Edward Glaeser, Joshua Gottlieb, Oren Ziv15 October 2014
Governments are now measuring happiness, or subjective wellbeing, and some have begun trying to maximise it. This column discusses recent research showing that happiness is not the same thing as utility. The choices people make suggest that they have desires and objectives other than happiness. It is therefore possible to make people worse off while increasing their reported subjective wellbeing.
Recent interest in the psychology and economics of happiness has had pronounced influence on public policy. The high-profile report by Stiglitz et al. (2009) epitomises a push for policies to explicitly promote increases in survey measures of wellbeing as a major social objective. Places ranging from the country of Bhutan to the city of Somerville, Massachusetts explicitly measure happiness, or subjective wellbeing, and strive for improvements over time in such measures.
How immigration benefits natives despite labour market imperfections and income redistribution
Michele Battisti, Gabriel Felbermayr, Giovanni Peri, Panu Poutvaara08 August 2014
Immigration continues to be a hotly debated topic in most OECD countries. Economic models emphasising the benefits of immigration for natives have typically neglected unemployment and redistribution – precisely the things voters are most concerned about. This column analyses the effects of immigration in a world with labour market rigidities and income redistribution. In two-thirds of the 20 countries analysed, both high-skilled and low-skilled natives would benefit from a small increase in immigration from current levels. The average welfare gains from immigration are 1.25% and 1.00% for high- and low-skilled natives, respectively.
Recent research has sought to quantify the magnitude of the welfare gains from trade. One of the main findings from this literature is that the gains from trade are relatively modest. This column suggests a channel that the standard approach typically abstracts from. It argues that trade induces changes in domestic productivity through a more efficient organisation of production within the supply chain.
The theoretical result that there are gains from trade is a central tenet of international economics. Assuming perfect competition and no market failures, trade acts like a technological improvement that expands the set of feasible allocations and enables Pareto superior outcomes to be achieved. A recent body of research has sought to quantify the magnitude of these welfare gains.
It’s not a skill mismatch: Disaggregate evidence on the US unemployment-vacancy relationship
Rand Ghayad, William Dickens05 January 2013
US unemployment seems stuck at an unusually high level of 8%, prompting some to suggest a widespread skills mismatch. This column argues that a skills mismatch is not supported by the evidence. Rather, out of the possible explanations, it seems that any shift in the ratio between unemployment and vacancies is driven by either lower search efforts by the long-term unemployed or by a reduction in their employability.
The Beveridge curve – the empirical relationship between unemployment and vacancies – is thought to be an indicator of the efficiency of the functioning of the labour market. Normally when vacancies rise, unemployment falls following a curved path that typically remains stable over long periods of time.
China’s pure exporter subsidies: Protectionism by exporting
Fabrice Defever, Alejandro Riaño04 January 2013
The West perennially complains about China subsidising industry geared towards its domestic market. But what will happen when China enacts its latest Five Year Plan’s emphasis on domestic growth? This column argues that ending ‘pure-exporter subsidies’ – subsidies that boost Chinese exports while simultaneously protecting the least efficient, domestically oriented firms – will benefit Chinese consumers, but will cost the rest of the world.
On 17 September last year, the US requested consultations with China concerning a wide range of export-contingent measures – grants, tax preferences and interest-rate subsidies, totalling at least $1 billion – in apparent violation of the WTO’s Agreement on Subsidies and Countervailing Measures, China’s accession protocol and article XVI of the GATT. The EU joined the consultations shortly after on 28 September.
Modern happiness research leaves no doubt that religious people are happier than their contemporaries. And the causality runs from religion to happiness (though it might also be possible that religious people are less interested in material aspects and, therefore, less affluent).
Should governments pay entitlements in cash or in kind to help reduce poverty? The authors of CEPR DP8581 find that cash transfers increase prices, especially in remote areas where the poorest consumers often live. In-kind transfers lower local prices, helping consumers at the expense of producers with a benefit equal to 11% of value of the transfer.
Public opinion is turning against migration during the recession, as generous European welfare states make migrants a potential fiscal burden. This column warns against the excessively exclusionary solutions to which voters are turning and suggests decoupling migration and the welfare state.
Recessions are traditionally good times for left-wing parties, whose support for redistributive policies is perceived by voters as a sort of insurance scheme. If someone loses her job in the recession or gets poorer in the generalised downturn, there will be someone up there in the “centre of things” making sure that she receives some social support. “Nobody will be left behind” is the motto of Social Democrats. The golden age of Social Democrats in the European Parliament was in the mid-nineties when the EU was displaying a double-digit unemployment rate.
Welfare payments, liquidity constraints, and crime
Fritz Foley05 August 2008
Crime rises when US welfare recipients run short of cash at the end of the month. This column discusses research that links the timing of financially-motivated crime and the timing of welfare payments. Cities that make monthly welfare payments see a clear monthly crime cycle, whereas cities that spread out the payments do not.
Consider an individual who receives support from welfare payments that occur once a month. Several recent papers indicate that this individual is likely to spend this income soon after receiving it and to face severe liquidity constraints. Dobkin and Puller (2007), Shapiro (2005), and Stephens (2003) find that recipients of government income support increase their consumption when these payments arrive and experience increasing marginal utility of consumption in between payments.
Since 1900, consumers have enjoyed a dramatic explosion in the number and quality of goods available. This column discusses a simple method for quantifying welfare gains from the introduction of new goods into the economy and their subsequent quality improvements using the personal computer as an example.