Spring 2013 Brookings Panel on Economic Activity
The Spring 2013 Brookings Panel on Economic Activity is taking place March 21-22, 2013 at the Brookings Institution's Falk Auditorium in Washington, DC. The agenda is available for download and panels will be live-tweeted under the Chatham House rule with the #BPEA hashtag.
New research findings at the Spring 2013 BPEA conference by leading academic and government economists include: the large worldwide gender gap in access to the financial system; a proposal to reform money market funds; the rise and permanence of inequality over the past two decades; Portugal's economic slump and the euro-crisis; selective colleges' failure to find high-achieving, low income students; and the positive social and economic effects of family planning.
Inequality Rising and Permanent Over Past Two Decades
Disadvantaged Becoming Worse Off Long-term; Tax System Has Helped But Not Significantly
by Vasia Panousi, Ivan Vidangos, Shanti Ramnath, Jason DeBacker and Bradley Heim
Income inequality in the US has increased in recent decades, and this increase is of a permanent nature, according to “Rising Inequality: Transitory or Permanent: New Evidence from a Panel of U.S. Tax Returns.” Using new data, the paper shows that the advantaged are becoming permanently better-off, while the disadvantaged are becoming permanently worse-off, making economic mobility more difficult. Although the research shows that the US federal tax system has provided some help in mitigating the increase in income inequality over the sample period, it has not significantly altered the broadly increasing inequality trend.
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Minimum Balance of 5 Percent Could Prevent Future Money Market Fund Runs
Time to Reform Money Market Funds before another Financial Crisis
by Patrick E. McCabe, Marco Cipriani, Michael Holscher, and Antoine Martin
It has been almost five years since the losses on debt issued by Lehman Brothers triggered a broad run on money funds that quickly spread to the broader U.S. financial system, yet money market fund reform continues to stall. Altering the rules governing redemptions from money market funds could help reduce the risk of future financial crises, according to “The Minimum Balance at Risk: A Proposal to Mitigate the Systemic Risks Posed by Money Market Funds.” Using a “minimum balance at risk” (MBR) of between 3 to 5 percent would both mitigate the systemic risk that arises from the funds’ vulnerability to runs and protect shareholders who do not redeem shares quickly when runs occur.
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Portuguese Economic Slump Caused by the Large Capital Inflows that Came with the Euro
Clues as to What is Happening Europe-wide; Outlook for the Future is Grim
by Ricardo Reis
Over the past 12 years, Portugal has been in a severe economic slump—growing less than the US during the Great Depression and Japan during the Lost Decade—and that slump was mainly caused by the country’s inability to efficiently allocate the foreign capital inflows it received after joining the Eurozone in 1999, according to “The Portuguese Slump and Crash and the Euro-Crisis.” Because Portugal was one of the first countries where the symptoms of the sovereign debt crisis were initially identified, it can help macroeconomists understand what has been happening in Europe more broadly. Portugal did not have a housing boom like Spain and Ireland, nor as rampant an increase in public debt as Greece, nor does it have Italian political instability: yet, since 2010, all five countries have been in a similar crisis.
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Family Planning Over Past Half-Century Has Had Positive Social and Economic Impacts
Children 5 percent less likely to be poor; 15 percent less likely have parents on welfare; 4 percent less likely to have a single parent
by Martha J. Bailey
Children born after taxpayer-funded family planning programs began 50 years ago have benefitted socially and economically. “Fifty Years of Family Planning: Lessons and Implications” looks at the history of contraception in the US, spanning the period when the sales and distribution of information regarding contraception was illegal, to today, with public funds supporting family planning clinics serving over 7 million women. Lifting restrictions on contraceptive sales reduced unwanted births and increased the average weight at birth; in addition, those children lived in households with higher annual incomes, were 5 percent less likely to live in poverty, 15 percent less likely to live in households receiving public assistance, and 4 percent less likely to have a single parent.
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Low-Income High-Achieving Students Miss Out on Attending Selective Colleges
Most Don’t Apply and Colleges Don’t Find Them; Selective College Would Even Cost Less; Income Diversity vs. Racial Diversity
by Caroline M. Hoxby of Stanford and Christopher Avery
The vast majority of low-income, high-achieving students in the US do not even apply to any selective colleges, in spite of the fact that attending those institutions would cost less than the ones the students do attend thanks to generous financial aid packages, according to “Missing ‘One-Offs’: The Hidden Supply of High-Achieving, Low-Income Students”. The research has implications for how selective universities conduct recruitment and ultimately whether they focus on having a student body that is racially diverse or one that is more broadly income diverse. The paper finds there are between 25,000-35,000 low-income high-achieving students who rarely consider selective colleges, and selective colleges in turn miss them because they tend to focus their outreach efforts in only 15 major cities whereas many of these students live in non-major urban areas.
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Large Gender Gap in Financial Inclusion Worldwide
Cost, Distance, Documentation Cause Barriers to Financial Inclusion
by Asli Demirguc-Kunt and Leora Klapper
Women worldwide have less ability to broadly access the financial system than men, with 47 percent of women owning a bank account compared to 55 percent of men, according to “Measuring Financial Inclusion: The Global Findex Database.” Even after controlling for income and education, women in developing economies are still more excluded from the financial sector than men, the paper finds: for example, women living below US $2 per day are 28 percent less likely than men at the same income level to have an account. Overall, in the developing world, there is still a persistent 6 to 9 percentage point gap in account penetration, across even among the 20 richest percent of income earners. Looking at all low-income earners in the richer countries worldwide, the paper finds that in the US, over one-quarter the poorest quintile has no access to a formal financial institution compared to 9 percent in Canada, and 3 percent each in the UK and Australia.
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