Data Source

Sentences to ponder

by on October 8, 2014 at 11:50 am in Data Source, Economics, Education, Science | Permalink

On average, students in 2014 in every income bracket outscored students in a lower bracket on every section of the test, according to calculations from the National Center for Fair & Open Testing (also known as FairTest), using data provided by the College Board, which administers the test.

Students from the wealthiest families outscored those from the poorest by just shy of 400 points.

From Josh Zumbrun, there is more here.

Alcohol inequality

by on October 5, 2014 at 3:08 am in Data Source, Food and Drink | Permalink

I double-checked these figures with [Philip] Cook, just to make sure I wasn’t reading them wrong. “I agree that it’s hard to imagine consuming 10 drinks a day,” he told me. But, “there are a remarkable number of people who drink a couple of six packs a day, or a pint of whiskey.”

As Cook notes in his book, the top 10 percent of drinkers account for well over half of the alcohol consumed in any given year. On the other hand, people in the bottom three deciles don’t drink at all, and even the median consumption among those who do drink is just three beverages per week.

The piece, by Christopher Ingraham, is interesting throughout.  Here is my earlier post on “The culture of guns, the culture of alcohol”, one of my favorites.

Addendum: Via Robert Wiblin, Trevor Butterworth offers a good critique of the data.

Maybe so.  Let’s hear from Mounir Karadja, Johanna Möllerström (my new colleague), and David Seim:

We study the extent to which people are misinformed about their relative position in the income distribution and the effects on preferences for redistribution of correcting faulty beliefs. We implement a tailor-made survey in Sweden and document that a vast majority of Swedes believe that they are poorer, relative to others, than they actually are. This is true across groups, but younger, poorer, less cognitively able and less educated individuals have perceptions that are further from reality. Using a second survey, we conduct an experiment by randomly informing a subsample about their true relative income position. Respondents who learn that they are richer than they thought demand less redistribution and increase their support for the Conservative party.

This result is entirely driven by prior right-of-center political preferences and not by altruism or moral values about redistribution. Moreover, the effect can be reconciled by people with political preferences to the right-of-center being more likely to view taxes as distortive and to believe that it is personal effort rather than luck that is most influential for individual economic success.

The paper (pdf) is here, and the pointer is from Gabriel Sahlgren.

Renee B. Adams, Matti Keloharju, and Samuli Knüpfer have a new paper:

This paper analyzes the role three personal traits — cognitive and non-cognitive ability, and height — play in the market for CEOs. We merge data on the traits of more than one million Swedish males, measured at age 18 in a mandatory military enlistment test, with comprehensive data on their income, education, profession, and service as a CEO of any Swedish company. We find that the traits of large-company CEOs are at par or higher than those of other high-caliber professions. For example, large-company CEOs have about the same cognitive ability, and about one-half of a standard deviation higher non-cognitive ability and height than medical doctors. Their traits compare even more favorably with those of lawyers. The traits contribute to pay in two ways. First, higher-caliber CEOs are assigned to larger companies, which tend to pay more. Second, the traits contribute to pay over and above that driven by firm size. We estimate that 27-58% of the effect of traits on pay comes from CEO’s assignment to larger companies. Our results are consistent with models where the labor market allocates higher-caliber CEOs to more productive positions.

In other words, Swedish CEOs are a pretty impressive lot.  Scott Sumner offers some related remarks on American CEOs.

Christopher Buccafusco and Chris Sprigman report:

…we ran an experiment to measure how much people value the ability to recline compared to extra knee and laptop room.

In an online survey, we asked people to imagine that they were about to take a six-hour flight from New York to Los Angeles. We told them that the airline had created a new policy that would allow people to pay those seated in front of them to not recline their seats. We asked one group of subjects to tell us the least amount of money that they would be willing to accept to not recline during the flight. And we asked another group of subjects to tell us the most amount of money that they would pay to prevent the person in front of them from not reclining.

It turns out that Barro was right: Recliners wanted on average $41 to refrain from reclining, while reclinees were willing to pay only $18 on average. Only about 21 percent of the time would ownership of the 4 inches change hands.

But it also turns out that Barro was wrong and Marron was right. When we flipped the default—that is, when we made the rule that people did not have an automatic right to recline, but would have to negotiate to get it—then people’s values suddenly reversed. Now, recliners were only willing to pay about $12 to recline while reclinees were unwilling to sell their knee room for less than $39. Recliners would have ended up purchasing the right to recline only about 28 percent of the time—the same right that they valued so highly in the other condition.

Wait … what? How is it possible that people’s valuation of reclining vs. not being reclined upon depended so completely on which party (recliner or reclinee) held initial ownership of the property right? Shouldn’t the right to recline be worth the same to you whether you initially have it or not?

It is fair to call this an endowment effect, but I also view it as evidence for my earlier view that people do not want to bargain over this right.

For the pointer I thank Tim Harford.

Claudia Sahm has given us the link (pdf) for Guvenen, Kaplan, and Song, David Wessel the summary.  The paper abstract is this:

We analyze changes in the gender structure at the top of the earnings distribution in the United States over the last 30 years using a 10% sample of individual earnings histories from the Social Security Administration. Despite making large inroads, females still constitute a small proportion of the top percentiles: the glass ceiling, albeit a thinner one, remains. We measure the contribution of changes in labor force participation, changes in the persistence of top earnings, and changes in industry and age composition to the change in the gender composition of top earners. A large proportion of the increased share of females among top earners is accounted for by the mending of, what we refer to as, the paper floor — the phenomenon whereby female top earners were much more likely than male top earners to drop out of the top percentiles. We also provide new evidence at the top of the earnings distribution for both genders: the rising share of top earnings accruing to workers in the Finance and Insurance industry, the relative transitory status of top earners, the emergence of top earnings gender gaps over the life cycle, and gender di erences among lifetime top.

David pulls this out:

A trio of economists, wielding big data from Social Security’s records, says that in 1981-85, women constituted just 1.9% of the top 0.1% of earners (based on average earnings for those years) and 5.2% of the top 1%.

But a quarter-century later, in 2008-12, women were 10.5% of the top 0.1% and 27.5% of the top 1%.

Deconstruction of the EU’s actual greenness must start by separating old renewables from new renewables — an essential task because in most countries the old renewables still provide the largest combined contribution in the green category. Readers of European news might be forgiven if they thought that wind turbines and PV panels, both heavily promoted and subsidized by many governments, lead the charge toward the continent’s renewable future. Actually, “solid biofuels” continue to be by far the largest category. In plain English, solid biofuels are wood, the oldest of fuels, be it trunks directly harvested for heat and electricity generation and burned as chips, or large amounts of wood-processing waste — a category particularly abundant in the EU’s two Nordic members with large forestry sectors. In 2012, 80 percent of Finland’s and 52 percent of Sweden’s renewable energy came from wood, and the average for EU-28 was 47 percent; even for Germany, the most aggressive developer of wind and solar, it was about 36 percent.

Burning logging and wood-processing wastes make sense; importing wood chips from overseas in order to meet green quotas does not. In 2013, the EU was burning more than 6 million tons of imported wood pellets. According to Forests and the European Union Resource Network, if all the EU states were to meet their 2020 green quotas, some of them would have to burn 50-100 percent more wood than they did in 2010. Imports now come mostly from North American and Russian forests, but Brazil is considered as the best source for future imports.

The irrationality of wood-based electricity generation is perhaps best illustrated by the conversion of Britain’s largest, originally coal-fired station to burning wood chips: initially they were to come from Brazil, but eventually more than 6 million tons a year will come from the swamp forests of North Carolina and tree plantations in Georgia. And wood-burning electricity generation would not be carbon-neutral even if all the trees cut down for chips were promptly replanted and if all of them regrew quickly and completely: more trees would have to be planted in order to offset carbon released by fossil fuels used in harvesting, processing, and intercontinental transportation of imported wood.

That is from Vaclav Smil, there is more here.

Chores down, child care up

by on September 28, 2014 at 3:11 pm in Data Source, Economics, Web/Tech | Permalink

There is evidence that technology has already made household chores much less time-consuming. Parents together now spend 27.6 hours a week on chores, down from 36.3 in 1965, according to data from the American Time Use Survey and Pew Research Center. Some of their new free time is being spent on their children. They spend 20.8 hours a week on child care, up from 12.7 in 1965.

That is from Claire Cain Miller, most of the piece is about the economies of paying people to ship your goods for you.

Eliminating heterogeneity bias causes 97 percent of the variance in the price level of food products across cities to disappear relative to a conventional index. Eliminating both biases reverses the common finding that prices tend to be higher in larger cities. Instead, we find that price level for food products falls with city size.

That is part of an abstract and new paper from Jessie Handbury and David E. Weinstein, via Kevin Lewis.  They have two additional interesting papers on the cost of living here.

Indian average is over

by on September 23, 2014 at 8:28 am in Current Affairs, Data Source, Economics | Permalink

The richer states have, on average, experienced relatively faster per capita GDP growth than the poorer states, despite the strong performance of low income states such as Bihar, Orissa and Uttarakhand. The reality is that the pace at which richer states are pulling away appears to be increasing.

That is from David Keohane at the FT, two excellent maps at the link as well.

Are stock buybacks too high?

by on September 22, 2014 at 2:08 am in Data Source, Economics | Permalink

Edward Luce writes in The Financial Times:

According to William Lazonick, a scholar at the University of Massachusetts Lowell, seven of the top 10 largest share repurchasers spent more on buybacks and dividends than their entire net income between 2003 and 2012. In the case of Hewlett-Packard, which spent $73bn, it was almost double its profits. For ExxonMobil, which came top with $287bn in buybacks and dividends, it amounted to 83 per cent of net income. Others, such as Microsoft (125 per cent), Cisco (121 per cent) and Intel (109 per cent) were even more extravagant. In total, the top 449 companies in the S&P 500 spent $2.4tn – or more than half their profits – on buybacks in those years. They spent almost the same again in dividend payouts. Taken together, they came to 91 per cent of net income.

There is more here.  I would read the data this way: the rents earned by those companies stem from their preexisting intellectual property, rather than from their current managerial talents.

We again looked at those individuals moving into and out of the finance sector, but this time restricted the sample only to those doing a job with the same title in both the finance and non-finance sectors, focusing on generic job titles such as ‘function manager’, ‘ICT professional’, ‘secretarial’, ‘customer service’ etc. The results reveal that the same people doing the same job earn around 20% more when doing that job in the finance sector rather than the non-finance sector. This premium is observed to be remarkably similar whatever job title is considered – whether it is a typically high-paid or low-paid job. This suggests that the pay premium is ubiquitous across all individuals working in the finance sector. This idea is further supported by looking at the wage premium at various points of the wage distribution. Although the finance sector pay premium is observed to be the largest between high earners in the finance and non-finance sectors – at the top end of the wage distribution – it is certainly the case that it is also observed throughout the full distribution.

That is from Joanne Lindley and Steven McIntosh, there is more here.  As you will grasp from basic microeconomics, this is evidence of rents and rent-sharing in the financial sector, a conclusion which the authors second.

The median household income in the city of New York is a few hundred dollars a year more than the median household income in the state of Texas, but in practical terms the average New York City household is much worse off.The most obvious issue is the cost of housing, which for New Yorkers is about four times what it is for Texans.

That is from Kevin Williamson, who stresses that New York City is actually a relatively poor place.

By the way, New York and DC have Ginis reflecting more inequality than what we find in Mexico or Nigeria.  Manhattan and Putnam County, Tennessee have Ginis almost as high as that of South Africa.

Have I mentioned that a Gini coefficient isn’t a very good measure of inequality for most purposes?  It does not command much loyalty from people who actually work in that area (generalized entropy measures are much more popular), yet it has become a staple of discussion in popular economics.

Jennifer Schuessler at The New York Times reports on the work and new book of Dan Jurafsky:

In a study of more than a million Yelp restaurant reviews, Mr. Jurafsky and the Carnegie Mellon team found that four-star reviews tended to use a narrower range of vague positive words, while one-star reviews had a more varied vocabulary. One-star reviews also had higher incidence of past tense, pronouns (especially plural pronouns) and other subtle markers that linguists have previously found in chat room discussions about the death of Princess Diana and blog posts written in the months after the Sept. 11 attacks.

In short, Mr. Jurafsky said, authors of one-star reviews unconsciously use language much as people do in the wake of collective trauma. “They use the word ‘we’ much more than ‘I,’ as if taking solace in the fact that this bad thing happened, but it happened to us together,” he said.

Another finding: Reviews of expensive restaurants are more likely to use sexual metaphors, while the food at cheaper restaurants tends to be compared to drugs.

Previous MR posts on Jurafsky are here.

I remain amazed that we have as much free trade as we do.  Here is from a recent Pew poll:

President Barack Obama and other world leaders are having a tough time selling the benefits of the trade agreements they’re negotiating, in part because much of the public thinks all the talk about trade’s benefits is a bunch of baloney.

Out of 44 nationalities surveyed this year, only one — Israelis — tends to believe the basic tenet of economists that increased trade will foster competition and deliver lower prices for consumers.

On a broader question of whether increasing trade and business ties with other countries is a good thing, only 68% of Americans agree, compared with 76% worldwide, according to the study released Tuesday by the Pew Research Center.

The Pew study itself is here and it is interesting throughout.  It is in Bangladesh, Uganda, and Lebanon that people are most likely to believe trade raises real wages, and Bangladeshis are most sympathetic to foreign direct investment.  Only 28% of Americans believe it is good when foreigners buy up U.S. companies.  58% of Chinese think trade leads to price increases, perhaps a sign of the prevalence of foreign luxury goods in that country.

For the pointer I thank Ray Lopez, who himself benefits from free trade, factor mobility, and foreign direct investment.