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Brookings Papers on Economic Activity, Spring 2020 Edition

The Brookings Papers on Economic Activity (BPEA) is an academic journal published twice a year by the Economic Studies program at Brookings. Each edition of the journal includes five or six new papers on macroeconomic topics currently impacting public policy.

Below you’ll find five new papers submitted to the Spring 2020 journal and presented at Brookings on March 19. This edition of the journal includes research that looks at how tight the labor market really is, whether the tax code favors automation over labor, how declining worker power is influencing recent macroeconomic trends, whether the Phillips Curve is dead, and whether financial indicators can be used to provide an early prediction of recessions.

The final versions of each paper will be published later this year. Sign up here to learn more about subscribing to the journal to read the final papers. Visit the new BPEA home page to see more recent content and browse research presented at past conferences from 1970 to present.

--FILE--Chinese workers assemble smart watches on the assembly line at a factory of Hope Technology in Shenzhen city, south China's Guangdong province, 22 April 2015.The mass market has turned smart watch a hot product beyond well-known brands such as Apple and Samsung, as local manufacturers foray into the market with their own products. Shenzhen-based Hopu Technology, partnered with UK firm Dyal, is among those that have grown from a manufacturer to a wearable device developer. Shenzhen, the "most modern city" in Guangdong province, launched a smart wear industry alliance earlier this year at the innovation park in Baoan district, according to Xinhua news.No Use China. No Use France.

Anna Stansbury and Lawrence H. Summers examine the co-existence of four significant trends in the U.S. economy since 1980—a declining share of national income going to labor, increased market values of corporations, low average unemployment, and low inflation—finding a decline in workers’ power, rather than an increase in corporations’ monopoly power, is the likely explanation.

man circles a job listing in a newspaper classifieds section

Katharine G. Abraham, John C. Haltiwanger, and Lea E. Rendell construct a more comprehensive measure of labor market tightness, finding the standard metric of measuring labor market tightness—the number of jobs openings relative to the number of unemployed people—overstates the tightness of the labor market. While the traditional vacancy-to-unemployment ratio shows labor market conditions to be far tighter than at any time over the 1994-2019 period studied, the authors’ more complete measure shows the current market is comparable to where the U.S. was in the late 1990s.

Snow covers the "Charging Bull" statue in New York's financial district on March 6, 2001 as a winter storm battered the Northeastern United States. Forecasters predicted up to six inches of snow would fall in the city while parts of upstate New York and New England would get as much as two feet.PM/SV

Mikkel Plagborg-Møller, Lucrezia Reichlin, Giovanni Ricco, and Thomas Hasenzagl, address the question of whether financial indicators provide extra predictive power, finding they cannot mechanically be used to provide a reliable early warning sign of a recession—which may have implications for the more-than-year-long debate in the United States over the predictive power of the Treasury securities yield curve.

Daron Acemoglu, Andrea Manera, and Pascual Restrepo document the tax treatment of capital and labor, finding the U.S. tax code systematically favors investments in robots and software over investments in people—resulting in too much automation that destroys jobs while only marginally improving efficiency.

Unleaded regular gas sells for under $3 in Annandale, Virginia outside Washington, DC on November 29, 2014. The Federal Reserve is welcoming the sharp drop in global energy prices, with two influential policymakers on December 1, 2014, cheering the boost it should provide American pocketbooks and shrugging off any pressure on already low inflation. Picture taken on November 29, 2014.  REUTERS/Hyungwon Kang  (UNITED STATES - Tags: ENERGY BUSINESS)

Marco Del Negro, Michele Lenza, Giorgio Primiceri, and Andrea Tambalotti, look at why inflation in the United States has remained remarkably stable since 1990, even in the face of pronounced cycles in economic activity. The authors do not solve the puzzle, but using several modeling techniques, they rule out some explanations—concluding that shifting structural forces likely are its principal explanation and that systematic policies, like average inflation targeting, could be effective in bringing it back to 2 percent in the current environment.

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