Brad DeLong: Worthy reads on equitable growth, November 30–December 6, 2018

Worthy reads from Equitable Growth:

  1. In her column for The Hill, “Failed Tax-Cut Experiment in Kansas Should Guide National Leaders,” Heather Boushey attempts to make sense of the relative economic disaster that has been Kansas under its former governor, Sam Brownback (R). It is turning out to be rather hard to find convincing channels through which Gov. Brownback’s policies could plausibly and easily have had such disastrous relative effects on employment that we see were suffered by the Kansas economy over the past 8 years. I find myself wondering about whether it might have been the effect of Gov. Brownback’s waging an aggressive rhetorical culture war against many in, and many who might have moved to, Kansas: Telling lots of people in and out of Kansas that the governor and the power structure in that state does not want people who think well of places such as California and New York—and, in fact, would rather that they stayed in or moved to Colorado or Iowa or Missouri—is not something that is in our standard economic models. But perhaps it should be: Read Boushey’s column, in which she writes: “Sam Brownback’s failed “red state experiment” has truly come to an end … In 2012 and 2013, Republican Gov. Sam Brownback signed into law the largest tax cuts in Kansas history. The top state income tax rate fell by nearly one-third and passthrough taxes that affected mainly relatively wealthy individuals were eliminated. With the decline in revenues came significant spending cuts.”
  2. Another in what is now a large series of papers finding long-run impacts from state-run pre-Kindergarten programs comes from Equitable Growth grantee Mariana Zerpa, “Short and Medium Run Impacts of Preschool Education: Evidence from State Pre-K Programs.” Once again, the working paper finds that it is difficult to attribute such large effects to the standard channels. Yet effects of this size are likely to turn out to be robust, rather than due to chance variation or minor details of econometric specification. Thus, we are likely to have to reach for more sociological explanations. They may, perhaps, involve huge peer and cultural effects—for example, that policies did not only change the lives of those directly affected, but also changed hearts and minds in the broader community. Read Zerpa’s working paper, in which she writes: “I also provide a discussion of two local average treatment effects under different counterfactual childcare arrangements. I find implied effects that are very large, although not very different from the estimates found in the literature on Head Start. This finding highlights the relevance of estimating intention-to-treat effects on the full affected cohorts of children, which do not rely on any assumptions regarding who are the affected children, and particularly on whether there are any externalities on children that do not attend the programs. The relevance of externalities and peer effects in early childhood experience is an open question that is part of a promising research agenda.”

Worthy reads not from Equitable Growth:

  1. This is an excellent paper about how the American feminist revolution supported rapid business-cycle recoveries in the1970s and 1980s, back when there was a huge reservoir of women who would take jobs but who had not previously held jobs only because of the lagging of social structure behind economic and cultural change—thus, increases in demand in recovery focused on this industrial reserve army could very easily and rapidly find good matches between unfilled jobs and unemployed workers. Read Masao Fukui, Emi Nakamura, and Jon Steinsson, “Women, Wealth Effects, and Slow Recoveries,” in which they write: “A female-biased shock generating a 1 percent increase in female employment leads to only a 0.15 percent decline in male employment (and this estimate is statistically insignificant). In other words, our estimates imply very little crowding out of men by women in the labor market … Seventy percent of the slowdown in recent business cycle recoveries can be explained by female convergence.
  2. Read Aline Bütikofer, Sissel Jensen, and Kjell G. Salvanes, “The Role of Parenthood on the Gender Gap Among Top Earners,” in which they write: “Recent literature argues that a ‘motherhood penalty’ is a main contributor to the persistent gender wage gap in the upper part of the earnings distribution. Using Norwegian registry data, this column studies the effect of parenthood on the careers of high-achieving women relative to high-achieving men in a set of high-earning professions. It finds that the child earnings penalty is substantially larger for mothers with an MBA or law degree than for mothers with a STEM or medical degree.”
  3. Read Antonio Fatas, “Global Rebalancing,” in which he writes: “Prior to the Global Financial Crisis the world economy experienced a period of increasing global imbalances … Today the world displays smaller imbalances than at the peak of 2008 but what it was more interesting is the extent to which rebalancing had happened between different country groups.”
  4. Read Andreas Beerli, Jan Ruffner, Michael Siegenthaler, and Giovanni Peri, “The Abolition of Immigration Restrictions and the Performance of Firms and Workers: Evidence from Switzerland,” in which they write: “We study a reform that granted European cross-border workers free access to the Swiss labor market. … Regions close to the border were affected more intensely and earlier. The greater availability of cross-border workers increased their employment but also wages and possibly employment of highly educated native workers although the new cross-border workers were also highly educated … the reform increased the size, productivity, innovation performance of some incumbent firms, attracted new firms, and created opportunities for natives to pursue managerial jobs.”
  5. Read Ramesh Ponnuru, “Recession Is a Far Larger Threat Than Inflation,” in which he writes: “We should use this moment of relative monetary calm to consider deeper questions, such as whether that target is the right one … The real failing of the current monetary regime is not that it generates too much inflation. We haven’t had ruinous levels of inflation since the early 1980s (something for which Volcker’s own chairmanship deserves great credit).”
  6. Read an excellent new paper by economist Mark Glick, “The Unsound Theory Behind the Consumer (and Total) Welfare Goal in Antitrust.”
  7. Read Noah Smith, “Trump’s Embrace of Tariffs Hurts U.S. Consumers More Than China,” in which he writes: “Trump’s goal of making the U.S. more competitive isn’t bad, but he needs to stop using bad tools. Tariffs … raise costs for American manufacturers and prices for American consumers. Tariff Man needs to cool his jets.”

December 6, 2018


Brad DeLong
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