The Unassuming Economist

From a new VOX post:

“Rising income and wealth inequality have come into sharp focus since the Global Crisis. Using US and European data, this column explores the factors contributing to unfair inequality, focusing on equality of opportunity and freedom from poverty. The results show that unfair inequality is greater in the US than anywhere in Europe, and that it has been increasing over time. The findings also show that relying solely on measures of equality of opportunity will severely underestimate unfair inequality.”

“How much of the unfairness of inequality can be attributed to its two components – equality of opportunity and freedom from poverty? We cannot cleanly allocate all unfair inequality to either freedom from poverty or equality of opportunity, since they are partly overlapping. But we can derive upper and lower bounds (technical details are provided in Hufe et al. 2018). As documented in Figures 3 and 4, our baseline results are driven by equality of opportunity and freedom from poverty in about equal proportions. But, what this does suggest is that relying solely on equality of opportunity as a gauge will grossly understate the degree of unfairness in a society.”

From a new IMF working paper by Yu Shi:

“This paper identifies a new mechanism leading to inefficiency in capital reallocation at the extensive margin when an economy experiences a sectoral boom. I argue that imperfections in the financial market and capital barriers to entry in the booming sector create a misallocation of managerial talent. Using comprehensive firm-level data from China, I first provide evidence that more productive firms reallocate capital to the booming real estate sector, and demonstrate that the pattern is likely driven by fewer financial constraints on these firms. I then use a structural estimation to verify the talent misallocation. Finally, I calibrate a dynamic model and find that the without the misallocation, the TFP growth in the manufacturing sector would have improved by 0.5% per year.”

 

From a new IMF working paper by Mitsuru Katagiri:

“This paper investigates the developments in house price synchronization across countries by a dynamic factor model using a country- and city-level dataset, and examines what drives the synchronization. The empirical results indicate that: (i) the degree of synchronization has been rising since the 1970s, and (ii) a large heterogeneity in the degree of synchronization exists across countries and cities. A panel and cross-sectional regression analysis show that the heterogeneity of synchronization is partly accounted for by the progress in financial and trade openness. Also, the city-level analysis implies that the international synchronization is mainly driven by the city-level connectivity between large and international cities.”

The latest IMF report on Philippines points out that:

From a new paper by Francesco Saraceno:

“The New Consensus that has dominated macroeconomics since the 1980s was based on a fundamentally neoclassical structure: efficient markets that on their own converged on a natural equilibrium with a very limited role for macroeconomic (mostly monetary) policy to smooth fluctuations. The crisis shattered this consensus and saw the return of monetary and fiscal activism, at least in academic debate. The profession is reconsidering the pillars of the Consensus, from the size of the multipliers to the implementation of reform, including the links between business cycles and trends. It is still too soon to know what macroeconomics will look like tomorrow, but hopefully it will be more eclectic and open. ”