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March 26, 2014

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Posted: 26 Mar 2014 12:06 AM PDT

Stop Long-term Unemployment Before It Starts

Posted: 25 Mar 2014 04:31 PM PDT

Catherine Rampell:

When long-term unemployment becomes self-perpetuating, by Catherine Rampell, Commentary, Washington Post: Say it with me: The long-term unemployed are not lazy. Nor are they coddled, hammocked or enjoying a coordinated, taxpayer-funded vacation.
They are, however, extremely unlucky — and getting unluckier by the day. ...
It was already known that the longer workers have been out of a job, the lower their chance of finding work in the coming month. The Brookings paper — by the former Obama administration economist Alan Krueger and his Princeton colleagues Judd Cramer and David Cho — took this analysis a step further: What about (gulp) these workers' longer-run prospects?
It turns out that from 2008 to 2012, only one in 10 people who were already long-term unemployed in a given month had returned to "steady, full-time employment" ... a little more than a year later. "Steady" in this case means that they were working for at least four consecutive months. And the other nine in 10 workers? They were still out of work, toiling in part-time or transitory jobs or had dropped out of the labor force altogether.  ...
One implication of the Brookings research is that policymakers should have done more to prevent the short-term jobless from falling into long-term joblessness in the first place. ...

'Democracy, What Is It Good For?'

Posted: 25 Mar 2014 12:02 PM PDT

Democracy is good for growth:

Democracy, What Is It Good For?, by Daron Acemoglu and James Robinson: ...[There is] a consensus engulfing both academia and the popular press that democracy is at its best irrelevant for growth, and perhaps even a hindrance. ...
A recent survey of the recent literature ... concludes:
The net effect of democracy on growth performance cross-nationally over the last five decades is negative or null.
... Our paper ... (joint with Suresh Naidu and Pascual Restrepo) is out, and as the title suggests "Democracy Does Cause Growth, it sharply disagrees with this consensus. ...
Our baseline estimates suggest that a country that democratizes increases its GDP per capita by about 20% in the next 20-30 years. Not a trivial effect at all. ...

In all, the evidence seems to be fairly clear that democracy is good for economic growth.
Why? This is a harder question to answer. Our evidence shows that democracies are better at implementing economic reforms, and also increase education. They also probably increase the provision of public goods (though the evidence here is a little less robust).
But none of this is conclusive evidence. ...

Wanted: A New Approach to Growth Policy

Posted: 25 Mar 2014 08:59 AM PDT

I have a new column:

Broadening the Discussion about Economic Growth, by Mark Thoma: Macroeconomic policy can be divided into two types, stabilization policy that attempts to keep the economy as close as possible to full employment, and growth policy that tries to make the economy expand as fast as possible over time. ...
Prior to the onset of our recent economic troubles, much of the research in economics and much of the political debate was about growth policy rather than stabilization policy. ...
That changed when the Great Recession hit. Suddenly, questions about stabilization policy came to the forefront. ...
Now that we are beginning to come out of the recession ... the focus is once again turning to economic growth. And it's not just the political right that is thinking about the growth question. The left is thinking about growth too. ...
Increasingly, the idea that the ever-growing inequality can be harmful to economic growth has been taking hold. ...
Cutting taxes in the heyday of supply-side economics did not produce robust economic growth and ever lasting prosperity, and it did not solve the problem of rising inequality. If anything it made the problem worse. As we begin to focus on economic growth once again, it's time for a new approach, one that recognizes the advantages of a more equitable distribution of income.

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