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I need some help from the growth empiricists out there.  If you aren't one of them, stop reading.  Continuing will be a waste of your time.

For researchers studying economic growth, one of the standard resources for cross-country data has been the Penn World Table.  My 1992 paper with David Romer and David Weil (my most cited paper by a large margin) used this resource, as have numerous other papers in this literature.  In my intermediate macro book, I present a couple of figures presenting some of these data.

Here's the problem: It seems that the data have changed substantially in the most recent revision, and I cannot figure out why.

My intermediate macro text shows a scatterplot of per capita income and the investment share of GDP.  These two variables are strongly positively correlated.  When revising this figure with the newest data, I found that the correlation declines substantially (though is still positive).  When I looked into the source of the change, I found that the historical estimates of the investment share of GDP have changed, in some some cases by a lot.

Let me give you an example.  Take the investment share for Ghana in the year 2000.  According to version 6.2 of the data, the investment share was about 5 percent.  In version 7.0, it was about 21 percent.  This is one of the larger change I have found, but it is not the only country for which there are sizable changes in the reported investment share of GDP.

I understand that the changes may be related to new information about the relative price of investment goods.  But the changes seem too large to be explained so easily, although perhaps I am wrong about this.  If anyone can shed light on the matter, I would be greatly appreciative.  Send me an email if you can help.

An article in the National Journal.

Several readers have asked me my opinion of SOPA, the Stop Online Piracy Act.  I fear that in this case, the devil is in the details, so I find it hard to reach a strong view.  But I have been disturbed by the relatively knee-jerk reaction of the anti-SOPA crowd.  This is a hard issue, and when someone makes it sound easy, I feel like they haven't thought it through very thoroughly.

The anti-SOPA crowd argues that this is a matter of basic liberty.  But it's not.  In a free society, you don't have the freedom to steal your neighbor's property.  And that should include intellectual property.  Moreover, it is the function of the state to enforce those rights.  We don't leave it up to civil litigation to protect property rights (although that is part of the solution).  We give the state substantial powers to stop theft.  Just as owners of tangible personal property have good cause to call for a police force and a system of criminal courts, owners of intellectual property have good cause to ask the state to stop those who would infringe on their rights.

This is an important economic issue for the United States.  We are large producers of intellectual property: movies, novels, software, video games, TV shows, and even economics textbooks.  If offshore websites find a way to distribute this intellectual property without paying for it, it is as if organized crime were stealing merchandise from a manufacturing firm at the loading dock.  It is neither efficient nor equitable. 

Maybe SOPA went too far.  As I said, I am not knowledgeable enough about the details to judge.  But we need something along these lines.  Believers in free enterprise, property rights, and economic liberty should be among the most vocal advocates of laws to stop intellectual piracy.

There has been a lot of discussion recently about tax progressivity.  A few observations on the topic:

1. The U.S. personal income tax is generally progressive, and substantially so.  Click here to see the numbers.  The average tax rate for tax returns with over $1 million in income is 25 percent.  The average tax rate for returns with income between $50,000 and $75,000 is 7 percent.

2. It is arguably better to use an average tax rate that is all-inclusive.  That is, we should include not only personal income taxes but also payroll and corporate income taxes.  CBO analysts regularly do that.  They find a substantially progressive tax system, as I have pointed out before.

3. If we added transfer payments (which are essentially negative taxes), we would find an even more progressive fiscal system.  Those data are harder to come by, as data on transfers are rarely integrated with data on taxes.

4. It make little sense to aggregate payroll taxes with personal income income and ignore corporate income taxes.  A corollary: Paul Krugman should be more careful when reproducing graphs from partisan think tanks.

5. All of these calculations are static.  They ignore the general-equilibrium effects that arise as the true burden of taxation is shifted by behavioral responses.  In essence, these calculations are made under the implicit assumption that factors of production are supplied inelastically, so the tax stays where legislators put it.  Of course, that assumption is implausible, especially in the long run.  True general-equilibrium tax incidence is very hard, and as far as I know, reliable estimates on it are not readily available.

From a University of Minnesota graduate student:

Michael Mussa has passed away.