A G20 priority for this year is to identify policies that can boost global growth. One priority area is to address barriers to the financing of infrastructure projects. The Reserve Bank of Australia’s annual conference was dedicated to this theme: the papers (including my own contribution) are available here.
This week’s edition of the Economist also has an article on this topic here.
Paper by Yvonne McCarthy and Kieran McQuinn on “attenuation bias” (i.e. tendency to underestimate) in recall of house prices.
IFAC is recruiting.
Details here.
Pascal Saint-Amans restates the OECD intention to tackle double non-taxation in this follow-up piece to the taxation of MNCs in the Australian Financial Review.
“The current rules legally facilitate the location of the profit in non-tax jurisdictions. In other words you can develop schemes that can put your intangibles in Singapore or Switzerland or Luxembourg while there is no activity there. You can deduct your expenses in Australia. You can put your intangibles in Singapore – where it is not taxed. You can lend money to your subsidiaries across the world so that you can erase profit in all these countries because there is excessive interest, then you locate a treasury centre in Ireland for there is no tax either. At the end of the day there is no tax anywhere.”
This New York Times article discusses a recent letter signed by over 500 economists arguing against the proposed increases in minimum wages in the US.
The fact that the letter itself was initiated by a party with a vested interest has generated discussion online. I will leave people to make their own minds up on that.
More interesting is why so many economists have a firm belief that minimum wage increases are a bad thing. Aside from the toy models we present to students to introduce economic principles, where is the firm empirical evidence that would lead over 500 professionals to sign their name to something like this?
As this 1982 NBER survey shows, pretty much nothing was known empirically about the employment impact of minimum wages up to that stage despite a substantial body of theoretical work. A body of empirical work that followed generally has found no effects or even positive employment effects. The most famous paper directly estimating minimum wage effects on unemployment is this Card and Krueger AER paper that finds positive employment effects. It has been cited over 1400 times and debated over and again. Another highly cited UK study finds no adverse employment effects.
There is no credible empirical study documenting increases in unemployment following changes in minimum wage legislation. Nor are there credible empirical studies linking temporal and spatial variation in unemployment to minimum wage legislation. Simply type “minimum wages unemployment” into google scholar and sample the papers from peer-reviewed journals that come up. You will find some papers showing that minimum wage effects on unemployment result from highly stylised theoretical models but no papers in high-level peer reviewed journals showing a clear negative aggregate employment effect. Please feel free to link to some credible empirical evidence in the comments if you think I am overdoing the case. Here, for example, is a meta-analysis of UK studies finding no employment effect. With the empirical literature in mind, another group of economists have signed a letter in support of minimum wage increases.
Obviously people outside of economics will cite this as another case of economists not being able to agree. But the difference is the second group can point to empirical evidence. It is baffling as to where the first group derive their confidence from.