Sunday, February 24, 2013

Education et croissance

Une lecture recommandée en français, pour une fois. Il s'agit d'un article de vulgarisation de David de la Croix (UCL, Belgique) sur Education et croissance, accessible ici.

Abstract

Les personnes plus éduquées ont en moyenne un meilleur salaire et de meilleures chances de trouver un emploi. Au niveau macroéconomique, les pays et régions avec une population mieux éduquée ont un niveau de PNB par habitant plus grand. Est-il vrai pour autant qu’une politique éducative volontariste, par  exemple en accroissant les budgets alloués à l’enseignement, se traduise par davantage de croissance et permette de combler un retard de développement dont souffrirait un pays ou une région donnée?

L'accent est mis sur la Belgique, mais les résultats devraient intéresser l'ensemble des Européens. Le taux de rendement privé de l'éducation est estimé à 8.5% en Belgique (les bénéfices sont à la fois un revenu d'activité plus élevé et une chance plus élevée de trouver un emploi). Les différences entre provinces au sein du pays reflètent principalement l'effet sur la probabilité d'emploi. L'article calcule également comment certaines politiques publiques (comme l'assurance chômage) affectent ce rendement.

L'auteur poursuit:

"Là où il y a davantage de controverses, c’est sur la manière dont le système éducatif doit s’y prendre pour favoriser l’éducation et son rendement. De ma lecture de la littérature sur le sujet, je retiendrais que, contrairement à ce que l’on pourrait attendre, les moyens budgétaires et le taux d’encadrement ne sont pas des facteurs particulièrement importants, mais que, au contraire, la qualité des enseignants et l’autonomie donnée aux écoles sont essentiels, du moins dans les pays développés."


Autres morceaux choisis:

Face à l’unanimité entourant les effets microéconomiques de l’éducation, le monde politique pourrait être tenté de conclure qu’il suffit d’accroître l’investissement éducatif pour générer de la croissance. Or, ce n’est apparemment pas si simple. L’éducation ne se décrète pas. D’après Easterly, pour obtenir un effet sur la croissance, il est essentiel de développer les bons incitants auprès des acteurs de l’éducation : pour les élèves, pour les enseignants, et pour les parents. C’est seulement sous cette condition qu’une politique d’expansion de l’éducation pourra avoir les effets espérés. Des objectifs administratifs tels que d’atteindre un tel taux de fréquentation scolaire (pour un pays en développement), ou tel taux de redoublement (pour un pays développé), ne créent pas en soi les incitants à investir dans ce qui va générer de la croissance
(...)
La littérature récente sur le lien entre éducation et croissance incorpore depuis quelques années une telle notion, mesurée par les scores obtenus aux tests internationaux en mathématiques et en sciences, comme les tests de l’OCDE PISA. La corrélation entre ces mesures de qualité du capital humain et la croissance est positive, forte, et robuste.
(...)
Avoir le niveau de qualité de la Finlande plutôt que celui de la moyenne de l’OCDE procure un avantage de croissance de 0.87% chaque année. Cumulé sur quelques années, l’écart de niveau de vie généré par ce différentiel de croissance devient rapidement impressionnant. Le coût d’un système éducatif de mauvaise qualité devient donc très vite exorbitant.

Bref, une lecture à recommander (entre autre) à notre Président Hollande...

Economic history at its best

Economic history as I love it (and not only because of the many political economy explanations ;-) :


Douglas A. Irwin*
* Irwin is a Research Associate in the NBER's International Trade and Investment and Development of the American Economy Programs, and a Professor of Economics at Dartmouth College. His "Profile" appears later in this issue.

In the wake of the contentious debate over the North American Free Trade Agreement and the Clinton administration's failure to obtain fast-track negotiating authority from the Congress, there are growing fears that domestic political support for liberal U.S. trade policies may be waning. It remains to be seen, however, whether globalization will unleash forces that will further erode the postwar bipartisan consensus in favor of an open trade regime and shift policies onto a more protectionist track.

The renewed debate over the future direction of U.S. trade policy, however, provides an opportune moment to reexamine the history of those policies. In a series of recent papers, I have explored the historical evolution of U.S. trade policy to investigate the role of protectionist policies in America's past and to understand the origins of the move toward a more liberal trade policy stance since World War II.

A Tariff Laffer Curve?
The Civil War marked the beginning of a long period of high U.S. tariffs. These tariffs served the dual purpose of raising revenue for the federal government and keeping out foreign goods, ostensibly for the protection of U.S. labor and business. After the war, tariffs (which generated roughly half of government revenue) remained high to service the enormous debt burden that resulted from the war. Yet by the mid-1880s a curious problem had arisen: though much of the debt had been paid off, federal revenues were outstripping expenditures by as much as 50 percent.

Republican and Democratic politicians agreed that the fiscal surplus should be reduced, but they proposed exactly the opposite policies for achieving this objective. Democrats advocated cutting tariff rates in an effort to reduce revenue. Arguing that this would simply encourage imports and raise even more revenue, Republicans proposed higher tariff rates to reduce fiscal revenue. This debate over the tariff "Laffer curve" essentially hinged on whether existing tariffs were above or below the revenue-maximizing rate, which in turn depended on the height of the tariff and the price elasticity of import demand. My estimates of these parameters indicate that the average tariff was below its revenue-maximizing rate; therefore, a tariff reduction would have been an appropriate policy for reducing revenue. Evidence from the McKinley tariff of 1890 supports this finding.(1)

Voting to Protect Infant Industries?
The tariff was an important, and highly partisan, political issue during the late nineteenth century. Republicans supported high protective tariffs and Democrats endorsed moderate tariffs for revenue purposes only. This partisan conflict came to a head in what became known as the Great Tariff Debate of 1888. After President Grover Cleveland devoted his entire State of the Union message to an attack on high tariffs, the presidential campaign of 1888 was contested primarily on the tariff issue. Cleveland won more popular votes than his Republican rival, Benjamin Harrison, but Harrison received more electoral votes; as president, he signed the McKinley tariff of 1890. Although political historians stress that ethnic and religious factors determined electoral behavior during this period, I find that state voting patterns are more consistent with constituent economic interests. Because cotton accounted for one third of U.S. exports, cotton-producing states voted overwhelmingly for the Democrats. The Republicans drew their electoral support from Northern states, which were home to many import-competing manufacturers.(2)

The United States rapidly industrialized during this high-tariff period and for the first time became a net exporter of manufactured goods. Were high tariffs responsible for the growth of manufacturing since they protected infant industries from foreign competition? The tinplate industry often has been singled out as the best practical example of infant industry protection. Unlike most other manufacturers, tinplate producers did not receive significant protection after the Civil War, and the United States did not produce tinplate for most of this period. After receiving protection in 1890, however, the industry grew rapidly and U.S. prices soon fell below those prevailing in Britain, previously the major source of consumption.

My analysis of this proposed infant industry explicitly considers the counterfactual: What would have happened to the tinplate industry in the absence of protection? My results suggest that, without protection, the United States would have seen domestic tinplate production about a decade later anyway because of the fall in the domestic price of iron and steel inputs, which comprised almost two thirds of tinplate production costs. The earlier failure of the tinplate industry was attributable to the negative effective protection resulting from high tariffs on iron inputs, which severely compromised the competitive position of prospective producers. Dynamic scale economies in the form of learning by doing, by contrast, appear limited. To the extent that learning economies existed, they spilled over easily from Britain through the migration of skilled labor. A tinplate tariff would have been a fourth-best industry policy to offset the distorted domestic price of iron inputs, but the actual tariff applied was not optimally set and thus reduced economic welfare.(3)

Smoot-Hawley and the Great Depression
Although Democrats introduced a brief period of lower tariffs in 1913 (along with an income tax to create a revenue alternative to the tariff), Republican protectionism reemerged after World War I when high tariffs were imposed again. The tumultuous interwar years were marked by the excesses of protectionism and a later shift toward free trade.(4) The Smoot-Hawley Act of 1930, perhaps the most infamous tariff in U.S. history, raised import duties to high levels on the eve of the Great Depression. Contrary to many assertions, however, Smoot-Hawley accounted for only a small part of the large decline in U.S. trade in the early 1930s. Smoot-Hawley raised the average tariff from 40.7 percent to 47 percent, roughly a 20 percent increase in rates, which translates into just a 5 to 6 percent increase in the relative price of imports. Using estimates of the price elasticity of U.S. import demand for this period, I conclude that the initial Smoot-Hawley duties were responsible for a 4 to 8 percent decline in import volume, a small part of the observed 40 percent decline.(5)

However, most of the Smoot-Hawley tariffs were specific, not ad valorem, duties. The steep price deflation after 1930 significantly raised the ad valorem equivalent of the Smoot-Hawley duties, and by 1932 the average tariff on dutiable imports reached nearly 60 percent. When this deflationary effect on tariffs is taken into account, the higher effective tariff explains nearly one quarter of the observed drop in imports in the early 1930s.

In joint work with Randall S. Kroszner, I have also investigated the political factors behind the passage of Smoot-Hawley. Several previous studies examined Congressional voting patterns on the Smoot-Hawley tariff; they concluded that, because the final House and Senate votes were almost straight "party line," it was simply a partisan matter. In contrast, we examine the numerous Senate roll call votes on tariff rates for individual commodities. We find that votes for higher tariffs were not strictly the result of partisan factors, but were related to nonpartisan log-rolling (or vote trading) among different economic interests.(6) This supports the contention that the institutional structure of Congressional decisionmaking was biased in favor of protection-seeking interests, thus resulting in relatively high tariffs.

From Isolationism to Internationalism
If Congress was inherently biased in favor of high tariffs, how did the United States achieve trade liberalization? U.S. trade policy began an initial shift toward a more open stance after the traditionally moderate-tariff Democrats gained control of the legislative and executive branches in 1933. In 1934, the Democrats enacted the Reciprocal Trade Agreements Act (RTAA), an important piece of legislation that set the stage for current U.S. trade policy. The RTAA allowed the president to negotiate tariff-reduction agreements with other countries without obtaining Congressional approval (although the RTAA itself required periodic renewal). Under the authority of the RTAA, the executive reached numerous bilateral trade agreements in the late 1930s and, in the immediate postwar period, negotiated the General Agreement on Tariffs and Trade (GATT), which remains the principal framework of the world trading system today.(7)

Because ultimate authority over trade policy still resided with Congress, however, the shift toward trade liberalization was not secure until the traditionally protectionist Republicans could be persuaded to support the RTAA. Republicans consistently rejected the RTAA through the 1930s, but began to change their position in the mid-1940s. In joint work with Kroszner, I have investigated the reasons for the shift. We find that it came not from an ideological change in favor of a liberal trade policy, but from a new configuration of constituent economic interests and changes in institutional incentives arising from the RTAA.(8) After World War II had eliminated competition from many foreign producers, domestic manufacturers supported trade agreements to obtain access to foreign markets. The RTAA itself also shifted the political balance of power toward export interests at the expense of import-competing interests. By directly tying lower foreign tariffs to lower domestic tariffs, the RTAA encouraged exporters to organize politically to oppose high tariffs and support international trade agreements.

Higher Prices, Lower Tariffs
The use of specific duties in the U.S. tariff code (referred to earlier) played an important role in bringing about the postwar tariff reductions. In the century after the Civil War, import price fluctuations had important effects on the ad valorem equivalent of those duties. Between 1865 and 1967, according to my estimates, a 10 percent increase in import prices would reduce average tariffs by about 6.5 percent. Deflation served to increase tariffs in the early 1930s, and substantial inflation during and after World War II served to erode specific duties. I find that three quarters of the decline in average tariffs between 1932 and the early 1950s - when tariffs fell from nearly 60 percent to almost 10 percent - was attributable to higher import prices.(9)

The lower postwar U.S. tariffs usually are attributed to cuts in tariff rates resulting from negotiations undertaken as a result of the RTAA, principally the GATT, which was formed in 1947. Yet these results suggest that only a small fraction of the tariff decrease came as a consequence of bilateral and multilateral trade negotiations. The importance of the GATT and the agreements it has fostered cannot be measured in terms of reducing U.S. tariffs, perhaps, but in strengthening the vested interests that have a stake in perpetuating open trade policies. The GATT has provided an institutional means of giving stability and credibility to such policies by making their reversal more costly.(10)

The postwar period has been marked by a broad, bipartisan consensus in favor of trade liberalization, which only recently has shown signs of fraying. Just as the creation of an open trading system depended on changes in underlying economic interests and the institutional framework in which those interests were played out, any unraveling of that system will depend on those same factors.

Endnotes
1. D.A. Irwin, "Higher Tariffs, Lower Revenues? Analyzing the Fiscal Aspects of the 'Great Tariff Debate of 1888,'" NBER Working Paper No. 6239, October 1997; published in Journal of Economic History, 58 (March 1998), pp. 59-72.
2. D. A. Irwin, "Voting for Protection? Tariff Politics and the Presidential Election of 1888," NBER Working Paper, forthcoming.
3. D.A. Irwin, "Did Late Nineteenth Century U.S. Tariffs Promote Infant Industries? Evidence From the Tinplate Industry," NBER Working Paper No. 6835.
4. For an analysis of the impact of interwar preferential trade arrangements on world trade, see B. Eichengreen and D.A. Irwin, "Trade Blocs, Currency Blocs, and the Reorientation of World Trade in the 1930s," Journal of International Economics, 38 (February 1995), pp. 1-24.
5. D.A. Irwin, "The Smoot-Hawley Tariff: A Quantitative Assessment," NBER Working Paper No. 5509, March 1996; published in Review of Economics and Statistics, 80 (May 1998), pp. 326-34.
6. D.A. Irwin and R.S. Kroszner, "Logrolling and Economic Interests in the Passage of the Smoot-Hawley Tariff," NBER Working Paper No. 5510, March 1996; published in Carnegie Rochester Conference Series on Public Policy, 45 (December 1996), pp. 176-200.
7. D.A. Irwin, "From Smoot-Hawley to Reciprocal Trade Agreements: Changing the Course of U.S. Trade Policy in the 1930s," NBER Working Paper No. 5895, January 1997; published in The Defining Moment: The Great Depression and the American Economy in the Twentieth Century, M.D. Bordo, C. Goldin, and E.N. White, eds. Chicago: University of Chicago Press for the NBER, 1998.
8. D.A. Irwin and R.S. Kroszner, "Interests, Ideology, and Institutions in the Republican Conversion to Trade Liberalization, 1934-1945," NBER Working Paper No. 6112, July 1997.
9. D.A. Irwin, "Changes in U.S. Tariffs: Prices or Policies?" NBER Working Paper No. 5665, July 1996; published as "Changes in U.S. Tariffs: The Role of Import Prices and Commercial Policies," American Economic Review, 88 (September 1998), pp. 1015-26.
10. D.A. Irwin, "The GATT's Contribution to Economic Recovery in Post-War Europe," in Europe's Postwar Growth, B. Eichengreen, ed. New York: Cambridge University Press, 1995.

A gift for eternal truths is as dangerous as the gift of Midas’s touch

Here is to the political economy of the Catholic church:

New Pope? I’ve Given Up Hope
by GARRY WILLS, nytimes.com
February 12th 2013

THERE is a poignant air, almost wistful, to electing a pope in the modern world. In a time of discredited monarchies, can this monarchy survive and be relevant? There is nostalgia for the assurances of the past, quaint in their charm, but trepidation over their survivability. In monarchies, change is supposed to come from the top, if it is to come at all. So people who want to alter things in Catholic life are told to wait for a new pope. Only he has the authority to make the changeless church change, but it is his authority that stands in the way of change.

Of course, the pope is no longer a worldly monarch. For centuries he was such a ruler, with all the resources of a medieval or Renaissance prince — realms, armies, prisons, spies, torturers. But in the 19th century, when his worldly territories were wrested away by Italy, Pope Pius IX lunged toward a compensatory moral monarchy.

In 1870, he elicited — from a Vatican council he called and controlled — the first formal declaration that a pope is infallible. From that point on, even when he was not making technically infallible statements, the pope was thought to be dealing in eternal truths. A gift for eternal truths is as dangerous as the gift of Midas’s touch. The pope cannot undo the eternal truths he has proclaimed.

When Pope Paul VI’s commission of learned and loyal Catholics, lay and clerical, reconsidered the “natural law” teaching against birth control, and concluded that it could not, using natural reason, find any grounds for it, Cardinal Alfredo Ottaviani, the secretary of the Holy Office, told Paul that people had for years, on papal warrant, believed that using a contraceptive was a mortal sin, for which they would go to hell if they died unrepentant. On the other hand, those who followed “church teaching” were obliged to have many children unless they abstained from sex. How could Paul VI say that Pius XI, in his 1930 encyclical Casti Connubii, had misled the people in such a serious way? If he admitted it, what would happen to his own authority as moral arbiter in matters of heaven and hell? So Paul VI doubled down, adding another encyclical in 1968, Humanae Vitae, to the unrenounceable eternal truths that pile up around a moral monarch.

In our day, most Catholics in America have reached the same conclusion that Paul VI’s commission did. But successive popes have stuck by Pius and Paul and have appointed bishops who demonstrate loyalty on this matter. That is why some American bishops in the recent presidential election said that President Obama was destroying “religious liberty” if his health plan insured funds for contraception. Nonetheless, more Catholics voted for Mr. Obama than didn’t. In a normal government, this disconnect between rulers and ruled would be negotiated. But eternal truths are nonnegotiable.

Wistful Catholics hope that on this and other matters of disagreement between the church as People of God and the ruling powers in the church, a new pope can remedy that discord. But a new pope will be elected by cardinals who were elevated to office by the very popes who reaffirmed “eternal truths” like the teaching on contraception. They were appointed for their loyalty, as were the American bishops who stubbornly upheld the contraception nonsense in our elections.

Will the new conclave vote for a man who goes against the teachings of his predecessors? Even if they do, can the man chosen buck the structure through which he rose without kicking the structure down? These considerations have given the election of new popes the air of watching Charlie Brown keep trying to kick the football, hoping that Lucy will cooperate.

As this election approaches, some hope that the shortage of priests, and their damaged reputation and morale, can be remedied by adding married priests, or women priests, or gay priests. But that misses the point. Whatever their sexual status, they will still be priests. They will not be chosen by their congregations (as was the practice in the early church). They will be appointed from above, by bishops approved for their loyalty to Rome, which will police their doctrinal views as it has with priests heretofore. The power structure will not be changed by giving it new faces. Monarchies die hard.

In 1859, John Henry Newman published an article that led to his denunciation in Rome as “the most dangerous man in England.” It was called “On Consulting the Faithful in Matters of Doctrine” and it showed that in history the laity had been more true to the Gospel than the hierarchy. That was an unacceptable position to Rome. It still is. Pope Benedict XVI, when he was still Cardinal Joseph Ratzinger, was asked if it did not disturb him that Catholics disagreed with the rulings of Rome. He said no — that dogma is not formed by majority rule. But that is precisely how it was formed in the great councils like that at Nicaea, where bishops voted to declare dogmas on the Trinity and the Incarnation. There was no pope involved in those councils. Yet they defined the most important truths of the faith.

Jesus, we are reminded, said to Peter, “You are Peter, and upon this rock I will build my church.” But Peter was addressed as a faithful disciple, not as a priest or a pope. There were no priests in Peter’s time, and no popes. Paul never called himself or any of his co-workers priests. He did not offer sacrifice. Those ideas came in later, through weird arguments contained in the anonymous Epistle to the Hebrews. The claim of priests and popes to be the sole conduits of grace is a remnant of the era of papal monarchy. We are watching that era fade. But some refuse to recognize its senescence. Such people will run peppily up, like Charlie Brown, to the coming of a new pope. But Lucy, as usual, still holds the football.

Garry Wills is the author, most recently, of “Why Priests? A Failed Tradition.” For a review of his book, see here.

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Relax! You’ll Be More Productive

I dedicate this New York Times article to my colleague from across the hall, and specifically this passage:


Daytime naps have a similar effect on performance. When night shift air traffic controllers were given 40 minutes to nap — and slept an average of 19 minutes — they performed much better on tests that measured vigilance and reaction time.

Longer naps have an even more profound impact than shorter ones. Sara C. Mednick, a sleep researcher at the University of California, Riverside, found that a 60- to 90-minute nap improved memory test results as fully as did eight hours of sleep.


And personnaly, I will try to pay more heed to the following...

MORE vacations are similarly beneficial. In 2006, the accounting firm Ernst & Young did an internal study of its employees and found that for each additional 10 hours of vacation employees took, their year-end performance ratings from supervisors (on a scale of one to five) improved by 8 percent. Frequent vacationers were also significantly less likely to leave the firm.

Sunday, February 10, 2013

Social Democratic America

An original and counter-mainstream view of the (past and) future of social policies in the US: read Lane Kenworthy's slides on Social Democratic America, where he explains why he sees a gradual expansion of social programs in the US in the next 50 years.

Tuesday, February 5, 2013

A top publication in economics is worth at least 100 000 US$

In this freakonomics podcast "Who Owns the Words That Come Out of Your Mouth?", Steve Levitt states (at 25' 40) that a top publication in economics is worth at least 100 000 US$ for a young academic. How interesting ... (by the way, I'd like to see the calculation - thanks for pointing the paper out if it exists).

The rest of the podcast is of interest as well, since it shows how (over)reaching the copyright law is in the UK (even compared to the US). The example taken is Winston Churchill, and how his estate receives roughly 40 US cents for any word pronounced by him that is published in a book...

By the way, I have recently listened to an audio class on "Winston Churchill: Man of the Century" produced by The Modern Scholar. I have found it most interesting, long enough at 7 hours to get some real feedback on the guy, but not too long as to become boring. I recommend this as a very nice introduction to Winston Churchill's life and time.