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Webinar: The economic a and soc ocial i implications of of - - PDF document

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Webinar: The economic a and soc ocial i implications of of racial d disp sparities Lisa Coo Cook 2020-06-08 Intro: Markus Brunnermeier Mark rkus i intro Previous webinar: Darrell Duffie Fixing US Treasury

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SLIDE 1

Webinar: The economic a and soc

  • cial i

implications of

  • f

racial d disp sparities

Lisa Coo Cook

Intro: Markus Brunnermeier

2020-06-08

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SLIDE 2

Mark rkus’ i ’ intro

  • Previous webinar:
  • Darrell Duffie

“Fixing US Treasury market”

  • Today:
  • “Economic and social

implications of racial disparities”

  • Next webinars:
  • Ken Rogoff

“Global Sovereign Debt and the Dollar Post COVID”

  • Raj Chetty

“Tracking impact of COVID with real time data”

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SLIDE 3

Op Opportu tunity ty g gap

  • Ken Frazier, CEO of Merck
  • “What put my life on a

different trajectory was that someone intervened to give man opportunity not close that opportunity gap” (on CNBC)

  • Free society
  • Can we really be free if we

don’t have equal oppor- tunity?

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SLIDE 4
  • DIAGRAM HERE
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SLIDE 5

Po Poll

  • 1. The whole framework

has to be changed

a. Yes b. Two/three key measures will improve whole framework

  • 2. Current movement

will persist unlike Anti-

School shooting, Occupy Wall Street

a. Yes b. No

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SLIDE 6

Poll f ll from

  • m L

Lisa

3. When were the peak years for patenting per capita for blacks?

a. 1875-1900 b. 1900-1925 c. 1945-1970 d. 1990-2015

4. Link violence-economic growth

a. for blacks, but not for whites, hate- related violence has a negative and persistent effect on economic activity. b. For blacks and for whites, …ditto .. c. For whites, but not for blacks, hate- related violence has … ditto

5. Median Size Investor team

a. 1 b. 5 c. 10 d. 15

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SLIDE 7

Markus’ ’ Zoominar with Lisa C Cook

2020-06-08

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SLIDE 8

Economic and Social Implications of Racial Disparities

Lisa D. Cook Economics and International Relations Michigan State University Bendheim Center for Finance, Princeton June 8, 2020

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COVID-19 Pandemic Exposed Fissures in Economy and Society

  • Health
  • Work, occupations
  • Income, wealth
  • Policing and violence
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COVID-19 Pandemic Exposed Fissures in Economy and Society

  • Health
  • Work, occupations
  • Income, wealth inequality
  • Policing and violence
  • Common feature: Systemic racism  racial disparities
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SLIDE 11

COVID-19 Pandemic Exposed Fissures in Economy and Society

  • How do we think about the origins, channels, and implications of systemic

racism?

  • There’s a lot of literature.
  • North’s lack of diligence and consistency on Reconstruction (Foner)
  • Entrenchment, spread, and legalization of racial animus (Plessy v. Ferguson, Wilson’s

segregation of the federal government)

  • Racist redevelopment policies that deliberately destroyed Black neighborhoods with

highways during the period of urban renewal

  • Schooling, housing/redlining, car purchases, job callbacks, segregation, violence,

credit

  • Literature largely did not address macro inputs and outcomes, like

innovation and GDP

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Violence, Innovation, and Economic Activity

  • Innovation is a key driver of the economy
  • Romer (1990)
  • Current contribution: 10% of GDP for Intangibles (see Corrado,

Hulten, and Sichel 2009)

  • Driver of business investment: 20% of GDP
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SLIDE 13

Violence, Innovation, and Economic Activity

  • In Cook (2014), I show that threats to the rule of law can undermine

innovation, economic activity, and the rise in living standards.

  • Race-related violence in the United States increased significantly

between 1870 and 1940.

  • Segregation laws peaked in 1908, 1928, and 1933
  • Race riots peaked in 1919
  • Lynchings peaked in 1892 and 1893
  • These are proxies for absence of rule of law in estimation.
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SLIDE 14

Violence, Innovation, and Economic Activity

Figure 1: Black and White Utility Patents, Per Million, 1870-1940

.2 .4 .6 .8 1 Patents per million, Blacks 150 200 250 300 350 400 450 500 550 Patents per million , Whites 1860 1880 1900 1920 1940 Year White Patents Black Patents

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Violence, Innovation, and Economic Activity

  • Main Findings
  • Violence diminishes innovation and economic activity with persistent effects
  • 1899 is STILL the peak year for patenting per capita for African Americans
  • Lynchings affect patents of African Americans significantly
  • Segregation laws hurt most valuable patents – Electrical
  • Missing patents equivalent to medium-size European country then (1870-

1940)

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Violence, Innovation, and Economic Activity

Figure 4. Predicted White Patent Activity Using African American Estimates

  • 1.5
  • 1
  • .5

.5 Patenting Change 1880 1900 1920 1940 Year True White Patenting Change Predicted White Patenting Rate Based on Black Estimates

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SLIDE 17

Violence, Innovation, and Economic Activity

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SLIDE 18

Contemporary Innovation and GDP

  • From Cook and Kongcharoen (2010), Cook (2019), and Cook and

Gerson (2019)

  • 3 stages: education, training/lab, commercialization
  • At each stage, there could be implications for income or wealth

inequality

  • Education
  • Training
  • Commercialization
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SLIDE 19

Contemporary Innovation and GDP

  • Commercialization is where largest wealth gap is
  • Racial disparities in entrepreneurship: 50/1 White to Black entrepreneurs
  • Racial disparities in founders receiving VC funding: 1% of founders receiving

are Black

  • Racial disparities in tech firm IPOs
  • Top 10 wealthiest people – 7 are tech entrepreneurs
  • None is African American
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SLIDE 20

Contemporary Innovation and GDP

  • What are we losing because of missing African Americans?
  • 4.4% GDP per capita
  • Compared to 2.7% for women (Hunt, et al. 2014)
  • Consistent with findings of Hsieh, Hurst, Jones, and Klenow (2018)
  • Analyze gender and racial distribution for highly-skilled occupations last

50 years

  • Show change in occupational distribution since 1960 suggests that

substantial pool of innately talented women and African Americans in 1960 not pursuing their comparative advantage

  • Misallocation of talent affects aggregate productivity in the economy:
  • 1/4 of growth in aggregate output from 1960 to 2010 can be explained

by improved allocation of talent

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SLIDE 21

Policy Prescriptions

  • Learn about and address racism, encourage anti-racist behavior,

policies and practices

  • E.g., American Economic Association code of conduct, etc.
  • Reverse California’s Prop 209; Berkeley grad student Zach Bleemer is showing

that it significantly diminished opportunities, mobility for Black students, particularly in tech; adopt Texas-style targets

  • Improve pipeline, especially STEM, including exposure to invention (cf

Chetty, et al. 2019)

  • Enhance mentoring, and generally improve workplace environment,

including reporting and prosecuting racial and gender harassment and misconduct and addressing racial bias

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Policy Prescriptions

  • Release the report on white supremacist groups, prosecute hate

crimes, and other fundamental police reforms

  • Return military equipment to federal government, demilitarize police

forces

  • Complete restructuring of police forces
  • E.g., Camden, NJ dismantled police department; homicides down 50%
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SLIDE 23

Policy Prescriptions

  • Congressional Legislation
  • From Cook and Kongcharoen (2010):
  • SUCCESS Act, IDEA Act
  • Improve opportunities for commercialization (NAS SBIR/STTR Report 2020)
  • Address racial wealth gap
  • Black HH in Boston area has $8 in net worth (Darity, Hamilton,

et al.)

  • Not enough to weather unexpected events, like a pandemic
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Policy Prescriptions

  • Big Ideas
  • Movement: protest  policy  structural change needed to address

SYSTEMIC issues

  • Continuation, reinvigoration of the War on Poverty?
  • Have to think about fundamental resets
  • Have we seen this before? Yes!
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SLIDE 25

March on Washington for Jobs and Freedom

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Policy Prescriptions

  • Big Ideas
  • My cousin Floyd McKissick, Sr. dreamed of and built an entire city, Soul City,

North Carolina, to address the racial income, wealth, and financial gaps

  • People moved there from urban areas with limited job opportunities and

acute environmental racism

  • IBM was major component of plan for job creation
  • Podcast: https://99percentinvisible.org/episode/soul-city/
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SLIDE 27

Soul City, North Carolina

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SLIDE 28

Soul City, North Carolina

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SLIDE 29

Soul City, North Carolina

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Policy Prescriptions

  • Big Ideas
  • Reparations: Coates (2014), Darity and Mullen (2020)
  • Job guarantee (Darity)
  • Baby bonds
  • Blue-sky thinking necessary!
  • All relevant ideas must address racism and racial disparities!
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SLIDE 31

Thank You!

  • I look forward to your questions!
  • Join me at @drlisadcook for more conversation!