London School of Economics and Political Science

About: London School of Economics and Political Science is a education organization based out in London, United Kingdom. It is known for research contribution in the topics: Population & Politics. The organization has 8759 authors who have published 35017 publications receiving 1436302 citations.

Rethinking the Effect of Immigration on Wages

Abstract: This paper calculates the effects of immigration on the wages of native US workers of various skill levels in two steps. In the first step we use labor demand functions to estimate the elasticity of substitution across different groups of workers. Second, we use the underlying production structure and the estimated elasticities to calculate the total wage effects of immigration in the long run. We emphasize that a production function framework is needed to combine own-group effects with cross-group effects in order to obtain the total wage effects for each native group. In order to obtain a parsimonious representation of elasticities that can be estimated with available data, we adopt alternative nested-CES models and let the data select the preferred specification. New to this paper is the estimate of the substitutability between natives and immigrants of similar education and experience levels. In the data-preferred model, there is a small but significant degree of imperfect substitutability between natives and immigrants which, when combined with the other estimated elasticities, implies that in the period from 1990 to 2006 immigration had a small effect on the wages of native workers with no high school degree (between 0.6% and +1.7%). It also had a small positive effect on average native wages (+0.6%) and a substantial negative effect (−6.7%) on wages of previous immigrants in the long run.

A new model of social class : findings from the BBC's Great British Class Survey Experiment.

Abstract: The social scientific analysis of social class is attracting renewed interest given the accentuation of economic and social inequalities throughout the world. The most widely validated measure of social class, the Nuffield class schema, developed in the 1970s, was codified in the UK’s National Statistics Socio-Economic Classification (NS-SEC) and places people in one of seven main classes according to their occupation and employment status. This principally distinguishes between people working in routine or semi-routine occupations employed on a ‘labour contract’ on the one hand, and those working in professional or managerial occupations employed on a ‘service contract’ on the other. However, this occupationally based class schema does not effectively capture the role of social and cultural processes in generating class divisions. We analyse the largest survey of social class ever conducted in the UK, the BBC’s 2011 Great British Class Survey, with 161,400 web respondents, as well as a nationally representative sample survey, which includes unusually detailed questions asked on social, cultural and economic capital. Using latent class analysis on these variables, we derive seven classes. We demonstrate the existence of an ‘elite’, whose wealth separates them from an established middle class, as well as a class of technical experts and a class of ‘new affluent’ workers. We also show that at the lower levels of the class structure, alongside an ageing traditional working class, there is a ‘precariat’ characterised by very low levels of capital, and a group of emergent service workers. We think that this new seven class model recognises both social polarisation in British society and class fragmentation in its middle layers, and will attract enormous interest from a wide social scientific community in offering an up-to-date multi-dimensional model of social class.

The Credibility Revolution in Empirical Economics: How Better Research Design Is Taking the Con out of Econometrics

Abstract: Since Edward Leamer's memorable 1983 paper, "Let's Take the Con out of Econometrics," empirical microeconomics has experienced a credibility revolution. While Leamer's suggested remedy, sensitivity analysis, has played a role in this, we argue that the primary engine driving improvement has been a focus on the quality of empirical research designs. The advantages of a good research design are perhaps most easily apparent in research using random assignment. We begin with an overview of Leamer's 1983 critique and his proposed remedies. We then turn to the key factors we see contributing to improved empirical work, including the availability of more and better data, along with advances in theoretical econometric understanding, but especially the fact that research design has moved front and center in much of empirical micro. We offer a brief digression into macroeconomics and industrial organization, where progress -- by our lights -- is less dramatic, although there is work in both fields that we find encouraging. Finally, we discuss the view that the design pendulum has swung too far. Critics of design-driven studies argue that in pursuit of clean and credible research designs, researchers seek good answers instead of good questions. We briefly respond to this concern, which worries us little.

Too Much Investment: A Problem of Asymmetric Information

Abstract: This paper shows that under plausible assumptions, the inability of lenders to discover all of the relevant characteristics of borrowers results in investment in excess of the socially efficient level. Raising the rate of interest above the free market level will restore optimality. This conflicts with generally held views and is contrasted with the Stiglitz-Weiss model. It is shown that the assumptions which yield overinvestment support debt as the equilibrium method of finance. However, under the Stiglitz-Weiss assumptions, used to derive an underinvestment result, equity is shown to be the equilibrium method of finance.

A Model of Growth Through Creative Destruction

Abstract: This paper develops a model based on Schumpeter's process of creative destruction. It departs from existing models of endogenous growth in emphasizing obsolescence of old technologies induced by the accumulation of knowledge and the resulting process or industrial innovations. This has both positive and normative implications for growth. In positive terms, the prospect of a high level of research in the future can deter research today by threatening the fruits of that research with rapid obsolescence. In normative terms, obsolescence creates a negative externality from innovations, and hence a tendency for laissez-faire economies to generate too many innovations, i.e too much growth. This "business-stealing" effect is partly compensated by the fact that innovations tend to be too small under laissez-faire. The model possesses a unique balanced growth equilibrium in which the log of GNP follows a random walk with drift. The size of the drift is the average growth rate of the economy and it is endogenous to the model ; in particular it depends on the size and likelihood of innovations resulting from research and also on the degree of market power available to an innovator.