Macro Roundup

Note they don’t provide the regression results but describe them, “…Yet, even when districts are the same on these dimensions,a CDO remains significantly and negatively related to both the level and change in white-black achievement gaps. The white-Hispanic achievement gap and the rate of change in that gap, at least for math test scores, continues to be negatively associated with a district employing a CDO even when all of these other factors are controlled. The relationship between a CDO position and achievement gaps between non-poor and poor students ceases to be statistically significant—meaning that one can no longer be confident that the gaps differ from zero, even when other factors are controlled statistically….”

Here is their achievement gap data, “…A simple comparison of achievement gaps in districts with and without CDOs shows that gaps are larger in districts that employ CDOs. In districts without a CDO, the average black student is 1.9 grade levels behind the average white student on standardized test results. In districts with CDOs, the achievement gap is half a grade level larger, with the average black student being 2.4 grade levels behind the average white student. This pattern repeats itself for the white-Hispanic and the non-poor-poor achievement gaps. The gap between the average white and Hispanic student on standardized tests is 0.44 grade levels larger in districts with a CDO than it is in districts without that position. The gap between the average non-poor and poor students is 0.37 grade levels larger in districts with CDOs than in those without them. Perhaps districts create CDO positions because they have larger achievement gaps that they wish to remedy. To address this concern, it is possible to examine the trend in achievement gaps, over time, rather than the static magnitude of those gaps, to see if districts with CDOs are making progress to close those gaps. Standardized test results show that achievement gaps are growing wider over time in districts with CDOs. From 2009 to 2018, the white-black achievement gap grew by 0.03 grade levels each year in districts with CDOs relative to districts without that position. The white-Hispanic achievement gap grew by 0.02 grade levels more per year over this time period in districts with CDOs versus those without them. And the gap between poor and non-poor students grew by 0.01 grade level in districts with CDOs compared to those without them. Even when other observed characteristics about school districts are controlled statistically, the negative relationship between a CDO position and achievement gaps remains. A regression can make statistical adjustments for differences across districts to gain a better picture of how CDOs affect achievement gaps….”

Reviewed the Heritage study, here is who has diversity officers, “…The picture that emerges is that being in a larger district, in a blue state, with more black students, more ELL and FRL students, and more school resources all contribute to the likelihood of school districts employing a CDO. Being in a blue state may make CDOs more common because there is stronger political sympathy for the activities in which CDOs engage. Larger districts with more resources may be in a better position to afford CDOs. More black students, more non-English-speaking students, and more students in poverty may increase the chances of having a CDO because districts may believe that these are the groups that a CDO is meant to assist…”

“…According to the Almanac of American Philanthropy, Americans donate around seven times as much as continental Europeans to charitable causes per capita. Per person, even after adjusting for differences in household income, Americans donate twice as much of their income as the Dutch, three times as much as the French, five times as much as Germans, and ten times that of Italians. Only 14 percent of American donations come from foundation grants, and another 5 percent from corporations. More than 80 percent of charitable giving, however, is done by individuals. And this charity is found wide and deep within society. Every year, six out of ten households in the United States donate to a charitable cause, and the typical household gives somewhere around $2,000 to $3,000. The entire nation is altruistic, though the more religious the population, the more it gives. But even 40 percent of secular Americans give to charity, still better than most European nations….”

David Harsanyi, "Americans are more generous than Europeans — by a large margin,"New York Post, October 23, 2021, https://nypost.com/2021/10/23/americans-are-more-generous-than-europeans-by-a-large-margin/

Americans are more generous than Europeans — by a large margin

Liberals often love to portray America as a cartoonishly greedy nation driven by a hyperindividualistic and capitalistic nature that exhibits little concern regarding the common good or others around the world.

This idea pervades our culture. When asked to describe themselves, 68 percent of Americans came to the word “selfish” as the top negative trait.

Yet by nearly every measure Americans are more generous with their money and time than anyone — including Europeans.

Indeed, American charitable giving exceeds the entire GDP of most European countries.

According to the Almanac of American Philanthropy, Americans donate around seven times as much as continental Europeans to charitable causes per capita. Per person, even after adjusting for differences in household income, Americans donate twice as much of their income as the Dutch, three times as much as the French, five times as much as Germans, and ten times that of Italians.

Only 14 percent of American donations come from foundation grants, and another 5 percent from corporations. More than 80 percent of charitable giving, however, is done by individuals. And this charity is found wide and deep within society. Every year, six out of ten households in the United States donate to a charitable cause, and the typical household gives somewhere around $2,000 to $3,000.

The entire nation is altruistic, though the more religious the population, the more it gives. But even 40 percent of secular Americans give to charity, still better than most European nations.

Indeed, in the United States, the generous can be found among the wealthy and the poor. As a percentage of income, Americans in lower income brackets are just as generous as the wealthy, and more generous than most of the middle class. Unsurprisingly, in absolute dollars the rich give the most, with the top 1 percent of the income earners donating a third of all charity. And the richest 1.4 percent are responsible for nearly all charitable donations made at death.

Despite stereotypes about the selfishly rich, the more the nation struggles, the more the wealthy Americans pitch in. During the coronavirus crisis, for example, the nonprofit arms of major investment houses saw huge increases in charitable giving from wealthy Americans. Grants to food banks and other food assistance programs were up 667 percent nationally — 800 percent in the hardest-hit mid-Atlantic states.

Middle- and working-class people continued to give to their local charities, even as they struggled — one report tallied over 750,000 transactions to more than 100,000 charities in the first three months of the pandemic.

Critics of the US argue that most of the charitable donations are given to religious groups, and are thus obligations rather than altruism.

This is also a myth. The three most popular causes Americans contribute to are household basic social services, “combined purpose” charitable organizations like United Way or Catholic Charities — which help the poor — and health care.

Europeans will, no doubt, argue that they already give charity in high taxes that fund big social safety nets. The data shows, however, that in overall spending, there isn’t much difference between the United States and other developed nations — each redistributing 20 percent of GDP. Once added in with the massive amount of charity, there is no comparing American generosity — the only difference is that most of ours is not a state obligation.

The American disposition is to rely far more on the communal and local help than Europeans, who rely on government to do their charity for them. The cultural habits formed over 200 years of American life have created a society that both values and leans heavily on charitable causes.

New Nick Bloom paper we highlighted in newsletter presents evidence suggesting supervision is the limiting constraint, firms with better management prices are more productive and employees have higher earnings with CEO pay rising the most, "...We use confidential Census matched employer-employee earnings data to study the relationships between pay, productivity, and management practices. We find that employees at more productive firms and firms with more structured management practices have substantially higher pay, both on average and across every percentile of the pay distribution. This pay-performance relationship is particularly strong amongst top paid executives, with a doubling of firm productivity associated with 11% more pay for the highest-paid employee (likely the CEO) compared to 4.7% for the median worker. This pay-performance link holds in public and private firms,although is almost twice as strong in public firms for the highest paid executives. Top-executive pay volatility is also strongly related to productivity and structure managed, suggesting this performance-pay relationship arises from more aggressive monitoring and incentive practices amongst top executives...."
To measure quality of management they use the Management and Organizational Practices Survey (MOPS), "...TheMOPS was issued as a supplement to ASM for survey years 2010 and 2015. All establishments that were included in the ASM samples for those years were also sent the MOPS.10 In both survey waves, the MOPS asks plant managers 16 questions about the management practices at their establishments. In particular, respondents are asked questions regarding their practices relating to performance monitoring, target setting, and incentivization of workers….we score responses to each question between 0 and 1, where zero corresponds to the least structured practices (practices that are less explicit, formal, frequent, or specific) and one corresponds to the most structured practices (practices that are more explicit, formal, frequent, or specific). We then compute an establishment’s overall structured management score as the simple mean of the scores of all completed questions.11The resulting management score is itself bounded between 0 and 1, where we interpret an establishment with a larger value as having more structured management practices….find that establishments with higher structured management scores also tend to be more productive. We aggregate across establishments to the firm level by taking employment-weighted averages of the management scores across establishments...."

Four core findings, "First, employees at more productive firms and firms with more structured management practices have substantially higher pay across all percentiles of the earnings distribution. Not only are executive earnings higher but so are earnings at every level, from the 1st percentile upwards."

Second, "... this increase in earnings is greater at higher pay levels. Thus, higher productivity and more structured management practices are also associated with higher levels of pay dispersion within firms (as well as higher pay levels as noted above).This is particularly notable at the very top end of the earnings ranks. For example, while the firm’s top earner sees a pay increase of 11% for the doubling of productivity, the 5th, 25th and 50th ranked managers see only 9.0%, 7.1% and 6.5% respectively...."

Third, "... this pay-performance link holds in public and private firms, although it is almost twice as strong in public firms for the highest paid workers. The highest paid worker (likely the CEO) sees a 16.4% pay increase in public firms but only a 9.4% pay increase in private firms for a doubling a productivity. Lower ranks, in particular employees outside the top 50 highest paid, display similar performance-pay relationships in public and private firms...."

Fourth, "...Finally, top-earner pay volatility is also strongly related to productivity and structured managed practices. One explanation is that more productive firms adopt more aggressive management practices - more intensive monitoring and aggressive performance pay schemes - which leads to both higher levels of pay but also higher volatility of pay...."

The evidence:

Productivity and pay, "...Figure 1 presents the point estimates of model (2), where the outcome is the mean log earnings of workers within a firm earnings percentile. The figure shows three striking patterns. First, all the coefficients on the y-axis are positive, showing that workers at higher-productivity firms tend to earn more across the entire earnings distribution, consistent with the higher average pay in Column (1) of Table 2. Second, consistent with Columns (2)-(5) of Table 2, this positive relationship is not equal across the earnings distribution. Instead, the upwards slope shows that the pay of higher earners is more positively correlated with productivity than the pay of lower earners. For example, a 10% increase in productivity predicts a 0.82% increase in pay for earners at the 90th percentile (the 0.086 coefficient for the 90th percentile in Figure 1) but only a 0.51% increase in pay for earners at the 10th percentile (the 0.053 coefficient for the 10th percentile in Figure 1). Third, this upward slope in the correlation between pay and productivity across the earnings percentiles is particularly large across the top percentiles: the difference in coefficients between the 100th percentile and the 90th percentile is larger than the difference in the coefficients between the 90th percentile and the 10th percentile...."

Management structure and pay across the within-firm earnings distribution, "...First, we document how management relates to average pay and within-firm inequality. Table 3 presents estimates of versions of model (1) in which we replace productivity with the firm’s management score as the key explanatory variable; this table is analogous to Table 2. Recall that management scores are normalized between 0 and 1, with a mean value of 0.67 in our sample (Table 1).As Table 3 shows, the patterns we see between productivity and pay in Table 2 are also present for management and pay. Firms with more structured management tend to have higher average pay and larger inequality. In terms of the aggregate distribution of management, these patterns are economically large. Moving from the 10th to the 90th percentile in the distribution of management is associated with an increase in average pay of 6.3% and an increase in the gap between the top earner’s pay and the median worker’s pay of 26%.23 Second, as we did for productivity, we consider how pay across the firm earnings distribution correlates with management. Analogous to Figure 1,Figure 6 presents the point estimates of version of model (2), where the outcome is the mean log earnings of workers in a given earnings percentile and we replace productivity with management as the key explanatory variable. While the standard errors are relatively large - the management sample contains only 2.5% of the observations from the main sample - we see similar patterns. Workers across the earnings distribution at firms with more structured management tend to have higher earnings, and these correlations generally increase across the distribution, with workers in the top percentile experiencing the largest correlation.In Figure A3, we focus on the very top earners at the firms; similar to Figure 2, we see positive and increasing coefficients on management for these top earners, as we move towards the top earner, although these estimates are noisy.Finally, we return to studying pay volatility. Because part of management structure is how a firm incentivizes its workers, studying the link between management and pay volatility is informative about whether the relationship between productivity and pay volatility may reflect incentives. Figure 7, analogous to Figure 5, presents point estimates of model (2) where the outcomes it the with in year standard deviation of log quarterly earnings and we replace productivity with management. We see striking patterns here: Top earners at firms with more structured management tend to have higher earnings, particularly so for the very top earners. This implies senior executives at firms with highly structured management practices - more performance monitoring and more aggressive performance bonuses - have earnings that are more tightly linked to firm-productivity, but also higher levels of pay volatility...."

“…We investigate this by estimating model (2) where the outcome is the within-year pay volatility for the top earners at firms. We measure within-year pay volatility as the standard deviation in quarterly log earnings, within a given year. Figure 5 presents these estimates. Consistent with performance based pay,earners at more productive firms are more likely to have higher within-year pay volatility, and this is particularly true for the very top earners. Because our sample restricts to full-year workers, we do not believe that the with-year pay volatility, or the relationship between volatility and productivity, is driven by top earners at more productive firms being more likely to leave the firm. Rather, because these workers are consistently employed at the firm, these patterns reflect real within-job pay variation, which may be particularly driven by the sizes of their bonuses….”

“…To further explore the role performance-based pay for top earners, we explore changes in productivity and pay within firms. We replicate Figure 2 but now include firm fixed effects, such that now the covariation of pay and productivity are interpreted as changes over time within firms. Figure 4 shows the point estimates of this version of model (2). By adding the firm fixed effects, we reduce the variation in productivity and the coefficients decrease. Recall that in Figure 2, the coefficient on the pay of the top earner, without firm fixed effects, is 0.15. In Figure 4, this coefficient falls by two-thirds to 0.05. However, the patterns are still apparent. Regardless of which of the top earners we consider at firms, when a firm’s productivity is relatively high, those earners earn more (i.e., the coefficients are positive). Further, the correlation between productivity and pay within firm increases as we consider higher earners at the firm. These patterns mean that when a firm’s productivity is relatively high, all top earners are predicted to earn more, but the predicted proportional increase are largest for workers at the very top…”

Foreign buyers manage their Treasury holding more efficiently than American investors, "...We instead observe foreigners’ Treasury portfolio at the security-level and find results that strikingly differ from the existing literature…. Foreign investors are prominent in the Treasury bond market, holding just under half of all outstanding Treasuries…Foreigners do not earn a low return on their Treasury portfolios and have higher Sharpe ratios than U.S. investors. And private foreign investors appear to be price sensitive..."
Bottomline, “…Our security-level and aggregate analyses show that private foreign investors perform quite well, earn similar yields as other investors on similar maturity bonds (which is inconsistent with bad timing), on a risk-adjusted basis perform better than U.S. investors, and, consistent with elastic demand, increase purchases and the duration of their Treasury portfolio when CIP deviations decrease. Foreign officials, with much broader objective functions, appear to be price insensitive but do not seem to pay for this, as their Sharpe ratios are higher than other investor types'. Therefore, our analysis shows no support for the notion that foreign investors have poor performance and, other than foreign officials, inelastic demand….”
Evidence, “…Results are in Table 1. Using directly observed portfolios, over the period June 2003-June 2019 private foreign investors had returns (3.77 percent per annum) that exceeded market returns (3.59 percent). The fact that private foreign investors earn higher than market returns is not consistent with the poor performance = inelastic demand notion that is used to support some convenience yield theories. U.S. private investors (4.34 percent) also had higher than market returns. And while foreign official investors' returns (3.02 percent) were lower than market returns, the 57 basis point gap is relatively small and statistically insignificant. Combining the foreign official and foreign private portfolios, we find that foreign investors' return of 3.21 percent is only 38 basis points lower than the market, and the difference is not statistically significant….”