December 13, 2009
In their new paper for the National Bureau of Economic Research, Matthew Gentzkow, Jesse M. Shapiro and Michael Sinkinson look at the effect of newspaper entry and exit on electoral politics. Below is their abstract:
We use new data on entries and exits of US daily newspapers from 1869 to 2004 to estimate effects on political participation, party vote shares, and electoral competitiveness. Our identification strategy exploits the precise timing of these events and allows for the possibility of confounding trends. We find that newspapers have a robust positive effect on political participation, with one additional newspaper increasing both presidential and congressional turnout by approximately 0.3 percentage points. Newspaper competition is not a key driver of turnout: our effect is driven mainly by the first newspaper in a market, and the effect of a second or third paper is significantly smaller. The effect on presidential turnout diminishes after the introduction of radio and television, while the estimated effect on congressional turnout remains similar up to recent years. We find no evidence that partisan newspapers affect party vote shares, with confidence intervals that rule out even moderate-sized effects. We find no clear evidence that newspapers systematically help or hurt incumbents.
December 5, 2009
In his new paper on the economics and policy of illegal immigration in the U.S., Gordon H. Hanson (University of California-San Diego, National Bureau of Economic Research) makes some important observations:
Unauthorized immigrants provide a ready source of manpower in agriculture, construction, food processing, building cleaning and maintenance, and other low-end jobs, at a time when the share of low-skilled native-born individuals in the US labor force has fallen dramatically.
Not only do unauthorized immigrants provide an important source of low-skilled labor, they also respond to market conditions in ways that legal immigration presently cannot, making them particularly appealing to US employers. Illegal inflows broadly track economic performance, rising during periods of expansion and stalling during downturns (including the present one). By contrast, legal flows for low-skilled workers are both very small and relatively unresponsive to economic conditions. Green cards are almost entirely unavailable to low-skilled workers; while the two main low-skilled temporary visa programs (H-2A and H-2B) vary little over the economic cycle and in any case represent scarcely 1 percent of the current unauthorized population, making them an inconsequential component of domestic low-skilled employment.
Despite all this, illegal immigration’s overall impact on the US economy is small. Low-skilled native workers who compete with unauthorized immigrants are the clearest losers. US employers, on the other hand, gain from lower labor costs and the ability to use their land, capital, and technology more productively. The stakes are highest for the unauthorized immigrants themselves, who see very substantial income gains after migrating. If we exclude these immigrants from the calculus, however (as domestic policymakers are naturally inclined to do), the small net gain that remains after subtracting US workers’ losses from US employers’ gains is tiny. And if we account for the small fiscal burden that unauthorized immigrants impose, the overall economic benefit is close enough to zero to be essentially a wash.
December 1, 2009
In a particularly interesting new paper from the National Bureau of Economic Research, Eli Berman, Joseph Felter and Jacob N. Shapiro examine whether employment reduces rates of political violence.
They find that contrary to the common belief that there is positive correlation between unemployment and violence, there is a “robust negative correlation between unemployment and attacks against government and allied forces and no significant relationship between unemployment and the rate of insurgent attacks that kill civilians.”
The figure below shows that in Baghdad’s largest districts, violence fell as unemployment increased but subsequently rose while unemployment fell.
Of important note, these results do not suggest that policies that increase employment cause violence. Instead,
they must lead us to doubt whether those policies actually decrease violence. What they certainly suggest is that the relationship between employment and violence is perhaps more complex than has been commonly assumed. To probe possible explanations for this pattern we now turn to a closer examination of the Iraqi insurgency where the negative correlation between unemployment and violence is strongest.
October 20, 2009
George J. Borjas and Rachel M. Friedberg of the National Bureau of Economic Research have a new study on the trends in earnings of new immigrants to the U.S.
This paper studies long-term trends in the labor market performance of immigrants in the United States, using the 1960-2000 PUMS and 1994-2009 CPS. While there was a continuous decline in the earnings of new immigrants 1960-1990, the trend reversed in the 1990s, with newcomers doing as well in 2000, relative to natives, as they had 20 years earlier. This improvement in immigrant performance is not explained by changes in origin-country composition, educational attainment or state of residence. Changes in labor market conditions, including changes in the wage structure which could differentially impact recent arrivals, can account for only a small portion of it. The upturn appears to have been caused in part by a shift in immigration policy toward high-skill workers matched with jobs, an increase in the earnings of immigrants from Mexico, and a decline in the earnings of native high school dropouts. However, most of the increase remains a puzzle. Results from the CPS suggest that, while average entry wages fell again after 2000, correcting for simple changes in the composition of new immigrants, the unexplained rise in entry wages has persisted.
October 4, 2009
In response to a previous post, a reader writes:
What about infant mortality rates? How do you explain that the U.S. is 40-something in the world, way below most developed countries?
The United Nations ranks the United States 33rd in the world for infant mortality rates. No one denies that this is a problem. But the US population is not the same as other developed populations. Americans suffer from higher rates of obesity and have higher rates of teenage mothers. Approximately 40 percent of American babies are born to unwed mothers. Such factors are linked to higher infant mortality rates.
In 2007, economists June O’Neill and Dave O’Neill of the National Bureau of Economic Research released a study titled ‘Health Status, Health Care and Inequality: Canada vs. the U.S.‘ In the study, they pointed out that “a multitude of behaviors unrelated to the health care system such as substance abuse, smoking and obesity” are connected “to the low birth weight and preterm births that underlie the infant death syndrome.”
Moreover, they “show that the efficacy of health care systems cannot be usefully evaluated by comparisons of infant mortality and life expectancy:”
In fact, our calculations indicate that if in Canada the distribution of births by birth weight was the same as in the U.S. their infant mortality rate would rise to 7.06 from the observed level of 5.5. Similarly if births in the U.S. had the same distribution by birth-weight as Canadian births, the U.S. infant mortality rate would have been 5.401 instead of 6.85.
Much can be done to reduce infant mortality rates in the US. But methods to improve this problem lie outside the realm of the present health care debate.
September 21, 2009
Northwestern University economist Robert J. Gordon has written a new paper on behalf of the NBER titled ‘Misperceptions About the Magnitude and Timing of Changes in American Income Inequality.’ Below is the abstract:
The rise in American inequality has been exaggerated both in magnitude and timing. Commentators lament the large gap between the growth rates of real median household income and of private sector productivity. This paper shows that a conceptually consistent measure of this growth gap over 1979 to 2007 is only one-tenth of the conventional measure. Further, the timing of the rise of inequality is often misunderstood. By some measures inequality stopped growing after 2000 and by others inequality has not grown since 1993. This cessation of inequality’s secular rise in 2000 is evident from the growth of Census mean vs. median income, and in the income share of the top one percent of the income distribution. The income share of the 91st to 95th percentile has not increased since 1983, and the income ratio of the 90th to 10th percentile has barely increased since 1986. Further, despite a transient decline in labor’s income share in 2000-06, by mid-2009 labor’s share had returned virtually to the same value as in 1983, 1991, and 2001.
Recent contributions in the inequality literature have raised questions about previous research on skill-biased technical change and the managerial power of CEOs. Directly supporting our theme of prior exaggeration of the rise of inequality is new research showing that price indexes for the poor rise more slowly than for the rich, causing most empirical measures of inequality to overstate the growth of real income of the rich vs. the poor. Further, as much as two-thirds of the post-1980 increase in the college wage premium disappears when allowance is made for the faster rise in the cost of living in cities where the college educated congregate and for the lower quality of housing in those cities. A continuing tendency for life expectancy to increase faster among the rich than among the poor reflects the joint impact of education on both economic and health outcomes, some of which are driven by the behavioral choices of the less educated.
September 6, 2009
A new paper by Michael Burda and Daniel S. Hamermesh provides an interesting insight into how unemployed people spend their time:
Using time-diary data from four countries we show that the unemployed spend most of the time not working for pay in additional leisure and personal maintenance, not in increased household production. There is no relation between unemployment duration and the split of time between household production and leisure. U.S. data for 2003-2006 show that almost none of the lower amount of market work in areas of long-term high unemployment is offset by additional household production. In contrast, in those areas where unemployment has risen cyclically reduced market work is made up almost entirely by additional time spent in household production.
Co-author Daniel Hamermesh explains,
The unemployed use the time freed up from work for pay almost entirely in leisure and personal maintenance—they do no more household work than employed people. Similarly, in areas where unemployment is perennially high, there is less work for pay, more leisure, but no more household production. BUT—when unemployment suddenly rises, as in a recession, people shift from work for pay to household production—people don’t take more leisure time than before. So if we measured output to include production at home, we would infer that a recession doesn’t reduce total output by as much as we thought; and perhaps the utility burden of a short recession is not as severe as one might imagine.
August 28, 2009
According to a new study by the National Bureau of Economic Research:
American workers who belong to unions are paid more than their non-union counterparts, and this difference is greater in low-tax locations, reflecting that unions and employers share tax savings associated with low tax rates. In 2000 the difference between average union and non-union hourly wages was $1.88 greater in states with corporate tax rates below four percent than in states with tax rates of nine percent and above. Controlling for observable worker characteristics, a one percent lower state tax rate is associated with a 0.36 percent higher union wage premium, suggesting that workers in a fully unionized firm capture roughly 54 percent of the benefits of low tax rates.
The study, undertaken by R. Alison Felix, an economist at the Federal Reserve Bank of Kansas City, and James R. Hines Jr., from the University of Michigan, looks at “union wage premiums,” the average amount union hourly wages exceed non-union hourly wages.
According to the study, union workers made $1.30 more per hour than non-union workers in states with a corporate tax rate greater than 9%. But in states with a corporate tax rate below 4%, the wage premium increased to $3.73.
In an interview, Hines explained that since lower taxes leave firms with higher profits, and unions hold significant negotiating powers over profit distribution, it come as no surprise that high taxes hurt union wages more than non-union wages.
Ultimately, Hines points out that “the study provides more evidence that while income taxes tax corporations, it is the stakeholders, including employees, who bear the burden of those taxes.”
July 22, 2009
According to Freakonomics, unions are under fire these days in Detroit and elsewhere — and for good reason. A working paper by David Lee and Alexandre Mas of the National Bureau of Economic Research finds that a successful unionization vote significantly decreases the market value of the company even absent changes in organizational performance. After running a policy simulation, Lee and Mas conclude , “ … a policy-induced doubling of unionization would lead to a 4.3 percent decrease in the equity value of all firms at risk of unionization.”
The U.S. Department of Labor seems to agree:
Larry Summers, director of the White House’s National Economic Council, also agrees,
Another cause of long-term unemployment is unionization. High union wages that exceed the competitive market rate are likely to cause job losses in the unionized sector of the economy. Also, those who lose high-wage union jobs are often reluctant to accept alternative low-wage employment. Between 1970 and 1985, for example, a state with a 20 percent unionization rate, approximately the average for the fifty states and the District of Columbia, experienced an unemployment rate that was 1.2 percentage points higher than that of a hypothetical state that had no unions.