- : Fear of the robots is founded in the messy reality of labour
- : The Case Against Helicopter Money
- : Labor Market Institutions in the Gilded Age
- : The World Needs More U.S. Government Debt
Should-reads:
Category: Equitablog
Electoral institutions and electoral cycles in foreign direct investment
Working Paper 2016-05: Jensen, Findley, and Nielson
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Authors:
Nathan M. Jensen, Department of International Business, The George Washington School of Business
Michael G. Findley, Department of Government, University of Texas at Austin
Daniel L. Nielson, Department of Political Science, Brigham Young University
Abstract:
Through a field experiment and audit study we test prominent arguments about the political-business and political-budget cycles. We explore how electoral timing, direct elections, and party composition affect local governments’ offers of investment incentives to outside firms. To minimize deception, we legally incorporated a consultancy and, on behalf of a real investor in manufacturing, approached roughly 3,000 U.S. municipalities with inquiries. The main experimental results show no greater tendency to offer incentives for investment anticipated prior to than after elections – a null result that is estimated with high precision. Limiting the sample to municipalities that specialize in manufacturing suggests that election timing matters in this most likely set of locales. Some observational findings include mixed evidence on how direct elections of executives and the seasons in which elections occur are related to incentives. Finally, our evidence suggests that larger, Republican-controlled municipalities more readily offer investment incentives than their Democratic counterparts. Our results suggest limited support for political cycles in driving incentive policies, but uncover other political factors that shape economic development practices.
The decline in lifetime earnings mobility in the U.S.: Evidence from survey-linked administrative data
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Authors:
Michael D. Carr, Department of Economics, University of Massachusetts-Boston
Emily E. Wiemers, Department of Economics, University of Massachusetts-Boston
UPDATED VERSION: Posted September 7, 2016
Abstract:
There is a sizable literature that examines whether intergenerational mobility has declined as inequality has increased. This literature is motivated by a desire to understand whether increasing inequality has made it more difficult to rise from humble origins. An equally important component of economic mobility is the ability to move across the earnings distribution during one’s own working years. We use survey-linked administrative data from the Survey of Income and Program Participation to examine trends in lifetime earnings mobility since 1981. These unique data allow us to produce the first estimates of lifetime earnings mobility from administrative earnings across gender and education subgroups. In contrast to much of the existing literature, we find that lifetime earnings mobility has declined since the early 1980s as inequality has increased. Declines in lifetime earnings mobility are largest for college-educated workers though mobility has declined for men and women and across the distribution of educational attainment. One striking feature is the decline in upward mobility among middle-class workers, even those with a college degree. Across the distribution of educational attainment, the likelihood of moving to the top deciles of the earnings distribution for workers who start their career in the middle of the earnings distribution has declined by approximately 20% since the early 1980s.
The limited macroeconomic effects of unemployment benefit extensions
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Authors:
Gabriel Chodorow-Reich, Harvard University and NBER
Loukas Karabarbounis, FRB Minneapolis, Chicago Booth, and NBER
Abstract:
By how much does an extension of unemployment benefits affect macroeconomic putcomes such as unemployment? Answering this question is challenging because U.S. law extends benefits for states experiencing high unemployment. We use data revisions to decompose the variation in the duration of benefits into the part coming from actual differences in economic conditions and the part coming from measurement error in the real-time data used to determine benefit extensions. Using only the variation coming from measurement error, we find that benefit extensions have a limited influence on state-level macroeconomic outcomes. We use our estimates to quantify the effects of the increase in the duration of benefits during the Great Recession and find that they increased the unemployment rate by at most 0.3 percentage point.
Must-read: Duncan Weldon: “Fear of the robots is founded in the messy reality of labour”
Must-Read: : Fear of the robots is founded in the messy reality of labour: “Dystopian visions of a future in which machines sweep millions of people out of work…
…are as old as technological change itself. What is missing from today’s debate about the march of the robots is an appreciation of the crucial role of labour bargaining power. When labour bargaining is weak, the Luddite fear of mechanisation is worth taking more seriously…. The best argument for being relaxed about this process is the long sweep of economic history itself…. But looking at the big picture risks missing important details….
To understand how the labour market reacts to labour-saving technology, economists tend to look at two related effects: the displacement effect and the compensation effect. The interaction of these processes determines how long a painful short run will last…. Labour market interactions are rarely the bloodless interplay of supply and demand lines on a graph. They are instead conditioned by the social and political context…. If labour’s bargaining position is weak, as it is currently, then the danger is that the higher productivity from new technologies will not sufficiently be captured in swift wage growth. Instead, it could flow to the owners of the technology…. Avoiding that unhappy outcome means recognising now that wage growth plays a crucial role in helping an economy through technological transitions and that labour bargaining power is a big part of it…
Must-read: Michael Heise: “The Case Against Helicopter Money”
Must-Read: Michael Heise does not seem to understand that central banks’ comprehensive assets include the ability to tax banks by raising reserve requirements:
: The Case Against Helicopter Money: “Helicopter drops would arrive in the form of lump-sum payments to households or consumption vouchers for everybody, funded exclusively by central banks…
…This… would reduce the central bank’s equity capital…. Proponents defend this approach by claiming that central banks are subject to special accounting rules that could be adjusted as needed…. Proponents… today include… Ben Bernanke and Adair Turner….
Distributing largesse… would have dangerous systemic consequences…. Policymakers would be tempted to… [avoid] difficult structural reforms… [and] would raise expectations… that central banks and governments would always step in to smooth out credit bubbles and mitigate their consequences…. Add to that the impact of the depletion of valuation reserves and the risk of negative equity–developments that could undermine the credibility of central banks and thus of currencies–and it seems clear that helicopter drops should, at least for now, remain firmly in the realm of academic debate.
Must-read: Cory Doctorow: “Supreme Court sends Authors Guild packing, won’t hear Google Books case”
Must-Read: A defeat for the rent-seekers!
: Supreme Court sends Authors Guild packing, won’t hear Google Books case: “The Authors Guild has been trying to get a court to shut down…
…Google’s book-scanning/book-search program for more than a decade. Last October, the Second Circuit Court of Appeals — the most publisher-friendly court in America — ruled that the program was legal. Today, the Supreme Court settled the question forever, by declining to hear the Authors Guild’s appeal. I’ve written a lot about this, but here’s the tl;dr: if making a copy in order to create a search index violates copyright, then all search engines are illegal….
Unlike other forms of Google search, Google does not display advertising to book searchers, nor does it receive payment if a searcher uses Google’s link to buy a copy. Google’s book scanning project started in 2004. Working with major libraries like Stanford, Columbia, the University of California, and the New York Public Library, Google has scanned and made machine-readable more than 20 million books. Many of them are nonfiction and out of print.
Must-read: Suresh Naidu and Noam Yuchtman: “Labor Market Institutions in the Gilded Age”
Must-Read: : Labor Market Institutions in the Gilded Age: “Although 19th century labor markets were unencumbered by regulatory legislation…
…there existed frictions and rents… [that] played an active role in determining labor market outcomes and the distribution of income…. When firms experienced positive output price shocks, their employees earned wage premia…. The existence of rents in the labor contract suggests a role for bargaining and conflict between employees and employers. Workers in the late 19th century
attempted to strike to increase their wages; we present data on the frequency of strikes in the 19th century as well as some evidence suggesting that strikes were correlated with workers’ wages. Employers were supported by institutions of their own: we describe the important role played by the U.S. government in limiting the efficacy of union strikes in the 19th century…. We present new evidence documenting the rise of judicial injunctions that ended strikes, pointing to the important role played by the judicial branch of the U.S. government in structuring (Northern) American labor market institutions prior to the rise of legislative regulation.
Must-read: Narayana Kocherlakota: “The World Needs More U.S. Government Debt”
Must-Read: : The World Needs More U.S. Government Debt: “Are government-imposed restrictions holding back the U.S. economy?…
…In a way, yes: The federal government is causing great harm by failing to issue enough debt.
The U.S. generates more income than any other country, and will keep doing so for many years to come. The federal government can generate a lot of revenue by taxing this income — a power that puts it in a unique position to issue the kind of extremely safe bonds that are in great demand among the world’s investors. How is the U.S. government wielding its power? Not well. The yield on a 20-year inflation-protected Treasury bond, at just over 0.5 percent, is nearly two full percentage points lower than it was 10 years ago. This means that the price is near record highs, suggesting that the U.S. government’s supply of such safe investments is falling far short of demand. In other words, we’re starving the world of desperately needed financial safety. To some, the idea that the U.S. government isn’t issuing enough debt may seem counterintuitive — after all, federal debt outstanding has more than doubled over the past 10 years. But scarcity is not about supply alone. In the wake of the financial crisis, households and businesses are demanding more safe assets to protect themselves against sudden downturns. Similarly, regulators are requiring banks to hold more safe assets. Market prices tell us that the government needs to produce more safety in order to meet this increased demand. The scarcity of safety creates hardships for people and businesses…
Must-See: Imran Rasul and Brendon McConnell: Ethnic Sentencing Differentials in the Federal Criminal Justice System
Must-See: More evidence that the federal judicial system needs more wise Latinas on the bench…
: Ethnic Sentencing Differentials in the Federal Criminal Justice System: “Wed, May 4: 4:00 PM: In the Federal criminal justice system…
…large differences in sentencing outcomes exist between minority and White defendants…. [Does] unobserved heterogeneity of defendants, correlated to their ethnicity, drive these differentials[?] We… estimat[e]… bounds on treatment effects of ethnicity…. Black-White judicial sentencing differentials are not robust to accounting for unobserved heterogeneity across defendants. Hispanic-White differentials are robust along multiple sentencing margins. A candidate explanation is ingroup bias causing
outsiders' (Hispanics) to be treated differently toinsiders’ (Whites and Blacks). We test this explanation by exploiting 9-11 as an exogenously timed cue heightening the salience of insider-outsider differences…. Among those sentenced post 9-11, Hispanic-White judicial sentencing differentials are further exacerbated. Decomposition analysis shows that only 7% of the DiD Hispanic-White gap is attributable to observables…. We find evidence for prosecutor’s ingroup biases in setting initial offense charges…. In districts with a higher proportion of Hispanic judges, the Hispanic-White sentencing differential is significantly reduced, consistent with judges’ ingroup biases driving their sentencing decisions…