Parts and Labor
Trade, education, and innovation: Prospects for the U.S. economy
Ralph Gomory & William Baumol
Journal of Policy Modeling, September-October 2011, Pages 682-697
Abstract:
This paper examines international trade issues as vital indicators of the economic prospects of the United States and other developed economies. In particular, it challenges misuses of the doctrine of mutual gains from trade and instead argues that comparative advantage does not guarantee increases in benefits to both trading partners-especially when one partner seeks to distort the market mechanism in its favor. In the face of such mercantilist or protectionist practices, efforts to advance innovation, without retaining manufacturing jobs, will not ensure continued prosperity, as the number of jobs entailed in the invention process is small compared with the number of jobs associated with manufacturing an innovative product for mass consumption. These matters call for the urgent rethinking of trade policy by the United States and other developed nations, if they are to balance their imports and exports and ensure continued economic growth.
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Has China run out of surplus labour?
Jane Golley & Xin Meng
China Economic Review, forthcoming
Abstract:
Many recent studies claim that China has reached a Lewisian ‘turning point' in economic development, signalled by rising wages in urban areas and the exhaustion of rural surplus labour. In this paper we show that despite some evidence of rising nominal urban unskilled wages between 2000 and 2009, there is little in the data to suggest that this wage increase has been caused by unskilled labour shortages. China still has abundant under-employed workers with very low income in the rural sector. We argue that China's unique institutional and policy-induced barriers to migration have both prevented many rural workers from migrating to cities and also reduced the migrants' length of stay. We project that under alternative institutional settings, the migrant stock could easily be doubled from the current 150 million to 300 million by increasing either the average length of migrant stay, or the migrant inflow, or both.
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How do Students Respond to Labor Market and Education Incentives? An Analysis of Homework Time
Steven McMullen
Journal of Labor Research, September 2011, Pages 199-209
Abstract:
This study examines the extent to which high school students respond to education and labor market incentives when making decisions about homework. Student and state fixed effects estimators are used to control for unobserved individual and geographic heterogeneity and selection. I find that students' choices about homework respond to unemployment rates and changes in the minimum wage, but not to changes in the price of higher education. These responses are not constant throughout the population: female students, low income students, and low achieving students in particular increase their homework time in response to a higher minimum wage, while male students are more responsive to changes in the unemployment rate.
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Labor Market Dysfunction During the Great Recession
Kyle Herkenhoff & Lee Ohanian
NBER Working Paper, August 2011
Abstract:
This paper documents the abnormally slow recovery in the labor market during the Great Recession, and analyzes how mortgage modification policies contributed to delayed recovery. By making modifications means-tested by reducing mortgage payments based on a borrower's current income, these programs change the incentive for households to relocate from a relatively poor labor market to a better labor market. We find that modifications raise the unemployment rate by about 0.5 percentage points, and reduce output by about 1 percent, reflecting both lower employment and lower productivity, which is the result of individuals losing skills as unemployment duration is longer.
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Entrepreneurship: The role of extreme events
Tilman Brück, Fernanda Llussá & José Tavares
European Journal of Political Economy, forthcoming
Abstract:
We use aggregate country data as well as individual surveys to uncover, for the first time, the effect of extreme events such as natural disasters and terrorist attacks on entrepreneurial activity. We find that natural disasters and terrorist attacks influence individual perceptions of the rewards to entrepreneurship and, more surprisingly, extreme events affect entrepreneurship rates positively in a robust and significant way.
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Social Security and elderly labor supply: Evidence from the Health and Retirement Study
James Vere
Labour Economics, October 2011, Pages 676-686
Abstract:
This study uses panel data from the Health and Retirement Study (HRS) to estimate the effects of Social Security income on elderly labor supply in the 1990s and early 2000s. The identification strategy takes advantage of the 1977 amendments to the Social Security Act, which led to a large, unanticipated reduction in Social Security benefits for those born after January 1, 1917. Despite the advanced age of the notch cohorts, there is a significant, negative and surprisingly elastic relationship between Social Security income and hours of work. This suggests that currently proposed reductions in benefits would induce Social Security recipients to work more hours in retirement, even through their 70s and early 80s.
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Exploring the Changing Meaning of Work for American High School Seniors From 1976 to 2005
Laura Wray-Lake1 et al.
Youth & Society, September 2011, Pages 1110-1135
Abstract:
Using data from the Monitoring the Future study, this article presents historical trends in U.S. high school seniors' work values across 30 years (1976-2005). Adolescents across three decades highly valued most aspects of work examined. Recent cohorts showed declines in the importance of work, values for job security, and various potential intrinsic rewards of work. After increasing until 1990, adolescents remained stable in their values for extrinsic and materialistic aspects of work until 2005. The value of work that allows for leisure time has steadily increased. Stable level differences in work values emerged for adolescents by gender, race, parents' education, and college aspirations. Findings have implications for understanding the changing meaning of work for the future workforce.
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Making sense of the manufacturing belt: Determinants of U.S. industrial location, 1880-1920
Alexander Klein & Nicholas Crafts
Journal of Economic Geography, forthcoming
Abstract:
This article investigates industrial location in the USA around the turn of the 20th century using a model which subsumes both market-potential and factor-endowment arguments. The results show that market potential was central to the existence of the manufacturing belt, that it mattered more than factor endowments, and that its impact came through interactions both with scale economies and with linkage effects. Market potential was generally much higher for states in the manufacturing belt. Natural advantage played a role in industrial location decisions in the late 19th century but its importance then faded away.
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Heidi Swarts & Ion Bogdan Vasi
Urban Affairs Review, forthcoming
Abstract:
This article investigates predictors of living wage ordinance adoption in U.S. cities. The authors build on previous research by including all cities with more than 25,000 people (1,072 cities), adding new variables to measure favorable political context, use of event history analysis (Cox regression) to analyze temporal effects in diffusion, and distinguishing between predictors of early and late adoption. General political context, city size, and municipal expenditures were significant predictors, while grievances, presence of a local ACORN chapter, union density, and form of city government were not significant. Density of nonlabor progressive associations and history of progressive activism were major predictors of policy adoption.
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Implicit Taxes on Work from Social Security and Medicare
Gopi Shah Goda, John Shoven & Sita Nataraj Slavov
Tax Policy and the Economy, September 2011, Pages 69-88
Abstract:
Implicit taxes are present in many government programs and can create substantial work disincentives. The implicit tax created by Social Security is the payroll tax used to fund the retirement portion of Social Security minus the present value of the incremental retirement benefits associated with the earnings. While the payroll tax is always 10.6%, the implicit tax varies over a worker's career because additional earnings translate nonlinearly into additional retirement benefits. We show that workers at the start of their careers experience lower implicit tax rates, as the increase in benefits from additional work is relatively large. However, workers who are closer to retirement earn little or no additional benefit from additional work. The main implicit tax in Medicare lies in the Medicare as Secondary Payer (MSP) policy, which requires Medicare to be a secondary payer for Medicare-eligible workers whose employers offer a health plan and have 20 or more employees. Thus, affected workers effectively forgo the Medicare benefits that they would have received if they had not been working. We investigate a combination of policies that can reduce average implicit tax rates on older workers by as much as 45%.
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Trade Wars and Trade Talks with Data
Ralph Ossa
NBER Working Paper, August 2011
Abstract:
What are the optimal tariffs of the US? What tariffs would prevail in a worldwide trade war? What are the gains from international trade policy cooperation? And what gains can be expected from future reciprocal trade negotiations? I address these and other questions using a unified framework which nests traditional, new trade, and political economy motives for protection. I find that US optimal tariffs average 66 percent, world trade war tariffs average 63 percent, the welfare gains from international trade policy cooperation average 4.4 percent, and there is almost no scope for future reciprocal trade negotiations. Optimal tariffs are tariffs which maximize a political economy augmented measure of real income.
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Does Local Firm Ownership Matter?
David Fleming & Stephan Goetz
Economic Development Quarterly, August 2011, Pages 277-281
Abstract:
A data set for U.S. counties that includes residence status of firm owners is used to assess whether per capita density of locally owned businesses affects local economic growth, compared with nonlocal ownership. The database also permits stratification of firms across different employment size categories. Economic growth models that control for other relevant factors reveal a positive relationship between density of locally owned firms and per capita income growth but only for small (10-99 employees) firms, whereas the density of large (more than 500 workers) firms not owned locally has a negative effect. These results provide strong evidence that local ownership matters for economic growth but only in the small size category. Results are robust across rural and urban counties.
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Corporate Strategy and National Institutions: The Case of the Man-Made Fibres Industry
Geoffrey Owen
Capitalism and Society, 2011
Abstract:
This article discusses the impact of national policies and institutions on the strategies that companies adopt when they are faced with disruptive changes in their external environment. The article focuses on the man-made fibres industry in the U.S., Western Europe and Japan between 1980 and 2010 and describes the different ways in which the leading fibre manufacturers in those regions responded to the shift in textile, clothing and later fibre production to low-cost countries, principally in Asia. These companies had to decide whether they could continue to compete profitably in the man-made fibres industry, and, if not, what non-fibre businesses they should invest in. In countries such as the U.S. and the UK, where capital markets are powerful and companies are under pressure to enhance shareholder value, virtually all the former leaders have withdrawn from the industry and a set of new entrants, including private equity firms, have taken their place. In Japan, by contrast, leading companies such as Toray and Teijin remain committed to man-made fibres, although they have also diversified in other directions. Despite the increasing role of Anglo-American investors in Japan, Japanese companies see themselves as responsible to a broad range of stakeholders, not just to shareholders; the continuity of the enterprise and of employment is given a higher priority than in the U.S. or the UK. In Continental Europe, the restructuring of the man-made fibres industry has involved numerous divestments and demergers, and this partly reflects the growing influence of Anglo-American investors, but in some of these countries the stakeholder view of the enterprise continues to carry considerable weight. Lenzing in Austria, which is now the largest European man-made fibre manufacturer, is an example of a company which has combined commercial success with a strong sense of responsibility to the region where its main factory is based. In reviewing these different strategies the article shows how Japanese-style "long-termism" can be a source of strength in certain industries such as carbon fibre, but has the disadvantage of allowing companies to persist for too long with low-return businesses which might do a better under different owners. Some further movement towards the Anglo-American model is likely in Japan and in Continental Europe, but these countries have a different view of what companies are for, and this will continue to affect how their companies respond to industrial change.
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Robert Weathers & Jeffrey Hemmeter
Journal of Policy Analysis and Management, Fall 2011, Pages 708-728
Abstract:
SSDI beneficiaries lose their entire cash benefit if they perform work that is substantial gainful activity (SGA) after using Social Security work incentive programs. The complete loss of benefits might be a work disincentive for beneficiaries. We report results from a pilot project that replaces the complete loss of benefits with a gradual reduction in benefits of $1 for every $2 earned above an earnings disregard level. Beneficiaries who volunteered to participate in the project were randomly assigned to a group receiving the new program or to a control group. The policy led to a 25 percent increase in the percentage of beneficiaries with earnings above the annualized SGA amount, or $11,760 in 2009 dollars. It did not result in a reduction in benefit payments.
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Seth Giertz & Jeffrey Kubik
Journal of Labor Research, September 2011, Pages 237-253
Abstract:
This paper uses Social Security earnings records linked to data from the Health and Retirement Study to examine the labor market behavior of rejected and accepted disability applicants prior to their application. We find that rejected applicants have substantially lower earnings and labor force participation rates during the decade prior to application than beneficiaries. Also, we find some evidence of a divergence between these groups, with rejected applicants leaving the labor force at a faster rate than beneficiaries as their application date approaches. One interpretation of these results is that the disability screening process on average separates those who are at least partially motivated by adverse economic circumstances when applying for disability benefits from other applicants.
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Is Leisure a Normal Good? Evidence from the European Parliament
Naci Mocan & Duha Tore Altindag
NBER Working Paper, August 2011
Abstract:
Prior to July 2009, salaries of the members of the European Parliament were paid by their home country and there were substantial salary differences between parliamentarians representing different EU countries. Starting in July 2009, the salary of each member of the Parliament is pegged to 38.5% of a European Court judge's salary, paid by the EU. This created an exogenous change in salaries, the magnitude and direction of which varied substantially between parliamentarians. Parliamentarians receive per diem compensation for each plenary session they attend, but salaries constitute unearned income as they are independent of attendance to the Parliament. Using detailed information on each parliamentarian of the European Parliament between 2004 and 2011 we show that an increase in salaries reduces attendance to plenary sessions and an increase in per diem compensation increases it. We also show that corruption in home country has a negative effect on attendance for seasoned members of the Parliament.
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Industrial de-licensing, trade liberalization, and skill upgrading in India
Rubiana Chamarbagwala & Gunjan Sharma
Journal of Development Economics, November 2011, Pages 314-336
Abstract:
We investigate the relationship between industrial de-licensing, trade liberalization, and skill upgrading during the 1980s and 1990s among manufacturing plants in India. We use a unique dataset on India's industrial licensing regime to test whether industrial de-licensing during the 1980s and 1990s played a role in skill upgrading, as measured by the employment and wagebill shares of white-collar workers. In addition, we assess the relative contribution of industrial de-licensing and trade liberalization to skill upgrading. We identify two main channels through which industrial de-licensing affects skill upgrading: capital- and output-skill complementarities. Using both difference-in-differences as well as regression discontinuity techniques, we find two important results. First, after controlling for the size-based exemption rule that determined whether or not a plant faced licensing restrictions, industrial de-licensing during the 1980s appears to have increased the relative demand for skilled workers via capital- and output-skill complementarities. Capital- and output-skill complementarities exist for plants in both licensed and de-licensed industries but were stronger in de-licensed industries during the 1980s, prior to India's massive trade liberalization reforms in 1991. Second, regardless of de-licensing, capital- and output-skill complementarities are generally weaker after trade was liberalized during the early 1990s. Together, capital- and output-skill complementarities contributed 75% (57%) and 31% (29%), respectively, of the growth in the employment and wagebill shares of white-collar workers in de-licensed (licensed) industries before trade was liberalized. After trade liberalization, these contributions were smaller. This suggests that trade liberalization may not have played a major role in raising the relative demand for skilled labor during the early 1990s.