Tuesday, November 29, 2011

Picks from The Latest NBER Research (2011-11-28)

The Euro and European Economic Conditions
by Martin S. Feldstein  -  #17617 (EFG IFM ME)


The creation of the euro should now be recognized as an experiment that has led to  the sovereign debt crisis in several countries, the fragile condition of major European banks, the high levels of unemployment, and the large trade deficits that now exist in most Eurozone countries.  Although the European Central Bank managed the euro in a way that achieved a low rate of inflation, other countries both in Europe and elsewhere have also had a decade of low inflation without incurring the costs of a monetary union.

The emergence of these problems just a dozen years after the start of the euro in 1999 was not an accident or the result of bureaucratic mismanagement but the inevitable consequence of imposing a single currency on a very heterogeneous group of countries, a heterogeneity that includes not only economic structures but also fiscal traditions and social attitudes.

This paper reviews (1) the reasons for these economic problems, (2) the political origins of the European Monetary Union, (3) the current attempts to solve the sovereign debt problem, (4) the long-term problem of inter-country differences of productivity growth and competitiveness, (5) the special problems of Greece and Italy, (6) and the pros and cons of a Greek departure from the Eurozone.


Diversity and Donations: The Effect of Religious and Ethnic Diversity on Charitable Giving
by James Andreoni, Abigail Payne, Justin D. Smith, David Karp  -  #17618 (PE)

We explore the effects of local ethnic and religious diversity on individual donations to private charities.  Using 10-year
neighborhood-level panels derived from personal tax records in Canada, we find that diversity has a detrimental effect on charitable donations.  A 10 percentage point increase in ethnic diversity reduces donations by 14%, and a 10 percentage point increase in religious diversity reduces donations by 10%.  The ethnic diversity effect is driven by a within-group disposition among non-minorities, and is most evident in high income, but low education areas.  The religious diversity effect is driven by a within-group disposition among Catholics, and is concentrated in high income and high education areas.  Despite these large effects on amount donated, we find no evidence that increasing diversity affects the fraction of households that donate.  Over the period studied, ethnic diversity rises by 6 percentage points and religious diversity rises by 4 percentage points; our results suggest that charities receive about 12% less in total donations.  As areas like North America continue to grow more diverse over time, our results imply that these demographic changes may have significant implications for the charitable sector.

Monday, November 14, 2011

Picks from The Latest NBER Research (2011-11-14)

Substitution and Stigma: Evidence on Religious Competition from the Catholic Sex-Abuse Scandal
by Daniel M. Hungerman  -  http://papers.nber.org/papers/W17589


This paper considers substituting one charitable activity for another in the context of religious practice.  I examine the impact of the Catholic Church sex-abuse scandal on both Catholic and non-Catholic religiosity.  I find that the scandal led to a 2-million-member fall in the Catholic population that was compensated by an increase in non-Catholic participation and by an increase in non-affiliation. Back-of-the-envelope calculations suggest the scandal generated over 3 billion dollars in donations to non-Catholic faiths.  Those substituting out of Catholicism frequently chose highly dissimilar
alternatives; for example, Baptist churches gained significantly from the scandal while the Episcopal Church did not. These results challenge several theories of religious participation and suggest that regulatory policies or other shocks specific to one religious group could have important spillover effects on other religious groups.


Trade Prices and the Global Trade Collapse of 2008-2009
by Gita Gopinath, Oleg Itskhoki, Brent Neiman  http://papers.nber.org/papers/W17594


We document the behavior of trade prices during the Great Trade Collapse of 2008-2009 using transaction-level data from the U.S. Bureau of Labor Statistics.  First, we find that differentiated manufactures exhibited marked stability in their trade prices during the large decline in their trade volumes.  Prices of non-differentiated manufactures, by contrast, declined sharply. Second, while the trade collapse was much steeper among differentiated durable manufacturers than among non-durables, prices in both categories barely changed.  Third, despite this lack of movement in average price levels, the frequency and magnitude of price adjustments at the product level noticeably changed with the
onset of the crisis.


Gold Sterilization and the Recession of 1937-38
by Douglas A. Irwin http://papers.nber.org/papers/W17595


The Recession of 1937-38 is often cited as illustrating the dangers of withdrawing fiscal and monetary stimulus too early in a weak recovery.  Yet our understanding of this severe downturn is incomplete:  existing studies find that changes in fiscal policy were small in comparison to the magnitude of the downturn and that higher reserve requirements were not binding on banks.  This paper focuses on a neglected change in monetary policy, the sterilization of gold inflows during 1937, and finds that it exerted a powerful contractionary force during this period.  The transmission of this monetary shock to the real economy appears to have worked through lower asset (equity) prices and higher interest rates.