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2017-07-23

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

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

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

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

2017-07-22

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

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

2017-07-20

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

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

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

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

2017-07-18

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

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

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

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

2017-07-17

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

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

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

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

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

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

2017-07-15

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

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

2017-07-14

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

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

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

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

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

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

2017-07-13

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

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

2017-07-12

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

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

2017-07-11

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

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

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

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

2017-07-10

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

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

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

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

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

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

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

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

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

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

2017-07-09

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

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

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

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

2017-07-07

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

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

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