The Unassuming Economist

From a new post by Timothy Taylor:

“Markets for beer, wine and spirits offer can patterns of broad cultural interest–and for the college teacher, may serve to attract the attention of students as well. Kym Anderson, Giulia Meloni, and Johan Swinnen discuss “Global Alcohol Markets: Evolving Consumption Patterns, Regulations, and Industrial Organizations” in the most recent Annual Review of Resource Economics (vol. 10, pp. 105-132, not freely available online, but many readers will have access through a library subscription).  The authors take a global perspective on the evolution of alcohol markets. Here are a few points of the many that caught my eye.

1) “The global mix of recorded alcohol consumption has changed dramatically over the past half
century: Wine’s share of the volume of global alcohol consumption has fallen from 34% to 13% since the early 1960s, while beer’s share has risen from 28% to 36%, and spirits’ share has gone from 38% to 51%. In liters of alcohol per capita, global consumption of wine has halved, while that of beer and spirits has increased by 50%.”

2) “As of 2010–2014, alcohol composed nearly two-thirds of the world’s recorded expenditure on beverages, with the rest being bottled water (8%), carbonated soft drinks (15%), and other soft
drinks such as fruit juices (13%).”

3) There is something of inverse-U relationship between quantity consumed of alcohol and per capita GDP of countries.

4) However, when it comes to spending on alcohol as a share of income, it does not seem to drop off as income rises. The implication is that those in countries with higher per capita GDP drink smaller quantities of alcohol, but pay more for it.

5) “In early history, wine and beer consumption was mostly positively perceived from health and food security perspectives. Both wine and beer were safe to drink in moderation because fermentation kills harmful bacteria. Where available at affordable prices, they were attractive substitutes for water in those settings in which people’s access to potable water had deteriorated. Beer was also a source of calories. For both reasons, beer was used to pay workers for their labor from Egyptian times to the Middle Ages. Wine too was part of some workers’ remuneration and was included in army rations of some countries right up to World War II. Moreover, spirits such as rum and brandy were a standard part of the diet for those in European navies from the fifteenth century.”

The authors then discuss how the rise of hard spirits and income levels raised concerns about health effects of alcohol consumption, while nonalcoholic alternatives became safe to drink–factors that helped to reconfigure social attitudes about alcohol.

The article also includes discussions of the evolution of alcohol taxes, shifts in market concentration and competition, the rise of smaller-scale producers in recent years, and much more. “

From a new post by Timothy Taylor:

“Remittances are money sent back to a home country by emigrants. On a global basis, remittances to developing countries topped $400 billion in 2017, far exceeding foreign aid to those countries, similar in size to flows of loans and equity investment in those countries, and beginning to approach the level of foreign direct investment in those countries.”

These inflows of funds are clearly helpful to the recipient families, helping to boost and to smooth their consumption. But do they help to boost overall economic growth for the recipient country? Ralph Chami, Ekkehard Ernst, Connel Fullenkamp, and Anne Oeking raise doubts in “Is There a Remittance Trap? High levels of remittances can spark a vicious cycle of economic stagnation and dependence,” published in Finance & Development (September 2018, pp. 44-47). This short and readable article draws on insights from their IMF working paper, “Are Remittances Good for Labor Markets in LICs, MICs and Fragile States? Evidence from Cross-Country Data” (May 9, 2018).

The authors point out that at a big picture level, countries that receive more remittances (as a share of GDP) don’t seem to grow faster. They offer the intriguing example of Lebanon”

Continue reading paper here.

From a new CESifo working paper:

“The stock market influences some of the most fundamental economic decisions of investors, such as consumption, saving, and labor supply, through the financial wealth channel. This paper provides evidence that daily fluctuations in the stock market have important – and hitherto neglected – spillover effects in another, unrelated domain, namely driving. Using the universe of fatal road car accidents in the United States from 1990 to 2015, we find that a one standard deviation reduction in daily stock market returns is associated with a 0.5% increase in the number of fatal accidents. A battery of falsification tests support a causal interpretation of this finding. Our results are consistent with immediate emotions stirred by a negative stock market performance influencing the number of fatal accidents, in particular among inexperienced investors, thus highlighting the broader economic and social consequences of stock market fluctuations.”

According to Mark Perry of Carpe Diem: “over the last 15 years from June 30, 2003 to June 30, 2018, only one in 13 large-cap managers, only one in 21 mid-cap managers, and one in 43 small-cap managers were able to outperform their benchmark index. So it is possible for some active fund managers to “beat the market” over various time horizons, although there’s no guarantee that they will continue to do so in the future. And the percentage of active managers who do beat the market is usually pretty small – fewer than 8% in most of the cases above over the last 15 years; and they may not sustain that performance in the future.”

Read the full story here, which gives a link to the underlying study.

On cross-country:

• Homeownership motivation, rationality, and housing prices: Evidence from gloom, boom, and bust‐and‐boom economies – International Journal of Finance & Economics

On the US:

• Assessing Housing Risk – Money and Banking
• Local regulatory responses during a regional housing shortage: An analysis of rezonings in Silicon Valley – Land Use Policy
• HUD can’t fix exclusionary zoning by withholding CDBG funds – Brookings
• Housing Market Is Raising Serious Red Flags – Bloomberg
• Promoting Luxury Housing with an Ironic Twist – Institute for Policy Studies
• Homebuilding Isn’t What It Used to Be – Bloomberg
• Reconciling the back to the city thesis with sustained suburban growth – Harvard Joint Center for Housing Studies
• Airbnb and Neighborhood Conflict – Cato Institute
• Slower Growth Anticipated in Home Remodeling – Harvard Joint Center for Housing Studies

On other countries:

• [Austria] Austrian Housing Policy – Dublin Economics
• [Canada] Condo Flippers Aren’t the Vancouver and Toronto Housing Culprits – Bloomberg
• [China] China homeowners stage protests over falling prices – Financial Times
• [United Kingdom] No, the housing crisis will not be solved by building more homes – Financial Times

Photo by Aliis Sinisalu