Category: Data Source

A short lesson about the history of U.S. employment

by  Tyler Cowen in

From Ray Fisman:

The wages of less educated men—which had been in decline since the 1970s—also enjoyed a brief reprieve in the late 1990s and into the following decade. Working with University of Chicago colleagues Kerwin Charles and Matthew Notowidigdo, Hurst found that these aggregate statistics for the United States as a whole have played out in miniature across the country (PDF), as one would expect if the housing boom were really behind the short-lived uptick in the employment and salaries for the bottom 20 percent. In regions where the housing booms were greatest, the employment prospects of low-skilled workers fared the best, while in places that the housing bubble passed by, the job prospects of such workers continued their inexorable decline. (The researchers also found that the increase in construction employment was only part of the explanation: Low-skilled service employment also went up in places with housing booms as local residents, feeling wealthier as a result of the increased value of their homes, spent more at restaurants, barber shops, and local retail establishments.)

Overall, Hurst and his co-authors estimate that roughly 40 percent of the increase in nonemployment (those who are unemployed but still looking for jobs, as well as those who have given up and exited the labor force entirely) since 2007 involves manufacturing jobs that were already lost during the earlier part of the decade. But the loss of these jobs was temporarily obscured by the housing boom that allowed low-skilled individuals to find work. (For the college-educated, there was at most a modest connection between the housing booms and employment.)

Once again, we are not as wealthy as we thought we were.  And there really is a significant structural component behind today’s sluggish labor market.

Growth tigers of the 1950s

by  Tyler Cowen in

If we pull out Japan, Israel, and postwar European catch-up, and do per capita growth, B.R. Shenoy’s list of top performers looks like this:

Jamaica, 6.9%

Trinidad and Tobago, 5.9%

Algeria, 5.7%

Puerto Rico, 5.5%

Rhodesia and Nysaaland, 4.1%

Turkey, 2.9%

Philippines, 2.5%

If you do absolute rather than per capita, many of those numbers go up by a few percentage points, for instance the Philippines becomes 5.8% and Algeria becomes 8.0%.

Those numbers are from B.R. Shenoy’s book Indian Economic Policy.  Are there lessons?  One is that parts of the Caribbean are in fact wealthier than many people think.  Another is that the 1950s were a very good decade for the Caribbean, culturally too.  A third lesson is that the top performers in one period may not have legs.  Finally, looking at this table makes one realize, yet again, how good it was to more or less rid the world of communism.

Weather or Not People are Bayesians

by  Alex Tabarrok in

A new paper by Tatyana Deryugina finds that people make inferences about global warming from local weather but, given that they use local information, their inferences are mostly consistent with rational updating with some deviations in the very short run. Much more important than local weather, however, are other factors such as education and ideology.

…a Bayesian who is perfectly informed about world weather and science should
not give signicant weight to recent weather in his county when updating his beliefs. However, I
find that some forms of temperature and precipitation abnormalities have an effect over short time
scales of 1-2 days. Average weekly deviations and extreme events such as heat waves or droughts
weeks or months before the survey have no effect on beliefs, suggesting that the short run effects
are temporary and due to psychological heuristics.

Unlike previous studies, I also consider the effects of prolonged periods (1-12 months) of
abnormal weather. I find that abnormally low precipitation and abnormally high temperatures are
signicant predictors of the degree to which people believe the effects of global warming have
already begun to happen. The estimated patterns are consistent with how a Bayesian who only
observes local information would update his beliefs, but I cannot rule out that informed individuals
simply overweight their local weather.

…The marginal effects of education, relative to high school [on “the effects of global warming have already begun to happen”]  is 0.045 for “some college”, 0.101 for “college”, and 0.166 for “graduate school” A day on which precipitation is 2.5 standard deviations above normal would produce a change
in beliefs about the timing of global warming comparable to the estimated correlation between beliefs and “some college”. Precipitation would have to be 8 standard deviations above normal to produce a change in beliefs comparable to the coefcient of “graduate school”…In addition, the [weather] effects are short-lived because the average standard deviation over the past week does not change beliefs.

Hat tip: @jzilinksy via @bryan_caplan.

Addendum: Yes, the title of the post was on purpose!

Salzburg fact of the day

by  Tyler Cowen in

Data released by Eurostat reveals just how divergent and paints a fairly consistent, and depressing, picture. So we have Salzburg in Austria sitting pretty with only 2.5 per cent of its populations in the jobless category while Andalucia in Spain has to grapple with a rate of 30.4 per cent. The youth unemployment divide is even starker – 65.8 per cent in Ceuta, Spain versus 4.3 per cent in Tubingen, Germany.

Here is more.

“Star Wars: The Empirics Strike Back”

by  Tyler Cowen in

That is a new paper by Abel Brodeur, Mathias Lé, Marc Sangnier, and Yanos Zylberberg:

Abstract:

Journals favor rejections of the null hypothesis. This selection upon results may distort the behavior of researchers. Using 50,000 tests published between 2005 and 2011 in the AER, JPE and QJE, we identify a residual in the distribution of tests that cannot be explained by selection. The distribution of p-values exhibits a camel shape with abundant p-values above .25, a valley between .25 and .10 and a bump slightly under .05. Missing tests are those which would have been accepted but close to being rejected (p-values between .25 and .10). We show that this pattern corresponds to a shift in the distribution of p-values: between 10% and 20% of marginally rejected tests are misallocated. Our interpretation is that researchers might be tempted to inflate the value of their tests by choosing the specification that provides the highest statistics. Note that Inflation is larger in articles where stars are used in order to highlight statistical significance and lower in articles with theoretical models.

For the pointer I thank Michelle Dawson.

Addendum: Here is related commentary from Mark Thoma.

$100 Billion in Consumer Surplus from Fracking

by  Alex Tabarrok in

Energy production is one of the few bright spots in the American economy. A back of the envelope cost-benefit calculation from a Yale-associated group estimates that recent increases in shale gas production have been worth just over $100 billion annually to US consumers. In comparison, the authors estimates that groundwater contamination costs $250 million per year, a 400 to 1 benefit to cost ratio. The calculation is crude and the authors do not take into account environmental benefits from using natural gas over coal but the ratios are of interest.

Hat tip: Carpe Diem.

The Massachusetts health care reform reduced emergency room visits

by  Tyler Cowen in

I just spotted a new paper by Sarah Miller (a fellow Messiaen fan), who seems to be on the job market this year from U. Illinois:

Abstract:This paper analyzes the impact of a major health reform in Massachusetts on emergency room (ER) visits. I exploit the variation in pre-reform uninsurance rate across counties to identify the causal effect of the reform on ER visits. My estimates imply that the reform reduced ER usage by about 8 percent, nearly all of which is accounted for by a reduction in non-urgent visits that could be treated in alternative settings. In contrast, I find no effect for non-preventable emergencies such as heart attacks. These estimates are consistent with a large causal effect of insurance on ER usage and imply that expanding insurance coverage could have a substantial impact on the efficiency of health services.

Don’t worry, I’ll get back to Stuxnet and related topics by Thursday.

China and Russia billionaire facts of the day

by  Tyler Cowen in

…two men who in the last decade held the title of richest man in China are now in jail on corruption charges of one kind or another.  That is not to say that the charges were baseless, only that in China’s freewheeling business culture, the authorities seem to pay particularly close attention when the deal-making generates fortunes approaching $10 billion. Deng Xiaoping declared that “it’s glorious to be rich,” but the message now is, not too rich. The government appears intent on generating competitive churn at the top, in part to contain social resentments.

Now look at Russia, where one hundred billionaires control fortunes worth an astonishing 20 percent of national GDP. Russia has nearly as many billionaires as China but they control twice as much total wealth in an economy one-fourth the size. Just as striking, Russia is missing not only a middle class but also a millionaire class; according to Boston Consulting Group, China ranks third in the world for number of millionaires, while Russia is not even in the top 15 for millionaires.

The growing business influence of the state is reflected in the fact that 69 of those billionaires live in Moscow, the largest concentration for any city in the world. Protected by their patrons, the richest face little competition. Eight of the top 10 are holdovers from 2006. More than 80 percent of the wealth of Russian billionaires comes from non-productive industries like real estate, construction and especially commodities, namely oil and gas, in which political ties can sustain fortunes indefinitely. In no other developing nation is this share greater than 35 percent. Even in Brazil, a commodity economy at the same income level as Russia, the non-productive share of billionaires’ wealth is just 12 percent.

The entire post, by Ruchir Sharma, is fascinating, and with some superb visuals, do read it.

Tick Size and Listings

by  Alex Tabarrok in

In earlier posts I have argued for a smaller tick size to reduce rent-seeking. The Wall Street Journal reports today that there is a move to increase tick size in order to increase rent seeking.

Smaller and lesser-known companies could benefit from being nickel-and-dimed, at least on stock markets.

Allowing thinly traded stocks to rise or fall in broader increments–five or ten cents versus the current penny, for instance–could help those securities draw more investors and make their shares easier to trade, according to exchange and brokerage executives.

Publicly traded companies or those eyeing an initial public offering should have the ability to choose whether they want their shares to move cent-by-cent or in larger steps, executives told lawmakers at a Wednesday hearing in Washington.

In other cases, exchanges ought to be able to transact the most heavily traded shares in fractions of a cent, some said.

There is a case for having a tick-size function, in which tick sizes would change with share price and perhaps also volume. Many exchanges in the world have such tick functions. I am suspicious, however, when industry insiders plump for higher tick sizes as being in the public interest. In particular, I have doubts that this is true:

Wall Street’s current methods for trading stocks have helped fuel a slide in the number of publicly traded companies, according to David Weild, senior adviser with Grant Thornton LLP. He told lawmakers Wednesday that the number of U.S.-listed companies has declined steadily for the last 15 years, with an average 208 listings falling off exchanges per year since 2002.

The increments by which stocks can be bought or sold, known as their “tick size,” are a key factor, Weild said at the hearing. Trimming the increment to one cent created more potential prices at which shares can trade, making it more work for traders to ensure liquidity, he said.

IPOs and listings are down but I think tick size is at most a minor reason. There are more plausible reasons for declining listings including more competition from abroad, greater use of private equity, increased stringency of regulation in the United States (SOX) and perhaps also declining profitability of small firms.

FYI, here is the testimony from the hearing before the House Financial Services Committee.

Hat tip: John Welborn.

Drug Shortages Caused by the FDA

by  Alex Tabarrok in

Shortages of drugs, especially generic injectables, continue to cause significant harm to patients. A new Congressional report offers the best account to date of the shortages and provides details confirming my earlier post. The story in essence is this:

The FDA began to ramp up GMP rules and regulations under the new commissioner in 2010 and 2011 (see figure at left (N.B. this includes all warning letters not just GMP so it is just illustrative, AT added). In fact, the report indicates that FDA threats shut down some 30% of the manufacturing capacity at the big producers of generic injectables. The safety of these lines was not a large problem and could have been handled with a targeted approach but instead the FDA launched a sweep against all the major manufacturers at the same time. These problem have been exacerbated by a change in Medicare reimbursement rules and by the rise of GPOs (buying groups) which reduced the prices of generics. Thus, in response to the cut in capacity, firms have shifted production from less profitable generics to more profitable branded drugs, so we get shortages of generics rather than of branded drugs.

Add to these major factors a few unique events such as the FDA now requiring pre-1938 and pre-62 drugs to go through expensive clinical trials, the slowdown of ANDAs and crazy stuff such as DEA control over pharmaceutical manufacturing and you get very extensive shortages.