Author: David Madden

Angus Deaton wins 2015 Economics Nobel Prize

A very good choice in my opinion.  Though in some ways a pity it was not on a joint ticket with Tony Atkinson.

Here is link to his personal web page   http://scholar.princeton.edu/deaton/home.

Deaton has written extensively on consumer demand systems, taxation, health, welfare, poverty, well-being, econometric methodology, the list is very long.

There is a good discussion of his contributions at  http://marginalrevolution.com/marginalrevolution/2015/10/nobel-prize-winner-is-angus-deaton.html and http://marginalrevolution.com/marginalrevolution/2015/10/deaton.html.

Note that Deaton is due to speak in Ireland soon, along with our own Cormac O Grada on the topic of “Modern Plagues: Lessons Learned from the Ebola Crisis”.

More details here  http://fungforum.princeton.edu/program/agenda.

Geary Policy Peer Review Series

The Geary Institute at UCD has initiated a Policy Peer Review Series.  This involves members of the Geary Institute reviewing research/evaluation reports which have significant implications for public policy.  The authors of the evaluations/reports are then invited to reply to the review.  The first two such reviews (and responses) are on (a) an evaluation of the School Support System under DEIS and (b) an evaluation of  FAS training programmes where the participants exited in 2012.  The reviews and responses are available here:

http://www.ucd.ie/geary/publications/policypeerreviews/

Educational Reform and all that…

Educational reform and Junior Cert reform in particular has been getting a bit of coverage lately.  One observation which struck me was by Tom Collins, formerly Professor of Education at NUI Maynooth.  He mentioned anecdotal evidence claiming that primary school teachers could predict eventual secondary school educational outcomes from as early as six years of age.  Some recent work I did is consistent with this observation (http://www.ucd.ie/t4cms/WP14_20.pdf) .  Using Growing Up in Ireland data, I  looked at the scores of nine year olds in the Drumcondra maths and reading tests.  Children were partitioned into four groups on the basis of their mothers’ education.  Rather than looking at gaps in average outcomes for each group, I looked at gaps for selected percentiles.  This is in the spirit of John Romer’s analysis of inequality of opportunity, whereby between-group gaps calculated at the same percentile are regarded as having to some degree controlled for “effort” and the gaps can be regarded as reflecting ex post inequality of opportunity.  At the limit the gaps are about one standard deviation and are pretty constant across percentiles.  I also perform quantile decompositions for pairwise gaps and find that in general about one third to  one half of the gap is accounted for by observable characteristics (including school, class-size and teacher characteristics) with most of this “explained” gap arising from income and the number of books in the house.  Unobserved factors and “returns” to observed factors thus account for more than half the gaps.

The paper provides evidence that gaps in educational outcomes, on the basis of parental education, kick in at remarkably early ages.  It is also consistent with the idea that returns to education apply across as well as within generations.  There is a good recent review of this area by my colleague Paul Devereux here http://wol.iza.org/articles/intergenerational-return-to-human-capital.

The 75% of the world’s population not covered by Piketty

In between grading exam papers I have been wading through the Piketty book.  Its a bit like walking through a muddy field.  The going is sometimes a bit stodgy, but you eventually get there.  There have been many reviews and commentaries on the book – one of the best I think is by Debraj Ray (http://debrajray.blogspot.co.uk/2014/05/nit-piketty.html ), who also wrote what I believe to be the best textbook on Development Economics in 1998, which, alas, I don’t think was ever updated.

Ray is sceptical about Piketty’s “Fundamental Laws of Capitalism”, but believes that the book makes a major contribution in highlighting the concentration of top incomes, arising from both an increasing share of income accruing to capital and also the phenomenon of very high returns to human capital at the top of the wage distribution.

All of this I am sure is very familiar to readers of this blog – Piketty’s must be one of the most reviewed economics books of the last 30 years.  But what seems to get less coverage is what has been happening to the approximately 75% of the world population not covered by the Piketty book.  A recent World Bank study by Lakner and Milanovic (covered here in Vox http://www.voxeu.org/article/global-income-distribution-1988 ) shows that over the 1988-2008 period, growth for the bottom 75% of the world (with the exception of the very bottom 7% or so) has been well above average, thus contributing to an overall compression of the world income distribution.  There have basically been three broad changes in world income distribution over the last 30 years.  Yes, the top 1% have seen high growth, while those between about the 75th and 99th percentiles have done relatively poorly – these are the phenomena covered in Piketty.  But the vast majority of the bottom 75% have also done relatively well, particularly those just above the median – effectively the Chinese and Indian middle classes are catching up with lower income groups in the OECD countries.  The net effect of these three changes is a fall in overall world income inequality.  The data stops at 2008 but my guess is that developments since then have probably only accentuated these trends.  And further globalisation is likely to have the same effect.

The piece finishes off with some speculation about the political implications of all this, which I am not quite so convinced by.  But overall, given that inequality seems to be flavour of the moth these days, it is interesting to get a more global view.

Chartbook of economic inequality

Readers of the blog may be interested in a Vox piece by Tony Atkinson and Salvatore Morelli on the Chartbook of Economic Inequality. It provides a summary of changes in inequality for 25 countries (alas not including Ireland) over a 100 year period.  If you follow the links you can get the data on an Excel basis or in chart format.  The vox link is here  http://www.voxeu.org/article/chartbook-economic-inequality.