New Economist

Britain's immigrants: they're not all the same

How much do we know about Britain's immigrants? Not as much as we should. A new report by the ippr think tank, Britain's Immigrants: An economic profile, adds to the picture. Drawing on the Labour Force Survey, authors Dhananjayan Sriskandarajah, Laurence Cooley and Tracy Kornblatt analyse the characteristics and contribution of 25 of the UK’s largest immigrant communities, plus those of the UK-born as a comparator. The report was commissioned by Channel 4, who have a Dispatches programme on Monday night based on its findings, called Immigrants: The Inconvenient Truth.

The report highlights considerable heterogeneity amongst immigrant groups. it makes clear that many - though not all - immigrants have done well. Many are hard working and make few claims on the state. These immigrant groups include Australians, the French, Canadians and Poles (see chart from the Daily Mail). But other groups have very high levels of economic inactivity and/or claims on the state. The ippr report says (emphasis in the original):

It is clear ..that there is considerable variation between the economic characteristics of immigrant groups. ...The heterogeneity of immigrant groups makes any discussion of the average or overall impact of immigration highly problematic. What we can say, however, is that based on the relatively simple ranking system employed in the tables presented above, it is clear that on most criteria, most immigrant groups do better in economic terms than the UK-born population. Overall, when we take into account the relative size of the groups studied in this report, it would seem that the average immigrant has better economic characteristics than the average UK-born person.

However, this observation should not lead to complacency for those interested in promoting the socio-economic integration of immigrant communities. There are some immigrant communities who rank consistently lower on most indicators than the UK average. In some cases, these relatively low-ranking communities are predominantly made up of people who have come to the UK for non-economic reasons (for example, to join family members who are already in the UK, or to seek asylum). In others words, these communities may be made up of large numbers of people whose admission into the UK is not based on their
potential economic contribution to the UK.

While the Mail on Sunday story highlights the poor performers such as the Somalis, the ippr authors argue that account must be taken of their circumstances:

It is essential to look beyond the statistics to look at the reasons for groups’ differential
contributions. The relatively low rankings of Somalis, for example, may be down to the fact that many newcomers came to the UK as asylum seekers (and probably did not have the right to work while their claim was/is being processed), may not speak English, have few easily transferable skills, and have been housed in deprived areas.

Similarly, at the other end of the rankings, Americans may be doing very well because they are mostly elite business people and professionals who are often here to work for short periods. It is therefore important to consider the reasons why migrants are here before we decide whether to judge their contribution solely in economic terms. It may also be the case that groups with relatively poor economic characteristics are directly supporting those with better characteristics – for example, low-paid cleaners and security guards from countries such as Poland working in the offices of American bankers. It is important to recognise the broader economic contribution of these low-paid essential staff. Also, groups who are concentrated in relatively low-skilled, low-paid jobs can be ranked highly on other measures, such as incidence of public service employment.

Valid points - though these findings surely raise the issue of whether Britain's immigrant mix is optimal? Compared with Canada and Australia, for example, Britain seems to have a higher proportion of low skilled and non-working immigrants.

New econobloggers: Mike and Megan

Two new econoblogs started last month. One is by Mike Ward at the University of Texas: Unintended Consequences. The subtitle, 'research findings from economics that you may not have expected' explains the aim. Mike elaborates in his first post:

The goal of this blog is to try to disseminate interesting research findings from economics that may be counter intuitive. Most of these will be summarizing findings by other researchers. Others will represent work I, and my colleagues are working on. And some will be my musings on what economic theory predicts is likely to happen due to a policy proposal or news item. I will try to go beyond the direct effects of the topic under investigation and look and the secondary, and likely unintended, effects.

And that's what he has done, with daily posts covering a wide range of fascinating topics.

The other new blog is by Megan McArdle, and hosted by The Atlantic magazine. Megan used to blog at The Economists's Free Exchange. And her alter ego Jane Galt is one of the very first econobloggers, with her Asymmetrical Information blog going way back. The 'About' section says:

Megan McArdle was born and raised on the Upper West Side of Manhattan, and yes, she does enjoy her lattes, as well as the occasional extra dry skim milk cappuccino. Her checkered work history includes three start-ups, four years as a technology project manager for a boutique consulting firm, a summer as an associate at an investment bank, and a year spent as sort of an executive copy girl for one of the disaster recovery firms at Ground Zero . . . all before the age of thirty.

She may or may not have been the first major economics blogger, depending on whether we are allowed to throw outlying variables such as Brad Delong out of the set. From there it was but a few steps down the slippery slope to freelance journalism.

...Megan holds a bachelor's degree in English literature from the University of Pennsylvania, and an MBA from the University of Chicago. After a lifetime as a New Yorker, she now resides in northwest Washington DC, where she is still trying to figure out what one does with an apartment larger than 400 square feet.

Megan's postings on her new blog are both prolific and provocative. I hope she's enjoying life in Washington.

Women: more equal, less happy

I had been meaning to post about the fascinating new paper by Betsey Stevenson and Justin Wolfers from the Wharton School: The Paradox of Declining Female Happiness (PDF). American men are now more satisfied with their lives than women - a reversal of the situation in the mid-1970s. There is a similar, though less sizeable, pattern in Europe.

Alex Tabarrok at Marginal Revolution blog also noticed the paper. His explanation?

My wife, a PhD microbiologist, told me once that when she was at work she felt guilty about not being at home with the kids and when she was at home with the kids she felt guilty about not being at work.

...Opportunity brings opportunity cost.

...As I wrote this post, I asked my wife about her feeling guilty at home and at work but she told me she no longer feels this way. "Really?" I asked,  "Why not?"

"I decided to act more like a man and get over it," she responded.

Tabarrok also cites a recent New York Times article by David Leonhardt, He’s Happier, She’s Less So. Leonhardt's explanation is not dissimilar:

What has changed — and what seems to be the most likely explanation for the happiness trends — is that women now have a much longer to-do list than they once did (including helping their aging parents). They can’t possibly get it all done, and many end up feeling as if they are somehow falling short.

'Happiness' (life satisfaction) is dynamic not static, and expectations can matter greatly.

UPDATE:
Mark Liberman at Language Log makes an important point about the Stevenson and Wolfers paper. To the naked eye, Figure 1 in the paper (the US happiness time series from 1972-2006) shows very little difference by gender. As Liberman points out, it is only after responses have been adjusted via an ordered probit that a statistically significant difference (though not a huge one) is detected. In a follow-up post, Gender-role resentment and Rorschach-blot news reports, he goes further:

OK, everybody, take a deep breath and listen: THERE IS NO HAPPINESS GAP!

Every year since 1972, the General Social Survey has been asking a big demographically-balanced sample of American men and women "Taken all together, how would you say things are these days? Are you a) very happy, b) pretty happy, c) not too happy."

Neither in 1972 nor in 2006 was there any statistically significant difference between men and women in the distribution of their responses! And in both 1972 and 2006, the proportion of women who said "very happy" was a little bit higher than the proportion of men who gave that response (though again, in neither year was the difference distinguishable from chance fluctuations).

So what is everyone talking about? Well, some economists fit a complicated statistical model (called an "ordered probit") to the whole sequence of survey results from 1972 to 2006, and this analysis suggests that women have become a little tiny bit less happy relative to men over that whole time period. But the effect is so small that you can't actually see it in the statistical analysis for any one year; the effect is much smaller than the amount of year-to-year jiggle. That's true even through the General Social Survey involves a huge sample, much bigger than is normally used for opinion polls: 4,500 people in 2006.

Hat tip: Steven Levitt at the Freakonomics blog

Psychology and economics

Stefano DellaVigna from UC Berkeley has written a very useful review of Psychology and Economics: Evidence from the Field (PDF). Hat tip: Andrew Leigh

In the conclusions DellVigna specuates on future research topics:

..future research is likely to reduce the imbalance across fields in economics and across topics in psychology. While the research in behavioral finance and consumption savings is very active, relatively few studies, instead, have tackled mortgage markets, development, and political decisions, fields ripe for exploration. Future research is also likely to explore psychological phenomena that have been largely neglected. For example, emotions,automatic processing, and implicit discrimination are likely to matter for economic decisions such as divorce, judicial sentencing, and policing. Ten years from now, we will hopefully be able to assess quantitatively which psychological factors matter in which decisions.

I identify two specific areas for future research: the market interaction between standard and non-standard agents, as in Section 5, and public policy applications. The market interaction is likely to find several additional applications, for example to the interaction between politicians and voters. In addition, this area is likely to investigate the judgmental biases, such as overconfidence, of experienced agents such as managers and politicians.

For another recent review of the literature, see my earlier post, Who are the behavioral economists and what do they say?

Why not target unit labour costs?

Perhaps I am missing some fatal flaw, but I have found  econoblogger KNZN's arguments in favour of central banks targeting unit labour costs quite persuasive. It has the advantage over inflation targets of excluding exogenous shocks. It also forces the monetary authorities to take more account of productivity. Here is the nub of KZNZ's arguments:

The main purpose of this approach is to have a simple and easily understood (by the market) answer to the question of how to react to supply shocks. The appropriate response to supply shocks is a matter of great controversy in macroeconomics: should a central bank accommodate supply shocks and let the inflation rate rise temporarily in order to avoid a recession or a slowing of growth (or a boom, in the case of a favorable supply shock), or should it lean heavily against the inflationary impact (or the deflationary impact) of supply shocks in order to pursue an unchanged target inflation rate? The labor cost target settles the question: if the shock is to domestic productivity or to the labor market, then lean against the inflationary impact; if the shock is entirely outside the domestic labor market and production process, then accommodate (except to the extent that you expect the shock to have indirect effects on productivity and the labor market, such as might arise, for example, from sticky real wages).

The main arguments against this approach I can think of are:
1) the objection that this would put undue focus on wage bargaining
2) estimates of unit labour costs are subject to considerable revision - unlike the CPI.

Mark Thoma's post is, as always, worth reading. Your views welcome.

Reversing Poland's brain drain?

Young Polish workers have flocked in the hundreds of thousands to the UK, Ireland and Sweden to find work since Poland's EU entry in 2004. Now Poland is faced with a serious lack of skilled workers and Warsaw wants to entice them back home, reports Der Spiegel Online: Poland Tries to Woo Its Young Back Home

The limits of microcredit

Plenty of people are enraptured by the possibilities of microcredit, but not Aneel Karnani. In a recent Michigan working paper, Employment, not Microcredit, is the Solution, he writes:

Most studies suggest that microcredit is beneficial but only to a limited extent. The problem lies not with microcredit but rather with microenterprises. With low skills, little capital and no scale economies, these businesses have low productivity and lead to meager earnings that cannot lift their owners out of poverty.

Creating opportunities for steady employment at reasonable wages is the best way to take people out of poverty. The government is responsible for providing public services that are critical for increasing the productivity and the employability of the poor.

New econometric textbook online

'Marshall Jevons' of the weblog The Bayesian Heresy alerts us to a new graduate-level econometrics textbook, available free online, by Professor Bruce E. Hansen from the University of Wisconsin. Here is a direct link to the PDF (1.2Mb).

Top 25 econoblogs on del.icio.us

For what it's worth, a ranking from KNZN of the top 25 economics blogs on Del.icio.us:

			number
Rank			of saves
1		Freakonomics	3152
2		Marginal Revloution	1132
3		The Big Picture	890
4		The Becker-Posner Blog	707
5		Brad DeLong's Semi-Daily Journal	644
6		Greg Mankiw's Blog	570
7		Calculated Risk	296
8		Economist's View	292
9		EconLog	273
10		Mish's Global Economic Trend Analysis	259
11		Econbrowser	249
12		Cafe Hayek	228
13		Daniel Drezner	226
14		Asymmetrical Information	205
15		New Economist	189
16		Nouriel Roubini's Blog	189
17		Environmental Economics	156
18		Tim Harford	136
19		Free Exchange at Economist.com	132
20		Angry Bear	129
21		Knowledge Problem	120
22		The Sports Economist	111
23		Oligopoly Watch	110
24		macroblog	107
25		Dani Rodrik's weblog	106

This information is provided with no warranty. The original list from which I worked was created by searching on "tag:economics tag:blog" in del.icio.us. For me to consider a site an economics blog, it generally had to have at least one URL bookmarked with "economics" as one of the top two tags and "blog" as one of the top four, and I eliminated some sites just because they didn't look like blogs to me. I tried to combine the number of saves for multiple URLs pointing to the same site, but there were undoubtedly some that I missed, and the decision as to what constitutes "pointing to the same site" was a subjective one. (I also ignored bookmarks pointing to particular posts within a blog.)

How should one rank economists?

I've never found the phrase 'one size fits all' useful for T-shirts. Maybe it is also wrong when seeking to rank academic economists too.

Much heated debate has ensued from the 2001 working paper Rankings of Academic Journals and Institutions in Economics  by Pantelis Kalaitzidakis and colleagues. The 'KMS' paper, later published in the December 2003 issue of the Journal of the European Aconomic Association, proposed a world-wide ranking of economic research institutions based on a computation of the current impact factors ranking of economic journals. Harvard, Chicago and MIT were ranked first, second and third respectively. But US instutions accounted for less than half (44%), compared with one-third from Europe and a fair smattering of Asian institutions.

But was the methodology the right one? A new paper by Magnus Henrekson and Daniel Waldenström argues it wasn't. In Should Research Performance be Measured Unidimensionally? Evidence from Rankings of Academic Economists, they applied seven established measures of research performance for all professors of economics in Sweden, exploring how different measures influenced the skewness and ranking of individual performances. The Kalaitzidakis et al method did not perform well:

We find large differences across all measures, but some deviate more than others. In particular, the journal ranking of Kalaitzidakis et al. 2003 (KMS), which was endorsed by the European Economic Association and has been extremely influential especially in Europe, appears to be an outlier among the available measures. Its distribution of performances is the most skewed, and its ranking of scholars corresponds the least with the rankings of the other measures.

Hence, relying on one single metric of research quality, especially one that is as extreme as KMS, is associated with a great risk given that researchers tend to adjust behavior in order to maximize the assessed relative and absolute value of their work.

The authors conclude on a cautious but sensible note:

Our results do not imply that we should refrain from efforts to rank individual researchers and ban all attempts to quantify the value of research output. But our results make clear that there is no single unequivocal catch-all measure that can be used.

All seven measures provide relevant information about the performance of individual researchers, and no doubt there are additional aspects that may be important that are largely overlooked by all of these measures. For instance, only a small subset of all journals are included in the KMS, IF and KY measures, and most measures either ignore or give little weight to impact outside economics or on policymaking. Hence, quantitative measures cannot fully substitute for careful reading and individual assessment of the works of individual researchers.