The Unassuming Economist

From a new working paper by Zoe Cullen (Harvard University) and Ricardo Perez-Truglia (UCLA):

“The old boys’ club refers to the alleged advantage that male employees have over their female counterparts in interacting with powerful men. For example, male employees may schmooze with their managers in ways that female employees cannot. We study this phenomenon using data from a large financial institution. We use an event study analysis of manager rotation to estimate the causal effect of managers’ gender on their employees’ career progression. We find that when male employees are assigned to male managers, they are promoted faster in the following years than they would have been if they were assigned to female managers. Female employees, on the contrary, have the same career progression regardless of the manager’s gender. These differences in career progression cannot be explained by differences in effort or output. This male-to-male advantage can explain a third of the gender gap in promotions. Moreover, we provide suggestive evidence that these manager effects are due to socialization between male employees and male managers. We show that these manager effects are present only if the employee works in close proximity to the manager. We use survey data to show that, after transitioning to a male manager, male employees spend more time with their managers. Finally, we study a shock to socialization within males, based on the anecdotal evidence that employees who smoke tend to spend more time together. We find that when male employees who smoke switch to male managers who smoke, they spend more of their breaks with their managers and are promoted faster in the following years. Moreover, the effects of these smoking manager switches are similar in timing and magnitude to the effects of the gender manager switches.”

Interesting research paper by Min Zhu , Longmei Zhang and Daoju Peng:

“China’s growth potential has become a hotly debated topic as the economy has reached an income level susceptible to the “middle-income trap” and financial vulnerabilities are mounting after years of rapid credit expansion. However, the existing literature has largely focused on macro level aggregates, which are ill suited to understanding China’s significant structural transformation and its impact on economic growth. To fill the gap, this paper takes a deep dive into China’s convergence progress in 38 industrial sectors and 11 services sectors, examines past sectoral transitions, and predicts future shifts. We find that China’s productivity convergence remains at an early stage, with the industrial sector more advanced than services. Large variations exist among subsectors, with high-tech industrial sectors, in particular the ICT sector, lagging low-tech sectors. Going forward, ample room remains for further convergence, but the shrinking distance to the frontier, the structural shift from industry to services, and demographic changes will put sustained downward pressure on growth, which could slow to 5 percent by 2025 and 4 percent by 2030. Digitalization, SOE reform, and services sector opening up could be three major forces boosting future growth, while the risks of a financial crisis and a reversal in global integration in trade and technology could slow the pace of convergence.”

From New Zealand Institute of Economic Research:

“Summer reading list for the Prime Minister 2019. Presented in alphabetical order by lead author:

• The Narrow Corridor: States, societies, and the fate of liberty, Daron Acemoglu & James A Robinson, 2019
• Fatal Necessity: British Intervention in New Zealand, 1830-847, Peter Adams, 1977
• Good economics for hard times: Better answers to our biggest problems, Abhijit V Banerjee and Esther Duflo, 2019
• The Sex Factor: How women made the West Rich, Victoria Bateman, 2019
• Tutira: The story of a New Zealand Sheep Station, Herbert Guthrie-Smith, 1921
• Confronting Inequality: How Societies Can Choose Inclusive Growth, Jonathan D Ostry, Prakash Loungani & Andrew Berg, 2019
• Island Time: New Zealand’s Pacific Future, Damon Salesa, 2017
• Economics for the Common Good, Jean Tirole, 2019
• Deep Medicine: How Artificial Intelligence Can Make Healthcare Human Again, Eric Topol, 2019″

From a VOX post by Sebastian Edwards:

“In a few decades, Chile experienced dramatic economic growth and the fastest reduction of inequality in the region. Yet, many Chilean citizens feel that inequality has greatly increased. Such feelings of ‘malestar’ triggered the violent social unrest of October 2019. This paper explains this seeming paradox by differentiating ‘vertical’ (income) inequality from ‘horizontal’ (social) inequality. It argues that the neoliberalism that created Chile’s economic growth is no longer effective and that Chile may be headed towards adopting a welfare state model.

The October 2019 social explosion in Chile took everyone by surprise. The scale of protests and the violence of demonstrators had no precedent. Millions of people marched demanding change. Protesters embraced all sort of causes but one demand united them: they were against inequality and privilege. The police responded with force and were accused of multiple human rights violations.

For a long time, economists praised Chile’s market-oriented reforms. Moreover, Chile’s political system and institutions were ranked highly by think tanks such as Freedom House (2019). However, many analysts pointed out that inequality was Chile’s Achilles heel (Edwards 2010). Its Gini coefficient is one of the highest in the OECD although it has declined rapidly; during the last two decades, there has been significant progress in social conditions.

Chile went from being the poorest country in a sample of Latin American countries (jointly with Peru) to having the highest GDP per capita in the region (Figure 1). In 2016, Chile’s Gini was equal to the median in the region (Figure 2). Chile is among the countries that reduced inequality the fastest since 2000: the Gini declined from 56 to 46 between 2000 and 2016 (Figure 3). Other indicators of social progress, such as the Human Development Index,¹ rank Chile in the first place in Latin America.’

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From a VOX post by Davide Furceri, Prakash Loungani, and Jonathan D. Ostry:

“Free trade has contributed to a ‘great convergence’ of emerging market countries toward incomes in industrialised nations in recent decades. It is less clear whether free mobility of capital across national boundaries has conferred similar benefits. This column presents evidence suggesting that the gains in average incomes have been – at best – small, while increases in income inequality and the decline in the labour share of income have been significant. Financial globalisation thus poses far more difficult equity-efficiency trade-offs than free trade and should be at the centre of debates about how to make globalisation inclusive.

Even some staunch defenders of international trade have long been sceptical of the benefits of financial globalisation (e.g. Bhagwati 1998). Rodrik (1998) famously wrote that letting capital flow freely across the world would leave economies “hostage to the whims and fancies of two dozen or so thirty-somethings in London, Frankfurt and New York”. Arteta et al. (2001) concluded that any evidence of a positive impact of capital account liberalisation on growth is “decidedly fragile”, a finding that has largely held up in the literature that has followed.

Our recent work takes a fresh look at the effects of policies to liberalise international capital flows for a group of nearly 150 countries over the period 1970-2015 (Furceri et al. 2019). There are two novel aspects of our work.

• First, we look at the impact on both average (or aggregate) income as well as the distribution of income. While the potential for international trade to generate ‘winners and losers’ has long been recognised – and has been the source of much recent debate – financial globalisation has tended to go scot free of similar scrutiny.

• Second, we use industry-level data to identify some of the causal mechanisms through which financial globalisation has aggregate and distributional impacts.”

Continue reading here.