Roundup: Juvenile Conviction, Trade and Greenspan’s Conundrum

Today, we are highlighting some research the St. Louis Fed has recently produced that you may have missed. The articles below were all published in the Review.

The Impact of Juvenile Conviction on Human Capital and Labor Market Outcomes

Using data from the National Longitudinal Survey of Youth 1997, the authors documented that youth convicted at or before age 17 have a lower full-time employment rate and lower wage growth rate even after 10 years in the labor market. Merging the survey data with occupational characteristics data, they also showed that youth with a juvenile conviction are less likely to be employed in occupations that have a high on-the-job training requirement and that these occupations have higher wages and wage growth. Their results highlight the important role of occupational choices as a human capital investment vehicle through which juvenile crimes have a long-term impact on wages and recidivism.

Sectoral Impacts of Trade Wars

In recent years, there has been rising trade protectionism with broad ranges of tariffs imposed on intermediate products. In this article, the authors developed an accounting framework to evaluate the sectoral impacts of the current U.S.-China trade war. They found that U.S. final demand and intermediate demand for goods produced by China decline significantly, with the largest losses occurring in the electronic and ICT (information and communications technology) industry and the electrical industry.

Further Evidence on Greenspan’s Conundrum

In February 2005, Alan Greenspan identified what he termed a conundrum: The Federal Open Market Committee (FOMC) had increased the federal funds rate 150 basis points since June 2004, but the 10-year Treasury yield remained essentially unchanged. In 2018, Daniel Thornton showed that the relationship between the 10-year Treasury yield and the federal funds rate changed many years prior to Greenspan's observation because the FOMC began using the federal funds rate as its policy instrument. In this article, the authors explored the experiences of the U.K. and New Zealand and found that the correlation between the policy rate and the long-term sovereign bond yield for those two countries declined effectively to zero after their central banks began using a short-term rate as their policy instrument.