Brad DeLong: Worthy reads on equitable growth, January 1–11, 2021

Worthy reads from Equitable Growth:

1. Attend the launch of our new book Ideas to Boost Wages in the New Economy on Jan 14. Here are the details: “When: January 14, 2021 2:30PM – 4:00PM. Where: Event will be virtual and not held in person. The forthcoming book collecting the series, Ideas to Boost Wages in the New Economy, features 10 essays by leading scholars on policies to boost wages for U.S. workers by addressing underlying structures and dynamics in our economy. The series—developed in partnership with the Institute for Research on Labor and Employment at the University of California, Berkeley and with funding from the Bernard and Anne Spitzer Charitable Trust—guides policymakers on how to deliver broadly shared economic prosperity by making wages a key outcome to structural economic policy at the federal and state levels. The virtual event will include a series of fireside chats to discuss how to reimagine the U.S. economy so that workers are able to share in the value that they create, highlighting policy priorities and proposals to balance power and foster an equitable economy. This conference will feature three essay authors: Ioana Marinescu, Assistant Professor of Economics, University of Pennsylvania, on addressing market concentration and employers’ ability to undercut wages. Jesse Rothstein, Professor of Public Policy and Economics, University of California, Berkeley, and Faculty Director, California Policy Lab, on supporting policies to broadly share economic risks. Andria Smythe, Assistant Professor of Economics, Howard University, on making higher education more accessible. Register for the launch event.”

2. Reread this essay in Vision 2020: Evidence for a stronger economy on how race amplifies class by super-amplifying blockages to upward economic mobility. I used to think, back in the late 1970s, that the African-American economic trajectory was like the standard immigrant economic trajectory if you set the clock so that the migration that counted was the Great Migration after World War II from the rural U.S. south to the urban U.S. north. That was just completely wrong. And stupid. Read Bradley Hardy and Trevon Logan, “Race & the Lack of Intergenerational Economic Mobility in the United States,” in which they present these “Key Takeaways: “The evidence: U.S. intergenerational economic mobility—the likelihood that children achieve a higher standard of living than the household in which they were reared—varies considerably by race and ethnicity. There are significant racial and gender differences in mobility that exacerbate racial differences in other areas such as housing, education, and health. The solutions: Policy remedies for persistently low intergenerational economic mobility include more equitable housing and educational opportunities, better income security and wealth accumulation, and investments to improve school quality, lower crime, and encourage private-sector amenities to improve infrastructure in the poorest neighborhoods.”

3. It was a disaster of a jobs report for December—the absence of lockdowns did not keep the coronavirus from sending the U.S. economy back into recession, as people got scared. Kate Bahn and Carmen Sanchez Cumming have the receipts. Read their “Equitable Growth’s Jobs Day Graphs: December 2020 Report Edition.”

Worthy reads not from Equitable Growth:

1. Let’s look at the bright side—the sunny side of things—in the long run at least. Read Noah Smith,” Why I’m so excited about solar and batteries,” in which he writes: “In the 19th century we switched to coal … in the 20th century we upgraded to oil … After World War II, a global extraction regime and price controls allowed us to keep cheap oil flowing. That ended with the Oil Shocks of the ‘70s. And though oil became cheaper again in the ‘80s and ‘90s, it never attained its former lows, or its low volatility. Then in the ‘00s it got expensive again … We didn’t get anything better than oil during this time … More expensive energy makes physical innovation harder in every way … This stagnation in energy technology almost certainly contributed to the productivity slowdown of the 1970s … Why didn’t bits fill the gap?… IT did drive the re-acceleration of productivity that began in the late ‘80s and continued through the early ‘00s … But around 2005 … that productivity growth faded … Some have argued that digital services are substantially undervalued in our economic production statistics … Physical technology is less “skill-biased” than IT, meaning that pretty much anyone can be a factory worker but only a few people can use computers productively and effectively … [or] IT simply touches less of our lives than energy does … “Bits” innovation sometimes drives fast productivity growth, and sometimes doesn’t … The cost declines in solar and batteries—and to a lesser extent, in wind and other storage technologies—comprise a true technological revolution … And there’s no end in sight to this revolution. New fundamental advances such as solid state lithium-ion batteries and next-generation solar cells seem within reach, which will kick off another virtuous cycle of deployment, learning curves, and cost decreases.”

2. Very interesting evidence that stimulus (as opposed to income support) spending should wait until after the coronavirus pandemic has been brought under control. Read the abstract of the paper by lan Auerbach, Yuriy Gorodnichenko, Peter B. McCrory, and Daniel Murphy, “Fiscal Multipliers in the COVID19 Recession,” in which they write: “In response to the record-breaking COVID19 recession, many governments have adopted unprecedented fiscal stimuli. While countercyclical fiscal policy is effective in fighting conventional recessions, little is known about the effectiveness of fiscal policy in the current environment with widespread shelter-in-place (“lockdown”) policies and the associated considerable limits on economic activity. Using detailed regional variation in economic conditions, lockdown policies, and U.S. government spending, we document that the effects of government spending were stronger during the peak of the pandemic recession, but only in cities that were not subject to strong stay-at-home orders. We examine mechanisms that can account for our evidence and place our findings in the context of other recent evidence from microdata.”

3. I find this very surprising, and am eager to dig deeper into it. I will not claim to understand it yet, but I think it is potentially very important. Read the abstract to the paper by Martha Bailey, Thomas Helgerman, and Bryan Stuart, “The Impact of the 1963 Equal Pay Act on the Gender Gap,” in which they write: “The 1963 Equal Pay Act mandated equal pay for equal work for individuals covered by the Fair Labor Standards Act. Drawing on an empirical strategy used in the minimum wage literature, we exploit variation in the “bite” of the Act due to the pre-existing gender pay gap in the same occupation, industry, and Census region. Consistent with the Equal Pay Act binding, the results show that women’s wages increased more sharply in more affected jobs after implementation. However, women in more affected jobs also experienced substantially larger employment reductions by 1970. The resulting reshuffling of women from higher wage (and higher gender gap) jobs to lower paying (and lower gender gap) jobs offset women’s aggregate wage gains entirely. The result was negligible changes in the aggregate gender gap during the 1960s.”