- America’s Dismal Turning Point - Paul Krugman
- Don’t Fall for Employers’ Whining About a ‘Skills Gap’ - Bloomberg
- Trump lags behind his predecessors on economic growth - Brookings
- Monetary policy and inequality: A new channel - VoxEU
- Nominal Wage Rigidities and the Future Path of Wage Growth - Kansas City Fed
- The Bankrupt Ideology of Business School - The New Republic
- Will the Paris Agreement Help or Hinder Cooperation among Nations? - Robert Stavins
Thursday, May 17, 2018
Wednesday, May 16, 2018
- Economics trails the sciences in attracting a diverse student mix - Mary Daly
- Rethinking Stigler’s Theory of Regulation: Regulatory Capture or Deregulatory Capture? - ProMarket
- Just Saying Yes to Drug Companies - Paul Krugman
- On neoliberalism - Stumbling and Mumbling
- Do larger health insurance subsidies benefit patients or producers? - Microeconomic Insights
- Companies Can't Hold the Line on U.S. Wages Much Longer - Tim Duy
- Structural change and the productivity slowdown - VoxEU
- Cryptocurrencies, Digital Currencies, and Distributed Ledger Technologies - Lael Brainard
- G.O.P. Insists Making Poor People Work Lifts Them Up. Where’s the Proof? - NYTimes
- The US Petroleum Trade Balance - Econbrowser
- The effects of legalising undocumented immigrants - VoxEU
- The current economy and the outlook - FRBSF
Monday, May 14, 2018
- What’s Good for Pharma Isn’t Good for America - Paul Krugman
- Cryptocurrencies’ challenge to central banks - VoxEU
- We can't ignore climate change - Pyndyck and Stock
- Finance and the Blockchain: A Primer - Cecchetti & Schoenholtz
- The “accounting view” of money: money as equity - All About Finance
- How the broadcast media created mediamacro - mainly macro
- The Future of Reliable News - Economic Principals
- Interviews: Dow, Harcourt, Goodhart, Lawson, Nelson, Chang - Tim Taylor
- The paradox of markups, part 2 - Growth Economics
- Ireland Exports its Leprechaun - Brad Setser
Friday, May 11, 2018
- The Death of Acceleration (Wonkish) - Paul Krugman
- Fiscal policy remains in the stone age - mainly macro
- It's a (low inflation) trap! - Antonio Fatas
- Initial Coin Scams - Nouriel Roubini
- Let Them Eat Trump Steaks - Paul Krugman
- Inflation, globalisation, and competition - VoxEU
- The Double Standard of America’s China Trade Policy - Dani Rodrik
- Job Guarantee: Marxist or Keynesian? - Stumbling and Mumbling
- Estimating Aggregate Fiscal Multipliers from Local Data - FRB Richmond
- Some Economic Effects of US Import Restraints - Tim Taylor
- Disaggregating the Fall in China's Current Account Surplus - Brad Setser
- More From Your Horseshoe Crab Blood Economics Leader - Tim Taylor
- Beauty contests and the term structure - VoxEU
Wednesday, May 09, 2018
- Gnawing Away at Health Care - Paul Krugman
- May 1968 and inequality - Thomas Piketty
- The paradox of markups - Growth Economics
- Tax evasion and inequality - VoxEU
- The yield curve and the stock market - VoxEU
- Explaining Germany’s exceptional recovery: A new eBook - VoxEU
- Forecasts of the Lost Recovery - Liberty Street Economics
- TReagan's Policies: Supply-Side Miracle or Keynesian Stimulus? - Econbrowser
- Globalisation, government popularity, and the Great Skill Divide - VoxEU
- Economic policies for tectonic change - FT
Monday, May 07, 2018
- Unnatural Economics (Wonkish) - Paul Krugman
- The Destruction of the Republican Party - J. Bradford DeLong
- A very simple model of too much city - Nick Rowe
- How Futures Trading Changed Bitcoin Prices - FRBSF
- Banking the Masses: 2018 Edition - Cecchetti & Schoenholtz
- Corporate Profit Margins at Risk From Rising Input Prices - Tim Duy
- It’s not just monopoly and monopsony - EPI
- Making (some) sense of cryptocurrencies - VoxEU
- State of the union - gender equality - Women in Economics at Berkeley
- The threat of secular stagnation has not gone away - Larry Summers
- CA’s Crude Oil Production and its Climate Change Policies - Robert Stavins
- How to spot fraudulent economic arguments - mainly macro
- How to represent the interests of future generations now - VoxEU
- Black Unemployment Is at an All-Time Low, But ... - Bloomberg
- What the boss wants to hear ... - Understanding Society
- After the Next Recession - Economic Principals
- Is the economy overheating? - Econbrowser
Friday, May 04, 2018
From the NBER Digest. "Two studies suggest that an increase in employers' monopsony power is associated with lower wages.":
Employer Concentration and Stagnant Wages: Stagnant wages and a declining share of labor income in GDP in recent decades have spawned a number of explanations. These include outsourcing, foreign competition, automation, and the decline of unions. Two new studies focus on another factor that may have affected the relative bargaining position of workers and firms: employer domination of local job markets. One shows that wage growth slowed as industrial consolidation increased over the past 40 years; the other shows that in many job markets across the country there is little competition for workers in specific job categories.
In Strong Employers and Weak Employees: How Does Employer Concentration Affect Wages? (NBER Working Paper No. 24307), Efraim Benmelech, Nittai Bergman, and Hyunseob Kim analyzed county-level census data for industrial firms for the period 1977 to 2009 to study the impact of employer concentration on wages in local labor markets. By focusing on manufacturing, they were able to control directly for worker productivity. The researchers found that, although there was substantial cross-sectional and time series variation in concentration, average local-level employer concentration increased between 1977-81 and 2002-9, based on the Standard Industrial Classification four-digit code for industry groups. Their measure of concentration is the Herfindahl-Hirschman Index (HHI), which is defined as the sum of the squares of the employment shares for all of the firms in a given industry. The employment-weighted mean value of this index rose from 0.698 to 0.756 during the study period, an increase of 5.8 percent. Forty percent of the plant-year observations were associated with manufacturing facilities in counties dominated by just a few firms. The researchers found a negative relationship between employer concentration and wages; it was twice as strong in the second half of their data sample as in the first half; a one standard deviation increase in the HHI was associated with a wage reduction of between 1 and 2 percent. They estimate that a firm operating in a labor market in which it was the only employer would pay wages 3.1 percent lower than those of a firm that operated in a less concentrated market. Most of the decline in wages appeared to occur as labor markets approached the pure monopsony case, namely the situation in which only one firm is hiring workers. In addition to finding lower wages in monopsony markets, the researchers also found that, over time, firms that dominate their labor markets were less likely to share productivity gains with employees. A one standard deviation decline in the HHI mapped to an increase in the elasticity of wages with respect to productivity of about 25 percent, from 0.38 to 0.47. Over the course of the study period, U.S. imports from China increased. The researchers found that import competition from China, which was associated with the closure or relocation of plants in a number of industries, accelerated the trend toward greater employer concentration in some local labor markets. This finding suggests that import competition not only reduced the demand for workers who previously produced the now-imported products, but that it may also have depressed wages for workers in other industries in affected labor markets as a result of increased labor market concentration. The only employees who did not experience wage stagnation in markets with high plant concentration were those who belonged to unions. About one quarter of the plants studied were unionized; the fraction was lower in the later than in the earlier years. Because this study focuses on workers employed by industrial firms, the fraction of workers who are union members is higher than for the U.S. labor market more broadly. To assess the robustness of their results, the researchers compared plants in the same industry owned by the same company but operating in different locations; they found that "those located in a more concentrated local labor market pay significantly lower wages."
In Concentration in U.S. Labor Markets: Evidence from Online Vacancy Data (NBER Working Paper No. 24395), José A. Azar, Ioana Marinescu, Marshall I. Steinbaum, and Bledi Taska found that in most locations employers have substantial monopsony power. The researchers studied job vacancies in the 709 federally delineated commuting zones, which depict the bounds of local economies. Drawing on a database compiled by Burning Glass Technologies from 40,000 employment websites, they calculated the level of labor market concentration by commuting zone, occupation, and quarter for the year 2016. They selected the top 200 occupations as classified by the Bureau of Labor Statistics' six-digit code, capturing 90 percent of the job postings in the database. As a yardstick for labor market concentration, the study calculated the Herfindahl-Hirschman Index measure, similar to the application in Working Paper 24307. The results suggested that the higher the market concentration, the stronger an employer's bargaining position. The average market had the equivalent of 2.5 recruiting employers. Under the standards that federal antitrust officials use when determining whether product markets exhibit excessive levels of concentration, 54 percent of the markets were highly concentrated, meaning they had the equivalent of fewer than four firms recruiting employees. Eleven percent of markets were moderately concentrated, and only 35 percent had low concentration. Nationwide, among the 30 largest occupations, marketing managers, web developers, and financial analysts faced the least favorable job markets; markets were most favorable for registered nurses, tractor-trailer drivers, and customer service representatives. The actual picture for job seekers, however, was brighter than these figures would indicate because commuting zones vary widely in employment levels. Commuting zones encompassing large cities had lower levels of labor market concentration than those around small cities or in rural areas. Accounting for the unequal distribution of employment, the researchers found that 23 percent of the national workforce is in highly or moderately concentrated labor markets. They argue that traditional market concentration thresholds underestimate workers' loss of bargaining power over time. They point out that those thresholds are geared to gauging the impact of mergers on the consumer marketplace, and that while consumers can buy products without the producers' explicit agreement, workers must find employers who agree to hire them.
- Free markets require robust social insurance. - The Washington Post
- "The Very Structure of Capitalism Is Inherently Monopolistic" - ProMarket
- Is the Great Recession Still Holding Down Wages? (Wonkish) - Paul Krugman
- Unemployment Falls to 3.9 percent, Wage Growth Remains Weak - Dean Baker
- Apple and the Fruits of Tax Cuts - Paul Krugman
- Progress in economics - Stumbling and Mumbling
- Hamilton on Econometrics, Energy, and Low Interest Rates - David Beckworth
- Rising Bilateral Deficit with China, Negotiations Over China 2025 - Brad Setser
- Spring 2018 Journal of Economic Perspectives is Online - Tim Taylor
- Donald Trump’s Normal Fed - Kenneth Rogoff
- The influence of Karl Marx—a counterfactual - globalinequality
- Don’t go spare over excess capacity in manufactures - VoxEU
- Financial globalisation, bank lending and the limits of monetary policy - VoxEU
- Politicians Don’t Need New Ideas - Paul Krugman
- Why was economics so insular? - mainly macro
- The Eurasian Landbridge and China's Belt and Road Initiative - VoxEU
- Can an Emerging Economy Hold Too Many Foreign Assets? - Brad Setser
Tuesday, May 01, 2018
- How’s That Tax Cut Working Out? - Paul Krugman
- Gender and collaboration in economic research - VoxEU
- Economics: Reviled Because It Matters - Tim Taylor
- Econ Grapples With What Causes Recessions - Noah Smith
- Investment Boom From Trump’s Tax Cut Has Yet to Appear - NYTimes
- The strong economy: how Brexit dishonesty began - mainly macro
- Excessive Zoning Makes Us Poorer and More Unequal - ProMarket
- Is The Economist Correct About the State of Applied Micro? - Matthew Kahn
- An Age Such As This - Economic Principals
- Quantifying the gains from trade - VoxEU
- The financial power of the powerless - VoxEU
- Is Marx Still Relevant? - Peter Singer
Friday, April 27, 2018
- Inequality in US Life Expectancy - Tim Taylor
- Opinion | Trump’s War on the Poor - Paul Krugman
- Data Workers of the World, Unite! - ProMarket
- How much does infrastructure boost an economy? - MIT News
- Macroeconomic Policy Reform the IPPR way - mainly macro
- Some Things Are Worse Than Paying Taxes - Justin Fox
- Why Innovation Tends to Bypass Mainstream Economics - Bloomberg
- Keynesian economics without the Phillips curve - Farmer and Nicolò
- Econ Critics Are Stuck in the Past - Noah Smith
- Revisiting the 1990s debate on globalisation - VoxEU
- The curse of persistently low real interest rates - VoxEU
- Rethinking the macroeconomics of resource-rich countries - VoxEU
- Do Firms Use Capital and Labor Efficiently? - ProMarket
- Opinion | We Don’t Need No Education - Paul Krugman
- Hayek, Radner and Rational-Expectations Equilibrium - Uneasy Money
- Regulatory failure - Understanding Society
- Is Amazon really an antitrust worry? – Digitopoly
- Opinion | Americans Aren’t Centrist on Economics - NYTimes
- Universal Central Bank Digital Currency? - Cecchetti & Schoenholtz
Monday, April 23, 2018
- Winners and losers from rising American inequality - VoxEU
- A Tribute to Uwe Reinhardt - Paul Krugman
- Metrics Monday: Don’t Overcontrol - Marc Bellemare
- A hostile environment - mainly macro
- Steel Tariffs and Wages (Painfully Wonkish) - Paul Krugman
- "What Money Can't Buy" with Sandel, Barro, and Summers - Matthew Kahn
- Marx and modern microeconomics - Samuel Bowles
- The 2018 John Bates Clark: Parag Pathak - A Fine Theorem
- How the Loss of Union Power Has Hurt American Manufacturing - NYTimes
- Good bad theories - Stumbling and Mumbling
- The Clean Cooking Problem: 2.3 Million Deaths Annually - Tim Taylor
- International transmission of monetary policy via banks - VoxEU
- The Great Snake Oil Slump - Paul Krugman
- Natural Resources, Living Standards and Inequality - Livio Di Matteo
- U.S. inequality: It's worse than we thought - FRB Minneapolis
- Facts vs hand-waving in economics - Stumbling and Mumbling
- Moving the Overton Window: Let the Debate Continue - Roger Farmer
- Did macro give up on explaining recent economic history? - mainly macro
Thursday, April 19, 2018
- Trump’s Advisors Recognize That His China Tariff Strategy Calls for… What Might You Call It? A “Trans-Pacific Partnership”, Perhaps? - Equitable Growth
- Equilibrium Selection, Observability and Backward-stable Solutions - Brad DeLong
- On Equilibrium in Economic Theory - Uneasy Money
- Scam I Amn’t: Voters and the Tax Cut - Paul Krugman
- No Worker Left Behind - Laura Tyson & Lenny Mendonca
- Why Democracy Fails to Reduce Inequality - ProMarket
- Rent Stabilization Fails to Target Those in Need - Richard Green
- FedViews: April 12, 2018 - Federal Reserve Bank of San Francisco
- The FOMC: Inflation Theory and Inflation Control - Stephen Williamson
- The Wage Growth Premium from Changing Jobs - macroblog
- A neo-Fisherian experiment that hedges its New Keynesian bets - longandvariable
- Mexico and Its Workers Didn't Hit the Jackpot With Nafta - Bloomberg
- Important Choices for the Federal Reserve in the Years Ahead - William Dudley
- The Importance of Meta-Learning - EconoSpeak
- Mutiny on the Down-Low - Economic Principals
- Employment Breakeven Levels: They’re higher than most of us thought - Jared Bernstein
- Update: journals making it difficult to review a paper - Environmental Economics
- Krugman on renewables - Environmental Economics
- The Fed’s Asymmetric Forecast Errors - Andrew C. Chang
- How Much Consumption Responds to Government Stimulus - FRBSF
- Can Media and Text Analytics Provide Insights into Labour Market Conditions in China? - Econbrowser
- Prediction Machines – Digitopoly
- Trump Picks Monetary Expert for No. 2 Job at Federal Reserve - The New York Times
- On the Distribution of Wealth - Cecchetti & Schoenholtz
- Mortgage-Backed Securities Ratings and Losses Maybe Not So Bad - Carola Binder
- Opinion | Earth, Wind and Liars - Paul Krugman
- On the rift between economics and everything else - Notes On Liberty
- What Does Economics Need to Learn Next? - Brad DeLong
- Jupyter, Mathematica, and the Future of the Research Paper – Paul Romer
- Standing on the Shoulders of Giants - Roger E. A. Farmer
- Wage returns to schooling and early work experience - VoxEU
- Opinion | The Paul Ryan Story: From Flimflam to Fascism - Paul Krugman
- The Dream of a Republican New Deal - The New York Times
- China’s Communists Rewrite the Rules for Foreign Businesses - The New York Times
- Fiscal Rules: Make them Easy to Love and Hard to Cheat - IMF Blog
- What can regional data tell us about the UK Phillips Curve? - Bank Underground
- State and Local Spending on Higher Education - Tim Taylor
- The leverage ratio as a macroprudential policy instrument - VoxEU
- Paul Ryan's Roadmap Was an Epic Fiscal Failure - Justin Fox
- China’s hidden shipbuilding subsidies and their impact on its industrial dominance - Microeconomic Insights
- Solutions to the Threats of Digital Monopolies - ProMarket
Tuesday, April 10, 2018
- The Fallacy of the Free Market - James Kwak
- Trump’s Trade Confusion - Joseph E. Stiglitz
- Capital in Russia - Thomas Piketty
- What’s Been Stopping the Left? - Dani Rodrik
- Opinion | Obamacare’s Very Stable Genius - Paul Krugman
- Supporting Strong, Steady, and Sustainable Growth - John Williams
- A debt crisis is coming. But don’t blame entitlements. - The Washington Post
- Price-level targeting to escape the zero lower bound - VoxEU
- Phillips Curve bashing and immaculate inflation - longandvariable
- Vulnerable Growth - Liberty Street Economics
- US Lagging in Labor Force Participation - Tim Taylor
- Donald Trump trade threats lack credibility - Larry Summers
- Opinion | Unicorns of the Intellectual Right - Paul Krugman
- DSGE models: A cup half full - John Williams
- What Random Walks in Multiple Dimensions Teach You About Life - WIRED
- Reflections on Economics and Policy Making in the Environmental Domain - Robert Stavins
- Should the 5% Convention for Statistical Significance be Dramatically Lower? - Tim Taylor
- "Trickle Down", "Magic Dirt", memes and deep parameters - Nick Rowe
- Misconceptions about Milton Friedman's 1968 Presidential Address - Tim Taylor
- Early gender gaps among university graduates - VoxEU
- The Outlook for the U.S. Economy - Jerome Powell
- Modern Money Theory (MMT) vs. Structural Keynesianism - Thomas Palley
- Unemployment Holds at 4.1 Percent in March, Wage Growth Picks Up - Jobs Bytes
- The economic impacts of immigration to the UK - VoxEU
- Disagreeing With Krugman: Is China Stealing Knowledge? - Dean Baker
- The Art of the Flail - Paul Krugman
- The Roots of ‘Bubbly’ Recessions - Federal Reserve Bank of Richmond
Wednesday, April 04, 2018
- Trade Wars, Stranded Assets, and the Stock Market - Paul Krugman
- No, “Obamasclerosis” wasnt a real problem for the economy - Larry Summers
- Will China Really Supplant US Economic Hegemony? - Kenneth Rogoff
- Consumption data: New frontiers - VoxEU
- The dollar-euro exchange rate, 2016-2018 - VoxEU
- India’s Path to Stigmatized Capitalism - Arvind Subramanian
- What’s the Matter With Trumpland? - Paul Krugman
- Inequality and poverty - Stumbling and Mumbling
- Safeguarding public interests in the platform economy - VoxEU
- A recipe for monetary policy in emerging market economies - VoxEU
- Flexible Price-Level Targeting in the Big Picture - macroblog
- Raising the Speed Limit on Future Growth - FRBSF
Monday, April 02, 2018
- Will China Really Supplant US Economic Hegemony? - Kenneth Rogoff
- The Debate on Trade Deficits Is Littered with Misconceptions - Joseph Gagnon
- Big Business Is Too Big - The New York Times
- ‘Metrics Monday: Survivorship Bias - Marc F. Bellemare
- Liquidity Regulation is Back - Cecchetti & Schoenholtz
- Stabilising the real economy increases average output - VoxEU
- The uncertain future of central bank independence - VoxEU
- Cloak and… Megaphone - Economic Principals
- When did sustained growth start? - Growth Economics
- The Phillips Curve and the Lucas Critique - Uneasy Money
Friday, March 30, 2018
- Is It Policy, or Just Reality TV? - Paul Krugman
- How to Think About Corporate Tax Cuts - Justin Wolfers
- Misconceptions about Trade Deficits - Tim Taylor
- “Globalization Has Contributed to Tearing Societies Apart” - Dani Rodrik
- Congress Considers Going Easy on Predatory Lenders - NYTimes
- E.P.A. Prepares to Roll Back Rules Requiring Cars to Be Cleaner - NYTimes
- Endogenous Uncertainty - Fed in Print
- Inflation and Unemployment (Part 2) - MacroMania
- Beware Economists Who Warn of an Entitlement Explosion - Justin Fox
- NY Fed's Next President Should Be More Challenging - Narayana Kocherlakota
- The UK’s productivity puzzle is in the top tail - Bank Underground
Wednesday, March 28, 2018
- Immaculate Inflation Strikes Again (Wonkish) - Paul Krugman
- The Phillips Curve and Identification Problems - Everyday Economist
- Large Scale Econometric Models: Do they Have a Future? - Roger E. A. Farmer
- A Long-Run Monetary Policy Framework: Framing the Question - macroblog
- The Principle of Bounded Nominal Uncertainty - macroblog
- An Example of Flexible Price-Level Targeting - macroblog
- Trump’s economic team needs to grow up — fast - Washington Post
- The world is not flat - FT
- The stubbornly high cost of remittances - VoxEU
- Pols Use Economics the Way Drunks Use Lampposts - Alan Blinder
- How does monetary policy affect inequality? - Bank Underground
Monday, March 26, 2018
- Trade and the Cities (Wonkish) - Paul Krugman
- Tax Cuts and Wages Redux (Slightly Wonkish) - Paul Krugman
- Chinese income distribution in 2002-3 and 2013 - globalinequality
- Tariffs as a Method of Promoting LR Free Trade - Everyday Economist
- Saving the Shrinking Middle - Mohamed A. El-Erian
- The War Within The FBI - Economic Principals
- Inflation and unemployment - MacroMania
- Mechanisms, singular and general - Understanding Society
- Do Adjustment Lags Matter for Inflation-Indexed Bonds? - FRBSF
- Size is Overrated - Cecchetti & Schoenholtz
Friday, March 23, 2018
- Bumbling Into a Trade War - Paul Krugman
- Globalization: What Did Paul Krugman Miss? - Brad DeLong
- The Economic Scars of Crises and Recessions - IMF Blog
- The Trump Boom Is Making It Harder to See the Next Recession - Robert Shiller
- The Output Gap is no longer a sufficient statistic for inflation - mainly macro
- How economics failed us - Martin Wolf
- Response to Wolf: Economics failed us before the global crisis - Peter Doyle
- Francis Bator, Influential White House Economist, Dies at 92 - NYTimes
- Income redistribution through taxes and transfers - VoxEU
- The hysteresis-resilience trade-off in unemployment - VoxEU
- Oil prices do not affect inflation expectations after all - VoxEU
- How reciprocity can magnify inequality - EurekAlert
Tuesday, March 20, 2018
- Trump and Trade and Zombies - Paul Krugman
- The Distribution and Redistribution of US Income - Tim Taylor
- The Golden Rule - Magic, maths and money
- What economics and cars can tell us about guns - The Berkeley Blog
- Big Data and Economic Nowcasting - No Hesitations
- What anchors inflation? - MacroMania
- Tougher capital regulation pays off - Cecchetti & Schoenholtz
- What Does it Mean to Have Rational Expectations? - Roger Farmer
- A road to right wing authoritarian government - mainly macro
- The /Other/ Marshall Plan - Economic Principals
Saturday, March 17, 2018
- Voters May Be Wising Up - Paul Krugman
- A new classification of monetary policy frameworks - VoxEU
- Monetary and Fiscal Federalism, Debt, Canada, and the Eurozone - Nick Rowe
- Paul Krugman Explains Trade and Tariffs - The New York Times
- The Skeptical View in Favor of an Antitrust Push - Tim Taylor
- Monetary policy spillovers in the first age of globalisation - Bank Underground
- Cryptocurrencies challenge the status quo - VoxEU
- Mortgage delinquency rates: A cross-country perspective - VoxEU
- The illusion of knowledge - Stumbling and Mumbling
- A Keynesian model of long-run growth - VoxEU
- What Hath Merkel Wrought? - Uneasy Money
- Household Inequality, Consumption, and Aggregate Real Shocks - FRB Chicago
- The Dollar’s Doldrums - Barry Eichengreen
- The Distribution of Gains from Globalization - The Unassuming Economist
Tuesday, March 13, 2018
- Springtime for Sycophants - Paul Krugman
- Assessing Trends in Real Shares - Econbrowser
- The consumer benefits of trade agreements - VoxEU
- Towards a Union in the Union - Thomas Piketty
- When Shall We Overcome? - Joseph E. Stiglitz
- AEA draft code of conduct - Women in Economics at Berkeley
- China’s Unnecessary and Counterproductive Fiscal Consolidation - Brad Setser
- Identification Is Not Causality, Causality Is Not Identification - Marc Bellemare
- Trade Wars Can Be a Game of Chicken. Sometimes, Literally. - NYTimes
- Budget deficits, fiscal councils and authoritarian regimes - mainly macro
- The Great Recession took a toll on public health - EurekAlert
- Shares of Real GDP Don't Give the Real Story of Manufacturing - Justin Fox
- Great Recession still plagues workers with lower lifetime wages - EurekAlert!
- The Household Fallacy - Roger E. A. Farmer
- Ergodicity - Roger E. A. Farmer
- Cultural costs of high house prices - Stumbling and Mumbling
- US economy is still far from fully recovered - Martin Sandau
- Ten Years After Bear - Cecchetti & Schoenholtz
- Can central bankers become Superforecasters? - Bank Underground
- Innovation as a Challenge to Regulation - The Regulatory Review
- Equity markets are thriving but are they relevant? - John Kay
Monday, March 12, 2018
Jobs Report Gives Fed Cover To Retain Gradual Rate Path: The jobs report gives the Fed cover to retain a gradual rate path. To be sure, the rapid pace of job growth will leave them nervous about an unsustainable pace of growth. But the flat unemployment rate remains consistent with their forecasts. In addition, low wage growth indicates the economy has not pushed past full employment. If inflation remains constrained, the Fed would be pretty much on target for this year. That suggests the three-hike scenario should remain in play. But increased confidence in the outlook and risk management concerns will push up enough “dots” in the next Summary of Economic projections toward four hikes for this year. ...continued here...
Sunday, March 11, 2018
- Trump’s Trade Gimmickry - Dani Rodrik
- The three mistakes of centrism - mainly macro
- Trump’s Negative Protection Racket (Wonkish) - Paul Krugman
- Graphs for the Most Basic of Business Cycle Macro Analyses - Brad DeLong
- Inflation? Bring It On. Workers Could Actually Benefit. - Isabel Sawhill
- Immigration: the wrong battle - Stumbling and Mumbling
- Potential threats to central bank independence - VoxEU
- The New Fama Puzzle, post-ZLB - Econbrowser
- FedView - FRBSF
- Special Greeting from the UCLA Causality Blog - Judea Pearl
- Putin’s Stated Plan: A High-Tech Russian Doll - Economic Principals
- The many flaws in the Senate’s rollback of Dodd-Frank - Jared Bernstein
- Job Growth Soars in February, Wage Growth Slows - Dean Baker
- How poor was 18th century France? - Notes On Liberty
- Wicksellian Exchange Rate – losinterest
- Some Economics of Place-Based Policies - Tim Taylor
- The New York Fed DSGE Model Forecast–March 2018 - Liberty Street
- Medicine Markup - FRB Richmond
- Too Many Co-Authors - FRB Richmond
- Interview of Jean Tirole - FRB Richmond
Friday, March 09, 2018
I kind of got behind...
- The gendered impact of eliminating mandatory retirement - Frances Woolley
- What Do Stock Prices Tell Us about the Economy? - Uneasy Money
- The productivity slowdown and labor’s income share - Equitable Growth
- A new take on low interest rates and risk taking - VoxEU
- Publicly funded applied research pays off - VoxEU
- The Real Engine of the Business Cycle - Amir Sufi & Atif Mian
- Will China Out-Innovate the West?- Edmund S. Phelps
- The Blockchain Pipe Dream - Nouriel Roubini & Preston Byrne
- Trump’s Tax on America - Brad DeLong
- What Insights Do Taxi Rides Offer into Federal Reserve Leakage? - Promarket
- Airlines Use Earnings Calls to Coordinate Capacity Reductions - ProMarket
- A Ranting Old Guy With Nukes - Paul Krugman
- Krugman’s Taking Your Questions on Trade - The New York Times
- Oh, What a Trumpy Trade War! - Paul Krugman
- Keynes on the Sequencing of Economic Policy: Recovery and Reform in 1933 - NBER
- A First Look at Employment - macroblog
- The Misthinking of Globalization—Past, Present, and Future - IGM Forum
- This article at Vox summarizes everything that I've been trying to say - Environmental Economics
- How Will the U.S. Fund its Twin Deficits? - Brad Setser
- Saving the heartland: Place-based policies in 21st Century America - Larry Summers
- Cochrane Fails to Make His Case for the Trump Tax Cut Again - EconoSpeak
- D is for Devastating: A Statistical Error and the Vitamin D Saga - Carola Binder
- The 2016 Sterling Flash Episode - Bank Underground
- Preventing Bank Runs - FRB Richmond
- Did the Dodd-Frank Act End ‘Too Big to Fail’? - Liberty Street Economics
- Currency markets send a warning on the US economy - Larry Summers
- E.U. Pledges to Fight Back on Trump Tariffs as Trade War Looms - The New York Times
- A new fiscal policy for a world of accelerated change and artificial intelligence - Brookings
- Economic Forecasts with the Yield Curve - FRBSF
- Bank Financing: The Disappearance of Interbank Lending - Cecchetti & Schoenholtz
- Janet Yellen: 10 quotes on her past and the economy - Brookings
- Questions - Tim Duy's Fed Watch
- The Macroeconomics of Trade War - Paul Krugman
- Consensus and mutual understanding - Understanding Society
- The economic and political cost of UK austerity - mainly macro
- Why do beginner econometricians get worked up about the wrong things? - Frances Woolley
- Sorting, incentives, and excessive managerial pay - VoxEU
- Top5itis: The Disease that Affects Economics - ProMarket
Friday, March 02, 2018
- The Force of Decency Awakens - Paul Krugman
- The Hidden Taxes on Women - The New York Times
- Republicans say they favor free markets. Yeah, right. - Washington Post
- Economists vs. Scientists on Long-Term Growth - Kenneth Rogoff
- Bernanke Interviews Yellen - Tim Taylor
- Mathematical Finance - Magic, maths and money
- Regional Consumption Responses and the Aggregate Fiscal Multiplier - Fed
- The dangers of pluralism in economics: the case of MMT - mainly macro
- Why Jay Powell’s Fed taper is not causing tantrums - FT
- Making Globalization Work - William Dudley
- A snippet on bounded rationality - Crooked Timber
- Peer to Peer – Scale and Scalability - Bank Underground
- Weighting the Wage Growth Tracker - macroblog
Thursday, March 01, 2018
Fed Changing Its Tune: Yesterday I called attention to this line from Federal Reserve Chairman Powell’s testimony:In gauging the appropriate path for monetary policy over the next few years, the FOMC will continue to strike a balance between avoiding an overheated economy and bringing PCE price inflation to 2 percent on a sustained basis.
I interpreted this as a shift in the Fed’s focus. The risks are shifting, hence the new concern about an overheated economy. In contrast, previous iterations of this policy guidance referred to “achieving” and then “sustaining” full employment. Central bankers must view the economy as in a danger zone for inflationary pressures. ...continued here...
Wednesday, February 28, 2018
- Bonuses and Bogosity - Paul Krugman
- How Low Can Unemployment Really Go? - The New York Times
- Krugman on Temporary vs Permanent Monetary Injections - David Beckworth
- Two Central Bankers Walk Into a Restaurant... - Tim Taylor
- Fed Chair Jay Powell on Monetary Policy Rules - David Beckworth
- Black/White Disparities: 50 Years After the Kerner Commission - Tim Taylor
- Working Toward the Next Economic Paradigm 1 Mohamed A. El-Erian
- A skeptical view of the impact of the Fed’s balance sheet - Econbrowser
- Understanding the U.S. Investment Income Balance (wonky) - Brad Setser
- Computational social science - Understanding Society
- The Rate of Return on Everything - No Hesitations
- An Assessment of the U.S. Economy - Randal Quarles
Monday, February 26, 2018
Looking For Policy Continuity From Powell, by Tim Duy: Federal Reserve Chairman Jerome Powell will tackle his first Semiannual Monetary Policy Report to the Congress this week. The expectation is that Powell will by and large reiterate the case for continued gradual tightening of monetary policy. That has come to mean three rate hikes in 2018, although given the data dependence of policy the risk is that three becomes four. Market participants remains nervous, however, that Powell will set a more hawkish tone indicating a sharp acceleration of rate hikes. I think this very unlikely at this juncture. I do think there is room, however, to emphasize that if fiscal spending supercharges growth in 2018, then rate hikes will continue into 2019. ...Continued here...
- Paroling the Spanish Prisoner (Wonkish) - Paul Krugman
- The Making of Lehman Brothers II - Simon Johnson
- Monetary Policy Cycles and Financial Stability - FRBSF
- Three questions for Federal Reserve chairman Jay Powell - FT
- Options of Last Resort - Liberty Street Economics
- ‘Metrics Monday: What to Do Instead of log(x +1) - Marc F. Bellemare
- Relying on the Fed's Balance Sheet - Cecchetti & Schoenholtz
- Rebuilding macroeconomic theory project - Equitable Growth
- Keynes's General Theory Contains Few Mentions of "Fiscal Policy"- Brad DeLong
- Slok on QE, and a great paper - John Cochrane
- A great EFG - John Cochrane
- Money and monetary stability in Europe, 1300-1914 - VoxEU
- Paul Krugman Looks Back at the Macroeconomic Policy Debate - Brad DeLong
- A Skeptical View of the Impact of the Fed’s Balance Sheet”- William Dudley
- Bulls--- Detection as a Student Learning Goal - Brad DeLong
Friday, February 23, 2018
- Financial Plumbing Most to Blame for 2008 Crisis - IGM Forum
- Foreign exchange interventions: Frequent and effective - VoxEU
- The recession of 2012-13 and the taper tantrum - MacroMania
- Some Thoughts About Economic Exposition in Math and Words - Tim Taylor
- Europeans should stop whining about their appreciating currency - FT Alphaville
- In America’s absence, Japan takes lead on Asian free trade - Washington Post
- Should Hurricane Maria Be Modeled as a Positive Growth Shock? - Brad Setser
"there’s a faction in our country that sees public action for the public good, no matter how justified, as part of a conspiracy to destroy our freedom":
Nasty, Brutish and Trump, by Paul Krugman, NY Times: On Wednesday, after listening to the heart-rending stories of those who lost children and friends in the Parkland school shooting — while holding a cue card with empathetic-sounding phrases — Donald Trump proposed his answer: arming schoolteachers.
It says something about the state of our national discourse that this wasn’t even among the vilest, stupidest reactions to the atrocity. No, those honors go to the assertions by many conservative figures that bereaved students were being manipulated by sinister forces, or even that they were paid actors.
Still, Trump’s horrible idea, taken straight from the N.R.A. playbook, was deeply revealing...
To see why, consider the very case often used to illustrate how bizarrely we treat guns: how we treat car ownership and operation...,there’s a lot of variation in car safety among states within the U.S., just as there’s a lot of variation in gun violence.
America has a “car death belt” in the Deep South and the Great Plains; it corresponds quite closely to the firearms death belt defined by age-adjusted gun death rates. It also corresponds pretty closely to the Trump vote — and also to the states that have refused to expand Medicaid, gratuitously denying health care to millions of their citizens. ...
For whatever reason, there’s a faction in our country that sees public action for the public good, no matter how justified, as part of a conspiracy to destroy our freedom.
This paranoia strikes both deep and wide. ... And it goes along with basically infantile fantasies about individual action — the “good guy with a gun” — taking the place of such fundamentally public functions as policing.
Anyway, this political faction is doing all it can to push us toward becoming a society in which individuals can’t count on the community to provide them with even the most basic guarantees of security — security from crazed gunmen, security from drunken drivers, security from exorbitant medical bills (which every other advanced country treats as a right, and does in fact manage to provide).
In short, you might want to think of our madness over guns as just one aspect of the drive to turn us into what Thomas Hobbes described long ago: a society “wherein men live without other security than what their own strength and their own invention shall furnish them.” And Hobbes famously told us what life in such a society is like: “solitary, poor, nasty, brutish and short.”
Yep, that sounds like Trump’s America.
I am here today:
Economic Fluctuations and Growth Research Meeting
Andrew Atkeson and Monika Piazzesi, Organizers
Federal Reserve Bank of San Francisco
February 23, 2018
Friday, February 23
Fatih Guvenen, University of Minnesota and NBER
Gueorgui Kambourov, University of Toronto
Burhanettin Kuruscu, University of Toronto
Sergio Ocampo-Diaz, University of Minnesota
Daphne Chen, Florida State University
Use It Or Lose It: Efficiency Gains from Wealth Taxation
Discussant: Roger H. Gordon, University of California at San Diego and NBER
Matteo Maggiori, Harvard University and NBER
Brent Neiman, University of Chicago and NBER
Jesse Schreger, Columbia University and NBER
International Currencies and Capital Allocation
Discussant: Harald Uhlig, University of Chicago and NBER
Katarína Borovičková, New York University
Robert Shimer, University of Chicago and NBER
High Wage Workers Work for High Wage Firms
Discussant: Isaac Sorkin, Stanford University and NBER
Marcus Hagedorn, University of Oslo
Iourii Manovskii, University of Pennsylvania and NBER
Kurt Mitman, Institute for International Economic Studies
The Fiscal Multiplier
Discussant: Adrien Auclert, Stanford University and NBER
Carlos Garriga, Federal Reserve Bank of St. Louis
Aaron Hedlund, University of Missouri
Housing Finance, Boom-Bust Episodes, and Macroeconomic Fragility
Discussant: Veronica Guerrieri, University of Chicago and NBER
John Kennan, University of Wisconsin at Madison and NBER
Spatial Variation in Higher Education Financing and the Supply of College Graduates
Discussant: Danny Yagan, University of California at Berkeley and NBER
Thursday, February 22, 2018
Fedspeak Reiterates Gradual Path: Fed speakers continue to reiterate that policy remains on a gradual path of tightening. So far, the inflation data and brightening economy has more emboldened their commitment to gradual rate hikes than a faster pace of hikes. What about fiscal policy? That train has left the station, but central bankers don’t seem too concerned – yet. ...continued here...
And one more from Tim:
First Impressions of the January FOMC Minutes: The minutes of the January FOMC meeting revealed increasing confidence in the economic outlook. That translated into increased confidence that gradual rate hikes remains the appropriate policy path. Does that mean the central bankers stand poised to raise their “dots” such that the median rate hike projection rises to four hikes? I don’t think so. I read the minutes as wiping away lingering concerns about the inflation outlook and allowing policymakers to coalesce around the existing three hike projection. The risk remains, of course, that conditions remain sufficiently buoyant to raise the rate projection in June or September. More important to me at this juncture is I see clear hints that the projections beyond 2018 are vulnerable to upward revisions. ...continued here...
- What Does a True Populism Look Like? It Looks Like the New Deal - Dani Rodrik
- Mapping Capital Flows Into the U.S. Over the Last Thirty Years - Brad Setser
- Stable exploitation - Stumbling and Mumbling
- The World-Wide Fama Puzzle Reversal - Econbrowser
- Puerto Rico and the U.S. Virgin Islands after the Hurricanes - Liberty Street
- Fed Officials Say Economy Is Ready for Higher Rates - The New York Times
- The Economic Roots of the Rise of Trumpism - John Komlos
- Economic Conditions and Key Challenges Facing the U.S. Economy - Dallas Fed
- Bank bail-ins: Lessons from the Cypriot crisis - VoxEU
Tuesday, February 20, 2018
Anna Stansbury and Lawrence Summers at VoxEU:
On the link between US pay and productivity, by Anna Stansbury and Lawrence Summers, VoxEU: Pay growth for middle class workers in the US has been abysmal over recent decades – in real terms, median hourly compensation rose only 11% between 1973 and 2016.1 At the same time, hourly labour productivity has grown steadily, rising by 75%.
This divergence between productivity and the typical worker’s pay is a relatively recent phenomenon. Using production/nonsupervisory compensation as a proxy for median compensation (since there are no data on the median before 1973), Bivens and Mishel (2015) show that typical compensation and productivity grew at the same rate over 1948-1973, and only began to diverge in 1973 (see Figure 1).
Figure 1 Labour productivity, average compensation, and production/nonsupervisory compensation 1948-2016
Notes: Labour productivity: total economy real output per hour (constructed from BLS and BEA data). Average compensation: total economy compensation per hour (constructed from BLS data). Production/nonsupervisory compensation: real compensation per hour, production and nonsupervisory workers (Economic Policy Institute).What does this stark divergence imply about the relationship between productivity and typical compensation? Since productivity growth has been so much faster than median pay growth, the question is how much does productivity growth benefit the typical worker?2
A number of authors have raised these questions in recent years. Harold Meyerson, for example, wrote in American Prospect in 2014 that “for the vast majority of American workers, the link between their productivity and their compensation no longer exists”, and the Economist wrote in 2013 that “unless you are rich, GDP growth isn't doing much to raise your income anymore”. Bernstein (2015) raises the concern that “[f]aster productivity growth would be great. I’m just not at all sure we can count on it to lift middle-class incomes.” Bivens and Mishel (2015) write “although boosting productivity growth is an important long-run goal, this will not lead to broad-based wage gains unless we pursue policies that reconnect productivity growth and the pay of the vast majority”.
Has typical compensation delinked from productivity?
Figure 1 appears to suggest that a one-to-one relationship between productivity and typical compensation existed before 1973, and that this relationship broke down after 1973. On the other hand, just as two time series apparently growing in tandem does not mean that one causes the other, two series diverging may not mean that the causal link between the two has broken down. Rather, other factors may have come into play which appear to have severed the connection between productivity and typical compensation.
As such there is a spectrum of possibilities for the true underlying relationship between productivity and typical compensation. On one end of the spectrum – which we call ‘strong delinkage’ – it’s possible that factors are blocking the transmission mechanism from productivity to typical compensation, such that increases in productivity don’t feed through to pay. At the opposite end of the spectrum – which we call ‘strong linkage’ – it’s possible that productivity growth translates fully into increases in typical workers’ pay, but even as productivity growth has been acting to raise pay, other factors (orthogonal to productivity) have been acting to reduce it. Between these two ends of the spectrum is a range of possibilities where some degree of linkage or delinkage exists between productivity and typical compensation.
In a recent paper, we estimate which point on this linkage-delinkage spectrum best describes the productivity-typical compensation relationship (Stansbury and Summers 2017). Using medium-term fluctuations in productivity growth, we test the relationship between productivity growth and two key measures of typical compensation growth: median compensation, and average compensation for production and nonsupervisory workers.
Simply plotting the annual growth rates of productivity and our two measures of typical compensation (Figure 2) suggests support for quite substantial linkage – the series seem to move together, although typical compensation growth is almost always lower.
Figure 2 Change in log productivity and typical compensation, three-year moving average
Notes: Data from BLS, BEA and Economic Policy Institute. Series are three-year backward-looking moving averages of change in log variable.Making use of the high frequency changes in productivity growth over one- to five-year periods, we run a series of regressions to test this link more rigorously. We find that periods of higher productivity growth are associated with substantially higher growth in median and production/nonsupervisory worker compensation – even during the period since 1973, where productivity and typical compensation have diverged so much in levels. A one percentage point increase in the growth rate of productivity has been associated with between two-thirds and one percentage point higher growth in median worker compensation in the period since 1973, and with between 0.4 and 0.7 percentage points higher growth in production/nonsupervisory worker compensation. These results suggest that there is substantial linkage between productivity and median compensation (even the strong linkage view cannot be rejected), and that there is a significant degree of linkage between productivity and production/nonsupervisory worker compensation.
How is it possible to find this relationship when productivity has clearly grown so much faster than median workers’ pay? Our findings imply that even as productivity growth has been acting to push workers’ pay up, other factors not associated with productivity growth have acted to push workers’ pay down. So while it may appear on first glance that productivity growth has not benefited typical workers much, our findings imply that if productivity growth had been lower, typical workers would have likely done substantially worse.
If the link between productivity and pay hasn’t broken, what has happened?
The productivity-median compensation divergence can be broken down into two aspects of rising inequality: the rise in top-half income inequality (divergence between mean and median compensation) which began around 1973, and the fall in the labour share (divergence between productivity and mean compensation) which began around 2000.
For both of these phenomena, technological change is often invoked as the primary cause. Computerisation and automation have been put forward as causes of rising mean-median income inequality (e.g. Autor et al. 1998, Acemoglu and Restrepo 2017); and automation, falling prices of investment goods, and rapid labour-augmenting technological change have been put forward as causes of the fall in the labour share (e.g. Karabarbounis and Neiman 2014, Acemoglu and Restrepo 2016, Brynjolffson and McAfee 2014, Lawrence 2015).
At the same time, non-purely technological hypotheses for rising mean-median inequality include the race between education and technology (Goldin and Katz 2007), declining unionisation (Freeman et al. 2016), globalisation (Autor et al. 2013), immigration (Borjas 2003), and the ‘superstar effect’ (Rosen 1981, Gabaix et al. 2016). Non-technological hypotheses for the falling labour share include labour market institutions (Levy and Temin 2007, Mishel and Bivens 2015), market structure and monopoly power (Autor et al. 2017, Barkai 2017), capital accumulation (Piketty 2014, Piketty and Zucman 2014), and the productivity slowdown itself (Grossman et al. 2017).
While we do not analyse these theories in detail, a simple empirical test can help distinguish the relative importance of these two categories of explanation – purely technology-based or not – for rising mean-median inequality and the falling labour share. More rapid technological progress should cause faster productivity growth – so, if some aspect of faster technological progress has caused inequality, we should see periods of faster productivity growth come alongside more rapid growth in inequality.
We find very little evidence for this. Our regressions find no significant relationship between productivity growth and changes in mean-median inequality, and very little relationship between productivity growth and changes in the labour share. In addition, as Table 1 shows, the two periods of slower productivity growth (1973-1996 and 2003-2014) were associated with faster growth in inequality (an increasing mean/median ratio and a falling labour share).
Taken together, this evidence casts doubt on the idea that more rapid technological progress alone has been the primary driver of rising inequality over recent decades, and tends to lend support to more institutional and structural explanations.
Table 1 Average annual growth rates of productivity, the labour share and the mean/median ratio during the US’ productivity booms and productivity slowdowns
Note: Data from BLS, Penn World Tables, EPI Data Library.Policy implications
The slow growth in median workers’ pay and the large and persistent rise in inequality are extremely concerning on grounds of both welfare and equity. There are important ongoing debates about the factors responsible for this phenomenon, and what must be done to reverse it.
Our contribution to these debates is, we believe, to demonstrate that productivity growth still matters substantially for middle income Americans. If productivity accelerates for reasons relating to technology or to policy, the likely impact will be increased pay growth for the typical worker.
We can use our estimates to calculate a rough counterfactual. If the ratio of the mean to median worker's hourly compensation in 2016 had been the same as it was in 1973, and mean compensation remained at its 2016 level, the median worker's pay would have been around 33% higher. If the ratio of labour productivity to mean compensation in 2016 had been the same as it was in 1973 (i.e. the labour share had not fallen), the average and median worker would both have had 4-8% more hourly compensation all else constant. Assuming our estimated relationship between compensation and productivity holds, if productivity growth had been as fast over 1973-2016 as it was over 1949-1973, median and mean compensation would have been around 41% higher in 2016, holding other factors constant.
This suggests that the potential effect of raising productivity growth on the average American’s pay may be as great as the effect of policies to reverse trends in income inequality – and that a continued productivity slowdown should be a major concern for those hoping for increases in real compensation for middle income workers.
This does not mean that policy should ignore questions of redistribution or labour market intervention – the evidence of the past four decades demonstrates that productivity growth alone is not necessarily enough to raise real incomes substantially, particularly in the face of strong downward pressures on pay. However it does mean that policy should not focus on these issues to the exclusion of productivity growth – strategies that focus both on productivity growth and on policies to promote inclusion are likely to have the greatest impact on the living standards of middle-income Americans.
Acemoglu, D and P Restrepo (2017), "Robots and jobs: Evidence from US labour markets", NBER Working Paper 23285.
Acemoglu, D and P Restrepo (2016), “The race between machine and man: Implications of technology for growth, factor shares and employment”, NBER, Working Paper 22252.
Autor, D, D Dorn, L F Katz, C Patterson and J Van Reenen (2017), “The fall of the labour share and the rise of superstar firms”, CEPR Discussion Paper 12041.
Autor, D, D Dorn and G H Hanson (2013), "The China syndrome: Local labour market effects of import competition in the United States", American Economic Review 103(6): 2121-2168.
Autor, D, L F Katz and A B Krueger (1998), "Computing inequality: Have computers changed the labour market?" Quarterly Journal of Economics 113(4): 1169-1213.
Barkai, S (2016), "Declining labour and capital shares", Stigler Center for the Study of the Economy and the State, New Working Paper Series 2.
Bernstein, J (2015), “Faster productivity growth would be great. I’m just not sure we can count on it to lift middle class incomes”, On the Economy Blog, 21 April.
Bivens, J and L Mishel (2015), “Understanding the historic divergence between productivity and a typical worker's pay: Why it matters and why it's real", Economic Policy Institute, Washington DC.
Borjas, G J (2003), “The labour demand curve is downward sloping: Reexamining the impact of immigration on the labour market”, Quarterly Journal of Economics 118(4): 1335-1374.
Brynjolfsson, E and A McAfee (2014), The second machine age: Work, progress, and prosperity in a time of brilliant technologies, WW Norton & Company.
The Economist (2015), “Inequality: A defining issue – for poor people”, Economist Blog – Democracy in America, 16 December.
Elsby, M, B Hobijn and A Şahin (2013), "The decline of the US labour share", Brookings Papers on Economic Activity 2013(2): 1-63.
Feldstein, M (2008), “Did wages reflect growth in productivity?" Journal of Policy Modeling 30(4): 591-594.
Freeman, R B, E Han, B Duke, D Madland (2016), “How does declining unionism affect the American middle class and inter-generational mobility?”, Federal Reserve Bank, 2015 Community Development Research Conference Publication.
Gabaix, X, J‐M Lasry, P‐L Lions and B Moll (2016), "The dynamics of inequality", Econometrica 84(6): 2071-2111.
Goldin, C D, and L F Katz (2009), The race between education and technology, Harvard University Press.
Grossman, G M, E Helpman, E Oberfield and T Sampson (2017), “The productivity slowdown and the declining labour share: A neoclassical exploration”, NBER, Working Paper No 23853.
Karabarbounis, L and B Neiman (2014), “The global decline of the labour share", Quarterly Journal of Economics 129(1): 61-103.
Lawrence, R Z (2015), “Recent declines in labour's share in US income: A preliminary neoclassical account", NBER Working Paper No w21296.
Lawrence, R Z (2016), “Does productivity still determine worker compensation? Domestic and international evidence”, in The US Labour Market: Questions and Challenges for Public Policy, American Enterprise Institute Press.
Levy, F and P Temin (2007), "Inequality and institutions in 20th century America", NBER Working Paper 13106
Meyerson, H (2014), “How to raise Americans’ wages”, The American Prospect, 18 March.
Piketty, T (2014), Capital in the Twenty-First Century, Cambridge, MA: Belknap Press.
Piketty, T and G Zucman (2014), “Capital is back: Wealth-income ratios in rich countries 1700–2010”, Quarterly Journal of Economics 129(3): 1255–1310.
Stansbury, A and L Summers (2017), “Productivity and pay: Is the link broken?”, NBER, Working Paper 24165.
 As measured using the CPI-U-RS consumer price deflator. Using the PCE consumer price deflator, median compensation has risen by about 26% over the period rather than 12%. We use the Economic Policy Institute’s measure of median compensation, which they calculate from median wages (BLS) and the average wage-total compensation ratio (BEA NIPA).
 Note that we focus in this column on the divergence of median or typical pay from average productivity. The divergence of average compensation from average productivity – equivalent to the declining labour share – has been smaller and more recent. Analyses of the average compensation-average productivity divergence can be found in Feldstein (2008), Lawrence (2016) and our recent paper (Stansbury and Summers 2017).
- Come the Recession, Don’t Count on That Safety Net - The New York Times
- Absolute poverty: when necessity displaces desire - Microeconomic Insights
- Do Job Market Networks Help Recovery from Mass Layoffs? - FRBSF
- Interest Ratess and Exchange Rates Before and After the Crisis - Econbrowser
- Milton Friedman’s Rabble-Rousing Case for Abolishing the Fed - Uneasy Money
- Start preparing for the next financial crisis now - FT
- How internet giants damage the economy and society - FT
- The market failures of Big Tech - FT
Inflation, General Data Flow, Fiscal Stimulus, And Implications For Monetary Policy, by Tim Duy: The data flow remains supportive of the Fed’s forecast of sustained moderate growth. A spike in prices, however, drove core CPI inflation to the fastest monthly pace since 2005, again raising fears that the Fed will accelerate the pace of rate hikes. I still think this is premature. To be sure, the risk is that the Fed hikes rates more than the projected three times this year. But Powell & Co. will need more data to support a faster pace of rate hikes. They will not overreact to data that may prove to be nothing more than a flash in a pan. ...continued here...
Monday, February 19, 2018
- Trump’s Twin Deficits (Wonkish) - Paul Krugman
- Income inequality and aggregate demand - Equitable Growth
- What Do Trade Agreements Really Do? - NBER
- Why Economists Are Worried About International Trade - Greg Mankiw
- Trump’s Tax Success Is at the Expense of His Trade Agenda - Brad Setser
- “Fake news”: the monopoly on the narrative - Branko Milanovic
- When the impartial spectator is missing - Stumbling and Mumbling
- The Stubbornly High Cost of Remittances - Cecchetti & Schoenholtz
- Arms and Projects (Wonkish) - The Leisure of the Theory Class
- House prices and rents in the UK - mainly macro
- Economics in Two Lessons - Crooked Timber
- Economics in Two Lessons: Chapter 1 - Crooked Timber
- Leading on Climate at Every Level - Regulatory Review
- U.S. GDP Expenditure Components - MacroMania
- More on Neural Nets and ML - No Hesitations
- Do Trump’s deficits matter? - mainly macro
- Missing Productivity Growth - IGM Forum
Friday, February 16, 2018
"our job, whether we’re policy analysts or journalists, isn’t to be “balanced”; it’s to tell the truth":
Budgets, Bad Faith and ‘Balance’, by Paul Krugman, NY Times: Over the past couple of months Republicans have passed or proposed three big budget initiatives. First, they enacted a springtime-for-plutocrats tax cut that will shower huge benefits on the wealthy while offering a few crumbs for ordinary families — crumbs that will be snatched away after a few years, so that it ends up becoming a middle-class tax hike. Then they signed on to a what-me-worry budget deal that will blow up the budget deficit to levels never before seen except during wars or severe recessions. Finally, the Trump administration released a surpassingly vicious budget proposal that would punish not just the vulnerable but also most working families.
Looking at all of this should make you very angry... But my anger isn’t mostly directed at Republicans; it’s directed at their enablers, the professional centrists, both-sides pundits, and news organizations that spent years refusing to acknowledge that the modern G.O.P. is what it so clearly is.
Which is not to say that Republicans should be let off the hook. ...I can’t think of a previous example of a party that so consistently acted in bad faith — pretending to care about things it didn’t, pretending to serve goals that were the opposite of its actual intentions. ... The ... party’s true agenda, dictated by the interests of a handful of super-wealthy donors, would be very unpopular if the public understood it. So the party must consistently lie...
Meanwhile, many news organizations ... treat recent G.O.P. actions as if they are some kind of ... departure from previous principles. They aren’t. Republicans are what they always were: They never cared about deficits; they always wanted to dismantle Medicare, not defend it. They just happen not to be who they pretended to be.
Now, there’s no mystery about why many people won’t face up to the reality of Republican bad faith. Washington is full of professional centrists, whose public personas are built around a carefully cultivated image of standing above the partisan fray, which means that they can’t admit that while there are dishonest politicians everywhere, one party basically lies about everything. News organizations are intimidated by accusations of liberal bias, which means that they try desperately to show “balance” by blaming both parties equally for all problems.
But our job, whether we’re policy analysts or journalists, isn’t to be “balanced”; it’s to tell the truth. And while Democrats are hardly angels, at this point in American history, the truth has a well-known liberal bias.
Thursday, February 15, 2018
- Gaps in the Market - Heather Boushey
- The President’s new budget - Jared Bernstein
- Rising Interest Rates, but Easier Financial Conditions - Tim Taylor
- UBI policies don’t cause people to leave workforce - UChicago News
- Landing a Jumbo Is Getting Easier - Liberty Street Economics
- Urban concentration and economic growth - VoxEU
- Pedantry and Mastery in Following Rules - Uneasy Money
- Nudge Policies - Tim Taylor
- Deficits - John Cochrane
Tuesday, February 13, 2018
- Parcoursup: could do better - Thomas Piketty
- The Double Threat to Liberal Democracy - Dani Rodrik
- GDPNow's Forecast: Why Did It Spike Recently? - macroblog
- The Disappointing Recovery in U.S. Output after 2009 - FRBSF
- Great Recession’s Impact Lingers in Hardest-Hit Regions - Liberty Street
- Network Effects, Big Data, and Antitrust Issues For Big Tech - Tim Taylor
- Money As Equity: For An "Accounting View" Of Money - EconoMonitor
- The Belt and Road Initiative Didn't Quite Live up to its Hype - Brad Setser
"Trump’s offer on infrastructure is this: nothing":
Trump Doesn’t Give a Dam, by Paul Krugman, NY Times: Donald Trump doesn’t give a dam. Or a bridge. Or a road. Or a sewer system. Or any of the other things we talk about when we talk about infrastructure.
But how can that be when he just announced a $1.5 trillion infrastructure plan? That’s easy: It’s not a plan, it’s a scam. The $1.5 trillion number is just made up; he’s only proposing federal spending of $200 billion, which is somehow supposed to magically induce a vastly bigger overall increase in infrastructure investment, mainly paid for either by state and local governments (which are not exactly rolling in cash, but whatever) or by the private sector.
And even the $200 billion is essentially fraudulent: The budget proposal announced the same day doesn’t just impose savage cuts on the poor, it includes sharp cuts for the Department of Transportation, the Department of Energy and other agencies that would be crucially involved in any real infrastructure plan. Realistically, Trump’s offer on infrastructure is this: nothing.
That’s not to say that the plan is completely vacuous. One section says that it would “authorize federal divestiture of assets that would be better managed by state, local or private entities.” Translation: We’re going to privatize whatever we can. It’s conceivable that this would be done only in cases where the private sector really would do better, and contracts would be handed out fairly, without a hint of cronyism. And if you believe that, I have a degree from Trump University you might want to buy. ...
So why isn’t Trump proposing something real? Why this dog’s breakfast of a proposal that everyone knows won’t go anywhere?
Part of the answer is that in practice Trump always defers to Republican orthodoxy, and the modern G.O.P. hates any program that might show people that government can work and help people.
But I also suspect that Trump is afraid to try anything substantive. To do public investment successfully, you need leadership and advice from experts. And this administration doesn’t do expertise, in any field. Not only do experts have a nasty habit of telling you things you don’t want to hear, their loyalty is suspect: You never know when their professional ethics might kick in.
So the Trump administration probably couldn’t put together a real infrastructure plan even if it wanted to. And that’s why it didn’t.
From the San Francisco Fed:
FRBSF Fed Views: Fernanda Nechio, research advisor at the Federal Reserve Bank of San Francisco, stated her views on the current economy and the outlook as of February 8, 2018.
Based on the advance estimate of the Bureau of Economic Analysis, real GDP expanded at an annual rate of 2.6 percent for the fourth quarter of 2017 and 2.5 percent for the year overall. The bulk of the strength in real GDP growth can be attributed to robust consumer spending, which in turn reflects household wage gains, increased equity prices, and supportive financial conditions. As monetary policy continues to normalize over the next two to three years, we expect growth gradually to fall back to our trend growth estimate of about 1.8%.
Recent employment gains remain solid. Nonfarm payroll employment in January rose by 200,000 jobs. During 2017, payroll gains have averaged around 181,000 jobs per month.
The unemployment rate remained at 4.1% in January, unchanged since October. We expect this rate to fall below 4% in 2018 before gradually returning to our estimate for its natural level at 4.75%.
Inflation continues to remain below the Federal Reserve’s 2% target. Overall inflation in the twelve months through December, as measured by the price index for personal consumption expenditures was 1.7%. Core inflation, which excludes volatile food and energy prices, rose 1.5% in the twelve months through December. Given the strong labor market conditions, we expect overall and core consumer price inflation to rise gradually and reach our 2% target over the next couple of years.
Interest rates are continuing to increase with the gradual removal of monetary policy accommodation. At its January meeting, the FOMC maintained the target range for the federal funds target at 1.25% to 1.5%.
The developed world is undergoing a dramatic demographic transition. In most advanced economies, actual and expected longevity have increased steadily, while the median retirement age has changed little, leading to longer retirement periods. Meanwhile, population growth rates are declining and in some cases, even becoming negative.
Changing demographics can affect the natural real rate of interest, r-star; the inflation-adjusted interest rate that is consistent with steady inflation at the Fed’s target and the economy growing at its potential. Demographic trends affect the equilibrium rate by changing incentives to save and consume. Lengthier retirement periods may raise some households’ desire to save rather than consume, lowering r-star. At the same time, declining population growth increases the share of older households in the economy, who generally have higher marginal propensities to consume, raising consumption and r-star. As population growth declines, it could also reduce real GDP growth and productivity, thereby putting downward pressure on r-star.
In the United States, these demographic changes have already put significant downward pressure on interest rates between 1990 and 2017. As demographic movements tend to be long-lasting, the effects on interest rates may be ongoing. A lower equilibrium rate has the potential to limit the scope for the Federal Reserve to cut interest rates in response to future recessionary shocks.
The views expressed are those of the author, with input from the forecasting staff of the Federal Reserve Bank of San Francisco. They are not intended to represent the views of others within the Bank or within the Federal Reserve System.
Monday, February 12, 2018
So far, I’d say this is small potatoes… -- New York Federal Reserve President William Dudley, February 8, 2018
All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. -- Federal Reserve Chairman Ben Bernanke, May 17, 2007
Friday was yet another day of wild swings on Wall Street as market participants continue to digest the implications for stocks and bonds of this new stage of the business cycle. In short, there looks to be a painful repricing underway that involves a new equilibrium set of prices for bonds and stocks. For now, though the Fed doesn’t care about your pain. At least that’s the message from Fed officials. They want to keep the focus on the bigger picture. That bigger picture is the economic forecast – which continues to point to gradual rate hikes. ...[continued here]...
- How Big a Bang for Trump’s Buck? (Wonkish) - Paul Krugman
- Kaldor and Piketty’s facts: The rise of monopoly power - Equitable Growth
- The rise of market power explains macroeconomic puzzles - Equitable Growth
- Economics and politics of monetary policymaking: A new eBook - VoxEU
- Weber’s proof of Gittins Index Theorem - The Leisure of the Theory Class
- Metrics Monday: Causal Inference with Observational Data - Marc Bellemare
- Does More "Skin in the Game" Mitigate Bank Risk-Taking? - Liberty Street
- The Impact of Tax Arbitrage on the U.S. Balance of Payments - Brad Setser
- A Multicointegration Model of Global Climate Change - Stochastic Trend
- Understanding Bank Capital: A Primer - Cecchetti & Schoenholtz
- Notes on European Recovery (Wonkish) - Paul Krugman
- Nobody Knows Anything - Economic Principals
- Global trade and the dollar - VoxEU
- Economic Goodness-of-Fit - Dave Giles
Friday, February 09, 2018
"...pretending to care about the deficit served several useful political purposes":
Fraudulence of the Fiscal Hawks, by Paul Krugman, NY Times: In 2011, House Republicans, led by Paul Ryan, issued a report full of dire warnings about the dangers of budget deficits. ... Citing the horrors of big deficits, Republicans refused to raise the federal debt ceiling, threatening to create financial turmoil and effectively blackmailing President Barack Obama into cutting spending on domestic programs.
How big were these horrifying deficits? In the 2012 fiscal year the federal deficit was $1.09 trillion. Much of this deficit, however, was a direct result of a depressed economy... The deficit fell rapidly over the next few years as the economy recovered.
This week Republicans, having just enacted a huge tax cut, cheerfully agreed to a budget deal that, according to independent experts, will push next year’s deficit up to around $1.15 trillion — bigger than in 2012..., but this time none of the deficit will be a result of a depressed economy.
Wait, it gets worse. In 2012 there were strong economic reasons to run budget deficits. The economy was still suffering the aftereffects of the 2008 financial crisis. ... By contrast, there is no comparable case for deficits now, with the economy near full employment and the Fed raising interest rates to head off potential inflation. ...
If anything, we should be using this time of relatively full employment to pay down debt, or at least reduce it relative to G.D.P. ...Republicans ... are providing more stimulus to an economy with 4 percent unemployment than they were willing to allow an economy with 8 percent unemployment.
There have been many “news analysis” pieces asking why Republicans have changed their views on deficit spending. But let’s be serious: Their views haven’t changed at all. They never really cared about debt and deficits; it was a fraud all along. ...
However, pretending to care about the deficit served several useful political purposes. It was a way to push for cuts in social programs. It was also a way to hobble Obama’s presidency.
And I don’t think it’s unfair to suggest that there was an element of deliberate economic sabotage. ... Basically, they were against anything that might help the economy on President Obama’s watch.
Now Obama is gone, and suddenly deficits don’t matter. ...
No, this is all about Republican bad faith. Everything they said about budgets, every step of the way, was fraudulent. And nobody should believe anything they say now.
- No Fairy, No Cry - Paul Krugman
- Do Not Overlook the December Trade Data - Brad Setser
- What Bitcoin Reveals About Financial Markets - John Quiggin
- What Do Cryptocurrencies Have to Do with Trust? - Liberty Street
- Fisherian Decomposition of Interest Rate Increase - Econbrowser
- Technology, power & ideology - Stumbling and Mumbling
- Decreasing the size of the state is very unpopular - mainly macro
- Economic predictions with big data: The illusion of sparsity - VoxEU
- The Chinese banking system - VoxEU
- Olympic Economics - Tim Taylor
- The origins of money - FT
Thursday, February 08, 2018
Angus Deaton on the Under-Discussed Driver of Inequality in America: “It’s Easier for Rent-Seekers to Affect Policy Here Than In Much of Europe”
"In an interview with ProMarket, Nobel Prize-winning economist Angus Deaton talks about the connection of rent-seeking and monopolization to rising inequality":
Angus Deaton on the Under-Discussed Driver of Inequality in America: “It’s Easier for Rent-Seekers to Affect Policy Here Than In Much of Europe”: In December, the United Nations’ special rapporteur on extreme poverty and human rights, Philip Alston, embarked on a coast-to-coast tour of the United States. Alston’s fact-finding mission, conducted at the invitation of the federal government, resulted in a grim report that declared the US “the world champion of extreme inequality” and highlighted the vast inequities that plague American society: The US is one of the world’s wealthiest countries, yet 40 million of its inhabitants live in poverty, its infant mortality rates are the highest among developed nations, and Americans lead “shorter and sicker lives, compared to people living in any other rich democracy.” The US also has the lowest rate of social mobility of any rich country, rapidly turning the American Dream—its national ethos—to “an American illusion.”
Rising inequality has been the focus of countless articles, books and debates in recent years, as more and more empirical studies show that in the decades since 1980, income gains have gone overwhelmingly to the top 1 percent and 0.1 percent. Much of the debate, however, is concerned with the implications of inequality: Does rising inequality negatively affect economic growth? Does it undermine democracy? Did it contribute to the rise of populist politics in America and around the developed world?
Those, says Nobel Prize-winning economist Angus Deaton, are the wrong questions to ask if we wish to understand inequality. In fact, he suggested in a recent piece for Project Syndicate, it’s possible that the term “inequality” itself might be ill-fitting. A better term might be “unfairness”: Inequality, he argued, is the consequence of economic, political, and social processes—some good, some bad, and some very bad. The key to addressing its rapid increase is to address the processes that can be deemed “unfair.”
Examples are plenty. In his piece, Deaton focuses on several processes and policies that have allowed the rich to get richer while holding down middle- and working-class wages. Among them: rising health care costs, market consolidation, diminishing labor power, and corporations’ political power. These processes do not stem from “unstoppable processes” like technology or globalization, argues Deaton, but are the result of rent-seeking.
Deaton, the recipient of the 2015 Nobel Prize in Economics, is one of the world’s foremost experts on inequality. The groundbreaking research on US mortality rates he conducted together with Anne Case revealed an increase in midlife mortality rates among white non-Hispanic Americans, led by death related to drugs, alcohol and suicide—what they called “deaths of despair.”
To better understand the connection between inequality and rent-seeking in America, we spoke with Deaton, a Senior Scholar and the Dwight D. Eisenhower Professor of Economics and International Affairs Emeritus at the Woodrow Wilson School of Public and International Affairs and the Economics Department at Princeton University. In his interview with ProMarket, Deaton discussed the connection of rent-seeking and monopolization to rising inequality, and explained why he believes it’s easier for rent-seekers to influence policy in the US than in Europe. ...[continue]...
Wednesday, February 07, 2018
- Wells Fargo’s board members are getting off too easily - Larry Summers
- A Farewell to Fracking Regulations - The Regulatory Review
- A DSGE Perspective on Safety, Liquidity, and Low Interest Rates - Liberty Street
- US History and the Path to European Integration - Tim Taylor
- Confidence and Crashes - Roger E. A. Farmer
- The size and composition of fiscal adjustment matter for inequality - VoxEU
- U.S. Government Views on Climate in Historical Context - Robert Stavins