Photographer: Craig Warga/Bloomberg

Globalization Gave American CEOs Fatter Paychecks

The top 1 percent has won out as bonuses climbed alongside exports
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The idea that advanced-economy globalization has fostered inequality is a common theme these days, but we may be spending too much time focusing on the lower end of the income scale, new research suggests. 

While low- and middle-skill jobs shifted overseas, hurting pay at the bottom, interconnected trade networks have also pushed up income at the very top of the scale, a new paper by University of Colorado Boulder economist Wolfgang Keller and Williams College's William Olney finds. It's the first item in our research wrap this week. We also take a look at employers' take on coding bootcamps, monetary policy rules, and what happens when for-profit colleges lose federal student aid. Check this column each week for the latest in pertinent economic research from around the world. 

CEOs earn more. Thank globalization.

The top 1 percent can attribute their fatter paychecks partly to globalization, new research finds. As exports climb, so does executive compensation. That could be because super-talented CEOs are needed to deal with a globalized world, but the authors find that the increase often comes from bonus payments rather than regular salary. The effect is especially strong in companies with insiders on the board or low marginal tax rates on top pay. "This indicates that rent capture plays an important role in the relationship between globalization and top incomes," the authors write, indicating that internal deal-making rather than skills boosts pay.


"In recent elections throughout the developed world, anger about globalization is leading to a populist resurgence," they write. "To the extent that top income earners disproportionately benefit from globalization through the exploitation of poor governance settings, these attitudes are understandable." 

Globalization and Executive Compensation
Published May 2017
Available at the NBER website

Coding bootcamps work 

Employers really like fast-track courses on computer coding, as it turns out. About 72 percent of employers think coding bootcamp graduates are "just as prepared" to be high-performers as those with a four-year degree, according to a survey by job-listings website Indeed of more than 1,000 human resources managers and technical recruiters. About 80 percent have hired a coding bootcamp graduate for a tech role, with the vast majority of those saying they would do it again. The thing they're less happy about: bootcamp oversight. The programs aren't accredited, and 98 percent of employers would like to see increased regulation.  And, as Indeed points out, bootcamps offer practical skills but miss many of the theoretical underpinnings that computer science majors learn. 

This finding matters because it speaks to two big labor market trends. High-tech workers have been hard for employers to come by, and learning formats that break with the four-year-degree tradition have been met with mixed reviews. The idea that non-college retraining programs seem to work is a hopeful one, even if it's isolated to one field.

What Do Employers Really Think About Coding Bootcamps?
Published May 2
Available on the Indeed Blog

Who needs a rule? 

Central banks can mimic the gains from a rule-based monetary policy without actually setting a rule, recent research from the Federal Reserve Bank of Kansas City suggests. Specifying an inflation target, specifying tolerance bands, and providing economic projections allows monetary policy makers to "implicitly pin down a rule without having to explicitly express one," the authors write. Pro tip: the Federal Reserve has been using just this sort of communication, so this study is essentially telling rule-advocates — there are many, led by Stanford's John Taylor — that the central bank wouldn't accomplish much by changing course. 

Communicating Monetary Policy Rules
Published April 2017
Available on the Kansas City Fed website

The for-profit college fallout

When for-profit colleges lose access to federal student aid, their students leave in droves, new Federal Reserve Bank of Philadelphia research shows — and that might be a good thing. When for-profits lost federal Pell Grants because of their misbehavior, enrollment among students who would have received that aid dropped 53 percent over the next five years. That change doesn't seem to have reduced college attendance, though, because the decline was totally offset by increases at the county's community colleges. What's more, "back-of-the-envelope estimates suggest that roughly 70 percent of the students induced to stop borrowing by switching sectors would have defaulted on their loans in the absence of sanctions," Stephanie Cellini, Rajeev Darolia and Lesley Turner write. 

Where Do Students Go When For-Profit Colleges Lose Federal Aid?
Published May 2017
Available at the Philadelphia Fed website 

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