ABSTRACT: The global fertility rate has reached a record low, with nearly half of all countries now below replacement level. This has sparked renewed interest among policymakers and researchers alike. In this paper, we explore a novel explanation for low birth rates based on comparison motives. We show theoretically that strong comparison motives lead to high parental investments—both in time and money—and low fertility. We further show that comparison motives can amplify fertility declines driven by other forces. We provide suggestive empirical support for the role of comparison motives in explaining cross-country and within-US regional variation in fertility. The resulting policy implications are different from those usually considered. Specifically, reliance on high-stakes testing and precise rankings in the education system may heighten comparison motives and thereby contribute to fertility decline. Taxing or regulating certain types of private education institutions or reforming college admission could reduce excessive parental investments and thereby stimulate fertility.
ABSTRACT: The CHIPS and Science Act, enacted in August 2022, is a key element of the revival of US industrial policy. We examine the short-term employment effects of the act. Drawing on quarterly industry-by-county data from the Quarterly Census of Employment and Wages (QCEW), we implement two county-level difference-in-differences designs, the first comparing counties with preexisting semiconductor facilities to other counties with high-tech industries and the second comparing counties with semiconductor fabrication facilities (which were targeted for the bulk of the CHIPS funding) to counties with non-fabrication semiconductor facilities. Using both approaches, we find robust, positive employment impacts in affected counties. The effects began at the time of the passage in the Senate of a precursor bill, in anticipation of the signing of the CHIPS Act. Our preferred estimates suggest an increase of 110 jobs per affected county in the first design and 180 jobs per affected county in the second design. We also find robust positive impacts on local construction employment. Evidence on total employment and GDP at the county level, as well as on employment in upstream input sectors, is mixed. Simple back-of-the-envelope calculations (which come with caveats) suggest national direct employment effects of approximately 15,000–16,000 jobs in the core semiconductor sector and indirect effects of 15,000–30,000 jobs in related sectors.
A policy priority of the US government is to reduce America's long-standing trade deficit. Economic planners in the Trump administration blame the postwar world trading system for harming the US economy and hope to change it through wide-ranging tariffs and other measures. Three prominent myths underlie the narrative that the United States has been victimized by trade partners. The first holds that trade liberalization that has left the United States open to mercantilist foreign practices is a primary cause of the aggregate US trade deficit. The second is that the dollar's status as the premier international reserve currency obliges the United States to run trade deficits to supply foreign official holders with dollars. The third is that US deficits are caused entirely by foreign financial inflows that America must accommodate by consuming more than it produces. This paper shows that the realities are more nuanced. While foreign and domestic trade policies can affect both imports and exports separately, they are not principal drivers of their difference, the trade deficit. The United States can supply the world with dollars without trade deficits. Finally, the trade deficit reflects the interplay of foreign and US macroeconomic factors (including China's saving rate and the US government budget deficit) and often US factors are dominant. Higher federal fiscal deficits, for example, will raise US trade deficits despite more import tariffs.
We build a simple model that shows how the incentives and constraints facing three key types of market players-broker-dealers, hedge funds, and asset managers-interact to create a heightened level of fragility in the Treasury market, and how this fragility can become more pronounced as the supply of Treasury securities increases. After validating a number of the model's empirical premises and implications, we ask what it can tell us about how the Federal Reserve might best address future episodes of market dysfunction. In so doing, we take as given that an important priority for any Fed response to Treasury market dysfunction is that it be clearly separated from anything having to do with monetary policy.
