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Productivity in the Slow Lane? The Role of Information and Communications Technology

June 15, 2015 Comments off

Productivity in the Slow Lane? The Role of Information and Communications Technology
Source: Federal Reserve Bank of Boston

Key Findings

  • We find that this pattern of a TFP speed-up followed by a slowdown has been widespread across industries.
  • Prior to the mid-2000s, investment in ICT capital grew much faster than investment in non-ICT capital for most industries, and there is little correlation across industries in the growth of these two types of investment. Since then, the relative growth of ICT investment has declined more than its relative price growth has increased. In addition, growth rates of the two types of investment have also become highly correlated across industries.
  • For those industries that use ICT more intensively, the acceleration in TFP in the early 2000s seems to have depended positively on the intensity of ICT investment in the second half of the 1990s, which is likely highly correlated with the unmeasured spending on restructuring. This can be construed as evidence that firms invested simultaneously in tangible ICT capital and intangible organizational capital that diverted resources but enhanced the future efficacy of ICT capital.

Nudging Credit Scores in the Field: The Effect of Text Reminders on Creditworthiness in the United States

June 14, 2015 Comments off

Nudging Credit Scores in the Field: The Effect of Text Reminders on Creditworthiness in the United States
Source: Federal Reserve Bank of Boston

Key Findings

  • Monthly text reminders had a positive effect, a gain of 23–24 points on average, on the credit scores of individuals who initially had low scores (below 584), no effect on the credit scores of initially mid-score individuals (584–671), and a negative effect of about 17–18 points on the credit scores of individuals who started with high credit scores (672 or higher).
  • The effect of information about the relationship between credit scores and average APR had a marginal effect in decreasing the number of credit report inquiries for low-score individuals and in reducing the number of collection accounts among mid-score individuals. For high-score individuals the information had a marginal effect in increasing total past-due amounts by an average of $81–$82, based on a comparison of the figures in the 2013 and 2014 credit reports.
  • The positive effect of these interventions on low-score individuals comes from helping them achieve their debt goals and reduce their rate of credit use, and some weak evidence that the intervention helps them improve their payment patterns as reflected in delinquencies.

Did Abnormal Weather Affect U.S. Employment Growth in Early 2015?

June 10, 2015 Comments off

Did Abnormal Weather Affect U.S. Employment Growth in Early 2015?
Source: Federal Reserve Bank of Boston

Key Findings

+ During the first four months of 2015, the harsh winter weather exerted a significant effect on the pattern of monthly payroll employment. The severe weather explains about 40 percent of the surprising March dip in employment growth and a significant portion of the April rebound.

+ When the effects of the abnormal weather are removed, the resulting pattern of employment growth over the first four months of this year is much more stable than that of the actual monthly data, suggesting an underlying rate of employment growth of just less than 200,000 jobs per month.

+ Over the first four months of 2015, the weather effect averages out to essentially zero. Consequently, bad weather does not appear to be responsible for the overall slowdown in monthly employment growth, which averaged more than 300,000 jobs per month in 2014:Q4.

Informal Work in the United States: Evidence from Survey Responses

April 13, 2015 Comments off

Informal Work in the United States: Evidence from Survey Responses
Source: Federal Reserve Bank of Boston

Key Findings

  • The authors calculate the following informal work participation rates among four employment-status groups: 42.8 percent of full-time workers, 59.4 percent of part-time workers, 39.6 percent of those who report wanting a job, and 26.5 percent of those classified as “other not working.” Overall, about 44 percent of the survey respondents reported participating in some informal paid work during 2011–2013—earning money was the most widely cited reason for doing so.
  • Translating their four employment categories into the three official classifications used by the Bureau of Labor Statistics (BLS), the authors find that 26 percent of those people who the BLS define as “not in the labor force” (NILF) are engaging in informal work.
  • In respect to offsetting the negative effects from the Great Recession, 8 percent of those participating in the informal labor market said that this work helped “very much” to mitigate these shocks, while 27 percent indicated that informal work helped “somewhat” to insulate them from the recession. Part-timers engaging in informal work appear to have benefitted the most—19 percent indicated that informal work helped “very much” to offset the recession’s negative consequences.
  • Over half of those reporting engaging in informal work indicated that they were performing Internet-based tasks, or making use of the Internet when doing such tasks.

Saving for a Rainy Day: Estimating the Appropriate Size of U.S. State Budget Stabilization Funds

April 9, 2015 Comments off

Saving for a Rainy Day: Estimating the Appropriate Size of U.S. State Budget Stabilization Funds
Source: Federal Reserve Bank of Boston

Rainy day funds (RDFs) are potentially an important countercyclical tool for states to stabilize their budgets and the overall economy during economic downturns. However, U.S. states have often found themselves exhausting their RDFs and having to raise tax rates or reduce expenditures while still experiencing a downturn. Therefore, how much each state should save in its RDF has become an increasingly important policy question. To address this issue, this paper applies several new methodologies to develop target RDF levels for each U.S. state, based on the estimated short-term revenue component associated with business cycles and also on policymakers’ preferences for stable tax rates and expenditures.

How Do Speed and Security Influence Consumers’ Payment Behavior?

April 8, 2015 Comments off

How Do Speed and Security Influence Consumers’ Payment Behavior?
Source: Federal Reserve Bank of Boston

The Federal Reserve Financial Services (FRFS) strategic plan for 2012-2016 named improvements in the end-to-end speed and security of the payment system as two of its policy initiatives. End-to-end in this context means that for the first time end-users are explicitly included. Earlier versions of the strategy plan were circulated for public comment, and the feedback received by FRFS specifically identified a need for further research.

This brief draws upon new data from the 2013 Survey of Consumer Payment Choice and employs econometric modeling and simulation to complement FRFS-commissioned market research on end users’ preferences. The authors’ approach relies on revealed preference to incorporate insight into consumers’ actual behavior, not just their attitudes, and their models employ a two-stage technique, estimating, first, the influence of the simulated improvements in speed and in security on the adoption of the payment instruments considered, and, second, the influence on the choice of which of the adopted payment instruments to use. The final version of the strategic plan is currently under discussion by Federal Reserve policymakers, so all the policies and strategies discussed in this brief are preliminary.

House Price Growth When Children are Teenagers: A Path to Higher Earnings?

April 1, 2015 Comments off

House Price Growth When Children are Teenagers: A Path to Higher Earnings?
Source: Federal Reserve Bank of Boston

This paper examines whether a rise in house prices that occurs immediately prior to children entering college has an impact on their earnings as adults. Higher house prices provide homeowners with additional funds to invest in their children’s human capital. The results show that a 1 percentage point increase in house prices, when children are 17 years-old, results in roughly 0.9 percent higher annual income for the children of homeowners, and a 1.5 percent lower annual income for the children of renters. House price appreciation at age 17 also leads to higher college enrollment rates at age 19 and an increased likelihood of attendance at higherranked post-secondary institutions for the children of homeowners, as well as lower college enrollment rates for the children of renters.

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