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Do coffee drinkers live longer?

Simon Hedlin Larsson — Sat, 19 May 2012 18:14:25 +0000

An interesting study published in The New England Journal of Medicine finds that coffee drinking among the study’s participants was associated with lower risks of mortality. The study does, however, not reveal whether the suggested relationship is a casual one or simply a correlation. If coffee drinking would have an inverse impact on mortality, it is possible that it affects the brain in a positive way. But it is also plausible that healthy persons for some reason have higher coffee-intakes. Or that coffee drinking correlates with exercising, thus having an indirect effect on mortality.

Simon Hedlin Larsson

O Brothers, Where Art Ye? Young men are leaving the US labour force

Simon Hedlin Larsson — Tue, 08 May 2012 22:24:08 +0000

Following April’s jobs report, there has been much discussion about America’s declining labour force participation rate. Brad DeLong, for instance, writes:

Given the current state of the employment-to-population ratio, we would predict that the current labor-force participation rate would be 1.5% points below its natural rate. That gives us a predicted labor-force participation rate today of 64.3%-64.7%. Instead, our labor-force participation rate is 63.6%.

That is a gap of 0.7%-1.1% points of the adult population: people who really ought to be in the labor force right now, but who are not.

Evan Soltas breaks down the numbers of the decline according to various factors, including gender. And as many people, for instance Mark J. Perry, have noted, the decline in the labour force participation rate is partly due to the fact that men are leaving the labour market.

Mike Konczal quotes Ben Bernanke saying that we are “no longer getting increased participation from women /…/ society ages and also, for other reasons, male participation has been declining over time.”

Catherine Rampell reaches the same conclusion:

The main reason the labor force has been declining in the last couple of decades, then, is that men have been dropping out in droves.

Rampell has posted two interesting graphs, where the first shows the labour force participation rate among adults aged 25-54, and the second shows the long-term trend of men aged 25-54 leaving the labour market.

The following figures take off where her second graph ends, focusing on the differences for men in various age groups:

This chart shows foremost two things: 1) the labour force participation rate varies widely between the age groups, and 2) the only age group for which we find a large decline is men aged 15-24.

If we draw another graph using 1990 as an index year, the second point becomes clearer:

So for two age groups, the labour force participation rates among men have actually increased over time, for two other groups they have – in relative terms – decreased a little, and for the youngest men it has declined severely compared with 1990. Here it is also interesting to note the clear positive relationship between age and change in labour force participation rate.

But what about the youth? Pete Seeger’s old lyrics do indeed come in handy here: “Where have all the young men gone?”

(Feel free to use all figures in this post as you wish.)

Simon Hedlin

From Here to Austerity

Simon Hedlin Larsson — Tue, 08 May 2012 19:04:34 +0000

There is now not only a debate on whether austerity for Europe is good or not, but also on whether austerity in Europe exists or not. In a blog post by Veronique de Rugy at the Mercatus Center titled ‘Fiscal Austerity in Europe Doesn’t Mean Large Spending Cuts‘, she claims that many European countries “haven’t significantly reduced spending since “austerity” supposedly started in 2008″. Ryan Avent at The Economist did then writte a reply titled ‘Yes, there is austerity‘ in which he argues that “[t]he supposed absence of austerity in Ms de Rugy’s figures is mostly a product of poor graph scaling and a reliance on nominal, absolute figures”.

The following graph takes a slightly other approach to the issue, and shows not just what is today, but also what is expected tomorrow:

(Feel free to use this figure for your own purposes, but please do not forget to mention this blog as the source.)

Simon Hedlin

Gone with the Wind: America’s vanishing labour force

Simon Hedlin Larsson — Sun, 06 May 2012 13:20:19 +0000

At first, the falling unemployment rate in the United States may have seemed to be only positive news when the April numbers were released a few days ago. However, as Mark Gongloff at Huffington Post noted, the decline was partly because the labour force participation rate “dropped to 63.6 percent, the lowest since December 1981″. In fact, even in absolute numbers, the American labour force is currently shrinking. The Economist makes the same correct analysis, and points out that compared with the Congression Budget Office’s (CBO) estimate back in 2008, the actual size of the labour force in 2012 is smaller by five million people :

True, the slide in the unemployment rate – a full percentage point since September – owes mostly to rising employment (as measured by the household survey). But the decline in unemployment has been helped by the failure of the labour force to grow more quickly. /…/ Yet in January, 2008, the Congressional Budget Office reckoned it would be some 5m larger by now, or 159.5m /…/”

In addition to a slow-growing labour force with a falling labour force participation rate, there is another growing problem: a relatively smaller potential workforce.

In last week’s issue of The Economist, there was an interesting article about the United States and China. It metaphorically hypothesized that had China been dipped in the river Styx to be given invulnerability, the country would perhaps had been “held” in its demography:

Alongside the other many problems it faces, China too has its deadly point of unseen weakness: demography. /…/ Between 2010 and 2050 China’s workforce will shrink as a share of the population by 11 percentage points, from 72% to 61%—a huge contraction, even allowing for the fact that the workforce share is exceptionally large now. That means China’s old-age dependency ratio (which compares the number of people over 65 with those aged 15 to 64) will soar. At the moment the ratio is 11—roughly half America’s level of 20. But by 2050, China’s old-age ratio will have risen fourfold to 42, surpassing America’s.

True, China’s demographic prospects from an economic viewpoint do indeed look glum. Considering several important factors such as population growth, median age and old-age dependency rate, America’s position does in comparison look better. But it is important to note the “in comparison”, because as stated, America has its own demographic issues. And aside from the fact that the labour force participation rate is falling, the number of persons in working-age (aged 15-64) in relation to the number of children and seniors is rapidly contracting, as this graph shows.

(Feel free to use this figure for your own purposes, but please do not forget to mention this blog as the source.)

So to sum up this post in three points:

1) America’s labour force is growing at a slower rate
2) America’s labour force participation rate is falling
3) America’s potential labour force (persons in working-age) is shrinking relative the size of the rest of the population

1) implies slower economic growth, 2) means fewer workers are active on the labour market relative to the number of people who are likely to need support, and 3) will likely make the effects of 2) worse.

Hypothetically, with a faster growing labour force and a constant labour force participation rate, 3) alone would still constitute a worrying development. Thus, if these three issues are not taken seriously, America might really be heading for trouble.

Simon Hedlin

Track and yield: all students benefit from teaching at one’s own level

Simon Hedlin Larsson — Sat, 05 May 2012 20:05:58 +0000

The leader of the Swedish Social Democrats, Stefan Löfven, says that he wants to make it Swedish law that student groups are mixed so that the most ambitious students should be prevalent in all school classes. The reason, he argues, is that it would reduce inequality. It seems as the main issue according to Löfven is performance inequality amongst students – not the fact that many students underperform.

Either way, he ought to read Esther Duflo et al. (2011) ‘Peer Effects, Teacher Incentives, and the Impact of Tracking: Evidence from a Randomized Evaluation in Kenya’, American Economic Review, 101 (5): 1739-1774. This paper demonstrates well through which mechanisms and under what circumstances tracking students may just benefit everybody:

“This paper provides experimental evidence that students at all levels of the initial achievement spectrum benefited from being tracked into classes by initial achievement. /…/ Together, these results suggest that peers affect students both directly and indirectly by influencing teacher behavior, in particular teacher effort and choice of target teaching level.”

It seems logical that the well-being of the students increases if peers are sorted into groups and classes with like-minded people who have similar ambitions and perform at a similar level. It is also likely that students will be more motivated to study if they are not way behind or way ahead the rest of the class in terms of performance. But most importantly, tracking enables teachers to adjust their level according to the needs of the group.

If all students in a school class perform more equally, the teacher will be able to teach at a level and a pace that fits most, if not all, of the students. It is therefore not surprising that Duflo et al. find in their experimental study that tracking benefits students all across the spectrum, both higher- and lower-achieving peers.

A paper by Lars Lefgren ((2004) ‘Educational Peer Effects and the Chicago Public Schools’, Journal of Urban Economics, 56 (2): 161-191) shows that schools using tracking do not have larger differences in performance between higher- and lower-achieving students, which suggests that Löfven’s proposal alone would have little or no effect on the inequality he says that he wants to fight.

There is also another argument to be made for tracking, which has been raised by Thomas Piketty: tracking could result in more resources being devoted to underachieving students, promoting a catch-up. This argument, however, is sometimes rejected by claiming that there is a trade-off. But as Duflo et al. write in another article:

It is often suggested that there is a trade-off between the value of targeting resources to weaker students, and the costs imposed on them by separating them from stronger students. We find no evidence for such a trade-off in this context.

Simon Hedlin

Not quite there yet

Simon Hedlin Larsson — Tue, 01 May 2012 19:24:11 +0000

Most people who have taken a Principles of Economics 101 course are familiar with the convergence hypothesis, i.e. that poorer economies in terms of per capita should grow at faster rates than wealthier economies eventually resulting in a convergence. Few would probably defend the absolute version of the convergence hypothesis today, but if there is somebody who does, the following graph will at least show that we are not quite there yet.

(Feel free to use this figure for your own purposes, but please do not forget to mention this blog as the source.)

Simon Hedlin

Excess or shortage of politicians?

Simon Hedlin Larsson — Thu, 19 Apr 2012 20:14:53 +0000

Should a more democratic state have more parliamentarians per capita, or does increased competition between politicians lead to better outcomes of political decision-making?

(Feel free to use this figure for your own purposes, but please do not forget to mention the source, which is this blog.)

Simon Hedlin Larsson

Red meat and mortality

Simon Hedlin Larsson — Wed, 18 Apr 2012 15:50:01 +0000

A new study published in Archives of Internal Medicine ((2012) ‘Red Meat Consumption and Mortality: Results From 2 Prospective Cohort Studies’, 172 (7): pp. 555-563) links red meat to higher mortality. Red meat consumption was found to be associated with increased risk of cardiovascular disease (CVD) and cancer mortality. Compared with some other studies, however, the results of this one may not comfort vegetarians and vegans as it did not find an increase in mortality for consumption of either fish or poultry. Read more about the study here.

Simon Hedlin Larsson

Linear projection of Europe’s spending on the Common Agricultural Policy (CAP)

Simon Hedlin Larsson — Tue, 17 Apr 2012 16:58:27 +0000

The data used could be found here and here.

(Feel free to use this figure for your own purposes, but please do not forget to mention the source, which is this blog.)

Simon Hedlin Larsson

“Du måste kunna berätta en historia”

Simon Hedlin Larsson — Sun, 15 Apr 2012 08:52:00 +0000

Idag publiceras en artikel i Dagens Nyheter (Jobbdelen, s. 6-7) om ett lunchmöte där jag i egenskap av nationalekonomistudent ställde frågor till Annika Winsth på Nordea om vad en chefekonom gör.

Simon Hedlin Larsson