The Economic and Fiscal Consequences of Improving U.S. Educational Outcomes

From the introduction

This study addresses a key challenge confronting the United States—how to promote both widely shared and faster economic growth. It does so by analyzing and describing the effects of raising educational achievement, especially for those not at the top of the economic ladder.The results of this analysis, which are consistent with a large body of research across a variety of academic disciplines, demonstrate that improving the education of future workers accelerates economic growth and can promote more equal opportunity over the long run. The result: stronger, more broadly shared economic growth, which in turn raises national income and increases government revenue, providing the means by which to invest in improving our economic future.

Source: Washington Center for Equitable Growth

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U.S. Workers’ Diverging Locations: Policy and Inequality Implications

From the introduction:

Over the past three decades, the earnings of workers with a college education have substantially increased relative to those with less education. In 1980, the average college graduate earned 38% more than the average high school graduate. By 2000, the college-high school graduate wage gap increased to 57%, and by 2011 it rose to 73%.1 At the same time, workers have become increasingly spatially segregated by education. Cities that initially had a large share of college graduates in 1980 increasingly attracted larger shares of college educated workers from 1980 to 2000, while cities with relatively less educated populations in 1980 gained few college grads over the following 20 years. The increasingly “highly educated cities” also experienced higher wage growth for both low- and high-skill workers and substantially larger increases in housing costs. The economic trajectories of these increasing high skill cities are diverging from those with fewer college graduates (Moretti, 2013).

Source: Stanford Institute for Economic Policy Research

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Inequality in a Lower Growth Latin America

Forward:

This semiannual report produced by the Office of the Chief Economist for Latin America and the Caribbean (LAC) of the World Bank reviews the economic and financial outlook for the LAC region at a time when growth in the region and most of the world has decelerated significantly. As usual in this series, Chapter 1 reviews the configuration of global risks and assesses the outstanding short term opportunities and challenges facing the LAC region. We document the significant slowdown in economic activity across the region, and explore the possibility of this being the ‘new normal’. In Chapter 2 we assess if the major social gains achieved during the ‘Golden Decade’, in particular the decline in inequality, will hold in this less supportive environment, and discuss alternative policy responses to preserve and further the equity gains in the region

Source: World Bank

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How Close is Asia to Already Being A Trade Bloc?

Abstract:

FTA bilateral and regional negotiations in Asia have developed quickly in the past decade moving Asia ever closer to an economic union. Unlike Europe with the EU and the 1997 treaty of Rome and the 1993 NAFTA in North American, Asian economic integration does not involve a comprehensive trade treaty, but an accelerating process of building one bilateral agreement on another. For countries in Asia there is negotiation of a China-Japan-Korea agreement, a China-India agreement, a Trans-Pacific Partnership (TPP) agreement, and a Regional Comprehensive Economic Partnership (RCEP). This paper uses a fifteen-country global general equilibrium model with trade costs to numerically calculate Debreu distance measures between the present situation and potential full Asia integration in the form of a trade bloc. Our results reveal that these large Asia economies can be close to full integration if they act timely in agreements through negotiation. All Asia countries will gain from Asia trade bloc arrangements except when the Asia FTA can only eliminate tariffs. These countries’ gain will increase as bilateral non-tariff elimination deepens. Larger countries will gain more than small countries. Asia FTA, Asia Union and RCEP will benefit member countries more than ASEAN+3. Global free trade will benefit all countries the most.

Source: NBER

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The Effect of Sleep on Wages: Time Use and Productivity

Abstract:

While economists have long been interested in effects of health and human capital on productivity, less attention has been paid to the influence of time use. We investigate the productivity effects of the single largest use of time--sleep. Because sleep influences performance on memory and focus intensive tasks, it plausibly affects economic outcomes. We identify the effect of sleep on wages by exploiting the relationship between sunset time and sleep duration. Using a large, nationally representative set of time use diaries from the United States, we provide the first causal estimates of the impact of sleep on wages: a one-hour increase in long-run average sleep increases wages by 16%, equivalent to more than one year of schooling. We also document the nonlinearity of the sleep-wage relationship. Our results highlight the economic importance of sleep and pose potentially fruitful questions about the effects of time use on labor market outcomes.

Source: UCSD Department of Economics [via e-scholarship repository]

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Young Adults, Student Debt and Economic Well-Being

From the introduction:

An analysis of the most recent Survey of Consumer Finances finds that households headed by a young, college-educated adult without any student debt obligations have about seven times the typical net worth ($64,700) of households headed by a young, college-educated adult with student debt ($8,700). And the wealth gap is also large for households headed by young adults without a bachelor’s degree: Those with no student debt have accumulated roughly nine times as much wealth as debtor households ($10,900 vs. $1,200). This is true despite the fact that debtors and non-debtors have nearly identical household incomes in each group.

Source: Pew Research Center

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International Comparison Program Summary Results Release Compares the Real Size of the World Economies

From the April 29, 2014 Press Release:

The International Comparison Program (ICP) released new data today showing that the world economy produced goods and services worth over $90 trillion in 2011, and that almost half of the world’s total output came from low and middle income countries.

Under the authority of the United Nations Statistical Commission, the 2011 round of ICP covered 199 economies - the most extensive effort to measure Purchasing Power Parities (PPPs) across countries ever. ICP 2011 estimates benefited from a number of methodological improvements over past efforts to calculate PPPs.

The ICP’s principal outputs are PPPs for 2011 and estimates of PPP-based gross domestic product (GDP) and its major components in aggregate and per capita terms. When converting national economic measures (e.g. GDP), into a common currency, PPPs are a more direct measure of what money can buy than exchange rates.

ICP implementation was led and coordinated by the ICP Global Office, hosted by the World Bank, in partnership with regional agencies overseeing activities in eight geographic regions: Africa, Asia and the Pacific, Commonwealth of Independent States (CIS), Latin America, the Caribbean, Western Asia, Pacific Islands, and the countries of the regular PPP program managed by the Statistical Office of the European Communities (Eurostat) and the Organization for Economic Cooperation and Development (OECD). In addition, two “singleton” economies, Georgia and Iran, participated in bilateral exercises with partner economies, without being part of any regional comparisons.

Source: World Bank ICP

Download the Summary of Results and Findings of the 2011 International Comparison Program (PDF) published April 30, 2014
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The Lehman Sisters hypothesis

Abstract:

This article explores the Lehman Sisters hypothesis. It reviews empirical literature about gender differences in behavioural, experimental and neuro-economics as well as in other fields of behavioural research. It discusses gender differences along three dimensions of financial behaviour: risk aversion and response to uncertainty, ethics and moral attitudes, and leadership. The article argues that gender stereotypes are influential in finance, constraining women to achieve top positions in banking and sustaining a strong masculine culture. At the same time the analysis indicates that the few women who make it to the top tend to perform on average better than men, in particular under uncertainty. This is explained by a combination of gender beliefs, gender stereotypes, gender identity and flexible biological processes. Although further research is necessary, the existing empirical literature would support a plea for having more rather than fewer women in financial trade, risk management and at the top of the financial sector.

Source: Cambridge Journal of Economics

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The Economics of Slums in the Developing World

Abstract:

The global expansion of urban slums poses questions for economic research as well as problems for policymakers. We provide evidence that the type of poverty observed in contemporary slums of the developing world is characteristic of that described in the literature on poverty traps. We document how human capital threshold effects, investment inertia, and a "policy trap" may prevent slum dwellers from seizing economic opportunities offered by geographic proximity to the city. We test the assumptions of another theory -- that slums are a just transitory phenomenon characteristic of fastgrowing economies -- by examining the relationship between economic growth, urban growth, and slum growth in the developing world, and whether standards of living of slum dwellers are improving over time, both within slums and across generations. Finally, we discuss why standard policy approaches have often failed to mitigate the expansion of slums in the developing world. Our aim is to inform public debate on the essential issues posed by slums in the developing world.

Source: Journal of Economic Perspectives

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The danger of high home ownership: greater unemployment

Description:

On the basis of evidence from the United States and Europe, the authors maintain that high home ownership is a major reason for the high unemployment rates of the industrialized nations in the post-war era. They argue that governments should encourage more renting, as the Swiss and Germans do, and they should not give financial incentives for ownership.

Source: Chatman House / Competitive advange in the global economy

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An Experiment in Hiring Discrimination Via Online Social Networks

Abstract:
Surveys of U.S. employers suggest that numerous firms seek information about job applicants online. However, little is known about how this information gathering influences employers’ hiring behavior. We present results from two complementary randomized experiments (a field experiment and an online experiment) on the impact of online information on U.S. firms’ hiring behavior. We manipulate candidates’ personal information that is protected under either federal laws or some state laws, and may be risky for employers to enquire about during interviews, but which may be inferred from applicants' online social media profiles. In the field experiment, we test responses of over 4,000 U.S. employers to a Muslim candidate relative to a Christian candidate, and to a gay candidate relative to a straight candidate. We supplement the field experiment with a randomized, survey-based online experiment with over 1,000 subjects (including subjects with previous human resources experience) testing the effects of the manipulated online information on hypothetical hiring decisions and perceptions of employability. The results of the field experiment suggest that a minority of U.S. firms likely searched online for the candidates’ information. Hence, the overall effect of the experimental manipulations on interview invitations is small and not statistically significant. However, in the field experiment, we find evidence of discrimination linked to political party affiliation. Specifically, following the Gallup Organization’s segmentation of U.S. states by political ideology, we use results from the 2012 presidential election and find evidence of discrimination against the Muslim candidate compared to the Christian candidate among employers in more Romney-leaning states and counties. These results are robust to controlling for firm characteristics, state fixed effects, and a host of county-level variables. We find no evidence of discrimination against the gay candidate relative to the straight candidate. Results from the online experiment are consistent with those from the field experiment: we find more evidence of bias among subjects more likely to self-report more political conservative party affiliation. The online experiment’s results are also robust to controlling for demographic variables. Results from both experiments should be interpreted carefully. Because politically conservative states and counties in our field experiment, and more conservative party affiliation in our online experiment, are not randomly assigned, the result that discrimination is greater in more politically conservative areas and among more politically conservative online subjects should be interpreted as correlational, not causal.

Source: Acquisti, Alessandro and Fong, Christina M., An Experiment in Hiring Discrimination Via Online Social Networks (November 20, 2013). Available at SSRN: http://ssrn.com/abstract=2031979

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The State of Women in America: A 50-State Analysis of How Women Are Faring Across the Nation

From the overview:

In this report, we examine both the progress made and the challenges remaining for women across the country. We do so by reviewing three categories that are critical to women’s overall well-being: economics, leadership, and health. Within each of those three categories, we analyze multiple factors—36 factors overall. In selecting the factors, we were unable to include every metric available but strove to include a broad array of factors that would help illustrate the multitude of issues facing women. We also included data on women of color in order to show the challenges that different communities face.

Source: Center for American Progress

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Self-Image and Strategic Ignorance in Moral Dilemmas

Abstract: 

Avoiding information about adverse welfare consequences of self-interested decisions, orstrategic ignorance, is an important source of corruption, anti-social behavior and even atrocities. We model an agent who cares about self-image and has the opportunity to learn the social benefits of a personally costly action.  The trade-off between self-image concerns and material payoffs can lead the agent to use ignorance as an excuse, even if it is deliberately chosen. Two experiments, modeled after Dana, Weber, and Kuang (2007), show that a) many people will reveal relevant information about others' payoffs after making an ethical decision, but not before, and b)  some people are willing to pay for ignorance. These results corroborate the idea that Bayesian self-signaling drives people to avoid inconvenient facts in moral decisions.

Source:  Departmental Working Papers, Department of Economics, UCSB, UC Santa Barbara [via eScholarship Repository]

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Individual Creativity, Ex-ante Goals and Financial Incentives

Abstract:

Creativity is a complex and multi-dimensional phenomenon that has hardly been considered by economists, despite a great deal of economic importance. This paper presents a series of experiments where subjects face creativity tasks where, in one case, ex-ante goals and constraints are imposed on their answers, and in the other case no restrictions apply. The effects of financial incentives in stimulating creativity in both types of tasks is then tested, together with the impact of personal features like risk and ambiguity aversion. Our findings show that, in general,financial incentives affect “in-box” (constrained) creativity, but do not facilitate “blue sky”(unconstrained) creativity. However, in the latter case incentives do play a role for ambiguity averse agents, who tend to be significantly less creative and seem to need extrinsic motivation to exert effort in a task whose odds of success they don’t know. We do find that measures of creative style, sensation-seeking preferences, and past involvement in artistic endeavors are related to our creativity score, but do not find any difference across gender for either form of creativity.

Source: Departmental Working Papers, Department of Economics, UCSB, UC Santa Barbara

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Compare50.org : database for comparing economic indicators across 50 States

Info:

Supported by the nonprofit Next 10 foundation, [David] Neumark and [U.C. Irvine] economics graduate student Jennifer Muz compiled data on fundamental economic measures – including economic growth, job growth, layoffs and unemployment, earnings, income distribution and poverty – from 1990 to 2011 for all 50 states. Sources included the U.S. Bureau of Economic Analysis and the U.S. Bureau of Labor Statistics’ Quarterly Census of Employment & Wages and Current Population Survey.

Compare50.org is a Next 10 project. Next 10 is focused on innovation and the intersection between the economy, the environment, and quality of life issues for all Californians. We create tools and provide information that fosters a deeper understanding of the critical issues affecting all Californians. Through education and civic engagement, we hope Californians will become empowered to affect change.

Go to: Compare50.org

The Transformation of Mortgage Finance and the Industrial Roots of the Mortgage Meltdown

Abstract:

The 2007-2009 financial crisis was centered on the mortgage industry. This paper develops a distinctly sociological explanation of that crisis based on Fligstein’s (1996) markets as politics approach and the sociology of finance. We use archival and secondary sources to show that the industry became dominated by an “industrial” conception of control whereby financial firms vertically integrated in order to capture profits in all phases of the mortgage industry including the production of financial products. The results of multivariate regression analyses show that the “industrial” model drove the deterioration in the quality of securities that firms issued and significantly contributed to the eventual failure of the firms that pursued the strategy. We show that large global banks which were more involved in the industrial production of U.S. mortgage securities also experienced greater investment losses. The findings challenge existing conventional accounts of the crisis and provide important theoretical linkages to the sociology of finance.

Source: 
Fligstein, Neil (CASBS Fellow 1995); & Goldstein, Adam. (2012). The Transformation of Mortgage Finance and the Industrial Roots of the Mortgage Meltdown. UC Berkeley: Institute for Research on Labor and Employment. Retrieved from: http://escholarship.org/uc/item/2zx8r7fb

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