Category: Data Source

The evolution of income volatility

by  Tyler Cowen in

Shane Jensen and Stephen Shore report:

Recent research has documented a significant rise in the volatility (e.g., expected squared change) of individual incomes in the U.S. since the 1970s. Existing measures of this trend abstract from individual heterogeneity, eff ectively estimating an increase in average volatility. We decompose this increase in average volatility and find that it is far from representative of the experience of most people: there has been no systematic rise in volatility for the vast majority of individuals. The rise in average volatility has been driven almost entirely by a sharp rise in the income volatility of those expected to have the most volatile incomes, identified ex-ante by large income changes in the past. We document that the self-employed and those who self-identify as risk-tolerant are much more likely to have such volatile incomes; these groups have experienced much larger increases in income volatility than the population at large. These results color the policy implications one might draw from the rise in average volatility. While the basic results are apparent from PSID summary statistics, providing a complete characterization of the dynamics of the volatility distribution is a methodological challenge. We resolve these difficulties with a Markovian hierarchical Dirichlet process that builds on work from the non-parametric Bayesian statistics literature.

It is difficult to make the different papers on this topic commensurable, so I would say this is not the final word.  Still, it does raise the possibility that rising income volatility is not as fearful as it at first sounds.  You'll find many other posts on topic by searching for Jacob Hacker posts on this blog and over at Mark Thoma's, among other places.

Stimulus timing

by  Tyler Cowen in

For travel reasons, I won't get a chance to read through this right away, but here is a CBO report on the stimulus. (and this time the real report)  Here is one summary paragraph:

Assuming enactment in mid-February, CBO estimates that the bill would increase outlays by $93 billion during the remaining several months of fiscal year 2009, by $225 billion in fiscal year 2010 (which begins on October 1), by $159 billion in 2011, and by a total of $604 billion over the 2009-2019 period. That spending includes outlays from discretionary appropriations in Division A of the bill and direct spending resulting from Division B.

Here is the CBO Director's blog, which offers and links to more information.  What do you all think?

I thank Bruce Bartlett for the pointer.

Comparing Recessions

by  Alex Tabarrok in

It you look at job losses in this recession compared to previous recessions this recession looks very bad but the labor force is much bigger today than in previous recessions.  Thus, if you look at the percentage change in employment you get a different story.  The Minneapolis Fed crunches the numbers:
1employment_length_small 

and
2gdp_length_small

Of course, this recession is not yet over but this is useful information.  We might not like it but recessions are normal.

Important Addendum: The Fed defines Mildest, Median, Harshest by taking the Mildest employment drop of any recession in that quarter and plotting that.  Thus, the Mildest, Median, and Harshest recessions are Frankenstein recessions, cobbled together from other recessions. I do not think this is a good way to express the data.  See this update for a better method.

Gold fact of the day

by  Tyler Cowen in

…the world produces a cube of gold that is about 4.3 meters (about 14
feet) on each side every year. In other words, all of the gold produced
worldwide in one year could just about fit in the average person’s
living room!

The total amount of gold, ever produced by mankind, is estimated to fill only one-third of the Washington Monument.  Here are the calculations, including an estimate for the even more scarce platinum.  Hat tip to Jason Kottke.

Safest and most dangerous U.S. cities

by  Tyler Cowen in

Here is a list, via Craig Newmark.  For the large cities, note that of the five safest (San Jose, Honolulu, El Paso, New York, Austin), I believe four have substantial Latino populations.  San Diego and San Antonio are next in line for safety.  Of the five least safe major cities (Detroit, Baltimore, Memphis, Washington, Philadelphia), none has an especially large Latino population.

Here is a bit more.  Here is a lot more.

Facts about automakers

by  Tyler Cowen in

Yermack estimates that the aggregate capital investment in GM and Ford since 1980 has led to a net reduction in capital of $465 billion…This is what I find particularly disturbing: with that $465 billion, “GM and Ford could have closed their own facilities and acquired all of the shares of Honda, Toyota, Nissan, and Volkswagen.”

Here is more.  And here are facts about GM wages.

Where has all the income gone?

by  Tyler Cowen in

  • The U.S. Census Bureau reports that median household
    income stagnated from 1976 to 2006, growing by only 18 percent. In
    contrast, data from the Bureau of Economic Analysis indicate that
    income per person was up 80 percent.

  • Three data issues adversely impact reported median household income gains: the choice of price index, a change in the mix of household types and the measure of income used.

  • After adjusting the Census data for these three issues, inflation-adjusted median household income for most household types is seen to have increased by 44 percent to 62 percent from 1976 to 2006.

That’s from Terry Fitzgerald at the Minneapolis Fed.  I am not sure if he is asserting that his alternatives measures are just that — alternative measures — or if they are the true and correct measures in the sense of being better than the alternatives.  In any case this is the latest look at a long-contentious issue.  I thank Don Boudreaux for the pointer.