Energy intensity: Deindustrialization,composition, prices,and policies in U.S. states

This paper uses the historical experience of U.S. states to examine the reasons why energy intensity has declined in some places more than in others. In aggregate, U.S. energy per dollar of GDP declined 34 percent between 1997 and 2018, but across states the decline varied from 9 percent in Iowa to 52 percent in Washington State. I show that none of this variation is explained by either deindustrialization or the changing composition of states’ industrial sectors. Although some U.S. state policies are significantly correlated with these changes, they are not correlated in a way that explains the changing overall state energy intensities. Energy intensity declines do not appear to be a result of leakage to other states or countries and have not been associated with slower economic growth.     

Understanding the recent Sino-U.S. trade conflict

ABSTRACT

To understand Sino-U.S. trade relations, this article interprets the trade imbalance between China and the United States from the Trump administration’s perspective. The Trump administration claims that the Chinese government’s subsidies and high import tariffs cause the Sino-U.S. trade deficit, resulting in job losses in the U.S. The Trump administration therefore argues that imposing high tariffs on Chinese exports can resolve the deficit. The article finds that U.S. statistical accounting overestimates the deficit. Reducing China’s imports cannot increase U.S. employment, and China provides the United States with low-price and high-quality products. Chinese investors tend to invest the surplus by purchasing U.S. Treasury bonds. In addition, the United States limits Chinese investments due to ‘national security’ concerns. China’s upgrading to the high end of the global value chain is a consequence of economic development. Therefore, the two countries should rebalance Sino-U.S. trade by seeking economic and trade cooperation via trade negotiations.     

Finance and sources of growth: evidence from the U.S. states

How does financial development affect economic growth: through its impact on accumulation of physical and human capital or by boosting total factor productivity (TFP) growth? We use a new data set on output, inputs, and total factor productivity for the US states to study this question. Unlike previous cross-country research that tries to disentangle the channels through which financial development impacts growth, we use a plausibly exogenous measure of financial development: the timing of banking deregulation across states during the period 1970–2000. At the same time our new data set allows us to go beyond what was previously done in the state banking deregulation literature and identify whether finance impacts states’ input accumulation or TFP growth. We find, in line with existing cross-country studies, that deregulation boosts growth by accelerating both TFP growth and the accumulation of physical capital without having any impact on human capital. In contrast to the cross-country studies, we also find that the effects of deregulation are largely independent of states’ initial level of development; both rich and poor states grow faster after deregulation. Additionally, since our data set breaks down aggregate output into three sectors: agriculture, manufacturing, and the remaining industries, we are able to show that deregulation accelerates the growth of productivity in manufacturing. This last finding answers an important critique of the banking deregulation studies which asserts that observed growth effects may be coming from the growth of financial industry itself and not from the beneficial effect of finance on other industries, such as manufacturing.     

The effects of federal regulations on corruption in U.S. States

Using the newly constructed Federal Regulation and State Enterprise Index (FRASE Index) to measure the federal regulations and the existing Corruption Convictions Index (CCI), we investigate the effects of federal regulations on corruption in U.S. states. Controlling for several demographic and economic variables including the Fraser Institute’s Economic Freedom Index (EFI), which measures the size and scope of government in U.S. states, we find a positive and statistically significant relationship between federal regulations and corruption. Our findings have important policy implications. A 1 standard deviation increase in FRASE Index causes CCI to increase by approximately 0.5 standard deviations. Standardized coefficient of EFI is also approximately equal to 0.5. In other words, it is possible to mitigate the effects of regulations at the federal level by reducing the size and the scope of the government at the state level.     

DO MOVIE PRODUCTION INCENTIVES GENERATE ECONOMIC DEVELOPMENT?

Movie production incentives (MPIs) are a popular economic development strategy employed by U.S. states. Film subsidies are intended to encourage external investment into a nascent industry that spills over onto complementary industries to generate economic growth through a multiplier. Despite their widespread use, the positive impact of MPIs on state economies has not been documented, and several states have halted their MPI programs due to high costs and questionable efficacy. This study exploits the staggered implementation, suspension, and elimination of film incentive programs across states to estimate the macroeconomic impact of MPIs. Instrumental variable estimates that permit causal inference do not support the hypothesized positive impacts of film incentives on state economies. (JEL H25, H71, L82, R11, R38, Z11, Z18)     

Productivity and convergence across U.S. States and industries

We examine the sources of aggregate labor productivity movements and convergence in the U.S. states from 1963 to 1989. Productivity levels vary widely across sectors and across states, as do sectoral output and employment shares. The main finding is the diverse performance of sectors regarding convergence. Using both cross-section and time series methods, we find convergence in labor productivity for both manufacturing and mining. However, we find that convergence does not hold for all sectors over the period. Decomposing aggregate convergence into industry productivity gains and changing sectoral shares of output, we find the manufacturing sector to be responsible for the bulk of cross-state convergence.     

The impact of political institutions on U.S. state bond yields during crises: evidence from the 2008 credit market seizure

This study examines how political institutions mediate bond market reactions to severe economic crisis, based on U.S. states’ experience of the 2008 credit market seizure. Following severe fiscal shocks, political institutions assume greater importance in assessing risk characteristics of state bonds. The bond market reacts most strongly to two factors: public sector union strength in a state and the proportion of Democrats in the state legislature. We suggest that the identity of political institutions becomes increasingly important, during periods of economic crises, when credit markets might expect that political systems can no longer delay stabilisations and must deliver policy.     

Measuring the size and dynamics of U.S. state-level shadow economies using a dynamic general equilibrium model with trends

We use a two-sector dynamic deterministic general equilibrium model that specifically accounts for trends among time-series variables to estimate the size of the shadow economy for the 50 U.S. states from 1999 to 2019, following Solis-Garcia and Xie (2018, 2022). This paper improves on existing measures of the state-level shadow economy (such as the multiple indicators, multiple causes (MIMIC) methodology by Wiseman (2013a)). In particular, this new measure is based on theoretical foundations, extends the previous measure to include the Great Recession, includes dollar value estimates of the shadow economy, and produces considerably more variation over time and across states. Furthermore, we explore determinants of this new shadow economy measure using a panel vector autoregressive model and find that, on average, states with higher levels of economic freedom, lower regulatory barriers, and larger real GDP have smaller shadow economies. States with bigger governments, on average, have larger shadow economies, and the effect of corruption on shadow economic activity is non-linear, with a positive initial and subsequent negative impact.     

Bank lending channel in India: evidence from state-level analysis

This paper seeks to answer two questions: first, do monetary policy shocks affect the size of bank loans, and second, do bank loans affect real economic activity? Using annual panel data on the Indian states from 1996 to 2008, we find that money demand shocks have large and statistically significant impact on bank loans. Furthermore, using money demand shocks as instruments for bank lending à la Driscoll (J Monet Econ 51:451–471, 2004), we find an economically large and statistically significant effect of bank loans on output. Our findings, to some extent, reflect the dominant role played by banks in the India’s overall financial system.     

Why is the teen birth rate in the United States so high and why does it matter?

Teens in the United States are far more likely to give birth than in any other industrialized country in the world. U.S. teens are two and a half times as likely to give birth as compared to teens in Canada, around four times as likely as teens in Germany or Norway, and almost 10 times as likely as teens in Switzerland. Among more developed countries, Russia has the next highest teen birth rate after the United States, but an American teenage girl is still around 25 percent more likely to give birth than her counterpart in Russia. Moreover, these statistics incorporate the almost 40 percent fall in the teen birth rate that the United States has experienced over the past two decades. Differences across U.S. states are quite dramatic as well. A teenage girl in Mississippi is four times more likely to give birth than a teenage girl in New Hampshire--and 15 times more likely to give birth as a teen compared to a teenage girl in Switzerland. This paper has two overarching goals: understanding why the teen birth rate is so high in the United States and understanding why it matters. Thus, we begin by examining multiple sources of data to put current rates of teen childbearing into the perspective of cross-country comparisons and recent historical context. We examine teen birth rates alongside pregnancy, abortion, and "shotgun" marriage rates as well as the antecedent behaviors of sexual activity and contraceptive use. We seek insights as to why the rate of teen childbearing is so unusually high in the United States as a whole, and in some U.S. states in particular. We argue that explanations that economists have tended to study are unable to account for any sizable share of the variation in teen childbearing rates across place. We describe some recent empirical work demonstrating that variation in income inequality across U.S. states and developed countries can explain a sizable share of the geographic variation in teen childbearing. To the extent that income inequality is associated with a lack of economic opportunity and heightened social marginalization for those at the bottom of the distribution, this empirical finding is potentially consistent with the ideas that other social scientists have been promoting for decades but which have been largely untested with large data sets and standard econometric methods. Our reading of the totality of evidence leads us to conclude that being on a low economic trajectory in life leads many teenage girls to have children while they are young and unmarried and that poor outcomes seen later in life (relative to teens who do not have children) are simply the continuation of the original low economic trajectory. That is, teen childbearing is explained by the low economic trajectory but is not an additional cause of later difficulties in life. Surprisingly, teen birth itself does not appear to have much direct economic consequence. Moreover, no silver bullet such as expanding access to contraception or abstinence education will solve this particular social problem. Our view is that teen childbearing is so high in the United States because of underlying social and economic problems. It reflects a decision among a set of girls to "drop-out" of the economic mainstream; they choose non-marital motherhood at a young age instead of investing in their own economic progress because they feel they have little chance of advancement. This thesis suggests that to address teen childbearing in America will require addressing some difficult social problems: in particular, the perceived and actual lack of economic opportunity among those at the bottom of the economic ladder.     

The “swing of the pendulum” from public to market support for science and technology: Is the U.S. leading the way?

The structure and financing of science and technology activities are undergoing a slow, but profound, change. This change can be briefly characterized as a shift from relying and supporting public science to a stronger emphasis on “market-based” incentives for science and technology. In this paper we analyze this shift in a historical perspective, discussing both the theoretical explanations and the empirical trends of the ongoing change. While we do not claim to provide a comprehensive and exhaustive identification of the causes of this shift, we argue that it is largely driven by the perception of a shift of the U.S. policy towards market-based, rather than publicly supported, incentives for science and technology. This, in turn—given the strong economic performance of the United States over the 1990s—has influenced policies in most OECD countries, especially in Europe.We conclude by analyzing the evolution of research in U.S. higher education and find two major trends: an increasing diversity in the number of institutions of different types other than universities and a steady and continuous public funding of the leading U.S. universities. This has allowed the construction of an infrastructure now used largely by the private sector, but it also noted that the United States has not compromised public support for core areas or in those fields in which there is a clear perception that market incentives are not sufficient for meeting the strategic targets of the U.S. policy. The implication is that there is a considerable policy diversity in the U.S. practice and that all aspects of this diversity should be considered when using the United States as a reference.     

Inequality and growth in the United States: is there asymmetric response at the state level?

A previous study that tried to assess the impact of economic growth on income inequality in the U.S. used state-level data and an ARDL panel model to conclude that economic growth worsens income inequality in the U.S. In this article, we use the same data set but an ARDL time-series model applied to each state in the U.S. to show that the above conclusion is only valid in 20 states. Additionally, we use a nonlinear ARDL approach to show that the effects are asymmetric in the short run as well as in the long run. Significant long-run asymmetric effects reveal that in 28 states both an increase and a decrease in real output have worsened income distribution.     

Impact of foreign prices and interest rates on canadian economy under alternative monetary and exchange rate regimes

The main objective of this paper is to analyze the impact of U.S. short- and long-term monetary policy under both flexible and managed floating systems, using the new CANDIDE Model 2.0. We have also examined the role of domestic monetary policy in the Canadian economy under both fixed and flexible exchange rate systems. The following are some of the important findings of our study:

1. Our results support the traditional view that under the fixed exchange rate regime, monetary authorities cannot successfully pursue an independent monetary policy from its trading partners — an effort to increase money supply will be almost offset by increases in the balance of payments deficit. In contrast, in the flexible exchange rate regime, monetary policy is more effective in producing an increased growth in output and employment. However the increased output growth comes at the cost of higher prices induced by increased wages and a depreciation of the Canadian dollar.
2. Our results suggest that the impact of U.S. interest rates on investment, GNE, employment, productivity, and government debt is less severe in a pure floating exchange rate regime, compared to the managed floating system. However, the impact of U.S. interest rate policy on the Canadian inflation rate is worse in the case of flexible exchange rate regime. Even though real income and inflation are less favourable in both cases, our results indicate a trade-off between output growth and inflation.
3. Our results imply that under a pure floating monetary authorities can determine the long-run rate of inflation in Canada independent of others. However, the United States and Canadian economies are interrelated during the adjustment process, even under the flexible exchange rates, through the terms of trade and the wage-price spiral channels.

     

Religiosity and the adoption of formal financial services

Recent studies have suggested that institutional and economic factors are important drivers of financial inclusion. However, the effects of culture on the usage and adoption of formal financial services are not as widely understood. This paper explores the impact of religiosity on financial inclusiveness, utilizing aggregated data from individuals’ religious preferences and financial behaviors. The results suggest that higher levels of religiosity are negatively associated with the usage and adoption of formal financial services, both across U.S. states and across different countries. To explore possible causal implications, we exploit spatial variations in historical pathogen prevalence as the main instrument of our study.     

Can Latent Groups Influence Policy Decisions? The Case of Telecommunications Policy

Electoral constituencies recognize favorable policy outcomesin high-turnout jurisdictions. In this article I evaluate whetherunderlying institutions might provide a finer explanation ofthis relationship. To do so I formally examine variation intelecommunications policy across U.S. states. The resultingevidence is consistent with residential customers recognizingmore favorable policy when institutions reduce voting's resourcecost (measured by registration rules) or increase its nonpecuniarybenefit (measured by Perot support). Measures of either forceexplain significantly more variation in the present data thandoes a measure of actual participation (i.e., turnout).     

GROWTH,INEQUALITY, AND ECONOMIC FREEDOM: EVIDENCE FROM THE U.S. STATES

This article returns to the discussion of how income inequality affects economic growth. The main argument of the article is that economic freedom is likely to mediate the association between inequality and growth. In a panel of 300 observations from six 5‐year periods across the 50 U.S. states, I employ five different measures of inequality. The results show that across measures, the growth effects of inequality turn more positive with more economic freedom. The moderating effects are mainly driven by measures of public sector consumption. (JEL O11, O38, O43, P48)     

Allocative inefficiency and sectoral allocation of labor: Evidence from U.S. agriculture

Are productivity differences across producers in an industry a good indicator of allocative inefficiency? If so, what are the welfare consequences of reallocating labor from lesser to more productive producers? This paper addresses these questions in the context of factor specificity, which generates endogenous distribution of total factor productivity across producers, and reallocation of labor across sectors, as well as within a sector. The paper builds a multi-sector, multi-region general equilibrium model with land as a region-specific factor, and calibrates it using state-level U.S. data from 1960 to 2004, a period with considerable reallocation of labor out of agriculture. The results show that large and persistent differences in agricultural productivity across U.S. states are consistent with factor specificity due to geoclimatic conditions and do not correspond to economically significant allocative inefficiencies.     

美国金融危机对我国进出口贸易冲击的实证研究

中美两国互补型的直接贸易关系紧密,美国金融危机导致美国国内收入水平的下降、美元贬值以及物价水平波动易通过直接贸易溢出对中国进出口贸易状况形成冲击。研究发现,危机通过收入效应对我国贸易状况产生的溢出较弱,而通过价格效应对我国贸易状况产生了明显溢出,并且对我国的出口贸易冲击较大。出口贸易对美国价格水平变化冲击的响应强度、持续时间和衰减方式都发生了显著变化。     

FACTORS IN CANADA-UNITED STATES REAL INCOME DIFFERENCES

This paper is a part of a larger study of economic growth in Canada, following the methods developed by Edward Denison in his book The Sources of Economic Growth in the United States and the publication Why Growth Rates Differ. The new material in this paper relates to Canada and the Canadian/U.S. comparison, while the material on Northwest Europe is drawn from the Brookings study. The present paper sets out the results to date on the differences in real output per employed person between Canada and the United States for one year, 1960. At this stage in our research the results indicate that the level of real output per employed person in Canada was about 20 per cent lower than in the United States in that year. On the basis of historical output data, it would appear that this margin of difference in Canadian/U.S. product levels has persisted throughout the present century. The central part of this paper examines the significance of differences in factor inputs in Canada and the United States and their contribution to the difference in income. The level of inputs per employed person in Canada accounts for only about 2 percentage points of the income difference between Canada and the United States. These results indicate that the overwhelming part of the difference in output per employed person between the two countries reflects the differences in output in relation to total factor inputs, rather than the magnitude of other factor inputs used in combination with labour. This result is consistent with earlier studies by Denison and others which have indicated the crucial importance of output in relation to total factor inputs, both in output growth over time and intercountry comparisons of output level. The body of the paper can give only brief attention to the numerous conceptual and statistical questions that arise in such a wide-ranging study, and the authors do not pretend to have tackled, let alone resolved, all of the wide range of problems related to this study. Nor do they claim any high degree of precision for the results, especially in the light of the statistical limitations of the basic data.     

中美两国经济周期协动性分析

美国是世界第一大经济体也是中国的第一大贸易国,其国内的经济波动对中国经济的发展有着重要的影响。通过HP滤波法并使用1978—2009年度数据以及2008—2010年季度数据对中美两国经济周期波动的协动性研究后发现,中美经济周期协动程度随周期变动且呈现出明显的增强趋势,中国经济增长潜力高于美国且经济波动幅度逐渐减小。为此,应加强对美国经济周期波动的预测与中国货币政策制定、施行时机的把握,从而做到提前反周期操作。