Category Archives: Economy

Metro Monitor 2016: Tracking Growth, Prosperity, and Inclusion in the 100 Largest U.S. Metropolitan Areas

Source: Richard Shearer, John Ng, Alan Berube, and Alec Friedhoff, Brookings Institution, January 2016

From the summary:
The Metro Monitor aims to advance new ways of measuring economic success in metropolitan America with in-depth analyses of regional economic trends. Updated throughout the year, these analyses will seek to help leaders understand the factors and trends that contribute to or hinder progress toward increasing growth, prosperity, and inclusion and how new models of economic development can help deliver an advanced economy that works for all.
Press release

The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade

Source: David H. Autor, David Dorn, Gordon H. Hanson, National Bureau of Economic Research (NBER), NBER Working Paper No. 21906, January 2016
(subscription required)

From the abstract:
China’s emergence as a great economic power has induced an epochal shift in patterns of world trade. Simultaneously, it has challenged much of the received empirical wisdom about how labor markets adjust to trade shocks. Alongside the heralded consumer benefits of expanded trade are substantial adjustment costs and distributional consequences. These impacts are most visible in the local labor markets in which the industries exposed to foreign competition are concentrated. Adjustment in local labor markets is remarkably slow, with wages and labor-force participation rates remaining depressed and unemployment rates remaining elevated for at least a full decade after the China trade shock commences. Exposed workers experience greater job churning and reduced lifetime income. At the national level, employment has fallen in U.S. industries more exposed to import competition, as expected, but offsetting employment gains in other industries have yet to materialize. Better understanding when and where trade is costly, and how and why it may be beneficial, are key items on the research agenda for trade and labor economists.

The Minimum Wage and the Great Recession: Evidence from the Current Population Survey

Source: Jeffrey P. Clemens, National Bureau of Economic Research (NBER), NBER Working Paper No. w21830, December 2015
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From the abstract:
I analyze recent federal minimum wage increases using the Current Population Survey. The relevant minimum wage increases were differentially binding across states, generating natural comparison groups. I first estimate a standard difference-in-differences model on samples restricted to relatively low-skilled individuals, as described by their ages and education levels. I also employ a triple-difference framework that utilizes continuous variation in the minimum wage’s bite across skill groups. In both frameworks, estimates are robust to adopting a range of alternative strategies, including matching on the size of states’ housing declines, to account for variation in the Great Recession’s severity across states. My baseline estimate is that this period’s full set of minimum wage increases reduced employment among individuals ages 16 to 30 with less than a high school education by 5.6 percentage points. This estimate accounts for 43 percent of the sustained, 13 percentage point decline in this skill group’s employment rate and a 0.49 percentage point decline in employment across the full population ages 16 to 64.

Organizational Network Activities for Local Economic Development

Source: Hyunsang Ha, In Won Lee, Richard C. Feiock, Economic Development Quarterly, Vol. 30 no. 1, February 2016
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From the abstract:
There has been considerable interest and study of local and regional economic development networks in recent years. Local governments forge informal and formal network ties with a variety of organizations, the most prominent of which are private, private/public development, community/residential, and public. Extant research has examined networks but not the processes of network partner choice and their networking. This research begins to fill these lacunas by empirically examining various explanations for economic development networks and their influence on each of these four types of networking. The findings reveal that the factors shaping network ties in each organization type are different. Except for community/residential organization network ties, local governments’ networking is significantly related to the development incentives that they offer. Network ties with public organizations are related to government structures. Network ties with community/residential organizations are distinguished by their relationships with financial conditions and citizens’ opposition to development. The factors influencing network activities for economic development with organizational types are shaped by the predisposition of each organizational network; thus, the factors promoting local economic development activities and the factors stimulating network activities for local economic development are different.

Do Incentive Programs Cause Growth? The Case of the Oklahoma Quality Jobs Program and Community-Level Economic Growth

Source: Brian E. Whitacre, David Shideler, Randi Williams, Economic Development Quarterly, Vol. 30 no. 1, February 2016
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From the abstract:
The academic literature on economic development incentive programs has generated mixed results, though most studies conclude that incentives do not lead to economic growth. Oklahoma has received high praise for its innovative Quality Jobs program, because it provides cash payments (not tax incentives) and emphasizes jobs with high wages and benefits. However, few evaluations of the program’s success in growing the state’s economy have been made. This study employs multivariate regression and mixed-pair analysis techniques and concludes that the economic growth between 1990 and 2005 was not statistically different between Oklahoma communities with businesses participating in the Quality Jobs program and those that were not participating. There was, however, a statistical difference in median household income growth when Oklahoma communities with participating businesses were compared with similar Kansas communities.

Did the Community Renewal Tax Incentives Pirate Businesses From Other Places?

Source: Richard Smith, Economic Development Quarterly, Vol. 30 no. 1, February 2016
(subscription required)

From the abstract:
An early concern regarding place-based economic developments was that they might encourage business relocation into target neighborhoods at the expense of other places. To address this concern, when the U.S. Congress passed the Empowerment Zone/Enterprise Community (EZ/EC) program, it included an “antipirating” provision prohibiting use of grants for business relocation. Later iterations of the EZs and Renewal Communities (RCs) received tax incentives only. The RC program did not include an antipirating provision. Did businesses relocate? This study compares business moves within 1,000 feet inside a given RC/EZ with moves within 1,000 feet outside the RC/EZ before and after the intervention. Data are from the National Establishment Time Series (NETS) Database for California and Tennessee. Moves into some RC/EZs increased but so did moves out, leading to no statistically significant net change in numbers of firms. There were no obvious differences between RCs and EZs. The article concludes with policy recommendations.

Study claiming right-to-work in West Virginia will create job growth is fundamentally flawed

Source: Josh Bivens, Elise Gould, and Will Kimball, Briefing Paper #417, January 14, 2016

From the press release:
A recent paper on so-called right-to-work laws relies on flawed data and analysis, according to research by Economic Policy Institute economists Elise Gould and Josh Bivens and research analyst Will Kimball. Gould, Bivens, and Kimball analyze a recent paper by West Virginia University (WVU) School of Business researchers John Deskins, Eric Bowen, and Christiadi, and find that that the study relies on questionable research methods that skewed the results in favor of right-to-work legislation.
Deskins, Bowen, and Christiadi attempt to analyze the effect of right-to-work laws on employment. However, their paper does not have sufficient variation in right-to-work status within states during the study period to reach conclusive results. The authors misidentify Texas and Utah as having not been right-to-work states when in fact they were, leaving only one state that switched to right to work during their study period. Furthermore, the authors failed to include state fixed effects in their analysis—the industry standard for this type of research—which account for economic shocks or characteristics that are particular to a given state and not controlled for in other variables in the model…..
The Economic Impact of Right to Work Policy in West Virginia
Source: John Deskins, Eric Bowen, and Christiadi, West Virginia University College of Business and Economics, November 2015
(Funding for this research was provided by the West Virginia Legislature)

The Effects of Minimum Wages on Employment

Source: David Neumark, Federal Reserve Bank of San Francisco, FRBSF Economic Letter, 2015-37, December 21, 2015

From the summary:
The minimum wage has gained momentum among policymakers as a way to alleviate rising wage and income inequality. Much of the debate over this policy centers on whether raising the minimum wage causes job loss, as well as the potential magnitude of those losses. Recent research shows conflicting evidence on both sides of the issue. In general, the evidence suggests that it is appropriate to weigh the cost of potential job losses from a higher minimum wage against the benefits of wage increases for other workers.
It is easy to be confused about what effects minimum wages have on jobs for low-skilled workers.

Researchers offer conflicting evidence on whether or not raising the minimum wage means fewer jobs for these workers. Some recent studies even suggest overall employment could be harmed. This Letter sheds light on the range of estimates and the different approaches in the research that might explain some of the conflicting results. It also presents some midrange estimates of the aggregate employment effects from recent minimum wage increases based on the research literature.

Strengthening U.S. Manufacturing Through Public Procurement Policies: How Procurement Policies Can Promote Innovation and Good Jobs

Source: Robert Pollin, James Heintz, and Jeannette Wicks-Lim, Political Economy Research Institute (PERI), December 2015

From the abstract:
This study advances a policy framework capable of supporting a major revival of the U.S. manufacturing sector. The study focuses on one set of policy tools—U.S. public sector procurement of manufactured goods—to promote growth and expanding job opportunities within one manufacturing industry, the production of railcar transportation equipment. The authors find that significant but straightforward reforms of the “Buy America” program of the Department of Transportation are capable of generating major benefits to domestic railcar manufacturers and workers in this sector.
>> Read the study’s Policy Highlights and Summary
>> Read coverage of the study on Campaign for America’s Future blog: “Let’s Make Sure Our Tax Dollars Buy Good Manufacturing Jobs