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- 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 firstname.lastname@example.org (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 [...]
- 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 [...]
- 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 [...]
- 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 [...]
- 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 ( [...]
- 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 [...]