Friday, May 28, 2010

Darwin and the current account?

Sexual competition is a wonderful thing. Just ask any bird of paradise you happen to meet.

Now, in a new NBER working paper (gated version here), Du and Wei argue that it can have aggregate macro consequences as well:

"Large savings and current account surpluses by China and other countries are said to be a contributor to the global current account imbalances and possibly to the recent global financial crisis. This paper proposes a theory of excess savings based on a major, albeit insufficiently recognized by macroeconomists, transformation in many of these societies, namely, a steady increase in the surplus of men relative to women. We construct an OLG model with two sexes and a desire to marry. We show conditions under which an intensified competition in the marriage market can induce men to raise their savings rate, and produce a rise in the aggregate savings and current account surplus. This effect is economically significant if the biological desire to have a partner of the opposite sex is strong. A calibration of the model suggests that this factor could generate economically significant current account responses, or more than 1/2 of the actual current account imbalances observed in the data"

So there you have it people, rampant heterosexuality helped cause the crisis.


This paper certainly has some interesting policy implications, no?


ericmc said...

Hey Mike,
So I start grad school not this fall but next. Is this the crap I'll have to come up with to get published?
Seriously seems like I could like dudes and save a ton to impress them too. Actually my bench press impresses dudes more than chicks right now anyways.
The crappy ex post guess(model) they generate may or may not be the truth, they probably know that though. Does it seem unethical to you to even both with this crap because this noise distracts thought from actually grabbing an idea once in a while?
For some reason test days make me rant in the comments on your blog. Next 2 Fridays be ready.

ericmc said...

crap, just noticed Angus posted this. Sorry bro, same to you though.