Category: Data Source
A median voter theory of right-wing populism
From a recent paper:
Populists are often defined as those who claim that they fill “political representation gaps” -differences between the policymaking by established parties and the “popular will.” Research has largely neglected to what extent this claim is correct. I study descriptively whether representation gaps exist and their relationship with populism. To this end, I analyze the responses of citizens and parliamentarians from 27 European countries to identical survey policy questions, which I compile and verify to be indicative of voting in referendums. I find that policymaking represents the economic attitudes of citizens well. However, I document that the average parliamentarian is about 1SD more culturally liberal than the national mean voter. This cultural representation gap is systematic in four ways: i) it arises on nearly all cultural issues, ii) in nearly all countries, iii) nearly all established parties are more culturally liberal than the national mean voter, and iv) all major demographic groups tend to be more conservative than their parliamentarians. Moreover, I find that demographic differences between voters and parliamentarians or lack of political knowledge cannot fully account for representation gaps. Finally, I show that right-wing populists fill the cultural representation gap.
That is by Laurenz Guenther. I am myself (largely) a cultural liberal, so I am not siding with the right-wing populists here. But let us be clear what is going on. The right-wing populists are gaining ground in so many countries because the cultural liberals in various parliaments and congresses are extremely reluctant to meet the preferences of their median voters. On the immigration issue most of all. And then they wish to talk about threats to democracy!
The whole thing is really quite tragic. Whether you are willing to admit this state of affairs to yourself is one of the better measures of self-awareness in our current political environment. tekl.
Are Juries Racially Discriminatory?
We implement five different tests of whether grand juries, which are drawn from a representative cross-section of the public, discriminate against Black defendants when deciding to prosecute felony cases. Three tests exploit that while jurors do not directly observe defendant race, jurors do observe the “Blackness” of defendants’ names. All three tests—an audit-study-style test, a traditional outcome-based test, and a test that estimates racial bias using blinded/unblinded comparisons after purging omitted variable bias—indicate juries do not discriminate based on race. Two additional tests indicate racial bias explains at most 0.3 percent of the Black-White felony conviction gap.
That is from a new NBER working paper by
The Rising Returns to R&D: Ideas Are not Getting Harder to Find (one hypothesis)
R&D investment has grown robustly, yet aggregate productivity growth has stagnated. Is this because “ideas are getting harder to find”? This paper uses micro-data from the US Census Bureau to explore the relationship between R&D and productivity in the manufacturing sector from 1976 to 2018. We find that both the elasticity of output (TFP) with respect to R&D and the marginal returns to R&D have risen sharply. Exploring factors affecting returns, we conclude that R&D obsolescence rates must have risen. Using a novel estimation approach, we find consistent evidence of sharply rising technological rivalry and obsolescence. These findings suggest that R&D has become more effective at finding productivity-enhancing ideas, but these ideas may also render rivals’ technologies obsolete, making innovations more transient. Because of obsolescence, rising R&D does not necessarily mean rising aggregate productivity growth.
Here is the paper by Yoshiki Ando (Singapore Management University, TPRI), James Bessen (BU, TPRI), and Xiupeng Wang. Via Arjun.
Personalism and the returns to democracy
Studies of income and regime type typically contrast democracies and autocracies, ignoring heterogeneity in the character of authoritarian regimes. We focus on the consequences of personalist rule, where power is concentrated in an individual or small elite. Extending the dynamic panel strategy of Acemoglu, Naidu, Restrepo, and Robinson (2019), we estimate the differential growth performance of democracies, institutionalized autocracies, and personalist autocracies. Across eight GDP series, eight autocracy codings, and six measures of personalism, we observe a consistent pattern: Whenever an “autocratic penalty” emerges, it is concentrated in personalist regimes. The growth performance of institutionalized dictatorships, in contrast, is statistically indistinguishable from that of democracies. We document evidence that the “personalist penalty” is driven by some combination of low private investment, poor public-goods provision, and conflict. These findings emphasize the analytic payoff of unpacking autocracy and highlight the different incentives facing leaders with narrow and broad bases of power.
That is from a new NBER working paper by Christopher Blattman, Scott Gehlbach, and Zeyang Yu.
Did the Minnesota housing reform lower housing costs?
Yes:
In December 2018, Minneapolis became the first U.S. city to eliminate single-family zoning through the Minneapolis 2040 Plan, a landmark reform with a central focus on improving housing affordability. This paper estimates the effect of the Minneapolis 2040 Plan on home values and rental prices. Using a synthetic control approach we find that the reform lowered housing cost growth in the five years following implementation: home prices were 16% to 34% lower, while rents were 17.5% to 34% lower relative to a counterfactual Minneapolis constructed from similar metro areas. Placebo tests document these housing cost trajectories were the lowest of 83 donor cities (p=0.012). The results remain consistent and robust to a series of subset analyses and controls. We explore the possible mechanism of these impacts and find that the reform did not trigger a construction boom or an immediate increase in the housing supply. Instead, the observed price reductions appear to stem from a softening of housing demand, likely driven by altered expectations about the housing market.
That is from a new paper by Helena Gu and David Munro. Via the excellent Kevin Lewis.
New data on tenure
Tenure is a defining feature of the US academic system with significant implications for research productivity and creative search. Yet the impact of tenure on faculty research trajectories remains poorly understood. We analyze the careers of 12,000 US faculty across 15 disciplines to reveal key patterns, pre- and post-tenure. Publication rates rise sharply during the tenure-track, peaking just before tenure. However, post-tenure trajectories diverge: Researchers in lab-based fields sustain high output, while those in non-lab-based fields typically exhibit a decline. After tenure, faculty produce more novel works, though fewer highly cited papers. These findings highlight tenure’s pivotal role in shaping scientific careers, offering insights into the interplay between academic incentives, creativity, and impact while informing debates about the academic system.
Here is the paper. That is by Giorgio Tripodi, Ziang Zheng, Yifan Qian, and Dashun Wang, via the excellent Kevin Lewis.
The economics of the U.S. auto industry, a brief history
The economic value of the cars being made has climbed substantially through the years. As a result, real value added and industrial production — two different ways of measuring actual output — are now at all-time highs.
And this:
What about jobs? The auto industry today employs 1 million workers. Between 1950 and the signing of NAFTA in 1993, it averaged 1.1 million workers, just slightly higher.
And this:
The deindustrialization of Detroit is typically understood as a phenomenon of the 1970s and 1980s, and it is therefore blamed on the growth of trade during this period. But the fact is that auto investment and employment had started moving out of Detroit decades earlier.
I pieced together data from a variety of sources, which shows that auto manufacturing employment in the City of Detroit had already peaked in 1950, at just over 220,000 workers.
By 1970 the biggest declines had already occurred, with employment falling by more than half, to fewer than 100,000 jobs.
An important nuance is that many of these lost jobs migrated to other parts of Michigan, at least for a while. So while auto employment was collapsing in Detroit, the rest of Michigan managed to hold auto employment stable for another five decades until the 2000s, when it started falling everywhere in the state.
And:
Michigan now has about 280,000 fewer auto jobs than it did in the 1950s, a decline of roughly 60 percent. For the United States as a whole, auto employment is only down 4.7 percent — further showing that the struggles of Detroit and Michigan are less about the decline of the American auto industry and more about its relocation elsewhere.
Another way of understanding the trend: If Michigan had simply maintained the same share of American auto jobs as it had in the 1950s, meaning it did not lose any production to other states, then it would only have lost 21,000 auto jobs since then, not the 280,000 it actually did lose.
An excellent piece, recommended.
What does consulting do?
It is actually pretty useful:
This paper provides the first systematic and comprehensive empirical study of management and strategy consulting. We unveil the workings of this opaque industry by drawing on universal administrative business-to-business transaction data based on value-added tax links from Belgium (2002-2023). These data permit us to document the nature of consulting engagements, take-up patterns, and the effects on client firms. We document that consulting take-up is concentrated among large, high-labor-productivity firms. For TFP and profitability, we find a U-shaped pattern: both high and low performers hire consultants. New clients spend on average 3% of payroll on consulting, typically in episodic engagements lasting less than one year. Using difference-in-differences designs exploiting these sharp consulting events, we find positive effects on labor productivity of 3.6% over five years, driven by modest employment reductions alongside stable or growing revenue. Average wages rise by 2.7% with no decline in labor’s share of value added, suggesting productivity gains do not come at workers’ expense through rent-shifting. We do observe organizational restructuring with small increases in dismissal rates, and higher services procurement but reduced labor outsourcing. Our heterogeneity analysis reveals larger productivity gains for initially less productive firms, suggesting improvements in allocative efficiency. Our findings broadly align with ex-ante predictions from surveyed academic economists and consulting professionals, validating the productivity-enhancing view of consulting endorsed by most practitioners though only half of academics, while lending less support to a rent-shifting view favored by many economists.
That is from a new NBER working paper by
The Rising Cost of Child and Pet Day Care
Everyone talks about the soaring cost of child care (e.g. here, here and here), but have you looked at the soaring cost of pet care? On a recent trip, it cost me about $82 per day to board my dog (a bit less with multi-day discounts). And no, that is not high for northern VA and that price does not include any fancy options or treats! Doggie boarding costs about about the same as staying in a Motel 6.
Many explanations have been offered for rising child care costs. The Institute for Family Studies, for example, shows that prices rise with regulations like “group sizes, child-to-staff ratios, required annual training hours, and minimum educational requirements for teachers and center directors.” I don’t deny that regulation raises prices—places with more regulation have higher costs—but I don’t think that explains the slow, steady price increase over time. As with health care and education, the better explanation is the Baumol effect, as I argued in my book (with Helland) Why Are the Prices So Damn High?
Pet care is less regulated than child care, but it too is subject to the Baumol effect. So how do price trends compare? Are they radically different or surprisingly similar? Here are the two raw price trends for pet services (CUUR0000SS62053) and for (child) Day care and preschool (CUUR0000SEEB03). Pet services covers boarding, daycare, pet sitting, walking, obedience training, grooming but veterinary care is excluded from this series so it is comparable to that for child care.
As you can see, the trends are nearly identical, with child care rising only slightly faster than pet care over the past 26 years. Of course, both trends include general inflation, which visually narrows the gap. When we normalize to the overall CPI, we get the following:
Over 26 years, the real (relative) price of Day Care and Preschool has increased 36%, while Pet Services have risen 28%. If regulation doesn’t explain the rise in pet care costs–and it probably doesn’t–then regulation probably doesn’t explain the rise in child care costs either. After all, child and pet care are very similar goods!
The similar rise in the price of child day care and pet day care/boarding is consistent with Is American Pet Health Care (Also) Uniquely Inefficient? by Einav, Finkelstein and Gupta, who find that spending on veterinary care is rising at about the same rate as spending on human health care. Since the regulatory systems of pet and human health care are very different this suggests that the fundamental reason for rising health care isn’t regulation but rising relative prices and increasing incomes (fyi this is also an important reason why Americans spend more on health care than Europeans).
Thus, my explanation for rising prices in child care and pet care is that productivity is increasing in other industries more than in the care industries which means that over time we must give up more of other goods to get child and pet care. In short, if productivity in other sectors rises while child/pet care productivity stays flat, relative prices must rise. Another way to put this is that to retain workers, wages in stagnant-productivity sectors must rise to match those in (equally labor-skilled) high-productivity sectors. That means paying more for the same level of care, simply to keep the labor force from leaving
But rising productivity in other sectors is good! Thus, I always refer to the Baumol effect rather than the “cost disease” because higher prices are not bad when they reflect changes in relative prices. As with education and health care the rising price of child and pet care isn’t a problem for society as whole. We are richer and can afford more of all goods. It can be a problem, however, for people who consume more than the average quantities of the service-sector goods and people who have lower than average wage gains. So what can we do? Redistribution is one possibility.
If we focus on the prices, the core problem is that care work is labor-intensive and labor has a high opportunity cost. One solution is to lower the opportunity cost of that labor. Low-skill immigration helps: when lower-wage workers take on support roles, higher-wage workers can focus on higher-value tasks. As I’ve put it, “The immigrant who mows the lawn of the nuclear physicist indirectly helps to unlock the secrets of the universe.” Same for the immigrant who provides boarding for the pets of the nuclear physicist.
Another solution is capital substitution—automation, AI, better tools. But care jobs resist mechanization; that’s part of why productivity growth is so slow in these sectors. Still, the basic truth remains: if we want more affordable day care—for kids or pets—we need to use less of what’s expensive: skilled labor. That means either importing more people to do the work, or investing harder in ways to do it with fewer hands.
China kindergarten fact of the day
The number of children in Chinese kindergartens has fallen by a quarter in four years, prompting the closure of tens of thousands of preschools in the country as a precipitous drop in births hits the education system.
Enrolments in China’s kindergartens have declined by 12mn children between 2020 and 2024, from a peak of 48mn, according to data from the country’s ministry of education. The number of kindergartens, serving Chinese children aged 3-5, has also fallen by 41,500 from a high of nearly 295,000 in 2021.
Here is more from the FT.
Partisan Bias in Professional Macroeconomic Forecasts
Here is a recent paper by Benjamin S. Kay, Aeimit Lakdawala, and Jane Ryngaert:
Using a novel dataset linking professional forecasters in the Wall Street Journal Economic Forecasting Survey to their political affiliations, we document a partisan bias in GDP growth forecasts. Republican-affiliated forecasters project 0.3-0.4 percentage points higher growth when Republicans hold the presidency, relative to Democratic-affiliated forecasters. Forecast accuracy shows a similar partisan pattern: Republican-affiliated forecasters are less accurate under Republican presidents, indicating that partisan optimism impairs predictive performance. This bias appears uniquely in GDP forecasts and does not extend to inflation, unemployment, or interest rates. We explain these findings with a model where forecasters combine noisy signals with politically-influenced priors: because GDP data are relatively more uncertain, priors carry more weight, letting ideology shape growth projections while leaving easier-to-forecast variables unaffected. Noisy information therefore amplifies, rather than substitutes for, heterogeneous political priors, implying that expectation models should account for both information rigidities and belief heterogeneity. Finally, we show that Republican forecasters become more optimistic when tax cuts are salient in public discourse, suggesting that partisan differences reflect divergent beliefs about the economic effects of fiscal policy.
Here is the SSRN link.
USA fact of the day
…fraction of children living with two parents is highest it’s been since 1991 (which wouldn’t be surprising with less teen/v young pregnancy)…
That is from Kevin Bryan, here is the source material.
China fact of the day
China alone accounts for almost 1000 hotels that include Vienna in their name, far more than any country, including Austria itself.
This article is more generally about what you learn when you study 25,000 hotel names and look for common patterns. Via the excellent Samir Varma.
USA fact of the day
Federal Reserve Board operating expenses have *quadrupled* from 2004 to 2023, reaching ~$1 billion in 2023, according to the Annual Reports of the Board of Governors of the Federal Reserve System.
That is from Jon Hartley. It is of course correct that the other effects of the Fed far outweigh the size of these expenditures. Nonetheless, it is worth asking, given these numbers, whether the system in place is generating good decisions. That in turn said, we do not currently have an “appropriate set of askers.”
The Benefits of Scholastic Athletics
This paper uses longitudinal data to study the benefits of participation in scholastic athletics starting with high school participation and continuing with college athletics, including the benefits of intramural athletics. We study the impact of participation on a number of important life outcomes, including graduation from high school and college and wages after schooling is completed. Controlling for rich measures of cognitive and personality skills and social background, we find substantial benefits at all levels. Participation in athletics promotes social mobility for disadvantaged and minority students.
Here is the paper, by