Category: Economics

Gender Differences in Persistence and Publishing in Economics

We design an experiment to study gender differences in reactions to editorial decisions on submissions to top economics journals. Respondents read a hypothetical editor’s letter where the decision (e.g., revise and resubmit) is randomized across participants. Relative to an R&R, female assistant professors who receive a rejection perceive a significantly lower likelihood of subsequently publishing the paper in any leading journal than comparable male assistant professors. We do not find this gender difference among tenured professors. We consider several mechanisms, pointing to gender differences in attribution of negative feedback to ability and confidence under time constraints as likely explanations.

Here is the full paper by Gauri Kartini Shastry and Olga Shurchkov.  Via the excellent Kevin Lewis.

Why Matt Yglesias should be a conservative

“Conservative” isn’t exactly the word I would use, but he chose it, so for now let’s just run with that.  Here is an excerpt from Matt’s Substack (do subscribe!):

In terms of Tyler’s take, while I accept the logic of the view that it’s better to tax consumption than to tax investment, I just don’t buy into the idea that taxing investment is really bad. If I did, I would be a conservative like he is. But I don’t. I also think that, frankly, he always holds Democratic bills to a super-high standard of technocratic rigor while setting a much lower bar for Republican ones — to be generous, he maybe does that to counteract what he sees as a prevailing left bias of econ Twitter.

But to me, taxing investment with one hand while subsidizing investment with another is pretty good, especially paired with deficit reduction and permitting reforms.

Whether taxing investment at high rates is “bad,” or “really bad,” I am not sure.  But it is at least one of those.  Let me lay out a core, simple case for relatively low rates of taxation on capital income.  One can slug it out with the models, but much of the case comes down to two core intuitions:

1. A lot of people are myopic.  That encourages too much consumption relative to investment.  Matt himself frequently cites examples of myopia, in this Substack post it is Doritos chips and also Instagram.

2. A lot of institutions, including corporations, are too risk-averse relative to social returns.  This is the old Arrow-Lind argument.  They won’t take enough chances, and that too stifles some investment.  After all, consumption usually is safer than investment, at least if you know where to take your dinners.  Furthermore, the bureaucratization of society, including much of the private sector, is proceeding apace, so the thrust of the Arrow argument is stronger than it used to be, even though it may be relying increasingly on non-Arrovian mechanisms.

If you favored Operation Warp Speed, chances are you buy into this argument for at least some kinds of investment.

We simply don’t want the tax system to make these biases worse.  And those biases are pretty strong, close to ever present, and fairly universal.

You might add a third argument from time inconsistency:

3. Governments are often not credible, and short-sighted, so they have an excess tendency to tax or confiscate fixed capital investments, even when this is bad in the longer run.

To refer back to Matt’s post,  I am not so keen on the general concept “raise the taxes on capital and make the subsidies for investment even bigger” as an approach  If you wish to subsidize some kinds of investment, do so at the lowest (optimal) rate possible.-  It is simpler, cheaper, involves less deadweight loss, and places less burden on the government to find and implement all of the right tax and subsidy offsets.

I used to favor a zero tax rate of capital, but I no longer hold that view.  There are too many options for reclassifying labor income into capital income and thwarting the purposes of the tax system altogether.  Nonetheless, subject to this constraint, I think taxes on capital should be as low as possible.

John Stuart Mill was considered a “socialist” in his time, but even he thought the tax rate on capital should be zero and governments should tax land and consumption, still a good formula.

I would make a few additional points:

a. You can favor a low rate of capital taxation without thinking the elasticity of savings is very high.  If you tax Amazon less, they will have more money to invest, no matter how savings respond.  Furthermore, capital can flow in from abroad, all the more as the world becomes wealthier (and less politically safe?).

b. Capital investment boosts wages, and the quantity/quality of capital invested per worker is a major long-run determinant of wages.

c. Capital investments produce goods and services, which create consumer surplus for everyone.  If you are tempted to use the words “trickle down” in this discussion, you are not understanding #b or #c.  You really do want to live in the economies with more capital investment per worker.

d. Plenty of Western European governments have relatively favorable taxation for capital income, and still achieve relatively egalitarian outcomes.  I don’t myself put much stock in this point, but if it matters to you fine by me.  A low tax rate on capital income is hardly “giving away the store.”

So Matt should be a conservative.  It is fine if he in turn thinks the alternate views are “bad,” rather than “really bad.”

From the comments, on corporate tax

How about the corporate minimum tax provisions?

Different rules apply for the determination of income for US tax purposes and for financial reporting purposes. Both are artificial constructs. Who is to say that one is a more accurate indication of “income” than the other? Congress is largely responsible for the difference by creating incentives through the tax code by offering accelerated depreciation, etc. for taxable income for pet projects such as climate related investment.

The AMT provisions of this tax bill create enormous additional complexity. The fact that they are designed to apply to only about 150 large corporations isn’t a way to create an rationale and equitable corporate tax system. Rather, it is designed to punish, in a Robin Hood like manner, the most successful US corporations and to *temporarily* fund spending provisions in the bill. Its complexity will create additional complexity and costs which consumers and investors ultimately bear.

I say *temporary* funding because the corporate AMT is generally an acceleration of regular tax liability. If a corporation pays the AMT, a credit against future corporate regular tax is carried forward. Congress likes to complain about corporations artificially carrying forward financial book income and postponing taxable income. Here, Congress is engaging in the same sort of shenanigan by accelerating current tax revenues at the cost of future revenue. The JCT only estimates additional revenue over a 10-year period. What they don’t report is that the AMT revenue during the first 10 years will reduce tax revenues in the years thereafter. It’s not completely zero sum, but mostly zero sum over a longer period of time.

The extent of public accounting games played by our political *leaders* is shameful.

That is all from Vivian Darkbloom.

Gender Differences in Peer Recognition by Economists

Card et al. study the selection of fellows to the prestigious Econometrics Society showing essentially that prior to about 1980 there was modest discrimination against women. Between 1980 and 2005 about equal access but since 2005 a large bias towards women. Not surprising but citation metrics give us a way of comparing selection with achievement.

The key result can be seen in the raw data–compare the green line of at least 3 top-5s with the red line of selection as an ES fellow.

Here is the abstract to the paper with more details.

We study the selection of Fellows of the Econometric Society, using a new data set of publications and citations for over 40,000 actively publishing economists since the early 1900s. Conditional on achievement, we document a large negative gap in the probability that women were selected as Fellows in the 1933-1979 period. This gap became positive (though not statistically significant) from 1980 to 2010, and in the past decade has become large and highly significant, with over a 100% increase in the probability of selection for female authors relative to males with similar publications and citations. The positive boost affects highly qualified female candidates (in the top 10% of authors) with no effect for the bottom 90%. Using nomination data for the past 30 years, we find a key proximate role for the Society’s Nominating Committee in this shift. Since 2012 the Committee has had an explicit mandate to nominate highly qualified women, and its nominees enjoy above-average election success (controlling for achievement). Looking beyond gender, we document similar shifts in the premium for geographic diversity: in the mid-2000s, both the Fellows and the Nominating Committee became significantly more likely to nominate and elect candidates from outside the US. Finally, we examine gender gaps in several other major awards for US economists. We show that the gaps in the probability of selection of new fellows of the American Academy of Arts and Sciences and the National Academy of Sciences closely parallel those of the Econometric Society, with historically negative penalties for women turning to positive premiums in recent years.

One reason why a global carbon tax is impossible

Consequently, from a regional perspective, there are large disagreements about the welfare effects of carbon taxes: when a uniform carbon tax is imposed across all regions, with revenues redistributed locally as a lump sum so that there are no interregional transfers, some regions gain and others lose, often by large amounts that swamp the globally-averaged benefits of carbon taxes.

The microfoundations of that claim are interesting:

At the regional level, the optimal annual average temperature (at which the calibrated inverse U -shape governing how labor productivity varies with temperature reaches its peak) is approximately 12 degrees Celsius (C); an increase of regional temperature from 10 C to 12 C increases a region’s total factor productivity (TFP) by about 1%, while a further increase in annual average temperature from 12 C to 14 C reduces its TFP by about 2%.

Here are some bottom-line numbers on the global costs of climate change, with and without a carbon tax regime:

Without taxes global GDP reaches its nadir (relative to trend) just after 2190, when it is about 7.3% below the trend that would have obtained starting in 1990 without further global warming. With taxes, global GDP reaches its nadir just before 2190, at about 5.5% below trend.

Again, the costs of climate change are a few years of global economic growth.  That is a big deal, and worth attending to, but far from an existential risk.

Here is the 160 pp. NBER working paper by Per Krusell and Anthony A. Smith Jr.

A better way to think about wage pressures than the Phillips curve

Most economists maintain that the labor market in the United States is ‘tight’ because unemployment rates are low. They infer from this that there is potential for wage-push inflation. However, real wages are falling rapidly at present and, prior to that, real wages had been stagnant for some time. We show that unemployment is not key to understanding wage formation in the USA and hasn’t been since the Great Recession. Instead, we show rates of under-employment (the percentage of workers with part-time hours who would prefer more hours) and the rate of non-employment which includes both the unemployed and those out of the labor force who are not working significantly reduce wage pressures in the United States. This finding holds in panel data with state and year fixed effects and is supportive of a wage curve which fits the data much better than a Phillips Curve. We find no role for vacancies; the V:U ratio is negatively not positively associated with wage growth since 2020. The implication is that the reserve army of labor which acts as a brake on wage growth extends beyond the unemployed and operates from within and outside the firm.

We are the reserve army of the unemployed!  Here is the full paper from David G. Blanchflower, Alex Bryson, and Jackson Spurling.  The results also suggest that getting inflation under control will be easy than some alternative accounts might indicate, and in that sense this is mild cause for macroeconomic optimism, relatively speaking that is.

These ten veteran ex-Lakers from the 2021-2022 season, however, are still unemployed (ESPN).

Pharmaceutical drugs redux

In 2019 I presented this excerpt:

Humans are living longer, better lives thanks to innovations in prescription drugs over the past three decades, according to several new studies by Frank Lichtenberg, the Courtney C. Brown Professor of Business.

Every year, according to Lichtenberg’s research, drugs launched since 1982 are adding 150 million life-years to the lifespans of people in 22 countries that he analyzed. He calculated the average pharmaceutical expenditure per life-year saved at $2,837 — a bargain, he says.

“According to most health economists and policymakers, if you could extend someone’s life by a year for less than $3,000, that is highly cost effective,” says Lichtenberg, who gathered new data for these studies to cast a never-before seen view of the econometrics of prescription drugs. “People might be surprised by how cost-effective drugs appear to be in general.”

…To tease out the answer, the professor gathered data on drug launches and the age-standardized premature mortality rate by country, disease, and year. Drawing on data from the World Health Organization, the United Nations, consulting company IQVIA, and French database Theriaque, Lichtenberg was able to identify the role that pharmaceutical innovation played in reducing the number of years of life lost due to 66 diseases in 27 countries. (“Years of life lost” is an estimate of the average years a person would have lived if he or she had not died prematurely.)

OK, now a simple economics question: given such numbers, should we be spending more on pharmaceutical drugs, or less?  I might add that biomedicine has made some spectacular advances as of late, so the notion that these are average costs, and the marginal cost slants sharply upward, probably is not true.

Here are further MR posts on this line of research.  Here are Lichtenberg’s NBER working papers.

How many of you got the simple economics question right?

Ireland facts of the day

The republic is enjoying a €8bn corporate tax windfall after bumper pandemic-enhanced revenues from tech and pharmaceutical companies. The tax take from companies attracted by Ireland’s 12.5 per cent corporate rate has soared since 2015 and leapt a further 30 per cent last year compared with 2020.

Ireland’s economy expanded by 6.3 per cent over the second quarter, against an EU average of just 0.6 per cent. So great was the impact from multinationals that Ireland’s numbers distorted EU figures, despite the nation of 5.1mn making up less than 3 per cent of the region’s economy.

Here is more from the FT.

The tax provisions of the new climate and taxes bill

I can’t quite bring myself to call it the Inflation Reduction Act.  One thing I have learned from experience is how hard it is to judge such bills upfront.  For instance, I just learned that the electric vehicle tax credits do not currently apply to any electric vehicle whatsoever, nor will they obviously apply to any electric vehicle to be produced in the near future.  Now the United States might take a larger role in battery production, or perhaps the law/regulation will be modified — don’t assume these standards will collapse.  Still, the provisions are going to evolve.  Or maybe there is a modest chance that provision of the bill simply will never kick in.

I don’t know.

How about the corporate minimum tax provisions?  It sounds so simple to address unfairness in this way, and how much opposition will there be to a provision that might cover only 150 or so companies?  But a lot of the incentives for new investment will be taken away, including new investment by highly successful companies.  (You can get your tax bill down by making new investments, for instance, and that is why Amazon has paid relatively low taxes in many years.)  Most of the companies covered are expected to be manufacturing, and didn’t we hear from the Democratic Party (and indeed many others) some while ago that manufacturing jobs possess special economic virtues?  Furthermore, some of the tax incentives for green energy investments will be taken away.  Has anyone done and published a cost-benefit analysis here?  That is a serious question (comments are open!), not a rhetorical one.

Here are some other concerns (NYT):

“The evidence from the studies of outcomes around the Tax Reform Act of 1986 suggest that companies responded to such a policy by altering how they report financial accounting income — companies deferred more income into future years,” Michelle Hanlon, an accounting professor at the Sloan School of Management at the Massachusetts Institute of Technology, told the Senate Finance Committee last year. “This behavioral response poses serious risks for financial accounting and the capital markets.”

Other opponents of the new tax have expressed concerns that it would give more control over the U.S. tax base to the Financial Accounting Standards Board, an independent organization that sets accounting rules.

“The potential politicization of the F.A.S.B. will likely lead to lower-quality financial accounting standards and lower-quality financial accounting earnings,” Ms. Hanlon and Jeffrey L. Hoopes, a University of North Carolina professor, wrote in a letter to members of Congress last year that was signed by more than 260 accounting academics.

How bad is that?  I do not know.  Do you?  My intuition is that the book profits concept cannot handle so much stress.  By the way, kudos to NYT and Alan Rappeport for doing that piece.  It is balanced but does not hold back on the skeptical side.

And here’s one matter I haven’t seen anyone mention: the climate part of the bill, and indeed most of the accompanying science and chips bill, assume in a big way that private sector investment is deficient in solving various social problems and needs some serious subsidy and direction.

Now the direction of that investment is a separate matter, but when it comes to the subsidy do you recall Kenneth Arrow’s classic argument that the private sector does not invest enough in risk-taking?  Private investors see their private risk as higher than the actual social risk of the investment.  This argument implies subsidies for investments, as much of the rest of the bill and its companion bill provide, not additional taxes on investment.  This same kind of argument lies behind Operation Warp Speed, which most people supported, right?

And yet I see everyone presenting the new taxes on investment in an entirely blithe manner, ignoring the fact that the rest of the bill(s) implies private investment needs to be subsidized or at least taxed less.

Overall the ratio of mood affiliation and also politics in this discussion, to actual content, makes me nervous.  The bills went through a good deal of uncertainty, and so a significant portion of the intelligentsia has been talking them up.  Biden after all needs some victories, right?  And at some point the green energy movement needs some major legislative trophies, right?  What I’d like to see instead is a more open and frank discussion of the actual analytics.

It is very good when a top economist such as Larry Summers has real policy influence, in this case on Joe Manchin.  But part of that equilibrium is that other economists start watching their words, knowing some other Democratic Senator might fall off the bandwagon.  There is Sinema, Bernie Sanders has been making noise and complaining, someone else might have tried to extract some additional rents, and so on.

The net result is that you are not getting a very honest and open discussion of what is likely to prove a major piece of legislation.

The new class of “insider” trader?

Then, crucially, the government stepped in with covid-relief funds, which were somehow granted to prisoners. (Congress did not bar us from getting stimulus cheques, though the Internal Revenue Service tried to.) That windfall came as a total shock…

Stimulus payments meant people habituated to scarcity suddenly had $1,200 in their hands (then $2,000 more as the government approved two additional payouts). And rather than splurge on items we usually go without – honey buns ($1.10 each), king-size chocolate bars ($2.40) or high-end toothpaste ($5.28) – more than a few of us chose to invest.

Cryptocurrencies have been popular too.  Here is the full Economist/1843 story.  And get this:

The perverse incentive structure of prisoner accounts makes things worse. The prison does not touch account balances below $25, the threshold at which a prisoner is considered indigent. But for those with more than $25, the prison deducts onerous fees totalling 55% of incoming transfers. “Every week I have to max out my commissary order and zero out my account,” Steve said. Prisoners are being conditioned to live pay cheque to pay cheque.

The authors are themselves incarcerated in Washington state.  Via Mike Rosenwald.

Dose Stretching for the Monkeypox Vaccine

Photo Credit: NIAD. https://www.flickr.com/photos/niaid/52103767506/

We are making all the same errors with monkeypox policy that we made with Covid but we are correcting the errors more rapidly. (It remains to be seen whether we are correcting rapidly enough.) I’ve already mentioned the rapid movement of some organizations to first doses first for the monkeypox vaccine. Another example is dose stretching. I argued on the basis of immunological evidence that A Half Dose of Moderna is More Effective Than a Full Dose of AstraZeneca and with Witold Wiecek, Michael Kremer, Chris Snyder and others wrote a paper simulating the effect of dose stretching for COVID in an SIER model. We even worked with a number of groups to accelerate clinical trials on dose stretching. Yet, the idea was slow to take off. On the other hand, the NIH has already announced a dose stretching trial for monkeypox.

Scientists at the National Institutes of Health are getting ready to explore a possible work-around. They are putting the finishing touches on the design of a clinical trial to assess two methods of stretching available doses of Jynneos, the only vaccine in the United States approved for vaccination against monkeypox.

They plan to test whether fractional dosing — using one-fifth of the regular amount of vaccine per person — would provide as much protection as the current regimen of two full doses of the vaccine given 28 days apart. They will also test whether using a single dose might be enough to protect against infection.

The first approach would allow roughly five times as many people to be vaccinated as the current licensed approach, and the latter would mean twice as many people could be vaccinated with existing vaccine supplies.

…The answers the study will generate, hopefully by late November or early December, could significantly aid efforts to bring this unprecedented monkeypox outbreak under control.

Another interesting aspect of the dose stretching protocol is that the vaccine will be applied to the skin, i.e. intradermally, which is known to often create a stronger immune response. Again, the idea isn’t new, I mentioned it in passing a couple of times on MR. But we just weren’t prepared to take these step for COVID. Nevertheless, COVID got these ideas into the public square and now that the pump has been primed we appear to be moving more rapidly on monkeypox.

Addendum: Jonathan Nankivell asked on the prediction market, Manifold Markets, ‘whether a 1/5 dose of the monkey pox vaccine would provide at least 50% the protection of the full dose?’ which is now running at a 67% chance. Well worth doing the clinical trial! Especially if we think that the supply of the vaccine will not expand soon.

The new tax on stock buybacks

Democrats opted to seek a new 1 percent tax on corporate stock buybacks, a move that would make up at least some of the revenue that might have lost as a result of the [Sinema-driven] changes.

Here is further detail.  Something has to be taxed, and I don’t pretend to have a comprehensive ranking of tax options from best to worst.  I can’t tell you where this might rank on the list.  I can however tell you these three things:

1. This is flat out a new tax on capital, akin to a tax on dividends.

2. Are you worried about corporations being too big and monopolistic?  This makes it harder for them to shrink!  Think of it also as a tax on the reallocation of capital to new and growing endeavors.

3. The real reason this is being proposed is because so many Democratic and left-leaning public intellectuals have written “flat out wrong, doesn’t matter what your partisan stance is” pieces on stock buybacks.

And there you go.

The rise and fall of empires

The last two centuries witnessed the rise and fall of empires. We construct a model which rationalises this in terms of the changing trade gains from empires. In the model, empires are arrangements that reduce trade cost between an industrial metropole and the agricultural periphery. During early industrialisation, the value of such bilateral trade increases, and so does the value of empires. As industrialisation diffuses, and as manufactures become more differentiated, trade becomes more multilateral and intra-industry, reducing the value of empires. Our results are consistent with long-term changes in income distribution and trade patterns, and with previous historical arguments.

That is from a new NBER working paper by Roberto Bonfatti and Kerem Coşar.

There is No Such Thing as Development Economics

I used to think there was such a thing as development economics. There are still richer and poorer countries, of course, but is there a “development economics,” a special type of economics for poor countries? I don’t think so. Maybe there once was. In the twentieth century, divergence in per-capita GDP increased big time and it was a burning question why poor countries weren’t on the same development path as the developed nations. Starting around 1990-2000, however, we have seen convergence. Most countries are now on the same path. Poorer countries and richer countries are becoming more alike, sometimes for good and sometimes for bad. I tweeted the following news headline recently:

Image

Notice the commentary on NYC infrastructure but also the man bites dog angle. In Pakistan people on social media are apparently sharing videos of flooding in the New York subway to complain about the poor state of infrastructure in Pakistan!

My own anecdote fit the pattern. This week I am in Delhi and due to a series of unfortunate supply chain shocks at my house-build in the US, for the first time in 3 weeks I have running hot water and reliable internet access!  Not only that but although India has sadly fallen for the paper straw nonsense the top hotels remain free from flow constrictors so the water gushes out of the shower with elan just as God intended. Civilization is  truly moving back east.

More generally, poorer and richer countries face many of the same problems today: infrastructure, low-skill workers and technological change, climate adaption and so forth. Is the latest paper on cash transfers, pollution, or corruption about a poor country or a rich country? It’s hard to tell. Poor countries still have their own unique problems, of course, but those problems are best analyzed by country rather than by income category. India is not the same as Thailand or Peru. I see little that unites poor countries under the rubric development economics.