27 June 2013

The Global Decline of the Labor Share

Loukas Karabarbounis and Brent Neiman show that globally, the share of income going to labor has declined significantly since the early 1980s. This is true within the majority of countries and industries worldwide. They conclude that a decrease in the relative price of investment goods, often explained by advances in information technology and the computer age, has induced firms to shift away from labor and toward capital. They estimate that this shift explains roughly half of the observed decline in the labor share of income.

26 June 2013

How Firms Respond to Business Cycles

Teresa Fort, John Haltiwanger, Ron Jarmin, and Javier Miranda show that young businesses (which are typically small) are more sensitive to changes in the business cycle than older small businesses, and the two behave very differently across cycles. They further show that young/small businesses were hit especially hard in the Great Recession, largely because of the collapse in housing prices during that period. They observe that the business decline was especially pronounced in states that saw a large decline in housing prices.

25 June 2013

Differential Fertility, Human Capital, and Development

Analyzing data from 48 developing countries, Tom Vogl finds that between 1950 and 2000 the association between economic status and fertility, and between the number of siblings in a family and how much education they receive, went from generally positive to generally negative. Large families began to invest less in education; fertility differences now mainly decrease rather than increase the average educational attainment in families.

24 June 2013

Selection and Economic Gains in the Great Migration of African-Americans

The onset of World War I witnessed the beginning of the "Great Migration" of African-Americans from the U.S. South. When William Collins and Marianne Wanamaker analyze census data covering the period 1910-1930 for more than 5,000 African-American men, they find that the economic gains of those who chose to migrate were large. They conclude that much of the black-white convergence in economic status that took place at the time was attributable to Blacks' decision to migrate

21 June 2013

Does California's Energy Efficiency Translate to the Rest of the World?

Arik Levinson finds that three long-run trends differentiate California's electricity demand of the past 40 years from that of other states: 1) a shifting of the U.S. population towards warmer climates of the South and West; 2) the relatively small income elasticity of energy demand in California's temperate climate; and 3) differences between the demographics of households in California and in other states. He estimates that these trends together account for around 90 percent of California's apparent residential electricity savings that began in the 1970s.

20 June 2013

The Challenge of Measuring Top Incomes Using Tax Record Data

Richard Burkhauser, Markus Hahn, and Roger Wilkins point out one of the problems with using income tax-based data to measure the share of income held by top income groups. They show that comprehensive tax reform legislation in Australia in 1985 substantially altered the top income series there, especially for individuals who did not separate out taxable realized capital gains from their other taxable income. They conclude that tax reforms that expand the tax base to include income sources such as capital gains and dividends, which are disproportionately held by top income groups, can increase the reported share of income received by those groups.

19 June 2013

Is a VC Partnership Greater than the Sum of its Partners?

Michael Ewens and Matthew Rhodes-Kropf examine many years of data on the investment performance of individual venture capitalists and analyze the results over time and as the VCs move between firms. They find differences in skill and style, even among partners investing at the same VC firm at the same time. They estimate that a partner’s human capital -- education, experience, skill -- is much more important than the VC firm’s organizational capital in explaining the firm's investment performance.

18 June 2013

Information and Student Achievement

In an experiment in the Oklahoma City Public Schools, students were provided with free cellular phones and then received daily text messages about how getting an education is linked to a better future. Roland Fryer finds that receiving this information via text message is reported to have influenced the students’ beliefs about the value of education and encouraged them to be more focused and to work harder in school. However, these cell phone messages did not lead to measurable changes in attendance, behavior, or test scores.

17 June 2013

Levels and Trends in U.S. Income and Its Distribution

In various studies, U.S. income has been measured as the market income of tax units based on tax return data from the IRS, the pre-tax but post-transfer cash income of households, and a combination of both of those data that also includes taxable realized capital gains. Philip Armour, Richard Burkhauser, and Jeff Larrimore start their analysis with a comprehensive definition of income that incorporates accrued capital gains, and thus measures yearly changes in wealth, rather than focusing on the realized taxable capital gains that appear in IRS tax return data. Using this approach reduces the previously observed growth in income inequality and, in particular, the rise in top-end income since 1989.

14 June 2013

Some Evidence from a Countrywide Field Experiment in Mexico

Given a sample of randomized interest rates offered across 80 regions by Mexico’s largest microlender, Compartamos, Dean Karlan and Jonathan Zinman find that a 10 percent increase in the cost of borrowing leads to a 19 percent decline in the demand for loans over the long run. However, they find no evidence of crowd-out of one lender over another. They confirm that lower borrowing prices bring in substantial numbers of new borrowers who do not differ with respect to income or education from existing borrowers. But the lower interest rates do not increase profits, because the costs of servicing additional clients offset any increase in revenues.
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