New article from Econ Journal Watch: And the IMF Said, Let There Be Data, and There Was Data: Private Capital Stocks in the Eastern Bloc

From two graduates of the Suffolk University PhD program in Economics I had the pleasure of knowing and working with over the years. Here's Ryan Murphy and Colin O'Reilly's new paper. 

And the IMF Said, Let There Be Data, and There Was Data: Private Capital Stocks in the Eastern Bloc

Abstract

The International Monetary Fund has recently published a dataset on public and private capital stocks for 170 countries from 1960–2015 using the perpetual inventory methodology. Following a reckless assumption, opaquely imposed, the dataset likely overstates levels of private investment as a percentage of total investment in former Eastern bloc countries, and thereby likely overstates their private capital stocks. This comment explores the nature and implications of the assumption, and suggests that, in light of the problem, the scope of the IMF project be significantly diminished to address the issue.

Read more here (PDF). 

Hat tip to MarginalRevolution.com.

Comment on the BEA report on Massachusetts GDP state

OVERVIEW

• Real gross domestic product (GDP) state increased in 43 states and the District of Columbia where real gross domestic product (GDP) increased in the first quarter of 2017, according to statistics on the geographic breakout of GDP released by the U.S. Bureau of Economic Analysis.
• The Massachusetts economy grew by 1.1 percent in the first quarter of 2017. This was slightly below the 1.2 national average. 
• The growth rate was slower than the annual rate for 2016 which posted at 2.0 percent but was an improvement over the first quarter of 2016 which contracted by 2.0. 
• Real GDP by state growth in the first quarter ranged from 3.9 percent in Texas to -4.0 percent in Nebraska. See Chart 1 from the BEA. 
• As a region, the six states of New England only grew by 0.9 percent. The Southwest — Texas, New Mexico, Arizona and Oklahoma — grew the largest for Qtr1-2017 at 3.3 percent nearly three times the adjusted-for-state comparison U.S. rate of 1.2 percent. 
• The current dollar size of the Massachusetts GDP by State is $519.9 billion. 

ANALYSIS 

GDP-State is the market value of goods and services produced by labor and property (or capital) in a state. The sum of GDP for all states released this week (1.2 percent for Qtr1-2017) differs from the national GDP number (1.2 percent)* since outputs like military and overseas activity can’t be attributed to any one state.  The Massachusetts economy comprises 2.7 percent of the total U.S. economy according to the BEA update. New England, as a region comprises one of the smallest at 5.4 percent outpacing the Rocky Mountain states which accounts for 3.4 of the national total. 

Real Estate and Rental and Leasing, Mining and Durable Goods Manufacturing were the leading contributors nationally. In Massachusetts, the leading contributions to the percent change were: Real Estate and Rental and Leasing, Construction, Health Care and Social assistance, Durable-goods Manufacturing, Wholesale Trade, Nondurable-goods Manufacturing, and Administrative and Waste Management Services. (See Table 1 p. 2.) 

Massachusetts ranked 25th in growth during the first quarter.  How did Massachusetts rank in this latest BEA report compared with its high-technology competitors?  The state of Washington grew by 2.7 percent, Virginia by 2.0 percent while the Utah economy grew by 1.9 percent. Meanwhile, California slowed to 0.1 percent, Colorado by 0.4 percent; North Carolina grew by 0.7 percent as Minnesota contracted by 0.3 percent. 

*Revised figure from 7/28 GDP press release; The originally reported figure was 1.4 percent.

Increased consumption for most families despite growth in income inequality

Income inequality has been increasing but so has consumption according to a working paper by Bruce Sacerdote of Dartmouth College. 


Extract:
Despite  the  large  increase  in  U.S.  income  inequality,  consumption  for  families  at  the  25th  and  50th percentiles  of  income  has  grown  steadily  over  the  time  period  1960-2015.  The  number  of  cars  per household  with  below  median  income  has  doubled  since  1980  and  the  number  of  bedrooms  per  household has  grown  10  percent  despite  decreases  in  household  size.  The  finding  of zero growth in American real wages since the 1970s is driven in part by the choice of the CPI-U as the price deflator (Broda and Weinstein 2008). Small biases in any price deflator compound  over  long  periods  of  time.  Using a  different  deflator  such  as  the  Personal  Consumption Expenditures index (PCE) yields modest growth in real wages and in median household incomes throughout  the  time  period.  Accounting  for  the  Hamilton (1998)  and  Costa  (2001)  estimates  of  CPI  bias  yields  estimated  wage  growth  of  1  percent  per  year during  1975-2015.  Meaningful growth  in  consumption  for  below  median  income  families  has  occurred even  in  a  prolonged period of increasing income inequality, increasing consumption inequality and a decreasing share of national income accruing to labor.


Link: Fifty Years Of Growth In American Consumption, Income, And Wages - 61497-w23292.pdf

A look at the City of Boston's capital spending plan for FY2018-FY2022

Titled, "Ambitious City Projects Benefiting from Building Boom in Boston," https://shar.es/1F3Fbr, the article examines the good luck Boston's enjoying as a result of the building boom. 

The debate on what to do about income inequality intensifies

Or, is the debate shifting to one about semantics?

From Fatih Guvenen and Greg Kaplan in a new NBER paper.

We revisit recent empirical evidence about the rise in top income inequality in the United States, drawing attention to four key issues that we believe are critical for an informed discussion about changing inequality since 1980. Our goal is to inform researchers, policy makers, and journalists who are interested in top income inequality. Our analysis is based on a reexamination of publicly available detailed statistics from two administrative data sources: (i) Internal Revenue Service (IRS) data on total incomes (labor income plus capital income), reported in Saez (2012), and (ii) individual-level micro data on labor income (wage plus self-employment income) from the U.S. Social Security Administration (SSA)  reported in Guvenen et al. (2014).

One key take-away:

Put simply, so far in the 21st century, all the action in top income shares has been S-corporation income at very, very high income levels.

National Bureau of Economic Research Working Paper 23321.