Mr. Ravi Balakrishnan, Mai Dao, Mr. Juan Sole, and Jeremy Zook
The U.S. labor force participation rate (LFPR) fell dramatically following the Great Recession and has yet to start recovering. A key question is how much of the post-2007 decline is reversible, something which is central to the policy debate. The key finding of this paper is that while around ¼–? of the post-2007 decline is reversible, the LFPR will continue to decline given population aging. This paper’s measure of the “employment gap” also suggests that labor market slack remains and will only decline gradually, pointing to a still important role for stimulative macro-economic policies to help reach full employment. In addition, given the continued downward pressure on the LFPR, labor supply measures will be an essential component of the strategy to boost potential growth. Finally, stimulative macroeconomic and labor supply policies should also help reduce the scope for further hysteresis effects to develop (e.g., loss of skills, discouragement).
Mr. Luc Laeven, Mr. Martin R. Goetz, and Mr. Ross Levine
This paper assesses the impact of the geographic diversification of bank holding company (BHC) assets across the United States on their market valuations. Using two novel identification strategies based on the dynamic process of interstate bank deregulation, we find that exogenous increases in geographic diversity reduce BHC valuations. These findings are consistent with the view that geographic diversity makes it more difficult for shareholders and creditors to monitor firm executives, allowing corporate insiders to extract larger private benefits from firms.
International Monetary Fund. External Relations Dept.
This paper analyzes economic implications of high rates of population growth in the world. The paper highlights that today, the world population is growing at a rate that is 30 times as high as the average rate of growth between the first century A.D. and 1650. In less developed countries, this rate is 40 times as high. In discussing the advantages that economic development derives when human fertility is reduced, the paper shows that while some commonly held beliefs about these are correct, others are out of touch with modern expert thinking.