Paid family care leave is a missing piece in the U.S. social insurance system

The aging of the baby-boom generation means that millions of working families are part of a growing “sandwich generation,” juggling care for young children and aging parents. Many will need time off work to care for a seriously ill child, an ailing spouse, or an elderly family member, and the cost of caregiving is far more expensive than most realize. For instance, the cost of “informal caregiving” for a loved one with ovarian cancer averages more than $66,000, while caregiving for lung cancer costs nearly $73,000.

Download File
Paid family care leave: A missing piece in the U.S. social insurance system

The federal Family and Medical Leave Act of 1993 provides job-protected unpaid leave to some workers, yet many are either unable to take unpaid leave or not covered by the law at all due to eligibility restrictions that disproportionately impact low-income workers and their families. But
momentum continues to build around a national solution to make paid family and medical leave broadly available to American workers, understanding the need for family caregiving leave is all the more critical.

A newly published Washington Center for Equitable Growth report by Columbia University professor Jane Waldfogel and Columbia master of Public Health graduate student Emma Leibman summarizes why paid family care leave is a policy with important economic, social, and health implications for U.S. employers, employees, and their family members. Building on new research that draws on the experience of the growing number of states with paid family and medical leave policies in place—all of which include not only paid parental leave but also paid family caregiving leave—the evidence for the impact of such policies on not only families but also the economy as a whole is increasingly difficult to ignore.

Posted in Uncategorized

Weekend reading: “Stimulating Economic Growth” edition

This is a weekly post we publish on Fridays with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is the work we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.

Equitable Growth round-up

Earlier this morning, the U.S. Bureau of Labor Statistics released new data on the U.S. labor market during the month of May. Kate Bahn, Will McGrew, and I compiled five graphs highlighting important trends in the data.

This week, we mourn the loss of Herb Sandler, who supported the mission of equitable growth even before the creation of our organization. As our founding funder and head of the Sandler Foundation, Herb was committed to reshaping the economic policy debate to prioritize the elimination of inequality.

Brad DeLong compiles his most recent worthy reads on equitable growth both from Equitable Growth and outside press and academics.

Fatih Karahan, Benjamin Pugsley, and Aysegül Sahin propose a simple explanation for the long-run decline in the rate of start-up companies: It was caused by a slowdown in labor supply growth since the late 1970s, largely pre-determined by demographics. The authors find this channel explains roughly two-thirds of the decline.

Links from around the web

A new study by the Federal Reserve Bank of New York finds that people’s attachment to their communities contributes to their willingness to move for higher-paying jobs. Richard Florida looked at the variety of explanations for declining mobility and saw that those who identify as “rooted” (people who have the resources to move yet prefer to say where they are) make up almost 50 percent of survey respondents. Approximately 15 percent of respondents identify as “stuck,” meaning they want to move for better opportunities but don’t have the resources, and these individuals have less educational attainment or poor health conditions. [citylab]

Eric Ravenscraft delves into competing definitions of the term “living wage” this week in The New York Times. While he concedes that having “enough” money can be a nebulous concept, he points to helpful tools like the Massachusetts Institute of Technology’s “Living Wage Calculator” that help paint the picture of the minimum required to cover basic expenses in different communities.[nyt]

In ProPublica, Justin Elliot follows up on a previous story that U.S. congressional leaders had agreed to include a provision in the Taxpayer First Act that would prohibit the IRS from developing its own tax filing assistance service. After public backlash claiming the bill favors the often predatory practices of private tax-filing firms, Elliot reports that the provision has been removed from the bill. [propublica]

The House Judiciary Committee announced the launch of a “top-to-bottom” antitrust investigation of Silicon Valley’s largest tech firms, including Apple Inc., Alphabet Inc.’s Google unit, Facebook Inc., and Amazon.com Inc. The Federal Trade Commission and the U.S. Department of Justice will be investigating the tech industry’s impact on local journalism, consumer protection and privacy, and barriers to entry. [cnn]

Economists at the U.S. Department of Agriculture find that the Supplemental Nutrition Assistance Program helped stimulate economic growth, especially in rural America, after the Great Recession. Every $22,000 in taxpayer dollars spent on nutrition assistance between 2001 to 2014 led to the creation of about one job. Researchers found that spending on these benefits helped the U.S. economy more than any other government spending program in the years following the recession. [vox]

Friday Figure

Figure is from Equitable Growth’s, “Equitable Growth’s Jobs Day Graphs: May 2019 Report Edition” by Kate Bahn, Raksha Kopparam, and Will McGrew.

Posted in Uncategorized

Equitable Growth’s Jobs Day Graphs: May 2019 Report Edition

Earlier this morning, the U.S. Bureau of Labor Statistics released new data on the U.S. labor market during the month of May. Below are five graphs compiled by Equitable Growth staff highlighting important trends in the data.

1.

The prime-age employment rate held steady at 79.7%, recovered from the Great Recession but still slightly below its pre-recession heights.

2.

The Black unemployment rate decreased to 6.2%, offsetting the recent upward trend, but remains significantly higher than the White unemployment rate.

3.

The U-6 employment rate, which includes marginally attached workers, trended downward while the U-3 unemployment rate held steady.

4.

Employment in service sector jobs like health care and leisure and hospitality continues to have strong growth, while employment in construction and manufacturing has plateaued in recent months.

5.

The year-over-year rate of wage growth slowed to 3.1% in May, and remains below the target of 3.5% for a healthy labor market expansion.

Posted in Uncategorized

Statement on the passing of our founding funder, Herb Sandler

Herb Sandler passed away on June 5, 2019.

Herbert Sandler, whose death we deeply mourn, never had a title at the Washington Center for Equitable Growth. But this organization, with its mission of advancing evidence-backed ideas and policies that promote strong, stable, and broad-based economic growth, would not exist without the support and leadership of Herb and the Sandler Foundation.

In 2014, Equitable Growth had two official co-founders, Heather Boushey and John D. Podesta. But Herb was effectively the third. He was generous with the resources of the Sandler Foundation and equally demanding when it came to creating, developing, and implementing their mutual vision of a nonprofit grantmaking organization that would fund original academic research and convey the evidence and policy ideas that emerged from that research to policymakers and journalists.

“Herb was committed to equitable growth long before our organization launched,” said Boushey, who serves as Equitable Growth’s executive director. “He saw the need to reshape the national economic policy debate from one that put markets first to one that recognizes how economic inequality obstructs, subverts, and distorts our society, our democracy, and our economy. His dedication to this idea led him to engage with our nation’s top economists and bring them on board to help us achieve our mission.”

University of California, Berkeley professor of economics and Equitable Growth Steering Committee member Emmanuel Saez said, “Herb wanted to transform academic research in economics to put fairness and inclusivity on equal footing with growth, and make sure the research would have an impact on policymaking. In the past decade, in part because of Herb’s inspiration and support, equitable growth research has thrived, attracting many young talented scholars and reshaping the field of economics.”

“Herb Sandler was a visionary philanthropist,” said Melody Barnes, Equitable Growth Steering Committee member and co-founder and principal of MBSquared Solutions, LLC. “Always rigorous and unafraid of doing big things, he supported and challenged us to bridge the gap between academic research and policy. His wisdom, wit, and deep commitment to progressive causes will be sorely missed.”

Equitable Growth is not the only organization that owes its existence to Herb Sandler and his late wife, Marion. Many have been inspired by the breadth and depth of the couple’s commitment to making this country the just and equitable society they knew it could be. Whether it was promoting economic inequality or human rights or investigative journalism or progressive ideas generally, they had the commitment, discipline, and generosity to find people in whom they believed. Then, they helped those people envision and stand up, one organization after another, and gradually let them walk and then run on their own.

The sadness felt by all of us at Equitable Growth is leavened by the knowledge that Herb lived to see the organization walk and then break into a run. The Sandler Foundation was Equitable Growth’s sole funder when it opened for business, providing the seed money an organization needs to begin its existence. Despite that seminal role, Herb never tried to dictate the research or policy ideas on which that money would be spent. Five years later, Equitable Growth has a dozen foundations investing in its work, with the Sandlers’ share of funding down to about one-third in 2020.

“Just as Herb was committed to the idea of equitable growth, he was committed to the institution of Equitable Growth,” Boushey added. “He was deeply engaged in providing leadership for the organization, as well as a sounding board for ideas, and an advocate for the institution with other potential stakeholders. I met Herb near the end of his life; his mentorship and support of the development of an institution that could help change the national economic narrative—always with good cheer—are gifts for which the organization and I will always be grateful.”

Posted in Uncategorized

Brad DeLong: Worthy reads on equitable growth, May 31–June 6, 2019

Worthy reads from Equitable Growth:

  1. Fascinating! Very, very big if true—and it might well be. Read Fatih Karahan, Benjamin Pugsley, and Aysegül Sahin, “Demographic Origins of the Start-up Deficit,” in which they write: “We propose a simple explanation for the long-run decline in the start-up rate … a slowdown in labor supply growth since the late 1970s, largely predetermined by demographics. This channel explains roughly two-thirds of the decline and why incumbent firm survival and average growth over the lifecycle have been little changed … We test the mechanism using shocks to labor supply growth across states.”
  2. “Charlatans and cranks” was what George W. Bush’s chief economist Greg Mankiw called Arthur Laffer and his ilk. Heather Boushey’s recent tweet about Laffer, “A few thoughts on Arthur Laffer’s legacy,” gets to the core of this criticism. She writes: “Laffer promoted a set of ideas to policymakers that promised to deliver a more fulsome American Dream, even though they were not grounded in empirical evidence. Time and again, we’ve seen that Laffer’s hypothesis that tax cuts will lead to an amount of growth that would make up for lost revenue and improve economic well-being broadly is false … Research undermines the contention since the 1970s that lower rates stimulate the economy. What they seem to do instead is increase inequality. Millions of families have felt the effects of stalled incomes and cutbacks in much-needed government services, including education … Former Kansas Gov. Sam Brownback, a proponent of Laffer’s ideas, admitted that putting his supply-side tax cut plan in place would be ‘a real live experiment,’ one that failed so spectacularly his Republican legislature overrode his veto.”
  3. Let me highlight something of mine from a couple of years ago that is worth highlighting now, in these days of trade wars. Read my interview in the San Francisco Review of Books. An excerpt: “Typically and roughly, the average import we buy from other countries we get for 30 percent off—we use foreign currency that costs us $1.40 to purchase goods and services made abroad that would cost us $2 worth of time, energy, resources, and cash to make at home. But there’s more. Typically and roughly, we sell the typical export to foreigners for about 40 percent more than we would get if we had to find a market for it at home: It costs us $1 worth of time, energy, resources, and cash to make stuff that we can sell to foreigners for $1.40 worth of foreign currency. Thus, for the country as a whole, our foreign trade sector—exports and imports—is a way to get $2 worth of value for $1 worth of work. That’s a very good deal. Our foreign trade sector takes advantage of this good deal on a mammoth scale: In the fourth quarter of 2016, we were trading goods and services at a rate of $2.8 trillion a year—17.5 percent of national income. That means that in a typical year, we sell exports that we could get $2 trillion for if we had to sell them here at home and get imports that would cost us $4 trillion. That makes us $2 trillion per year—$25,000 per family each year—richer and more prosperous. That is a big deal.”

Worthy reads not from Equitable Growth:

  1. I was remiss a couple of years ago in not highlighting this, by four very good friends of Equitable Growth. During the Great Recession, unemployment-benefit extensions had essentially no effect discouraging employment at all: Nobody took advantage of the unemployment-benefit extension to take an extra vacation on Uncle Sam’s dime. Read Christopher Boone, Arindrajit Dube, Lucas Goodman, and Ethan Kaplan, “Unemployment Insurance and Employment during the Great Recession,” in which they write: “We compare 1,161 county pairs that straddle the border between two states, such as Allegany County, Maryland, and Bedford County, Pennsylvania. Within each pair, counties share a similar geography and economic environment, but may have … different lengths of benefits, largely due to the economic situations in the rest of the state … Extending benefits by 73 weeks increased the employment-to-population, or EPOP, ratio by 0.2 percent, a negligible amount that is not statistically significant. While our employment estimates are not statistically distinguishable from zero, they do rule out moderate-sized negative employment effects of the UI extensions on EPOP of 0.5 percent or more.”
  2. We still do not really know why the distribution of income has shifted against labor so much in the past generation. Read Tim Taylor, “Why Did the U.S. Labor Share of Income Fall So Quickly?” for some ideas from a recent report from The McKinsey Global Institute by James Manyika, Jan Mischke, Jacques Bughin, Jonathan Woetzel, Mekala Krishnan, and Samuel Cudre. Taylor notes that the report finds: “From 1947–2000, the labor share of income fell from 65.4 percent to 62.3 percent. There already seemed to be a pattern of decline in the 1980s and 1990s in particular, which was then reversed for a short time at the tail end of the dot-com boom. But since 2000, the labor share has sunk to 56.7 percent in 2016 … ‘We find that that the main drivers for the decline in the labor share of income since 1999 are as follows, starting with the most important: supercycles and boom-bust (33 percent), rising depreciation and shift to IPP capital (26 percent), superstar effects and consolidation (18 percent), capital substitution and technology (12 percent), and globalization and labor bargaining power (11 percent) … One possible interpretation is that sharp drop in labor income from 1999–2016 was a little deceptive, because in part it was based on cyclical factors, but a number of the factors underlying a longer-term decline in labor share continue to operate.”
  3. The eurozone has neither domestic monetary space nor fiscal space nor exchange rate depreciation space to fight a recession, should it come. Of course, the United States is in no better a position. Read Paul Krugman, “After Draghi,” in which he writes: “Europe’s overall performance since the 2008 crisis has been better than, I believe, most U.S. observers realize. The big problem now, I’d say, is the extreme fragility of Europe with respect to any future shocks. In the years since Draghi came in, the euro area has done surprisingly well in restoring growth and regaining employment losses. But this success rests on extremely low interest rates and an undervalued euro. What this means is that Europe has essentially no “monetary space”—there is nothing more it can do if something goes wrong. If there’s a Chinese recession, or Trump slaps tariffs on German cars, or whatever, what can Europe do? The European Central Bank can’t significantly ease monetary policy. Fiscal expansion could help, but it would have to be led by Germany, which seems implausible.”
  4. The focus in “How to Design a Stimulus Package” on the unemployment multiplier number seems very good. The two authors, Pascal Michaillat and Emmanuel Saez, write: “the size of the stimulus does not follow the bang-for-the-buck logic … Stimulus spending should be similarly small when multipliers are small and large. The stimulus should only be large for medium multipliers. Relatedly, the threshold value of one for the multiplier plays no role at all … A well-designed stimulus package should also depend on the usefulness of public expenditure … When the elasticity of substitution is higher, extra public goods are more valuable, so stimulus spending is more desirable … We find that the output multiplier is not a robust statistic to use in stimulus discussion. Instead, we should use the ‘unemployment multiplier.’”
Posted in Uncategorized

Weekend reading: “Alternative workers” edition

This is a weekly post we publish on Fridays with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is the work we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.

Equitable Growth round-up

Raksha Kopparam briefly details the findings from Equitable Growth guest author Fiona Scott Morton’s review of recent academic literature on U.S. antitrust and competition issues, arguing that modern research does not support recent policy pushes for antitrust laws to be more limited in scope.

Catch up on Brad DeLong’s latest worthy reads from Equitable Growth and around the web.

Equitable Growth’s Liz Hipple discusses the research findings from Marie Connolly, Miles Corak, and Catherine Haeck that compares intergenerational mobility within and between the United States and Canada and the effects of public policy, race, and inequality in influencing children’s economic outcomes in the two countries.

Links from around the web

Alphabet Inc.’s Google unit, like many other high-tech companies, has worked to garner a reputation as an idyllic workplace with high pay and great benefits. But Daisuke Wakabayashi of The New York Times tells the story of Google’s overlooked workers—its temps and contractors—who now outnumber full-time employees and are making less money, receiving poor benefits, and garnering no paid vacation time. (nyt)

Gig economy workers are facing extreme financial hardships, according to the latest report from the Federal Reserve examining economic well-being in the United States. Vox’s Alexia Fernandez Campbell breaks down the shocking statistics, including that 58 percent of gig economy workers couldn’t afford a $400 emergency and that 40 percent of drivers qualify for Medicaid and 18 percent qualify for food stamps. (vox)

Will Parker and Cameron McWhirter of The Wall Street Journal shed light on Uber Technologies Inc. drivers facing economic hardships who have taken on new part-time jobs in the gig economy—working for house flippers. In the struggle for additional cash, Uber drivers are being paid by house flippers to identify homes on their routes that real-estate firms can buy, flip, and quickly sell for large profits. (wsj)

The U.S. economy has seen a shift over the past decade of minimizing labor costs and cutting lasting ties to their workers as the rest of the country’s quest for decent jobs continues. Steven Greenhouse, Lawrence Mishel, Katherine Stone, and David Weil discuss the toll that alternative work arrangements are taking on American workers in The American Prospect. (prospect)

Chris Westfall asks why 46 percent of Americans are finding themselves working side jobs in order to make ends meet and looks at whether our strong Gross Domestic Product numbers are being felt by everyday workers. (forbes)

Friday Figure

U.S. and Canadian rates of economic mobility

A cluster map of mobility rates shows that while there are areas of low mobility in both Canada and the United States, areas of low mobility are more widespread in the United States

Source: Marie Connolly, Miles Corak, and Catherine Haeck, “Intergenerational Mobility between and within Canada and the United States.” Working Paper No. 25735 (National Bureau of Economic Research, 2019), available at LINK.

Figure is from Equitable Growth’s, “Low intergenerational mobility in the United States shows impact of race and public policy” by Liz Hipple.

Posted in Uncategorized

Low intergenerational mobility in the United States shows impact of race and public policy

A new working paper from the National Bureau of Economic Research compares intergenerational mobility within and between the United States and Canada to yield new insights into the impact of public policy, race, and inequality in influencing children’s economic outcomes. The paper, by Université du Québec à Montréal economists Marie Connolly and Catherine Haeck and City University of New York economist Miles Corak recreates for Canada Harvard University economist Raj Chetty’s analysis of how intergenerational mobility varies dramatically by geography in the United States, allowing for a better understanding of how intergenerational mobility varies both within and between the two countries.

The paper, released last month, finds that while mobility also varies greatly by geography within Canada, overall a parent’s income north of the border is less strongly related to a child’s adult income than in the United States. This finding echoes previous research showing that intergenerational mobility is lower in the United States than in other developed economies.

In the United States, privilege and disadvantage persist more than they do in Canada. The three authors find, for example, that “a child raised by top percentile parents in the United States will rank about 31 to 34 percentiles higher in the income distribution than a bottom percentile child, but in Canada this difference, at 21 to 23 percentiles, [is] a full decile lower.” At the bottom end of the distribution, while a Canadian child raised by parents in the bottom 20 percent of the income distribution will likely grow up to have an income that puts her around the 40th percentile of the income distribution, an American child would have to start out at the 30th percentile to achieve the same adult economic outcome.

This “stickiness at the ends” of U.S. mobility has been observed by other researchers previously, and the steeper climb to ascend the income ladder in the United States means that, “The U.S. ‘middle class’ is within easier reach for lower income Canadian children, than it is for low income Americans,” the authors write.

Overall mobility outcomes are better for Canadian children than American, but there are parts of Canada where mobility is just as low as the parts of the United States where mobility is extremely low, namely the American South. The parts of Canada with extremely low mobility are northern provinces that have large First Nation indigenous populations, but also are a small part of Canada’s overall population. In contrast, in the United States, the areas of low mobility account for a large bulk of the country’s population. “Most Americans live in regions of less mobility, with parental income ranks being more strongly related to child ranks, and the chances of escaping low income being lower,” Connolly and her co-authors note.

They also point out that these findings underscore the role of race in U.S. mobility outcomes: “To the extent that the communities we highlight as part of … the low mobility cluster dominated by the southern American states, have a higher black population, then this must be part of the explanation for the cross-country differences.” This point echoes findings by Federal Reserve Bank of Chicago economist Bhash Mazumder and Harvard economist Raj Chetty—that mobility for black Americans is far lower than that for white Americans—the latter of whom found this to be true for black men even after controlling for parents’ income, wealth, education, and neighborhood.

The interaction between race and public policy in explaining Americans’ lower mobility outcomes can also be seen in areas of the second-lowest mobility outcomes, which the authors refer to as Cluster 3 and are found almost exclusively on the U.S. side of the border. In offering an explanation for why Cluster 3 is an almost exclusively U.S. phenomenon, the authors highlight research by Ellora Derenoncourt—a postdoctoral research associate in economics at Princeton University and an Equitable Growth grantee—which found that northern cities where black Americans moved to from the South during the Great Migration of the mid-20th century changed in ways that hurt upward mobility for blacks. For example, enrollment of white children in private schools increased and public spending on policing increased. “Her results suggest that access to public goods and schooling became more restrictive, [with] ‘white flight’ depriving these migrants and their children of public investments that in turn had long-term negative consequences that continued across generations,” Connolly and her co-authors say of Derenoncourt’s research.

If this is the case, they write, then the areas of low mobility found in the United States in the Deep South and Industrial North represent the interrelated intermediating role race and public policy responses play in mobility outcomes in the United States. (See Figure 1.)

Figure 1

U.S. and Canadian rates of economic mobility

A cluster map of mobility rates shows that while there are areas of low mobility in both Canada and the United States, areas of low mobility are more widespread in the United States

Source: Marie Connolly, Miles Corak, and Catherine Haeck, “Intergenerational Mobility between and within Canada and the United States.” Working Paper No. 25735 (National Bureau of Economic Research, 2019), available at LINK.

Connolly, Corak, and Haeck argue that their comparison of intergenerational mobility within and between Canada and the United States is particularly apt because of similarities between the two countries—namely, their physical size, their heterogenous populations, and very similar conceptualizations of what the “American” or “Canadian” Dream is. “Sixty percent of American respondents ranked being able to succeed regardless of family background eight or higher on a ten point scale, while 59 percent of Canadians did so,” they note. Despite the many similarities between the two countries, the differences in children’s outcomes between the two illustrate the role that race and public policy play in influencing children’s economic outcomes.

Posted in Uncategorized

Brad DeLong: Worthy reads on equitable growth, May 24–30, 2019

Worthy reads from Equitable Growth:

  1. An excellent conversation with Janet Currie on how, in the United States today, choosing the right parents does a lot to determine your life chances. But it does not have to be that way. Read “In Conversation with Janet Currie,” in which she observes: “It is hard to talk about prenatal influences without sounding deterministic, but outcomes aren’t deterministic at all. One way that you can see that is that the same negative shock, such as a given level of air pollution, will typically have a much greater effect on a poor infant than on a richer infant. What that observation tells you is that there is something that can be done to mitigate the effects of a harmful shock, and the richer parents are doing it, whatever it is. If you could find that and put it in a bottle, or put it in a program, then you would be able to mitigate the effects of these early-childhood insults. And in fact, we have had reasonable success in mitigating the effects of some types of prenatal disadvantage through public programs. There is a great deal of evidence, some to which I have contributed, on the positive effects of the Supplemental Nutrition Program for Women, Infants, and Children during pregnancy on infant health outcomes. These positive effects are striking, given that the dollar value of WIC benefits is fairly small. It may well be that modest amounts of money combined with improved access to medical care and some psychosocial support can go a long way toward improving the health of mothers and their babies.”
  2. Kate Bahn tweets that she is “Looking forward to the day when economists stop interpreting constraints as preferences. E.g. women just choose to earn less at jobs that give them flexibility to do all of the caregiving and unpaid household work in their families!”

Worthy reads not from Equitable Growth:

  1. It has been known since the late 1990s by those who cared to think about it—and the Federal Reserve certainly ought to have cared to do so—that it was worth substantial compromises with respect to other goals in order to make sure that your policy excursions to the zero lower bound were rare and short. This should have been happening two decades ago. Indeed, I thought this was happening two decades ago. Read Joseph E. Gagnon and Christopher G. Collins, “Changes Are Coming to the Fed’s Monetary Policy Strategy,” in which they write: “The most likely outcome of the review is that the Fed will commit itself to intentionally overshooting its inflation target after episodes at the zero bound in which it has undershot the target.”
  2. There’s a 2.5 percent reduction in suicides with a 10 percent rise in two dimensions of the safety net. That seems, to me, to be large effect. Read William H. Dow, Anna Godøy, Christopher A. Lowenstein, and Michael Reich, “Can Economic Policies Reduce Deaths of Despair?,” in which they write: “Midlife mortality has risen … largely reflect[ing] increased mortality from alcohol poisoning, drug overdose, and suicide … We leverage state variation in policies over time to estimate difference-in-differences models of drug overdose deaths and suicides, using data on cause-specific mortality rates from 1999—2015 … Higher minimum wages and the Earned Income Tax Credit significantly reduce nondrug suicides … Increasing both the minimum wage and the EITC by 10 percent would likely prevent a combined total of around 1,230 suicides each year.”
  3. I confess that I am a profound skeptic about deep negative nominal interest rates. A slightly higher inflation target and policies to fight the asset price configuration called “secular stagnation” would largely obviate the need and leave behind a problem easily and straightforwardly dealt with via expansionary fiscal policy. And we really do not know how such an institutional reconfiguration would actually work. Confronted with a choice between known and understood policies that would work, and new ones with unknown side effects and effects that might, I do not understand the enthusiasm for the second. Read Ruchir Agarwal and Miles Kimball, “Enabling Deep Negative Rates to Fight Recessions: A Guide,” in which they write: “We (i) survey approaches to enable deep negative rates … (ii) establish … enabling negative rates while remaining at a minimum distance from the current paper currency policy and minimizing the political costs; (iii) discuss why standard transmission mechanisms … are likely to remain unchanged in deep negative rate territory; and (iv) present communication tools that central banks can use.”
Posted in Uncategorized

Modern U.S. antitrust research supports strict enforcement of the law

Good policy should follow good research. Many would argue that current U.S. antitrust enforcement policy is built upon a foundation of now-questionable economic theory and outdated evidence. The evidence is based largely on economic research published in the 1950s and 1960s by conservative economists from the University of Chicago. Their theory held that markets generally regulate themselves, and antitrust intervention should be minimal. This thinking has dramatically influenced antitrust law over the past 40 years, which has become more accommodating of business activity.

Yet modern research does not support the idea that the best antitrust enforcement should be limited in scope. Today, Equitable Growth releases a report and antitrust and competition literature database by Fiona Scott Morton, the Theodore Nierenberg Professor at the Yale School of Management (and an Equitable Growth grantee). The review includes both a narrative overview and a database that includes each article, its authors, its publication status, and a summary or abbreviated abstract. After reviewing more than 150 academic articles covering various issues on antitrust enforcement, Scott Morton finds that modern research generally shows that past enforcement policies have generated higher shareholder profits, higher prices for consumers, fewer choices, and less competitive labor markets.

This review of antitrust literature creates a hub for recent evidence that helps understand what research says about antitrust enforcement and its impact, including contributing to increased economic inequality. Scott Morton urges the agencies to respond to this literature by pursuing stricter antitrust enforcement and uses this compilation to present policy recommendations on how antitrust enforcers can target enforcement activity to best aid consumers. Doing so will promote greater innovation, consumer choice and protection, and reallocate power back to workers, all of which can create a more equitable economy.

Scott Morton broke up the review into multiple subsections that highlight various topics of antitrust enforcement and details her findings and recommendations for each issue. Horizontal mergers occur when a company acquires one of its competitors. The research finds that market power is frequently created and exploited in these transactions, which supports the conclusion that the law been too lenient on mergers. Scott Morton recommends “that the agencies be more aggressive in challenging mergers,” and that the courts should be more open to relying on the specific facts of each case to evaluate market power.

Vertical mergers occur when a company acquires another company to which it sells goods or services or from which it buys goods or services. As a result of economic literature from the 1950s and 1960s, challenges to vertical mergers have grown rare. Recent literature, however, rejects this view. Some vertical mergers are procompetitive, while some pose serious harm to the market. Scott Morton recommends agencies look at each vertical merger in context of their efficiencies and potential to harm competition.

Exclusionary conduct means business conduct that denies a competitor access to the market in order to maintain or grow a single firm’s market power. Antitrust law has become increasingly skeptical that such conduct is an effective way to harm competition. The review covers a number of these practices, but overall both theoretical and empirical work finds that such tactics can undermine competition and harm consumers. Scott Morton recommends that enforcers should be more willing to build and bring these cases when they see anticompetitive conduct, and courts need to be less skeptical. The review also covers specific types of conduct that can be exclusionary: most favored nation clauses, predation, and loyalty rebates.

The final area deals with broader issues of antitrust policy. Common ownership is the impact on competition when mutual funds and other types of institutional investors are the largest owners of product-market competitors. Scott Morton indicates that antitrust enforcement in this area “could have a high payoff.”

Monopsony power occurs when the buyer (or an employer) faces little competition and can pay below competitive prices for goods or wages for workers. At best, monopsony power has been a tertiary concern in antitrust law. The research, however, finds it is prevalent and that antitrust enforcement can address some of the issues from its creation and exploitation. Scott Morton recommends the federal antitrust agencies should consider monopsony power as a standard element of a merger review and consider the restrictions on employment mobility or other conditions that affect competition in labor markets.

Scott Morton concludes the review by addressing the impact competition policy has on the broader U.S. economy. Although no one piece of work can cover the whole economy conclusively, overall, researchers are finding that market power is pervasive and growing and affecting the overall economy. Market power may be contributing to broader problems such a reduced business investment, stifled business dynamism, and economic inequality. These papers provide the context in which to understand the implications of ineffective antitrust enforcement.

This database is a tool for academics, enforcers, and the public to visualize the anticompetitive effects of lax antitrust enforcement. It is also an ongoing project. If you come across any academic articles that you believe should be included in our database, please send it to mkades@equitablegrowth.org or ThurmanArnoldYale@gmail.com.

Posted in Uncategorized

Weekend reading: “Memorial Day” edition

This is a weekly post we publish on Fridays with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is the work we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.

Equitable Growth round-up

Raksha Kopparam writes about a new paper in the May edition of the Quarterly Journal of Economics by Equitable Growth grantee Xavier Jaravel, who is an assistant professor at the London School of Economics, which finds that price competition for the dollars spent by the wealthy results in more product innovation for those goods, leading to less inflationary pressure on those products compared to products bought by everyone else.

In the latest edition of our In Conversation series, Equitable Growth Executive Director Heather Boushey talks with Janet Currie about what her research shows about the role of early childhood health, environments, and learning in the formation of human capital and later-in life outcomes.

Catch up on Brad DeLong’s latest worthy reads from Equitable Growth and around the web.

Links from around the web

A profile of University of California, Berkeley economist and Equitable Growth grantee Gabriel Zucman by Ben Steverman discusses Zucman’s research into measuring wealth inequality and offshore tax havens. [bloomberg businessweek]

Dylan Matthews profiles Harvard University’s “Economics 1152” course, taught by economist and former Equitable Growth Steering Committee member Raj Chetty. The course, which draws heavily from Chetty’s empirical research and use of data to explore questions related to inequality, mobility, and race, is seen as an antidote to the overly theoretical approach in traditional “econ 101” courses. [vox]

Eduardo Porter and Guilbert Gates discuss why superstar cities are losing population to other, less dynamic parts of the country, drawing on new research by Massachusetts Institute of Technology economist and Equitable Growth Academic Advisory Board member David Autor. [nyt]

Peter Reuell writes about new research that finds increased exposure to harsh environments—such as toxicity, violence, and incarceration—in childhood results in worse outcomes later in life, deepening academics’ understanding of the pathways via which poverty impacts outcomes. Harvard Professor of Social Sciences Robert Sampson says this research broadens understanding of what potential policy solutions could improve mobility. “What this study suggests is that environmental policy and criminal justice reform can be thought of as social mobility policy,” he writes. “ I think that’s provocative, because that’s different than saying it’s just about poverty itself and childhood education and human capital investment, which has traditionally been the conversation.” [harvard gazette]

Friday Figure

Figure is from Equitable Growth’s,“Competitive Edge: Principles and presumptions for U.S. vertical merger enforcement policy” by Jonathan B. Baker, Nancy L. Rose, Steven C. Salop, and Fiona Scott Morton.

Posted in Uncategorized