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- Osborne's wage squeeze
by chris in Stumbling and Mumbling, 2015-11-26 14:34:58 UTC
In the 2009 Pre-Budget Report the Labour government proposed a rise in employers' National Insurance Contributions. David Cameron said the measure was a "jobs killer" and George Osborne attacked it as a "tax rise on jobs" that "will stamp out the green shoots and kill the recovery."
Yesterday, Mr Osborne announced his own tax rise on jobs by introducing an Apprenticeship Levy.
It is this, and not just the money the OBR has magically discovered behind the sofa, which is paying for his tax credits U-turn. It will raise the Treasury £2.7bn in 2017-18 - very close to the £2.9bn that the restora [...]
- On the desirability of capital controls
by Christian Zimmermann in NEP-DGE blog, 2015-11-24 16:37:46 UTC
By Fabrizio Perri and Jonathan Heathcote
In a standard two country international macro model we ask whether shutting down the market for international non-contingent borrowing and lending is ever desirable. The answer is yes. Imposing capital controls is unilaterally desirable when initial conditions are such that ruling out bond trade generates a sufficiently favorable change in the expected path for the terms of trade. Imposing capital controls can be welfare improving for both countries for calibrations in which changes in equilibrium terms [...]
- The UN’s Coming Paris Folly: Part 1
by rbezdek in MasterResource, 2015-11-24 07:00:32 UTC
“The UN’sÂ ‘Deep Decarbonization Pathways’ …Â will require a radical transformation of economic and energy systems by 2050, through massive declines in carbon intensity in all sectors. It is not about modest or incremental change [but] …Â major changes in every countryâs energy and production systems , over both the mid-term and long-term.”
Radical Islamist terrorists just maimed and murdered hundreds of people in Paris, dozens more in Mali, still more in other nations. They promise more atrocities in the United States and around the globe.
Meanwhile some 40,000 bureaucrats, politicians, sc [...]
- What caused the Great Recession ?
by Robert in Robert's Stochastic Thoughts, 2015-11-23 21:41:00 UTC
A short comment on a shorter comment on Krugman's short comment on "The Big Short" Comment FSP asked a question FSP Los Angeles 41 minutes ago My question is this: Would the Lesser Depression have occurred if we did not have the "financial superstructure" of sub-prime backed securities, and just had instead the bursting of a housing bubble, without the implosion of those financial products adding to the problem? Or, can the two not be separated? I think at least a rough attempt to separate the two factors (housing bubble and financial superstructure) can be managed. Dean Baker has definitely [...]
- Where is the growth?
by tambo0986 in NEP-HIS blog, 2015-11-23 17:21:08 UTC
Mismeasuring Long Run Growth: The Bias from Spliced National Accounts
by Leandro Prados de la Escosura (Carlos III)
Abstract: Comparisons of economic performance over space and time largely depend on howÂ statistical evidence from national accounts and historical estimates are spliced. To allowÂ for changes in relative prices, GDP benchmark years in national accounts are periodicallyÂ replaced with new and more recent ones. Thus, a homogeneous long-run GDP seriesÂ requires linking different temporal segments of national accounts. The choice of theÂ splicing procedure may result in substan [...]
- On Bayesian DSGE Modeling with Hard and Soft Restrictions
by Francis Diebold in No Hesitations, 2015-11-23 11:57:00 UTC
A theory is essentially a restriction on a reduced form. It can be imposed directly (hard restrictions) or used as as a prior mean in a more flexible Bayesian analysis (soft restrictions). The soft restriction approach -- "theory as a shrinkage direction" -- is appealing: coax parameter configurations toward a prior mean suggested by theory, but also respect the likelihood, and govern the mix according to prior precision. (1) Important macro-econometric DSGE work, dating at least to the classic Ingram and Whiteman (1994) , finds that using theory as a VAR shrinkage direction is helpful for for [...]
- Zimbabwe's new bond coins and the demonetization of the rand
by JP Koning in Moneyness, 2015-11-21 18:17:00 UTC
Issued a little less than a year ago, Zimbabwe's bond coin is one of the world's newest monetary units. The bond coin is designed to solve one of the most venerable problems in the pantheon of monetary conundrums; the big problem of small change —a nice turn of phrase coined by economists Tom Sargent and François Velde (excuse the pun). Some background first. When Zimbabweans spontaneously ceased to use worthless Zimbabwe dollars in 2009 they simultaneously adopted a ragtag collection of currencies including the South African rand and U.S. dollar. Unlike cash, coins are heavy—shipping the [...]
- How Should State Governments Prepare for Climate Change?
by Matthew Kahn in Environmental and Urban Economics, 2015-11-19 15:25:00 UTC
While the challenges vary on a state by state basis, here is o ne current report card grading states on their preparation for climate change. �Here I list a set of "free market" policies to facilitate adaptation. �For those who have read my 2010 Climatopolis book , this will be familiar. 1. �Sign up more households, farmers, industrial and agricultural customers for dynamic pricing of water and electricity. �By exposing consumers to dynamic pricing, this will encourage conservation and purchasing more resource efficient durables. The net effect will be that heat waves and drought cause less "s [...]
- Foreign exchange intervention
by ? in FRED blog, 2015-11-19 14:00:36 UTC
Foreign exchange intervention is the buying and selling of foreign currencies by central banks and finance ministries to influence the value of their own currencies. It has become rare for developed countries to intervene in foreign exchange markets. The last U.S. intervention in the foreign exchange market was in March 2011, as part of the G3 intervention with Japan and the European Central Bank ( Neely, 2011 ).
In the bad old days, it was very difficult for researchers to obtain data on foreign exchange intervention, which central banks and finance ministries often treated as confidential. [...]
- I'm at that point in my career where I'm ready to do something absolutely crazy
by John Whitehead in Environmental Economics, 2015-11-19 11:06:26 UTC
And, as always,�Matt Kahn makes a timely suggestion:
In the past, I've done s ome writing on social capital and civic engagement. � I just put the theory to the test by volunteering to serve on USC Econ's PHD Admissions Committee. � � �USC Economics is world renown for its excellence in econometrics. � With Antonio Bento, Dana Goldman, me and Arie Kapteyn now all at USC (and many other research active Price School faculty) , �a talented student can take his/her knowledge of econometrics and apply it to the economics of aging, health, the environment and cities. �There are many exciting possib [...]
- The Commodity Roller Coaster
by Carmen Reinhart in Project Syndicate, 2015-11-19 10:52:25 UTC
CAMBRIDGE – The global commodity super-cycle is hardly a new phenomenon. Though the details vary, primary commodity exporters tend to act out the same story, and economic outcomes tend to follow recognizable patterns. But the element of predictability in the path of the commodity-price cycle, like that in the course of a roller coaster, does not make its twists and turns any easier to stomach.
Since the late eighteenth century, there have been seven or eight booms in non-oil commodity prices, relative to the price of manufactured goods. (The exact number depends on how peaks and troughs are [...]
- Regulatory arbitrage in action: evidence from cross-border lending and macroprudential policy
by bankunderground in Bank Underground, 2015-11-19 07:30:56 UTC
Dennis Reinhardt and Rhiannon Sowerbutts.
We find evidence that certain types of macroprudential regulation are avoided by borrowing from abroad. Borrowing by the non-bank sector from abroad increases after an increase in capital requirement, but not after an increase in lending standards. This is likely to be because of the way that the two regulations are applied and is supportive of strong frameworks for reciprocating capital regulation.
Following the global financial crisis macroprudential policies have become part of many central banks’ toolkits. These instruments are being used actively [...]
- Apply to USC Econ's PHD Program
by Matthew Kahn in Environmental and Urban Economics, 2015-11-18 21:01:00 UTC
In the past, I've done s ome writing on social capital and civic engagement. � I just put the theory to the test by volunteering to serve on USC Econ's PHD Admissions Committee. � � �USC Economics is world renown for its excellence in econometrics. � With Antonio Bento, Dana Goldman, me and Arie Kapteyn now all at USC (and many other research active Price School faculty) , �a talented student can take his/her knowledge of econometrics and apply it to the economics of aging, health, the environment and cities. �There are many exciting possibilities and permutations here. �I strongly encourage s [...]
- Unions in a Frictional Labor Market
by Christian Zimmermann in NEP-DGE blog, 2015-11-18 14:55:34 UTC
By Leena Rudanko and Per Krusell
We analyze a labor market with search and matching frictions where wage setting is controlled by a monopoly union. Frictions render existing matches a form of firm-specific capital which is subject to a hold-up problem in a unionized labor market. We study how this hold-up problem manifests itself in a dynamic infinite horizon model, with fully rational agents. We find that wage solidarity, seemingly an important norm governing union operations, leaves the unionized labor market vulnerable to potentially substa [...]
- Keynes' error
by chris in Stumbling and Mumbling, 2015-11-18 14:08:42 UTC
Why was Keynes wrong? In his 1930 essay (pdf) , Economic possibilities for our grandchildren he predicted that:
the standard of life in progressive countries one hundred years hence will be between four and eight times as high as it is to-day.
This looks like being spot-on: real UK GDP per head is now 5.2 times what it was in 1930.
However, Keynes made another forecast that has been wrong - that the average working week would fall to around 15 hours. In fact, it is more than twice that. What's more, it is now falling much more slowly than it did in Keynes' time: in the last 20 years it has [...]
- GDP as a Faulty Measure of Economic Development: The Weapons Industry
by email@example.com (David Zetland) in Aguanomics, 2015-11-17 13:01:00 UTC
Laurens S. writes* Gross Domestic Product (GDP) is the most widely used measure of economic activity in the market ( Stiglitz et al. 2009 ). GDP makes no distinction between well-being enhancing activities in the economy and well-being degrading activities. Both are considered equal and more economic activity means in either case a higher GDP. Governments and other organisations often present GDP as a measure of well-being. They assume thereby that more goods in general equates more welfare. This blog post will try to argue why equating GDP with welfare is a dangerous equation, as it enables o [...]
- Neoliberalism: A Cultural Social Construction
by stefanotijerina in NEP-HIS blog, 2015-11-17 09:45:16 UTC
Crisis Without End: Neoliberalism in a Globalized Environment
by Richard N. Rambarran (University of Hyderabad)
Abstract: Since the 1970âs, both politically and theoretically, neoliberalism as an ideology has been on a persistent rise to the point where, in the twenty first century, it has garnered hegemonic dominance. Despite several recurring crises in countries since the ascendance of neoliberalism, we yet remain reluctant to point out the political economy philosophy as a root cause of the crises. Instead, many of the academics within Economics prefer to offer bouts of highly technical r [...]
- 287 – Farmers like trees
by David Pannell in Pannell Discussions, 2015-11-16 15:00:23 UTC
In most parts of the world, the original establishment of farms required removal of the existing vegetation, creating a different, much less natural, environment. There can be a tendency for some people to view farmers as people who don’t value the environment, but rather seek to destroy it for economic gain. In fact, many farmers have a strong affinity for nature. They have to make a living from their land, but that doesn’t mean they are indifferent to the environment around them.
In a recent study in the Australian state of Victoria (Polyakov et al. 2015), we found that farmers and other rur [...]
- A Primer on Central Bank Independence
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2015-11-16 12:24:31 UTC
"These are my principles. If you don't like them... well, I have others." (Groucho Marx) Central bank independence is controversial. It requires the delegation of powerful authority to a group of unelected officials. In a democracy, this anomaly naturally raises questions of legitimacy. It also raises fears of the concentration of power in the hands of a select few. An independent central bank is a device to overcome the problem of time consistency: the concern that policymakers will renege in the future on a policy promise made today. Keeping inflation low and stable requires a credible polic [...]
- Wrapping up ARC DP12 Project
by firstname.lastname@example.org (David Stern) in Stochastic Trend, 2015-11-15 11:15:00 UTC
I just submitted the final report for this funded project which has been running since 2012 to the research office. We achieved most of the project goals despite receiving much less funding than requested. I also had to take on the role of research director for the Crawford School for 2 years of the project, which took up quite a lot of my time. On the other hand, one of the main papers is still not quite complete and another is in the revise and resubmit stage. We haven't yet put out working papers for either of those papers either. So, the reduced funding and added admin work did slow things [...]
- Optimal Unemployment Insurance and Cyclical Fluctuations
by Christian Zimmermann in NEP-DGE blog, 2015-11-13 14:31:54 UTC
By Rui Li and Noah Williams
The authors study the design of optimal unemployment insurance in an environment with moral hazard and cyclical fluctuations. The optimal unemployment insurance contract balances the insurance motive to provide consumption for the unemployed with the provision of incentives to search for a job. This balance is affected by aggregate conditions, as recessions are characterized by reductions in job finding rates. We show how benefits should vary with aggregate conditions in an optimal contract. In a special case of th [...]
- Business rates and the Scottish economy
by Brian Ashcroft in Scottish Economy Watch, 2015-11-12 13:51:58 UTC
Magnus Gardham writes in the Herald on Tuesday 10 November that
'Some of Britain's biggest retailers have warned stores could be forced to shed jobs in Scotland unless business rates are overhauled. Boots, Marks & Spencer and John Lewis are among 40 firms and business organisations that have called for a fundamental reform of non-domestic rates . They say business rates, which raise £2.8billion, place an "unsustainable burden" on them. In an open letter to The Herald, they describe rates as "a tax on jobs and growth" that "acts as a drag on the Scottish economy".
Gardham al [...]
- Our watershed… opportunity
by Johan Fourie in Johan Fourie's Blog, 2015-11-12 07:44:13 UTC
SlingShot: Could this device make water infrastructure redundant?
South Africans are gearing up for a tough summer. While loadshedding (the frequent power shortages that plagued the country since 2008) has eased, a new issue came to the fore this week: watershedding. In areas of GermistonÂ and the East Rand, water shortages have been reported and watershedding between 10am and 3pm is on the cards. While the heatwave and drought across the country are the immediate cause of the shortages, there are far deeper structural problems that is likely to make watershedding a common feature of daily lif [...]
- A Better Way to Calculate the ROI of Your Marketing Investment
by Werner Reinartz in HBR Blog Network, 2015-11-10 17:00:50 UTC
Traditionally, marketers calculate the ROI of a marketing investment by measuring how much sales increased in its aftermath. This is a blunt metric: maybe the consumer had a different interaction with the brand that influenced them. Or maybe they had an intrinsic preference for the brand and would have made a purchase anyway.
Today the situation has changed. Marketers have access to data that allows them to track individuals’ various interactions with a brand before their purchase, and better understand what role each interaction — and individual preferences — played in the eventual sale.
- Disciplining the Human Capital Model: Learning By Doing, Ben-Porath, and Policy Analysis
by Christian Zimmermann in NEP-DGE blog, 2015-11-10 16:40:56 UTC
By Adam Blandin
The human capital literature is largely split between two models of human capital investment: Learning By Doing (LBD) and Ben-Porath (BP). Given the importance of human capital investment for a host of policy issues, I ask whether observable macroeconomic moments are informative about the relative importance of LBD investment versus BP investment. A life-cycle human capital model is constructed which nests both LBD and BP as extreme special cases. I find: (1) Both the BP and LBD versions of the model are consistent with the agg [...]
- Green Power Creates Free Electricity in Texas: Will this Increase Night Industrial Economic Activity?
by Matthew Kahn in Environmental and Urban Economics, 2015-11-09 15:30:00 UTC
The NY Times r eports that Texas households are being offered free electricity after 9pm because wind power generators are generating a surplus that cannot be stored and the physics of the local grid (which is not connected to the national grid) are such that the power must just flow and be consumed locally. � Suppose that Texas could commit to low industrial night electricity prices. �This would create a large economic incentive for energy intensive industries to locate in this Right to Work State. For a list of such industries, read my 2013 paper with Erin Mansur. � � � If such industries su [...]