Category Archives: Economy

Americans Aren’t So Optimistic About Economic Mobility

Source: James Devitt, Futurity, June 25, 2019

Americans overestimate the future income for children from wealthy and middle-income families, but underestimate that of children from poor ones, according to a new study.

Related:
Americans overestimate the intergenerational persistence in income ranks
Source: Siwei Cheng and Fangqi Wen, Proceedings of the National Academy of Sciences (PNAS), first published June 24, 2019
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Significance
Intergenerational mobility indicates the openness within a society. The question of how Americans think about socioeconomic mobility prospects is drawing growing attention from scholars and policy makers. Our study proposes a survey instrument that connects the empirical literature on patterns of mobility with the literature on the public perceptions of mobility. With large-scale, population-representative data, we show that Americans overestimate the intergenerational persistence in income ranks. That is, they tend to see greater inequality of economic prospects between children from rich and poor families. These results highlight the need for policy and political solutions that seriously engage with Americans’ concerns about the equality of opportunity in the society.

Abstract
Recent research suggests that intergenerational income mobility has remained low and stable in America, but popular discourse routinely assumes that Americans are optimistic about mobility prospects in society. Examining these 2 seemingly contradictory observations requires a careful measurement of the public’s perceptions of mobility. Unlike most previous work that measures perceptions about mobility outcomes for the overall population or certain subgroups, we propose a survey instrument that emphasizes the variation in perceived mobility prospects for hypothetical children across parent income ranks. Based on this survey instrument, we derive the perceived relationship between the income ranks of parents and children, which can then be compared against the actual rank–rank relationship reported by empirical work based on tax data. We fielded this instrument in a general population survey experiment (n = 3,077). Our results suggest that Americans overestimate the intergenerational persistence in income ranks. They overestimate economic prospects for children from rich families and underestimate economic prospects for those from poor families.

Local Labor Markets in Canada and the United States

Source: David Albouy, Alex Chernoff, Chandler Lutz, Casey Warman, Journal of Labor Economics, Vol. 37 no. S2, July 2019
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From the abstract:
We examine US and Canadian local labor markets from 1990 to 2011 using comparable household and business data. Wage levels and inequality rise with city population in both countries, albeit less in Canada. Neither country saw wage levels converge despite contrasting migration patterns from/to high-wage areas. Local labor demand shifts raise nominal wages similarly, although in Canada they attract immigrant and highly skilled workers more while raising housing costs less. Chinese import competition had a weaker negative impact on manufacturing employment in Canada. These results are consistent with Canada’s more redistributive transfer system and larger, more educated immigrant workforce.

A Huge Tax Break Went to a Politically Connected Company in New Jersey Despite Red Flags

Source: Jeff Pillets and Nancy Solomon, WNYC, and Alex Mierjeski, ProPublica June 26, 2019

….Generous tax breaks from New Jersey’s new economic development program, he argued, could place Camden “on a level playing field” with Holtec’s other suitors. In return, the firm pledged the retention of 160 jobs and the creation of an additional 235 positions. Six months later, the EDA awarded the company $260 million in taxpayer assistance — the second-largest tax break in state history.

What Holtec didn’t reveal, though, was that just weeks before filing its application in New Jersey, Ohio had stripped the company of tax credits there for failing to create the jobs it had promised as part of a similar program. According to records obtained by WNYC and ProPublica, none of the 200 positions it had pledged in 2009 to bring to Orrville, a small town about 20 miles outside Akron, ever materialized….

An Estimate of the Local Economic Impact of State-Level Earned Income Tax Credits

Source: Eric James Stokan, Economic Development Quarterly, OnlineFirst, Published June 22, 2019
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From the abstract:
This study investigates the impact of state-level earned income tax credits on local economic outcomes (employment, wages, and establishments). The study employs difference-in-differences and triple-difference models to estimate the impact of these credits at the border of metropolitan areas where one side of the border adopts the credit between 1986 and 2012, and the other side of the border does not. Separate analyses are conducted for specific industries and subindustries. Synthetic control methods are used as a robustness check. The analyses suggest that state-level earned income tax credits do not have a significant impact on the local economic outcomes of metropolitan areas. At least one potential reason offered is that while these impacts are not a direct goal of the program, the credits may not be large enough to realize positive economic gains.

Why Does Immigration Matter So Much?

Source: Dante DeAntonio, Regional Financial Review, Vol. 29 no. 9, May 2019
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Given the demographic hurdles facing the U.S. economy, it becomes more clear that increasing immigration should be seen as a net positive. Although the changing face of immigration may provide slightly less support in terms of combating an aging workforce, the benefits of stronger labor force growth and the potential to fuel birthrates with a robust first generation remain clear.

Will Trump Push Too Far?

Source: Ryan Sweet, Regional Financial Review, Vol. 29 no. 9, May 2019
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The trade war between the U.S. and China continues to dominate the geopolitical sphere and cloud the global economic outlook. In this article we assess the damage so far from the trade tensions between the U.S. and China. We examine whether the tariffs have had their desired effect and highlight their costs. Finally, we present two scenarios, Trade War Standoff and Trade War Conflagration, to quantify how trade tensions could play out.

Big city growth stalls further, as the suburbs make a comeback

Source: William H. Frey, Brookings Institution blog, May 24, 2019

As we approach the end of the 2010s, the biggest cities in the United States are experiencing slower growth or population losses, according to new census estimates. The combination of city growth declines and higher suburban growth suggests that the “back to the city” trend seen at the beginning of the decade has reversed.

These trends are consistent with previous census releases for counties and metropolitan areas that point to a greater dispersion of the U.S. population as the economy and housing market pick back up, perhaps propelled by young adult millennials who may be finally departing dense urban cores as they make a delayed entrance into marriage and the housing market.

Express busways and economic development: Case study of the Miami-Dade South Express Busway

Source: Arthur C. Nelson, Robert Hibberd, Research in Transportation Economics, In Press – Corrected Proof, Available online June 10, 2019
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From the abstract:
This is the first study reporting the association between economic development and express bus transit (XBT) service. Using shift-share analysis applied to the South Miami-Dade express busway transit system, this study assesses differences in shift-share outcomes over three time periods: before the Great Recession (2004–2007), during the Great Recession and early recovery years (2008–2011), and after the Great Recession (2012–2014). Over the entire study period (2004–2014), total jobs grew within one-half mile of XBT stations. Using shift-share analysis, we find that (a) XBT station areas gained share of jobs relative to the central county (Miami-Dade) before the Great Recession, (b) continued to gain share albeit at a slower pace during the Great Recession, but (c) lost share during the post Great Recession period. Over the entire study period, land-extensive jobs (such as in manufacturing and non-manufacturing industry) lost share as did lower-wage retail-lodging-food service jobs. Jobs in knowledge, office, education and arts-entertainment-recreation economic groups gained share overall. Since the Great Recession, we surmise that XBT stations have shifted firm dynamics mostly by displacing land extensive or lower wage jobs away from station areas. Planning and policy implications are offered.

U.S. States Take Advantage Of A Prolonged Economic Expansion

Source: S&P Global Ratings, May 16, 2019
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– Consistent with a prolonged national economic expansion, overall state credit quality remains high.
– Even oil- and gas-reliant states have shown recent gains.
– Most states forecast improvement in fiscal 2019 fund balances, and preliminary indications are that April income tax collections will be strong.
– Most states project to build or maintain reserves in fiscal 2020, despite cautious revenue projections.
– Some states propose raising top taxpayers’ income taxes; others will increase gas taxes; and marijuana, sugary drinks, and plastics bags might become the new “sin” tax targets.
– Other state budgets will include funding for education, workforce development, and infrastructure.

The radical plan to change how Harvard teaches economics

Source: Dylan Matthews, Vox, May 22, 2019

Raj Chetty has an idea for introducing students to econ that could transform the field — and society…..

….Chetty has made his name as an empirical economist, working with a small army of colleagues and research assistants to try to get real-world findings with relevance to major political questions. And he’s focused on the roots and consequences of economic and racial inequality. He used huge amounts of IRS tax data to map inequality of opportunity in the US down to the neighborhood, and to show that black boys in particular enjoy less upward mobility than white boys.

Ec 1152 is an introduction to that kind of economics. There’s little discussion of supply and demand curves, of producer or consumer surplus, or other elementary concepts introduced in classes like Ec 10. There is no textbook, only a set of empirical papers. The material is relatively cutting-edge. Of the 12 papers students are required to read, 11 were released in 2010 or after. Half of the assigned papers were released in 2017 or 2018. Chetty co-authored a third of them.

And while most economics courses at Harvard require Ec 10 as a prerequisite, Ec 1152 does not. Freshmen can take it as their first economics course…..

….If this were just a pedagogical shift at Harvard, that would be one thing. But Chetty is aiming to make the course a model for other schools. After the financial crisis, many economists have concluded that Econ 101 is broken across the university system and is not preparing students for a world where markets frequently fail. Chetty’s class offers a new way to teach an introductory course, yet at the same time is more closely aligned with what contemporary economic research looks like. The course’s lecture videos are already available online, for students at other institutions to use…..