25 research outputs found
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Tractable Bayesian inference for an unidentified simple linear regression model
In this paper, I propose a tractable approach to Bayesian inference in a simple linear regression model for which the standard exogeneity assumption does not hold. By specifying a beta prior for the squared correlation between an error term and regressor, I demonstrate that the implied prior for a bias parameter is t-distributed. If the posterior distribution for the identified regression coefficient is normal, this implies that the posterior distribution for the unidentified treatment effect is the convolution of a normal distribution and a t-distribution. This result is closely related to the literatures on unidentified regression models, imperfect instrumental variables, and sensitivity analysis
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A shorter working week as part of a green caring economy: feminist green new deal policy paper
In this report, we argue that a shorter working week, as part of a wider set of policy changes, can promote gender-equal distributions in paid work, unpaid work, and income, while facilitating a green transition. The paper analyses time-use data and evidence on the impact of Covid-19 on working patterns together with international case studies and makes a series of policy recommendations. We explore what other mechanisms are needed in order to ensure that a shorter working week and a green transition are equitable. Policy experiments in shorter working hours are ongoing, with trials for a four-day week currently being designed in Spain and Scotland, and employer trials beginning here in the UK. A shorter working week, in combination with an expansion in public social infrastructure and universal basic services, is an important measure to address the social and political consequences of dysfunctional health and social care systems, extreme inequality, and environmental breakdown
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The impact of Covid-19 restrictions on economic activity: evidence from the Italian regional system
Non-pharmaceutical interventions adopted by governments to halt the spread of Sars-Cov2 are thought to have non-trivial consequences for the economy. The purpose of this paper is to estimate the economic impact of non-pharmaceutical interventions in Italy, by taking advantage of timing differences in their implementation across regions and employing mobility data to proxy activity. To achieve this, we estimate one-way and two-way fixed effects models on a large sample of Italian provinces. We also isolate a set of well-defined quasi-natural experiments in which one region goes from a lower to a higher tier of restrictions, while a neighbouring region remains in the lower tier, for which we can estimate difference-in-differences and continuous treatment models. Moreover, in order to observe whether the impact of restrictions has changed over time, we split the sample around December 2020 and replicate the analysis in each subsample. Our case studies indicate that an Italian province moving from tier 2 to tier 3 in the system of restrictions can expect a fall in mobility of between 12 and 18 percentage points. Thus, we provide evidence of the negative effects of non-pharmaceutical interventions on economic activity. Finally, we provide some evidence that the effectiveness of NPIs in reducing mobility is likely to reduce over time, which has important policy implications. Our estimations are robust to a number of checks
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Do research universities recession proof their regions? Evidence from state flagship college towns
No abstract available
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A history of aggregate demand and supply shocks for the United Kingdom, 1900 to 2016
While economic theory has been applied to numerous topics in economic history, there are very few attempts to interpret major macroeconomic shocks from the perspective of standard Keynesian theory. This paper presents a history of aggregate demand and supply shocks spanning 1900 – 2016 for the United Kingdom, whose signs are identified using economic theory. We utilise sign restrictions derived from an AD-AS framework consistent with the workhorse New Keynesian model, and demonstrate how they can be used to identify the signs of structural shocks. The existence of 33 large shocks is inferred from estimated vector autoregressions, comprising 21 demand shocks and 12 supply shocks. We find that aggregate supply shocks were important in the late 1920s and early 1970s, which we attribute to changes in the bargaining power of labour. We also identify positive aggregate demand shocks in the mid-1970s, which we attribute to fiscal policy and suggest that these shocks will have exacerbated the inflationary effects of the 1973 oil price crisis, while mitigating its unemployment effects
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Inside the black box: the public finances after coronavirus
The global Covid-19 pandemic has required unprecedented government action at an unprecedented pace. It is vital that policymakers act to slow the spread of the virus, protect people's livelihoods and ensure the economic recovery delivers both prosperity and justice for the long term. This discussion paper has been commissioned to provide rapid analysis and expertise to the UK government with this goal in mind and will be followed by further analysis and recommendations from IPPR
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The dangerous fiction of the "fiscal black hole": how arbitrary targets and uncertain forecasts are driving a return to austerity
Executive Summary
Media reporting of the economy and choices facing the new Prime Minister and Chancellor has focused on a supposed ‘black hole’ in the public finances, typically given as being around £50bn in five years’ time. This has been presented as an urgent priority for government to fix, and both the Chancellor and Prime Minister have stressed that a return to austerity and spending cuts is now needed. Yet this fiscal ‘hole’ is the product of forecasts produced by economic models and the government’s own fiscal rules. Its size depends on how much we think the economy will grow, what interest rate the government must pay on its borrowing, and the target for the size of the government’s debt relative to the size of the whole economy (the ‘debt to GDP ratio’). This means that the so-called fiscal ‘hole’ is not an objective statement of economic fact in the same way that, for example, estimates of current inflation and wage rises are. It is dangerously misleading to present it as if it was. Forecasts from economic models are highly uncertain, but this uncertainty is not being reported properly. The rate of future economic growth, the level of future interest rates, and the nature of the fiscal target will dramatically alter the size of the so-called fiscal ‘hole’. Using the Office for Budget Responsibility’s own forecasts, we show that estimates of the fiscal ‘hole’ are highly sensitive to small changes in future growth rates or interest rates. Remarkably, using these forecasts, a ‘black hole’ as large as £50bn could be eliminated simply by reverting to the official measure of public debt used 18 months ago, and even £14bn of extra spending would not bring it back. Specifically, the government used to target the public sector net debt including the Bank of England but changed this to the public sector net debt excluding the Bank of England at the beginning of this year. This small change has a huge impact on whether the government’s target is hit – far bigger than any actual policy changes. Including the Bank of England in the government’s target, for instance, means that the targeted measure of debt would be forecast to fall by around £64bn in five years’ time – easily more than the so-called ‘black hole’, and more than the current round of cuts and tax rises being trailed in advance of the Autumn statement. Pushing spending cuts to chase a target that is highly uncertain and affected by factors over which the government has very limited control is bad economic policy, made at high cost with limited chance of success. Any fiscal difficulties that the government currently faces have little to do with control of departmental spending, investment, or taxation. Instead, they are based on arbitrary targets, and contingent on projected borrowing costs and growth rates which are both subject to significant levels of uncertainty. It makes no sense to pre-empt any potential increases in borrowing costs with a return to austerity. We do not know what the cost of government borrowing will be. We do not know what nominal GDP will be. We do, however, know all too well what the cost of austerity would be. A rational policy response at this point in time would be a cautious, ‘wait and see’ approach. Spending should not be cut, while taxes on higher earnings and income from wealth could reasonably be increased to cover any further increases in borrowing costs if they occur. For an interactive tool to explore these options, see https://arunadvani.com/taxreform.html
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The day after tomorrow: stress tests, affordability and the roadmap to the four day week
Summary of findings
• We provide a conservative, ‘worst-case’ scenario for the
impacts on profitability of a suddenly-implemented four
day week in the private sector.
• We find that a four day week with no loss of pay would
be affordable for most firms once the initial phase of the
Covid-19 crisis has passed.
• However, some firms in some industries would experience
cashflow problems if changes were implemented too
quickly.
• A four day week with no loss of pay will most likely be
implemented in the public sector before the private
sector.
• Public sector organisations could influence private
sector businesses through procurement policy and other
indirect routes.
• The process of changing expectations and behavioural
norms could be sped up by the creation of more bank
holidays, and the reintroduction of pro-union legislation.
Even if a four day week in the private sector took longer
than expected, a four day week in the public sector
could support the UK’s long-term recovery from the
Covid-19 crisis
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Guaranteeing incomes: modes of delivery
In order to cope with the increasingly severe reduction in economic activity in the UK, guaranteeing the incomes of all those who are eligible for in-work or out-of-work benefits is rapidly becoming a necessary policy lever.
Payments need to be fast, need to reach as many people as possible in all sorts of employment situations, and need to reach the most vulnerable to the present crisis first and foremost.
This document is not a calculation of how much an unconditional income scheme or negative income tax scheme would cost. What it does is set out are four methods to implement such a scheme at whatever level the government sees fit
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Public sector as pioneer: shorter working weeks as the new gold standard
• A shorter working week in the public sector (with no loss in pay) is badly needed: burn out, work-related poor mental health and bad work-life balance plague public sector staff across organisations.
• A 32-hour week in the public sector is not just desirable for worker wellbeing and for reducing the costs of burn out and presenteeism; a 32-hour week would also create hundreds of thousands of jobs and establish a new standard for all employment in the UK.
â–ª It would create between 300,000 and 500,000 new full-time
equivalent jobs in the sector.
• Public sector employment takes up a relatively high proportion of
employment in Wales, the North of England and Scotland – entailing that a 32-hour working week would benefit regions that have felt the hardship of austerity most.
• Such a policy is eminently affordable and achievable: on Autonomy’s conservative calculations a 32-hour week could cost around £9bn, but the true figure could be much lower at around £5.4bn.
â–ª This figure is only 6% of the public sector employment salary bill
and just over 1% of the total government spending budget.
• In addition to the public sector pioneering through its own working practices, we outline how procurement strategies aimed at private sector partners can encourage broader change across the UK labour market