The Unassuming Economist

From a paper by Iyanuoluwa Fatoba and Adewumi Otonne:

“This study aims to investigate fiscal policy shocks’ impact on Nigeria’s Income Inequality and
Household Poverty. Using the impulse response function and variance decomposition technique
within the Bayesian Vector Autoregressive framework (BVAR), findings from the study show that
from year 2 to 15, a 1% shock to tax revenue (i.e., when taxes are suddenly changed) generates a
reduced average impact of 0.036% on household poverty. In contrast, household poverty increases
with shocks to government expenditure (i.e., when government expenditures are suddenly altered) in
the short run, with an average impact of 0.022%. In other words, household poverty increases in the
short run (years 2 to 4) and decreases in the medium to long run (years 5 to 15) with shocks to
government expenditure. Similarly, the results show that shocks to tax revenue reduce income
inequality (years 2 to11), and it increases the gap between the rich and the poor in the long run (years
12 to 15). Meanwhile, shocks to government expenditure increase the gap between the rich and the
poor in the short to medium run (year 2 to 6) while decreasing the gap in the medium to long run
(year 7 to15). The implication of these findings suggests that shocks to tax revenue directly benefit
low-income families and individuals in Nigeria. Moreover, as unanticipated alteration of government
expenditure increases household poverty and income inequality in the short run to medium run, any
shock to government expenditure (internal or external) should be combated with pro-poor policy
action.”

From a paper by Jerome Creel, and Jonas Kaiser:

“This paper investigates the stabilization property of fiscal policy by revisiting the notion of
potential output via the use of Okun’s Law including the vacancy-to-unemployment ratio (V/U)
to proxy economic slack. We propose new measures of the US fiscal stance based on observable
data and transparent targets. Our results suggest that the US actually had a more conservative
fiscal stance than official data indicate. This paper also examines fiscal multipliers, which are
larger when V/U, rather than the unemployment rate, is used as measure of economic slack. We
find that state-dependence of fiscal multipliers is as sensitive to thresholds for bad years than
to the slack measure employed in Okun’s Law.”

From a paper by Jan Acedański and Marek A. Dąbrowski:

“This paper provides novel insights into the Feldstein-Horioka puzzle. The famous finding of Feldstein and Horioka (1980) is that despite perfect international capital mobility, domestic saving does not flow among countries to equalise yields but instead is tightly related to domestic investment. We observe that the link between empirical results and their theoretical foundations rarely goes beyond the saving-investment identity, and the research is dominated by empirical approaches coupled with advanced econometric techniques. This paper harnesses open economy macroeconomic models to demonstrate that the saving-retention coefficient informs about the relative importance of shocks rather than the degree of international capital mobility. Using the Monte Carlo experiments and the open economy RBC model, we show that the dominance of spending and foreign shocks moves the distribution of the estimated coefficient towards zero, whereas the prevalence of investment (productivity) shocks shifts the distribution towards one. On the empirical side, we proxy shocks to saving with debt and current account surprises constructed from the IMF’s forecasts and employ them to instrument the saving ratio. Using the CCE estimator, we uncover that, in line with the theoretical framework, the saving-retention coefficient is significantly lower in the instrumental variable regressions than in the regressions without instruments. Finally, we replicate the puzzling finding that investment-saving correlations are higher in advanced economies than in emerging market economies only in a few regressions without instrumentation and demonstrate that the difference disappears when the endogeneity of the saving rate is adequately remedied.”

From a paper by Jaison R. Abel, and Richard Deitz:

“We develop a measure of chronic joblessness among prime-age men and women in the United Statestermed the detachment rate-that identifies those who have been out of the labor force for more than a year. We show that the detachment rate more than doubled for men since the early 1980s and rose by a quarter for women since 2000, though it is consistently considerably higher for women than men. We then explore the economic geography of labor market detachment to help explain its rise. Results show that the detachment rate increased more in places with weak local economies, particularly those that experienced a loss of routine production and administrative support jobs due to globalization and technological change. The loss of production jobs affected both men and women and was particularly consequential in the 1990s and the first decade of the 2000s, while the loss of administrative support jobs mostly affected women and was particularly severe in the 1980s and 1990s. Moreover, we find the rise in detachment was concentrated among older prime-age individuals and those without a college degree, and occurred less in places with high human capital.”

From a paper by Jordan Rosenblum, Lane Kenworthy, and Mikael Nygård:

“We explore the link between the distribution of power and income inequality in rich capitalist democracies since 1960. We advance understanding of the impact of government ideology, a key indicator of the distribution of power, in two ways. First, previous research has tended to focus on government ideology at the country level. We make use of party manifesto data to introduce a novel global ideology measure that captures a global shift rightward since 1980, often referred to as the rise of neoliberalism. Second, for country-level party ideology, we use party manifesto data to capture changes over time. We find that this time-varying operationalization of party ideology is more strongly linked to income inequality than the standard expert-survey operationalization that assumes party ideology remains constant. In line with theoretical expectations derived from prior research, our findings show that a more rightward distribution of power at both the country and the global level is associated with increased income inequality within countries.”