U.S. and Them: The Geography of Academic Research

Using a database of 76,046 empirical economics papers published between 1985 and 2004 in the top 202 economics journals, the World Bank finds two associations:

First, per-capita research output on a given country increases with the country’s per capita gross domestic product (GDP). Regressions controlling for data availability and quality in the country, indicators of governance and the use of English yield an estimated research-GDP elasticity of 0.37; surprisingly, the United States (US) is not an outlier in the production of empirical research.

Second, papers written about the US are far more likely to be published in the top five economics journals, even after the quality of research has been partially controlled for through fixed-effects for the authors’ institutional affiliations; the estimates suggest that papers on the US are 2.6 percentage points more likely to be published in the top-five journals. This is a large effect because only 1.5 percent of all papers written about countries other than the US are published in the top-five journals. The authors speculate about the interpretations of these facts, and invite further analysis and additions to the public release of the database that accompanies this paper.

The figure below plots publications aggregated over the 20 years for all countries included in the database, separated by geographical region. In each region, countries are aligned in descending order of the number of publications.

According to the authors, “[T]here is a mass of countries with very few publications; a thin layer above this group, which includes China, Canada, Japan and; above these is the United Kingdom with 6,567 publications over the 20 years. Standing out from the group is the United States with 36,649 publications over these 20 years, accounting for the geographical focus in 48 percent of all the economic empirical research during this time.”

Obama continues U.S. trade war

According to the Financial Times:

The US will impose tough new duties on Chinese steel piping imports, raising tensions with its biggest trading partner and emerging geopolitical rival.

With Chinese piping imports worth $2.8bn in 2008, the case is the biggest against China brought before the International Trade Commission, a US trade body, but follows other US actions to counter a flood of goods that Washington claims China is exporting at below market prices.

Friction between the US and China has been building this year after disputes over tariffs on tyres, cars and chickens. China denounced a move by the US earlier this year to tax imports of Chinese car and light truck tyres as a “serious act of trade protectionism”.

Something is seriously wrong when China denounces protectionism and the U.S. defends it.

They’ve All Come To Look For America, Part II

From the Economist:

Students flock to American universities from all over the world. But according to the OECD, a rich-country think-tank, over 40% of the 106,123 foreign students in the country during the 2007-08 academic year came from just three Asian countries: China, India and South Korea. And the 23,779 Chinese students in America far outnumbered those from India and South Korea, which each sent just under 10,000 students to America. But over the period between 1997 and 2008 the number of Indian students grew the fastest. The European presence on American campuses has grown more slowly. But between them, Germany, France and Italy still sent more students to America in 2007-08 than either India or South Korea.

Why “Buy American” is a Bad Idea but Politicians Still Like it

In their new paper, Mario Larch (University of Munich) and Wolfgang Lechthaler (Kiel Institute for the World Economy) write:

When the world economy was recently hit by a severe recession, governments all over the world reacted by initiating stimulus packages. Some countries (among them, most notably, China and the US) tried to put special emphasis on their home industries by including “Buy local” clauses into the stimulus package. By analyzing the dynamics of transitory changes of trade barriers as a short-run response to an economic downturn, we show that beggar-thy-neighbor policy does not work. We then come up with two rationales that help to understand why countries nevertheless consider protectionism to be a good response to a recession: (i) the relationship between vulnerability and the degree of openness to trading partner countries, and (ii) the lobbying of domestic, non-exporting firms.

Click here to read the paper.

The Economics and Policy of Illegal Immigration in the United States

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.

HT: Economist’s View

U.S. Seen as Less Important, China as More Powerful

According to results from a new Pew survey, Americans are “apprehensive and uncertain about America’s place in the world.” They see the United States as playing a less important role globally while “acknowledging the increasing stature of China.”

Why third generation immigrants earn less

The Economic Logic blog has posted on an interesting new study by Vincenzo Caponi which finds that third generation Mexican immigrants  (particularly males)to the US earn significantly lower wages than second generation Mexican immigrants.

The table below shows the evolutions of earnings across all generations. It reports results for men and women using two definitions: the standard definition and the stricter definition. The standard definition includes those with at least one parent born in Mexico while the stricter definition includes those who not only have at least one parent born in Mexico, but also consider themselves Mexican.

 

Economic Logic concludes the following:

The way I understand it is that there is selection in migration decisions: only those with higher than average abilities (not necessarily realized human capital) go. Their children inherit some of those traits, and thus have higher than average abilities and human capital. While the first generation was not able to fully exploit this, while the second does, wages go up. But abilities of the third generation continue regressing to the mean, and the selection effect erodes. This generation ends up with lower human capital than their parents and thus lower wages.

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.

Retirement and Cognitive Ability

Susann Rohwedder and Robert J. Willis of the RAND Center for the Study of Aging have a new paper that looks at the relationship between retirement age and cognitive ability:

Some studies suggest that people can maintain their cognitive abilities through “mental exercise”. This has not been unequivocally proven. Retirement is associated with a large change in a person’s daily routine and environment. In this paper, the authors propose two mechanisms how retirement may lead to cognitive decline. For many people retirement leads to a less stimulating daily environment. In addition, the prospect of retirement reduces the incentive to engage in mentally stimulating activities on the job. They investigate the effect of retirement on cognition empirically using cross-nationally comparable surveys of older persons in the United States, England, and 11 European countries in 2004. They find that early retirement has a significant negative impact on the cognitive ability of people in their early 60s that is both quantitatively important and causal. Identification is achieved using national pension policies as instruments for endogenous retirement.

In the scatter plot below, each data point in the figure represents a country-specific ratio of means. The horizontal axis shows the mean labor force participation rate of men age 60-64 relative to that of men age 50-54. The vertical axis measures the mean performance on a cognitive test of immediate and delayed word recall of 60-64 year-olds relative to the performance of 50-54 year-olds. The scatter plot shows a clear correlation, indicating that when men stay in the labor force longer, they perform significantly better on cognitive tests:

This chart plots the percent of those retiring early in each country compared to the percent penalty for continued work. It “shows that the cross-country variation in national policies governing retirement is a powerful instrument in an econometric sense that can be used to identify the effect of retirement on cognition in micro-level analysis”:

The chart below shows the average cognitive score for each country by the fraction not working for 60 to 64 year-old males and females pooled. It shows a “systematic relationship between the average cognitive score and the fraction not working across countries, suggesting that on average being retired is associated with a lower memory score of about 4.9 points on a 20 point scale.”:

Ultimately, the authors conclude:

Early retirement has a significant negative impact on the cognitive ability of people in their early 60s that is both quantitatively important and causal. We obtain this finding using cross-nationally comparable survey data from the United States, England, and Europe that allow us to relate cognition and labor force status. We argue that the effect is causal by making use of a substantial body of research showing that variation in pension, tax, and disability policies explain most variation across countries in average retirement rates.

Foreign Policy Views and U.S. Standing in the World

Matthew A. Baum (Harvard University) and Henry R. Nau (George Washington University), who taught my first university course, have a new paper titled ‘Foreign Policy Views and U.S. Standing in the World.’

What do Americans think about the US role in world affairs and why do they think the way they do? Americans typically do not think about foreign policy most of the time, and, as a consequence, know relatively little about it (Almond 1950, Lippmann 1955, Converse 1964, Erskine 1963, Edwards 1983, Sobel 1993, Holsti 2004, Canes-Wrone 2006, Page and Bouton 2006, Berinsky 2007). While foreign policy issues can become salient when major international events (like 9/11 and the Iraq War) arise or when political candidates focus on foreign policy (Aldrich, Sullivan and Borgida 1989), ceteris paribus, Americans know and care more about domestic politics (Delli-Carpini and Keeter 1996, Holsti 1994, Canes-Wrone 2006, Converse 1964). Consequently, typical Americans are broadly aware of foreign policy, and have some available attitudes about it (Page and Bouton 2006, Aldrich et al. 1989). However, except in the face of political priming by elites or exogenous shocks, such attitudes may not be broadly accessible when making political decisions, like voting.

And if you know my style by now, you know I can’t resist throwing in a nice chart. The first illustrates the percent of Americans who believe the U.S. position in the world has grown weaker, broken down by party affiliation:

The second two charts show the favorability ratings of the United States and China based on the variations of the share of U.S.  global GDP: