Here is the table of contents for the Summer 2012 issue of my own Journal of Economic Perspectives, with abstracts and links to each article. I'll be blogging about some of these articles in more detail in the next week or so. As always, all JEP articles are freely available, going back to 1994, courtesy of the American Economic Association.
Symposium:
Labor Markets and Unemployment
“A Search
and Matching Approach to Labor Markets: Did the Natural Rate of Unemployment
Rise?”
Mary C. Daly, Bart Hobijn, Ayşegül Şahin and Robert G. Valletta
Mary C. Daly, Bart Hobijn, Ayşegül Şahin and Robert G. Valletta
Abstract: The
U.S. unemployment rate has remained stubbornly high since the 2007-2009
recession, leading some observers to conclude that structural rather than
cyclical factors are to blame. Relying on a standard job search and matching
framework and empirical evidence from a wide array of labor market indicators,
we examine whether the natural rate of unemployment has increased since the
recession began, and if so, whether the underlying causes are transitory or
persistent. Our preferred estimate indicates an increase in the natural rate of
unemployment of about one percentage point during the recession and its
immediate aftermath, putting the current natural rate at around 6 percent. An
assessment of the underlying factors responsible for this increase, including
labor market mismatch, extended unemployment benefits, and uncertainty about
overall economic conditions, implies that only a small fraction is likely to be
persistent.
“Who Suffers during Recessions?”
Hilary Hoynes, Douglas L. Miller and Jessamyn Schaller
Abstract: “In
this paper, we examine how business cycles affect labor market outcomes in the
United States. We conduct a detailed analysis of how cycles affect outcomes
differentially across persons of differing age, education, race, and gender,
and we compare the cyclical sensitivity during the Great Recession to that in
the early 1980s recession. We present raw tabulations and estimate a state
panel data model that leverages variation across U.S. states in the timing and
severity of business cycles. We find that the impacts of the Great Recession
are not uniform across demographic groups and have been felt most strongly for
men, black and Hispanic workers, youth, and low-education workers. These
dramatic differences in the cyclicality across demographic groups are
remarkably stable across three decades of time and throughout recessionary
periods and expansionary periods. For the 2007 recession, these differences are
largely explained by differences in exposure to cycles across industry-occupation
employment.”
Symposium: Government Debt
“The
European Sovereign Debt Crisis”
Philip R. Lane
Philip R. Lane
Full-Text
Access
Abstract: The
origin and propagation of the European sovereign debt crisis can be attributed
to the flawed original design of the euro. In particular, there was an incomplete
understanding of the fragility of a monetary union under crisis conditions,
especially in the absence of banking union and other European-level buffer
mechanisms. Moreover, the inherent messiness involved in proposing and
implementing incremental multicountry crisis management responses on the fly
has been an important destabilizing factor throughout the crisis. After
diagnosing the situation, we consider reforms that might improve the resilience
of the euro area to future fiscal shocks.
“Public Debt
Overhangs: Advanced-Economy Episodes since 1800”
Carmen M. Reinhart, Vincent R. Reinhart and Kenneth S. Rogoff
Carmen M. Reinhart, Vincent R. Reinhart and Kenneth S. Rogoff
Abstract: We
identify the major public debt overhang episodes in the advanced economies
since the early 1800s, characterized by public debt to GDP levels exceeding 90
percent for at least five years. Consistent with Reinhart and Rogoff (2010) and
most of the more recent research, we find that public debt overhang episodes
are associated with lower growth than during other periods. The duration of the
average debt overhang episode is perhaps its most striking feature. Among the
26 episodes we identify, 20 lasted more than a decade. The long duration belies
the view that the correlation is caused mainly by debt buildups during business
cycle recessions. The long duration also implies that the cumulative shortfall
in output from debt overhang is potentially massive. These growth-reducing
effects of high public debt are apparently not transmitted exclusively through
high real interest rates, as in eleven of the episodes, interest rates are not
materially higher.
Articles
The
Economics of Spam
Justin M. Rao and David H. Reiley
Justin M. Rao and David H. Reiley
Abstract: We
estimate that American firms and consumers experience costs of almost $20
billion annually due to spam. Our figure is more conservative than the $50
billion figure often cited by other authors, and we also note that the figure
would be much higher if it were not for private investment in anti-spam
technology by firms, which we detail further on. Based on the work of crafty
computer scientists who have infiltrated and monitored spammers' activity, we
estimate that spammers and spam-advertised merchants collect gross worldwide
revenues on the order of $200 million per year. Thus, the "externality
ratio" of external costs to internal benefits for spam is around 100:1. In
this paper, we start by describing the history of the market for spam,
highlighting the strategic cat-and-mouse game between spammers and email
providers. We discuss how the market structure for spamming has evolved from a
diffuse network of independent spammers running their own online stores to a
highly specialized industry featuring a well-organized network of merchants,
spam distributors (botnets), and spammers (or "advertisers"). We then
put the spam market's externality ratio of 100 into context by comparing it to
other activities with negative externalities. Lastly, we evaluate various
policy proposals designed to solve the spam problem, cautioning that these
proposals may err in assuming away the spammers' ability to adapt.
“Identifying the Disadvantaged: Official Poverty, Consumption Poverty, and the New Supplemental Poverty Measure”
Bruce D. Meyer and James X. Sullivan
“We discuss
poverty measurement, focusing on two alternatives to the current official
measure: consumption poverty, and the Census Bureau's new Supplemental Poverty
Measure (SPM) that was released for the first time last year. The SPM has
advantages over the official poverty measure, including a more defensible
adjustment for family size and composition, an expanded definition of the
family unit that includes cohabitors, and a definition of income that is
conceptually closer to resources available for consumption. The SPM's
definition of income, though conceptually broader than pre-tax money income, is
difficult to implement given available data and their accuracy. Furthermore,
income data do not capture consumption out of savings and tangible assets such
as houses and cars. A consumption-based measure has similar advantages but
fewer disadvantages. We compare those added to and dropped from the poverty
rolls by the alternative measures relative to the current official measure. We
find that the SPM adds to poverty individuals who are more likely to be college
graduates, own a home and a car, live in a larger housing unit, have air
conditioning, health insurance, and substantial assets, and have other more
favorable characteristics than those who are dropped from poverty. Meanwhile,
we find that a consumption measure compared to the official measure or the SPM
adds to the poverty rolls individuals who are more disadvantaged than those who
are dropped. We decompose the differences between the SPM and official poverty
and find that the most problematic aspect of the SPM is the subtraction of
medical out-of-pocket expenses from SPM income. Also, because the SPM poverty
thresholds change in an odd way over time, it will be hard to determine if
changes in poverty are due to changes in income or changes in thresholds. Our
results present strong evidence that a consumption-based poverty measure is
preferable to both the official income-based poverty measure and to the
Supplemental Poverty Measure for determining who are the most disadvantaged.”
“The New
Demographic Transition: Most Gains in Life Expectancy Now Realized Late in Life”
Karen N. Eggleston and Victor R. Fuchs
Karen N. Eggleston and Victor R. Fuchs
Abstract: The
share of increases in life expectancy realized after age 65 was only about 20
percent at the beginning of the 20th century for the United States and 16 other
countries at comparable stages of development; but that share was close to 80
percent by the dawn of the 21st century, and is almost certainly approaching
100 percent asymptotically. This new demographic transition portends a
diminished survival effect on working life. For high-income countries at the
forefront of the longevity transition, expected lifetime labor force
participation as a percent of life expectancy is declining. Innovative policies
are needed if societies wish to preserve a positive relationship running from
increasing longevity to greater prosperity.
“Groups Make Better Self-Interested Decisions”
Gary Charness and Matthias Sutter
Full-Text Access
Abstract: In this paper, we describe what economists have learned about differences between group and individual decision-making. This literature is still young, and in this paper, we will mostly draw on experimental work (mainly in the laboratory) that has compared individual decision-making to group decision-making, and to individual decision-making in situations with salient group membership. The bottom line emerging from economic research on group decision-making is that groups are more likely to make choices that follow standard game-theoretic predictions, while individuals are more likely to be influenced by biases, cognitive limitations, and social considerations. In this sense, groups are generally less "behavioral" than individuals. An immediate implication of this result is that individual decisions in isolation cannot necessarily be assumed to be good predictors of the decisions made by groups. More broadly, the evidence casts doubts on traditional approaches that model economic behavior as if individuals were making decisions in isolation.
Abstract: In this paper, we describe what economists have learned about differences between group and individual decision-making. This literature is still young, and in this paper, we will mostly draw on experimental work (mainly in the laboratory) that has compared individual decision-making to group decision-making, and to individual decision-making in situations with salient group membership. The bottom line emerging from economic research on group decision-making is that groups are more likely to make choices that follow standard game-theoretic predictions, while individuals are more likely to be influenced by biases, cognitive limitations, and social considerations. In this sense, groups are generally less "behavioral" than individuals. An immediate implication of this result is that individual decisions in isolation cannot necessarily be assumed to be good predictors of the decisions made by groups. More broadly, the evidence casts doubts on traditional approaches that model economic behavior as if individuals were making decisions in isolation.
“Deleveraging
and Monetary Policy: Japan since the 1990s and the United States since 2007”
Kazuo Ueda
Kazuo Ueda
Abstract: As the U.S. economy works through a sluggish recovery several years after the Great Recession technically came to an end in June 2009, it can only look with horror toward Japan's experience of two decades of stagnant growth since the early 1990s. In contrast to Japan, U.S. policy authorities responded to the financial crisis since 2007 more quickly. Surely, they learned from Japan's experience. I will begin by describing how Japan's economic situation unfolded in the early 1990s and offering some comparisons with how the Great Recession unfolded in the U.S. economy. I then turn to the Bank of Japan's policy responses to the crisis and again offer some comparisons to the Federal Reserve. I will discuss the use of both the conventional interest rate tool—the federal funds rate in the United States, and the "call rate" in Japan—and nonconventional measures of monetary policy and consider their effectiveness in the context of the rest of the financial system.
“The Relationship between Unit Cost and Cumulative Quantity and the Evidence for Organizational Learning-by-Doing”
Peter Thompson
Abstract: The
concept of a learning curve for individuals has been around since the beginning
of the twentieth century. The idea that an analogous phenomenon might also
apply at the level of the organization took longer to emerge, but it had begun
to figure prominently in military procurement and scheduling at least a decade
before Wright's (1936) classic paper providing evidence that the cost of
producing an airframe declined as cumulative output increased. Wright (1936)
was careful not to describe his empirical results as a learning curve. Of his
three proposed three explanations for the relationships he observed between
cost and cumulative quantity produced, only one is unambiguously a source of
organizational learning; the others are consistent with organizational learning
but also with standard static economies of scale. It quickly became apparent
that the notion of organizational learning as a by-product of accumulated
experience has important consequences for firm strategy. The Boston Consulting
Group (BCG) built its consulting business around the concept of what it branded
the experience curve, asserting that cost reductions associated with cumulative
output applied to all costs, were "consistently around 20-30% each time
accumulated production is doubled, [and] this decline goes on in time without
limit" (Henderson 1968). Today, the negative relationship between unit
production costs and cumulative output is one of the best-documented empirical
regularities in economics. Nonetheless, the thesis of this paper is that the
conceptual transformation of the relationship between cost and cumulative
production into an organizational learning curve with profound strategic
implications has not been sufficiently supported with direct empirical
evidence.
Features
“Recommendations
for Further Reading”
Timothy
Taylor