Results for “series”

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On the new (and anonymous) Economist blog, Maybe Megan McArdle writes:

A new working paper from the IMF
looks at the impact of the 35-hour working week in France, where it has
been imposed by law on large firms since 2000. The authors, Marcello
Estevao and Filipa Sa, find that the 35-hour week has:

(i) encouraged workers in large firms to take second jobs, or to move to small firms where the 35-hour week is not obligatory;

(ii) driven up hourly wage costs for large firms;

(iii) probably had "no significant impact" on aggregate employment;

and

(iv) brought no significant increase in worker satisfaction, as measured by the Eurobarometer opinion survey series.

I usually doubt the kind of questionnaire evidence that would go into the kind of judgment represented by iv), but nonetheless this is worth reporting.

I introduce a new series of posts, titled as above, just to keep you all on your toes.  And by the way, I’ve long wondered if ATM surcharges aren’t taking advantage of a consumer intransitivity of indifference…you don’t mind losing the first fifty cents but…

We estimate a structural model of the market for automatic teller machines (ATMs) in order to evaluate the implications of regulating ATM surcharges on ATM entry and consumer and producer surplus.  We estimate the model using data on firm and consumer locations, and identify the parameters of the model by exploiting a source of local quasi-experimental variation, that the state of Iowa banned ATM surcharges during our sample period while the state of Minnesota did not.  We develop new econometric methods that allow us to estimate the parameters of equilibrium models without computing equilibria.  Monte Carlo evidence shows that the estimator performs well. We find that a ban on ATM surcharges reduces ATM entry by about 12 percent, increases consumer welfare by about 35 percent and lowers producer profits by about 20 percent.  Total welfare remains about the same under regimes that permit or prohibit ATM surcharges and is about 17 percent lower than the surplus maximizing level.  This paper can help shed light on the theoretically ambiguous implications of free entry on consumer and producer welfare for differentiated products industries in general and ATMs in particular.

The core intuition is that a given ATM often has monopoly power ex post, once you are there and need the money.  Lower fees mean fewer machines but that still might be better than facing the mark-up.  Here is the paper, whack it down if you can.

Addendum: Don Boudreaux offers commentary and some whacks.

Jane Galt and Malcolm Gladwell have a tiff. 

Gladwell, citing David Bloom and David Canning, suggested that changes in the "youth dependency ratio," account for a big chunk of Irish economic growth.  The youth dependency ratio refers to how many young-uns require support, relative to the broader population.  The Irish legalized contraception in 1979, birth rates continued to fall, and later the economy boomed.  But is the connection a causal one?

Here is a basic argument and model that the youth dependency ratio can matter.

I can see three possible mechanisms.  1) Fewer babies mean that more women work.  2) Fewer babies mean that each baby gets more parental investment; in the long run those people are smarter.  3) Fewer babies raises the savings rate.

Which of these might have operated in Ireland? 

On Mechanism #1, Irish women still work much less than the OECD average, yet Ireland is wealthier than almost anywhere else in Europe.  If a theory of growth first postulates a big or dominant effect, and then predicts rates but fails when it comes to predicting levels, I worry.

If we look at "rates of growth" only, this estimate suggests that more Irish female labor accounts for 1.5 percent Irish growth a year.  That hardly covers the growth gap between Ireland and the rest of Europe.  One estimate of elasticities suggests that an extra kid lowers an Irish woman’s chance of working full-time by 11.3 percent, but raises her chance of part-time work by 7.7 percent.  How far does that get us?  Bloom is a renowned labor economist but his article is far from state of the art macroeconomics.  Do note that increases in "total factor productivity" — often driven by foreign investment — seem to be more important than "growth in labor inputs" by a three to two ratio.

It ought to be easy to show evidence that the Irish boom has been strongest in the sectors where women work the most, such as services and not manufacturing.  I can’t find that evidence, can my readers?

Mechanism #2 is for the long run and it cannot explain the Irish boom of recent times or the timing of its possible connection to contraception.  Higher skills are a big part of the Irish story, but the trend started in about 1967. 

Mechanism #3: In Ireland, since the mid 1970s, gross private savings rates have been falling, more or less.  More generally, time series models for a single country, including demographic ones, don’t predict savings rates very well.

These studies I am citing have their defects, but they do show that the overall question is not so simple.

Notes:

1. These graphs show that, for developing countries, the change in the youth dependency ratio has "eyeball power" for 1975-1990, but not for 1960-1975. 

2. This study of Asia suggests that the youth dependency ratio matters, often through the savings rate (not the Irish scenario); the entire story is conditioned by "institutional factors."

3. Latin America has had falling birth rates but has failed to cash in.  As Bloom stresses, favorable birth rates help only if the country has good policies for putting the new female workers into productive positions.  In this regard Galt and Gladwell may not be so far apart.

The bottom line: How much of the Irish boom is caused by the change in the youth dependency ratio?  I don’t know.  If I had to offer a "I’m just a poor lil’ ol’ blogger but I’ve read lots of real business cycles macroeconomics simulation papers" seat of the pants sort of estimate, I would opt for a maximum of 15 to 20 percent.  That’s certainly worth writing about, but it is not the major story either.  I’d like to see a sectoral decomposition analysis, and I suspect that would point our attention toward FDI, education, and a favorable tax regime as bigger factors.

Addendum: Malcolm adds more.

Andrew Samwick asked a very good question last week: if Paul Krugman says that rising wages at the top are due to nasty Republican policies and not due to rising returns to education/skill how does he explain his own high income?  Unfortunately Mark Thoma interpreted Samwick to be saying that Krugman was hypocritical.  That, however, was not the point at all.

The point is that Krugman is a very good example of someone in the top 1% of income – someone whose earnings have increased tremendously in the 1980s and 1990s thus generating much income inequality.  Krugman wants to say that earnings in the top 1% have gone up because of a reduction in the minimum wage or fewer labor unions.  Huh?  Remember, it’s not just inequality that has increased it’s absolute earnings at the top – where are these earnings coming from?

The idea that reductions in the bottom generate big earnings at the top reminds me of the theory, once popular among theorists of development, that the way to get rich is to steal from poor people.  At best what you can get from lower labor earnings at the bottom is a slightly higher return to capital in general – not a big return to a few people at the top.

Krugman says it’s Republican policies that are generating inequality  Or does he?  Let’s go to the tape.  Here’s what Krugman had to say when it was revealed that Enron paid him $50,000 for a speaking engagement.

My critics seem to think that there was something odd about Enron’s
willingness to pay a mere college professor that much money. But such sums
are not unusual for academic economists whose expertise is relevant to
current events…

Remember that this was 1999: Asia was in crisis, the world was a mess.
And justifiably or not, I was regarded as an authority on that mess. I
invented currency crises as an academic field, way back in 1979; anyone
who wants a sense of my academic credentials should look at the Handbook
of International Economics, vol. 3, and check the index….

And I wasn’t an ivory-tower academic. In 1994 I had published an article… in August 1998 I had advocated temporary
capital controls …in 1998 I had taken on the Japanese
situation, with a series of papers…

I mention all this not as a matter of self-puffery, but to point out
that I was not an unknown college professor. On the contrary, I was a hot
property, very much in demand as a speaker to business audiences: I was
routinely offered as much as $50,000 to speak to investment banks and consulting
firms. They thought I might tell them something useful. For what it’s worth,
Citibank officials said – you can check it out with a Nexis search – that
a heads-up I gave them in 1996 about the risks of an Asian currency crisis
saved them hundreds of millions of dollars.

Now all this is amusing but that’s not my point (really, it’s just a side-benefit.)  My point is that Krugman’s earlier explanation for his high income was all about the rising return to education ("Look at all my papers!")  I would supplement this basic story with a greater winner-take-all market, more economies of scope etc.  (See also Tyler’s comments.)   

I think Krugman’s earlier explanation for his own income is mostly correct.  Where Krugman and I apparently disagree is that I think that the very same explanation Krugman gives for his income also explains why other people in the top 1% are earning more.  Krugman, however, no longer wants to talk about education and skill he wants to talk about nasty Republicans.

So let me rephrase Samwick’s question.  Paul, If you’re not so smart, why are you so rich?