US Economy Research Articles

Hohe und weiter steigende Ungleichheit in den USA – politisch nicht gewollt und doch geduldet?

Abstract Looking at both the Gini coefficients ex-ante as well as at the Gini coefficients ex-post reveals that the distribution of personal incomes has become more unequal in the USA in the periods between 1947 and 2020. This paper investigates the possible underlying concepts of income distribution targets and argues, based on empirical findings, that neither clear electoral/partisan cycles nor station-arity (equilibrium) in the figures of income distribution of the USA can be detected. Instead, one observes an unbroken cyclical upward trend in inequality, which contributes significantly to the fission in the US society and economy. Surprisingly, as measured by the results produced by US presidents on the national level since 1947, the Republican Party and the Democratic Party have made similar contributions to lowering the inequality.

The Frame for the Not-Yet Existent: How American, European, and Soviet Scholars Jointly Shaped Modern Mathematical Economics

This article tells the story of the first international topological conference in Moscow (1935), an outstanding event that, for the first time, brought together the most notable American, European, and Soviet mathematicians, including those who would later play decisive roles in the mathematization of economics: John von Neumann, Leonid Kantorovich, and Albert W. Tucker. The fact that Kantorovich was in contact with von Neumann and his closest colleagues, Solomon Lefschetz and Garrett Birkhoff, is hardly appreciated in the histories of mathematics and mathematical economics. Their brief academic exchange was interrupted by the increasing international isolation of Soviet mathematics and by the wars that ensued. The article provides a historical account of the conference and traces the intellectual and personal affinities of Soviet and non-Soviet mathematicians, as well as their conceptual innovations. It argues that the conference, as a singular event linking several research communities, mattered for the development of various formal frameworks and their dissemination, contributing to the intellectual landscape in which postwar mathematical economics could emerge. The article calls for a deeper analysis of conceptual affinities and motivations in applying mathematics to economics and for a more nuanced narrative linking these motivations to social and political contexts of economic modeling.

The Cobb-Douglas Production Function and the Old Bowley's Law

Bowley's law, also referred to as the law of the constant wage share, was a noteworthy empirical finding in economics, suggesting that a nation's wage share tended to remain stable over time, as observed through most of the 20th century. The wage share represents the proportion of a country's economic output that is distributed to employees as compensation for their labor, usually in the form of wages. The term ''Bowley's law'' was coined in 1964 by Paul Samuelson, the first American laureate of the Nobel memorial prize in economic sciences. He attributed this principle to Sir Arthur Bowley, an English economist, mathematician, and statistician. In this paper, we introduce a mathematical model derived from data for the American economy, originally employed by Cobb and Douglas in 1928 to validate the renowned Cobb-Douglas production function. We utilize symmetry methods, particularly those developed by Peter Olver, to elucidate the validity of Bowley's law within our model's framework. By employing these advanced mathematical techniques, our objective is to elucidate the factors contributing to the stability of the wage share over time. We demonstrate that the validity of both Bowley's law and the Cobb-Douglas production function arises from the robust growth of an economy, characterized by expansion in capital, labor, and production, which can be approximated by an exponential function. Through our analysis, we aim to offer valuable insights into the underlying mechanisms that support Bowley's law and its implications for comprehending income distribution patterns in economies.

Progressive-Era Racism and Another 'Blaming the Victim' Narrative

This note reproduces a brief article by Thomas Nixon Carver, a leading Progressive Era American economist on what was then called the ‘Negro Question’. This virtually unknown piece represents a striking in-stance of blaming the victim for her/his condition which is to be found in the economic literature of the period.

The shale oil boom and the US economy: Spillovers and time‐varying effects

SummaryWe provide new evidence that the transmission of oil price shocks to the US economy has changed with the shale oil boom. To show this, we develop a time‐varying parameter factor‐augmented vector autoregressive (FAVAR) model with a large data environment of state‐level, industry, and aggregate US data. The model effectively captures potential spillovers between oil and non‐oil industries, as well as variation over time. Specified in this way, we find that investment, income, industrial production, and (non‐oil) employment in most oil‐producing and some manufacturing‐intensive US states increase following an oil‐specific shock—effects that were not present before the shale oil boom.

Forecasting the direction of the Fed's monetary policy decisions using random forest

AbstractThe federal funds target rate is commonly considered to be an important indicator of the state of the US economy and is of keen interest to individual investors, financial firms, and other economic agents. In this paper, we focus on the discrete changes in the federal funds target rate during the period from January 1994 to June 2022 and apply the ordinal forest model, a random forest‐based prediction method for ordinal response variable. We examine the model's performance with 45 predictor variables which include macroeconomic and financial variables as well as forward‐looking survey measures. For an accurate and honest measure of the model performance, we employ single‐period‐ahead out‐of‐sample forecasting accuracy instead of evaluating the in‐sample fit. Our empirical results show the ordinal forest method significantly outperforms a benchmark that uses the most recent data among previous studies on federal funds target rate. We find that TB spread is the most informative from a forecasting perspective along with GDP, initial jobless claims, and survey measures.

Catch-up growth with alpha and beta decoupling and their relationships between CO2 emissions by GDP, population, energy production, and consumption

This study explores the relationship between CO2 emissions by GDP, population, energy production, and consumption in the United States, China, Romania, and Thailand economies from 1990 to 2019. It evaluates the phenomenon of catch-up growth, which transpires when an lagging economy goes through an expansionary phase after a period of below-average performance. We used the stochastic model to illustrate in terms of alpha and beta decoupling techniques. The outcomes validated by positive and negative decoupling attitudes play a crucial role in predicting a rise in CO2 emissions owing to oil, gas, and coal use in comparison to Romania. Thailand and Romania have a more viable road to sustainability than the United States and China. The United States and China appear to have an antagonistic relationship, as suggested by decoupling attitudes. Thailand and Romania are considered to be highly environmentally sustainable countries on account of their minimal carbon emissions, efficient energy usage, and forward-thinking environmental policies. Accordingly, policy recommendations are offered based on CO2 emissions and effective mitigation policies, since this allows for determining which countries with high emissions need technological advances, best practices, and intersectoral policies.

Score-driven latent-factor panel data models of economic freedom: an empirical application to the United States

ABSTRACT In this paper, we study the link between economic freedom and gross domestic product (GDP) growth of 12 industries making up the United States (US) economy for 50 US states from 2005 to 2020. To measure the industry-specific impact of economic freedom in the US, we use a novel panel data model, named the score-driven latent-factor panel data model of economic freedom, which includes US state- and industry-specific score-driven components, US state- and industry-specific unobserved effects, and federal-level latent factor. We show that the statistical performance of the novel panel data model is superior to those of classical static and dynamic panel data models. With the exception of the ‘Agriculture’ and ‘Utilities’ industries, we find a positive relationship between economic freedom and growth in 10 of the 12 US industries considered for the score-driven latent-factor panel data model.

Book Review: Surprised Again! The COVID Crises and the New Market Bubble

The COVID recession in early 2020 rocked the United States economy. Output and the stock market tanked before unprecedented fiscal and monetary policies brought everything roaring back to life. Surprised Again! by Mises Institute senior fellow Alex J. Pollock and Howard B. Adler tells this story.

ЯНИС СРЕЩУ МИНОТАВЪРА: ЛЕГЕНДАТА ПРОДЪЛЖАВА (РАЗМИСЛИ ПО ПОВОД НОВАТА КНИГА НА ЯНИС ВАРУФАКИС)

A new book by Yanis Varoufakis, Technofeudalism - What Killed Capitalism, has recently been published. Do you remember Varoufakis? In early 2015, at the height of the Greek debt crisis, the little-known (at the time) university lecturer was appointed finance minister and quickly became a star. He was certainly not the first to oppose the so-called Washington Consensus and neoliberalism in economics, but he was perhaps the most eloquent and the most extreme in his criticism, backed by a deep knowledge of the workings of the modern market economy. His time in power was less than half a year, but he will certainly be remembered for a long time. After him, Greece now has its sixth finance minister, but I am sure that even there few people know their names. I allowed myself this extravagant title as I am still under the strong impression of one of his previous books, The Global Minotaur, in which Varoufakis examines economic history and crises, focusing on the role of the US in the post-World War II global economy. The author uses the myth of the Minotaur as a metaphor to explain the complex system of global financial flows that fuelled the US economy and contributed to the accumulation of global economic imbalances that ultimately led to the global financial crisis of 2007-2009.

“The primacy of labor over profits”: Thomas Mahony, the Beet Field Workers of Colorado, and Visions for a Consumerist Democracy, 1902–1957

Abstract During the first half of the twentieth century, ethnic Mexican beet workers in Colorado endured a daunting array of challenges that included dismal housing, meager wages, and a family labor system that forced children as well as adults to labor relentless hours in the sugar-beet fields. In response to these conditions, Catholic reformer Thomas Mahony promoted a vision of the American economy in which marginalized populations like the beet laborers would take their rightful place as healthy consumers and effective family providers. His vision was shaped by the Catholic social justice movement of the Progressive Era, as well as by a career in agricultural consumerism. From 1910 to 1913, for example, he served as director of exhibits for the Chicago Land Show, a position that immersed him in a world that marketed farm lands as idealized consumer commodities while rendering invisible the struggles of propertyless farm workers. When Mahony began his reform career a decade later, he strove to do exactly the opposite: make beet field workers as visible as possible in his blueprint for a vigorous consumerist democracy. At the same time, however, Mahony’s intense fears of radicalism overshadowed his reform impulses, reflecting profound tensions within the Catholic reform ethos that shaped him: a yearning for spiritual and social regeneration in constant battle with a dread of social upheaval. Mahony’s story therefore helps to illuminate the considerable potential of twentieth-century religious reform, even as his obsessive fears highlight the perils of antiradicalism in the U.S. West.

Economic resilience and the dynamics of capital stock

Abstract The role of capital in measuring resilience is investigated. Focusing on the current short-run and potential long-run growth paths of the economic system, we propose new indexes to separately measure adaptability and resistance to shocks, which are the essence of a system’s resilience. Capital dynamics during the transition and along the balanced growth path are used here instead of employment to represent the evolution of the size and composition of the economy. Our indexes measure adaptability and resistance by comparing the two capital growth rates. They are built by mimicking the average and variance of the difference in growth rates. In this new setting, investment and depreciation flows play an important role in explaining what the partial index of adaptability reveals. The available data on the USA and Spanish capital allow us to empirically compute the indexes and draw conclusions about their ability to resist shocks and absorb their effects. We conclude that the US economy is more adaptable and has a greater capacity to absorb impacts than the Spanish economy, but it is less resistant to disturbances.

The Effects of Oil Price on Energy Production and the Ecuadorian Economy

Through an empirical analysis of the impact of variations in the international price of oil on the economic production of different strategic sectors and on energy production from various sources in Ecuador, the study seeks to show evidence on the economic effects of the price of oil. in a Latin American economy strongly linked to oil production. For this, relevant data were collected on production in different economic sectors, on the type of ownership in oil production and on energy production in various energy sources in Ecuador and statistical analyzes were carried out to evaluate the relationships between these and the international oil price. The results indicate that the effect of the oil price varies between the economic sectors of Ecuador. Some sectors, such as financial services and construction, show positive responses, while others, such as agriculture and fishing, appear less affected. The oil and mining sector in Ecuador is strongly linked to variations in the price of oil. The positive and significant response of the Oil and Mines GDP underlines the sensitivity of this sector to changes in international prices. Furthermore, energy production in Ecuador exhibits heterogeneous responses to variations in the price of oil. Forms of energy such as wind, solar, and thermal energy show positive and significant responses, while hydropower presents a negative response in some periods. Positive responses in forms of energy such as wind, solar, and thermal may indicate that the increase in the price of oil positively influences investment decisions in these energy sources. The study provides a significant contribution to the field of energy economics in oil-exporting countries and, particularly, in developing countries, as well as highlights the importance of energy diversification for these types of economies.

Solar Weather Dynamics and the US Economy: A Comprehensive GVAR Perspective

Solar Weather Dynamics and the US Economy: A Comprehensive GVAR Perspective

Income Inequality as a Barrier to Economic Growth

This paper examines the relationship between income inequality and economic growth. Drawing on existing literature and empirical data, we analyze the effects of income inequality on the US GDP using statistical methods such as linear modeling. Our results show that high levels of income inequality are a barrier to sustained economic growth, as the concentration of wealth in a few individuals limits overall consumer spending and investment. Additionally, we find that income inequality exacerbates social and political instability, leading to further negative consequences for economic growth. We conclude that addressing income inequality through policy interventions such as progressive taxation and redistribution is essential for promoting long-term economic prosperity and equity in the United States. Our research contributes to the ongoing discourse on income inequality and its implications for economic growth and highlights the need for evidence-based policy solutions to address this pressing issue.

Did the nationwide implementation of electronic fund management in the Indian employment guarantee scheme result in reduced expenditures? A re‐examination of the evidence

AbstractDigital tools are increasingly being used in welfare programmes to reduce corruption and increase transparency. Banerjee et al. (2020, E‐governance, accountability, and leakage in public programmes: experimental evidence from a financial management reform in India. American Economic Journal: Applied Economics. https://doi.org/10.1257/app.20180302) evaluate the effectiveness of one such intervention. In a later section of their paper, they use a Two‐Way Fixed Effects (TWFE) specification to examine the consequences of the nationwide scale of an electronic funds management system in India's workfare programme, and report that it reduced expenditures by 19%. The present paper extends its analysis by (a) exploiting the recent literature that disaggregates the TWFE coefficient in the presence of staggered treatment timing to pinpoint sources of identifying variation and (b) attempting to uncover heterogeneity in treatment effects. We find that certain problematic comparisons have a large weight in the TWFE coefficient. Further, an event study analysis of the six constituent and valid comparisons shows that there is no support for parallel trends, so lag coefficients cannot be vested with causal interpretation. Our results imply that large‐scale evaluations, because of the very diversity they encompass, need to explicitly account for the factors that are responsible for programme effectiveness.

The Case of Renewable Methane by and with Green Hydrogen as the Storage and Transport Medium for Intermittent Wind and Solar PV Energy

Long-duration energy storage is the key challenge facing renewable energy transition in the future of well over 50% and up to 75% of primary energy supply with intermittent solar and wind electricity, while up to 25% would come from biomass, which requires traditional type storage. To this end, chemical energy storage at grid scale in the form of fuel appears to be the ideal option for wind and solar power. Renewable hydrogen is a much-considered fuel along with ammonia. However, these fuels are not only difficult to transport over long distances, but they would also require totally new and prohibitively expensive infrastructure. On the other hand, the existing natural gas pipeline infrastructure in developed economies can not only transmit a mixture of methane with up to 20% hydrogen without modification, but it also has more than adequate long-duration storage capacity. This is confirmed by analyzing the energy economies of the USA and Germany, both possessing well-developed natural gas transmission and storage systems. It is envisioned that renewable methane will be produced via well-established biological and/or chemical processes reacting green hydrogen with carbon dioxide, the latter to be separated ideally from biogas generated via the biological conversion of biomass to biomethane. At the point of utilization of the methane to generate power and a variety of chemicals, the released carbon dioxide would be also sequestered. An essentially net zero carbon energy system would be then become operational. The current conversion efficiency of power to hydrogen/methane to power on the order of 40% would limit the penetration of wind and solar power. Conversion efficiencies of over 75% can be attained with the on-going commercialization of solid oxide electrolysis and fuel cells for up to 75% penetration of intermittent renewable power. The proposed hydrogen/methane system would then be widely adopted because it is practical, affordable, and sustainable.

Shocks, Frictions, and Inequality in US Business Cycles

We show how a heterogeneous agent New Keynesian (HANK) model with incomplete markets and portfolio choice can be estimated in state space using a Bayesian approach. To render estimation feasible, the structure of the economy can be exploited and the dimensionality of the model automatically reduced based on the Bayesian priors. We apply this approach to analyze how much inequality matters for the business cycle and vice versa. Even when the model is estimated on aggregate data alone and with a set of shocks and frictions designed to match aggregate data, it broadly reproduces observed US inequality dynamics. (JEL D31, D52, E12, E32, E52, E62)

How Important are Sino-Latin American Trade for Economic Growth? A Trade in Value-Added Perspective

Sino-Latin American trade have increased substantially for decades. However, the increasing trade imbalances between China and several Latin American countries have yielded growing trade frictions. In this paper, we re-calculate the bilateral trade balance using the value-added content in trade and measure the contribution of Sino-Latin American trade to economic growth. The results show that gross trade statistics seriously overestimate the real bilateral trade imbalance, and China’s trade surplus with Mexico decreased by over 50%. The composition of Sino-Latin American trade suggests that most Latin American economies are complementary with Chinese economy. The South-South trade has been increasingly important for both China’s and Latin America’s economic development. We foresee an optimistic future of relations and continuously increasing trade between China and Latin America. Meanwhile, more efforts should be made to settle trade frictions and intensify Sino-Latin American relations.

Impact versus Inclusion in the Economics Profession: Insights from the Papers and Proceedings

We examine trends in author representation, research topics, and impact of citations to articles in the American Economic Review and what was formerly its Papers & Proceedings (P&P). Over what we refer to as the P&P expansion period (2008-2017), we see a significant shift toward greater diversity of P&P authors with respect to gender and institutions, and the range of topics covered. Importantly, the rise in inclusivity during this time period occurred without any loss of impact, with P&P article citations actually rising relative to regular-issue articles. Thus, our analysis suggests there is no trade-off between impact and inclusion.