The economics of travel visas
Bob Lawson and Jayme Lemke write:
This paper examines travel visa restrictions in 188 countries. We measure travel visa requirements (1) facing foreign visitors into a given country and (2) facing citizens of a given nation traveling abroad. Our analysis shows that countries are more likely to impose visas on foreign visitors when they are large, but less likely when they are rich and economically free. Citizens from richer and more populous countries face fewer travel visa requirements when traveling abroad. Countries are less likely to impose visa requirements on similar nations.
Assorted links
1. Turkey vs Egypt.
2. Bryan responds on twin and adoption studies.
3. New results from Dale and Krueger on the value of selective colleges.
4. When public sector workers unionize, a dated but still valuable book.
5. Favorite crime novels of 2010, from an idiosyncratic mind.
6. Via Eric, most tourists take pictures from the same spot.
What is the state employee union wage premium?
How much does collective bargaining matter? On Twitter, Will Wilkinson asks for data. I find this web site specifying the average Virginia state employee to be earning $50,298. Rortybomb says that for Wisconsin the comparable number is $48,267.
Yet Wisconsin had collective bargaining for state employees and Virginia does not. Of course this comparison is a gross one and it is not holding constant the composition of each work force, seniority, cost of living differences, and it also does not seem to pick up possible differences in benefits. Furthermore it does not consider the 48 other states. Yet, crude as this one-to-one comparison may be, it is more empirically sophisticated than most (all?) other discussions I have seen.
This David Blanchflower and Alex Bryson paper (see pp.9-10), using 1980s data, finds a union wage premium, for state employees, of 14.5 percent, with the premium being strongest for unskilled workers, as is the case in the private sector as well. (NB: I am not sure if they are adjusting for differential benefits but I think not.) Alan Krueger tells us that the union/non-union wage gap is smaller in the public sector than in the private sector ("overwhelming evidence").
I'm not pushing any particular answer, I'd just like to put the question on the table. What else do you all know?
Addendum: from Adam Ozimek: "The regression coefficients on page 8 of the report show that the union wage premium is between 15% to 16%, while the public sector wage discount is around 11%, meaning unionized public sector employees are paid 4% to 5% wage premium." Adam also provides further references and discussion.
Libya fact of the day
Investment implications of The Great Stagnation
1. Slow revenue growth means that fiscal crises will be more severe than expected.
2. The deeper point is that the revenue growth/utility growth gradient has fundamentally changed, due to the "real shock" (as they call it) of the internet. Facebook is fun but it doesn't produce a proportional amount of revenue, and ultimately that has implications for asset pricing.
3. The change in this gradient means that a downturn hurts less, and that in turn means we will have more recessions and more asset price bubbles. Investors will take more chances, in part because safe returns are lower and in part because financial loss hurts less, in utility terms, than it used to.
4. Since the MU of money is now lower in downturns, the equity premium will fall. Risk premia will fall. Risk-taking will be less rewarded, because the destruction of one's finances is not as bad as it used to be.
5. If threshold savings is not an issue for you (e.g., needing to save a certain amount to put a kid through college), you should consider higher levels of consumption as a response to The Great Stagnation. Real rates of return on savings will not be fantastic, and risk-taking will be rewarded less. Spending is one sure way to get your money's worth.
6. I have other thoughts on this topic.
Assorted links
The new federalism, New Hampshire style
A lot of governors don't want high-speed rail and at least one state is wondering whether it wants a new hospital:
New Hampshire Public Radio ran a story yesterday about Governor Lynch's request that hospitals in the state stop building new facilities. Normally, governors never miss an opportunity to encourage new business in their state, because in most markets, greater investment leads to better services or lower prices. Finally, policy makers understand that the normal rules don't apply in health care:
[T]hese facilities are driving up utilization and driving up health care costs. Those are costs that we all see in our ever-increasing health insurance premiums. To that, I say enough.
That is from Andrew Samwick. This shows how deeply the current system of both health care finance and American federalism is broken. It is not that the governor was suddenly persuaded by…Robin Hanson. Instead, the shadow value of "money to spend as the governor wants it spent" is rising rapidly and old political equilibria are falling away, in Wisconsin too.
In a nutshell
What do twin adoption studies show?
"A case in point is provided by the recent study of regular tobacco use among SATSA's twins (24). Heritability was estimated as 60% for men, only 20% for women. Separate analyses were then performed for three distinct age cohorts. For men, the heritability estimates were nearly identical for each cohort. But for women, heritability increased from zero for those born between 1910 and 1924, to 21% for those in the 1925-39 birth cohort, to 64% for the 1940-58 cohort. The authors suggested that the most plausible explanation for this finding was that "a reduction in the social restrictions on smoking in women in Sweden as the 20th century progressed permitted genetic factors increasing the risk for regular tobacco use to express themselves." If purportedly genetic factors can be so readily suppressed by social restrictions, one must ask the question, "For what conceivable purpose is the phenotypic variance being allocated?" This question is not addressed seriously by MISTRA or SATSA. The numbers, and the associated modeling, appear to be ends in themselves."
How best to learn some econometrics
A few times I've received this question, usually from people whose work intersects with economics, yet without those people needing to produce econometric studies themselves. "How can I better understand the empirical papers I am reading?" I have a few suggestions:
1. Attend some (empirical) economics seminars first, to get a sense of what you need to learn and how discourse proceeds and what sort of points end up being contested. Subsequent class learning will be more focused and productive.
2. Often a good hands-on undergraduate class is more useful for these purposes than a graduate class. The latter might have too much econometric theory and theorem-proving.
3. The quality of an econometrics class (for these purposes, putting aside frontier work) is not well correlated with the quality of the college or university it is being taught at. The quality of the class is instructor-specific.
4. The quality of econometrics in the profession has continued to rise. That is good news, but for the purposes of this discussion there is a downside, namely that mistakes are much less transparent. For an increasing number of papers, it is hard to judge the final quality of the work without spending a lot of time on it. Whether or not a paper can be replicated is a more important question, given that more researchers are operating with frontier-level techniques.
Do you have other suggestions?
Addendum: Here is Mark Thoma's course, entirely on-line and free.
Murakami’s *1Q84*
That's the new Haruki Murakami book, due out in the U.S. in late October. It's over one thousand pages and it was published originally in three parts. My view of Murakami is that his later works are good but not special, and that his masterpieces are the early novels and also his non-fiction chronicle of the Tokyo gas attacks, Underground. My favorite is Hard Boiled Wonderland the End of the World, which also should appeal to science fiction fans.
IQ84 has been a smash hit in Japan and the never-easy-to-please Germans very much like it too. Here are other foreign reviews. I have read the first 130 pages and believe it may well be his masterpiece. It starts off with two dual stories, with what are recognizably Murakami-esque characters, but I won't say more than that.
Why does college cost so much?
David Leonhardt serves up a dialogue with Robert B. Archibald, and also David H. Feldman. Archibald starts by citing the cost disease and also the heavy use of skilled labor in the sector. I don't think they get to the heart of the matter, as there is no mention of entry barriers, whether legal, cultural, or economic. The price of higher education is rising — rapidly — and yet a) individual universities do not have strong incentives to take in larger classes, and b) it is hard to start a new, good college or university. The key question is how much a) and b) are remediable in the longer run and if so then there is some chance that the current structure of higher education is a bubble of sorts.
I never see the authors utter the sentence: "There are plenty wanna-bee professors discarded on the compost heap of academic history." Yet the best discard should not be much worse, and may even be better, than the marginally accepted professor. Such a large pool of surplus labor would play a significant role in an economic analysis of virtually any other sector.
When it comes to solving the access problem, the word which pops up is "financial aid," not "increased competition." Why might that be?
Matt Yglesias once had a good post on how innovation in higher education may come through the proliferation of cheaper and "inferior" alternatives; more on that here. And here is more from Matt.
Assorted links
1. Prepare for health care ping pong.
2. Car insurance in Rio fell over 15 percent in price, in 2010 (Portuguese link, 37 percent in some cases).
5. Which proposition is this story evidence for?
*How Measurement led to the Modern World*
That's the very good subtitle, the less interesting title is The Institutional Revolution, and it is a book manuscript by Douglas W. Allen. Someone sent it to me in the mail. The bottom line:
Once fundamental measurement problems were solved — involving time, distance, weights, and power, among others — it became possible to cheaply measure worker performance, input and output quality, and the role of nature, in areas of life that were unheard of before. This ability to cheaply measure ushered in the world of modern institutions.
Pre-modern customs, in contrast, were all about dealing with trust, the need for direct supervision, and facing up to the enormous risks posed by nature. The astute reader will note the influence of Yoram Barzel, one of the most underrated economists.
When will this book come out?
Bahrain no fact of the day
Bahrain's security forces are the backbone of the Al Khalifa regime, now facing unprecedented unrest after overnight shootings. But large numbers of their personnel are recruited from other countries, including Jordan, Pakistan and Yemen.
Tanks and troops from Saudi Arabia were also reported to have been deployed in support of Bahraini forces.
Precise numbers are a closely guarded secret…
Here is more, yet no numbers. The implied prediction is that they are willing to shoot.