Saturday, March 25, 2017

Mortality rates are not supposed to increase

The middle class has been getting squeezed for years, according to economic data on employment and income.  Now we have a study from Princeton economists Angus Deaton (a Nobel laureate) and Anne Case that finds that mortality rates have increased for white Americans with no more than a high school education.

Mortality has increased in part because of more deaths from alcohol and drug abuse and suicide.  These "diseases of despair" reflect diminished hope.  There also has been an increase in mortality from other causes, including heart disease.

Mortality for whites aged 45-54 with a high school education or less started increasing in 2000.  This trend is limited to the US; mortality in European countries has continued to shrink over the dame time span.  Also mortality for nonwhites in the US has continued to shrink, as has the mortality rate for those with college education.

Centuries of economic history have shown economic progress has gone along with longer life spans.  Now, despite an increase in health insurance coverage in the US, the pattern has been reversed for a significant segment of our society.  

Monday, March 20, 2017

NC State ranked #18 online MBA in the world by Financial Times

NC State's online MBA program is now ranked among the top 20 in the world according to the Financial Times.  This year is the first in which our program was eligible for the FT ranking.

The ranking is mostly based (60%) on a survey of alumni who graduated there years go.  They have done well professionally and were pleased with their online learning experience.   Faculty credentials and research productivity accounted for another 20 percent of the ranking, with student and faculty diversity and international exposure accounting for the remainder.

Where we did well compared to other schools in the top 20:
— value for money (#12)
— career progress (#9)
— aims achieved (#11)
— career services (#8)
— program delivery (#13)
— online interaction (#10)
— percentage female (#7)
— doctoral program graduates (#9, thank you econ!)
— research in top 50 journals (#11)

NC State has been featuring a story about the ranking on its home page.
https://mba.ncsu.edu/news/financial-times-ranks-nc-state-top-20-online-mba/

With the new curriculum rolling out and the enhanced flexibility students have to mix and match online and face-to-face classes, I truly believe we are positioned for even greater impact and recognition in the years ahead.  Kudos to the faculty and staff who, along with the alumni, made this happen.

Friday, March 17, 2017

How to pay for lower tax rates

The new President campaigned on a platform of lower tax rates and a simpler tax code.  Simple arithmetic dictates that the tax base must be broadened in order to lower tax rates and maintain the same tax revenue.  The political trick is to find something new to tax.

Even though the same party controls the Presidency and both houses of Congress, there is no agreement on how to broaden the sources of tax revenue.  The focus right now is on the corporate income tax.  The US has one of the highest statutory rates in the world, but it also has a bewildering array of deductions and exclusions.  Paul Ryan has proposed lowering the top rate from 35% to 20% by taxing imports.  This is great news for companies that do not use many raw materials or have supply chains internal to the US.  Not so great news for any company with a global supply chain and terrible news for retailers.

According to Grep Ip in WSJ, another approach would be to raise tax rates on shareholders by taxing dividends and capital gains at the same rate as labor income.  One would think this would play well with the President's supporters.  But would Republicans ever raise taxes on those in the top brackets to pay for a corporate tax cut that would make the US a more attractive business location and create more jobs?

Friday, March 3, 2017

Should an H-1B be free?

H-1B visas allow employers to hire skilled foreign workers in a limited set of specialized occupations that require a college degree.  The visa is good for three years and can be renewed for another three.  During this period visa holders have the option of applying for a Green Card for permanent residence.

In 2015 the eight largest H-1B employers were (in descending order) Cognizant, Infosys, Tata Consultancy Services, Accenture, Wipro, HCL, Tech Mahindra Americas, and IBM India.  All of these firms do IT outsourcing and rely on workers from India.

There are only 65,000 H-1B visas given each year, well below the number of requests.  The visas are allocated by a lottery system.

But maybe not for much longer.  WSJ reports that someone in the Trump administration has remembered some basic economics: price ceilings create shortages.  Why should the H-1Bs be free?  

One adjustment under consideration would be to allocate the visas to the firms that pay the highest salaries.   This means more foreigners in high wage occupations (e.g., surgeons) get admitted than those in relatively low wage gigs (e.g., most of today's IT consultants).  

Another approach would be to auction off the visas.  This would force firms to put their money where their mouth is regarding labor shortages.

Finally one could argue for more visas, but I do not think that argument is going to go very far for at least the next four years.




Wednesday, February 8, 2017

Jenkins MBA team wins Krispy Kreme challenge

Kudos to the 20 Jenkins MBAs who joined me last Saturday to participate in the Krispy Kreme challenge.  The Jenkins MBA team finished in first place in the Casual Runner Teams division.  Casual Runners run the five miles but are not obliged to eat the dozen donuts.

More importantly the annual event raised $190k for the UNC Children's Hospital.  Looking forward to an even larger Jenkins MBA contingent next year.


Wednesday, February 1, 2017

National Signing Day

Today is National Signing Day when college football programs lock in their new recruits for next year.  According to ESPN, Nick Saban's evil Alabama empire appears to once again have the top entering class, as has been the case five of the last six years.  (Why the sour grapes? He abandoned my Spartans!)  Based on that data point alone, there does seem to be a connection between signing the best players and winning the most games.

But how does being a top-ranked high school footballer work out for the players?  According to this WP article, not so well.  Of the top 100 who finished high school in 2007, only 39 ever played in the NFL and 20 still play.  More strikingly, four are dead and one is in prison for murder.  Some had their football careers cut short by injury; others found success in fields other than football.   According to WP, at least a third received college degrees from the school with which they signed.

My takeaway: even the very best high school players need a Plan B in case football does not work out.  Success in football is very hard to predict on an individual basis.

Monday, January 30, 2017

The basic economics of an import tax

We have had many surprises in the political arena, but perhaps none are more surprising than to see Republicans rallying around a tax increase.  Import taxes are politically convenient.  Gullible voters think that such taxes will be paid by foreign entities and will encourage producers to shift production to the US to avoid such taxes.

This is wrong on both counts.  Consumers in the US end up paying for the tax via higher prices.  As they cut back spending this means fewer domestic jobs in retail.  Producers have developed complex global supply chains to take advantage of productivity and cost differences across different countries. A 20% import tax is not going to be enough to offset a 500% labor cost difference.  

This applies to all industries, including the luxury industry.  See a quote from this expert in Luxury Daily!

Tuesday, January 17, 2017

Can pet economics tell us something about human health economics?

A recent HBR piece by Liran Einav of Stanford and Amy Finkelstein of MIT compares recent trends. for spending on veterinary care to spending on health care for humans.  They find that total spending on both items has risen more than spending overall, meaning more and more of our budgets are going to veterinary services as well as health care for people.  Spending by income brackets shows the same pattern, with much larger spends for high income than low income households.  Also spending for veterinary care tends to be concentrated in the last months of life, just like human health care.

These similarities are striking in some way because there is no employer-provided veterinary care insurance and there is no Medicare- or Medicaid-like program for pets.  So the trends for pet health spending closely mirror those for human health spending even though the role of government and insurance is quite different in the two markets.

The careful reader will note that Einav and Finkelstein do not address the question of price inflation for veterinary and human health care.  We all know that human health care inflation is much higher than overall inflation.  The picture for veterinary inflation is more mixed.  A research team from Purdue looked at the inflation measure published by the Bureau of Labor Statistics and then developed their own price index based on pet insurance claims submitted to Nationwide.  The BLS veterinary care price index increased by 25%, well above the 12% inflation rare for 2009-2015.  The price index based on the Nationwide index showed no veterinary inflation over this period.  

One last question: if we are spending more and more on our pets' health, are they getting healthier?  Are they living longer?  Are they leading more active lives?  Are they getting more tummy rubs?  Clearly this calls for more research.

Wednesday, January 11, 2017

NC State online MBA stays in US News top 20

More great rankings news!  For the third year in a row the NC State online MBA has placed in the US News and World Report top 20.  The program placed 18th, tied with Mississippi State and South Florida.

The US News rankings are based on faculty credentials and training, student services and technology, student engagement, peer evaluations, and admissions selectivity.  I am especially proud of how well we scored on the student engagement dimension.

I was fortunate enough this fall to have my first opportunity to teach the online core economics course.  It was one of the best teaching experiences I have ever had.  More people come to your office hours online than they do in day or evening instruction.  Accessibility matters, a lot!


Thursday, December 8, 2016

What trade deficits really mean

Harvard's Greg Mankiw explains in this NYT Upshot column what happens when a country runs a trade deficit.  When imports are greater than exports, this results in lower GDP.   But is this something we should really be concerned about?

Mankiw points out that the trade deficit is accompanied by a foreign investment surplus.  When businesses overseas sell more to us than we sell to them, they have to do something with the funds they accumulate.  In practice that means they either end up buying US assets or make physical investments in the US, e.g., Siemens opening facilities here.  And guess what?  The investment foreign companies make in the US is considerably larger than the investments US firms make overseas.  In other words, there are many more cases like Siemens than like Carrier.  

Viewed differently, US consumers are able to have a higher standard of living by being able to import goods from overseas.  Investors overseas are able to invest in a relatively "vibrant and safe" economy.  So why would you want to mess with this?