Tyler Cowen's Blog, page 125
August 31, 2014
Assortative mating in Bolivia
It is potent:
If people married each other more randomly, poverty levels would be considerably lower than they are now. If we abandoned all current family arrangements and randomly grouped all Bolivians into new families of 5 persons, poverty levels would fall by about 15 percentage points (from the current level of 55% of all households to about 40% of all households). The Gini coefficient measuring inequality would also fall from about 0.70 to 0.55.
But Bolivians do not mix much in marriage. The correlation between partners’ education levels is extremely high at about 0.77, with no signs of falling. For comparison, the corresponding number for Germany is 0.52 and for Britain it is 0.41.
But not all Bolivians are equally restricted in their marriage choices. In the department of Santa Cruz the correlation is only 0.69 while in Potosi it is 0.82, with a corresponding difference in poverty rates.
That is from Lykke E. Andersen, Development from Within, an interesting and well-written collection of essays on Bolivian development, and sometimes on development policy more generally. The cited piece was written in 2008.
Here is a good sentence from that book:
Just one little road block can disrupt an entire vacation.
Here is the author on Twitter. Here is her blog.
Sunday assorted links
1. David Rosand has passed away.
2. Which state has the worst drivers?
3. Interview with Robert Aumann.
4. Summer books from Politico, many are the sorts of titles you don’t usually run across at MR.
5. Does the language of deceit betray scientific fraud?
Do wealth shocks affect the health of the elderly?
Hannes Schwandt of Princeton has a new paper (pdf) on this topic:
Do wealth shocks affect the health of the elderly in developed countries? The economic literature is sceptical about such effects which have so far only been found for poor retirees in poor countries. In this paper I show that wealth shocks also matter for the health of wealthy retirees in the US. I exploit the booms and busts in the US stock market as a natural experiment that generated considerable gains and losses in the wealth of stockholding retirees. Using data from the Health and Retirement Study I construct wealth shocks as the interaction of stock holdings with stock market changes. These constructed wealth shocks are highly predictive of changes in reported wealth. And they strongly affect health outcomes. A 10% wealth shock leads to an improvement of 2-3% of a standard deviation in physical health, mental health and survival rates. Effects are heterogeneous across physical health conditions, with most pronounced effects for the incidence of high blood pressure, smaller effects for heart problems and no effects for arthritis, diabetes, lung diseases and cancer. The comparison with the cross sectional relationship of wealth and health suggests that the estimated effects of wealth shocks are larger than the long-run wealth elasticity of health.
You can read more by Hannes Schwandt here.
August 30, 2014
Ambiguous business cycles
Here is a new paper by Cosmin L. Ilut and Martin Schneider on how ambiguity aversion can give rise to a kind of real business cycle, augmented by nominal rigidities:
This paper studies a New Keynesian business cycle model with agents who are averse to ambiguity (Knightian uncertainty). Shocks to confidence about future TFP are modeled as changes in ambiguity. To assess the size of those shocks, our estimation uses not only data on standard macro variables, but also incorporates the dispersion of survey forecasts about growth as a measure of confidence. Our main result is that TFP and confidence shocks together can explain roughly two thirds of business cycle frequency movements in the major macro aggregates. Confidence shocks account for about 70% of this variation.
The AER version is here, there are various versions here.
By Kristoffer P. Nimark, here is a paper on “Man bites Dog” business cycles.
Putin ends the interregnum
By Lilia Shevtsova, this is the best essay I have read on Russia, Ukraine, and Putin. It is difficult to excerpt, but here is one short bit:
Having flipped the global chessboard with his annexation of the Crimea and an undeclared war against Ukraine, Putin effectively ended the most recent period of interregnum and inaugurated a new era in global politics. However, no one yet knows what this era will bring. The global community is still reeling in shock, when it isn’t trying to pretend that nothing extraordinary has in fact occurred. This denial of the fact that the Kremlin has dealt a blow to conventional ideas, stable geopolitical constructs, and (supposedly) successful policies proceeds from the natural instinct for self-preservation. It is also quite natural that the political forces that have grown accustomed to the status quo will try to look to the past for answers to new challenges—this is precisely what those who were unprepared for a challenge always do. It was easy enough to predict that many politicians and political analysts would explain what Putin has done to the global order by using Cold War analogies. Drawing these historical parallels is potentially useful in only one respect: if they help us to see what is truly new about the current situation, and the scale of the risks involved.
Read the whole thing.
Saturday assorted links
1. Obstacles to self-driving cars.
2. Paul Bloom is against empathy.
3. Why your flight was cancelled.
5. Is IT spending going down in real terms?
6. Publication bias in the social sciences.
7. Are these the most boring or the most interesting people in the UK? “But these things become detached from what it’s OK to have curiosity about.” I thought this was a truly excellent piece. And here is the SneezeCount website. Read this too, and this. After those, you don’t need to look at anything else on the internet today.
What has Economics Done for You Lately?
A very nice talk by Robert Litan on the contributions of economists and economic ideas to the internet economy:
August 29, 2014
Love in the old East Germany
The East German woman had a job, was economically independent, self-confident, and divorce-happy; at a time when only 50 percent of West German women made their own money, 90 percent of women in East Germany were employed.
…the East German woman didn’t consider her male partner an enemy but rather a partner who, economically speaking, had little or nothig on her. Indeed, the average East German man, unless he had managed to gin a foothold in the regime’s upper echelons — but what woman would want a man like that? — wasn’t in a position to boast any typically macho privileges. He couldn’t show off with money, fast cars, or a house on Ibiza. he had to rely on his potential talent as a lover and his qualities as a father and partner. As a result, he tended to cultivate a rather “soft” masculine image.
…And, on top of all this: the suppression of free movement in public in East Germany had led both sexes to develop a relatively uninhibited attitude toward sex. What other unregulatable pastime did East Germany have to offer its citizens?
That is from the newly translated book by Peter Schneider, Berlin Now: The City After the Wall. Much of that passage makes sense, but one part confuses me: does “rely on his potential talent as a lover” support or contradict “cultivate a “soft” masculine image”?
Further evidence that the housing crisis was about screwy beliefs, not moral hazard
Ing-Haw Cheng, Sahil Raina and Wei Xiong have a new paper in the AER, here is the abstract:
We analyze whether mid-level managers in securitized finance were aware of a large-scale housing bubble and a looming crisis in 2004-2006 using their personal home transaction data. We find that the average person in our sample neither timed the market nor were cautious in their home transactions, and did not exhibit awareness of problems in overall housing markets. Certain groups of securitization agents were particularly aggressive in increasing their exposure to housing during this period, suggesting the need to expand the incentives-based view of the crisis to incorporate a role for beliefs.
There are other versions of the paper here.
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