The Unassuming Economist

Do minimum wages lower or raise employment in China? Yes. That’s the answer from the paper my co-author Yi Huang presented at the University of Zurich’s Macro-Finance-Labor Seminar. 

Over the past few years, the IMF has argued that Okun isn’t brokun’—the relationship between output growth and unemployment remains tight. We’ve done so here, here, here, here, here, and here. Hear! Hear! Finally it seems we’re being heard.

An independent study by the San Francisco Fed—independent in the sense that it seems unaware of any of the 6 links given above—finds that rumors of the demise of Okun’s Law may have been exaggerated; see the WSJ story on the study.

For those tempted to say, “yes, that’s the U.S. but my country is different,” see the evidence we provide in one of the six links above on how well Okun’s Law fits for advanced economies, including high unemployment countries like Spain.

Why does it matter whether Okun’s Law holds? It’s because the alleged demise of Okun’s Law is often used as a jumping-off point to argue that the link between jobs and growth is broken, so structural reforms are needed to restore job creation. The stability of Okun’s Law, combined with evidence that the Beveridge Curve is looping back to normality, as noted by Krugman, suggests that cyclical factors may still be behind the weakness in labor markets.

A new IMF note on Malaysia’s housing market points out that:

• “The high growth in housing prices over the past two years cannot be easily attributed to the factors that, historically, have explained developments in house prices (…) the growth rate in house prices displays a structural break in 2010.”

• “In particular, the behavior of residential loans does not seem to contribute to the recent dynamics of house prices.”

The sales of Piketty’s book threaten to put him into the top 1% of earners. On tax day in the US, Piketty presented his book the IMF Book Forum (and Jobs & Growth Seminar). The event was chaired by George Akerlof and Martin Ravallion was the discussant. Here are the links to the slides by Ravallion and Piketty.

Piketty said “we live in a world where we have to rely on Forbes to know the wealth of billionaires. I would prefer to get these statistics from the IMF but apparently there isn’t a publication on the distribution on income. Perhaps one day there will be.”

Forecasters have a poor reputation for predicting recessions. This Vox column quantifies their ability to do so, and explores several reasons why both official and private forecasters may fail to call a recession before it happens.