Tuesday, 15 December 2015

Party closeness among Christian denominations in the UK

My last post plotted party closeness for major religious groups in the UK, using data from the 2014 wave of Understanding Society. The chart blow plots party closeness for the major Christian denominations, along with party closeness for the general population. Respondents who did not specify a denomination were ignored. 

The most interesting result is that Anglicans (Church of England) are considerably more likely than the general population to support the Tories, whereas Catholics are considerably more likely to support Labour. Adherents to the Church of Scotland are somewhat less likely to support either party. Methodists and Baptists are slightly more likely to support the Tories. And adherents to the United Reform Church are much more likely to support the Tories (though n < 100 in this case).

Monday, 14 December 2015

Religion and party closeness in the UK

In the 2014 wave of Understanding Society, respondents were asked, "Which political party are you closest to?" The chart below plots the distribution of responses across Labour, the Conservatives and other parties, separately for the general population and each major religious group. It should be noted that, although I applied sampling weights, the percentages are probably slightly off. In this sample, 43% are closest to Labour, and only 36% are closest to the Tories, whereas in the last General Election, the Tories won 37% of the vote and Labour only 30%. It should also be noted that the sample sizes for Buddhists and Jews are very low (n < 100). 

Nevertheless, it is instructive to examine the differences between the various religious groups. Christians and Jews are slightly more likely than the general population to support the Tories. Buddhists are slightly less likely to support Labour, and much less likely to support the Tories. Hindus are somewhat more likely to support Labour. And Muslims and Sikhs are massively more likely to support Labour. A full 83% of Muslims and 86% of Sikhs say they are closest to Labour, which is 40+ percentage points higher than the fraction in the general population. One important caveat is that some recent surveys have suggested that Tory support among Hindus and Sikhs increased appreciably at the last election. 

Monday, 30 November 2015

Migration and the minimum wage

Few policies generate as much disagreement among economists as the minimum wage. In 2014 for example, two petitions relating to the US federal minimum wage were published online: one proposing an increase in the minimum wage, which was signed by around 600 economists, and another opposing any increase, which was signed by approximately 500 economists. Supporters of the minimum wage claim that it shores up the wages of the lowest paid workers, whilst having little distortionary impact on the labour market. Detractors retort that it is a poorly targeted anti-poverty measure, which exerts sizeable distortionary effects on employers hiring, pay and investment decisions. 

For many years there was a near consensus among economists that the minimum wage reduces employment among low-skilled workers. The argument is quite simple: in a competitive labour market, workers get paid the marginal product of their labour; the marginal product of some workers’ labour may be lower than an arbitrarily defined minimum wage; it is not profitable for employers to pay workers more than the marginal product of their labour; since employers seek to maximise profits, they will not hire workers whose marginal product is less than the minimum wage. As the progressive economist Paul Krugman, who now favours raising the minimum wage, said in 1998:
So what are the effects of increasing minimum wages? Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment.
In the same article, Krugman went on to note that “this theoretical prediction has, however, been hard to confirm with actual data”. And indeed, many economists’ reading of the literature now seems to be that any disemployment effects from the minimum wage are negligible. For example, in 2009, Doucouliagos and Stanley conducted a meta-analysis of over 60 different studies, and found that the most precisely estimated elasticities of the minimum wage clustered around zero. In a 2013 poll of the IGM Economic Experts panel, very few of the 34 economists who responded disagreed with the statement, "the distortionary costs of raising the federal minimum wage to $9 per hour and indexing it to inflation are sufficiently small compared with the benefits to low-skilled workers who can find employment that this would be a desirable policy." It should be noted, of course, that other economists, such as Neumark and Wascher, as well as Meer and West, have mustered considerable evidence to the contrary. 

There could be several reasons why many (though by no means all) studies have unearthed relatively small disemployment effects from the minimum wage. First, most markets for low-skilled labour are monopsonistic, meaning that prior to minimum wage increases workers were actually getting paid less than the competitive wage. Second, employers respond to an increase in the minimum wage by: cutting hours, trimming fringe benefits, reducing the wages of higher-paid employees, raising prices, lowering employee turnover, encouraging employees to work harder, or simply tolerating lower profits. Third, the lowest-skilled workers who are put out of work by the minimum wage subsequently sort into jurisdictions with lower minimum wages.

This third possibility was recently investigated by two economists, Martin and Termos, in a paper published in the journal Economics Letters. Using data from the US, they examined whether workers tend to move from areas where the minimum wage is comparatively high to areas where it is comparatively low, holding other things (such as distance, relative incomes and relative housing costs) equal. They found that the difference in minimum wages between two areas is a significant predictor of the volume of migration from the area with the higher minimum wage to the area with the lower one. Moreover, the effect they observed was significant for low-skilled workers, but not for high-skilled workers. This is consistent with the out-migration being due to a difference in minimum wages rather than to some factor affecting the entire distribution of workers (e.g., a local economic slump), given that the vast majority of high-skilled are paid more than the minimum wage. The authors conclude by noting:
Under competitive labor markets, a higher minimum wage will reduce the demand for low-skilled labor. The most reasonable explanation of our result is therefore that workers preferentially move to locations where the demand for their labor is highest.
They go on to point out the implication of their findings for public policy:
Since cross-country emigration is more difficult than migration between states or cities, increases in the federal minimum wage will have a stronger negative effect on low-skilled employment rates than we might expect from experiments with local minimum wages.

Thursday, 5 November 2015

Citizens of richer EU countries are less sanguine about free movement

In a previous post, I showed that EU citizens are much more sanguine about richer non-EU countries joining the EU (e.g., Switzerland) than they are about poorer non-EU countries joining (e.g., Macedonia). One possible explanation is that EU workers believe, correctly or incorrectly, that immigrants from poorer non-EU countries would be more likely to compete with them in the labour market. If this explanation were true, one would expect citizens of richer EU countries to be less sanguine about free movement generally.    

In many waves of the Eurobarometer survey, respondents have been asked the following question:
Which of the following do you think is the most positive result of the EU: peace among the member states; the free movement of people, goods and services; the Euro; student exchange programmes; the common agricultural policy; the economic power of the EU; the political and diplomatic influence of the EU; the level of social welfare; other; none?
The charts below plot, for spring 2014 and spring 2015 respectively, log of GDP per capita against the percentage of respondents who believe free movement is the most positive result of the EU. (GDP data, taken from the World Bank, are for 2013.)

In both cases, the correlation is moderate and negative: citizens of richer EU countries are less sanguine about free movement than their counterparts from poorer EU countries. The correlation for the left-hand chart is r = –.55 (p = 0.003), while the correlation for the right-hand chart is r = –.66 (p < 0.001). Luxembourg was excluded because it is an outlier on GDP per capita, meaning that its inclusion obscured the pattern on the charts. Nonetheless, the correlations with Luxembourg included are approximately identical: r = –.55 (p = 0.002) for the left-hand chart, and r = –.64 (p < 0.001) for the right-hand chart.

It is of course possible, however, that these results derive simple from the fact that citizens of richer EU countries consider some other result of the EU more positive than free movement (e.g., peace among the member states), and so by definition, fewer of them were available to say that free movement was the most positive. 

Sunday, 1 November 2015

Germans know they have more say in Europe

I just came across a YouGov poll from last week which asked respondents in seven European countries how far they agreed or disagreed with the statement, "My country is influential in European affairs". The upper chart below plots total agreement in each country, while the lower chart plots strong agreement. Perhaps unsurprisingly, the conventional wisdom that Germany holds particularly firm sway in Europe does not appear to be lost on the German people. 

Nearly 60% of Germans agree that their country is influential in European affairs, compared to less than less than 40% of French, and less than 30% of Britons. Similarly, almost 20% of Germans strongly agree their country is influential in European affairs, compared to less than 10% of French, and less than 5% of Britons

Sunday, 25 October 2015

Immigration does lower native wages

There is a large and rich empirical literature dealing with the impact of immigration on native wages. Many commentators have concluded on the basis of this literature that immigration exerts little or no effect. This post asserts, to the contrary, that immigration often does in fact lower native wages. It qualifies the argument by pointing to circumstances where one would not expect immigration to have negative wage effects. 

In a simple supply-and-demand model, immigration pushes the labour supply curve to the right, leading to a decline in the equilibrium wage; competition for jobs increases, so wages get bid down. There are two main reasons why this inference could be unsound. First, labour demand might be extremely elastic. Yet this seems rather implausible to me, as I will proceed to argue. Second, immigration might simultaneously increase both labour supply and labour demand. Immigrants not only buy goods and services, thereby indirectly contributing to labour demand, but also start businesses of their own. For example, the tech giants Google, Ebay and Yahoo were all founded by immigrants. However, notwithstanding much pontificating on the subject, immigrants are not a single, homogeneous mass; some are more entrepreneurial than others. On average, high-skilled immigrants will be more likely to start businesses, while low-skilled immigrants will be more likely to compete in the labour market. All else being equal, there is some percentile of the skill distribution below which the average immigrant will increase labour supply more than labour demand. In addition, the more barriers to entry there are in an economy, the greater the advantage to incumbents, and the less likely immigrants will be to grow successful businesses. Having mentioned migrant heterogeneity then, the rest of this post will focus on low-skilled (non-entrepreneurial) immigration, arguing that it often does lower the equilibrium wage.

The literature dealing with the impact of immigration on native wages is plagued by at least three important methodological issues. First, immigrants frequently settle in areas where labour demand is high or rising. Under such circumstances, the negative effect of immigration on wages may be misidentified due to the endogeneity of labour supply and labour demand. Second, immigration into an area may cause natives to relocate elsewhere, thereby leaving total labour supply unchanged. And third, immigration may have opposing effects on wages at different points in the earnings distribution. For example, shareholders and executives may be able to pay themselves more when labour costs are lower, owing to higher profit margins. 

A seminal paper dealing with the impact of immigration on native wages is David Card’s study of the 1980 Mariel Boatlift, when Fidel Castro unexpectedly permitted more than 100,000 Cubans to emigrate to the United States over a six month period. Famously, “the Mariel influx appears to have had virtually no effect on the wages or unemployment rates of less-skilled workers, even among Cubans who had immigrated earlier.” However, George Borjas recently re-analysed the impact of the Mariel Boatlift, and found that, “The absolute wage of high school dropouts in Miami dropped dramatically, as did the wage of high school dropouts relative to that of either high school graduates or college graduates.” In another working paper, Sir Stephen Nickell and Jumana Saleheen examined the consequences of British immigration, taking care to partition their sample into different occupational groups. They observed “a significant, small, negative impact on average wages”, yet “closer examination reveals that the biggest impact is in the semi/unskilled services sector.” In 2008, the House of Lords commissioned a report on the economic impact of immigration, which garnered opinions and expertise from a number of leading researchers. According to the report, “Most of our witnesses agreed that there is some negative effect of immigration on the wages of low-skilled workers”. It does add, however, that “there were disagreements over the extent of the effects and the amount of evidence”. 

Of course, as the qualification in the House of Lords report makes clear, some scholars continue to read the econometric evidence as implying that any downward pressure on wages due to immigration is negligible. However, statistical studies in which one attempts to identify the causal impact of immigration on wages are not the only kind of evidence that can be brought to bear on the present question. There are several kinds of circumstantial evidence, which––taken alongside the statistical studies––constitute a fairly compelling case that low-skilled immigration really does depress native wages. 

The first kind of evidence comes from the effects of changes in labour supply for reasons other than immigration. Economic historians have documented a marked rise in labourers’ real wages following the scourge of the Black Death, which dramatically reduced the size of the European workforce. In fact, wages increased so rapidly that controls were implemented by a number of West European states. Though somewhat more tentative, according to several US studies, the mass-entry of women into the labour force during the second half of the 20th century depressed wages at the low end of the skill distribution, particularly among men. In both these cases, a plausibly exogenous change in labour supply influenced wages in exactly the manner predicted by the simple supply-and-demand model outlined above.

The second kind of evidence comes from public opinion. Polls consistently show that native whites in the lowest social classes are the least sanguine about immigration. Moreover, such individuals are not uniformly opposed to all categories of immigration: they are much more hostile to low-skilled immigration than to high-skilled immigration. This suggests that their opposition is at least partly motivated by economic concerns, rather than solely by attachment to national culture or xenophobic prejudice. In addition, Europeans living in EU member states are noticeably more favourable toward richer non-EU countries joining the EU (e.g., Switzerland) they are toward poorer non-EU countries joining (e.g., Macedonia). 

The third kind of evidence comes from the political activities of professionals and big businesses. If demand for labour were extremely elastic, there would be little incentive for practitioners to restrict entry into their profession through occupational licensure. In reality, a diverse array of professions have managed to get legislation passed requiring new entrants to pay extortionate fees, sit time-consuming exams, or jump through pointless bureaucratic hoops. Such measures serve to reduce the total supply of practitioners, the better to bolster the wages of incumbents. In the US, it is not merely doctors who must have a licence in order to practice, but also auctioneers, massage therapists, hair braiders, and even hypnotists. Furthermore, if demand for labour were extremely elastic, there would be little reason for big business to lobby for higher levels of immigration. Yet in reality, the Chamber of Commerce and the Confederation of British Industry––the primary big business lobbies in the US and UK respectively––consistently press their governments to let in more immigrant workers. Indeed, the infamous Koch brothers are staunchly in favour of higher immigration––a stance that has not won them many friends within the conservative ranks of the Republican Party. 

The fourth kind of evidence comes from statements made by prominent “old left” figures. Such statements constitute germane evidence insofar as the old left has conventionally seen protecting the interests of low-paid workers as its central goal; this is in contrast to the new “liberal” left, which is concerned with defending all victim groups, foreign and native. No less a luminary of the old left than Karl Marx himself recognised the negative wage effects of low-skilled immigration. In an 1869 letter, Marx wrote:
The railway to California was built by the bourgeoisie awarding itself through Congress an enormous mass of ‘public land’, that is to say, expropriating it from the workers; by importing Chinese rabble to depress wages; and finally by instituting a new off-shoot, the ‘financial aristocracy’.
And in an 1870 letter, he wrote:
Owing to the constantly increasing concentration of leaseholds, Ireland constantly sends her own surplus to the English labour market, and thus forces down wages and lowers the material and moral position of the English working class.
It is not only historical representatives of the old left who have made these sorts of statements. Bernie Sanders, the self-described socialist senator from Vermont, said the following in a recent interview with Ezra Klein: 
Open borders? No, that’s a Koch brothers proposal… that’s a right-wing proposal that essentially says there is no United States… It would make everybody in America poorer––you’re doing away with the concept of a nation state, and I don’t think there’s any country in the world that believes in that… What right-wing people in this country would love is an open-border policy. Bring in all kinds of people, work for $2 or $3 an hour, that would be great for them.”
Indeed, in a 2011 article, the conservative columnist Ed West asked, “When did opening borders to mass immigration become a ‘Left-wing’ idea?”

In conclusion, whilst immigration is capable of increasing both labour supply and labour demand, low-skilled immigration tends to increase labour supply more than labour demand, which has the effect of lowering workers’ equilibrium wage. Evidence for this mechanism can be found not just in econometric analyses of immigration, but also in changes in labour supply for reasons other than immigration, in public opinion, in the political activities of professionals and big businesses, and in statements made by prominent members of the old left.

Sunday, 11 October 2015

Follow-up on homicide and gun ownership in the US

My last post inspired a number of requests for a multiple regression analysis with potential suppressor variables included. The table below shows standardised coefficients from OLS models of the state murder rate. In addition to population density (which was requested twice), Southern state, fraction in poverty, and fraction black were selected as covariates, due to their well-documented associations with the frequency of homicide in the US. These variables were all taken from the US Census Bureau

The estimate for gun ownership is quite unstable across the different models, ranging from marginally significant and positive to significant and negative. In the final model, which explains just under 70% of the variance in state murder rate, gun ownership has a negative estimate; both fraction in poverty and fraction black have positive estimates. If anyone wants to play around with the data, I'd be happy to share them. Or else they can be retrieved through the various links provided. 

Thursday, 8 October 2015

Gun ownership and homicide in the US and the EU

The chart below plots estimates of gun ownership against the murder rate for EU countries (red) and US states (blue). Estimates of gun ownership for EU countries were taken from the 2007 Small Arms Survey. Estimates of gun ownership for US states were taken from a paper by Okoro et al. (2005; Pediatrics). Because Okoro et al.'s figures are from 2002 (when gun ownership was lower), and correspond to household ownership rather than simply guns per capita, I (conservatively) added 20 to each state's estimate. I say "conservatively" because this still only brings up the average gun ownership to ~60 per 100 people, whereas the Small Arms Survey estimated ownership at 89 per 100 people in 2007. Homicide figures for EU countries were taken from Eurostat, while those for the US were taken from the FBI. Figures were averaged over the years 2008-2010 to obviate sampling error in small states with few murders.

Overall, the murder rate is much higher in the US than in the EU. However, within each continent there is no clear association between gun ownership and the murder rate. Some US states are armed to the teeth (e.g., North Dakota, Idaho, Utah and Iowa), but have murder rates on a par with countries such as Ireland, Belgium and Cyprus. By contrast, other US states are not especially well-armed (e.g., New Jersey, New York, California and Maryland), but have murder rates considerably higher than nearly all EU countries. Interestingly, the four EU countries with the highest murder rates are concentrated in the North East, next to Russia.

Furthermore, Eugene Volokh at the Washington Post recently reported that there does not seem to be any association between the murder rate and the stringency of gun control laws across US states:
There’s been much talk recently — including from President Obama — about there being a substantial correlation between state-level gun death rates and state gun laws. Now correlation obviously doesn’t equal causation; there may be lots of other factors that are the true causes of both of the things that are being measured. But if we do look for now at correlation, it seems to me that the key question should focus on state total homicide rates, or perhaps (for reasons I describe below) total intentional homicide plus accidental gun death rates. And it turns out that there is essentially zero correlation between these numbers and state gun laws.
He argues, as I also would, that the appropriate measure of homicide is not murders committed with guns per capita, but simply murders per capita. The main reason being that, in the absence of guns, individuals presumably select into other methods of killing, such as knives or clubs. 

Monday, 28 September 2015

US Presidential candidates on social media

A number of people have already shared some variant of the chart below on Twitter. It shows Google search interest in: Donald Trump (blue), Hillary Clinton (red), Bernie Sanders (yellow), Ben Carson (green), and Jeb Bush (purple). 

Since announcing his run in mid June, Trump has enjoyed notably higher search interest than any of the other main contenders, mostly likely in part because of his frequent gaffes. There was a surge of interest in Clinton around the time of her announcement, which has subsequently faded. Interest in Sanders has been growing over time; it reached its local maximum around the time that his Seattle speech was interrupted by Black Lives Matter protestors.

Purely for amusement, I thought I'd compare the candidates by number of Twitter followers and number of Facebook likes. Clinton and Trump are at the head of the pack on Twitter followers, each racking up more than 4 million. This is almost certainly attributable, at least in part, to their longer-standing notoriety. In the case of Facebook likes, Trump and Carson (somewhat surprisingly) lead the way, each tallying more than 3.5 million. Clinton has noticeably fewer Facebook likes, while Bush ranks feebly on both measures.

In spite of the foregoing, Clinton is currently favourite to win, with Bush in second, Biden in third, Trump in fourth, and Sanders in fifth. 

Friday, 25 September 2015

Most Brits are proud of the British Empire

I just came across a YouGov poll from the summer of 2014 which asked respondents, 
Thinking about the British Empire, would you say it is more something to be proud or more something to be ashamed of? 
A full 59% of respondents said "more something to be proud of", while only 19% said "more something to be ashamed of". Young people were slightly less sanguine than old people, and the Scottish were slightly less sanguine than the English; but there was no subgroup in which more people felt ashamed than felt proud. The poll also asked respondents, 
Overall do you think the countries that were colonised by Britain are better off or worse off for being colonised?
49% of respondents answered "better off", and only 15% answered "worse off". Interestingly however, when asked, "Would you like Britain to still have an empire", only 34% said yes, while 45% said no. 

Thursday, 24 September 2015

Native/foreign unemployment gaps in Western OECD countries

The table below shows the native-born and foreign-born male unemployment rates in all the Western OECD countries for which data were available. Countries are ranked by the gap. Data, which are for the year 2013, were taken from the OECD. (For some reason, it was only possible to obtain both native- and foreign-born unemployment rates for men.)

Intriguingly, all the Eastern European and Anglo countries are clustered at the top of the list, while all the Mediterranean countries are clustered at the bottom; the Continental countries and the Nordics are clustered in the middle, except Sweden, which is fourth from bottom. The only countries with both a small gap and relatively low overall unemployment are the four Anglo countries plus the Czech Republic. It would of course be interesting to see these figures for 2015, but they don't seem to be available yet.

Thursday, 17 September 2015

Ed West on the housing crisis

Ed West deftly sums up the housing crisis:
Housing is an intractable problem because the Tories don’t want rural development, which upsets their Nimby supporters, and Labour are pro-immigration but unwilling to accept that four million new residents means four million new residencies, and that building them is not easy on an already crowded island. 
I would add that some Tory big-business donors push for high immigration, while some left-leaning environmentalists oppose rural development. 

Sunday, 13 September 2015

Rising GDP per capita can coincide with deflation and falling government spending

According to the Keynesian theory of macroeconomics, one justification for expansionary monetary policy is that prices (and particularly wages) are sticky downwards, meaning that they may not adjust appropriately when demand drops during a recession. To quote the estimable Tim Harford:
Sticky prices. Think about it. If prices adjusted with complete freedom in response to competitive forces, then the actual amount of currency in an economy simply would not matter.
Expansionary monetary policy reduces the value of the currency, which allows prices to fall without their nominal value changing. A key prediction of this theory is that recessions should take much longer to recover from in the absence of either expansionary monetary policy or expansionary fiscal policy funded through borrowing. Indeed, the fact that most countries, such as the UK and the US, have had massive secular inflation since the early the 20th century is a testament to how influential the theory has been. 

In this context, it is interesting to note that between about 1815 (when Wellington's victory at Waterloo brought an end to the Napoleonic wars) and about 1850, Britain experienced rising GDP per capita, deflation and falling government spending. The first chart (below) plots GDP per capita in Britain between 1700 and 1850, using data from the Maddison Project (which are not reported for Britain after 1850). The second chart, which is taken from a parliamentary report on the historical value of the pound, plots the retail prices index between 1750 and 2011 (on a log scale). And third chart, which is taken from Gregory Clark's book A Farewell To Alms, plots government spending as a percentage of GNP in England between 1285 and 2000. 

The three respective charts show that, between about 1815 and about 1850: GDP per capita took an unmistakably upward trend; the retail prices index declined in a haphazard fashion and then roughly stabilised; and government spending as a percentage of GNP collapsed from ~30% to ~18% before decreasing further to ~12%. Prima facie, these observations would seem to be inconsistent with Keynesian theory. 

Five possible explanations are as follows. First, all three series contain too much measurement error to be reliable. Second, output per capita didn't actually grow that fast: only ~1% per year on average. Third, output per capita increased simply because of "pent up demand" from the period encompassing the Napoleonic wars. Fourth, prices tend not to be quite as sticky when the economy is smaller and less complex. Fifth, prices tend not to be quite as sticky when there are fewer labour market regulations. I'd be interested to know if anyone has another explanation or would argue that the data are in fact perfectly consistent with Keynesian theory.

Saturday, 12 September 2015

Poland versus Greece: A response to Krugman

Yesterday on his blog, Paul Krugman argued that it is incorrect to attribute the decline in GDP and concomitant rise in unemployment in Greece to misguided supply-side policies. Rather, the only factor that can be understood to have caused the massive Greek recession is the Euro, i.e., Greece's inability to devalue its currency. (And fiscal austerity imposed by the troika presumably hasn't helped).
I would argue that it’s very, very wrong to point to factors limiting Greek productivity and claim that these factors are the “cause” of the Greek crisis... The main answer, surely, is the euro: by adopting the euro Greece first brought on massive capital inflows, then found itself in a trap, unable to achieve the needed real devaluation without incredibly costly deflation... Every time someone asserts that the Greek problem is really on the supply side, you should ask, not whether it has supply-side problems––it does––but why this should lead to collapse.
To make his point, he draws a comparison with Poland, a country with similar productivity to Greece but which weathered the financial crisis remarkably well.
Consider, in particular, a comparison that should be made––between Greece and Poland. Poland, like Greece, is a country on Europe’s periphery, closely linked to the rest of the European economy. It’s also a country with relatively low productivity by northwestern European standards... But Poland has not had a Greek-style crisis, or indeed any crisis at all. Instead, it has powered through the turmoil of recent years.
Krugman is surely right that Greece's inability to devalue has contributed substantially to the current mess that it's in. Equally however, one shouldn't ignore the supply-side altogether. If I understand the Keynesian model correctly, because wages are sticky downward, excess involuntary unemployment occurs during a recession when the central bank fails to adequately bolster nominal wages through monetary expansion. This means that, all else being equal, any policies (such as minimum wages, hiring and firing rules, bans on zero-hours contracts etc.) which prevent wages from adjusting downward should worsen unemployment during a recession. And Greece appears to have many such policies; certainly more than Poland.

In the Fraser Institute's index, Greece is ranked 138 for labour market regulations, while Poland is ranked 34. In the Heritage Foundation's index, Greece is ranked 131 for labour freedom, while Poland is ranked 101. And In the World Economic Forum's index: Greece is ranked 109 for labour market flexibility, while Poland is ranked 79 (averaging across the 6 relevant metrics). Indeed, Greece ranks much lower than Poland on overall indexes of competitiveness too: on the Fraser Institute's index, the Heritage Foundation's index, the World Economic Forum's index, and the World Bank's index.

I would therefore claim that it is not simply Greece's inability to devalue, but the combination of its inability to devalue and its particularly inflexible markets (along with the troika-imposed fiscal austerity), which explain the massive recession it has experienced. As Bryan Caplan has noted:
When Keynesians want to gloat, they often point to the overwhelming empirical evidence in favor of nominal wage rigidity. For the latest example, see Krugman on the Irish labor market. Their unemployment is 14.5%, but the nominal wage index has only fallen by about 2.5%... The gloating is easy to understand. After all, nominal wage rigidity is the driving assumption of the Keynesian model... What's hard to understand, though, is Keynesian neglect of––if not outright hostility to––the logical implication of their argument: Wages must fall!
In point of fact, however, wages in Greece have fallen quite considerably. Yet unemployment there is still around 25% (but falling). This would seem to imply that the situation is a little more complicated than I have suggested. But I also can't see how it vindicates Krugman's argument. Why would reduced real wages only help to bring down unemployment when the reduction occurs through monetary devaluation? Perhaps someone with a better understanding of economics can explain it to me. One possibility is that Greece would be on the road to recovery by now if the country's lurch leftward hadn't upset the animal spirits of Greek entrepreneurs. 

Monday, 7 September 2015

Another case of national self-flagellation

Spurred by my previous post, a friend points me toward another swift, cathartic lash of national self-flagellation in the Guardian. Having just been voted in as our national bird, the humble English robin is laid bare for the monster that it truly is: "a vicious murdering bully... brutish, ruthless and ready to ruck... a hooligan bird that puffs up big, jealously guards its patch and... Oh, right, I see what you mean now".

Sunday, 6 September 2015

Progressive elites unpatriotic, out of touch

My previous post documented the attitudinal chasm between the white working class and Labour elites on the issue of immigration. The two charts below show there is also a huge difference in patriotic sentiment between these two groups. Most members of the white working class feel proud when they see the Union Jack or the St George's Cross, whereas most members of the Labour elite do not feel anything. (Data are from the 2003 wave of the BSA; only English respondents were asked the relevant questions.)

In this context, it is revealing that the Guardian––the newspaper of record for Britain's progressive elites––feels comfortable wearing its distaste for Britain's national pastimes on its sleeve. Apparently, the Union Jack is "ugly and divisive"; a Sunday roast is "oppressive and outmoded"; tea is "a national disgrace"; and brown sauce is "a product of the British empire, and should have gone the same way"

Friday, 21 August 2015

Immigration Attitudes: Labour elites versus the white working class

Last time, I noted that the white working class in the UK are about 37-46 percentage points more likely to want immigration reduced than young graduates. Here I compare the immigration attitudes of the white working class (defined the same way as before) to those of "Labour elites"––individuals with a university degree who support the Labour Party. Data are again from the 2013 wave of the British Social Attitudes survey.

The first chart plots the distributions of responses to the question, "Do you think the number of migrants to Britain nowadays should change?" The second chart plots the distributions of responses to the question, "Would you say it is generally bad or good for Britain's economy that migrants come to Britain from other countries?" And the third chart plots the distributions of responses to the question, "Would you say that Britain's cultural life is generally undermined or enriched by migrants coming to live here from other countries?"

Perhaps unsurprisingly, in all three cases there is a vast difference in attitudes between the white working class and Labour elites; the former have a substantially less favourable view of the economic and cultural effects of immigration than the latter.

Tuesday, 11 August 2015

Immigration attitudes: Young graduates versus the white working class

As I've noted before, a large majority of the British public is in favour of reducing immigration: around 70-80%, depending on exactly how the question is phrased. Here I compare the immigration attitudes of two salient social groups: young graduates––individuals aged 18-35 with a university degree; and the white working class––individuals with two British-born parents who identify as white and do not have a university degree. 

Young graduates are of interest because they comprise a disproportionate share of the social media commentariat––those who share articles and broadcast their opinions on Twitter and Facebook. The white working class are of interest because they are the demographic which has allegedly been abandoned by the Labour Party, their traditional and natural ally. Data are from the 2013 wave of the British Social Attitudes survey.

Respondents were asked, "Do you think the number of immigrants to Britain nowadays should change?" The response categories were "increased a lot", "increased a little", "remain the same", "reduced a little", "reduced a lot" and "don't know". The two charts below display, respectively, the percentages of young graduates, the general population and the white working class who want immigration "reduced a little" or "reduced a lot"; and the percentages who want immigration "reduced a lot".

Unsurprisingly, the gap between young graduates and the white working class is huge: 37 percentage points in the top chart, and 46 percentage points in the bottom chart. Indeed, these are larger than the gaps between Labour and Tory voters on state ownership of rail and energy companies. Nearly 90% of the white working class want immigration reduced, compared to only 50% of young graduates. And 70% of the white working class want immigration reduced a lot, compared to under 25% of young graduates. 

Monday, 10 August 2015

Is wealth inequality high in Denmark and Sweden?

It is well known that the Scandinavian countries have some of the lowest levels of income inequality in the world. According to several recent studies, however, Sweden and Denmark appear to have some the highest levels of wealth inequality. 

Sierminska et al. (2008) examined data on seven countries from the Luxembourg Wealth Study. They found that wealth inequality was highest in the US and Sweden. Davies et al. (2009) examined Household Balance Sheet data on twenty countries. They found that wealth inequality was highest in Denmark, Switzerland and the US, with Sweden in sixth place behind Indonesia and France. Skopek et al. (2014) examined data on eighteen countries from both the Survey of Health, Ageing and Retirement in Europe and the Global Wealth Databooks. They found that in the SHARE data, wealth inequality was highest in Estonia, Switzerland and Israel (with Sweden in sixth place and Denmark in ninth); but that in the GWD data, wealth inequality was highest in Denmark, Switzerland and Sweden. 

In the Discussion, Skopek et al. comment on the unexpectedness of their results:
Most surprising is certainly the finding that the Northern European countries––known for their high level of social equality––exhibit high levels of wealth inequality, although a number of studies have already reported this phenomenon, most of them for Sweden... and also several for Denmark.
I'm not quite sure what to make of these findings yet. One alarm bell is that average wealth appears to differ vastly more across developed countries than either average household income or GDP per capita. For example, according to the SHARE data analysed by Skopek et al., median net worth is €180,820 in Belgium, but only €83,700 in Austria––and this is despite the fact that GDP per capita is slightly higher in Austria.

Tuesday, 4 August 2015

Drug offences account for only one fifth of the rise in the US prison population

I just came across a fascinating article by John Pfaff entitled 'The War on Drugs and Prison Growth: Limited Importance, Limited Legislative Options', which was published in the Harvard Journal on Legislation. The central thrust of the article is that, contrary to widespread belief, the rise in incarceration has not been primarily driven by "increases in the arrest, conviction and incarceration... of low-level drug offenders as part of federal, state, and local efforts to combat drug use and trafficking".

He presents two salient facts. First, as of 2010, only about 22% of US prisoners were serving time for drug offences. And second, drug offences account for only 21% of the rise in incarceration in state prisons (which encompass nearly 90% of all inmates) between 1980 and 2009. (More than half of the rise is attributable to violent offences.) Pfaff also finds little evidence that drug offences contributed indirectly to the rise in incarceration via: drug-related parole violations, sequential drug-related prison admissions, sentence enhancement due to prior drug offences, or loss of neighbourhood cohesion due to drug arrests (though owing to data limitations, this conclusion is more tentative.)

Furthermore, according to Pfaff, drug offences cannot account for much of the racial disparities in incarceration either. For example, as of 2010, blacks accounted for 40% of state prisoners serving time for violent offences and 45% of state prisoners serving time for drug offences, while hispanics accounted for 23% of state prisoners serving time for violent offences and 20% of state prisoners serving time for drug offences:
If we were to release every inmate serving time for a drug offence in 2010, the total prison population would fall from 1,362,028 to 1,125,028, and... the percent of the prison population that is black would fall by only 1.4 percentage points (from 38.1% to 36.7%), and the white-black gap would narrow only slightly, from 3.8 percentage points (34.3% vs. 38.1%) to 1.2 percentage points (35.5% vs. 36.7%). 
Incidentally, this is not to say the War on Drugs hasn't contributed to the rise in incarceration by changing the incentives for individuals to engage in violent behaviour, namely making it profitable to shoot rival gang members, the better to protect one's monopoly in the local drug market.   

Saturday, 1 August 2015

Bernie Sanders and Donald Trump on open borders

"Open borders?... That's a right-wing proposal, which essentially says there is no United States... You're doing away with the concept of a nation state, and I don't think any country in the world believes that."
––Bernie Sanders, July 2015, interview with Ezra Klein 

"If we're gonna have a country, we need a border... You don't have a country without a border. You know, what's a country? How do you define a country if you don't have borders?"
––Donald Trump, June 2015, interview with Hugh Hewitt

Thursday, 23 July 2015

Has fracking contributed to the decline in US carbon emissions?

Yesterday I came across an interesting but slightly perplexing paper in Nature Communications entitled 'Drivers of the US CO2 emissions 1997-2013'. The central claim of the paper seems to be that, contrary to some headlines, exploitation of shale gas from fracking has not been an important contributor to the recent decline in US carbon emissions:
Before 2007, rising emissions were primarily driven by economic growth. After 2007, decreasing emissions were largely a result of economic recession with changes in fuel mix (for example, substitution of natural gas for coal) playing a comparatively minor role.
(I say "seems", because on p. 4 they claim that "about half of the 2.1% decrease in emissions during 2011–2013 is related to changes in the fuel mix of the energy sector"). Incidentally, the reason why exploitation of shale could plausibly have contributed to a decline in US carbon emissions is that natural gas has much lower emissions per unit of energy than other fossil fuels, particularly coal.

The authors of the Nature Comm. paper carry out a rather complex decomposition analysis in which they partition recent changes in carbon emissions into contributions from six factors: population, energy intensity, consumption patterns, fuel mix, production structure, and consumption volume. (I'm not quite sure why they felt that such a complex analysis was necessary to make their point; but I'm of course well outside my area of expertise.)

In any case, I decided to conduct my own, simpler analysis using data from the Energy Information Administration. The chart below plots absolute change in energy consumption from different sources, along with absolute change in total energy consumption, for the period 2007-2014. Since 2007, there has been: a fall in total energy consumption, followed by a partial recovery since 2012; a protracted fall in consumption of coal and petroleum; a rise in consumption of natural gas since 2009; a smaller rise in consumption of wind and biomass; and little change in consumption of hydro, geothermal and solar. In fact, coal consumption has fallen by 4.8 quadrillion Btu, while natural gas consumption has risen by 3.9 quadrillion Btu. 

In order to examine how much the exploitation of shale gas (i.e., the rise in natural gas consumption) has contributed to the decline in US carbon emissions, I reconstructed changes in carbon emissions since 2007 under the assumption that there had been zero substitution of coal for natural gas. In other words, I assumed that natural gas consumption had remained constant, and that all the increase in energy consumption from natural gas (3.9 quadrillion Btu) had actually come from coal. To calculate carbon emissions in each year, I multiplied the quantity of energy consumed from each source by that source's life-cycle carbon emissions (taken from the IPCC), and then summed over all the sources. 

The chart below plots three series for total carbon emissions: actual emissions (taken from the EPA); reconstructed emissions; and reconstructed emissions, without shale gas (i.e., under the assumption of zero substitution). All three lines have a very similar profile to the thick black line for total energy consumption in the chart above, consistent with the Nature Comm. paper's finding: most of the decline in carbon emissions has been due to a fall in energy consumption caused by the recession. Comparison of the non-dashed blue and red lines reveals a remarkably good fit between actual emissions and reconstructed emissions (r = .99). Comparison of the non-dashed and dashed blue lines indicates that emissions are appreciably lower than they would have been if there hadn't been any rise in natural gas consumption. In fact, exploitation of shale gas accounts for just under a third (29%) of the difference in total carbon emissions between 2007 and 2014.

My reading of the evidence here is that most of the decline in US carbon emissions since 2007 is indeed attributable to a decline in total energy consumption caused by the recession, but that just under a third of it is due to exploitation of shale gas from fracking. As noted, I am well outside my area of expertise, so I would be interested to know if anyone with a better understanding of the area has any comments or criticisms.

Tuesday, 14 July 2015

A selection of the most revealing Eurofederalist quotes

"The internal market and the common currency demand joint co-ordinating action. This will require us to finally bury some erroneous ideas of national sovereignty... National sovereignty in foreign and security policy will soon prove itself to be a product of the imagination."
––Former German Chancellor Gerhard Schröder,

"We decide on something, leave it lying around, and wait and see what happens. If no one kicks up a fuss, because most people don't understand what has been decided, we continue step by step until there is no turning back."
––President of the European Commission Jean-Claude Juncker,

"Monetary union is there, the common currency is there. So our main concern nowadays is foreign policy and defence. The next step, in terms of integration of the European Union, will be our constitution. We are today where you were in Philadelphia in 1787."
––French diplomat Jean-David Levitte,

"The Constitution is the capstone of a European Federal State."
––Former Belgian Prime Minister Guy Verhofstadt, 

"We know that nine out of ten people will not have read the Constitution and will vote on the basis of what politicians and journalists say. More than that, if the answer is No, the vote will probably have to be done again, because it absolutely has to be Yes."
––Former Belgian Prime Minister Jean-Luc Dehaene,

"The EU Constitution is the birth certificate of the United States of Europe. The Constitution is not the end point of integration, but the framework for––as it says in the preamble––an ever closer union."
––Former German Minister for Europe Hans Martin Bury,

"If it's a Yes, we will say "on we go", and if it's a No we will say "we continue"."
––President of the European Commission Jean-Claude Juncker,

"Of course there will be transfers of sovereignty. But would I be intelligent to draw the attention of public opinion to this fact?"
––President of the European Commission Jean-Claude Juncker,

"I like to compare the EU as a creation to the organisation of empire. We have the dimension of empire."
––Former President of the European Commission José Manuel Barroso,

"If governments were always right we would not have the situation that we have today. Decisions taken by the most democratic institutions in the world are very often wrong."
––Former President of the European Commission José Manuel Barroso,

"Monetary policy is a serious issue. We should discuss this in secret, in the Eurogroup… I'm ready to be insulted as being insufficiently democratic, but I want to be serious… I am for secret, dark debates... When it becomes serious, you have to lie."
––President of the European Commission Jean-Claude Juncker,

"We decided to arrive at a political union via an economic and currency union. We had the hope––and we still have it today––that the Euro will gradually bring about political union... Most member states are not yet fully prepared to accept the necessary constraints on national sovereignty. But trust me, the problem can be solved."
––German Finance Minister Wolfgang Schäuble,

"We need a political union, which means we must gradually cede powers to Europe and give Europe control... We cannot just stop because one or other doesn’t want to join in yet."
––German Chancellor Angela Merkel,

"There can be no democratic choice against the European treaties."
––President of the European Commission Jean-Claude Juncker,
January, 2015, quote to French newspaper Le Figaro

"It's a horrible path, but it's a logical path. Leave Europe, leave Schengen and leave democracy. Do you really want to participate in a common state? That's the question."
––French President Francois Hollande,

Thursday, 9 July 2015

Harvard professors make more than CEOs

According to the Chronicle of Higher Education, the average full professor at Harvard makes $205,506 a year. According to the Bureau of Labor Statistics (Table 1), the average chief executive makes $180,700 a year. So Harvard professors apparently make $25,000 a year more than CEOs. In fact, according to the Chronicle data, full professors at the top twelve highest-paying colleges all make more than $180,700 a year. Of course, the distribution of CEO pay is likely far more skewed than the distribution of college professor pay, meaning that the highest-paid CEOs earn disproportionately more than the rest. 

According to the Congressional Research Service (Tables 1-2, pp. 9-10), senators and members of the House make $174,000 a year, majority and minority leaders make $193,400 a year, and the Speaker makes $223,000 a year. So CEOs make more than senators and members of the House, but less than majority and minority leaders. And the Speaker makes more than Harvard professors. One caveat is that I do not know whether any or all of the preceding figures include fringe benefits, which could be sizeable––particularly for CEOs. (The description given by the BLS in the Technical Note suggests they may not.)

Monday, 29 June 2015

Left-wing euroscepticism in the UK

YouGov recently carried out a poll on the upcoming EU referendum in which respondents were asked to identify with one of the following four positions (unless they had not yet formed an opinion): "strongly in", "leaning in", "leaning out" or "strongly out". Respondents were then asked to give the names of politicians they liked, which allowed YouGov to compile a list of the most well-liked politicians among respondents in each of the four groups (shown below). All the most well-liked politicians in the "strongly in" group are, with the exception of the speaker John Bercow, from Labour, the Greens or the SNP; by contrast, all the most well-liked politicians in the "strongly out" group are from the Tories or UKIP. 

Whilst these results fit with the conventional wisdom that those on the left are less nationalistic and more supportive of immigration, it is not entirely unremarkable that Caroline Lucas––the only MP from the most left-wing environmentalist party in Europe––should be the most well-liked politician among Brits who identify with "strongly in". After all, such "neoliberal" newspapers as The Financial Times and The Economist have editorialised in favour of staying in; big businesses generally favour staying in (while small businesses generally favour getting out); large investment banks, such as Goldman Sachs, have argued in favour of staying in (though some hedge funds would reportedly prefer to leave); and many of the EU's strongest proponents, such as Ken Clarke, Michael Heseltine, and the late Ted Heath, have come from the Conservative Party. 

Consistent with the notion that there is a left-wing strain of euroscepticisim in the UK as well as a right-wing one, I identified all the following leftist individuals and organisations as being either somewhat or very eurosceptic: the late Michael Foot, the late Tony Benn, the late Bob Crow, Lord Glasman, Alan Sked, Costas Lapavistas, Mark Wallace, Mehdi Hasan, John King, Kate Hoey, Owen Jones, John Gray, Scott Dickinson, Chris Bambery, the RMT, the AGS, the Communist Party, the Socialist Party, the Liberal PartySocialist Resistance, and Solidarity.

Friday, 26 June 2015

Contribution of oil and gas to US economic growth

As I've noted in several previous posts, the US fracking industry has grown precipitously in the last decade or so. Oil and gas production has increased by about 50% since 2005. The US is now the world's largest gas producer, and third largest oil producer. Using data on real output (calculated as gross value added) from the Bureau of Economic Analysis, the chart below plots the change in output from oil and gas along with change in output from all other sources. From 2000 to 2013, oil and gas output rose by 72%, while output from all other sources rose by only 25%.  

Using the same figures, it is possible to estimate how much of the growth in real output under both President Bush and President Obama was attributable to growth in the oil and gas industry. Between 2000 and 2007 (the year before Bush entered office to the year of peak output) oil and gas accounted for ~1% of growth in real output. By contrast, between 2008 and 2013 (the year before Obama entered office to the latest available year) oil and gas accounted for ~7% of growth in real output. Indeed in 2013, oil and gas represented 1.7% of gross domestic product––the highest value since 1984.

Sunday, 21 June 2015

Energy sources, carbon emissions and electricity prices

This post investigates the relationships between the percentage of a country's electricity from different (alternative) sources, the country's carbon emissions, and the price its households pay for electricity. The sample comprises the 34 OECD countries. Data on the percentages of electricity from different sources were obtained from the Energy Information Association. Data on carbon emissions were obtained from the World Bank. And data on electricity prices were taken from the OECD. All figures are for 2010; electricity prices were unavailable for Australia and Iceland. 

The chart below displays histograms of the distribution of countries by percentage of total electricity generated from six sources: hydroelectric, nuclear, geothermal, wind, solar, and biomass. The distributions for geothermal, wind, solar and biomass are heavily concentrated at the low end of the scale. Mean percentages of electricity from these four sources are, respectively, 1.3%, 3.4%, 0.3% and 3.9%. The distributions for hydro and nuclear are slightly less concentrated at the low end. Mean percentages of electricity from these two sources are 21% and 16%, respectively. Iceland is an outlier in the case of geothermal, generating fully 26% of its electricity from that source, while most other countries generate none.

The first table (below) displays coefficients from linear regression models of carbon emissions per unit of energy used on percentage of electricity from different sources. Carbon emissions per unit of energy used was calculated simply as carbon emissions per capita divided by energy use per capita. For investigating which energy sources are associated with the highest carbon emissions across countries, emissions per unit of energy is a preferable measure to emissions per capita, since the former will be unaffected by differences in emissions that derive from wealth, population density and lifestyle factors.

The first three columns contain significant negative coefficients, indicating that emissions per unit of energy tend to be lower in countries that generate more electricity from hydro, nuclear and geothermal. By contrast, the next three columns contain non-significant coefficients (two positive and one negative), indicating that emissions per unit of energy do not tend to be lower in countries that generate more electricity from wind, solar and biomass. As the seventh and eighth columns show, respectively, percentage of electricity from hydro, nuclear and geothermal explains 73% of the variance in emissions per unit of energy across OECD countries, whereas percentage of electricity from wind, solar and biomass explains 0% of the variance. (I suggest why further down.)

The second table (below) displays coefficients from linear regression models of electricity price for households on percentage of electricity from different sources. The first three columns contain non-significant negative coefficients, indicating that the electricity price does not tend to be higher in countries that generate more electricity from hydro, nuclear and geothermal. By contrast, the next three columns contain significant positive coefficients, indicating that the electricity price tends to be higher in countries that generate more electricity from wind, solar and biomass. As the seventh and eighth columns show, respectively, percentage of electricity from hydro, nuclear and geothermal explains only 1% of the variance in the electricity price across OECD countries, whereas percentage of electricity from wind, solar and biomass explains 48% of the variance.

The chart below displays, on the left, emissions per unit of energy against percentage of electricity from hydro, nuclear and geothermal (corresponding to the seventh column in the first table), and on the right, the electricity price against percentage of electricity from wind, solar and biomass (corresponding to the eighth column in the second table). Both relationships are strong as well as linear, though the correlation on the right does drop from r = .69 to r = .57 when Denmark is omitted. 

In conclusion: use of hydro, nuclear and geothermal tends to coincide with lower emissions per unit of energy but not with a higher price of electricity, whereas use of wind, solar and biomass tends to coincide with a higher price of electricity but not with lower emissions per unit of energy. It is important to note, of course, that these are simply cross-country associations, not causal effects. One possible reason why use of wind and solar does not tend to coincide with lower emissions is that, because these are intermittent sources of energy, they generally have to be backed up by alternative sources, which often means fossil fuels. On the other hand, it could simply be that countries which generate more electricity from wind and solar tend to generate more of the rest of their electricity from fossil fuels, rather than from hydro, nuclear or geothermal.