Data Source

Shenzhen, a city in southern China known for electronics manufacturing, stood out last year, completing 11 such skyscrapers. That’s more than the US and Australia combined. The city was also China’s hottest real estate market last year.

Next was Chongqing, noted for its fast GDP growth (link in Chinese), and Guangzhou, which completed a new finance center with 111 stories and especially fast elevators.

There is much more information at the link.

Hunt Allcott and Matthew Gentzkow have a new paper (pdf) on this topic.  I haven’t had a chance to look at it, but here is the bottom line:

… we find: (i) social media was an important but not dominant source of news in the run-up to the election, with 14 percent of Americans calling social media their “most important” source of election news; (ii) of the known false news stories that appeared in the three months before the election, those favoring Trump were shared a total of 30 million times on Facebook, while those favoring Clinton were shared eight million times; (iii) the average American saw and remembered 0.92 pro-Trump fake news stories and 0.23 pro-Clinton fake news stories, with just over half of those who recalled seeing fake news stories believing them; (iv) for fake news to have changed the outcome of the election, a single fake article would need to have had the same persuasive effect as 36 television campaign ads.

Self-recommending…

Most estimates of the impact of parental leave entitlement on female labor market outcomes range from negligible to weakly positive. There is stronger evidence that spending on early education and childcare increases labor force participation of women and reduces gender gaps.

That is from a new NBER paper by Claudia Olivetti and Barbara Petrongolo.  A different new paper, by Hope Corman, Dhaval Dave, Ariel Kalil, and Nancy E. Reichman, offers these results:

We find that welfare reform led to reduced youth arrests for minor crimes, by 7-9 %, with similar estimates for males and females, but that it did not affect youth arrests for serious crimes. The results from this study add to the scant literature on the effects of maternal employment on adolescent behavior by exploiting a large-scale social experiment that is still in effect to this day, and provide some support for the widely-embraced argument that welfare reform would discourage undesirable social behavior, not only of mothers, but also of the next generation.

Overall I still consider Clinton-era welfare reform to be underrated.

RMB accounted for 98% global bitcoin trading volume over past six months

Here is the link, picture, and source.  Of course that is all about capital controls, and a capital control-evading mechanism is what Bitcoin has evolved into.  I wonder how it will evolve further, especially if the Chinese crack down on the practice, which they are more than capable of doing.

From Simcha Barkai at the University of Chicago (pdf):

This paper shows that the decline in the labor share over the last 30 years was not offset by an increase in the capital share. I calculate payments to capital as the product of the required rate of return on capital and the value of the capital stock. I document a large decline in the capital share and a large increase in the profit share in the U.S. non-financial corporate sector over the last 30 years. I show that the decline in the capital share is robust to many calculations of the required rate of return and is unlikely to be driven by unobserved capital. I interpret these results through the lens of a standard general equilibrium model, and I show that only an increase in markups can generate a simultaneous decline in the shares of both labor and capital. I provide reduced form empirical evidence that an increase in markups plays a significant role in the decline in the labor share. These results suggest that the decline in the shares of labor and capital are due to an increase in markups and call into question the conclusion that the decline in the labor share is an efficient outcome.

For the pointer I thank David Levey.

Cliff Asness reports:

Maybe it’s just me but a lot of end-of-year commentary about financial markets in 2016, implicitly and sometimes explicitly, makes it sound as if it was a crazy year. It wasn’t. In fact, it was amazingly normal. This is true of at least the S&P 500 (I’m not going to be more ambitious here) which is what I think many of these commentators are talking about.1,2

Annualized daily volatility during 2016 came in at 13.1%. Based on rolling same-length periods going back to 1929 this falls at the 47th percentile.3 You say you don’t want to compare to the craziness of the Great Depression? Maybe that leads to everything else looking calm and you don’t think that’s meaningful. That’s reasonable. Well, that same value of 13.1% is at the 54th percentile since WWII and the 42nd percentile since 1990. Pretty darn normal. Maybe people are comparing to very recent times (I would argue in error) and have been lulled into a false sense of calmness now shattered by 2016? Nope, it’s still only at the 54th percentile when compared to the last five years. Realized daily volatility simply was not high in 2016 compared to pretty much any prior period (it certainly wasn’t exceptionally low either).

And:

The S&P 500 was +9.5% in price return in 2016.

Here is the source, there is further evidence and discussion of the metrics at the link.

That is the title of a new paper by Jakob B. Madsen and Stojanka Andric, here is the abstract:

Using annual data from 1850 to 2010 for Argentina, Australia, Brazil, Canada, New Zealand, and the USA, this paper examines the impact of immigration and the immigrants’ educational and cultural background on unemployment. Instruments for 27 emigrating countries are used to deal with the feedback effects from unemployment to immigration. The results show that educated immigrants, in particular, and immigrants from Protestant countries significantly reduce unemployment, while poorly educated and non-Protestant immigrants enhance unemployment.

For the pointer I thank the excellent Kevin Lewis.

Both male and female scientists felt that female scientists (light bars) were more objective, intelligent, etc. than male ones (dark bars), although the differences were larger when it was female scientists making the ratings.

I found this interesting too:

Strikingly, though, early-career scientists were rated as having less objectivity, integrity and open-mindedness than PhD students – or so thought the senior scientists.

Junior researchers, however, saw themselves as being slightly superior to PhD students…

Here is more, via the excellent Samir Varma.

We show that promotions to top jobs dramatically increase women’s probability of divorce, but do not affect men’s marriages. This effect is causally estimated for top jobs in the political sector, where close electoral results deliver exogenous variation in promotions across job candidates. Descriptive evidence from job promotions to the position of CEO shows that private sector promotions result in the same gender inequality in the risk of divorce.

The paper is by Olle Folke and Johanna Rickne, via James Feigenbaum.

We find that hedge fund managers who own powerful sports cars take on more investment risk. Conversely, managers who own practical but unexciting cars take on less investment risk. The incremental risk taking by performance car buyers does not translate to higher returns. Consequently, they deliver lower Sharpe ratios than do car buyers who eschew performance. In addition, performance car owners are more likely to terminate their funds, engage in fraudulent behavior, load up on non-index stocks, exhibit lower R-squareds with respect to systematic factors, and succumb to overconfidence. We consider several alternative explanations and conclude that manager revealed preference in the automobile market captures the personality trait of sensation seeking, which in turn drives manager behavior in the investment arena.

That is from a new paper by Stephen Brown, Yan Lu, Sugata Ray, and Melvyn Teo, and for the pointer I thank the excellent Kevin Lewis.

It’s good for others, however:

The value of Canada’s natural resource assets stood at $287 billion in 2015, down 73% from 2014, largely due to lower energy prices. This decrease followed a 28% increase in 2014.

Timber resources accounted for 55% of the value of all natural resource assets in 2015, followed by minerals (26%) and energy resources (19%).

The value of energy resource assets, which consist of reserves of coal, crude bitumen, crude oil and natural gas, decreased by 93% in 2015 to $56 billion, following a 49% increase in 2014. The large decline in 2015 came primarily from lower crude bitumen prices. As a result, this also increased the shares of mineral and timber resources of total natural resource wealth.

The value of mineral assets fell 38% to $74 billion in 2015 following a 24% decline in 2014. In general, lower commodity prices, combined with stable labour and energy costs compared with the previous year, contributed to the decline. The decrease in iron ore values made the largest contribution to the decline, although decreases in potash, copper-zinc and nickel-copper values were also major contributors.

The value of timber assets declined by 1% in 2015, following a 9% increase in 2014.

Here is the link, via Dan Wang.

U.S.A. fact of the day

by on December 17, 2016 at 3:00 am in Data Source, Economics | Permalink

Poverty is higher among Appalachians than the national average, but not by much — Kentucky has a poverty rate of 18.5% and West Virginia 17.9%, compared to a national average of 14.7%.

That is from Bill Easterly.  The difference of course would be smaller yet if we adjusted the poverty level by regional rather than national CPIs.

The new NBER paper by Erik Gilje, Robert Ready, and Nikolai Roussanov shows some truly impressive economic benefits:

We quantify the effect of a significant technological innovation, shale oil development, on asset prices. Using stock returns on major news announcement days allows us to link aggregate stock price fluctuations to shale technology innovations. We exploit cross-sectional variation in industry portfolio returns on days of major shale oil-related news announcements to construct a shale mimicking portfolio. This portfolio can explain a significant amount of variation in aggregate stock market returns, but only during the time period of shale oil development, which begins in 2012. Our estimates imply that $3.5 trillion of the increase in aggregate U.S. equity market capitalization since 2012 can be explained by this mimicking portfolio. Similar portfolios based on major monetary policy announcements do not explain the positive market returns over this period. We also show that exposure to shale oil technology has significant explanatory power for the cross-section of employment growth rates of U.S. industries over this period.

Do note that $3.5 trillion figure is not a measure of social value.  It does not count the losses to coal companies for instance, nor does it measure the consumer surplus or the “greener energy” benefits from fracking, among other factors.

For a while I have been arguing that China is much more of a meritocracy than many outsiders (or for that matter insiders) believe.  You have to distinguish type I from type II error; the princelings do unjustly well but smart people from rural areas are elevated at fairly high rates.  Most important jobs are filled by very smart people.  Therefore I am happy to see this new paper by Margaret Boittin, Gregory Distelhorst, and Francis Fukuyama:

How should the quality of government be measured across disparate national contexts? This study develops a new approach using an original survey of Chinese civil servants and a comparison to the United States. We surveyed over 2,500 Chinese municipal officials on three organizational features of their bureaucracies: meritocracy, individual autonomy, and morale. They report greater meritocracy than U.S. federal employees in almost all American agencies. China’s edge is smaller in autonomy and markedly smaller in morale. Differences between the U.S. and China lessen, but do not disappear, after adjusting for respondent demographics and excluding respondents most likely to be influenced by social desirability biases. Our findings contrast with numerous indices of good government that rank the U.S. far above China. They suggest that incorporating the opinions of political insiders into quality of government indices may challenge the foundations of a large body of cross-national governance research.

That is based on questionnaires, but the basic comparative results hold up when you consider only those Chinese officials who are willing to make negative remarks about their own government elsewhere on the questionnaire.  Still, to some extent the American and Chinese respondents simply may be understanding the scales in different terms.

There are other interesting results in the body of the paper.  The only U.S. federal agencies with higher meritocratic self-assessment than the Chinese mean are the Nuclear Regulatory Commission, the SEC, the OPM, and Education.  Homeland Security, Agriculture, and HUD do the worst, with the performance of the branches of the military being poor as well (see Figure 3, p.32).  For the participation variable, NASA and the SEC do best of the U.S. agencies, Homeland Security again doing the worst and the military again not doing well (Figure 4, p.33).  It’s a pretty consistent picture for the variable of morale, with NASA, the NRC, Education, SEC, and OPM at the top, in that order, and guess again which agency comes in at the very bottom? (Figure 5, p.34)

You will note that Chinese civil service jobs are highly coveted, and on average there are fifty applicants for each slot, making those jobs more exclusive than Ivy League universities.

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.