Macro Roundup

new NBER upon becoming parents, women (especially more educated women) adopt more negative views toward female employment (ie., they are more likely to say that women working hurts family life) Women on average (and, again, more educated women in particular) report that parenthood is harder than they expected.

rings true with my experience, lots of our friends are on their second kid now and lots of the mom's are thinking about leaving the workforce (granted their husbands have the ability to support a family)

"...This paper provides evidence suggesting that women do not fully anticipate the effect of motherhood. Using rich data from the British Household Panel Survey (BHPS) and an event-time framework, we document that women's labor supply exhibits a sudden, large, and persistent decline in the years immediately after the birth of the first child. Additionally, we show that women become significantly more conservative in terms of their attitudes toward the appropriate role of women and men in the household and society. The effects are considerably more muted for men...their labor supply response (if any) is about one- tenth the size of that observed for women, and while they too appear to become slightly more conservative post-childbirth, the magnitude of the effect is much smaller and not statistically significant. The effects of motherhood on women's gender-role attitudes exhibit no appreciable pre-trend and show no evidence of fadeout, suggesting that the effects of motherhood on gender-related attitudes are unexpected and long-lasting. Given that the gender-related questions asked in the BHPS are not about women's own preferences but about the appropriate role of women and men more generally, we would expect a woman who fully anticipates the effects of motherhood to report similar attitudes before and after her first birth. Therefore, we interpret the sudden conservative shift in attitudes post-childbirth as indirectly suggesting that women do not anticipate these changes in their views. To the extent that these gender- related attitudes shape employment preferences, these results also suggest that part of the employment response to motherhood is likely to be unanticipated. Interestingly, despite the fact that motherhood is a very common event, women seem surprised by the consequences. We provide more direct evidence on the question of anticipation by showing that women during the sample period appear to systematically over-estimate their likelihood of employment after first birth. While childless women in the BHPS make very accurate predictions about their labor force attachment one year later, upon the birth of the first child, women are significantly more likely to state that they expect to remain in the labor market when, in fact, they give up paid work twelve months later. To examine longer-term expectations, we turn to US data and show that beginning in 1978, female high school seniors have been increasingly under-estimating the probability that they will be home-makers by age thirty. Qualitative evidence from a series of interviews of women who graduated from Northwestern in 1993 provide additional supporting evidence of a lack of anticipation of the effects on motherhood on labor supply decisions. That women do not appear to fully anticipate the employment effects of motherhood has important implications for understanding education decisions, occupational choice, and dynamic labor supply and savings. In particular, in most dynamic models of fertility and labor supply, women's preferences are fixed and they are assumed to be able to perfectly forecast the costs of motherhood and childcare....Recent models that endogenize education to fertility decisions also assume perfect foresight of childcare costs.....Our results question the validity of these assumptions and raise the question of how these models can accommodate relaxing the assumption of fixed preferences and the (systematic) lack of anticipation of the costs of motherhood. Our findings also provide an alternative resolution to the puzzle of why women continue to make rapid gains in human capital investment relative to men in spite of their apparent stalled progress in the labor market. To the extent that before they become mothers, women expect that they will continue to have high labor market attachment after motherhood, they will make their education decisions on the basis of these potentially erroneous beliefs, resulting in some degree of over-investment" in education (at least from the point of view of the human capital model). While there may be other sources of non-labor market returns to education, the failure to correctly anticipate the employment effects of motherhood provides an alternative, though not mutually exclusive, explanation of the puzzling decoupling of women's educational gains and labor market progress...."

Ilyana Kuziemko, Jessica Pan, Jenny Shen, Ebonya Washington, "The Mommy Effect: Do Women Anticipate the Employment Effects of Motherhood?" National Bureau of Economic Research, June 2018, http://www.nber.org/papers/w24740

“…Those who believe the U.S. is an oligarchy often cite the research of political scientists Martin Gilens and Benjamin Page. In a 2014 paper, Gilens and Page measured correlations between policy outcomes and the preferences of various income groups. They found that policy was most highly correlated with the preferences of high earners. Some take this result as an indication that the rich have their way in U.S. politics, while the poor and middle class are voiceless. But there are many reasons to doubt that conclusion. First of all, the group that Gilens and Page label “affluent” are those making more than $146,000 a year. Although this takes in the billionaire class that socialists rail against, it mostly includes people who could hardly be considered rich. More importantly, the authors found a strong correlation between the preferences of this affluent group and those of the middle class — in other words, the policies that are enacted don’t often seem to buck the will of the broad public. Additionally, correlation doesn’t equal causation — politicians might do things that they think will benefit the overall economy, and that only coincidentally happen to please the affluent. It’s also likely that Gilens and Page are just wrong. A number of other research teams have done their own studies, and most concluded that it’s the middle class, not the rich, who tend to hold sway in democratic politics. A 2015 paper by political scientist Peter Enns, for example, concludes that “policy ends up about where we would expect if policymakers represented the middle class and ignored the affluent.”…”

Noah Smith, “Sanders’s Socialism Won’t Bring On the Revolution,” Bloomberg, June 28, 2019, https://www.bloomberg.com/opinion/articles/2019-06-28/sanders-s-socialist-revolution-won-t-go-far-with-middle-class

Sanders’s Socialism Won’t Bring On the Revolution

The front-runner for the Democratic presidential nomination is still the centrist Joe Biden. But two strong candidates on the left are competing to topple him — Senators Elizabeth Warren and Bernie Sanders. Both have spent years advocating for higher wages, higher taxes, stricter regulation of corporations and a variety of other egalitarian goals. But there’s a big difference between the two when it comes to ideological positioning — Sanders proudly declares himself a socialist, while Warren labels herself “capitalist to my bones.”

In past decades, those labels might have had more rigorous distinctions. But these days, socialists in the U.S. don’t do a lot of arguing over what’s needed to produce revolution, or whether workers ought to own businesses and factories. And Warren feels perfectly comfortable calling herself a capitalist while advocating government-run health insurance, worker representation on corporate boards and government promotion of industry. So what do the socialist or capitalist labels mean in the U.S. in 2019?

A big difference might be how one thinks about power. Sanders, in a recent criticism of Warren, declared that she had been embraced by corporate interests:

This seems to reflect a more general view among American socialists that wealth concentration — at both the individual and corporate levels — has subverted the political process. According to this narrative, the U.S. is now an oligarchy, where billionaires and corporate lobbyists are able to buy their preferred policies. Taxing wealth and profit, according to this view, won’t simply create a more materially equitable society, but a more politically democratic one as well. If wealth equals power, a more equal distribution of the former automatically leads to a more equal distribution of the latter. That raises the expectation that economic equality could snowball — that higher taxes on wealth and profits could lead to the election of leaders who are eager to enact even more egalitarian policies.

But how accurate is this narrative? Looking at modern history, has greater egalitarianism been a self-reinforcing process? The greatest period of U.S. economic equality was in the late 1970s:

But this era of equality is precisely when the U.S. took a turn toward free-market conservatism, culminating in the election of Ronald Reagan in 1980. Meanwhile, corporate profits as a share of the economy hit a trough during Reagan’s second term and — with a few interruptions during recessions — have been rising ever since:

But this seemed to merely whet the country’s appetite for deregulation.

Why did the U.S. support a capitalist revolution right at the point when inequality was at its nadir? The most prosperous Americans might have been able to exert a major influence even though their wealth hadn’t yet reached its present lofty heights — after all, even today, the biggest political donors spend only a small fraction of their net worth on politics or buying influence. Alternatively, the country’s leaders really believed that economic liberalization was what was necessary to get the economy moving again after almost a decade of stagnation. Or it could be that policy is like a pendulum, and that the public will tends to run counter to prevailing trends.

Those who believe the U.S. is an oligarchy often cite the research of political scientists Martin Gilens and Benjamin Page. In a 2014 paper, Gilens and Page measured correlations between policy outcomes and the preferences of various income groups. They found that policy was most highly correlated with the preferences of high earners. Some take this result as an indication that the rich have their way in U.S. politics, while the poor and middle class are voiceless.

But there are many reasons to doubt that conclusion. First of all, the group that Gilens and Page label “affluent” are those making more than $146,000 a year. Although this takes in the billionaire class that socialists rail against, it mostly includes people who could hardly be considered rich. More importantly, the authors found a strong correlation between the preferences of this affluent group and those of the middle class — in other words, the policies that are enacted don’t often seem to buck the will of the broad public. Additionally, correlation doesn’t equal causation — politicians might do things that they think will benefit the overall economy, and that only coincidentally happen to please the affluent.

It’s also likely that Gilens and Page are just wrong. A number of other research teams have done their own studies, and most concluded that it’s the middle class, not the rich, who tend to hold sway in democratic politics. A 2015 paper by political scientist Peter Enns, for example, concludes that “policy ends up about where we would expect if policymakers represented the middle class and ignored the affluent.”

This isn’t to say that the extremely wealthy exert no influence over the political process, or that corporate lobbyists wield no power in Washington. What it does suggest is that the struggle for equality of political power will be an eternal, ongoing one. The idea that reducing wealth and profit concentration will ignite a self-reinforcing political process that will eventually lead to true socialism seems like wishful thinking. Sanders’s policies would undoubtedly make the U.S. a less unequal society, but they are far more likely to end up as reform than revolution.