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2019-04-24

• Living/minimum wage: what we know
  by aortmannphd in Core Economics, 2019-04-24 00:01:29 UTC

  Version 1.0 (April 24, 2019) A couple of weeks ago, I got ensnarled in one of these debates on Facebook that do not go anywhere; it was triggered by the Australian Labor Party’s recent Living Wage policy proposal and the related discussion about the merits of minimum wages, and there specifically whether increases in minimum wages have negative employment effects and even more specifically whether such detrimental employment effects hit those at the low end of the wage distribution. These debates tie into other current debates like the one about lacking wages growth  about which even the RBA i [...]

2019-04-22

• Communicating Monetary Policy Uncertainty
  by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2019-04-22 13:01:56 UTC

  “My recommendation for the presentation of economic projections and their use in policy explanations is to align them better with the rhetoric of uncertainty and data dependency and the true state of economic knowledge.” Former Federal Reserve Board Vice Chairman Donald Kohn, January 2019 . When it comes to forecasting, we usually cite famous Yankee catcher and baseball philosopher Yogi Berra , who reputedly said: “It's tough to make predictions, especially about the future.” For central bankers, this is more than just a minor headache. Given the lags between policy actions and their effects, [...]

2019-04-19

• When failure succeeds
  by chris in Stumbling and Mumbling, 2019-04-19 11:56:53 UTC

  In politics, failure sometimes works better than success. This is the message of this piece by Janan Ganesh, wherein he argues that it is in Trump’s interest to fail on his promise to control immigration, because if he does so it will remain a big issue which will attract voters to him. Janan says: It is perverse, I know, that a president could make so little progress on his number-one priority during four years in office, only to be rewarded for it.  Maybe not so perverse. There are other examples. One, as he says, is Brexit. If Brexiters get their way, voters will see that it is in fact no [...]

2019-04-18

• Thesis Thursday: David Mott
  by Chris Sampson in The Academic Health Economists' Blog, 2019-04-18 06:00:33 UTC

  On the third Thursday of every month, we speak to a recent graduate about their thesis and their studies. This month’s guest is Dr David Mott who has a PhD from Newcastle University . If you would like to suggest a candidate for an upcoming Thesis Thursday, get in touch. Title How do preferences for public health interventions differ? A case study using a weight loss maintenance intervention Supervisors Luke Vale , Laura Ternent Repository link http://hdl.handle.net/10443/4197 Why is it important to understand variation in people’s preferences? It’s not all that surprising that peopl [...]

2019-04-17

• Broad-spectrum policies
  by chris in Stumbling and Mumbling, 2019-04-17 13:20:11 UTC

  Is there a case for the Bank of England to target house prices? The debate, I suspect, highlights a difference in how we think about economic policy – between what might be called a single-issue technocratic approach versus a broad-spectrum approach. Many of us, I suspect, agree that high and rising house prices are a cultural and economic menace. They encourage high debt which is potentially destabilizing (pdf) . They divert spending towards rent and mortgage payments (and sometimes housebuilding) and away from new goods and services, thereby reducing dynamism and innovation. They encourage p [...]

• Policy Trade-Offs in Building Resilience to Natural Disasters: The Case of St. Lucia
  by Christian Zimmermann in NEP-DGE blog, 2019-04-17 03:54:00 UTC

  BY Alessandro Cantelmo; Leo Bonato; Giovanni Melina; Gonzalo Salinas http://d.repec.org/n?u=RePEc:imf:imfwpa:19/54&r=dge Resilience to climate change and natural disasters hinges on two fundamental elements: financial protection —insurance and self-insurance— and structural protection —investment in adaptation. Using a dynamic general equilibrium model calibrated to the St. Lucia’s economy, this paper shows that both strategies considerably reduce the output loss from natural disasters and studies the conditions under which each of the two strategies provides the best protection. While struct [...]

2019-04-16

• Finding the right amount of independence for Asia’s central banks
  by Adam Triggs in East Asia Forum, 2019-04-16 00:00:45 UTC

  Authors: Adam Triggs and Jake Read, ANU March 2019 saw Philippine President Rodrigo Duterte move his Budget Secretary, Benjamin Diokno, to govern the central bank. The press was quick to call this a politically motivated interference with the central bank’s independence. The markets were equally quick to shave 1 per cent off the Philippine Peso. Duterte’s decision follows a common trend — the independence of central banks is being challenged to differing degrees and for different reasons in many Asian countries. These include the Philippines, India, Thailand, Indonesia, Japan, Pakistan, Turke [...]

2019-04-15

• Is Marijuana a Gateway to Opioids?
  by Jacob Sullum in Hit & Run blog, 2019-04-15 16:00:51 UTC

  During a hearing on the 1937 law that effectively banned cannabis throughout the United States, a congressman asked Federal Bureau of Narcotics Commissioner Harry Anslinger “whether the marihuana addict graduates into a heroin, an opium, or cocaine user.” Anslinger, who at that point was blaming marijuana for inspiring outbursts of vicious and irrational violence, said he had seen no evidence that its users progress to other drugs. “I have not heard of a case of that kind,” he said. “I think it is an entirely different class. The marihuana addict does not go in that direction.”   By the early [...]

• Qualifying for the Fed
  by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2019-04-15 12:01:03 UTC

  We’re strictly nonpartisan. We check our political identification at the door.” Federal Reserve Board Chairman Jerome H. Powell, cited in The Washington Post , April 11, 2019 “The Federal Reserve is an apolitical, or nonpolitical, institution, in which decisions are made by looking at economic facts and bringing economic analysis to bear on those facts.” Former Federal Reserve Board Vice Chairman Donald Kohn, NPR Interview , April 6, 2019. Monetary economists of nearly all persuasions are overwhelming in their condemnation of President Trump’s desire to appoint Stephen Moore and Herman Cain to [...]

2019-04-10

• The Intergenerational Incidence of Green Tax Reform
  by Christian Zimmermann in NEP-DGE blog, 2019-04-10 14:33:20 UTC

  By Sebastian Rausch and Hidemichi Yonezawa http://d.repec.org/n?u=RePEc:eth:wpswif:18-287&r=dge We examine the lifetime incidence and intergenerational distributional effects of an economywide carbon tax swap using a numerical dynamic general equilibrium model with overlapping generations of the U.S. economy. We highlight various fundamental choices in policy design including (1) the level of the initial carbon tax, (2) the growth rate of the carbon tax trajectory of over time, and (3) alternative ways for revenue recycling. Without revenue recycling, we find that generations born before the t [...]

• Inefficient Short-Time Work
  by maximorossi in NEP-LTV blog, 2019-04-10 14:10:59 UTC

  By: Pierre Cahuc  (Département d’économie);  Sandra Nevoux  (Banque de France) Abstract: This paper shows that the reforms which expanded short-time work in France after the great 2008-2009 recession were largely to the benefit of large firms which are recurrent short-time work users. We argue that this expansion of short-time work is an inefficient way to provide insurance to workers, as it entails cross-subsidies which reduce aggregate production. An efficient policy should provide unemployment insurance benefits funded by experience rated employers’ contributions instead of short-time [...]

• When Short-Time Work Works
  by maximorossi in NEP-LTV blog, 2019-04-10 14:07:14 UTC

  By: Pierre Cahuc  (École polytechnique (X));  Francis Kramarz  (Sciences Po);  Sandra Nevoux  (Banque de France) Abstract: Short-time work programs were revived by the Great Recession. To understand their operating mechanisms, we first provide a model showing that short-time work may save jobs in firms hit by strong negative revenue shocks, but not in less severely-hit firms, where hours worked are reduced, without saving jobs. The cost of saving jobs is low because short-time work targets those at risk of being destroyed. Using extremely detailed data on the administration of the progra [...]

• Men without work: Why are they so unhappy in the US compared to other places?
  by maximorossi in NEP-LTV blog, 2019-04-10 14:00:51 UTC

  By: Sergio Pinto  (University of Maryland);  Carol Graham  (The Brookings Institution) Abstract: The global economy is full of paradoxes. Despite progress in technology, reducing poverty, and increasing life expectancy, the poorest states lag behind, and there is increasing inequality and anomie in the wealthiest ones. A key driver of such unhappiness in advanced countries is the decline in the status and wages of low-skilled labor. A related feature is the increase in prime-aged males (and to a lesser extent women) simply dropping out of the labor force, particularly in the U.S. This sa [...]

• Revisiting 1916 (Part II): The Economics of Population Density
  by Jason Barr in Building the skyline, 2019-04-10 12:31:43 UTC

  Jason M. Barr       April 10, 2019 [This is part two of a four-part series on New York’s first zoning regulations, enacted in 1916. Part I focuses on the history of the regulations. This post revisits the reformers’ thinking through the lens of modern economics. Part III will continue this discussion by comparing the 1916 Zoning Resolution to other policy alternatives not implemented. Finally, Part IV will argue that the ideas and rules from 1916 helped to set the stage for today’s NIMBYism and housing affordability problems.] From the point of view of public advantage the distribution of popu [...]

2019-04-09

• Stephen G. Cecchetti and Kermit L. Schoenholtz - Why a gold standard is a very bad idea
  by contrarianmedia@hotmail.com (Mike Norman) in Mike Norman Economics, 2019-04-09 17:56:00 UTC

  Far from being synonymous with stability, the gold standard itself was the principal threat to financial stability and economic prosperity between the wars.”  Barry Eichengreen,  Golden Fetters . This article is written by two bankers, but anywhere you look, the problems of using the gold standard are described the same. One thing, the money is limited to the amount of gold a country has, not the resources or the know how of the people. That would be a waste.  The extraordinary monetary easing engineered by central banks in the aftermath of the 2007-09 financial crisis has fueled criticism of [...]

2019-04-04

• Trump’s Faulty Wind Power Claims
  by Jessica McDonald in FactCheck.org, 2019-04-04 16:02:59 UTC

  During an April 2  speech  to the National Republican Congressional Committee, President Donald Trump once again attacked wind power, falsely claiming that noise from turbines causes cancer and that turbines sink property values by 75 percent. The president has repeatedly erred when it comes to wind power. As we’ve explained before , when the president said living near turbines is noisy enough to make someone “go crazy after a couple of years,” there’s no direct evidence that the sound is harmful to human health. Here, we’ll explain why there’s no turbine-cancer link, and describe some of the [...]

2019-04-03

• Germany
  by Bruno Duarte in EUnomics, 2019-04-03 09:35:38 UTC

  The third consecutive month of contraction hints at more than exogenous causes for Germany’s manufacturing. At its crux, German policy and social preferences led the Member-State’s policy makers and firms to ignore the repeated urge for more investment, not least by the European Commission . Feldstein and Horioka , who uncovered the correlation between savings and investment levels, reinterpreted their findings to describe how capital markets fail to effectively channel savings to where it is most profitable. According to a new paper by Horioka and Ford , as good and financial markets net bila [...]

2019-04-01

• Wealth Disparities for Early Childhood Anthropometrics and Skills: Evidence from Chilean Longitudinal Data
  by maximorossi in NEP-LTV blog, 2019-04-01 18:19:13 UTC

  By: Jere R. Behrman  (Department of Economics, University of Pennsylvania);  Dante Contreras  (Department of Economics, University of Chile);  Isidora Palma  (Department of Economics, University of Chile);  Esteban Puentes  (Department of Economics, University of Pennsylvania) Abstract: We study wealth disparities in the formation of anthropometrics, cognitive skills and socio-emotional skills. We use a sample of preschool and early school children in Chile. We extend the previous literature by using longitudinal data, which allow us to study the dynamics of child growth and skills forma [...]

• Human Capital Inequality: Empirical Evidence
  by maximorossi in NEP-LTV blog, 2019-04-01 18:18:16 UTC

  By: Brant Abbott  (University of British Columbia);  Giovanni Gallipoli  (University of British Columbia) Abstract: Wealth inequality has received considerable attention, with mounting evidence of steady and economically meaningful changes in the concentration of wealth ownership. By definition, wealth inequality captures disparity in the ownership of productive capital and other non-labor factors of production. In contrast, in this article we focus on the distribution of human capital and its implications for the accrual of economic resources to individuals and households. Human capital [...]

• Dot-ology: What can we learn from the dot plot?
  by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2019-04-01 12:24:01 UTC

  “[I]f properly understood, the dot plot can be a constructive element of comprehensive policy communication,” Federal Reserve Board Chairman Jerome Powell, March 8, 2019 . The primary objective of monetary policy is to keep inflation and unemployment low and stable. To be effective, central bankers must address shocks to inflation and unemployment, while ensuring that what they say and do is not a source of volatility. One way to make a commitment to stability credible is for policymakers to broadcast their likely responses to shocks—their reaction function . Such transparency escalates the co [...]

• Chris Sampson’s journal round-up for 1st April 2019
  by Chris Sampson in The Academic Health Economists' Blog, 2019-04-01 11:00:21 UTC

  Every Monday our authors provide a round-up of some of the most recently published peer reviewed articles from the field. We don’t cover everything, or even what’s most important – just a few papers that have interested the author. Visit our Resources page for links to more journals or follow the HealthEconBot . If you’d like to write one of our weekly journal round-ups, get in touch . Toward a centralized, systematic approach to the identification, appraisal, and use of health state utility values for reimbursement decision making: introducing the Health Utility Book (HUB) . Medical Decis [...]

2019-03-31

• Examining an MMT model in detail
  by Noah Smith in Noahpinion, 2019-03-31 19:45:00 UTC

  What is MMT, the heterodox economic theory that has  captivated Alexandria Ocasio-Cortez , made its way into  the Green New Deal discussion , and inspired dozens of thinkpieces and critiques? What does it say? How can we tell if it's a good theory or a bad one? These are incredibly important questions. Thanks to Ocasio-Cortez and the Green New Deal, MMT has very quickly gone from an obscure heterodox idea to one of the most potentially influential and important theories in all of economics.  Formal Models vs. Guru-Based Theories These days, most economic theories are collections of mathematica [...]

2019-03-30

• Fairly Recently: Must- and Should-Reads, and Writings... (March 30, 2019)
  by J. Bradford DeLong in Grasping Reality with the Invisible Hand, 2019-03-30 15:09:35 UTC

  Professional Republicans, Not Professional Economists: How Low can They Go? : Among the professional Republicans, Ross Douthat joins Greg Mankiw in opposition to Steve Moore. So far, they are the only two I have seen—and Greg Mankiw is the only economist.... So far, not a peep I have seen out of anybody else: not Marty Feldstein, Michael J. Boskin, John Cogan, Douglas Holtz-Eakin, Glenn Hubbard, Lawrence B. Lindsey, Harvey S. Rosen, George P. Shultz, John. B. Taylor, James C. Miller III, Douglas Holtz-Eakin, Barry W. Poulson, Charles W. Calomiris, Donald Luskin, or Glenn Hubbard... Yes, Of [...]

2019-03-29

• Environmental Policy Instrument Choice and International Trade
  by Christian Zimmermann in NEP-DGE blog, 2019-03-29 03:24:21 UTC

  By J. Scott Holladay, Mohammed Mohsin and Shreekar Pradhan http://d.repec.org/n?u=RePEc:ten:wpaper:2019-01&r=dge We develop a dynamic stochastic general equilibrium model to understand how environmental policy instrument choice affects trade. We extend the existing literature by employing an open economy model to evaluate three environmental policy instruments: cap-and-trade, pollution taxes, and an emissions intensity standard in the face of two types of exogenous shocks. We calibrate the model to Canadian data and simulate productivity and import price shocks. We evaluate the evolution of k [...]

2019-03-27

• 
  by J. Bradford DeLong in Grasping Reality with the Invisible Hand, 2019-03-27 18:38:12 UTC

  James Montier will soon have an answer to his question why people hate MMT. MMT is about to hate James Montier too: James Montier : Why Does Everyone Hate MMT? : "Many of the negative articles I’ve read about MMT use the tried and tested method of setting up a straw man purely for the purposes of knocking him down. So, to avoid confusion, I will lay out a simple and straightforward description of what MMT is.... (4) Functional finance, not sound finance. Fiscal policy is much more potent than monetary policy. Fiscal policy should be aimed at generating full employment while maintaining low inf [...]

• Behavioural economics is useful also in macroeconomics : the role of animal spirits
  by Christian Zimmermann in NEP-DGE blog, 2019-03-27 15:30:15 UTC

  By Paul de Grauwe and Yuemei Ji http://d.repec.org/n?u=RePEc:ehl:lserod:87286&r=dge Dynamic stochastic general equilibrium models are still dominant in mainstream macroeconomics, but they are only able to explain business cycle fluctuations as the result of exogenous shocks. This paper uses concepts from behavioural economics and discusses a New Keynesian macroeconomic model that generates endogenous business cycle fluctuations driven by animal spirits. Our discussion includes two applications. One is on the optimal level of inflation targeting under a zero lower bound constraint. The other is [...]

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