Tuesday, November 18, 2014

EJMR post win

As an economist at that transition from PhD to work with an interest in economics of the household and labor economics, and who is also sort of a stay at home dad (much more so last year - though still fairly frequently this year since my schedule is more flexible than Kates'), this EJMR discussion made me smile - particularly the fourth comment down.

If you don't know what EJMR is, don't worry about it. You might be better off.


Cute Caroline pictures from New Mexico




Dissertation proposal and life in the immediate future

Sorry for not updating - a couple people have kindly asked how the proposal went and I fell off the radar a little. It went great - they signed off on it. Somewhat unusually they asked questions as if it were a seminar (i.e., during my presentation rather than afterwards), which threw me at first but it all turned out fine. It felt like a lot of questions and comments, but none of them fundamentally undercut anything I was doing or my approach. Lots of work ahead still of course.

This weekend I'm going to be presenting some work on a generalized maximum entropy version of propensity score matching at the Southern Economic Association conference. I'm chairing a panel on GME. This is work I started last fall and have gotten back to intermittently. I'm still trying to figure out what I think of the simulation results - they're a little mixed (but at least they don't come out completely against the GME set up). It might be worth finishing off as a methods note somewhere. Several of the policy analysis journals have a regular methods note section that I think it could work well for. We'll see.

The week after that I'm presenting work at a National Academy of Engineering workshop on the engineering technician and technologist workforce. I'll be presenting a paper on work-based education and training (internships, apprenticeship, and on-the-job training) to a closed session and a broader paper on the workforce to an open session. Then the following week I'll be presenting my GME work to a methods group seminar here at the Urban Institute.

After those go through I think I'll feel a little less stressed. Of course the Sloan project on the STEM workforce continues, as does the project work I'm picking up at the Urban Institute. The plan is to defend this summer, Sloan will wrap up around then, and then I'm going to be transitioning to full time work at the Urban Institute and hopefully raising some money for projects of my own in short order.

Thursday, November 13, 2014

Defending my dissertation proposal today

"Three Essays on Connecting to Work"

Essay 1: The employment and earnings effects of Georgia's job creation tax credit: a regression discontinuity approach.

Essay 2: Educational mismatch and occupational sorting by science and engineering graduates.

Essay 3: Registered apprenticeships and the Great Recession.

Chair: Robert Lerman
Members: Robert Feinberg and Mary Hansen

Essays 1 and 2 are in pretty decent draft form, although some more work to do. Essay 3 is still a little loose. My chair and I have been going through lots of options with it (apprenticeships are his area of expertise). There's simply not a lot of work on apprenticeship in the U.S. - the most important papers, even by American economists, are on European apprenticeship. I have a database of all registered apprentices in the U.S. from 1999 to 2014, so in that sense practically anything I do with it is going to be a contribution. I was at first concerned about thinking of something more methodologically innovative and thinking along those lines, but my chair is really pushing me to do something simple but highly informative. The idea has grown on me. Apprenticeship in the U.S. is heavily concentrated in the construction sector so looking at apprenticeships over the business cycle is particularly interesting right now. I have a job I love - I'm not going on the academic market. My first two essays are methodologically sophisticated (I'm not a superstar, but you know what I mean - thoughtful non-basic methods appropriate to the question that fill a hole in the literature). So I'm digging this approach to the third essay if my chair does.

Friday, November 7, 2014

Some thoughts on Gene Callahan and Francis Fukuyama on job training programs

Gene wanders into some education and training program and federal/local governance tensions stuff in a recent post, and as I'm interested in both issues I thought I'd comment and disagree a little. He writes:
"In a discussion of how the American system of checks-and-balances and federalism produces wildly inefficient legislation, Fukuyama notes that: "Congress created fifty-one separate programs for worker retraining, and eighty-two projects to improve teacher quality." (p. 497)

I have been making this point even before reading this latest work of Fukuyama's. But he has an interesting perspective on why this occurs.

[...]

My own preference would be for worker-retraining and teacher-improvement programs to be implemented at a much more local level (the importance of local knowledge: see Hayek, as well as Catholic social thought on subsidiarity). The federal government should intervene in these issues only to the extent that it redistributes some tax revenues from the richer to the poorest states, to allow the poorer states the resources to implement these goals. But if these things are going to be handled at the federal level, I would much prefer Congress authorized a single agency to deal with each, and empowered that agency to do so.

Fukuyama contends that these legislative Rube Goldberg devices we create arise primarily from the way our system of checks-and-balances and federalism have worked out in practice: multiple branches, agencies, and levels of government are involved with almost every political issue in the United States. Rather than working to limit government, as the founders had intended, this multiplicity of authorities has served to create a byzantine government."
I think federal job training reflect these priorities more than Gene might expect, and the multiplicity of programs is not as pernicious as you might think either (I can't speak for programs to improve teacher quality). There are always things to disagree with, and this has been a process of improvement over time as well, but both of those are only natural.

First, much of the job training that goes on is in fact locally designed and controlled. This happens for at least two reasons. First, the "federal job training programs" we talk about are often better thought of as funding streams rather than programs per se. They'll often be targeted to specific populations (workers displaced by imports, TANF recipients, youth, the unemployed, etc.) and sometimes there may even be restrictions on the spending that goes on (you'll often see requirements that the money be spent on capacity building for the trainer but not tuition, for example). But these are generally existing or newly started training programs at community colleges or other workforce development organizations that are designed locally to meet local needs that then compete for appropriate funding streams from the federal government.

The other major mechanism for local design and control of training programs is good old fashioned devolution. The Workforce Investment Act (WIA) and the new Workforce Investment Opportunity Act (WIOA), which provides a lot of the funding for federal job training are both administered by local Workforce Investment Boards (WIBs), which are composed of employers, educators, and other local stakeholders. WIA/WIOA and many other federal job training efforts have also been pushing sectoral partnerships where employers in important local industry clusters partner with education and training providers to design curricula and programs.

Certainly some training programs are structured at a higher level. I imagine Job Corps is one such program (although I'm not as familiar with its design). But many aren't either by virtue of the funding stream or the structure of the program itself. And the trend is certainly in the direction of decentralization of program design.

The other element of Gene's post is that there are so many different training programs. I think this is a little odd, given his emphasis on local knowledge and local programs. The reason why we have a lot of programs is that workers in different situations have very different needs. Disadvantaged youth need very different training and support services than experienced workers displaced by import competition. I am at a conference right now and I just spoke with a colleague who wants to include me on a proposal to evaluate a training program for older workers, who are going to have different needs and obstacles as well. Needs also vary by industry. Registered apprenticeships are heavily concentrated in construction and to a certain extent manufacturing because those training models work in those fields in a way that might be more difficult for other occupations or industries. The labor market is remarkably diverse, and if you are going to get into the business of job training, as the federal government has, you probably don't want a one-size-fits-all policy. This can lead to headaches too of course, but if we're concerned about Hayek and local knowledge (and if we leave aside Hayek-style libertarianism for a second), there are good reasons to have the sort of system we have.

Tuesday, November 4, 2014

Caroline's first election

We sat out of the governor's race last year because needless to say things were pretty crazy back then.

She did not get a ballot but she did get a sticker and a stylized explanation of what daddy was doing. Here we're admiring each other's stickers and posing for the camera.











Wednesday, October 29, 2014

Inflation letter signer James Grant has a new book on the 1920-21 depression and he's talking about it AEI tomorrow

Here.

As some of you may recall, two of my first published articles are on the 1920-21 depression, so this is of some interest to me. Can't go tomorrow - I'm at home with a sick kid while mommy is away on business. The book isn't out yet so of course I haven't read it, but I found this claim of from the write up about the AEI event interesting:
"Grant considers 1920–21 to have been “the last governmentally untreated business depression in America,” yet “by late 1921, a powerful jobs-filled recovery was under way.” This history offers a sharp contrast to and skeptical look at the hyperactive central banking and regulation of our own time."
The Fed wasn't active? In fact the Fed was so active during this episode that Marvin Goodfriend (formerly Richmond Fed, now Carnegie Melon) said of the events that "It is no exaggeration to say that the Fed was traumatized by its first use of interest rate policy."

It is nice he doesn't ascribe the recovery to Harding's fiscal stimulus because (1.) that came on the tax side after the recovery was underway, and (2.)... on the spending side the fiscal story is even more confusing to entertain because Wilson reduced spending much more than Harding but the timing is all wrong for people that want to make this an "expansionary austerity" story. That doesn't stop people from talking up Harding of course. I've got nothing against Harding really, I just don't think he has all that much to do with it. It's really a Fed + natural bounce-back story as far as I can tell.

Tuesday, October 21, 2014

Anybody that likes John Papola's new video on Elysium needs to google "colonialism".

I just haven't complained about Papola for a while, that's all.


Do people really walk away from that movie thinking it's a criticism of capitalism and technology?

Sunday, October 19, 2014

New and speedier modes of transportation

"But chiefly, like his senior countrymen, the young American studies new and speedier modes of transportation. Mistrusting the cunning of his small legs, he wishes to ride on the necks and shoulders of all flesh. The small enchanter nothing can withstand - no seniority of age, no gravity of character; uncles, aunts, grandsires, grandams, fall an easy prey. He conforms to nobody, all conform to him: all caper and make mouths and babble and chirrup to him. On the strongest shoulders he rides, and pulls the hair of laurelled heads."

- Ralph Waldo Emerson, "Domestic Life"

INEQUALITY DEATH SPIRAL!!!... misses the point

I was disheartened to read Kevin Drum write this about the IGM Piketty question today:
"Piketty doesn't say that r > g has been a big driver of income inequality in recent years. He says only that he thinks it will be a big driver in the future. 
This is good clean fun as a gotcha. But liberals should understand that it also exposes one of the biggest weaknesses of Piketty's argument: r > g has been true for centuries, but the rich have not gotten steadily richer over that time. Wealth concentration has stayed roughly the same."
It's nice that it's dawning on more and more people that the IGM survey is not that consequential for Piketty, and it's nice that Drum is spreading that point. But I think he's adding to the confusion by perpetuating this idea that if r > g it means that inequality grows without bound. This narrative is part of what's driving peoples' incredulity about an inequality which (as Debraj Ray has pointed out very clearly) is a standard result that pops out of standard growth models and doesn't have any of the dire inequality death-spiral implications people impute to it.

Piketty doesn't use it to predict a death spiral either. It's one of many fundamental equations he uses to talk about the capital-income ratio and the capital income as share of total income ratio. Rather than obsess over the r > g inequality death spiral stuff, I think people need to spend a little time with this set of equations (and I think guys like Kevin Drum should take the opportunity to walk readers through it). If you made it through middle school, you can handle the math.

First, the share of income from capital of national income (α) is:

α = r*β

Where r is the rate of return on capital and β is the capital-income ratio (the ratio of the capital stock to annual income). This is straightforward, I hope. The capital-income ratio already has national income as its denominator, and the rate of return to capital times the amount of capital you have earning that return is capital income.

Next we have the equation governing β, the capital-income ratio:

β = s/g

g is the growth rate of the economy (national income), and s is the savings rate. Economies that save a lot but don't grow fast will eventually accumulate a large capital stock relative to national income. Of course this can be substituted in the first equation so that we've got both β and α written in terms of the other three variables:

α = (r*s)/g

So whatever r, g, and s are even when r > g, it's important to realize that the capital share of income is going to stabilize at some point. Piketty says this can happen in a number of ways. The classic answer in economics is that r is going to decline (Piketty refers to this as "too much capital kills the return to capital"). It's a diminishing returns story. You could imagine ways that s and g could adjust too either for endogenous reasons (in other words - there's something about the way the economy works that pushes these variables in a certain direction) or for socio-political or technological reasons. And it's likely to be in flux in the real world and across societies of course. But one thing is very clear: r > g does not tell us that capitalists' share just keeps increasing forever and ever - certainly it doesn't tell us that that's a necessity.

Part of the Piketty story is that we are in a period of convergence which is why things are changing now. The wars and the depression wiped out significant portions of the capital stock, and post-war institution subdued convergence back to these steady state values for β and α. As some of these institutions have been dismantled, convergence seems to be happening more rapidly. On top of this we know a couple things:

1. That g is falling simply as a result of the demographic transition, and since g is in the denominator of both β and α, these quantities get less stable as growth slows.

2. Wage income has been an important factor driving inequality in the late twentieth century, and as generations turn over that wage income becomes a new avenue for the fundamental equations above to kick in and begin converging again.

None of this is a death spiral story - it's more of a convergence story. Piketty suggests we might not like what we're converging too and we might want to consider institutional arrangements that might push things in a nicer direction.

Before closing I'd also emphasize a point I've made before on Piketty - the fundamental equations are really about capital income and the capital share, not wealth or income inequality directly. Capital income is a big piece of the puzzle of income inequality particularly because of what we know about the ownership of capital, but inequality is much more institutionally determined than capital dynamics.