The Unassuming Economist

The COVID-19 pandemic brought with it numerous travel and immigration-related restrictions throughout the globe. For the USA, this translated into a shortfall of nearly 2 million working-age immigrants compared to how many there would have been if the pre-2020 immigration trend had continued unchanged. 

Metadata within this shows that out of these 2 million immigrants nearly one million would have been college graduates, implying a loss to the US labor market in terms of skilled workers, entrepreneurs, and a huge loss to American Universities which annually attract several foreign students. The drop in numbers of highly-skilled immigrants is significant due to its “long-run effects on productivity, innovation, and entrepreneurship”. The blog sheds light on these and several such issues.

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Source: NBER Working Paper (2022)

Abstract– “Need fluctuates over the business cycle. We conduct a survey revealing a desire for nonprofit activities to countercyclically expand during downturns. We then demonstrate, using comprehensive US nonprofit data drawn from millions of tax returns, that the public’s hopes are disappointed. Nonprofit expenditure, revenue, and balance sheets fluctuate procyclically: contracting during national and local downturns. This finding is evident even for a narrow group of nonprofits the public most wishes would expand during downturns, e.g., those providing critical needs like food or housing. Our new facts contribute to the charitable giving, nonprofit, and business cycle literatures (sic).”

Source: VoxDev

Authors of this article (2022), Baafra Abeberese, A. et al describe their study and its results as follows:

“We study how democratisation affects firm productivity — a critical micro-driver of economic growth. We do so in the context of Indonesia, which had been under the dictatorial rule of Soeharto for three decades, until the unexpected collapse of his regime in 1998. Using the exogenous timing of when each district in the country transitioned to a democracy, we estimate the causal effect of democratisation on firm productivity. We combine data on the timing of democratisation with an annual census of manufacturing firms over two decades to analyse the impact of democratisation on firms using an event study design. Our findings suggest that democratic leaders are less likely to impose socially inefficient regulations or engage in rent-seeking and, hence, enhance firm productivity.”

Related Reading

Revisiting the causal effect of democracy on long-run development

In a latest blog for the Conversable Economist, author Timothy Taylor studies data from the OECD publication, Health at a Glance (2021) to understand why meaningful healthcare reform in the USA may be harder to achieve.

It glances over evidence that demonstrates USA’s not-so-commendable performance on health and wellbeing indicators (like mortality, growth in life expectancy, etc.) despite a large share of expenditure on healthcare. Subsequently, parameters of Americans’ satisfaction from their healthcare industry are discussed, which are found to be upbeat and high-ranking in contrast.

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In a recent column for VoxEU CEPR, Elwyn Davies, Mary Hallward-Driemeier and Gaurav Nayyar of the World Bank write about prospects of services-led development and the role of small firms in driving it.

“This column argues that the services sector deserves more credit for helping drive economic transformation than it generally receives. Using firm-level data from 20 developing economies, the authors find that while services establishments are smaller than manufacturing establishments, this matters less for their productivity. Services firms can scale up without sizing up through investments in human and other more intangible forms of capital can leverage the diffusion of digital technologies. “

This theme is elaborated upon further in their book, At Your Service?: The Promise of Services-Led Development (2021), which “assesses the scope of a services-driven development model and policy directions that maximize its potential”.

Related Reading:

Services Development and Comparative Advantage in Manufacturing

Global services value chains: A new path to development