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61. U.S. Debt Sustainability under Low Interest Rates and after the Covid‐​19 Shock

Author:
William R Cline
Publication Date:
10-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The worst pandemic in 100 years has hit the United States at a time when economic thinking has become more comfortable with high public debt, facilitating an aggressive response in public spending for relief that has reached a remarkable 27 percent of GDP.1 One reason for the receptiveness to large spending has been the perception that the fiscal stimulus in the Great Recession of 2007–2009 erred on the side of excessive caution and left an aftermath of unduly slow growth. More fundamentally, low real interest rates in recent years have shifted the center of gravity in macroeconomic analysis away from concern about chronic deficits and rising debt toward a certain benign neglect of debt as a problem.
Topic:
Debt, Interest Rates, Sustainability, and COVID-19
Political Geography:
North America and United States of America

62. Trade Is Good for Your Health

Author:
James Bacchus
Publication Date:
06-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
There is increasing need to free up medical trade to help end the COVID-19 pandemic and secure global health. Yet import tariffs, export restrictions, and other limitations on international trade in medicines and medical goods continue to confound the hopes for fulfilling this need. Indeed, added restrictions have been imposed on medical trade during the pandemic. Meanwhile, governments have accomplished little at the World Trade Organization (WTO) to help meet this need. Using trade to help fight the COVID-19 pandemic and to otherwise support global health must move to the top of the WTO agenda, with the aim of finalizing new rules to support trading for health care goods by the time of the next WTO ministerial conference in Geneva in late November 2021 — and ideally, sooner.
Topic:
Health, Trade, and COVID-19
Political Geography:
Global Focus

63. A Brief History of U.S. Immigration Policy from the Colonial Period to the Present Day

Author:
Andrew M. Baxter and Alex Nowrasteh
Publication Date:
08-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
More than 86 million people have legally immigrated to the United States between 1783 and 2019. The legal regime under which they immigrated has changed radically over that time; the politics surrounding those changes have remained contentious, and past immigration policies inform the current political debate. Conflicting visions and piecemeal legislation have left the United States with an archaic and barely coherent immigration system with outdated policy objectives that is primarily controlled by the executive branch of government. We review the history of U.S. immigration policy, including the legal controversies that empowered Congress with its immigration plenary power and the historical policy decisions that still guide the U.S. immigration system, in order to contextualize the current political debate over immigration at the beginning of the Biden administration.
Topic:
Government, History, Immigration, and Immigration Policy
Political Geography:
North America and United States of America

64. Common‐​Sense Policy Reforms for California Housing

Author:
Lee E. Ohanian
Publication Date:
08-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
California housing has become unaffordable. As of February 2021, the median California home price was nearly $700,000 and the median condominium price was $515,000. The median rent for the same month was $1,733. Based on industry mortgage financing and renting standards, this means that both homebuyers and renters require household incomes of nearly $100,000 to qualify for housing.
Topic:
History, Reform, Regulation, and Housing
Political Geography:
North America and United States of America

65. How Wealth Fuels Growth

Author:
Chris Edwards
Publication Date:
09-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
The role of wealth in the economy is the focus of much policy debate. This study examines wealthy individuals as “angel” investors, who fund startup businesses. Angel investors provide a unique source of support for America’s entrepreneurs, particularly in leading‐​edge industries.
Topic:
Entrepreneurship, Economic Growth, Investment, Wealth, and Angel Investors
Political Geography:
North America and United States of America

66. Industrial Policy Implementation: Empirical Evidence from China’s Shipbuilding Industry

Author:
Panle Barwick, Myrto Kalouptsidi, and Nahim Bin Zahur
Publication Date:
08-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Industrial policy has been widely used in developed and developing countries. Examples include the United States and Europe after World War II; Japan in the 1950s and 1960s; South Korea and Taiwan in the 1960s and 1970s; and Brazil, China, India, and other developing countries more recently. Industrial policies are now back in the spotlight in developed countries, such as Europe and the United States. Designing and implementing industrial policies is a complicated task. Governments seeking to promote the growth of selected sectors have a wide range of policy tools at their disposal, including subsidies on output, provisioning loans at below‐​market interest rates, preferential tax policies, tariff and nontariff barriers, and so on. They must also choose the timing of policy interventions and whether to target selected firms within an industry.
Topic:
Government, Industrial Policy, Economic Policy, and Shipbuilding
Political Geography:
China and Asia

67. Effects of Sanctions on North Korea’s Refined Oil Prices

Author:
Kyoochul Kim
Publication Date:
09-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
During 2016 and 2017, North Korea conducted three nuclear tests and four missile launches, and, in response, the international community strengthened its sanctions against North Korea. The sanctions were aimed at deterring North Korea from developing nuclear weapons; the means to achieve this included blocking the inflow of foreign currency into North Korea and banning the import of goods related to its nuclear development efforts. Specifically, the sanctions against North Korea banned the exports of anthracite, processed garments, and marine products to limit its foreign currency acquisition; they banned the import of machinery; and they limited the amount of oil (crude oil and refined oil products) introduced, thus hurting its economy.
Topic:
Oil, Sanctions, Weapons, and Trade
Political Geography:
Asia and North Korea

68. Inequality beyond GDP: A Long View

Author:
Leandro Prados de la Escosura
Publication Date:
09-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
In the past century and a half, substantial gains in wellbeing have been achieved across the board. This can be observed for the main dimensions of well‐​being: health, education, political voice, civil liberties, personal security, and material well‐​being. However, in the study of international well‐​being and its distribution, the focus remains on income. My research addresses multidimensional well‐​being and raises some questions. How have the gains from well‐​being dimensions been distributed? Do relative and absolute inequality move together? What drives relative inequality? Which parts of the distribution achieved larger gains over time in relative and absolute terms?
Topic:
GDP, Inequality, Economic Policy, and Well-Being
Political Geography:
Global Focus

69. Impact of Colonial Institutions on Economic Growth and Development in India: Evidence from Night Lights Data

Author:
Priyaranjan Jha and Karan Talathi
Publication Date:
09-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Many cross‐​country studies find that quality of historical institutions is a major cause of disparity in present‐​day economic development as measured by income per capita. Due to the unavailability of data on a comprehensive measure of development such as per capita income, studies examining the role of historical institutions on development at the subnational levels use alternate proxies of economic well‐​being in their analysis. We examine the long‐​term effects of British colonial institutions on overall economic development within India using satellite night lights data.
Topic:
Development, Economic Growth, Colonialism, Economic Policy, and Institutions
Political Geography:
South Asia and India

70. Discrimination, Managers, and Firm Performance: Evidence from “Aryanizations” in Nazi Germany

Author:
Killian Huber, Volker Lindenthal, and Fabian Waldinger
Publication Date:
10-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Large‐​scale increases in discrimination can lead to dismissals of highly qualified business leaders and managers. Discriminatory expulsions of individuals holding important positions in the economy have occurred repeatedly, both historically and in modern times. Recent political developments have renewed interest in the economic effects of this type of discrimination. For instance, the U.S. travel ban on citizens of seven Muslim‐​majority countries has raised fears among large corporations that increasing discrimination will leave them unable to retain talent.
Topic:
History, Economy, Business, Discrimination, and Nazi Germany
Political Geography:
Germany and United States of America

71. Why U.S. Immigration Barriers Matter for the Global Advancement of Science

Author:
Ruchi Agarwal and Patrick Gaule
Publication Date:
10-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
While talent can be born anywhere, few places specialize in nurturing it. Accordingly, talented individuals have pursued opportunities abroad for centuries. For instance, Aristotle moved from Northern Greece to Athens to attend Plato’s Academy and then to Macedonia to tutor a young Alexander the Great. More recently, the United States has emerged as a hub for foreign talent, playing an outsized role in the global knowledge network of scientific activity in recent decades. However, the recent introduction of restrictive immigration policies in the United States may adversely impact scientific activity. While studies have examined the potential negative impact of restrictive U.S. immigration policies on U.S. competitiveness in science and innovation, there has been less focus on understanding how U.S. immigration barriers may in turn impact scientific activity globally. In this context, our work studies the impact of U.S. immigration barriers on global knowledge production and examines which policy actions are more likely to help advance the global knowledge frontier.
Topic:
Science and Technology, Immigration, Border Control, and Research and Development
Political Geography:
Global Focus and United States of America

72. The Smoot‐​Hawley Trade War

Author:
Kris James Mitchener, Kirsten Wandschneider, and Kevin H. O'Rourke
Publication Date:
11-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
In the words of Robert J. Samuelson, “The ghost of Smoot‐​Hawley seems to haunt President Trump.” As fears of a trade war between the United States and China grew after the U.S. presidential election of 2016, many commentators drew this link between the signing of the Smoot‐​Hawley Tariff Act of 1930 and recent trade disputes. And the consensus was that the trade wars of the 1930s were an ominous portent of what might await the world if Donald Trump’s protectionist impulses were not checked.
Topic:
Tariffs, Trade Wars, Economic Policy, and Imports
Political Geography:
China and United States of America

73. In Vaccines We Trust? The Effects of the CIA’s Vaccine Ruse on Immunization in Pakistan

Author:
Monica Martinez-Bravo and Andreas Stegmann
Publication Date:
11-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Trust in the medical sector and in medical products is a key determinant of the demand for health care. This is especially relevant for the use of vaccines. Because of herd immunity, it is difficult—if not impossible—to learn about the effectiveness of vaccines through one’s own experience. Hence, events that discredit the effectiveness of vaccines or the reputation of the medical sector can have dramatic consequences on immunization rates. A commonly discussed example of such dynamics was the publication of an article in the medical journal The Lancet in 1998 that linked autism to the measles, mumps, and rubella vaccine. Media reports have associated this publication with the emergence of the anti‐​vaccine movement and with the recent rise in the number of unvaccinated children in several countries. The declines in vaccination rates have contributed to the reemergence of previously eradicated diseases in several countries.
Topic:
Public Health, Vaccine, and Central Intelligence Agency (CIA)
Political Geography:
Pakistan and South Asia

74. The Intended and Unintended Consequences of Disposable Bag Regulation

Author:
Tatiana Homonoff, Lee-Sien Kao, Javiera Selman, and Christina Seybolt
Publication Date:
11-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Many recent government and corporate policies aimed at reducing a variety of negative externalities include regulations that ban the provision of externality‐​generating products. However, these policies often ban only a narrow subset of products associated with the underlying externality. For example, the U.S. Department of Justice banned bump stocks, which assist in rapid‐​fire shooting, after a Las Vegas mass shooting rather than placing stricter regulations on all assault weapons. Similarly, Starbucks recently banned the distribution of plastic straws at its stores to reduce environmental waste, and New York City attempted to pass a restaurant ban on sugar‐​sweetened beverages over 16 ounces to curb obesity.
Topic:
Environment, Government, Regulation, and Corporations
Political Geography:
Global Focus

75. The Economic Geography of Global Warming

Author:
José‐​Luis Cruz
Publication Date:
12-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
The world is getting warmer due to carbon emissions generated by the economic activity of humans. Global carbon emissions will affect temperatures everywhere over long periods of time and in geographically different ways. What will be the impact of carbon emissions, and the implied changes in temperatures, on the world economy and on the economies of particular regions? How will individuals react to these changes, and how are these reactions impacted by their ability to migrate, trade, or invest and develop alternative centers of economic activity? What are the best policies to combat global warming, and what are the implications of these policies for different regions across the world? We propose and quantify a novel model to address these questions.
Topic:
Climate Change, Migration, Economic Policy, Innovation, Trade, and Carbon Emissions
Political Geography:
Global Focus

76. Getting Schooled: The Role of Universities in Attracting Immigrant Entrepreneurs

Author:
Natee Amornsiripanitch, Paul A. Gompers, George Hu, and Kaushik Vasudevan
Publication Date:
12-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Immigrants play a vital role in innovation activities and entrepreneurship. Given the substantial contribution of immigrants in these areas, a set of natural questions arise: What are the pathways that high‐​skilled immigrants take to arrive in the United States, and how has the importance of these pathways changed over time? What are important institutions that serve as gatekeepers for high‐​skilled immigrants, and do they affect the types of immigrant founders that come to the United States? Do certain parts of the United States benefit disproportionately from high‐​skilled immigration, and if so, what are some factors that contribute to these benefits? The answers to these questions have important implications for designing immigration policy and regulation, which have become increasingly acrimonious topics in public discourse. They also have important implications for firms and universities that recruit talent from abroad and for the communities that hope to promote vibrant entrepreneurial ecosystems.
Topic:
Entrepreneurship, Immigrants, Innovation, Higher Education, and Startup
Political Geography:
North America and United States of America

77. The Economic Impact of Tax Changes, 1920–1939

Author:
Alan Reynolds
Publication Date:
01-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Estimates of the elasticity of taxable income (ETI) investigate how high‐​income taxpayers faced with changes in marginal tax rates respond in ways that reduce expected revenue from higher tax rates, or raise more than expected from lower tax rates. Diamond and Saez (2011) pioneered the use of a statistical formula, which Saez developed, to convert an ETI estimate into a revenue‐​maximizing (“socially optimal”) top tax rate. For the United States, they found that the optimal top rate was about 73 percent when combining the marginal tax rates on income, payrolls, and sales at the federal, state, and local levels. A related paper by Piketty, Saez, and Stantcheva (2014) concluded that, at the highest income levels, the ETI was so small that comparable top tax rates as high as 83 percent could maximize short‐​term revenues, supposedly without suppressing long‐​term economic growth. Such studies could be viewed as part of a larger effort to minimize any efficiency costs of distortive taxation while maximizing assumed revenue gains and redistributive benefits.
Topic:
Economics, History, Tax Systems, and High-Income People
Political Geography:
North America, Global Focus, and United States of America

78. How Misaligned Incentives Hinder Foster Care Adoption

Author:
Isabella M. Pesavento
Publication Date:
01-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Adoption, particularly adoption out of foster care, has not been well studied within the field of economics. Researchers may avoid this topic because the adoption market greatly deviates from a typical market, and the system and data collection are highly fragmented, with relatively little federal coordination. Rubin et al. (2007) and Thornberry et al. (1999) show that instability in foster care placements produces negative welfare outcomes, and Hansen (2006), Barth et al. (2006), and Zill (2011) demonstrate that adoption out of foster care is socially and financially beneficial. Yet, children waiting to be adopted out of foster care are in excess supply, which has been exacerbated in recent years. I hypothesize that this is, in part, due to misaligned incentives of government officials and the contracted foster care agencies. I show that earnings are prioritized over ensuring permanent child placement, which hinders the potential for adoption, and government oversight fails to correct such iniquities because of career interests.
Topic:
Economics, Government, Markets, Children, Incentives, Foster Care, and Adoption
Political Geography:
North America and United States of America

79. Barber Licensing in Arkansas: Public Health or Private Gain?

Author:
Tanner Corley and Marcus M. Witcher
Publication Date:
01-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
In Arkansas, the barber profession has been regulated and licensed for more than 80 years, and until recently, the issue was mostly absent from the political debate. During a regular session of Arkansas’s 92nd General Assembly in 2019, however, state Sen. John Cooper presented a bill to “repeal the [1937] Arkansas Barber Law” and to “abolish the State Board of Barber Examiners” (Briggs 2019). The average Arkansan probably was not aware of the bill, but occupational licensing reformers saw this as a great opportunity for Arkansas to pave the way for other states to reform their own license laws. If Cooper’s bill had passed, Arkansas’s economy would have likely benefited (Timmons and Thornton 2010, 2018). By removing restrictive requirements to becoming a barber, the bill would have allowed more Arkansans to enter the profession. This reform would have ­provided people with more economic opportunities, increased competition, and benefited consumers.
Topic:
Regulation, Business, Public Health, and Licensing
Political Geography:
North America and United States of America

80. Economic Well‐​Being under Plan versus Market: The Case of Estonia and Finland

Author:
Anna Bocharnikova
Publication Date:
01-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
This article investigates the dynamics of individual economic well‐​being in Estonia and Finland over three periods: (1) 1923–1938, when both countries were similarly situated; (2) 1960–1988, during which Estonia was under Soviet control; and (3) 1992–2018, after Estonian independence. Economic well‐​being is calculated using the purchasing power of wages in terms of the affordability of a minimal food basket. The results show that, in 1938, the purchasing power of wages in Estonia was 4 percent lower than in Finland; in 1988, it was 42 percent lower; and, by 2018, the gap had fallen to 17 percent. Consequently, as measured by the purchasing power of wages, well‐​being in Estonia and Finland was similar before the Soviet occupation, widely diverged during Soviet rule, and converged after Estonian independence, with the transition from plan to market.
Topic:
Economics, Markets, Politics, History, and Culture
Political Geography:
Europe, Finland, and Estonia