Moreover, both the “unipolar” moment of the US and the economic dominance of the G7 are history. True, the latter is still the most powerful and cohesive economic bloc in the world. It continues, for example, to produce all the world’s leading reserve currencies. Yet, between 2000 and 2023, its share in global output (at purchasing power) will have fallen from 44 to 30 percent, while that of all high-income countries will have fallen from 57 to 41 percent. Meanwhile, China’s share will have risen from 7 to 19 percent. For some emerging and developing countries, China is a more important economic partner than the G7: Brazil is one example. President Luiz Inácio Lula da Silva may have attended the G7, but he cannot sensibly ignore China’s heft.

Gen Z and Millennial voters had exceptional levels of turnout, with young voters in heavily contested states exceeding their 2018 turnout by 6% among those who were eligible in both elections. Further, 65% of voters between the ages of 18 and 29 supported Democrats, cementing their role as a key part of a winning coalition for the party. While young voters were historically evenly split between the parties, they are increasingly voting for Democrats. Many young voters who showed up in 2018 and 2020 to elect Democrats continued to do the same in 2022. Extreme “MAGA” Republicans underperformed. Across heavily contested Senate, Gubernatorial, and Congressional races, voters penalized “MAGA” Republicans.  Women voters pushed Democrats over the top in heavily contested races, where abortion rights were often their top issue.

Offering tax breaks and other incentives to corporations has been proved to be one of the least effective ways for localities and states to grow their economies. State audits and independent evaluations of these programs found poor targeting of incentives, weak oversight and excessive costs that harmed rather than benefited local governments. The CHIPS Act and the Inflation Reduction Act are threatening to give [unproductive tax incentives] an enormous infusion of steroids. Micron chose to build in upstate New York [after] the state offered a staggering $5.5 billion in tax credits over the life of the project … costing local and state governments upward of $95 million annually, far more than they are likely to gain from hosting the new facilities.  In February, Ford agreed to build its new electric vehicle plant in Michigan, but only after extracting a promise of as much $1.75 billion in state and local incentives...enough money to pay all the new workers’ salaries for around 15 years.

From 1995 to 2022, the U.S. labor force increased from nearly 131.6 million workers to over 164.3 million—an increase of nearly 32.8 million workers: 16.1 million of that increase came from immigrant workers (49%) and 6.7 million were children of immigrants (21%), according to data from the Current Population Survey’s Annual Social and Economic Supplement. Just 9.9 million were U.S.-born citizens without a foreign‐born parent. The actual effect of cutting off all immigration would have been even greater since the working immigrant population would have declined without more immigration by about 4.5 million. Immigrants have increased from about 10% of the U.S. labor force in 1995 to 18% in 2022, and immigrants and their children have gone from 18% to 29%.

Europe is more economically exposed to China than America is. Some 8% of publicly-listed European firms’ revenues are from China, compared with 4% for American ones, according to Morgan Stanley. Europe and America send a similar share of goods exports to China (7-9%), but because Europe is a more trade-intensive economy its sensitivity is higher. Multinational investments in China are worth 2% of Europe’s GDP compared with 1% for America. We have come up with a yardstick of “total China exposure,. We measure each country’s exposure as a share of its own economy.  The European big six’s total China exposure has hit 5.6% of their combined GDP, up from 3.9% in 2011. That is higher than America’s at 4.2%. There is a big range: Italy and Spain are at just 1-2%, France and Britain are at 4-5%. Germany is a huge outlier at 9.9%.

According to our calculations, the average student was half a year behind in math and a third of a year behind in reading. In 2019, the typical student in the poorest 10 percent of districts scored one and a half years behind the national average for his or her year – and almost four years behind students in the richest 10 percent of districts – in both math and reading. By 2022, the typical student in the poorest districts had lost three-quarters of a year in math, more than double the decline of students in the richest districts. The declines in reading scores were half as large as in math and were similarly much larger in poor districts than rich districts. The pandemic left students in low-income and predominantly minority communities even further behind their peers in richer, whiter districts than they were.

Levels of trust in the US have been eroding for decades and the share of Americans who say they do not trust other people in their neighbourhood is now roughly double what you would expect based on US socio-economic development. Few appreciate that at country and state level, the statistical relationship between gun availability and gun deaths is driven almost entirely by suicides. The more people who have access to guns, the more who use them to take their own lives. And since the vast majority of all gun deaths are suicides, this dynamic dominates the overall guns-deaths link. Look only at gun homicides instead, and the link with the number of guns is much weaker, whether the unit of analysis is different countries or US states. But add in interpersonal trust as well as gun ownership, and the relationship returns. In other words, it’s the interplay between guns and fear that sends homicide rates climbing.

Overall, managers explain between 25 and 35% of the variance of store-level productivity, which is about 50-70% of the explanatory power of store fixed effects. In the four largest connected sets across both companies, moving a manager from the 10th percentile to the 90th percentile increases overall productivity by between 22% and 82%. On average, this implies an effect on output equivalent to adding a fifth employee to a team of four.  We estimate that replacing a manager at the bottom of the distribution by one at the top could increase a store’s productivity by at least 50%, and perhaps as much as doubling it, depending on the company and the relevant connected set. 

We find that billionaires responded strongly to geographical differences in estate taxes by increasingly moving to states without estate taxes, especially as they grew older. Our estimated elasticity implies that $80.7 billion of 2001 Forbes 400 wealth escaped estate taxation in the subsequent years due to billionaires moving away from estate tax states. Yet despite the high elasticity of geographical location with respect to the estate tax, we find that for most states the benefit of additional revenue from the estate tax exceeds the cost of forgone income tax revenue by a significant margin. Adoption of an estate tax implies a one-time tax revenue gain for the state when a resident billionaire dies, but it also reduces its billionaire population and thus their flow of income tax revenue over remaining lifetimes. For the average state the benefit of additional revenue from the estate tax exceeds the cost of forgone income tax revenue by 31 percent. While the cost-benefit ratio varies substantially across states, most states that currently do not have estate taxes would experience revenue gains if they adopted estate taxes. California, which has the highest personal income top tax rate, is the main exception In California, the cost-benefit ratio is 1.45, indicating that if California adopted the estate tax on billionaires, the state would lose revenues by a significant margin. (Currently, California does not have an estate tax.)

An earlier version of this research was cited in my chapter The Economics of Inequality in High-Wage Economies in Oxford University Press's United States Income, Wealth, Consumption, and Inequality

Our analysis shows that comparative skill advantages are transferred across generations: Parents who were relatively better at math (vs. language) in childhood are more likely to have children with a similar comparative skill advantage in math. We also find that parents’ comparative skill advantage is a strong predictor of their own STEM choices and those of their children. The new Intergenerational Transmission of Skills (ITS) database that we develop permits matching skills of Dutch parents and children derived from similar tests taken at similar ages. We measure comparative skill advantage as the ordinal difference between math and language skills in the parent and child generation, respectively, each assessed by the percentile position in the nationwide skill distribution.  We find that parents with a comparative advantage in math skills are significantly more likely to have children with a similar math skill advantage.

America’s lowest-earning workers are enjoying higher wage growth than top earners, after taking into account the effects of the recent bout of high inflation. Since 2020, real wages for the bottom 10 percent of the workforce have returned to their pre-pandemic level. In contrast, top earners and those on average incomes have taken a substantial hit once the effect of price growth is taken into account.  Real hourly earnings for the lowest earners rose by 6.4 percent between January 2020 and September 2022.

In 2006, the federal government essentially uncapped student borrowing for graduate programs with the introduction of the Graduate PLUS loan program. We find that access to additional federal loans increased previously constrained students’ borrowing and shifted the composition of their loans from private to federal debt. However, the increase in borrowing limits had no effect on graduate student enrollment or the racial and gender composition of entering graduate students. We find little evidence of short or longer-run effects on the human capital accumulation of students who were or would have been constrained by federal borrowing limits in the absence of Grad PLUS, even though cumulative debt significantly increased for these students when they gained access to Grad PLUS loans. This suggests that access to additional liquidity did not constrain graduate student borrowers’ human capital investments prior to the implementation of Grad PLUS. We also find little evidence of an impact on later earnings, consistent with no change in human capital accumulation. Where we do see effects is on program prices. Grad PLUS-driven increases in federal student loans significantly increased program prices.

The U.S. system of taxes and transfers is highly progressive. The lowest quintile experienced a combined tax and transfer rate of negative 127.0 percent, meaning that for each dollar they earned, they received an additional $1.27 from the government, netting transfers (gains) and taxes (losses), while the top quintile had a rate of positive 30.7 percent, meaning on net they paid just under $0.31 for every dollar earned. The top quintile funded 90.1 percent, or $1.6 trillion, of all government transfers in 2019. For each dollar of taxes paid, the top quintile received $0.11 in gross government transfers. Government transfers account for 59 percent of the bottom quintile’s comprehensive income. For each dollar of taxes paid by the bottom quintile, they received $6.17 in gross government transfers.

TFP is the main factor accounting for differences in labor productivity growth across countries and over time. Since the mid-2000s, TFP growth has been lackluster across the large economies we analyze here. At the level of the market economy, productivity slowed because the productivity frontier (the U.S.) slowed, with similar slowdowns elsewhere. At a more disaggregated level, the frontier economy is sometimes different, but the pattern of slow TFP growth since the mid-2000s is evident in both manufacturing and market services. Qualitatively as well as statistically, the evidence suggests that, following that mid-1990s pickup, U.S. TFP growth slowed before the Great Recession.

In this paper, we studied the employment effects of an antipoverty program that does not include any such conditions. The two-year program, implemented in Barcelona (Spain), consisted of a monthly cash transfer to households with income below the subsistence level. The benefit level depended on the household income, size, and composition. On average, households received roughly e500 ($792 PPP) per month, equivalent to nearly 50 percent of the national minimum wage. Although the benefit was household-based, transfers were made to the account of a designated household member, the main recipient. Our findings for overall impacts can be summarized in four parts. First, we find strong evidence for sizeable negative labor supply effects. After two years, households assigned to the cash transfer were 14 percent less likely to have at least one member working compared to households assigned to the control group; main recipients were 20 percent less likely to work. Second, negative employment effects persisted until at least six months after the last payment. Third, we find tentative evidence that effects are mainly driven by households with care responsibilities. Fourth, there is no evidence of effects on social participation and education-related activities.

In our version of the AEI chart the number one item isn’t health care but ‘delivery services,’ which is “fees for delivery of items such as letters, documents, and packages at non-US Postal Services facilities.” Think UPS or FedEx. This is pretty far from a government monopoly, indeed it’s the private sector alternative to a government program. But it is services and it is labor intensive. The biggest thing, to me, isn’t “regulations” but whether it’s a service or a good. This is academically well known, check out The Missing Inflation Puzzle: The Role of the Wage-Price Pass-Through, which finds that the low inflation of pre-pandemic era “can be traced to a growing disconnect between unemployment and core goods inflation” and that “increased import competition and rising market concentration reduce pass-through from wages to prices” when it comes to goods.

Very high marginal tax rates create problematic incentives. Conservatives emphasize how taxes reduce the incentive to work and create wealth; this effect is surely overrated, but it does exist. More important, high tax rates encourage extraordinary efforts to avoid taxes (which is legal) or evade them (which isn’t). Estimates of the revenue-maximizing top tax rate tend to be in the range of 70 percent to 80 percent, well above the federal maximum of 37 percent — but bear in mind that many high earners also face state and local taxes that raise their effective marginal rate to something like 50 percent. So, the amount of additional revenue we can raise from taxing the rich, while substantial, is considerably less than their remaining untaxed income.

The basic idea of this paper is that a substantial rise in the volatility of costs and other determinants of prices can completely free the prices of a significant fraction of goods and services from the grip of New Keynesian stickiness, when the volatility of cost rises. There is a critical configuration of the model such that at lower values of the of the cost volatility, the price is a constant over time—resetting never occurs, except possibly to bring the price into the zone of indifference at the beginning of time.  The surprising implication of this investigation is that an increase in the volatility of cost that leaves the average level of cost unchanged can trigger a near collapse of price stickiness.  The next section of the paper presents an empirical analysis demonstrating a large increase in cost volatility around the time of a burst of inflation during and after the pandemic, followed by a reversal.

We are the first to show that, as a causal matter, a loose stance has strong implications for medium-term financial instability. The sample consists of 18 advanced economies over the period from 1870 until 2020. Since the unconditional probability of experiencing a crisis in a 3-year window is 10.5%, these effects are big. Moreover, these results are robust to alternative measures of stance and alternative definitions of financial stability. Lower interest rates in general and loose monetary policy in particular imply, ceteris paribus, higher asset valuations. This opens the door for collateral-driven credit booms. Such credit and asset price booms, in turn, have been identified by the literature as harbingers of financial turmoil.