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Noted for Your Nighttime Procrastination for February 18, 2015

Screenshot 10 3 14 6 17 PMOver at Equitable Growth--The Equitablog


And Over Here:

Must- and Shall-Reads:


  1. Stephen G Cecchetti and Enisse Kharroubi (2014): Why Does Financial Sector Growth Crowd Out Real Economic Growth? (Basel: BIS) http://www.bis.org/publ/work490.pdf "We... concluded that the level of financial development is good only up to a point, after which it becomes a drag on growth, and that a fast-growing financial sector is detrimental.... Financial sector growth benefits disproportionately high collateral/low productivity projects... the strong development in sectors like construction, where returns on projects are relatively easy to pledge as collateral but productivity (growth) is relatively low.... Where financiers employ the [most] skilled workers... productivity growth is lower than it would be had... entrepreneurs attract[ed] the [most] skilled labour.... [Thus] financial booms in which skilled labour work for the financial sector, are sub-optimal when the bargaining power of financiers is sufficiently large.... We focus on manufacturing industries and find that industries that are in competition for resources with finance are particularly damaged by financial booms... manufacturing sectors that are either R&D-intensive or dependent on external finance suffer disproportionate reductions in productivity growth when finance booms..."

  2. Ben Walsh: "Here’s a chart saying 'the rich have gotten poorer since 2007’. Here's a chart showing the wealth of the rich. They don’t seem to be getting poorer. @Adennisdillon: @BenDWalsh Other problem is picking a bubble year as a baseline.

  3. Simi Kedia and Thomas Philippon: The Economics of Fraudulent Accounting: "We argue that earnings management and fraudulent accounting have important economic consequences. In a model where the costs of earnings management are endogenous, we show that in equilibrium, low productivity firms hire and invest too much in order to pool with high productivity firms. This behavior distorts the allocation of economic resources in the economy. We test the predictions of the model using firm-level data. We show that during periods of suspicious accounting, firms hire and invest excessively, while managers exercise options. When the misreporting is detected, firms shed labor and capital and productivity improves. Our firm-level results hold both before and after the market crash of 2000. In the aggregate, our model provides a novel explanation for periods of jobless and investment-less growth."

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