Tyler Cowen's Blog, page 146
July 21, 2014
Overall large retailers are raising wages
There is a new NBER Working Paper from Brianna Cardiff-Hicks, Francine Lafontaine, and Kathryn Shaw, and the abstract is this:
With malls, franchise strips and big-box retailers increasingly dotting the landscape, there is concern that middle-class jobs in manufacturing in the U.S. are being replaced by minimum wage jobs in retail. Retail jobs have spread, while manufacturing jobs have shrunk in number. In this paper, we characterize the wages that have accompanied the growth in retail. We show that wage rates in the retail sector rise markedly with firm size and with establishment size. These increases are halved when we control for worker fixed effects, suggesting that there is sorting of better workers into larger firms. Also, higher ability workers get promoted to the position of manager, which is associated with higher pay. We conclude that the growth in modern retail, characterized by larger chains of larger establishments with more levels of hierarchy, is raising wage rates relative to traditional mom-and-pop retail stores.
This is not a surprising result, but it doesn’t receive nearly enough attention in popular discussions of the subject. There is a related ungated earlier draft here.
Virginia wage fact of the day
The economy here is just fine by most traditional measures. And yet:
Virginia has an unemployment rate of 5.1 per cent but average hourly wages in the year to May 2014 declined by 0.1 per cent.
That is from a probably gated piece, by James Politi, surveying the U.S. labor market more broadly.
The culture that is Russia
Many people in Russia are putting their own spin on recent events:
Did you know Malaysia Air Flight 17 was full of corpses when it took off from Amsterdam? Did you know that, for some darkly inexplicable reason, on July 17, MH17 moved off the standard flight path that it had taken every time before, and moved north, toward rebel-held areas outside Donetsk? Or that the dispatchers summoned the plane lower just before the crash? Or that the plane had been recently re-insured? Or that the Ukrainian army has air defense systems in the area? Or that it was the result of the Ukrainian military mistaking MH 17 for Putin’s presidential plane, which looks strangely similar?
Did you know that the crash of MH17 was all part of an American conspiracy to provoke a big war with Russia?
There is more here from Julia Ioffe.
How The Public Funding Of Elections Increases Candidate Polarization
Yet another shibboleth of campaign finance reform appears to be in weak shape, here is a new paper (pdf):
I show that the public funding of elections produces a large decrease in the �financial and electoral advantage of incumbents. Despite these eff�ects on electoral competition, I demonstrate that public funding produces more polarization and candidate divergence|not less. Finally, I establish that this eff�ect is at least in part due to the fact that public funding disproportionately aff�ects the contribution behavior of access-oriented interest groups, groups who, I show, systematically support moderate incumbents. Access-oriented interest groups therefore help generate the incumbency advantage and mitigate polarization by supporting moderate legislators.
That is from Andrew B. Hall at the Department of Government at Harvard.
July 20, 2014
Global inequality is down all the more if we count lifespan
From Becker, Philipson, and Soares (pdf):
GDP per capita is usually used to proxy for the quality of life of individuals living in different countries. Welfare is also affected by quantity of life, however, as represented by longevity. This paper incorporates longevity into an overall assessment of the evolution of cross-country inequality and shows that it is quantitatively important. The absence of reduction in cross-country inequality up to the 1990s documented in previous work is in stark contrast to the reduction in inequality after incorporating gains in longevity. Throughout the post–World War II period, health contributed to reduce significantly welfare inequality across countries. This paper derives valuation formulas for infra-marginal changes in longevity and computes a “full” growth rate that incorporates the gains in health experienced by 96 countries for the period between 1960 and 2000. Incorporating longevity gains changes traditional results; countries starting with lower income tended to grow faster than countries starting with higher income. We estimate an average yearly growth in “full income” of 4.1 percent for the poorest 50 percent of countries in 1960, of which 1.7 percentage points are due to health, as opposed to a growth of 2.6 percent for the richest 50 percent of countries, of which only 0.4 percentage points are due to health. Additionally, we decompose changes in life expectancy into changes attributable to 13 broad groups of causes of death and three age groups. We show that mortality from infectious, respiratory, and digestive diseases, congenital, perinatal, and “ill-defined” conditions, mostly concentrated before age 20 and between ages 20 and 50, is responsible for most of the reduction in life expectancy inequality. At the same time, the recent effect of AIDS, together with reductions in mortality after age 50—due to nervous system, senses organs, heart and circulatory diseases—contributed to increase health inequality across countries.
That reminder is from Aaron Schwartz. And of course that is the Becker, yet another contribution from Gary Becker.
Do note, by the way, that medical progress is usually egalitarian per se. A common metric is something like “health outcomes of the poor” vs. “health outcomes of the rich,” and that may or may not be moving in an egalitarian direction. But very often the more incisive metric is “health outcomes of the sick” vs. “health outcomes of the healthy,” and of course most medical treatments are going to the sick. The more desperate is the lot of the sick, the more likely that medical progress is egalitarian per se.
Bolivia fact of the day
One of the most surprising developments is the way that Bolivia has amassed foreign currency, salting away a rainy-day fund of about $14 billion, equal to more than half of its gross domestic product, or 17 months of imports, that can help it get through economic hard times.
According to the monetary fund, Bolivia has the highest ratio in the world of international reserves to the size of its economy, having recently surpassed China in that regard.
There is more here. What do you recommend as good to read on the economy of Bolivia? Please let me know in the comments. I am going there in late August.
Would campaign finance reform limit political polarization?
Mann and Corrado have new work on this topic, here is a brief excerpt from the Brookings summary:
The evidence suggests that increasing the role of small donors would have little effect on partisan polarization in either direction because small donors tend to be highly polarized. Although Mann and Corrado note that a healthier mix would champion democratic ideals like civic participation and equality of voice.
Taking both points together, Mann and Corrado find that campaign finance reform is insufficient for depolarizing the parties and improving governing capacity. They argue forcefully that polarization emerges from a broader political and partisan problem. Ultimately, they assert that, “some break in the party wars is probably a prerequisite to any serious pushback to the broader deregulation of campaign finance now underway.”
I view campaign finance reform as in general an overrated idea on the Left.
July 19, 2014
Assorted links
1. You only mimic the robot when it is present. And robot soccer, with automated referees.
3. How to make selfie toast (there is no great stagnation).
4. Roko’s Basilisk.
5. Wolfgang Streeck on how capitalism will end. And how many copies has Knausgaard sold?
6. The era of mood affililiation.
7. The pageant king of Alabama.
8. The world’s most cerebral marriage? (Parfit-relevant)
Global income inequality is falling
That is the theme of my new New York Times column. Here is one excerpt:
Income inequality has surged as a political and economic issue, but the numbers don’t show that inequality is rising from a global perspective. Yes, the problem has become more acute within most individual nations, yet income inequality for the world as a whole has been falling for most of the last 20 years. It’s a fact that hasn’t been noted often enough…
The message from groups like Occupy Wall Street has been that inequality is up and that capitalism is failing us. A more correct and nuanced message is this: Although significant economic problems remain, we have been living in equalizing times for the world — a change that has been largely for the good. That may not make for convincing sloganeering, but it’s the truth…
Many egalitarians push for policies to redistribute some income within nations, including the United States. That’s worth considering, but with a cautionary note. Such initiatives will prove more beneficial on the global level if there is more wealth to redistribute. In the United States, greater wealth would maintain the nation’s ability to invest abroad, buy foreign products, absorb immigrants and generate innovation, with significant benefit for global income and equality.
In other words, the true egalitarian should follow the economist’s inclination to seek wealth-maximizing policies, and that means worrying less about inequality within the nation.
Do read the whole thing.
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