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2021-10-24

• Incorporating Local Public Health Dynamics into The Rosen/Roback Spatial Equilibrium Model
  by Matthew E. Kahn in Environmental and Urban Economics, 2021-10-24 12:11:00 UTC

   Imagine if there is an infectious disease that spreads within cities but not across cities.   Throughout the COVID crisis, the city specific infection rate has varied across cities at each point in time.  In a city facing a rising infection rate, people can adapt by either engaging in costly self protection (self isolating) or through public health interventions --- such as vaccinating the local population.  In this case, public health substitutes for private health protection investments.  To be safe, one can either isolate and not be vaccinated or continue with life as usual and be vaccinat [...]

2021-10-21

• The Economist’s Guide to Parenting: 10 Years Later (Ep. 479)
  by Stephen J. Dubner in Freakonomics, 2021-10-21 03:00:42 UTC

  In one of the earliest Freakonomics Radio episodes (No. 39!), we asked a bunch of economists with young kids how they approached child-rearing. Now the kids are old enough to talk — and they have a lot to say. We hear about nature vs. nurture, capitalism vs. Marxism, and why you sometimes don’t tell your friends that your father is an economist. Listen and follow our podcast on Apple Podcasts , Spotify , Stitcher , or wherever you get your podcasts. Below is a transcript of the episode, edited for readability. For more information on the people and ideas in the episode, see the links at the bo [...]

• The Environmental Kuznets Curve: 2021 Edition
  by noreply@blogger.com (David Stern) in Stochastic Trend, 2021-10-21 02:50:00 UTC

  The second encyclopedia chapter. First one is here . Introduction  The environmental Kuznets curve (EKC) is a hypothesized relationship between various indicators of environmental degradation and countries’ gross domestic product (GDP) per capita. In the early stages of a country’s economic development, environmental impacts and pollution increase, but beyond some level of GDP per capita (which will vary for different environmental impacts) economic growth leads to environmental improvement. This implies that environmental impacts or emissions per capita are an inverted U-shaped function of GD [...]

• Energy and Development
  by noreply@blogger.com (David Stern) in Stochastic Trend, 2021-10-21 02:29:00 UTC

  The first of two book chapters for Elgar encyclopedias I recently wrote. What is the Role of Energy in Economic Activity? The economic system must operate within the constraints determined by the laws of physics and human knowledge of technology. Production, including household production, requires energy to carry out work to convert materials into desired products and to transport raw materials, goods, and people. The second law of thermodynamics implies that energy cannot be recycled and that there are limits to how much energy efficiency can be improved. Therefore, energy is an essential fa [...]

2021-10-19

• Rethinking the Welfare State
  by Christian Zimmermann in NEP-DGE blog, 2021-10-19 17:05:09 UTC

  By Nezih Guner, Remzi Kaygusuz and Gustavo Ventura http://d.repec.org/n?u=RePEc:cmf:wpaper:wp2021_2107&r=dge The U.S. spends non trivially on non-medical transfers for its working-age population in a wide range of programs that support low and middle-income households. How valuable are these programs for U.S. households? Are there simpler, welfare-improving ways to transfer resources that are supported by a majority? What are the macroeconomic effects of such alternatives? We answer these questions in an equilibrium, life-cycle model with single and married households who face idiosyncratic pr [...]

2021-10-18

• Productivity in late capitalism
  by chris in Stumbling and Mumbling, 2021-10-18 13:27:02 UTC

  In the debate about how to increase productivity, everybody seems to be making an assumption that I find questionable - that feasible policy changes can make a significant difference. We need some historical context here. My chart shows that big, sustained productivity growth is in fact very rare; growth of over 2.5 per cent a year was only seen over lengthy periods between 1945 and 1990. Our idea that rapid growth is normal and stagnation not  might owe more to the influence of our formative years than it does to the wider historical evidence. To see why strong growth should be so unusual, i [...]

2021-10-14

• The house price puzzle
  by chris in Stumbling and Mumbling, 2021-10-14 13:49:07 UTC

  Everybody knows that the housing market has become financialized, as Josh Ryan-Collins among others has documented . But what kind of financial asset is housing? The answer is far from straightforward. In one sense, house prices are like share prices. Both are claims upon future incomes – profits in the case of equities and wages in the case of houses (it’s fair to assume rents are a stable fraction of wages). Both tend to fall in recessions. And both have over the years delivered a risk premium – though how great depends upon which time period you use, how you account for liquidity risk and s [...]

• The Decline in Capital-Skill Complementarity
  by Christian Zimmermann in NEP-DGE blog, 2021-10-14 04:34:05 UTC

  By Gonzalo Castex, Stanley Cho and Evgenia Dechter http://d.repec.org/n?u=RePEc:swe:wpaper:2021-06&r=dge We revisit the capital-skill complementarity hypothesis and examine whether and under what conditions this mechanism can explain the developments in wage inequality and labor share in the 1963-2016 period. Krusell, Ohanian, Rios-Rull, and Violante (2000) show that a model with capital-skill complementarity mechanism matches the data well and can account for the changes in wage inequality in the 1963-1992 period. We show that applying the model to the 1963-2016 period delivers a good fit for [...]

2021-10-12

• How Large is the Economy-Wide Rebound Effect in Middle Income Countries? Evidence from Iran
  by noreply@blogger.com (David Stern) in Stochastic Trend, 2021-10-12 01:19:00 UTC

  � We have a new working paper in our rebound effect series. Previous papers reviewed the literature on the economy-wide rebound effect, estimated the economy-wide rebound effect for the United States, and estimated it for some European countries (as well as the United States). The new paper is about Iran. This is a middle income country with a resource intensive and quite regulated economy. Is it a lot different to the developed economies we have already looked at? The rebound effect is large in Iran too. A major difference between Iran and the developed economies is that energy intensity has [...]

2021-10-11

• Downward Interest Rate Rigidity
  by Christian Zimmermann in NEP-DGE blog, 2021-10-11 17:06:39 UTC

  By Grégory Levieuge and Jean-Guillaume Sahuc http://d.repec.org/n?u=RePEc:bfr:banfra:828&r=dge Empirical evidence suggests that bank lending rates are downward rigid: banks tend to adjust their rates more slowly and less completely to short-term market rates decreases than to increases. We investigate the macroeconomic consequences of this downward interest rate rigidity by introducing asymmetric bank lending rate adjustment costs in a macrofinance dynamic stochastic general equilibrium model. Calibrating the model to the euro area economy, we find that the difference in the initial response o [...]

2021-10-08

• The Neoclassical Model and the Welfare Costs of Selection
  by Christian Zimmermann in NEP-DGE blog, 2021-10-08 15:07:30 UTC

  By Fabrice Collard and Omar Licandro http://d.repec.org/n?u=RePEc:tse:wpaper:125924&r=dge This paper embeds firm dynamics into the Neoclassical model and provides a simple framework to solve for the transitional dynamics of economies moving towards more selection. As in the Neoclassical model, markets are perfectly competitive, there is only one good and two production factors (capital and labor). At equilibrium, aggregate technology is Neoclassical, but the average quality of capital and the depreciation rate are both endogenous and positively related to selection. At steady state, output per [...]

2021-10-05

• Optimizing the life cycle path of pension premium payments and the pension ambition in the Netherlands
  by Christian Zimmermann in NEP-DGE blog, 2021-10-05 13:49:27 UTC

  By Harry ter Rele, Carolijn de Kok, Nicoleta Ciurila and Peter Zwaneveld http://d.repec.org/n?u=RePEc:cpb:discus:421&r=dge Pension premium rates and pension benefits are independent of age or family situation in the second pillar of the Dutch pension system. In a life cycle model calibrated on Dutch data we investigate the optimal arrangement of pension premiums and benefits taking into consideration two factors: the fact that incomes generally rise with age and the presence of children in the early years of the household. Our analysis points out that due to these factors lifetime welfare can [...]

2021-09-28

• The minimum wage dilemma
  by chris in Stumbling and Mumbling, 2021-09-28 13:29:01 UTC

  Should the national living wage rise to £15 an hour? For me, it’s a dilemma because there are two competing and powerful perspectives. The economic perspective is sceptical. Econ 101 says a higher price means lower demand, so a higher minimum will lead to job losses or – just as importantly but often overlooked – cuts in hours. Granted, Econ 101 might be wrong. Where employers have monopsony power, a higher minimum wage can lead to employment actually increasing . Which leads us to the thorny question of empirical evidence. Here, we have a problem. It’s possible that previous rises in the mini [...]

2021-09-27

• Housing Gotham: The 21st Century So Far (Part I)
  by Jason Barr in Skynomics Blog, 2021-09-27 12:02:57 UTC

  Jason M. Barr ( @JasonBarrRU ) and Sean Franklin        September 27, 2021 The 1970s was New York’s darkest decade. The government nearly went bankrupt. A recession that began in 1969 triggered the loss of hundreds of thousands of manufacturing jobs. Between 1970 and 1980, Gotham’s population shrank by more than 800,000 people , while arsonists burned down entire neighborhoods. In those years, only a true visionary could have foreseen the city’s rebound. Yet starting in the early 1990s, New York began a dramatic resurgence. New service-based industries grew in place of the old factory jobs. Cr [...]

2021-09-23

• Monetary Policy over the Lifecycle
  by Christian Zimmermann in NEP-DGE blog, 2021-09-23 19:32:42 UTC

  By Anton Braun and Daisuke Ikeda http://d.repec.org/n?u=RePEc:ime:imedps:21-e-09&r=dge A tighter monetary policy is generally associated with higher real interest rates on deposits and loans, weaker performance of equities and real estate, and slower growth in employment and wages. How does a household’s exposure to monetary policy vary with its age? The size and composition of both household income and asset portfolios exhibit large variation over the lifecycle in Japanese data. We formulate an overlapping generations model that reproduces these observations and use it to analyze how househol [...]

2021-09-20

• Some Microeconomics of Extreme Heat Exposure in the United States
  by Matthew E. Kahn in Environmental and Urban Economics, 2021-09-20 23:12:00 UTC

  �The Biden Administration has made an announcement that it seeks to protect outdoor workers from extreme heat exposure.� �What does the theory of compensating differentials in real estate markets and labor markets teach us about exposure to high temperatures. I maintain two assumptions. Assumption #1:� The apartment rental market is perfectly competitive and an area's heat risk is common knowledge. If heat risk rises in a location, all market bidders are aware of this. Assumption #2:� The labor market for outdoor jobs is perfectly competitive and the job conditions (including heat exposure on [...]

2021-09-16

• The Neoclassical Model and the Welfare Costs of Selection
  by Christian Zimmermann in NEP-DGE blog, 2021-09-16 17:22:47 UTC

  By Fabrice Collard and Omar Licandro http://d.repec.org/n?u=RePEc:ces:ceswps:_9249&r=dge This paper embeds firm dynamics into the Neoclassical model and provides a simple framework to solve for the transitional dynamics of economies moving towards more selection. As in the Neoclassical model, markets are perfectly competitive, there is only one good and two production factors (capital and labor). At equilibrium, aggregate technology is Neoclassical, but the average quality of capital and the depreciation rate are both endogenous and positively related to selection. At steady state, output per [...]

• A Win for Devin Nunes in Lawsuit Over Journalist Ryan Lizza's Tweet
  by Elizabeth Nolan Brown in Hit & Run blog, 2021-09-16 13:41:02 UTC

  Tweeting article after Nunes called it defamatory could count as "actual malice," court says. In a disturbing ruling for fans of free speech, a federal court has partially sided with Rep. Devin Nunes (R–Calif.) in his lawsuit against journalist Ryan Lizza. Nunes has accused Lizza and Hearst Magazine Media, which publishes  Esquire , of defamation and conspiracy. Back in 2018, Esquire published an article by Lizza headlined "Devin Nunes's Family Farm Is Hiding a Politically Explosive Secret." The article suggested that Nunes [...]

2021-09-14

• No country is an island: International cooperation and climate change
  by Christian Zimmermann in NEP-DGE blog, 2021-09-14 15:00:18 UTC

  By Ferrari Massimo and Pagliari Maria Sole http://d.repec.org/n?u=RePEc:bfr:banfra:815&r=dge In this paper we explore the cross-country implications of climate-related mitigation policies. Specifically, we set up a two-country, two-sector (brown vs green) DSGE model with negative production externalities stemming from carbon-dioxide emissions. We estimate the model using US and euro area data and we characterize welfare-enhancing equilibria under alternative containment policies. Three main policy implications emerge: i) fiscal policy should focus on reducing emissions by levying taxes on pol [...]

2021-09-10

• Entrepreneurial Economies
  by Randall G. Holcombe in The Beacon, 2021-09-10 23:33:35 UTC

  Academic institutions increasingly are recognizing the importance of entrepreneurship to the performance of an economy, and in response, many (including my own institution, Florida State University) have established entrepreneurship programs to give students some skills that can help them succeed as entrepreneurs. I’m supportive of these efforts, but the degree to which individuals in an economy are entrepreneurial is affected more by an economy’s institutions than by characteristics of individual entrepreneurs. Some economies are more entrepreneurial than others. Entrepreneurial economies hav [...]

2021-09-09

• Residential segregation and redlining
  by ? in FRED blog, 2021-09-09 13:00:00 UTC

  In a recent post , the FRED Blog described how the Home Owners’ Loan Corporation (HOLC) created color-coded maps of 239 cities across the U.S. to indicate the riskiness associated with making mortgage loans in each neighborhood. This practice, adopted between 1935 and 1940, informed the supervisory work of the Federal Home Loan Bank Board over the lenders. Let’s recap the color codes for those maps: Grade A: “Best” (shaded green), where properties were expected to increase or maintain a high appraised value, posing the lowest default risk for mortgage lenders. Grade B: “Still desirable” (sha [...]

2021-09-06

• The Long-Term Effects of Capital Requirements
  by Christian Zimmermann in NEP-DGE blog, 2021-09-06 21:21:09 UTC

  By Gianni De Nicolo, Nataliya Klimenko, Sebastian Pfeil and Jean-Charles Rochet http://d.repec.org/n?u=RePEc:chf:rpseri:rp2152&r=dge We build a stylized dynamic general equilibrium model with financial frictions to analyze costs and benefits of capital requirements in the short-term and long-term. We show that since increasing capital requirements limits the aggregate loan supply, the equilibrium loan rate spread increases, which raises bank profitability and the market-to-book value of bank capital. Hence, banks build up larger capital buffers which (i) lowers the public losses in case of a [...]

2021-09-04

• Richard Murphy is not up to speed on banking.
  by Ralph Musgrave in Ralphonomics, 2021-09-04 02:36:00 UTC

    This article of his contains blunder after blunder.  It’s entitled “Positive Money and the Bank of England are completely wrong….”.  Apologies for the length of this article, but the sheer number of blunders will take time to address. In reference to Bank of England proposals on Central Bank Digital Currency (CBDC) he says in his second para: “Quite staggeringly they (Positive Money) are using this proposal to demand the end to the right of private banks to create money, and as I note below the Bank of England will not want to take on that role.”   Actually the Positive Money article to whic [...]

2021-09-03

• Monetary Policy and the Persistent Aggregate Effects of Wealth Redistribution
  by Christian Zimmermann in NEP-DGE blog, 2021-09-03 17:39:16 UTC

  By Martin Kuncl and Alexander Ueberfeldt http://d.repec.org/n?u=RePEc:bca:bocawp:21-38&r=dge We identify a sizable wealth redistribution channel which creates a monetary policy trade-off whereby short-term economic stimulus is followed by persistently lower output over the medium term. This trade-off is stronger in economies with more nominal household debt but weakened by a more aggressive monetary policy stance and underprice-level targeting. Given this trade-off, low-for-long episodes can lead to persistently depressed output. The medium-term implications of the wealth redistribution chann [...]

2021-09-02

• Residential redlining of U.S. neighborhoods
  by ? in FRED blog, 2021-09-02 13:00:00 UTC

  The FRED graph above shows home values for four classifications of neighborhoods from 1930 to 2010. The lowest values (and highest levels of risk) are shown by the red line, which was an intentional choice: Red is the color used in 1930s city maps to mark the residential neighborhoods where lenders deemed they were most likely to lose money when making mortgage loans. And that color gave rise to the term “redlining.” After the Great Depression (1929-1933), the federal government tasked the Home Owners’ Loan Corporation (HOLC), among several other agencies, with overseeing the work of resident [...]

2021-08-24

• Is there a “concrete wall” for women in Latin American Fintech?
  by bbatiz in The Cashless Society, 2021-08-24 17:40:14 UTC

  This was an original contriobution to Open Banking Excellence blog . Verbatim copy under creative commons licence. Bernardo Bátiz-Lazo (Newcastle Business School, Northumbria University, UK), and Ignacio González-Correa (Department of Economics, Universidad de Santiago, Chile) We initiated a project to explore the barriers women face to become fintech entrepreneurs in Latin America. Microfinance and then fintech start-ups have focused and helped women “at the base of the pyramid” (by reducing frictions and increasing financial inclusion), but what is the situation of others and particularl [...]

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