Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, July 15, 2024

AI Summary. The authors find the 2017 US business tax cuts reduced corporate tax revenue by 40% while raising total tangible corporate investment by about 11%, with firms facing larger tax declines investing relatively more. They estimate long-run GDP is higher by under 1% and labor income by under $1,000 per employee.

Gabriel Chodorow-Reich, Owen Zidar and Eric Zwick National Bureau of Economic Research
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.@gchodorowreich @omzidar and Eric Zwich conclude that the 2017 Tax Cuts and Jobs Act raised tangible corporate investment by about 11%, but long-run GDP by less than 1% while reducing corporate tax revenue by 40%.

How much did corporate tax cuts raise investment, GDP, and wages?

Core argument: Corporate tax revenue fell 40% following the 2017 Tax Cuts and Jobs Act, due to the lower rate and more generous expensing of investment.

We assess the business provisions of the 2017 Tax Cuts and Jobs Act, the biggest corporate tax cut in US history, [building] on empirical work since the passage of the 2017 legislation. We describe not only partial equilibrium results, but also aggregate effects on investment, tax revenue, and GDP, [focusing] on domestic effects. Corporate tax revenue fell by 40% due to the lower rate and more generous expensing [of investment]. In aggregate, we suggest a loose consensus from the literature [based on three different methodologies],that total tangible corporate investment increased by 11%. Firms with larger declines in their effective tax wedge increased investment relatively more. The business tax provisions increased economic growth and wages by less than advertised by the Act’s proponents, with long-run GDP higher by less than 1% and labor income by less than $1,000 per employee. Some of the expired and expiring provisions, such as accelerated depreciation, generate more investment per dollar of tax revenue than others. By contrast, the tax cuts to pass-through firms look quite unattractive: they are especially expensive in terms of how much investment they encourage.

Takeaways by Macro Roundup® AI

  1. Corporate tax revenue fell 40% following the 2017 Tax Cuts and Jobs Act, due to the lower rate and more generous expensing of investment.
  2. A loose consensus from the literature, based on three different methodologies, suggests total tangible corporate investment increased by 11%, with firms seeing larger declines in their effective tax wedge increasing investment relatively more.
  3. The 2017 law's business provisions increased growth and wages by less than its proponents advertised, with long-run GDP higher by less than 1% and labor income by less than $1,000 per employee.

Related Articles:

  • Tax Policy and Investment in a Global Economy — Using administrative tax data, the authors estimate that firms experiencing the mean corporate tax change under the 2017 US tax law increased investment by 20% relative to firms with no change, with long-run domestic and total capital up 7% and 13%. They find higher depreciation deductions largely offset added revenue from capital accumulation.
  • Making the Tax Cuts and Jobs Act Permanent: Two Revenue-Neutral, Pro-Growth Options for Tax Reform — Following the 2017 US tax law, real economic output, consumption, business investment, and payrolls grew faster than pre-law forecasts and nearly matched post-law projections, and an analysis of administrative corporate tax return data estimates firms with the average tax change raised domestic investment about 20% relative to firms with no change.
  • End of an Era: The Coming Long-Run Slowdown in Corporate Profit Growth and Stock Returns — The authors estimate that declining interest and corporate tax rates accounted for over 40% of real corporate profit growth from 1989 to 2019, while falling risk-free rates explain the entire expansion in price-to-earnings multiples. Real earnings before interest and taxes grew slightly more slowly than in 1962–1989, at 2.2% versus 2.4% per year.

AI Summary. A Low-Wage Index holding constant the labor force mix of sex, age, industry, occupation, and education finds bottom-quartile real weekly wages flat near $450 (in 2023 dollars) from 1979 to 1997, then grew 20% over 1997–2007 and 25% over the last decade. The 75th-to-25th percentile wage ratio fell from 2.9x to 2.5x.

Ernie Tedeschi Briefing Book
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.@ernietedeschi creates a Low Wage Index, holding the labor force mix of sex, age, industry, occupation, and education constant from 1979, and finds that workers at the bottom 25th percentile saw earnings rise 20% from 1997-2007 and 25% from 2014-23.

Have low-wage workers' real wages stagnated over the past five decades?

Core argument: The Low Wage Index, which holds the 1979 mix of sex, age, industry, occupation, and education constant, has grown 25% over the last 10 years, exceeding its 20% growth over 1997–2007.

Real wage pressure at the bottom has not stagnated over the last 50 years. But neither has it been steady and consistent. [Constructing] a Low Wage Index [LWI], holding the labor force mix of sex, age, industry, occupation, and education constant from 1979, [I find that] a worker at the bottom quartile with a 2023 profile would have made roughly the same in 1997 each week as 1979, about $450 a week in 2023 dollars. But then in the hot economy of the dot-com boom, real wages at the bottom finally grew. The Low Wage Index goes from barely budging for twenty years to growing 20% over the 1997-2007 period. The Great Recession hit, and for a time, low-wage workers saw wage pressure cool. In 2014, it began a second acceleration that, interestingly, continued throughout the pandemic. The low-wage index has grown by 25% over the last 10 years, an even stronger growth record than in the wake of the dot-com boom. The LWI suggests recent wage compression since 2014 has been extraordinary. The ratio of the 75th-to-25th percentile wage has steadily fallen since 2014, from 2.9x to 2.5x, the lowest level since data began in the late 1970s.

Takeaways by Macro Roundup® AI

  1. The Low Wage Index, which holds the 1979 mix of sex, age, industry, occupation, and education constant, has grown 25% over the last 10 years, exceeding its 20% growth over 1997–2007.
  2. A bottom-quartile worker with a 2023 profile would have earned roughly the same weekly pay in 1997 as in 1979, about $450 a week in 2023 dollars, before real wages at the bottom grew in the dot-com boom.
  3. The ratio of the 75th-to-25th percentile wage has fallen steadily since 2014, from 2.9x to 2.5x, the lowest level since the data begin in the late 1970s.

Related Articles:

  • The Unexpected Compression: Competition at Work in the Low Wage Labor Market — Labor market tightness produced an unexpected compression in the US wage distribution, with disproportionate wage growth at the bottom reducing the college wage premium and reversing nearly 40% of the rise in 90-10 wage inequality since 1980. The authors attribute this in part to increased competition for low-wage workers.
  • Perspectives on the Labor Share — The share of US income going to labor reached its lowest level since the Great Depression, falling roughly 5 percentage points between 1929 and 2022 across most industries, alongside a worldwide decline of about 6 percentage points since 1980. The author argues the most plausible causes are technological, including capital-augmenting technology.
  • Income Inequality in the United States: Using Tax Data to Measure Long-Term Trends — Using administrative tax data with the Survey of Consumer Finances, the authors estimate the top 1% pre-tax income share fell from 11.1% in 1962 to 9.4% in 1979, then rose to 13.8% by 2019, a 3 percentage point rise over the full period. Their after-tax measure shows increases of only 1.4 points since 1979 and 0.2 points since 1962.

AI Summary. Wage changes for union and nonunion workers tend to move similarly over time, with union workers' nominal wage changes less volatile, and since 2002 both groups' wages increased at the same rate. When consumer prices grew faster than wages, real wage growth turned negative despite a strong labor market, then turned positive as inflation fell.

Maximiliano Dvorkin Federal Reserve Bank of St. Louis
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Real wages for union members declined by more than non-union members in 2021-22; however, union member real wages are now outpacing those of non-union members. @stlouisfed

Do union and nonunion workers see similar wage growth over time?

Core argument: Since 2002, wages for union-affiliated and nonunion workers increased at the same average rate, with nominal and real wage changes moving similarly over time, though union workers' nominal wage changes appear less volatile.

In nominal and real terms, the wage changes of union-affiliated workers and those with no union affiliation tend to move over time in a similar way, although union workers’ nominal wage changes seem less volatile. On average, since 2002, wages for these two groups of workers increased at the same rate. Non-wage benefits and total compensation show similar trends. From mid-2021 to mid-2023, following the initial phases of the COVID-19 pandemic, consumer prices grew rapidly, outpacing the average annual growth rate in wages. This implies that, in real terms, wage growth was negative. In this case, high inflation rates pulled real wage growth down into negative values despite a strong labor market. After mid-2023 [given] lower levels of inflation [there was] positive real wage growth. In addition, the nominal wage growth of union workers increased more rapidly, leading to higher real wage growth and compensating for the lost ground of the previous few years.

Takeaways by Macro Roundup® AI

  1. Since 2002, wages for union-affiliated and nonunion workers increased at the same average rate, with nominal and real wage changes moving similarly over time, though union workers' nominal wage changes appear less volatile.
  2. From mid-2021 to mid-2023, consumer price growth outpaced average annual wage growth, implying negative real wage growth despite a strong labor market.
  3. After mid-2023, lower inflation coincided with positive real wage growth, and union workers' nominal wage growth rose more rapidly, yielding higher real wage growth that compensated for ground lost in the prior few years.

Related Articles:

  • Unions, Wages and Hours — After adjusting for worker characteristics, the gap between union and non-union members' hourly earnings has been declining since the Great Recession, while the union differential in weekly wages has been more stable at roughly 15 log points. That weekly gap reflects both a higher hourly wage (about 10 log points) and longer working hours (about 5 log points).
  • Labor Market Conflict and the Decline of the Rust Belt — The authors argue that persistent labor market conflict in the Rust Belt's main industries lowered investment and productivity growth, shifting employment to the rest of the country, and estimate it accounts for roughly half the decline in the region's share of US manufacturing employment. Rising foreign competition plays a more modest quantitative role.
  • Pettis On American Labor Unions — Strong labor unions are incompatible with a global trading system in which countries that subsidize domestic production externalize those costs through large, persistent trade surpluses, according to this argument. The US must either reform that system or unilaterally limit its economy's role in absorbing global savings and production imbalances.

AI Summary. Recent cooler inflation readings may be payback for surprisingly hot readings earlier in the year, reflecting new-year price resets rather than a change in underlying trend. Depending on the measure, inflation has been stable for anywhere from one to two years following the earlier spike, suggesting little has changed year over year.

Matt Klein The Overshoot
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.@M_C_Klein looks at inflation over the past 18 months and suggests the underlying rate hasn’t changed since 2023, and “the most recent prints are a form of payback from the surprisingly hot readings in the first few months of the year.”

Do cooler inflation readings signal a real change in the underlying trend?

Core argument: The author suspects the cooler inflation prints are payback for the surprisingly hot readings in the first months of the year, which many analysts attributed to new year's price resets rather than underlying trends.

While it is possible that trend inflation has decelerated sharply, my suspicion is that the most recent prints are a form of payback from the surprisingly hot readings in the first few months of the year. If those earlier prints were reflecting new year’s price resets rather than underlying trends, as many analysts argued, it would make sense for subsequent inflation numbers to come in somewhat cooler even if the overall rate of inflation in 2024 were on track to be unchanged from 2023. There is a clear pattern of deceleration from the inflation spike of 2021H2-2022H1. But after that, things are much less clear. Depending on your preferred measure, inflation has been stable for as long as two years (headline CPI), 18 months (“sticky” prices ex shelter and all items ex food, shelter, energy, and used vehicles), or since last summer (the 16% trimmed mean). Either way, this perspective implies that little about inflation has changed in 2024 relative to 2023.

Takeaways by Macro Roundup® AI

  1. The author suspects the cooler inflation prints are payback for the surprisingly hot readings in the first months of the year, which many analysts attributed to new year's price resets rather than underlying trends.
  2. Depending on the measure, inflation has been stable for as long as two years for headline CPI, 18 months for sticky prices excluding shelter and for all items excluding food, shelter, energy, and used vehicles, or since last summer for the 16% trimmed mean.
  3. A clear pattern of deceleration followed the inflation spike of 2021H2–2022H1, but the author argues little about inflation has changed in 2024 relative to 2023.

Related Articles:

  • Markets Think Inflation Will Be Too High For The Next 20 Years — Inflation expectations derived from the gap between regular Treasury yields and inflation-indexed Treasury yields show expected annual inflation over the next 10 and 20 years running considerably above expected inflation for the decade beginning 20 years out. Before the pandemic-era inflation surge, actual inflation and expected future inflation tracked each other closely.
  • The Defining Economic Issue of the US Election — Although inflation has largely receded from the 2021-23 shock, the price level remains elevated: the US consumer price index is about 20% above its level at the start of the Biden administration. A back-of-the-envelope estimate puts the aggregate price level roughly 15 percentage points higher than if inflation had continued on its 1.5% pre-COVID path.
  • Has Pay Kept Up With Inflation? — All four measures of typical and aggregate pay have grown since 2019 when adjusted using the personal consumption expenditures price index, but show smaller increases in three measures and a decline in one when adjusted using the consumer price index. This pattern of smaller gains under consumer price index adjustment holds across time periods.

AI Summary. US net investment per capita was 110% higher than three decades earlier, led by intellectual property at 460% higher, while net investment in structures was 22% lower. Net residential investment per person has added less each year since 2007, failing to keep pace with depreciation and population growth.

Zachary Bartsch Economist Writing Every Day
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Real net private investment per capita in 2022 was up 110% from 1993, led by a 460% increase in intellectual property, while residential investment failed to keep up with population growth. @zachary_bartsch

How has US net investment per person shifted across asset types?

Core argument: U.S. net investment per capita in intellectual property was 460% higher in 2022 than in 1993, leading all categories, while total net investment per capita rose 110% over the same period.

The graph illustrates the historical net investment per capita as a proportion of the 1993 values. Over the past 30 years, we’ve had massive increases in the annual contributions to our capital stock. Overall, we contributed 110% more in 2022 than in 1993. Intellectual property leads the way with the US adding 460% more capital per person than we did 30 years ago. Clearly, there are big structural changes happening in our economy. Speaking of structures, our net structures investment per capita is down 22% compared to 1993. A more concerning figure is net residential investment. Though the average house might be bigger, in every year since 2007 we’re getting less additional house per person. Our inflation-adjusted residential investment isn’t keeping up with the depreciation and population growth.

Takeaways by Macro Roundup® AI

  1. U.S. net investment per capita in intellectual property was 460% higher in 2022 than in 1993, leading all categories, while total net investment per capita rose 110% over the same period.
  2. U.S. net structures investment per capita in 2022 stood 22% below its 1993 level, even as overall net capital contributions per person rose 110%.
  3. In every year since 2007, the United States has added less housing per person, as inflation-adjusted net residential investment has not kept up with depreciation and population growth.

Related Articles:

  • Business Spending Is Lining Up to Reinforce Growth — Around 70% of sectors are posting positive year-over-year profit growth, with big tech showing the largest acceleration in demand and profits but strength broadening across the economy. Companies are responding with rising capital spending growth and more optimistic investment plans, as firms typically add capacity with a slight lag after real demand picks up.
  • U.S. Business Investment in the Post-COVID Expansion — Business fixed investment has held at roughly the same share of U.S. GDP as before COVID, a better outcome than after every other recession since 1980, when investment typically fell as a share of GDP and contributed less well into the recovery. American businesses invested $430bn more than if investment had followed its usual historical pattern.
  • Capital Is Making a Comeback — Tangible investment in property, factories and equipment fell from 12.5% to 8.5% of private gross domestic product, while intangible investment in intellectual property, software and process knowledge rose from about 11.5% to 16.75%. The author argues demand for tangible capital investment will now have to rise.

AI Summary. Chinese cities borrowed off-budget through state-owned local government financing vehicles to fund infrastructure and bypass borrowing limits, with economists estimating $7–11tn in hidden debt, about 2x central government debt, and as much as $800bn at high risk of default. Bailouts could encourage unsound borrowing; defaults could expose banks to losses.

Brian Spegele and Rebecca Feng Wall Street Journal
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Economists estimate that Chinese local government financing vehicles (LGFVs) have debt of “somewhere between $7-11T, about twice the size of China’s central government debt” and that $800B is at high risk of default. @WSJ

Does off-budget local borrowing threaten China's growth and banks?

Core argument: Economists estimate Chinese local government financing vehicles hold $7–11 trillion of off-the-books debt, roughly twice the size of China's central government debt, incurred to fund sewers, streets and similar projects while sidestepping borrowing limits.

Chinese cities discovered decades ago that they could take on debt through state-owned entities known as local government financing vehicles (LGFVs), to fund sewers, streets and the like. Because the debts don’t appear on government ledgers—only on the LGFV books—cities were able to sidestep borrowing limits. Economists estimate the size off-the-books debt is somewhere between $7-11T, about twice the size of China’s central government debt. The total amount isn’t known—likely not even to Beijing, say bankers and economists—because of the opaqueness surrounding the financial arrangements that allowed the debt to balloon. As much as $800 billion of that debt is at a high risk of default, economists say. If the financing vehicles can’t meet their obligations, Beijing could either pay for bailouts, which might create a bigger problem by encouraging unsound borrowing. Or it could allow insolvent funding vehicles to go belly up, exposing Chinese banks to serious losses and potentially spurring a credit crunch that would further erode economic growth. Rhodium Group found that only a fifth of nearly 2,900 LGFVs it reviewed last year had enough cash to cover their short term debt obligations and interest payments.

Takeaways by Macro Roundup® AI

  1. Economists estimate Chinese local government financing vehicles hold $7–11 trillion of off-the-books debt, roughly twice the size of China's central government debt, incurred to fund sewers, streets and similar projects while sidestepping borrowing limits.
  2. Economists say as much as $800 billion of Chinese LGFV debt is at high risk of default, leaving Beijing to choose between bailouts that might encourage unsound borrowing or failures that expose banks to serious losses and a potential credit crunch.
  3. Rhodium Group found that only a fifth of the nearly 2,900 local government financing vehicles it reviewed had enough cash to cover short-term debt obligations and interest payments.

Related Articles:

  • The Rise and Fall of LGFVs — China has nearly 12,000 local government financing vehicles whose aggregated assets and liabilities equal roughly 120% and 75% of national GDP, and whose earnings before interest, taxes, and depreciation do not cover their interest payments. Their average borrowing cost of about 5% far exceeds their 1% return on assets, and 80–90% of their annual spending is funded by new debt.
  • China Economy Memo: Tempest in a Teapot or Crisis A-Brewing? — The authors argue China is heading into a protracted debt crisis in which about 40% of local government financing vehicles default, hitting regional banks most exposed to such lending. They estimate total losses for these creditors at roughly $5tn, or about 30% of China's GDP.
  • China’s Debt Isn’t The Problem — China's roughly $47.5tn debt pile is a symptom rather than the core problem, which is the unrecognized losses from a decade of misallocated investment into excess property, infrastructure, and manufacturing. Resolving it requires distributing asset-side losses quickly in ways that minimize financial distress costs, not just restructuring liabilities to protect the financial system.

AI Summary. Chinese survey respondents once cited lack of ability, lack of effort, and low education as the main explanations for poverty, with unequal opportunity ranking 5th and an unfair economic structure 9th. In a later survey, unequal opportunity ranked first and an unfair economic structure third, with education remaining second.

Ilaria Mazzocco and Scott Kennedy Center for Strategic and International Studies
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In 2014 well over 60% of Chinese believed lack of ability and effort explained poverty; in 2023 these factors fell to 31-33%, topped by unequal opportunity at 38% and an unfair economic system at 36%. @mazzocco_ilaria @KennedyCSIS

Do Chinese citizens now blame the system rather than themselves for poverty?

Core argument: In China's 2023 survey, unequal opportunity ranked as the number one explanation for why people are poor, and an unfair economic structure rose to third, up from 5th and 9th respectively in surveys spanning 2004–2014.

Between 2004 and 2014 respondents identified lack of ability, lack of effort, and low education as the main factors that explained poverty in China. Structural issues, such as unequal opportunities, ranked 5th, while an unfair economic structure ranked 9th. The originally low assignment of responsibility to systems changed dramatically in the 2023 survey. Instead, respondents in China now believe that structural factors are most important in explaining why people are poor. Unequal opportunity surged to being the number one reason why respondents believe people are poor, and an unfair economic structure jumped to number three. Education remained the second most important factor, but uneven access to education in China is in itself a source and a symptom of widespread and persistent inequality.

Takeaways by Macro Roundup® AI

  1. In China's 2023 survey, unequal opportunity ranked as the number one explanation for why people are poor, and an unfair economic structure rose to third, up from 5th and 9th respectively in surveys spanning 2004–2014.
  2. Between 2004 and 2014, Chinese respondents named lack of ability, lack of effort, and low education as the main causes of poverty, assigning little responsibility to the economic system.
  3. Education remained the second most important explanation for poverty in China, and uneven access to education is itself both a source and a symptom of widespread and persistent inequality.

Related Articles:

  • 2023 Letter — Rising numbers of Chinese nationals are being apprehended at the US-Mexico border, with US officers encountering around 1,000 in one month early in the year and nearly 5,000 by November. Most Chinese emigrants leave through legal means, going primarily to Singapore, Japan, and Thailand.
  • Why So Many Middle-Class Chinese Migrants Take Risky, Illegal Route To U.S. — U.S. Customs and Border Protection reported more than 37,000 Chinese nationals detained at the border with Mexico in a single year, roughly 10x pre-pandemic levels, with families among the fastest-growing group. United Nations data show China's annual net emigration rose above 300,000, compared with about 190,000 a year over the prior decade.
  • Living Outside China Has Become More Like Living Inside China — About 10.5m people living outside China are or once were Chinese citizens, a diaspora exceeded only by India's, Russia's, and Mexico's. Chinese citizens received more than 70% of 81,000 American investor visas issued to dollar-millionaires over a decade, and 18% of China's nearly 900 dollar-billionaires now live abroad, up from 6%.

Tuesday, July 16, 2024

AI Summary. Among US PhDs from the same institution and field, first-generation college graduates are 13% less likely to end up tenured at a top research university and are tenured at institutions ranked 9% lower than classmates whose parent held a graduate degree. Detailed measures of research quantity and quality explain about a third of this class gap.

Anna Stansbury and Kyra Rodriguez Massachusetts Institute of Technology
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.@annastansbury finds 1st-gen college grads are 13% less likely to be tenured at a high-ranked university than PhD classmates whose parents held a non-PhD grad degree. Detailed measures of research productivity explain around a third of the “class gap.”

Does family background affect academic career outcomes among similar PhDs?

Core argument: First-generation college graduates are 13% less likely to end up tenured at an R1 institution and are tenured at institutions ranked 9% lower than PhD classmates from the same institution and field whose parent held a non-PhD graduate degree.

Using parental education to proxy for socioeconomic background, we compare career outcomes of people who got their PhDs in the same institution and field. First-generation college graduates are 13% less likely to end up tenured at an R1 [institution with very high research activity according to the 2015 Carnegie Classification], and are on average tenured at institutions ranked 9% lower, than their PhD classmates with a parent with a (non-PhD) graduate degree. [The dashed lines in Figure 2] incorporate research controls - second-order polynomials in publications, impact factors, and average number of authors per paper, all interacted with PhD field group. Our most detailed measures of research quantity and quality explain around a third of the class gap. Strikingly, the class gap in the likelihood of ending up tenured at an R1 is as large or larger than the analogous race or gender gaps. Our analyses of coauthor characteristics suggest networks likely play a role. [Similarly,] examining PhDs who work in industry we find a class gap in pay and in managerial responsibilities which widens over the career.

Takeaways by Macro Roundup® AI

  1. First-generation college graduates are 13% less likely to end up tenured at an R1 institution and are tenured at institutions ranked 9% lower than PhD classmates from the same institution and field whose parent held a non-PhD graduate degree.
  2. Detailed measures of research quantity and quality — publications, impact factors, and average authors per paper — explain around a third of the class gap, and analyses of coauthor characteristics suggest networks likely play a role.
  3. The class gap in the likelihood of ending up tenured at an R1 is as large or larger than the analogous race or gender gaps, and among PhDs working in industry a class gap in pay and managerial responsibilities widens over the career.

Related Articles:

  • The Inheritance Of Social Status: England, 1600 to 2022 — Using a genealogical database of 422,374 English people with rarer surnames, the authors find social status persists strongly even among distant relatives, with status correlations declining by a constant factor of 0.79 per step in the lineage across all status measures and eras studied. The authors argue this constancy suggests social interventions have modest effects.
  • The Life-Cycle Dynamics of Wealth Mobility — The authors identify four wealth trajectory groups within a birth cohort: 21% who start and remain near the top, 42% who start and remain near the bottom, and 21% and 15% who stay in the middle while rising or falling in rank. They conclude that wealth mobility is concentrated in these middle groups rather than shared across the population.
  • The Economics of Inequality in High-Wage Economies — Information technology created investment opportunities exceeding the supply of properly trained talent, while trade with low-wage economies, low-skilled immigration, trade deficits, and aging demographics eased constraints on low-skilled labor and risk-averse savings. The author argues this framework, rather than rising cronyism, explains high returns to success, slowing productivity growth, and low interest rates.

AI Summary. Manufacturing is 15% of global GDP but 11% of U.S. GDP versus 19% in Germany, 21% in South Korea, 26% in mainland China, and 34% in Taiwan, according to World Bank data. The author argues this gap stems from trade and industrial policies in surplus economies that effectively force households to subsidize manufacturing, drawing global manufacturers toward the largest subsidies.

Michael Pettis China Financial Markets
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.@michaelxpettis argues that the US manufacturing sector is significantly impacted by foreign industrial policies that “improve manufacturing competitiveness by effectively forcing households to subsidize their manufacturing sectors.”

Does the low U.S. manufacturing share reflect other countries' policies?

Core argument: Manufacturing accounts for 11% of U.S. GDP versus 19% in Germany, 21% in South Korea, 34% in Taiwan, and 26% in mainland China, against 15% of global GDP in the most recent World Bank data.

While manufacturing comprises 15% of global GDP, according to the most recent World Bank data, it comprises a much lower share of GDP for advanced economies that run persistent trade deficits and a much higher share for those that run persistent surpluses. Among the former countries, for example, manufacturing is 11% of U.S. GDP, it is 19% of German GDP, 21% of South Korean GDP, and 34% of Taiwanese GDP (and 26% of mainland Chinese GDP). This lopsided distribution of manufacturing across surplus and deficit economies isn’t a coincidence, nor is it the result of decisions made in the United States. It is mostly the result of trade and industrial policies in several major economies that were designed to improve manufacturing competitiveness in these economies by effectively forcing households in those economies to subsidize their manufacturing sectors. These policies have resulted not just in trade surpluses, as domestic demand inevitably has failed to keep up with production, but also in the increasing role of manufacturing in their economies. Over time, global manufacturers have migrated to these surplus economies because that is where direct and indirect manufacturing subsidies were greatest.

Takeaways by Macro Roundup® AI

  1. Manufacturing accounts for 11% of U.S. GDP versus 19% in Germany, 21% in South Korea, 34% in Taiwan, and 26% in mainland China, against 15% of global GDP in the most recent World Bank data.
  2. The author argues that the lopsided split of manufacturing between deficit and surplus economies stems mostly from foreign trade and industrial policies that effectively force households to subsidize manufacturing, not from decisions made in the United States.
  3. The author argues that those policies produced trade surpluses as domestic demand failed to keep up with production, and drew global manufacturers to the surplus economies where direct and indirect subsidies were greatest.

Related Articles:

  • The Dangerous Myth of Deglobalization — A tax on foreign capital inflows large enough to balance US trade would raise real interest rates for all US borrowers, domestic and foreign-funded alike, since some foreign funding is needed whenever a trade deficit exists. The argument holds the deficit would shrink mainly through lower investment, reducing demand, growth, and innovation.
  • and — A tax on foreign capital inflows large enough to balance US trade would raise real interest rates for all US borrowers, domestic and foreign-funded alike, since some foreign funding is needed whenever a trade deficit exists. The argument holds the deficit would shrink mainly through lower investment, reducing demand, growth, and innovation.
  • The Dangers of a US Capital Inflow Tax — A tax on foreign capital inflows large enough to balance US trade would raise real interest rates for all US borrowers, domestic and foreign-funded alike, since some foreign funding is needed whenever a trade deficit exists. The argument holds the deficit would shrink mainly through lower investment, reducing demand, growth, and innovation.
  • He Helped Trump Remake Global Trade. His Work Isn’t Done — A former U.S. trade representative argues that countries running chronic trade surpluses for decades are by definition protectionist, and backs a universal 10% tariff plus a higher tariff on China to push toward globally balanced trade over time. Alternatives include import certificates tied to exports and a charge on foreign investment in U.S. assets.

AI Summary. U.S. foreign exchange policy has rested with the Treasury since the 1933 dollar devaluation, and a president could pursue depreciation through direct intervention using the Exchange Stabilization Fund or diplomatic talks with other countries. A weaker dollar eases global financial conditions but could prompt foreign investors holding large amounts of U.S. equities to sell to avoid currency losses.

Joseph Wang Fed Guy Blog
Date Posted:

.@FedGuy12 argues that foreigners, who hold about 30% of total dollar-denominated stocks and bonds, will likely sell assets ahead of policy actions to improve US manufacturing competitiveness by weakening the dollar, creating “a notable tail risk.”

Would a weaker dollar push foreign investors to sell U.S. equities?

Core argument: A dollar depreciation under a Trump presidency could prompt foreign investors to sell U.S. assets to avoid currency losses, putting downward pressure on asset prices even as a weaker dollar inflates financial assets and eases global financial conditions.

A dollar depreciation is possible under a Trump presidency and it could trigger foreign selling that actually puts downward pressure on asset prices. Foreign exchange policy has been completely within the purview of the U.S. Treasury ever since President Roosevelt devalued the dollar in 1933. President Trump could depreciate the dollar through direction intervention using the Exchange Stabilization Fund, or high level diplomatic talks with other countries. On the surface, a weaker dollar inflates financial assets and eases global financial conditions, but it could also encourage foreign investors to sell dollar assets to avoid currency losses. The tremendous size of non-official foreign holdings in U.S. equities and recent surge in equity prices suggests this is a notable tail risk.

Takeaways by Macro Roundup® AI

  1. A dollar depreciation under a Trump presidency could prompt foreign investors to sell U.S. assets to avoid currency losses, putting downward pressure on asset prices even as a weaker dollar inflates financial assets and eases global financial conditions.
  2. Foreign exchange policy has resided entirely with the U.S. Treasury since President Roosevelt devalued the dollar in 1933, leaving President Trump options such as direct intervention via the Exchange Stabilization Fund or high-level diplomatic talks with other countries.
  3. The size of non-official foreign holdings of U.S. equities, combined with the surge in equity prices, suggests that foreign selling triggered by dollar depreciation is a notable tail risk.

Related Articles:

  • He Helped Trump Remake Global Trade. His Work Isn’t Done — A former U.S. trade representative argues that countries running chronic trade surpluses for decades are by definition protectionist, and backs a universal 10% tariff plus a higher tariff on China to push toward globally balanced trade over time. Alternatives include import certificates tied to exports and a charge on foreign investment in U.S. assets.
  • Long Live the Dollar — Foreign investors have been the dominant net buyers of longer-dated US Treasuries, purchasing a net $700bn over a 14-month period against $860bn in total net issuance. These purchases came largely from non-official entities such as hedge funds, pension funds, insurance funds, and banks, potentially motivated by high US interest rates or currency speculation.
  • Top Dollar — Foreign holdings of U.S. financial assets exceed American holdings abroad, making the United States a net debtor whose liabilities are denominated in dollars while its foreign assets are largely in other currencies. U.S. foreign liabilities grew from $30tn to over $51tn while U.S. foreign assets grew from $24tn to $33tn, tripling the net debtor position from $6tn.

AI Summary. China's business cycle has decoupled from the US business cycle, which had been closely correlated through Chinese exports to the US, because Chinese home prices are falling while US home prices rise, China's working-age population is declining while the US's grows, and US and European tariffs weigh on Chinese exports. A US slowdown would magnify China's ongoing slowdown.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk notes three factors driving divergent Chinese and US business cycles: 1) higher Chinese real estate investment share of GDP, 2) declining Chinese working-age population vs. ongoing US growth, and 3) US tariffs on Chinese imports.

Has China's business cycle decoupled from the US business cycle?

Core argument: China's business cycle, once highly correlated with the US cycle through Chinese exports to the US, has decoupled for three reasons: falling Chinese home prices, a declining working-age population, and US and European tariffs.

China’s business cycle used to be highly correlated with the US business cycle because of Chinese exports to the US. But the business cycles in China and the US have decoupled for three reasons: 1) Chinese home prices are falling. US home prices are rising. 2) China’s working-age population is declining. The US working-age population is growing. 3) The US and Europe have imposed tariffs and want to produce more goods at home. This is negative for Chinese exports. If US growth is about to slow down, then it will magnify the ongoing slowdown in China.

Takeaways by Macro Roundup® AI

  1. China's business cycle, once highly correlated with the US cycle through Chinese exports to the US, has decoupled for three reasons: falling Chinese home prices, a declining working-age population, and US and European tariffs.
  2. US home prices are rising and the US working-age population is growing, while Chinese home prices are falling and China's working-age population is declining.
  3. A slowdown in US growth would magnify the ongoing slowdown in China, while US and European tariffs and efforts to produce more goods at home weigh on Chinese exports.

Related Articles:

  • The Dangerous Myth of Deglobalization — China's manufacturing surplus rose by about 1 percentage point of global GDP over a four-year span and is far larger than those of Germany and Japan. China's $800bn goods trade surplus depends on the large U.S. trade deficit, which is still indirectly financed by China through the large offshore dollar stockpiles held by Chinese exporters.
  • Housing, Household Debt, and the Business Cycle: An Application to China and Korea — Household debt and housing booms in China and Korea are comparable to those in the United States and United Kingdom from 2001 to 2007, and consumer spending in both countries could be quite weak. Korea's debt service ratio has risen substantially to an exceptionally high level, a pattern historically associated with slower growth.
  • The Debt Supercycle Comes to China — China's property sector, which accounts for 23% of GDP (26% counting imports), is yielding diminishing returns after a construction boom driven by the country's massive post-2008 investment stimulus. The author argues this debt supercycle is the best explanation for China's faltering economy and what comes next.

AI Summary. States with higher per capita volumes of undocumented immigrants broadly had a lower ratio of job vacancies to unemployed workers, a common gauge of labor market tightness. Using state data, the author estimates that about one-fifth of the decline in that ratio was associated with higher immigration.

Evgeniya Duzhak Federal Reserve Bank of San Francisco
Date Posted:
Is Database:
Database

A @sffed analysis finds that the recent spike in immigration from ~1mm/year in the 2010s to at least 3.3mm people in 2023 and 2024 drove about one-fifth of the improvement in the vacancy-to-unemployment ratio.

How much did higher immigration ease labor market tightness?

Core argument: Using state data from 2021–2024, the author estimates that a doubling of new immigration court cases in the prior year is associated with a 16% increase in the job vacancy-to-unemployment (V–U) ratio.

The dashed line in Figure 4 demonstrates that states that experienced higher per capita volumes of undocumented immigrants in 2023 broadly had a lower job vacancy to unemployment (V–U) ratio in the first few months of 2024. It is worth noting that V–U ratios in some of these states declined to close to 1, indicating a relatively balanced labor market. To quantify the impact of the higher volume of migrants on labor market tightness, I use state data from 2021–2024 and estimate the relationship between relative changes in the number of new immigration court cases and relative changes in the V–U ratio. The results imply that a 100% increase (doubling) in the number of new immigration court cases in the prior year is associated with a 16% increase in the V–U ratio. The average change in the number of court cases was 85% across states, with some of the larger increases in Illinois (202% increase), Maine (179%), and Colorado (144%). The results suggest that about one-fifth of the V–U decline was associated with higher immigration.

Takeaways by Macro Roundup® AI

  1. Using state data from 2021–2024, the author estimates that a doubling of new immigration court cases in the prior year is associated with a 16% increase in the job vacancy-to-unemployment (V–U) ratio.
  2. States with higher per capita volumes of undocumented immigrants in 2023 broadly had lower V–U ratios in the first months of 2024, with some falling close to 1, indicating a relatively balanced labor market.
  3. New immigration court cases rose 85% on average across states, with larger increases in Illinois (202%), Maine (179%), and Colorado (144%), and the author's results suggest about one-fifth of the V–U decline was associated with higher immigration.

Related Articles:

  • The Demographic Outlook: 2024 to 2054 — The Congressional Budget Office projects the US population will grow from 342mm in 2024 to 383mm in 2054, an average 0.4% a year — less than half the 0.9% pace of the prior five decades. Immigration accounts for about 70% of growth over the next decade and for all population growth beginning in 2040.
  • The Role of Immigration in U.S. Labor Market Tightness — State-level analysis estimates that a slowdown in immigration to the United States modestly tightened local labor markets, raising the ratio of job vacancies to unemployed workers by 5.5 percentage points. A subsequent rebound in immigration helped close the shortfall in foreign-born labor, contributing a one-point reduction in that ratio.
  • Immigration’s Effect on US Wages and Employment Redux — The authors estimate that immigration to the US over 2000-2019 raised wages of natives with a high school degree or less by 1.7% to 2.6%, a period when that group's real wages fell by 5% to 6%. Effects on more-educated natives ranged from -0.5% to +0.7%, with an overall average effect of +0.5% to +0.8% that was not statistically significant.

AI Summary. Survey data show 56% of divorced men report supporting Trump versus 42% of divorced women, the largest gender gap of any marital-status group. Married men and women report similar support levels (50% vs. 45%), while single men are somewhat more likely than single women to back Trump.

Daniel Cox American Storylines
Date Posted:

In a survey of registered voters, 56% of divorced men said they are voting for Trump relative to 42% of divorced women. This 14pp gap is significantly larger than the 5pp gap between married men and women and the 9pp gap for single voters. @dcoxpolls

Does the gender gap in political support vary by marital status?

Core argument: 56% of divorced men said they are voting for Trump versus 42% of divorced women, the largest male-female voting divide of any marital-status group.

56% percent of men who are divorced said they are voting for Trump, compared to 42% of divorced women. The voting divide between men and women is larger among the formerly married than any other group. Married men and women report supporting Trump at remarkably similar rates (50% vs. 45%). Single men are somewhat more likely to vote for Trump than single women, a statistic that has been a topic of considerable comment.

Takeaways by Macro Roundup® AI

  1. 56% of divorced men said they are voting for Trump versus 42% of divorced women, the largest male-female voting divide of any marital-status group.
  2. Married men and women report supporting Trump at similar rates, 50% versus 45%, a narrower divide than among the formerly married.
  3. Single men are somewhat more likely to vote for Trump than single women, a gap that has drawn considerable comment.

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  • Post-Pandemic Recovery for America’s Prime Age Labor Force: A Tale of Two Sexes — Prime-age women's labor force participation climbed about 5 points above its pre-pandemic level over a decade, while prime-age men's rose barely a point, only just regaining pre-pandemic levels. Despite economic expansion and labor shortages, work rates for prime-age American men are barely as high as at the trough of the severe Reagan-era recession.
  • Why Young Men and Women are Drifting Apart — An analysis of polling from 20 rich countries found that a political gap between men and women aged 18-29 that was negligible two decades ago reached 0.75 points on a 1-10 liberal-conservative scale by 2020, roughly twice the gap between graduates and non-graduates. Young men were more conservative than young women in every large country examined.

AI Summary. Over less than a decade, the share of young men who identify with or lean toward the Democratic Party fell from 51% to 39%. Young women have retained a stronger Democratic allegiance, though that commitment also appears to have weakened more recently.

Daniel Cox The Liberal Patriot
Date Posted:
Is Database:
Database

According to Gallup data, the share of young men who identified with or leaned toward the Democratic Party has fallen from 51% in 2016 to 39% in 2023. @dcoxpolls

Are young voters shifting away from the Democratic Party?

Core argument: The share of young men identifying with or leaning toward the Democratic Party fell from 51% in 2016 to 39% in 2023, a drop of 12 percentage points.

In less than a decade, the number of young men who identify as Democrats dropped significantly. As recently as 2016, more than half of young men (51%) identified with or leaned toward the Democratic Party. By 2023, less than four in ten (39%) young men identified as Democrats. Young women retained a stronger allegiance to the Democratic Party, perhaps in part due to their strong aversion to Trump, but in the last couple of years, this strong Democratic commitment appears to have faltered.

Takeaways by Macro Roundup® AI

  1. The share of young men identifying with or leaning toward the Democratic Party fell from 51% in 2016 to 39% in 2023, a drop of 12 percentage points.
  2. Young women retained a stronger allegiance to the Democratic Party than young men, possibly in part because of their aversion to Trump.
  3. Young women's strong Democratic commitment appears to have faltered in the last couple of years.

Related Articles:

  • An Unsettled Electorate: How Uncertainty and Apathy Are Shaping the 2024 Election — A survey of young registered voters finds 54% backing Biden and 46% backing Trump, with 60% of young women supporting Biden while 52% of young men support Trump. Young men are more likely than young women to say the country has gone too far in giving women equal rights, 19% versus 9%.
  • Why Young Men and Women are Drifting Apart — An analysis of polling from 20 rich countries found that a political gap between men and women aged 18-29 that was negligible two decades ago reached 0.75 points on a 1-10 liberal-conservative scale by 2020, roughly twice the gap between graduates and non-graduates. Young men were more conservative than young women in every large country examined.
  • The Data is Clear: People Are Having Less Sex — Survey data show every age group now reports less frequent sexual activity than counterparts in earlier decades, with roughly an 8 percentage point decline across age groups. Among people around age 25, the share reporting sex at least monthly fell from over 80% to 72%, while the peak years remain ages 30 to 40.