Smart Money? The Effect of Education on Financial Outcomes (PDF)
Source: Harvard Business School Working Papers
Household financial decisions are important for household welfare, economic growth, and financial stability. Yet, our understanding of the determinants of financial decision-making is limited. Exploiting exogenous variation in state compulsory schooling laws in both standard and two-sample instrumental variable strategies, we show education increases financial market participation, measured by investment income and equities ownership, while dramatically reducing the probability that an individual declares bankruptcy, experiences a foreclosure, or is delinquent on a loan. Further results and a simple calibration suggest the result is driven by changes in savings or investment behavior, rather than simply increased labor earnings.
New GAO Reports and Testimony
Source: Government Accountability Office
1. HUD Rental Assistance Demonstration: Information on Initial Conversions to Project-Based Vouchers. GAO-14-402, April 24.
Highlights - http://www.gao.gov/assets/670/662737.pdf
2. Federal Vehicle Collisions and Aftermarket Collision Avoidance Technologies. GAO-14-408R, April 24.
1. Small Business Research Programs: Agencies Did Not Consistently Comply with Spending and Reporting Requirements, by John Neumann, acting director, natural resources and environment, before the Senate Committee on Small Business and Entrepreneurship, in Seattle, WA. GAO-14-567T, April 24.
Highlights - http://www.gao.gov/assets/670/662734.pdf
Stress testing: A look into the Fed’s black box
On March 26th, the Federal Reserve (Fed) announced the results of its annual Comprehensive Capital Analysis and Review (CCAR). This year the Fed assessed the capital plans of 30 bank holding companies (BHCs) – 12 more than last year – and objected to five plans (four due to deficiencies in the quality of capital planning process, and one for falling below quantitative minimum capital ratios). Two other US BHCs had to “take a mulligan” and quickly resubmit their plans with reduced capital actions to remain above the quantitative floors.
The CCAR 2014 results send two overarching messages: The quality of the capital planning process is now a more prominent aspect of the Fed’s focus (versus just the quantity of capital), and the bar continues to rise, especially for the largest firms. Therefore, BHCs must continue to improve their capital planning processes regardless of whether they meet quantitative capital requirements.
Fed objections this year covered both US and foreign-owned BHCs. Three of the six largest US BHCs were unable to make desired capital distributions, in part due to the Fed using its own forecasting models for the first time (rather than relying on the BHCs’ models). In addition, half of foreign-owned BHCs’ plans (again, three of six) were rejected due to qualitative issues. These outcomes suggest that the Fed will likely continue to use its models to exert downward pressure on stressed capital ratios to keep capital in the system, supplemented by its heightened qualitative assessments.
This A closer look provides our quantitative and qualitative analyses of the CCAR 2014 results and lessons learned, and our view of enhancements needed to meet increasingly heightened regulatory expectations.
State-by-State Economic Impact of Real Estate Activity
Source: National Association of REALTORS®
How is the housing market in your state affecting the local economy? These reports outline the total economic impact of real estate related industries on the state economy, as well as the expenditures that result from a single home sale, including aspects like home construction costs, real estate brokerage, mortgage lending and title insurance. Find out how much the real estate industry is affecting the gross state product for your area.
Leadership in Action – The Business of Government Magazine Spring 2014
Source: IBM Center for the Business of Government
This edition of The Business of Government magazine underscores the importance of correlating short-term decision-making with long-range consequences. We highlight the latest trends and best practices for improving government effectiveness by introducing you to key government executives, detailing the work of public management practitioners, and offering insights from leading academics.
Global flows in a digital age
Source: McKinsey & Company
Global flows have been a common thread in economic growth for centuries, since the days of the Silk Road, through the mercantilist and colonial periods and the Industrial Revolution. But today, the movement of goods, services, finance, and people has reached previously unimagined levels. Global flows are creating new degrees of connectedness among economies—and playing an ever-larger role in determining the fate of nations, companies, and individuals; to be unconnected is to fall behind.
Flows of goods, services, and finance reached $26 trillion in 2012, or 36 percent of global GDP, 1.5 times the level in 1990. Now, one in three goods crosses national borders, and more than one-third of financial investments are international transactions. In the next decade, global flows could triple, powered by rising prosperity and participation in the emerging world and by the spread of the Internet and digital technologies. Our scenarios show that global flows could reach $54 trillion to $85 trillion by 2025, more than double or triple their current scale.
The Indian Economy at a Crossroads
Source: Information Technology and Innovation Foundation
Indian economic growth in 2014 is expected to come in at less than 5 percent—the lowest level in over a decade—potentially signaling the end to 20 years of robust economic development often known as the “Indian Economic Miracle.” While the recent global economic downturn has played a part, a major factor in India’s economic slowdown has been the loss of momentum for continued economic and trade liberalizing reforms. In recent years this has been replaced by an economic development approach that has prioritized expanding domestic manufacturing and import substitution rather than across-the-board productivity growth, which has in part contributed to India’s recent embrace of several trade-distorting “innovation mercantilist” policies.
With national elections now underway, this report details the evolution of India’s post-independence economic policies and explains how the liberalizing reforms of the early 1990s spurred two decades of turbocharged growth. It explains how that success is increasingly threatened by innovation mercantilist policies—such as Preferential Market Access (PMA) rules for government procurement of ICT products and compulsory licensing of biopharmaceutical intellectual property—designed to promote selected domestic industries, even at the expense of other Indian industries and Indian consumers. But while such policies may seem beneficial in the short-term, they will ultimately prove counterproductive, by hampering domestic productivity, lessening India’s attractiveness to foreign direct investment (FDI), and potentially leading to retaliatory measures by other nations that would imperil the global trading system.
Beyond the Numbers: Employer-sponsored benefits extended to domestic partners
Source: Bureau of Labor Statistics
As part of compensation packages offered to employees, it is common for employers to extend certain benefits to an employee’s family members. For example, employment-based health benefits typically include insurance coverage for the family, and traditional (defined-benefit) pension plans provide survivor benefits to spouses of married employees. As employers recognize different family structures, many have adapted by offering similar benefits to employees who have varied family units. For example, employers often vary employee contributions for health benefits based on family makeup by identifying different contribution amounts for married employees with children and for single employees with children. New data provide a picture of how frequently certain benefits are extended to unmarried opposite-sex and unmarried same-sex partners. For example, 72 percent of civilian workers had access to employment-based health benefits in March 2013, with nearly all the employers extending these benefits to spouses and children, but only 32 percent of civilian workers had health benefits extended to unmarried same-sex domestic partners and 26 percent had benefits extended to unmarried opposite-sex domestic partners.
The “Amazon Tax”: Empirical Evidence From Amazon and Main Street Retailers (PDF)
Source: National Bureau of Economic Research
Several states have recently implemented laws requiring the collection of sales tax on online purchases. In practice, however, only Amazon.com has been affected. We find that households living in these states reduce Amazon expenditures by 9.5%, implying an elasticity of –1.3. We find the effect to be more pronounced for large purchases, for which we estimate an elasticity of –3.2. Further, we find that the decline in Amazon purchases is offset by a 2.0% increase in purchases at local brick-and-mortar retailers and a 19.8% increase in purchases at the online operations of competing retailers.
See also: An Analysis of Internet Sales Taxation and the Small Seller Exemption (U.S. Small Business Administration)
Optimal Evidence in Difficult Settings: Improving Health Interventions and Decision Making in Disasters
- As for any type of health care, decisions about interventions in the context of natural disasters, conflict, and other major healthcare emergencies must be guided by the best possible evidence.
- Disaster health interventions and decision making can benefit from an evidence-based approach.
- We outline how systematic reviews and methodologically sound research can build a much-needed evidence base.
- We do this from the standpoint of Evidence Aid, an initiative that aims to improve access to evidence on the effects of interventions, actions, and policies before, during, and after disasters and other humanitarian emergencies, so as to improve health-related outcomes.
My Manager Took My Lunch Money: A Look at Workplace Bullying (PDF)
Source: International Journal of Business, Humanities and Technology
Workplace bullying is when a person is singled out by others for embarrassing or intimidating treatment. Studies find that 37-50 percent of workers have been exposed to bullying. This paper defines behaviors, recognizes methods, and discusses the policies managers and employees can use in an attempt to eliminate bullying in the workplace.
Bio-Piracy or Prospering Together? Fuzzy Set and Qualitative Analysis of Herbal Patenting by Firms (PDF)
Source: Harvard Business Working Papers
Since the 1990s, several western firms have filed patents based on medicinal herbs from emerging markets, evoking protests from local stakeholders against ‘bio-piracy’. We explore conditions under which firms and local stakeholders share rents from such patents. Our theoretical model builds on two distinct strategy literatures: firms appropriating rents from new technologies and firms managing stakeholders. We predict that a win-win outcome emerges when the patent strength is moderate and when local stakeholders form a coalition with larger national stakeholders to initiate litigation against the focal firm. We test our predictions using a two-pronged empirical strategy. Our empirical context relates to herbal patents from emerging markets and given that we have a small sample (N=17), we employ a fuzzy set QCA methodology. In addition, we develop four in-depth qualitative case studies to support our predictions.
Next-generation IT infrastructure
Source: McKinsey & Company
The pressure on IT infrastructure leaders is unrelenting. They must deliver higher service levels and new IT-enabled capabilities, help accelerate application delivery, and do so while managing costs. As standard IT improvements near a breaking point, it’s no wonder that many IT infrastructure leaders have started to look for more transformative options, including next-generation IT infrastructure (NGI)—a highly automated platform for the delivery of IT infrastructure services built on top of new and open technologies such as cloud computing. NGI promises leaner organizations that rely more on cloud-provider-level hardware and software efficiencies. In addition, NGI facilitates better support of new business needs opened up by big data, digital customer outreach, and mobile applications.
To understand how senior executives view NGI, we canvassed opinions from invitees to our semiannual Chief Infrastructure Technology Executive Roundtable. The results were revealing: executives expressed strong interest in all key NGI technologies, from open-source infrastructure-management environments to software-defined networking, software-as-a-service offerings, cloud orchestration and management, and application-configuration management. Yet most have not yet fully taken advantage of the promise of NGI, largely because of the up-front investment required. The immaturity and complexity of the technology is also slowing adoption, as is concern about the security of the public cloud, particularly with respect to companies’ loss of control in the event of private litigation or inquiries from governmental agencies.
New GAO Reports
Source: Government Accountability Office
1. Telecommunications: Projects and Policies Related to Deploying Broadband in Unserved and Underserved Areas. GAO-14-409, April 23.
Highlights - http://www.gao.gov/assets/670/662712.pdf
2. Warfighter Support: DOD Policy and Implementation Plan for Reconstitution of Forces. GAO-14-530R, April 23.
AMA: Physicians Generate $1.6 Trillion in Economic Activity, Support 10 Million Jobs
Source: American Medical Association
A new report released today by the American Medical Association (AMA) shows that physicians have a huge influence on national and state economies beyond their role of safeguarding a healthy community and productive workforce. Patient care physicians enable economic growth, opportunity and prosperity by contributing $1.6 trillion in economic activity and supporting 10 million jobs nationwide in 2012.
The report notes that given the changing health care environment, it is paramount to quantify the economic impact physicians have on society. To provide lawmakers, regulators and policymakers with reliable information, the report measured the economic impact of physicians at the national level and in each of the 50 states and District of Columbia according to key economic barometers:
- Output: Each physician supported an average of $2.2 million in economic output and contributed to a total of $1.6 trillion in economic output nationwide.
- Jobs: Each physician supported an average of 13.84 jobs and contributed to a total of 10 million jobs nationwide.
- Wages and Benefits: Each physician supported an average of $1.1 million in total wages and benefits and contributed to a total of $775.5 billion in wages and benefits nationwide.
- Tax Revenues: Each physician supported $90,449 in local and state tax revenues and contributed to a total of $65.2 billion is local and state tax revenues nationwide.
College Enrollment and Work Activity of 2013 High School Graduates
Source: Bureau of Labor Statistics
In October 2013, 65.9 percent of 2013 high school graduates were enrolled in colleges or universities, the U.S. Bureau of Labor Statistics reported today. Recent high school graduates not enrolled in college in October 2013 were over twice as likely as enrolled graduates to be working or looking for work–74.2 percent compared with 34.1 percent.
Putting a Value on Crime Analysts: Considerations for Law Enforcement Executives (PDF)
Source: Vera Institute of Justice (via Bureau of Justice Assistance
Crime analysis has become a common feature of U.S. law enforcement agencies. According to a 2008 Police Executive Research Forum (PERF) survey, 89 percent of responding agencies reported having staff whose primary or secondary duty was crime analysis, and the number of analysts has likely increased since then.
But in light of ongoing budget woes, elected officials are asking law enforcement executives to explain how civilian positions, especially those of crime analysts, contribute to the goals and mission of policing. Law enforcement professionals want to know how they can articulate the value of crime analysts, and whether cost-benefit analysis (CBA) can help demonstrate a return on investment for these positions. To put the bottom line up front: the field has not provided many cost-benefit studies of crime analysts to date.
This paper offers guidance for police executives grappling with this issue. The first section gives an overview of the steps involved in CBA and the challenges of using this technique. The second section poses questions about crime analysts that police executives need to answer as part of conducting a CBA. The final section of the paper discusses key considerations when performing a CBA of crime analysts.
Executive Paywatch: High Paid CEOs and the Low-Wage Economy
In 2013 the CEO to worker pay ratio was 331:1 and the CEO to minimum wage worker pay ratio was 774:1. America is supposed to be the land of opportunity, a country where hard work and playing by the rules would provide working families a middle-class standard of living. But in recent decades, corporate CEOs have been taking a greater share of the economic pie while wages have stagnated and unemployment remains high.
High-paid CEOs of low-wage employers are fueling this growing economic inequality. In 2013, CEOs of the Standard & Poor’s (S&P) 500 Index companies received, on average, $11.7 million in total compensation, according to the AFL-CIO’s analysis of available data from 350 companies.
Today’s ratio of CEO-to-worker pay is simply unconscionable. While CEO pay remains in the stratosphere, production and nonsupervisory workers took home only $35,239 on average in 2013, and a full-time worker making the federal minimum wage earned only $15,080.
Even as companies argue that they can’t afford to raise wages, the nation’s largest companies are earning higher profits per employee than they did five years ago. In 2013, the S&P 500 Index companies earned $41,249 in profits per employee, a 38% increase.