Lots of political events in recent weeks, so I have few articles on US midterms and UK’s Brexit. On the more macro side, there are some interesting articles on how to think about central bank balance sheets, EM inflation and fiscal crowding out in Italy. Oh, and I have an article listing the most expensive business schools in the world. Enjoy.
Weak Spots in Democrats’ Strong Midterm Results Point to Challenges in 2020 This NYT article argues that the Democrat House win “was a somewhat narrow one, concentrated in well-educated, affluent communities.” They highlight Democrat weakness in like Miami-Dade (despite a large Cuban population) and rural non-white areas. FiveThirtyEight’s write-up discusses the record-breaking 19% female voting gap (59% of women voted for Democrats compared to 40% for Republicans). Digging deeper they find that white women split their vote equally between the two parties, while in 2016 they leaned Republican by 12%. It’s only when they look at non-college educated white women do they find the female vote lean Republican by 14%. Finally, the American Enterprise Institute has a summary of voters issues of concern. They find that the top issue was healthcare, followed by immigration and the economy.
Populism’s Common Denominator Barry Eichengreen writes: “What unites supporters of authoritarian, upstart politicians like US President Donald Trump and Brazilian President-elect Jair Bolsonaro is revulsion against the corruption of the political process. But voters will learn the hard way that strongman rule exacerbates rather than mitigates corruption”
Urban planning policy contributes to political polarization Study looks at Canada, but argues it can be applied to the US as well. Finds that the creation of suburbs after WW2 has resulted in heavy car use and the decline of shared public spaces. This leads to a greater resistance to change, which in turn the authors argue has helped fuel the rise of right-wing populism.
Brexiteers fear price rises, not return of Irish border Recent survey finds that price increases, staff shortages at NHS and medicine shortages biggest reason Brexit voters may change their minds.
What would it be like? LSE academics run through the impact of a “no deal” Brexit on various segments of the UK from its overall impact on the economy to its impact on Dover.
Arabia: the new Mecca for Chinese medical tourists? Forget Thailand, there’s a new destination on the map for China’s big-spending, travelling patients: the Middle East
Foreign Capital Has Been Propping Up China’s Currency. Here’s What Happens When It Leaves. The Council On Foreign Relations argues that the surge in portfolio flows to China in recent years could be about to reverse, which could spark a balance of payments crisis.
What Drives China’s Growth? Evidence from Micro-level Data The BoJ crunches the numbers and finds that China’s total factor productivity (TFP) has increased through the following four channels: (i) declining proportion of low-productivity state-owned enterprises, (ii) continuous influx of highly competent new start-ups, (iii) broad catching up trend among the laggards in the firm distribution, and (iv) innovation spawning R&D activities. The paper doesn’t discuss President Xi’s latest reforms and how they impact these channels, though.
China to create trade zone with Thailand and Laos as tariffs bite Apparently it will help “exporting into the European market via China’s western border with Kazakhstan”
Benoît Cœuré: Monetary policy and climate change Runs through the various dilemmas climate change pose to policy-makers. He suggests that “it will become increasingly difficult for central banks to disentangle the variation in the data relevant for the assessment of the medium-term inflation outlook.It will cause the signal-to-noise ratio to deteriorate and thereby increase the risk that central banks take action when in fact they shouldn’t, or vice versa.”
Central bank balance sheets and monetary policy Data for 31 advanced and emerging economies reveal a potentially negative, albeit tenuous, relationship between balance sheet policies and monetary policy objectives.
Equilibrium Yield Curve, the Phillips Curve, and Monetary Policy IMF paper which addresses the question of upward sloping yield curves being hard to reconcile with the positive association between income and inflation (the Phillips curve) in consumption-based asset pricing models. Using US and UK data, this paper shows inflation is negatively correlated with long-run income growth but positively correlated with cyclical income, thus enabling the model to replicate positive and sizable term premiums, along with the Phillips curve over business cycles.
Crowding out risk: Sovereign debt, banks, and firms’ investment in Italy According to the authors, the Italian government has decided to pursue an expansionary fiscal policy, with increased welfare spending as its focus. The authors look at the 2010-2012 sovereign debt crisis to explore the potential negative effects of this policy on private investment. They find that an increase in a bank’s credit default swap spreads leads to lower investment and employment for younger and smaller firms and in the aggregate, so private investment is crowded out.
Is Inflation Domestic or Global? Evidence from Emerging Markets IMF paper argues that the disinflation of the 1990s and early 2000s in EM was caused more by anchoring longer-term inflation expectations, linked to domestic factors, rather than China’s integration into world trade and the broader globalization in these economies.
Inflation in Emerging and Developing Economies Impressive report and soon-to-available dataset on inflation from the World Bank. They say they provide “the first comprehensive and systematic analysis of inflation in emerging market and developing economies” and “this book employs cutting edge empirical approaches. It also offers a rich dataset of multiple measures of inflation for a virtually global sample of countries over a half-century to spur further research into this important topic”
Demographics and Geography (4)
Globalization, Gender, and the Family Using data from Denmark, the authors show that lower labour market opportunities due to Chinese import competition lead to a shift towards family, with more parental leave taking and higher fertility as well as more marriages and fewer divorces. This pro-family, pro-child shift is driven largely by women, not men. Therefore, the negative earnings implications of the rising import competition are concentrated on women, and gender earnings inequality increases. They find that the female biological clock, that is, women have difficulties to conceive beyond their early forties, is central for the gender differential, rather than the composition of jobs and workplaces, as well as other potential causes.
Superstar effect wins again as amazon chooses New York, Washington for HQ2/3. Argues that tech firms are more concerned with attracting top talent than costs and the coasts have the 1-2% of students. Even Chicago cannot compete, apparently.
Global Burden of Disease From the Lancet, the most comprehensive worldwide observational epidemiological study to date. It describes mortality and morbidity from major diseases, injuries and risk factors to health at global, national and regional levels. Some findings include: “plateauing mortality rates, era-defining epidemics, and dramatic health worker shortages”, “conflict and terrorism have become two of the fastest growing causes of death globally. Alongside this alarming growth in violence, our era is characterised by epidemics such as opioid dependence, noncommunicable diseases, depression, and dengue fever.” The report also has stats on population growth (more linear, less exponential than before).
When No One Retires. HBR report that looks at how an ageing workforce can be turned into an opportunity.
Intangibles and Productivity (3)
Factor Incomes in Global Value Chains: The Role of Intangibles Recent studies document a decline in the share of labour and a simultaneous increase in the share of residual (‘factorless’) income in national GDP. The authors look at the GVC and define a new residual as the difference between the value of the final good and the payments to all tangibles (capital and labour) in any stage. They focus on manufactured goods and find the residual to be large, which is not covered in current national accounts statistics. They argue that since 2000 multinational firms have benefitted from reduced labour costs through offshoring, while capitalising on existing firm-specific intangibles, such as brand names, at little marginal cost.
Hurdles to workers’ and capital’s flow between firms: The roots of sluggish productivity The authors find generalized difficulty of reallocating resources between firms in the same industry and in the same geographical area. Surprisingly, more difficulties have been recorded in reallocating resources in industries where technology has been changing faster rather than between sectors with different speeds of technological change. They argue that more non-bank forms of financing such as VC funding and better human capital needs to developed to support the correct resource allocations within an industry.
Reading list on long-term drivers of growth. Nice selection with short summaries. Seems to have a pessimistic tilt.
The 35 best MBA programs in the world, ranked from least to most expensive The most expensive school charges $160,000!