Economist Spotlight: Interview with Alan B. Krueger, Part Two

POSTED: February 11, 2014 | BY: Daniel Thompson | TAGS: ,

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This is the second in an eight-part series of CEE’s Economist Spotlight with Dr. Alan B. Krueger.

Dr. Krueger, the Bendheim Professor of Economics and Public Affairs at the Wilson School at Princeton University and former chairman of President Obama’s Council of Economic Advisers, is the author of the newly published textbook, Explorations in Economics. In this spotlight series, Alan will address topical issues including unemployment benefits, increased job growth, minimum wage legislation, investment in human capital, and more.

The interviews were conducted by 2013 Alfred P. Sloan Teaching Champions Awardees, Kathleen Brennan and Saji James.

Kathleen Brennan:

Q. Given the recent economic and political climate, what do you believe are the most effective ways to make investments in human capital?

Alan Krueger:

A.  If we could only do one thing, I would expand access to preschool education. Research finds that access to early education helps to put students on a steeper trajectory. But I would also want to do a lot more. For example, I have a proposal to provide low- and moderate-income students with vouchers to go to summer school or participate in other summer enrichment activities. And I think we need to accelerate the use of technology in education, and the government can play a useful role in this area by evaluating what works and doesn’t work, just as the FDA does for new medications.

Saji James:

Q. How would an extension of unemployment benefits affect the US economy?

Alan Krueger:

A. An extension of UI benefits would likely have several effects on the economy. First, as the Congressional Budget Office (CBO) has emphasized, UI recipients have a very high marginal propensity to consume, so extended benefits tend to raise aggregate demand. Second, a number of studies have found that more generous UI benefits tend to lead UI recipients to search less intensively for a job. Third, extended benefits could help unemployed workers take the time they need to find a job that is a good match for their skill set, instead of take the first offer that comes along. I tend to agree with CBO that the consumption effect of extended UI benefits will, on net, have a beneficial effect on total employment; this is especially likely to be the case when aggregate demand continues to be weak, the economy is below full employment, and many job seekers who are not receiving UI benefits can fill job openings if UI recipients search less intensively and raise their reservation wage. In any event, extended UI benefits provide an opportunity to explain to students that there are tradeoffs involved in many public policies.

The next Economist Spotlight: Interview with Alan B. Krueger will publish February 13, 2014.

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