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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.

The Great Recession, Entrepreneurship, and Productivity Performance

February 18, 2015 Comments off

The Great Recession, Entrepreneurship, and Productivity Performance
Source: Federal Reserve Bank of Boston

I study the recent evolution of entrepreneurship in the United States . I find that there was a significant decline in entrepreneurship around the time of the Great Recession. However, I also find a recovery in recent years. I then link the evolution of entrepreneurship to productivity performance and find evidence of a positive association between the two variables.

The Forecasting Power of Consumer Attitudes for Consumer Spending

January 24, 2015 Comments off

The Forecasting Power of Consumer Attitudes for Consumer Spending
Source: Federal Reserve Bank of Boston

The widely studied Reuters/Michigan Index of Consumer Sentiment is constructed from the answers to five questions from the more comprehensive Reuters/Michigan Surveys of Consumers. Yet little work has been done on what predictive power the information taken from this more thorough compilation of consumer attitudes and expectations may have for forecasting consumption expenditures. The authors construct a limited set of real-time summary measures for 42 questions selected from these broader Surveys corresponding to three broad economic determinants of consumption—income and wealth, prices, and interest rates, and then use regression analysis to evaluate and test the ability of these summary measures to predict future changes in real consumer expenditures, even when controlling for current and future fundamentals. They explain a nontrivial portion of consumption and other real activity forecast errors from professional forecasts. This is consistent with these measures’ ability to predict consumption even when conditioning on a broader set of fundamentals as well as professional forecasters’ judgmental forecast adjustments.

Smoothing State Tax Revenues over the Business Cycle: Gauging Fiscal Needs and Opportunities

January 22, 2015 Comments off

Smoothing State Tax Revenues over the Business Cycle: Gauging Fiscal Needs and Opportunities
Source: Federal Reserve Bank of Boston

During the two most recent U.S. recessions in 2001 and in 2007–2009, state governments experienced an unusually high degree of fiscal stress due to increased revenue cyclicality. Expanding upon the aggregate evidence, this paper explores the degree to which individual states have experienced fluctuating tax receipts over the business cycle. The findings provide state policymakers with information to better understand the extent and causes of this tax revenue cyclicality and, in the context of balanced budget requirements, the efficacy of alternative measures that might be employed to smooth the sensitivity of state resources to economic conditions.

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