Clinton. Bush. Kennedy. Political family dynasties have survived the establishment of democracies in the developed and developing world and, in some cases, are strengthening. This column argues that political dynasties are still with us, and that it’s fairly easy to see why. Whoever said that elections are the only time that the vote of the richest citizen is equivalent to that of the poorest needs to start rethinking whether this still holds true.
Jan Fredrick P. Cruz, Ronald U Mendoza , Monday, August 31, 2015
Esa Jokivuolle, Jussi Keppo, Xuchuan Yuan, Thursday, July 23, 2015
Bankers’ compensation has been indicted as a contributing factor to the Global Crisis. The EU and the US have responded in different ways – the former legislated bonus caps, while the latter implemented bonus deferrals. This column examines the effectiveness of these measures, using US data from just before the Crisis. Caps are found to be more effective in reducing the risk-taking by bank CEOs.
Melissa S. Kearney, Phillip B. Levine, Thursday, July 16, 2015
Early childhood education has important effects on the academic readiness and ultimate life chances of children. This column examines how the introduction of the educational television show Sesame Street in the US affected primary school outcomes for disadvantaged children. Those from counties that had better access to the broadcast had superior educational outcomes through their early school years. These effects were particularly pronounced for black, non-Hispanic children, and those living in economically disadvantaged areas. The extremely low cost per child of such interventions make them ideal for addressing educational inequality in childhood.
Alexandra Lopez-Cermeño, Sunday, July 12, 2015
Economic historians tend to explain US geographical development gaps in terms of industrialisation. But by the end of the 20th century, the richest counties had become specialised in services, rather than in manufacturing. This column evaluates how the service economy triggered this evident contrast between the urban and rural US. Market size causes localisation of non-agricultural activity, with the effect being stronger for services, especially knowledge services. Local policymakers can thus foster growth by attracting high-skilled workers to a region, with the multiplier effect eventually increasing the local market.
Dale W. Jorgenson, Koji Nomura, Jon D. Samuels, Wednesday, July 8, 2015
The two lost decades in Japan and the Global Crisis of 2007–2009 have created new opportunities for economic growth. This column describes the evolution of productivity across sectors in Japan and the US and suggests that the greatest payoffs for Japan would come from combining the Trans-Pacific Partnership with domestic reforms and encouraging foreign direct investment.
Áureo de Paula, John Lynham, Timothy Halliday, Monday, June 22, 2015
For policy to target air pollution optimally, a thorough understanding of its harms is required. However, disentangling the health effects of specific pollutants has proved challenging, as multiple chemicals tend to co-occur in industrial pollution. This column exploits volcanic emissions in Hawaii to examine the health impact of a specific pollutant – airborne particulates. Short-term exposure to particulate pollution is found to increase pulmonary-related hospitalisations and expenditures, particularly among very young children.
Paola Conconi, David DeRemer, Georg Kirchsteiger, Lorenzo Trimarchi, Maurizio Zanardi, Tuesday, June 16, 2015
Economic cycles patently influence politics. This column explores an unexplored avenue of political economy research by assessing whether US politicians file international trade disputes to win votes. It turns out they do. This means that disputes might be brought earlier or later than they otherwise would – potentially costing lots more than they should – and that violations in industries that are deemed unimportant by electioneering politicians go unpunished.
Roger Backhouse, Mauro Boianovsky, Tuesday, May 19, 2015
The notion of secular stagnation – a state of negligible or zero economic growth – is back in the headlines. Questions naturally arise about its intellectual antecedents. This column discusses how the concept rose and fell with the economic fortunes of advanced industrialised nations. Political trends and trends in economic theory played a part in its trajectory, with the notion closely connected to the idea that the level of government debt should be allowed to rise.
Peter Debaere, Amanda Kurzendoerfer, Tuesday, May 12, 2015
Water management is a major challenge today. To guide efficient water allocation, it is essential to understand the drivers of water use. This column sheds light on this issue using US data from the 1950s until today. The findings show that US water withdrawal has stabilised, and has even decreased in the past decades. Technological improvements have been crucial towards that end. However, the shifting demand from agriculture and manufacturing to less-water intensive sectors has been just as important.
Fatih Guvenen, Fatih Karahan, Serdar Ozkan, Jae Song, Wednesday, April 29, 2015
Many policy design issues depend crucially on the nature of the idiosyncratic risks to labour income. The earning dynamics literature has typically relied on an implicit or explicit assumption that earnings shocks are log-normally distributed. This column challenges conventional knowledge by bringing in new evidence from a very large administrative dataset on US workers. It presents evidence suggesting income shocks exhibit substantial deviations from log-normality, and that shock persistence depends on income levels as well as the size and sign of the shock.
Dora L. Costa, Matthew E. Kahn, Monday, April 27, 2015
Newspapers report good and bad news, but the reporting doesn’t always match reality. This column presents evidence from turn-of-the-century America that news reports of typhoid tracked mortality patterns, but the reporting was biased. Spikes in death rates led to bigger jumps in media coverage when death rates were low. This could be due to the idea that deviations from Kahneman and Tversky’s ‘reference points’ are more newsworthy, or due to the possibility that bad news is more valuable to readers when things seem to be going well.
Francesco Bianchi, Wednesday, April 22, 2015
During the Great Recession, the possibility that the US might enter a second Great Depression was a real concern. This column argues that until early 2009, financial markets behaved in a manner consistent with the early years of the Great Depression. The large stock-market fall saw growth stocks outperforming value stocks. This pattern ended March 2009, arguably in light of robust policy interventions. These dynamics suggest that poor performance of growth stocks during regular times may be compensated by superior performance in crises.
Peter E. Robertson, Monday, March 30, 2015
The Soviets matched the US only by spending up to 20% of GDP on the military during the Cold War. This column argues that, in stark contrast to this example, China has the potential to match the US in certain military spheres with similar burden on its economy. Using exchange rates comparisons significantly understates the Chinese military spending. A much more realistic assessment is obtained using PPP terms. If both countries spent the same fraction of their GDP on the military, the relative size of China’s military machine would be more than 90% of the US one.
Rena M. Conti, Ernst Berndt, David H. Howard, Wednesday, March 25, 2015
Total US prescription drug spending rose 13% in 2014, the biggest increase in a decade. Driving this trend is spending on branded specialty drugs, which rose an unprecedented 31%. This column discusses recent research into the relationship between inflation-adjusted launch prices and survival benefits and approval year for 58 anticancer drugs approved in the US between 1995 and 2013. The authors find that launch prices are going up by $8,500 per year, approximately 12% year over year.
Jeffrey R. Brown, Chichun Fang, Francisco Gomes, Monday, March 23, 2015
College-educated workers are less likely to experience unemployment, but their lifetime earnings are also much more uncertain. This column estimates the risk-adjusted value of college education to be between $225,000 and almost $600,000, corresponding to risk-adjusted increases in total present-value lifetime wealth of 35% to 48%. Increased earnings volatility actually decreased the risk-adjusted value of college between 1968–1980 and 1991–2011 by almost $50,000, even though expected lifetime income increased by about $150,000. Nevertheless, even the most conservative estimates of the value of college education are still positive.
Trevon D. Logan, John M. Parman, Monday, March 9, 2015
Racial disparities in socioeconomic conditions remain a major policy issue throughout the world. This column applies a new neighbour-based measure of residential segregation to US census data from 1880 and 1940. The authors find that existing measures understate the extent of segregation, and that segregation increased in rural as well as urban areas. The dramatic decline in opposite-race neighbours during the 20th century may help to explain the persistence of racial inequality in the US.
Alejandro Justiniano, Giorgio Primiceri, Andrea Tambalotti, Friday, February 27, 2015
There is no consensus among economists on the forces that drove the historical rise of US house prices and household debt that preceded the Global Crisis. In this column, the authors argue that the fundamental factor behind that boom was an increase in the supply of mortgage credit. This rise was brought about by the diffusion of securitisation and shadow banking, and by a surge in foreign capital inflows. The finding is based on a straightforward interpretation of four key macroeconomic developments between 2000 and 2006, provided by a simple general equilibrium model of housing and credit.
Jason Furman, Friday, February 20, 2015
The US economy has strengthened considerably in recent years, presenting an opportunity to address the 40-year stagnation in incomes for the middle class. This column provides historical and international context for the key factors affecting middle-class incomes: productivity growth, labour force participation, and income inequality. It also outlines President Obama’s approach to economic policies – what he terms “middle-class economics” – which is designed to improve all three.
Carlo Carraro, Saturday, February 7, 2015
China and the US have recently agreed to reduce their greenhouse gas emissions. This column asks what quantifiable impact the new targets will have, whether they are any better than previous approaches, and if so, whether they are enough to avoid dangerous climate change. While insufficient for keeping temperature increase below the 2°C limit, the US and China’s bilateral commitments are a step in the right direction, and form the basis for a stronger international agreement in Paris later this year.
Bas Bakker, Joshua Felman, Friday, February 6, 2015
Much research about the Great Recession in the US has focused on the boom-bust in housing wealth and spending of the middle class. This column argues that a large role was actually played by the rich. The savings rate of the rich went through a similar cycle as that of the middle class with rising wealth first stimulating their consumption and falling wealth restraining it. Most importantly, the wealth of the rich has become so large and volatile that wealth effects on their consumption could impact the whole economy.