Data Source

Here is a very good Amanda Ripley NYT piece, more than just the usual.  Here is just one of numerous interesting bits:

In 2006, socioeconomic status had explained 17 percent of the variance in Americans’ science scores; in 2015, it explained only 11 percent, which is slightly better than average for the developed world. No other country showed as much progress on this metric. (By contrast, socioeconomic background explained 20 percent of score differences in France — and only 8 percent in Estonia.)

And this:

Generally speaking, the smartest countries tend to be those that have acted to make teaching more prestigious and selective; directed more resources to their neediest children; enrolled most children in high-quality preschools; helped schools establish cultures of constant improvement; and applied rigorous, consistent standards across all classrooms.

For the United States, math is still clearly the weakest subject, in fact at all income levels.

About 92 percent of 1940 babies had higher pretax household earnings at age 30 than their parents had at the same age. (The results were similar at older ages and for post-tax earnings.)

…For babies born in 1980 — today’s 36-year-olds — the index of the American dream has fallen to 50 percent: Only half of them make as much money as their parents did.

That is from David Leonhardt at the NYT, channeling new research by Raj Chetty.  Here is more from Jim Tankersley.  Here is Brookings coverage.  Here is Vincent Geloso considering various adjustments to the data.


Mexico facts of the day

by on December 8, 2016 at 1:03 pm in Data Source, Economics | Permalink

About 40 percent of the value of U.S. goods imports from Mexico was made up of goods originally exported from the U.S. to Mexico, four economists (three of them then employed at the U.S. International Trade Commission) found in 2010. The equivalent figure for imports from China was just 4.2 percent. In a 2014 report for the Peterson Institute for International Economics, Georgetown University’s Theodore Moran and Lindsay Oldenski found that a 10 percent increase in employment at the Mexican subsidiaries of U.S. corporations led to a 1.3 percent increase in employment and 4.1 percent increase in research and development spending back home.

That is from Justin Fox, I still think the peso is slightly undervalued due to excess fear of Trump on this issue.

The dimensions of China’s liquidity splurge are startling. Ousmène Jacques Mandeng, formerly with the International Monetary Fund, has calculated that between 2007 and 2015 China created 63 per cent, or $16.1tn, of the growth in the world’s supply of money.

That is from James Kynge at the FT.  Italy could use some of that nominal gdp right now…

I can’t say I followed this debate very closely, still this paper may settle some of the outstanding questions about public sector unions and wages and bargaining power.

The Effects of Public Unions on Compensation: Evidence from Wisconsin (Job Market Paper)

This paper seeks identify the effect that public sector unions have on compensation. Specifically, I look at the compensation premium associated with teachers’ unions in Wisconsin. In 2011, Wisconsin passed a landmark law (Act 10) which significantly lowered the bargaining power of all public sector unions in the state. Using an event study framework, I exploit plausibly exogenous timing differences based on contract renewal dates, which caused districts to be first exposed to the new regulations in different years. I find that the reduction in union power associated with Act 10 reduced total teacher compensation by 8%, or $6,500. Roughly two-thirds of this decline is driven through reduced fringe benefits. The analysis shows that the most experienced and highest paid teachers benefit most from unionization. I supplement the event study approach with synthetic control and regression discontinuity methods to find that regulatory limits on contract terms, rather than other mechanisms such as state financial aid cuts or union decertification, are driving the results.

That is from Andrew Littten, job market candidate at the University of Michigan (p.s.: Michigan, your job market candidate web site is the very hardest to use and browse, please improve it!)

That is the paper’s subtitle, the title is “Midpregnancy marriage and divorce,” and the authors are Christina M. Gibson-Davis, Elizabeth O. Ananat, and Anna Gassman-Pines.  Here is the abstract:

Conventional wisdom holds that births following the colloquially termed “shotgun marriage”—that is, births to parents who married between conception and the birth—are nearing obsolescence. To investigate trends in shotgun marriage, we matched North Carolina administrative data on nearly 800,000 first births among white and black mothers to marriage and divorce records. We found that among married births, midpregnancy-married births (our preferred term for shotgun-married births) have been relatively stable at about 10 % over the past quarter-century while increasing substantially for vulnerable population subgroups. In 2012, among black and white less-educated and younger women, midpregnancy-married births accounted for approximately 20 % to 25 % of married first births. The increasing representation of midpregnancy-married births among married births raises concerns about well-being among at-risk families because midpregnancy marriages may be quite fragile. Our analysis revealed, however, that midpregnancy marriages were more likely to dissolve only among more advantaged groups. Of those groups considered to be most at risk of divorce—namely, black women with lower levels of education and who were younger—midpregnancy marriages had the same or lower likelihood of divorce as preconception marriages. Our results suggest an overlooked resiliency in a type of marriage that has only increased in salience.

That is via Kevin Lewis and Anecdotal.

Market prices do convey important information about changing risks. For example, option prices suggest that Mexican assets are expected to deliver larger gains than losses, implying Trump won’t seek to impose headline-grabbing sanctions on the country. Although less pronounced, options market indicators are similar for China, Japan and emerging markets.

In short, the options market does not appear to view Trump as a protectionist but rather as someone who understands the value and importance of global trade.

That is from Myron Scholes in the FT.  Here is my earlier dialogue with Bob Zoellick on trade and Trump.

Maybe not:

Interestingly enough, in two of those crucial Midwestern states that flipped to Trump, Democratic Senate candidates campaigned on economically populist platforms — but they did notably worse than Hillary Clinton. Russ Feingold underperformed Clinton by 2.4 points in Wisconsin, and Ted Strickland underperformed her by 12.8 points in Ohio. Feingold amassed a populist record of challenging big money and special interests when he was in the Senate, and Strickland harshly condemned trade deals during his campaign against Rob Portman (who served as George W. Bush’s US trade representative).

Meanwhile, the two Democratic Senate candidates in competitive races who outperformedClinton the most both self-consciously presented a moderate image rather than running as liberal firebrands. In Missouri, Jason Kander overperformed Clinton by 15.9 points, and in Indiana, Evan Bayh did 9.6 points better than her (though they both lost).

Here is more from Andrew Prokop at Vox.

I find that a free trade zone in a province delays the age of first marriage by 1.6 years.  Moreover, the probability of early marriage is reduced by 30 percentage points.  The results are primarily driven by women that were in school at the time of the opening.  The free trade zones increase women’s years of education, especially during secondary school.

That is from a paper by Maria Micaela Sviatschi (pdf), who is on the job market from Columbia University.  Hers is one of the most interesting portfolios I have seen this year.

Another paper of hers shows that indoor prostitution lowers sex crime (pdf).  Her job market paper (pdf) is on how childhood exposure to illegal activities can breed criminal behavior later in life, here is the abstract:

This paper shows that exposing children to illegal labor markets makes them more likely to be criminals as adults. I exploit the timing of a large anti-drug policy in Colombia that shifted cocaine production to locations in Peru that were well-suited to growing coca. In these areas, children harvest coca leaves and transport processed cocaine. Using variation across locations, years, and cohorts, combined with administrative data on the universe of individuals in prison in Peru, affected children are 30% more likely to be incarcerated for violent and drug-related crimes as adults. The biggest impacts on adult criminality are seen among children who experienced high coca prices in their early teens, the age when child labor responds the most. No effect is found for individuals that grow up working in places where the coca produced goes primarily to the legal sector, implying that it is the accumulation of human capital specific to the illegal industry that fosters criminal careers. As children involved in the illegal industry learn how to navigate outside the rule of law, they also lose trust in government institutions. However, consistent with a model of parental incentives for human capital investments in children, the rollout of a conditional cash transfer program that encourages schooling mitigates the effects of exposure to illegal industries. Finally, I show how the program can be targeted by taking into account the geographic distribution of coca suitability and spatial spillovers. This paper takes a first step towards understanding how criminals are formed by unpacking the way in which crime-specific human capital is developed at the expense of formal human capital in bad locations.

She has numerous papers and virtually all of them look quite interesting.  Other topics include whether domestic violence lowers human capital investment and the economic effects of the (former) gang truce in El Salvador.  Here is her basic research portfolio.

It seems quite a few of the poor, when they get some extra money, want to keep on buying refined sugar.  Or in other words, it takes quite a bit of income (or is it education?) to “elevate taste.”  Here is the job market paper by Olga Kozlova of Duke University:

This paper explores how the low-income households change the quality of their food basket when they experience a budget increase. I use the variation in the monthly household budget coming from the exogenous variation in the winter temperature that directly affects the heating bills. I show that in response to a higher budget available the expenditure share on healthy food does not increase. I find that households increase the share of expenditure on fruits, but they purchase fruit products with a higher amount of sugar. My findings suggest that there are important trade-offs in policies that subsidize food expenditure because these policies allow low-income households to purchase more of the healthy as well as the unhealthy food products.

Also on the job market, from Northwestern, here is Mara P. Squicciarini, whose job market paper argues that Catholic education held back economic growth in 19th century France.  She also co-edited a book The Economics of Chocolate.

Summary: Across 33 rich countries, only 5% of the population has high computer-related abilities, and only a third of people can complete medium-complexity tasks.

That is from Jacob Nielsen, via Roman Hardgrave.

Is it a kind of Flynn effect for the elderly?:

Dementia is actually on the wane. And when people do get dementia, they get it at older and older ages.

Previous studies found the same trend but involved much smaller and less diverse populations like the mostly white population of Framingham, Mass., and residents of a few areas in England and Wales.

The new study found that the dementia rate in Americans 65 and older fell by 24 percent over 12 years, to 8.8 percent in 2012 from 11.6 percent in 2000. That trend that is “statistically significant and impressive,” said Samuel Preston, a demographer at the University of Pennsylvania who was not associated with the study.

In 2000, people received a diagnosis of dementia at an average age of 80.7; in 2012, the average age was 82.

“The dementia rate is not immutable,” said Dr. Richard Hodes, director of the National Institute on Aging. “It can change.”

And that “is very good news,” said John Haaga, director of the institute’s division of behavioral and social research. It means, he said, that “roughly a million and a half people aged 65 and older who do not have dementia now would have had it if the rate in 2000 had been in place.”

That is from Gina Kolata from the NYT.  The piece has many other points of interest.

Ian Martin and Christian Wagner have come up with something new (pdf), here is the abstract:

We derive a formula that expresses the expected return on a stock in terms of the risk-neutral variance of the market and the stock’s excess risk-neutral variance relative to the average stock. These components can be computed from index and stock option prices; the formula has no free parameters. We test the theory in-sample by running panel regressions of stock returns onto risk-neutral variances. The formula performs well at 6-month and 1-year forecasting horizons, and our predictors drive out beta, size, book-to-market, and momentum. Out-of-sample, we nd that the formula outperforms a range of competitors in forecasting individual stock returns. Our results suggest that there is considerably more variation in expected returns, both over time and across stocks, than has previously been acknowledged.

Here are some related slides; time will tell but this is possibly very important work.  And more slides, directly on this paper.

For the pointer I thank the excellent Samir Varma.

Addendum: And here are newer slides.

Yes it supports what many of us have been saying for what is now quite a few years:

Using panel data on individual labor income from 1957 to 2013, we document two empirical facts about the distribution of lifetime income in the United States. First, we show that from the cohort that entered the labor market in 1968 to the one entered in 1983, three-quarters of U.S. workers did not experience any increase in lifetime income. Further, during the same period, median lifetime income actually declined by 10-20% for men but increased by 20-30% for women, yet the latter increase was not enough to offset the decline for males because of the very low lifetime income of the earlier cohorts of females. Accounting for rising employer provided health and retirement benefits partly mitigates these findings, but does not overturn them. Much of these changes across cohorts that we document come from the large changes in starting income levels (i.e., at age 25) across cohorts. Based on partial life-cycle income observed for cohorts that are currently in the labor market, the stagnation of lifetime incomes is unlikely to reverse. Second, turning to inequality in lifetime incomes, we find that it has increased significantly within each gender group, but the closing lifetime gender gap has kept overall lifetime inequality virtually flat.

That is from forthcoming work by Justin Weidner, Fatih Guvenen, Greg Kaplan, and Jae Song.  Right now I am looking at Weidner’s site, his job market paper (pdf) is also quite interesting:

I demonstrate that rise in debt since 1990 has contributed to income stagnation, lowering affected graduates’ income by 1.9\% on average. Because it does not distort occupational choices, an income contingent repayment scheme would increase income for constrained graduates by 3.5% on average.

I look forward to following his work in years to come.

…individuals with criminal records have an involuntary separation rate that is no higher than that of other employees and a voluntary separation rate that is much lower. Employees with a criminal record do have a slightly higher overall rate of discharge for misconduct than do employees without a record, although we find increased misconduct only for sales positions. We also find that firms that do not use information about criminal backgrounds seem to compensate by placing more weight on qualifications that are correlated with a criminal record, such as low educational attainment.

That is from a new paper by Dylan Minor, Nicola Persico, and Deborah M. Weiss.