Friday, January 24, 2014

Interesting, but too cynical


My experience is that empirical economists care a whole lot about methods. They care about methods because they help us to understand problems we care about, of course. But what fires them up is neat modeling tricks that address tricky problems.

I can only speak from experience, but getting to know professionals in three different economics departments, a policy department, and professionally at the Urban Institute (both Urban economists and those I interacted with from elsewhere), they would get a lot more excited about their argument than about their answer.

This is not the case for, say, an advocacy organization in D.C., or activisty types I've come across at school and professionally. They care a lot more about the answer. And they'll cling onto the literature that gives them the answer that they want. But then again these guys don't write up analyses.

The minimum wage stuff is actually a good example of this. I don't really support the minimum wage as policy (although evidence for zero effects makes me OK with states trying things out - they have a better sense of appropriate levels - so I'm not a purist in that regard). Even at the state level I think it's an unnecessarily blunt instrument. And before I read the literature several years ago I personally thought that the minimum wage must have disemployment effects. At the time it fit my libertarianish ideological requirements, it fit what I thought I knew about economics, etc. I've really come around to the alternative view on the disemployment effects not because I was some huge energetic supporter of the minimum wage, and not because it was consistent with my ideology at the time, but despite those things - because the evidence was good. If there were disemployment effects in some cases (which I still expect there are), certainly there were enough positive employment effects elsewhere to get an averaged effect of zero.


  1. Did you see this?

    Makes me think that there may be some sort of tenure-related firm-specific human capital story going on. Ie, increases in the minimum wage allow employers to capture more from firm-specific investment due to an increase in the period of unemployment. (but not necessarily the rate: job tenure increases offset the unemployment period increases).

    1. Which in turn increases productivity of the marginal worker to the firm , which is the cause of the increased job tenure.

      Not sure what the net welfare effects would be. Less turnover would mean worse job matches on average, right? Which may be partially offset by the increased productivity at existing jobs.

    2. Are you TRYING to make more work for me Ryan?!?!?

      Looks interesting - I'll take a look.

      The tenure thing makes sense in terms of human capital theory, and Dube and co-authors have confirmed the reduced turnover point. I'm not sure this necessarily results in bad matches... it depends. Hiring and separation rates decline. If that's because firms are being more selective on the front end there's no necessary reason why bad matches have to increase. But I should become more conversant in search theory. As I said earlier, theory is not my strong suit. I'm not sure anything is my strong suit, but it's not even my least-weak-suit.


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