Thursday, March 28, 2013

Inequality, trickle-down consumption and economic growth

Here is an interesting article at the Washington Post (similar story in the local paper), regarding the effect of inequality on household savings by the middle class. The basic idea is one that we've discussed in class - personal well being may be influenced by the well being of those around you. If your "neighbors" are getting richer and buying more stuff, you may feel poorer and spend more to "catch up". What are some of the macro and micro implications? I can tell you from personal experience that this phenomenon works in reverse too. When we lived abroad, we lived very simply, barely spending any money at all.  There's a lesson here: As your income increases over time, try to maintain at least some of the spending habits that you develop when you have lower income.
Note chart 4 in the article... this looks like a simplified way of reporting the results of a regression model.

Wednesday, March 20, 2013

Health and economic growth

Our next topic is health...

Here is a nice intro from Jeffrey Sachs (Prof at Columbia).  Here is the full Sach's Report.

Here is a video of Sachs providing an overview 10 years later. 

Here is a nice overview of the relationship(s) between health and economic growth from The World Bank. It is long, but well worth the read.

For those of you interested in reading a more detailed analysis of the relationship between health and economic growth, here is a good paper from NBER. In both of these latter papers, note the discussion of the endogeneity problem we've been talking about all semester, and the econometric solution of instrumental variables.