Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, December 20, 2018

AI Summary. China's share of global GDP, measured on a purchasing power parity basis, is projected to fall from a mid-2020s peak of 20% to 17% by 2040, with its current share at 19%. The projected decline is attributed to demographic shifts, even as average incomes in China rise.

Steve Johnson Financial Times
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China’s share of global GDP is projected to decline from 20% in the mid-2020s to 17% by 2040, driven by demographic shifts, according to @SteveJohnsonFT.

Will demographic shifts shrink China's share of global output?

Core argument: China's share of global GDP on a purchasing power parity basis is projected to fall from a mid-2020s peak of 20% to 17% by 2040, a decline attributed to demographic shifts.

China's share of global GDP, measured on a purchasing power parity basis, is projected to decline from its peak of 20% in the mid-2020s to 17% by 2040. This decrease is attributed to demographic shifts, despite rising average incomes in the country. The People's Republic of China (PRC) currently holds a 19% share of global output, indicating a gradual reduction over the coming decades. These changes suggest a shift in the global economic landscape, with potential implications for international trade and investment patterns. As China's demographic challenges continue to unfold, the country's economic influence may be tempered, affecting global markets and economic policies. This anticipated decline underscores the importance of understanding demographic trends and their impact on macroeconomic dynamics.

Takeaways by Macro Roundup® AI

  1. China's share of global GDP on a purchasing power parity basis is projected to fall from a mid-2020s peak of 20% to 17% by 2040, a decline attributed to demographic shifts.
  2. China holds a 19% share of global output measured on a purchasing power parity basis.
  3. The projected decline in China's share of world output comes despite rising average incomes in the country.

great charts
demographics implies that the PRC's share of global output will fall, even as their average incomes keep rising"...The country will account for 17 per cent of global gross domestic product, measured on a purchasing power parity basis, by 2040, below its current 19 per cent weight, according to Neil Shearing, group chief economist at Capital Economics, having peaked at 20 per cent in the mid-2020s, as the first chart shows...".Steve Johnson, "China’s share of global output ‘to fall’ by 2040,"Financial Times, December 19, 2018, https://www.ft.com/content/2fec1b60-fefc-11e8-ac00-57a2a826423e

AI Summary. Urban workers with graduate degrees earn up to $20,000 more than rural counterparts, and college enrollment is 27% in rural areas versus over 40% in urban areas. Rural economies are concentrated in farming and manufacturing, sectors that traditionally required less education but increasingly demand higher skills as technology advances.

James Pethokoukis American Enterprise Institute
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Urban areas benefit from a highly educated workforce, with professionals earning up to $20,000 more than their rural counterparts at the graduate level.

How do education gaps drive income differences between urban and rural America?

Core argument: Graduate-level professionals in urban areas earn up to $20,000 more than their rural counterparts, a gap that discourages educated professionals from moving to or staying in rural areas and worsens rural brain drain.

The economic gaps between urban and rural America are starkly illustrated by education disparities, which significantly impact income levels and workforce distribution. Urban areas benefit from a highly educated workforce, with professionals earning up to $20,000 more than their rural counterparts at the graduate level. This income disparity discourages educated professionals from moving to or staying in rural areas, exacerbating the brain drain. Rural regions have fewer educational institutions, leading to lower college enrollment rates (27% vs. over 40% in urban areas), further diminishing their economic competitiveness. Additionally, rural economies are concentrated in sectors like farming and manufacturing, which traditionally require less education but are increasingly demanding higher skills due to technological advancements. This shift highlights the challenges rural areas face in transitioning to a knowledge-based economy, underscoring the need for strategic policy interventions to bridge these economic divides.

Takeaways by Macro Roundup® AI

  1. Graduate-level professionals in urban areas earn up to $20,000 more than their rural counterparts, a gap that discourages educated professionals from moving to or staying in rural areas and worsens rural brain drain.
  2. College enrollment reaches over 40% in urban areas versus 27% in rural regions, where fewer educational institutions contribute to lower attainment and diminished economic competitiveness.
  3. Rural economies are concentrated in farming and manufacturing, sectors that traditionally require less education but increasingly demand higher skills as technology advances, complicating the transition to a knowledge-based economy.

James Pethokoukis, "5 charts on the economic gaps between urban and rural America," American Enterprise Institute, December 18, 2018, https://www.aei.org/economics/5-charts-on-the-economics-gaps-between-urban-and-rural-america/

5 charts on the economic gaps between urban and rural America

So Goldman Sachs has put out a megareport on the issue of American geographic disparity. Dozens of charts looking at the various economic differences between rural, urban, and suburban areas, and between small and medium-sized towns vs. prime cities. A few examples:

5 charts on the economic gaps between urban and rural America: Extended Excerpt Image 1


Clearly one of the massive advantages of urban areas is its educated workforce. As the report points out: “As the American economy becomes more services- and technology-oriented, the demand for labor has favored workers with high levels of education and specialized skill sets.” So it’s worth highlighting the report’s analysis of education disparities:

Several factors have contributed to the high degree of education disparity between geographies. First, highly-educated professionals earn significantly more in the cities than they do in rural areas, which discourages them from remaining in, or moving to, rural areas.... Adults with low levels of education have comparable incomes regardless of geography. As the education level increases, geographical disparity starts to grow, reaching its peak at the graduate and professional degree level. The difference in median income between Rural and Prime areas is about $5000 for people with some college-level education but increases to more than $20,000 for people with a graduate-level education

This stark divergence offers one reason many low-income residents in struggling rural areas have not moved to more prosperous urbanized areas: at the lower end of the education scale, there is very little financial incentive to move. The income disparity at high education levels also explains the difficulties rural areas have in attracting and retaining well-educated workers such as doctors, engineers, and teachers: the financial rewards of working in the cities, along with the urban lifestyle, may be more appealing to many professionals.

Second, due to their small population size, rural areas have significantly fewer colleges and universities — including tax-funded community colleges and state universities — than urban areas, prompting many rural youths to move away in pursuit of a post-secondary education, which in turn often lead to careers in the cities. Relatively fewer of the youths who remain in rural areas attend college, resulting in significant differences in post-secondary enrollment between rural and urban youths. According to data from the American Community Survey, the enrollment rate among college-age population (18-24) in Rural areas is 27%, considerably lower than in other geographical areas, which are all above 40%. This is an indication of the brain drain in Rural counties that will have a long-term impact on their economic competitiveness.

Third, rural economies have a high concentration of sectors such as farming, manufacturing, and retail that ordinarily do not require a highly-educated labor force. As a result, workers may not face the same level of pressure to obtain advanced degrees in order to remain competitive in the labor market, as they do in urban areas. But, this is changing, especially in manufacturing as more complex systems are adopted. The lack of an educated workforce makes it especially challenging for rural communities to transition from a low value-add industry mix to a technology-intensive, knowledge-based economy.

Sunday, December 23, 2018

AI Summary. Research attributes longer US working hours than Germany's to inequality, with steeper income gradients giving individuals more incentive to work hard to climb the income ladder. The US output-per-person advantage over Belgium is attributed to hours worked rather than productivity per hour, and work habits are also influenced by peers.

Ryan Avent The Economist
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Research by Bell & Freeman shows inequality drives longer US working hours, as steeper income gradients push individuals to work harder to climb the income ladder.

Does greater inequality explain why Americans work longer hours?

Core argument: Bell and Freeman argue that inequality contributes to longer working hours in the US than in Germany, as steeper income gradients give individuals stronger incentives to work harder to climb the income ladder.

Research by Bell and Freeman highlights that inequality significantly influences the longer working hours in the US compared to Germany, as steeper income gradients drive individuals to work harder to climb the income ladder. This contributes to higher GDP, as seen in the output per person difference between the US and Belgium, which is attributed to hours worked rather than productivity per hour. The "social-multiplier" effect, described by Glaeser, Sacerdote, and Scheinkman, suggests that work habits are influenced by peers, making it costly to miss work when others are present. This peer influence, combined with individual flexibility in work time, underscores the societal challenge of balancing work with other life aspects.

Takeaways by Macro Roundup® AI

  1. Bell and Freeman argue that inequality contributes to longer working hours in the US than in Germany, as steeper income gradients give individuals stronger incentives to work harder to climb the income ladder.
  2. The difference in output per person between the US and Belgium is attributed to hours worked rather than productivity per hour.
  3. Glaeser, Sacerdote and Scheinkman describe a "social-multiplier" effect in which work habits are shaped by peers, making it costly for an individual to miss work when colleagues are present.

Economist reports on the Bell/Freeman hours worked research you cited inUpside

Ryan Avent, "Why Americans and Britons work such long hours,"The Economist, December 18, 2018, https://www.economist.com/finance-and-economics/2018/12/22/why-americans-and-britons-work-such-long-hours

"...Research by Linda Bell of Barnard College and Richard Freeman of Harvard University, for example, concluded that inequality accounts for much of the difference in hours worked between America and Germany. When the income gradient in an economy or within an occupation is steeper, people work longer and harder in order to increase their chances of moving up the income ladder. Inequality might thus contribute to higher GDP (the difference in output per person between America and Belgium, for example, is entirely down to differences in hours worked rather than output per hour). But as a result, success in elite professions often hinges as much on a willingness to focus on work to the exclusion of all else as on other factors....Just as importantly, individual decisions regarding work inevitably evolve in response to choices made by peers. Edward Glaeser of Harvard University, Bruce Sacerdote of Dartmouth College and José Scheinkman of Columbia University describe a “social-multiplier” effect, which boils down to the notion that spending time in a particular way is more enjoyable when others do the same. It is costly to miss work when others are there, and more fun to attend festivals when others are also free to do so. Individual flexibility in choosing working time is important; different people have different needs and preferences. But at some level, society as a whole must judge whether or not there is more to life than work..."

AI Summary. The authors estimate that the decline in US manufacturing employment reduced black male wages by 13.3% and black male employment rates by 5.6 percentage points, while lowering marriage rates by 4.6 percentage points for black men and 5.1 points for black women. They find it widened racial gaps in income, employment, health, and family formation.

Eric Gould Center for Economic and Policy Research
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Decline in manufacturing jobs in the US disproportionately affected less-educated workers, with a larger impact on black Americans due to lower education levels compared to whites.

Has manufacturing's decline widened racial gaps in wages, employment, and marriage?

Core argument: The decline in US manufacturing employment from 1960 to 2010 reduced black male wages by 13.3% and black male employment rates by 5.6 percentage points, with less-educated workers most affected.

The decline in manufacturing jobs in the US has disproportionately affected less-educated workers, with a larger impact on black Americans due to lower education levels compared to whites. From 1960 to 2010, this decline led to a 13.3% drop in black male wages and a 5.6 percentage point decrease in black male employment rates. Additionally, it widened racial gaps in income, employment, health, marriage, and family formation. The marriage rate for black men fell by 4.6 percentage points and by 5.1 percentage points for black women. This trend has exacerbated inequality both within and between black and white communities, highlighting the need for targeted economic policies to address these disparities.

Takeaways by Macro Roundup® AI

  1. The decline in US manufacturing employment from 1960 to 2010 reduced black male wages by 13.3% and black male employment rates by 5.6 percentage points, with less-educated workers most affected.
  2. The decline in manufacturing lowered marriage rates by 4.6 percentage points for black men and 5.1 percentage points for black women, and widened racial gaps in income, employment, health, marriage, and family formation.
  3. Lower education levels among black Americans relative to whites meant the loss of manufacturing jobs affected them disproportionately, raising inequality within and between black and white communities.

New study finds that the decline in manufacturing had a larger impact on blacks

"...Declining manufacturing jobs in the US has a disproportionate impact on less-educated workers. Given that the black population is less educated than the white population, this will have a larger effect on blacks relative to whites. This column uses US Census data to show that the decline has increased inequality both within black and white communities and between black and white communities. It has also widened racial gaps in income, employment, health, marriage, and family formation....the results show that the decline in manufacturing from 1960 to 2010 had the following impact on the black community....13.3% decline in black male wages..5.6 percentage point decline in black male employment rates...a marriage rate decline of 4.6 percentage points for black men, and 5.1 percentage points for black women..."

Eric Gould, "The impact of manufacturing employment decline on black and white Americans,"Center For Economic and Policy Research, December 19, 2018, https://voxeu.org/article/manufacturing-decline-has-hurt-black-americans-more