Macro Roundup

Crouzet/Eberly argue measuring intangible capital and rents together explains ~ 1/3 to 2/3 of the productivity slowdown in the USA, "... Empirically reasonable values of markups and unmeasured capital can account for about half of the measured productivity slowdown in the 2000s..."

One implication follows for TFP, "...In this framework,markups alone generate a downward bias in TFP growth. They imply that the measured labor share is an overestimate of the true elasticity of output with respect to labor. When capital is growing faster than labor, this biases downward measures of TFP growth. However, this bias is not quantitatively large, even in extreme cases. Omitted intangibles alone could also bias measured TFP growth: if the true stock of unmeasured capital is growing more slowly than the measured stock, measured TFP growth will be biased downward. In addition, omitting intangible investment makes the level of GDP too low, relative to true GDP; therefore, the measured labor share is higher than the elasticity of output to labor. This upward bias in the measured labor share can be large and increases with the amount of intangible investment omitted from GDP calculations. However, an upward bias in the labor share seems surprising empirically, since the measured labor share has been declining since at least the late 1990s..."

Two insights 1)"... First, while in the model, the level of output is mismeasured — it is too low —, its growth rate is correctly measured, because omitted and measured investment, in nominal terms, grow at the same rate on the balanced growth path. Thus, in our framework, mismeasurement of GDP growth is not a source of bias in productivity growth by construction, whereas it is the focus of much previous work...."

2)"... Second, and most important, the model helps clarify under what conditions mismeasurement in the growth rate of capital may lead to underestimating TFP growth. Specifically, we show that this will occur when the price of unmeasured investment grows sufficiently quickly relative to the price of measured capital. This mechanism, on its own, can lead to a substantial downward bias in measured TFP growth, which we characterize analytically..."

Their takeaway"...If the price of omitted intangible capital is rising sufficiently fast, an upward bias in measured capital growth (and therefore, a downward bias in measured TFP growth) can occur. However, such mismeasurement would also imply that the level of measured GDP is biased downward, by an amount equal to the flow of intangible investment. This, in turn, would tend to generate a rising measured labor share, at odds with the data. Rising markups, in tandem with rising intangibles, can offset this force and allow simultaneously for a downward bias in measured TFP growth and a declining labor share. We articulated this argument more precisely in balanced growth model featuring both intangibles and markups, and showed, using the input-output tables, that this mechanism could plausibly account for one to two-thirds of the decline in measured TFP growth. Our results do not imply that the rate of growth of output is mismeasured. Rather, they attribute some of this decline to rising relative prices of certain forms of intangible capital. A difficult but worthwhile question is why these forms of intangible capital have become relatively more expensive. Additionally, outside of the balanced growth path, omitted intangibles may bias the measured growth rate of GDP, further exacerbating TFP growth biases. Finally, our balanced growth analysis assumes Cobb-Douglas substitutability between labor and capital, but deviations from this assumption may accentuate the wedge between the 630 measured labor share and the output elasticity of labor, and amplifying measurement bias. We leave these questions to future research...."

"...In Section 3, we then use data on omitted intangibles, in the balanced growth framework, to quantify the size of the combined biases in measured TFP growth. We use the annual Input-Output tables for the 1997-2018 period to measure annual expenditures on 61 commodities or services that are treated as intermediate purchases in national accounting. We then examine those for which reclassifying intermediate purchases as final expenditure on capital goods would have the largest impact on GDP. Several service groups stand out. Professional, Scientific and Technical services, Administrative and Support services, and Management services, lead to large upward adjustments in measured GDP...."

"...Using these data and our balanced growth model, we then estimate that the combination ofmarkups and omitted intangibles can explain between one-third and two-thirds of the decline in U.S. productivity from the pre-1997 to the post-1997 period. Table 1 shows that productivity growth measured using the standard Solow residual, declined by 49bps, from 1.11% to 0.62% per year. Our corrected measure of TFP growth, which adjusts for both 122 intangibles and markups, instead declines from 1.11% to 0.95%, or only about one-third as much Importantly, we also show that measurement bias was likely much smaller in the 1947-1996 period, a period which pre-dates the rise in both intangibles and in markups...."

"... Table 2 reports the time-series averages of the ratios of unadjusted to adjusted GDP, ˆ b, defined as in Equation (18). The averages reported are computed when intermediate use of a single commodity or service group (among the 61 reported in the Use table) is reclassified as intangible investment in isolation. Among the groups with the 10 largest adjustments, 3 service groups are of particular interest. The largest adjustment is associated with the Professional, Scientific and Technical Services (PSTS) group. Reclassifying intermediate expenditures on these services as intangible investment implies that actual GDP is approximately 6% larger than measured GDP. This group comprises service activities that can be purchased externally by firms, such as accounting, consulting, design, or computer services. The two other service groups of interest are Administrative and Support Services, and Management of Companies and Enterprises. The former group measures the use of outsourced business support services (such as personnel administration and training). The latter group measures the service output of establishments that administer other establishments in a company. Our core argument is that intermediate expenditures on these types of services could in fact represent purchases of investment goods by firms, which would then be misclassified in national accounts.The type of capital created by these purchases is intangible, in that it does not have a physical presence. Indeed, these purchases could lead to the accumulation of various forms of organization capital (through consulting, advertising, design, management and personnel-related services), none of which are embodied in physical assets. These expenditures lead to capital accumulation to the extent that the corresponding inputs are not used up in production entirely within the year of their purchase. Taken together, omitting these forms of investment could have large effects on GDP. The first column of Table 3 shows that reclassifying the three service groups mentioned above leads to a cumulative adjustment in the level of GDP in the order of 11%. Accordingly, investment rates adjusted for these omissions are higher than, and diverging from, measured investment rates. Figure 3 reports the time series for both the ratio of unadjusted to adjusted GDP, and for the implied ratio of nominal investment to GDP after adjusting for omitted intangibles. For instance, adjusting for Professional Services leads to an upward revision of approximately 5% in the ratio of nominal investment to nominal GDP….”

"... Figure 4 reports the implied rate of growth of TFP (as well as a red line indicating the average simple Solow residual ˆgZ the post-1997 sample) when adjusting for the 61 commodity and service groups individually. Adjustments of individual service or commodities groups have a positive, though relatively small overall effect on measured TFP growth. Among the largest adjustments is obtained for the PSTS group; alone, it adds approximately 0.1% to overall TFP growth, or 1/5th of the gap between pre- and post- 1997 TFP growth...."

New NBER presents evidence that demand for skill helps drive the Flynn effect (in terms of rising intelligence). Using Swedish administrative data("...We focus on Sweden, where an administrative data join between standardized test scores (collected for military conscription typically at age 18 or 19) and earnings (collected by the tax agency over the lifecycle) allows us to measure the level of and return to skill in a consistent way across cohorts for the near-population of men....")they find that returns to both logical reasoning and vocabulary knowledge skills have fallen over time. They compare actual changes to a counterfactual where returns stay fixed over time, and find that changing returns can explain ~1/3 of the increase in fluid intelligence (general reasoning ability). and the entire decrease in crystallized intelligence (domain knowledge)

Core findings, "... Across the birth cohorts 1962-1975, we find that performance on a logical reasoning task—our proxy for fluid intelligence—improved by 4.5 percentile points relative to the distribution in the 1967 cohort. The estimated lifetime earnings premium to an additional percentile point of logical reasoning performance fell by 0.07 log points, from a base of 0.48 log points. Turning to performance on a vocabulary knowledge test—our proxy for crystallized intelligence—we find that performance declined by 2.8 percentile points. The estimated lifetime premium to an additional percentile point of vocabulary knowledge also fell by 0.07 log points, but from a much lower base of 0.16 log points..."

"...Because logical reasoning performance rose while its market return fell, a model in which logical reasoning is the only skill dimension would imply that there must have been an increase in the supply of skill, consistent with the hypothesis of a growth in the endowment of fluid intelligence of the sort emphasized in the cognitive science literature. A richer picture emerges when incorporating the second skill dimension. Vocabulary knowledge performance fell along with its market return, suggesting a decline in the demand for this skill dimension. Moreover, the premium to vocabulary knowledge relative to logical reasoning fell by 40 log points. Seen through the lens of our model, the declining relative premium to crystallized intelligence drove a reallocation of effort towards developing abstract reasoning and away from acquiring knowledge. We use the model to decompose the observed trends in skills into a portion driven by changing labor market returns and a portion driven by other factors. According to the estimated model, if the market returns to different skills had remained constant at their 1962 level, logical reasoning and vocabulary knowledge performance would have increased by 2.9 and 3.0 percentile points, respectively. The estimated model thus implies that trends in labor market returns explain 36 percent of the growth in logical reasoning performance and more than fully explain the decline in vocabulary knowledge...."

Evidence, "... Figure 1 depicts the average skill levels xc and the estimated lifetime skill premia Pc across cohorts in the enlistment data along with their 95 percent pointwise and uniform confidence intervals. For convenience we label cohorts with their birth year, i.e., c−29. Figure 1 also depicts the lines of best fit through the plotted series. The top row of plots in Figure 1 shows that logical reasoning skill rose, on average, by 4.5 percentile points, relative to the 1967 distribution, across the birth cohorts from 1962 to 1975. By contrast, vocabulary knowledge skill fell, on average, by 2.8 percentile points. Appendix Figure 9 depicts the cumulative distribution functions of skills in the 1962 and 1975 cohorts. The bottom row of plots in Figure 1 shows that the lifetime skill premium fell for both logical reasoning and vocabulary knowledge. The line of best fit indicates that the lifetime premium for a percentile point of logical reasoning skill fell from 0.48 to 0.41 log points across the birth cohorts from 1962 to 1975, and the lifetime premium for a percentile point of vocabulary knowledge fell from 0.16 to 0.09 log points. Thus, the lifetime premium for both skill dimensions fell, with a proportionately much greater decline for vocabulary knowledge.27 Appendix Figure 10 depicts estimated lifetime skill premia based on a generalization of equation (1) that allows interactions between the skill dimensions...."

Santiago Hermo, Miika Päällysaho, David Seim and Jesse Shapiro, "Labor Market Returns and the Evolution of Cognitive Skills: Theory and Evidence," National Bureau Of Economic Research, August 2021, https://www.nber.org/papers/w29135

“…Figure 4 shows the evolution of logical reasoning and vocabulary knowledge skill in the data and in the counterfactual scenario in which the lifetime skill premia Pc remain constant at their initial level Pc. In the counterfactual scenario, logical reasoning skill increases by 2.9 percentile points instead of 4.5 as in the actual data. Vocabulary knowledge skill increases by 3.0 percentile points rather than falling by 2.8 percentile points. In this sense, according to the model, changes in the lifetime skill premia Pc account for 36.1 percent of the increase in logical reasoning skill (with a standard error of 1.5 percent), and for more than the entire decline in vocabulary knowledge skill….”

Counterfactual

Using evidence from Chile Chad Syverson finds that when workers change firms they generally move from lower to higher productivity employers raising aggregate productivity, but that mean hides a great deal of churn in both directions. They use earnings as a proxy for skill level.

Three core findings, First, "...while on average individual job transitions move workers from lower-productivity to higher-productivity firms, the fraction of all job changes that flow up the productivity ladder is only marginally higher than those in the opposite direction. Almost half (49% in our preferred specification) of all job changes move workers towards firms that have lower productivity levels than their prior employer. Thus net labor reallocation towards higher-productivity firms hides a very large degree of job churning whose productivity implications mostly cancel...."

Second, "....we show that the fraction of up-the-productivity-ladder transitions varies significantly across job flow types and across firm productivity levels. They are more likely for direct job-to-job transitions than for those passing thorough non-employment spells. This is consistent with standard job-search theory, in the sense that movements resulting from on-the-job search should lead to better quality jobs more likely to be available at higher productivity firms. They are also more likely to occur between firms at the high end of the productivity distribution, with up-the-ladder transitions originating from low productivity firms happening less frequently than implied by a model of completely random movements...."

Third, "... the job transitions of younger workers, workers with high skills, and female workers are more likely to be to higher-productivity firms and correspond to larger productivity gains. In fact, young skilled workers provide the plurality of net labor reallocation to higher productivity firms. The net contributions of other large groupings are modest or even negative. Workers with the highest turnover rates contribute proportionally little to aggregate productivity growth...."

They note that their results imply that labor market churn for lower skilled workers likely isn't productivity enhancing, "... Overall, our findings sound a note of caution, or at least modesty in interpretation, about the connections between labor market fluidity and aggregate productivity growth. While fluidity enables reallocation of resources to more productive firms, many of the observed job transitions appear to happen for reasons that are orthogonal to industry or aggregate productivity growth. The flip side of this coin is that there may be a substantial amount of untapped potential for labor reallocations to enhance productivity growth...."

The data, "...First, we drop all firms that have only one employee for an entire year, as it seems likely that they represent some form of self-employment rather than an actual firm with workers in the spirit of our exercise. We also drop all workers employed in those firms. This is about 1.7% of the initial set of 48 million monthly worker-job matches. Second, we want to avoid spurious job transitions in which workers move to a “new” firm with a different tax ID that is actually directly linked to the previous firm. This includes cases in which the firm tax ID changes, M&As, or separations of a single firm into several business entities for tax reasons. We address this by excluding from the set of transitions all cases in which a significant share of a firm’s workforce jointly reallocates to another firm, whether existing or new. This removes just under 5000 firms.1 Third, we must assign any workers employed by more than one firm in a given month to a single job and employer. We classify the worker’s main job as the one with the longest current tenure and, if there is a tie, the one with the highest average monthly earnings. About 8% of our worker-job observations are dropped as secondary jobs. Finally, as we want to focus on full-time jobs but have no information on hours, we drop all employment relations in which the worker earns an implied full-time wage that is less than the minimum wage for 80% of her tenure. These jobs, which account for 20% of the initial set of observations, are probably part-time. We calculate average labor productivity at the firm level as a measure of annual sales (from form F22) per annual-equivalent worker. Firms’ annual-equivalent workers are simply the sum of workers in firms’ monthly DJ1887 reports, divided by 12. For example, a firm with one worker who is employed the entire year and two employees who each work in six months of the year (whether overlapping months or not) has two annual-equivalent employees.2 Thus, average labor productivity is defined at an annual level...."

The Evidence, "...Panel A presents the results across all 11 million transitions in our sample. Consistent with reallocation being a factor behind productivity growth, the average labor productivity gap between the destination and origin firm in a worker transition is about 8%. However, this aggregate result averages over enormous heterogeneity. This is clear in the large dispersion of the productivity differentials. The 25th percentile of the distribution involves a worker moving to a firm with a labor productivity level about half the size (e −0.625 = 0.535) of the firm she left. The 75th percentile transition is to a firm with a productivity level more than twice as high (e 0.761 = 2.14). The rough symmetry of this dispersion is reflected in the fact that the share of job transitions that move up the productivity ladder is only a shade above half, with 47.6% of worker transitions being to firms less productive than the origin firm. This is a striking result. While net reallocation flows are directed towards more productive firms, the process involves an enormous degree of churning in both directions. Theoretically, even in a frictionless world in which all job transitions were efficient, some transitions down the firm-productivity ladder might be motivated by better firm-worker matches or from other non-pecuniary motives that might drive worker reallocation across different firms…. Nonetheless, the fact that the frequency of upward flows is only marginally higher than that of a completely random reallocation benchmark, with a 50% unconditional change of moving up or down the firm-productivity ladder, is notable...."

"...Panel B addresses a potential concern regarding the exercise shown in Panel A. As discussed earlier, our data defines firm productivity by calendar years. Transitions that occur between calendar years compare productivity measures across different points in time. Secular aggregate productivity growth implies that the average true productivity gaps for across-year transitions would be overestimated. Additionally, the raw productivity gap does not account for systematic differences in average labor productivity across sectors, which are likely related to differences in capital intensity. We therefore adjust productivity across years by subtracting from the measured destination-origin productivity difference both the average annual productivity growth over the period as well as, for transitions across sectors, the difference in mean sector productivity levels. After this adjustment, the average productivity gaps do become smaller, with the average differential for all transitions falling to about 5%, and 51.3% of transitions being upwards. Most of the basic patterns in Panel A remain, however.The biggest difference is that the average and median productivity gaps of job-N-job transitions are now slightly negative.For the rest of the paper, our attention will focus on this measure of adjusted labor productivity differences across transitions, although all results are qualitatively robust to using the unadjusted gaps summarized in Panel A...."

"...To have a sense of the macroeconomic scale of the reallocation process described by the data, we sum sales per worker gaps across all job transitions that take place during a given year and then divide that sum by firms’ total sales that year. This calculation assumes each transition leads to an output change equal to what would happen if the transitioning worker experienced a labor productivity change equal to that between of the two firms she transitions between. The sum of these output changes relative to total output provides a metric of output growth coming from productivity gains through labor reallocation. Over our sample period, the implied average annual sales growth from reallocation computed in this way is 1.35. For comparison, average annual total sales growth in our data is 5.9%. This suggests that labor reallocation from lower to higher marginal product activities is quantitatively important as a potential source of growth..."

"...To explore these elements further and complement our firm-heterogeneity results in the previous section with worker-heterogeneity results, we place every worker into one of 25 age-by-skill worker groups. These use the five skills quintiles derived as above as well as five age groups (less than 25, 25-34, 35-44, 45-54, 55+). We compute the average productivity gap associated with worker transitions within each group. We take further advantage of our data to introduce one additional dimension by dividing the sample into men and women. This is a particularly interesting dimension for an economy like Chile, in which the gender wage gap is large and female labor participation, while growing, is still low. Figure 2 graphs the results. The differences across groups reflect some remarkable patterns. Consistent with the discussion above, productivity differentials are significantly larger for young, skilled workers. They are the largest for workers younger than 25 and in the top skill quintile. Productivity gaps decline monotonically with age, even conditioning on skill, becoming almost negligible for workers over 45. They also tend to increase with worker skill, conditioning on age. The one group where the average productivity difference between the destination and origin firm is clearly negative is for high-skilled workers over 55. This may reflect that a large share of those transitions are non-voluntary and associated with the destruction of such workers’ valuable job ladders. Comparing across genders, productivity gaps for a given age-skill group are consistently larger for female workers. The sole exception is the youngest, least-skilled group, where long time gaps between jobs are frequent. This indicates systematic gender-related difference in the process of labor reallocation. Overall, these results are further evidence of the heterogeneity in the interaction between job transitions and productivity. Productivity-enhancing reallocation is significantly stronger among young, high-skilled, and female workers. We now use these results to decompose productivity gains from reallocation into group-level contributions..."

Elias Albagli, Mario Canales, Chad Syverson, Matias Tapia and Juan Wlasiuk, "Productivity Growth and Workers’ Job Transitions: Evidence from Censal Microdata," National Bureau Of Economic Research, April 2021, https://www.nber.org/papers/w28657

Xavier Giroud, Simone Lenzu, Quinn Maingi and Holger Mueller, "Propagation and Amplification of Local Productivity Spillovers," National Bureau Of Economic Research, July 2021, https://www.nber.org/papers/w29084

Employment and Wages

"..Table 6 examines the local employment and wage spillovers in the winner county. As can be seen, employment and wages increase by 3.5% and 3.7%, respectively, which is of the same order of magnitude as the productivity gains.15 Table 7 examines the global employment and wage spillovers. As is shown, employment at treated plants increases by 1.6% to 1.7%, which is again of the same order of magnitude as the productivity gains.16 However, wages only increase by a small amount.This is not surprising; in any given county outside the winner county, only relatively few plants are treated, putting only mild pressure on local wages. With the usual caveats, we can perform a simple back-of-the-envelope calculation to determine the total number of jobs created outside the winner county versus those created in the winner county. In the winner county, about 52,600 workers are employed in manufacturing prior to the MDP opening. By comparison, about 211,900 workers are employed at treated plants outside the winner county. Given the estimates in Tables 6 and 7, this implies that 0.035 × 52, 600 = 1, 841 jobs are created in the winner county versus 0.016 × 211, 900 = 3, 390 jobs outside the winner county. Hence, almost twice as many jobs are created outside the winner county than at all plants in the winner county combined..."

"... Finally, in columns (3) to (6), we interact both terms in equation (1) with measures of knowledge sharing at the industry-pair level. The first measure, “mutual R&D ‑flows,” captures how R&D in one industry flows out to benefit another industry. The second measure, “mutual patent citations,” captures the extent to which technologies associated with one industry cite technologies associated with another industry.13 In either case, we measure the extent of knowledge sharing between the industry of the treated plant and either the industry of the MDP or the industry of the firm’s plant in the winner county. As is shown, the global productivity spillover is much stronger if the treated plant and either the MDP or the firm’s plant in the winner county are in (knowledge-based) industries characterized by mutual R&D ‑flows or patent citations.14 The effects are economically significant. For instance, in column (3), a one-standard deviation increase in the R&D ‑ow measure (0.022) raises the productivity gains at treated plants by 1.3 percentage points..."

Key driver, increase in worker knowledge/skill"... Why is the local productivity spillover twice as large as the global productivity spillover?12 For one, not all of the productivity gains in the winner county may be due to knowledge spillovers. As noted above, they are likely due to both knowledge spillovers and thicker labor markets. Furthermore, some knowledge may not be passed on to other plants of the firm, as it may be location-specific or difficult to share (“soft information”). In contrast, knowledge about specific products or production processes is likely relevant for, and easier to share with, other plants of the firm. We explore this idea in columns (1) and (2) of Table 5 by interacting both terms in equation (1) with indicators for whether the treated plant is in the same 4-digit SIC code industry as either the MDP or the firm’s plant in the winner county. The 4-digit industry classification is extremely fine; it comprises 459 manufacturing industries in the CMF/ASM. Plants in the same 4-digit industry produce similar goods and use similar production processes. For example, “nitrogenous fertilizers” (SIC 2873), “phosphatic fertilizers” (SIC 2874), and “fertilizers, mixing only” (SIC 2875) all have different 4-digit SIC codes. As is shown, the global productivity spillover is much stronger if the treated plant and either the MDP or the firm’s plant in the winner county are in the same narrow industry...."

"...We next study the global productivity spillover on treated plants outside the winner county that belong to firms with plants in the winner county. We estimate the same difference-in-differences specification as above, except that is now an indicator for whether the plant’s parent firm owns a plant in the winner county, the fixed effects vary by control group, and a “case” is more generally defined as comprising all treated plants as well as all plants in the corresponding control group. Table 3 presents the results.In column (1), the control group consists of all plants outside the runner-up counties that belong to MC firms with plants in the runner-up counties (“runner-up firms”). This specification includes plant, industry × year, and case fixed effects. Accordingly, we compare treated plants with plants of runner-up firms in the same industry and year, but possibly in different counties. In column (2), the control group consists of all plants of MC firms in the same county as the treated plant. This specification includes plant and industry × county × year fixed effects. Thus, we compare treated plants with other plants in the same county, industry, and year. This accounts for the possibility of common shocks between the county of the treated plant and the winner county, thus addressing potential concerns that the productivity gains at treated plants may be due to common regional shocks rather than internal spillovers within the firms plant-level network. Finally, in column (3), the control group is a subset of that in column (2): it consists of all plants of runner-up firms in the same county as the treated plant. In addition to plant and industry × county × year fixed effects, this specification also includes case fixed effects. Hence, we compare plants in the same county, industry, and year that belong to parent rms which either own plants in the winner county (treatment group) or in the corresponding runner-up counties (control group). As is shown, the MDP openings raise the productivity of treated plants outside the winner county by 1.8% to 2%. The estimate is stable across specifications, despite varying control groups and fixed effects. While the productivity gains at treated plants are less than the productivity gains in the winner county, Table 1 shows that the typical “treated” MC firm has about 6.3 (treated) plants outside the winner county. Indeed, using a back-of-the-envelope calculation, we illustrate below that almost twice as many jobs are created outside the winner county than among all plants in the winner county combined...."

Core results, "...A different picture emerges when we examine how productivity spillovers spread within firm boundaries. We consider large multi-plant, multi-region firms which are exposed to the MDP openings, and thus to the local productivity spillover, by having a plant in the winner county. We find that, in response to the MDP openings, these firms’ plants outside the winner county (“treated plants”) experience productivity gains of 1.8%, along with employment gains of 1.6%. To identify the (“global”) productivity spillover on plants outside the winner county, we compare plants in the same county, industry, and year that belong to firms which either own plants in the winner county (treatment) or the runner-up counties (control). This specification accounts for the possibility of correlated shocks between the county of the treated plant and the winner county, thus addressing potential concerns that the productivity gains at treated plants may be due to common regional shocks rather than internal spillovers within the firm’s boundaries......On the one hand, firms must have a nearby plant to benefit from knowledge spillovers. As we show, the local agglomeration economy is strongly significant only within a 50 mile radius around the MDP. On the other hand, not all of a firms plants need to be located nearby. In fact, it may suffice if only one of the firms plants is located in close proximity to the MDP. Once the knowledge spills over to that plant, it can be passed on to other plants inside the firms boundaries, increasing the productivity of distant plants hundreds of miles away...... Table 2 presents the results. In this and all other tables, we only report the main coefficient(s) of interest and write “MDP” in lieu of × for brevity. As column (1) shows, the MDP openings raise the productivity of incumbent plants in the winner county by 4%.10 In column (2), we examine if the local productivity spillover varies with distance between the incumbent plants and the MDP. To this end, we first identify all incumbent plants within a 250 mile radius around the MDP. Naturally, this includes plants outside the winner county. We then create three dummy variables, (< 50 miles), (50 to 100 miles), and (100 to 250 miles), that indicate whether the incumbent plant lies within 50 miles, between 50 and 100 miles, or between 100 and 250 miles from the MDP, and interact these dummy variables with both terms in equation (1). As is shown, the local productivity spillover decays rapidly with geographical distance. It is strong within a 50 mile radius around the MDP, much weaker within a 100 mile radius, and insignificant beyond. Hence, consistent with a large empirical literature, we find that productivity spillovers between (plants of) different rms are highly localized...."

Local productivity spillovers diffuse though economy via manufacturing plants both locally and globally, "...we showthat large manufacturing plant openings not only raise the productivity of local incumbent plants but also of distant plants hundreds of miles away,which belong to multi-region firms that are exposed to the local productivity spillover through one of their plants. This “global” productivity spillover does not decay with geographical distance and is stronger in (knowledge-based) industries characterized by mutual R&D flows and patent citations....... we show that the MDP openings raise the productivity of incumbent plants by 4%.This (“local”) productivity spillover is strong within a 50 mile radius around the MDP, weaker within a 100 mile radius, and insignificant beyond. Hence, consistent with a large empirical literature, we find that productivity spillovers between (plants of) different firms decay rapidly with geographical distance...."

“…The model also reproduces the empirical pattern shown in Table 4 that higher price dividend growth during the boom forecasts higher future dividend growth and not large relative price declines. For this exercise, we collapse the model time series by year and regress the log changes in dividends and price between model years corresponding to 2006 and 2019 on the log change in the price-dividend ratio during the boom. An additional log point of growth in the price-dividend ratio in the boom predicts additional 0.41 log point of dividend growth in the bust-rebound (compared to 0.20 in column (3) of Table 4) and additional 0.03 log point of price growth (compared to 0.03 in column (6) of Table 4)….echo the result from Table 4 that price rent growth in the boom not associated with long-run fundamentals strongly predicts subsequent price decline. However, they also suggest that the role of investors was mostly or wholly orthogonal to the role of fundamentals and less important to explaining the entirety of the boom or the full 1997-2019 period, which are the focus of our paper…”

New NBER argues that there was no housing bubble, national real house prices rose 80% between 1997 and 2006, lost two-thirds of their gain by 2012, but then rose again. The episode isn't best characterized as a boom-bust, but a boom-bust-rebound, "...We reevaluate the 2000s housing cycle from the perspective of 2020.1National real house prices grew steadily between 2012 and 2019, with the largest price growth in the same areas that had the largest booms between 1997 and 2006 and busts between 2006 and 2012. As a result, the areas that had the largest booms also had higher long-run price growth over the entire 1997-2019 period. With “2020 hindsight,” the 2000s housing cycle is not a boom-bust but rather a boom-bust-rebound...."

"...We argue that this pattern reflects a larger role for fundamentals than previously thought. In a first step, we use a standard spatial equilibrium framework to motivate several determinants of house prices. We find that these explain cross-city variation in long-run house price growth in reduced-form and structural supply regressions as well as the amplitude of the boom-bust-rebound across cities and severity of the foreclosure crisis. In a second step, we introduce a “neo-Kindlbergererian” model of a fundamentally rooted house price cycle in which belief over-reaction amplifies the boom and a foreclosure spiral exacerbates the bust, and discipline the model with our empirical moments. The estimated model generates the boom-bust-rebound from a single fundamental shock and quantitatively matches the cross-city patterns...."

Their housing cycle dynamic, "...House prices clear a Walrasian market, with demand emanating from potential entrants and supply coming from the the construction of new homes and foreclosures. An endogenous boom-bust-rebound cycle occurs in response to a single change in the city’s fundamental, an increase in the growth rate of the income and amenities or “dividend” from living in the city...."

Evidence: "... Figure 1 shows the national Case-Shiller house price index, deflated using the GDP price index. After a period of zero real growth, the series begins to rise in the late 1990s, peaks in 2006Q2, reaches a local trough in 2012Q1, and then grows again through the end of our sample in 2019. In what follows, we measure the boom as house price growth between 1997 and 2006, the bust as price growth between 2006 and 2012, and the rebound as price growth between 2012 and 2019.We start the boom in 1997 because very few cities have booms that start before that year..."

"... Here, we revisit the increase in price-rent ratios with the benefit of 2020 hindsight and show that the component associated with long-run fundamentals predicts subsequent rent growth and not future price decline, consistent with our interpretation of this component as fundamentally-based. We start by characterizing the behavior of rents. Panel (a) of Figure 5 plots the growth rate of real rents in each CBSA between the 2000 Census and the 2018 American Community Survey (ACS) against the long-run fundamental, again measured as the second stage fitted value from column (3) of Table 2. Areas with higher fundamentals experienced larger rent growth over the BBR, with the relationship especially strong for larger CBSAs. Panel (b) shows the timing of rent growth using BLS CPI rent data for the 22 CBSAs with annual data since 1987, grouped into population-weighted quartiles of the long-run fundamental. Rents rise fastest in areas with the highest fundamentals, and this growth appears to represent a break from the pre-boom period. Column (1) of Table 4 shows that CBSA-level price-rent increases in the boom correlate positively with the long-run fundamental. We measure the log growth in the price-rent ratio using 2000 Census and 2006 ACS mean rent and the same house price data as above. The bivariate relationship has an R2 of 0.29. Columns (2) and (5) report the correlation of price-rent growth in the boom with subsequent rent and price growth over the 2006-18 period. This user-cost decomposition (Poterba, 1984) closely resembles the Campbell and Shiller (1988b) exercise of decomposing variation in the price-dividend ratio of a stock into future dividend growth and returns with rents replacing dividends as the cash-flow measure.15 Larger price-rent growth during the boom forecasts both higher subsequent rent growth and future relative price declines. Columns (3) and (6) restrict the variation in the price-rent ratio in the boom to the part associated with the long-run fundamental. Specifically, these columns report regressions of subsequent rent and price growth on the fitted value of the growth of the price-rent ratio from column (1). Strikingly, the rise in price-rent ratios associated with long-run fundamental growth predicts even faster subsequent rent growth than in column (2) and no subsequent price decline, validating our labeling of this component as a fundamental. Columns (4) and (7) show that the part of price-rent growth not explained by long run fundamentals predicts no subsequent rent growth and large subsequent price declines. These columns make clear that our empirical evidence admits the possibility of aspects of the housing boom not associated with long-run fundamentals; in fact, the part of price rent increases not correlated with long-run fundamentals looks very bubble-like ex post…"

Benjamin Zycher, "Should US policies transfer our wealth to OPEC+?"National Review, August 13, 2021, https://www.aei.org/articles/should-us-policies-transfer-our-wealth-to-opec/

Should US policies transfer our wealth to OPEC+?

Incoherence is nothing new in the Beltway, but it’s still quite something to see the Biden administration simultaneously pursue new constraints on U.S. production of fossil fuels as a central component of its “climate” policies, while at the same time attempting to avoid the adverse price effects of that production stance. The administration on August 11 issued a plea for another increase in crude-oil production by OPEC+ (the 13 members of OPEC and ten other major international producers):

While OPEC+ recently agreed to production increases, these increases will not fully offset previous production cuts that OPEC+ imposed during the pandemic until well into 2022. At a critical moment in the global recovery, this is simply not enough. President Biden has made clear that he wants Americans to have access to affordable and reliable energy, including at the pump.

This follows the Biden administration effort in July to urge OPEC+ “to quickly come up with a compromise ‘that will allow proposed production increases to move forward.’”

Increases in gasoline prices in particular are highly visible, and thus politically damaging. And so it is both distressing and amusing to observe these efforts by the administration even as it remains busy proclaiming its climate credentials.

The basic laws of economics are difficult to defy: As fossil-energy demand strengthens alongside the global recovery from the COVID-19 downturn, sharp price increases follow, an effect reinforced by previous cutbacks in crude-oil production by OPEC+. The Biden administration may believe that its July pronouncements carried weight, but, in the end, OPEC+ made its own decision in its own interests. Accordingly, OPEC+ in July agreed to increase production as a response to the increase in the international demand for crude oil. OPEC+ production will increase by about 2 million barrels per day (400,000 barrels per day each month) through the end of this year, and the overall OPEC+ production cut of 9.7 mmbd — about 23 percent — implemented in May 2020 will be phased out fully by September of next year.

This decision was going to be forthcoming with or without the statements from the Biden administration. Fossil-fuel resources are one central form of national wealth — at least in countries where it is recognized as such. The increase in demand for crude oil allows producers to realize the wealth value of those resources, a reality ignored by the Biden administration and its allied opponents of fossil fuels. This national-wealth dynamic is not a mere intellectual exercise: Competitive market forces combined with long-standing legal arrangements yield a distribution of that national wealth consistent with the contributions of workers, asset owners, investors, suppliers, and others whose efforts, risk-taking, and ownership rights make the acquisition of the increased national wealth a reality.

In other words, the enhanced production of fossil resources improves the economic wellbeing of actual people. U.S. production of crude oil was 13.1 mmbd at the end of February 2020, fell to 10 mmbd one year later, and since then has increased only to 11.2 mmbd in late July. For federal lands (onshore and offshore) managed by the Bureau of Land Management, total production of crude oil increased by about 3.4 percent from February 2020 to March 2021 (the latest month for which official data are available).

Accordingly, the Biden pause on new leasing on federal lands is perverse. Even if maintained permanently, it would have an impact on future climate phenomena literally equal to zero; the entire Biden net-zero greenhouse-gas emissions policy would reduce global temperatures by 0.173°C by 2100, using the EPA climate model under assumptions that exaggerate the effects of reductions in GHG emissions. Note that this outcome is independent of assumptions and views of the science and evidence on anthropogenic climate change.

As an aside, this dismal benefit/cost reality applies to international climate policy proposals also. The entire Paris agreement: about 0.17°C. Net-zero emissions by the entire Organization for Economic Cooperation and Development: 0.352°C. A 50 percent reduction in Chinese GHG emissions: 0.184°C. A global 50 percent reduction in GHG emissions implemented immediately and maintained strictly: 0.687°C. Because “climate policy” in its essence means a reduction in the wealth expansion represented by fossil fuels, and a sharp increase in energy costs, it is difficult to see how it can satisfy any rational benefit/cost test.

That international reality applies a fortiori to the U.S: There is no good reason that the U.S. should engage in mindless economic sacrifice. Nonetheless, it is clear that the Biden administration is determined to find ways to impose artificial restrictions on expanded fossil-fuel output, simply as a matter of ideological imperative: a self-defeating increase in the royalty rate on production from federal leases, disapprovals or restrictions on investments in pipelines and other fossil energy infrastructure, a deeply dubious tightening of methane-emissions standards, and a general shift away from fossil fuels in favor of an energy system producing “net-zero” greenhouse gas emissions by 2050.

This stance is perverse: Whatever one believes about climate issues, a reduction in U.S. fossil-fuel production will yield an offsetting increase in production by non-U.S. producers. That is the ongoing reality — no other outcome is plausible — and nothing can change it in a world in which individuals, groups, and governments are interested in wealth acquisition greater rather than smaller. When we observe the opponents of fossil fuels arguing for reduced U.S. production but increased output overseas, it is time to recognize that Bizarro World is not merely a comic-book construct.

Fiona Greig, Daniel Sullivan, Peter Ganong, Pascal Noel, Joseph Vavra, "When unemployment insurance benefits are rolled back: Impacts on job finding and the recipients of the Pandemic Unemployment Assistance Program," J.P. Morgan, July 2021, https://www.jpmorganchase.com/content/dam/jpmc/jpmorgan-chase-and-co/institute/pdf/when-unemployment-insurance-benefits-are-rolled-back-research-brief.pdf

Editorial Board, "A Climate of Catastrophe,"Wall Street Journal, August 9, 2021, https://www.wsj.com/articles/a-climate-of-catastrophe-united-nations-intergovernmental-panel-on-climate-change-report-11628546180

A Climate of Catastrophe

The world awoke Monday after a logy August weekend to some alarming news: The climate Apocalypse is nigh, humanity is to blame, and unless the world remakes the global economy, havoc and death are inevitable. Repent of your sins all ye who enter here.

That’s only a mild overstatement of the media’s fire-and-brimstone accounts of the latest report by the United Nations Intergovernmental Panel on Climate Change (IPCC), a collection of scientists and politicians who purport to offer the best evidence on climate change. Prepare for days of reading what a terrible person you are for using a natural gas stove.

The gargantuan report will take time to plow through, but a read of the 41-page “summary for policymakers” and perusal of the rest suggests that there is no good reason to sacrifice your life, or even your standard of living, to the climate gods. Hot rhetoric aside, the report doesn’t tell us much that’s new since its last report in 2013, and some of that is less dire.

“It is unequivocal that human influence has warmed the atmosphere, ocean and land,” says the report in its lead conclusion. But no one denies that the climate has been warming, and no one serious argues that humans play no role. How could eight billion people not? Adding the adjective “unequivocal” adds emphasis but not context.

The report says the Earth has warmed by 1.1 degree Celsius since the last half of the 19th century, which is 0.1 degree warmer than its last estimate. This is not apocalyptic. The five-alarm headlines arise from the predictions of future temperature increases if greenhouse gas emissions, especially CO2, continue to increase.

Yet the report’s estimate of “climate sensitivity”—its response to a doubling of CO2—has moderated at the top end. The likely sensitivity range, says the report, is 2.5 to 4 degrees Celsius higher than in the late 1800s. The likely range was 1.5 to 4.5 in the 2013 report.

The new report offers five climate scenarios based on estimates of CO2 emissions. The intermediate scenario’s “best estimate” is a 1.5 degree increase by 2040 and a range of 2.1 to 3.5 by 2100. This is a highly speculative estimate on which to bet the U.S. economy.

The biggest difference is the new report’s direct linkage of warming to catastrophic weather events such as hurricanes, severe heat waves or rain events, drought and so on. The summary says this is based on “new methodology” and evidence, which means computer models. We await what independent climate experts say as they dig into these models.

But we know climate models are far from perfect, which explains the varying “confidence” levels attached to the report’s predictions. Steven Koonin, the scientist and former Obama official, devotes an illuminating chapter to “many muddled models” in his recent book about climate science, “Unsettled.”

The report also downplays some of the disaster scenarios you read about. It has “low confidence” that the Antarctic sea ice will melt. It says it is likely that tropical cyclones have increased around the world, but there is “low confidence in long-term (multi-decadal to centennial) trends in the frequency of all-category tropical cyclones.” Keep that in mind when the next hurricane becomes proof in the press of climate catastrophe.

Even the report’s prediction that warming oceans will melt Arctic sea ice doesn’t sound like a scene from “Waterworld.” The “Arctic is likely to be practically sea ice free in September at least once before 2050” under the five scenarios. Only once in 29 years, and not the rest of the fall and winter? Further thawing of the permafrost is said to be likely but how much or to what effect is uncertain.

Keep in mind that the IPCC report is a political document. It is intended to scare the public and motivate politicians to reduce CO2 emissions no matter the cost, which by the way the report summary never mentions. No less than Al Gore admitted this on PBS in October 2018 when the IPCC issued an interim report: “The language the IPCC used in presenting it was torqued up a little bit, appropriately. How do they get the attention of policymakers around the world?”

Torqued up is right. The U.N. Secretary-General called the new report a “code red for humanity.” And someone at Reuters actually wrote this sentence: “Further warming could mean that in some places, people could die just from going outside.”

If they really believe this, the policy response has failed miserably. Politicians have spent trillions of dollars subsidizing renewable energy with no effect on climate. Nuclear power, which would sharply reduce CO2, is taboo among the greens. Innovation in developing low-cost natural gas, which substitutes for coal, may have done more than any government policy to reduce U.S. emissions. Yet President Biden wants to crush the gas industry with regulation.

The IPCC report doesn’t justify putting the U.S. economy into the hands of government. A sensible climate policy will continue to monitor trends, while allowing a free economy to find solutions and build the wealth that will allow for adaptation and amelioration if the worst happens. This lacks the drama of the Apocalypse, but it will better serve the world.

“…The report says the Earth has warmed by 1.1 degree Celsius since the last half of the 19th century, which is 0.1 degree warmer than its last estimate. This is not apocalyptic. The five-alarm headlines arise from the predictions of future temperature increases if greenhouse gas emissions, especially CO2, continue to increase. Yet the report’s estimate of “climate sensitivity”—its response to a doubling of CO2—has moderated at the top end. The likely sensitivity range, says the report, is 2.5 to 4 degrees Celsius higher than in the late 1800s. The likely range was 1.5 to 4.5 in the 2013 report….”

Bjorn Lomborg on IPCC report, “…, the report is actually serious and sensible (and very, very long). It doesn’t surprise, since it is a summary of already-published studies, yet it reconfirms that global warming indeed is real and a problem.…The UN report only deals with the physical impact of climate change, but of course, much of what really matters is how humans handle this. Often the real problem of rising sea levels is converted into a catastrophe by arguing that nobody will adapt and everyone will drown or be displaced. Remember when news reports told us that rising seas will displace an astonishing 187 million people, potentially “drowning” entire cities like Miami in 80 years? In reality, humans adapt, as Holland has shown. That’s why many models show that adaptation will reduce the number of flooded people 12,000-fold. As in the past, rising prosperity will continue to reduce flood impacts, and climate change will merely slow down this reduction slightly. Ultimately, this is why the scare stories on climate impacts are vastly overblown and not supported by this new climate report. One of the clearest ways to see this is through climate economics. Because of climate change, the average person worldwide will be “only” 436 percent as well off in 2100 as they are now, instead of 450 percent….”

This matters because globally, many more people die from cold than from heat. A study in the highly respected journal Lancet shows that about half a million people die from heat per year, but 4.5 million people die from cold.

As temperatures have increased over the past two decades, that has caused an extra 116,000 heat deaths each year. This, of course, fits the narrative and is what we have heard over and over again. But it turns out that because global warming has also reduced cold waves, we now see 283,000 fewer cold deaths.

You don’t hear this, but so far climate change saves 166,000 lives each year.

Likewise, we have heard a lot about flooding in Germany and elsewhere being caused by climate change. But the new UN report tells us it has “low confidence in the human influence on the changes in high river flows on the global scale” — and low confidence in attributing “changes in the probability or magnitude of flood events.” The report tells us that the evidence isn’t there to say floods are caused or driven by climate change.

It also mentions climate upsides like the fact that more CO₂ in the atmosphere has acted as a fertilizer and created a profound global greening of the planet. One NASA study found that over a period of 35 years, climate change has added an area of green equivalent to twice the size of the continental United States. But don’t expect to read about this in any of the breathless articles on climate impact.

The UN report only deals with the physical impact of climate change, but of course, much of what really matters is how humans handle this. Often the real problem of rising sea levels is converted into a catastrophe by arguing that nobody will adapt and everyone will drown or be displaced. Remember when news reports told us that rising seas will displace an astonishing 187 million people, potentially “drowning” entire cities like Miami in 80 years?

In reality, humans adapt, as Holland has shown. That’s why many models show that adaptation will reduce the number of flooded people 12,000-fold. As in the past, rising prosperity will continue to reduce flood impacts, and climate change will merely slow down this reduction slightly.

Ultimately, this is why the scare stories on climate impacts are vastly overblown and not supported by this new climate report. One of the clearest ways to see this is through climate economics. Because of climate change, the average person worldwide will be “only” 436 percent as well off in 2100 as they are now, instead of 450 percent.

This is not the apocalypse but a problem we should fix smartly.

Bjorn Lomborg, "Don’t buy the latest climate-change alarmism,"New York Post, August 9, 2021, https://nypost.com/2021/08/09/dont-buy-the-latest-climate-change-alarmism/

Don’t buy the latest climate-change alarmism

The Intergovernmental Panel on Climate Change just released its latest climate report, and reactions from politicians and media pundits could not have been more predictable.

Fitting the apocalyptic narrative many have spun lately, the always-breathless Guardian literally summarized this scientific report as finding mankind “guilty as hell” of “climate crimes of humanity.” (Needless to say, the report never says any such things.)

UN Secretary-General António Guterres called the findings a “code red for humanity,” saying we can only avert catastrophe by acting in the next couple of months. Of course, the United Nations has a long history of claiming catastrophe is right around the corner: The first UN environment director claimed half a century ago that we had just 10 years left, and the then-head of the IPCC insisted in 2007 that we had just five years left.

In contrast to the hyperventilating media, the report is actually serious and sensible (and very, very long). It doesn’t surprise, since it is a summary of already-published studies, yet it reconfirms that global warming indeed is real and a problem.

But it also highlights how much one-sided thinking takes place in the climate conversation. Since the heat dome in June, there has been a lot of writing about more heat deaths. And the IPCC confirms that climate change indeed has increased heatwaves. However, the report equally firmly, if virtually unacknowledged, tells us that global warming means “the frequency and intensity of cold extremes have decreased.”

John Lott, “…government-issued photo IDs are required to vote by 33 nations in the 37-member Organistion for Economic Co-operation and Development(which has considerable European overlap). Only the UK, Japan, New Zealand, and Australia currently do not require IDs. …”

John Lott Jr., "America the Outlier: Voter Photo IDs Are the Rule in Europe and Elsewhere," Real Clear Investigations, June 1, 2021, https://www.realclearinvestigations.com/articles/2021/06/01/the_us_is_a_voter_photo_id_outlier_theyre_the_rule_in_europe_and_elsewhere_778714.html

America the Outlier: Voter Photo IDs Are the Rule in Europe and Elsewhere

Democrats and much of the media are pushing to make permanent the extraordinary, pandemic-driven measures to relax voting rules during the 2020 elections - warning anew of racist voter “suppression” otherwise. Yet democracies in Europe and elsewhere tell a different story - of the benefits of stricter voter ID requirements after hard lessons learned.

A database on voting rules worldwide compiled by the Crime Prevention Research Center, which I run, shows that election integrity measures are widely accepted globally, and have often been adopted by countries after they've experienced fraud under looser voting regimes.

Of 47 nations surveyed in Europe -- a place where, on other matters, American progressives often look to with envy -- all but one country requires a government-issued photo voter ID to vote. The exception is the U.K., and even there voter IDs are mandatory in Northern Ireland for all elections and in parts of England for local elections. Moreover, Boris Johnson’s government recently introduced legislation to have the rest of the country follow suit.

Criticisms of the British leader’s voter ID push are similar to those heard in the U.S. The Scottish National Party claims his voter ID push targets “lower income, ethnic minority and younger people” who are less likely to vote for Johnson’s conservatives and therefore represents “Trump-like voter suppression.”

Yet despite such pushback, Britain looks set to follow countries in Europe and elsewhere with stricter voting regimes, few of which temporarily relaxed any of their voting rules during the pandemic.

Seventy-four percent of European countries entirely ban absentee voting for citizens who reside domestically. Another 6% limit it to those hospitalized or in the military, and they require third-party verification and a photo voter ID. Another 15% require a photo ID for absentee voting.

Similarly, government-issued photo IDs are required to vote by 33 nations in the 37-member Organistion for Economic Co-operation and Development (which has considerable European overlap). Only the UK, Japan, New Zealand, and Australia currently do not require IDs. Of those outliers:

Japan provides each voter with tickets that bear unique bar codes. If the voter loses the ticket or accidentally brings the ticket for another family member, polling staff verifies the voter’s name and address using a computer with access to the city’s database. The voter may have to present government-issued photo identification.

New Zealand technically requires an ID with a unique code, but while it will take longer to look up identifying information, it is still possible to vote without the ID.

Australia has by far the loosest rules, and while a photo ID is required to register to vote, once at a polling station, voters need simply report their names, addresses, and whether they have voted in a previous election.

There were a few exceptions to developed countries’ general avoidance of emergency voting measures during the pandemic. Poland allowed mail-in ballots for everyone last year as a one-time measure, as did two cities in Russia, but Poland’s rushed plan played out so poorly it dissuaded other countries from following suit. France made more limited exceptions, temporarily allowing sick or at-risk individuals to vote absentee.

In some countries, even driver’s licenses aren’t considered authoritative enough forms of voter identity verification. The Czech Republic and Russia require passports or military-issued IDs and others use national identity cards. Others go even further: Colombia and Mexico each require a biometric ID to cast a ballot.

Many countries in Europe and beyond have learned the hard way that fraud can result from looser voting regimes -- and they have instituted stricter voting measures in direct response to it.

In Northern Ireland, where a bitter sectarian conflict extends to hardball electoral machinations, voter fraud has been described as “widespread and systemic” on all sides. Both Conservative and Labour governments instituted reforms to quell it. In 1985, the U.K. started requiring identification before ballots could be issued. This proved insufficient. A 1998 Select Committee on Northern Ireland report found that medical cards used as IDs after the 1985 law could be “easily forged or applied for fraudulently,” thus allowing non-existent people to vote. By 2002, the Labour government made voter identification cards much more difficult to forge, and used the more secure ID and other rules to prevent people from registering to vote multiple times. These anti-fraud provisions led to an immediate 11% reduction in total registrations -- a suggestion to Labour of the extent of earlier fraud.

One study of vote fraud in Northern Ireland before the 2002 reforms interviewed Brendan Hughes, the former IRA Belfast commander. Hughes explained that he had a fleet of taxis to ferry fraudulent voters from one polling station to another and that they “dressed up volunteers with wigs, clothes, and glasses, and said this practice continued for decades.” Young women were usually “used for voter impersonation because they were more likely to be let off if there was any doubt.”

A 2002 survey of Northern Ireland by the U.K. Electoral Commission, conducted after the rules passed but before they went into effect, found that by a 64% to 10% margin, voters thought that vote “fraud in some areas is enough to change the election results.”

Elsewhere in Britain, there have been notable fraud cases involving absentee ballots. In 2004, before recent photo ID requirements, six Labour Party councilors in Birmingham won office in what a judge later described as a “massive, systematic and organized” postal voting fraud campaign. The fraud was apparently carried out with the full knowledge and cooperation of the local Labour party, and involved “widespread theft” of absentee ballots (possibly around 40,000) in areas with large Muslim populations. The fraud reflected some Labour members’ worries that the areas’ Muslims could no longer be trusted to vote for the party because of unhappiness over the Iraq War.

On the mainland, France banned mail-in voting in 1975 because of massive fraud in the island region of Corsica, where postal ballots were stolen or bought and others were cast in the names of dead people.

In Hungary, which has the most lenient mail-in voting regulations in Europe, including no ID requirement, the government of Prime Minister Viktor Orbán, criticized for authoritarian tendencies, won 96% of the mail votes in the 2018 election, thus giving itself a supermajority in parliament by a very slim margin. Concerns are that fraud is possible because “there is little scope for verification of identities, or to check that people are still alive.”

When there are no tamper-resistant photo IDs, fraud is difficult to prove. If hundreds or thousands of people vote at a polling place, how do you verify if someone voted by pretending to be someone else? Criminal convictions tend to occur only when people try voting in the same polling station multiple times instead of visiting multiple stations. But, with poll workers often working different shifts, even the same polling station can be compromised.

Take a case from the U.K. in 2016. As the Electoral Commission describes it: “Later in the day the same voter attended again and sought to vote again, this time in his own name. Due to certain physical characteristics of the voter (he was very tall and wore distinctive clothing) and the vigilance of the presiding officer he was suspected of having already voted earlier and formally challenged.”

In another case in the U.K. from 2017, police caught a person voting multiple times only because he openly bragged about it on Twitter. By far the most common consequence for those caught voting multiple times is a “caution” notice from the police.

American progressives might take heed of a Mexican election stolen from voters on the left in part due to lax voting requirements facilitating fraud. The 1988 loss of Cuauhtémoc Cárdenas, the leading leftist presidential candidate, to Carlos Salinas de Gortari of the long-governing Institutional Revolutionary Party has long been considered a result of electoral chicanery, later even acknowledged by the president at the time, Miguel de la Madrid.

And as a result of that fraud, Mexico in 1991 mandated voter photo IDs with biometric information, banned absentee ballots, and required in-person voter registration. Despite making registration much more difficult and banning absentee ballots, voter participation rates rose after Mexico implemented the new rules. In the three presidential elections following the 1991 reforms, an average of 68% of the eligible citizens voted, compared with only 59% in the three elections prior to the rule changes. Seemingly, as people gained faith in the electoral process, they became more likely to vote. Ultimately, in 2006 Mexico would revert to permitting absentee voting, but limited it to those living abroad who requested a ballot at least six months in advance. Claims of voting irregularities have occasionally arisen in later years, but they focus on vote buying, not impersonating others, or having non-existent people voting.

Despite the record of Europe and the vast majority of the rest of the developed world, congressional Democrats are pushing to remove identification requirements for voting. The House recently passed the For the People Act of 2021, which replaces state voter ID rules with a signed statement from the voter, and makes permanent the pandemic’s mail-in ballot voting. The mailing out of blank absentee ballots en masse would become a fixture of American elections. The Senate Committee on Rules and Administration marked up the bill, but failed to pass it with a 9-to-9 pure party-line tie vote. However, Democrats have recently changed Senate rules, so they can still bring the bill to the Senate floor for a vote.

Meanwhile, efforts in Republican states to require voter IDs for in-person voting and absentee ballots have triggered boycotts from Major League Baseball and other corporations. Georgia’s new absentee provisions raised a ruckus despite being much less restrictive than much of the rest of the world. Anyone who wants an absentee ballot can obtain one. A reason need not be given, such as being out of town, but one must have an ID to get an absentee ballot. The pattern is similar for developed countries around the world.

The case of Mexico undermines the idea that stricter voting rules lead to vote suppression, and so does some of the evidence from America. A number of states have in recent years instituted photo and non-photo ID measures, and found no statistically significant change in voter participation rates. Other evidence suggests that black and minority voter registration rates increased faster than whites after states implemented voter ID requirements for registration.

RCI contacted both the Brennan Center for Justice and the ACLU, two organizations that have been at the forefront of the ballot access/voting integrity debate, to ask them what they made of the more restrictive voting rules implemented elsewhere. The ACLU did not respond, and a Brennan Center spokesman said: “As a rule, we don’t comment on other countries’ voting systems because that’s not our area of expertise.”

Net carbon impact on Chinese solar panels, “…Chinese factories supply more than three-quarters of the world’s polysilicon, an essential component in most solar panels, according to industry analyst Johannes Bernreuter. Polysilicon factories refine silicon metal using a process that consumes large amounts of electricity, making access to cheap power a cost advantage. Chinese authorities have built an array of coal-burning power plants in sparsely populated areas such as Xinjiang and Inner Mongolia to support polysilicon manufacturers and other energy-hungry industries.Producing a solar panel in China creates around twice as much carbon dioxide as making it in Europe, said Fengqi You, professor of energy systems engineering at Cornell University. In some countries or regions that don’t rely heavily on fossil fuels for electricity generation, such as Norway and France, installing a high-carbon, Chinese-made solar panel might not reduce emissions at all, Mr. You said. “Yes, we are clean” in the West, said Mr. You. “But then the process of getting these panels from another country—China now, maybe somewhere else later—produces a lot of emissions.”Scientists say, however, that installing Chinese-made panels almost always results in a net reduction in carbon dioxide emissions over time, because the panels are usually replacing electricity generated from fossil fuels. The emissions avoided after the first few years of a solar panel’s 30-year lifespan can offset the emissions required to produce it…”

Matthew Dalton, "Behind the Rise of U.S. Solar Power, a Mountain of Chinese Coal,"Wall Street Journal, July 31, 2021, https://www.wsj.com/articles/behind-the-rise-of-u-s-solar-power-a-mountain-of-chinese-coal-11627734770

Behind the Rise of U.S. Solar Power, a Mountain of Chinese Coal

Solar panel installations are surging in the U.S. and Europe as Western countries seek to cut their reliance on fossil fuels.

But the West faces a conundrum as it installs panels on small rooftops and in sprawling desert arrays: Most of them are produced with energy from carbon-dioxide-belching, coal-burning plants in China.

Concerns are mounting in the U.S. and Europe that the solar industry’s reliance on Chinese coal will create a big increase in emissions in the coming years as manufacturers rapidly scale up production of solar panels to meet demand. That would make the solar industry one of the world’s most prolific polluters, analysts say, undermining some of the emissions reductions achieved from widespread adoption.

For years, China’s low-cost, coal-fired electricity has given the country’s solar-panel manufacturers a competitive advantage, allowing them to dominate global markets.

Chinese factories supply more than three-quarters of the world’s polysilicon, an essential component in most solar panels, according to industry analyst Johannes Bernreuter. Polysilicon factories refine silicon metal using a process that consumes large amounts of electricity, making access to cheap power a cost advantage. Chinese authorities have built an array of coal-burning power plants in sparsely populated areas such as Xinjiang and Inner Mongolia to support polysilicon manufacturers and other energy-hungry industries.

Producing a solar panel in China creates around twice as much carbon dioxide as making it in Europe, said Fengqi You, professor of energy systems engineering at Cornell University. In some countries or regions that don’t rely heavily on fossil fuels for electricity generation, such as Norway and France, installing a high-carbon, Chinese-made solar panel might not reduce emissions at all, Mr. You said.

“Yes, we are clean” in the West, said Mr. You. “But then the process of getting these panels from another country—China now, maybe somewhere else later—produces a lot of emissions.”

Scientists say, however, that installing Chinese-made panels almost always results in a net reduction in carbon dioxide emissions over time, because the panels are usually replacing electricity generated from fossil fuels. The emissions avoided after the first few years of a solar panel’s 30-year lifespan can offset the emissions required to produce it.

Some Western governments and corporations are attempting to shift the solar industry away from coal. Companies that buy renewable energy are laying the groundwork to favor low-carbon solar panels when financing solar projects. The U.S. federal government is drafting a policy to do the same when it buys solar panels, said a spokesman for the Environmental Protection Agency. And the European Union is considering whether to regulate the carbon content of panels sold throughout the 27-nation bloc, EU officials say.

These policies would also help rebuild the West’s solar industry, which has withered under competition from higher-polluting Chinese producers, Western executives say.

U.S. solar power capacity in the last two years has jumped 48%, according to consulting firm Wood Mackenzie. In Europe, it is up 34%. Those installations amount to tens of thousands of solar panels shipped each year.

“Large energy buyers can influence supply chains,” said Jen Snook of the Renewable Energy Buyers Alliance, which represents Amazon.com Inc., Salesforce.com Inc. and more than 200 other corporations. “Solar hopefully will continue on a very strong growth rate, and we want to ensure that growth is sustainable.”

The dilemma is becoming more apparent as world leaders prepare to meet in Glasgow, Scotland, in November to make a new push to reduce greenhouse gas emissions. Part of that effort involves coaxing China, the world’s largest emitter, to shift away from coal-burning electricity to slash emissions even as the West gorges on Chinese gear from solar panels to lightweight aluminum for electric vehicles. At a July meeting of environment ministers from the Group of 20 leading economies, China and India blocked an agreement to phase out coal-fired electricity.

Finding alternatives won’t be easy. China’s surging and cheaper polysilicon production has harmed U.S. producers, forcing the shutdown of several factories that use power sources with lower carbon emissions than Chinese producers. Wacker Chemie AG, the West’s largest producer of solar-grade polysilicon, pays up to four times as much for power at its factories in Germany compared with Chinese producers in Xinjiang, said company spokesman Christof Bachmair.

China has pushed down the price of panels so sharply that solar power is now less expensive than electricity generated from fossil fuels in many markets around the world. Imports of the solar cells that make up the panels are also flooding into the U.S. and Europe.

Those shipments are either coming directly from China or contain key components made in China.

“If China didn’t have access to coal, then solar power wouldn’t be cheap now,” said Robbie Andrew, a senior researcher at the Center for International Climate Research in Oslo. “Is it OK that we’ve had this huge bulge of carbon emissions from China because it allowed them to develop all these technologies really cheaply? We might not know that for another 30 to 40 years.”

Some Chinese polysilicon producers are well-placed to respond to Western demand for low-carbon panels. Tongwei, the world’s largest producer, has some factories that run on hydropower. However, Daqo New Energy and GCL Poly, Tongwei’s main Chinese competitors, rely overwhelmingly on coal, according to the companies.

France is one of the few countries that regulate the carbon content of solar panels, requiring low-carbon panels for large solar projects. That has encouraged some Chinese panel manufacturers to use renewable energy in some processes, allowing them to sell into the French market. South Korea this year adopted rules inspired by the French system, and other European countries have expressed interest, officials from the region say.

China’s dominance of the solar supply chain also makes it harder on the handful of companies that are trying to rebuild solar-panel capacity in the West. China is home to most of the companies that slice polysilicon into wafers, package the wafers into cells and assemble the cells into panels. U.S. tariffs on Chinese solar panels and cells have pushed Chinese companies to set up factories for these parts in other countries.

JinkoSolar, a Chinese firm, built a panel assembly plant in Florida to supply NextEra Energy, one of the largest U.S. renewable-energy companies. But the wafer and polysilicon are from China, analysts say.

Italian energy company Enel SpA is planning to expand its solar-panel factory in Sicily, one of the few left in Europe, but the factory will still rely on silicon wafers coming from China.

“We would be happy if the other part of the value chain would be established in Europe,” said Antonello Irace, director of the factory in Sicily. “Think about sustainability, think about labor conditions, think about logistics costs and proximity.”

Beijing has further hobbled Western efforts by placing tariffs on U.S. polysilicon as part of a long-running trade dispute over solar panels. That blocked U.S. producers from selling raw material to Chinese wafering factories—which have more than 95% of global capacity—leaving them with almost no buyers for their product.

The tariffs led REC Silicon AS A in 2019 to idle a plant in Moses Lake, Wash., that runs on carbon-free hydropower. The company hoped negotiations between the Trump administration and Beijing would result in the tariffs being dropped. Instead, Beijing last year extended the tariffs for five years.

“We have a lot of polysilicon capacity,” said David Feldman, a researcher at the U.S. government’s National Renewable Energy Laboratory, “and it would be good for them to have customers.”

Mark Perry, “… Oil, coal, and natural gas provide the large majority of the nation’s energy, supplying 81 percent of U.S. energy demand in 2020….Rising natural gas prices have shifted energy market share back to coal. Coal generation on the PJM grid, the nation’s largest which extends from Pennsylvania to parts of Illinois, hit a three-year high. Coal generation in the Midcontinent Independent System Operator (MISO) rose 37 percent in June and 42 percent in the Southwest Power Pool (SPP)….”

Fossil fuels are essential, despite renewable energy zealotry

Anyone who thinks that the most important environmental task of the next few years is to reduce the use of fossil fuels must take no comfort in recent energy trends.

The Biden Administration – despite its opposition to domestic drilling – is pressuring OPEC to pump more oil and provide price relief at the gas pump. Global natural gas demand and prices are on the rise and coal prices have recently spiked to record levels.

For energy sources that are supposed to be in their decline, fossil fuels remain absolutely essential to our nation’s economy and security. Oil, coal, and natural gas provide the large majority of the nation’s energy, supplying 81 percent of U.S. energy demand in 2020.

No energy source has been more maligned or written off than coal but coal has increasingly provided an essential insurance policy for a sometimes overwhelmed energy grid, not something that should be cast aside.

Coal is currently helping shield the Midwest and other regions from electricity shortages. According to Argus, in June, coal generation on the PJM grid, the nation’s largest which extends from Pennsylvania to parts of Illinois, hit a three-year high. Coal generation in the Midcontinent Independent System Operator (MISO) rose 37 percent in June and 42 percent in the Southwest Power Pool (SPP).

Rising natural gas prices have shifted energy market share back to coal, with the coal fleet providing an important price shock absorber for the nation’s utilities and their consumers. If more coal plants are pushed into early retirement, that energy balance and fuel flexibility will go with them.

Balance on the energy grid matters as does fuel security. As this past year has demonstrated, with rolling blackouts in California, the near-collapse of the Texas power grid in February, and the threat of capacity shortfalls from the Pacific Northwest all the way to New York, the reliability of the nation’s electricity supply is getting more problematic by the month. While no one fuel source is a cure-all to energy reliability challenges, the months of fuel kept on-site at coal plants is a welcome hedge to the just-in-time fuel delivery at natural gas plants or from wind and solar generation.

Last winter, when bitter cold locked up natural gas infrastructure and wind turbines across the Midwest, it was our coal capacity that came to the rescue – much of it in coal-mining states. It is troubling that the Biden administration fails to grasp the importance of coal and would like to see it disappear in the next few years. If you think there’s a well-designed plan to replace coal and the reliability it provides, think again.

The U.S. Energy Information Administration reports that the vast majority of new power capacity added to the grid this year – nearly 40 gigawatts – will be windmills and solar. Increasing reliance on intermittent renewable power will exacerbate reliability concerns, especially if these additions come in place of the dispatchable power provided by traditional, on-demand sources of generation.

As reliability challenges become more severe across the country, it’s increasingly clear that renewable energy generation additions should come on top of existing coal and natural gas capacity, not in place of it. Pushing more coal capacity and its fuel security off the grid and replacing it with sources of power that are useless at night or when there is no wind is a recipe for a potential catastrophe.

What is critical for our energy future is a reliable and affordable supply of power that doesn’t take a backseat to renewable energy zealotry.

Frequently ignored or overlooked is the fact that fossil fuels remain the nation’s energy lifeblood and will serve as the dominant energy sources to power our vehicles, heat and light our homes, and fuel the growing economy for many decades into the future. Mandating the closure of reliable operating power plants or making it more expensive and difficult to produce the fuels we need in the future is denying reality and putting the American economy at great risk.

Mark Perry, “Fossil fuels are essential, despite renewable energy zealotry.” July 21, 2021, Detroit News, https://www.aei.org/op-eds/fossil-fuels-are-essential-despite-renewable-energy-zealotry/

EIA Staff, “Electricity Explained: Electricity In The United States,” Energy Information Agency, Updated March 18, 2021, https://www.eia.gov/energyexplained/electricity/electricity-in-the-us.php

To your point natural gas share of generation did gain y/y btw 2019-2020 from38% to 40%clearly it’s displacing the other carbon based electrical sources.

Last year (they note the 2020 numbers are preliminary) so same sources generated61%of the total kilowatthours. I suspect that trend will accelerate given trends in renewables.

Data from EIA shows American energy intensity continues to fall, but varies significantly by state, "...Energy intensity—calculated as total energy consumption divided by real gross domestic product (GDP)—is a common energy indicator and efficiency measure. In 2020, U.S. energy intensity reached a low of 5.05 thousand British thermal units (Btu) per chained 2012 dollar, down 4% from the previous year and less than half as energy intensive as the United States was in 1983. Energy intensity varies greatly by state, and some states operate with much greater energy intensity than the U.S. average....Louisiana, typically the state with the highest energy intensity, had the fourth-highest level of energy consumption of any state in 2019 and the 24th highest real GDP. States with high energy intensity, such as Louisiana, Wyoming, North Dakota, Alaska, and West Virginia, all have energy-intensive industrial sectors and are all top fossil fuel energy producers....From 1997 to 2019, the average energy intensity across the United States decreased by 36%. West Virginia and Iowa are notable exceptions to this trend. Since 1997, West Virginia’s energy intensity has decreased 4%, the smallest change in energy intensity in any state. Iowa’s energy intensity has decreased 6%, the second-smallest change...."

Mickey Francis, "U.S. energy intensity has dropped by half since 1983, varying greatly by state," Energy Information Agency, August 3, 2021, https://www.eia.gov/todayinenergy/detail.php

U.S. energy intensity has dropped by half since 1983, varying greatly by state

Louisiana, typically the state with the highest energy intensity, had the fourth-highest level of energy consumption of any state in 2019 and the 24th highest real GDP. States with high energy intensity, such as Louisiana, Wyoming, North Dakota, Alaska, and West Virginia, all have energy-intensive industrial sectors and are all top fossil fuel energy producers.

States with concentrated urban areas and relatively small industrial sectors tend to have lower energy intensities. The District of Columbia has a lower energy intensity than any state. Among states, New York has had the lowest energy intensity since 1997, the earliest year in our state-level data series.

From 1997 to 2019, the average energy intensity across the United States decreased by 36%. West Virginia and Iowa are notable exceptions to this trend. Since 1997, West Virginia’s energy intensity has decreased 4%, the smallest change in energy intensity in any state. Iowa’s energy intensity has decreased 6%, the second-smallest change.

Both West Virginia and Iowa rely on energy-intensive industrial activities for significant portions of their economies: coal, crude oil, and natural gas extraction in West Virginia and agriculture, food, and biofuel production in Iowa. In 2019, West Virginia was the 5th-most energy-intensive state and had the 35th-largest energy consumption and 10th-lowest GDP. Iowa, whose energy consumption and GDP are both about twice as large as West Virginia’s, was the 8th-most energy-intensive state.

Oregon is the only state that was more energy intensive than the U.S. average in 1997 but is now lower than the U.S. average. From 1997 to 2019, Oregon’s energy intensity decreased 51%. Only Washington’s energy intensity decreased at a faster rate (52%). Over the past two decades, Oregon and Washington transitioned their economies from energy-intensive activities, such as forestry and agriculture, to less energy-intensive activities, such as electronics and information technology.