Links (9/5/18)

  New Evidence that Unions Raise Wages for Less-Skilled Workers

From Steve Maas at the NBER:
New Evidence that Unions Raise Wages for Less-Skilled Workers: Tapping into eight decades of private and public surveys, a new study finds evidence that unions have historically reduced income inequality.

For Unions and Inequality over the Twentieth Century: New Evidence from Survey Data (NBER Working Paper No. 24587), Henry S. Farber, Daniel Herbst, Ilyana Kuziemko, and Suresh Naidu assembled a household-level database on union membership dating back to 1936.
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The U.S. Bureau of the Census has tracked wages and education consistently since 1940. Aggregate data on union membership goes back to the early 20th century, but data on individual workers were not readily available until the Census Bureau started asking about union affiliation in 1973. By that time, unions were already in decline, and higher-skilled workers accounted for an increasing share of their membership.

The researchers draw on
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Links (9/3/18)

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I have been in Hawaii since before the hurricane and kind of fell behind. Oops:

Links (8/23/18)

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Credit Supply and Housing Speculation

Atif Mian and Amir Sufi at VoxEU:
Credit supply and housing speculation, by Atif Mian and Amir Sufi, VoxEU: Charles P. Kindleberger, who was the world’s leading expert on financial crises, wrote that “asset price bubbles depend on the growth in credit” (Kindleberger and Aliber 2005). Nobel prize winner Vernon Smith described evidence from experimental settings showing that that the size of a bubble increased when individuals were allowed to borrow (Porter and Smith 1994). Economic theorists have taken this lesson to heart, writing down models in which easier credit helps fuel asset prices through an increase in speculative buying (Allen and Gorton 1993, Allen and Gale 2000).
A core idea in the theory of credit and bubbles is that easier credit allows optimists with high asset valuations to aggressively buy assets, and therefore boost the price (Geanakoplos 2010, Simsek 2013). Even if optimists form a small part of
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Links (8/15/18)

FRBSF: The Current Economy and the Outlook

From the FRBSF:
FedViews: Kevin J. Lansing, research advisor at the Federal Reserve Bank of San Francisco, stated his views on the current economy and the outlook as of August 9, 2018.
Economy running above sustainable rate
The initial estimate of real GDP growth in the second quarter of 2018 came in at 4.1% at an annual rate, resulting in a growth rate of 2.8% over the past four quarters. For 2018 as a whole, we expect growth to come in just under 3%, well above our estimate of the economy’s long-run sustainable growth rate. Given the diminishing effects of federal fiscal stimulus over the next few years and the expected tightening of financial conditions, we project that growth will slow to just under 2% by 2020.
Job growth remains strong
The Bureau of Labor Statistics reported that payroll employment increased by 157,000 jobs in July. Data for the previous two months were revised upward, resulting
Unemployment below sustainable levels
Inflation expected to modestly exceed target
Interest rates up but remain accommodative
Yield curve is flat but not inverted
Real short−term interest rate remains low
Credit spread is compressed
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Links (8/13/18)

Supply Chains and Trade War

Paul Krugman:
Supply Chains and Trade War (Very Wonkish): ...last month the IGM Forum weighed in on the issue of supply chains and trade war — the issue that the current trade war, unlike previous trade conflicts, is taking place in a world where much trade consists, not of shipments of consumer goods, but of shipments of inputs used in production. The panelists more or less unanimously agreed that the prevalence of global supply chains increases the cost of trade war. But is the consensus right?
Well, although I yield to nobody in condemning the stupidity and corruption behind Trump trade policy, I’m a bit skeptical about the supply chain concern. Or maybe the best way to say this is that there are three possible stories about how supply chains might increase the costs of trade war, and while two of them are right, I suspect that many economists
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Links (8/10/18)

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The Impact of Higher Temperatures on Economic Growth

This is from Riccardo Colacito, Bridget Hoffmann, Toan Phan and Tim Sablik:
The Impact of Higher Temperatures on Economic Growth, by Riccardo Colacito, Bridget Hoffmann, Toan Phan and Tim Sablik, Economic Brief, Richmond Fed: June 2018 was the third-warmest on average across the contiguous forty-eight states since record keeping began in 1895, according to the National Oceanic and Atmospheric Administration (NOAA). Only 1933 and 2016 saw hotter starts to the summer.
Climate scientists project that average global temperatures will rise over the coming decades, which could have a variety of environmental impacts. But what impact would higher temperatures have on the economy? To date, studies of this question have largely focused on developing countries, under the assumption that those countries are more exposed to the effects of higher temperatures. The economy in developing countries is often more reliant on agriculture or other outdoor activities, and those countries have
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Economic Policy for Artificial Intelligence

Ajay Agrawal, Joshua Gans, and Avi Goldfarb at VoxEU:
Economic policy for artificial intelligence: Artificial intelligence (AI) technologies advanced rapidly over the past several years. Governments around the world responded by developing AI strategies. France released its national AI strategy in March 2018, emphasising research funds, ethical issues, and inequality. China stated a goal of being the top AI country by 2030. The EUCanada, Japan, the Obama administration, the Trump administration, and many others have put forth their own plans (Sutton 2018). Pessimistic views of the impact of AI on society are widespread. Elon Musk, Stephen Hawking, Bill Gates, and others warn that rapid advances in AI could transform society for the worse. More optimistically, AI could enhance productivity so dramatically that people have plenty of income and little unpleasant work to do (Stevenson 2018). Regardless of whether one adopts a pessimistic
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Trump Hasn’t Prepared Us for the Inevitable Economic Slowdown

Larry Summers:
Trump hasn’t prepared us for the inevitable economic slowdown, Washington Post: President Trump regularly and proudly takes credit for the U.S. economy’s strong performance. And with rapid growth during the second quarter, the stock market strong, the unemployment rate back below 4 percent and the midterm elections looming, Trump’s rhetoric and that of his supporters will probably escalate in coming months.
In fact, however, the president receives more of a boost from the strong economy than the other way around. This conclusion will only be reinforced if Trump’s current steps toward a trade war retard U.S. economic performance, as is increasingly feared. ...
Fiscal stimulus is like a drug with tolerance effects; to keep growth constant, deficits have to keep getting larger. Some combination of gathering foreign storm clouds, the end of growing fiscal stimulus and the delayed effect of tightening monetary policies may converge to slow or
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Are Tariff Worries Cutting into Business Investment?

David Altig, Nick Bloom, Steven J. Davis, Brent Meyer, and Nick Parker at the Atlanta Fed's macroblog:
Are Tariff Worries Cutting into Business Investment?: "Nobody's model does a very good job of how uncertainty and hits to confidence affect behavior," says Deutsche Bank's Peter Hooper in a recent Wall Street Journal article. Count us as sympathetic to his viewpoint.
That's one reason why a few of us at the Atlanta Fed created a national survey of firms in collaboration with Nick Bloom of Stanford University and Steven Davis of the University of Chicago Booth School of Business. Our Survey of Business Uncertainty (SBU) elicits information about each firm's expectations and uncertainty regarding its own future capital expenditures, sales growth, employment, and costs.
A pressing issue at the moment is whether, and how, firms are reassessing their capital investment plans in light of recent tariff hikes and fears of more
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Links (8/6/18)