BLOG MASH-UP OF THE WEEK

Everyday the blogosphere offers an enormous amount of in-depth analysis on any imaginable topic. The world of macroeconomics and economic forecasting is no exception. To keep themselves updated on the latest information, our in-house team of economists scan the world wide web and gather what they consider the most interesting, appealing, informative or just curious blog posts from experts in the field of global economics. Here’s the list of the Top 4 posts from this week. Check it out!

  1. Crooked Timber – Chris Bertram: ‘Squeezing the rich is good: even when it raises no money

    There has been much debate about the consequences of rising income tax for high earners, particularly about the possibility that wealthy people would flee the country, thereby reducing government revenues. In this post, Chris Bertram suggests that increasing taxes on “rich” is good even if this measure does not raise more money. Much of the wealth is created in cooperation with others, so one part of the income already belongs to the society. A higher income tax for big earners is socially acceptable in order to reduce their power and influence. Finally, income redistribution has the potential to enhance social utility and promote social mobility. – Ricard Torné

  2. EconoMonitor – Ed Nolan: ‘Total US GDP Grows 3.2 Percent in Q4. That’s Nice, but Why do We Pay So Little Attention to Per Capita Measures’

    Economist Ed Nolan argues that too much importance is placed on total GDP data, while GDP per capita figures are typically overlooked, particularly in advanced countries. Nolan emphasizes that, “it is a commonplace of development economics that the living standards of a poor country cannot rise unless its GDP grows faster than its population, but we seem to forget that point when we talk about high-income countries.” Nolan points out that recent improving quarterly GDP results in the US have been interpreted as a sign that economic recovery is underway, although he questions whether or not such recovery is translating into rising living standards. Nolan compares the evolution of total GDP and GDP per capita since Q4 2007, the peak quarter before the recession hit. He finds that as of Q4 2013, “total real GDP is 6.5 percent above its previous peak, but real GDP per capita is up by just 1.7 percent. [Moreover], whereas total real GDP surpassed its previous peak already in Q2 2011, per capita GDP didn’t fully recover until Q2 2013, a full two years later.” Nolan adds that the two different ways of measuring GDP also make a difference when making international comparisons. The ranking of the G7 countries changes along these lines, for example. As an illustration, Nolan shows how  “Japan, whose sluggish growth of total GDP is often lamented, turns out to be doing about as well as the United States and Canada when its declining population is factored in.” Nolan’s conclusion is that measures of total GDP are misleading and yet capture all the headlines. Moreover, he proposes that more per capita measures be included in economic analysis. – Carl Kelly

  3. Mainly Macro – Simon Wren-Lewis: ‘Understanding ever increasing executive pay’

    In this interesting blog, Simon Wren-Lewis argues on the effect of an increase in the top tax rate. Basing his arguments on a paper by Piketty, Saez and Stantcheva, Wren-Lewis explains that there is a clear correlation between the drop in top marginal tax rates and the surge in top income shares. The simple idea behind the argument is that executive pay is not determined in a market where prices are set to balance supply and demand. Instead the wage is decided after a bargaining process between the firm and the CEO. The bargaining model developed by Pikkey, Saez and Stantcheva has a clear policy implication. Lower top tax rate will encourage the executive class to engage in efforts to raise their pay at the expense of everyone else. – Dirina Mancellari

  4. Behavioral Macro – Mark Dow: ‘Emerging markets in a New York Minute

    Mark Dow in his microblog writes that people will overstate how bad fundamentals are as price action worsens. But many things, fundamentally, are different this time. Gone is the fixed FX regime, emerging markets’ financial markets are deeper and their reserves are higher. – Ricardo Aceves

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