Weekend reading: “Fair markets, happy kids” 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

Equitable Growth released the next episode of our In Conversation series, in which our Executive Director and Chief Economist Heather Boushey discusses the research of prominent economists and how their work relates to contemporary policy debates on inequality and growth. In this edition, Heather talks to University of California, Berkeley economist Emmanuel Saez on the theory of optimal taxation, the necessity of raising taxes on the wealthy to reduce inequality and fund public investments, and the meager evidence of positive growth impacts of severe tax cuts, such as those implemented in Kansas.

Equitable Growth Research Assistant Raksha Kopparam discusses the findings of a new addition to Equitable Growth’s working paper series by economists Elena Prager at the Kellogg School of Management at Northwestern University and Matt Schmitt at the Anderson School of Management at the University of California, Los Angeles on “Employer Consolidation and Wages: Evidence from Hospitals.” Using data on a decade of hospital mergers, Prager and Schmitt show that mergers reduce wage growth for workers in situations where they result in a substantial increase in market concentration and where workers’ skills are industry-specific. Emphasizing the important role of collective organizing as a counter-balance to monopsony power, Prager and Schmitt find that this effect is weaker in markets with stronger labor unions.

In his weekly “Worthy Reads” column, UC-Berkeley economist and Equitable Growth columnist Brad Delong highlights recent research and writing in economics from Equitable Growth and other economists. This week, Brad highlights Prager and Schmitt’s working paper and University of Chicago economist Damon Jones’ seminar at Equitable Growth on his research with University of Pennsylvania economist Ioana Marinescu studying “The Labor Market Impacts of Universal and Permanent Cash Transfers: Evidence from the Alaska Permanent Fund.” Additionally, Brad points to a column by Economic Policy Institute Communications Director Pedro Nicolai da Costa on the negative health effects of rising inequality as well as recent work by economists Dani Rodrik and Richard Baldwin on the role of technological changes in the good jobs of the future.

Equitable Growth economist Kate Bahn analyzes the findings of another new working paper in Equitable Growth’s series, titled “Monopsony power and guest worker programs,” by economists Eric M. Gibbons at The Ohio State University at Marion, Allie Greenman at the University of Nevada, Reno, Peter Norlander at Loyola University Chicago, and Todd Sorensen at UNR. Using administrative immigration data, the authors calculate that many guest workers experience heightened employer concentration, which noticeably drives down their wages. Kate notes that search frictions facing disadvantaged populations such as guest workers likely play an important role in increasing firms’ monopsony power to set artificially low wages—similar to the effect of market concentration itself. The working paper authors argue that enforcing wage regulations and increasing job mobility for guest workers would help improve their bargaining position and wages.

Links from around the web

Clare Lombardo delves into recent research on the drastic negative effects of persistent school segregation on racially based funding disparities. Specifically, she highlights the findings of a report by the nonprofit EdBuild, which calculated that predominantly white school districts receive $23 billion in additional funding compared to predominantly black school districts in the United States. Advocating for a renewed commitment to school desegregation and equalized school funding, the report points out that creating larger school districts (often along county lines), especially in the South, facilitates reductions in these funding disparities by increasing the income and racial diversity of the tax base funding schools in these larger districts. [npr]

Dylan Matthews discusses the release of a comprehensive report commissioned by Congress on the most effective policy interventions to halve child poverty in the United States. The authors of the report include several economists from Equitable Growth’s network: Janet Currie, of Princeton University, Hilary Hoynes of UC-Berkeley, and Tim Smeeding of the University of Wisconsin. The authors estimate that child poverty costs society between $800 billion and $1.1 trillion yearly due to its negative effects on health, earnings, and crime. Relying on evidence from the United States and other countries, the report offers a variety of potential policy solutions and argues that direct federal support in the forms of monetary allowances per child along with housing and food benefits have a much larger effect on reducing poverty than “work-based” benefits. [vox]

Kathleen Geier provides a constructive critique of the sweeping new child care proposal from Senator Elizabeth Warren (D-MA). As Geier points out, Sen. Warren’s plan is a welcome step to increasing the federal government’s role in ensuring access to universal childcare, given the substantial economic evidence on market failures in exclusively private provision of this essential service for U.S. families. Geier argues, however, that a greater public role is needed not only in financing but also in building the infrastructure for a veritable universal child care system in the United States. [in these times]

Friday Figure

Figure is from Equitable Growth’s, “Falling behind the rest of the world: Childcare in the United States.”

March 1, 2019


Will McGrew
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