Category: Data Source

Heritability of lifetime earnings

Using twenty years of earnings data on Finnish twins, we find that about 40% of the variance of women’s and little more than half of men’s lifetime labour earnings are linked to genetic factors. The contribution of the shared environment is negligible. We show that the result is robust to using alternative definitions of earnings, to adjusting for the role of education, and to measurement errors in the measure of genetic relatedness.

That is from a newly published paper by Ari Hyytinen, Pekka Ilmakunnas, Edvard Johansson, and Otto Toivanen.

How much of education is signaling? — yet again

The social and the private returns to education differ when education can increase productivity and also be used to signal productivity. We show how instrumental variables can be used to separately identify and estimate the social and private returns to education within the employer learning framework of Farber and Gibbons (1996) and Altonji and Pierret (2001). What an instrumental variable identifies depends crucially on whether the instrument is hidden from or observed by the employers. If the instrument is hidden, it identifies the private returns to education, but if the instrument is observed by employers, it identifies the social returns to education. Interestingly, however, among experienced workers the instrument identifies the social returns to education, regardless of whether or not it is hidden. We operationalize this approach using local variation in compulsory schooling laws across multiple cohorts in Norway. Our preferred estimates indicate that the social return to an additional year of education is 5%, and the private internal rate of return, aggregating the returns over the life-cycle, is 7.2%. Thus, 70% of the private returns to education can be attributed to education raising productivity and 30% to education signaling workers’ ability.

That is from a new NBER Working Paper by Gaurab Aryal, Manudeep Bhuller, and Fabian Lange.  You can enter “education signaling” into the MR search function for much more on this ongoing debate.

Might Facebook boost wages?

From Luis Armona at Stanford:

In this paper, I estimate the causal effect of increased exposure to online social networks during college on future labor market outcomes.

Using quasi-random variation from Facebook’s entry to college campuses during its infancy, I exploit a natural experiment to determine the relationship between online social network access and future earnings.

I find a positive effect on wages from Facebook access during college. This positive effect is largest in magnitude for female students, and students from lower-middle class families.

I provide evidence that this positive effect from Facebook access comes through the channel of increased social ties to former classmates, which in turn leads to strengthened employment networks between college alumni.

My estimates imply that access to Facebook for 4 years of college causes a 2.7 percentile increase in a cohort’s average earnings, relative to the earnings of other individuals born in the same year. This translates to an average nominal wage increase of $3,000-$5,000 in 2014.

To be clear, some of that could be a wage distribution effect.  Still, this paper points to the possibility of some very real networking and matching gains from the use of Facebook, and perhaps those gains do not favor traditional elites.

For the pointer I thank the excellent Kevin Lewis.

Revisiting the Global Decline of the (Non-Housing) Labor Share

That is a new paper by Germán Gutiérrez and Sophie Pitony.  I am on the road and have not had a chance to go through this, but the abstract is of interest:

We identify two undocumented measurement challenges affecting corporate sector labor shares outside the United States: the inclusion of dwellings and the inclusion of self-employed workers in the corresponding sectoral accounts. Both issues have become more important over time, biasing corporate labor shares downward. We propose two methods to correct for these challenges and obtain `true’ non-housing labor share series. Contrary to common wisdom, the corrected series exhibit stable labor shares across all major economies, except the US, where the corrected labor share declines by 6 percentage points since 1980.

For the pointer I thank Ilya Novak.

China fact of the day

We find that party members on average hold substantially more modern and progressive views than the public on issues such as gender equality, political pluralism, and openness to international exchange.

That is from Chengyuan Ji and Junyan Jiang, via the excellent Kevin Lewis.  Of course this may partly explain why China’s rising middle class is not so outright enthusiastic for democratization.

Bias against indigenous Americans?

We conducted a resume correspondence experiment to measure discrimination in hiring faced by Indigenous Peoples in the United States (Native Americans, Alaska Natives, and Native Hawaiians). We sent employers realistic 13,516 resumes for common jobs (retail sales, kitchen staff, server, janitor, and security) in 11 cities and compared callback rates. We signaled Indigenous status in one of four different ways. We almost never find any differences in callback rates, regardless of the context. These findings hold after numerous robustness checks, although our checks and discussions raise multiple concerns that are relevant to audit studies generally.

That is from Patrick Button and Brigham Walter in their new NBER Working Paper.

Yes there has been an American male culture collapse

During the last 50 years, the earnings of prime-age men in the United States have stagnated and dispersed across the education distribution. At the same time, the labor-force participation rates of men without a college education have steadily declined. While wage and participation trends are often linked for this population, we have argued that this connection cannot solely be the result of an inward labor demand shift across a stable and elastic labor supply curve. The uncompensated labor supply elasticities implied by the twin declines of wages and participation during the 1970s, 1980s, and 2000s appear too large to be plausible. Moreover, labor-force participation continued to decrease in the 1990s while wages were rising. While the increasing availability of disability benefits and the increase in the fraction of the population with prior incarceration exposure may help explain some of the participation decline, we doubt either factor can explain the bulk of the decline.

We have argued that more plausible explanations for the observed patterns involve feedbacks from male labor demand shocks, which often involve substantial job displacement, to worker adjustment frictions and to family structure. Marriage rates, and corresponding male labor supply incentives, have also fallen for reasons other than changing labor demand. Moreover, we have noted interactions between labor demand and disability benefit take-up, and between mass incarceration and family structure. These factors have all converged to reduce the feasibility and desirability of stable employment, leading affected men—who may not often be eligible for disability or other benefits—to participate sporadically in the labor market and depend primarily on family members for income support.

That is from the concluding remarks of Ariel J. Binder and John Bound, in the most recent Journal of Economic Perspectives.  I’ll just highlight one bit again, bolded by me:

At the same time, the labor-force participation rates of men without a college education have steadily declined. While wage and participation trends are often linked for this population, we have argued that this connection cannot solely be the result of an inward labor demand shift across a stable and elastic labor supply curve.

In case you missed it.

Do people really even know what they want(ed)?

We examine the stability of preferences over time using panel data from Kenya on fertility intentions,realizations, and recall of intentions. We find that desired fertility is very unstable, but that most people perceive their desires to be stable. Under hypothetical scenarios, few expect their desired fertility to increase over time. Moreover, when asked to recall past intentions, most respondents report previously wanting exactly as many children as they desire today. Biased recall of preferences over a major life decision could have important implications for measuring excess fertility, the evolution of norms,and the perceived need for family planning programs.

That is from a new NBER working paper by Maximilian W. Mueller, Joan Hamory Hicks, Jennifer Johnson-Hanks, and Edward Miguel.

The Great Reset, applied to Millennials

“Their economic fundamentals are fundamentally different,” said Christopher Kurz, an economist at the Federal Reserve.

Mr. Kurz and his colleagues last year analyzed income, debt, asset and consumption data to figure out how millennials compared at similar ages with Generation X, people born between 1965 and 1980, as well as baby boomers, those born from 1946 to 1964.

They found that millennial households had an average net worth of about $92,000 in 2016, nearly 40% less than Gen X households in 2001, adjusted for inflation, and about 20% less than baby boomer households in 1989.

Wages didn’t look much better. At the same ages, Gen X men working full time and who were heads of households earned 18% more than their millennial counterparts, and baby boomer men earned 27% more, when adjusting for inflation, age and other socioeconomic variables.

Among women, incomes were 12% higher for Gen Xers and 24% higher for baby boomers than for millennials, using the same measures.

That is from Janet Adamy and Paul Overberg at the WSJ.  Note this too:

Millennials, as a group, are better educated than any generation before them. About four in 10 ages 25 to 37 hold at least a bachelor’s degree compared with about a quarter of baby boomers, and three in 10 Gen Xers when they were the same age.

You can see the problem, yes?  Here is the original paper by Christopher Kurz, Geng Li, and Daniel J. Vine.

Good art by women is cheaper

A rose painted by another name would cost more. In a new paper*, four academics show that art made by women sells for lower prices at auction than men’s, and suggest that this discount has nothing to do with talent or thematic choices. It is solely because the artists are female.

The authors used a sample of 1.9m transactions in art auctions across 49 countries in the period from 1970 to 2016. They found that art made by women sold at an average discount of 42% compared with works by men. However, auction prices can be distorted by a few famous artists whose output is perceived as extremely valuable. If transactions above $1m are excluded, then the discount falls to 19%.

…the researchers used a computer programme to generate paintings and randomly assign the results to artists with male or female names. They then asked participants to rate the paintings and ascribe a value. The experiment found that affluent individuals (those most likely to bid at auctions) attributed a lower value to works which the programme assigned to a woman. Clearly, this gap was unrelated to the artistic merit of the picture.

I don’t quite think that shows (non-statistical) discrimination, perhaps more convincing is this:

The average discount applied to the work of a given female artist was lowest in countries where women were more equal. (There are some exceptions to the rule, such as Brazil, where women’s art was highly rated.)

The good news is that the female discount has fallen over time. For transactions under $1m, the study calculated, the discount has dropped from 33% in the 1970s to 8% after 2010.

If you not wealthy and wish to collect art, buy textiles, they are much cheaper and very often the creators are women rather than men.  They are not as a whole less aesthetically valuable than paintings, except perhaps for paintings at the very very highest levels.  But within painting, prices for Gwen John vs. Augustus John have been in parity for some while now, same with Frida Kahlo and her male contemporaries, or Natalia Goncharova vs. her peers, the latter I check on a regular basis in fact I was just perusing them today.

Here is The Economist source piece.  Here is the original research., “Is gender in the eye of the beholder? Identifying cultural attitudes with art auction prices”, by Renée Adams, Roman Kräussl, Marco Navone and Patrick Verwijmeren.

It is the slacker writers who need agglomeration most of all

Do note the latter part of the last sentence, but the entire thesis is interesting:

This paper utilises a unique, purpose-built panel dataset on prominent authors in the UK and Ireland born 1700–1925 to estimate the productivity gains associated with agglomeration of an industry with few capital requirements and no apparent need to cluster geographically. I find the average author experiences productivity gains of 11.94% per annum when residing in London, the only major literary cluster – a gain not associated with living in any of the minor literary clusters. I find evidence of negative selection with respect to productivity, indicating the results are not driven by the self-selection of highly productive authors to London. I find heterogeneity of returns to living in London by birth cohort and Impact Index quartile (a measure of author quality) and that the cohorts who receive the greatest gains from locating in London are those for which there is the strongest evidence of negative selection with respect to productivity.

That is by Sara Mitchell in the Journal of Urban Economics, via the excellent Kevin Lewis.

Are social media really bad for your children?

Maybe not:

To disentangle between-person associations from within-person effects, we analyzed an eight-wave, large-scale, and nationally representative panel dataset (Understanding Society, the UK Household Longitudinal Study, 2009–2016) using random-intercept cross-lagged panel models (2). We adopted a specification curve analysis framework (35)—a computational method which minimizes the risk that a specific profile of analytical decisions yields false-positive results. In place of a single model, we tested a wide range of theoretically grounded analysis options [data is available on the UK data service (6); code is available on the Open Science Framework (7)]…

We first examined between-person associations (Fig. 1Left), addressing the question Do adolescents using more social media show different levels of life satisfaction compared with adolescents using less? Across all operationalizations, the median cross-sectional correlation was negative (ψ = −0.13), an effect judged as small by behavioral scientists (8). Next, we examined the within-person effects of social media use on life satisfaction (Fig. 1Center) and of life satisfaction on social media use (Fig. 1Right), asking the questions Does an adolescent using social media more than they do on average drive subsequent changes in life satisfaction? and To what extent is the relation reciprocal? Both median longitudinal effects were trivial in size (social media predicting life satisfaction, β = −0.05; life satisfaction predicting social media use, β = −0.02).

The effects which are observed are larger for females:

For females, however, social media was a predictor of slightly decreased life satisfaction across all domains, except satisfaction with appearance (b = −0.13 to −0.05 or β = −0.09 to −0.04; Fig. 2Center). Furthermore, all domains of life satisfaction, except satisfaction with friends, predicted slightly reduced social media use (b = −0.17 to −0.05 or β = −0.11 to −0.07; Fig. 2Right).

Here is the full (short) paper by Amy OrbenTobias Dienlin, and Andrew K. Przybylski.

Did the zero lower bound matter?

This is an article of faith in “Twitter economics,” but Scott Sumner, myself, and many others have been insisting for years that the arguments simply are not there and that the zero lower bound is not such a big deal.  There is now a new NBER working paper by Davide Debortoli, Jordi Gali, and Luca Gambetti:

The zero lower bound (ZLB) irrelevance hypothesis implies that the economy’s performance is not affected by a binding ZLB constraint. We evaluate that hypothesis for the recent ZLB episode experienced by the U.S. economy (2009Q1-2015Q4). We focus on two dimensions of performance that were likely to have experienced the impact of a binding ZLB: (i) the volatility of macro variables and (ii) the economy’s response to shocks. Using a variety of empirical methods, we find little evidence against the irrelevance hypothesis, with our estimates suggesting that the responses of output, inflation and the long-term interest rate were hardly affected by the binding ZLB constraint, possibly as a result of the adoption and fine-tuning of unconventional monetary policies. We can reconcile our empirical findings with the predictions of a simple New Keynesian model under the assumption of a shadow interest rate rule.

In my somewhat jaded view, the zero lower bound arguments have been an excuse of sorts to move outside of “scarcity economics” and make politically convenient claims about the necessity fiscal stimulus.  It is no wonder we ended up with MMT!

In the meantime, this evidence is the (current) final word, and I hope it will be heeded as such.

Do Pimples Pay? Acne, Human Capital, and the Labor Market

We use data from the National Longitudinal Study of Adolescent to Adult Health to investigate the association between having acne in middle to high school and subsequent educational and labor market outcomes. We find that having acne is strongly positively associated with overall grade point average in high school, grades in high school English, history, math, and science, and the completion of a college degree. We also find evidence that acne is associated with higher personal labor market earnings for women. We further explore a possible channel through which acne may affect education and earnings.

Here is the full piece by Hugo Mialon and Erik T. Nesson.  For the pointer I thank Daniel Gross.

The cutthroat world of children’s food

It’s all about the data:

After a year-long investigation, a top California exec has been arrested by the FBI for allegedly hacking into a competitor’s website and stealing their customer data in an effort to ruin their business.

There is an unusual twist, however: this isn’t the high-stakes world of big tech or high finance, but American school lunches.

Chief financial officer of Choicelunch, Keith Wesley Cosbey, 40, was collared last month over claims that he illegally grabbed details from competitor The LunchMaster on what precisely youngsters across the San Francisco Bay Area like to eat and are allergic to.

He has been charged with unlawful computer access and fraud, and identity theft. If found guilty, Cosbey faces up to three years behind bars.

According to the criminal complaint against him, filed in San Mateo County, Cosbey stole data on hundreds of students, and then sent it anonymously to the local government department that oversees the school lunch program in an apparent effort to undermine his competitor.

Here is the full story, and here is another story, both via the estimable Chug.