…before the current UN climate summit in Paris has been comprehensively discredited, yet he continues to flog a dead horse and the Financial Times, surprisingly, continues to print articles based on it…. The Paris pledges show they have the potential to keep the global temperature rise over the coming century to about 2.7C, rather than the 4-5C that would result from unconstrained fossil fuel burning. Yes, implementing the pledges will cost money; but again, properly conducted economic analyses suggest the costs of not doing this would be far higher, even in strictly economic terms…. I can tell Dr Lomborg that he does not speak for the majority in the developing world. Many developing countries are already building a low-carbon economy. They plan to skip the carbon-intense phase from which more developed nations are endeavouring to escape. Every developing country is present at the Paris talks and most are actively working towards an ambitious agreement, because they see it as squarely in their national interest. Through history, occasions arise when once-credible theories are shown to be untrue. It is not easy for proponents to admit as much. Dr Lomborg has had a good run with his theory that tackling climate change would harm developing countries. But it is now time for him to walk away and admit that he was wrong, because reality has now demonstrably left him behind.
Must-Read: The walled gardens of the pre-1995 .net strike back. I am left curious: why are browsers good enough on the desktop and the laptop to wipe the floor with walled gardens, but not so on smart phones?
…the public availability of linked information… [is] at least weakening…. The first phase was the shift in usage from the web to apps… [where] the actual infrastructure and logic for displaying content is downloaded and installed when you get the app from the App Store. Then… the app simply downloads… content… and drops the content into the pre-existing templates. It’s super fast. This was certainly an annoyance for Google… [which] has focused on deep linking… to a mobile web site….
Now we are into the second phase in the shift from the web to apps: apps that don’t exist on the web at all…. “Up until now, Google has only been able to show information from apps that have matching web content. Because we recognize that there’s a lot of great content that lives only in apps, starting today, we’ll be able to show some ‘app-first’ content in Search as well….”
This is a far graver threat to Google than someone simply starting their search in a vertical app like Yelp or Trip Advisor: Google can win that fight by delivering a superior experience, and they’ve made great strides in that regard over the past few years…. There’s one big problem with Google’s new capability, though: how do you actually show said content to users? The app installation problem remains a significant one: there is simply too much friction in expecting a search user to download an app to see a result. Enter app streaming…
Researchers have put a lot of time and effort into the search for the root causes of rising inequality. Technology, changes in educational levels, labor market institutions, and globalization are among the potentially important reasons why income inequality has risen in many countries over the past several decades. But if you’ve been paying attention to the debates about income inequality, you might realize that the kind of inequality being studied isn’t always the same.
Sometimes it’s the variance in wages earned by individuals. Sometimes it’s the declining share of labor. Or sometimes it’s the Gini index of household income. These measures tell us, respectively, about the distribution of labor income, the distribution of income between labor and capital, or the distribution of all income. So let’s say we’re ultimately interested in the distribution of all income. How much of this inequality is affected by changes in the distribution of labor income (wages and salaries) and how much is affected by a declining labor share?
Luckily, two researchers at the International Monetary Fund worked through the data to answer this question for recent decades. The working paper, by Maura Francese and Carlos Mulas-Granados, looks at the change in household income inequality in a number of countries—93, to be exact—from 1970 to 2013. The two economists break down how much of the rise in income inequality during this 43-year period was due to rising inequality within labor income (rising inequality of wages) and how much of it was due to income shifting away from labor to capital.
Francese and Mulas-Granados find that rising income inequality has been predominantly driven by rising wage inequality rather than a declining share of income going to labor. In other words, the change in the income distribution within labor was a much bigger factor than the change in the income distribution between labor and capital.
While the importance of these two factors will obviously vary among the countries Francese and Mulas-Granados examined, the authors also break out results for specific countries. In fact, their research shows that, in the United States, the declining labor share had no effect at all on rising income inequality from 1970 to 2013.
For those who think we shouldn’t be concerned about the decline in the labor share given these results, however, take a look at the years studied. The years between 1970 and 2013 show a number of different trends in income inequality. We only saw signs of a declining labor share in the United States until 2000, for example, but a decomposition of the factors affecting income inequality since 2000 might show a greater role for the labor share. At the same time, the analysis uses the Gini index as its measure of inequality. The Gini understates changes in tail-end inequality, so countries where inequality has been mostly at the top will appear to have less inequality to decompose. And finally the analysis assumes that changes in within-labor inequality and the changes in the labor share are independent. That might not be true.
Even then, the much larger importance of wage and salary inequality may still remain. While digging into the causes of the decline in the labor share is interesting and worthwhile, we should be keeping our eye on the inequality within labor.
Stephen S. Roach: China’s Macro Disconnect: “Speedy implementation of the shift from production to consumption will be vital if the country is to remain on course and avoid the middle-income trap…” :: I really wish that I thought I understood China. Strike that: I really wish that I actually understood China.
Gauti Eggertson and Michael Woodford (2003): The Zero Bound on Interest Rates and Optimal Monetary Policy: “any failure of… credib[ility] will not be due to skepticism about whether the central bank is able to follow through on its commitment…” :: [Are] those who think (1) that Bernanke shot himself in the foot… correct[?]
Jan Mohlmann and Wim Suyker: Blanchard and Leigh’s Fiscal Multipliers Revisited: “[We] do not find convincing evidence for stronger-than-expected fiscal multipliers… during the sovereign debt crisis (2012-2013) or during the tepid recovery thereafter…” :: Seizing the high ground of the null hypothesis for oneself, and then running tests with no power, is undignified…
Must-Read: I really wish that I thought I understood China. Strike that: I really wish that I actually understood China.
Stephen S. Roach: China’s Macro Disconnect: “China has been highly successful in its initial efforts to shift the industrial structure of its economy from manufacturing to services…
…But it has made far less progress in boosting private consumption…. After bottoming out at 36% of GDP in 2010, private consumption’s share of GDP inched up to 38% in 2014…. China has always been adept at engineering shifts in its industrial structure…. But China apparently is far less proficient in replicating the DNA of a modern consumer culture…. China’s high and rising urban saving rate in a climate of vigorous per capita income growth reflects a persistent preference for precautionary saving over discretionary consumption… a rational response to the uncertain future faced by the majority of Chinese families…. Over the past 35 years, China’s powerful growth model has yielded extraordinary progress in terms of economic growth and development. But speedy implementation of the shift from production to consumption will be vital if the country is to remain on course and avoid the middle-income trap…
Must-Read: The reality-based piece of the macroeconomic world is right now divided between those who think (1) that Bernanke shot himself in the foot and robbed himself of all traction by refusing to embrace monetary régime change and a higher inflation target, and thus neutered his own quantitative-easing policy; and (2) that at least under current conditions markets need to be shown the money in the form of higher spending right now before they will give any credit to factors that make suggest they should raise their expectation of future inflation. What pieces of information could we seek out that would help us decide whether (1) or (2) is correct?
…in which the central bank’s management of private sector expectations can be expected to mitigate the effects of the zero bound. Krugman emphasizes the fact that increased expectations of inflation can lower the real interest rate implied by a zero nominal interest rate. This might suggest, however, that the central bank can affect the economy only insofar as it affects expectations regarding a variable that it cannot influence except quite indirectly; it might also suggest that the only expectations that should matter are those regarding inflation over the relatively short horizon corresponding to the term of the nominal interest rate that has fallen to zero. Such interpretations easily lead to skepticism about the practical effectiveness of the expectations channel, especially if inflation is regarded as being relatively “sticky” in the short run.
Our model is instead one in which expectations affect aggregate demand through several channels…. Inflation expectations, even… [more than] a year into the future… [are] highly relevant… the expected future path of nominal interest rates matters, and not just their current level… any failure of… credib[ility] will not be due to skepticism about whether the central bank is able to follow through on its commitment…
In the acronym-heavy world of economic policymaking, even the phrase “the OECD and G-20’s new BEPS project” can furrow some brows. In clearer terms, it’s a project focused on the problems of base erosion and profit shifting in corporate taxation, put forward by the Organisation for Economic Co-operation and Development and the Group of Twenty, a forum for the world’s largest economies.
Even after sorting through the jargon, the plain-English description still doesn’t jump out at the average reader. But the proposed reforms are a good window into the complicated world of corporate taxation—and the possible paths to reforming the system.
To pull back slightly, let’s address what base erosion and profit shifting actually are. In essence, the two problems are really one. With the current global corporate taxation system, companies have found ways to shift their profits to countries that have very low corporate tax rates or even no corporate tax rate at all. This, in turn, erodes the tax base for the country where the economic activity actually occurred. In short, profits get taxed at a lower rate, and the home countries have a smaller amount of money to potentially raise revenue from.
These two trends make the tax system less progressive in two ways. The first way is by reducing the taxation of profits that will end up going to the shareholders, who are disproportionately higher-income households. The second way is by reducing the amount of potential tax revenue—and raising the same amount of revenue from the population may require increasing taxes on households lower down on the income ladder.
So how would the BEPS project go after the problem of profit shifting? The proposals are numerous and varied, including very specific calls for changing specific tax treatments. But the central call is to make sure that so-called “stateless income,” or income that can’t be traced back to a specific country, is no longer stateless. One suggestion from the proposal is to make companies report where they pay corporate taxes, and how much they pay. Such reporting would make corporate taxation more transparent and allow governments see where profits are flowing.
The idea of more centralized information sharing about the flows of corporate profits has spooked some in the businesscommunity. But for some critics of the current corporate taxation system, the reforms don’t go far enough. In a piece for The Guardian, University of California, Berkeley economist Gabriel Zucman writes that the reforms just paper over the inherent flaws in the system. A move toward formulary apportionment at the international level, says Zucman, would help make sure profits are taxed where the economic activity actually occurs.
The problem of opacity isn’t restricted to the profits of public corporations, however—business income in the United States is increasingly shifting toward forms of businesses that are less transparent, such as partnerships. In a paper tracing the source of business income, researchers found that 30 percent of partnership income was hidden in some way.
The process of reforming the global corporate tax system will be a complex and lengthy process. But it seems clear that having stateless income hidden from the light isn’t a solid state of affairs moving forward. Income that’s got it made in the shade should, perhaps, be taxed.
If the United States were to invest in a public, voluntary, high-quality universal prekindergarten program starting in 2016 and fully phased in by 2017, what would the long-term impacts be for ? Our study looks to quantify the long-term benefits and costs of investing in a high-quality universal prekindergarten program available to all 3- and 4-year-olds across the United States. Use the data and interactives below to explore how a universal prekindergarten program would affect .
Who would participate?
Currently, in , percent of 3- and 4-year-olds ( children) participate in state-sponsored prekindergarten. Unfortunately, the quality of these programs varies significantly, which means that preschoolers do not always experience the same benefits or long-term effects. If a universal prekindergarten program were enacted in 2016 and fully phased in by 2017, percent of 3- and 4-year-olds ( children) would be enrolled in public prekindergarten, benefiting from a high-quality early childhood education.
What are the benefits of a universal prekindergarten program?
High-quality prekindergarten education can generate significant long-run benefits for participating children, their families, and even other non-participants. Longitudinal studies have shown, for example, that aside from improved educational achievement, children who have attended a prekindergarten program have spent less time in special education and had lower grade retention rates. These children also experience less child maltreatment and reduced crime, smoking, and depression rates over the course of their lives. In addition, both participating children and their parents have higher projected earnings, which subsequently increases government tax revenue.
If a universal prekindergarten program were to start in the United States in 2016, would see more than $ million in total benefits in 2050, amounting to savings of $ per capita that year. Here’s how these total benefits break down:
$ per person is attributed to savings to government.
$ per person comes from increased compensation.
The remaining $ per person is accounted for by savings to each individual from better health and less crime.
What are the costs?
Currently, spends $ per capita per year on preschool programs, special education services, and Head Start. In 2017, when a universal prekindergarten program is fully phased in, it would take an investment of $ more per capita per year to maintain a high-quality prekindergarten program.
There are three main costs associated with a high-quality universal prekindergarten program: the cost of the program, increased high school attendance, and increased college attendance. The program itself is based on Chicago’s comprehensive high-quality Child-Parent Center half-day program, so the costs take into account the multitude of services that are provided at the Child-Parent Center offset by the current spending on similar early childhood education programs as to not double-count expenditures. Because studies have shown that students who attend prekindergarten have higher high school completion rates and are more likely to attend college, these usage costs are also factored into the total cost of a universal prekindergarten program.
In 2050, these costs add up to an additional $ million, or $ per capita in . $ per capita is attributed to program costs, $ comes from increased high school usage per person, and the remaining $ per person is accounted for by increased college attendance.
How do the benefits compare to the costs?
If a high-quality universal prekindergarten program were to start in the United States in 2016 and be fully phased in by the end of 2017, the program would require a total of $ million in taxpayer dollars. Over time, the cost would eventually grow to include the cost of additional high school and college attendance. And by 2050, there would be more than $ million in total benefits compared to merely $ million in total costs, yielding net benefits of $ million. By 2050, for every dollar invested in a universal program, there would be $ in returns.
To see the national numbers, return to the full report.
If the United States were to invest in a public, voluntary, high-quality universal prekindergarten program starting in 2016 and fully phased in by 2017, what would the long-term impacts be for ? Our study looks to quantify the long-term benefits and costs of investing in a high-quality universal prekindergarten program available to all 3- and 4-year-olds across the United States. Use the data and interactives below to explore how a universal prekindergarten program would affect .
Who would participate?
Currently, in , percent of 3- and 4-year-olds ( children) participate in state-sponsored prekindergarten. Unfortunately, the quality of these programs varies significantly, which means that preschoolers do not always experience the same benefits or long-term effects. If a universal prekindergarten program were enacted in 2016 and fully phased in by 2017, percent of 3- and 4-year-olds ( children) would be enrolled in public prekindergarten, benefiting from a high-quality early childhood education.
What are the benefits of a universal prekindergarten program?
High-quality prekindergarten education can generate significant long-run benefits for participating children, their families, and even other non-participants. Longitudinal studies have shown, for example, that aside from improved educational achievement, children who have attended a prekindergarten program have spent less time in special education and had lower grade retention rates. These children also experience less child maltreatment and reduced crime, smoking, and depression rates over the course of their lives. In addition, both participating children and their parents have higher projected earnings, which subsequently increases government tax revenue.
If a universal prekindergarten program were to start in the United States in 2016, would see more than $ million in total benefits in 2050, amounting to savings of $ per capita that year. Here’s how these total benefits break down:
$ per person is attributed to savings to government.
$ per person comes from increased compensation.
The remaining $ per person is accounted for by savings to each individual from better health and less crime.
What are the costs?
Currently, spends $ per capita per year on preschool programs, special education services, and Head Start. In 2017, when a universal prekindergarten program is fully phased in, it would take an investment of $ more per capita per year to maintain a high-quality prekindergarten program.
There are three main costs associated with a high-quality universal prekindergarten program: the cost of the program, increased high school attendance, and increased college attendance. The program itself is based on Chicago’s comprehensive high-quality Child-Parent Center half-day program, so the costs take into account the multitude of services that are provided at the Child-Parent Center offset by the current spending on similar early childhood education programs as to not double-count expenditures. Because studies have shown that students who attend prekindergarten have higher high school completion rates and are more likely to attend college, these usage costs are also factored into the total cost of a universal prekindergarten program.
In 2050, these costs add up to an additional $ million, or $ per capita in . $ per capita is attributed to program costs, $ comes from increased high school usage per person, and the remaining $ per person is accounted for by increased college attendance.
How do the benefits compare to the costs?
If a high-quality universal prekindergarten program were to start in the United States in 2016 and be fully phased in by the end of 2017, the program would require a total of $ million in taxpayer dollars. Over time, the cost would eventually grow to include the cost of additional high school and college attendance. And by 2050, there would be more than $ million in total benefits compared to merely $ million in total costs, yielding net benefits of $ million. By 2050, for every dollar invested in a universal program, there would be $ in returns.
To see the national numbers, return to the full report.
