Macro Roundup

was in the queue. didn’t include a suggested tweet as it’s based off a largely theoretical model. new NBER finds knowledge diffusion from frontier firms to laggard ones has slowed in the past two decades, due to the frontier firms use of patent law. they find that the slowdown in knowledge diffusion account for more then 70% of the symptoms of declining business dynamism.

“…In the past several decades, the U.S. economy has witnessed a number of striking trends that indicate a rising market concentration and a slowdown in business dynamism. In this paper, we make an attempt to understand potential common forces behind these empirical regularities through the lens of a micro-founded general equilibrium model of endogenous firm dynamics. Importantly, the theoretical model captures the strategic behavior between competing firms, its effect on their innovation decisions, and the resulting “best versus the rest” dynamics. We focus on multiple potential mechanisms that can potentially drive the observed changes and use the calibrated model to assess the relative importance of these channels with particular attention to the implied transitional dynamics. Our results highlight the dominant role of a decline in the intensity of knowledge diffusion from the frontier firms to the laggard ones in explaining the observed shifts. We conclude by presenting new evidence that corroborates a declining knowledge diffusion in the economy. We document a higher concentration of patenting in the hands of firms with the largest stock and a changing nature of patents, especially in the post-2000 period, which suggests a heavy use of intellectual property protection by market leaders to limit the diffusion of knowledge. These findings present a potential avenue for future research on the drivers of declining knowledge diffusion….”

Ufuk Akcigit and Sina T. Ates, “What Happened to U.S. Business Dynamism?,” National Bureau of Economic Research, April 2019, https://www.nber.org/papers/w25756

We reviewed this research when it was released (follows) Hanushek also wrote a frustrating WSJopedpreviewing itThe War on Poverty Remains a Stalemate

Eric A. Hanushek, Paul E. Peterson, Laura M. Talpey and Ludger Woessmann, "The Achievement Gap Fails to Close,"Education Next, Summer 2019, https://www.educationnext.org/achievement-gap-fails-close-half-century-testing-shows-persistent-divide/

"... We find that the socioeconomic achievement gap among the 1950s birth cohorts is very large—about 1.0 standard deviations between those in the top and bottom deciles of the socioeconomic distribution (the “90-10 gap”) and around 0.8 standard deviations between those in the top and bottom quartiles (the “75-25 gap”). These are very extensive disparities, as 1 standard deviation is approximately the difference in the average performance of students in 4th and 8th grades, or four years’ worth of learning. But though these inequalities are large, they have neither increased nor decreased significantly over the past 50 years.It could be, however, that the picture is not as dismal as suggested. If overall changes in society, coupled with policy initiatives, have proportionately lifted all boats at the same rate, everybody might be better-off, even if gaps have not significantly changed. Using the same data as for the gap analysis,we find gains in average student performance of about 0.5 standard deviations for students at age 14, or roughly 0.1 standard deviations per decade. But, surprisingly, over the last quarter century, those gains disappear for students by age 17. In other words, there is no rising tide for students as they leave school for college and careers.....As can be seen in Figure 1, the disparities in achievement between students from the highest and lowest socioeconomic status groups are strikingly persistent throughout the time period. The socioeconomic achievement divide hardly wavers over this half century. In the 1954 birth cohort, the achievement gap between the average of those in the top and bottom deciles of the socioeconomic distribution stood at slightly less than 1.2 standard deviations. For those born in 2001, the gap is only slightly less—about 1.05 standard deviations. That is, the most-disadvantaged students have made the same gains in achievement over the decades as those realized by the most-advantaged students. The disparity between students in the top and bottom quartiles of the socioeconomic distribution was about 0.9 standard deviations for the 1954 birth cohort. This 75-25 gap falls slightly during the next two decades, settling at barely below 0.8 for the cohort born in 2001. Trends are similar for math and reading separately. The gap in math achievement, particularly for the 90-10 comparison, shows a little movement over the period—narrowing in the early years but returning to a position below the initial level in recent decades. The 75-25 math gap narrows slightly over time. In reading, the pattern appears essentially flat for the entire period....Figure 2 also shows the white-black achievement gap. While this is not accurately thought of as a socioeconomic gap because of the improvements in black incomes, it represents another potential dimension of continuing societal disparities. As Figure 2 shows, there is a sizable shrinking of the racial gap in the early period but little change across the last two decades.... In sum, our results confirm Reardon’s finding of large gaps in academic performance between students at the extremes of the socioeconomic distribution. The average 90-10 income achievement gap across the surveys suggested by the Reardon analysis is very similar to the 90-10 socioeconomic achievement gap we identify. We are, however, unable to replicate Reardon’s finding that achievement differentials have risen by as much as 75 percent over the past 50 years. His results may be a function of a reliance upon cross-sectional studies that use disparate methods for collecting both income and achievement information. Whatever the reason, the trends estimated in his analysis differ markedly from the gaps we observe by using a uniform measure of socioeconomic status and data from intertemporally linked surveys administered to students of the same age...."

Okay, we have some recent stuff on this from Pew, the Federal Reserve and Ernie. Pew's looked at household incomes in December of last year and found each new generation seems to be doing better than prior ones at most ages, at least in real household money income. "....The median adjusted income in a household headed by a Millennial was $69,000 in 2017. That is a higher figure than for nearly every other year on record, apart from around 2000, when households headed by people ages 22 to 37 earned about the same amount - $67,600 in inflation-adjusted dollars. (A recent study by the Federal Reserve, which also looked at Millennials’ income, used a different methodology and data source.)..."

Richard Kahlenberg and Halley Potter, A Smarter Charter: Finding What Works For Charter Schools and Public Eduction, Teacher College Press, September 2014https://books.google.com/books