The effect is driven by both increased part-time presence of temporary disabled workers and accelerated recovery. Musculoskeletal disorders was the diagnosis group declining the most. I conclude that such an activation strategy represents an alternative to traditional attempts at welfare reform involving stricter screening or reductions in generosity, and may be more compatible with already existing legislation and obligations, as well as easier to find support for across political priorities.
One and a half years ago, I blogged about a working paper by Simen Markussen, Knut Røed and myself showing that access to commercial television channels during childhood and adolescence reduced cognitive ability scores and high school graduation rates of Norwegian men. Now, a substantially revised version is forthcoming in The Journal of Human Resources. (Preprint here.) The effects appear to be driven by consumption of light television entertainment crowding out more cognitively stimulating activities.
Two years ago, I blogged about a working paper on conditions for welfare and high school completion by Simen Markussen, Knut Røed and myself. The paper is now finally accepted for publication and is forthcoming in Labour Economics. The final version is here, freely downloadable until the beginning of October. An updated working paper version can be found here.
The recent “empirical” turn in economics should be known as an “applied” one and it is just one in a long series of related developments. Moreover, it is a move towards the historical roots of the discipline. Those are some lessons from Beatrice Cherrier‘s essay “Is there really an empirical turn in economics?“. Based on research conducted together with Roger Backhouse, she takes issue with the idea that there has been a revolution in economic research involving empirics. Some points I liked:
- Empirical work has been live and well, what has changed is its recent larger role in top journals. Besides, the view of theory as dominating in economics is based on looking only at the last 50 years – pre- and immediate post-war economics used to be a lot more empirical.
- Much theory has become more applied, often involving data. And John Bates Clark medal citations stress “applied,” often taken consisting of a mix of theory and empirics.
- Increasing availablity of data is a development that has been ongoing since at least the 1960’s. Hype around and criticism of new, large sources of data were the same in the 1970’s as today.
- Computerization is overrated, much modern empirical work is computationally and numerically very simple.
- Oscar Morgenstern (of von Neumann and Morgenstern‘s Theory of Games and Economic Behavior fame) proposed that to become a fellow of the Econometric Society, it should be a requirement to “have done some econometric work in the strictest sense” and be “in actual contact with data they have explored and exploited for which purpose they may have even developed new methods.”
H/t: Erwin Dekker.
That is the title of a just released working paper by Simen Markussen, Knut Røed, and myself. We show that access to commercial television channels during childhood and adolescence from the 1980’s onwards in Norway reduced cognitive ability scores and high school graduation rates of young men.
I have a new working paper out, joint work with Simen Markussen and Knut Røed. Simen has written provocatively about the paper in the today’s Dagens Næringsliv, which is also running a companion piece. These are only in Norwegian (and behind a paywall), however, so here is a brief summary in English:
We investigate what happens when Norwegian social insurance offices increase their use of conditions would-be welfare recipients need to satisfy in order to receive welfare. Using the staggered introduction of this program and based on double and triple difference models, we find that such conditionality reduces the number of young people that receive welfare, and more importantly, increases the high school graduation rate. For young people from disadvantaged backgrounds, we find substantial and precise effects, whereas we find no effects on youth from more resourceful backgrounds, as expected. A few years later, we find that those who were exposed to new regime have more education, earn more, and are more likely to be employed. Thus even though activating these people may cost something upfront, it pays off in the long run.
The newspaper has an interview with a guy who got on track and gets some work experience through this system. Here is the abstract of the research paper:
Based on administrative data, we analyze empirically the effects of stricter conditionality for social assistance receipt on welfare dependency and high school completion rates among Norwegian youths. Our evaluation strategy exploits a geographically differentiated implementation of conditionality. The causal effects are identified on the basis of larger-thanexpected within-municipality changes in outcomes that not only coincide with the local timing of conditionality implementation, but do so in a way that correlates with individual ex ante predicted probabilities of becoming a social assistance claimant. We find that stricter conditionality significantly reduces welfare claims and increases high school completion rates.
Via MarginalRevolution’s assorted links and others, a short BBC article about a pilot project in Finland on universal, basic income. Economist Ohto Kanninen, coincidentally a fellow student of mine from graduate school, describes the project:
The prime minister has expressed support for a limited, geographical experiment. Participants would be selected from a variety of residential areas.
Mr Kanninen proposes testing the idea by paying 8,000 people from low income groups four different monthly amounts, perhaps from €400 to €700.
They also have the Prime Minister on board:
Prime Minister Juha Sipila has praised the idea. “For me, a basic income means simplifying the social security system,” he said.
This sounds really exciting, and I cannot wait to see the working paper.
Does people’s life satisfaction adapt to material improvements? In a recent paper (gated), Galiani, Gertler and Undurraga find that it does, even in a case of very poor people receiving a really basic service (housing). In a large-scale experiment, some poor households in El Salvador, Mexico and Uruguay were randomly selected to receive a ready-made small house. Receiving such housing increased the share of households reporting to be “satsfied” or “very satisfied” with the quality of their life by around around 40 %, from 0.53 to 0.73, thus confirming that it was something these households really needed. What about the effect in the long term? Eight months later, more than half of the gain had disappeared, highly consistent with the hedonic treadmill hypothesis.
What I will write here will be the notes I took while reading the book, edited for clarity. It is well known now that the book is thick and contains very much information, Piketty explicitly wants to consider both big and small phenomena, both long and short term changes, hence disclaimer: There will inevitably be much that I will not have caught or write about, and there may also be things that I have misunderstood. But maybe these notes will be helpful for those who have themselves read parts of the book or know a little bit and are trying to understand more. Many others have written better proper reviews.
Conclusion: Much great empirics to learn from. Inequality is an important topic. Good figures. Good at using qualifications and caveats, necessary when writing such a broad book. Good that also tries to explain. Objections by others that the recent rise in inequality is caused by human capital, etc. are misguided. Fundamentals of and cause and effect relationships in theoretical framework should have been clearer, and objections often relevant. Recommended.
-Much entrepreneurial wealth on Forbes list, but probably more inherited. And entrepreneurs and their children in any case turn into rentiers. Comments on Gates and Slim on pp. 444-445 with footnote, (individual) merit not so straightforward. (Gates wrote a positive review nevertheless.)
Much of the discussion about Thomas Piketty’s Capital in the Twenty-First Century has been concerned with his “law” of the relationship between the rate of return on capital (r) and the rate of economic growth (g), known as r > g. To such an extent that the Initiative on Global Markets at University of Chicago asked its panel of economic experts whether they agreed or not with the statement:
The experts overwhelmingly disagreed.
Piketty’s reply in Slate was:
“I think the book makes pretty clear that the powerful force behind rising income and wealth inequality in the US since the 1970s is the rise of the inequality of labor earnings, itself due to a mixture of rising inequality in access to skills and higher education, and of exploding top managerial compensation (itself probably stimulated by large cuts in top tax rates), So this indeed has little to do with r>g.”
And he did indeed write e.g.:
“In short, two distinct phenomena have been at work in recent decades. First, the wage gap between college graduates and those who go no further than high school has increased, as Goldin and Katz showed. In addition, the top 1 percent (and even more the top 0.1 percent) have seen their remuneration take off. This is a very specific phenomenon, which occurs within the group of college graduates and in many cases separates individuals who have pursued their studies at elite universities for many years. Quantitatively, the second phenomenon is more important than the first. In particular, as shown in the previous chapter, the overperformance of the top centile explains most (nearly three quarters) of the increase in the top decile’s share of US national income since 1970. (p. 315)”
So why did the IGM ask this question in the first place? And why have so many economists been concerned with it? It is of course possible that they have not read the book. However it might also be the case that Piketty must take some of the blame and that in general it was not so clear in the book. At least the back cover text (on Amazon) is pretty ambiguous (though I hope the critics read more than that).
I should maybe disclose at this point that I have not read Capital in the Twenty-First Century either, although now I might have to.