Category Archive: Sources

  1. Part of Some Totality

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    DELIBERATE ETHOS

    “Informality” and globalization

    Standard theories of development have been predicated on the goal of an industrialized economy with the potential for full and regularized employment. Such a view necessitates a host of statistical categories to define and measure labor markets. In a 2000 paper, PAUL E. BANGASSER writes an institutional history of the International Labor Organization’s (ILO) evolving attempts to understand and quantify the category of the “informal sector”—by now a permanent feature of the global workforce.

    From the paper:

    “Over the past three decades, the ILO has been both the midwife and the principal international institutional home for the concept of the informal sector. While the phrase ‘informal sector’ came onto the development scene in 1972, its roots reach back into the economic development efforts of the 1950s and 1960s. With the surprisingly successful rebuilding of Europe and Japan following the Second World War, there seemed no reason why a similar sort of deliberate economy-building effort could not also be applied to the newly emerging countries in the Third World. This technical ethos towards development was especially strong in UN Specialized Agencies like the ILO. It allowed them a measure of protection from Cold War political crossfire without undercutting either their raison d’être nor their universality.

    Attention to the informal sector crescendoed in the early 1990s. The 1991 Director General’s Report, The dilemma of the informal sector, notes that ‘Contrary to earlier beliefs, the informal sector is not going to disappear spontaneously with economic growth. It is, on the contrary, likely to grow in the years to come, and with it the problems of urban poverty and congestion will also grow.’ A growing urbanization is consistent with the developmental expectations of the 1950s and 1960s. However, that this trend towards urbanization would represent a nexus of seemingly unsolvable problems of grinding urban poverty is quite different from that earlier thinking. The upward spiraling dynamics of ‘modernization’ which were supposed to accompany urbanization, and lead to economic ‘takeoff,’ didn’t kick in; there wasn’t any trickle-down of any significance, nor should any be expected, at least not within any reasonable time frame. This is an important conclusion, with fundamental implications for the conventional development paradigm.”

    Link to the paper.

    • Keith Hart’s 1973 paper “Informal Income Opportunities and Urban Employment in Ghana” coined the phrase “informal sector.” From the paper: “The distinction between formal and informal income opportunities is based essentially on that between wage-earning and self-employment. The key variable is the degree of rationalization of work—that is to say, whether or not labour is recruited on a permanent and regular basis for fixed rewards.” Link.
    • A 2019 paper by Aaron Benanav (previously shared here) critically appraises the ILO’s attempts at defining informality, situating the emergence of the “informal sector” as tied to the mid-century efforts to “generate a globally operational concept of unemployment for use in the ‘developing world.'” Link. (For a broader, less empirical take along similar lines, see Michael Denning’s 2006 article “Wageless Life.” Link.)
    • A new IZA paper by Andrea Brandolini and Eliana Viviano looks at contemporary employment statistics and proposes supplemental indices that “account for people’s experience in labor market states (e.g. work intensity for the employed and search intensity or unemployment duration for the unemployed).” Link.
    • “All the materials and human instruments of production are present in abundance, nay in excess. But their normal collaboration is impossible, because they cannot market the goods they could produce, so as to cover even the barest costs of the production.” From 1924, The Economics of Unemployment by J. A. Hobson. Link.
    ‡ unemployment history labor_market

    New Researchers

    Regulatory regimes and migrant social networks

    UCLA Sociology PhD candidate PEI PALMGREN analyzes how variations in state regulatory regimes influence the characteristics of migrant social networks by comparing the networks of Kachin refugees in Kuala Lumpur and Los Angeles.

    From the paper:

    “Between 2002 and 2014, over 130,000 refugees from Myanmar resettled to the U.S. from Malaysia or Thailand, including many originating in Myanmar’s Kachin State. Drawing from participant observation and in-depth interviews with Kachin refugees in Kuala Lumpur, Malaysia, and Los Angeles, California. In both locations, Kachin networks and the local refugee management regime feed off each other to manage the migration process in different ways, with key roles played by hybrid institutions rooted in grassroots adaptation efforts yet linked to formal institutional resettlement mechanisms. While the analysis of Kachin social networks demonstrates that displaced people have the capacity to work together to survive and adapt to conditions of displacement, such capacity is greatly contingent upon national policy and local power contexts, local labour market conditions, and the ability of refugees to accumulate social capital.”

    Link to the paper, link to Palmgren’s website.

    ‡ migration social_networks new_researchers

    Each week we highlight great work from a graduate student, postdoc, or early-career professor. Have you read any excellent research recently that you’d like to see shared here? Send it our way: editorial@jainfamilyinstitute.org.

    + + +

    • On the blog this week, a new post by Unlearning Economics assesses the weaknesses of Expected Utility, and stresses the importance of time and psychology for developing accurate theories of decision-making. Link.
    • A USA Today article on education deserts takes up JFI’s school concentration research, which we published back in December. JFI Higher Ed Finance lead Laura Beamer comments in the article: “It’s a stark reality: the richer ZIP codes have more education options.” Link to the story, link to our research.
    • “Sons of fathers randomly called by the Vietnam War draft have lower earnings and are more likely to volunteer for military service.” Sarena Goodman and Adam Isen examine the generational effects of the draft. Link.
    • Annie Lowrey reflects on America’s “Great Affordability Crisis.” Link. At Project Syndicate, Kaushik Basu anticipates “The Approaching Debt Wave.” Link.
    • “Using new data, we characterize Pinochet’s privatizations in Chile and find that some firms were sold underpriced to politically connected buyers. Once democracy arrived, they formed connections with the new government, financed political campaigns, and were more likely to appear in the Panama Papers.” Felipe González, Mounu Prem, and Francisco Urzúa examine how privatizations tie together the politics of democracies and dictatorships. Link. Relatedly, Sebastian Edwards and Leonidas Montes reveal new evidence on Milton Friedman’s 1981 meeting with Pinochet. Link.
    • Claudia Sahm (of Sahm Rule fame) interviewed by Matt Yglesias on the Vox Weeds podcast. Link.
    • Jessica Trounstine on land use regulations and urban segregation since the 1970s. Link.
    • In a new World Bank report, 20 scholars summarize major insights in development economics over the past decade, including a discussion of pilot scaling, institutional design, and the relationship between macroeconomic goals and microeconomic policy foundations. Link.
    • More development econ: Nathan Nunn with a new policy brief for Econfip. “We may have our largest and most positive effects on alleviating global poverty if we focus on restraining ourselves from actively harming less-developed countries rather than focusing our efforts on fixing them.” Link.
    • “The conventional distinction between white-collar and production workers has concealed substantial deskilling among manufacturing production workers since the 1950s.” A 2019 post at VoxEU from David Kunst, on deskilling in manufacturing jobs. Link.
    • Raluca Grosescu and Ned Richardson-Little survey “state socialist approaches to international criminal and humanitarian law.” Link.
    • “Monetary policy can be deployed towards social purposes other than controlling inflation, in institutional configurations other than isolation from the rest of the government and with instruments other than interest rate manipulation.” Benjamin Braun and Leah Downey on expanding the scope of central banking. Link. And Sebastian Alvarez “investigates the conditions under which the globalization of the domestic banking sector unfolded in Brazil and Mexico during the dizzying expansion of foreign finance that culminated in the international debt crisis of 1982.” Link.
    • Yikai Wang models “The Politico-Economic Dynamics of China’s Growth.” Link.
    • “Empires facilitated trade within their controlled territories by building and securing trade and migration routes, and by imposing common norms, languages, religions, and legal systems, all of which led to the accumulation of trading capital. In this paper, we uncover how the rise and fall of empires over the last 5,000 years still influence world trade. We collect novel data on 5,000 years of imperial history of countries, construct a measure of accumulated trading capital between countries, and estimate its effect on trade patterns today. Our measure of trading capital has a positive and significant effect on trade that survives controlling for potential historical mechanisms such as sharing a language, a religion, genes, a legal system, and for the ease of natural trade and invasion routes. This suggests a persistent and previously unexplained effect of long-gone empires on trade.” By Gunes Gokmen, Wessel N. Vermeulen, and Pierre-Louis Vézina. Link.

  2. Winter Night

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    VARIABLE DEPEDENCE

    Debating the merits of large- and small-N studies

    Sample size does more than determine the sort of methodology appropriate for a given study; theorists of social science have long pointed out that the number of case studies considered determines the sorts of questions researchers can analyze and the structure of their causal claims.

    A 2003 paper by PETER HALL takes these debates further. In the context of comparative political science, Hall argues that the sort of methods researchers use should be consistent with their beliefs about the nature of historical development. From the paper:

    “Ontology is crucial to methodology because the appropriateness of a particular set of methods for a given problem turns on assumptions about the nature of the causal relations they are meant to discover. It makes little sense to apply methods designed to establish the presence of functional relationships, for instance, if we confront a world in which causal relationships are not functional. To be valid, the methodologies used in a field must be congruent with its prevailing ontologies. There has been a postwar trend in comparative politics toward statistical methods, based preeminently on the standard regression model. Over the same period, the ontologies of the field have moved in a different direction: toward theories, such as those based on path dependence or strategic interaction, whose conceptions of the causal structures underlying outcomes are at odds with the assumptions required for standard regression techniques.

    The types of regression analyses commonly used to study comparative politics provide valid support for causal inferences only if the causal relations they are examining meet a rigorous set of assumptions. In general, this method assumes unit homogeneity, which is to say that, other things being equal, a change in the value of a causal variable x will produce a corresponding change in the value of the outcome variable y of the same magnitude across all the cases. It assumes no systematic correlation between the causal variables included in the analysis and other causal variables. And most regression analyses assume that there is no reciprocal causation, that is, that the causal variables are unaffected by the dependent variable. The problem is that the world may not have this causal structure.

    Small-N comparison is therefore far more useful for assessing causal theories than conventional understandings of the ‘comparative method’ imply. Precisely because such research designs cover small numbers of cases, the researcher can investigate causal processes in each of them in detail, thereby assessing the relevant theories against especially diverse kinds of observations. Reconceptualized in these terms, the comparative method emerges not as a poor substitute for statistical analysis, but as a distinctive approach that offers a much richer set of observations, especially about causal processes, than statistical analyses normally allow.”

    Link to the piece.

    • “Except for probabilistic situations that approach 1 or 0 (in other words, those that are almost deterministic), studies based on a small number of cases have difficulty in evaluating probabilistic theories.” Stanley Lieberson’s 1991 overview of the causal assumptions inherent to small-N studies. Link.
    • Theda Skocpol and Margaret Somers on “The Uses of Comparative History in Macrosocial Inquiry.” Link.
    • Jean Lachapelle, Lucan A. Way, and Steven Levitsky use small-N process tracing to “examine the role of the coercive apparatus in responding to crises triggered by mass anti-regime protest in Iran and Egypt.” Link. Andrey V. Korotayev, Leonid M. Issaev, Sergey Yu. Malkov and Alisa R. Shishkina present a quantitative analysis of destabilization factors in 19 countries during the Arab Spring. Link.
    ‡ methodology causality research_design

    New Researchers

    Intangible capital and the labor share

    University of Minnesota PhD candidate LICHEN ZHANG examines how micro-level heterogeneities generate varied macroeconomic outcomes. Her job market paper considers the relationship between increased investment in ‘intangible’ capital such as software and R&D, and the decline in the labor share of income.

    From the paper’s introduction:

    “I find that when intangible-investment specific technical change (IISTC) is calibrated to match the observed decline in the relative price of intangible investment goods, my model can explain both the observed decline in the current BEA-measured labor share by around 60% and the decline in measured labor share of the pre-1999 revision—when intangibles are not treated as final output—by around 40%. Moreover, it accounts for more than 90% of the observed increase in the employment share of large firms (with more than 500 employees) and of the increase in the share of total sales going to the top 10% firms. In addition, the model predicts more than two-thirds of the observed reduction in annual firm entry rate.”

    Link to the paper, link to Zhang’s website.

    ‡ investment labor_share new_researchers

    Each week we highlight great work from a graduate student, postdoc, or early-career professor. Have you read any excellent research recently that you’d like to see shared here? Send it our way: editorial@jainfamilyinstitute.org.

    + + +

    • Two new posts on the Phenomenal World this week. In the first—which we published in collaboration with the Los Angeles Review of Books—Jack Gross interviews the legendary historian of science Lorraine Daston. “No universal ever fits the particulars. Never in the history of human rulemaking have we created a rule or a law that did not stub its toe against unanticipated particulars.” Link.
    • As a companion to the above, Rodrigo Ochigame surveys the long history of attempts at formalizing fairness: “Algorithmic fairness should be understood not as a novel invention, but rather as an aspiration that reappears persistently in history.” Link.
    • Led by Arden Ali, JFI’s Digital Ethics team is co-organizing a conference in April with MIT’s Social and Ethical Responsibilities of Computing Working Group: “The Ethics of Algorithms.” Read the call for abstracts from all academic disciplines here.
    • From the always-excellent Carbon Brief, an interactive showing how the UK has transformed its electricity supply since the 2008 Climate Change Act. Link.
    • “We confront two seemingly-contradictory observations about the US labor market: the rate at which workers change employers has declined since the 1980s, yet there is a commonly expressed view that long-term employment relationships are more difficult to attain. We reconcile these observations by examining how the distribution of employment tenure has changed in aggregate and for various demographic groups.” By Raven Molloy, Christopher Smith, and Abigail Wozniak. Link.
    • On college access and adult health. By Benjamin Cowan and Nathan Tefft. Link. h/t Laura
    • “Until the mid-1930s, the 12 Federal Reserve banks had the ability to set their own discount rates and conduct independent monetary policy.” Pooyan Amir-Ahmadi, Gustavo S. Cortes, Marc D. Weidenmier on regional monetary policy and the Great Depression. Link.
    • “Strong Firms, Weak Banks: The Financial Consequences of Germany’s Export-Led Growth Model.” By Benjamin Braun and Richard Deeg. Link.
    • Related to last week’s spotlight on industrial policy, a 2004 paper from Ricardo Hausmann, Lant Pritchett, and Dani Rodrik on “Growth Accelerations.” Link.
    • Jan Fichtner “compiles the first ‘anatomy’ of the Cayman offshore financial center (OFC), utilizing all sources of publicly available data about the three main segments: banking, direct investment, and portfolio investment.” Link.
    • A paper by Giovanni Dosi et al presents an agent-based model to explain sluggish wage and productivity growth, and increased dispersion of firm productivity and worker earnings. “It shows that a single market process unleashed by the decline of unionization can account for both the macro and micro economic phenomena.” Link.
    • “Can new technology cause social instability and unrest? We look at one famous historical episode—the ‘Captain Swing’ riots in 1830s England. These constitute the largest wave of political unrest in English history, with more than 3,000 cases of arson, looting, attacks on authorities, and machine-breaking across 45 counties. Newly-collected data on threshing machine adoption shows that new technology was associated with both higher unemployment and more riots. Based on data about soil fertility and suitability for water power, we also show that the link was causal: Areas with more water power and better conditions for wheat cultivation witnessed both greater adoption of threshing machines and markedly more riots. In parishes where the technology was not adopted, the riot probability was 13.6%; in places where threshing machines had spread, it was 26.1%—twice as high.” By Bruno Caprettini and Hans-Joachim Voth. Link.

  3. Preparation

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    PATTERN MANAGE

    Re-thinking industrial policy

    Deindustrialization is a global phenomenon taking place more rapidly in middle- income countries than in high-income ones. Despite the global decline of manufacturing employment, “industrial policy” is increasingly salient in research and policy debates. But deindustrialization poses significant challenges for industrial strategy—particularly as it relates to direct state investment in productive capacity.

    In a new article, “Industrial Policy in the 21st Century,” Ha-Joon Chang and Antonio Andreoni lay the groundwork for a new theory of industrial policy:

    “Since the 18th century, the debate surrounding industrial policy has been one of the most important in the political economy of development. We discuss a number of issues which cannot be accommodated within the neoclassical framework and which are also often neglected by evolutionary and structuralist contributions—namely, commitment under uncertainty, learning in production, macroeconomic management, and conflict management. We also address three new challenges for industrial policy makers in a changing world: the global value chain, the increasing financialization of the world economy, and changes in the rules of the global economic system.

    Despite differences across countries in terms of their stages and levels of industrialization, their macroeconomic regimes and their political economy settings, the three sets of neglected issues we focus on are and will remain of paramount importance. The need to address long-term grand challenges like climate change calls for massive and coordinated investments in energy systems, production practices and mobility. The achievement of these global transformations still depends on micro-level structural changes in productive organizations and government interventions in creating new worlds of production as well as managing industrial and social restructuring.”

    Link to the piece.

    • “Industrial policy can no longer be about industry or manufacturing per se. As the world economy turns increasingly towards services, it is clear that we will need a conception of industrial policy that addresses the need to nurture and develop modern economic activities more broadly, including but not limited to manufacturing.” Karl Aiginger and Dani Rodrik’s introduction to the special issue of Industry, Competition, and Trade. Link. In the same issue, Nathan Lane presents a “New Empirics of Industrial Policy.” Link.
    • In Industrial and Corporate Change, Mario Pianta, Matteo Lucchese, and Leopoldo Nascia assess the post-crisis industrial policies of the European Union and examine the potential for more active public investment policies in the years to come. Link.
    • John Waterbury’s extensive comparison between the industrial strategies of Nasser and Sadat. Link. From 1993, Hajoon Chang on the importance of state intervention in the “political economy of industrial policy in South Korea.” Link.
    ‡ development industrial_policy public_investment

    New Researchers

    Measuring growth, productivity, and inequality

    PhD candidate in Economics at the New School REMZI BARIS TERCIOGLU examines the complexities of growth and distribution in the United States since the 1947. In a 2019 working paper, he re-calculates real output growth when financial, healthcare and professional-business services are categorized as intermediate-consumption.

    From the abstract:

    “Since the 1980s, financial, healthcare and professional-business services (PBS) have grown rapidly and produced more of the US value-added, however, these services do not produce final uses for households. This paper explores the impacts of treating finance, healthcare, and PBS as intermediate consumption of the economy on US growth rates, decomposition of expenditures, and distribution of income over 1947-2017. After adjustments to the National Income and Product Accounts (NIPAs), the annual per capita growth declines by one-fourth after 1980, decomposition of expenditures changes in favor of investment and government spending, and the compensation of employees (CE) share of output declines sharply as more than 90% of the expenditures on finance, healthcare and PBS are financed out of CE. Average CE stagnates even though labor productivity continues to grow after adjustments; thus creating a productivity gap. The current treatment of finance, healthcare, and PBS in the NIPAs not only overestimates growth but also understates income inequality”

    Link to the full paper.

    ‡ growth measurement new_researchers

    Each week we highlight great work from a graduate student, postdoc, or early-career professor. Have you read any excellent research recently that you’d like to see shared here? Send it our way: editorial@jainfamilyinstitute.org.

    + + +

    • New on the Phenomenal World, Wilson Sherwin looks to the welfare rights movement and cash transfer experiments of the 1970s to consider: “What type of activities would a UBI encourage?” Link to the post.
    • Antoine Dechezleprêtre, David Hémous, Morten Olsen and Carlo Zanella use Germany’s Hartz labor market reforms to test the relationship between wages and automation, finding that “an increase in low-skill wages leads to more automation innovation, while an increase in high-skill wages tends to reduce automation innovation.” Link.
    • For the rare earth files: a “Long-term outlook for global rare earth production.” by Jianliang Wang, Meiyu Guo, Mingming Liu, and Xinqiang Weid. Link. And from 2018, Terence Bell on the “Ancient History of Copper.” Link.
    • “Political Mobilization and Social Unrest in Rural Portugal in the Early Twentieth Century,” by Jesús Ángel Redondo Cardeñoso. Link.
    • At Data for Progress, Brian Callaci and Mark Paul anticipate the policy challenges associated with climate-induced labor displacement, and offer a history of American worker-displacement policies throughout the late 20th century. Link.
    • “This review argues that peripheral histories of international law challenge the narrative that a European international legal system was easily incorporated by the new non-European states that surged in the nineteenth and twentieth centuries.” Liliana Obregón on the development of international law. Link.
    • “Why are the prices so damn high?” Eric Helland and Alex Tabarrok on cost disease. Link.
    • Istvan Abel & Kristof Lehmann draw on Keynes and Schumpeter to critique the contemporary inflation-targeting monetary framework, and apply post-Keynesian monetary theory to explain the experience of Hungary’s central bank in the aftermath of the financial crisis. Link.
    • “The overall union membership rate dropped by 0.2 percentage points between 2018 and 2019, representing a loss of 170,000 union workers.” Hayley Brown and Hye Jin Rho analyze demographic trends in union membership decline. Link.
    • Seema Jayachandran reviews the literature on “microentrepreneurship” in developing countries. Link.
    • At 3P, Matt Bruenig presents a comprehensive plan to simplify, strengthen, and centralize America’s existing welfare infrastructure. Link.
    • “Policy discussions often treat EITC expansions and minimum wage raises as alternatives, of which we should choose just one. This is a misconception. In economic terms, the two policies are complementary and may be more effective in combination than either is on its own.” Jesse Rothstein and Ben Zipperer examine the empirical evidence in favor of EITC expansion and minimum wage increases. Link.
    • “After 1916, lawmakers included a provision in the National Defense Act that funded a swords-to-plowshares project to manufacture incendiary weapons during war and chemical fertilizer during peacetime. This essay examines how the United States entered a new era in agricultural production in spite of the government’s bungled job of enacting its mandate. It argues that 1916 marked a turning point, after which federal research helped usher in the chemical revolution in American agriculture. Significantly, it shows how legislators had pitched the arms-to-farms project as a type of federal fertilizer subsidy for farmers, but in practice the law became a corporate subsidy that helped agricultural firms become increasingly sophisticated chemical manufacturers.” Link. h/t Francis

  4. Futurist Landscape

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    REMEDY EXERCISE

    Legal frameworks for sovereign debt restructuring

    Despite contributing towards a series of crises (from the third world debt crisis of the 80s to the Euro-crisis of 2010), sovereign debt is rising across low-, middle-, and high-income economies, leading to renewed discussions around the macroeconomic consequences of sovereign debt restructuring and default.

    In addition to debates about the economic consequences of default, a large academic and policy literature explores the varying legal architectures of debt contracts. In a 2002 paper, LEE BUCHHEIT and G. MITU GULATI present a history of contractual provisions for sovereign bonds in the United States, focusing specifically on the absence of collective action clauses, which are mandated in the UK.

    From the article:

    “In most contracts, the parties know each other’s identity beforehand, and they make a conscious decision to enter into a legal relationship. In a multi-creditor debt instrument, the borrower’s identity is of course known by each investor, but what the investors don’t know is the identity of each other. When the bond issuer runs into financial difficulties, the actions of any one bondholder can dramatically affect the interests of all the other lenders.

    Bonds issued by both corporate and sovereign borrowers in the early nineteenth century rarely contained provisions that contemplated collective decisionmaking by the bondholders. Each bond was a freestanding debt instrument; its terms could not be changed without the consent of its holder, and, if not paid when due, each holder was free to pursue her individual remedies against the issuer. The instruments did not require a holder to consult with, much less to act in concert with, fellow bondholders before, during or after a default. Although this approach ensured that each bondholder’s claim against the borrower could not be deranged without that bondholder’s consent, it also had the consequence of forcing financially-distressed corporate borrowers into bankruptcy (which in those days meant liquidation). This was, is, and ever shall be the “holdout creditor problem” in a debt workout.

    One hundred years on, the financial community is again confronted with a remarkably similar problem. A sovereign bond issuer of the early twenty-first century is in much the same spot as the distressed corporate or railroad bond issuer of the early twentieth century. The merits of including majority action clauses in sovereign bonds as a method of neutralizing the holdout creditor are being proposed in some circles today, just as they were in the 1920s and 1930s in the context of corporate bonds. It may be feasible to engage the equity powers of U.S. federal courts in the oversight of some sovereign bond workouts with the result that the bondholders can be homogenized into a single voting class, and any court-approved compromise of the action will bind all members of that class.”

    Link to the paper.

    • “By noticeably intensifying distributional conflict over scarce public resources, sovereign debt crises tend to lay bare underlying power dynamics that, during normal times, are quietly at work beneath the surface.” Jerome Roos’s recently published book uncovers the global distributional politics underlying the financialization of sovereign debt. Link. See also Barry Eichengreen’s 2003 comparative overview of debt restructuring proposals. Link.
    • Two pieces by José Ángel Gurría on the recent history of Mexico’s debt crises: from Coping with Capital Surges, a chapter on the historical trade-offs of foreign direct investment; and a 1995 paper on “The Mexican Debt Strategy” draws policy lessons from the crises of the ’80s. Link, link.
    • “The Greek debt restructuring of 2012 stands out in the history of sovereign defaults. It achieved very large debt relief—over 50 per cent of 2012 GDP—with minimal financial disruption, but it did so at a cost.” From 2013, “An Autopsy” of Greek debt restructuring, by Jeromin Zettelmeyer, Christoph Trebesch, and Mitu Gulati. Link. And a 2014 paper by Miranda Xafa assesses the drawbacks to delaying the restructuring after mid-2011. Link.
      h/t reader Dominik L for several of these links
    ‡ debt legal_history credit

    New Researchers

    Fort construction and population distribution in the US

    Economics PhD candidate at Boston University CHELSEA E. CARTER studies the long term effects of historical policy decisions. Her job market paper examines how US military history has shaped the spatial distribution of the American population.

    From the abstract:

    “I build a new dataset of the 19th century Army’s frontier forts to document their place-based effects. Forts predict initial increases in population and population density, indicative of their role as man-made factors in explaining the origins of local population patterns. Increased population and density persist, on average, over a century after fort abandonment, indicative of path dependence at frontier fort locations. Results using new causal random forest estimation provide consistent evidence of frontier forts’ treatment effects both initially and in the long run.demographics of forts locations reflect those of the US Army itself, but only in the short run, with increased shares of men and foreign-born. Using the spread of the transcontinental railroad, I show that early rail access was critical for continued growth at fort locations and that forts are necessary, but not sufficient, in determining spatial patterns.”

    Link to the full paper, link to Carter’s website.

    ‡ military_history geography new_researchers

    + + +

    • At the Phenomenal World, the first of two new posts features Stephen Nuñez—JFI’s Project Lead on Guaranteed Income—explaining and contextualizing the results from a brand new working paper on UBI and New York City. The paper, by Khalil Esmkhani, Jack Favilukis and Stijn Van Nieuwerburgh, models the effects of a guaranteed income in the city, and finds that, “when financed through a progressive income tax, a UBI increases general welfare and—perhaps most notably—does not lead to housing market inflation.” Link.
    • Also at the Phenomenal World this week, JFI Fellow and Harvard PhD candidate Kathryn Holston gives an overview of recent advancements in macroeconomic modeling and how inequality can feature in future macro research. Link.
    • A study from last year by Gabor Simonovits et al looks at the political effects of USDA payments to agricultural producers: “Receiving agricultural payments is associated with a 20% increase in the probability of voting in county elections, a 34% increase in the probability of running for office, and a 25% increase in the probability of winning office.” Link. (See last week’s newsletter for more policy feedback literature.)
    • “Eight centuries of global interest rates, R-G, and the ‘suprasecular’ decline, 1311-2018.” A Bank of England paper by Paul Schmelzing. Link.
    • Raúl Sánchez de la Sierra examines the welfare effects of positive demand shocks for coltan and gold in villages near mineral mines in the Congo: “Positive demand shocks lead armed actors to settle as ‘stationary bandits’ introducing illicit mining visas, taxes, and administrations. My findings suggest that armed actors may create ‘essential functions of a state’ to better expropriate, which, depending on their goals, can increase welfare.” Link.
    • A new report from Kristin Blagg, Laurie Goodman, and Kelia Washington at the Urban Institute on the interaction between student loan debt and mortgage borrowing. Link.
    • Dylan Scott at Vox with an excellent piece on Taiwan’s single-payer healthcare system. Link. The post is part of an in-progress series looking at different health care systems around the world. Link to the series page. See also a recent systematic review paper on the political economy of universal health coverage, from the journal of Health Policy and Planning. Link.
    • From the ASSA annual conference, a webcast of Dani Rodrik and Suresh Naidu’s presentation on Economists for Inclusive Prosperity (followed by a presentation by Samuel Bowles and Wendy Carlin on new economic paradigms). Link.
    • “Using official voter turnout records and rich micro data, we document considerable demographic differences between voters who participate in school board elections and the students attending the schools that boards oversee. For example, we show that most majority nonwhite districts in our sample have a majority-white electorate and that these electoral disparities are associated with racial achievement gaps.” By Vladimir Kogan, Stéphane Lavertu, and Zachary Peskowitz. Link.
    • From the Internet Policy Review, a paper on the GDPR’s frameworks for regulating political micro-targeting. Link.
    • “Prevailing formulations of economic theory make an indiscriminate assumption of ergodicity, which underlies the assumption that the time average and the expectation value of an observable are the same. I argue that by carefully addressing the question of ergodicity, many puzzles besetting the current economic formalism are resolved in a natural and empirically testable way.” Ole Peters in Nature. Link.
    • At Vox Dev, a post on China’s 2009 VAT reform and its effects on firm behavior, by Zhao Chen, Xian Jian, Zhikuo Liu, Juan Serrato, and Daniel Xu. Link.
    • “The jury trial is a critical point where the state and its citizens come together to define the limits of acceptable behavior. Here we present a large-scale quantitative analysis of trial transcripts from the Old Bailey that reveal a major transition in the nature of this defining moment. By coarse-graining the spoken word testimony into synonym sets and dividing the trials based on indictment, we demonstrate the emergence of semantically distinct violent and nonviolent trial genres. We show that although in the late 18th century the semantic content of trials for violent offenses is functionally indistinguishable from that for nonviolent ones, a long-term, secular trend drives the system toward increasingly clear distinctions between violent and nonviolent acts. This work provides a new window onto the cultural and institutional changes that accompany the monopolization of violence by the state, described in qualitative historical analysis as the civilizing process.” By Sara Klingenstein, Tim Hitchcock, and Simon DeDeo. Link.

  5. Theater of Masks

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    PROPONENT EXCHANGE

    Policy feedback loops and US old-age policy

    Researchers of policy history have long deliberated over explanatory frameworks: institutionalist accounts tend to focus on inherited conditions and path dependency in political development, while others stress the importance of social movements in shaping policy. Among the more dynamic analytical frameworks for the study of welfare politics is that of “policy feedbacks,” which looks at the evolution of policy as an iterative process in which new policies change the conditions for further political engagement.

    In a 2019 article, EDWIN AMENTA and THOMAS ALAN ELLIOTT look at the utility of these frameworks for explaining the character of old-age pensions in the US from the mid-1930s to 1950s.

    From the article:

    “In 1935, Congress created Old Age Assistance (OAA), a federal-state matching program which immediately provided benefits to the elderly. All states adopted old-age assistance legislation by 1937, and many states passed generous pensions. These reforms occurred in the context of extensive activity by the old-age pension movement, which called for $200 monthly pensions to almost all nonemployed citizens over 60 years. This proposal was rejected, and the Social Security Act was enacted in August 1935. For the formative years of U.S. social policy, the elderly had to rely almost entirely on old age assistance programs, and these varied dramatically in generosity from state to state. We seek to explain why some states became generous and why some of them remained so during the formative years of U.S. old-age policy.

    The results provide some support for each of the models. Initial generosity was prompted in some states by way of insider institutional political processes. In others, the politically mediated influence of a social movement, including mediation through favorable public opinion, brought about generous pensions. In the second period, initial generosity was a key determinant of later generosity, but it also required group mobilization, as expected by the positive policy feedback model. Yet there was still a route for states that were not generous to become so, one that worked through the politically mediated effects of a social movement. This is good news for U.S. proponents of policy reform. Political institutional obstacles to democracy, including an underdemocratized polity and patronage-based parties, stood as major hindrances to progressive old-age policy in its formative years. These obstacles were reduced by the Voting Rights Act of 1965 and various reforms of political parties and nomination systems that work mainly through primaries.”

    Link to the paper.

    • “Drawing on the example of conservative cross-state advocacy against public sector unions, I describe the strategy of policy feedback as political weapon. I document that the passage of conservative network-backed legislation led to large and enduring declines in public sector union density and revenue. I further show that by curbing the power of public unions, the passage of conservative network-backed bills dampened the political participation of public sector employees.” Alexander Hertel-Fernandez on “Policy Feedback as Political Weapon.” Link. (See also our recommended readings post from Hertel-Fernandez, and a related newsletter on RTW and policy feedbacks from back in 2018.)
    • A 2003 book by Andrea Louise Campbell considers how the passage of Social Security galvanized political participation among low-income seniors. Link. And, from 2014, Amy Lerman and Vesla Weaver examine how the criminal justice system does just the opposite for the formerly incarcerated. Link.
    • “I suggest that laws and administrative rules operate on voluntary organizations to structure the resources, capacities, strategies, and ideals of individuals.” Kristin Goss develops a multi-level theory of feedback loops. Link.
    ‡ policy_making politics welfare

    New Researchers

    Unemployment & the gig economy

    In her job market paper, Stanford PhD candidate EMILIE JACKSON examines the relationship between unemployment and gig labor platforms like Uber and TaskRabbit, looking at take-up rates after unemployment spells and the longer run effects of that take-up.

    From the paper:

    “I utilize penetration of gig platforms across counties over time, along with variation in individual-level predicted propensities for gig work based on pre-unemployment characteristics. In the short run, I show an increase in gig work following an unemployment spell and that individuals are correspondingly better able to smooth the resulting drop in income. However, individuals stay in these positions and are less likely to return to traditional wage jobs. Thus, several years later, prime-age (25-54) workers’ income lags significantly behind comparable individuals who did not have gig work available. Among older workers (55+), I find an increase in gig work corresponds to a postponement of Social Security retirement benefits and a reduction in receipt of Social Security Disability Insurance (SSDI).”

    Link to the full paper, link to Jackson’s website.

    ‡ gig_economy labor_market unemployment

    + + +

    • At the Phenomenal World, a new entry in our recommended readings series, featuring Alice Evans: “If government is unresponsive or belligerent, people may lower their expectations, and reluctantly accept the status quo. This ‘despondency trap’ perpetuates a negative feedback loop.” Link.
    • Fascinating paper and blog post on new work by Inga Heiland et al., using satellite imagery to track container shipping routes worldwide: “We use the Panama Canal expansion in 2016 as a natural experiment. This allows us to identify the impact of the improvement of one link of the shipping network on worldwide trade. Exploiting route information inferred from the satellite data, we estimate the impact of the Panama Canal expansion on global trade, and quantify the trade and welfare effects of the shock through the lens of a quantitative trade model.” Link to the blog post, link to the paper.
    • At the FT: Steve Johnson on debt and austerity in emerging markets. Link.
    • On contracting with loan sharks: “We study roughly 11,000 loans from unlicensed moneylenders to over 1,000 borrowers in Singapore and provide basic information about this understudied market. We develop a very simple model of the relational contract between loan sharks and borrowers and use it to predict the effect of a crackdown on illegal moneylending.” By Kevin Lang et al. Link.
    • From the San Francisco Fed, by Peter J. Klenow, Huiyu Li, and Theodore Naff: “Is Rising Concentration Hampering Productivity Growth?” Link.
    • In the Boston Review, Annette Zimmerman, Elena Di Rosa, and Hochan Kim provide a robust introduction to the literature and debates surrounding algorithmic fairness. Link.
    • “Dynamic Efficiency in a Planned Economy: Innovation and Entrepreneurship Without Markets.” By Maxi Nieto and Juan Pablo Mateo. Link.
    • A 2013 paper by Luís Bettencourt on cities: “I show how all cities may evolve according to a small set of basic principles that operate locally. A theoretical framework was developed to predict the average social, spatial, and infrastructural properties of cities as a set of scaling relations that apply to all urban systems. Confirmation of these predictions was observed for thousands of cities worldwide, from many urban systems at different levels of development.” Link.
    • At VoxDev, Shelby Grossman blogs on new research into institutional structures in informal markets, with evidence from traders in Lagos. Link to the post, link to the paper.
    • New research by Simone Rambotti looks at welfare policy and suicide across the 50 US states, finding a relationship between SNAP participation and lower suicide rates. Link.
    • A recent working paper by Michael Gilraine suggested a relationship between air filtration in classrooms and student achievement, which was reported on at Vox by Matthew Yglesias. Link to the report. On his blog, Andrew Gelman raises some questions: “If there’s a problem, it’s with the general attitude in much of economics, in which it is assumed that identification strategy + statistical significance = discovery. That’s a mistake, and it’s something we have to keep talking about.” Link to the post.
    • Dani Rodrik at Project Syndicate on the changing face of economics. Link.
    • A post on technology adoption, from VoxEU: “Using new firm-level data from Hungary for the period 1992-2003, this column finds that firms are more likely to import a particular piece of sector-specific machinery when other local firms previously imported the same machine. Benefits are concentrated in large and foreign-owned companies, while small and domestically owned firms may actually be adversely affected.” Link.
    • “Plagues and other lethal epidemics played a key role in shaping economic, social, institutional, and cultural change in the past. They also provide useful insights for understanding better current developments. Take, for example, the institutions put in place internationally to organize the fight against health threats. A clearly-recognizable ligne rouge connects the permanent health boards introduced by many cities in the late Middle Ages, to the monitoring systems of regional states in the early modern period, to the nineteenth century’s national health authorities introduced in response to the arrival of cholera, to the global system of international cooperation epitomized in the creation of the WHO in 1948.” Guido Alfani and Tommy Murphy with a rich overview of the literatures on plagues and lethal epidemics from late Antiquity to 1800. Link.

  6. Illegitimate I

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    PREDOMINANCE THEORY

    Realism & idealism, WWI, and the history of IR

    Foundational to the discipline of international relations, historian E. H. Carr’s path-breaking book Twenty Years’ Crisis was the first to systematically assess the (then-emerging) field as consisting of ‘realist’ and ‘idealist’ approaches. Published in 1939, the book carefully outlines the economic, military, and legal underpinnings of the outbreak of World War I, and the failure of the utopianism that preceded it.

    From the book:

    “We can accept neither the Darwinian doctrine, which identifies the good of the whole with the good of the fittest and contemplates without repugnance the elimination of the unfit, nor the doctrine of a natural harmony of interests which has lost such foundation in reality as it once had, and which inevitably becomes a cloak for the vested interests of the privileged.

    “This then is the basic reason for the overwhelming importance of international politics after 1919. The conflict between privileged and unprivileged, between the champions of an existing order and the revolutionaries, which was fought out in the nineteenth century within the national communities of Western Europe, was transferred by the twentieth century to the international community. The nation became, more than ever before, the supreme unit round which centre human demands for equality and human ambitions for predominance. Everywhere in Europe, national governments and one-party states made their appearance; and where party issues survived, they were thought of as something outmoded and deplorable—a blot on national unity which cried out to be erased. The inequality which threatened a world upheaval was not inequality between individuals, nor inequality between classes, but inequality between nations.”

    Link to the book.

    • Jack Levy & William Thompson’s 2010 book provides a comprehensive analysis of the determinants of interstate and civil wars, encompassing a wide range of historical cases and theoretical frameworks. Link. And Dale Copeland’s 2015 book Economic Interdependence and War asks, contra the typical debates, “When and under what conditions will the trade and investment ties between nations lead to peace or military conflict?” Link.
    • A 2005 paper by Oona Hathaway develops “an integrated theory of international law,” in order to “explain why countries would commit to treaties that potentially constrain their behavior and how treaties influence or fail to influence state behavior.” Link.
    • Carr’s other most famous work is his 1961 book What Is History?, a classic work of historiography that poses challenging questions about the facts of history. Link. A 2010 paper by George Lawson examines discipline of IR’s relationship to history and historical research. Link.
    • Historian Susan Pederson reviews a 2015 book by Robert Vitalis on the origins of the discipline of International Relations in the US. Link. (Link to Vitalis’s book, link also to Pederson’s book The Guardians, on the League of Nations.)
    • Tangentially related, an economic history paper by Cong Liu looks at the effects of WWI on Chinese textile industry. Link.
    ‡ international_relations politics law

    Unequal and Uneven

    The Geography of Higher Education Access

    In place of our usual spotlight on an early-career researcher, we’re highlighting a project we made public just before the holidays: the first part in a new series on the geography of market power in the US higher education industry.

    The series, led by JFI’s Laura Beamer, Marshall Steinbaum, and Francis Tseng, introduces a new measurement of market concentration, the School Concentration Index, and an interactive map that allows exploration of higher education options in every ZIP code. Among the findings: 10.1 million individuals live in public education deserts; 30.7 million people have access to only public school nearby.

    From the report:

    “The geography of higher ed institutions strongly determines the options available to a given student. While a large share of higher education policy discourse justly attempts to improve students’ access to information (on school costs, financial aid information, completion rates, or post-graduation employment statistics, and the like) to inform their school choices, political attention to geographic access remains sparse.”

    The interactive map is available for perusal here.

    • Marshall Steinbaum, co-author on the report, elucidated a key point in the press release: “The most interesting single thing may be the difference between access to traditional and for-profit higher education, by geography. One policy implication is that, if free college is just leaving the existing public higher education system as-is, but better-funded, that won’t address access issues for non-traditional populations.” Link.
    • Inside Higher Ed spoke to Laura Beamer and Marshall Steinbaum here; Education Dive also covered the research here.
    • Notable Twitter threads in response: Daniel Kuehn gave a number of insights from the map, and on methodology, noted, “One thing I really like about this compared to prior work on ‘education deserts’ is that it treats community colleges the same as four years in the analysis.” Bill DeBaun wrote a summary of the work, and argued against a seemingly obvious solution: “I think the kneejerk reaction here for addressing geography challenges is ‘online programs!’ but there are infrastructure challenges with broadband in rural places and these postsecondary experiences are qualitatively different so I don’t think that’s the fix.”
    ‡ jfi_research higher_education market_concentration
    • A forthcoming World Bank publication by M. Ayhan Kose, Peter Nagle, et al. entitled Global Waves of Debt “presents the first in-depth analysis of the main features of global and national debt accumulation episodes.” Link.
    • Li Gan, Qing He, Ruichao Si, and Daichun Yi on patterns of urbanization across China. Link. Another recent NBER paper presents new data on railroad construction and American manufacturing development. Link.
    • Greg Mankiw’s skeptical guide to Modern Monetary Theory. Link.
    • UK Housing benefit cuts “substantially increased evictions, individual bankruptcies, property crimes, temporary accommodation, statutory homelessness and rough sleeping,” according to new research by Thiemo Fetzer, Srinjoy Sen, and Pedro CL Souza. Link. In the LRB, Susan Pederson reviews two books on the degradation of Britain’s postwar housing program. Link.
    • A working paper from Nacho Álvarez et al. sets out “general principles for fiscal governance reform aiming at a better economic, social and environmental performance on the part of the European Monetary Union.” Link.
    • From Joslyn Barnhart, Allan Dafoe, Elizabeth Saunders, and Robert Trager: The Suffragist Peace. “Women have been increasingly incorporated into political decision-making over the last century through suffragist movements, raising the question of whether these changes have had effects on the conflict behavior of nations consistent with their large effects in other areas, such as the size and competencies of governments. We find that the evidence is consistent with the view that the increasing enfranchisement of women, not merely the rise of democracy itself, is the cause of the democratic peace.” Link.
    • An OECD working paper by Mikkel Hermansen examines the relationship between occupational licensing and job-job mobility rates. Link.
    • At the Philadelphia Fed, a working paper by Nathan Blascak and Vyacheslav Mikhed on the financial consequences of health insurance: “estimates show that increasing access to health insurance lowered young adults’ out-of-pocket medical expenditures, debt in third-party collections, and the probability of personal bankruptcy. However, most improvements in financial outcomes are transitory, as they diminish after an individual ages out of the mandate at age 26.” Link.
    • Economic Policy Institute’s roundup of the most significant charts of 2019. Link. Of particular note: labor violations and racial employment disparities. Link and link to the respective reports.
    • Alan Auerbach, Yuriy Gorodnichenko, and Daniel Murphy use “new empirical data on demand shocks to evaluate the predictions of neoclassical and neo-Keynesian macroeconomic models for labour share, labour wedge, wage and price response, and multipliers.” Link.
    • A paper by Gojko Barjamovic et al, for all our Zipf’s-law lovers: “We analyze a large data set of commercial records produced by Assyrian merchants in the nineteenth century BCE. Using the information from these records, we estimate a structural gravity model of long-distance trade in the Bronze Age. We use our structural gravity model to locate lost ancient cities. In many cases, our estimates confirm the conjectures of historians who follow different methodologies. In some instances, our estimates confirm one conjecture against others. We also structurally estimate ancient city sizes and offer evidence in support of the hypothesis that large cities tend to emerge at the intersections of natural transport routes, as dictated by topography. Finally, we document persistent patterns in the distribution of city sizes across four millennia, find a distance elasticity of trade in the Bronze Age close to modern estimates, and show suggestive evidence that the distribution of ancient city sizes, inferred from trade data, is well approximated by Zipf’s law.” Link.

  7. The Road in the Forest

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    Thank you for reading the JFI letter this year. As we prepare for another year of research and link sharing, here’s some of what we sent in 2019.

    We’ll see you in 2020.

    OVER ILLUMINATION

    Highlights from a year of JFI Letters

    + In our first newsletter of 2019, we looked at a report by Yale School of Management’s Evidence in Practice project, which considered the relationship between research and policymaking: “The most successful examples of evidence integration lessen the distinction between evidence generation and application, and focus on designing approaches that simultaneously generate (different types of) rigorous evidence and develop an iterative process for integrating evidence into practice.” Link to the archived letter. + A July letter features work by Jonas Hjort et. al on how research evidence shaped the decisions of policymakers in Brazil. Link to the archived letter.

    + Recurring debates on the future of work: Brishen Rogers argues that labor precarity is the result of politics, not the outcome of any force of automation outside of our control: “Hotel work, food services, janitorial work, and retail work have become precarious over the past twenty years because companies in those sectors forcibly de-unionized and/or ‘fissured’ away their workers to subcontractors or franchisors, thereby denying them effective access to many legal rights.” Link to the April letter. + In the first of a two-part series, Aaron Benanav historicizes automation debates in order to shed light on their significance for the present. Link to the October letter.

    + On education and the labor market: Alicia Sasser Modestino et. al criticize the “skills gap” theory, which suggests that labor standards are declining because American workers lack the training to enter high paid industries. They argue instead that it’s due to an abundance of skilled workers that employers have raised the credentials required for entry level jobs. And Marshall Steinbaum and Julie Morgan show the “skills gap” theory to be inconsistent with the student debt crisis. Link. + In March, we looked at the proliferation of certificate programs, an understudied development in the higher education landscape. Link to the archived letter.

    + On the nuts and bolts policy history and implementation: A recent letter discussed Pamela Herd and Donald Moynihan’s book, Administrative Burden, which argues that, “ultimately, burdens are the fine print in the social contract between citizens and their government.” Link to the archived letter. + A look into the history of the EITC, from May. Link.

    ‡ end_of_year metaresearch automation skills_gap welfare

    Phenomenal World

    + Some of our favorite (and most visited) posts included Lily Hu’s magisterial two-part essay on the problems with causal reasoning about racial discrimination; Marshall Steinbaum’s post and white-paper on debt cancellation and the racial wealth gap; Anastasia Wilson’s review of Caitlin Zaloom’s ethnography of higher ed debt; Francis Tseng’s scrutiny of the optimism of decentralized net infrastructure; and Owen Davis’s overview of competing theories of money. If you aren’t already, sign up for the PW newsletter to get new posts in your inbox when they publish. And please pitch us—our interests are as wide as represented in this newsletter, and we’ve love to hear from you.

    + We’re very proud of the set of interviews we published this year—including: two members of the original September Group, Adam Przeworski and John Roemer; founder of network theory Mark Grannovetter; basic income scholar Almaz Zelleke; economist and JFI fellow Johannes Haushofer; and computer scientists Seda Gürses and Bekah Overdorf.

    + We launched a new series on the blog—Phenomenal Works—in which we invite our favorite researchers to recommend their favorite readings. Thus far, we’ve published three editions: with climate scholar Leah Stokes, on research and influence; sociologist Beth Popp Berman, on the limits and promise of poverty research; and political scientist Alexander Hertel-Fernandez, on unions and democracy. Many more to come in 2020.

    ‡ phenomenal_world interviews analysis phenomenal_works

  8. Ship in a Squall

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    FLUIDITY OF MANPOWER

    On contracts and ‘intermediate’ labor market institutions

    The recent boom in identifying and measuring monopsony in labor markets has brought the question of employers’ wage-setting power to the fore of various academic and policy debates. (For an overview, see our blog post by Owen Davis from earlier this year.) Along with its more direct theoretical antecedents, this body of work joins a broader interdisciplinary tradition in examining the relationship between various forms of coercion and the labor contract.

    In a 2011 paper, using historical data on contract breaches and game theoretical models, Suresh Naidu and Noam Yuchtman examine how Master and Servant law affected contracting and wages in 19th century Britain. The dynamics examined in the paper provide robust evidence of what the authors call “intermediate” labor market institutions—between the poles of free and forced labor.

    “We document that criminal prosecutions were widely applied by employers in response to labor demand shocks: a high marginal revenue product of labor led to greater numbers of prosecutions. We address concerns about endogeneity by using exogenous industry-specific output price shocks for independent variation in labor demand, and examining the resulting prosecutions specifically in areas where affected industries were concentrated. We find that positive labor demand shocks in the coal mining, iron, and textile industries all produced increased prosecutions, precisely in counties where those industries were located. We find further evidence suggesting that employers used penal sanctions as a substitute for paying higher wages in response to positive labor demand shocks, which supported long-term contracting: average wages in high prosecution counties, and the responsiveness of wages to labor demand shocks, increased after the 1875 elimination of criminal prosecutions under Master and Servant law.

    Historical labor markets have rarely looked like textbook, perfectly competitive markets. Attempts to manage labor mobility have generated a wide variety of legal institutions, ranging from slavery to employment at will. We believe that the study of intermediate cases, such as 19th century Britain, the American South after the Civil War, and the post-emancipation British Caribbean, illuminates the role of legal institutions in securing the supply of effective labor, and represents a rich area for future work.”

    Link to the full paper.

    • From 2005, Chiaki Moriguchi compares the development of labor law in the United States and Japan during the aftermath of the Great Depression. Link. In the International Review of Social History, Sidney Chalhoub examines the “legal and social ambiguities between slavery and freedom that prevailed in nineteenth-century Brazilian society.” Link.
    • “Negotiated labor contracts make only minor modifications to a relationship whose normatively critical features have already been set by law independently of the will of both parties.” A 2015 paper by Elizabeth Anderson on the role of government in ensuring free labor contracts. Link. See also: Anderson’s 2017 book Private Government, which drew from her 2015 Tanner Lectures at Princeton. Link to the lecture manuscript.
    • Daron Acemoglu and Alexander Wolitzky on the “economics of labor coercion.” Link.
    • “Suppose a worker were to refuse to yield to the coercion of any employer, but were to choose instead to remain under the legal duty to abstain from the use of any of the money which anyone owns. He must eat. While there is no law against eating in the abstract, there is a law which forbids him to eat any of the food which actually exists in the community—and that law is the law of property.” From legal realist Robert Hale’s classic 1923 paper ‘Coercion and Distribution in a Supposedly Non-Coercive State.’ Link.
    ‡ labor_market_power labor law

    New Researchers

    The effects of health care shocks on families

    Stanford Postdoctoral Researcher MARION AOUAD’s job market paper examines a large medical claims dataset to identify the fallout of sudden medical emergencies onto the families of insured individuals.

    From the paper:

    “Studies that examine the effects of health shocks have typically focused on the labor supply and earnings of working-age adults or their spouses, but relatively little is known about the impact of adverse shocks on the entire family—with even less known about how their health care consumption is affected. This is especially relevant in the US, where the prevalence of bundled family health insurance and employer-sponsored health insurance may result in non-trivial consequences. This study uses a large US medical claims dataset consisting of over 1 million families to examine how the health shocks of one family member, as proxied by emergency admissions, affect other family members.

    “Among those that remain insured for at least one additional year after an emergency, there are mild effects on the medical consumption of family members. However, for those family members who are ongoing users of prescription drugs used to treat certain chronic conditions, there are sizable declines of 12% to 22% in prescription drug spending. These findings suggests that families may trade off the health status of certain family members for the immediate expenses associated with a medical emergency.”

    Link to the paper, link to Aouad’s website.

    ‡ healthcare insurance new_researchers

    Each week we highlight great work from a graduate student, postdoc, or early-career professor. Have you read any excellent research recently that you’d like to see shared here? Send it our way: editorial@jainfamilyinstitute.org.

    + + +

    • In a new INET lecture series, Hajoon Chang explicates the basics of economic thought, and applies them to questions of governance, equality, and environmental policy. Link.
    • At VoxEU, António Henriques and Nuno Palma “compare Iberian and English institutional quality between 1385–1800, considering the frequency and nature of parliamentary meetings, the frequency and intensity of extraordinary taxation and coin debasement, and real interest spreads for public debt.” Link.
    • From the archives: a 1980 LRB article by Raymond Williams: “Isn’t the news terrible?” Link.
    • A look at labor relations in South Korea’s informal construction industry. Link.
    • “Macro statistics on foreign direct investment (FDI) are blurred by offshore centers with enormous inward and outward investment positions. This paper uses several new data sources, both macro and micro, to estimate the global FDI network and finds that phantom investment into corporate shells with no substance and no real links to the local economy may account for almost 40 percent of global FDI.” A new IMF working paper by Jannick Damgaard et al. Link.
    • In the Times: “How the Fed Lost Its Faith in ‘Full Employment.” Link.
    • In the LARB, Samantha Rose Hill reflects on Benjamin’s “Theses on the Philosophy of History.” Link.
    • A new paper by Jeremy Singer looks at school choice and social stratification in Detroit: “Even among Detroit’s racially and socioeconomically homogeneous student population, the results show evidence of a stratified educational landscape.” Link. At the Century Foundation, Halley Potter and Michelle Burris examine the impact of NYC’s Gifted and Talented programs on school segregation. Link.
    • A 2018 paper by Amia Srinivasan in the Journal of Political Philosophy: The Aptness of Anger. Link.
    • In Annual Reviews, Yair Listokin and Daniel Murphy consider “the role of law in determining economic aggregates like GDP, unemployment, inflation, and productivity growth.” Link.
    • From February, a World Resource Institute report on the potential for urban electrification in the Global South. Link. See also: Patrick Robbin’s Phenomenal World post on the history of rural electrification in the United States.
    • An article by Glenn Diesen in Asian Politics & Policy looks at the “geoeconomics” of Russia’s Greater Eurasia Initiative. Link.
    • “The value of Peruvian guano exports to Britain, which was the destination for between one-half and two-thirds of all Peruvian guano exports, rose dramatically between 1847 and 1860, and it routinely exceeded two million pounds sterling per year. I examine how Peru was able to take advantage of the guano boom to transform itself in the eyes of creditors. I argue that the spectacular magnitude of the revenues that guano generated was not a sufficient condition for this transformation. Guano revenues were earned from exports, mostly to the United Kingdom, and the Peruvian government contracted with a British merchant house to manage the country’s guano exports and simultaneously service its foreign debt with the proceeds. The key factor was that Peru pledged guano revenues to service its foreign debt, and this pledge was credible to bondholders.” By Catalina Vizcarra. Link.

  9. Red Wave

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    DEPENDENCE EFFECT

    Financialization in American higher ed

    Like many systems of social provision—from housing to pensions—American education has become increasingly financialized. In a recent paper, Charlie Eaton, Jacob Habinek, Adam Goldstein, Cyrus Dioun, Daniela García Santibáñez Godoy, and Robert Osley-Thomas consider the scope and consequences of financialization in the market for higher education.

    From the paper:

    “Increasing dependence on financial markets may bias resources towards revenue-generating commercial projects and increased student loan origination. We document the growing role of finance across the heterogeneous subsectors of US higher education: traditional public and non-profit educational providers have come to rely more heavily on financially mediated flows of investment revenue and debt-funded capital. Meanwhile, equity capital fueled the growth of an explicitly financialized sub-sector of for-profit providers. Finally, educational consumers have been saddled with growing interest payments as debt balances grew. Interestingly, the state has been one of the main participants in the transformation we describe.

    How does financialization affect educational outcomes and educational stratification? We show that students’ average student loan borrowing increased fastest and to the highest levels at for-profits. Yet for-profits and the poorest public institutions disproportionately enroll minorities and students from lower social class backgrounds. Together, these facts suggest that the financialization of higher education may play a significant direct role in exacerbating educational and economic stratification. We can also expect significant effects among public and non-profit institutions. Borrowed capital has disproportionately funded investments in non-instructional commercial activities, including amenities. In this way, bond markets promote organizational behaviors that may be at odds with the goals of cost-efficient social provision in areas like higher education.”

    Link to the full article.

    • Another Eaton paper, co-authored with Sabrina Howell and Constantine Yannelis, uses “novel data on 88 private equity deals involving 994 schools” to study the impact of private equity buyouts on higher education: “After buyouts, we observe lower education inputs, graduation rates, loan repayment rates, and earnings among graduates.” Link. See also this detailed report on financialization and higher education from the Roosevelt Institute. Link.
    • “When public higher education cannot keep pace with growing public demand for access and programs, governments often allow for-profits to rush in and help fill the gap. The future tertiary market will not be the result of a well thought out policy at the national or state levels, but a quasi-free market result that will foster lower quality providers and fail to meet national goals for increasing the educational attainment level of Americans.” A 2012 article by John Douglass analyzes the rise of for-profits in the aftermath of the financial crisis. Link.
    • “One generation of Americans owed $86 billion in student loan debt at last count. Its members are all 60 years old or more.” At the WSJ, AnnaMaria Andriotis writes on the emergence of senior held student debt. Link.
    ‡ higher_education financialization debt

    New Researchers

    The inception of capitalism through the lens of firms

    In a fascinating 2019 paper, NBER postdoctoral fellow KRISZTINA ORBÁN looks at the output patterns of post-communist economies. Using firm-level financial statements from administrative sources and a database of financial access and banking relationships from Hungary covering the period from 1986-1999, the paper investigates the factors that accounted for the steep decline in output after the fall of communism, and the mechanisms that drove those changes.

    From the paper:

    “After the fall of communism, output declined by 29% in the average Eastern European country. This average output recovered to its prior trend 16 years later, making this macroeconomic event comparable to the Great Depression in magnitude and length. The large output decline was a surprise to economists: Communism imposed distortions on firms and markets, and removing these distortions was expected to increase output. Despite the importance of the event, the channels behind the output decline and recovery have not been identified or quantified using comprehensive microdata.

    I develop a novel decomposition of output change. To the best of my knowledge, this paper is the first to incorporate allocative efficiency to the traditional output decomposition, Growth Accounting. The decomposition in this paper is based on the intuition that output can be thought of as the sum of two terms: first, output level if labor, capital, and productivity were randomly assigned across firms; second, the additional output if labor, capital, and productivity are sorted positively or negatively. The decomposition and its results allow me to evaluate previously proposed channels explaining the surprising output pattern of post-communist economies: first, the decreasing contribution of labor accounts for the majority of the decrease in output; second, improvements in aggregate productivity, in particular via allocative efficiency, account for 123% of output recovery.”

    Link to the paper, link to Orbán’s website.

    ‡ development communism new_researchers

    Each week we highlight great work from a graduate student, postdoc, or early-career professor. Have you read any excellent research recently that you’d like to see shared here? Send it our way: editorial@jainfamilyinstitute.org.

    + + +

    • On the blog last week, we published the third iteration of our series Phenomenal Works, featuring political scientist Alexander Hertel-Fernandez’s pick of essential reading. Link.
    • JFI fellow Johannes Haushofer published an exciting paper this week—with co-authors Dennis Egger, Edward Miguel, Paul Niehaus, and Michael Walker—on the general equilibrium effects of cash transfers. Link to the paper. And link to coverage on NPR.
    • “More than 53 million people—44% of all workers aged 18-64—are low-wage workers. They earn median hourly wages of $10.22 and median annual earnings of $17,950.” A new Brookings report on the realities of America’s low-wage workforce. Link.
    • Several weeks ago we shared the first part of historian Aaron Benanav’s essay on automation for the New Left Review. Part two is out now: “It is crucial that we reconceive of the present situation as marked not by the imminent arrival of mass unemployment, as automation theorists suggest, but by continuously rising under-employment.” Link.
    • From our colleagues Dubravka Ritter and Doug Webber, a new and comprehensive Philadelphia Fed discussion paper on income share agreements. Link.
    • A very short post by Brad DeLong: “One of the key insights of the Reverend Thomas Bayes was that your results give you a map between what you thought before and what you should think now. I would think that the Bayesian tradition would be to report this map. But it doesn’t.” Link. The instigating post by Andrew Gelman—”Here’s an idea for not getting tripped up with default priors”—offers a response. Link.
    • On race and networks in the job search process. “We develop and articulate two pathways through which networks may perpetuate racial inequality in the labor market: network access and network returns.” Link. See also: our interview on social network analysis with Mark Granovetter. Link.
    • By Jeff Powell and Yuliya Yurchenko: the evolution of private provision in urban drinking water. Link.
    • From VoxEU, a proposal by Samuel Schmassmann, Ulrich Schetter, and Hans Gersbach for a unified theory of public basic research. Link.
    • In the New York Times, economist Seema Jayachandran writes about RCTs that—rather than experiment with new, possible unimplementable social provisioning programs—uncover flaws in existing ones. Link.
    • “The labor share of income in China substantially declined from the mid-1990s to the late 2000s.” Hao Qi in the Cambridge Journal of Economics. Link.
    • “The Church’s real estate in Colombia was inalienable, free of taxes, and owned in perpetuity. In this article, I explore the evolution of political violence after an institutional reform that radically changed the Catholic Church’s property rights: the disentailment of mortmain. I measure the impact of the expropriation of Church assets on political violence after 1850. With yearly data on the number of battles per municipality, archival information on the reform, and difference-in-differences, the paper documents a reduction of political violence in places where the Church’s assets were expropriated. The paper contests the traditional idea of the expropriation of Church’s real estate as a source of political violence. It highlights changes in political competition after the alliance between Conservative factions and the Church was weakened.” Link.

  10. Political Sun

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    UPWARD ACCOMODATION

    The history of public housing provision

    In recent decades, policy approaches to housing provision have focused on increasing the incomes of subsidy recipients and, due to declining federal investment, promoting tenant mobility both between subsidized housing units and out of the public housing system altogether. But the discourse on housing seems to be shifting. Rather than promoting ever increasing incomes, recent proposals aim instead to control housing costs—both through increasing public housing stock and pegging rent to inflation.

    In a 2012 paper, Lawrence J. Vale and Yonah Freemark offer a history of public housing in the United States. Their narrative considers how changing approaches to housing provision reveal changes in the government’s definition of “deserving” welfare recipients.

    From the paper:

    “Public housing is too often conceptualized as a single failed program that tragically concentrated deeply impoverished single-parent minority households in ill-designed and publicly mismanaged slums. Such a viewpoint does little justice to the evolution and contingencies that motivated the growth and directions of the multiphased and multifaceted history of federally supported public housing and public-private housing. Taking a longer view, the concentrated poverty welfare phase of public housing may actually be seen as an aberration, a relatively brief interlude between about 1960 and 1990. This phase, we argue, was out of step with the larger pattern of policy preferences for housing the poor, both before and since.

    Seen this way, American public housing consists of a 25-year series of efforts to accommodate the upwardly mobile working class between 1935 and 1960, a 30-year consolidation of the poorest into welfare housing between 1960 and the mid 1980s, coupled by efforts to introduce direct private-sector involvement in public housing and other programs; and a series of programs and policies since the mid 1980s to return more of public housing to a less-poor constituency, while furthering growth in other kinds of both deep and shallow subsidy programs through mixed-finance projects and tax-code intervention. After 75 years of experimentation, much of the rest of public housing operations has become completely privatized. In many cities, housing authorities are regularly turning over their conventional housing stock to private managers and often own nothing more than the land beneath their redevelopment endeavors. In this context, even the basic definitional reason for calling some housing ‘public housing’ now comes into question.”

    Link to the article.

    • From November of last year, Jack Y. Favilukis, Pierre Mabille, and Stijn Van Nieuwerburgh find that “Housing affordability policies create large net welfare gains.” Link. See also J. W. Mason’s recent public testimony on rent control, which offers an overview of empirical findings and concludes that “there is no evidence that rent regulations reduce the overall supply of housing.” Link.
    • A report by Peter Gowan and Ryan Cooper at 3P compares housing policy in US metropolitan areas with those of Vienna, Helsinki, and Stockholm. Link. At the Urban Institute, Emily Peiffer discusses the history of housing policy in New York City. Link.
    • “Housing Affordability in the U.S.: Trends by Geography, Tenure, and Household Income.” By Andrew Dumont at the Federal Reserve. Link.
    • Data for Progress maps the diversity of America’s public housing communities, accounting for rates of unemployment, poverty, and population density. Link. Another map looks at flood risk, police stops, and segregation in NYCHA buildings. Link.
    ‡ housing welfare history

    New Researchers

    Identity and the labor market

    Columbia PhD candidate SUANNA OH studies how cultural and behavioral patterns impact labor markets. Her job market paper considers how caste identity shapes labor supply in rural India, drawing on a field experiment in which workers from different castes decide between a number of real job offers.

    The findings:

    “Workers’ average take-up rate of offers is 23 percentage points lower if offers involve working on tasks that are associated with castes other than their own. This gap increases to 47 pp if the castes associated with the relevant offers rank lower than workers’ own in the caste hierarchy. Responses to job offers are invariant to whether or not workers’ choices are publicized, suggesting that the role of identity itself—rather than social image—is paramount. Using a supplementary experiment, I show that 43% of workers refuse to spend ten minutes working on tasks associated with other castes, even when offered ten times their daily wage. This paper’s findings indicate that identity may be an important constraint on labor supply, contributing to misallocation of talent in the economy.”

    Link to the paper, link to Oh’s website. h/t reader Julis R.

    ‡ culture labor_market new_researchers

    Each week we highlight great work from a graduate student, postdoc, or early-career professor. Have you read any excellent research recently that you’d like to see shared here? Send it our way: editorial@jainfamilyinstitute.org.

    + + +

    • New on the Phenomenal World: Alice Zhang on development-induced displacement. Link.
    • On December 6, Suresh Naidu will be in the JFI offices to lead a seminar on his recent research: “Terms of Service: Free and Unfree Labor From American Slavery to Amazon Mechanical Turk.” Sign up for the session here.
    • “Of the United States’ 90,106 governments, 99.9% are local governments. Political scientists have been slow to take advantage of variation in institutional features, descriptive representation, and policy-making power because comprehensive data on local politics is extremely difficult to obtain. We show that crowdsourced data is both highly accurate and easy to use, demonstrating that nonexperts can be used to collect, validate, or update local data.” By Jane Lawrence Sumner, Emily M. Farris, and Mirya R. Holman. Link.
    • Jeanna Smialek tests the impact of minimum wage laws on jobs by comparing the labor markets of New York and Pennsylvania: “Pay increases in NY did not consistently come alongside weaker hiring relative to Pennsylvania’s trend.” Link. At Vox, Dylan Matthews gives an overview of recent minimum wage scholarship. Link.
    • A special issue of Politics & Society on “Democratizing Finance.” Inside: public investment platforms, central bank independence, enterprise structures. Link.
    • In the Times, a logistics officer for the US Marine Corps writes on the lack of a right-to-repair in the military: “Although parts from the manufacturer aren’t available to repair the equipment, we aren’t allowed to make the parts ourselves ‘due to specifications’.” Link. A longer piece on the history of repair rights in the military. Link. See also: an edition of this newsletter from last year on these same themes.
    • Joseph Halevi on the postwar formation of the European Common Market. Link.
    • While climate policy tends to be politically polarizing, solar panels enjoy broad bi-partisan support, according to new research by Matto Mildenberger, Peter D. Howe and Chris Miljanich. Link.
    • In a new working paper, Gregor Semieniuk and Isabella Weber cast doubt on existing measures of global inequality in energy consumption: “At present, there is no way of objectively determining the distribution of energy consumption levels across countries. If mitigation policies are meant to correlate to current consumption levels, this means that we are lacking a reliable point of reference.” Link.
    • Timothy Taylor on “the patent thicket.” Link. (Tangentially related, JFI fellow Francis Tseng’s project matter.farm, “an open database that continually generates and publishes novel molecular structures that are potential drug candidates.”)
    • Florian R. Hertel and Olaf Groh-Samberg “study the relationship between inter-class inequality and intergenerational class mobility across 39 countries.” Link. For the New York Fed, Jaison R. Abel and Richard Deitz analyze regional wage inequality in the United States. Link.
    • “Incorporating climate policy that restricts oil use and has an unknown arrival time in an otherwise standard climate-economic model generates a run on oil; firms dynamically accelerate extraction as climate change increases and oil reserves decrease due to the risk of future climate policy actions stranding oil reserves.” By Michael Barnett. Link.
    • “Drawing on previously unused contemporary sources about management and supervisory board composition and stock returns, we find that one out of seven firms, and a large proportion of the biggest companies, had substantive links with the National Socialist German Workers’ Party. Our data reveal that many more large firms had ties with the Nazis than suggested by earlier scholarship—to the extent that weighted by capitalization in 1932, more than half of listed firms on the Berlin stock exchange enjoyed close links with the Nazi movement. Affiliated firms outperformed the stock market by 5% to 8% and account for a large part of the market’s rise. Investors recognized value where they saw it and rewarded firms with preestablished ties handsomely.” Link.