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Research briefs offer glimpse into American life

March 28, 2019

If you are feeling that your money is not buying as much as it used to, that delinquent crime may be increasing as teenagers sit idle, that there is not enough focus on climate change or that corporate responsibility may be lacking, you may validate those feelings through the findings of several recently released research papers. SSTI received notice of the conclusions of five working papers that we thought we’d share.

The Trade War is increasing U.S prices, declines in real income.

If you were one of the millions of Americans who thought by the end of last year that your money wasn’t going as far as it used to, a recent impact analysis by Mary Amiti, Stephen J. Redding and David Weinstein supports your conclusion. From the abstract, “Over the course of 2018, the U.S. experienced substantial increases in the prices of intermediates and final goods, dramatic changes to its supply-chain network, reductions in availability of imported varieties, and complete passthrough of the tariffs into domestic prices of imported goods. Overall, using standard economic methods, we find that the full incidence of the tariff falls on domestic consumers, with a reduction in U.S. real income of $1.4 billion per month by the end of 2018.”

Mandatory minimum “Living Wages” may increase crime among younger population – probably because they can’t find work.

Proponents for raising minimum wages include arguments for it reducing crime. A recent working paper by Zachary Fone, Joseph Sabia and Resul Cesar reports their study found “no evidence that minimum wage increases reduce crime. Instead, we find that raising the minimum wage increases property crime arrests among those ages 16-to-24... This result is strongest in counties with over 100,000 residents and persists when we use longitudinal data to isolate workers for whom minimum wages bind.” The authors report that the result is consistent with adverse labor demand effects of the minimum wage, and that they find an increase in delinquency-related crimes related to teenage idleness. Other arguments for minimum wage increases may still hold, however.

Fed Reserve says economists could do more toward understanding climate change hazards.

The March 25 economic letter from the Federal Reserve Bank of San Francisco points out the need for monetary and financial policy to reflect current and future costs from climate change impacts and hazards.  Glenn Rudebusch writes, “For the Fed, the volatility induced by climate change and the efforts to adapt to new conditions and to limit or mitigate climate change are also increasingly relevant considerations. Moreover, economists, including those at central banks, can contribute much more to the research on climate change hazards and the appropriate response of central banks.”

Millennial Americans like cars as much as everyone else.

The idea that the generation known as millennials are more environmentally friendly in their transportation options by preferring public transit, ride-hailing and traveling less is simply wrong, according to a new research paper from Christopher R. Knittel and Elizabeth Murphy. In fact, they might be contributing to transportation’s negative impact on the climate more than older generations. From the paper’s abstract: “In contrast to the anecdotes, we find higher usage in terms of vehicle miles traveled (VMT) compared to Baby Boomers. Next we test whether Millennials are altering endogenous life choices that may, themselves, affect vehicles ownership and use. We find that Millennials are more likely to live in urban settings and less likely to marry by age 35, but tend to have larger families, controlling for age. On net, these other choices have a small effect on vehicle ownership, reducing the number of vehicles per household by less than one percent.”

Companies will not do the right thing on social insurance unless required.

An analysis of Finnish entrepreneurs allowed to relax their mandated social insurance contributions found that they significantly reduce contributions and inject the money into their firms. Researchers Youssef Benzart, Jarkko Harju, and Toumas Matikka also found older firms use the windfall to “improve their net lending position by purchasing stocks.” This finding is not unlike behavior reported for U.S. firms after the 2017 corporate tax cut after which little of the unleashed monies improved the lot of workers or charitable giving.

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