This New York Times story has it right: the German labor market now includes a sizable low-wage segment. This book has a very helpful comparison of developments in Germany with those in Denmark, France, the Netherlands, the United Kingdom, and the United States. My take on what this implies for incomes, poverty, and policy is here.
Archive for the 'Abroad' Category
Low wages in Germany
August 26, 2011Living standards in the U.K.
July 28, 2011Three very helpful reports on living standards in the United Kingdom:
James Plunkett, Growth without gain? The faltering living standards of people on low-to-middle incomes
Matthew Whittaker and Lee Savage, Missing out: why ordinary workers are experiencing growth without gain
Wenchao Jin, Robert Joyce, David Phillips, and Luke Sibieta, Poverty and inequality in the UK: 2011
To keep up with U.K. developments, I typically look to:
Centre for Analysis of Social Exclusion
Centre for Economic Performance
Why do some rich economies grow faster than others?
January 4, 2011Between 1973 and 2007 the twenty rich nations in the following chart averaged a 2% per year growth rate of per capita GDP. But some of them grew faster than others.
Why?

One reason is “catch-up”: partly because they could borrow technology from the leaders, countries that began with a lower per capita GDP tended to grow more rapidly. The growth rates shown here adjust for this.
What else matters? The list of hypothesized causes is lengthy. It includes investment, consumption, education, natural resources, macroeconomic policy, levels of taxation, welfare state size and structure, industrial policy, government regulations, the distribution of income, interest group organization, corporatist concertation, the partisan complexion of government, interest group-government coherence, cooperation-promoting institutions, and institutional coherence, among others.
In a chapter in the Oxford Handbook of Comparative Institutional Analysis, I take a stab at assessing the merits of some of these hypotheses. Many turn out to be of little use in understanding the cross-country variation in catchup-adjusted growth. Two that do seem to help are business and labor participation in policy making (“corporatism”) and limited product and labor market regulations, yet these go only a small part of the way toward accounting for the country differences.
An interesting element of the story is the tendency of countries that do well for a while to then lapse. During the course of these four decades an array of national models have gone in and out of fashion, first performing effectively and then falling on hard times: Germany (“modell Deutschland”) and Japan (“Japan Inc.”) in the 1970s and 1980s; the United States in the 1980s and 1990s; the Netherlands (“Dutch miracle”) in the 1990s; Denmark (“flexicurity”) and Ireland (“Celtic tiger”) in the 1990s and 2000s. Some later rebound, such as Sweden in the 2000s.

My conclusion: we know far less than we’d like to about this very important issue.
“I heard in your Kant a little Rousseau”
December 4, 2010France is a complex and puzzling country, but I agree with Simon Kuper that we tend to underappreciate the fact that it gets some very important things right.
Poverty and immigration in the U.S. and abroad
November 29, 2010The incomes of American households at the low end of the distribution aren’t especially high, and haven’t increased much, when compared to those of their counterparts in other rich nations. But perhaps this is an unfair comparison. After all, hasn’t the United States absorbed a much larger flow of immigrants than any other affluent country?
Actually, as the following chart shows, we’re not exceptional in this regard.

Does the U.S. have more of the type of immigrants most likely to struggle in the labor market — those with limited education? Again no. As this next chart indicates, here too we’re in the middle of the pack.

The politics of helping the poor
July 1, 2010Slides from my talk at the Luxembourg Income Study conference on “Inequality and the Middle Class.”
The conference papers are available online.
A not-so-great day for soccer fans
May 31, 2010Today came the official announcement that José Mourinho will take over as coach of Real Madrid. Given Mourinho’s record of success in winning domestic league and Champions League trophies, I presume this comes as good news to many Real fans. But as a soccer spectator, I’m not especially happy about it.
Real has two of the best attacking players in the world in Cristiano Ronaldo and Kaka, and a strong nucleus around them. This year’s Real team played with an attacking style that was fun to watch. In Spanish league competition it scored far more goals than its recent predecessors.

I suspect this will change under Mourinho. His preferred style is counterattack. That’s how his Inter Milan teams of the past two years have played, and it’s the way his Chelsea teams of the mid-2000s tended to play, despite their wealth of offensive talent. Mourinho’s Chelsea did use an offensive-looking 4-3-3 formation. But a team’s formation matters less than its strategy on the field, and the main thing Mourinho added to Chelsea when he arrived in 2004-05 was a defensive-minded counterattacking style. The club’s goal record bears this out. Chelsea upped its scoring slightly in the first two of Mourinho’s three seasons, but its chief improvement was in allowing fewer goals.

Real Madrid were successful this year, but not successful enough. Their record in the Spanish league was one of the best ever: 31 wins, 3 draws, 4 losses. Yet they finished second to Barcelona. In the Champions League, Real slipped up in the round of 16. Mourinho has been brought in to do better. And he might. Make no mistake: counterattack can be an effective strategy. It’s no accident that the Italian national team, a consistent practitioner, has won two of the last seven World Cups, reaching the semifinals two other times. And the only teams to fare well against Barcelona in the Champions League the past three years — Manchester United in 2008, Chelsea in 2009, Inter Milan this year — did so via a cautious, defensive approach.
As a spectator, though, I much prefer teams willing to play genuinely attacking soccer. This year’s Chelsea team, for instance, was more enjoyable to watch than its Mourinho-era counterparts, with many of the same players.
Few teams have the talent to thrive with an attacking style. The current Real squad is one that does. It would be a pity to waste it. Perhaps at Real Mourinho will change his stripes, but I’m not optimistic.
America and the world
May 13, 2010Lecture slides for the “America and the World” section of my Social Issues in America course:
Why does England lose?
December 27, 2009Soccernomics (U.K. title: Why England Lose) is an attempt by Simon Kuper, a sports journalist, and Stefan Szymanski, a sports economist, to understand the world’s most popular sport based on data rather than lore and cliché. If you’re partial to soccer or interested in sports analysis, it’s a good read. Among the book’s many interesting findings and arguments: soccer fans don’t like equality among teams; the best club teams currently reside in midsize industrial cities such as Manchester, Barcelona, and Turin, but domination likely will shift to postindustrial multicultural giants like London, Paris, Istanbul, and Moscow; soccer will succeed in the U.S. and the U.S. will succeed in soccer irrespective of how the Major Soccer League (MLS) fares; poverty does not make people or countries better at soccer.
The book’s lead chapter tries to answer the question “Why does England lose?” Why has England’s national team fared so poorly in the quadrennial World Cup since its one and only triumph in 1966? This is, the authors note, “perhaps the greatest question in English sports.”
England has a rich soccer history. It is one of only seven countries to have won a World Cup. It ranks fifth all-time in World Cup matches played (55) and wins (25). Its club teams have been highly successful; between 1970 and 2006 an English team won the world’s top club competition, Europe’s Champions League, nine times, which compares favorably to Germany (6), Italy (6), the Netherlands (6), and Spain (5). Yet England won none of the ten World Cups played during that span. Indeed, it never reached the finals, and made it to the semifinals only once. Why?
Kuper and Szymanski begin by dismissing the popular notion that the problem lies in English clubs’ overreliance on foreign players, which supposedly hinders the development of native talent. I agree with their skepticism here. Then they show that a large share of England’s national team players are from working-class households, and they suggest it would be good if more were recruited from the middle class. But they don’t look to see if other more successful countries have done that. They then say England has suffered from being outside the continental European soccer knowledge network. As a result, while other leading European national teams shifted to a rapid short passing game, English soccer remained wedded to a “kick-and-rush” style. But they don’t address the obvious question of why, if the kick-and-rush style contributed to failure in the World Cup, it yielded such success at the club level during the same period.
Ultimately, Kuper and Szymanski assert that the question “Why does England lose?” is wrongheaded, for England’s national team actually hasn’t performed too badly. Here they turn away from World Cup results and look at goal difference in all games played by the national team. They examine all countries’ national teams over the period 1980 to 2001 and discover that GDP per capita, population, and number of matches played since 1872 are helpful predictors. They find that England’s team has done, relative to what this formula predicts, about as well as those of Germany, Italy, Argentina, and France.
Yet here the authors are, I think, trying to be a bit too clever. England truly has underperformed in the past ten World Cups. Kuper and Szymanski note that “Any mathematician would say it’s absurd to expect England to win the World Cup … random factors play an outsize role in determining the winner.” Okay, fair enough. So let’s use getting to the semifinals as the benchmark. Over the past four decades eight nations have dominated world soccer: Argentina, Brazil, England, France, Germany, Italy, the Netherlands, and Spain. The following chart shows how these countries have fared in reaching the World Cup semis since 1970. England’s record is second-worst.

How well should England have done? We can predict these countries’ recent World Cup success pretty well by looking at their historical performance. The following chart plots the number of semifinals reached in the ten World Cups since 1970 by each country’s World Cup match wins over the entire history of the tournament, from 1930 to 2006. Given its overall number of match victories, England ought to have reached the semifinals three times since 1970, rather than just once.

What accounts for England’s poor results? I think it’s a fairly simple story. First, it helps to host the World Cup tournament. These countries have hosted six of the past ten, and in five of those six instances the host made it to the semifinals or beyond: Germany in 1974 and 2006, Argentina in 1978, Italy in 1990, and France in 1998. (Only Spain in 1982 failed.) England didn’t host any. Second, you need to do okay — not great, but okay — in matches decided on penalty kicks. Penalty kick shootouts have been used in the World Cup since 1982. In the seven tournaments from 1982 to 2006, England was eliminated on penalty kicks three times, with not a single penalty-kick win. In contrast, Germany is 4-0 in penalty-kick shootouts, Argentina is 3-1, Brazil is 2-1, and France is 2-2. Only Italy, at 1-3, rivals England’s record of futility in World Cup penalty-kick matches.
Had it hosted one of the past ten World Cups and won a penalty-kick shootout in either 1998 or 2006, England’s semifinals appearances might well have jumped from one to three, putting it right at the expected number.
Understanding France
October 5, 2009It’s been a while since I’ve posted anything here. I’ve been busy working on a book, among other things. I’ll try to get back to it soon.
In the meantime, Saturday’s Financial Times had two nice pieces on France:
The myth of Eurabia, by Simon Kuper
Vive la différence, by Donald Morrison










