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.

No comments: