“Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
“…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
“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
“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard 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
“…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
“…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
“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
“Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
“Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
“A full-throated defense of economic dynamism.” - The Wall Street Journal
“There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
Research on how the organization of work differs between urban and rural areas, including industry mix, productivity, wages, remote work, migration, and access to talent. Coverage tracks the geographic reallocation of firms and jobs.
AI Summary.The US population is split evenly among urban, suburban, and rural areas, but 64% of those living at suburban densities reside in prosperous or comfortable ZIP codes, versus 36% in rural and 38% in urban ones. County distress scores correlate strongly with life expectancy, with prosperous counties averaging 5.3 years longer.
Kenan Fikri and Sarah EckhardtAgglomerations
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An analysis of census data finds residents of the mean “prosperous” (top-quintile) county live 5.3 years longer than those in the mean “distressed” (bottom-quintile) one, with the discrepancy between the top and bottom percentiles widening to 8 years.
Do suburban areas concentrate America's prosperity and longer life expectancy?
Core argument: 64% of the U.S. population living at semi-urban (suburban) densities resides in prosperous or comfortable ZIP codes, far above the 36% in rural areas and 38% in urban ones.
Nationally, the country’s population is evenly divided between urban, semi-urban (which we’ll call suburban), and rural areas. Fully 55% of the population in top-tier ZIP codes live at suburban densities, compared to only 20% in the bottom (distressed) tier. Put differently, fully 64% of the U.S. population living at semi-urban densities reside in prosperous or comfortable zip codes (Figure 2). That is far and above the 36% in rural areas or 38% in urban ones. County distress scores are strongly correlated with life expectancy. Residents of the average prosperous county live over five years longer (5.3 years to be exact) than those in the average distressed one, widening to 8 years in the top and bottom percentiles.
Takeaways by Macro Roundup® AI
64% of the U.S. population living at semi-urban (suburban) densities resides in prosperous or comfortable ZIP codes, far above the 36% in rural areas and 38% in urban ones.
55% of the population in top-tier ZIP codes lives at suburban densities, compared with 20% in the bottom, distressed tier, while the country overall splits evenly among urban, suburban, and rural areas.
County distress scores are strongly correlated with life expectancy, with residents of the average prosperous county living 5.3 years longer than those in the average distressed county, widening to 8 years between top and bottom percentiles.
Related Articles:
The Great “Transfer”-mation— Government transfers rose from 8.2% of Americans' total personal income in 1970 to 17.6% in 2022, making them the third largest income source after work and investments. The share of U.S. counties drawing a quarter or more of personal income from transfers rose from under 1% in 1970 to 53% in 2022.
“Compensate the Losers?” Economic Policy and Partisan Realignment in the US— The authors argue that partisan realignment by education reflects Democrats' declining supply of "predistribution" policies such as job guarantees, higher minimum wages, protectionism, and stronger unions, which less-educated Americans favor while more-educated Americans prefer taxes and transfers. They estimate changing views of the parties' economic policies explain roughly half the shift.
The Economic Geography Of The 2024 Elections— Counties where government transfer programs such as Social Security, Medicare, Medicaid, and unemployment insurance make up at least a quarter of personal income gave Trump 63% of the vote, while counties where transfers account for less than 15% gave Harris 56%. Transfers supplied 18% of total US personal income.
AI Summary.Government transfers rose from 8.2% of Americans' total personal income in 1970 to 17.6% in 2022, making them the third largest income source after work and investments. The share of U.S. counties drawing a quarter or more of personal income from transfers rose from under 1% in 1970 to 53% in 2022.
Kenan Fikri, Sarah Eckhardt and Benjamin GlasnerEconomic Innovation Group
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Transfer payments made up 18% of all US personal income in 2022, up from 8% in 1970. Social Security/Medicare made up 56% of the increase from 1970 to 2022, and income maintenance programs/Medicaid accounted for 35%. @kenanfikri @BenGlasner
How much have government transfers grown as a share of personal income?
Core argument: Government transfers rose from 8.2% of Americans' total personal income in 1970 to 17.6% in 2022, ranking third as an income source after work and investments.
Transfers’ share of Americans’ total personal income has more than doubled over the past 50 years, from 8.2% in 1970 to 17.6% in 2022. They are the third largest source of Americans’ personal income, after income from work and investments. The average American received $11,500 in income from government transfers in 2022, compared to $40,500 in income derived from work and $12,900 from investments. Today, most U.S. counties depend on a level of government transfer income that was once reserved only for the most distressed places. In 1970, not even 1% of counties derived a quarter or more of their total personal income from transfers. In 2000, just 10.4% did. But by 2022, 53% of counties were receiving a quarter or more of their income from transfers. Increasing participation (as populations age) and rising underlying costs (driving up the expense of health-related programs, in particular) are the most significant factors at play. Income maintenance programs only account for 11.4% of the real increase in transfers from 1970 to 2022. In stark contrast to the rising elderly share of the population, the poor share has been stable.
Takeaways by Macro Roundup® AI
Government transfers rose from 8.2% of Americans' total personal income in 1970 to 17.6% in 2022, ranking third as an income source after work and investments.
In 2022, 53% of U.S. counties derived a quarter or more of total personal income from transfers, up from 10.4% in 2000 and under 1% in 1970.
Rising participation as populations age and rising underlying costs, particularly for health-related programs, are the most significant factors behind the increase, while income maintenance programs account for 11.4% of the real rise in transfers from 1970 to 2022.
Related Articles:
The Distribution of Household Income in 2021— Income after transfers and taxes grew most for households in the highest quintile, a rate that would have been nearly the same without temporary pandemic policies such as recovery rebate credits, expanded unemployment compensation, and the expanded child tax credit. Those policies raised average income in the lowest quintile to $48,700 from $41,200 without them.
Welfare Is What’s Eating the Budget— The U.S. redistributes 29.4% of its gross domestic product through transfers and taxes, a larger share than any developed country except France at 30.1%. Counting transfers as income and taxes as income lost and adjusting for household size, average households in the bottom, second, and middle income fifths have roughly equal incomes despite large differences in work effort.
AI Summary.California has lost tech jobs across computer systems design, streaming and social networks, software publishing, and web search, and its share of US tech industry jobs has fallen to the lowest level in more than a decade after peaking near 19% in late 2019. California still receives 31% of the industry's total compensation.
Joseph PolitanoApricitas Economics
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California’s share of US tech jobs is the lowest in a decade, falling from nearly 19% in late 2019 to just over 16% in February. Californians maintain an advantage in high-end jobs, earning 31% of the industry’s total compensation. @JosephPolitano
Is California losing its share of US tech jobs?
Core argument: California has lost 21k jobs in computer systems design, 15k in streaming and social networks, 11k in software publishing, and 7k in web search since August 2022, while gaining under 1k in computing infrastructure and data processing.
Since August 2022 California has lost 21k jobs in computer systems design, 15k in streaming and social networks, 11k in software publishing, and 7k in web search—while gaining less than 1k in computing infrastructure and data processing. As a result, the share of US tech jobs located in California has fallen significantly since 2020, dropping a full percentage point over the last year and hitting the lowest levels in more than a decade. California had gone from having less than 15% of all US tech industry jobs in 2010 to nearly 19% in late 2019, but the pandemic and ensuing remote work shock immediately reversed that trend. Despite losing significant amounts of tech jobs to other states, California still retains a massive advantage at the high end of the industry: Californians receive a whopping 31% of the industry’s total compensation.
Takeaways by Macro Roundup® AI
California has lost 21k jobs in computer systems design, 15k in streaming and social networks, 11k in software publishing, and 7k in web search since August 2022, while gaining under 1k in computing infrastructure and data processing.
California's share of US tech industry jobs has fallen a full percentage point over the past year to its lowest level in more than a decade, after rising from under 15% in 2010 to nearly 19% in late 2019 before the pandemic and remote work reversed the trend.
Californians receive 31% of the US tech industry's total compensation, an advantage at the high end of the industry that persists despite job losses to other states.
Related Articles:
California Mints Millionaires Faster Than They Can Leave— The number of California residents with incomes of $1m or more grew by 61,900, or 66%, from 2019 to 2021, lifting the state's share of US millionaires to 17.9% from 17% while the shares of New York, Texas, and Florida fell. Rising in-state incomes minted more new millionaires than the net outflow of higher-earning taxpayers to other states.
Behavioral Responses to State Income Taxation of High Earners: Evidence from California— A California ballot measure raising top marginal income tax rates by up to 3 percentage points prompted an additional 0.8% of the affected tax base to leave the state, with an estimated income elasticity of 2.5–3.2 for high earners who stayed. The authors estimate these responses eroded 45.2% of windfall revenues within one year and 60.9% within two.
The Ultra-Rich Are Flourishing and Sticking Around In California— California is home to 113 billionaires, more than any country except China, and added over 116,000 millionaire taxpayers between the end of 2019 and 2021, according to the state's Department of Finance. The number of residents reporting income above $50m rose 158% to 3,182.
AI Summary.The most economically prosperous U.S. zip codes house 80.6m residents and averaged nearly 3x the job growth of "comfortable" zip codes and 10x that of "at-risk" ones. In several Southeast and Mountain West states, a much greater share of the population now lives in top-ranked prosperous zip codes than a decade earlier.
Daniel Newman and Kenan FikriEconomic Innovation Group
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Between 2017-2021 the share of Americans living in high-income zip codes increased the most in the mountain west and southeast. @kenanfikri @InnovateEconomy
Is U.S. economic prosperity shifting toward the Mountain West and Southeast?
Core argument: The most economically prosperous zip codes on the Distressed Communities Index, home to 80.6 million residents, form the most populous quintile in the country.
Today, the most economically prosperous communities (those landing in the top-performing quintile on the index) are also the most populous with 80.6 million residents across the country. Access to economic opportunity is a major benefit afforded to these residents, with these zip codes on average enjoying nearly triple the increase in jobs from 2017 to 2021 compared to comfortable ones and 10 times the increase observed in at-risk ones. A much greater share of the population in several states across the Southeast and Mountain West live in the DCI’s top-ranked prosperous zip codes than did a decade ago.
Takeaways by Macro Roundup® AI
The most economically prosperous zip codes on the Distressed Communities Index, home to 80.6 million residents, form the most populous quintile in the country.
Prosperous zip codes averaged nearly three times the job growth of comfortable zip codes and 10 times that of at-risk ones from 2017 to 2021.
Several states across the Southeast and Mountain West have a much greater share of their population living in top-ranked prosperous zip codes than a decade ago.
Related Articles:
Southern Comforts— Migration into southern metropolitan areas such as Austin, San Antonio, Jacksonville, and Tampa has continued, and the South also has a higher birth rate than other census regions. Growth has been uneven: Florida's GDP rose 20% and Texas and Tennessee 15% against a US average of 11%, while Oklahoma and Louisiana contracted.
Movers And Money: Mapping the Flow of Income During the Pandemic— Manhattan recorded the largest county-level income outflow to other states at $16.5bn, with 27.7 cents of every dollar leaving—$4.6bn—going to Florida, including $2.9bn to Miami-Dade County and $1.1bn to Palm Beach County. California had the largest state-level losses, while Florida was the biggest beneficiary with a net gain of $39bn.
On The Move: West Side Story— The West's share of US population has flattened and appears to be falling, with relative housing affordability cited as a key part of the story. Metropolitan areas with median mortgage payments above the US average generally show negative or weakly positive population growth, and Pacific-state metros all have above-average mortgage payments.
AI Summary.Using administrative employer-employee data on workers displaced by firm closures, the authors find that workers in larger labor markets experience shorter non-employment spells and smaller earnings losses than those in smaller markets, indicating larger markets partially insure workers against job-loss shocks. The effects are larger in industries where human capital is more specialized and less portable.
Enrico Moretti and Moises YiNational Bureau of Economic Research
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Large labor markets are more liquid and improve matching. A 1% increase in market size results in an increase in the 1-year re-employment probability following a firm closure by .14 and .023 for high school and college graduates respectively. @MoisesYi3
Do larger labor markets protect workers against job loss?
Core argument: Using Longitudinal Employer-Household Dynamics administrative data, the authors find that workers displaced by firm closures in larger labor markets experience significantly shorter non-employment spells and smaller earnings losses than workers in smaller markets.
We use administrative data [Longitudinal Employer‐Household Dynamics reporting] to compare the job search outcomes of workers originally in large and small markets who lost their jobs due to a firm closure. Workers in larger markets experience significantly shorter non-employment spells and smaller earning losses following a closure than workers in smaller markets, indicating that larger markets partially insure workers against idiosyncratic employment shocks. We find that the effects are larger in industries where human capital is more specialized and less portable.
Takeaways by Macro Roundup® AI
Using Longitudinal Employer-Household Dynamics administrative data, the authors find that workers displaced by firm closures in larger labor markets experience significantly shorter non-employment spells and smaller earnings losses than workers in smaller markets.
The authors read the larger-market advantage as an indication that larger labor markets partially insure workers against idiosyncratic employment shocks.
The estimated benefits of larger markets are greater in industries where human capital is more specialized and less portable, according to the authors.
Related Articles:
Changes in the U.S. Economy and Rural-Urban Employment Disparities— Long-term shifts in the US economy — technological innovation and automation, declines in some energy extraction, greater globalization, and the move to a knowledge-based economy — have coincided with disproportionately negative employment outcomes in rural communities, especially for prime working-age men and those without a high school degree.
The World’s Rust Belts: The Heterogeneous Effects of Deindustrialization on 1,993 Cities in Six Countries— A study of 1,993 cities in France, Germany, Italy, Japan, the UK and the US finds former manufacturing hubs lost employment on average after each country's manufacturing peak, though a large share fully recovered. After the peak, hubs with a higher initial share of college-educated workers grew significantly faster.
Exodus From America’s Big Cities Slowed Last Year as Pandemic Receded— The core counties of large U.S. metropolitan areas lost a net of more than 800,000 residents to other parts of the country, an improvement from a 1.2m net outflow the prior year. About 500,000 net arrivals from abroad, plus more births and fewer deaths, left those counties' combined population little changed.
AI Summary.Long-term shifts in the US economy — technological innovation and automation, declines in some energy extraction, greater globalization, and the move to a knowledge-based economy — have coincided with disproportionately negative employment outcomes in rural communities, especially for prime working-age men and those without a high school degree.
Andrew DumontFederal Reserve Board
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While total employment in metro areas has passed its pre-pandemic peak, rural employment is still below 2007 levels. The employment-to-population rate of prime-aged men in metro areas is 84.2 relative to 76.2 for their rural counterparts. @FedResearch
Have long-term economic shifts hurt rural employment more than urban?
Core argument: Long-term U.S. economic shifts — technological innovation and automation, declines in some energy extraction, greater globalization, and the move to a knowledge-based economy — have coincided with disproportionately negative employment outcomes in many rural, nonmetro communities.
In the United States, long-term changes in the nature of the economy – including advances in technological innovation and automation, declines in the extraction of certain energy resources, increases in globalization, and a shift to the "knowledge-based" economy – have coincided with disproportionately negative employment outcomes in many rural, or "nonmetro," communities, especially for prime working-age men and those with less than a high school degree. These relatively large, negative employment effects may be due, in part, to differences in the historical industrial composition of nonmetro economies (e.g., a relatively large concentration in manufacturing), as well as the lower levels of educational attainment of their residents. In addition to these historical factors, remote places may face an inherent disadvantage in the modern knowledge economy where the clustering of highly skilled workers and firms in dense areas generate increasing returns.
Takeaways by Macro Roundup® AI
Long-term U.S. economic shifts — technological innovation and automation, declines in some energy extraction, greater globalization, and the move to a knowledge-based economy — have coincided with disproportionately negative employment outcomes in many rural, nonmetro communities.
The negative employment outcomes in nonmetro communities are concentrated among prime working-age men and workers with less than a high school degree.
Differences in the historical industrial composition of nonmetro economies, such as a relatively large concentration in manufacturing, and lower educational attainment among residents may partly explain these employment effects, while remote places may face disadvantage where skilled workers and firms cluster in dense areas.
Related Articles:
The World’s Rust Belts: The Heterogeneous Effects of Deindustrialization on 1,993 Cities in Six Countries— A study of 1,993 cities in France, Germany, Italy, Japan, the UK and the US finds former manufacturing hubs lost employment on average after each country's manufacturing peak, though a large share fully recovered. After the peak, hubs with a higher initial share of college-educated workers grew significantly faster.
Pandemic Population Boom in Rural Hotspots Sparks Resentment— U.S. rural population grew for a second consecutive year after decades of decline, with non-metro areas outpacing urban growth for the first time in three decades. Gains were concentrated: the 10 rural counties with the largest increases grew about 5% on average versus a 0.4% national rate, and their house prices rose more than 40% over three years.
AI Summary.A study of 1,993 cities in France, Germany, Italy, Japan, the UK and the US finds former manufacturing hubs lost employment on average after each country's manufacturing peak, though a large share fully recovered. After the peak, hubs with a higher initial share of college-educated workers grew significantly faster.
Luisa Gagliardi, Enrico Moretti and Michel SerafinelliUniversity of California
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Enrico Moretti, Michel Serafinelli and @GagliarL show that, among cities worldwide that were hit by shocks that caused a decline in manufacturing, those that had a high share of college-educated workers recovered faster.
Why do some former manufacturing hubs recover employment while others decline?
Core argument: Across 1,993 cities in France, Germany, Italy, Japan, the UK, and the US, former manufacturing hubs lost employment on average after their country's manufacturing peak, yet a surprisingly large share in each country fully recovered.
We study the employment consequences of deindustrialization for 1,993 cities in six countries: France, Germany, Italy, Japan, the United Kingdom, and the United States. We focus on former manufacturing hubs—defined as Local Labor Markets that in the year of their country’s manufacturing peak have a manufacturing employment share in the top tercile of their country’s distribution. While on average former manufacturing hubs lost employment after their country’s manufacturing peak, a surprisingly large share in each country was able to fully recover. We find that in the two decades before the relevant country’s manufacturing peak, cities with a high share of college-educated workers experienced a similar rate of employment growth as those with a low share of college-educated workers. By contrast, in the decades after the manufacturing peak, the employment trends diverge: cities with a high initial share of college-educated workers experience significantly faster employment growth.
Takeaways by Macro Roundup® AI
Across 1,993 cities in France, Germany, Italy, Japan, the UK, and the US, former manufacturing hubs lost employment on average after their country's manufacturing peak, yet a surprisingly large share in each country fully recovered.
In the two decades before each country's manufacturing peak, cities with high and low shares of college-educated workers grew employment at similar rates, with trends diverging only after the peak.
After their country's manufacturing peak, cities with a high initial share of college-educated workers experienced significantly faster employment growth than those with a low share.
Related Articles:
Are Manufacturing Jobs Still Good Jobs? An Exploration of the Manufacturing Wage Premium— Manufacturing average hourly wages, once about 3% above private-sector wages, have grown more slowly than private-sector wages, erasing the manufacturing wage premium for most manufacturing jobs. The authors estimate that declining unionization accounts for more than 70% of that drop, an effect that remains significant after controlling for worker and sector characteristics.
Bottlenecks: Sectoral Imbalances and the US Productivity Slowdown— The authors estimate that greater dispersion in productivity growth among an industry's input and idea suppliers has a strong negative effect on that industry's own productivity growth, using data on 462 US manufacturing industries and 42 non-manufacturing industries. Their evidence implies most of the US productivity slowdown can be explained by rising cross-industry variance in productivity growth.
AI Summary.Within the same metropolitan-area income quartile, denser neighborhoods have a higher share of jobs that can be done remotely. The authors argue this pattern suggests increased telework raises willingness to pay for housing in high-density places, where leisure amenities and nonwork social interaction are more available.
Leah Brooks, Philip Hoxie, and Stan VeugerAmerican Enterprise Institute
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Remote work is more prevalent in denser neighborhoods according to new research by @stanveuger @phoxie58 @AEIecon.
Does remote work increase demand for housing in dense neighborhoods?
Core argument: Among neighborhoods within the same metropolitan-area income quartile, denser block groups have a higher share of teleworkable jobs, a finding the authors describe as surprising.
We find that, for neighborhoods in the same metropolitan-area income quartile, the denser the block group, the higher the share of teleworkable jobs. This surprising finding could arise for a number of reasons. First, if workers in industries with greater telework potential enjoy more leisure time in equilibrium, their willingness to pay for amenities that complement leisure increases, and such amenities may not be available in lower-density areas. Second, if workers value social interactions and interactions at work are less frequent, they may seek out social interactions in nonwork settings. Nonwork social interactions are more readily found in population dense areas. Third, and similarly, if in-person contact drives agglomeration effects, a shift to remote work makes such contact outside the workplace more valuable. Again, in-person contact is easier in more population dense areas. All these explanations point toward increased telework leading to a greater willingness to pay for housing in high-density places.
Takeaways by Macro Roundup® AI
Among neighborhoods within the same metropolitan-area income quartile, denser block groups have a higher share of teleworkable jobs, a finding the authors describe as surprising.
One proposed explanation holds that workers in industries with greater telework potential enjoy more leisure in equilibrium, raising their willingness to pay for leisure-complementing amenities that may be unavailable in lower-density areas.
The authors argue that if workers seek social interaction and in-person contact outside the workplace, increased telework would raise willingness to pay for housing in high-density places.
Related Articles:
Remote Work Is Less Common Than We Thought— New Bureau of Labor Statistics estimates show hybrid remote work is substantially less common than other surveys indicated, while fully remote work matches other estimates at about one in ten workers, making fully remote slightly more common than hybrid. Nearly one in five college-educated workers are fully remote, and nearly 40% of advanced-degree holders work hybrid or fully remote.
Remote Work, Three Years Later— Remote work has reduced office utilization but not yet office occupancy, because most firms are locked into long-duration leases. Baseline estimates suggest remote work will exert 0.8 percentage points of upward pressure on the office vacancy rate near-term, 2.3 more over the following five years, and 1.8 thereafter.
The Geography of Working From Home Begins to Shift Again— Areas with the highest shares of people working from home are mostly central cities of metropolitan areas or places hosting large corporate headquarters, including Cupertino, California and Redmond, Washington, home to Apple and Microsoft. Working from home appears most popular in places close to concentrations of offices and other workplaces.
