When is a fiscal stimulus going to work? If you listen to economists these days, it would be difficult to know. One reason is that protagonists quickly become sidetracked by the associated political discourse. The other is that one would first need to define the fiscal stimulus. Depending on whether it is provided by tax rebates, public expenses or tax delays makes a big difference. Also, who is targeted matters a lot. Thus one needs to get the specifics of the fiscal stimulus to give a proper answer. The general rule, though, is that a fiscal stimulus works best if the credit or liquidity constraint households obtain additional cash. They are going to spend it right away. The other households would reduce consumption only slightly in anticipation of future increased taxes due to a wealth effect. In the aggregate, consumption would then go up, but not a lot. But there can be other circumstances where it would work better.
Thorsten Drautzburg and Harald Uhlig study a situation similar to the one now in the Unites States: nominal interest rates getting very close to zero. Then, they claim the fiscal multipliers are still rather small, but may be positive despite distortionary taxation. Now contrast this with the results of Lawrence Christiano, Martin Eichebaum and Sergio Rebelo, who argue that the fiscal multipliers become very large (and positive) when nominal interest rates are close to zero. Who is to believe? Both use a rather elaborate DSGE model, in both cases estimated. Both use the Calvo fairy. Or a Taylor rule. The first has financial frictions, while the second has investment adjustment costs, which should come to the same. If anybody can figure out why the results are so different, I would appreciate it.
It particular it would be interesting to understand why now would now be the wrong time to institute an austerity regime. To me, it would even make perfect business sense: why not build infrastructure when the cost in terms of financing and labor are low? Keep in mind that every unemployed worker that is hired does not need unemployment benefits...
Male circumcision and risky sexual behavior
There is a well-known phenomenon that states that when an activity becomes safer, people will respond with riskier behavior. The classic example is the use of seat belts that has lead to more aggressive driving (although there is a claim that this example is wrong). Now switch to another risky behavior: sex. It is well established that male circumcision leads to a significantly lower transmission probability of AIDS. Is risk compensation also happening here?
Nicholas Wilson, Wentao Xiong and Christine Mattson look at recently circumcised males in a region of Kenya and find that their sex behavior is less risky than the uncircumcised control group. This is not a selection effect, as circumcision has been randomly assigned. The authors think that the circumcised ones have become less fatalist about future life prospects and thus changed their behavior for the better (this is also why you want to provide health insurance conditional on not dying from AIDS). I wonder though whether the circumcision has made them more aware of the risk of AIDS as well.
Nicholas Wilson, Wentao Xiong and Christine Mattson look at recently circumcised males in a region of Kenya and find that their sex behavior is less risky than the uncircumcised control group. This is not a selection effect, as circumcision has been randomly assigned. The authors think that the circumcised ones have become less fatalist about future life prospects and thus changed their behavior for the better (this is also why you want to provide health insurance conditional on not dying from AIDS). I wonder though whether the circumcision has made them more aware of the risk of AIDS as well.
Athletes are more competitive, but also more destructively envious
Student athletes are better than average students, despite having some sports severely dragging down this record. My impression is that these students know that they have less time to study and thus do not fool around like the others. They develop superior time management skills and thus obtain better results with less time to study.
Another aspect I did not think about is that athlete are more competitive. It is in part selected and in part learned: they get into sports because they are competitive, and they become competitive because they are athletes. Jérémy Celse shows that this is a mixed blessing, though. Once they have graduated, they also get an edge from being competitive and used to compete. However, athletes are less cooperative and find satisfaction in hurting others. Using an experimental approach, Celse finds that (self-declared) athletes behave anti-socially and with more jealousy than others when learning they did worse than their experiment partners (or opponents). In other words, do not count on athletes to be team workers. It is unclear whether this applies also for those practicing team sports. The variable was captured, but I see no result using it.
Another aspect I did not think about is that athlete are more competitive. It is in part selected and in part learned: they get into sports because they are competitive, and they become competitive because they are athletes. Jérémy Celse shows that this is a mixed blessing, though. Once they have graduated, they also get an edge from being competitive and used to compete. However, athletes are less cooperative and find satisfaction in hurting others. Using an experimental approach, Celse finds that (self-declared) athletes behave anti-socially and with more jealousy than others when learning they did worse than their experiment partners (or opponents). In other words, do not count on athletes to be team workers. It is unclear whether this applies also for those practicing team sports. The variable was captured, but I see no result using it.
Are government workers more motivated?
In times if tight fiscal conditions, it is easy to criticize public employees. Civil servant have the reputation of being overpaid, underworked, lazy, unmotivated and enjoying too many benefits. I will not address all of this concerns here. I already covered overpaid, let us talk about unmotivated.
Using the World Values Survey, Sarah Smith and Edd Cowley find that public sector workers are intrinsically more motivated. To some extend this is not surprising, as one self-selects into the public sector when one is not that motivated by profits and money, but rather what public service stands for: serving others. But this does not apply to every country. The more corruption there is, the less motivated are civil servants. Indeed, in a corrupt government, public service takes a back seat to earning more money (or influence). How can one the explain the bad rap civil servants gets from private sector workers in the least corrupt economies? Maybe it is the public just reflecting its own values about work on the public workers, unjustifiably.
Using the World Values Survey, Sarah Smith and Edd Cowley find that public sector workers are intrinsically more motivated. To some extend this is not surprising, as one self-selects into the public sector when one is not that motivated by profits and money, but rather what public service stands for: serving others. But this does not apply to every country. The more corruption there is, the less motivated are civil servants. Indeed, in a corrupt government, public service takes a back seat to earning more money (or influence). How can one the explain the bad rap civil servants gets from private sector workers in the least corrupt economies? Maybe it is the public just reflecting its own values about work on the public workers, unjustifiably.
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More on the long term consequence of slavery in Africa
Since the start of this blog, one of the most popular posts has been one that analyzes the long-term costs of slavery in Africa. Of course, it is about the consequences in regions where slaves were taken from. There is also a region where they have been taken to, that is South Africa. What has been the impact there?
Johan Fourie writes that farmers taking slaves prospered thanks to economies of scale of specialization, to the point that they were considered by some to be the richest in the world at the time. But this advantage did not last long, as the use of slave labor discouraged further immigration from Europe. And as education opportunities were limited to (free) whites, large inequalities were maintained through a period where human capital became more important. These inequalities and the large fraction of poorly educated citizens, even after emancipation and the end of apartheid, stills drags the South African economy down, because institutions emerged to perpetuate these inequities.
This persistent impact of inequality in human capital is consistent with evidence from the US, as I reported in a previous post, with a recent update by the same authors just published recently. Graziella Bertocchi and Arcangelo Dimico expand on their use of US panel data. In short, they find that the education gap between whites and blacks at the county level today is determined by the initial gap in 1940, with only little convergence since. And the initial gap is largely explained by prevalence of slavery in earlier years.
Johan Fourie writes that farmers taking slaves prospered thanks to economies of scale of specialization, to the point that they were considered by some to be the richest in the world at the time. But this advantage did not last long, as the use of slave labor discouraged further immigration from Europe. And as education opportunities were limited to (free) whites, large inequalities were maintained through a period where human capital became more important. These inequalities and the large fraction of poorly educated citizens, even after emancipation and the end of apartheid, stills drags the South African economy down, because institutions emerged to perpetuate these inequities.
This persistent impact of inequality in human capital is consistent with evidence from the US, as I reported in a previous post, with a recent update by the same authors just published recently. Graziella Bertocchi and Arcangelo Dimico expand on their use of US panel data. In short, they find that the education gap between whites and blacks at the county level today is determined by the initial gap in 1940, with only little convergence since. And the initial gap is largely explained by prevalence of slavery in earlier years.
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