The Unassuming Economist

From a new paper by Monica Langella and Alan Manning:

“The UK has suffered from persistent spatial differences in unemployment rates for many decades. A low responsiveness of internal migration to unemployment is often argued to be an important cause of this problem. This paper uses UK census data to investigate how unemployment affects residential mobility using small areas as potential destinations and origins and four decades of data. It finds that both in- and out-migration are affected by local unemployment – but also that there is a very high ‘cost of distance’, so most moves are very local. We complement the study with individual longitudinal data to analyse individual heterogeneities in mobility. We show that elasticities to local unemployment are different across people with different characteristics. For instance, people who are better educated are more sensitive, the same applies to homeowners. Ethnic minorities are on average less sensitive to local unemployment rates and tend to end up in higher unemployment areas when moving.”

New paper by YaojieZhang, M.I.M.Wahab & YudongWang in International Journal of Forecasting.

“This paper aims to improve the predictability of aggregate oil market volatility with a substantially large macroeconomic database, including 127 macro variables. To this end, we use machine learning from both the variable selection (VS) and common factor (i.e., dimension reduction) perspectives. We first use the lasso, elastic net (ENet), and two conventional supervised learning approaches based on the significance level of predictors’ regression coefficients and the incremental R-square to select useful predictors relevant to forecasting oil market volatility. We then rely on the principal component analysis (PCA) to extract a common factor from the selected predictors. Finally, we augment the autoregression (AR) benchmark model by including the supervised PCA common index. Our empirical results show that the supervised PCA regression model can successfully predict oil market volatility both in-sample and out-of sample. Also, the recommended models can yield forecasting gains in both statistical and economic perspectives. We further shed light on the nature of VS over time. In particular, option-implied volatility is always the most powerful predictor.”

Read more here.

New post by Timothy Taylor.

“The Olympic Summer Games were held in Beijing in 2008. Now the Winter Games are being held there in 2022. For the sake of the athletes who will be inhaling and exhaling more frequently and deeply than usual in the next few weeks, how has the air quality changed? Michael Greenstone, Guojun He, and Ken Lee discuss the evidence in “The 2008 Olympics to the 2022 Olympics: China’s Fight to Win its War Against Pollution” (February 2022, Energy Policy Institute at the University of Chicago). They write:

In the years before the 2008 Beijing Summer Olympics, pollution in China had been sharply climbing. The government responded with quick reforms that temporarily reduced pollution during the games. The reforms, however, only managed to slow the climb in the long run. By 2013, pollution in China had reached record levels. The following year, the same year Beijing applied to host the 2022 Olympic Games, Chinese Premier Li Keqiang declared a “war against pollution” and vowed that China would tackle pollution with the same determination it used to tackle poverty. Seven years later, pollution has declined dramatically by about 40 percent. In Beijing, there is half as much pollution compared to both 2008 and 2013 levels. In most areas of China, pollution has fallen to levels not seen in more than two decades.”

Read more here.https://conversableeconomist.wpcomstaging.com/

Source: IMF Working Paper

Abstract:

“This paper provides an overview of the relation between tax policy and gender equality, covering labor, capital and wealth, as well as consumption taxes. It considers implicit and explicit gender biases and corrective taxation. On labor taxes, we (the authors) discuss the well-established findings on female labor supply and present new empirical work on the impact of household taxation. We also analyze the impact of progressivity on pay gaps and labor supply. On capital and wealth taxation, we discuss the implications of lower effective capital income taxation on the personal income tax burden gap across genders. We show that countries with relatively low female shares of capital income and wealth also tend to tax property and inheritances particularly lightly. On consumption taxes, we cover taxes on female hygiene products and excise taxes, which we assess in relation to externalities and differences in consumption patterns across genders.”

One of the most significant stylized facts in the U.S. economy since the 1970s has been the decline in the share of national income accruing to labor. Many recent studies have sought to explain this trend, with most explanations focusing on structural changes such as deindustrialization, globalization, financialization, rising market concentration, and technological change.

In this paper, the authors argue that these forces primarily operate through a bargaining power channel measured by the cost of job loss and that the reduction in labor’s share of income has been driven by lower bargaining power for workers. They examine various parameters for the US between 1960 and 2016 to test this hypothesis and conclude that structural changes such as globalization (Furceri and Loungani, 2018) and weak economic performance in the US have increased inequality over time.

Click here to read the full paper.