Law

…we find that the between-state migration rate for individuals in occupations with state-specific licensing exam requirements is 36 percent lower relative to members of other occupations. Members of licensed occupations with national licensing exams show no evidence of limited interstate migration.

That is from Janna E. Johnson and Morris E. Kleiner in the NBER working paper series.  Here are ungated copies.

…a recent report by Yale University concluded the country is suffering the highest rate of homelessness in the developed world with 40,000 people, nearly 1 per cent of the population, living on the streets or in emergency housing or substandard shelters.

…“The big change in homelessness is the number of working families struggling to find homes and pay rent,” says Ms Rutledge, who adds the situation is the worst she has seen in her 13 years working in homeless services in Auckland. Nationwide, some 5,844 people were on the social housing waiting list in September, a 42 per cent increase on the same month two years ago.

This FT article indicates the country will respond by banning foreign purchases of Kiwi homes — I guess the country is too crowded to allow for an elastic supply response.

Adam Smith on Occupational Licensing

by on December 7, 2017 at 11:26 am in Economics, Law | Permalink

Adam Smith warned that “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Although Smith’s warning is often quoted, few people know that what Smith was talking about was occupational licensing. At the time Smith wrote, tradesmen such as weavers, hatters, and cutlers (metalworkers) monopolized their industries by limiting entry to students who had served long apprenticeships under a master, and tradesmen also limited the number of students a master could teach. Seven-year apprenticeships had been required in Britain since the 1563 Statute of Artificers. In Smith’s time, however, occupational licensing was beginning to fall apart because the 1563 law had been interpreted to apply only to the trades listed in 1563 and not to the new trades then arising with the Industrial Revolution. The act was finally repealed in 1813, in part because of Smith’s influential attack.

Occupational licensing is also undergoing great changes in the United States today—but in the opposite direction of those in Smith’s time.

That is the introduction to the Undertaker’s License a Cato Research Brief on my paper with Brandon Pizzola on occupational licensing in the funeral services industry.

India’s government has expanded a scheme offering payment incentives to Hindus who marry members of the country’s poorest and most oppressed caste, the Dalits.

A scheme introduced in 2013 offered 250,000 rupees (£2,900) to encourage Hindus from higher castes to marry members of the “untouchable” community, in the hope that it would help to remove the stigma of intercaste marriage and foster greater social cohesion.

To qualify, the annual income of the spouse from the high caste had to be less than 500,000 rupees (‎£5,800).

The government envisaged about 500 such marriages annually, but less than 100 have taken place each year.

On Wednesday, the Ministry of Social Justice and Empowerment announced it would scrap the income ceiling, and said all couples in which one spouse is from the Dalit caste would receive the cash incentive.

Here is the article, via Eric D., also read the last few paragraphs.

That is the topic of my latest Bloomberg column, here is the opening bit:

I’ve seen hundreds of articles on President Donald Trump and trade, but the real significance of the Trump economic revolution — for better or worse — is a focus on investment. There is no coordinating mastermind, but if you consider the intersection between what the Trumpian nationalists want and what a Republican Congress will deliver, it’s this: wanting to make the U.S. a new and dominant center for investment, including at the expense of other nations.

And:

In essence, a new kind of supply-side economics has been invented. The theory of the 1980s focused mainly on individuals, and lowering the tax rates they faced on labor income and capital gains. Cutting these rates was supposed to mobilize the power of those individuals, through more work or more investment. The idea today is that the real power of mobilization comes through corporate associations. Assuming the tax bill passes, that theory is about to get a major test.

Strikingly, the tax bill and the trade policies of the Trump administration can be viewed as having a similar underlying philosophy, whether entirely intended or not. One of the president’s first official acts was to withdrawal from the Trans-Pacific Partnership. Although I favored that agreement, as did most other economists, it’s worth considering what the most intelligent nationalist case against the TPP looks like. It’s not about trade, because the deal wouldn’t have affected tariff rates faced by Americans very much (exports of beef to Japan aside). Rather, the TPP would have given American certification to Vietnam, Malaysia and eventually other emerging economies as stable repositories of foreign investment from multinationals. That could in turn draw investment away from the U.S.

Do read the whole thing, it is my favorite recent piece by me.

That is studied by Renkin, Montialoux, and Siegenthaler in a recent paper, which is also a job market paper for Tobias Renkin from the University of Zurich.  Here is the abstract:

We study the impact of increases in local minimum wages on the dynamics of prices in local grocery stores in the US during the 2001-2012 period. We find a signifi cant impact of increasing minimum wages on prices in grocery stores. Our baseline estimate of the minimum wage elasticity of grocery prices is 0.02. This magnitude is consistent with a full pass-through of cost increases into prices. We show that price adjustments occur mostly in the months following the passage of minimum wage legislation rather than at the actual implementation of higher minimum wages. This forward-looking pattern of price adjustments is qualitatively consistent with pricing models that feature nominal rigidities. We fi nd no differential price effect for products consumed by poorer and richer households, and no evidence for demand effects. Our results suggest that consumers rather than firms bear the cost of minimum wage increases. Moreover, poor households are most negatively affected by the price response. Price increases in grocery stores alone offset at least 10% of the nominal income gains of the poorest households.

Of course this also would suggest the sector is relatively competitive.  And if you are wondering, here is the full slate of job candidates from Zurich.

NZ Ministry of Health: People who donate a kidney or part of their liver can now do so knowing they can be fully compensated for lost earnings as a result of their donation surgery.

The Ministry of Health will be implementing compensation for live organ donors from 5 December. People who donate a live organ will be fully recompensed for lost earnings for up to 12 weeks while they recover. This will be paid weekly following the donation surgery. In the past donors received some assistance in the form of a benefit for this.

Former GMU student, Eric Crampton, now Senior Fellow at University of Canterbury had a role in the design.

Hat tip: Frank McCormick.

That is by by Caitlin Knowles Myers, and the full title is “The Power of Abortion Policy: Reexamining the Effects of Young Women’s Access to Reproductive Control.”  It is published in the most recent JPE, here is the abstract:

I provide new evidence on the relative “powers” of contraception and abortion policy in effecting the dramatic social transformations of the 1960s and 1970s. Trends in sexual behavior suggest that young women’s increased access to the birth control pill fueled the sexual revolution, but neither these trends nor difference-in-difference estimates support the view that this also led to substantial changes in family formation. Rather, the estimates robustly suggest that it was liberalized access to abortion that allowed large numbers of women to delay marriage and motherhood.

In other words, the pill was less influential than you might think.  And from the paper proper:

…policy environments in which abortion has legal and readily accessible by young women are estimated to have caused a 34 percent reduction in first births, a 19 percent reduction in first marriages, and a 63 percent reduction in “shotgun marriages” prior to age 19.

And:

Between the 1950 and 1955 birth cohorts, the fraction of women having sex prior to age 18 increased from 34 to 47 percent.

And:

…cohorts that experienced the most rapid changes in sexual behavior exhibited little change in fertility.

And:

Lahey (2014)…finds that the introduction of abortion restrictions in the nineteenth century increased birthrates by 4-12 percent…

I thought this was one of the most interesting papers I have read all year.  Here is an earlier, ungated copy.

Doug’s new book Clashing over Commerce: A History of US Trade Policy is the greatest book on trade policy ever written, bar none. and also a splendid work of American history more generally.  So I thought he and I should sit down to chat, now I have both the transcript and audio.

We covered how much of 19th century American growth was due to tariffs, trade policy toward China, the cultural argument against free trade, whether there is a national security argument for agricultural protectionism, TPP, how new trade agreements should be structured, the trade bureaucracy in D.C., whether free trade still brings peace, Smoot-Hawley, the American Revolution (we are spoiled brats), Dunkirk, why New Hampshire is so wealthy, Brexit, Alexander Hamilton, NAFTA, the global trade slowdown, premature deindustrialization, and the history of the Chicago School of Economics, among other topics.  Here is one excerpt:

COWEN: Here goes. The claim that 19th century American growth was driven by high tariffs. What’s your take?

IRWIN: Not really true. If you look at why the US economy performed very well, particularly relative to Britain or Germany or other countries, Steve Broadberry’s shown that a lot of the overtaking of Britain in terms of per capita income was in terms of the service sector.

The service sector was expanding rapidly. It had very high productivity growth rates. We usually don’t think as that being affected by the tariff per se. That’s one reason.

We had also very high productivity growth rates in agriculture. I’ve done some counterfactual simulations. If you remove the tariff, how much resources would we take out of manufacturing and put into services or agriculture is actually pretty small. It just doesn’t account for the success we had during this period.

COWEN: Is there any country where you would say, “Their late 19th century economic growth was driven by tariffs?” Argentina, Canada, Germany, anything, anywhere?

IRWIN: No. If you look at all those, once again, in late 19th century, they were major exporters, largely of commodities, but they did very well that way. You know that Argentina was one of the richest countries in the world in the late 19th century. It really wasn’t until they adopted more import substitution policies after World War I that they began to fall behind.

Definitely recommended, and here is Doug’s Wikipedia page.

That is the topic of my latest Bloomberg column, here is the closing bit:

Perhaps it’s not always an appetizing thought, but in many contexts wealth aids liberty, and the freedom to keep one’s wealth can limit political degeneration.

There are many possible outcomes here, and it is also possible that offshore finance can make tyranny worse.  But it seems to me opinion has turned against these institutions, without much serious consideration of the political economy issues.  By the way:

The top five countries on this list, [offshore wealth] measured as a percentage of GDP, are United Arab Emirates, Venezuela, Saudi Arabia, Russia and Argentina, based on estimates from 2007.

Worth a ponder.

Sentences to ponder

by on November 29, 2017 at 2:09 pm in Data Source, Economics, Law | Permalink

Policies, such as the minimum wage, that affect the cost of marketization, have a large [negative] effect on the fertility and labor supply of high income women.

Here is the full research paper, which focuses on the flattening of the income-fertility curve, via a loyal MR reader.

Because Doug’s book is just out, we are rushing out the podcast, here is the audio, most of all about trade, trade history, and trade policy.  We covered how much of 19th century American growth was due to tariffs, trade policy toward China, the cultural argument against free trade, whether there is a national security argument for agricultural protectionism, TPP, how new trade agreements should be structured, the trade bureaucracy in D.C., whether free trade still brings peace, Smoot-Hawley, the American Revolution (we are spoiled brats), Dunkirk, why New Hampshire is so wealthy, Brexit, Alexander Hamilton, NAFTA, the global trade slowdown, premature deindustrialization, and the history of the Chicago School of Economics, among other topics.

Here you can buy Doug’s Clashing over Commerce: A History of U.S. Trade Policy.

An American citizen who teaches in Denmark, she may be charged with a crime and kicked out of the country for violating the terms of her work visa, carrying a criminal record for the rest of her life.  Her sin?  Giving a talk to Danish Parliament:

Laws barring nonpermanent Danish residents from holding side jobs, paid or unpaid, have been in effect for some time. But Harrington said public scholarship is hardly a side job for an academic. Moreover, a separate Danish law mandates that university faculty members publicly share their research. Ironically, on the day Harrington learned of her criminal charges, she was notified that she’d received an award for research dissemination from the Danish Society for Education and Business.

And no matter that Parliament invited Harrington to speak — it’s facing scrutiny, too, for being unaware of laws preventing academics from speaking outside their universities without first obtaining explicit permission to do so from the Danish Agency for International Recruitment and Integration. That permission process is lengthy, by the way; Harrington said applying for a recent one-day work permit to give lecture to a political group took 15 hours.

Here is the full story.

Sex Offender Hysteria

by on November 28, 2017 at 2:19 pm in Law | Permalink

Illinois Public Radio has an astounding story on sex offenders who have completed their sentences but are still behind bars because they can’t find a place to live. How hard can it be to find a place to live? Sex offenders in Illinois cannot live close to:

  • Elementary and High Schools
  • Day Care Centers
  • Public Parks
  • Pools
  • Libraries
  • Malls

In addition, they can’t live in a house with a minor. One convicted offender could not return to his mother’s house because his sister was 17 (his conviction did not involve the sister). Sex offenders also cannot live in houses with devices that can access the internet including computers, smartphones and televisions.

Contrary to popular belief, sex offenders have low rates of recidivism relative to many other crimes. It’s almost impossible, however, to argue against a law that is supposed to protect the public from sex offenders. What kind of monster could argue against a law preventing a convicted sex offender from living near a day care center? And who would want a pervert at the mall? Add up every semi-reasonable law, however, and the result is unreasonable and unconscionable. Many people remain in prison for years after their sentences are complete because they cannot find a place to live that satisfies all of the restrictions. Madness.

This paper examines the impact of perceived risk of street harassment on women’s human capital attainment. I assemble a unique dataset that combines information on 4,000 students at the University of Delhi from a survey that I designed and conducted, a mapping of the potential travel routes to all colleges in the students’ choice set using an algorithm I developed in Google Maps, and crowd-sourced mobile application safety data. Using a random utility framework, I estimate that women are willing to choose a college in the bottom half of the quality distribution over a college in the top quintile for a route that is perceived to be one standard deviation (SD) safer. Alternatively, women are willing to spend an additional INR 18,800 (USD 290) per year, relative to men, for a route that is one SD safer – an amount equal to double the average annual college tuition. These findings have implications for other economic decisions made by women. For example, it could help explain the puzzle of low female labor force participation in India.

That is the excellent job market paper by Girija Borker at Brown University, this is one of the most novel and important works I have seen this job market season.