Measuring Fiscal Stance 2009-2012. Quarterly Economic Commentary, Autumn 2012

Over the period since mid-2008 the Irish government has introduced a series of austerity measures equivalent to approximately 15 per cent of GDP. These measures were taken to try and reverse the deterioration in the government deficit that began in 2008. It is never a straightforward exercise to assess the outcome of such a package of discrete policy changes on the public finances. It is made more difficult in circumstances where the economy is going through a precipitous collapse in output and employment as occurred in Ireland between 2008 and 2011. This collapse caused a dramatic decline in taxation revenues and an increase in unemployment-related expenditures, both of which serve to worsen the public finance position. In such circumstances, it is important to disentangle the effect of policy decisions (e.g. higher tax rates or lower transfer payments) which affect the discretionary fiscal position from those changes which are driven by the collapse in the economy

Rising House Prices in an Open Labour Market

In this paper we explore the consequences of the recent steep rise in house prices for the openness of the Irish labour market. Specifically we look at the possible effect rising house prices may have on the migration decision. Since many immigrants are in the household formation age group, and tend to be highly skilled, we argue that the boom in house prices, by reducing the attractiveness of Ireland for potential immigrants, could reduce labour supply. Thus housing emerges as an important infrastructural constraint affecting the labour market. To formulate the role of house prices in the migration decision we use a structural model of the determination of output, labour supply and labour demand in Ireland. We modify the basic model in a number of ways: firstly we endogenise the determination of house prices using structural equations for the demand and supply of housing; secondly we separate out the user cost of housing in the migrant's cost of living index; and thirdly we endogenise the determination of consumer prices. Simulation results suggest that rising house prices, by discouraging potential migrants, could significantly reduce the growth potential of the economy, shifting the balance of labour market growth from employment to wages, with a consequent deterioration in competitiveness. The welfare effects of this differ for different groups; there are unambiguous gains for current home owners while immigrants, first time buyers and those with lower labour market skills are net losers.housing, labour market, migration

Rising House Prices in an Open Labour Market

We explore the consequences of rising house prices for the openness of the Irish labour market. Since many immigrants are in the household formation age group, and tend to be highly skilled, we argue that the boom in house prices, by reducing the attractiveness of Ireland for potential immigrants, could reduce labour supply. Using a structural model of the labour market we endogenise the determination of house prices. Our results suggest that rising house prices, by discouraging potential migrants, could significantly reduce the growth potential of the economy, shifting the balance of labour market growth from employment to wages, with a consequent deterioration in competitiveness.

Human Capital, the Labour Market and Productivity Growth in Ireland. ESRI WP158. September 2004

Recent developments in growth theory1 suggest that factors such as human capital accumulation are central to the growth process of an economy through raising productivity and increasing a country’s ability to develop and facilitate technology. In these models policies that raise the level of human capital can permanently increase the growth rate. The Irish economy presents a highly interesting case-study of this hypothesis. Ireland2 is a small, highly-traded economy which witnessed dramatic growth rates in the 1990s with a doubling of output, a 40% increase in employment and a 60% fall in levels of unemployment. This remarkable performance led to rapid convergence in per capita output with the EU average

User Cost of Debt-Financed Capital in Irish Manufacturing Industry: 1985 – 2011. ESRI WP448. February 2013

This paper provides estimates of the cost of debt-financed capital to Irish manufacturing industry over the period 1985 to 2011. The estimates are provided for two types of capital assets, machinery and equipment and industrial buildings. They also incorporate policy interventions aimed at influencing investment behaviour of manufacturing firms in Ireland. The results show that large capital gains recorded during the Celtic Tiger period created a downward distortion in the user cost of investing in industrial buildings. On average, policy interventions reduced the cost of capital compared to the cost of capital in the absence of these interventions, and the tax-related interventions were more favourable in the case of industrial building than for machinery and equipment

MIGRATION AND THE IRISH LABOUR MARKET. ESRI Working Paper No. 113, July 1999

When Ireland became independent in 1922 it still remained part of a common British Isles labour market with no restriction on movement between the two jurisdictions. With the exception of the years of the Second World War, this was to remain the case (for Irish citizens) right up to the present. By contrast, from the end of the 1920s tariffs were introduced in Ireland (and the UK) so that by the mid 1930s the goods market was subject to very considerable restrictions. The exceptionally high tariff barriers remained in place until the end of the 1950s, unlike the situation in most other European countries where trade barriers were rapidly reduced in the immediate post-war years. This combination of an open labour market and a closed goods market over a sustained period was most unusual in Europe

Quarterly Economic Commentary, Winter 2008 Special Articles An Analysis of the Potential of the European Commission Business and Consumer Surveys for Macroeconomic Forecasting by Jean Goggin An Empirical Analysis of Development Cycles in the Dublin Office Market 1976-2007 by John McCartney

The forecasts in this Commentary, especially for 2009, illustrate how the Irish economy is in the midst of a contraction that is large by both historic and international comparisons. For 2009, we expect GNP to fall by 4.6 per cent in volume terms. Following an anticipated contraction of 2.6 per cent in 2008, the accumulated fall in output is dramatic

Quarterly Economic Commentary, Summer 2007 Special Articles On the Likely Extent of Falls in Irish House Prices by Morgan Kelly Valuing Ireland’s Pension System by Shane Whelan

According to the preliminary estimates contained in the Quarterly National Accounts for December 2006, real GNP grew by 7.4 per cent last year. The corresponding figure for real GDP was 6 per cent. These figures imply that the economy continued to perform very strongly last year and are consistent with other positive outcomes. For example, 87,000 extra jobs were created in 2006 and the Exchequer recorded a surplus of over €2 billion

Quarterly Economic Commentary, Summer 2008. With SPECIAL ARTICLE Ireland’s Innovation Performance: 1991 to 2005

The recent trend of downward revisions to our previous forecasts continues in this Commentary in the light of emerging data. The downward revisions this time are such that we are now forecasting a contraction in the economy in 2008, with both GNP and GDP falling by 0.4 per cent in real terms. Thus Ireland will experience a recession for the first time since 1983. For 2009, we expect an upturn with real GNP expected to grow by 1.9 per cent and real GDP expected to grow by 2 per cent

Quarterly Economic Commentary, Spring 2008 Special Article The Decline of the Computer Hardware Sector: How Ireland Adjusted by Frank Barry and Chris Van Egeraat

It has been evident for some time that 2008 was likely to be a year of slow economic growth. The leading indicators for house building that emerged last year suggested that this sector would contract in 2008. The absence of an SSIA effect also pointed to lower consumption growth in 2008. In the more recent weeks and months, most of the international developments are such that they will have the effect of compounding the difficulties that the economy is facing this year. Among these developments are the appreciation of the euro, the slowing in economic growth in the United States and the on-going difficulties in international financial markets