The Unassuming Economist

From a paper by Angela Okeke, and Constantinos Alexiou:

“This paper examines the relationship between public debt levels and income inequality during periods of fiscal consolidation (austerity). Specifically, it investigates two key questions: (a) whether high public debt during fiscal adjustments exacerbates income inequality, and (b) whether the composition of these adjustments influences the debt–inequality link. To address these issues, we apply a panel threshold methodology using annual data from 16 OECD countries over the period 1980–2019. Our findings reveal that public debt significantly affects income inequality, with the impact intensifying during fiscal adjustments, particularly at moderate debt thresholds (30–60%). Furthermore, when comparing the effects of tax-based versus spending-based adjustments, the evidence shows that tax-based consolidations tend to produce more persistent negative effects on income inequality.”

From a book review by Barry Eichengreen:

“Lawrence considers how government can create high-paying manufacturing jobs, a common goal of the Biden and Trump administrations. In seeking to increase the share of manufacturing in total employment, U.S. policy is pushing against the tide. Although the country’s manufacturing output continues to expand, manufacturing employment does not, reflecting mechanization and other factors that have boosted output per worker. Trade similarly limits manufacturing employment in the United States and other advanced economies since low-income countries have a comparative advantage in manufacturing activities that use semiskilled labor. Advanced countries are more likely to hold on to manufacturing jobs involving specialized tasks, but since these require skilled labor, policies promoting them have the perverse effect of widening income inequality. Lawrence concludes that although industrial policies might aid certain workers and specific U.S. states, they are unlikely to benefit American workers overall. To address low pay and worker displacement, he recommends expanding trade adjustment assistance to workers in declining industries, retraining workers to fill high-wage service-sector jobs, providing federal wage insurance that compensates displaced workers for income losses, and creating a better-targeted tax and transfer system.”

From a post by Astrid Haas:

“Africa’s cities are expanding at an unprecedented rate, bringing both challenges and opportunities. In this episode, feminist urban economist Astrid Haas explores three key pillars for inclusive and sustainable growth: governance, planning, and financing. In her view, effective governance requires adaptive institutions, transparent decision-making, and collaboration with civil society and the private sector to ensure cities meet the needs of all citizens. Proactive planning must address infrastructure, housing, and services while recognising the vital role of informal economies. Meanwhile, long-term, strategic financing and smarter municipal spending are essential for equitable development. With two-thirds of Africa’s population expected to live in cities by 2050, this conversation offers practical insights into harnessing urbanisation as a force for sustainable and inclusive growth.”

From a book review by Barry Eichengreen:

“Conventional wisdom, shaped by the economist Thomas Piketty, holds that changes in the concentration of wealth among the richest people in advanced economies followed a U-shaped pattern over the past century: high at the outset, declining as a result of the Great Depression and World War II, and then rising in recent decades, owing to deregulation and the dilution of progressive taxation. Waldenstrom dissents, arguing that a more comprehensive analysis, incorporating data on real estate holdings and pension wealth, tells a different story. The wealth-to-GDP ratio rose without interruption over the past century, while the share of wealth held by those at the top of the income and wealth distribution showed a steady decline. Whereas the elites hold their assets mainly in stocks and bonds, the wealth of the masses lies mainly in their homes and pensions, which were neglected in earlier analyses. The property and pension wealth of the working class has grown faster over the last hundred years than the capital holdings of the elite. Waldenstrom insists that the century has been marked by the democratization of wealth, not spiraling inequality.”

From a paper by by Óscar Peláez-Herreros:

“We develop the first disaggregation of Okun’s law that quantifies all of the information that is subsumed within its coefficients. The proposed method decomposes the coefficients into the sum of the direct effect of the change in output upon the unemployment rate, plus the indirect effects of the variations in the output per hour worked, the hours worked per employed person, the participation rate, and the size of the working-age population. With quarterly data for the United States from 1948 to 2024, we found that the value of the intercept in Okun’s relation is determined by the increases in working-age population and output per hour of work, along with the decrease in the number of hours worked per employed person, plus the growth of the participation rate until the 1990s and its subsequent decline. For its part, the slope, that is, the value of Okun’s coefficient, depends mainly upon the variations in output per hour of work and the hours per employed person. The other factors were scarcely relevant. Changes in these components caused the Okun’s relation to vary over time, showing a greater sensitivity of the unemployment rate to variations in production since the 2008 crisis.”