Month: October 2013

Dani Rodrik on premature deindustrialization

Consider Brazil and India, two emerging economies that have done comparatively well in the last decade or so. In Brazil, manufacturing’s share of employment barely budged from 1950 to 1980, rising from 12% to 15%. Since the late 1980’s, Brazil has begun to deindustrialize, a process which recent growth has done little to stop or reverse. India presents an even more striking case: Manufacturing employment there peaked at a meager 13% in 2002, and has since trended down.

It is not clear why developing countries are deindustrializing so early in their growth trajectories. One obvious culprit may be globalization and economic openness, which have made it difficult for countries like Brazil and India to compete with East Asia’s manufacturing superstars. But global competition cannot be the main story. Indeed, what is striking is that even East Asian countries are subject to early-onset deindustrialization.

China is a very large country, of course, with much of its workforce still in rural areas. But most migrant workers now find jobs in services rather than in factories. Similarly, it is extremely unlikely that the new crop of manufacturing exporters, such as Vietnam and Cambodia, will ever reach the levels of industrialization attained by the early industrializers, such as Britain and Germany.

An immediate consequence is that developing countries are turning into service economies at substantially lower levels of income. When the US, Britain, Germany, and Sweden began to deindustrialize, their per capita incomes had reached $9,000-11,000 (at 1990 prices). In developing countries, by contrast, manufacturing has begun to shrink while per capita incomes have been a fraction of that level: Brazil’s deindustrialization began at $5,000, China’s at $3,000, and India’s at $2,000.

There is more here.

Online Education and the Tivo Revolution

Here’s a TV schedule from 1963. If you wanted to watch Hootenanny you needed to be in front of the television on Saturday night between 7:30 and 8:30 pm. Have something else to do that night? Too bad. No pause or rewind either.

TVSchedule

Here’s a college class schedule from 2010  If you want to learn Accounting with Ms. Gettler you need to be in class on Mondays and Wednesdays between 11:25 am and 12:50 pm (bring your lunch). If you need another class that’s scheduled at the same time, too bad. No pause or rewind either.

ClassSchedule

A TV Guide looks quaint. Tivo has liberated us from the dictates of the networks. Today we can get entertainment on demand. Next up, education on demand.

Do children brought up in the same family share the same environmental influences?

Maybe not.  Here is a fascinating 2011 paper (pdf) from Robert Plomin and Denise Daniels, and here is part of the abstract:

…environmental differences between children in the same family (called ‘‘nonshared environment’’) represent the major source of environmental variance for personality, psychopathology, and cognitive abilities. One example of the evidence that supports this conclusion involves correlations for pairs of adopted children reared in the same family from early in life. Because these children share family environment but not heredity, their correlation directly estimates the importance of shared family environment. For most psychological characteristics, correlations for adoptive ‘‘siblings’’ hover near zero, which implies that the relevant environmental influences are not shared by children in the same family. Although it has been thought that cognitive abilities represent an exception to this rule, recent data suggest that environmental variance that affects IQ is also of the nonshared variety after adolescence.

My favorite part of the paper is the section which discusses how siblings represents a non-shared environment for each other.  For instance my sister grew up with a slightly younger brother and I grew up with…a slightly older sister, which is a somewhat different proposition.

For the pointer I thank Michelle Dawson.

Rental car *Average is Over*

A new car rental service at Los Angeles International Airport will allow customers to pick up an Audi A4 without ever having to interact with a clerk.

The company is called Silvercar, and it aims to fill a niche in the car rental market, according to chief executive Luke Schneider. Like other companies seeking to reinvent travel, Silvercar allows customers to streamline the entire process using their mobile phones.

“Mobile plus travel is a beautiful combination,” Schneider said. “To get into a Silvercar, you literally scan the car with your phone. That’s how the doors unlock and you jump in.”

The company’s entire fleet consists of silver Audi 4s, an entry level luxury car made in Germany that starts at around $35,000.

There is further information here, and for the pointer I thank Zenon Zygmont.

Price ambiguity as a buyer sorting mechanism

This is from Peter Aspden’s FT ten point guide to mastering the contemporary art market:

So you quite like the look of something, and you ask how much it costs. “Two,” may be the reply. The air of vagueness is a test. You will know, from your studies of the artist in question, whether that means £2 (no), £200 (unlikely), £200,000, or £2m. But if the gallerist’s assistant is American, she (almost always a she) may be talking dollars. Don’t ask. Make a rough calculation in your head that covers all possible options. Any physical reaction is ill-advised, other than the barely perceptible raising of an eyebrow. Finally, ask if she will accept roubles. You’re on the front foot now.

Keep in mind that art sellers very often have preferences over the quality of buyers they sell to.  Higher quality buyers lead to referrals, perceived gallery quality, and also do more to boost the artist’s reputation, which in turn helps the value of the gallery’s inventory.

Assorted links

Alice Munro wins the Nobel Prize in literature

She is one of my favorite authors.  If you are looking for one place to start try Hateship, Friendship, Courtship, Loveship, Marriage: Stories, but all of her books are worth reading.  As writers go, she falls into the “behavioral” camp, so to speak.  Here is a story on Alice Munro retiring, as of earlier this year.  Here is an associated slide show.  I liked this article about her decision to retire.  She was 37 when her first collection of stories was published, her first story was published in 1977, but she had been sending stories to The New Yorker as early as the 1950s.  Here is a good interview with Munro.

Getting beneath the Veil of Effective Schools: Evidence from New York City

That is a new paper by Will Dobbie and Roland G. Fryer Jr., here is the abstract:

In this paper, we collect data on the inner-workings of 39 charter schools and correlate these data with school effectiveness. We find that traditionally collected input measures—class size, per-pupil expenditure, teacher certification, and teacher training—are not correlated with school effectiveness. In stark contrast, we show that an index of five policies suggested by qualitative research—frequent teacher feedback, the use of data to guide instruction, high-dosage tutoring, increased instructional time, and high expectations— explains approximately 45 percent of the variation in school effectiveness. The same index provides similar results in a separate sample of charter schools.

The gated AEJ version is here, an ungated version is here.

What I’ve been reading

1. Sunil S. Amrith, Crossing the Bay of Bengal: The Furies of Nature and the Fortunes of Migrants.  Not thrilling, but a well-informed, readable book, full of good information, about a part of the world which is growing in importance rapidly.

2. Richard Bauckham, Jesus and the Eyewitnesses: The Gospels as Eyewitness Testimony.  This is a remarkably good, serious, detailed, and documented work on what we (possibly) know about the Gospels, if we read them through the lens of being eyewitness testimony.  Anyone interested in The New Testament should read this book.

3. Lara Feigel, The Love-Charm of Bombs: Restless Lives in the Second World War.  This book chronicles some fairly intense love affairs, albeit in an intellectual sort of way.

4. Jonathan Franzen, editor, The Kraus Project.  The Karl Kraus texts in German are energetically written, but one remembers how cantankerous and idiosyncratic he was.  The Kraus translated into English doesn’t work and probably the works are untranslatable.  The Franzen in English is cringe-worthy.  The Michael Hofmann review in TNYRB is one of the best book reviews I have read, ever, gated here.

Arrived in my pile are:

5. Brigitte Granville, Remembering Inflation, and

6. Dwight H. Perkins, East Asian Development: Foundations and Strategies.

What I've been reading

1. Sunil S. Amrith, Crossing the Bay of Bengal: The Furies of Nature and the Fortunes of Migrants.  Not thrilling, but a well-informed, readable book, full of good information, about a part of the world which is growing in importance rapidly.

2. Richard Bauckham, Jesus and the Eyewitnesses: The Gospels as Eyewitness Testimony.  This is a remarkably good, serious, detailed, and documented work on what we (possibly) know about the Gospels, if we read them through the lens of being eyewitness testimony.  Anyone interested in The New Testament should read this book.

3. Lara Feigel, The Love-Charm of Bombs: Restless Lives in the Second World War.  This book chronicles some fairly intense love affairs, albeit in an intellectual sort of way.

4. Jonathan Franzen, editor, The Kraus Project.  The Karl Kraus texts in German are energetically written, but one remembers how cantankerous and idiosyncratic he was.  The Kraus translated into English doesn’t work and probably the works are untranslatable.  The Franzen in English is cringe-worthy.  The Michael Hofmann review in TNYRB is one of the best book reviews I have read, ever, gated here.

Arrived in my pile are:

5. Brigitte Granville, Remembering Inflation, and

6. Dwight H. Perkins, East Asian Development: Foundations and Strategies.

What would default look like?

As you may know, I do not wish to be a sensationalist on this topic.  As Felix Salmon has pointed out, the recent spike in short-term T-Bill prices still isn’t that big a deal.  So please consider this question as a (mostly) academic exercise.  And by the way, if/when they pass a short-term debt limit extension, you can simply update the specific dates given in this post accordingly, maybe you will need to add six weeks or so.

Anyway, here is one (unlikely) scenario.  As the evening of October 16th approaches, John Boehner is preparing to invoke the Hastert Rule when a car accident intervenes and he is temporarily out of commission.  Coordination collapses and some Republicans believe that on the 17th debt payments can continue while some other federal obligations are violated instead.  A combination of insufficient payment prioritization (for bizarre technical reasons) and angry Social Security voters, who irrationally fear missing their deposits, means that some payments are in fact missed on Treasury securities.  Some GOP representatives see this as a new chance to blame the Obama administration, and no one can agree quickly exactly how to reorder the payments, and so the mess isn’t cleared up immediately.

But before this accident gets well underway, word leaks out through various “insider trading in conjunction with investment banks Capitol Hill staff members” that not all is well.  Interest rates skyrocket and there are numerous collateral calls from clearinghouses and thus a squeeze on Treasuries.  Everyone is scrambling after Treasuries and suddenly T-Bill liquidity is quite scarce.  (Here is one FT post on collateral crunch.)  The next morning retail runs on money market funds commence and most redemptions cannot be made (another FT post here).  Those funds are shuttered and new commercial paper issues are put on hold.

By mid-morning of the 17th the payments system has shut down entirely.  The Fed tries everything possible, but even with a flood of monetary liquidity, T-Bills are “not what they used to be” and no flow of reserves can make up for this.  The monetary authority cannot become the fiscal authority in the span of an hour or a day, especially when it doesn’t have a fully credible fiscal authority behind it.  The payments system remains gridlocked.  Elsewhere, the Italian 10-year rate shoots over eleven percent, so the ECB has to invoke Outright Monetary Transactions, but the Germans get nervous and don’t go whole hog with this program.  A lot of European credit markets shut down too.  A major clearinghouse is nationalized.

Obama prepares the Super-Premium Treasury issue, and a few days later this happens.  By that time Boehner is again running the Republican Party and enough of the payments mess is sorted out for money markets to function again, albeit at slow speed, although some previously illiquid major financial institutions are now insolvent and they are nationalized.  No one knows which of the others are actually solvent, due to the interest rate spike, and so there is a general and longer-lasting credit collapse.

A full sorting out of the payments mess takes months.  In the meantime gdp has shed five or ten percent and borrowing costs are permanently higher.  Credit stays slow and the United States enters another major recession.  Scott Sumner issues a call for higher nominal gdp.

Fortunately, none of that is very likely to happen (except the part about Scott).

Addendum: By the way, we used to read that an attack of the bond market vigilantes would be good for the economy, but it seems this is no longer the case when the vigilantes are led by Republicans.  Hint: an attack of the bond market vigilantes is not good for the economy.

Why are children shorter in India than in Africa?

Via Chris Blattman, Jayachandran and Pande have a new paper (pdf), here is the abstract:

Height-for-age among children is lower in India than in Sub-Saharan Africa. This presents a puzzle since India is richer than the average African country and fares better on most other development indicators including infant mortality. Using data from African and Indian Demographic and Health Surveys, we document three facts. First, among firstborns, Indians are actually taller than Africans; the Indian height disadvantage appears with the second child and increases with birth order. Second, investments in successive pregnancies and higher birth order children decline faster in India than Africa. Third, the India-Africa birth order gradient in child height appears to vary with sibling gender. These three facts suggest that parental preferences regarding higher birth order children, driven in part by cultural norms of eldest son preference, underlie much of India’s child stunting.