mechanomics

Macroeconomics is represented as a hard science like physics and, specifically, classical mechanics. Due to this similarity we have called our concept "mechanomics" highlighting its mechanistic entity. There exist statistically reliable deterministic links between measured macroeconomic variables. In the order of causality, the overall population and its age structure drives the evolution of real GDP which, in turn, determines the rate of participation in workforce. The level of labour force unambiguously defines the rate of price inflation and unemployment. The age structure also controls the S&P 500 returns. Statistically, the goodness-of-fit between measured and predicted macroeconomic time series is at the level of 0.9, with the residuals likely related to measurement errors. Tests for cointegration confirm the presence of long-term equilibrium relations. We have extended the sets of econometric tools by the method of boundary elements well-known in physics. As a bonus to the prolific concept of mechanomics, we have modelled real GDP per capita during the transition from socialism to capitalism combining two physical processes: radioactive decay and saturation.

1/26/12

Who is responsible for income inequality? Blame old men.

I've plotted a series of mean personal income estimates borrowed from the Census Bureau. There are 10-year age bins with data from 1967 for men and women separately. The first plot shows that the male mean income is much higher than that of female. The gap between them has been slightly decreasing since 1974 but not spectacularly. Therefore, a higher rate of income growth for women results in decreasing income inequality, i.e. convergence of mean incomes.
In order to highlight the age and sex groups growing at the the highest rates all mean values in given age groups are normalized to 1967 (except the youngest group normalized to 1974). These plot show the following empirical results:
1. Young women (especially between 25 and 44) have been effectively closing the income gap with men.
2. Younger male groups (from 15 to 34) have suffered absolute decrease in mean income since 1974!
3. For men, the highest rates of income growth belongs to the eldest group. Hence, one has to blame them for increasing inequality. Some of them are blogging on inequality.

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