Today was the third and final day of the annual meeting of the Allied Social Science Associations. The conference, held in Philadelphia this year, features hundreds of sessions covering a wide variety of economics research. Interesting research is all over the place here, so below are some of the papers that caught the attention of Equitable Growth staffers during the first day. Check out the highlights from days one and two of the conference.
Carlos Carvalho, Andrea Ferrero, and Fernanda Nechio
Abstract: The demographic transition can affect the equilibrium real interest rate through three channels. An increase in longevity—or expectations thereof—puts downward pressure on the real interest rate, as agents build up their savings in anticipation of a longer retirement period. A reduction in the population growth rate has two counteracting effects. On the one hand, capital per-worker rises, thus inducing lower real interest rates through a reduction in the marginal product of capital. On the other hand, the decline in population growth eventually leads to a higher dependency ratio (the fraction of retirees to workers). Because retirees save less than workers, this compositional effect lowers the aggregate savings rate and pushes real rates up. We calibrate a tractable life-cycle model to capture salient features of the demographic transition in developed economies, and find that its overall effect is a reduction of the equilibrium interest rate by at least one and a half percentage points between 1990 and 2014. Demographic trends have important implications for the conduct of monetary policy, especially in light of the zero lower bound on nominal interest rates. Other policies can offset the negative effects of the demographic transition on real rates with different degrees of success.
Coral Del Rio and Olga Alonso-Villar
Abstract: This paper examines how important the occupational sorting of individuals in same-sex couples is in explaining the economic position of lesbians and gays beyond controlling for occupation in the estimation of their respective wage gaps. The analysis reveals that the distribution of partnered gay men across occupations brings them a remarkable positive earning gap (11% of the average wage of partnered workers), whereas the occupational sorting of partnered lesbian women only allows them to depart from the large losses that straight partnered women have since their earning gap, although positive, is close to zero. If gay men had the same educational achievements, immigration profile, racial composition, and age structure as straight partnered men have, the advantages of this group associated with their occupational sorting would disappear completely. Likewise, if lesbian women had the same characteristics, other than sex and gender orientation, as straight partnered men have, the small advantage that these women derive from their occupational sorting would not only vanish but would turn into disadvantages, leaving them with a loss with respect to the average wage of coupled workers similar to the one straight partnered women have after their corresponding homogenization. It is their higher educational attainments and, to a lower extent, their lower immigration profile, that prevents workers living in same-sex couples from having a disadvantaged occupational sorting.
Abstract: We estimate the labor market impacts of universal and permanent cash transfers. While an income transfer may typically be expected to decrease individual labor supply, it may alternatively reduce fixed costs of employment. Furthermore, a universal transfer may also have general equilibrium effects. Since 1982, all Alaskan residents are entitled to a yearly cash dividdnt from the Alaska Permanent Fund. We use the current Population Survey and a synthetic control method and fail to reject the null hypothesis of no effect on employment. Meanwhile, on the intensive margin, we find an increase in part-time work. We discuss the implications of these results on the effect of a universal basic income on the labor market.
Christian Neumeier, Todd A. Sorensen, and Douglas Webber
Abstract: It is well known that the explicit costs of raising a child have grown over the past several decades. Less well understood are the implicit costs of having a child, and how they have changed over time. In this paper, we are the first to examine the evolution of the implicit costs of motherhood over the lifecycle and across generations using high quality administrative data. We estimate that the lifetime labor market income gap between mothers and non-mothers decreases from around $350,000 to $280,000 between women born in the late 1940s and late 1960s. Gaps tend to increase monotonically over the lifecycle, and decrease monotonically between cohorts. Our evidence suggests that changes in the gaps are causes by changing labor force participation rates on the extensive margin.
Nicolas Crouzet and Janice Eberly
Abstract: Recent work on US macroeconomic trends has emphasized slowing capital investment, but strong business profits and valuations. The retail sector is a microcosm of these trends, and accounts for a large share of the increase in aggregate business concentration also observed over this time period. Moreover, retail has implemented a series of technology-driven changes in business practice, such as inventory management and distribution of goods, that are manifested in rising intangible investment, which is also evident in the macro data. Focusing on the retail sector, we show that the weak investment and rising concentration are associated with rising productivity. Stronger productivity is correlated with increasing investment in intangible capital, both over time and across sub-industries. These comovements suggest that weaker capital investment and increasing industry concentration may arise from technological change that favors intangible, rather than physical, capital.
David Price and Jae Song
Abstract: We investigate the long-term effect of cash assistance for beneficiaries and their children by following up, after four decades, with participants in the Seattle-Denver Income Maintenance Experiment. Treated families in this randomized experiment received thousands of dollars per year in extra government benefits for three or five years in the 1970s. Using administrative data from the Social Security Administration and the Washington State Department of Health, we find that treatment caused adults to earn an average of $1,800 less per year after the experiment ended. Most of this effect on earned income is concentrated between ages 50 and 60, suggesting that it is related to retirement. Treated adults were also 6.3 percentage points more likely to apply for disability benefits, but were not significantly mroe likely to receive them, or to have died. These effects on parents, however, do not appear to be passed down to their children: children in treated families experienced no significant effects in any of the main variables studied. These results for children are estimated precisely enough to rule out effects found in other contexts and inform the literature on intergenerational mobility. Taken as a whole, these results suggest that policymakers should consider the long-term effects of cash assistance as they formulate policies to combat poverty.