Lajos Kossuth

Economist and Behavioral Scientist. Assistant Professor @UCOMILLAS. Opinions are mine. 🇵🇪🇵🇪

Also on BSKY:

[Lajos Kossuth @LKossuth]

Thrilled to share that, after years of work, Roberto Asmat and I have published our paper in the Journal of Development Economics: “Gender Differences in Judicial Decisions under Incomplete Information: Evidence from Child Support Cases” 👩‍⚖️

https://t.co/5CG4wyZsEr

[Veronica Frisancho @VeronicaFrisan1]

Ven a trabajar con nosotros en la Dirección de Investigaciones Socioeconómicas (DIS) de la Gerencia de Conocimiento en @AgendaCAF!

Estamos buscando un oficial para que nos apoye en la producción del RED 2028.

Más detalles aquí:
https://t.co/y5QPckjWcV

[NBASpain @NBAspain]

Señoras y señores, con todos ustedes...

🎞️😱CUATRO MINUTOS CON LA MAYOR REMONTADA DE LA HISTORIA EN LAS #NBAFinals:

[Lajos Kossuth @LKossuth]

Me preocupa que hasta ahora casi ningún periodista pueda comunicar bien temas estadísticos básicos. Alimentan el "¡fraude!" cada vez que un conteo rápido se mueve.

Y las caras que ponen cuando entrevistan a expertos... parece que conversan con acusadas de brujeria en 1700.

[Sonia Laszlo @sclaszlo]

🚨‼️10 days left to submit ‼️🚨

[María Hernández-de-Benito @MariaHdzdB]

⭐️Send your papers to the Spanish Development Workshop (SPANDE)! This year organized by the Development team at the great Alicante Economics Department!

[Lajos Kossuth @LKossuth]

👇👇

[Jorge Garcia Hombrados @jorgeghombrados]

A raíz de este 🧵 ha surgido debate sobre si los profesores universitarios de economía en España ganan mucho o poco.
Mi opinión: algunos ganan ridículamente poco para lo que hacen; otros, + de lo que merecen.
Y ese es el problema. Me explico 🧵 1/N

[Paulo Drinot @paulodrinot]

Job: https://t.co/JnefoRzQ28

[Luis Garicano 🇪🇺🇺🇦 @lugaricano]

We stopped everything to write an answer (link below) to Paul Krugman's two posts of today (one informal, one with a simple model) arguing that Europe is broadly not falling behind the United States.

The change measured by the Draghi report, he argues, is mostly due to growth in the technology industry, which has distorted GDP numbers without actually leading to higher standards of living. We should believe our eyes when we walk around France and walk around Mississippi.

Krugman is wrong. The measures he uses understate European stagnation. This matters enormously. Divergence with the United States is the strongest evidence for reform in Europe.

1. The growth numbers

Krugman compares the United States, France, and Germany at purchasing power parity in current prices. On that measure, France's and Germany's position relative to America has been roughly constant since 2000.

But current price comparisons miss productivity gains in sectors where prices fall. If America produces twice as much software while the price of each unit halves, the value of American software output looks unchanged even though the volume has doubled.

Most economists therefore use constant prices, which fix the base-year PPP level and apply each country's real output growth on top of it. American output growth has concentrated in tech, where prices have fallen tremendously as productivity rises. In terms of the volume of things produced, America has pulled away from Europe.

2. Is it all the tech industry?

Krugman concedes this tech divergence but says it is not welfare-relevant. The American growth lead is an accounting artefact of measuring more iPhones at base-year prices, not a sign that Americans are actually richer, because Europeans buy the same iPhones at the same world prices.

This is not the right way to think about the world today, as an earlier Paul Krugman would have argued.

His model assumes tradable goods, interchangeable workers, marginal-cost pricing, and no profits. Each assumption fails.

Most of what households buy is non-tradable: housing, healthcare, childcare, education. When American tech firms bid workers from haircutting to coding, American haircut wages rise. Germany has no growing tech sector to do the bidding, so German wages stay flat.

Technology is not priced at marginal cost. Apple's margins are around 40 percent. Anthropic's inference margins are at 70 percent. The major platforms enjoy network effects, switching costs, and lock-in that hold prices well above what a competitive market would deliver. A large share of the productivity gains in technology stays as profit.

A lot of the value of American technology dominance shows up in equity, not in wages. Apple, Microsoft, Nvidia, Alphabet, Meta, and Amazon together are worth $21 trillion, more than the entire combined stock market value of all European stock markets. Around 60 percent of US equity is held by American households. The median French or Spanish household holds almost no equity.

The median employee at Meta, a company with almost 80,000 employees, earned $388,000 in 2025.

This advantage is not going to go away. Krugman's own 1991 paper, cited in his Nobel prize, showed that comparative advantage in modern industries is produced by increasing returns to scale, specialized labor markets, supplier networks and the agglomeration of suppliers, workers, and ideas in particular places. Once an industry concentrates somewhere, the concentration is self-reinforcing. Europe is being pushed away from the next round of technology industries (AI!).

3. What about inequality?

Another retort is that GDP per capita hides substantial inequality, and so even if America is rich on average, this is mostly due to the super wealthy.

But despite the US's high pre-tax income inequality, it also achieves higher median incomes than Europe, in part because of such a high base, and in part because it actually redistributes more than many European countries.

The cleanest comparison is median equivalised disposable household income: income after cash taxes and transfers, adjusted for household size and purchasing power. According to the OECD's 2021 numbers, the median American earns 30 percent more than the median Dutchman, about 31 percent more than the median German, and about 52 percent more than the median Frenchman.

4. What about hours worked?

Krugman points out that while American GDP per person is higher, most of this is because Americans work more. For this divergence to be an hours worked story, Americans must work more relative to Europeans now than they did in 2000.

The opposite has happened. Birinci, Karabarbounis, and See in a 2026 NBER paper show that about half of the American-European hours gap that existed in the 1990s has reversed by the end of the 2010s. Americans work fewer hours per person than they did in 2000, while most Europeans work more.

5. Is America not a bad place to live?

Walk around Alabama and France: surely the former cannot be substantially richer than the latter?

American cities often have poorer centres and richer suburbs or exurbs. European cities preserve richer and more attractive historic cores. A visit to a city as a tourist in America compared with a city in France will leave one having seen different spots on the income distribution. Americans in Europe go to the nicest and richest European cities.

Rather than a walking around test, do a driving around test. Go to the periphery of any modern American city and see a level of new-built material wealth that is extremely uncommon in Europe, with thousands of enormous four- or five-bedroom homes. In the South, in places like Nashville and Austin, drive around the downtowns to see hundreds of luxury apartment buildings springing from the ground. This construction boom is replicated virtually nowhere in Europe today.

The other question is generational. Housing often costs more in Europe than in the United States, despite the quality of the housing stock generally being much better. Europe has nice city cores but these are inaccessible to young Europeans.

Consider the salaries available to entry-level workers. The starting pay for a London police officer is $57,000. In Washington, DC, $75,000. The entry-level Deloitte consultant job in Madrid pays around €28,000, roughly $33,000 per year. In Charlotte, the entry-level Deloitte job pays $63,000.

There are many things to dislike about life in America. But relative to 25 years ago, the gap in material wealth has shifted dramatically in America's favor.
https://t.co/VOpQ32R5tg

[Lajos Kossuth @LKossuth]

@kaytansevin @univienna @YaleCowles Congrats!

[Daron Acemoglu @DAcemogluMIT]

Simon Johnson and I are hiring a postdoc at MIT to research the history, social implications, and future of technology. The job description and application link are available here: https://t.co/wTZaAuy1wr

[Lajos Kossuth @LKossuth]

@FernandoLoayza_ Pregunta desde la ignorancia. Bajo esa premisa, si la ONPE dolosamente evitara que se vote en toda la región de Huancavelica, por ejemplo, como no llegan a ser 1/3 de la votación nacional, ¿no pasa nada porque la Ley Orgánica no contempla ese caso?

[Lajos Kossuth @LKossuth]

Lo de la ONPE es vergonzoso.

[Lajos Kossuth @LKossuth]

@paulodrinot O sea, demográfico.

[Lajos Kossuth @LKossuth]

En realidad la única fija en su puesto es Keiko. Alvarez no está 2do. De hecho su margen inferior (9 - 2.8) se traslapa con el superior incluso de Acuña (3.8 + 2.8), que está 6to.

[Ronald Cross @RonaldCrossPeru]

Salio Ipsos… y Lopez Aliaga ya esta tercero. Carlos Alvarez en segundo lugar, Sanchez cuarto con 6% en la encuesta, 7% en el simulacro.

[Lajos Kossuth @LKossuth]

@KhamaRamaq @JavierAlban Me parece que te has equivocado en el cálculo. Con p=0.25 y 1500 sería como +-2.19 de margen de error. Para el margen que mencionas necesitarias como 6800 encuestados.

[Lajos Kossuth @LKossuth]

Parálisis de decisión ante sobrecarga de opciones. Bajo ciertos requisitos (opciones difíciles de comparar, decisión relevante, etc.), el equilibrio puede ser la ausencia de elección.

Que no sorprenda ver al final resultados incompatibles con el análisis político típico.

[Diego Macera @dmacera]

Intención de voto presidencial:

% de "blanco/viciado" + "no sabe/no precisa"

Enero del 2016: 14%
Enero del 2021: 25%
Enero del 2026: 44% (!!)

Hartazgo? Cinismo? Demasiadas opciones?

Siempre se dice que "nos decidimos al final". Pero esta vez nos estamos pasando de la raya.

[Lajos Kossuth @LKossuth]

Brillante.

[Jesús Fernández-Villaverde @JesusFerna7026]

Olivier Blanchard (@ojblanchard1) had a provocative post yesterday about a higher preference of French people for leisure:

https://t.co/d8eSlXs6Y0

I have learned nearly an infinite amount of economics from Olivier since I was an undergrad, and he came to Spain to present a report on our unemployment problem, so I feel a bit intimidated about pushing back on this idea.

I am perfectly happy with the idea that preferences are heterogeneous: some people like leisure more than others. And the goal of economic policy should never be to maximize output, but to maximize welfare. If most people in France enjoy sitting in the beautiful sun of Provence while productivity increases, who am I to question their wisdom?

But perhaps one of the aspects of economics that I have always felt uneasy about is how little effort we have put into exploring the extent to which preferences are endogenous.

Let me borrow from an old idea of Gary Becker and Kevin M. Murphy (1988) in their classic “A Theory of Rational Addiction,” a beautiful piece of work all students of economics should read.

Becker and Murphy consider a model with two consumption goods: one that requires “consumption capital” to be enjoyed and one that does not. Think about fine wine: it takes some time and experience to truly enjoy a good bottle. In comparison, every kid enjoys candy on first taste, no experience required (nor much is gained from repeated tastings).

How much an agent invests in “consumption capital” determines whether increases in consumption of the first good in the past will lead to higher consumption of that good in the future. Many leisure activities belong to the former group, not the latter: going to the Opera, appreciating fine food, discovering the charming streets of a world-class city, ...

Based on that observation, let me extend Becker and Murphy’s framework to the work-leisure choice by introducing the notion of “leisure capital.”

Imagine a situation where, in France, taxes on labor income were high (or, equivalently, wages were lower than they should have been because of misallocation). This made leisure activities preferable in the past because their relative price was low (let’s assume the income effect was small), leading to an increase in the “leisure capital” of the French today and, therefore, in how French society takes advantage of increases in productivity.

Now, one could argue that this reasoning is a hyper-sophisticated form of rationality that does not resemble reality. But I have seen this phenomenon at a micro level: very rich people who made their own fortunes are often not very good at enjoying leisure, but their kids are extremely good at it, because they accumulated plenty of “leisure capital” when they were young.

More seriously, other observers of society would have found the reasoning natural, because there is a long tradition of analyzing labor supply decisions as embedded in social relations.

Let us start with Karl Marx. In historical materialism, consciousness follows the forces of production. When the forces of production generate a lower labor supply (for whatever reason), consciousness will follow through the multiple channels of the superstructure, starting with the creations of the culture industry that favor leisure. Having delightful bistros is an epiphenomenon of a deeper structure of relations of production.

In the opposite direction, E.P. Thompson, also from a Marxist perspective (though less orthodox), emphasized that the factory system required clock-based discipline and, therefore, that within a generation or two of the Industrial Revolution, punctuality became a cardinal virtue. Just reverse E.P. Thompson’s analysis.

And Émile Durkheim, with his view of how social facts shape the division of labor in society, might have agreed as well. For Durkheim, social facts are “every way of acting which is general throughout a given society, while at the same time existing in its own right, independent of its individual manifestations.” In this perspective, the French have absorbed a particular relationship to work through decades of participation in French economic life, which is not divorced from taxes and regulations.

Of course, one could reply that it might be the preferences for leisure that are behind higher taxes and regulations. For example, you can use regulations to move to a better coordination equilibrium: you do not want to take vacations if your spouse at another firm cannot take a vacation at the same time. This is what Max Weber would have called an elective affinity (Wahlverwandtschaft) of leisure and taxes. But that reply only reinforces my point that we probably want to think about preferences and economic policy as a simultaneous system, more than one driving the other.

The practical implication is that policy reforms may have effects far beyond what an analysis that takes preferences as given would suggest. If decades of high taxes built up “leisure capital” in France (which fits perfectly with Olivier’s observation that the French are better at leisure), lowering taxes tomorrow will not instantly undo that accumulation. Preferences have their own inertia. But by the same token, sustained policy changes can, over time, reshape what people want, not just what they can afford.

The real problem with all this reasoning, though, is that it makes welfare analysis a nightmare! I will leave that task to someone smarter than me.

[Lajos Kossuth @LKossuth]

Si ese va a ser el pronóstico mejor que inviten a Agatha Lys.

[Canal N @canalN_]

En #CuentasClaras, Urpi Torrado, gerente general de Datum, consideró que, en la medida que los candidatos se hacen más conocidos ante la población, pasan por un riesgo: "O ganan votos o pierden votos"

Mantente informado en la WEB ► https://t.co/QTAt5w7uQw

[Lajos Kossuth @LKossuth]

¿Alguien ha hecho el paper de cuántos minutos de vida quita el Microsoft Authenticator? Pregunto para un amigo.