Consumption, business managers and more

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    Bruce D. Meyer and Connacher Murphy of the University of Chicago and James X. Sullivan of the University of Notre Dame, using nationally representative microdata, find that after the start of the pandemic, those at the bottom of the consumption distribution experienced modest or no reductions in consumption, while those higher up experienced progressively larger and more significant declines that were concentrated in the second quarter of 2020. The decline in consumption was more pronounced for families with at least some college education nearby. of the upper part of the distribution of consumption and the elderly upper half of the distribution. Family income showed a different pattern. Relative to 2019, revenues increased overall in the first half of 2020 and stabilized in the second half of the year. The authors conclude that the fiscal policy response helped prevent the consumption of the most disadvantaged families from falling, but they warn that their results do not imply that the pandemic has not had negative impacts on the economic well-being of disadvantaged families.

    The rise of managers with business degrees has contributed to declining labor earnings shares and slowing wage growth in the US and Denmark over the past few decades, find MIT’s Daron Acemoglu, Daniel le Maire from the University of Copenhagen and Alex He from the University of Maryland. Using US data, the authors show that when a “business manager” (a CEO with a business degree) takes over leadership of a company from a non-business manager, that company experiences a 5% decline in its labor participation and a 6% decrease in employee wages over the next five years, as well as a 3% increase in earnings and a 5% increase in stock value. The authors find similar results using Danish administrative data and using CEO deaths or retirements as a source of variation. They suggest that a mechanism behind this finding could be differences in “rent-sharing” behaviors between business and non-business managers. To investigate this channel, the authors study firm-specific impacts on export demand in Denmark, finding that wages in firms run by business managers remain stable in response to increases in demand, while wages in companies not run by business managers increase. The authors argue that the effect of business managers on salaries is attributable to business schools’ focus on maximizing shareholder value and reducing unnecessary costs. They estimate that the growing fraction of workers employed by business managers in US companies could account for about 20% of the overall decline in the labor share of income and 15% of the slowdown in real wage growth in the US. Since 1980.

    Elizabeth Burland of the University of Michigan and coauthors conduct a controlled experiment in Michigan where low-income high school students who meet certain academic criteria are assigned to one of three groups: an unconditional offer of full tuition and fees for four years if are admitted (the HAIL scholarship), an offer of full tuition and fees for up to four years conditioned on verification of financial eligibility if admitted (“Go Blue” stimulus), or typical recruiting materials (the control group). The unconditional HAIL scholarship increased applications by 28 percentage points, admission by 10 percentage points, and enrollment by 9 percentage points relative to the control group. In contrast, the Go Blue program increased applications by 8 percentage points, admission by 3 percentage points, and enrollment by only 1 percentage point relative to the control group. Students in all three groups were equally likely to complete both required financial aid forms, suggesting that these differences are not the result of cumbersome aid forms. Instead, the authors attribute the high application rates of those in the HAIL scholarship pool to the high value placed on financial certainty. The Go Blue group’s lower enrollment rates could be attributed to lower than expected or desired financial aid, they say; in fact, those in the HAIL scholarship received $2,700 more in grants than those in the Go Blue stimulus group, on average. The authors conclude that, while more expensive, a broad-based tuition-free program would increase college attendance for low-income students more than programs that require financial verification.

    How the value of the ruble has changed

    Graphic courtesy of The New York Times

    “Look, budgets are statements of value; The president has been clear about it. What he thinks is fair is asking billionaires and those with more than $100 million to pay roughly the same tax rates as teachers, nurses and firefighters. That’s all he’s asking for. They are supposed to pay taxes on this unrealized income,” says OMB Director Shalanda Young.

    “They often use loopholes and deferrals to not do that. So, this president has been very clear. What we’re not going to do is send a budget that cuts benefits to our seniors, but it will ask the 400 richest people in this country. [who are] worth more than 150 million other americans [to pay taxes]. He doesn’t think that’s right and he’s asking them to pay their fair share.”

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