Der Spiegel on Obama’s Asia Trip

Gabor Steingart writes:

Upon taking office, Obama said that he wanted to listen to the world, promising respect instead of arrogance. But Obama’s currency isn’t as strong as he had believed. Everyone wants respect, but hardly anyone is willing to pay for it. Interests, not emotions, dominate the world of realpolitik. The Asia trip revealed the limits of Washington’s new foreign policy: Although Obama did not lose face in China and Japan, he did appear to have lost some of his initial stature.

In Tokyo, the new center-left government even pulled out of its participation in a mission which saw the Japanese navy refueling US warships in the Indian Ocean as part of the Afghanistan campaign. In Beijing, Obama failed to achieve any important concessions whatsoever. There will be no binding commitments from China to reduce greenhouse gas emissions. A revaluation of the Chinese currency, which is kept artificially weak, has been postponed. Sanctions against Iran? Not a chance. Nuclear disarmament? Not an issue for the Chinese.

The White House did not even stand up for itself when it came to the question of human rights in China. The president, who had said only a few days earlier that freedom of expression is a universal right, was coerced into attending a joint press conference with Chinese President Hu Jintao, at which questions were forbidden. Former US President George W. Bush had always managed to avoid such press conferences.

Taxes Proposed to Pay for Health Care Reform

The Heritage Foundation has compiled a list of proposed taxes to pay for health care reform. The list includes taxes in the bill already passed by the House of Representatives, the bill currently being debated in the Senate, and other taxes mentioned as a possible way to finance health care reform. I’m sure more will come our way, don’t worry.

Individual Attitudes towards Skilled Migration

A new paper by Anna Maria Mayda and Giovanni Facchini examines individual attitudes towards skilled immigrants.

It is commonly argued that skilled immigration benefits the destination country through several channels. Yet, only a small group of countries reports to have policies in place aimed at increasing the intake of skilled immigrants. Why? In this paper we analyze the factors that a direct measure of individual attitudes towards skilled migration, focusing on two main channels: the labor market and the welfare state. We find that more educated natives are less likely to favor skilled immigration - consistent with the labor-market channel – while richer people are more likely to do so – in accordance with the welfare state channel under the tax adjustment model. Our findings thus suggest that the labor market competition threat perceived by skilled natives in the host countries might be driving the observed cautious policies.

Why would more educate natives resist skilled immigration? They fear competition. They don’t want to be displaced.

The Wages of Sin

Lena Edlund, Joseph Engelberg and Christopher A. Parsons have a new paper on the wages of prostitutes:

Edlund and Korn [2002] (EK) proposed that prostitutes are well paid and that the wage premium reflects foregone marriage market opportunities. However, studies of street prostitution in the U.S. have revealed only modest wages and considerable risks of disease and violence, casting doubt on EK’s premise of an unexplained wage premium. In this paper, we present evidence from high-end prostitution, the so called escort market, a market that is, if not entirely safe, notably safer than street prostitution. Analyzing wage information on more than 40,000 escorts in the U.S. and Canada collected from a web site, we find strong support for EK. First, escorts in the sample earn high wages, on average $280/hour. Second, while looks decline monotonically with age, wages follow a hump-shaped pattern, with a peak in the 26-30 age bracket, which coincides with the most intensive marriage ages for women in the U.S. Third, the age-wage profile is significantly flatter, and prices are lower (5%), despite slightly better escort characteristics, in cities that rank high in terms of conferences, suggesting that servicing men in transit is associated with less stigma. Fourth, this hump in the age-wage profile is absent among escorts for whom the marriage market penalty is lower or absent: escorts who do not provide sex and transsexuals.

The paper also provides some interesting charts. The figure below plots the mean hourly wage by age group among escorts who provide sex to their clients, escorts who do not (e.g. massage only) and escorts who are transsexuals.

The next figure plots the mean hourly wage among escorts who have sex but are located in cities with few conferences. (Conference cities were extracted from the National Business Travel Association’s (NBTA) 2004 survey, “Business and Convention Travelers Report.”)

Quote of the Day

“Those immigrants didn’t come here in order to be lawbreakers; they broke a law in order to come here.”

~ Jeff Jacoby

Does the Senate Finance Committee version of the health-care bill threaten to cripple evidence-based medicine?

Andrew Gelman has posted on an article by Harry Selker and Alastair Wood on the rules for evidence-based medicine in the House and Senate versions of the health-care bill. The main point is as follows:

The [Senate] Finance Committee bill also includes language requested by industry lobbyists (pages 1138-1139) that threatens to withdraw federal funding for 5 years from any investigator who publishes a report on research funded by the proposed institute that is not “within the bounds of and entirely consistent with the evidence.” Determinations regarding such consistency would be made by the newly created research entity, which would have industry involvement both in its governance and in study design.

The authors continue:

To allow scientists — and their institutions, which receive the support for the conduct of research — to be punished for the publication of work that is not approved by this entity is essentially to cede authority over the dissemination of government-funded research to a body that is at least partially controlled by persons with a potential commercial interest in its outcome. This move would be a major retrograde step that would both inhibit the conduct of CER and call its integrity into question. In addition, because researchers and their institutions will seek to avoid such punishment, this provision is likely to result in prolonged arguments, taking place out of public view, regarding which data are acceptable to publish, thereby impeding and delaying publication.

Despite Recession, Innovation Is Alive and Well

From the press release for Booz & Company’s 2009 edition of the Global Innovation 1000:

From the In the face of a severe global recession, the world’s 1,000 largest publicly traded corporate research and development spenders increased R&D budgets in 2008, affirming the critical importance of innovation to their corporate strategies, according to Booz & Company’s Global Innovation 1000, the global management consulting firm’s fifth annual analysis of global innovation spending. R&D spending at these firms rose 5.7% in 2008, a slower rate of growth than the prior year’s 10% increase, but in line with the group’s 6.5% increase in worldwide sales. More than two-thirds of the companies included in this year’s Global Innovation 1000 maintained or increased R&D spending in 2008, even though a third of the companies reported a financial loss for the year.

Judging from the data in this year’s study, the results of the senior management survey, and conversations with executives, the recession’s effect on innovation activity has not been as severe as some observers of the business scene might have anticipated. Innovation has become central to every company’s efforts to compete, and the degree of competition has been in no sense reduced by the downturn; if anything, it has been heightened. Long product development cycles have forced companies to maintain their R&D spending even when revenues decline. And most companies are fully aware of the need to be in position to profit from the coming upturn.

HT: Carpe Diem

Labor regulations in a dual labor market economy

How do labor regulations effect a dual labor market economy? Rita Almeida and Pedro Carneiro from the World Bank study this question in their new working paper, ‘Mandated benefits, employment, and inequality in a dual economy.’

This paper studies the effect of enforcing labor regulation in an economy with a dual labor market. The analysis uses data from Brazil, a country with a large informal sector and strict labor law, where enforcement affects mainly the degree of compliance with mandated benefits (severance pay and health and safety conditions) in the formal sector, and the registration of informal workers. The authors find that stricter enforcement leads to higher unemployment but lower income inequality. They also show that, at the top of the formal wage distribution, workers bear the cost of mandated benefits by receiving lower wages. Wage rigidity (due, say, to the minimum wage) prevents this downward adjustment at the bottom of the income distribution. As a result, formal sector jobs at the bottom of the wage distribution become more attractive, inducing the low-skilled self-employed to search for formal jobs.

The Economic Diversity of Immigration Across the United States

Rachel M. Friedberg and David A. Jaeger of the Centre for Research and Analysis of Migration have a new paper on the economic diversity of Immigration across the United States. The study is important given that today, “one in eight people in the United States was born abroad, and over a quarter of population growth in the United States is now due to the arrival of new immigrants.”

While immigrants are less educated than natives on average, immigrants of certain cities are more educated than immigrants in others. The graph below shows the relationship between immigrant and native schooling levels. The diagonal line indicates the average relationship between the two measures. Immigrants clearly tend to be more educated in places with more-educated natives:

A short guide to protectionism

From the Telegraph:

1.  Smoot-Hawley

The most famous act of protectionism took place in the 1930s when the US government, facing the early forces of depression, legislated to impose tariffs on over 20,000 imported goods – some significantly. The act triggered a spiral of retaliatory protectionism across the world, and in the view of some economists, fuelled both the Great Depression and the geopolitical tension that led to the Second World War.

2. Common Agricultural Policy

Under the CAP – a European scheme, although similar programmes are in place in the US and throughout the developed world – domestic farmers are given subsidies for producing (or in some cases not producing) food. Without such subsidies many domestic agricultural businesses would collapse, since they cannot compete with the cheap prices charged by overseas exporters for everything from vegetables to livestock to cotton.

3. Shoe wars, bra wars

Recently, in his former role as European Trade Commissioner, Peter Mandelson accused China of illegally dumping vast numbers of shoes – and later bras – on the European markets. “Dumping” is the name given when a country exports a product at a price even lower than that paid in its domestic market. Under the WTO code, it can act against such moves under so-called “anti-dumping” rules.

4. Chinese tyres

China and the US are currently locked in a trade battle over the trade in car tyres. In September, the US Congress accused China of illegally swamping the US market with cheap tyres and imposed tariffs on those imported from the Asian giant. China in turn accused the US of protectionism, arguing that exports to America had actually dropped last year. But with thousands of American jobs on the line, the case is still the focus of heated debate.

5. India vs China

The WTO is not merely a mechanism for the West to fight its own corner against cheaper emerging market exporters. Emerging and developing nations also use it as a forum to tackle their own independent trade battles. Recently, China and India have been locked in debate over trade, with India accusing China of expanding overly aggressively into its silk and satin markets. India argues that Chinese prices are so cheap that its key domestic industry is simply unable to compete.