By Elijah Asdourian, James Lee, Lorae Stojanovic, David Wessel
What’s the latest thinking in fiscal and monetary policy? The Hutchins Roundup keeps you informed of the latest research, charts, and speeches. Want to receive the Hutchins Roundup as an email? Sign up here to get it in your inbox every Thursday.
French firms produced more patents in 2010 than they did in 1995, yet they didn’t increase the size of their patenting teams. Anna Maria Mayda of Georgetown, Gianluca Santoni of CEPII, and Gianluca Orefice of University Paris-Dauphine find that the rise in patenting activity came from an inflow of skilled migrants to France, who increased both specialization and innovation within French firms. As the number of skilled migrants grew, both native French workers and immigrants specialized where they had comparative advantage. French workers concentrated in language-heavy, “communication-intensive occupations” like management and administration, while foreign workers concentrated in research jobs “requiring technical and quantitative skills,” leading to increasingly specialized patenting teams. The authors thus find that skilled immigrants in France drive “significantly higher” patent production than domestic skilled workers due to the gains from specialization.
Nominal wage accelerations do not necessarily signal a wage-price spiral, defined as an episode where at least three of four successive quarters see both accelerating consumer prices and nominal wages, according to Jorge Alvarez of the International Monetary Fund and co-authors. Since the 1960s, the authors identified 79 episodes across 38 advanced economies where wage-price spirals took place; of these, a minority saw further sustained acceleration in wages and prices. The authors found 22 episodes that exhibited wage-price dynamics similar to those surrounding the COVID-19 pandemic. After four quarters, these episodes were, on average, followed by an increase in wage growth, but not further wage-price spirals. While it is too early to say whether the recovery from the pandemic will play out similarly to previous episodes, nominal wages can accelerate while inflation recedes, as has happened during past episodes.
Wage and employment benefits to lifelong learning—continuing education outside the formal education system and throughout a worker’s career—vary based on the composition of hard and soft skills required for a job, find Tobias Schultheiss and Uschi Backes-Gellner of the University of Zurich. The authors use a machine learning algorithm to classify Swiss job descriptions along a hard- to soft- skill continuum, where hard skills include concrete knowledge, such as knowing how to operate a certain machine, and soft skills include attributes such as leadership ability. Job classifications were then matched to lifelong learning decisions and professional outcomes of respondents to the 2011 and 2016 waves of the Swiss Microcensus of Continuing Education. In harder-skill occupations, where skills tend to depreciate over time, lifelong learning is primarily a hedge against unemployment risks rather than a boost to wages. In contrast, in softer-skill occupations, lifelong learning instead mostly acts as a boost for promotion and leads to larger wage gains.
Consumer inflation expectations rising once again
Chart courtesy of Axios Visuals; data from New York Fed’s Survey of Consumer Expectations
“[D]espite a lot of hype—you you heard a lot about how decentralized these [cryptocurrency] markets are and how innovative and different—it turns out they’re highly concentrated, highly interconnected, and you’re just seeing a domino effect: Failures from one platform or one firm spilling over elsewhere,” says Lael Brainard, Vice Chair of the Federal Reserve Board of Governors.
“It reinforces this need to make sure that crypto finance—because it is no different than traditional finance in the risks that it exposes investors to—needs to be under the regulatory perimeter. And it’s precisely these issues of interconnectedness, leverage, liquidity that are traditional financial risks, and consumer protection, retail protection—we really need to make sure that that environment has the appropriate regulatory guardrails, whether that means bringing some into compliance with existing rules or in some cases, expanding that regulatory perimeter.”
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