Macro Roundup

Economist Staff, "African-Americans are the Democrats’ most loyal constituency,"The Economist, March 7, 2019, https://www.economist.com/united-states/2019/03/09/african-americans-are-the-democrats-most-loyal-constituency

African-Americans are the Democrats’ most loyal constituency

“There is no such thing as a base voter,” says Stacey Abrams, who last year came closer than any Democrat this century to becoming Georgia’s governor. Ms Abrams embraced identity politics—she contributed an article to the current issue of Foreign Affairs entitled “Identity politics strengthens democracy”—and made registration and mobilisation of young and non-white voters central to her campaign. “To win we had to activate voters communities that had been discounted because they were seen as not viable. Republicans didn’t worry about them because they could never win. And Democrats didn’t engage because they didn’t vote.”

In purely strategic terms, it is not obvious that Democrats need make a special effort to court black voters. The last Republican to win a majority of their votes was Herbert Hoover, in 1932. No American ethnic group is as reliably and deeply partisan. Since 1964—when Republicans nominated Barry Goldwater, who voted against that year’s Civil Rights Act—no Democratic presidential candidate has captured less than 80% of the black vote.

This loyalty leaves many African-Americans feeling taken for granted, as though Democrats have not so much courted their votes as assumed they will show up. “What we’ve seen in the past,” explains DeJuana Thompson, whose group Woke Vote helped propel Doug Jones to victory in Alabama’s Senate race in 2017, is “candidates who show up in black churches two weeks before” election day, expecting parishioners to “trust, vote, and get out and work for their campaigns for free.”

Things are different as the Democratic Party’s marathon primary gets under way. Not only are two African-American senators, Cory Booker and Kamala Harris, among the top tier of Democratic candidates. Both they and their rivals have discussed racism and racial inequities openly, in ways that previous Democratic candidates have shied away from. The Democrats’ directness about race reflects both shifting priorities within their coalition and a tactical bet on how to best mobilise and expand their base.

Rhetoric from the party’s candidates reflects that consensus. Elizabeth Warren mentioned racial wealth gaps in the first minute of her campaign announcement. Soon after Kirsten Gillibrand announced, she acknowledged “systemic, institutional and daily individual acts of racism”, and decried racial income gaps, as did Ms Harris in her announcement speech, along with the state of criminal justice and police killings of young black men. Cory Booker backs “baby bonds”—a plan to give each child $1,000 at birth, followed by annual payments, tailored to family wealth, until the child turns 18—as a way to narrow the racial wealth gap. Ms Harris, Ms Warren and Julián Castro, a former mayor and cabinet secretary also seeking the nomination, have all endorsed some form of reparations for slavery, but have all stopped short of calling for direct financial transfers.

Some might consider these positions pandering. But as Leah Wright-Rigueur, a Harvard professor who wrote “The Loneliness of the Black Republican” notes, voters might ask, “Do I really care that they’re pandering? Maybe I want to be pandered to. Republicans pander to their base all the time.”

The tactical bet, that lots of people who have not voted before can be led to the polls, is one that Ms Abrams and Andrew Gillum made in their governors’ races, in Georgia and Florida respectively. According to this theory, the limited time and energy of a campaign is better spent mining untapped black voters than trying to win back wavering white ones. Some fear this strategy may turn off white voters, who still comprise a majority of the electorate. After all, both Ms Abrams and Mr Gillum lost—the latter in a swing state, in a year that was otherwise favourable to Democrats.

That suggests the bet may be mistaken. It may also be a category error. When it comes to issues, black Democrats are not very different from Democrats of other hues. Criminal-justice reform, investing in public education and expanding access to health care all have particular appeal to black voters, who bear the brunt of mass incarceration and poor schools. They also appeal to Democratic voters of all stripes. Ultimately, says Gilda Cobb-Hunter, a state representative from South Carolina, black Democrats are looking for the same thing as every other Democrat. “In the past it’s been kind of like a beauty contest: who’s speaking to your heart. But what I’m picking up now is a real sense of, ‘I want a winner’. And the winner is going to be the candidate who can beat 45.”

That candidate need not be black to win black votes. But he or she will need to court their support more vigorously than in past cycles. That is not only an acknowledgment of past oversight. Ms Abrams argues it will, be “cost-efficient. These communities are already tilted toward the value system and policies of Democrats. The mission isn’t to get someone to change their ideology. The mission is to get them to act on their beliefs.”

"...: Using data over more than a century, we show that shifts in the location of manufacturing industries are a domestic reflection of what the international trade literature refers to as the product cycle in a cross-country context, with industries spawning in high-wage areas with larger pools of educated workers and moving to lower-wage areas with less education as they age or become “standardized.” We exploit the China shock industries as a set of industries that were in the late-stage product cycle by 1990 and show how the activity in those industries shifted from high-innovation areas to low-education areas over the 20th century.... the analysis in this paper suggests that the resilience of local labor markets to manufacturing shocks depends on local industries’ phase in the product cycle, on their education levels, and their manufacturing wages, with the greatest risk of unemployment and detachment from the labor force occurring when a shock hits areas where an industry already is phasing out, wages are high, or education levels are low. The results are consistent with the belief that there are long-term, secular trends in U.S. industrial structure driving the movement of industries, which shocks may mitigate or accelerate....The analysis also suggests that the resilience of local labor markets to manufacturing shocks depends on local industries’ phase in the product cycle, on local education levels, and on local manufacturing wages....Areas where the shock-affected industries had been reducing employment the most between 1960 and 1980— which we interpret as a characteristic of local industries being in a late stage of the product cycle—experienced a roughly 0.25 basis point additional increase in the unemployment rate above that attributable to the shock by itself. Locations with high manufacturing wages also felt more pain conditional on their level of exposure. This could occur if firms had been holding on in a location due to sunk costs as in Fillat and Garreto (2015) or adjustment costs as in Rodriguez- Lopez (2014) amidst increasing pressures to move or exit, then a large shock jolted them out of the range of inaction. Areas with a greater fraction of workers with college degrees had somewhat less adverse labor-market outcomes conditional on the shock, suggesting that a highly educated workforce may be better able to achieve resilience through innovation or expansion in different sectors along the lines of Feenstra, Ma, and Xu (2017), for instance.....The risk of unemployment and detachment from the labor force rises most when a shock hits in areas where an industry already has begun phasing out, wages are high, or education levels are low. The results are consistent with the belief that there are long-term, secular trends in U.S. industrial structure driving the movement of industries, which shocks may mitigate or accelerate.... As points of comparison, we compute an analogous “Japan shock" for the period from 1975- 1985 and “Tiger shock” from 1975-1988 and find that the regions most directly affected were quite different from those hit by the China shock. In particular, exposure to the China shock is correlated with lower educational attainment, lower incomes, and higher unemployment rates. In contrast, exposure to the Japan shock shows no such pattern, nor do areas with high concentrations in China-Shock industries in 1910 through 1960. Thus, the China shock was concentrated in areas that look distinctly different from regions hit by earlier shocks to manufacturing. We argue that the China shock hit industries late in their product cycle, while the Japan shock did not...."

Katherine Eriksson, Katheryn Russ, Jay C. Shambaugh, Minfei Xu, "Trade Shocks and the Shifting Landscape of U.S. Manufacturing," National Bureau of Economic Research, March 8, 2019, https://katherynruss.weebly.com/uploads/4/5/1/7/45179109/mfgshifts_ersx.pdf

"...We have three main empirical results. First, we find that opioid prescription rates and labor force statuses are strongly correlated for both prime-age men and women. We find that increasing the local opioid prescription rate decreases employment rates for both prime-age men and women by lowering labor force participation rates and increasing unemployment. Specifically, increasing the local prescription rate by one-tenth of a log point (roughly 10%) decreases the employment rate of prime age men by 0.50 percent percentage points for men and 0.17 percentage points for prime age women.Examining the growth of national average prescription rates between 2000 to 2016, our estimates imply that opioid prescriptions can account for an important share of the change in labor force participation rates in recent years. For prime age men, they would imply a reduction in the labor force participation rate of 1.3 percentage points, or 44 percent of the decline from 2001 to 2015.For prime age women, our estimates would imply a reduction in the labor force participation rate of 0.5 percentage points, or 17 percent of the decline. Our estimates are larger for men, but smaller for women, than those reported in Krueger (2017). Second, inspired by Case and Deaton (2017)’s finding of demographic heterogeneity related to mortality, we use our data set to investigate heterogeneity across demographic groups. Consistent with Case and Deaton (2017), we find that opioids have a strong effect on the labor market outcomes of white men with less than a BA. However, we find that coefficients are actually largest for minority men with less than a BA. While NSDUH data indicate lower abuse rates of minority men nationally, we reconcile this seemingly contradictory finding by showing that the exposure to opioids, in terms of local prescription rates, is considerably higher for whites than minorities. The policy implications of this finding are clear: If exposure were to spread and increase for minority men, their labor force participation would likely decline from today’s levels. Third, we also provide evidence in favor of giving our results a causal interpretation. We begin by reviewing other recent literature that tends to provide support for a causal link between opioid prescription rates and labor market outcomes...."
Dionissi Aliprantis, Kyle Fee, and Mark E. Schweitzer, "Opioids and the Labor Market,"The Federal Reserve Bank of Cleveland, March 1, 2019, https://www.clevelandfed.org/newsroom-and-events/publications/working-papers/2019-working-papers/wp-1807r-opioids-and-labor-market

"....The 2018 buyback and dividend spree brings the total since 2009 up to just under $8tn. That would, at current prices, be more than enough to buy all the major listed companies of the UK, France, Germany, Spain, Italy and Sweden. It is nearly five times the size of Russia’s annual economic output, and almost equal to the current value of all gold ever mined through history, according to the World Gold Council...."

Robin Wigglesworth, "US investor cash return bonanza breaks records,"Financial Times, March 5, 2019, https://www.ft.com/content/e1d53cc2-3f92-11e9-9bee-efab61506f44

"...“We didn’t really find large differences in student achievement gains across different textbooks,” said the University of Maryland’s David Blazar, one of the study’s authors. It’s a surprising conclusion for the six-state analysis, which was funded in part by the Bill and Melinda Gates Foundation and released Monday. And though it is just one study — which clashes with prior research — the results raise questions about the likelihood that the Gates Foundation’s curriculum-focused approach will boost student learning in the way its leaders hope. “This study throws some cold water on the idea that just swapping out textbooks would make a big difference,” said Morgan Polikoff, a University of Southern California professor and another of the study’s researchers...."
Matt Barnum, "The Gates Foundation is hoping better curriculum will boost student learning. A study says, not so fast,"Chalkbeat, March 11, 2019, https://chalkbeat.org/posts/us/2019/03/11/gates-foundation-curriculum-textbooks-study/

"....Of the three changes that we consider, that is wages, out-of-pocket medical expenses during retirement, and life expectancy, we find that the observed changes in the wage schedule had by far the largest e ect on the labor supply of men and women born in the 1960s cohort. Specifically, it depressed the labor supply of men and increased that of women, especially in married couples. The decrease in life expectancy mainly reduced retirement savings, while the expected increase in out-of-pocket medical expenses increased them. On net, these two changes taken together had overall modest effects on all of the outcomes that we consider, including savings. We also find that the combined effect of the changes have large welfare costs. In fact, the one-time asset compensation required to make 25-year-old households indifferent between the 1940s and 1960s health and survival dynamics, medical expenses, and wages are $126,000 for single men, $44,000 for single women, and $132,000 for couples. The corresponding numbers expressed as a fraction of their average discounted present value of earnings are, 12.5%, 7.2%, and 8.0%, respectively. Lower wages explain 47-58% of these losses, shorter life expectancies explain 26-34%, and higher medical expenses account for the rest. Other interesting changes took place for the same cohorts, including in the number of children, marriage and divorce patterns, assortative mating, child care costs, initial conditions at age 25, and time spent in home production and raising children. Our paper suggests that studying the opportunities and outcomes of people in different cohorts and across different groups is a topic worthy of investigation, including from a macroeconomic standpoint.... Our results thus indicate that the group of white, non-college educated people born in the 1960s cohort, which comprises about 60% of the population of the same age, experienced large negative changes in wages, large increases in medical expenses, and large decreases in life expectancy and would have been much better oif they had faced the corresponding lifetime opportunities of the 1940s birth cohort.....
Margherita Borella, Mariacristina De Nardi, and Fang Yang, "The lost ones: the opportunities and outcomes of non-college educated Americans born in the 1960s," National Bureau of Economic Research, March 11, 2019, http://users.nber.org/~denardim/research/Couples_Macro_Annual_26.pdf