Does Means-Tested Welfare Affect Family Formation?

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Do the marriage penalties of the welfare system have effects on family formation? According to a 2016 AEI/IFS report, the evidence is mixed:

  1. Our data show that the presence of marriage penalties does not affect marriage patterns among unmarried couples in urban America who have just had a baby, or among couples with children two and under whose income falls close to the lower threshold of the marriage penalty facing such couples, that is, for couples whose joint income is close to a level where they would still qualify for means-tested benefits were they to marry. Most in this latter group are in the lowest two quintiles of family income for families with children two and under (less than $48,000). We also find no evidence that marriage penalties associated with Temporary Assistance to Needy Families (TANF) reduce the odds of marriage among lower-income couples.
  2. However, we do find that couples whose oldest child is two or younger whose income falls closer to the upper threshold of the marriage penalty—couples where each partner’s individual income is near the cut-off for means-tested benefits—are about two to four percentage points less likely to be married if they face a marriage penalty in Medicaid eligibility or food stamps. Most of these couples are in the second and third quintiles of family income for families with children two and under ($24,000 to $79,000).
  3. Almost one-third of Americans aged 18 to 60 report that they personally know someone who has not married for fear of losing means-tested benefits.

You can see the full report here.

How Important is Human Capital for Economic Development?

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How important was human capital–specialized scientific knowledge typically in the hands of relatively few elites–to the British Industrial Revolution? According to a 2016 working paper, not as important as you’d think. Economist B. Zorina Khan finds that “evidence from the backgrounds and patenting of the great inventors in Britain suggest that the formal acquisition of human capital did not play a central role in the generation of new inventive activity, especially in the period before the second industrial revolution” (pg. 21). It turns out that “scientists were not well-represented among the great British inventors nor among patentees during the height of industrial achievements…Instead, many of the most productive inventors, such as Charles Tennant, were able to acquire or enhance their inventive capabilities through apprenticeships and informal learning, honed through trial and error experimentation” (pg. 23).

By examining the patent record, Khan finds that

the patterns are consistent with the notion that at least until 1870 a background in science did not add a great deal to inventive productivity. If scientific knowledge gave inventors a marked advantage, it might be expected that they would demonstrate greater creativity at an earlier age than those without such human capital. Inventor scientists were marginally younger than nonscientists, but both classes of inventors were primarily close to middle age by the time they obtained their first invention (and note that this variable tracks inventions rather than patents). Productivity in terms of average patents filed and career length are also similar among all great inventors irrespective of their scientific orientation. Thus, the kind of knowledge and ideas that produced significant technological contributions during British industrialization seem to have been rather general and available to all creative individuals, regardless of their scientific training (pg. 18).

In short,

The overall empirical findings together suggest that, by focusing their efforts in a particular industry, relatively uneducated inventors were able to acquire sufficient knowledge that allowed them to make valuable additions to the available technology set. After 1820, as the market expanded and created incentives to move out of traditional industries such as textiles and engines, both scientists and nonscientists responded by decreasing their specialization. The patent reforms in 1852 encouraged the nonscience-oriented inventors to increase their investments in sectoral specialization, but industrial specialization among the scientists lagged significantly. This is consistent with the arguments of such scholars as Joel Mokyr, who argued that any comparative advantage from familiarity with science was likely based on broad unfocused capabilities such as rational methods of analysis that applied across all industries (pg. 20).

“More generally,” she writes,

the experience of the First Industrial Nation indicates that creativity that enhances economic efficiency is somewhat different from additions to the most advanced technical discoveries. The sort of creativity that led to spurts in economic and social progress comprised insights that were motivated by perceived need and by institutional incentives, and could be achieved by drawing on practical abilities or informal education and skills. Elites and allegedly “upper-tail knowledge” were neither necessary nor sufficient for technological productivity and economic progress. In the twenty-first century, specialized human capital and scientific knowledge undoubtedly enhance and precipitate economic growth in the developed economies. However, for developing countries with scarce human capital resources, such inputs at the frontier of “high technology” might be less relevant than the ability to make incremental adjustments that can transform existing technologies into inventions that are appropriate for general domestic conditions. As Thomas Jefferson pointed out, a small innovation that can improve the lives of the mass of the population might be more economically important than a technically-advanced discovery that benefits only the few (pgs. 23-24).

I’m reminded of something Matt Ridley said in his TED talk years ago:

We’ve gone beyond the capacity of the human mind to an extraordinary degree. And by the way, that’s one of the reasons that I’m not interested in the debate about I.Q., about whether some groups have higher I.Q.s than other groups. It’s completely irrelevant. What’s relevant to a society is how well people are communicating their ideas, and how well they’re cooperating, not how clever the individuals are. So we’ve created something called the collective brain. We’re just the nodes in the network. We’re the neurons in this brain. It’s the interchange of ideas, the meeting and mating of ideas between them, that is causing technological progress, incrementally, bit by bit…Because through the cloud, through crowd sourcing, through the bottom-up world that we’ve created, where not just the elites but everybody is able to have their ideas and make them meet and mate, we are surely accelerating the rate of innovation.

The State of Social Mobility Research

Brookings scholars Richard Reeves and Isabel Sawhill have an informative article in the Milken Institute Review that provides a nice summary of the research on social mobility. “So how are we doing?” they ask.

The good news is that economic standards of living have improved over time. Most children are therefore better off than their parents. Among children born in the 1970s and 1980s, 84 percent had higher incomes (even after adjusting for inflation) than their parents did at a similar age, according to a Pew study. Absolute upward income mobility, then, has been strong, and has helped children from every income class, especially those nearer the bottom of the ladder. More than 9 in 10 of those born into families in the bottom fifth of the income distribution have been upwardly mobile in this absolute sense.

That’s good news, but “[t]here’s a catch…Strong absolute mobility goes hand in hand with strong economic growth. So it is quite likely that these rates of generational progress will slow, since the potential growth rate of the economy has probably diminished.” Furthermore, “[i]f you are born to parents in the poorest fifth of the income distribution, your chance of remaining stuck in that income group is around 35 to 40 percent. If you manage to be born into a higher-income family, the chances are similarly good that you will remain there in adulthood. It would be wrong, however, to say that class positions are fixed. There is still a fair amount of fluidity or social mobility in America – just not as much as most people seem to believe or want. Relative mobility is especially sticky in the tails at the high and low end of the distribution. Mobility is also considerably lower for blacks than for whites, with blacks much less likely to escape from the bottom rungs of the ladder. Equally ominously, they are much more likely to fall down from the middle quintile.”

But are these rates of relative mobility getting worse? “Current evidence suggests not. In fact, the trend line for relative mobility has been quite flat for the past few decades, according to work by Raj Chetty of Stanford and his co-researchers. It is simply not the case that the amount of intergenerational relative mobility has declined over time.”

social mobility chart 01

Some other interesting points:

  • “Interestingly, the most recent research suggests that the United States stands out most for its lack of downward mobility from the top.”
  • Pioneering work (again by Raj Chetty and his colleagues) shows that some cities have much higher rates of upward mobility than others. From a mobility perspective, it is better to grow up in San Francisco, Seattle or Boston than in Atlanta, Baltimore or Detroit. Families that move to these high-mobility communities when their children are still relatively young enhance the chances that the children will have more education and higher incomes in early adulthood. Greater mobility can be found in places with better schools, fewer single parents, greater social capital, lower income inequality and less residential segregation.”
  • The Social Genome Project “tracks children’s progress through multiple life stages with a corresponding set of success measures at the end of each…Three findings from the model stand out. First, it’s clear that success is a cumulative process. According to our measures, a child who is ready for school at age 5 is almost twice as likely to be successful at the end of elementary school as one who is not…Children who get off track at an early age frequently get back on track at a later age; it’s just that their chances are not nearly as good. So this is a powerful argument for intervening early in life. But it is not an argument for giving up on older youth.”
  • “Second, the chances of clearing our last hurdle – being middle class by middle age (specifically, having an income of around $68,000 for a family of four by age 40) – vary quite significantly. A little over half of all children born in the 1980s and 1990s achieved this goal. But those who are black or born into low-income families were very much less likely than others to achieve this benchmark.”
  • “Third, the effect of a child’s circumstances at birth is strong. We use a multidimensional measure here, including not just the family’s income but also the mother’s education, the marital status of the parents and the birth weight of the child. Together, these factors have substantial effects on a child’s subsequent success. Maternal education seems especially important.”

Check out the full article.

Does the Work Test Work?

In the United States, “to be eligible for UI benefits, a claimant initially needs an adequate work history and must have lost her job through lack of work and no fault of her own. In addition, to remain eligible, the worker must be “able, available, and searching” for work—that is, must satisfy the work test.” A 2016 study[ref]An earlier, ungated version can be found here.[/ref] “examine[s] effects on earnings, hours worked, employment, and job match quality in the nine years following the experiment. Among UI recipients as a whole, the effects of the work test were negligible, counter to the hypothesis that the work test may harm long-term earnings. But for permanent job losers, the work test reduced time to reemployment by 1–2 quarters, and increased job tenure with the first post-claim employer by about 2 quarters. Also, we find that the work test selected lower-wage workers into reemployment. Accordingly, the work test may be an important policy for improving the reemployment prospects of lower-wage, permanent job losers.”

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Infrastructure, Knowledge, and Technological Progress

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“In a recent working paper,” economist Daron Acemoglu and colleagues “empirically tests the hypothesis that the US government’s infrastructural capacity helped drive innovation during the 19th century (Acemoglu et al. 2016). Our results suggest that, notwithstanding the view that the American state was weak in the 19th century, a major part of the explanation for US technological progress and prominence is the way in which the US developed an effective state.” Using the U.S. Post Office as a proxy and relying on “historical records compiled by the US Postmaster General,” the researchers

determined how many post offices were in each US county for several years between 1804 and 1899. As a measure of county-level innovative activity, [they] use the number of patents granted to inventors living in the county (these data are presented in Akcgit et al. 2013). There are several reasons for expecting the number of post offices to impact the number of patent grants. First, post offices facilitated the spread of ideas and knowledge. Second, more prosaically, the presence of a post office made patenting much easier, in part because patent applications could be submitted by mail free of postage (Khan 2005, p. 59). Third, the presence a post office is indicative of – and thus the proxy for – the presence and functionality of the state in the area. This expanded state capacity may have meant greater access to legal services and regulation, or greater security of other forms of property rights, all of which are essential conditions for modern innovative activity.

The results?

We find a significant correlation between a history of state presence – using the number of post offices as a proxy – and patenting in US counties. We show that the correlation holds either using a sample of the 935 US counties that had been established by 1830, or using a sample to which counties are added as they were established between 1830 and 1890, ultimately reaching 2,644 in total. This relationship is not only statistically significant, but also economically meaningful. Our results suggest that the opening of a post office in a county that did not previously have a post office or patents on average increased the number of patents by 0.18 in the long run.  

…One concern with this initial set of results might be that they are confounded by the possibility that post offices were built in counties that already had more patenting activity. Though we cannot fully rule out such reverse causality concerns, we find no statistically or economically significant correlation between patenting and the number of post offices in a county in future years. This suggests that post offices led to patenting and not the other way around. Historical evidence also suggests that post offices were established for a range of idiosyncratic reasons during the 19th century, making it unlikely that reverse causality is driving the association.

…Taken together – while we do not establish unambiguously that the post office and greater state capacity caused an increase in patenting – our results highlight an intriguing correlation and suggest that the infrastructural capacity of the US state played an important role in sustaining 19th century innovation and technological change. In the current economic climate in which pessimism about US economic growth prospects is common, we present a more optimistic historical narrative in which government policy and institutional design have the power to support technological progress.

While I don’t dispute the importance of infrastructure and the role of the state in developing it, I’m curious if “state capacity” is the real takeaway from this study. To restate a section from above, “post offices facilitated the spread of ideas and knowledge” (italics mine). I’ve highlighted studies before that show how important social networks, communication capacity, and information flows are for decreasing poverty. These aspects are deemed more important than institutions. This seems to be the case with technological innovation as well. While the state can certainly help increase the spread of ideas, I wonder if post offices should be viewed less as “state capacity” and more as proxy for information flows.

Check out the study and determine for yourself.

Doing Business 2017

The World Bank’s latest Doing Business report has been released. The report “measures regulations affecting 11 areas of the life of a business. Ten of these areas are included in this year’s ranking on the ease of doing business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures labor market regulation, which is not included in this year’s ranking.”

Its key findings are as follows:

  • Doing Business 2017: Equal Opportunity for All finds that entrepreneurs in 137 economies saw improvements in their local regulatory framework last year. Between June 2015 and June 2016, the report, which measures 190 economies worldwide, documented 283 business reforms. Reforms reducing the complexity and cost of regulatory processes in the area of starting a business were the most common in 2015/16, as in the previous year. The next most common reforms were in the areas of paying taxes, getting credit and trading across borders. Read about business reforms.
  • Brunei Darussalam, Kazakhstan, Kenya, Belarus, Indonesia, Serbia, Georgia, Pakistan, the United Arab Emirates, and Bahrain were the most improved economies in 2015/16 in areas tracked by Doing Business. Together, these 10 top improvers implemented 48 regulatory reforms making it easier to do business.
  • Economies in all regions are implementing reforms easing the process of doing business, but Europe and Central Asia continues to be the region with the highest share of economies implementing at least one reform—96% of economies in the region have implemented at least one business regulatory reform.
  • Doing Business includes a gender dimension in four of the 11 topics sets. Starting a business, registering property and enforcing contracts present a gender dimension for the first time this year. Labor market regulation already captured gender disaggregated data in last year’s report.
  • This year’s report expands the paying taxes topic set to cover postfiling processes—what happens after a firm pays taxes—such as tax refunds, tax audits and administrative tax appeals.
  • This year’s report also includes an annex with analysis on a pilot indicator on public procurement regulations.
  • The report features six case studies in the areas of getting electricity, getting credit: legal rights, getting credit: credit information, protecting minority investors, paying taxes and trading across borders as well as two annexes in the areas of labor market regulation and selling to the government. The case studies and annexes either present new indicators or provide further insights from the data collected through methodology changes implemented in the past two years. See all case studies.

A number of things jumped out at me. First off, the rankings of the oft-praised Nordic countries, particularly Denmark and Sweden. See how those two countries compare to the U.S. below.

World Bank Rankings Denmark Sweden U.S.
Overall 3 9 8
Starting a business 24 15 51
Construction permits 6 25 39
Getting electricity 14 6 36
Registering property 12 10 36
Getting credit 32 75 2
Protecting minority investors 19 19 41
Paying taxes 7 28 36
Trading across borders 1 18 35
Enforcing contracts 24 22 20
Resolving insolvency 8 19 5

Denmark ranks higher than the United States with Sweden only a spot behind.[ref]Full rankings found on pgs. 203 (Denmark), 242 (Sweden), and 248 (United States) of the full report.[/ref] Yet, in both Denmark and Sweden it is easier to

  • Start a business
  • Get a construction permit
  • Get electricity
  • Register property
  • Protect minority investors
  • Pay taxes
  • Trade across borders

As Will Wilkinson put it, “[Y]ou cannot finance a Danish-style welfare state without free markets and large tax increases on the middle class. If you want Danish levels of social spending, you need Danish middle-class tax rates and a relatively unfettered capitalist economy.”

However, the next few graphs are probably some of the most interesting bits of the report:

As the report explains,

research shows that where business regulation is simpler and more accessible, firms start smaller and firm size can be a proxy for the income of the entrepreneur. Doing Business data confirms this notion. There is a negative association between the Gini index, which measures income inequality within an economy, and the distance to frontier score, which measures the quality and efficiency of business regulation when the data are compared over time (figure 1.8).

Data across multiple years and economies show that as economies improve business regulation, income inequality tends to decrease in parallel. Although these results are associations and do not imply causality, it is important to see such relation. The results differ by regulatory area. Facilitating entry and exit in and out of the market—as measured by the starting a business and resolving insolvency indicators—have the strongest link with income inequality reduction (figures 1.9 and 1.10). These two Doing Business indicators are focused on equalizing opportunities and access to markets (pgs. 11-12).

In short, lower income inequality is correlated with simpler, business-friendly regulations. Anyone worried about income inequality should take note.

I recommend taking a look at the data for yourself. Lots of good stuff.

Meaningless Secular Democracies and Islamic Exceptionalism

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According to Brookings scholar Shadi Hamid, liberal democracies offer little meaning for many Muslims across the world. The Atlantic summarizes his view:

History will not necessarily favor the secular, liberal democracies of the West. Hamid does not believe all countries will inevitably follow a path from revolution to rational Enlightenment and non-theocratic government, nor should they. There are some basic arguments for this: Islam is growing, and in some majority-Muslim nations, huge numbers of citizens believe Islamic law should be upheld by the state. But Hamid also thinks there’s something lacking in Western democracies, that there’s a sense of overarching meaninglessness in political and cultural life in these countries that can help explain why a young Muslim who grew up in the U.K. might feel drawn to martyrdom, for example. This is not a dismissal of democracy, nor does it comprehensively explain the phenomenon of jihadism. Rather, it’s a note of skepticism about the promise of secular democracy—and the wisdom of pushing that model on other cultures and regions. 

Most Islamists—people who, in his words, “believe Islam or Islamic law should play a central role in political life”—are not terrorists.[ref]See my post on Who Speaks for Islam?[/ref] But the meaning they find in religion, Hamid said, helps explain their vision of governance, and it’s one that can seem incomprehensible to people who live in liberal democracies.

The article continues with an interview with Hamid, which offers some interesting points not only about Islam, but about the relation between religion and politics generally:

I am arguing that Islam is exceptional. I think there’s a general discomfort among American liberals about the idea that people don’t ultimately want the same things, that there isn’t this linear trajectory that all peoples and cultures follow: Reformation, then Enlightenment, then secularization, then liberal democracy.

Where I would very much part ways with those on the far right who are skeptical about Islam is that I don’t think it’s necessarily a bad thing for Islam to play an outsized role in public life.

…There are many of us here in the U.S. who are skeptical [of theology in government], but ultimately I think it’s up to the people of the region to decide what’s best for themselves through a democratic process that would play out over time.

I see very little reason to think secularism is going to win out in the war of ideas. But the question is: Why would it in the first place? Why would that even be our starting presumption as American observers? It’s presumptuous and patronizing to think a different religion is going to follow the same basic trajectory as Christianity.

Hamid touches on Malaysia and Indonesia, two countries which are often ignored because “they’re not very central to U.S. national-security interests”:

Those two countries are often described as models of pluralism, tolerance, and relative democracy. But there are actually more sharia bylaws on the local level in those two countries than you see in much of the Arab world, including Tunisia, Egypt, Lebanon, and certainly Turkey, in the broader region.

That tells us something: It’s not just an Arab problem. It’s not just a Middle Eastern problem. What I do think is quite different is that Malaysia and Indonesia have come to terms with this reality. [Islam] doesn’t have the same kind of polarizing effect on the body politic [in those countries] as it does in the Arab world, because those two countries have reached a conservative consensus, where people say, “Yes, Islam does play an outsize role in public life, but we’re going to agree to adjudicate our differences through a democratic process, or at least not through violence.”

Unfortunately, too many Westerners refuse to take the metaphysical and spiritual claims of Islam (and religion in general) seriously:

As political scientists, when we try to understand why someone joins an Islamist party, we tend to think of it as, “Is this person interested in power or community or belonging?” But sometimes it’s even simpler than that. It [can be] about a desire for eternal salvation. It’s about a desire to enter paradise. In the bastions of Northeastern, liberal, elite thought, that sounds bizarre. Political scientists don’t use that kind of language because, first of all, how do you measure that? But I think we should take seriously what people say they believe in…There’s a desire for a politics of substantive meaning. At the end of the day, people want more than economic tinkering.

I think classical liberalism makes a lot of sense intellectually. But it doesn’t necessarily fill the gap that many people in Europe and the U.S. seem to have in their own lives, whether that means [they] resort to ideology, religion, xenophobia, nationalism, populism, exclusionary politics, or anti-immigrant politics. All of these things give voters a sense that there is something greater.

What about the supposedly inherent violence within Islam?

A question I get a lot is, “Wait, ok, is Islam violent? Does the Quran endorse violence?”[ref]This is one way we help perpetuate the myth of Islam vs. the West.[/ref] I find this to be a very weird question. Of course there is violence in the Quran. Muhammad was a state builder, and to build a state you need to capture territory. The only way to capture territory is to wrest it from the control of others, and that requires violence. This isn’t about Islam or the Prophet Muhammad; state building has historically always been a violent process.

…ISIS has gone well beyond the al-Qaeda model of terrorism and destruction…ISIS one of the most successful Islamist state-building groups. And that’s what makes it scary and frightening as an organization: They have offered a counter model. They’ve shown that capturing and holding territory is actually an objective worth striving for. An overwhelming majority of Muslims dislike ISIS and oppose them. But ISIS has changed the terms of the debate, because other Islamist groups in recent decades have not been able to govern. They have not been able to build states, and ISIS has.

One of his final thoughts is probably one of the most important:

Islamism is a very modern thing. It was inconceivable four centuries ago. In the pre-modern era [in the Islamic world], Islam imbued every aspect of public and political life. It was the unquestioned overarching legal and moral culture in these territories. With the advent of secularism as a competing idea, or ideology, for the first time Muslims have to ask themselves these kinds of questions of who they are and what their relationship to the state is. So, in that sense, Islamism only makes sense in opposition to something else that isn’t Islamism, i.e., secularism.

If I had to sum up mainstream Islamism in a sentence, I would say it’s the attempt to reconcile pre-modern Islamic law with the modern nation-state. But the problem is that Islamic law wasn’t designed for the modern nation-state. It was designed for the pre-modern era. So the question then is, “How do you take something that wasn’t meant for the modern era and adapt it to the modern era—the era of nation-states?” That is the conundrum that Islamist movements are facing.

An insightful, fascinating read.

The Rich Are Selfish, Right?

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“[The rich][ref]It should, of course, be noted that “the rich” are not a monolithic group.[/ref] evade taxes more often, flaunt traffic laws that protect pedestrians and donate less frequently to charity. In the aftermath of the Great Recession, there has been no shortage of reports in the popular media on their selfishness and opportunism,” write three economists at The Conversation. “…But are the rich really so different from the rest of us? In recently published research, we used a natural field experiment to try to find out.”

Their first focus is incentives and opportunities:

For instance, because rich people face a higher tax bracket, every dollar of income they hide from the tax collector benefits them more than it would a poor person. Similarly, although both rich and poor get the same penalty for a traffic law violation, a fine that would be devastating for a person in poverty amounts to a pinprick for someone who’s wealthy. And while the rich are less likely to give to charity in any one year, they instead tend to make large gifts later in their lives. So even if the rich often do behave more selfishly than the less well off, their behavior might be more the result of different circumstances rather than differing moral values.

But what does their experiment show?:

[W]e designed a field experiment in which we “misdelivered” transparent envelopes with money to over 400 rich and poor households in a medium-sized city in the Netherlands. Returning envelopes is individually costly (mostly in terms of time) but benefits the rightful recipient, making this an altruistic, “pro-social” act.

All the envelopes contained €5 (US$5.34) or €20 as well as a card with a message from a grandfather to his grandson explaining the gift. We sent the money, however, in two variations: either as banknotes that could be easily seen by anyone handling the envelope, or as a bank transfer card, which is a slip of paper that orders a bank to send money from one account to another. In other words, the cash acted as “bait,” while the bank transfer card would have had no value to the individual.

Our setup had two advantages over other studies on the topic. First, participants did not know they were being studied as part of an experiment. They were, therefore, not changing their choices for fear of what we might think of them. Second, there was no “selection bias” in our data that might have skewed the results because the rich tend to shy away from participating in experiments (possibly because they don’t have much time to participate or don’t like the idea of researchers having data on them). In our setup, every rich or poor household was randomly selected.

The overall results showed that the rich returned roughly 80 percent of all envelopes, regardless of whether it contained cash or a card. When cash was used, the rich returned only slightly less. So the rich were somewhat sensitive to the money bait, but not much. The poor, however, were much less likely to go to the trouble of returning the money and were much more vulnerable to the bait inside the envelope. They kept roughly half of the noncash envelopes and roughly three-quarters of the cash envelopes.

Does this mean the poor are the truly selfish ones? Not necessarily. In line with the point about incentives and opportunities above, the researchers used “a theoretical model” to “measure a household’s “neediness” of the cash and how financial stress changes over the course of a month. When we do so, as one might expect, we find big differences in needs and stresses between rich and poor. But what is more important is that, when we statistically remove the influence of these factors, we no longer find differences in the relative altruism of the rich versus the poor.”

They conclude,

These findings show the perils of inferring deeper motives from casual behavior. While our raw data show clear differences between the rich and poor in terms of pro-social behavior, digging a little deeper erases them. Our conclusion is that incentives are the biggest determinants of pro-social behavior and that neither the rich nor the poor are inherently kinder or more selfish – in the end all of us are susceptible to behaving this way…This is not to absolve those who evade taxes or break the law. What it suggests is that the rich are no different than the rest: If we were to put the poor in their place, they would likely behave similarly.

The Rise of Occupational Licensing

I’ve written about occupational licensing and its negative effects on economic mobility before. In May 2016,

the Bureau of Labor Statistics released its first-ever data on certification and licenses, providing the most comprehensive and reliable look to date at occupational licensing in the United States. In 2015, over 22 percent of U.S. workers held an occupational license at the State, Federal, or local level, while around 26 percent held a license or a certificate. While licensing and certification seek to ensure that workers have the necessary qualifications, especially for occupations impacting consumer safety and well-being, overly-broad application of licensing requirements can create costly and unnecessary barriers to entering a profession. Licensing can lead to higher wages for those able to obtain a license, but can also lead to inefficiency and unfairness, including reducing employment opportunities and depressing wages for excluded workers, reducing workers’ mobility across State lines, and increasing costs for consumers. 

Here are some of the highlights from the data:

  • Nearly one-quarter of U.S. workers require a license to do their jobs.

Share of Workers with an Occupational License

  • About two-thirds of the growth in licensing over time stems from an increase in the number of professions that require a license.

Percent Licensed Over Time: Estimated and Counterfactual

  • While licensing is more prevalent in high-income professions such as healthcare and law, it is common in many middle- and lower-income professions as well.

Percent Licensed by Occupation Group

  • Unlicensed workers earn less than licensed workers in the same occupation with similar demographics and educational attainment, and the wage gap is similar across high and low-wage occupations.

Hourly Wages of Licensed and Unlicensed Workers By Occupation

 

There’s more. Check out the entire White House post.

Teachers: Made, Not Born

Teacher quality matters, according to The Economist:

Many factors shape a child’s success, but in schools nothing matters as much as the quality of teaching. In a study updated last year, John Hattie of the University of Melbourne crunched the results of more than 65,000 research papers on the effects of hundreds of interventions on the learning of 250m pupils. He found that aspects of schools that parents care about a lot, such as class sizes, uniforms and streaming by ability, make little or no difference to whether children learn (see chart). What matters is “teacher expertise”. All of the 20 most powerful ways to improve school-time learning identified by the study depended on what a teacher did in the classroom.

Eric Hanushek, an economist at Stanford University, has estimated that during an academic year pupils taught by teachers at the 90th percentile for effectiveness learn 1.5 years’ worth of material. Those taught by teachers at the 10th percentile learn half a year’s worth. Similar results have been found in countries from Britain to Ecuador. “No other attribute of schools comes close to having this much influence on student achievement,” he says.

Rich families find it easier to compensate for bad teachers, so good teaching helps poor kids the most. Having a high-quality teacher in primary school could “substantially offset” the influence of poverty on school test scores, according to a paper co-authored by Mr Hanushek. Thomas Kane of Harvard University estimates that if African-American children were all taught by the top 25% of teachers, the gap between blacks and whites would close within eight years. He adds that if the average American teacher were as good as those at the top quartile the gap in test scores between America and Asian countries would be closed within four years.

…In 2014 Rob Coe of Durham University, in England, noted in a report on what makes great teaching that many commonly used classroom techniques do not work. Unearned praise, grouping by ability and accepting or encouraging children’s different “learning styles” are widely espoused but bad ideas. So too is the notion that pupils can discover complex ideas all by themselves. Teachers must impart knowledge and critical thinking.

But the real question is this: are good teachers born or made? A 2011 “survey of attitudes to education found that such portrayals reflect what people believe: 70% of Americans thought the ability to teach was more the result of innate talent than training.” But the article notes,

Few other professionals are so isolated in their work, or get so little feedback, as Western teachers. Today 40% of teachers in the OECD have never taught alongside another teacher, observed another or given feedback. Simon Burgess of the University of Bristol says teaching is still “a closed-door profession”, adding that teaching unions have made it hard for observers to take notes in classes. Pupils suffer as a result, says Pasi Sahlberg, a former senior official at Finland’s education department. He attributes much of his country’s success to Finnish teachers’ culture of collaboration. As well as being isolated, teachers lack well defined ways of getting better…Much of what passes for “professional development” is woeful, as are the systems for assessing it. In 2011 a study in England found that only 1% of training courses enabled teachers to turn bad practice into good teaching. The story in America is similar. This is not for want of cash. The New Teacher Project, a group that helps cities recruit teachers, estimates that in some parts of America schools shell out about $18,000 per teacher per year on professional development, 4-15 times as much as is spent in other sectors.

The New Teacher Project suggests that after the burst of improvement at the start of their careers teachers rarely get a great deal better. This may, in part, be because they do not know they need to get better. Three out of five low-performing teachers in America think they are doing a great job. Overconfidence is common elsewhere: nine out of ten teachers in the OECD say they are well prepared. Teachers in England congratulate themselves on their use of cognitive-activation strategies, despite the fact that pupil surveys suggest they rely more on rote learning than teachers almost everywhere else.

I’ll stop the overquoting here, but the piece is truly worth reading in its entirety. Our teachers need better training.