@asymmetricinfo paper:"How Far Are We From The Slippery Slope? The Laffer Curve Revisited" bit.ly/1HMhmqu http://t.co/D9IffNhd92—
Old Whig (@aClassicLiberal) April 20, 2015
Who is where on the Laffer curve?
20 Jun 2015 Leave a comment
in economic growth, fiscal policy, human capital, labour economics, labour supply, macroeconomics, politics - USA, public economics Tags: endogenous growth theory, EU, Eurosclerosis, laffer curve, optimal tax theory, taxation and entrepreneurship, taxation and investment, taxation and the labour supply
The U.S. bailout barometer.
19 Jun 2015 Leave a comment
in business cycles, financial economics, monetary economics, Public Choice, rentseeking Tags: bailouts, deposit insurance, implicit guarantees, lender of last resort
Peter Garber on what is an asset price bubble
18 Jun 2015 Leave a comment
in entrepreneurship, financial economics, macroeconomics Tags: asset price bubbles, entrepreneurial alertness, The fatal conceit
Who are the members of Euroland?
17 Jun 2015 Leave a comment
in currency unions, Euro crisis, macroeconomics Tags: Euroland, European Union
Since today is Europe Day, a look at which countries have and haven't adopted the Euro brilliantmaps.com/eurozone2015/ http://t.co/N8tGhBe8eN—
Brilliant Maps (@BrilliantMaps) May 09, 2015
How great was the Great Depression unemployment? The official and Darby estimates of US unemployment in the 1930s
17 Jun 2015 Leave a comment
in business cycles, economic history, great depression, labour economics, macroeconomics, unemployment Tags: Euro sclerosis, measurement error, Michael Darby
The graph below shows two different series for unemployment in the 1930s in the USA: the official BLS level by Lebergott; and a data series constructed famously by Michael Darby.
Figure 1: US unemployment rate, 1929 – 40: Darby and Lebergott estimates
Source: Robert Margot (1993).
Darby includes workers in the emergency government labour force as employed – the most important being the Civil Works Administration (CWA) and the Works Progress Administration (WPA). Once these workfare programs are accounted for, the level of U.S. unemployment fell from 22.9% in 1932 to 9.1% in 1937, a reduction of 13.8%.
For 1934-1941, the corrected unemployment levels are reduced by two to three-and-a half million people and the unemployment rates by 4 to 7 percentage points after 1933.
Not surprisingly, Darby titled his 1976 Journal of Political Economy article Three-and-a-Half Million U.S. Employees Have Been Mislaid: Or, an Explanation of Unemployment, 1934-1941. The corrected data by Darby shows stronger movement toward the natural unemployment rate after 1933.
From about 1935, the unemployment rate in the Great Depression in the USA is not much different from what it is in Europe in recent decades under Eurosclerosis.
In the 1930s in the USA, many unemployed were employed by the Civil Works Administration and the Works Progress administration. In contemporary Europe, the unemployed are simply paid not to work under their welfare state arrangements.
How to argue against employment protection laws while arguing for additional employment regulation
17 Jun 2015 Leave a comment
in human capital, job search and matching, labour economics, labour supply, macroeconomics, minimum wage, unions Tags: climate law, efficiency wage, employment at will, employment protection law, fixed costs of employment, fixed costs of working, flexible working hours, living wage, paid leave, Richard Ebstein
The Centre for American Progress recently published an excellent survey of the costs to employers of hiring and training new recruits. As the paper notes:
it is costly to replace workers because of the productivity losses when someone leaves a job, the costs of hiring and training a new employee, and the slower productivity until the new employee gets up to speed in their new job.
Our analysis reviews 30 case studies in 11 research papers published between 1992 and 2007 that provide estimates of the cost of turnover, finding that businesses spend about one-fifth of an employee’s annual salary to replace that worker.
The purpose of the research published by the Centre for American Progress was to argue there were large costs to employers from replacing even low paid workers and there are a workplace policies such as paid family leave and workplace flexibility will reduce these job turnover costs to employers.
Similar arguments are used to justify a living wage on efficiency grade wage grounds. A living wage would reduce job turnover and therefore the costs to employers of job turnover in the jobs.
The research published by the Centre for American Progress also illustrates the bargaining power of workers. Employers who failed to treat workers fairly and pay them the going wage risk an increase in job quit rates. These large costs of job turnover have been carefully documented by the Centre for American Progress.
Beyond jobs data: Industries w/ better pay have lower worker turnover rates equitablegrowth.org/news/looking-b… http://t.co/gug33EbYy3—
Equitable Growth (@equitablegrowth) July 03, 2015
Employers incur fixed costs of employment when they recruit and train new employees. These recruits must be expected to stay long enough to work sufficient hours for the firm to expect to recover these investments (Oi (1962, 1983a, 1990), Idson and Oi (1999), Hutchens (2010), Hutchens and Grace-Martin (2006)).
These costs are fixed costs because they do not vary with how many hours the employee works or with how long an employee stays with their employer. These fixed employment costs must be recouped over the expected job tenure of the employee with the firm. Employers will not hire an additional worker unless they anticipate recovering the costs of doing do including fixed employment costs and other overheads.
Central to arguments such as by Richard Epstein for employment at will is the threat of the employee to quit imposes a real cost on employers which the employer will seek to avoid by treating their employees well.
The best way to prevent exploitation of workers is to make hiring and firing easy, facilitate new entry by firms into all markets and promote full employment – a worker with other available job opportunities is difficult to exploit.
With large fixed costs of recruitment and training, employers cannot afford to behave whimsically if they wish to survive in competition with the rival firms with more competitive wage and employment policies.
By the same token, the large fixed costs of employment documented by the Centre for American Progress illustrate the large investments employers must risk to recruit a new employee.
If this large investment in recruitment doesn’t turn out well, but is difficult to get out of because of strict employment laws, employers will be more reluctant in the first instance to risk this investment because they are risking several months wages in fixed costs of employment. As Richard Epstein explained:
A second great advantage of the at-will system is that it supplies an informal method of bonding that keeps both sides in line.
The employer who tries to take advantage of the employee by altering working conditions for the worse will be met by the threat to quit, for now the deal is worth less to the employee than the wage received.
So long as markets are competitive the switching costs will be relatively low – lower in fact than they are in a highly regulated world where employers have to think twice before taking on a worker whom they may be unable to fire if things do not work out.
Yet on the other side, the employee who takes it easy on the job is faced with dismissal because he is no longer worth his wages.
But even here management will hesitate to dismiss for good reasons. One is the very substantial costs of recruiting and training a replacement who might or might not turn out to be better than the worker who was dismissed. The second is that unjust dismissals could induce other workers to leave while the going is good, thereby compounding the problem of recruitment and retention.
The Centre for American Progress was good enough to document the very substantial costs of recruiting and training a replacement employee. As the Centre for American Progress explained in their paper, employers have every reason to protect their investments in training and recruitment by minimising job turnover costs.
If You’re A Keynesian Then You Must Believe The Minimum Wage Increases Unemployment
14 Jun 2015 Leave a comment
in business cycles, fiscal policy, labour economics, macroeconomics, minimum wage Tags: Bryan Caplan, economic fallacies, involuntary unemployment, Keynesian macroeconomics, methodology of economics, wage rigidity
Via If You’re A Keynesian Then You Must Believe The Minimum Wage Increases Unemployment and The Myopic Empiricism of the Minimum Wage, Bryan Caplan | EconLog | Library of Economics and Liberty.
Milton Friedman on the essence of the Age of the Worker
13 Jun 2015 Leave a comment
in applied price theory, applied welfare economics, economic growth, economic history, health and safety, income redistribution, industrial organisation, labour economics, labour supply, macroeconomics, Milton Friedman, occupational choice, politics - Australia, politics - New Zealand, politics - USA, Public Choice, rentseeking, unions Tags: competition and monopoly, The Great Enrichment, union power, union wage premium
Sir Humphrey was right on why Britain entered the common market in 1973? Real GDP growth per working age British and French, PPP, detrended, 1950 – 2013
11 Jun 2015 Leave a comment
in economic growth, economic history, fiscal policy, global financial crisis (GFC), macroeconomics, monetarism, monetary economics Tags: British disease, British economy, Eurosclerosis, France, Margaret Thatchernomics, sick man of Europe
Figure 1: Real GDP per British and French aged 15-64, converted to 2013 price level with updated 2005 EKS purchasing power parities, 1.9 per cent detrended, 1950-2013
Source: Computed from OECD Stat Extract and The Conference Board, Total Database, January 2014, http://www.conference-board.org/economics
Figure 2: Real GDP per British and French aged 15-64, converted to 2013 price level with updated 2005 EKS purchasing power parities, 1.9 per cent detrended, base 100 = 1974, 1950-2013
Source: Computed from OECD Stat Extract and The Conference Board, Total Database, January 2014, http://www.conference-board.org/economics
In figure 2, a flat line represents annual real GDP growth at a rate of 1.9%, which is the trend rate of annual growth of the USA in the 20th century. A rising line means annual growth at above that trend rate; a falling line means annual growth at below that trend rate of 1.9% per year.
The US share market since 1900
10 Jun 2015 Leave a comment
in business cycles, economic growth, economic history, entrepreneurship, financial economics, macroeconomics Tags: active investing, efficient market hypothesis, entrepreneurial alertness, passive investing
Here’s how Warren Buffett sees the stock market read.bi/1HsUe1p http://t.co/Zm6fDTYpf9—
BI Chart of the Day (@chartoftheday) April 23, 2015
Who will be the 20 largest economies in 2030?
10 Jun 2015 Leave a comment
in development economics, economic growth, growth miracles, macroeconomics Tags: China, convergence, India, Japan
These will be the world’s 20 largest economies in 2030 bloom.bg/1IzgMhl http://t.co/KADxgakbEj—
Bloomberg VisualData (@BBGVisualData) May 20, 2015
The Spanish economic recovery compared
10 Jun 2015 Leave a comment
in business cycles, currency unions, economic growth, Euro crisis, global financial crisis (GFC), great recession, macroeconomics Tags: Eurosclerosis, France, Germany, Italy, Spain
Spain's economic growth is being touted as a success story. Don't tell the Spaniards: on.wsj.com/1M45yzI http://t.co/pm4DAd1qkF—
Nick Timiraos (@NickTimiraos) June 03, 2015
Supply-side economics and the migration of inventors
07 Jun 2015 Leave a comment
in applied price theory, entrepreneurship, fiscal policy, human capital, labour economics, labour supply, occupational choice, politics - Australia, politics - New Zealand, politics - USA Tags: economics of migration, taxation and the labour supply
#Braindrain is real, even quantifiable — as per NBER paper 21024. Geniuses don't tolerate extra taxes easily. http://t.co/HVP8uEFAfz—
Amity Shlaes (@AmityShlaes) June 07, 2015
The global business cycle in one chart
05 Jun 2015 Leave a comment
in business cycles, economic growth, macroeconomics Tags: world economy
The entire global economy. In one chart. bloom.bg/1FrXQ1A http://t.co/H07P9n2LkL—
Bloomberg VisualData (@BBGVisualData) May 22, 2015


Recent Comments