useful slides for a presentation given by Yuriy Gorodnichenko:
Keywords: Ukraine, Europe
Mueller, Kai-Uwe and Steiner, Viktor, Distributional Effects of a Minimum Wage in a Welfare State – The Case of Germany (December 19, 2013). SOEPpaper No. 617. Available at SSRN: http://ssrn.com/abstract=2385893 or http://dx.doi.org/10.2139/ssrn.2385893
"A popular argument for a federal minimum wage is that it will prevent in-work poverty and reduce income inequality. We examine this assertion for Germany, a welfare state with a relative generous means-tested social minimum and high marginal tax rates. Our analysis is based on a microsimulation model that accounts for the interactions between wages, the tax-benefit system and net incomes at the household level as well as employment and price effects on the distribution of incomes induced by the introduction of a minimum wage. We show that the impact of even a relatively high federal minimum wage on disposable incomes is small because low wage earners are scattered over the whole income distribution and wage increases would to a large extent be offset by reductions in means-tested welfare transfers and high marginal tax rates. Taking into account negative employment effects and increases in consumer prices induced by the minimum wage would wipe out any positive direct effects on net incomes of households affected by the minimum wage."
Keywords: Minimum Wage, Employment Effects, Income Distribution,
Good presentation which helps to understand the current situation in emerging markets and the consequences of monetary policies of the past years on EMEs.
First Phase of Global Liquidity (2003 - 2008)
— Key theme is leverage
— Main actors: European banks intermediating US dollar credit
Second Phase of Global Liquidity (2010 - )
— Bond market-driven
— Key theme is search for yield
— Main actors: Asset managers with global reach
Keywords: Monetary Policy, Emerging Markets, Search for Yield
"Emerging-market economies had a brutal week. For years, during the crash and its aftermath, they did well as the advanced economies slumped. Recently, not so much. Many developing countries are seeing their currencies drop and their bonds and equities hammered. Just as the global recovery appeared to be strengthening, a fresh source of instability has presented itself.
The issue now is how to keep the turmoil from derailing the global expansion. In a way, this was not an unexpected development: The recession in the advanced economies caused central banks to push short-term interest rates to zero and buy assets to drive long-term rates down as well. Capital flowed to the developing world in search of better returns. As investors prepare for a resumption of normal monetary policy, demand for emerging-market assets is bound to fall. The question has always been whether this adjustment would be smooth or abrupt. read more on Bloomberg"
Keywords: Monetary Policy, Emerging Markets
"Economists Joseph J. Sabia and Richard V. Burkhauser examined the effects of state minimum wage increases between 2003 and 2007 and reported that they found no evidence the increases lowered state poverty rates.
Further, they calculated the effects of a proposed increase in the federal minimum wage to $9.50 on workers then earning $5.70 (or 15 cents less than the minimum in March 2008) to $9.49. They found that if the federal minimum wage were increased to $9.50 per hour:
. Only 11.3 percent of workers who would gain from the increase live in households officially defined as poor.
. A whopping 63.2 percent of workers who would gain were second or even third earners living in households with incomes equal to twice the poverty line or more.
. Some 42.3 percent of workers who would gain were second or even third earners who live in households that have incomes equal to three times the poverty line or more." more on Library of Economics and Liberty
Keywords: Minimum Wage, Employment
"We review the burgeoning literature on the employment effects of minimum wages - in the United States and other countries - that was spurred by the new minimum wage research beginning in the early 1990s. Our review indicates that there is a wide range of existing estimates and, accordingly, a lack of consensus about the overall effects on low-wage employment of an increase in the minimum wage. However, the oft-stated assertion that recent research fails to support the traditional view that the minimum wage reduces the employment of low-wage workers is clearly incorrect. A sizable majority of the studies surveyed in this monograph give a relatively consistent (although not always statistically significant) indication of negative employment effects of minimum wages. In addition, among the papers we view as providing the most credible evidence, almost all point to negative employment effects, both for the United States as well as for many other countries. Two other important conclusions emerge from our review. First, we see very few - if any - studies that provide convincing evidence of positive employment effects of minimum wages, especially from those studies that focus on the broader groups (rather than a narrow industry) for which the competitive model predicts disemployment effects. Second, the studies that focus on the least-skilled groups provide relatively overwhelming evidence of stronger disemployment effects for these groups."
Keywords: Minimum Wage, Regulation, Re-Distribution
World economic freedom has reached record levels, according to the 2014 Index of Economic Freedom, released Tuesday by the Heritage Foundation and The Wall Street Journal. But after seven straight years of decline, the U.S. has dropped out of the top 10 most economically free countries.
For 20 years, the index has measured a nation's commitment to free enterprise on a scale of 0 to 100 by evaluating 10 categories, including fiscal soundness, government size and property rights. These commitments have powerful effects: Countries achieving higher levels of economic freedom consistently and measurably outperform others in economic growth, long-term prosperity and social progress. Botswana, for example, has made gains through low tax rates and political stability. read the whole article in the Wall Street Journal
Keywords: Economic Freedom, Regulation, Taxes, Liberalism
Keywords: Economic Growth, Economic Freedom, Democracy
read the opinion of following people in the Politico Magazine:
Mohamed El-Erian, CEO and co-CIO of PIMCO
Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities
Laurence Kotlikoff, professor of economics at Boston University
Robert Reich, labor secretary in the Clinton administration and now professor of public policy at the University of California Berkeley Goldman School of Public Policy
Menzie Chinn, professor of public affairs and economics at University of Wisconsin, and Jeffry Frieden, professor of government at Harvard University
Jeffrey Frankel, professor of capital formation and growth at Harvard University
Dean Baker, co-director of the Center for Economic and Policy Research
Keywords: Economy, US Economy
"Income Gap: As President Obama laments America's growing income inequality, a new government report shows the futility of his calls for ever-more wealth redistribution.
To deflect attention from ObamaCare's failures, the president this month trotted out his income inequality chestnut. "A dangerous and growing inequality," he intoned, "has jeopardized middle-class America's basic bargain."
He argued, "as a trickle-down ideology became more prominent, taxes were slashed for the wealthiest, while investments in things that make us all richer, like schools and infrastructure, were allowed to wither."
Apparently, nobody bothered to brief the president before he delivered this speech. Fact is, federal transportation spending has climbed 39% in real terms since 1980, and spending on education has more than doubled.
And while Obama claims taxes were "slashed for the wealthiest," the average tax rate among the top 1% was higher in 2010 than in the early 1980s.
Meanwhile, a new Congressional Budget Office report shows that the government is already a massive wealth redistribution machine.
The CBO study breaks down the country by income into five equal groups, or quintiles. It found the top 40% paid more than 100% of all the income taxes, while the bottom 40% had a negative income tax. These families got more money through various refundable tax credits, on average, than they paid in income taxes.
Even when you include payroll and other federal taxes, the poorest group paid just 0.4% of all federal taxes, while the wealthiest paid 70%.
And this doesn't include transfer programs like food stamps, disability, welfare, Medicaid, Medicare and Social Security. These too are heavily tilted to the poor.
All together, the CBO found that families in the lowest income group earned an average of $8,100 on their own. But they received an average of $22,700 through federal transfer programs, net of taxes. In other words, the federal government more than tripled their income." read more on Investors.com (powered by Investor's Business Daily
Keywords: Wealth re-destribution, Taxes, Social Welfare
Keywords: US Economy, US Growth,
..."Between 2008 and 2012, several of the developed world's most fiscally challenged nations (including the United Kingdom, Ireland and Spain) increased top personal income tax rates by an average of 8%. In the United States, the expiration of the Bush tax cuts pushed the highest federal income tax bracket to 39.6% from 35%.
What the IMF calls "revenue-maximizing top income tax rates" may be a good indication of how much further those rates could rise: As the IMF calculates, the average revenue-maximizing rate for the main Organization of Economic Cooperation and Development countries is around 60%, way above existing levels.
For the U.S., it is 56% to 71%—far more than the current 45% paid in federal, state and local taxes by those in the top tax bracket. The IMF singles out the U.S. as the country where raising top rates toward 70% (where they were before the Reagan tax cuts) would yield the most revenue—around 1.25% of GDP. And with a chilling candor, the IMF admits that its revenue-maximizing approach takes no account of the well-being of top earners (or their businesses).".... read more in The Wall Street Journal
Keywords: Over-indebted Nations, Wealth Taxes
In Scotland, residents will vote next September on whether their homeland should become an independent country or remain part of the United Kingdom. In Catalonia, Spain, provincial president Artur Mas has called for a referendum on whether Catalonia should become a sovereign state. And in the Belgian province of Flanders, the leader of the ruling party has called for negotiations that would “enable both Flanders and French-speaking Wallonia to look after their own affairs.”
Although the economic integration of Western Europe has proceeded at a rapid pace in recent decades, the political borders of the region have remained almost entirely unchanged since the end of World War II. And yet, “there is the real possibility of one or several national divorces being initiated in Western Europe in 2014,” notes Nicholas Siegel, senior program officer at the Transatlantic Academy, a U.S.-European think-tank based in Washington, D.C. read more on Knowledge Wharton
Keywords: Europe, Secession, Scotland, Catalonia, Flanders
Is it time for the Federal Reserve to start its exit from the extraordinary set of policies it has pursued over the past few years? That crucial question is on the minds of the nation’s central bankers, as well as the stock and bond traders who follow the Fed’s every move. read more in the New York Times
Keywords: Monetary Policy, Fed, Exit
US Public Pension Funds would have to achieve "impressive" future returns to close the funding gap. The US is definitely not alone. Other nations' public pension funds would show similar pictures. A 20-year snapshot of BlackRock shows that such returns are hardly achievable in a well diversified portfolio. Only top quartile private equity funds would systematically come close to such returns.
Keywords: US Public Pension Funds, Pension Funds Funding Gap
Charts of the article in The New Yorker come from Emmanuel Saez, of Berkeley, which shows the share of pre-tax income enjoyed by the top one per cent of earners over the period from 1913 to 2012. The data, which comes from the Internal Revenue Service, is for market income: it includes realized capital gains but excludes government transfers. see charts and article in The New Yorker
Keywords: Income Distribution, Wealth Distribution, Gini Coefficient
The euro area may be facing renewed deflationary pressures. Inflation measures are now near multi-year lows and falling. see some interesting charts on CPI, French employment, monetary base etc. on Sober Look
Keywords: Europe, European Crisis, European Recovery
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