Category: Economics

We compile the list of articles published in major refereed economics
journals during the last 35 years that have received more than 500
citations.  We document major shifts in the mode of contribution and in
the importance of different sub-fields: Theory loses out to empirical
work, and micro and macro give way to growth and development in the
1990s.  While we do not witness any decline in the primacy of production
in the United States over the period, the concentration of institutions
within the U.S. hosting and training authors of the highly-cited
articles has declined substantially.

That is from Kim, Morse, and Zingales; here is the paper.

Kremer
and Watt argue that as more immigrant women serve in household
positions, more high-skilled native women are therefore available to
join the labor market, driving down relative wages among high-skilled
workers and reducing the disparity in wages between low- and
high-skilled workers.

Here is the paper, and that is via Greg Mankiw.  I’ll say it again: it is not frequently enough recognized that the gender of immigrants is a major policy issue.  Female immigrants bring fewer problems than do male immigrants, and they encourage the male immigrants to behave better, but of course they also, in the longer run, mean a greater demographic shift in favor of the immigrants and their culture.

Here is Ken Rogoff on the IMF, via Asymmetrical Information.

Many critics argue that Bretton Woods has gone away and the world has no current financial crises.  What is the IMF to do?  Plus the IMF’s management of crises can be counterproductive and create moral hazard.

The primary question is what kind of recurring but temporarily patched together multilateral crisis management arrangements would replace the IMF.  The IMF would seem to be an especially good deal for the United States.  Despite being the world’s largest debtor nation, in the absence of an IMF, we would be looked upon as a global lender of last resort. 

The presence of an IMF allows us to trade with other nations, and sometimes bully them around.  But when their financial claims come we can calmly tell them to go take a place in line; furthermore other countries will help pick up the tab or help make "conditionality" look less imperialistic.  Given that the US has a role as global policeman in any case, the IMF shifts the "terms of trade" of that role in our favor.  Do note that many IMF critics would prefer to revise this entire arrangement, but simply abolishing the IMF, taken alone, would not bring large gains even under a libertarian view of the world.

A question: given that much of the funds are raised on
private capital markets, how much does the IMF cost (in the crude sense
of the gross subsidy) each year?

By the way, I’ll go out on a limb and predict the next financial crisis will come in an Eastern European nation which wanted to join the Eurozone but couldn’t quite make it.  Once this failure is realized capital will flow out rapidly.

On the IMF, here is commentary from The Economist.

Addendum: Here is an IMF piece on Robert Mundell, via Greg Mankiw.

The highly-intelligent-but-requiring-a-good-dose-of-Don-Boudreaux Ezra Klein writes:

My guess is that Wal-Mart’s size and might is having much more profound effects on our economy through the demands and strains it places on suppliers than through their lowish wages and benefits for direct employees (although those labor standards give them a competitive advantage over chains with higher standards, and so we race to the bottom…).  So much as I want the latter to go up and unionization to rush across the land, I’m more worried that Wal-Mart’s size and status as the indispensable outlet for products, when coupled with their virtually maniacal (though fully understandable) demands for lower pricing, are pushing down wages and work conditions all throughout [sic] the land and, for that matter, the world.  Suppliers simply can’t pay better and push the marginal cost to consumers — Wal-Mart will drop them faster than you can say "Always low prices."

If our economy had more pockets of sluggish monopoly power, those highly stable and visible firms might be more unionized.  But unionization is not desirable per se.  Keep in mind, a well-functioning antitrust law raises real wages rather than lowering them.  Wal-Mart, by squeezing suppliers and lowering prices, does the same.  Wal-Mart suppliers are still selling at "price above the appropriate measure of marginal cost," albeit by less than before.  Asking for higher prices and higher monopoly profits — not as a spur to innovation, but in the hope that monopolizing suppliers will share those profits with their laborers — is a bad way to elevate the American standard of living.

I worry more when Wal-Mart acts to keep prices up. 

It is suddenly on the web, and here is the RSS feed.  Who knows, Trudie may even weigh in on a few of these now…

Hypoallegenic cats: "These cats allow some of the millions of people with feline allergies to finally enjoy the love and companionship of a household pet without suffering from allergic symptoms."

Here is one analysis; CNN seems to believe.

The pointer is from Jacqueline Passey.

Sit down, not all of you are going to like hearing this one…

Moreover, the bigger CPI bias, the more social democratic we should be.

Here is more. 

MaxSpeak is pushing a letter from economists, already signed by notables Alan Blinder, Clive Granger, Rebecca Blank and others, to raise the minimum wage.  Don’t worry, I won’t bore you with the usual story about unemployment.  A small increase in the minimum wage will have only a small unemployment effect, nuff said.  Nevertheless, parts of the letter strikes me as absurd.  The letter says, for example, that "The minimum wage is also an important tool in fighting poverty."  Rubbish.  But don’t take my word for it. 

The minimum wage is a blunt instrument for reducing overall poverty, however, because many minimum-wage earners are not in poverty and because many of those in poverty are not connected to the labor market.  We calculate that the 90-cent increase in the minimum wage between 1989 and 1991 transferred roughly $5.5 billion to low-wage workers…. an amount that is smaller than most other federal antipoverty programs, and that can have only limited effects on the overall income distribution.

The source? Card and Krueger in Myth and Measurement (p.3).

The letter also states that most of the people earning the minimum wage are adults.  Most workers are adults so this is hardly surprising.  What is more surprising is that 25% of the workers earning the minimum wage are teenagers, even though teenagers are a much smaller percent of the workforce.  In addition, over half the workers earning the minimum wage are younger than 25.  The letter can spin things how it wants but it would be more informative to say that most of the workers earning the minimum wage are young workers who with a little age and experience would have their wages increased in anycase.

That brings me to a second strange statement, the idea that "the minimum wage helps to equalize the imbalance in bargaining power that
low-wage workers face in the labor market."  One wonders how bargaining power is defined.  Do these economists really believe that the fat cats are getting rich slurping up surplus from the low-wage workers?  If you measure bargaining power as a difference between wages and marginal productivity it is surely high wage workers who lack bargaining power.

The real rebuke, however, to the bargaining power idea is this: a lot of people earning the minimum wage are teenagers but more than 90 percent of working teenagers earn more than the minimum wage.  Either most teenagers are very good bargainers or wages depend less on "bargaining power" than on productivity.  Either way the letter is confused.

The debate over the minimum wage is more about rhetoric than reality. 

Stiglitz has a short piece in the New Scientist coming out in favor of prizes.  There isn’t much to the article that you don’t already know and its actually more anti-patent than pro-prize still it’s an interesting sign that prizes are being taken seriously in top economic circles.

More or less.  Here are the graphs.  The implications?

…consider the hypothesis that US real wages are being held
back by competition from low-wage countries such as China.  This is a
plausible story – we’d expect wages to converge eventually – but it
doesn’t square with the Canadian experience.  If anything, we’d expect
the effect to be even stronger in Canada, what with the 40%
appreciation of the CAD against the yuan since 2002.

The pointer is from New Economist blog.  And no, the difference is not there because the Canadians are caring people or because they did not elect that nasty Mr. Bush.  Mexican immigrants won’t explain stagnant wages along the middle end of the distribution.  One commentator has an intriguing suggestion:

Positive net employment change in Canada is most concentrated in the
high-paying energy sector in Alberta.  A great proportion of the jobs
being created demand high-skilled workers.  I wonder how much of the discrepancy in median incomes between Canada
and the US can be explained by the increase in job creation in Canada’s
energy sector relative to the type of job creation occurring in the US. 
Entry-level workers in BC and Alberta are getting paid big bucks.

Might the United States have experienced sectoral shifts which are unfavorable for median wages but favorable for wages at the upper ends of the distribution?  Another factor is that rising health care costs in the U.S. are absorbed into benefit costs but in Canada these costs are socialized to greater degree.  In any case economists have yet to get to the bottom of this mystery…

1. Here is a new paper by Fabio Rojas on that topic.  Hat tip to Organizations and Markets blog.

2. Tradesports.com is just starting betting on the new NBA season.  I looked at Sporting News; of their five experts, two picked Phoenix, two San Antonio, and one Miami.  No Dallas supporters there, or for that matter here.

3. Analysis of the new Booker shortlist; is it a changing of the literary guard?

4. Update: prediction markets and the law.

Megan Non-McArdle continues her transformation into a rational choice theorist:

While I can’t guess how
it will actually work out when I am faced with this in real life, I
like the idea of both partners putting two-thirds of each paycheck in a
joint account and reserving one-third to themselves.  ‘Cause why argue,
or even discuss, some personal purchases?  Buy it for yourself with your
own money, and look, no one cares!  It would also make gifts more
meaningful, if it came from your own hoard rather than shared money. 
And give you a reserve, if you are the cautious type.

Convexifying the choice set.  Who would expect that from a water engineer?  Money decisions do not have to be all-or-nothing.  Totally separate finances are undesirable, if only for symbolic reasons, but why not opt for a middle point? 

The key problem, in my view, is not overspending from a common pool of money.  Rather it is that couples use money as a medium for conducting ongoing fights, and thus the value of partially separate finances as a safety valve. 

The percentage of separate funds should rise with:

1. The age of the parties when married.  The two people might be very good together, but used to making their own money decisions.

2. The number of preceding marriages.

3. The two parties each earning decent or at least roughly comparable incomes. 

4. Small numbers of children or grown, out-of-college children.

5. Portfolio safety.  Portfolio riskiness should be borne jointly.

6. Inversely with the size of the mortgage and other fixed commitments.  The common fund should be spent on something which is not merely automatic.

Surely state property laws should matter, as should the strength of Kahneman-Tversky framing effects, but I haven’t quite figured out how.

Can you think of other relevant variables?

He will write a monthly column.  He is also listed as a contributor over at New Republic’s Open University blog.