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- In Praise of David Neumark
by Adam Ozimek in Modeled Behavior, 2015-07-30 00:07:00 UTC
When opponents of minimum wage hikes cite empirical research, they almost always point to David Neumark who has written a book on this topic, done leading research, and remains at the forefront of the academic debate. This I think leads to the impression by some that opposition over the minimum wage is just âconservative economistsâ like David Neumark reflecting their conservative bias. This is a mischaracterization of Neumark, whose research is hard to put in a box. Instead, Neumark is just a thoughtful labor economist who happens to think the literature shows non-trivial negative employm [...]
- The Most Egalitarian of All Professions: Pharmacy and the Evolution of a Family-Friendly Occupation By: Goldin, Claudia D. ; Katz, Lawrence F.
by maximorossi in NEP-LTV blog, 2015-07-29 18:07:55 UTC
Pharmacy has become a female-majority profession that is highly remunerated with a small gender earnings gap and low earnings dispersion relative to other occupations. We sketch a labor market framework based on the theory of equalizing differences to integrate and interpret our empirical findings on earnings, hours of work, and the part-time work wage penalty for pharmacists. Using extensive surveys of pharmacists for 2000, 2004, and 2009 as well as samples from the American Community Surveys and the Current Population Surveys, we explore the gender earnings gap, the penalty to part-time work [...]
- The Dynamics of Inequality By: Xavier Gabaix ; Jean-Michel Lasry ; Pierre-Louis Lions ; Benjamin Moll
by maximorossi in NEP-LTV blog, 2015-07-29 18:06:52 UTC
The past forty years have seen a rapid rise in top income inequality in the United States. While there is a large number of existing theories of the Pareto tails of the income and wealth distributions at a given point in time, almost none of these address the fast rise in top inequality observed in the data. We show that standard theories, which build on a random growth mechanism, generate transition dynamics that are an order of magnitude too slow relative to those observed in the data. We then suggest parsimonious deviations from the basic model that can explain such changes, namely heteroge [...]
- Not Working At Work: Loafing, Unemployment and Labor Productivity By: Burda, Michael C ; Genadek, Katie R. ; Hamermesh, Daniel S.
by maximorossi in NEP-LTV blog, 2015-07-29 18:05:51 UTC
Using the American Time Use Survey (ATUS) 2003-12, we estimate time spent by workers in non-work while on the job. Non-work time is substantial and varies positively with the local unemployment rate. While the average time spent by workers in non-work conditional on any positive non-work rises with the unemployment rate, the fraction of workers who report time in non-work varies pro-cyclically, declining in recessions. These results are consistent with a model in which heterogeneous workers are paid efficiency wages to refrain from loafing on the job. That model correctly predicts relationship [...]
- Youth Unemployment in Old Europe: The Polar Cases of France and Germany By: Pierre Cahuc (Department of Economics) ; Stéphane Carcillo (Departement d’Economie de Sciences Po) ; Ulf Rinne (Institute for the Study of Labor (IZA)) ; Klaus F. Zimmermann (
by maximorossi in NEP-LTV blog, 2015-07-29 18:03:56 UTC
France and Germany are two polar cases in the European debate about rising youth unemployment. Similar to what can be observed in Southern European countries, a “lost generation” may arise in France. In stark contrast, youth unemployment has been on continuous decline in Germany for many years, hardly affected by the Great Recession. This paper analyzes the diametrically opposed developments in the two countries to derive policy lessons. As the fundamental differences in youth unemployment primarily result from structural differences in labor policy and in the (vocational) education system [...]
- Does Protecting Older Workers from Discrimination Make It Harder to Get Hired? Evidence from Disability Discrimination Laws By: David Neumark ; Joanne Song ; Patrick Button
by maximorossi in NEP-LTV blog, 2015-07-29 18:02:29 UTC
We explore the effects of disability discrimination laws on hiring of older workers. A concern with anti-discrimination laws is that they may reduce hiring by raising the cost of terminations and – in the specific case of disability discrimination laws – raising the cost of employment because of the need to accommodate disabled workers. Moreover, disability discrimination laws can affect non-disabled older workers because they are fairly likely to develop work-related disabilities, yet are not protected by these laws. Using state variation in disability discrimination protections, we find [...]
- Endogenous Labor Share Cycles: Theory and Evidence
by Christian Zimmermann in NEP-DGE blog, 2015-07-28 13:32:10 UTC
By Peter McAdam, Jakub Muck and Jakub Growiek
ased on long US time series we document a range of empirical properties of the labor’s share of GDP, including its substantial medium-run swings. We explore the extent to which these empirical regularities can be explained by a calibrated micro-founded long-run economic growth model with normalized CES technology and endogenous labor- and capital-augmenting technical change driven by purposeful directed R&D investments. It is found that dynamic macroeconomic trade-offs created by arrivals of both typ [...]
- 'Are We Overestimating Inflation (Again?)'
by Mark Thoma in Economist's View, 2015-07-28 00:24:00 UTC
Cecchetti & Schoenholtz:
Are we overestimating inflation (again?) : Twenty years ago, a group of experts – the “ Boskin Commission ” – concluded that the U.S. consumer price index (CPI) systematically overstated inflation by 0.8 to 1.6 percentage points each year. Taking these findings to heart, the Bureau of Labor Statistics (BLS) got to work reducing this bias, so that by the mid-2000s, experts felt it had fallen by as much as half a percentage point.
We bring this up because there is a concern that as a consequence of the way in which we measure information technology (IT), healt [...]
- Rebonato on Bond-Yield Econometrics
by Francis Diebold in No Hesitations, 2015-07-27 14:09:00 UTC
Riccardo Rebonato (R) has a fascinating new paper , which builds most directly on important earlier work of� Cieslak and Povala (2010) (CP).� The cool thing about CP is the way it advances and blends both the spanning literature ("all information of relevance for yield prediction is embedded in the current term structure," e.g. via forward-rate tent functions as in Cochrane-Piazessi (2004) ), and the non-spanning literature ( "not all information of relevance for yield prediction is embedded in the current term structure," e.g. because certain macro variables seem to help predict risk premia, [...]
- Neoclassical Production Function Reader
by Mike Isaacson in Vulgar Economics, 2015-07-27 14:00:00 UTC
Two-Factor Production Function Charles Cobb & Paul Douglas - A Theory of Production Robert Solow - Technical Change and the Aggregate Production Function Anwar Shaikh - Laws of Production and Laws of Algebra: Humbug II CES Function Kenneth Arrow, et al. - Capital Labor Substitution and Economic Efficiency Jesus Felipe & John McCombie - The CES Production Function, the accounting identity, and Occam's razor Endogenous Technical Change Paul Romer - Endogenous Technological Change Francesco Caselli - Accounting for Cross-Country Income Differences Michael Isaacson - Braaaaaaaains! The Undead Humb [...]
- Are we overestimating inflation (again?)
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2015-07-27 12:16:54 UTC
Twenty years ago, a group of experts – the “ Boskin Commission ” – concluded that the U.S. consumer price index (CPI) systematically overstated inflation by 0.8 to 1.6 percentage points each year. Taking these findings to heart, the Bureau of Labor Statistics (BLS) got to work reducing this bias, so that by the mid-2000s, experts felt it had fallen by as much as half a percentage point. We bring this up because there is a concern that as a consequence of the way in which we measure information technology (IT), health care, digital content and the like, the degree to which conventional [...]
- Are China's Mayors Good at "Picking Winners"? An Evaluation of Managed Industrial Policy
by Matthew Kahn in Environmental and Urban Economics, 2015-07-25 21:47:00 UTC
Jianfeng Wu, Siqi Zheng, Weizeng Sun and I have just released a new NBER paper titled "The Birth of Edge Cities in China: Measuring the Spillover Effects of Industrial Parks". Abstract Several Chinese cities have invested billions of dollars to construct new industrial parks. These place based investments solve the land assembly problem which allows many productive firms to co-locate close to each other. The resulting local economic growth creates new opportunities for real estate developers and retailers that develop properties and stores close to the new park. The city mayor has the politica [...]
- On welfare incentives
by chris in Stumbling and Mumbling, 2015-07-25 12:35:55 UTC
A loyal reader has chastised my defence of welfare benefits for ignoring incentive effects. This deserves a reply.
The issue here is not about Osborne's welfare cuts, simply because these haven't, net, made much difference to incentives. On the one hand, the rise in the "living wage" relative to Universal Credit will increase incentives to work. But on the other hand, this won't affect under-25s (who aren't covered by the wage floor); cuts to in-work tax credits reduce work incentives; and the higher taper rate reduces incentives to work longer. Overall, says the Resolution Foundation's David [...]
- Cross-country co-movement in long-term interest rates: a DSGE approach
by Christian Zimmermann in NEP-DGE blog, 2015-07-24 15:58:29 UTC
By Thomas Chin, Thomai Filippeli and Konstantinos Theodoridis
Long-term interest rates in a number of small open inflation-targeting economies co-move more strongly with US long-term rates than with short-term rates in those economies. We augment a standard small open economy model with imperfectly substitutable government bonds and time-varying term premia, that captures this phenomenon. The estimated model fits a range of US and UK data remarkably well, and produces term premium estimates that are comparable to estimates from the affine term [...]
- The male wage premium
by jamesz in TVHE, 2015-07-24 15:33:00 UTC
Wage inequality between men and women has split opinion in the UK after the Government last week announced that all large firms would have to publish the gap in average earnings between their male and female employees. In light of that debate, today’s HESA data on the pay of recent graduates is interesting. It shows that female graduates are slightly more likely than male graduates to be in work a year after graduating, but they earn considerably less.
Of course, that’s not necessarily a causal link and Ben Southwood rightly pointed out that , in the US, similar results are due to differences [...]
- Are firms ever going to empty their war chests?
by bankunderground in Bank Underground, 2015-07-24 09:30:00 UTC
Katie Farrant and Magda Rutkowska
UK private non-financial corporations (PNFCs) consistently ran a financial surplus between 2002 and 2013. They now hold around Â£1.8 trillion of financial assets, including Â£0.5 trillion of cash. This has attracted attention from policymakers and the media. Should we expect companies to spend these assets to finance investment? The MPC considers this to be possible (see e.g. the February 2015 Inflation Report ). Many agree, calling on companies to spend their âcash hoardsâ (see e.g. these articles in the Telegraph and the FT ). Here, we explain why we thi [...]
- Fertility, Longevity and International Capital Flows
by Christian Zimmermann in NEP-DGE blog, 2015-07-23 00:18:52 UTC
By Zs�fia B�r�ny, Nicolas Coeurdacier and St�phane Guibaud
The neoclassical growth model predicts large capital flows towards fast-growing emerging countries. We show that incorporating fertility and longevity into a lifecycle model of savings changes the standard predictions when countries differ in their ability to borrow inter-temporally and across generations through social security. In this environment, global aging triggers capital flows from emerging to developed countries, and countries’ current ac [...]
- A second correction in the Journal of Economic Perspectives
by John Whitehead in Environmental Economics, 2015-07-22 16:27:55 UTC
From Retraction Watch :�
The� Journal of Economic Perspectives � has published a second correction for a 2009� paper �that argued that some amount of global warming could lead to economic gains. ...
After the first correction was published, several people contacted the� JEP �to point out more issues with the paper. Editors worked with [Richard] Tol and outside researchers to update the paper again. ...
The latest correction probably wouldn’t be the end of the argument. In the final section of the latest correction, the JEP has provided an index of methods and materials in anticipation of fu [...]
- The Big Lesson of the Eurozone Crisis
by firstname.lastname@example.org (David Beckworth) in Macro and Other Market Musings, 2015-07-22 16:03:00 UTC
Paul Krugman notes that Eurozone crisis is a vindication of that optimum currency area (OCA) theory. I agree but would note the crisis also sheds light on the specialization versus endogeneity debate surrounding the OCA criteria. Interestingly, Krugman himself wrote some of the literature in this debate back in the early-to-mid 1990s. So what is the specialization versus endogeneity debate? To answer this question, first recall that the OCA theory says members of a currency union should share similar business cycles, have economic shock absorbers (fiscal transfers, labor mobility, and price fl [...]
- Random thoughts on happiness: how to be happy?
by noname in ZeeConomics, 2015-07-22 08:16:39 UTC
Happiness is a relative concept. Specifically, how happy you are depends on what your aspirations are, or how high you set the bar. For instance, if you are a blue-collar worker with a relatively low salary, and your current goal is to go on a camping trip to the Rockies, and you can do it, then, ceteris paribus , you are probably happier than a rich investment banker whose goal is to buy a private island but cannot do it because his bonus wasn’t as high as expected.
Of course an economist might ask, does the probability that one’s aspirations are fulfilled vary with income? One would expect t [...]
- Unpleasant debt dynamics: Can fiscal consolidations raise debt ratios?
by Christian Zimmermann in NEP-DGE blog, 2015-07-20 21:06:56 UTC
By Gabriela Castro, Ricardo Felix, Paulo Julio and Jose Maria
Using PESSOA, a medium-scale DSGE model for a small euro-area economy, we evaluate how fiscal adjustments impact short- and medium-term debt dynamics and output for alternative policy options, and budgetary and economic conditions. Fiscal adjustments may increase the public debt-to-GDP ratio in the short run, even for consolidations carried out in normal times in economies characterized by moderate indebtedness levels. Financial turmoils and hikes in the nationwide risk premia, c [...]
- Letter from Delhi, Part 1
by Triplecrisis in Triple Crisis, 2015-07-20 12:00:44 UTC
Air Pollution as Environmental Injustice
This is part 1 of a two-part series from UMass-Amherst professor of economics and regular Triple Crisis contributor James K. Boyce. This part focuses on disparate exposure to air pollution in Dehli. Part 2, to be posted next week, focuses on solutions to the problem.
James K. Boyce
Arriving in Delhi in January, at the height of the winter pollution season, you notice the air as soon as you step off the plane. A pungent smell with hints of burning rubber and diesel fumes assaults the nose and stings the eyes. On the highway into the city center, a digita [...]
- ‘Metrics Monday: Outliers
by Marc F. Bellemare in Marc F. Bellemare, 2015-07-20 09:00:00 UTC
(Credit: Wolfram MathWorld.)
This post is not about Gladwellian pabulum. Rather, it is about the econometric problem posed by outliers, whoseÂ presence of extreme-valued observations in a data set whose presence might cause problems of estimation and inference, and which a few colleagues have asked for a ‘Metrics Monday post on a few weeks ago.
Outliers cause estimation problems because they bias point estimates. They cause inference problems because they cause standard errors to be too large,Â thereby making it more likely that one will fail to reject a false null, i.e., a type II error. For [...]
- Maternal time investment in early childhood
by noname in ZeeConomics, 2015-07-19 12:17:51 UTC
Researchers have shown that early childhood (pre-primary) education is quite important. Skill differences among children already exist by the time they start primary school, and they’re likely to persist over time. But how do these skill differences arise?
Factors including income, family structure, parental education, maternal employment, child care, school quality and neighborhood characteristics all play a role. But the subject of this post is maternal time investment in early childhood.
To address this question, Del Bono et al. (2015) ( ungated ) use data from more than 8,000 British chil [...]
- Labour's economic narrative
by chris in Stumbling and Mumbling, 2015-07-19 11:31:59 UTC
I like Paul Bernal's description of Blairites as like Elvis impersonators who only impersonate the old, fat conservative rather than the younger radical man.
I'd add that one way in which this is true is that the young Blair had a distinctive economic narrative. Globalization and technical change, he said, were transforming the economy and required new policies - such as more education because low-skilled jobs were disappearing overseas, and macroeconomic stability to attract and retain investment.
This narrative had its faults. But it was an act of genius compared to the fiction that dominat [...]
- No Evidence of Distortion?
by Don Boudreaux in Cafe Hayek, 2015-07-18 22:02:47 UTC
Tweet Suppose that, say, Bob Higgs or George Will or Richard Epstein or Holman Jenkins or Deirdre McCloskey or David Boaz – or, really, any well-respected public intellectual known to favor free markets – wrote the following in a major publication:
Thereâs just no evidence that raising the minimum wage fails to destroy some jobs, even when the starting point is as low as it is in modern America.
What would be the political left’s reaction to this assertion? Â Almost certainly a reaction from the political left would occur quickly and be full of indignation and accusations [...]