United States

Reflections on Decarbonization: Wyoming vs. Japan

By Ryosuke Shimizu

This summer, as a Growth Lab intern, I conducted research on decarbonization in the United States. To gain a better understanding of this topic, I worked with an economist at the Center for Business and Economic Analysis (CBEA) at the University of Wyoming in Laramie. CBEA's primary task is to work with other departments and state agencies to conduct economic assessments of industrial projects in Wyoming. Most...

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Student Stories: Assessing Decarbonization (and the Rodeo) in Wyoming

Ryosuke Shimizu photoRyosuke Shimizu is a second-year MPA/ID student at Harvard Kennedy School. He was accepted into the Growth Lab's 2022 Summer Internship Program and contributed to our policy engagement in Wyoming. Initial work will focus on understanding the causes of economic stagnation that have resulted in a deficit of job opportunities. We will also examine the risks and opportunities for the future of Wyoming’s economy, including automation and global decarbonization.... Read more about Student Stories: Assessing Decarbonization (and the Rodeo) in Wyoming

Reclaiming Populism: How Economic Fairness Can Win Back Disenchanted Voters
Protzer, E. & Summerville, P., 2022. Reclaiming Populism: How Economic Fairness Can Win Back Disenchanted Voters, Polity Books. Publisher's VersionAbstract

Populist upheavals like Trump, Brexit, and the Gilets Jaunes happen when the system really is rigged. Citizens the world over are angry not due to income inequality or immigration, but economic unfairness: that opportunity is not equal and reward is not according to contribution.

This forensic book draws on original research, cited by the UN and IMF, to demonstrate that illiberal populism strikes hardest when success is influenced by family origins rather than talent and effort. Protzer and Summerville propose a framework of policy inputs that instead support high social mobility, and apply it to diagnose the differing reasons behind economic unfairness in the US, UK, Italy, and France. By striving for a fair, socially-mobile economy, they argue, it is possible to craft a politics that reclaims the reasonable grievances behind populism.

Reclaiming Populism is a must-read for policymakers, scholars, and citizens who want to bring disenchanted populist voters back into the fold of liberal democracy.

Eric Protzer is a Research Fellow at Harvard University’s Growth Lab.
Paul Summerville is an Adjunct Professor at the University of Victoria’s Gustavson School of Business.

Estimating the drivers of urban economic complexity and their connection to economic performance
Gomez-Lievano, A. & Patterson-Lomba, O., 2021. Estimating the drivers of urban economic complexity and their connection to economic performance. Royal Society Open Science , 8 (9). Publisher's VersionAbstract
Estimating the capabilities, or inputs of production, that drive and constrain the economic development of urban areas has remained a challenging goal. We posit that capabilities are instantiated in the complexity and sophistication of urban activities, the know-how of individual workers, and the city-wide collective know-how. We derive a model that indicates how the value of these three quantities can be inferred from the probability that an individual in a city is employed in a given urban activity. We illustrate how to estimate empirically these variables using data on employment across industries and metropolitan statistical areas in the USA. We then show how the functional form of the probability function derived from our theory is statistically superior when compared with competing alternative models, and that it explains well-known results in the urban scaling and economic complexity literature. Finally, we show how the quantities are associated with metrics of economic performance, suggesting our theory can provide testable implications for why some cities are more prosperous than others.
Hausmann, R. & Sturzenegger, F., 2007. The Valuation of Hidden Assets in Foreign Transactions: Why 'Dark Matter' Matters. Business Economics , 42 (1) , pp. 28-34. Publisher's VersionAbstract
This paper clarifies how the valuation of hidden assets—what we call “dark matter”—changes our assessment of the U.S. external imbalance. Dark matter assets are defined as the capitalized value of the return privilege obtained by U.S. assets. Because this return privilege has been steady over recent decades, it is likely to persist in the future or even to increase, as it becomes leveraged by an increasingly globalized world. Once this is included in future projections of U.S. current accounts, the U.S. external position looks much more balanced than depicted in official statistics.
Hausmann, R. & Sturzenegger, F., 2006. The Implications of Dark Matter for Assessing the US External Imbalance.Abstract
This paper clarifies how dark matter changes our assessment of the US external imbalance. Dark matter assets are defined as the capitalized value of the return privilege obtained by US assets. Because this return privilege has been steady over recent decades, it is likely to persist in the future or even to increase, as it becomes leveraged by an increasingly globalized world. Once this is included in future projections of US current accounts, the US external position looks much more balanced than depicted in official statistics.
Bustos, S. & Yıldırım, M.A., 2019. Production Ability and Economic Growth.Abstract
Production is shaped by capability requirements of products and availability of these capabilities across locations. We propose a capabilities based production model and an empirical strategy to measure product sophistication and location’s production ability. We apply our framework to international trade data, and employment data in the US, recovering measures of production ability for countries and cities, and sophistication of products and industries. We show that both country and city level measures have a strong correlation with income, and economic growth at different time horizons. Product sophistication is positively correlated with measures like education and training needed in the industry. Our model-based estimations also predict the diversification patterns through the extensive margin.
Patterson-Lomba, O. & Gomez-Lievano, A., 2018. On the Scaling Patterns of Infectious Disease Incidence in Cities.Abstract
Urban areas with larger and more connected populations offer an auspicious environment for contagion processes such as the spread of pathogens. Empirical evidence reveals a systematic increase in the rates of certain sexually transmitted diseases (STDs) with larger urban population size. However, the main drivers of these systemic infection patterns are still not well understood, and rampant urbanization rates worldwide makes it critical to advance our understanding on this front. Using confirmed-cases data for three STDs in US metropolitan areas, we investigate the scaling patterns of infectious disease incidence in urban areas. The most salient features of these patterns are that, on average, the incidence of infectious diseases that transmit with less ease– either because of a lower inherent transmissibility or due to a less suitable environment for transmission– scale more steeply with population size, are less predictable across time and more variable across cities of similar size. These features are explained, first, using a simple mathematical model of contagion, and then through the lens of a new theory of urban scaling. These frameworks help us reveal the links between the factors that determine the transmissibility of infectious diseases and the properties of their scaling patterns across cities.
What is different about urbanization in rich and poor countries? Cities in Brazil, China, India and the United States
Chauvin, J.P., et al., 2017. What is different about urbanization in rich and poor countries? Cities in Brazil, China, India and the United States. Journal of Urban Economics , 98 (March 2017) , pp. 17-49. Publisher's VersionAbstract
Are the well-known facts about urbanization in the United States also true for the developing world? We compare American metropolitan areas with analogous geographic units in Brazil, China and India. Both Gibrat’s Law and Zipf’s Law seem to hold as well in Brazil as in the U.S., but China and India look quite different. In Brazil and China, the implications of the spatial equilibrium hypothesis, the central organizing idea of urban economics, are not rejected. The India data, however, repeatedly rejects tests inspired by the spatial equilibrium assumption. One hypothesis is that spatial equilibrium only emerges with economic development, as markets replace social relationships and as human capital spreads more widely. In all four countries there is strong evidence of agglomeration economies and human capital externalities. The correlation between density and earnings is stronger in both China and India than in the U.S., strongest in China. In India the gap between urban and rural wages is huge, but the correlation between city size and earnings is more modest. The cross-sectional relationship between area-level skills and both earnings and area-level growth are also stronger in the developing world than in the U.S. The forces that drive urban success seem similar in the rich and poor world, even if limited migration and difficult housing markets make it harder for a spatial equilibrium to develop.
Russell, S., Barrios, D. & Andrews, M., 2016. Getting the Ball Rolling: Basis for Assessing the Sports Economy.Abstract

Data on the sports economy is often difficult to interpret, far from transparent, or simply unavailable. Data fraught with weaknesses causes observers of the sports economy to account for the sector differently, rendering their analyses difficult to compare or causing them to simply disagree. Such disagreement means that claims regarding the economic spillovers of the industry can be easily manipulated or exaggerated. Thoroughly accounting for the industry is therefore an important initial step in assessing the economic importance of sports-related activities. For instance, what do policymakers mean when they discuss sports-related economic activities? What activities are considered part of the "sports economy?" What are the difficulties associated with accounting for these activities? Answering these basic questions allows governments to improve their policies.

The paper below assesses existing attempts to understand the sports economy and proposes a more nuanced way to consider the industry. Section 1 provides a brief overview of existing accounts of the sports economy. We first differentiate between three types of assessments: market research accounts conducted by consulting groups, academic accounts written by scholars, and structural accounts initiated primarily by national statistical agencies. We then discuss the European Union’s (EU) recent work to better account for and understand the sports economy. Section 2 describes the challenges constraining existing accounts of the sports economy. We describe two major constraints - measurement challenges and definition challenges - and highlight how the EU's work has attempted to address them. We conclude that, although the Vilnius Definition improves upon previous accounts, it still features areas for improvement.

Section 3 therefore proposes a paradigm shift with respect to how we understand the sports economy. Instead of primarily inquiring about the size of the sports economy, the approach recognizes the diversity of sports-related economic activities and of relevant dimensions of analysis. It therefore warns against attempts at aggregation before there are better data and more widely agreed upon definitions of the sports economy. It asks the following questions: How different are sports-related sectors? Are fitness facilities, for instance, comparable to professional sports clubs in terms of their production scheme and type of employment? Should they be understood together or treated separately? We briefly explore difference in sports-related industry classifications using data from the Netherlands, Mexico, and the United States. Finally, in a short conclusion, we discuss how these differences could be more fully explored in the future, especially if improvements are made with respect to data disaggregation and standardization.

Hausmann, R., et al., 2014. Implied Comparative Advantage. CID Working Paper , 276.Abstract

The comparative advantage of a location shapes its industrial structure. Current theoretical models based on this principle do not take a stance on how comparative advantages in different industries or locations are related with each other, or what such patterns of relatedness might imply about the underlying process that governs the evolution of comparative advantage. We build a simple Ricardian-inspired model and show this hidden information on inter-industry and inter-location relatedness can be captured by simple correlations between the observed patterns of industries across locations or locations across industries. Using the information from related industries or related locations, we calculate the implied comparative advantage and show that this measure explains much of the location’s current industrial structure. We give evidence that these patterns are present in a wide variety of contexts, namely the export of goods (internationally) and the employment, payroll and number of establishments across the industries of subnational regions (in the US, Chile and India). The deviations between the observed and implied comparative advantage measures tend to be highly predictive of future industry growth, especially at horizons of a decade or more; this explanatory power holds at both the intensive as well as the extensive margin. These results suggest that a component of the long-term evolution of comparative advantage is already implied in today’s patterns of production.

Revised July 2020.