Monthly Archives: November 2011

Unemployment and support for democracy

Yale economist Robert Shiller in the New York Times this weekend:

Bad as it is for those without jobs and their immediate families, unemployment tears the fabric of our society. Duha T. Altindag of Auburn University and Naci H. Mocan of Louisiana State University used data collected by the World Values Survey on more than 130,000 people from 69 countries to learn how unemployment affects confidence in civil society and basic democratic institutions.

They looked at a survey question inquiring whether “having a strong leader who does not have to bother with Parliament or elections” is a good thing. In the United States, being jobless increases the propensity to agree by about 11 percentage points, to 38 percent from the sample mean of 27 percent, after controlling for other factors like income and education. They also found that, in countries where they had the appropriate data, people who have been unemployed for more than a year are even more likely to agree, if other factors are held constant.

The original paper can be found here. The authors do indeed find a robust correlation between anti-democratic views and joblessness. They also discuss potential alternative explanations, including that the correlation is spurious and reverse causality. I’m not sure that they ruled them out, but at least they have considered them.

Why is there more inequality?

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Lawrence Summers in the Washington Post:

Why has the top 1 percent done so well relative to the rest? The answer lies substantially in changes in technology and in globalization. When George Eastman revolutionized photography, he did very well, and because he needed a large number of Americans to carry out his vision, the city of Rochester, N.Y., had a thriving middle class for two generations. When Steve Jobs revolutionized personal computing, he and Apple shareholders did very well, but those shareholders are all over the world, and a much smaller benefit flowed to middle-class American workers, both because production was outsourced and because the production of computers and software was not terribly labor-intensive.

For a contrasting view, see this paper (and book) by political scientists Jacob Hacker and Paul Pierson:

The dramatic rise in inequality in the United States over the past generation has occasioned considerable attention from economists, but strikingly little from students of American politics. This has started to change: in recent years, a small but growing body of political science research on rising inequality has challenged standard economic accounts that emphasize apolitical processes of economic change. For all the sophistication of this new scholarship, however, it too fails to provide a compelling account of the political sources and effects of rising inequality. In particular, these studies share with dominant economic accounts three weaknesses: (1) they downplay the distinctive feature of American inequality —namely, the extreme concentration of income gains at the top of the economic ladder; (2) they miss the profound role of government policy in creating this “winner-take-all” pattern; and (3) they give little attention or weight to the dramatic long-term transformation of the organizational landscape of American politics that lies behind these changes in policy. These weaknesses are interrelated, stemming ultimately from a conception of politics that emphasizes the sway (or lack thereof) of the “median voter” in electoral politics, rather than the influence of organized interests in the process of policy making. A perspective centered on organizational and policy change —one that identifies the major policy shifts that have bolstered the economic standing of those at the top and then links those shifts to concrete organizational efforts by resourceful private interests —fares much better at explaining why the American political economy has become distinctively winner-take-all.

As per usual, explanations for why a problem happened color the proposed solutions. But actually, both Summers and H&P are pretty vague. Summers for example says we need “pro-fairness, pro-growth tax reforms.” Hacker and Pierson talk about…well, I’m not sure really.

“Spacing Children Farther Apart Benefits Older Siblings”

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Via the New York Times, this post at the Freakonomics blog caught my attention:

A new study (PDF here) by University of Notre Dame economist Kasey Buckles and graduate student Elizabeth Munnich finds that siblings spaced more than two years apart have higher reading and math scores than children born closer together. The positive effects were seen only in older siblings, not in younger ones.

The NYT post doesn’t address the selection issue–that those who choose to space their children apart may just be “better” parents than those who don’t. But the actual paper, and the Freakonomics post, does: the authors take advantage of the fact that some families wait between births due to factors beyond their control, i.e. miscarriages. This from the paper’s abstract:

However, because we are concerned that spacing may be correlated with unobservable characteristics, we also use an instrumental variables strategy that exploits variation in spacing driven by miscarriages that occur between two live births. The IV results indicate that a one-year increase in spacing increases test scores for older siblings by about 0.17 standard deviations—an effect comparable to estimates of the effect of birth order. Especially close spacing (less than two years) decreases scores by 0.65 SD. These results are larger than the OLS estimates, suggesting that estimates that fail to account for the endogeneity of spacing may understate its benefits.

Interesting stuff. So my question is whether the authors think they are going to convince policy makers that they should come up with incentives to influence birth spacing?

Causes of the financial crisis, redux

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Washington Post columnist Barry Ritholtz:

Rather than attend a college-level seminar on the complex philosophy of causation, we’ll keep it simple. To assess how blameworthy any factor is regarding the cause of a subsequent event, consider whether that element was 1) proximate 2) statistically valid 3) necessary and sufficient.

These are some strange criteria. Actually, I’m not sure I can even call them “strange” since they aren’t ever defined in the piece. I guess it’s just a way for Ritholtz to justify appealing to actual standards for evaluating causation–as he puts it, things taught in a “college-level seminar on the complex philosophy of causation.”

But to get to what Ritholtz is arguing against (what he calls the “big lie” of the crisis):

Consider the causes cited by those who’ve taken up the big lie. Take for example New York Mayor Michael Bloomberg’s statement that it was Congress that forced banks to make ill-advised loans to people who could not afford them and defaulted in large numbers. He and others claim that caused the crisis. Others have suggested these were to blame: the home mortgage interest deduction, the Community Reinvestment Act of 1977, the 1994 Housing and Urban Development memo, Fannie Mae and Freddie Mac, Rep. Barney Frank (D-Mass.) and homeownership targets set by both the Clinton and Bush administrations.

Running through his counter examples, I guess it’s not completely unconvincing.

Has Occupy Wall Street made inequality salient?

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The Washington Post reports:

More than six in 10 Americans see a widening gap between the wealthy and the less well-off in this country, and about as many want the federal government to try to shrink the divide, according to a new Washington Post-ABC News poll.

Democrats and independents largely support government policies to reduce the wealth gap, while most Republicans oppose such action. The issue cuts even more sharply along a new political fault line, with tea party supporters and those backing the fledgling Occupy Wall Street movement on opposite sides of the question.

I’ve heard lots of chatter lately about how the Occupy movement has succeeded in getting inequality on the policy agenda. Polls like this could be evidence of that. Or it could be that people have always cared about inequality. To see if this is true, I created the following figure using survey data from the General Social Survey. Since the late 70s the GSS has asked the following question:

Some people think that the government in Washington ought to reduce the income differences between the rich and the poor, perhaps by raising the taxes of wealthy families or by giving income assistance to the poor. Others think that the government should not concern itself with reducing this income difference between the rich and the poor. Here is a card with a scale from 1 to 7. Think of a score of 1 as meaning that the government ought to reduce the income differences between rich and poor, and a score of 7 meaning that the government should not concern itself with reducing income differences. What score between 1 and 7 comes closest to the way you feel?

The figure below plots the proportion of respondents favoring government action to reduce income differences (below the midpoint; solid line), those against (above the midpoint; dashed line), and those replying with the midpoint on the scale (dotted line).

Note that the “reduce income differences” category has always had a plurality, though never a majority. Could differences in the way the question is worded account for the apparent 20% jump between the GSS in 2010 and the Washington Post result in 2011?

Does government regulation kill jobs?

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The Washington Post reports.

Does voting increase stress among of voters?

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NYT: Voters Experience Stress on Election Day, Study Finds. Here’s a link to the research. Reading the NYT article left me wondering who the control group was? This is revealed in the paper’s abstract:

Compared to a second sample of voters who reported their affective state on election night (N = 70), we found that voters at the ballot box had higher positive and negative affect.

Do targeted tax credits create jobs? If not, what do they do?

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Charles Lane writes in the Washington Post:

At last there may be a job-creation idea everyone in Washington can vote for. Too bad it’s an idea that has been amply proven not to work.

The subject is tax breaks for hiring veterans. President Obama included two such provisions in his American Jobs Act. The Returning Heroes Tax Credit gives employers up to $4,800 for hiring unemployed vets, and the Wounded Warrior Tax Credit would double an existing break for hiring disabled veterans from a maximum of $4,800 to $9,600. The two-year cost of the programs: $120 million.

Lane runs through some possible evidence that such tax breaks don’t “work” in terms of creating jobs, and claims they fail consistently. So why do they persist?

The only explanation is politics. If you’re a politician, and you want to make it sound like you’re helping a particular needy group but not giving them a handout, you promise to pay employers to hire them. That’s basically what Obama is doing now, with the likely backing of Republicans.

Environmental regulation and jobs

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The NY Times editorializes today:

The House’s campaign to undercut environmental laws has now migrated to the Senate. Rand Paul, a Republican of Kentucky, is expected to offer a resolution this week to block a new federal regulation requiring cuts in soot- and smog-forming gases from power plants east of the Mississippi River. Joe Manchin III, a Democrat of West Virginia, and Dan Coats, an Indiana Republican, are then expected to try to delay all new rules governing power-plant pollution.

These are bad bills, and Senate leaders should stop them from going forward. Weakening clean-air rules would harm public health. And the fundamental premise, that environmental regulation destroys jobs, is simply wrong.

The editorial is cleverly titled “Bad theory, bad legislation.”

Unfortunately, the force of the Times’ words–”simply wrong”–is undercut by the weakness of the evidence it provides. If I were a Republican reading this, I would have no trouble thinking up counterarguments. If I were an objective reader, I’d note that the EPI is a left-wing think tank and that their report is the only piece of evidence the Times gives for its claims. And from the sound of it the EPI report wasn’t even using observational data, but was based on some kind of simulation.

It would be nice if there were better evidence on what creates jobs. Unfortunately the more politicized an issue is, the harder it seems to research it.