Five Must-Read Studies From the Big Economics Confab: Eco Pulse

Bloomberg

Economists descended on Philadelphia last weekend for an annual conference that’s basically wonk utopia.

Central bankers, Nobel laureates and the profession’s elite professors debated the merits of math-heavy models in packed conference rooms while Ph.D. job market candidates vied for jobs down the hall. The American Economic Association confab’s program spanned three days and hundreds of topics, with major themes ranging from the death of the Phillips Curve to how women are treated in the field. And amid all that hustle and bustle, even the most dedicated econ-nerd might have missed a paper or two.

Fortunately, we’ve got your back. Here are five of our favorite, from a look at wages and the opioid crisis to an analysis of how the Fed responds to stock market changes. This is a special edition of our weekly Eco Pulse column, which you can check each Tuesday for new and pertinent economic research from around the world.

Drugs and money

Wage and Employment Growth in America’s Drug Epidemic: Is All Growth Created Equal?
Published December 2017
Available  at the AEA website

It turns out wage stagnation may be playing into the opioid crisis. As a recap, previous research has made is clear that unemployment and trade shocks are associated with an increase in overdose deaths. This new paper, from Ohio State’s Michael Betz and Lauren Jones, finds that in rural areas, 5 percent faster wage growth at the lowest-paying tier of the industry distribution could cut the drug overdose death rate by 10 percent.  In metro areas, faster wage gains in middle- and bottom-tier industries would come with fewer overdose deaths. “In rural areas, local economic conditions are not affecting overdose rates primarily through work availability, but rather through wage growth,” the authors write. “This finding is a new piece of the story and suggests that the unemployment rate may not fully capture the macroeconomic conditions that are important predictors of overdose.”

Perhaps most unexpectedly, stronger employment growth in top-tier industries causes more overdose deaths in metro counties and among men in rural areas, according to the authors. Why? It could be that inequality of opportunity is weighing on people, or that working increases access to employer-provided health insurance, increasing prescription opioid supply.

When prices are personalized

Dynamic Competition in the Era of Big Data
Published December 2017
Available at the AEA website

What if product price-tags were based on your needs and characteristics? It’s happening, and this paper argues that it’s economically important. Using eBay data, the authors look at the gains from sophisticated forms of price discrimination on phones and tablets. “On average, most consumers benefit from the introduction of price discrimination and that consumer surplus gains more than offset the loss in profits suffered by firms,” Patrick Kehoe, Brad Larsen, and Elena Pastorino write. But it hurts to be picky. “Consumers more certain about their tastes are, however, worse off under price discrimination.”

So, about the Amazon effect

Internet Rising, Prices Falling
Powerpoint dated January 2018
Available at the AEA website

Using data collected through Adobe Analytics, which tracks online prices and quantities, University of Chicago economist Austan Goolsbee and Stanford’s Pete Klenow find that online inflation averaged about 100 basis points lower than inflation in the CPI for the same categories between 2014 and 2017. What’s more, there was a huge variety of products sold online – goods were introduced and removed rapidly – and factoring that in implies shaving off another 90 to 150 basis points from online inflation versus the matched CPI indices. This research is in its early stages, but it could be  a big deal, because it quantifies that internet commerce could be weighing on goods prices and making them harder to measure.

Stocks and the Fed

The Economics of the Fed Put
Published April 2017
Available at the AEA website

The next time you’re trying to figure out whether the Federal Reserve is about to cut rates, maybe skip the data and watch the markets instead. Stock returns are a statistically more powerful predictor of the Fed lowering rates than standard macroeconomic releases, Duke University’s Anna Cieslak and University of California at Berkeley’s Annette Vissing-Jorgensen find. “Consistent with the Fed put, the number of negative stock market mentions—but not the number of positive stock market mentions—has significant explanatory power for target changes over the 1994–2008 period,” they write.

Textual analysis of Federal Open Market Committee minutes and transcripts suggests that they might actually cause the changes: it’s not just that prices reflect a mosaic of information that the Fed has also built into its reaction function. Fed deliberations either look at how stock wealth changes will affect consumption—economic variables like “consumer spending” are most frequently discussed in paragraphs mentioning the stock market – or focus on the market’s impact on investment. They more rarely address stocks as a metric that simply reflects economic activity.

Weekly demo(graphic)

Good news for American girls: they’ve nearly reached chore parity with teenage boys. This is potentially economically important. “These notable changes in the housework roles seem likely to persist into young adulthood and to continue the long term change to a more similar division of labor of men and women,” authors Ping Li, from the South China Normal University and Frank Stafford, from the University of Michigan, write in their paper. Women currently spend more time on non-market work than men even when they have jobs, so that could free up extra time to dedicate to their careers – or to Netflix.