Flèche Parents whose sleep quality is reduced by young children waking them in the night are less likely to work, work shorter hours and/or earn less than otherwise similar people who enjoy a good night’s sleep. The negative labour market effects of sleep disruption caused by children are particularly strong for low-skilled mothers. These are among the findings of research by Joan Costa-i-Font and Sarah Flèche, which uses data on 14,000 families in and around the city of Bristol in the UK to investigate the link between mothers’ employment outcomes and the [...]

• Firms and Labor Market Inequality: Evidence and Some Theory
  by maximorossi in NEP-LTV blog, 2017-08-11 12:45:10 UTC

  By: David Card  ;  Ana Rute Cardoso  ;  Jörg Heining  ;  Patrick Kline We synthesize two related literatures on firm-level drivers of wage inequality. Studies of rent sharing that use matched worker-firm data find elasticities of wages with respect to value added per worker in the range of 0.05 to 0.15. Studies of wage determination with worker and firm fixed effects typically find that firm-specific premiums explain 20% of overall wage variation. To interpret these findings we develop a model of wage setting in which workers have idiosyncratic tastes for different workplaces. Simple [...]

• Big Data and Unemployment Analysis
  by maximorossi in NEP-LTV blog, 2017-08-11 12:44:18 UTC

  By: Simionescu, Mihaela  ;  Zimmermann, Klaus F. Internet or “big” data are increasingly measuring the relevant activities of individuals, households, firms and public agents in a timely way. The information set involves large numbers of observations and embraces flexible conceptual forms and experimental settings. Therefore, internet data are extremely useful to study a wide variety of human resource issues including forecasting, nowcasting, detecting health issues and well-being, capturing the matching process in various parts of individual life, and measuring complex processes where t [...]

• Why Are Some Immigrant Groups More Successful than Others?
  by maximorossi in NEP-LTV blog, 2017-08-11 12:43:27 UTC

  By: Edward P. Lazear Success, measured by earnings or education, of immigrants in the US varies dramatically by country of origin. For example, average educational attainment among immigrants ranges from 9 to 16 years, depending on source country. Perhaps surprisingly, immigrants from Algeria have higher educational attainment than those from Israel or Japan. Also true is that there is a strong inverse relation of attainment to number of immigrants from that country. These patterns result because in the US, immigrant slots are rationed. Selection from the top of the source country’s abil [...]

• Survey Under-Coverage of Top Incomes and Estimation of Inequality: What is the Role of the UK’s SPI Adjustment?
  by maximorossi in NEP-LTV blog, 2017-08-11 12:42:47 UTC

  By: Richard V. Burkhauser  ;  Nicolas Hérault  ;  Stephen P. Jenkins  ;  Roger Wilkins Survey under-coverage of top incomes leads to bias in survey-based estimates of overall income inequality. Using income tax record data in combination with survey data is a potential approach to address the problem; we consider here the UK’s pioneering ‘SPI adjustment’ method that implements this idea. Since 1992, the principal income distribution series (reported annually in Households Below Average Income) has been based on household survey data in which the incomes of a small number of ‘very ric [...]

• Gender, Age, and Competition: a Disappearing Gap?
  by maximorossi in NEP-LTV blog, 2017-08-11 12:41:53 UTC

  By: Jeffrey Flory  ;  Uri Gneezy  ;  Kenneth Leonard  ;  John List Research on competitiveness at the individual level has emphasized sex as a physiological determinant, focusing on the gap in preference for competitive environments between young men and women. This study presents evidence that women’s preferences over competition change with age such that the gender gap, while large for young adults, disappears in older populations due to the fact that older women are much more competitive. Our finding that tastes for competition appear just as strong among older women as they are among [...]

• How Restricted is the Job Mobility of Skilled Temporary Work Visa Holders?
  by maximorossi in NEP-LTV blog, 2017-08-11 12:40:46 UTC

  By: Jennifer Hunt Using the National Survey of College Graduates, I investigate the degree to which holders of temporary work visas in the United States are mobile between employers. Holders of temporary work visas either have legal restrictions on their ability to change employers (particularly holders of intra-company transferee visas, L-1s) or may be reluctant to leave an employer who has sponsored them for permanent residence (particularly holders of specialty worker visas, H-1Bs). I find that the voluntary job changing rate is similar for temporary visa holders and natives with [...]

2017-08-08

• Populism is Back! Why has this happened and why does it matter?
  by chechurris in NEP-HIS blog, 2017-08-08 06:48:43 UTC

  Populism and the Economics of Globalization By Dani Rodrik (Harvard University) Abstract: Populism may seem like it has come out of nowhere, but it has been on the rise for a while. I argue that economic history and economic theory both provide ample grounds for anticipating that advanced stages of economic globalization would produce a political backlash. While the backlash may have been predictable, the specific form it took was less so. I distinguish between left-wing and right-wing variants of populism, which differ with respect to the societal cleavages that populist politicians highlight [...]

2017-08-07

• Looking Back: The Financial Crisis Began 10 Years Ago This Week
  by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2017-08-07 11:35:27 UTC

  “ The complete evaporation of liquidity in certain market segments of the U.S. securitization market has made it impossible to value certain assets fairly regardless of their quality or credit rating.”                                                           BNP Paribas press release , August 9, 2007 In his memorable review of 21 books about the 2007-09 financial crisis, Andrew Lo evoked Kurosawa’s classic film, Rashomon , to characterize the remarkable differences between these crisis accounts. Not only were the interpretations in dispute, but the facts were as well: “Even its starting date [...]

• Sam Watson’s journal round-up for 7th August 2017
  by Sam Watson in The Academic Health Economists' Blog, 2017-08-07 11:00:31 UTC

  Every Monday our authors provide a round-up of some of the most recently published peer reviewed articles from the field. We don’t cover everything, or even what’s most important – just a few papers that have interested the author. Visit our Resources page for links to more journals or follow the HealthEconBot . If you’d like to write one of our weekly journal round-ups, get in touch . Financing transformative health systems towards achievement of the health Sustainable Development Goals: a model for projected resource needs in 67 low-income and middle-income countries . Lancet: Global Health [...]

2017-08-06

• Choice in economics
  by chris in Stumbling and Mumbling, 2017-08-06 08:10:11 UTC

  The other day, I woke up thinking I fancied toast for breakfast rather than my usual muesli. I got up, got dressed, put the kettle on…and got myself a bowl of muesli. Force of habit overcame my conscious choice. I mention this because of a post by Jason Smith, in which he questions economists’ assumption that people make deliberate choices. “I do not think humans are "really thinking" about many of their economic choices” he writes. My breakfast was an example of that. Now, I don’t want to get into high-falutin’ grand theory here. Instead, I’ll just suggest four things that might [...]

• Is There A Relationship Between Coffee Shops And High Rent?
  by Tyler Durden in Zero Hedge, 2017-08-06 00:28:49 UTC

  Submitted by Priceonomics The American city runs on coffee. It’s served nearly everywhere, in cafes, restaurants, and corner stores, and it’s an ingrained part of most people’s morning routines. From the distinct taste, to the plethora of ways it can be prepared, to the benefits of caffeine, most people can find an aspect of the drink that they love. Though while it is common, getting coffee from a coffee shop rather than making it at home can be expensive. It is somewhat of a luxury item, especially if you consider the cost of fancy cafes serving espresso and pour over drinks (generally refe [...]

2017-08-04

• Quantifying the Welfare Gains from History Dependent Income Taxation
  by Christian Zimmermann in NEP-DGE blog, 2017-08-04 21:18:17 UTC

  By Marek Kapicka http://d.repec.org/n?u=RePEc:red:sed017:271&r=dge I quantify the welfare gains from introducing history dependent income tax in an incomplete markets framework where individuals face uninsurable random walk idiosyncratic shocks. I assume that the income tax paid is a function of a geometrical weighted average of past incomes, and solve for the optimal weights. I find that the optimal weights on past incomes decline geometrically at a rate equal to the discount rate. The welfare gains from history dependence are large, about 1.77 percent of consumption. I decompose the total ef [...]

2017-07-31

• 6 Digital Strategies, and Why Some Work Better than Others
  by Jacques Bughin in HBR Blog Network, 2017-07-31 14:00:40 UTC

  Digital technology has been roiling markets and disrupting companies for more than two decades, but despite that lengthy history, incumbents are still struggling to enact and deliver on digital transformations. The first challenge is disruption; digitization is enabling new, disruptive models that aggressively compete with legacy models, putting material pressure on incumbents’ revenue and profit growth. As incumbents fight back with their own digital strategies, our research shows that they often trigger a second wave of competition, closer to the notion of Schumpeterian imitation where incu [...]

• Modernizing the U.S. Payments System: Faster, Cheaper, and more Secure
  by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2017-07-31 12:50:04 UTC

  A few months ago, one of us (Steve, who lives near Boston) needed to send some money to his son (Dan, who lives in Chicago). Hoping to use the most up-to-date technology, Steve checked out the person-to-person (PTP) transfer options on his bank’s website. The first three choices required standard banking information—payee’s account number, bank ABA routing number and the like. They differed in cost and speed: you could implement a transfer in 3 days for $3, next day for $10, and same day for $30. All three used versions of the 20th century payments system: the automated clearing house (ACH) fo [...]

• Reinventing the wheel
  by chris in Stumbling and Mumbling, 2017-07-31 12:13:39 UTC

  In both the UK and US, wage inflation has stayed low despite apparently low unemployment – to the puzzlement of believers in the Philips curve. Felix Martin in the FT says there's a reason for this. The “dirty secret of economics,” he says, is “the central importance of power.” Inflation, he says, is “society’s default method of reconciling, at least for a while, irreconcilable demands.” And because workers don't have the power to make big demands , we haven’t got serious inflation. What's depressing about this isn’t just that it’s right , but that it needs saying at all. [...]

2017-07-30

• Investing in a "Northwest" Real Estate REIT
  by Matthew Kahn in Environmental and Urban Economics, 2017-07-30 17:03:00 UTC

  For years, I have argued that climate change will boost real estate prices in regions of the U.S that prove to have an edge in adaptation (i.e relatively cool summers and warm winters). �I published my paper back in 2009 and then several other teams started doing similar work. My wife asked me; why don't we make a $ bet on the places that you are optimistic about. �Why aren't we buying property in Washington state and Oregon? �I returned to this thought today after I read t his NY Times piece about a young man who has bought a rental property in Atlanta. He has never seen it but he used an onl [...]

• The Saga Continues: A New Addition to the Currency Unions and Trade Literature
  by Doug Campbell in Douglas L. Campbell, 2017-07-30 13:35:00 UTC

  Previously on this blog, I have written about the saga of the Currency Unions and Trade literature. This literature began with Andrew Rose, the famed discoverer of the finding that currency unions, like the Euro, appear to have an effect on trade that is nothing short of miraculous. Effect estimates range in the 100% to 1,300% range, according to researchers at places like Harvard and Berkeley. I published my very first academic paper about this topic, and found that the earlier large estimates of currency unions (CUs) on trade were driven by rather blunt omitted variables, such as warfare, de [...]

2017-07-29

• A "Bunker Boom"? Will Elevated Risk of a North Korea Nuclear Attack Lower California Home Prices?
  by Matthew Kahn in Environmental and Urban Economics, 2017-07-29 20:55:00 UTC

  Economists have taught zillions of students that if investors are risk neutral and forward looking that the value of a piece of real estate today is the expected present discounted value of its future rents. � As North Korea's ability to shoot nuclear missiles improves, will real estate assets in the Western U.S drop as this "new news" is reflected in prices? � This Fo x News piece suggests that people in Japan are investing in precautions. Without engaging in science fiction, this example raises interesting issues related to risk perception and the compensating differential that people requir [...]

2017-07-28

• Crowding Out and the Social Overhead Costs of Labor
  by Sandwichman in EconoSpeak, 2017-07-28 22:00:00 UTC

  Another strange twist in the convoluted lump-of-labor saga. Chartist leader Feargus O'Connor refuted the "Treasury View" -- aka "crowding out" -- in 1844. O'Connor's tract is long-winded and sentimentalized an idyllic past but it also contains some cogent analysis of why workers were (and should still be) wary of the exploitative use of technology by capitalist firms. O'Connor's critique took the form of a dialogue, which parodied and refuted an earlier dialogue, "The Employer and Employed," that had been published in Chambers's Miscellany of Useful and Entertaining Tracts. In the Chambers  di [...]

• Il mercato (a senso) unico, ovvero la journée des QED: 78, 79, 80.
  by Alberto Bagnai in Goofynomics, 2017-07-28 10:26:00 UTC

  Senza ombra di dubbio questo venerdì 28 luglio passerà alla storia come una delle giornate più tristi della nostra storia recente, e, quindi, anche del nostro blog. Veder arrivare la catastrofe, cercare, con tutti i propri (deboli) mezzi di rendere consapevoli i miei concittadini del rischio che il paese correva, mi ha riservato nel tempo amare soddisfazioni intellettuali (i QED dei quali è punteggiato il blog: e oggi sono, come vedremo, almeno tre), ma rischia anche di schiacciarmi sotto l'opprimente consapevolezza della mia, della nostra, impotenza. Il mood , insomma, è questo: e vista retro [...]

2017-07-27

• Trade deal? Yawn.
  by chris in Stumbling and Mumbling, 2017-07-27 12:36:49 UTC

  One of the most elementary distinctions in economics (and in life) is that between instruments and objectives. Interest rates, for example, are only an instrument whereas the objectives are price and output stability. I fear, though, that this distinction is being overlooked by those Brexiters aroused by what Trump calls a “big and exciting” trade deal between the UK and US. Trade deals are only a means of achieving what really matters – prosperity. And they might be a weak one at that. Liam Fox claims that bilateral US-UK trade could rise from £167bn a year to about £207bn by 2030 “ [...]

• Una mirada al fracaso histórico de la educación
  by Francisco Beltrán Tapia in Nada Es Gratis, 2017-07-27 04:00:20 UTC

  El tema de la importancia de la educación en el desarrollo económico ha sido abordado repetidamente en este blog, especialmente a la luz de los mediocres resultados que tradicionalmente cosecha el sistema educativo español ( aquí , aquí , aquí o aquí ). Una idea por lo demás nada nueva. Nuestros antepasados más ilustres ya lo repetían, sin quizás mucha suerte. Gaspar Melchor de Jovellanos , el conocido reformista ilustrado, resaltaba en 1804 que "las fuentes de la prosperidad social son muchas; pero todas nacen de un mismo origen, y este origen es la instrucción pública" ( aquí ). Aunque algo [...]

• Scarce 5%-corrections, worldwide
  by Salil Mehta in Statistical Ideas, 2017-07-27 02:08:00 UTC

  The Wall Street Journal (WSJ) showcased a widely-shared article [ link ] earlier this month exposing the fact that we have lacked 5% corrections, jointly among three main indices around the globe.   This is a provocative statistical indicator, as many investors consider for their portfolio generally one market index that is heavily weighted towards their home country.   The fact that other indices in foreign regions are mirroring these similar streaks could perhaps be compelling.   Let’s take the U.S. for example, we've gone over a year without a 5% correction.   This exact lengthy time withou [...]

2017-07-26

• Error in 2014 Energy Journal Paper
  by noreply@blogger.com (David Stern) in Stochastic Trend, 2017-07-26 23:58:00 UTC

  I hate looking at my published papers because there are often typos in them which I didn't catch at the proofs stage...This time my coauthor, Stephan Bruns, found one in our 2014 paper in the Energy Journal : " Is There Really Granger Causality Between Energy Use and Output? " In Table 1, which describes the details of the studies in our meta-analysis, the control variable labeled "energy production" should actually be labeled "energy price". Energy production would be a weird control variable, but for some reason I never noticed this. My excuse is that I didn't create this table, but that isn [...]

• An Economist's Look at the NYC Public Transit Budget
  by Matthew Kahn in Environmental and Urban Economics, 2017-07-26 14:33:00 UTC

  Here is MT A's 2017 budget. �It will spend $17 billion dollars to keep the New York City region's buses and subways moving. That's a lot of $! �Look at the pie chart on page I-1. �Only 23% of the budget is spent on capital goods. �60% is spent on labor and 17% is spent on paying back past debts (these debts in turn must be mainly caused by past labor expenses). � �On average, 8.8 million people ride this system each weekday (see page II-11). �The MTA has 69,000 total employees. � Let's calculate the expenditure per average worker = �17 billion*(1-.4)/69000 = �$148,000 . �Now, this includes sal [...]

• Marriage & wages
  by chris in Stumbling and Mumbling, 2017-07-26 12:57:45 UTC

  Actor Tom Chambers has caused a row by claiming that “many men's salaries aren't just for them, it's for their wife and children, too." As a justification for the gender pay gap, this is lousy. But there’s a core of truth in what he says. It’s a lousy justification because if employers paid higher wages to people with dependents we’d expect to see women with children earn more than childless ones. But the opposite is the case. TUC research (pdf) has found that full-time working mothers aged 42 earn 7% less than otherwise similar but childless women. That might be because mothers take t [...]

2017-07-25

• Alternative Facts When the Truth Could Kill by Mark Harrison
  by Mark Harrison in Mark Harrison's blog, 2017-07-25 09:50:35 UTC

  Writing about web page http://warwick.ac.uk/cage/news/20-07-17-advantage_magazine/ CAGE (Warwick's ESRC Centre for Competitive Advantage in the Global Economy) has just published the summer issue of its excellent Advantage Magazine . Claire Crawford asks: "Does offering more free childcare help parents work more?" Luigi Pascale writes about "Globalisation and economic development: A lesson from history." Nick Crafts ponders: "Building a new industrial strategy ... on shaky foundations?" Sascha O. Becker, Thiemo Fetzer and Dennis Novy discuss "Who voted for Brexit?" And Daniel Sgroi explains n [...]

• Knowledge in Mining does matter. But not any Knowledge.
  by mlmorell in NEP-HIS blog, 2017-07-25 03:11:04 UTC

  The Mining Sectors in Chile and Norway, ca. 1870 – 1940: the Development of a Knowledge Gap By: Kristin Ranestad (University of Oslo) Abstract : Chile and Norway are two ‘natural resource intensive economies’, which have had different development trajectories, yet are closely similar in industrial structure and geophysical conditions. The questions of how and why Chile and Norway have developed so differently are explored through an analysis of how knowledge accumulation occurred and how it was transformed by learning into technological innovation in mining, a sector which has long traditions [...]

• A Civilization Intent on Eating Itself into an Early Grave
  by Reason in Fight Aging, 2017-07-25 00:11:24 UTC

  If the successes in technological development achieved over the past few hundred years is teaching us anything, perhaps it should be that individual members of a species that evolved in an environment of pervasive scarcity and intermittent famine are not well equipped for an environment of consistent plenty. Our biochemistry and our instincts lead us astray: eat too many calories and life expectancy and long-term health will suffer for it. This is not new. We are no different from our ancestors in this aspect of the human condition. The change lies in the fact that we now live in an age so we [...]

2017-07-24

• Velocity in the Long Run: Money and Structural Transformation
  by Christian Zimmermann in NEP-DGE blog, 2017-07-24 16:30:17 UTC

  By Antonio Mele and Radek Stefanski http://d.repec.org/n?u=RePEc:red:sed017:168&r=dge Monetary velocity declines as economies grow. We argue that this is due to the process of structural transformation – the shift of workers from agricultural to non-agricultural production associated with rising income. A calibrated, two-sector model of structural transformation with monetary and non-monetary trade accurately generates the long run monetary velocity of the US between 1869 and 2013 as well as the velocity of a panel of 92 countries between 1980 and 2010. Three lessons arise from our analysis: [...]

• Steve Cecchetti and Kim Schoenholtz — The Other Trilemma: Governing Global Finance
  by contrarianmedia@hotmail.com (Mike Norman) in Mike Norman Economics, 2017-07-24 14:09:00 UTC

  Courses in international economics usually introduce students to the impossible trinity, also known as the trilemma of open-economy macroeconomics: namely, that a fixed exchange rate, free cross-border capital flows, and discretionary monetary policy are incompatible (see left panel of diagram). Why? Because, in the presence of free capital flows under a fixed exchange rate, private currency preferences (rather than policymakers) determine the size of the central bank balance sheet and hence the domestic interest rate. We’ve highlighted this problem several times in analyzing China’s evolving [...]

• The Other Trilemma: Governing Global Finance
  by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2017-07-24 13:07:11 UTC

  “Global banks are global in life but national in death.” Mervyn King Courses in international economics usually introduce students to the impossible trinity , also known as the trilemma of open-economy macroeconomics : namely, that a fixed exchange rate, free cross-border capital flows, and discretionary monetary policy are incompatible (see left panel of diagram). Why? Because, in the presence of free capital flows under a fixed exchange rate, private currency preferences (rather than policymakers) determine the size of the central bank balance sheet and hence the domestic interest rate. We’v [...]

2017-07-23

• Urban Economics in the New York Times
  by Matthew Kahn in Environmental and Urban Economics, 2017-07-23 14:37:00 UTC

  While the Sports Section doesn't have any new NBA news, the NY Times has published two really interesting pieces related to major themes in urban economics. One focuses on the garbage problem in the NYC subway and the other examines th e challenge of high property tax payments (as a function of current market value) in Detroit due to falling home prices combined with "sticky" earlier property value assessments. Subways and the Tragedy of the Commons -- some cities such as Washington DC ban food eating on the subway. �This imposes private costs on busy commuters but offers social benefits as th [...]

• Random Matching under Priorities: Stability and No Envy Concepts by Haris Aziz and Bettina Klaus
  by Al Roth in Market Design, 2017-07-23 12:06:00 UTC

  Here's the preprint: Here's a new paper by Haris Aziz and Bettina Klaus: Random Matching under Priorities: Stability and No Envy Concepts Abstract We consider stability concepts for random matchings where agents have preferences over objects and objects have priorities for the agents. When matchings are deterministic, the standard stability concept also captures the fairness property of no (justified) envy. When matchings can be random, there are a number of natural stability / fairness concepts that coincide with stability / no envy whenever matchings are deterministic. We formalize known sta [...]

• Vamva who? Il dollaro e la sostenibilità dell'euro (ovvero: perché i trader mi amano...)
  by Alberto Bagnai in Goofynomics, 2017-07-23 09:04:00 UTC

  (... e va bene: parliamo di economia. Di politica ci impediranno presto di parlare, in nome dell'amore, come credo abbiate capito. Oggi Barbara su Twitter ha chiesto se fa male constatare che la sinistra è arrivata a toglierci la libertà (di espressione). Si riferisce al rapporto della "commissione Cox" che viene commentato oggi da Palombi sul Fatto Quotidiano con insolita (per lui) cautela - eppure non tiene famiglia e se la tenesse se ne fregherebbe come me. Un rapporto che è solo una tappa di un percorso che era stato individuato e stigmatizzato ante litteram da due membri del comitato scie [...]

2017-07-22

• The ideology of "the market"
  by chris in Stumbling and Mumbling, 2017-07-22 12:00:29 UTC

  One curiosity of the row over top BBC pay has been the attempts of past and present BBC bosses to defend high pay by invoking “the market”. “There is a market for Jeremy Vines, there is a market for John Humphrys” says James Purnell. “We operate in a market place.” Pay is based on a “market-based calculation” say Mark Damazer ( 9” in ). “The BBC does not exist in a market on its own where it can set the market rates.If we are to give the public what they want, then we have to pay for those great presenters and stars" says Lord Hall. However, the “market” here is a queer [...]

2017-07-21

• Le scelte finanziarie migliorano con una spinta gentile
  by Maria De Paola, Francesca Gioia e Fabio Piluso in La Voce, 2017-07-21 08:19:00 UTC

  Non basta l’educazione finanziaria per garantire buone scelte di investimento. Perché poi bisogna ricordarsi di avere informazioni e conoscenze per le decisioni corrette. È qui che entra in gioco quella “spinta gentile” che in Italia potrebbe essere utile. Le cause degli investimenti sbagliati La teoria economica tradizionale descriveva l’ homo oeconomicus come un soggetto perfettamente razionale; negli ultimi anni vi è stata però un’inversione di tendenza e una poderosa quantità di evidenze sperimentali (divulgate in libri, a , b , che hanno riscosso un notevole successo anche in Italia) ha [...]

2017-07-20

• Climate Change Will (Probably) Not Destroy the Global Economy but That Doesn't Mean We are Out of the Woods
  by Ed Dolan in Ed Dolan's Econ Blog, 2017-07-20 11:25:00 UTC

  Climate change is on course to do a lot of harm to our planet. That is why concerned economists like myself advocate measures that would at least slow the pace of damage and give us more time to adapt. Paradoxically, though, economists rarely discuss what global warming is likely to do to the economy itself. Will climate change destroy the global economy as it raises sea levels, intensifies extreme weather, and kills our crops? The answer turns out to be more complex than you might think. It is certainly not as simple as David Wallace-Wells endeavors to make it in his widely read New Yo [...]

• Thesis Thursday: Till Seuring
  by Chris Sampson in The Academic Health Economists' Blog, 2017-07-20 06:00:57 UTC

  On the third Thursday of every month, we speak to a recent graduate about their thesis and their studies. This month’s guest is Dr Till Seuring who graduated with a PhD from the University of East Anglia . If you would like to suggest a candidate for an upcoming Thesis Thursday, get in touch. Title The economics of type 2 diabetes in middle-income countries Supervisors Marc Suhrcke , Max Bachmann , Pieter Serneels Repository link https://ueaeprints.uea.ac.uk/63278/ What made you want to study the economics of diabetes? I was diagnosed with type 1 diabetes when I was 18. So while looking for a [...]

2017-07-18

• A note on automation, stagnation, and the implications of a robot tax
  by Christian Zimmermann in NEP-DGE blog, 2017-07-18 21:09:49 UTC

  Emanuel Gasteiger and Klaus Prettner http://d.repec.org/n?u=RePEc:zbw:fubsbe:201717&r=dge We analyze the long-run growth effects of automation in the canonical overlapping generations framework. While automation implies constant returns to capital within this model class (even in the absence of technological progress), we show that it does not have the potential to lead to positive long-growth. The reason is that automation suppresses wages, which are the only source of investment because of the demographic structure of the overlapping generations model. This result stands in sharp contrast to [...]

• Why is California Housing 4 Times as Expensive as Alabama Housing? Supply or Demand Revisited
  by Matthew Kahn in Environmental and Urban Economics, 2017-07-18 14:50:00 UTC

  Zillow reports that the median home price in Alabama is $126,000 while in California it is $500,000 .  Why?  The NY Ti mes reports today on this issue. In this self serving blog post,  I want to point you to my demand side papers that explain why California home prices are so high and my supply side papers. Demand Side: Kahn Matthew E., 1995. " A Revealed Preference Approach to Ranking City Quality of Life ,"  Journal of Urban Economics , Elsevier, vol. 38(2), pages 221-235, September. Cragg, Michael & Kahn, Matthew, 1997. " New Estimates of Climate Demand: Evidence from Location Choice ,"  Jo [...]

2017-07-17

• Why Is There No New Housing Construction in the Desirable Venice Beach, California Area?
  by Matthew Kahn in Environmental and Urban Economics, 2017-07-17 18:40:00 UTC

  When I walk around the Venice Beach area, I see plenty of two story buildings and homes that could be knocked down and rebuilt with 6 story and taller buildings. Th e WSJ poses a great puzzle today on why more housing isn't being built in this paradise. �My friends Issi Romem and Jed Kolko are both quoted. My simple economic explanation for why supply isn't keeping up with demand is the fact that Venice Beach is a progressive community with much of its land located within the Coastal Commission's jurisdiction. �Both of these factors create more regulation and zoning which leads to an inelastic [...]

• An Open Letter to the Honorable Randal K. Quarles
  by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2017-07-17 12:58:28 UTC

  Dear Mr. Quarles, Congratulations on your nomination as the first Vice Chairman for Supervision on the Board of Governors of the Federal Reserve System. We are pleased that President Trump has chosen someone so qualified, and we are equally pleased that you are willing to serve. Assuming everything goes according to plan, you will be assuming your position just as we mark the 10th anniversary of the start of the global financial crisis. As a direct consequence of numerous reforms, the U.S. financial system—both institutions and markets—is meaningfully stronger than it was in 2007. Among many o [...]

• Paul Mitchell’s journal round-up for 17th July 2017
  by paulmitchell1 in The Academic Health Economists' Blog, 2017-07-17 11:00:07 UTC

  Every Monday our authors provide a round-up of some of the most recently published peer reviewed articles from the field. We don’t cover everything, or even what’s most important – just a few papers that have interested the author. Visit our Resources page for links to more journals or follow the HealthEconBot . If you’d like to write one of our weekly journal round-ups, get in touch . What goes wrong with the allocation of domestic and international resources for HIV?  Health Economics [ PubMed ]  Published 7th July 2017 Investment in foreign aid is coming under considered scrutiny as a numbe [...]

2017-07-15

• A Quick Economic Evaluation of Jim Hansen's Predictions About Our Urban Future
  by Matthew Kahn in Environmental and Urban Economics, 2017-07-15 13:34:00 UTC

  The respected climate scientist Jim Hansen says many interesting things in this interview.     Below, I reproduce one direct quote and then comment on it. To think for a minute at the scarier end of the spectrum. If we do end up four or five degrees warmer, within a relatively short period of time — that’s the IPCC’s RCP8.5 scenario, by the end of the century, and that’s not counting some of these dramatic feedback mechanisms, what would that do to the planet, in your mind?  "I don’t think we’re going to get four or five degrees this century, because we get a cooling effect from the melting ic [...]

2017-07-14

• 5 Cities That Won't Be Hosting the 2024 Olympics, and Why That Makes Them Winners
  by Ed Krayewski in Hit & Run blog, 2017-07-14 20:00:00 UTC

  The International Olympics Committee (IOC) announced this week that the 2024 Summer Olympics would be awarded to either Paris or Los Angeles, the only two cities bidding for the games. The other city would be awarded the 2028 Summer Olympics. It's a far cry from the 1990s, when the IOC had six cities to choose from for the 1996 Summer Olympics and five for the 2000 Summer Olympics. City residents, especially in democratic countries, are starting to figure out what a rip-off hosting the Olympics can be . Every Olympics games since 1960 for which data is available has faced cost over-ru [...]

• The Complex Relationship between Income and GHG Emissions
  by Matthew Kahn in Environmental and Urban Economics, 2017-07-14 17:02:00 UTC

  Dave Roberts h as written a thought provoking blog post. � My read of his piece is that he is telling a "Elvis Presley" story. �Back before he was rich and famous, Elvis had a small carbon footprint because he couldn't afford several cars, a �pool, lots of steak and a big house but as he got rich , he lived the American Dream and had a much larger carbon footprint. �Roberts doesn't mention Elvis but this scale story is his story. To an economist, consumption has a quantity and quality dimension. Roberts is fixated on just the former. �Really poor people are more likely to burn coal for heating [...]

• Public Transit Investment in Older, Progressive Cities: The Tradeoff of Investing in Capital versus Labor:
  by Matthew Kahn in Environmental and Urban Economics, 2017-07-14 00:08:00 UTC

  Budget constraints bind. �Read this NY Times Editorial in which the NYC mayor is lectured for not spending enough on subways. �My simple theory for why this mayor and past mayors have under-invested is because almost all of the $ goes to the public sector transportation unions. �As we argue in this 2016 NBER paper , these public sector transport workers are very well paid. In aggregate, this leaves very little money for upgrading capital. �New York City's subway is old (and thus not at the technological frontier) and the unions have great power. �Read about the NYC bus driver who made $153,000 [...]

2017-07-13

• No Mention of General Equilibrium Effects in The Economist Magazine!
  by Matthew Kahn in Environmental and Urban Economics, 2017-07-13 18:43:00 UTC

  Read this sensible piece �published in the esteemed Economist Magazine�about the possible effects of climate change. �A key point that the piece focuses on is that poor counties in the U.S may become poorer because of increased heat and climate risk. � In a standard compensating differentials model, this will lower home prices there. � Read my 2014 Istanbul Keynote. � � �Yes, home owners in places that do not play good defense against climate change will suffer an asset price loss as the aggregate demand for such homes declines (the supply of such durable capital is inelastic). �But, poor peop [...]

• …IRPF…
  by J. Ignacio Conde-Ruiz in Nada Es Gratis, 2017-07-13 05:03:09 UTC

  de J. Ignacio Conde-Ruiz y Carmen Marín Estos días estamos oyendo hablar mucho del impuesto sobre la renta a las personas físicas (IRPF). En este post vamos a ver, dada la información disponible, los principales hechos estilizados del impuesto. En primer lugar vemos que el IRPF como porcentaje del PIB recauda un 7,4%, 2 puntos de PIB por debajo de la media europea (véase Gráfico 1). Fuente: Elaboración propia con datos de Eurostat La explicación de la menor recaudación que la media, como ya pusimos de relieve en este trabajo ,  no es por tener unos tipos marginales más bajos que la media. Pue [...]

2017-07-12

• Robustness, Low Risk-Free Rates, and Consumption Volatility in General Equilibrium
  by Christian Zimmermann in NEP-DGE blog, 2017-07-12 14:07:55 UTC

  By Yulei Luo, Jun Nie and Eric Young http://d.repec.org/n?u=RePEc:pra:mprapa:80046&r=dge This paper develops a tractable continuous-time recursive utility (RU) version of the Huggett (1993) model to explore how the preference for robustness (RB) interacts with intertemporal substitution and risk aversion and then affects the interest rate, the dynamics of consumption and income, and the welfare costs of model uncertainty in general equilibrium. We show that RB reduces the equilibrium interest rate and the relative volatility of consumption growth to income growth when the income process is sta [...]

2017-07-11

• Peer Pressure: Tax Competition and Developing Economies
  by IMFBlog in iMFdirect, 2017-07-11 16:09:42 UTC

  By Michael Keen and Jim Brumby July 11, 2017 A salesman checks an iphone in New Delhi, India: governments compete to attract investors with low corporate tax rates (photo: Adnan Abidi/Reuters/Newscom) Economists tend to agree on the importance of competition for a sound market economy. So, what’s the problem when it comes to governments competing to attract investors through the tax treatment they provide? The trouble is that by competing with one another and eroding each other’s revenues, countries end up having to rely on other—typically more distortive—sources of financing or reduce much- [...]

• IL DEBITO PUBBLICO GRAVA SULLE GENERAZIONI FUTURE? MOLTO, MOLTO MENO DELL'EURO, MR. MOSCOVICI
  by Quarantotto in Orizzonte48, 2017-07-11 14:08:00 UTC

  1. L'immancabile Repubblica , adiuvata criticamente dalla Stampa , riporta la ormai nota (quanto trita) replica di Moscovici all'uscita di Renzi sull'aggiramento/modifica del fiscal compact:  Accoglienza tiepida se non fredda a Bruxelles per la proposta lanciata da Matteo Renzi di tenere il deficit al 2,9% per cinque anni per liberare risorse per spingere la crescita economica. "È interesse dell'Italia continuare a ridurre il deficit per ridurre il debito pubblico che pesa sulle generazioni future e impedisce di investire: ogni euro per far fronte al debito è un euro in meno alla scuola, [...]

• The Taylor Review: 1990s answers to 2010s problems
  by chris in Stumbling and Mumbling, 2017-07-11 12:51:28 UTC

  For me, the Taylor Review (pdf) of working practices is frustrating. There are some good things about it, not least of which is it’s mere existence. Anything that brings the hidden abode of production into public view, and draws attention to the ground truth of working lives, is to be welcomed. I also welcome its demand that “workers must have a voice”, its pointing out the hidden unemployment that is economic inactivity, and the insecurity evident in labour market flows data. I also like this : People who have less autonomy over what they do at work tend to report lower wellbeing rates [...]

2017-07-10

• Monetary Policy According to HANK
  by Christian Zimmermann in NEP-DGE blog, 2017-07-10 20:32:58 UTC

  By Greg Kaplan, Benjamin Moll and Giovanni L. Violante http://d.repec.org/n?u=RePEc:ime:imedps:17-e-04&r=dge We revisit the transmission mechanism of monetary policy for household consumption in a Heterogeneous Agent New Keynesian (HANK) model. The model yields empirically realistic distributions of wealth and marginal propensities to consume because of two features: uninsurable income shocks and multiple assets with different degrees of liquidity and different returns. In this environment, the indirect effects of an unexpected cut in interest rates, which operate through a general equilibrium [...]

• Climate Change Impacts: More Popular Press Doom and Gloom
  by Matthew Kahn in Environmental and Urban Economics, 2017-07-10 15:54:00 UTC

  Read this piece and let me reprint some quotes; "The present tense of climate change — the destruction we’ve already baked into our future — is horrifying enough. Most people talk as if Miami and Bangladesh still have a chance of surviving; most of the scientists I spoke with assume we’ll lose them within the century, even if we stop burning fossil fuel in the next decade." another quote "At 11 or 12 degrees of warming, more than half the world’s population, as distributed today, would die of direct heat. Things almost certainly won’t get that hot this century, though models of unabated emissi [...]

• 305 – Feeling virtuous: what’s it worth?
  by David Pannell in Pannell Discussions, 2017-07-10 15:00:54 UTC

  We all like to feel good about ourselves. A product that makes us seem virtuous to others, or even to ourselves, would be worth paying more for than its strictly utilitarian value. That was one of our hypotheses behind a surprising result in some recent research. We were trying to measure the benefits of installing a rainwater tank on an urban property in Perth. We did this by measuring the premium in house sale prices for houses that already had a rainwater tank installed, compared with similar houses that did not. The results left us deeply puzzled. First, the price premium was enormous: aro [...]

• China: Deleveraging is Hard to Do
  by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2017-07-10 12:37:23 UTC

  “Financial security is an important part of national security and an important basis for the steady and healthy development of the economy.” President Xi Jinping, Reuters , April 26, 2017. “Leverage comes by the pound and goes away by the ounce.” Zhang Zhongkai, Xinhua News Service , May 4, 2015. For the first time in nearly three decades, Moody’s recently downgraded the long-term sovereign debt of China, lowering its rating from Aa3 to A1. As is frequently true in such cases, the adjustment was overdue. Since China’s massive fiscal stimulus in 2008, the government has experienced a surge in c [...]

• ‘Metrics Monday: Dealing with Imperfect Instruments III
  by Marc F. Bellemare in Marc F. Bellemare, 2017-07-10 10:00:06 UTC

  Back in January, I wrote two posts about dealing with imperfect instruments. One went over Conley et al. (2012), which deals with instruments that the authors deem plausibly exogenous; the other went over Nevo and Rosen (2012), which deals with instruments that the authors deem imperfect. In a new working paper , Damian Clarke and Benjamin Matta discuss both methods, and they present the Stata commands – plausexog – and – imperfectiv – they created to implement them. If you are dealing with an instrumental variable that can sort of, kind of meet the exclusion restriction but might not (in othe [...]

2017-07-09

• Ben Bernanke, in Denial? "When Growth is Not Enough"
  by Doug Campbell in Douglas L. Campbell, 2017-07-09 08:14:00 UTC

  "When Growth is Not Enough" is the title of a recent Ben Bernanke speech �in Portugal. I found it via the NYT article on the " Robocalypse ", which contained this bizarre quote from Ben S. Bernanke " as recent political developments have brought home, growth is not always enough." However, as you can see, something terrible has happened to US GDP growth, even if it has escaped the attention of our former Fed Chair. On twitter, Kocherlakota and I were both hoping he'd been taken out of context. Unfortunately, that turned out not to be the case.� In his speech, Bernanke is trying to make sense o [...]

• Robots, Artificial Intelligence, and the Future of Work
  by noreply@blogger.com (David Stern) in Stochastic Trend, 2017-07-09 01:23:00 UTC

  I think that robots/artificial intelligence and the future of work is a hugely important topic. This is a very active research field but it seems to me that people (some informed by this research but most without referring to the research) are rushing to one of two conclusions. The first of these conclusions is that up till now economic growth has resulted in rising wages and full employment and so it surely will in the future too. The other is that robots must mean structural unemployment and so the solution is to introduce universal basic income or some similar redistributive policy. I don't [...]

2017-07-07

• Reorganization or Liquidation: Bankruptcy Choice and Firm Dynamics
  by Christian Zimmermann in NEP-DGE blog, 2017-07-07 20:51:40 UTC

  By Dean Corbae and Pablo D’Erasmo http://d.repec.org/n?u=RePEc:fip:fedpwp:17-14&r=dge In this paper, we ask how bankruptcy law affects the financial decisions of corporations and its implications for firm dynamics. According to current U.S. law, firms have two bankruptcy options: Chapter 7 liquidation and Chapter 11 reorganization. Using Compustat data, we first document capital structure and investment decisions of non-bankrupt, Chapter 11, and Chapter 7 firms. Using those data moments, we then estimate parameters of a firm dynamics model with endogenous entry and exit to include both bankrup [...]

• Does the Fundamental Law of Traffic Congestion Hold in the Developing World?
  by Matthew Kahn in Environmental and Urban Economics, 2017-07-07 13:28:00 UTC

  Transport economics is a lively field. �I have written papers on who uses public transit in the United States and I've studied the effectiveness of new rail systems built in the U.S (and their gentrification effects ) and I've studied the complementarities between public investment in transit systems and private investment in nearby rea l estate and retail stores in China. One point that I thought was established was the " fundamental law of traffic congestion". � When roads are not priced, there is a classic tragedy of the commons such that each driver who seeks to maximize his own speed igno [...]

• Perché non trasformare il Cnel in qualcosa di utile?
  by Andrea Goldstein in La Voce, 2017-07-07 08:44:21 UTC

  La lenta convergenza nei tassi di crescita rischia di minare l’Unione economica e monetaria. Perciò le autorità europee raccomandano l’istituzione di National Productivity Board. Per l’Italia, fanalino di coda della produttività tra i G7, è un’opportunità. Se la produttività è un problema Il contributo di Paul Krugman all’economia politica è vastissimo, ma forse la sua “scoperta” più importante è che la produttività non è tutto, ma nel lungo periodo è praticamente tutto ( The Age of Diminishing Expectations , 1994). Pertanto, non desta sorpresa che preoccupino i pessimi risultati al riguardo [...]

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