BackFactory job boost for US, India’s adverse sex ratio and roots of post-truth world
Latest research in economics can help us examine tall claims and warns against always relying on intuition
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US President-elect Donald J Trump might find it difficult to fulfil his vow to “be the greatest jobs producer that God ever created" as he would require to fight the seemingly inevitable fate of manufacturing in developed countries. Companies like Apple, “which concentrates research and design innovations at home but no longer has any factories in the USA, may be the norm in the future", according to a recently released working paper, authored by Lionel Fontagné (Paris School of Economics) and Ann Harrison (University of Pennsylvania).
The paper argues that the advanced world is unlikely to witness any growth in factory jobs, as manufacturing companies of these countries find it profitable to combine their know-how with low-wage labour in developing nations. Of course, while the corporations of the advanced world might continue to extract substantial profits from patents and technology, the paper concedes that many of the workers in these countries could lose, especially those “caught in the shift from an industrial to a service economy".
Read more: The Factory-Free Economy: Outsourcing, Servitization and the Future of Industry
An adverse sex ratio is one of the most important challenges to gender equality in India. The vice is often blamed on poor education levels. A forthcoming paper in the American Economic Journal authored by Seema Jayachandran, an associate professor of economics at Northwestern University, says it might not be the case. The logic is simple: higher education among women generally leads to a preference for lesser number of children. In a society which prefers sons over daughters it could actually increase the practice of sex selective abortions, to have a male child without multiple childbirths.
To illustrate, if a family plans to have six children, then there is a 98% chance that at least one of their off springs will be a male, and hence lesser incentive for sex-selective abortion. The paper backs the theory with data from the National Family Health Survey.
Read more: Fertility Decline and Missing Women
Another forthcoming paper in the American Economic Journal says that rehabilitation of slum-dwellers in improved houses might not always be beneficial for them, especially if the newly allotted houses are far away from the urban centre. The paper, authored by Sharon Barnhardt, Erica Field and Rohini Pande from the Indian Institute of Management (Ahmedabad), Duke University, and Harvard University, respectively, studies the effects of relocating some slum-dwellers, chosen by lottery, from inner-city Ahmedabad to government housing around seven miles away.
Their study shows that subsidized housing often could not compensate for the additional costs in terms of longer commute to work or to children’s schools.
Moreover, the relocated families reported increased isolation from family and caste networks and lower access to informal insurance. The fact that 34% of winners never moved into the subsidized housing and 32% eventually exited indicates that the relocation and rehabilitation plan was not a grand success.
Read more: Moving to Opportunity or Isolation? Network Effects of a Randomized Housing Lottery in Urban India
Post-truth was declared word of the year by Oxford dictionary in 2016. Political and social opinions across the globe today are sharply polarized on the lines of partisanship, with each side accusing the other of supressing facts. A paper by Alberto Alesina, Stefanie Stantcheva and Edoardo Teso, all economists at Harvard University, which has been released this month shows that social conditions and political leanings play an important role in shaping people’s responses to important policy questions. The study which is based on based on cross-country survey and experimental data from France, Sweden, Italy, the UK and the US finds that Americans are more optimistic about their future generations being better off than the Europeans, even when facts show the trend to be different. The authors also found that left-wing respondents were more likely to express support for redistributive policies than those who belong to the right. One of the authors’ conclusion is that even an agreement on existing social problems (social mobility in their case), there is no guarantee of an agreement on what should be done about it. Thinking about the popularity of Donald Trump and Bernie Sanders in the US Polls?
Read more: Intergenerational mobility and preferences for redistribution
2017 has started on a sad note for the economics fraternity. Anthony B Atkinson a celebrated economist who was associated with Oxford and London School of Economics passed away on January 1. Multiple tributes have followed Atkinson’s demise. One of world’s most famous economists Thomas Piketty has described Atkinson’s insights on inequality as instrumental in shaping his own ideas.
Read more: Passing of Anthony B. Atkinson
Economics Digest will run weekly, and will feature interesting reads from the world of economics.
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