Una de tantas cosas que supuestamente se aprenden en introducción a la economía es que los controles de precios (o salarios) generan distorsiones en la economía.  En el caso del mercado laboral, estas distorsiones pueden significar desempleo y/o discriminación.  “¡Mentiras tecnocráticas!”, dicen los estudiantes de 1er año…  Aquí les va cierta evidencia (aunque también hay papers que encuentran lo contrario, conste).

“The Effects of Living Wage Laws: Evidence from Failed and Derailed Living Wage Campaigns”
BY: SCOTT J. ADAMS
University of Wisconsin – Milwaukee
DAVID NEUMARK
Public Policy Institute of California, National Bureau of Economic Research (NBER)

http://papers.ssrn.com/paper.taf?abstract_id=579906
Paper ID: IZA Discussion Paper No. 1566; Public Policy Institute
of California Working Paper No. 2004-11

Judicial Lobbying: The Politics of Labor Law Constitutional Interpretation
Matias Iaryczower, Pablo Spiller, Mariano Tommasi – NBER #11317
http://papers.nber.org/papers/W11317

Abstract:
This paper links the theory of interest groups influence over the
legislature with that of congressional control over the judiciary.
The resulting framework reconciles the theoretical literature of
lobbying with the negative available evidence on the impact of
lobbying over legislative outcomes, and sheds light to the
determinants of lobbying in separation-of-powers systems. We provide
conditions for judicial decisions to be sensitive to legislative
lobbying, and find that lobbying falls the more divided the
legislature is on the relevant issues. We apply this framework to
analyze supreme court labor decisions in Argentina, and find results
consistent with the predictions of the theory.

I covered the Coase theorem in class today and how transaction costs turned out to be an idea worth three nobel prizes (Coase, Buchanan and North).

“Ever since Coase published “The Problem of Social Cost,” economists unconvinced by his analysis have argued that the Coase Theorem is merely a theoretical curiousity, of little or no practical importance in a world where transaction costs are rarely zero. One famous example was in an article by James Meade (who later received a Nobel prize for his work on the economics of international trade).

Meade offered, as an example of the sort of externality problem for which Coase’s approach offered no practical solution, the externalities associated with honey bees. Bees graze on the flowers of various crops, so a farmer who grows crops that produce nectar benefits the beekeepers in the area. The farmer receives none of the benefit himself, so he has an inefficiently low incentive to grow such crops. Since bees cannot be convinced to respect property rights or keep contracts, there is, Meade argued, no practical way to apply Coase’s approach. We must either subsidize farmers who grow nectar rich crops (a negative Pigouvian tax) or accept inefficiency in the joint production of crops and honey.

It turned out that Meade was wrong. In two later articles, supporters of Coase demonstrated that contracts between beekeepers and farmers had been common practice in the industry since early in this century. When the crops were producing nectar and did not need pollenization, beekeepers paid farmers for permission to put their hives in the farmers’ fields. When the crops were producing little nectar but needed pollenization (which increases yields), farmers paid beekeepers. Bees may not respect property rights but they are, like people, lazy, and prefer to forage as close to the hive as possible.

The fact that a Coasian approach solves that particular externality problem does not imply that it will solve all such problems. But the observation that an economist as distinguished as Meade assumed Coase’s approach was of no practical significance in a context where it was actually standard practice suggests that the range of problems to which the Coasian solution is relevant may be much greater than many would at first guess.”

Money in politics is a hotly debated issue in almost every democratic regime. The debate, however, between public vs. private funded political campaigns is not settled. Most countries actually subsidize campaigns somewhat in line with their degree of state intervention in the economy. But I am not aware of a systematic cross country analysis of this issue. And for the Mexican case, most pundits immediately assume that public funding per se triumphs over private contributions.

My current take is that large fixed costs may justify subsidizing campaigns at the early stages of a democratic transition–although explaining why a regime would find that beneficial is also puzzling. However, subsidizing campaigns creates undesirable consequences and distorts the incentives of would-be politicians, political parties, etc. On the other hand, having only privately funded campaigns also has its problems, as it may over-represent wealthy special interests.

The argument for full public funding (that private money is “obscure”) is odd: Following the same logic, the government should own most enterprises to get revenues and finance public spending. But most people would agree that it is more efficient to let private parties run their businesses and then just tax them.

Assume a country spends 1 billion in political party subsidies. Is this the best use of public money? How about allowing private contributions and then spending, say half a billion in monitoring contributions and campaign spending, or in susbsidizing only certain campaigns? An intermediate and interesting proposal would be: spend more on monitoring money flows, and only use public money to “match” the fund raising of candidates.

Caso de la vida real
Un economista narra una experiencia con el sexo opuesto en un club de jazz:

…For in that brief minute of conversation it was established that;

1. She reads The Economist
2. She was a financial manager at a money management firm
3. She had her undergraduate in finance
4. She was getting her masters in economics

The next hour of conversation was tantilizing and insanely intelligent. We talked about econometric modeling. We talked about efficient frontier theory. We talked about Miller-Modigliani. And then she talked about her specialty, behavioral economics.

I love it when chicks talk dirty to me.

…No se pierdan el desenlace de la historia (y los comentarios) en:
http://captaincapitalism.blogspot.com/2005/04/dear-penthouse-forum.html

Existe una amplísima literatura sobre la brecha salarial entre “blancos y
negros” en los EU que informa el debate de los “civil rights” y demás. Este
paper de Heckman (premio nobel, por cierto) y compañía ilumina el origen de
tales brechas usando a los hispanos como grupo de comparación.

Los hispanos también ganan menos que los blancos… pero, hay
una sorpresa: hispanos con similares niveles de pobreza y educación que
negros, acaban ganando más que éstos, inclusive cuando aquellos no terminan
college… Es decir que el impacto marginal de cada año de educación es
mayor para los los hispanos que para los negros… ¿Por qué?
Aparentemente, por cosas que pasan en su infancia…

La conclusión es clara: si te preocupan estas brechas salariales
cuasi-discriminatorias, hay que atender mejor la educación preescolar y
hacer menos marchas de affirmative action.

Más detalles abajo:

Labor Market Discrimination and Racial Differences in Premarket Factors

PEDRO CARNEIRO,
University College London
JAMES J. HECKMAN,
University of Chicago
and
DIMITRIY V. MASTEROV
University of Chicago

http://www.journals.uchicago.edu/JLE/journal/issues/v48n1/480105/480105.web.pdf

o bien: http://www.ifau.se/swe/pdf2005/wp05-03.pdf

This paper discusses the sources of wage gaps between minorities and
whites. For all minorities but black males, adjusting for the ability that
minorities bring to the market eliminates wage gaps. The major source of
economic disparity by race and ethnicity in U.S. labor markets is in
endowments, not in payments to endowments.

This evidence suggests that strengthened civil rights and affirmative action
policies targeted at the labor market are unlikely to have much effect on
racial and ethnic wage gaps, except possibly for those specifically targeted
toward black males. Policies that foster endowments have much greater
promise.

On the other hand, this paper does not provide any empirical evidence
on whether the existing edifice of civil rights and affirmative action
legislation should be abolished. All of our evidence on wages is for an
environment in which affirmative action laws and regulations are in place.

Minority deficits in cognitive and noncognitive skills emerge early and
then widen. Unequal schooling, neighborhoods, and peers may account for
this differential growth in skills, but the main story in the data is not
about growth rates but rather about the size of early deficits. Hispanic children
start with cognitive and noncognitive deficits similar to those of black children.
They also grow up in similarly disadvantaged environments and are likely
to attend schools of similar quality. Hispanics complete much less schooling
than blacks. Nevertheless, the ability growth by years of schooling is much
higher for Hispanics than for blacks. By the time they reach adulthood,
Hispanics have significantly higher test scores than do blacks. Conditional
on test scores, there is no evidence of an important Hispanic-white wage
gap. Our analysis of the Hispanic data illuminates the traditional study of
black-white differences and casts doubt on many conventional explanations
of these differences since they do not apply to Hispanics, who also suffer
from many of the same disadvantages. The failure of the Hispanic-white gap
to widen with schooling or age casts doubt on the claim that poor schools
and bad neighborhoods are the reasons for the slow growth rate of black test
scores. Deficits in noncognitive skills can be explained (in a statistical
sense) by adverse early environments; deficits in cognitive skills are less easily
eliminated by the same factors.

Effective social policy designed to eliminate racial and ethnic inequality
for most minorities should focus on eliminating skill gaps, not on
discrimination in the workplace of the early twenty-first century. Interventions targeted
at adults are much less effective and do not compensate for early
deficits. Early interventions aimed at young children hold much greater
promise than strengthened legal activism in the workplace.

Daron Acemoglu acaba de ganar la medalla JBC… lo cual es una buena noticia
para el campo de economía política:

http://www.vanderbilt.edu/AEA/JohnBatesClarkMedal.htm

“Acemoglu is an extremely broad and productive economist. He has made
valuable contributions to several distinct fields, starting with labor
economics, and successively moving to macroeconomics, institutional
economics, and political economy. His most recent work on the role of
institutions in development and in political economy is especially
innovative, and has already had a large impact on research in these areas.
Although Acemoglu is primarily a theorist, his work is always motivated by
real-world questions that arise when facts are difficult to reconcile with
existing theory.

(…)
The Role of Institutions in Economic Development and Political Economy

Acemoglu has several papers that argue that institutions play a more
prominent role in development than was generally accepted. His 2002 QJE
paper with Johnson and Robinson argues that countries that were relatively
rich in 1500 are now relatively poor, a point that is inconsistent with the
view that geography is destiny. The argument, supported by empirical
evidence, is that this is due to colonizing countries treating rich and
densely populated countries differently from poor and sparsely populated
countries. In the former, they followed policies of extracting wealth and in
the latter they followed policies that encouraged investment. Acemoglu’s
2001 AER paper, also with Johnson and Robinson, uses differences in
mortality rates faced by Europeans in different countries to study further
the degree to which different policies lead to different institutions, which
in turn lead to different development paths. Some of the methods and the
conclusions of this paper are still being debated, but this line of
Acemoglu’s work has already stimulated substantial research that rethinks
the development process. In related work on political economy, for example
with Robinson in APSR 2001, he has examined the dynamics of political
processes and the persistence of inefficient policies. This work has been
influential in political science.”

Institutions, institutions, institutions. These are some references of a yet unsettled debate… But I don’t know which to include in my political economy course!

Do Institutions Cause Growth?
http://papers.nber.org/papers/W10568
Edward L. Glaeser, Rafael La Porta, Florencio Lopez-de-Silane, Andrei Shleifer
NBER Working Paper No. 10568 (Issued in June 2004)
—- Abstract —–
We revisit the debate over whether political institutions cause economic growth, or whether, alternatively, growth and human capital accumulation lead to institutional improvement. We find that most indicators of institutional quality used to establish the proposition that institutions cause growth are constructed to be conceptually unsuitable for that purpose. We also find that some of the instrumental variable techniques used in the literature are flawed. Basic OLS results, as well as a variety of additional evidence, suggest that a) human capital is a more basic source of growth than are the institutions, b) poor countries get out of poverty through good policies, often pursued by dictators, and c) subsequently improve their political institutions.

Income and Democracy
Daron Acemoglu, Simon Johnson, James A. Robinson and Pierre Yared
February 2005
http://econ-www.mit.edu/faculty/download_pdf.php?id=1090

Institutions as the Fundamental Cause of Long-Run Growth
Daron Acemoglu, Simon Johnson and James A. Robinson – April 2004
http://econ-www.mit.edu/faculty/download_pdf.php?id=947

Forms of Democracy, Policy and Economic Development
Torsten Persson
http://www.nber.org/papers/w11171

“Homes owned by real estate agents sell for about 3.7 percent more than
other houses and stay on the market about 9.5 days longer, even after
controlling for a wide range of housing”

¿Y eso es mucho o poco?

Market Distortions when Agents are Better Informed: The Value of Information
in Real Estate Transactions

Steven D. Levitt, Chad Syverson
NBER Working Paper No. w11053

Issued in January 2005
http://papers.nber.org/papers/W11053

—- Abstract —–
Agents are often better informed than the clients who hire them and may
exploit this informational advantage. Real-estate agents, who know much more
about the housing market than the typical homeowner, are one example.
Because real estate agents receive only a small share of the incremental
profit when a house sells for a higher value, there is an incentive for them
to convince their clients to sell their houses too cheaply and too quickly.
We test these predictions by comparing home sales in which real estate
agents are hired by others to sell a home to instances in which a real
estate agent sells his or her own home. In the former case, the agent has
distorted incentives; in the latter case, the agent wants to pursue the
first-best. Consistent with the theory, we find homes owned by real estate
agents sell for about 3.7 percent more than other houses and stay on the
market about 9.5 days longer, even after controlling for a wide range of
housing characteristics. Situations in which the agent’s informational
advantage is larger lead to even greater distortions.

Más sobre red states vs. blue states:

http://www.marginalrevolution.com/marginalrevolution/2005/04/rich_state_poor.html

Rich Man, Poor Man; Rich State, Poor State

Statistical Modeling, Causal Inference, and Social Science is one of my favorite new blogs. It is primarily written by Andrew Gelman, a professor in the Departments of Statistics and Political Science at Columbia University.

A recent post looks at the difference between red and blue states and red and blue individuals. We all know that in the recent election poorer states tended to vote Republican while richer states tended to vote Democrat. On the basis of the famous maps many people jumped to the conclusion that poorer individuals were voting Republican (Nascar Republicans) while richer individuals were voting Democrat (trust fund Democrats). But the inference is a fallacy, the ecological fallacy. In fact, high-income individuals, as opposed to high-income states, vote Republican with greater likelihood than low-income individuals (the effect is not huge and it may be declining but it is significant).

It’s even true that rich counties tend to vote Republican with greater likelihood than poorer counties. Gelman links to this graph which nicely illustrates the ecological fallacy. The three lines show that within each state higher-income counties are more likely to vote Republican but when you look between states the correlation between income and voting Republican is negative. (Click to enlarge).