The Unassuming Economist

From EconoSpeak:

“In the world of urban politics, there is probably no more potent populist rallying cry than the demand to halt gentrification.  Activists have fought it on multiple fronts: zoning, development subsidies, permitting, rent control—every lever housing policies afford.  But what if they’re mistaking cause for effect, hacking away at the visible manifestations of the problem while leaving the problem itself intact?

Pivot to an important article in today’s New York Times, reporting on recent research David Autor  of MIT presented at the economics meetings in Atlanta earlier this month.  It’s all summed up in this set of charts:

As you can see from the tiny print at the top, the data are being read horizontally within each chart, from less dense regions (rural areas) on the left to high density cities on the right.  The question being asked in the article is, if you live in a rural area or a small town, how much benefit can you get from moving to a big city?  In the early post-WWII period, the answer was “a lot” for both the majority holding only a high school diploma and the few with a college BA.  By 2015 the situation had changed: it was still a good move for college grads but there was little to be gained by those with only a high school education—and probably even less when you factor in the increased cost of living.  That’s an interesting story.

But there’s another way to read these charts, vertically, comparing wage gaps at any particular time and place between these two education-defined groups.  In 1950 the gap was relatively small; in the densest cities the college crowd made about 30% more per hour than the high schoolers.  By 2015 they made almost twice as much.  And don’t forget that the rise of inequality is virtually fractal: similar gaps have opened up within the top 20%, and within the top 5%, 1% and .01%.  The whole rightward tail of the distribution has elongated, pulling ever further from the median.”

Continue reading here.

From American Enterprise Institute:

On the US:

• Housing finance issues to watch in 2019 – Urban Institute
• Experts weigh in on housing reform at House hearing – Housing Wire
• The Price of Residential Land for Counties, ZIP codes, and Census Tracts in the United States – Federal Housing Finance Agency
• Leaving Households Behind: Institutional Investors and the U.S. Housing Recovery – Federal Reserve Bank of Philadelphia
• Real-estate agents say government shutdown is impacting the housing market – MarketWatch
• Chinese buyers expand their reach in the US housing market as the middle class gets in on the act – CNBC
• What actions can policymakers take to avert the brewing national housing crisis? – Washington Post
• 2018 Roundup: Our Most Popular Blogs of the Year – Harvard Joint Center for Housing Studies
• Appraising Home Purchase Appraisals – Federal Reserve Bank of Philadelphia
• California Housing Development Is A ‘Disaster Waiting To Happen’ – NPR
• Is Housing the Business Cycle, 2019? – Econbrowser
• Elizabeth Warren’s Housing Crisis Plan Hints at Reparations – Citylab
• Substance Use Disorder Treatment Centers and Property Values – NBER
• Affordable homes or investment assets? – Washington Post
• The American Dream Isn’t for Black Millennials – New York Times
• Rich Cities Created the Housing Shortage – Wall Street Journal
• Housing Confidence Down as More Americans Believe It’s a Bad Time to Buy a Home – Fannie Mae
• It’s a Wonderful Loan: A Short History of Building and Loan Associations – Federal Reserve Bank of Richmond
• See How Landlords Pack Section 8 Renters Into Poorer Neighborhoods – Citylab
• As Fewer Young Adults Wed, Married Couples’ Wealth Surpasses Others’ – Federal Reserve Bank of St. Louis
• America’s Housing Crisis Could Imperil Trump’s Presidency – Citylab
• Survey: First Home Nightmares – Porch
• US housing market uncertainty prompts Lennar to scrap guidance – Financial Times

On other countries:

• [Australia] Australia’s house price slide prompts worries about economy – Financial Times
• [Canada] What happened when Vancouver residents built new homes in their backyards – Financial Times
• [China] China house price gains no longer a certainty: central bank adviser – Reuters
• [China] Empty Homes and Protests: China’s Property Market Strains the World – New York Times
• [China] China warns cities to cut reliance on property, developers’ shares fall – Reuters
• [Netherlands] Amsterdam Houses Head for Record Prices – Bloomberg
• [New Zealand] New Zealand’s house prices are rising again – Global Property Guide
• [Slovak Republic] Slovak Republic’s house price rises slowing – Global Property Guide
• [United Kingdom] Cheer up, millennials! It will become easier to buy a house – Economist

Photo by Aliis Sinisalu

From a FEDS Note by Hie Joo Ahn and James Hamilton:

“The U.S. unemployment rate averaged 8.4% during the first five years of recovery from the Great Recession of 2007-2009, the weakest recovery on record (see Figure 1). But as the expansion continued, unemployment continued to decline and by 2018 reached the lowest levels in almost half a century. Why did unemployment remain so high for so long, and what factors contributed to the recent lows?”

“One of the most striking features of the length of time people stay unemployed is the heterogeneity across the experience of different people. Most people who become unemployed find a new job relatively quickly. Even during the Great Recession, of people who were newly unemployed in month t, on average only 64% were still unemployed in month t + 1. By contrast, if someone has been unemployed for 4-6 months as of month t, on average since 1976, there was an 81% probability that they would still be unemployed in month t + 1. The lowest the latter probability ever got in any month from 1976 to 2018 was 71%. In other words, the newly unemployed during the Great Recession had better success finding jobs than did the long-term unemployed during the strongest economic boom.”

Continue reading here.

From a new IMF working paper:

“This paper examines the impact of highway expansion on aggregate productivity growth and sectoral reallocation between cities in China. To do so, I construct a unique dataset of bilateral transportation costs between Chinese cities, digitized highway network maps, and firm-level census. I first derive and estimate a market access measure that summarizes all direct and indirect impact of trade costs on city productivity. I then construct an instrumental variable to examine the causal impact of highways on economic outcomes and the underlying channels. The results suggest that highways promoted aggregate productivity growth by facilitating firm entry, exit and reallocation. I also find evidence that the national highway system led to a sectoral reallocation between cities in China.”

“The findings presented in this paper have important policy implications. Facing the threat of secular stagnation, policymakers are searching for tools to boost aggregate demand in the short run and promote economic growth in the long run. After the global recession, there has been a growing interest among policymakers worldwide in using infrastructure investments both as a short-term fiscal policy instrument and as a long-term growth generator. For example, the World Bank has consistently dedicated itself to investing in infrastructure in low-income countries to fight poverty. The International Monetary Fund is also actively advocating for more infrastructure investments in Latin America and Africa to meet the infrastructure needs and boost economic growth in these regions. The two recently-founded development banks–the Asian Infrastructure Investment Bank and the New Development Bank, were established under the leadership of China to address the increasing infrastructure needs in Asia. The US President Donald Trump envisions a trillion-dollar infrastructure plan. The increasing use of infrastructure projects by policymakers begs the question of whether the huge amount of tax dollars spent on infrastructure is well justified by their potential benefits.”