The Unassuming Economist

From a new paper by Ning Jia, Raven Molloy, Christopher Smith, and Abigail Wozniak:

“Internal migration patterns in the US have drawn growing attention among researchers, policy analysts, and others. This interest has been driven by two trends. First, internal migration in the US has fallen for more than three decades (Molloy et al. 2011; Frey 2009; Cooke 2011, 2013). This decline raises questions about whether it stems from desirable factors, like improved location or job matching, or undesirable factors, like employer monopsony power or other barriers to job mobility (Kaplan and Schulhofer-Wohl 2017; Molloy et al. 2016). Relatedly, highly educated Americans have become increasingly concentrated in larger cities (Diamond 2016). Thus, both the level of migration in the US and the types of destinations chosen by different types of people have changed in important ways over the last several decades.

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Dao et al. (2017) revisit the key ideas from BK and show more directly that the nature of local labor market adjustment to demand shocks has changed in the last few decades—and that the diminished responsiveness of net migration is a key reason for the change in how local labor markets adjust. The authors take a similar approach to BK by estimating adjustment margins at the state level’s response to demand shocks. However, they extend the BK sample with an additional 20 years of data and make other methodological innovations, including using administrative data on migration flows instead of inferring population adjustment from CPS-based measures. Among the many useful contributions of this analysis is a demonstration that after 1990, the net migration response to a state-level demand shock has been smaller on average than in earlier periods, and the response of the unemployment and labor force participation rates is larger. Hence, one way to reconcile the BK findings with the more recent conflicting evidence on local labor market adjustment and regional divergence is that migration was more important as an equilibrating mechanism from the 1970s through the early 1990s (the period in the BK sample) and has recently become less important.”

Source: NBER Working Paper

Historically, the number and wages of women in the labor force grew at a significant pace during the 1970s and 1980s but began stalling in the early 1990s, especially for college graduates.

In this paper, the authors have argued that this discontinued growth since the 1990s is a consequence of growing inequality. They show that slowdown in participation and wage growth was concentrated among women married to highly educated and high-income husbands, whose earnings grew dramatically over the period under study. Through a model of household labor supply, they qualitatively analyze the above-mentioned effect and account for the rise in the gender wage gap for college graduates.

Source: Conversable Economist

In this recent blog, author Timothy Taylor discusses the perplexing question of slowing agricultural growth witnessed in several countries across the world in the past couple of years. He first analyzes what percentage of influence on agricultural growth is exerted by rising overall economic productivity in the country, and discovers that it is mostly low-income countries where the decline has been most profound. The column also provides explanations for this trend that are worth exploring.

The ongoing Covid-19 crisis, which is likely to exacerbate economic inequality within countries in the West and probably among countries worldwide (Furceri, Loungani, Ostry, Pizzuto, 2021), has reinstated the need for a thorough investigation into the causes and consequences of inequality. In a recent column for VoxEU CEPR, economists Guido Alfani, Victoria Gierok, and Felix Schaff discuss inequality in the context of Germany over the years.

This column reconstructs wealth inequality in Germany over five centuries and demonstrates potential leveling effects of catastrophes with the help of evidence from events like the Black Death and the Thirty Years’ War. They conclude with insights like the fact that inequality falls in the aftermath of epidemics only in the presence of extremely high mortality rates.

Click here to read more.

Source: VoxEU CEPR

The informal sector, which accounts for nearly one-third of the GDP and employment in emerging and developing economies (EMDEs), has not only been the worst affected by the Covid-19 pandemic but is now also threatening to dampen economic recovery. Three features of the informal sector have compounded the damage of Covid-19 on activity: (i) their predominant presence in the service sector, (ii) limited savings and access to social safety nets, and (iii) the lack of effective policy support (Ohnsorge and Yu 2021).

This column assesses the impact of the pandemic on job losses in the informal sector of both manufacturing and service sectors of EMDEs and the impact of support policies rolled out by governments. Thus, recommendations call for facilitating access to finance for small firms, adopting cash transfer programs in the short run for countries with larger poor populations (Furceri, Loungani, Ostry, and Pizzuto, 2020), and using technology to reach the poor and informal workers.