The Unassuming Economist

From a VOX post by Stefania Albanesi:

“The US economy has been hampered over the last four decades by three trends: the productivity slowdown, the Great Moderation, and jobless recoveries. Economists seeking to explain these phenomena have generally looked to the impact that technological change has on labour demand. This column proposes an alternative explanation: the rise and stabilisation of women’s participation in the workforce, one of the most notable developments in the post-war US. Excluding gender differences in aggregate models of the US economy obscures our understanding of business cycle behaviour and economic performance.

The rise in women’s market work is one of the most notable economic developments in the post-war United States. Female participation rose from 37% in 1960 to a peak of 61% in 1997, and then flattened out, as shown in Figure 1. This phenomenon contributed substantially to the rise in aggregate hours per person in the US in the 1970s and 1980s. While a large literature has studied the determinants of the rise in women’s employment, the implications of this phenomenon for the aggregate performance of the US economy have been left largely unexplored. At the same time, several key properties of US business cycles changed over this period, and economists have yet to provide a comprehensive explanation of those changes. Three particularly puzzling phenomena stand out:

• the productivity slowdown in the 1970s (Jorgenson 1988) and the decline in the cyclical correlation between aggregate per capita hours and productivity (Gali and Gambetti 2009);
• the decline in the cyclicality of output and aggregate hours starting in the early 1980s, known as the Great Moderation (Stock and Watson 2002); and
• the sluggish growth in employment in the aftermath of recessions starting in the early 1990s, often referred to as jobless recoveries (Graetz and Michaels 2017).”

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From a new paper by Alberto Alesina, Davide Furceri, Jonathan D. Ostry, Chris Papageorgiou and Dennis P. Quinn:

“We assemble a unique database of reforms in domestic finance, external finance, trade, product markets and labor markets which covers 90 advanced and developing economies from 1973 to 2014. In the 66 democracies which we consider in this paper, we show that these reforms have medium run benefits thus they are electorally more successfully when introduced at the beginning of a new term of office. Liberalizing reforms shortly before elections are costly to incumbents. However, the effect depends on the state of the economy at the time of reform: reforms are sharply penalized during contractions, reforms undertaken in expansions are not punished and sometimes rewarded.”

A new IMF paper by Frederic Lambert and Hyunmin Park  highlights the role played by social spending to reduce poverty and inequality:

“We analyze microdata from Mexico’s survey on household income and expenditures (ENIGH) to study the evolution of income inequality in Mexico over 2004-16, identify its sources, and investigate how it was affected by government social policy. We find evidence of only a small decline in inequality over this period. The observed decline may be attributed to government transfers, notably targeted cash transfers (Prospera) and non-contributory pensions. In 2016, those two programs accounted for more than two thirds of the reduction in the Gini coefficient due to government transfers. Other transfer programs such as farmland subsidies (Proagro), government scholarships, and non-monetary transfers for medical expenditures have not been as effective.”

From an IMF working paper by Benedicte Baduel; Carolin Geginat; and Gaëlle Pierre:

“This paper examines the extent to which firms in selected MENA countries reported being constrained by the business environment around the time of the Arab Spring and the extent to which these constraints affected their employment performance. The results suggest that small firms in MENA faced more structural constraints than similar firms in other regions. We also find that MENA firms’ weaker job creation can be explained in great part by the macroeconomic environment and structural constraints. Low GDP growth, falling external competitiveness, corruption, lack of access to finance and poor access to electricity are found to explain a significant part of the lack of employment growth in MENA firms compared to their peers.”

From the OECD:

“Launched in May 2015, OECD Secretary-General Angel Gurría’s ‘21 for 21’ proposal called for consolidation and further transformation of the OECD by ‘redefining the growth narrative to put the well-being of people at the centre of our efforts.’

To contribute to this debate, in 2018 the Secretary-General commissioned an Advisory Group on a New Growth Narrative to examine how economic, social and environmental considerations could be integrated in a coherent approach. Acting in a personal capacity, the Advisory Group comprises Andy Haldane, Michael Jacobs, Nora Lustig, Mariana Mazzucato, Robert Skidelsky, Dennis Snower and Roberto Unger.1 The Group has sought to bring together in a single, short and readable document the various strands of new economic thinking curated over recent years by the New Approaches to Economic Challenges (NAEC) initiative. Beyond Growth: Towards a New Economic Approach is their draft report.

The report was written and coordinated by Michael Jacobs, with research assistance by Merve Sancak at the Sheffield Political Economy Research Institute. The project has been overseen by the OECD Chief of Staff and Sherpa, Gabriela Ramos, who has responsibility for NAEC in the OECD Secretariat, with the support of William Hynes.

The report attempts to synthesise a wide range of reflection on new ways of thinking about economic policymaking. It encompasses a new set of goals and measures of economic progress; new frameworks of economic analysis; and new approaches to policy.

While reactions from OECD members are strongly welcomed, this is not an OECD report requiring approval. Nor is it exhaustive in the content covered. Focusing on the challenges facing OECD countries, it builds on New Approaches to Economic Challenges: Towards a New Narrative presented at OECD Week in 2017 and Elements of a New Growth Narrative (SG/NAEC(2018)1) discussed at the NAEC Group meeting in September 2018 marking 10 years after the collapse of Lehman Brothers.

The objective of this draft document is to receive feedback and comments from the different OECD Policy Committees and Members that will participate in the NAEC Group meeting of 17-18 September, and to continue the dialogue with NAEC partners and thinkers outside the OECD.

The opinions expressed and the arguments employed herein do not necessarily reflect the official views of OECD member countries, nor any institution with which the contributors may be affiliated.”

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