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Economic Indicators of the College Station-Bryan MSA, January 2019
(Private Enterprise Research Center, Texas A&M University, 2019-01-21) Bullock, Ashley; Jansen, Dennis W.; Navarro, Carlos I.; Rettenmaier, Andrew J.
Employment in November 2018 increased at an annualized rate of 4.4% from its revised October figure and is up 2.5% from the level in November 2017. Employment counts from June to November 2018 were revised upward with the most recent data release. The Business Cycle Index for the month of November 2018 rose at an annualized rate of 7.3%, above the long-run average. The Unemployment rate remained unchanged at the historically low rate of 2.8%. Real taxable sales for the month of November 2018 were up 4% compared to November of the previous year. Local GDP experienced the third highest growth between 2001 and 2017 of the measured Texas Triangle metros, exceeding the state and national GDP growth rates.
Goodbye 2018, Hello 2019
(Private Enterprise Research Center, Texas A&M University, 2019-01-22) Jansen, Dennis W.; Liu, Liqun; Rettenmaier, Andrew J.
The decline of the stock market and its recent volatility have many wondering about the future prospects of the economy. Other leading economic indicators offer a mixed outlook: hours worked in manufacturing remains high and wages are rising. However, the yield curve is flattening, and an inverted yield curve often occurs in advance of a business cycle peak. In this issue of PERCspectives on Policy, authors Dennis W. Jansen, Liqun Liu and Andrew J. Rettenmaier consider indicators of the economyâ€™s health and use employment ratios to discuss how much employment could continue to grow in the near-term future.
Inter-Jurisdiction Migration and the Fiscal Policies of Local Governments
(Private Enterprise Research Center, Texas A&M University, 2019-02-04) Dai, Darong; Jansen, Dennis W.; Liu, Liqun
In this paper, authors Darong Dai, Dennis W. Jansen and Liqun Liu analyze the effects of migration on the fiscal policies of local governments. Because of the possibility of migrating to another jurisdiction later in life, and as a result, not being responsible for the debt repayment in one's original jurisdiction, the residents in a jurisdiction have a tendency to run excessive debt. This paper first analyzes a fiscal-policy game between two jurisdictions connected by mutual migration and finds that as the mutual migration intensifies, both jurisdictions in the Nash equilibrium choose more public consumption, less public investment, and more total spending that is entirely financed by debt. Results also show that the first-best allocation can be achieved through Nash play by imposing the restriction that public consumption should be financed by a contemporary tax and not by borrowing. The paper goes on to analyze a model with one-directional migration and obtain results on how migration affects the fiscal policies of both the jurisdiction of migration destination and the jurisdiction of migration origin.
The Vicious Circle of Blackouts and Revenue Collection in Developing Economies: Evidence from Ghana
(Private Enterprise Research Center, Texas A&M University, 2019-02-05) Puller, Steven; Street, Brittany; Yebuah-Dwamena, Belinda; Dzansi, James
As reliable electricity is needed to form and sustain successful businesses, power is critically important for economic growth, especially for developing countries in Sub-Saharan Africa. In urban areas where most residences and businesses are connected to the power grid, utilities that are hampered by revenue shortfalls must implement load shedding, or rolling blackouts, to meet rising demand. In working paper 1809, PERC Professor Steven Puller, PERC Graduate Fellow Brittany Street and co-authors Belinda Yebuah-Dwamena and James Dzansi investigate whether revenue shortfalls from low bill collection rates contribute to a negative feedback loop that results in power supply shortages and a weaker electric utility.
Monetary Policy Uncertainty: A Tale of Two Tails
(Private Enterprise Research Center, Texas A&M University, 2019-02-05) Sekhposyan, Tatevik; Dahlhaus, Tatjana
Over the past two decades, expectations about the future of monetary policy has become a useful agent used by households and firms as they make spending and investment decisions. As central banks worldwide recognize the role of these expectations, there has been a push to set specific macroeconomic targets and transparently communicate future actions to achieve those targets. In PERC working paper 1808, PERC Fellow Tatevik Sekhposyan and coauthor Tatjana Dahlhaus study the link between monetary policy uncertainty and interest rate predictability, as well as the effects of the uncertainty on the larger economy.
Staying the Course or Rolling the Dice: Time Horizonâ€™s Effect on the Propensity to Take Risk
(Private Enterprise Research Center, Texas A&M University, 2019-02-06) Liu, Liqun; Rettenmaier, Andrew J.; Saving, Thomas R.
Is the old adage that states that the young take more risk than the old correct? In PERC Working Paper 1902, authors Liqun Liu, Andrew J. Rettenmaier and Thomas R. Saving investigate this conventional wisdom in the context of non-financial risk taking. The paper analyzes a model of dynamic decision making under uncertainty, where in each period the decision maker is faced with a choice between accepting a known level of benefit inherited from the last period - â€œstaying the courseâ€�- and drawing from a random benefit distribution, or â€œrolling the dice.â€� Results show that the decision makerâ€™s propensity to roll the dice decreases as it gets closer to the ending period, therefore providing a justification for the conventional wisdom that the young would take more risk than the old. Additional results show that it is possible for a risk averse decision maker with an inherited benefit level greater than the mean of the random benefit distribution to prefer rolling the dice to staying the course, and that it is also possible for a risk averse decision maker to be more prone to risk taking as the underlying benefit distribution becomes riskier.
Fiscal Decentralization, Political Heterogeneity and Welfare
(Private Enterprise Research Center, Texas A&M University, 2019-02-15) Aslim, Erkmen Giray; Neyapti, Bilin
Theoretical and empirical literature on ï¬�scal decentralization has been thriving, while understanding the welfare implications of ï¬�scal decentralization under political diversity necessitates further investigation. Authors Erkmen G. Aslim and co-author Bilin Neyapti contribute to this literature by formally modeling the interaction between the central government and local governments, where the latter may have varying degrees of political proximity to the former. The model solution reveals that the optimal tax rate is positively associated with ï¬�scal decentralization, political unison, and spillovers across localities, while the local tax collection eï¬€ort is negatively associated with all of these parameters. The ï¬�rst novel ï¬�nding of this study is that both the welfare and the central governmentâ€™s utility peak and income distribution is more equitable at a lower level of ï¬�scal decentralization when spillovers exist than otherwise, which supports the decentralization theorem. The second novel ï¬�nding is that both the amount of redistributable income and central government utility increases with political unison.
Economic Indicators of the College Station-Bryan MSA, February 2019
(Private Enterprise Research Center, Texas A&M University, 2019-02-25) Bullock, Ashley; Jansen, Dennis W.; Navarro, Carlos I.; Rettenmaier, Andrew J.
The Business Cycle Index for the month of December 2018 rose at an annualized rate of 4.6%, slightly above the long-run average. Nonfarm employment in College Station-Bryan rose slightly between November and December 2018 and is up 2.7% from its December 2017 figure. The unemployment rate, while low by historical standards, increased to 3% in December 2018 from 2.8% in November. Real taxable sales rose 0.8% in December and was 9.3% higher than sales in December 2017. In our focus section we discuss how official poverty rates for â€œcollege townsâ€� are misleading because of the relatively large share of college students and show that in applying a modified poverty measure, the rate in Brazos County drops from 26% to 15% after adjusting for college students.
The Impact of Election Fraud on Government Performance
(Private Enterprise Research Center, Texas A&M University, 2019-03-07) Peralta, Abigail
Election fraud is considered pervasive throughout many countries, raising concerns it can facilitate corruption and inhibit economic growth by preventing voters from holding elected officials accountable. This paper examines whether reducing election fraud causes improvements in government performance. To measure the type of government corruption and red tape that inhibits economic growth, author Abigail Peralta focuses on building permit approvals in the Philippines, since delays in granting approvals are often associated with requests for bribes. To identify effects, the author a switch to automated elections in 2010 that made committing fraud more difficult through the use of stronger ballot security measures, timely counting of ballots, and the simultaneous transmission of votes to various servers. Estimates from a research design comparing changes over time in previously high-fraud and low-fraud towns indicate that automated elections significantly reduced election fraud, as measured by digit-based tests. In addition, results indicate that this led to a sharp and sustained 15 percent increase in the number of building permits approved annually, leading to greater investment in the local economy.
Economic Indicators of the College Station-Bryan MSA, March 2019
(Private Enterprise Research Center, Texas A&M University, 2019-03-25) Bullock, Ashley; Jansen, Dennis W.; Navarro, Carlos I.; Rettenmaier, Andrew J.
The Business Cycle Index decreased at an annualized rate of -1% between December 2018 and January 2019. Nonfarm employment in College Station-Bryan increased 0.9% from December 2018 to January 2019 and is up 3.5% from the January 2018 rate. The unemployment rate increased to 3.1% in January 2019 from 3.0% in December. Real taxable sales declined by 0.5% in January 2019 but were 4.6% higher than sales in January 2018. Real wages decreased by 0.3% from the second to the third quarter of 2018 but grew by 3.1% relative to the third quarter of 2017. This month, we highlight the growth in Texas A&M Universityâ€™s enrollment, the enrollment composition and growth by college, and the educational attainment of our local population.
Economic Indicators of the College Station-Bryan MSA, April 2019
(Private Enterprise Research Center, Texas A&M University, 2019-04-22) Bullock, Ashley; Jansen, Dennis W.; Navarro, Carlos I.; Rettenmaier, Andrew J.
The Business Cycle Index measured one point lower than the revised January 2019 value, a -4.7% annualized rate of decline. Nonfarm employment for January was revised downward by 0.1% from the value released last month, and the February value was 0.5% lower than the revised January number. The unemployment rate in February 2019 remained at 3.1%, the same rate as in January. Real taxable sales increased by 1.5% in February 2019, and are up 9.4% relative to February of 2018. The focus this month is on property and sales taxes. Average property taxes per person in College Station-Bryan are similar to the state average. Local property taxes and around the state have been growing faster, and state sales taxes slower, than the sum of inflation plus population growth.
Texas Taxes
(Private Enterprise Research Center, Texas A&M University, 2019-05-09) Jansen, Dennis W.; Navarro, Carlos I.; andRettenmaier, Andrew J.
Local property tax collections are increasing faster than other Texas taxes. The legislature is currently considering proposals the would limit the growth in property tax revenues. How much does a Texas resident pay in property and other taxes and how does Texas compare to the rest of the United States when it comes to state revenues per person? In this issue of PERCspectives on Policy, Dennis W. Jansen, Carlos Navarro, and Andrew J. Rettenmaier discuss the main tax revenues of the state of Texas, historical taxes collections in the state, and the proposed changes to property and sales taxes by the Texas legislature.
Federal Liabilities: 2019 Update
(Private Enterprise Research Center, Texas A&M University, 2019-05-17) Jansen, Dennis W.; Liu, Liqun; Rettenmaier, Andrew J.
The Financial Report of the United States Government (FRUSG), released at the end of March, identifies total federal liabilities of $25.4 trillion as of September 30, 2018. The debt held by the public, $15.8 trillion, comprises 62% of these liabilities. Federal employeesâ€™ accrued benefits make up another 31%, and various other categories round out the remainder. But, absent from the official liabilities is a measure of current retireesâ€™ expected Social Security and Medicare benefits. These benefits are conceptually equivalent to the federal employeesâ€™ accrued benefits. We suggest adding these portions of the elderly entitlement programsâ€™ obligations â€“ net benefits payable to current retirees â€“ to the official liabilities of the federal government to arrive at a more comprehensive measure of total federal liabilities. Social Security and Medicare benefits payable to current retirees produces additional liabilities of $23.5 trillion. This amount exceeds the debt held by the public and that is 93% of the size of the official liability measure. Together, the official liabilities and current retireesâ€™ accrued Social Security and Medicare benefits total $48.9 trillion, or 238% of GDP.
Economic Indicators of the College Station-Bryan MSA, May 2019
(Private Enterprise Research Center, Texas A&M University, 2019-05-20) Bullock, Ashley; Jansen, Dennis W.; Navarro, Carlos I.; Rettenmaier, Andrew J.
The Business Cycle Index decreased by 0.1% between February and March 2019, resulting in an annualized rate of -1.1%. Nonfarm employment in College Station-Bryan increased 0.3% from February to March 2019 and has grown 2.1% from its March 2018 level. The unemployment rate in March remained at a revised rate of 3.0%. Real taxable sales decreased by 0.3% in March 2019. They have grown 2.5% relative to March of 2018.The focus this month is on year-to-year population growth in College Station-Bryan and other comparable metropolitan areas. Over half of population growth in College Station-Bryan between 2017 and 2018 can be attributed to migration, with a larger net inflow of people from international locations than from domestic immigration.
Homeownership and Housing Transitions: Explaining the Demographic Composition
(Private Enterprise Research Center, Texas A&M University, 2019-06-03) Ma, Eunseong; Zubairy, Sarah
The homeownership rate was relatively stable for the few decades preceding 1995, followed by a large increase between 1995-2005 and a subsequent decline over the next ten years. Authors Eunseong Ma and Sarah Zubairy document the evolution of homeownership rate across various age groups for the period 1995-2015. Two interesting empirical findings emerge. First, there are uneven variations in the homeownership rates across age: it is large for the young, but small for the old. Second, the total variation is mostly driven by renter-to-owner transitions of the young. The authors also consider a life-cycle model featuring housing tenure decisions to explain these empirical facts. The analysis suggests that a variation in the debt-to-income limit plays a crucial role in accounting for the overall rise in homeownership and the uneven behavior across age groups
Federal Reserve Asset Reductions and the Economy
(Private Enterprise Research Center, Texas A&M University, 2019-06-07) Saving, Thomas R.
At its September 2017 meeting, the Board of Governors of the Federal Reserve System announced that they would begin to reverse the massive acquisition of assets that began in 2009. What has been the impact of these asset sales, and what challenges face the Federal Reserve as the asset sales continue? This paper goes over the past 18 months of the asset reduction program and future challenges facing the Fed.
Economic Indicators of the College Station-Bryan MSA, June 2019
(Private Enterprise Research Center, Texas A&M University, 2019-06-24) Bullock, Ashley; Jansen, Dennis W.; Navarro, Carlos I.; Rettenmaier, Andrew J.
The Business-Cycle Index increased by a scant 0.06% between March and April 2019, which translates to an annualized increase of 0.8%. Nonfarm employment increased by 0.2% from March to April and is now 2% higher over the past twelve months. The unemployment rate decreased to 2.9% in College Station-Bryan for the month of April, or 0.1 percentage point lower than the rate for March 2019. Real taxable sales grew 3.2% between March and April and are up 6.1% from this time last year. Real wages decreased by 0.4% from the third to the fourth quarter of 2018, but grew by 0.9% relative to the fourth quarter of 2017. The focus this month is on average daily vehicle traffic along Highway 6, and on air travel in College Station-Bryan compared to other Texas airports
Inter-Jurisdiction Migration and the Fiscal Policies of Local Governments
(Private Enterprise Research Center, Texas A&M University, 2019-06-28) Jansen, Dennis W.; Liu, Liqun; Dai, Darong
The relationship between migration and the economy is of great interest to researchers, especially where migration and local government fiscal policy intersect. In order to attract immigrants or retain current residents, how do local governments choose to spend, and how do they choose to finance their spending? This article summarizes PERC working paper 1901, where Dennis W. Jansen, PERCâ€™s director, and PERC Research Scientist Liqun Liu, along with co-author Darong Dai analyze the effects of non-tax/debt-driven migration on the fiscal policies of local governments using a two-period model of two identical local governments that are connected by mutual migration.
Am I the Big Fish? The Effects of Ordinal Rank on Student Academic Performance in Middle School
(Private Enterprise Research Center, Texas A&M University, 2019-06-28) Yu, Han
The idea that through perseverance and hard work, one can achieve his or her dreams is a pervasive one. There is already an established literature that studies the link between relative achievement and individual outcomes, but findings on relative achievement in the classroom is rare. This article summarizes working paper 1811, where PERC Postdoctoral Associate Han Yu provides the first evidence from a developing country by studying the effects of academic class rank for 7th and 8th grade students from China. This paper also breaks new ground by providing the first direct evidence on the relationship between objective academic class rank and the rank perceived by students, as well as the impact of self-perceived rank on a student's future academic attainments.
Economic Indicators of the College Station-Bryan MSA, July 2019
(Private Enterprise Research Center, Texas A&M University, 2019-07-22) Bullock, Ashley; Jansen, Dennis W.; Navarro, Carlos I.; Rettenmaier, Andrew J.
The Business-Cycle Index increased at a robust annualized rate of 5.8% between April and May 2019. The seasonally adjusted unemployment rate reached an all-time low of 2.8% in May. Nonfarm employment increased by 0.1% from April to May and stood at 121,885 workers. Real taxable sales in May were 3.9% lower than in April and were down 1% compared to May of 2018. This month, the focus section compares the retirement income in College Station-Bryan to other Texas MSAs, and also compares the local percentage of the population over 65 years of age to the rest of the state.

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