Data Source

No.  From Thomas J. Miles and Adam B. Cox in the JLE:

Prior research investigates whether immigrants commit more crimes than native-born people. Yet the central policy used to regulate immigration — detention and deportation — has received little empirical evaluation. This article studies a recent policy innovation called Secure Communities. This program permits the federal government to check the immigration status of every person arrested by local police and to take the arrestee into federal custody promptly for deportation proceedings. Since its launch, the program has led to a quarter of a million detentions. We utilize the staggered rollout of the program across the country to obtain differences-in-differences estimates of its impact on crime rates. We also use unique counts of the detainees from each county and month to estimate the elasticity of crime with respect to confined immigrants. The results show that the Secure Communities program has had no observable effect on the overall crime rate.

That is once again via the excellent Kevin Lewis.

That is the NBER paper by Chang, Chen, Waggoner, and Zha, pdf here.  Here is the abstract:

We make three contributions in this paper. First, we provide a core of macroeconomic time series usable for systematic research on China. Second, we document, through various empirical methods, the robust findings about striking patterns of trend and cycle. Third, we build a theoretical model that accounts for these facts. The model’s mechanism and assumptions are corroborated by institutional details, disaggregated data, and banking time series, all of which are distinctive of Chinese characteristics. The departure of our theoretical model from standard ones off ers a constructive framework for studying China’s macroeconomy.
Not a very illuminating abstract, but I thought this was an important piece.  There is now real and apparently reliable time series information for China!   And with the accompanying model, the authors find there is low consumption growth and overcapacity of heavy industry with rising debt risks, both problems stemming from the preferential credit access given to large Chinese firms.  That is hardly news, but it is nice to see it confirmed and measured, I call that Austro-Chinese business cycle theory
I’ll again be live-blogging the presentation and discussion once it is up and running, in the MR comments section to this post, feel free to add your own comments.

A conglomerate on the order of the old Gulf + Western, China National runs more than 160 cigarette brands, manufactured in about 100 factories across the country, and uses its earnings to invest in banks, luxury hotels, a hydroelectric plant, a golf course, and even drugmakers. Most of its money goes to its owner, the Chinese government; the tobacco industry accounts for about 7 percent of the state’s revenue each year [emphasis added], and China National controls as much as 98 percent of the market. All told, the industry in China employs more than 500,000 Chinese. They are among roughly 20 million people who get some income from tobacco, including members of 1.3 million farming households and workers at 5 million retailers, according to government figures. The extent to which the government is interlocked with the fortunes of China National might best be described by the company’s presence in schools. Slogans over the entrances to sponsored elementary schools read, “Genius comes from hard work. Tobacco helps you become talented.”

From Andrew Martin, there is more here.  Of course this helps explain why the Chinese government has such mixed feelings about conducting a successful anti-tobacco campaign.  By the way, do any of you know of a source on the 7 percent figure?

Veronique de Rugy and Diane Katz have the scoop:

…the primary beneficiaries on the buyer side of the transactions are also very large firms.  Among the top 10 buyers, 5 are state-controlled and rake in millions of dollars from their own governments in addition to Ex-Im Bank subsidies.

Five of the top ten buyers are related to the production of oil or natural gas.  The other five top buyers are airlines.  Number one on the list is…can you guess it?  Pemex.  Clearly a company worthy of further subsidy, and from the American government too.

On the sell side, 80 percent of Ex-Im financing goes to support the exports of large American firms, note that the number one firm — Boeing — already receives plenty of implicit subsidy from DOD contracts.  Is there no limit to strategic trade policy?  And to the extent carbon emissions are important, how is the Ex-Im Bank doing on that scorecard?

There is some new research by Castilla and Bernard:

In this article, we develop and empirically test the theoretical argument that when an organizational culture promotes meritocracy (compared with when it does not), managers in that organization may ironically show greater bias in favor of men over equally performing women in translating employee performance evaluations into rewards and other key career outcomes; we call this the “paradox of meritocracy.” To assess this effect, we conducted three experiments with a total of 445 participants with managerial experience who were asked to make bonus, promotion, and termination recommendations for several employee profiles. We manipulated both the gender of the employees being evaluated and whether the company’s core values emphasized meritocracy in evaluations and compensation. The main finding is consistent across the three studies: when an organization is explicitly presented as meritocratic, individuals in managerial positions favor a male employee over an equally qualified female employee by awarding him a larger monetary reward. This finding demonstrates that the pursuit of meritocracy at the workplace may be more difficult than it first appears and that there may be unrecognized risks behind certain organizational efforts used to reward merit. We discuss possible underlying mechanisms leading to the paradox of meritocracy effect as well as the scope conditions under which we expect the effect to occur.

The link is here, and for the pointer I thank Samarth Bhaskar.

Probably so:

For at least three decades before the 2008 financial crisis, global trade regularly grew at twice the rate of the global economy, leading some economists to hail an era of “hyperglobalisation”. According to the WTO, the annual average recorded since 1990 has been 5.1 per cent growth.

With last year’s growth of 2.8 per cent, global trade has now expanded at, or below, the rate of the broader global economy for three straight years.

That is from Shawn Donnan, the rest of the FT piece is here.

…firms in sectors that rely more on external funds, such as pharmaceuticals, have seen a larger fall in investment than other firms since the crisis. This finding is consistent with the view that a weak financial system and weak firm balance sheets have constrained investment.

That is Timothy Taylor, summarizing an IMF study, is an excellent post on the investment slowdown.  Here is more from his summary:

  • For these [advanced] economies, private investment has declined by an average of 25 percent since the crisis compared with precrisis forecasts, and there has been little recovery. In contrast, private investment in emerging market and developing economies has gradually slowed in recent years, following a boom in the early to mid-2000s.
  • The investment slump in the advanced economies has been broad based. Though the contraction has been sharpest in the private residential (housing) sector, nonresidential (business) investment—which is a much larger share of total investment—accounts for the bulk (more than two-thirds) of the slump. …

Steven Quartz writes:

…our current Gilded Age has been greeted with relative complacency. Despite soaring inequality, worsened by the Great Recession, and recent grumbling about the 1 percent, Americans remain fairly happy. All of the wage gains since the downturn ended in 2009 have essentially gone to the top 1 percent, yet the proportion of Americans who say they are “thriving” has actually increased. So-called happiness inequality — the proportion of Americans who are either especially miserable or especially joyful — hit a 40-year low in 2010 by some measures. Men have historically been less happy than women, but that gap has disappeared. Whites have historically been happier than nonwhites, but that gap has narrowed, too.

In fact, American happiness has not only stayed steady, but converged, since wages began stagnating in the mid-1970s. This is puzzling. It does not conform with economic theories that compare happiness to envy, and emphasize the impact of relative income for happiness — how we compare with the Joneses.

Here is part of the answer, consistent with what I argued in my book What Price Fame?:

…social status, which was once hierarchical and zero-sum, has become more fragmented, pluralistic and subjective. The relationship between relative income and relative status, which used to be straightforward, has gotten much more complex.

…A new generation of ethnographers has discovered an explosion of consumer lifestyles and product diversification in recent decades. From evangelical Christian Harley-Davidson owners, who huddle together around a motorcycle’s radio listening to a service on Sunday mornings, to lifestyles organized around musical tastes, from the solidarity of punk rockers to yoga gatherings, from meditation retreats to book clubs, we use products to create and experience community. These communities often represent a consumer micro-culture, a “brand community,” or tribe, with its own values and norms about status.

The article is very interesting throughout, hat tip goes to Claire Morgan.

Note that the closing bit of this piece is…this: “Money may not buy happiness in the long run, but consumer choice has gone a long way in keeping most Americans reasonably content, even if they shouldn’t be.”

In a recently published article, Clucas, Rabotyagov, and Marzluff report:

Human-wildlife interactions in urban areas, both positive and negative, often involve people and birds. We assess the economic value placed on interactions with common native songbirds in two different urban areas (Berlin, Germany and Seattle, Washington, USA) by combining a revealed preference (recalled expenditures on bird feed) and a stated preference approach (determining willingness to pay for conservation or reduction of birds). Residents in both cities purchase bird food, engage in a range of bird-supporting activities and are generally willing to pay a small amount for native songbird conservation. Demographic, cultural and socio-economic factors, as well as specific attitudes towards birds and general attitudes about conservation were found to influence these decisions. This study presents the first attempt at estimating the economic value of enjoying common native urban songbirds and estimates the lower bound to be about 120 million USD/year in Seattle and 70 million USD/year in Berlin.

There is some media coverage here, and for the pointer I thank Charles Klingman.

Producer prices deflated for a 37th consecutive month in March, falling 4.6 per cent, versus a 4.8 per cent fall in February.

That is the longest period of factory gate deflation in China on record.

“The current bout of goods deflation in China and South Korea is the longest in postwar East Asia outside of Japan in the 1990s,” said Rodney Jones, Beijing-based principal of Wigram Capital.

Producer prices in South Korea have also fallen for 39 consecutive months.

The producer price index, often regarded as a leading indicator for consumer prices, has been mired in deflation thanks to sliding domestic demand and chronic overcapacity in many sectors.

That is from McGee and Anderlini at the FT.

By the way, here is the FT citing Deutsche Bank:

Bubble watchers point out median earnings multiples for Chinese technology stocks are twice US peer valuations at their dot.com peak. More worrying perhaps is a health-goods-from-deer-antlers producer on 70 times, the seamless underwear manufacturer on 90 times or those school uniform and ketchup makers on 330 times!

Last week there were 1.67 million new brokerage accounts.

Karkarmar: It was clear that shoppers who brought their own bags were more likely to replace nonorganic versions of goods like milk with organic versions. So one green action led to another. But those same people were also more likely to buy foods like ice cream, chips, candy bars, and cookies. They weren’t replacing other items with junk food, as they did with organic food. They were just adding it to their carts.

The full story is here, via Peter Metrinko.

Mayor of a city or town – 9.3% are willing to consider

Member of Congress – 8.8%

President – 6.4%

That is from Jennifer L. Lawless and Richard L. Fox, Running From Office: Why Young Americans Are Turned Off to Politics, a fascinating and also readable book.

Maybe so, I haven’t yet had a chance to look at the paper, so I can’t lay out for you how the measurements work, or how many data points they have, but the abstract sounds interesting, albeit in a possibly speculative way:

The present article analyzes the differences between economists and non-economists with respect to observed corruption behavior used as a proxy for selfishness. For this purpose, I analyzed real world data of relating to the 109th–111th US Congress between 2005 and 2009, including 695 representatives and senators. I show that those who hold a degree in economics are significantly more prone to corruption than ‘non-economists’. These findings hence support the widespread, but controversial hypothesis in the ‘economist vs. non-economist literature’ that economists lack what Frey and Meier (2004) call ‘social behavior’. Moreover, by using real world data, these findings overcome the lack of external validity, which impact on the (low cost) experiments and surveys to date.

That is from René Ruske in Kyklos.  Hat tip goes to Kevin Lewis.

Can any of you find an ungated version?

The Guardian reports:

Researchers led by Gert Stulp, a specialist in population health at the London School of Hygiene and Tropical Medicine, combed a Dutch database for clues.

Called LifeLines, the record contains exhaustive detail about the lives and health of more than 94,500 people who lived in the northern the Netherlands from 1935 to 1967. In this three-decade snapshot, the people who had the most children were tall men, and women of average height, the team found.

For example, the most fertile men were seven centimetres above the average height. Statistically, they had 0.24 more children on average than the least fertile men, who were about 14 cm below the average height.

Compared to counterparts in other countries where they often tended to have fewer children, taller women also reproduced more in the Netherlands. Many postponed having children until after their studies, but once they forged a successful relationship, often had a large family.

…Stulp pointed to figures showing that, in the United States, shorter women and men of average height have the most reproductive success.

The short piece is interesting throughout, and for the pointer I thank John B. Chilton.  And elsewhere on the height research front, the Indian height advantage, relative to Africa, exists only for firstborn sons.

Justin Fox started it, and Robin Hanson has a good restatement of the puzzle:

The S&P 500 are five hundred big public firms listed on US exchanges. Imagine that you wanted to create a new firm to compete with one of these big established firms. So you wanted to duplicate that firm’s products, employees, buildings, machines, land, trucks, etc. You’d hire away some key employees and copy their business process, at least as much as you could see and were legally allowed to copy.

Forty years ago the cost to copy such a firm was about 5/6 of the total stock price of that firm. So 1/6 of that stock price represented the value of things you couldn’t easily copy, like patents, customer goodwill, employee goodwill, regulator favoritism, and hard to see features of company methods and culture. Today it costs only 1/6 of the stock price to copy all a firm’s visible items and features that you can legally copy. So today the other 5/6 of the stock price represents the value of all those things you can’t copy.

Check out his list of hypotheses.  Scott Sumner reports:

Here are three reasons that others have pointed to:

1. The growing importance of rents in residential real estate.
2. The vast upsurge in the share of corporate assets that are “intangible.”
3. The huge growth in the complexity of regulation, which favors large firms.

It’s easy enough to see how this discrepancy may have evolved for the tech sector, but for the Starbucks sector of the economy I don’t quite get it.  A big boost in monopoly power can create a larger measured role for accounting intangibles, but Starbucks has plenty of competition, just ask Alex.  Our biggest monopoly problems are schools and hospitals, which do not play a significant role in the S&P 500.

Another hypothesis — not cited by Sumner or Hanson —  is that the difference between book and market value of firms is diverging over time.  That increasing residual gets classified as an intangible, but we are underestimating the value of traditional physical capital, and by more as time passes.

Cowen’s second law (“There is a literature on everything”) now enters, and leads us to Beaver and Ryan (pdf), who study biases in book to market value.  Accounting conservatism, historical cost, expected positive value projects, and inflation all can contribute to a widening gap between book and market value.  They also suggest (published 2000) that overestimations of the return to capital have bearish implications for future returns.  It’s an interesting question when the measured and actual means for returns have to catch up with each other, what predictions this eventual catch-up implies, and whether those predictions have come true.  How much of the growing gap is a “bias component” vs. a “lag component”?  Heady stuff, the follow-up literature is here.

Perhaps most generally, there is Hulten and Hao (pdf):

We find that conventional book value alone explains only 31 percent of the market capitalization of these firms in 2006, and that this increases to 75 percent when our estimates of intangible capital are included.

So some of it really is intangibles, but a big part of the change still may be an accounting residual.  Their paper has excellent examples and numbers, but note they focus on R&D intensive corporations, not all corporations, so their results address less of the entire problem than a quick glance might indicate.  By the way, all this means the American economy (and others too?) has less leverage than the published numbers might otherwise indicate.

Here is a 552 pp. NBER book on all of these issues, I have not read it but it is on its way in the mail.  Try also this Robert E. Hall piece (pdf), he notes a “capital catastrophe” occurred in the mid-1970s, furthermore he considers what rates of capital accumulation might be consistent with a high value for intangible assets.  That piece of the puzzle has to fit together too.  This excellent Baruch Lev paper (pdf) considers some of the accounting issues, and also how mismeasured intangible assets often end up having their value captured by insiders; that is a kind of rent-seeking explanation.  See also his book Intangibles.  Don’t forget the papers of Erik Brynjolfsson on intangibles in the tech world, if I recall correctly he shows that the cross-sectoral predictions line up more or less the way you would expect.  Here is a splat of further references from scholar.google.com.

I would sum it up this way: measuring intangible values properly shows much of this change in the composition of American corporate assets has been real.  But a significant gap remains, and accounting conventions, based on an increasing gap between book and market value, are a primary contender for explaining what is going on.  In any case, there remain many underexplored angles to this puzzle.

Addendum: I wish to thank @pmarca for a useful Twitter conversation related to this topic.