Minimum Wage and Worker Commutes

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Do minimum wage increases cause low-wage workers to commute out-of-state more? A brand new paper in Regional Science and Urban Economics answers in the affirmative. According to the Cato Institute’s blog,

[Terra McKinnish] seeks to exploit the variation in minimum wage rates between states and the compressing effect of the 2009 federal minimum wage increase to analyze whether a relative increase in a minimum wage within a state led to more commuting into that state to work for under 30s or more commuting out of the state to work.

…McKinnish employs difference-in-differences techniques to try to find the answer, using commuting records of people earning both low and modest hourly rates to control for other factors which could influence commuting, such as the health of the economy.

Upon doing all this, three key findings arise from her work:

  1. Prior to the 2009 federal minimum wage increase, there is no evidence that low-wage workers commuted at higher rates (relative to moderate-wage workers) to neighboring states with a higher minimum wage.

  2. After the federal minimum wage increase, low-wage workers modestly increased out-of-state commuting out of states most affected by the federal minimum wage increase.

  3. Moderate-wage workers reduced the rate at which they commuted out of states most affected by the federal increase following the rise in the rate (consistent with the idea that increasing minimum wages leads to employers replacing low productivity workers with higher productivity ones).

In short, “this study is further evidence to support the Econ 101 view of minimum wages.” Or, as the paper itself highlights, these “[r]esults are consistent with a disemployment effect of minimum wage increases.”

Does Imprisonment Reduce Repeated Drug Offenses?

Ha. Nope. According to a recent article in the Journal of Experimental Criminology,

Image result for drug offendersImprisonment for drug crimes as opposed to non-prison sentences such as jail stays and terms of probation was not associated with a reduction in the likelihood of recidivism. That “null” finding held for all felony drug offenders as well as for different racial, ethnic, gender, and age groups and for inmates with different punishment histories. The sole and notable exception was for whites. For white drug offenders, imprisonment—as compared to being sentenced to community sanctions such as jail, intensive probation, or probation— appeared to increase recidivism. The results of this study thus do not support the argument that prison appreciably reduces or increases recidivism for most drug offenders, but they do suggest the possibility that it may do so for white drug offenders.

These results “raise questions about the benefits that stem from tough-on-crime anti-drug legislation.”

“In short,” the authors conclude,

this study echoes other scholarship that has raised questions about the wisdom of imprisoning drug offenders if the goal is to increase public safety. That does not mean that legislation should necessarily change. Public policy reflects a range of considerations, and evidence about the effectiveness of a particular policy, such as imprisonment, on one outcome, recidivism, constitutes but one factor that may be relevant. Even so, the study adds to others in calling attention to the need to carefully assess the empirical foundation for criminal justice policy.

Politics and Populism Make Us Stupid

Political ignorance is a topic I’ve been reading up on as of late. It’s a tad depressing, if not all that surprising. A brand new Brookings paper builds off this research to argue the following:

  • Always empirically questionable at best, the populist-progressive idea that more participation will reliably improve either the products or the popularity of governance has taken a pounding in recent years, to the point where it is basically untenable. The populist model assumes that voters are better informed, more rational, and more engaged than is the case—or ever will be.
  • Even implausibly well-informed and rational voters could not approach the level of knowledge and sophistication needed to make the kinds of decisions that routinely confront the government today. Professional and specialist decision making is essential, and those who demonize it as elitist or anti-democratic can offer no plausible alternative to it.
  • Professional intermediaries make democracy more inclusive and more representative than direct participation can do by itself. In complex policy spaces, properly designed intermediary institutions can act more decisively and responsively on behalf of the public than an army of “the people” could do on its own behalf. Intermediated systems are also less likely to be paralyzed by factional disputes and distorted by special-interest manipulation than are systems designed to maximize voter participation and direct input.
  • Nonetheless, the predominant ethos of the political-reform community remains committed to enhancing individual political participation. This is a costly oversight. Some populist reform ideas are better than others, but, as a class, they have eclipsed a more promising reform target: strengthening intermediating actors such as political professionals and party organizations.

They review the literature on political ignorance to reveal the following:

  • Voters are very ignorant, and always have been.
  • Voters are ignorant because they’re rational, not because they’re stupid.
  • Voters are irrationally biased as well as rationally ignorant.
  • Providing more education or information isn’t a solution (though it’s worth doing anyway).
  • Even if voters were deeply informed and meticulously rational, elections still would not reliably tell us what the public thinks or wants.

What’s to be done? GMU law professor Ilya Somin suggests “foot voting“:

Image result for vote with feetIn many situations, the better approach to mitigating political ignorance is not to give up on empowering ordinary people, but to do so in a different way. Instead of putting our faith in political participation, we can instead give people more opportunities to “vote with their feet.”When people vote with their feet in the private sector, or by choosing which jurisdiction to live in within a federal system, they have much better incentives to acquire relevant information and use it wisely. Unlike ballot box voters, foot voters have the opportunity to make individually decisive choices that are likely to make a real difference. If you are like most people, you probably spent more time and effort acquiring information the last time you decided which TV or smartphone to buy than the last time you decided who to support for president or governor. That is likely because you knew that the decision about the smartphone would make a real difference, whereas the one about the presidency had only a miniscule chance of doing so.

We can enhance opportunities for foot voting by limiting government power and devolving it to lower levels. It is cheaper and easier to vote with your feet between states than between countries, and easier still to choose between localities or between competing alternatives in the private sector. There is also much that can be done to make foot voting easier for the poor and disadvantaged. Greater decentralization of power can also help mitigate the partisan bias and polarizatoin that both Rauch and I believe have exacerbated our political pathologies.

…I certainly do not claim that decentralization and foot voting can overcome all the dangers of political ignorance. Probably no one strategy can do that. But I think it can be be a bigger and less risky part of the solution than increasing the role of political professionals, even though there are indeed some situations where we should rely more on the latter. Be that as it may, Wittes and Rauch deserve credit for taking the problem of political ignorance seriously, and for their valuable contribution to the debate over this crucial issue.

Check both pieces out.

Are Mormon Women Depressed?

Mormon women deal with depression at higher levels because of the absurd demands placed on them by their faith and culture, right? Maybe not. Jana Riess over at Flunking Sainthood writes,

Overall, about a fifth of currently-identified Mormons say they have taken or are currently taking medication for depression—21%. The numbers are definitely higher for Mormon women than for men. 27% of women say yes, almost twice the number of Mormon men who do (14.5%). 

…[But] the rate of Mormon women suffering from depression may actually be lower than the national average for women. The data on this is inconsistent, though; Timothy Heaton’s research has indeed found that “LDS women are significantly higher in depression than non-LDS women.” So there is no consensus here.

Second, there’s a known “gender gap” between men and women in the United States where mental health is concerned—and not just in Mormonism.

According to a publication of the Harvard Medical School, women “are about twice as likely as men to develop major depression,” based on a combination of genetic, hormonal, and emotional factors (and also the fact that even if men do develop depression, they are idiots about it they are less likely than women to seek the help they need). The World Health Organization has also found that depression is twice as common in women.

Bottom line, then: Mormon women appear to struggle more than Mormon men do with depression, or at least are getting treated for it nearly twice as often. This is not, however, an unusual or Mormon-specific gender dynamic.

But what are the factors that correlate with Mormon women who seek treatment?

  • Age doesn’t matter much: younger women are a little more likely to get treatment than older women.
  • Employment matters a little bit: unemployed women not looking for work–like stay-at-home moms–were a bit more likely to get treatment than full-timers and part-timers.
  • Politics matters: Democrats are more likely to take medication than Republicans.
  • Church activity matters: “very active” members are less likely to take medication than members who are “not active at all.”
  • Beliefs matter: A quarter of women who believe “all or most Mormon teachings” compared to 1/3 of women “who doubt or find some Mormon teachings hard to believe.”
  • Family size matters: “Women who have no children at all are a little more likely to take medication for depression than women who have one, two, or three children. In families of four or more children, women are also a bit more likely take medication. Overall, the women who were least likely to take medication for depression were those with one, two, or three children.”
  • Divorce matters: “Women who were divorced were almost twice as likely as married women to have taken medication for depression (41% vs. 23%). Never-married women fall in the middle at 34%.”

As Riess concludes, “The reality is nuanced and complex.”

The Long-Term Impact of Immigrants

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“Immigration is one of the most controversial policy issues in the US and Europe today,” write the authors of a new economics paper.

The debate mostly focuses on the short-run effects of immigration: Do immigrants take jobs away from natives? Do immigrants increase pressure on public goods? Do immigrants increase crime and reduce social capital? Many researchers have attempted to address these questions by providing empirical evidence on the short-run, immediate effects of immigration (e.g. Kerr and Kerr 2016, Peri 2012, Peri and Sparber 2009, Card 2009, 2012). While understanding the short run is important, policymakers should also consider the long-run consequences if the welfare of our children and grandchildren are to matter. And yet, we know very little about the long-run impact of immigration.

In order to study this long-run impact, the researchers

examine migration into the US during America’s Age of Mass Migration (from 1850–1920) and estimate the causal effect of immigrants on economic and social outcomes approximately 100 years later (Nunn et al. 2017). This period of immigration is notable for many reasons. First, this was the period in US history with the highest levels of immigration. Second, the immigrants that arrived during this time were different from previous waves of immigrants. While earlier immigrants were primarily from western Europe, the new wave also included large numbers of immigrants from southern, northern, and eastern Europe who spoke different languages and had different religious practices (Hatton and Williamson 2005: 51, Daniels 2002: 121–137, Abramitzky and Boustan 2015).

In order to measure the effects, the authors developed “an instrumental variable (IV) strategy that exploits two facts about immigration during this period. The first is that after arriving into the US, immigrants tended to use the newly constructed railway to travel inland to their eventual place of residence (Faulkner 1960, Foerster 1969). Therefore, a county’s connection to the railway network affected the number of immigrants that settled in the county. The second fact is that the aggregate inflow of immigrants coming to the US during this period fluctuated greatly from decade to decade.”

Their findings?

We find that higher historical immigration (from 1860–1920) resulted in significantly higher incomes, less poverty, less unemployment, more urbanisation, and higher educational attainment today. The estimates, in addition to being statistically significant, are also economically meaningful. For example, according to the estimates for per capita income, moving a county with no historical immigration (i.e. during 1860–1920) to the 50th percentile of the sample (which is 0.049) results in a 20% increase in average per capita income today.

We also try to shed light on the mechanisms. We find that immigration resulted in an immediate increase in industrialisation.  Immigrants contributed to the establishment of more manufacturing facilities and to the development of larger facilities. We also found that immigrants contributed to increased agricultural productivity in the medium-run and to increased innovation, as measured by patenting rates of both immigrants and the native-born. These findings are consistent with a long-standing narrative in the historical literature suggesting that immigrants benefitted the economy by providing an ample supply of unskilled labour, which was crucial for early industrialisation. A smaller number of immigrants brought with them knowledge, skills, and know-how that were beneficial for industry and increased productivity in agriculture. Thus, by providing a sizeable workforce and a (smaller) number of skilled workers, immigration led to early industrial development and long-run prosperity, which continues to persist until today.

 

Do Immigrants Assimilate?

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“In the past,” writes one pair of economists,

new immigrants arrived from Southern and Eastern Europe, joining earlier waves of migrants from Britain, Germany and Ireland. Today, many immigrants hail from Latin America and Asia, entering a country that is already more diverse. Are fears that immigrants retain their own cultural practices and fail to fully join American society justified by the data?

In recent work with our co-author Katherine Eriksson, we study the cultural assimilation of immigrants during the Age of Mass Migration (1850-1913), during which 30 million migrants moved from Europe to the US (Abramitzky et al. 2016). We trace out a ‘cultural assimilation profile’ with time spent in the US, using changes in the foreignness of names that immigrant parents selected for their children as a measure of cultural adaptation. Children’s names offer an attractive measure of the assimilation process, both because names carry cultural content and because naming is a pure choice for immigrant parents, unconstrained by financial limitations or by discrimination on the part of natives. In particular, we measure the relative probability that each first name was held by a foreigner versus a native in the 1920 Census, and use this to construct a Foreignness Index, a measure between zero (name only held by natives) and one (name only held by foreigners).

By this measure, we find that recent immigrants gave their children more foreign names than did long-standing immigrants, which we take to be evidence of cultural assimilation with time spent in the US.

This change in names yielded benefits for the children of immigrants:

We link over a million children of immigrants across historical Censuses from their childhood families in 1920 into adulthood in 1940, and find that children with less foreign names completed more years of schooling, earned more and were less likely to be unemployed. Children with less foreign names were also less likely to marry a spouse who was born abroad or who had a very foreign name herself.

To summarize,

Despite arriving with a distinct set of cultural practices (proxied here by name choices), immigrants closed half of their cultural gap with natives after 20 years in the US. By 1930, more than two-thirds of immigrants had applied for US citizenship and almost all reported some ability to speak English. A third of first-generation immigrants who arrived in the US before marrying and more than half of second-generation immigrants married spouses from different origins.

I’m really not all that worried about cultural diversity. But for those who are, looks like you don’t have much to fear from immigrants.

Full Moral Alchemists

Caring about a loved one’s seemingly non-moral values may in fact moralize them according to a new study. The authors explain,

[W]e believe that many of our everyday moral anxieties center on cases where there is a conflict between our belief in any proposition (including morally neutral ones) and our belief that actions consistent with that proposition will upset someone we love. It is in this sense that love can lead to what we will call moral alchemy: caring for others (and indeed the moral obligation to do so) allows propositions with little or no moral weight in themselves to become morally charged. To be very clear, our hypothesis is distinct from the claim that our moral values depend on the values of our close others; many researchers have investigated the degree to which our sense of moral value is affected by moral contagion, or social affiliation (see e.g., Eskine, 2013; Haan et al., 1968; Haidt and Hersh, 2001 ;  Hofmann et al., 2014). Here we are interested in cases where although our own opinion about the actual rightness or wrongness of the behavior may remain unchanged, we nonetheless assign the behavior an elevated moral status.

They provide the following examples:

We will start with a trivial example: the moral status of Pogs. (For those of you who were neither a parent nor child in the 1990’s, Pogs are collectible colored disks, originally from bottle caps.) Clearly in the world at large, if someone steps on a Pog, uses one to prop up a table leg, or publically disparages them on national TV, he is morally blameless. He is morally blameless even if he knows that Pogs are valued by millions of school children in his culture. Suppose however, your child comes up to you and says, ‘‘Pogs are the best thing ever.” Most of us would be (morally) appalled if you replied, ‘‘Pogs are stupid” and snapped a Pog in two.

Of course what is bad in this example is hurting your child’s feelings, not hurting Pogs. Nonetheless, we suggest that the effect of moral alchemy is to (locally) change the moral status of Pogs. You cannot disregard them as objects worthy of care and attention without insufficiently valuing your child’s values…All that matters is that you knew he cared about Pogs and you did not take his utilities as your own. Note that this is neither moral contagion nor moral duplicity: you do not adopt your child’s attitude of valuing Pogs for their own sake but neither do you merely act ‘‘as if” you care about Pogs when you do not. Rather, insofar as, and for as long as, failing to care about Pogs would be hurtful to your child, you represent Pogs as objects worthy of care (e.g., you would likely feel guilty about intentionally destroying a Pog, even in private).

…It is after all, uncontroversial that people value idiosyncratic things and that morality requires respecting things that others value. However, we suggest that taken together, these commonplaces of human psychology play a key and underappreciated role in real life moral dilemmas, moral learning and moral change. Consider a proposition less trivial than ‘‘Pogs are the best thing ever.” Consider ‘‘Academic achievement is important.” For the sake of argument, let’s presume that within a given cultural context, this counts as a value but not a moral one: everyone concerned accepts that mediocre students can be morally unimpeachable. Suppose however, that your parents are among those who care about this (non-moral) value. If you underachieve in school, rip up your homework, and refuse to study for tests, are those moral transgressions or not?

The researchers tested the hypothesis that non-moral concerns could be moralized based on close relationships with the following steps:

• participants rated how much they cared about a set of behaviors.

• Next they rated how much a close other or an acquaintance cared about different items from the set.

• On a third set of items, they rated “how most people” would judge the behavior.

• Experiment 1 looked at permissibility judgments.

• Experiment 2 looked at whether the behavior was seen as a norm, value, or moral.

Their results?

Experiment 1 suggested that failing to engage in a behavior is perceived as “more wrong” by third parties when someone you care about cares more about the behavior than you do. Experiment 2 suggests that the behavior may also be perceived as “more moral”. To the degree that positive behaviors exist on a continuum of importance, with conventions regarded as relatively unimportant, values as moderately important (insofar as their importance varies from person to person), and morals as extremely important, believing that a loved one cares more than you about a behavior elevates the significance of the behavior, making conventions somewhat more like values and values somewhat more like morals.

The results further suggest that this was not due to a general elevation of the status of positive behaviors in the context of thinking about a loved one. Relative to participants in the Distant Other condition, participants’ ratings in the Close Other condition were only higher when they believed the loved one cared more about that kind of behavior than they did themselves. This is consistent with the idea that concern for the interests of close others makes us treat some behaviors more seriously than we otherwise would because failing to so value them risks interpersonal harm.

…[C]oncern for the loved one added moral importance to behaviors perceived as more important to their close other than the self, leading participants to elevate the moral significance of these behaviors to third parties.

Looks like we’re all full moral alchemists.

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Post-Seculars: Science-Oriented, Religiously Inclined

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A fairly recent study by sociologists Timothy O’Brien and Shiri Noy looks at the relation between science, religion, and politics with interesting–and perhaps counter-intuitive–results.

“We were looking at the assumption that science and religion are conflicting sources of knowledge,” O’Brien said. “There is this assumption in the popular imagination that if you’re scientifically oriented you can’t be religious, and if you’re religious you can’t be scientifically oriented. What was found was that it is true to some extent. We found three big groups of Americans based on their attitudes about science, their knowledge about science, and their attitudes about religion.”

The author broke the survey data into three categories:

  1. Moderns: “those most familiar with and favorable toward science.”
  2. Traditionals: “the most religiously devout and the least familiar with science.”
  3. Post-seculars: “whose worldviews blend elements of both science and religion.”

“As you might expect,” O’Brien continues, “moderns tend to hold more liberal or progressive opinions and traditionalists tend to be more conservative or orthodox.” The post-seculars, however, were different from both groups. You can see how they compare to moderns and traditionals below:

  • Human Life: Post-seculars are “less supportive than moderns of making contraceptives accessible to teenagers. Postseculars and traditionals are also less likely than moderns to agree that it is acceptable for individuals to end their own lives and that patients with incurable diseases have a right to die…[P]ostseculars’ restrictive beliefs about abortion and other issues in this domain are evidence that appreciation and understanding of science do not necessarily lead to liberal social attitudes” (pg. 7).
  • Gender and Sexuality: “Results indicate that compared with each other group, moderns hold more progressive views of gender roles, sexuality, pornography, and sex education. There are no significant differences in postseculars’ and traditionals’ attitudes in this area, indicating that as with attitudes about human life, familiarity with science does not ensure liberal sociopolitical beliefs” (pg. 10).
  • Race and Civil Liberties: “Given their liberal views on gender and sexuality, it is perhaps surprising that moderns are less supportive than traditionals of affirmative action. Postseculars are even less supportive than moderns of affirmative action. Yet this pattern aligns with moderns’ and postseculars’ greater likelihood of agreeing that African Americans can overcome prejudice without favors. In addition, traditionals and postseculars are more likely than moderns to explain Black-White differences in terms of innate qualities, whereas moderns are more likely than traditionals to attribute race disparities to educational opportunities and discrimination…Moderns are more likely than traditionals to agree that atheists, communists, gays and lesbians, militarists, and racists should be able to place books in public libraries and to speak publically. Postseculars are also more supportive than traditionals of these civil liberties these groups” (pg. 10).
  • Government and Social Assistance: While “postseculars are more religious than traditionals, they are less supportive than traditionals of government efforts to reduce inequality” (pg. 10).
  • Criminal Justice: “Interestingly, although moderns are less likely than traditionals to approve of the police’s use of force in some situations, moderns are more likely than traditionals to approve of police force under other circumstances. Furthermore, compared with traditionals, moderns report that courts should deal with criminals more harshly. Postseculars’ opinions in this domain generally resemble moderns with one exception: despite moderns’ relatively tough-on-crime attitudes, they are more likely than each other group to support the decriminalization of marijuana” (pg. 10).
  • Children, Families, and School: “Postseculars share moderns’ emphasis on independent thinking but emphasize obedience more and social acceptance less than moderns. Furthermore, traditionals are more likely than moderns to view spanking as an acceptable form of punishment for children. Finally, consistent with the prominence of faith in the traditional and postsecular worldviews, these groups are each more likely than moderns to approve of prayer in public schools” (pg. 10).
  • Personal Well-being and Interpersonal Trust: “Postseculars…report more positive interpersonal attitudes compared with traditionals” (pg. 11).

In conclusion,

In most, but not all, domains, moderns’ beliefs are relatively liberal or inclusive, whereas traditionals’ are more conservative or exclusive. However, the postsecular perspective defies this binary. Individuals in this category, who are familiar with and appreciative of science and also deeply religious, are marked by sociopolitical attitudes that cannot be consistently labeled conservative or liberal (pg. 11).

Quality vs. Size of Government

Economist Ed Dolan has a couple of interesting posts at the Niskanen Center. His first one draws on data from the Economic Freedom of the World index, the Legatum Prosperity Index, and the Human Freedom Index. Based on his breakdown, personal freedom and economic freedom are positively correlated.

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And while the relationship between personal freedom and economic freedom and real GDP is nonlinear, a “one-point increase in EFI is…associated with a 0.61 point increase in the PFI rather than the 0.91 point increase that was estimated without including GDP.  All of these results are statistically significant at a 0.01 level of confidence.”

freedom2

In short, “personal freedom and economic freedom are positively associated with each other, and…both freedom indexes are positively associated with prosperity as measured by real GDP per capita. Good libertarians should expect these results and be gratified to find them confirmed.”

These indices also demonstrate that “human freedom in both its economic and personal manifestations contributes positively to human well-being as measured by data on education, health, and personal safety—another result sure to please libertarian readers.”

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And yet, “[w]hen we look at the simple correlations between the personal freedom index and the EFI components, we find they are all are positive, as expected, except that for the size of government (SoG), which is negative. The correlation of SoG with the personal freedom index is -0.16. Remember that for all components of the EFI, a higher value means more freedom, so the negative coefficient means that a larger government is associated with greater freedom. That is not what most libertarians would expect. Is this just an anomaly or a real statistical regularity?”

After pointing out some of the shortcomings of the EFI’s “size of government” measure, Dolan instead employs data regarding the ratio of total government expenditures to GDP from the IMF World Economic Outlook. Check the comparisons below:

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What these measurements show is:

  1. First, the data appear to support notion that economic freedom makes a positive contribution to personal freedom and prosperity. That holds true whether we measure prosperity in a narrowly economic sense, as GDP per capita, or in a broader sense, using noneconomic indicators of education, health, and personal safety.
  2. Second, the data do not support the notion that a larger government is necessarily detrimental to either freedom or prosperity.  On the contrary, countries with larger government sectors tend to have more personal freedom and higher indicators of education, health, and personal safety.

I’m reminded of Nathaniel’s review of Francis Fukuyama’s books on political order: “Fukuyama is dismissive of arguments about the quantity of government in favor of arguments about the quality of government.” In Dolan’s second post, he attempts to measure the quality of government using subsets of the same three databases as before:

  • “Legal system and property rights” (EFI): “indicators of judicial independence, impartiality of courts, and protection of property rights.”
  • “Rule of Law” (HFI): “indicators of procedural justice, civil justice, and criminal justice. These subcomponents consider factors such as adherence to due process and the presumption of innocence, the risk of arbitrary arrest, and the degree to which civil and criminal courts are subject to corruption and improper government influence.”
  • “Governance” (LPI): “measures of confidence in the government and elections; the corruption perceptions index from Transparency International; a measure of the level of democracy; and an overall measure of government effectiveness from the World Bank’s Doing Business survey.”

Check out how quality and size of government go together below:

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And to drive the point home:

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Dolan obviously provides much more detailed explanations than what I’ve shown here, but the graphs alone should make his conclusions fairly clear:

  • The size of government per se is not an especially useful indicator. Simple correlations based on cross-country data suggest that by and large, people who live in countries with relatively large governments, as measured by the share of GDP devoted to government spending, are better educated, healthier, safer, and generally more prosperous. They also tend to enjoy greater personal freedoms.
  • On the other hand, cross-country data on the rule of law, protection of property rights, and other measures of the quality of government show strong, positive associations with quantitative indicators of freedom and prosperity.
  • When size and quality indicators are compared directly, using multivariate analysis that controls for the effects of per-capita GDP, quality dominates. In such tests, the size of government turns out to have little effect one way or the other on most measures of freedom and prosperity.

Dolan is quick to point out, “There is a lot of variety in the world. Too strong a focus either on statistical regularities or on selected outliers can draw us too strongly toward conclusions that, in reality, admit of many exceptions. For example, the small-government city states of Singapore and Hong Kong are rightly admired for their prosperity and economic freedoms. However, it gives one pause to note how many small-government countries enjoy neither. Chad, Bangladesh, and the Democratic Republic of Congo, labeled in the chart, are just the outliers among a whole cluster of countries in that category.”

Perhaps the focus should be on improving our government rather than simply shrinking it.

 

An Economic View of Mental Health

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“The factors involved in mental health are many and varied,” writes economist Isamu Yamamoto,

but for a working person, work styles in the workplace are an important factor. For example, if workers have to put in long hours, have little discretion over their work, or get few opportunities to change assignments or workplaces, this adds to their stress and increases the likelihood of deteriorating mental health.

On the other hand, there has been little research on mental health problems in the field of labour economics, which focuses on analysing work styles in the workplace. As for Japanese work styles, we see moves everywhere to try to change from so-called ‘Japanese employment’ practices. New aspects now include reducing long working hours, seeking a better work/life balance, diversity management, and encouraging women to be more involved in the workplace. These moves suggest that work styles under conventional Japanese employment practices create some kind of difficulty for workers. In other words, there are concerns that work styles under Japanese employment practices are a major factor in causing mental health to deteriorate.

In Yamamoto’s view, there are at least two economic approaches that could be utilized regarding mental health research:

  1. “The first approach is to reveal the characteristics of work styles, based on labour supply-and-demand mechanisms and internal labour market models, and use those characteristics to explain the impact that work styles have on workers’ mental health and the role of the business in mental health.”
  2. “The other approach is to reveal work style factors that impact mental health from observed data (controlling for heterogeneities between individual employees and businesses, and other noise), and to show how mental health affects objective indicators such as business productivity and profitability.”

Using findings from the Labor Market Analysis Using Matched Employer-Employee Panel Data research project, Yamamoto provides the following insights:

First, the research shows that factors affecting employees’ mental health include long work hours, job characteristics, workplace management methods, workplace climate, job transfers, and promotions, among others (Kuroda and Yamamoto 2016a, Sato 2016). Second, mechanisms that cause employee mental health to deteriorate include working irrationally long work hours because of such psychological tendencies as overconfidence bias (i.e. the employee has too much confidence in his or her own health), which could result in unexpected health damage (Kuroda and Yamamoto 2016b). Research also has looked at the impact of deteriorating mental health on corporate performance, with the results showing that businesses with higher sick leave or turnover rates of employees with mental disorders tend to have poorer performance as measured by return on sales (Kuroda and Yamamoto 2016c).

There are still just a few examples of research that validate mental health problems from an economic perspective, and more research needs to be done. Moreover, mental health is a major issue that is relevant to a number of fields, including medicine, epidemiology, industrial health, and psychology. As such, it is important to address it with interdisciplinary research, and researchers in various fields should collaborate in this regard.