After UMass economics graduate student Thomas Herndon and professors Robert Pollin and Michael Ash blew the lid off of data errors in Carmen Reinhart and Kenneth Rogoff’s “Growth in a Time of Debt,” professor Arindrajit Dube determined that high public debt was more likely after a period of slow economic growth than before a period of slow growth. This indicates that slow growth is the driver of increasing debt, not that high debt diminishes growth. Dylan Matthews of The Washington Post’s “Wonkblog” recently cited Dube’s research (additionally he made a short mention of Herndon, Pollin and Ash):
And indeed, analyses after Reinhart and Rogoff’s confirmed that the causal arrow went from slow growth to high debt, not the other way around. Arindrajit Dube, an economist at UMass Amherst, found that high debt loads are better correlated with slow growth before the debt gets that large as opposed to after, indicating that it’s the slow growth causing the debt and not the other way around:
The left chart correlates debt-to-GDP ratios of a given year to the GDP growth rates of the next three years. If debt is causing slow growth, there should be a strong relationship. But except at the very low end, there isn’t. Meanwhile, the right chart correlates debt-to-GDP ratios of a given year to GDP growth rates of the previous three years. There’s a very strong relationship, indicating that slow growth causes high debt and not the other way around.
With Massachusetts legislators considering increasing the Commonwealth’s minimum wage, the economics is emerging as a point of contention. Professor Arindrajit Dube is the lead author of a study published by Harvard’s Review of Economics and Statistics regarding the effect of minimum wage increases on employment, which finds that workers would not be fired if the minimum wage rose.
Yet such a review would also have to include research finding no evidence that increases in minimum wage lead to job losses. Arindrajit Dube, an economics professor at the University of Massachusetts Amherst, is the lead author of a study published in 2010 by Harvard’s ”Review of Economics and Statistics” that found no evidence that minimum wage increases between 1990 and 2006 caused job losses among teens or restaurant and retail workers.
Dube said that unlike Neumark’s research, his analysis took into account regional and state differences in unemployment, minimum wage requirements, and other factors to track restaurant and retail employment.
”It doesn’t reduce the number of jobs and workers stick around their jobs longer,” he said.
Dube said he supports minimum wage increases in Massachusetts because the gap between rich and poor has been widening for decades and because such increases can play a small but important role in raising wages at the bottom.
In the wake of the Herndon paper, The Washington Post profiled the UMass Amherst Department of Economics, providing a detailed history of the department’s growth and development over the last 40-plus years. Interviewed for the piece were Professors Richard Wolff, Gerald Epstein, Nancy Folbre, Arindrajit Dube and Robert Pollin.
It was surprising to learn last week that Harvard professors Kenneth Rogoff and Carmen Reinhart’s argument for austerity is based in part on an Excel blooper. What’s not surprising is who found it out.
The rebuttal came in the form of a paper released by the Political Economy Research Institute, a group at the University of Massachusetts – Amherst with close ties to its economics department. Two of its authors, Michael Ash and Robert Pollin, are UMass professors, and the other, Thomas Herndon, is a grad student in the department. No one who knows the UMass department was surprised they’d trained their considerable analytical firepower on Reinhart and Rogoff. Amherst has, over the past 40 years, developed a reputation as perhaps the single most important heterodox economics department in the country.
It wasn’t always that way. In the 1960s, it was a fairly mainstream department, with a moderately conservative inclination, according to emeritus professor and influential Marxist economist Richard D. Wolff. It employed Vernon Smith, a noted libertarian who shared the 2002 Nobel, from 1968 to 1972, and Hugo Sonnenschein, who would go on to be president of the University of Chicago, from 1970 to 1973.
That was when things started to change. The tipping point, Wolff says, was the denial of tenure for Michael Best, a popular, left-leaning junior professor. “He had a lot of student support, and because it was the 1960s students were given to protest,” Wolff recalls. That, and unrelated personality tensions with the administration, inspired the mainstreamers to start leaving. Read more…
On April 15, UMass Amherst Economics Department Graduate Student Thomas Herndon and Professors Michael Ash and Robert Pollin published a working paper titled, Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff. In the paper the authors examine Reinhart and Rogoff’s research on the relationship between public debt and GDP growth for advanced economies in the post-World War II period. Reinhart and Rogoff argue that the rate of economic growth for these countries has consistently declined precipitously once the level of government debt exceeds 90 percent of the country’s GDP. In recent years, Reinhart and Rogoff’s results have been highly influential as support for austerity policies in both Europe and the United States.
Herndon, Ash and Pollin find that a series of data errors and unsupportable statistical techniques led to an inaccurate representation of the actual relationship between public debt levels and GDP growth. They find that when properly calculated, average GDP growth for advanced economies at public debt-to-GDP ratios over 90 percent is not dramatically different than when debt-to-GDP ratios are lower.
Almost immediately the Herndon, Ash, Pollin findings went viral with lots of social media buzz on Twitter and Facebook. The story has garnered extensive national and international coverage. Below is a list of media coverage to date.
On March 14, 2013 Professor Arindrajit Dube testified at the Senate’s Health, Education, Labor and Pensions Committee Hearing, “Keeping up with a Changing Economy: Indexing the Minimum Wage.” One of six witnesses, Dube testified that increasing and indexing minimum wage would reduce employee turnover and poverty. Watch the full hearing.
Professor Arindrajit Dube’s research on minimum wage has been widely cited in the media. In the paper Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties, Dube and co-authors, T. William Lester and Michael Reich, examined minimum wage policies between 1990 and 2006, comparing all contiguous county-pairs in the United States that straddle a state border, and found that an increased minimum wage does not have adverse employment effects. Dube told the Wall Street Journal that there is no “evidence of any loss of employment or hours for the type of minimum-wage changes we have seen in the U.S. in the last 20 years.”
UMass Amherst Economics Department faculty continue to participate in events and publish information on the Occupy Wall Street movement. The “Occupy” protests started on Wall Street and have spread internationally. Protests have been held locally in Amherst, Boston and Northampton.
UMass Amherst Economics Professor Arindrajit Dube, who is also a research fellow at the Institute for the Study of Labor (IZA) based in Bonn, discussed the Occupy Wall Street movement with his colleague Marta Murray-Close for the UMass Amherst Department of Economics Echoes alumni newsletter. (Echoes, 12/12/11)
In her Economix blog, Nancy Folbre, UMass Amherst economics professor, says concerns about growing economic inequality that spurred the rise of the Occupy Wall Street movement should be the focus of a wider discussion by economists about capitalism and its effects. (New York Times, 11/28/11)
Gerald Friedman participated in an Occupy Wall Street Teach-In at Smith College. His talk can be viewed here. (11/12/11)
More than 350 economists have added their name in support of the Occupy Wall Street movement. Read their statement and watch a video featuring UMass Amherst Professors James Boyce, Nancy Folbre and Mwangi wa Githinji.
Arindrajit Dube, UMass Amherst economics professor, comments in a Wall Street Journal story about how businesses in states that are about to increase the minimum wage are looking for ways to cut costs.
According to Dube, there is no “‘evidence of any loss of employment or hours for the type of minimum-wage changes we have seen in the U.S. in the last 20 years’….Earlier this year, Mr. Dube and two colleagues used government data to compare employment figures in counties that border states with different minimum wages. If employers cut back on labor, it’s generally due to poor economic conditions, not pay requirements, Mr. Dube says.” (Wall Street Journal, 12/1/11)
Arindrajit Dube, UMass Amherst economics professor, is co-author of the paper, “Cross-border Spillover: U.S. Gun Laws and Violence in Mexico.” The authors find that the expiration of the federal assault weapons ban in 2004 coincides with an increase in gun-related crimes and homicides in Mexico bordering on Arizona and Texas. A similar increase didn’t happen near the California border, perhaps because California has tough state gun laws, the authors say. (The New Republic, 6/15/11)
Many of the most important questions in contemporary macroeconomics have proven elusive and thus have yet to be answered in a convincing way. This is in part due to heavy reliance by empirical macroeconomists on time series variation of economic aggregates to find answers.
The project will be conducted through three separate research projects with a common methodological approach using spatial cross-sectional variation in addition to time series variation to identify effects. The projects will focus on: (1.) estimating fiscal multipliers, (2.) estimating the impact of anti-predatory lending laws on housing prices, default rates and foreclosures, (3.) estimating the impact of raising wages during recessions. The end product of the project will make both methodological and substantive contributions to modern macroeconomics.
The financial sector has grown significantly over the last several decades and some have suggested that the sector is now too big. Yet we have no obvious theoretical framework nor clear metric to measure the social usefulness of financial activities to help us determine the desirable size of the financial sector.
Building on James Tobin’s concept of “functional efficiency,” this project will develop new micro and macro data sets to: 1) estimate the size of “functionally inefficient” financial activity and to 2) estimate the share of financial innovations that are “socially inefficient.” We will then utilize these data sets to study the impacts of financial regulations, financial taxes and other safety enhancing financial measures that affect the level of “functionally efficient” finance. Finally, we will study the impact of financial size on political capture, and then add those impacts to the study of the socially desirable size and character of the financial system.
About INET Launched in October 2009 with a $50 million commitment from George Soros and driven by the global financial crisis, the Institute for New Economic Thinking (INET) is dedicated to empowering and supporting the next generation of economists and scholars in related fields through research grants, Task Force groups, academic partnerships, and conferences. INET embraces the professional responsibility to think beyond current paradigms. Ultimately, INET is committed to broadening and accelerating the development of innovative thinking that can lead to insights into and solutions for the great challenges of the 21st century and return economics to its core mission of guiding and protecting society.