Brad DeLong: Worthy reads on equitable growth, February 22–28, 2019

Worthy reads from Equitable Growth:

  1. Great conversation between Heather Boushey and Emmanuel Saez from their “In conversation with Emmanuel Saez.” My favorite highlight: “Kansas … illustrates beautifully from a research perspective even though it’s a disaster in terms of public policy [that] … tax avoidance … pass-through businesses … huge incentives for high-income earners to reclassify … a big erosion of the wage income tax base in the state … [resulted in] a much bigger negative impact on tax revenue than would have been predicted mechanically … When governments have actually to balance their budgets, they realize that taxes are useful, and that brings the two pieces of the debate together … Certainly Kansas didn’t experience an economic boom.”
  2. Damon Jones came to Equitable Growth and presented a paper about Alaska’s Oil Dividend Fund that made me significantly more optimistic about Universal Basic Income. His “Labor Market Impacts of Universal and Permanent Cash Transfers,” includes these points about the UBI concept: “UBI-like cash transfer in Alaska: unconditional, universal, long-run, captures macro effects. The macro effects of Alaska PDF on labor supply less negative than the macro effects of an unconditional cash transfer … a very small *(0.001) and insignificant effect on employment to population.” [Equitable Growth will be posting a video of his presentation in early March.]
  3. Excellent working paper from the very sharp Elena Prager and Matt Schmitt on how hospital mergers appear to be as much about gaining market power with respect to health-care workers as about gaining market power with respect to patients and their insurers. There continues to be very little evidence that they are about efficiencies of any kind. Read their “Employer Consolidation and Wages: Evidence from Hospitals,” in which they write: “We find evidence of reduced wage growth in cases where both (i) the increase in concentration induced by the merger is large and (ii) workers’ skills are at least somewhat industry-specific. Following such mergers, annual wage growth is 1.1 percentage points slower for skilled non-health professionals and 1.7 percentage points slower for nursing and pharmacy workers than in markets without mergers … Observed patterns are unlikely to be explained by merger-related changes aside from labor market power. Wage growth slowdowns appear to be attenuated in markets with strong labor unions, and we do not observe reduced wage growth after out-of-market mergers that leave employer concentration unchanged.” [Also read Raksha Kopparam’s summary of the working paper.]
  4. Equitable Growth has money to spend to support research. It is very easy and straightforward to apply. Request for Proposals: “Equitable Growth supports inquiry utilizing many different kinds of evidence, relying on a variety of methodological approaches and cutting across academic disciplines. We are especially interested in projects using data linking individuals, households, and/or firms, and those that utilize geocoded data or rigorous comparative case studies—including across places in the United States, as well as comparing the experience of different countries—that allow for insight into the role of place in shaping economic opportunities and outcomes.”

Worthy reads not from Equitable Growth:

  1. I am still recovering from my joint appearance at San Francisco’s Commonwealth Club with Steve Moore, and my having to listen to an extraordinary number of things from his mouth that simply were not true. It is draining to find oneself thinking over and over again: “But this is different than you said last year” and “but that prediction will be so obviously wrong in six months.” Menzie Chinn has a similar reaction in “Why Isn’t Stephen Moore Still Bragging about Coal As #1?,” in which he writes: “Recall from July 2017, when Stephen Moore wrote an article entitled ‘When It Comes To Electric Power, Coal Is No. 1’? No more. Now, lying has never been an impediment to Mr. Moore claiming something that was untrue (see [1] [2] [3] [4] [5] [6] [7])—but in this case perhaps it’s just so clearly untrue, he was chastened. So much for ‘winning’ (coal edition). Not that I’m complaining [See this graphic].”
  2. Pedro Nicolaci da Costa, newly-installed over at EPI, is doing a bang-up job. Read his “These 5 Charts Show Inequality Is Bad for Your Health—Even If You Are Rich,” in which he writes: “Pickett and Wilkinson kept coming back to a single uniting factor—inequality: ‘What the research shows—not just ours but that of hundreds of researchers around the world—is that inequality brings out features of our evolved psychology, to do with dominance and subordination, superiority and inferiority, and that affects how we treat one another and ourselves, it increases status competition and anxiety, anxieties about our self worth, worries about how we are seen and judged’ … Here are five charts from their presentation.”
  3. Simon Wren-Lewis says a “Green New Deal” needs to be not just technocratically efficient but politically popular. Read his “How to Pay for the Green New Deal,” in which he writes: “Tackling climate change is resisted by powerful political forces that have in the past prevented the appropriate taxes, subsidies and regulations being applied. Which is a major reason why the world has failed to do enough to mitigate climate change … Just as proponents of a Green New Deal are savvy about the need to overcome the resistance of, for example, the oil and gas industry, they also realize that the Green New Deal needs to be politically popular. So the New Deal package has to include current benefits for the many, perhaps at the expense of the few … If you cannot make the polluter pay, it is still better to take action to stop climate change even if future generations have to pay the cost of that action.”
  4. Dani Rodrik has, I think, a better way to frame the problems that he and Richard Baldwin are both thinking about this winter. Read “The Good Jobs Challenge,” in which Rodrik writes: “[For] developing countries … existing technologies allow insufficient room for factor substitution: using less-skilled labor instead of skilled professionals or physical capital. The demanding quality standards needed to supply global value chains cannot be easily met by replacing machines with manual labor. This is why globally integrated production in even the most labor-abundant countries, such as India or Ethiopia, relies on relatively capital-intensive methods … The standard remedy of improving educational institutions does not yield near-term benefits, while the economy’s most advanced sectors are unable to absorb the excess supply of low-skilled workers. Solving this problem may require … boosting an intermediate range of labor-intensive, low-skilled economic activities. Tourism and non-traditional agriculture … public employment … non-tradable services carried out by small and medium-size enterprises, will not be among the most productive, which is why they are rarely the focus of industrial or innovation policies. But they may still provide significantly better jobs than the alternatives in the informal sector.”
  5. Richard Baldwin has a new book and has coined the ugliest word I have ever seen to promote it. It is very interesting, and I think it is largely right. But I think it does have a big problem with the word “globotics.” “Globalization” and “robots,” even robot-enabled globalization and globalization-enabled robots, are two very different processes with very different implications. Squashing them into one makes his argument less coherent than it might have been. Read Baldwin’s “The Globotics Upheaval: Globalization, Robotics, and the Future of Work,” in which he writes: “A new form of globalization will combine with software robots to disrupt service-sector and professional jobs in the same way automation and trade disrupted manufacturing jobs … Software robots … pervasive translation that open[s] new opportunities for outsourcing to tele-migrants … Future jobs will be more human and involve more face-to-face contact since software robots and tele-migrants will do everything else.”

February 28, 2019


Brad DeLong


Economic Inequality


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