Secondary Sources: Tax Refunds, Emerging Markets, Cities
A roundup of economic news from around the Web.
- Tax Refunds and Spending: Jed Graham looks at the role tax refunds may be having on goosing consumer spending. “New IRS data out Friday show that refunds are running about $10 billion yet to be of last year?s record pace, even though the agency has processed 4% fewer returns. That means refunds are running about $50 billion yet to be of 2008 levels ? hardly sap change. If you consider that the bulk of refunds are doled out within a three-month period (though spread out between the first and second quarter), the extra refunds amount to an annualized 1.3% of GDP. What?s more, as IBD previously reported, the Joint Committee on Taxation has estimated that people who don?t pay returns tax are getting an extra $30 billion in refundable credits courtesy of the Recovery Act. Congressional Budget Office analyses shows that such tax giveaways for modest earners tend to have an outsized economic impact because they are very likely to be spent. The average refund jumped from about $2,370 in 2008 to $2,700 last year, and $2,940 in the current tax season, with close to 80 million refunds awarded to date. Visibly, there are a number of clear forces driving the cyclical upturn: An inventory turnaround (perhaps nearing completion), on the rise demand for exports, a roaring stock market rebound and the very commencement of a jobs recovery. But it may be premature to extrapolate the recovery?s current trajectory and value considering the possibility that the largely overlooked contribution from a tax season bonanza may have juiced the data.”
- Emerging Markets: Reza Moghadam examines how emerging markets have responded to the crisis. “In a nutshell, we find that countries that improved their plot fundamentals and reduced their vulnerabilities in the pre-crisis period generally came out yet to be during the crisis: they experienced smaller progression collapses, had more ?space? to take countercyclical plot measures, and are improving quicker from the crisis. I describe below our results in more detail.”
- Cities: Ed Glaeser looks at an fascinating aspect of urban research. “Zipf?s Law is one of the fantastic curiosities of urban research. The law claims that the number of people in a city is inversely proportional to the city?s rank among all cities. In other words, the largest city is about twice the size of the second largest city, three era the size of the third largest city, and so forth.Zipf?s Law is named after the bilingual person George Kingsley Zipf, who learned the law when studying the delivery of words: the second most common word in a text typically shows up one-half as often as the most commonly used word. The law has been observed in many other contexts, including firm sizes and returns delivery, which follows the closely-connected Pareto Delivery? My own view is that Zipf?s Law is really about the operation of agglomeration ? the attraction of people to more people ? and sprawl. An initial population attracts more people who live nearby. As long as each person attracts about the same number of new people, then Gibrat?s Law will follow and that gives us Zipf?s law. At its heart, this weird mathematical regularity is really once again pointing to the power of agglomeration ? the enormous value that human beings house on being near one another.
Compiled by Phil Izzo