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- RBC as gaslighting
by Noah Smith in Noahpinion, 2015-09-02 21:35:00 UTC
"Say it wasn't you" - Shaggy On my last post, I wrote that "RBC gaslighting knows no shame." To which Steve Williamson said "You're a real meany with the poor RBC guys." Which reminds me that it's been a while since I wrote a gratuitous, cruel RBC-bashing post! (Fortunately the "poor RBC guys" all have high-paying jobs, secure legacies, and widespread intellectual respect that sometimes includes Nobel Prizes, so a mean blog post or two from lil' old me is unlikely to cause them any harm.) Anyway, I used the word " gaslighting ", but in case you don't know what it means, here's the def'n: Gasli [...]
- Fischer: U.S. Inflation Developments
by Guest Author in The Big Picture, 2015-09-02 09:00:33 UTC
U.S. Inflation Developments
Vice Chairman Stanley Fischer
Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, Wyoming August 29, 2015
I am delighted to be here in Jackson Hole in the company of such distinguished panelists and such a distinguished group of participants.
I will focus my remarks today on forces–domestic and international–that have been holding down inflation in the United States, 1Â and some of the consequences of recent–primarily international–developments.
Although the economy has continued to recover and the labor market is approaching our maximum employm [...]
- Intuitive Neo-Fisherism
by Stephen Williamson in Stephen Williamson: New Monetarist Economics, 2015-09-01 18:57:00 UTC
John Cochrane's blog post, Whither Inflation, is excellent reading. Basically, John takes a mainstream New Keynesian model and shows how it has Neo-Fisherian characteristics - if the central bank raises the nominal interest rate, inflation increases. Noah Smith seems to find this interesting, but he's got some problems with it. I'm going to attempt to answer his questions. First, Noah says: What about the Volcker disinflation, when Fed interest rate hikes were followed by disinflation? Volcker was Fed Chair from August 1979 to August 1987. During that period the time series for the fed funds r [...]
- How Does Nature Adapt to Climate Change? A Field Experiment
by Matthew Kahn in Environmental and Urban Economics, 2015-09-01 16:16:00 UTC
Wired Magazine reports� �that John List and J-PAL are not the only researchers running field experiments. � Ecologists are running "out of sample" field experiments to test which plants, trees and creatures can adapt to extreme heat that they have not been exposed to in the past. �The main research finding is that nature appears to be more resilient than some think. A Direct Quote: "A FEW YEARS ago in a lab in Panama, Klaus Winter tried to conjure the future. A plant physiologist at the Smithsonian Tropical Research Institute, he planted seedlings of 10 tropical tree species in small, geodesic [...]
- När verkligheten förändras måste kartan hänga med
by Henrik Bäckström in Sanning om bemanning, 2015-09-01 10:56:14 UTC
Häromdagen var jag involverad i ett seminarium kring framtidens industri där representanter för såväl fack, arbetsgivare som staten deltog. Några punkter kring förutsättningar och förändring var speciellt intressanta att ta med sig i fortsatta diskussioner kring industriell utveckling.
Några stora, globala industriföretag vittnade om att verka i en miljö där kompetensförsörjning, utbildningsinsatser och närvaro av progressiva leverantörer av högt specialiserade tjänster är avgörande aspekter. Vid övervägande att förlägga verksamhet till Sverige värderas dessa aspekt [...]
- Forecasting GDP in the presence of breaks: when is the past a good guide to the future?
by Guest Author in The Big Picture, 2015-09-01 09:00:11 UTC
Forecasting GDP in the presence of breaks: when is the past a good guide to the future?
George Kapetanios, Simon Price and Sophie Stone.
Bank of England, 20 August 2015
Structural breaks are a major source of forecast errors, and few come larger than the recent financial crisis and subsequent recession. After a break, formerly good models stop working. One way to cope is to discount the past in a data driven way. We try that, and find that shortly after the crash it was best to ignore almost all data older than three years – but now it is again time to take a longer view.
- FedEx Packages
by Mike Isaacson in Vulgar Economics, 2015-08-31 19:29:00 UTC
In keeping with the GOP's attempt to keep up with Donald Trump's fascist appeal, Chris Christie proposed a technocratic "solution" to undocumented immigration. I put solution in scare quotes not because his policy plan is ridiculous, but because I remain unconvinced that undocumented immigration is a problem to be solved. By and large, immigration is a boon for the economy - it tends to positively impact citizens' earnings , has minimal impact on domestic unemployment , and are comparatively less likely to be violent criminals than citizens . What Christie proposed was a bit silly in its phras [...]
- Is China's devaluation a game changer?
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2015-08-30 14:04:01 UTC
Since 1978, China has engaged in an unprecedented and wildly successful experiment, moving gradually from a command economy to one based on markets; in small steps transforming a system where administrators controlled the goods that were produced to one where prices allocate resources. There were surely miscalculations along the way. But, even big blunders could largely be concealed. Until now! What has changed in recent months? The day has come for China to become more closely integrated into the global financial system, and this has a number of implications. The most important is that as pri [...]
- 'Is China's Devaluation a Game Changer'
by Mark Thoma in Economist's View, 2015-08-30 09:41:03 UTC
If you can't get enough on China, here's more from Cecchetti & Schoenholtz:
Is China's devaluation a game changer? : Since 1978, China has engaged in an unprecedented and wildly successful experiment, moving gradually from a command economy to one based on markets; in small steps transforming a system where administrators controlled the goods that were produced to one where prices allocate resources. There were surely miscalculations along the way. But, even big blunders could largely be concealed. Until now!
What has changed in recent months? The day has come for China to become more closely [...]
- A New Book on the Risks Caused by Climate Change
by Matthew Kahn in Environmental and Urban Economics, 2015-08-29 21:26:00 UTC
The Risky Business Project is not a Tom Cruise vehicle. �Instead, it is a group of talented people who are deeply worried about the consequences that climate change will pose. This group has now released a new book . �Here is its Amazon webpage. � � The authors provide a real service highlighting the challenges we are likely to face if we take no actions to protect ourselves from the serious threat of climate change. In this sense, the authors provide a blueprint for how entrepreneurs can make money by developing new products (whether they are electric vehicles, floating homes, well functionin [...]
- What is the Neo-classical Growth Model good for?
by dvollrath in The Growth Economics Blog, 2015-08-28 21:01:43 UTC
This is a long post. It is partly in response to some questions from first-year grad students, and so it can be considered as notes for a lecture that might potentially be given to them at some point in the near future. For all that, it isn’t pitched at a high mathematical level. I think you could understand this without having ever done any kind of dynamic optimization work before.
Do savings matter for growth? This is an ill-formed question for several reasons. First, implicitly hiding in that question is the assumption that savings = investment. That doesn’t necessarily have to be true, an [...]
- Multivariate volatility forecasting (2)
by Eran Raviv in Eran Raviv, 2015-08-28 20:29:22 UTC
Last time we showed how to estimate a CCC and DCC volatility model. Here I describe an advancement labored by Engle and Kelly (2012) bearing the name: Dynamic equicorrelation . The idea is nice and the paper is well written.
Departing where the previous post ended, once we have (say) the DCC estimates, instead of letting the variance-covariance matrix be, we force some structure by way of averaging correlation across assets. Generally speaking, correlation estimates are greasy even without any breaks in dynamics, so I think forcing some structure is for the better.
In essence, the authors pr [...]
- On the benefits of birthright citizenship
by James Pethokoukis in AEIdeas, 2015-08-28 17:27:16 UTC
Shutterstock. AEI’s Madeline Zavodny:Â Because the U.S. has had birthright citizenship for so long, there is no direct evidence here on its costs or benefits. However, there is evidence from Germany, which in 2000 began offering birthright citizenship to the children of immigrants if at least one parent has legally resided in Germany for at least eight years. Of course, this is not exactly analogous to the issue in the U.S., which concerns parents here illegally. Nevertheless, Germanyâs population of legal immigrants from Turkey is in many other ways comparable to our population of Latino i [...]
- Birthright citizenship makes America great
by Kaavya Ramesh in The American, 2015-08-27 13:50:47 UTC
Whether to continue automatically conferring U.S. citizenship to the children born in this country to unauthorized immigrants suddenly emerged as a dividing line among Republican presidential candidates last week. In all the controversy over Donald Trump’s latest flaming salvo, there has been virtually no discussion of the economic reasons for or against birthright citizenship. Republican Presidential candidate Donald Trump (R) debates with Univision reporter Jorge Ramos before Trump’s “Make America Great Again Rally” at the Grand River Center in Dubuque, Iowa, August 25, 2015. Reuters Birthri [...]
- The day macroeconomics changed
by Mainly Macro in Mainly Macro, 2015-08-27 10:58:00 UTC
It is of course ludicrous, but who cares. The day of the Boston Fed conference in 1978 is fast taking on a symbolic significance. It is the day that Lucas and Sargent changed how macroeconomics was done. Or, if you are Paul Romer, it is the day that the old guard spurned the ideas of the newcomers, and ensured we had a New Classical revolution in macro rather than a New Classical evolution. Or if you are Ray Fair (HT Mark Thoma), who was at the conference, it is the day that macroeconomics started to go wrong. Ray Fair is a bit of a hero of mine. When I left the National Institute to become a [...]
- 'The Day Macroeconomics Changed'
by Mark Thoma in Economist's View, 2015-08-27 09:23:47 UTC
The day macroeconomics changed : It is of course ludicrous, but who cares. The day of the Boston Fed conference in 1978 is fast taking on a symbolic significance. It is the day that Lucas and Sargent changed how macroeconomics was done. Or, if you are Paul Romer, it is the day that the old guard spurned the ideas of the newcomers, and ensured we had a New Classical revolution in macro rather than a New Classical evolution. Or if you are Ray Fair ..., who was at the conference, it is the day that macroeconomics started to go wrong.
Ray Fair is a bit of a hero of mine. ...
- Global Energy Use: Decoupling or Convergence Accepted to be Published in Energy Economics
by email@example.com (David Stern) in Stochastic Trend, 2015-08-27 02:55:00 UTC
My paper with Zsuzsanna Csereklyei on trends in global energy use and whether they can be better explained by decoupling or convergence in energy intensity or some mixture has been accepted to be published in Energy Economics . I wrote a blogpost about the paper in December last year when we first completed the paper. This was not a bad review experience though Zsuzsanna who is in a short-term post-doc position would have liked it to be faster! We first sent the paper to World Development who desk-rejected it. Then we sent it to Energy Economics . The first review took seven months due to one [...]
- Human Capital Risk, Contract Enforcement, and the Macroeconomy
by Christian Zimmermann in NEP-DGE blog, 2015-08-26 13:13:08 UTC
By Tom Krebs, Moritz Kuhn and Mark Wright
We use data from the Survey of Consumer Finance and Survey of Income Program Participation to show that young households with children are under-insured against the risk that an adult member of the household dies. We develop a tractable macroeconomic model with human capital risk, age-dependent returns to human capital investment, and endogenous borrowing constraints due to the limited pledgeability of human capital. We show analytically that, consistent with the life insurance data, in equilibrium y [...]
- Creación de empresa, género y honestidad
by Juan Camilo Cárdenas in Foco Económico, 2015-08-26 06:10:32 UTC
La creación de nuevos emprendimientos es una meta deseable, y está asociada a la formalización de empleos, la innovación y el crecimiento. Las cifras de mujeres involucradas en emprendimientos varía mucho de región a región, y dentro de cada una. La siguiente gráfica, tomada del Global Entrepreneurship Monitor 2012 muestra dicha variación en diferentes regiones del mundo.
Así como en la gráfica, un reciente estudio del Banco Mundial destaca que la región de América Latina no lo está haciendo tan mal en términos de creación de nuevos negocios, aunque a un ritmo lento y sin ma [...]
- Will China Transition to "Higher Quality" Growth?
by Matthew Kahn in Environmental and Urban Economics, 2015-08-26 03:04:00 UTC
Eduardo Porter makes some bold predictions in today's NY Times. �He writes; � "A totalitarian regime may be good at deploying capital and labor to deliver raw economic growth. Yet autocracies are not good at fostering innovation and creativity, which rarely flourish where there is no freedom of thought or speech. While “make the economy grow and don’t have demonstrations” might have worked in the past, a bureaucratic command and control structure will have a hard time handling the more complex demands of citizens in countries that reach middle-income status." I believe that Mr. Porter un [...]
- Nothing to fear but...
by chris in Stumbling and Mumbling, 2015-08-25 12:17:50 UTC
Yesterday's big stock market falls pose the question: do we really have anything to worry about?
It's tempting to answer: no. The claim that stock markets have predicted nine of the last five recessions is a cliche because it is true - although why (pdf) this is is a matter of doubt. And we know from the very mild repercussions of the tech crash of the early 00s that exogenous falls in share prices don't have catastrophically negative wealth effects.
Nevertheless, I suspect there are four concerns here.
First, the fact that the Chinese economy is slowing down (pdf) is a symptom that world tra [...]
- Scusa, Tommaso...
by Alberto Bagnai in Goofynomics, 2015-08-23 21:24:00 UTC
Gentile collega, qui su questo blog, dove, mi affretto a sottolinearlo, siamo tutte persone pacifiche, a cominciare dal titolare, siamo abbastanza abituati alle acrobazie intellettuali degli economisti mainstream . La loro ricerca del paradosso, del controintuitivo (come dicono), ha le motivazioni che Keynes lucidamente metteva in evidenza in quel libro che voi tanto disprezzate, perché privo di formule: il desiderio (lecito) di acquisire prestigio intellettuale .Ora, però, sinceramente, che si chiedano con tono ultimativo delle scuse a un collega che si è provocato per un'intera serata (ho [...]
- Il dividendo dei coglioni (cit.): er Biretta e l'euro...
by Alberto Bagnai in Goofynomics, 2015-08-23 16:48:00 UTC
"Maestra Elsaaaaaaa! Bagnai dice le parolacce!"... No, tranquilli. È solo che voi opinionisti pro euro siete di una sesquipedale ignoranza, altrimenti avreste immediatamente riconosciuto la citazione di un autore che senz'altro disprezzate, perché ha la colpa ormai irredimibile di essere italiano .I miei lettori, che sono su un altro livello, ricordano come, costretto dall'ignoranza crassa di un musicista dell'epoca ad aggiungere i numeri a un basso cifrato , Vivaldi glielo restituì con la graziosa annotazione: per i coglioni. Sottinteso: i numeri sono per i coglioni. Povero Antonio! Oggi c [...]
- Open Letter to Senator Rand Paul
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2015-08-23 13:43:47 UTC
We read with interest your August 21 Bloomberg View that calls for “a thoughtful congressional discussion of the pros and cons of a more thorough audit” of the Federal Reserve. While we share your desire for effective congressional oversight of the Federal Reserve, we strongly disagree on the best way to do it. In our democracy, Congress must hold the Fed accountable for achieving its economic and financial stability mandate. Congress has wisely delegated circumscribed authority over monetary policy and the lender of last resort function to the Federal Reserve. Doing so is consistent with [...]
- Russia Growth Diagnostics (7): Market Structure and Competition
by Anton Tarasenko in Economics and Development, 2015-08-22 15:05:11 UTC
< Part 6: Taxation and Laws
Thirty years agoÂ the entireÂ Russian economy was managed by the state. Some estimates of the current state presence reach 50% of GDP, and this makes the current market structure a likely source of inefficiencies. Let’s see if it is.
Over the last 15 years, Russia transformed severalÂ state-owned industries according to a simple rule: take an industry and separate it into a natural monopoly and firms that will compete with each other. After the separation, the state retains control over the natural monopoly and privatizes the rest.Â This was [...]
- Managing Expectations
by Matthew Kahn in Environmental and Urban Economics, 2015-08-22 14:24:00 UTC
The NY Times has published a long piece making the case that China's President Xi has promised too much to his people. � While we all wish that there was an all knowing benevolent leader to protect us from risk, �such a leader doesn't exist. �The belief that such a person exists only creates moral hazard and excessive risk taking without investors doing their homework. A quote: "Before that, the authorities did nothing to disabuse the investing public of the notion that a rising stock market was a state-backed goal and integral to Mr. Xi’s promise to build “the China dream.”" The NY Time [...]
- Krugman Comes Around
by Stephen Williamson in Stephen Williamson: New Monetarist Economics, 2015-08-21 16:58:00 UTC
I opened up my New York Times (literally - I still retrieve the physical NYT from the curb, the bushes, the mud puddle) and was pleased as could be to see that Paul Krugman has finally picked up on what I think is a key idea for understanding macroeconomic behavior post-financial crisis. The essence of the idea is: When the housing bubble burst, all that AAA-rated paper turned into sludge. So investors scurried back into the haven provided by the debt of the United States and a few other major economies. In the process they drove interest rates on that debt way down. I could also add that sove [...]
- Russia Growth Diagnostics (6): Taxation and Laws
by Anton Tarasenko in Economics and Development, 2015-08-21 16:18:59 UTC
< Part 5:Â Uncertainty
Taxation and law enforcement are a bunch of different factors, whose impact on growth could be described best as “it depends”. So my goal here will be modest. For each issue, I briefly outline the references on topic, discuss the magnitude of a possible impact on growth, and check if this issue is a candidate for a growth constraint.
Despite inflation being an importantÂ topic in macro, economic growth theory barely touches inflation at all. For rare examples, see Barro ( 1995 ),Â Bruno and Easterly ( 1998 ), IMF ( 2014 ). Scarce evidences suggest that problems [...]
- Bemanningsbranschen gör alla till vinnare
by Henrik Bäckström in Sanning om bemanning, 2015-08-21 10:23:45 UTC
Som den forskare jag är låter fakta och statistik som musik i mina öron. Speciellt om resultaten i sig är glädjande. Så nu ska jag sjunga bemanningsbranschens lov en stund, med en bukett klara fakta som libretto.
De två mest utsatta grupperna på svensk arbetsmarknad är unga och utlandsfödda. Konjunkturinstitutet skriver 2012: Unga och utrikes födda kan upplevas som mer riskfyllda att anställa då de ofta har mindre dokumenterad erfarenhet än andra grupper på arbetsmarknaden. Det faktum att bemanningsbranschen i större utsträckning än övriga ekonomin anställer unga och utrike [...]
- Monies – Joining Economic and Legal Perspectives
by bankunderground in Bank Underground, 2015-08-21 06:30:00 UTC
David Bholat, Jonathan Grant and Ryland Thomas.
The economist John Kenneth Galbraith once quipped that the answers economists give to the question âwhat is money?â are usually incoherent. So in this blog we turn to law for some answers. Debate about the nature of money has been renewed by recent financial crises and the rise of digital currencies ( Ali et al 2014 ; Desan 2014 ; Ryan-Collins et al 2014 ; Martin 2013 ). This was the focus of a panel session at the Bankâs recent annual conferenceÂ on Monetary and Financial Law, which brought together lawyers and economists to develop interd [...]
- The New Keynesian Failure
by Josh in The Everyday Economist, 2015-08-20 17:39:07 UTC
In a previous post , I defended neo-Fisherism. A couple of days ago I wrote a post in which I discussed the importance of monetary semantics. I would like to tie together two of my posts so that I can present a more comprehensive view of my own thinking regarding monetary policy and the New Keynesian model.
My post on neo-Fisherism was intended to provide support for John Cochrane who has argued that the neo-Fisher result is part of the New Keynesian model. Underlying this entire issue, however, is what determines the price level and inflation. In traditional macroeconomics, the quantity theor [...]
- Russia Growth Diagnostics (5): Uncertainty
by Anton Tarasenko in Economics and Development, 2015-08-20 13:39:33 UTC
< Part 4: Infrastructure and Human Capital
While checking for government failures, I closely follow HRV (2008), who break the failures into three groups: ex ante risks, taxation, and law enforcement.Â Let’s start from the first group.
Uncertainty and Investments
Ex ante risks refer to the volatilityÂ of expected returns to economic activity. Low expectations reduce investments and growth slows down. Here I discuss only theÂ risks associated with government actions (or inactions).
We should distinguish these risks from the risks arising in particular economic activities. Acemoglu and Zilibotti [...]
- On wishful thinking
by ? in Stumbling and Mumbling, 2015-08-20 13:07:00 UTC
David Aaronovitch in the Times has a nice piece on how people fall for conspiracy theorists and conmen:
What a fraudster, a fantasist or a hoaxer needs to be able to survive, is to fall among people who are anxious to believe.
This urge to believe is not [...]
- Forecasting GDP in the presence of breaks: when is the past is a good guide to the future?
by bankunderground in Bank Underground, 2015-08-20 06:30:00 UTC
George Kapetanios, Simon Price and Sophie Stone.
Structural breaks are a major source of forecast errors, and few come larger than the recent financial crisis and subsequent recession.Â After a break, formerly good models stop working.Â One way to cope is to discount the past in a data driven way.Â We try that, and find that shortly after the crash it was best to ignore almost all data older than three years â but now it is again time to take a longer view.
It is often argued (eg by Clements and Hendry ) that structural change is the main cause of forecast errors.Â Often t [...]
- 10 Things Every Economist Should Know About The Gold Standard
by Tyler Durden in Zero Hedge, 2015-08-20 02:45:00 UTC
Submitted by George Selgin via Alt-M.org , At the risk of sounding like a broken record (well, OK–at the risk of continuing to sound like a broken record), I'd like to say a bit more about economists' tendency to get their monetary history wrong. In particular, I'd like to take aim at common myths about the gold standard. If there's one monetary history topic that tends to get handled especially sloppily by monetary economists, not to mention other sorts, this is it. Sure, the gold standard was hardly perfect, and gold bugs themselves sometimes make silly claims about their favorite former [...]
- Correlation and correlation structure (1); quantile regression
by Eran Raviv in Eran Raviv, 2015-08-19 21:20:12 UTC
Given a constant speed, time and distance are fully correlated. Provide me with the one, and I’ll give you the other. When two variables have nothing to do with each other, we say that they are not correlated.
You wish that would be the end of it. But it is not so. As it is, things are perilously more complicated. By far the most familiar correlation concept is the Pearson’s correlation . Pearson’s correlation coefficient checks for linear dependence. Because of it, we say it is a parametric measure. It can return an actual zero even when the two variables are fully dependent on each other ( [...]
- Ballroom dancing, & Sapir-Whorf
by ? in Stumbling and Mumbling, 2015-08-19 13:25:00 UTC
Last night I went to a ballroom dance lesson, which set me thinking about the Sapir-Whorf hypothesis.
When you are a rank beginner, the natural thing to do is to speak as you are moving: "left-forward-back" and so on. But this of course confuses your partn [...]
- Russia Growth Diagnostics (4): Human Capital
by Anton Tarasenko in Economics and Development, 2015-08-19 11:13:58 UTC
< Part 3: Finance
I find it difficult to diagnose human capital in Russia because the literature on topic is scarce and the market differs from what economists knowÂ well. Like with the rest of economics, economistsÂ know much about human capital in the United States and almost nothing about human capital in other countries.
Still, a couple of points.
First, being careful with interpreting the data. The relations between education and output became an instant classic after Mankiw, Romer, and Weil ( 1992 ):
While Russia is clearly under the regression line and underperforms for its stock of hu [...]
- Reform and revolution in macroeconomics
by Mainly Macro in Mainly Macro, 2015-08-19 10:33:00 UTC
Mainly for economists Paul Romer has a few recent posts (start here , most recent here ) where he tries to examine why the saltwater/freshwater divide in macroeconomics happened. A theme is that this cannot all be put down to New Classical economists wanting a revolution, and that a defensive/dismissive attitude from the traditional Keynesian status quo also had a lot to do with it. I will leave others to discuss what Solow said or intended (see for example Robert Waldmann ). However I have no doubt that many among the then Keynesian status quo did react in a defensive and dismissive way. Th [...]
- Who Pays the Bills?
by bbatiz in NEP-HIS blog, 2015-08-18 17:44:26 UTC
Sovereign Debt Guarantees and Default: Lessons from the UK and Ireland, 1920-1938
By Nathan Foley-Fisher (Federal Reserve Board) and Eoin McLaughlin (St. Andrews)
Abstract We study the daily yields on Irish land bonds listed on the Dublin Stock Exchange during the years 1920-1938. We exploit structural differences in bonds guaranteed by the UK and Irish governments to find Irish events that had long term effects on the credibility of government guarantees. We document two major events: The Anglo-Irish Treaty of 1921 and Irelandâs default on intergovernmental payments in 1932. We discuss the [...]
- Social mobility: why does private school give you such a leg up?
by Matt Dickson, Lecturer in Social Policy at University of Bath in The Conversation, 2015-08-18 05:32:48 UTC
Already at the head of life's line-up. REUTERS/Stefan Wermuth Ever since John Major declared his shock at the dominance of the privately educated throughout Britain’s “upper echelons of power”, there has been a brighter spotlight shone on the way top professions in society are dominated by a selective elite.
Addressing this problem has never been more important for UK social mobility. With the re-shaping of the economy towards services, it’s predicted that four out of five future jobs will be in these professions, making them key to the future of social mobility.
Alan Milburn’s 20 [...]
- Why Bernie Sanders Should Add a Job Guarantee to His Policy Agenda
by Pavlina Tcherneva in New Economic Perspectives, 2015-08-17 19:12:13 UTC
Why Bernie Sanders Should Add a Job Guarantee to His Policy Agenda
By Pavlina R. Tcherneva
Discussions of the âpolitically possibleâ always remind me of a favorite quote: âArgue for your limitations, and sure enough theyâre yours.â
Bernie Sandersâ issues page reads like a list of everything weâve been told is not politically possible. Â And yet heâs getting record breaking support , precisely because people are tired of being told that something cannot be done–that it is impossible to get money out of politics, or that tackling inequality and racial injustice is unrealistic, or [...]
- Challenges to promoting social inclusion of the extreme poor: evidence from a large scale experiment in Colombia By: Laura Abramovsky (Institute for Fiscal Studies) ; Orazio Attanasio (Institute for Fiscal Studies and University College London) ; Ka
by maximorossi in NEP-LTV blog, 2015-08-17 14:34:33 UTC
We evaluate the large scale pilot of an innovative and major welfare intervention in Colombia, which combines homes visits by trained social workers to households in extreme poverty with preferential access to social programs. We use a randomized control trial and a very rich dataset collected as part of the evaluation to identify program impacts on the knowledge and take-up of social programs and the labor supply of targeted households. We find no consistent impact of the program on these outcomes, possibly because the way the pilot was implemented resulted in very light treatment in terms of [...]
- Partial insurance and investments in children By: Pedro Carneiro (Institute for Fiscal Studies and cemmap and UCL) ; Rita Ginja (Institute for Fiscal Studies and University of Uppsala)
by maximorossi in NEP-LTV blog, 2015-08-17 14:33:01 UTC
This paper studies the impact of permanent and transitory shocks to income on parental investments in children. We use panel data on family income, and an index of investments in children in time and goods, from the Children of the National Longitudinal Survey of Youth. Consistent with the literature focusing on non-durable expenditure, we find that there is only partial insurance of parental investments against permanent income shocks, but the magnitude of the estimated responses is small. We cannot reject the hypothesis full insurance against temporary shocks. Another interpretation of our f [...]
- Poor Little Rich Kids? The Determinants of the Intergenerational Transmission of Wealth By: Black, Sandra E. (University of Texas at Austin) ; Devereux, Paul J. (University College Dublin) ; Lundborg, Petter (Lund University) ; Majlesi, Kaveh
by maximorossi in NEP-LTV blog, 2015-08-17 14:31:43 UTC
Wealth is highly correlated between parents and their children; however, little is known about the extent to which these relationships are genetic or determined by environmental factors. We use administrative data on the net wealth of a large sample of Swedish adoptees merged with similar information for their biological and adoptive parents. Comparing the relationship between the wealth of adopted and biological parents and that of the adopted child, we find that, even prior to any inheritance, there is a substantial role for environment and a much smaller role for genetics. We also examine t [...]
- Do More of Those in Misery Suffer from Poverty, Unemployment or Mental Illness? By: Flèche, Sarah (CEP, London School of Economics) ; Layard, Richard (London School of Economics)
by maximorossi in NEP-LTV blog, 2015-08-17 14:30:31 UTC
Studies of deprivation usually ignore mental illness. This paper uses household panel data from the USA, Australia, Britain and Germany to broaden the analysis. We ask first how many of those in the lowest levels of life-satisfaction suffer from unemployment, poverty, physical ill health, and mental illness. The largest proportion suffer from mental illness. Multiple regression shows that mental illness is not highly correlated with poverty or unemployment, and that it contributes more to explaining the presence of misery than is explained by either poverty or unemployment. This holds both wit [...]
- "A Pigovian tax solution (for now) for review/publication of studies that use M Turk samples"
by John Whitehead in Environmental Economics, 2015-08-17 13:32:00 UTC
I'm not sure where the Pigouvian tax comes in, but Dan Kahan:
I often get asked to review papers that use M Turk samples.
This is a problem because I think M Turk samples, while not invalid for all forms of study , are �invalid for studies of how individual differences in political predispositions and cognitive-reasoning proficiencies influence the processing of empirical information relevant to risk and other policy issues.
I've discussed this point at length.
And lots of serious scholars now have engaged this isssue seriously . ��
"Seriously" not in the sense of merely collecting some data [...]
- My Rose-Colored Glasses
by ? in Cato Unbound, 2015-08-17 12:52:00 UTC
I am guilty as charged by both Scott and Lauren for often looking at the changes in the family over the last century with excessive optimism. I have been known to over-emphasize the good things that have happened because so much of the literature on the family spends so much time on the (supposed) pathologies that someone has to step up and point out the good stuff. It a classic case of Bastiat’s seen and unseen : the bad stuff is visible and immediate, while the good stuff requires more work to see and has unfolded slowly over a longer period of time. Plus, we just take the [...]
- Bond market liquidity: should we be worried?
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2015-08-17 12:20:01 UTC
quities are the stars, they are the financial instruments in the headlines. But it is bonds that are the cast and crew. They do the day-to-day work behind the scenes. And, as with any tradable asset, the confidence that prices are fair and that you can sell what you buy is essential. So, when knowledgeable people express concerns that regulatory changes are causing bond markets to malfunction (see, for example, here ), it leads us to ask some tough questions. Are these markets somehow impaired? Is enhanced financial regulation to blame? Is this creating risks to the financial system as a whole [...]
- Inverting the rhetoric of inequality
by chris in Stumbling and Mumbling, 2015-08-16 11:45:10 UTC
It's not often that Sir Tom Jones provides evidence to support Mariana Mazzucato, but he's done just this.
Here 's the FT's John Thornhill:
As Mazzucato explains it, the traditional way of framing the debate about wealth creation is to picture the private sector as a magnificent lion caged by the public sector. Remove the bars, and the lion roams and roars. In fact, she argues, private sector companies are rarely lions; far more often they are kittens. Managers tend to be more concerned with cutting costs, buying back their shares and maximising their share prices (and stock options) than [...]
- Fairness, decentralization & capitalism
by chris in Stumbling and Mumbling, 2015-08-15 12:47:41 UTC
Marxists and Conservatives have more in common than either side would like to admit. This thought occurred to me whilst reading a superb piece by Andrew Lilico.
He describes the Brams-Taylor procedure for cutting a cake in a fair way - in the sense of ensuring envy- freeness - and says that this shows that a central agency such as the state is unnecessary to achieve fairness:
Provided that all adhere to an appropriate mechanism, large numbers of people themselves, without central direction, can divide goods, services and assets up in ways that all consider fair.
The appropriate mechanism he [...]
- What We Don’t Know Doesn’t Hurt Us: Rational Inattention and the Permanent Income Hypothesis in General Equilibrium
by Christian Zimmermann in NEP-DGE blog, 2015-08-14 15:19:20 UTC
By Yulei Luo, Jun Nie, Gaowang Wang and Eric Young
This paper derives the general equilibrium effects of rational inattention (or RI; Sims 2003, 2010) in a model of incomplete income insurance (Huggett 1993, Wang 2003). We show that, under the assumption of CARA utility with Gaussian shocks, the permanent income hypothesis (PIH) arises in steady state equilibrium due to a balancing of precautionary savings and impatience. We then explore how RI affects the equilibrium joint dynamics of consumption, income and wealth, and find that elastic atten [...]
- Weekly links August 14: reducing the costs to formalize has no effect again, don’t trust the Mechanical Turk, and more…
by David McKenzie in Development Impact, 2015-08-14 13:21:00 UTC
Nature covers the rise of randomized experiments in development economics
In VoxEU, Sebastian Galiani and co-authors summarize an experiment in Colombia which, like several other recent experiments, finds reducing the fixed costs to formalization does not do much in terms of getting informal firms to formalize .
Andrew Gelman on reasons not to trust papers using Mechanical Turk
Vox covers the difficulty in knowing whether policies work with a description of a study which got the public to guess which programs work or not, and found they do little better than chance – and a tough 10-quest [...]
- You could be leaving money on the table by not switching jobs
by Ana Swanson in Wonkblog, 2015-08-12 14:53:48 UTC
And you think your boss is bad. Photo credit: Barry Wetcher, "The Devil Wears Prada." Most people find their first jobs to be somewhat of a mismatch. Whether you end up slinging hamburgers, crunching Excel spreadsheets late into the night, or fetching coffee and answering phones for a “The Devil Wears Prada” type executive, your first job rarely ends up being your dream job. As their lives progress, most people go through a process of trying out different jobs and zeroing in on something better. But some people do this faster and better than others do. And new research suggests that abi [...]
- A Rush to Judge Gold
by George Selgin in Free Banking, 2015-08-12 13:03:22 UTC
Of course I didn't expect my recent post, listing "Ten Things Every Economist Should Know about the Gold Standard," to stop economists from repeating the same old misinformation.Â Â So I'm not surprised to find two of them, from the New York Fed, repeating recently someÂ of the very myths that I would have liked to lay to rest.
The subject of James Narron and Don Morgan's August 7th Liberty Street Economics post is the California gold rush.Â After describing the discovery at Sutter's mill and the "stampede" of prospectors anxious to get their hands on part of the "vast quantities of gold" w [...]
- By failing to prepare, you are preparing to fail
by bbatiz in NEP-HIS blog, 2015-08-11 16:10:50 UTC
The European Crisis in the Context of the History of Previous Financial Crisis
by Michael Bordo & Harold James
Abstract – There are some striking similarities between the pre 1914 gold standard and EMU today. Both arrangements are based on fixed exchange rates, monetary and fiscal orthodoxy. Each regime gave easy access by financially underdeveloped peripheral countries to capital from the core countries. But the gold standard was a contingent ruleâin the case of an emergency like a major war or a serious financial crisis –a country could temporarily devalue its currency. The EMU has no such [...]
- The Ins and Outs of Selling Houses
by Christian Zimmermann in NEP-DGE blog, 2015-08-11 13:06:33 UTC
By Rachel Ngai and Kevin Sheedy
The number of houses for sale is as volatile as sales volume and much more volatile than house prices, yet it has received relatively little attention. What drives volatility in the number of houses for sale? Is it due to changes in the difficulty of selling houses or changes in the incentive to put houses up for sale? This paper presents evidence that both inflows and outflows are important using a variance decomposition. It then uses a search-and-matching model with both the decision of when to agree a sale (ou [...]
- Pricing Genius: The Market Evaluation of Innovation By: David Galenson (University of Chicago) ; Simone Lenzu (University of Chicago)
by maximorossi in NEP-LTV blog, 2015-08-10 18:10:36 UTC
Economists have neglected a key issue for understanding and increasing technological change, in failing to study how talented individuals produce innovations. This paper takes a quantitative approach to this problem. Regression analysis of auction data from 1965-2015 reveals that the age-price profiles of Jackson Pollock and Andy Warhol â€“ the two greatest painters born in the 20th century â€“ closely resemble the age profiles of the two artists derived both from textbooks of art history and from retrospective exhibitions. The agreement of these sources confirms that the auction mar [...]
- Aggregating Elasticities:\ Intensive and Extensive Margins of Female Labour Supply By: Attanasio, Orazio ; Levell, Peter ; Low, Hamish ; Sánchez-Marcos, Virginia
by maximorossi in NEP-LTV blog, 2015-08-10 18:09:37 UTC
There is a renewed interest in the size of labour supply elasticities and the discrepancy between micro and macro estimates. Recent contributions have stressed the distinction between changes in labour supply at the extensive and the intensive margin. In this paper, we stress the importance of individual heterogeneity and aggregation problems. At the intensive margins, simple specifications that seem to fit the data give rise to non linear expressions that do not aggregate in a simple fashion. At the extensive margin, aggregate changes in participation are likely to depend on the cross section [...]
- Job Quality in Segmented Labor Markets: The Israeli Case By: Neuman, Shoshana
by maximorossi in NEP-LTV blog, 2015-08-10 18:08:45 UTC
Till the early-1990s the collectively-bargained labor contract (between the trade-union that presented the employees, and the employer or the employers’-association) was the norm, granting salaried workers a stable and protected labor contract. Thereafter, and more significantly after 1995, the share of unionized workers dropped constantly, to almost half of its peak level (of more than 80 percent). In parallel, two other types of contracts became more common: personal temporary contracts (between an individual worker and his employer), and contracts between a labor-contractor and employees wh [...]
- Bargaining, Sorting, and the Gender Wage Gap: Quantifying the Impact of Firms on the Relative Pay of Women By: David Card ; Ana Rute Cardoso ; Patrick Kline
by maximorossi in NEP-LTV blog, 2015-08-10 18:07:29 UTC
There is growing evidence that firm-specific pay premiums are an important source of wage inequality. These premiums will contribute to the gender wage gap if women are less likely to work at high-paying firms or if women negotiate (or are offered) worse wage bargains with their employers than men. Using longitudinal data on the hourly wages of Portuguese workers matched with income statement information for firms, we show that the wages of both men and women contain firm-specific premiums that are strongly correlated with simple measures of the potential bargaining surplus at each firm. We th [...]
- Entrepreneurs, Economic Growth, and the Enlightenment
by Tim Sullivan in HBR Blog Network, 2015-08-10 14:00:46 UTC
Diderot’s Encyclopedie , best known as an eighteenth-century repository of Enlightenment principles, might also serve as an interesting lens into what makes economies grow.
The Encylcopedie was a project spearheaded by Denis Diderot, published in 28 volumes between 1751 and 1772. It aimed to gather all the knowledge in the world, and, with 71,818 articles and more than 3,000 illustrations, it was a valiant effort. While the Encyclopedie (or, more properly, Encyclopédie, ou dictionnaire raisonné des sciences, des arts et des métiers [ Encyclopedia, or a Systematic Dictionary of the Sciences, [...]
- Ambiguity aversion in politics
by chris in Stumbling and Mumbling, 2015-08-10 13:42:22 UTC
There's a link between David Cameron's holiday snaps and the moral panic about migrants. The link is ambiguity aversion.
We've known ever since Daniel Ellsberg's famous experiments that people don't like ambiguity or uncertainty; they much prefer known probabilities to unknown ones.
This is well known in financial markets: "markets hate uncertainty" is a cliche because its true. However, uncertainty aversion matters in politics too - a fact which is, I fear, under-appreciated.
Here are some examples:
- People fear immigration because it creates uncertainty : they are disquieted by the pros [...]
- Bücherkiste (15): Moderne Wirtschaftslehre
by Gerald Braunberger in Fazit, 2015-08-10 12:06:48 UTC
Um kÃ¼nftig schwere Krisen zu verhindern, mÃ¼ssen FinanzmÃ¤rkte besser in die Wirtschaftstheorie integriert werden.Â In den vergangenen Jahren haben Ãkonomen auf diesem faszinierenden Gebiet viel Arbeit geleistet, Ã¼ber die eine BroschÃ¼re berichtet.
Der Hauptstrom und viele SeitenstrÃ¶me in den Wirtschaftswissenschaften haben seit jeher oft dazu geneigt, die Bedeutung des Geldes und der FinanzmÃ¤rkte fÃ¼r die wirtschaftliche Entwicklung zu unterschÃ¤tzen. Dies lÃ¤sst sich fÃ¼r so unterschiedliche Lehrmeinungen wie den Historismus, den Marxismus, die Neoklassik, den Ordoliberalismus und die [...]
- How the Fed will tighten
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2015-08-10 11:53:34 UTC
Before the financial crisis, tightening monetary policy was straightforward. The Federal Open Market Committee (FOMC) would announce a rise in the target for the federal funds rate in the overnight interbank lending market, and the open market desk would implement it with a small reduction in the quantity of reserves in the banking system. Matters are no longer so simple. The unconventional policies designed first to avert a financial and economic collapse, and then to spur growth and employment, have left the banking system with reserves that are so abundant that it would be impossible to tig [...]
- Facciamo i conti...
by Alberto Bagnai in Goofynomics, 2015-08-09 22:06:00 UTC
...e ora, come promesso, facciamo i conti. Lo scorso anno li facemmo a febbraio, come forse ricordate . Quest’anno sono in ritardo, e me ne scuso. Per la precisione, i rendiconti sono stati approvati dall’assemblea e pubblicati sul nostro sito nei termini previsti dallo Statuto, entro la fine di aprile. Non ho però avuto modo né di commentarli con voi (cosa che l’anno scorso feci prima della pubblicazione ufficiale), né di discutere sugli sviluppi dell’associazione. Credo immaginiate i motivi. Nei primi mesi dell’anno mi son trovato da gestire le pantomime della sinistra del part [...]
- Peru’s mining mita
by Inaki Villanueva in Applied economist, 2015-08-09 17:42:00 UTC
Reading the notable book from Easterly and Robinson, "Why nations fail" I came across the concept of mita and the effect of it on economic growth. Mita was an extensive forced mining labor system in effect by the Spanish Empire in some regions of today´s Peru and Bolivia between 1573 and 1812. Fascinatingly, a paper wrote in 2011 by Melissa Dell �( or here ) found that: Regression discontinuity results indicate that a mita effects lowers household consumption by 25% and increases the prevalence of stunted growth in children by around 6% points. Mita’s influence has persisted through its [...]
- The Extent and Consequences of P-Hacking in Science
by firstname.lastname@example.org (David Stern) in Stochastic Trend, 2015-08-09 03:34:00 UTC
Interesting paper from my biology colleagues at ANU on the effects of "p-hacking" - searching for more significant results by looking at various statistical models or samples and picking the more significant ones to report - on reported science. They conclude that when there is a strong real effect it can be detected despite p-hacking by looking at the "p-curve". The p-curve is the distribution of p-values across all the studies collected in a meta-analysis. If the curve is skewed right - there is a peak at very high significance levels (numbers a lot smaller than 5%) then there is a real effe [...]
- Economic Convergence of US States in 1987-2014
by Anton Tarasenko in Economics and Development, 2015-08-08 18:55:48 UTC
Over the last quarter century, less productive states in America hadÂ been catching up withÂ the rich states. I’m talking about unconditional beta convergence :
GSP PC is Gross State Product per capita. The green line excludes territories colored with red (see “Technical details” for the reasons and OLS estimates). Otherwise, less developed states grew faster than the rest.
However, most of this convergence occurredÂ before 2000:
Slopes after 1992 are not statistically significant. Including the post-2008 recovery:
And after the 1990s, the dispersion of GSP (another perspective on the catch [...]
- The Monetary Superpower Strikes Again
by email@example.com (David Beckworth) in Macro and Other Market Musings, 2015-08-08 00:41:00 UTC
China's economy has been slowing down for the past few years and many observers are� worried . The conventional wisdom for why this is happening is that China's demographic problems , its credit binge , and the related� malinvestment have all come home to roost. While there is a certain appeal to these arguments, there is another explanation that I was recently reminded of by Michael T . Darda and JP Koning : the Fed's passive tightening of monetary policy is getting exported to China via its quasi-peg to the dollar. Or, as I would put it, the monetary superpower has struck again. The Fed as a [...]
- Coordinating Business Cycles
by Christian Zimmermann in NEP-DGE blog, 2015-08-07 13:25:42 UTC
By Mathieu Taschereau-Dumouchel and Edouard Schaal
We develop a quantitative theory of business cycles with coordination failures. Because of a standard aggregate demand externality, firms want to coordinate production. The presence of a non-convex capacity decision generates multiple equilibria under complete information. We use a global game approach to show that, under incomplete information, the multiplicity of equilibria disappears to give rise to a unique equilibrium with two stable steady states. The economy exhibits coordination traps: [...]
- When Women Out-Earn Men
by Guest Author in The Big Picture, 2015-08-07 09:00:46 UTC
When Women Out-Earn Men
Jaison R. Abel and Richard Deitz
Liberty Street Economics AUGUST 05, 2015
We often hear that women earn “77 cents on the dollar” compared with men. However, the gender pay gap among recent college graduates is actually much smaller than this figure suggests. We estimate that among recent college graduates, women earn roughly 97 cents on the dollar compared with men who have the same college major and perform the same jobs. Moreover, what may be surprising is that at the start of their careers, women actually out-earn men by a substantial margin for a number [...]
- When Women Out-Earn Men
by ? in The Big Picture, 2015-08-07 09:00:00 UTC
When Women Out-Earn Men
Jaison R. Abel and Richard Deitz
Liberty Street Economics AUGUST 05, 2015
We often hear that women earn “77 cents on the dollar” compared with men. However, the gender pay gap among recent college graduate [...]
- 'Inventing Prizes: A Historical Perspective on Innovation Awards and Technology Policy'
by Mark Thoma in Economist's View, 2015-08-07 08:54:34 UTC
“Inventing Prizes: A Historical Perspective on Innovation Awards and Technology Policy,” B. Z. Khan�(2015) : B. Zorina Khan is an excellent and underrated historian of innovation policy. In her new working paper, she questions the shift toward prizes as an innovation inducement mechanism. The basic problem ... is that patents are costly in terms of litigation, largely due to their uncertainty , that patents impose deadweight loss by granting inventors market power... (as noted at least as far back as Nordhaus 1969 ), and that patent rights can lead to an anticommons which in [...]
- After Greece: Saving EMU
by Stephen G. Cecchetti in Huffington Post Business, 2015-08-06 22:51:29 UTC
Euro-area leaders announced yet another agreement with Greece in mid-July . However, the survival of the euro area has never been about the fate of Greece. Instead, it is whether the Europeans will implement the reforms necessary to keep the euro area together. If they do, the common currency will endure. If they don't, then the euro may not survive the next big adverse shock. Saving the euro requires the creation of a truly pan-European financial system. While a unified financial market would surely improve capital allocation across the continent, it is a full euro-area banking union that is [...]
- “Inventing Prizes: A Historical Perspective on Innovation Awards and Technology Policy,” B. Z. Khan (2015)
by afinetheorem in A Fine Theorem, 2015-08-06 22:21:23 UTC
B. Zorina Khan is an excellent and underrated historian of innovation policy. In her new working paper, she questions the shift toward prizes as an innovation inducement mechanism. The basic problem economists have been grappling with is that patents are costly in terms of litigation, largely due to their uncertainty , that patents impose deadweight loss by granting inventors market power (as noted at least as far back as Nordhaus 1969 ), and that patent rights can lead to an anticommons which in some cases harms follow-on innovation (see Scotchmer and Green and Bessen and Maskin for the the [...]