Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…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
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, October 24, 2019

AI Summary. Consumption-based poverty in the US fell from 13% to 2.8% over roughly four decades, while the official poverty rate declined just 1.2 percentage points. The authors attribute the gap to flaws in the official measure, which relies on a price index with documented problems and counts only cash income, excluding tax credits and in-kind transfers.

Bruce Meyer American Enterprise Institute
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Consumption poverty fell from 13% in 1980 to 2.8% in 2018, versus the official poverty decline of 1.2%.

Does measuring consumption instead of cash income show far less poverty?

Core argument: The US consumption poverty rate fell from 13% in 1980 to 2.8% in 2018, while the official poverty rate declined by just 1.2 percentage points over the same period.

The consumption poverty rate in the US has significantly decreased from 13% in 1980 to 2.8% in 2018, contrasting with a mere 1.2 percentage point decline in the official poverty rate over the same period. This discrepancy arises from flaws in the official poverty measure, which uses a price index with well-documented issues and considers only cash income, excluding tax credits and in-kind transfers. Adjusting for these factors, the poverty threshold today would be about $18,000 instead of $25,465 for a family of four. Additionally, under-reporting of certain income types skews the official measure. Using the 2015 standard, both income and consumption-based poverty fell by about 1 percentage point between 2017 and 2018, highlighting the importance of comprehensive resource measurement in assessing poverty accurately.

Takeaways by Macro Roundup® AI

  1. The US consumption poverty rate fell from 13% in 1980 to 2.8% in 2018, while the official poverty rate declined by just 1.2 percentage points over the same period.
  2. The official US poverty measure relies on a price index with documented problems and counts only cash income, excluding tax credits and in-kind transfers, and under-reporting of certain income types skews it further.
  3. Adjusting for those price index and resource measurement flaws would put the poverty threshold for a family of four at about $18,000 rather than $25,465.

“…..Simple adjustments to account for well-known flaws with the official poverty measure make clear that poverty in America has fallen sharply over the past 50 years….. Using the standard of living of the poor in 1980, the consumption poverty rate fell by more than 10 percentage points, from 13.0 percent in 1980 to 2.8 percent in 2018, while the official poverty rate fell by only 1.2 percentage points over that period…..If, on the other hand, one uses the standard of living of the poor in 2015, the consumption poverty rate fell from 32.9 percent in 1980 to 10.8 percent in 2018…..Three factors explain why consumption poverty shows a long-term decline but the official poverty measure does not. First, the official federal poverty line is adjusted over time using a price index with well-documented flaws. The official poverty line for a family of four in 1980 was $8,351. Today it is $25,465. If one corrects for the flaws in how the poverty line is adjusted for inflation, based on the 1980 standard, the threshold today would be about $18,000. Second, the official poverty measure is based on cash income only, which fails to capture all the resources available to a family including tax credits and in-kind transfers. Finally, the official measure of family resources is biased due to under-reporting of certain types of income that are commonly received by those with low reported income……Using the higher 2015 standard, both income and consumption based poverty fell by about 1 percentage point between 2017 and 2018….”

Bruce Meyer and James X. Sullivan, “Annual report on US consumption poverty: 2018,” American Enterprise Institute, October 18, 2019, https://www.aei.org/research-products/report/annual-report-on-us-consumption-poverty-2018/

Tuesday, October 29, 2019

AI Summary. A 1% increase in high-quality entrepreneurship in the US is associated with a 0.08 percentage point rise in the top 1%'s income share, with gains concentrated in the top 10% of the income distribution. The authors find little evidence of income growth for the bottom half or spillovers to low-skilled workers.

John Voorheis U.S. Census Bureau
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New evidence indicates that high-quality entrepreneurship in the U.S. benefits the top 10% of the income distribution, with limited spillover effects for low-skilled workers.

Do the gains from high-quality entrepreneurship flow mainly to top earners?

Core argument: A 1% increase in high-quality entrepreneurship in the U.S. correlates with a 0.08 percentage point rise in the top 1%'s income share, with gains concentrated in the top 10% of the income distribution.

New evidence indicates that the benefits of high-quality entrepreneurship in the U.S. are predominantly captured by the top 10% of the income distribution, with limited spillover effects for low-skilled workers. An increase of 1% in entrepreneurship correlates with a 0.08 percentage point rise in the top 1%'s income share, highlighting a significant economic gain for high-income individuals. Conversely, there is little evidence of income growth for those in the bottom half of the distribution. This suggests that entrepreneurship may exacerbate income inequality, as gains are concentrated among the wealthiest, while low-skilled productivity and wages remain stagnant. The study underscores the need for further research into how entrepreneurship impacts different economic groups, particularly through firm and establishment-level data.

Takeaways by Macro Roundup® AI

  1. A 1% increase in high-quality entrepreneurship in the U.S. correlates with a 0.08 percentage point rise in the top 1%'s income share, with gains concentrated in the top 10% of the income distribution.
  2. The study finds little evidence of income growth for the bottom half of the U.S. income distribution, with limited spillovers to low-skilled workers, whose productivity and wages remain stagnant.
  3. The study suggests entrepreneurship may exacerbate income inequality and calls for further research, using firm- and establishment-level data, on how entrepreneurship affects different economic groups.

This was released yesterday. Might be worth your time as it provides support (in my reading) to supervision being a limiting constraint to low skilled productivity growth. "... more productive uses for high-skilled labor than supervising low-skilled labor, have slowed the growth of low-skilled productivity, the marginal product of low-skilled labor, and low-skilled wages..." paper finds that gains from "high quality entrepreneurship" (using Guzman's index) are limited to the top 10% of the income distribution; limited spillover effects for low skilled workers

Steve

"..Using new aggregate measures of income inequality and income mobility produced from the universe of tax returns linked with survey data, we have surfaced new evidence on an old question - who benefit from creative destruction, which we capture by new measures of high-quality entrepreneurship?In CZ-by-year fixed effects regressions, and in regressions instrumenting for entrepreneurship using a Bartik-style instrument, we find that, overwhelmingly, the benefits of entrepreneurship accrue to high-income individuals, with no evidence of offsetting growth or mobility effects accruing to the bottom of the distribution. Put starkly, our evidence suggests that if anything, entrepreneurship makes the rich richer and the poor poorer....In particular, an increase of 1 percent in entrepreneurship corresponds to an increase of the top 1 percent's share of income of 0.08 percentage points. Although the increase in the top 1 percent share could be consistent with broadly rising incomes, we fi nd little evidence of an economically relevant increase of incomes for people in the bottom half of the distribution. This stands in contrast to the top of the distribution (top decile and top 1 percent) where the increase is positive and statistically and economically significant. It is worth also noting that the gain experienced by the top decile appears somewhat negligible when compared to the one experienced by the top 1 percent.....Although the use of high-quality administrative data allows us to produce highly detailed aggregates of local income distributions, we are not able to fully tease out the mechanisms by which entrepreneurship affects different groups of individuals - for instance investors, the entrepreneurs themselves, and employees of innovative firms. While we attempt to shed some light on this issue, it is difficult to clearly identify these categories using the tax data available in the Census Bureau's linkage infrastructure. Specifically, many of the high-quality start-ups which are captured in the RECPI measure might be incorporated as C-Corporations. These entrepreneurs are particularly difficult to pinpoint using the available administrative data. Future work to understand the mechanisms by which entrepreneurship increases inequality should focus on incorporating rm and establishment level data (such as the Census Bureau's Longitudinal Business Database) to examine how employees of different types of firms are affected...."

Astrid Marinoni and John Voorheis, "Who Gains from Creative Destruction? Evidence from High-Quality Entrepreneurship in the United States," U.S. Census Bureau, October 2019, https://www2.census.gov/ces/wp/2019/CES-WP-19-29.pdf

AI Summary. The authors estimate that children of immigrants in the US raised at the 25th income percentile reach adult income ranks 5–8 percentiles higher than children of US-born parents, a pattern that persists across origin countries, initial income levels, and immigration policies. Accounting for childhood region and state narrows this gap by 70%.

Santiago Pérez National Bureau of Economic Research
Date Posted:
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Immigrant children in the US have consistently demonstrated higher upward intergenerational mobility compared to children of US-born parents, moving 5-8 percentiles higher in income rank from the 25th percentile.

Do children of immigrants achieve greater upward income mobility?

Core argument: Children of immigrants in the US move 5–8 percentiles higher in adult income rank than children of US-born parents starting from the 25th percentile, a pattern holding across two centuries.

Children of immigrants in the US have consistently demonstrated higher upward intergenerational mobility compared to children of US-born parents, moving 5-8 percentiles higher in income rank from the 25th percentile. This trend persists despite changes in immigrants' countries of origin, initial income levels, and US immigration policies. Immigrant families often relocate to areas with better prospects, contributing significantly to this mobility advantage. The gap in mobility diminishes by 70% when accounting for childhood region and state fixed effects, indicating location choices as a key factor. Second-generation immigrants often surpass their US-born counterparts, reflecting a more optimistic view of immigrant assimilation and aligning with the "American Dream" narrative. This suggests that immigrant children have substantial opportunities for economic advancement, challenging short-term perspectives on immigrant assimilation.

Takeaways by Macro Roundup® AI

  1. Children of immigrants in the US move 5–8 percentiles higher in adult income rank than children of US-born parents starting from the 25th percentile, a pattern holding across two centuries.
  2. The immigrant mobility advantage shrinks by 70% once childhood region and state fixed effects are included, pointing to immigrant families' relocation to areas with better prospects as a key factor.
  3. Higher second-generation mobility persists despite shifts in immigrants' countries of origin, initial income levels, and US immigration policies, supporting a more optimistic view of immigrant assimilation than short-term perspectives suggest.

worth noting their US born series doesn't carve out by ethnic origin, so they aren't comparing Italian immigrants to native's of Italian stock.

also note that when they compare children growing up in the same county, the gap btw immigrants and natives is reduced by 70%. IE immigrants don't earn more then others who grow up in the same area, the immigrants move to the high mobility areas. Note NYT writeup of paper is attached.

"....We use newly-constructed father-son linked datasets to study whether the children of immigrants achieve earnings parity with the children of the US-born, and how the intergenerational mobility of immigrants has changed over the last two centuries. We find that, both in the past and today, children of immigrants had greater chances of moving up in the income distribution relative to the children of US-born parents with comparable family income or occupation score. Second generation immigrants growing up in the 25th percentile end up 5-8 percentiles higher in the income rank than the children of the US born.The children of immigrants achieve similar rates of upward mobility despite large changes in country of origin (immigrants hailed from Europe in the past, and from Latin America and Asia today), initial income levels (immigrants today starting from lower levels), and US immigration policy over the last century (the ending of open borders for European immigrants and the imposition of additional regulations for immigrant entry). Our finding that children of immigrants have on average higher upward mobility is not driven by immigrants from any particular ethnic origin. Rather, when estimating rates of intergenerational mobility separately for each country of origin, we find that children of immigrants from nearly every sending country have higher rates of upward mobility than the children of the US-born. Using the historical data to dig deeper into why children of immigrants were more upwardly mobile,we find that immigrant families were more likely than the US born to move to areas that offered better prospects for their children....including childhood region fixed effects diminishes the intergenerational gaps by roughly 70% in both historical cohorts. The intergenerational gaps are further reduced when adding childhood state fixed effects (third bar of each graph). Finally, when we further include either childhood state-by-urban status fixed effects (fourth bar) or childhood county fixed effects (fifth bar) the gap between the children of immigrants and the US-born fully closes. Hence, these results suggest that location choices are an important source of difference in upward mobility for the children of immigrants versus children of the US-born....Furthermore, immigrant parents were “under-placed” in the income distribution, thus allowing their children who were native English speakers and educated in the US more scope for upward mobility. The success of second-generation immigrants gives a more optimistic view of immigrant assimilation than previous studies that have focused only on the first generation. Indeed, we find that second generation immigrants overtake, rather than just catch up with the children of the USborn with comparable family incomes. Although some politicians have a short-term perspective on immigrant assimilation, our findings suggest that this view might underestimate the long-run success of immigrants. Our findings are more consistent with the idea of the “American Dream,” by which even immigrants who come to the United States with few resources and little skills have a real chance at improving their children’s prospects...."

Ran Abramitzky, Leah Platt Boustan, Elisa Jácome and Santiago Pérez, "Intergenerational Mobility of Immigrants In The US Over Two Centuries," National Bureau of Economic Research, October 2019, https://scholar.princeton.edu/sites/default/files/lboustan/files/w26408.pdf