Sectoral impact of free intra-EU migration in the presence of unemployment benefits

This paper builds a multi-sector, three country (centre and two peripheries), New Economic Geography model, where industrial sectors differ in the degree of scale economies and skill-intensity. The model incorporates, for the first time in this class of models, payments to the unemployed in each country. The model is used to evaluate the impact of migration in the enlarged EU, and would also be directly relevant for the NAFTA countries, under a range of possible migration scenarios involving three types of workers: skilled, unskilled, and unemployed. Full migration is the only scenario in which the central country obtains an increase in both skilled and unskilled wages and employment levels. The obverse is true for the two peripheral countries, they lose firms and real wages decline. As a consequence, the central country has an interest in allowing for full migration but the two peripheral countries have an interest in restricting migration.new economic geography, migration, EU enlargement, unemployment, human capital

Do house prices overreact to relevant information? New evidence from the UK housing market

We use recent panel data and various empirical models to investigate the validity of the irrational expectations hypothesis and the feedback theory in the UK housing market. We provide the first empirical evidence to justify the statistically significant and positive feedback causality effect between the changes in bubbles and the contemporaneous changes in house prices. While we have found evidence to support the idea that the irrational expectation hypothesis best fits the UK housing market in the short-run, we failed to find evidence in support of the feedback theory. We observe that an increase in bubbles could cause a subsequent decrease in house prices, ceteris paribus, suggesting that people also learn from their mistakes and attempt to compromise by acting as rationally as possible. Overall, we observe that the causality effects are asymmetrical, being more significant from bubble to house price than they are from house price to bubble

Wage gradients in an enlarged EU.

In this paper we estimate a sectoral real wage equation for three regional blocs of the enlarged EU that we defined as North (wealthiest EU), South (Greece, Portugal and Spain) and East (acceding Central and Eastern European countries). The estimation results show that real wages react differently in each of the blocs to the impact of market size, location and factor endowments across a range of industrial sectors which differ by their degrees of economies of scale and skill-intensities in the presence of transport costs

The EU’s New Economic Geography after the Eastern Enlargement

Using a centre-two periphery new economic geography model we study the location and real wage effects of the EU’s Eastern enlargement on current and future EU member countries under pure trade integration and with migration of skilled labour. The quality of final and intermediate products differs across countries according to their effective endowments of human capital engaged in R&D. Allowing for migration prevents the relocation of firms into the integrating periphery. Moreover, the location of firms differs according to the sectors’ skill and R&D intensity, low skill and low R&D firms tending to locate in the Eastern and Southern peripheries

Extending EU Single Market eastwards: sectoral trade and real wage effects

In this paper we address the question of the impact of permitting free migration in an enlarged trading bloc. We estimate two sectoral equations for trade flows and real wages of three regional blocs of the enlarged EU that we defined as North (wealthiest EU), South (Greece, Portugal and Spain) and East (acceding Central and Eastern European countries). We then use the estimated coefficients to compute potential trade flows and real wages for these three groups under the two alternative scenarios of an enlargement with and without free movement of labour. A fully-fledge Single Market allows the North, with good market access and human capital endowments, to consolidate its current hub position by attracting more firms and skilled workers. Thus its net exports of high scale economy, skill-intensive goods increase and so do overall real wages, though they decrease in low scale economies sectors. The South, with poor market access and human capital endowments, retains competitiveness in low scale economies, low skill-intensity sectors and sees an overall reduction in real wages, except in high scale economies, low skill-intensity sectors. The East, with poor market access but well endowed in human capital, has a marginal gain in trade terms but suffers a real wage loss. Moreover, skilled migration would cause a brain drain that, if of sufficiently large proportions, could have very damaging consequences in the long-term

What determines sectoral trade in the enlarged EU?

In this paper we estimate a sectoral gravity model for trade within a heterogeneous trade bloc, the enlarged EU, comprised of a high-income group (wealthiest EU), a middle-income group (Greece, Portugal and Spain), and a low-income group (acceding Central and Eastern European countries). The estimation was conducted on sectors with different degrees of scale economies and skill-intensities in the presence of transport costs. The results offer support for the call to incorporate trade theories based on both endowments and scale economies. In addition, whilst integrating poorer countries is beneficial for all of the participants in the bloc, there is still a role for redistribution policy. However, the EU’s Regional Policy, for example, should not be individual initiatives but should be a mix of policies, focussing on both income and education/skills, together with infrastructure development

Exchange rate pass through: the experience of the United Kingdom

The focus of the thesis is on the role of exchange rates in price setting and consequentially nominal price stickiness. A data set was constructed of individual product lines that were imported to the UK, together with competitive product lines. The empirical results showed that the impact of competitive products is significant and for one of the five products selected the pass through of exchange rates into prices was insignificantly different from zero, one passed a proportion of the exchange rate changes into price adjustments and three adjusted prices in such a way as to reinforce the exchange rate changes. A multi period pricing model was postulated, drawing on the work of Ball and Mankiw (1994) but extending it to allow exchange rates shocks to impact a firm's costs in both its home country and its export market. This model shows when temporary shocks will not be passed through and provides a rationale why permanent shocks might also not be passed through. Two further empirical studies were carried on a wider range of products. The first was conducted on imports from major trading partners of the UK. The results were based on aggregated data but showed a very similar picture to the initial product line study. The second study focused on UK exports to the same group of countries using similar products ranges to the import study. The results again showed a similar picture and further for a majority of individual countries, where there was a significant level of pass through, the sign of the exchange rate pass through changed dependent upon whether the country was importing or exporting. Indicating that a country's responsiveness to exchange rate shocks is an important determinant of firm's pricing decisions. Finally these studies provide further evidence that nominal price stickiness is evident in the UK economy

Exchange rate pass through: the experience of the United Kingdom

The focus of the thesis is on the role of exchange rates in price setting and consequentially nominal price stickiness. A data set was constructed of individual product lines that were imported to the UK, together with competitive product lines. The empirical results showed that the impact of competitive products is significant and for one of the five products selected the pass through of exchange rates into prices was insignificantly different from zero, one passed a proportion of the exchange rate changes into price adjustments and three adjusted prices in such a way as to reinforce the exchange rate changes. A multi period pricing model was postulated, drawing on the work of Ball and Mankiw (1994) but extending it to allow exchange rates shocks to impact a firm's costs in both its home country and its export market. This model shows when temporary shocks will not be passed through and provides a rationale why permanent shocks might also not be passed through. Two further empirical studies were carried on a wider range of products. The first was conducted on imports from major trading partners of the UK. The results were based on aggregated data but showed a very similar picture to the initial product line study. The second study focused on UK exports to the same group of countries using similar products ranges to the import study. The results again showed a similar picture and further for a majority of individual countries, where there was a significant level of pass through, the sign of the exchange rate pass through changed dependent upon whether the country was importing or exporting. Indicating that a country's responsiveness to exchange rate shocks is an important determinant of firm's pricing decisions. Finally these studies provide further evidence that nominal price stickiness is evident in the UK economy

The optical depth of white-light flare continuum

The white-light continuum emission of a solar flare remains a puzzle as regards its height of formation and its emission mechanism(s). This continuum, and its extension into the near UV, contain the bulk of the energy radiated by a flare, and so its explanation is a high priority. We describe a method to determine the optical depth of the emitting layer and apply it to the well-studied flare of 2002 July~15, making use of MDI pseudo-continuum intensity images. We find the optical depth of the visible continuum in all flare images, including an impulsive ribbon structure to be small, consistent with the observation of Balmer and Paschen edges in other events

Dread and latency impacts on a VSL for cancer risk reduction

We propose a structural relationship between the value of preventing a statistical cancer fatality and the value of statistical life (VSL) for risks of an instantaneous road accident fatality. This relationship incorporates a context effect reflecting both the illness or ‘morbidity’ associated with cancer fatality and the ‘dread’ or horror associated with the prospect of eventual death from cancer, as well as a latency effect that captures the discounting likely to arise because the onset of the symptoms of cancer typically occurs after some delay. We use a Risk-Risk trade-off study to validate this model by directly estimating the influence of context and latency effects upon the relative size of the VSL for cancer and for road accidents, confirming that both effects are significant and estimating their size using regression analysis. We show that morbidity accounts for the majority of the context premium. We use the elicited coefficients to reconstruct VSL estimates for a range of cancers characterised by their latency and morbidity periods