PERI
Financialization and Speculative Commodity Price Movements

After declining for almost three decades, the food price index of the Food and Agricultural Organization rose by 96 percent between 2000 and 2008. This massive spike in food prices contributed to a worldwide rise in malnutrition and food insecurity. Manisha Pradhananga considers a range of factors in seeking to explain this price spike. She finds that a substantial part of the explanation is tied to the concurrent rise in speculative trading of a wide range of commodities on financial markets, including energy, metals as well as agricultural commodities. Increasing food price stability on a global scale will therefore require financial regulations that limit speculative financial trading within global commodity markets.

>>Read Financialization and the Rise in Comovement of Commodity Prices

>>Read an interview with paper author Manisha Pradhananga about her research

Does the Earned Income Tax Credit Improve Health?

Poverty and health have a well-established relationship: lower socioeconomic status leads to worse health outcomes. Yet research has rarely tested the effectiveness of anti-poverty programs at improving health. In this paper, Jeannette Wicks-Lim and Peter Arno examine the health effects of the Earned Income Tax Credit (EITC), the largest anti-poverty program for working families operating throughout the U.S. The authors find that New York’s EITC program reduced the low birth weight rate in poor neighborhoods, an important health indicator. The study is the first to analyze EITC’s impact on neighborhoods, rather than households, and finds a concentrated health benefit in high poverty areas.

>> Read "Improving Population Health by Reducing Poverty: New York’s Earned Income Tax Credit"

A $15 U.S. Minimum Wage Without Job Losses Can Work

Pollin and Wicks-Lim examine whether U.S. fast-food businesses could adjust to an increase in the federal minimum wage from its current level of $7.25 per hour to $15 an hour without having to lay off workers.  They show how, through a four-year phase-in process, the fast-food industry could adjust to a $15 minimum wage without resorting to any layoffs or even cuts in profitability.  Rather, the fast-food industry could fully absorb the cost increases generated by a $15 minimum wage over the four-year period through a combination of turnover reductions along with modest increases in both sales growth and prices.

>>Read "A $15 U.S. Minimum Wage: How the Fast-Food Industry Could Adjust Without Shedding Jobs"

Did Quantitative Easing Lead to Bank Profits?

The rationale for the Federal Reserve’s Large Scale Asset Purchases—the biggest emergency economic stimulus in history, also known as “Quantitative Easing”—was to boost the economy after the 2007-8 financial crisis. Another explanation is that the Fed’s goal was to help its natural constituency: large banks. Authors Juan Antonio Montecino and PERI Co-Director Gerald Epstein examine transactions-level data on Fed purchases during the first phase of QE. They find that purchases of mortgage-backed securities led to significant increases in bank profits, and only mixed evidence that these were associated with increased lending. 

>> Read "Have Large Scale Asset Purchases Increased Bank Profits?"

Did the Obama Stimulus Work?

The 2009 American Recovery and Reinvestment Act (ARRA) was the most far-reaching experiment in fiscal stimulus in the history of the American economy. It was designed to raise GDP and employment. Did it work? Or did state governments save, rather than spend, their stimulus money? In this PERI working paper, Stephen A. Marglin and Peter M. Spiegler find that approximately two-thirds of every ARRA dollar was spent by the states. Further, they argue that ideological bias has informed previous evaluations of this politically charged program, and they call for a higher standard of empirical fidelity in future analyses.

>>Read “Did the State Pocket the Obama-Stimulus Money? Lessons from Cross-Section Regression and Interviews with State Officials”