Edward Conard

Top Ten New York Times Bestselling Author

  • “…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
  • “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
  • “…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
  • “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
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, April 1, 2019

AI Summary. An international assessment of adult skills found large gaps in numeracy proficiency among U.S. adults aged 16–65: 18% of White adults scored at the top levels versus 5% of Black adults and 6% of Hispanic adults, while 47% of Black adults and 52% of Hispanic adults scored at the lowest levels compared with 28% of White adults.

OECD Staff OECD
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White adults had the highest numeracy proficiency, with 18% scoring at the top levels, while only 5% of Black adults & 6% of Hispanic adults reached similar levels.

How large are racial gaps in U.S. adult numeracy proficiency?

Core argument: In the 2012 PIAAC assessment, 18% of White U.S. adults aged 16–65 scored at the top numeracy proficiency levels, versus 5% of Black adults and 6% of Hispanic adults.

The 2012 PIAAC [Program for the International Assessment of Adult Competencies] data reveals significant disparities in numeracy proficiency among U.S. adults aged 16 to 65 across different racial/ethnic groups. White adults had the highest proficiency, with 18% scoring at the top levels, while only 5% of Black adults and 6% of Hispanic adults reached similar levels. Conversely, 47% of Black adults and 52% of Hispanic adults scored at the lowest proficiency levels, compared to 28% of White adults. These disparities highlight critical challenges in workforce readiness and economic participation, underscoring the need for targeted educational policies to bridge these gaps and enhance overall economic productivity.

Takeaways by Macro Roundup® AI

  1. In the 2012 PIAAC assessment, 18% of White U.S. adults aged 16–65 scored at the top numeracy proficiency levels, versus 5% of Black adults and 6% of Hispanic adults.
  2. At the lowest numeracy proficiency levels, the 2012 PIAAC data show 47% of Black adults and 52% of Hispanic adults, compared with 28% of White adults.

Ed, they do carve out numeracy score by race, see Figure 7-B (FYI, their new data will be released in September)
OECD Staff, "Literacy, Numeracy, and Problem Solving in Technology-Rich Environments Among U.S. Adults: Results from the Program for the International Assessment of Adult Competencies 2012," Organisation for Economic Co-operation and Development, Accessed April 1, 2019, https://nces.ed.gov/pubs2014/2014008.pdf

AI Summary. A National Bureau of Economic Research model estimates that national market concentration has risen while local labor market concentration has fallen, with the local decline contributing a 2.89 percentage point increase in labor's share of income from 1976 to 2014. The authors estimate welfare losses from labor market power of 2.9%–8.0% of lifetime consumption.

David Berger, Kyle Herkenhoff and Simon Mongey National Bureau of Economic Research
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National market concentration has increased, but local labor market concentration has decreased over the past 35 years, according to a new @nberpub model. This decline has contributed to a 2.89 percentage point increase in labor’s share of income from 1976 to 2014.

Has rising employer market power reduced labor's share of income?

Core argument: An NBER model estimates that declining local labor market concentration raised labor's share of income by 2.89 percentage points from 1976 to 2014, countering the view that labor market power drove the labor share's decline.

A new NBER model reveals that while national market concentration has increased, local labor market concentration has decreased over the past 35 years. This decline in local concentration has contributed to a 2.89 percentage point increase in labor's share of income from 1976 to 2014, countering the notion that labor market power is responsible for the declining labor share. Despite substantial welfare losses from labor market power, ranging from 2.9% to 8.0% of lifetime consumption, the model suggests that labor market power has not driven the decline in labor share. Additionally, a national minimum wage could offer limited welfare gains by reallocating workers to larger, more productive firms. This data-driven insight highlights the complex dynamics of labor market power and its implications for economic policy.

Takeaways by Macro Roundup® AI

  1. An NBER model estimates that declining local labor market concentration raised labor's share of income by 2.89 percentage points from 1976 to 2014, countering the view that labor market power drove the labor share's decline.
  2. National market concentration rose over the past 35 years while local labor market concentration fell, according to the NBER model.
  3. The NBER model puts welfare losses from labor market power at 2.9% to 8.0% of lifetime consumption and suggests a national minimum wage could deliver limited welfare gains by reallocating workers to larger, more productive firms.

New NBER model on monopsony power, counterintuitively suggesting it's real but is actually declining not increasing.

"...In this paper, we develop a tractable, quantitative, general equilibrium model of oligopsony in the labor market that captures precisely this notion of labor market power. The model guides measurement by delivering a structurally consistent notion of labor market power that is both intuitive and easily measurable. We implement our approach using U.S. Census micro data and use our estimated model to explore the implications of labor market power for welfare and trends in the aggregate labor share. We have three main results. First, the model implies substantial welfare losses from labor market power, ranging from 2.9 to 8.0 percent of lifetime consumption. Second, despite these large losses, we find that labor market power has not contributed to the declining labor share because, despite an overall increase in national concentration, we find that the model consistent measure of local labor market concentration has declined over the last 35 years. Third, we revisit a classic question in labor economics: can a national minimum wage mitigate the effects of labor market power? We find that a national minimum wage delivers positive, but limited welfare gains, largely by reallocating workers from smaller to larger, more productive firms....Our theory implies that this declining labor market concentration increase labor’s share of income by 2.89 percentage points between 1976 and 2014, suggesting that labor market concentration is not the reason for a declining labor share...."

David Berger, Kyle Herkenhoff and Simon Mongey, " Labor Market Power," National Bureau of Economic Research, March 2019, https://www.nber.org/papers/w25719

AI Summary. Labor force participation among U.S. women aged 25–54 has surpassed its pre-Great Recession level, recovering 70% of its decline from the 2000 peak to the 2015 trough. Participation among men in the same age group has regained only 31% of its decline and remains below its 2007 level.

Stacy A. Anderson Brookings Institution
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Women staging a labor force comeback. LFP For Prime Age Women Now Higher Than Prior To Great Recession, Men Still < 2007 Levels.

Are prime-age women recovering labor force participation faster than men?

Core argument: Prime-age women's U.S. labor force participation has recovered 70% of its decline from January 2000 to September 2015 and now exceeds pre-Great Recession levels.

Since 2015, the U.S. labor market has seen significant changes, with prime-age women's Labor Force Participation [LFP] now surpassing pre-Great Recession levels. This demographic has recovered 70% of its decline from January 2000 to September 2015, indicating a robust comeback. In contrast, prime-age men's LFP has only regained 31% of its previous decline and remains below 2007 levels. These trends highlight a gender disparity in labor market recovery, suggesting that economic policies and labor market dynamics have differently impacted men and women. The data underscores the importance of understanding gender-specific factors in labor force trends and their implications for economic growth and policy-making.

Takeaways by Macro Roundup® AI

  1. Prime-age women's U.S. labor force participation has recovered 70% of its decline from January 2000 to September 2015 and now exceeds pre-Great Recession levels.
  2. Prime-age men's labor force participation has regained only 31% of its earlier decline and remains below its 2007 level, trailing the recovery among prime-age women.

"...But much like 2000 is now recognized as a pivotal year for the U.S. labor market, 2015 is beginning to look like another turning point. In part due to the ongoing strengthening of the labor market, both prime-age women’s labor force participation and prime-age men’s participation have increased sharply from 2015 through the beginning of 2019. Figure 1 shows that prime-age women now participate at higher levels than prior to the Great Recession and have now made up 70 percent of their January 2000-September 2015 decline, while prime-age men have only made up 31 percent over the same period and are still below 2007 levels...."

Stacy A. Anderson, Lauren Bauer, Ryan Nunn, and Jay Shambaugh, "Women staging a labor force comeback,"Brookings Institution, March 26, 2019, https://www.brookings.edu/blog/up-front/2019/03/26/women-staging-a-labor-force-comeback/

Tuesday, April 2, 2019

AI Summary. Firm-level data from Spain indicate that low-productivity family-managed firms raised productivity after import tariff reductions, while initially productive family firms and non-family firms showed no productivity response to import competition. The authors attribute the gains to more efficient use of input materials rather than research and development.

Cheng Chen National Bureau of Economic Research
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Family-managed firms in Spain raised productivity faster when exposed to import competition, especially those with multigenerational family ties. @ChengChen

Does import competition raise productivity only at low-productivity family-managed firms?

Core argument: Firm-level Spanish data for 1993–2007 show that initially low-productivity family-managed firms raised productivity significantly after EU import tariff reductions, while initially productive family firms and non-family firms showed no productivity response to import competition.

Analysis of firm-level data from Spain between 1993-2007 reveals that low productivity family-managed firms significantly increased productivity following reductions in EU-imposed import tariffs. This contrasts with initially productive family firms and non-family firms, whose productivity remained unaffected by import competition. The productivity gains in family-managed firms were attributed to more efficient use of input materials rather than innovation activities like R&D. The increased bankruptcy risk from import competition motivated family managers to enhance cash flow for survival, a behavior more pronounced in multigenerational family firms. These findings highlight the unique response of family managers to import shocks, challenging the notion that they are less productive and suggesting a focus on short-term efficiency over long-term innovation.

Takeaways by Macro Roundup® AI

  1. Firm-level Spanish data for 1993–2007 show that initially low-productivity family-managed firms raised productivity significantly after EU import tariff reductions, while initially productive family firms and non-family firms showed no productivity response to import competition.
  2. Productivity gains among family-managed firms are attributed to more efficient use of input materials rather than innovation activities such as R&D.
  3. Greater bankruptcy risk from import competition motivated family managers to enhance cash flow for survival, a response more pronounced in multigenerational family firms.

interesting view of principal-agent problem, when low productivity Spanish firms were exposed to import competition the family managed firms

"...we use rich, firm-level data from Spain and changes in EU-imposed import tariffs between 1993 and 2007 to study how stiffer import competition affects productivity of firms depending on their manager type. We find that family-managed firms with initially low productivity show significant productivity increases after a reduction of import tariffs. This is in contrast to initially very productive family firms as well as non-family firms, whose productivity is not affected by import competition. This finding is driven by family management rather than family ownership or other characteristics of family firms. In addition, these productivity increases seem to be driven by a more efficient use of input materials rather than innovation activities like R&D or patenting. This shows that family managers that face increased bankruptcy risk try to improve their cash flow position in order to ensure survival into the next period. We propose a model featuring heterogeneity in managers’ preferences in order to rationalize the empirical findings. Motivated by the literature, we assume that family managers receive additional private benefits when their firm exists. When import competition increases, the bankruptcy risk of the initially unproductive firms increases. Family managers increase effort which makes the firm more productive and ensures survival, while professional managers let the firm exit. Consistent with this notion of the preferences of family managers, our findings are empirically stronger for multigenerational family firms. Our results shed light on the behavior of family firms, which contribute to a large share of economic activities in many countries throughout the world. Economists have long been worried about the implications of unsatisfactory performance of family firms on welfare and aggregate productivity. At the same time, the surge of China’s exports in recent decades has increased the bankruptcy risk of these vulnerable firms. Our findings suggest that the attachment of family managers to their firms creates a stronger motive to “fight” against bankruptcy when the import shock hits. This mechanism may help to reconcile the mixed evidence in existing empirical studies, which have found positive effects for emerging economies that typically host a large number of family managers. Also, this positive effect of import competition is in contrast to the literature that has pictured family managers as less able or less productive. However, all is not well: The increased efforts are targeted towards improving short-term efficiency (to ensure survival) rather than long-term productivity based on innovation or research and development. Future research should focus on embedding these findings into a general equilibrium trade model that can help us understand how the difference in managers’ preferences affects gains in aggregate productivity and welfare after trade liberalization..."
Cheng Chen, Claudia Steinwender, "Import Competition, Heterogeneous Preferences of Managers, and Productivity," National Bureau of Economic Research, February 2019, https://www.nber.org/papers/w25539