Review of Income and Wealth (ROIW)

ROIW is the official journal of the @theiariw, promoting research in economic measurement focusing on income and wealth. Edited by @RobertInklaar and Suman Seth

[Review of Income and Wealth (ROIW) @ROIWeditors]

The special issue on "Measuring Intangible Assets and their Contribution to Growth" is now out in the Review: https://t.co/rxGHb5kTo1

[Rafael Domenech | @BBVAResearch & @UV_EG @rdomenechv]

Social Welfare and the Social Cost of Carbon, by @JavierAndresDom @JBarrutiabengoa @juliancubero & @rdomenechv

Review of Income and Wealth @ROIWeditors @WileyGlobal Open Access

We analyze the implications of incorporating the imputed external cost of carbon into welfare accounting. Specifically, we construct an emissions-adjusted welfare measure for OECD countries from 1960 to 2019 by deducting from per capita consumption the imputed external cost of observed CO2 emissions, valued at the social cost of carbon (SCC).

Within the Jones-Klenow framework, this provides a partial environmental correction to welfare comparisons that preserves tractability and cross-country comparability.

Our findings indicate that this emissions-adjusted welfare index is, on average, about 2% lower than the conventional measure in OECD countries, with smaller corrections in economies with lower incomes. Because the adjustment operates only through the consumption term, these estimates should be interpreted as a conservative consumption-side correction rather than as the full welfare effect of carbon pricing.

We also find that in most OECD countries, consumption-based CO2 emissions exceed production-based emissions, resulting in a 0.6 percentage point larger welfare correction when the former are considered.

A similar-magnitude effect emerges when using GHG instead of CO2. Furthermore, our analysis reveals a nonlinear relationship between the discount rate and welfare, emphasizing that SCC estimates and their welfare implications vary substantially across discounting and damage-function assumptions.

Comparing our SCC benchmark with estimates from the literature, we show that while SCC values fluctuate across methodologies, the resulting welfare adjustment remains moderate relative to potentially larger losses under catastrophic climate scenarios.

https://t.co/b9LpP4AJDP
cc @bbvaresearch @UV_EG @aballabriga

[Rafael Domenech | @BBVAResearch & @UV_EG @rdomenechv]

Related to the issue raised by @SethAckerman regarding the measurement of real economic growth and productivity, I’m sharing this article I co-authored in the Review of Income and Wealth (@ROIWeditors) with @TeresaDaban and @Cesar_Molinas:

The Problem of Measurement Sensitivity: Our research highlights how sensitive the understanding of "growth" is to specific methodologies and price indices. We demonstrate that even slight adjustments in how Real Product is calculated can lead to vastly different conclusions about a country's economic performance.

The "Price Gap" and Distorted Comparisons: We found that traditional methods for comparing international wealth often fail to account for diverging price levels. This creates a "growth sensitivity" where nations appear to be converging or diverging in productivity based on technical assumptions about price changes, rather than actual shifts in living standards.

A Lasting Relevance: Decades later, these measurement challenges remain central to how we interpret economic stagnation or progress. If the data foundations are fragile, our narratives about global productivity may need a fundamental rethink.

https://t.co/XCdpdFhszE

[Review of Income and Wealth (ROIW) @ROIWeditors]

For more details, see: https://t.co/HCN3URO0tM

[Philippe Lemoine @phl43]

Not only is the idea that Russia's economy is only as large as that of Spain and Portugal completely ridiculous, but if we're interested in military potential, even the PPP-adjusted GDP provided by the IMF may be misleading.

That's because the PPPs used by the IMF, which ultimately come from the ICP, are computed to reflect economy-wide average price differences, but military spending is only part of GDP and there is no reason to expect that PPPs calculated for GDP as a whole accurately reflect the size of military spending.

One economist, Peter Robertson, actually estimated defense-specific PPPs in 2021 and he found that GDP-PPP actually understated how much more bang for its buck Russia gets in defense, because military wages are low relative to economy-wide wages in Russia and the defense sector in Russia is relatively labor intensive.

This has become less true or even not true at all with the war, because Russia has been forced to increase military wages a lot to recruit and because sanctions have increased the cost of imports used as inputs in the defense sector, but as Robertson's updated estimates show it's still the case that Russian military spending is much larger than you'd think by converting them at the market exchange rate.

Of course, this whole argument about the size of Russia's GDP relative to NATO is idiotic because, even putting aside the inefficiencies arising from coordination problems and redundancies in an alliance, as I keep stressing the fact that NATO has more resources at its disposal than Russia won't help Ukraine if NATO doesn't commit them to the war and it won't because of political constraints.

Western commentators somehow manage to both underestimate and overestimate Russia at the same time. On the one hand, they talk as if a country of 140 million that has inherited a gigantic military-industrial complex and is sitting on enormous reserves of natural resources was some kind of military dwarf whose economy will collapse any minute, but on the other hand they talk about it as if it posed the same kind of threat to Europe as a military juggernaut like the Soviet Union.

Russia is actually in a much better position to deal with the shocks created by the war and Western sanctions than the Soviet Union would have been other things being equal, because it's a market economy and as such has powerful mechanisms to adjust to those shocks relatively efficiently, but other things are not equal because even now it spends a much smaller share of its GDP on defense than the Soviet Union.

Even if sanctions harm Russia a lot, its economy is not going to collapse because of them. The comparisons with the collapse of the Soviet Union are particularly inept, because Russia doesn't have a massive deficit that it monetizes, creating hyperinflation in the process, like the Soviet Union at the end. It has a modest deficit that it can finance pretty easily in a non-inflationary way.

Inflation mostly comes from labor shortages created by the war at this point, but it's nothing like the hyperinflation at the end of the Soviet period. I think the war will harm Russia's economy a lot, mostly in the long run because military spending will crowd out civilian investment, but I don't think it will cause a collapse that will force it to stop fighting and it's also not true that the West could easily bring that about.

The West and NATO would probably have to suffer real pain to bring that about because Russia is not Serbia and again that's just not going to happen because we don't care that much about Ukraine at the end of the day.

[Matthias Schnetzer @matschnetzer]

Wie fair empfinden Menschen die Vermögensungleichheit?

Das fragen sich @MarterbauerM, @JuliaHofmann_ak und ich in einem Artikel in der Fachzeitschrift "Review of Income and Wealth" (@ROIWeditors): https://t.co/FGEpie0PrB

Hier ein paar Blitzlichter aus unserem Beitrag 👇

[Ignacio Belloc @nachobelloc]

📢 Hi #EconTwitter! Excited to share that our paper “Unexpected Inheritances and Household Labor Supply: Does the Identity of the Recipient Matter?” with @JAlbertoMolina1 and @jvelilla_ is now published at @ROIWeditors! 🎉🤩 Full paper: https://t.co/mGXvBaph1d (1/3)

[Review of Income and Wealth (ROIW) @ROIWeditors]

Mary O'Mahony and @rebeccasriley of @KingsCollegeLon are the guest editors of this issue and as editors we greatly appreciate their effort in bringing together this wonderful special issue!

[Review of Income and Wealth (ROIW) @ROIWeditors]

The special issue on "Measuring Intangible Assets and their Contribution to Growth" is now out in the Review: https://t.co/rxGHb5kTo1

[Review of Income and Wealth (ROIW) @ROIWeditors]

Finally, a team of @BEA_News estimate marketing capital across detailed US industries, dealing with issues of quality adjustment and finding a contribution to growth of similar importance as R&D and software

[Review of Income and Wealth (ROIW) @ROIWeditors]

In this paper he argues that even though the pay gap between men and women has mostly closed in recent decades, women have moved ahead in the human capital they have, suggesting women are better qualified but do not earn more. Congratulations, Gordon, on an important study!

[Review of Income and Wealth (ROIW) @ROIWeditors]

At this week's meeting of @theiariw, the winner of the John W. Kendrick Prize for the best article in @ROIWeditors of 2023 was announced: congratulations to prof. Gordon Anderson for his paper on the gender gap in Canada, https://t.co/p7mmXqwVaC

[Wiley Economics, Business, and Finance @WileyEconBiz]

🎉 We are thrilled to welcome @RobertInklaar and Suman Seth as new editors of @ROIWeditors, published in association with @theiariw.

We are delighted to have you on board, and look forward to your contributions!

[Stone Center on Socio-Economic Inequality @stone_lis]

"Chasing the Tail: A Generalized Pareto Distribution Approach to Estimating Wealth Inequality" by Stone Center Affiliated Scholar Arthur B. Kennickell is now published in The Review of Income and Wealth. @ROIWeditors
https://t.co/IGOAGBxoPX

[Review of Income and Wealth (ROIW) @ROIWeditors]

The paper examines earnings and employment disparities between Indigenous and non-Indigenous working age adults, using the Canadian Survey of Labour and Income Dynamics.

[Review of Income and Wealth (ROIW) @ROIWeditors]

Published in #ROIW:

"A Decomposition of Economic Vulnerability Among Indigenous and Non-Indigenous Adults in Canada"

by Barry Watson and Angela Daley

https://t.co/V5Gd5z4lu3

[Review of Income and Wealth (ROIW) @ROIWeditors]

Homoploutia, when individuals are rich in both capital and labor income, has increased in the US from 10% in 1950 to 30% today. This blurs the capitalist-laborer divide and contributes to 20% of the rise in income inequality since 1986.

[Review of Income and Wealth (ROIW) @ROIWeditors]

Published in #ROIW:

"Homoploutia: Top Labor and Capital Incomes in the United States, 1950–2020"

by Yonatan Berman (@bermanjoe) and Branko Milanovic (@BrankoMilan)

https://t.co/1TW28wbCu8