The Need for Pension Reform

pension reform; norway

Eurosclerosis or Financial Collapse: Why Did Swedish Incomes Fall Behind?

Sweden represents an archetypal welfare state economy, with extensive government safety nets. Some scholars have attributed a decline in its per capita income ranking since 1970 to “eurosclerosis” or sluggish growth caused by distortionary policies. This paper argues rather, that the permanent loss in output following Sweden’s banking crisis in the early 1990s explains the decline in its per capita GDP ratings. The paper finds no macroeconomic evidence that welfare state policies have deterred growth. The results warn that empirical growth analyses should distinguish between trend output growth and permanent output loss associated, for example, with financial crises.Financial Crisis; Welfare State; Sweden; Output Loss

How Competitive is Irish Manufacturing?

Ireland experienced significant competitiveness gains in the 1990s on the basis of the standard manufacturing unit labour cost-based measure of the real effective exchange rate. A few sectors mostly dominated by multinational companies have accounted for the bulk of value added in production. Their productivity gains have greatly contributed to Ireland’s exceptional growth performance in the 1990s, which has earned it the nickname of “Celtic Tiger.” However, these sectors represent a disproportionately smaller share of manufacturing employment, and competitiveness in employment-intensive sectors has been much weaker. This paper thus explores Irish competitiveness from the viewpoint of risks to employment.

The Great Mortgaging: Housing Finance, Crises, and Business Cycles

This paper unveils a new resource for macroeconomic research: a long-run dataset covering disaggregated bank credit for 17 advanced economies since 1870. The new data show that the share of mortgages on banks' balance sheets doubled in the course of the 20th century, driven by a sharp rise of mortgage lending to households. Household debt to asset ratios have risen substantially in many countries. Financial stability risks have been increasingly linked to real estate lending booms which are typically followed by deeper recessions and slower recoveries. Housing finance has come to play a central role in the modern macroeconomy

Natural Disaster Shocks and Macroeconomic Growth in Asia: Evidence for Typhoons and Droughts

Climate-related natural disaster shocks are expected to rise as the earth is getting warmer, which will adversely affect growth prospects globally. Current robust estimates of the effects of typhoons and droughts point to both short- and long-term declines in national incomes compared to predisaster trends and economic effects likely to persist up to 2 decades. Using the typhoon landfalls and damage in Asia, we analyze the wind-damage relationship and find damages to gross domestic product increase by 2.3% for an increase in maximum wind speed. The extreme projected temperature rise in Representative Concentration Pathway (RCP) 8.5 will result in higher damage by more than 50% in 2100. Vulnerable developing Asian economies could expect dampened growth with significant impacts on agriculture and tourism, a concern that may roll back years of development gains and exacerbate inequality. To cope with increasing disaster risks, both short-term adaptation strategies like relocation, government transfers, and other social safety nets, as well as long-term strategies like disaster insurance or similar ex ante mechanisms are needed

Essays on growth, human capital, and income distribution

Thesis (Ph.D.)--University of Washington, 1996The first two chapters present a pair of endogenous growth models with both physical and human capital and a public education input. These papers contribute to the literature on endogenous growth by analyzing a nonrepresentative agent model. That is, agents are permitted to differ in their initial endowment of both types of capital. Using this framework I study the dynamics of the income and wealth distribution and optimal fiscal policy. Existing models of growth and income distribution that are modeled using only human capital typically find a counterfactual income convergence. This pair of models illustrates how convergence is sensitive to the extent of factor markets and to the existence of nonhuman wealth.In regard to fiscal policy, I find that the optimal income tax rate is constant over time and the same for all agents regardless of initial endowments. However, if the tax rates on capital and effective labor income can differ, individuals would be made better off with a low (high) tax on the factor in which they have a relatively large (small) endowment.The third chapter expands the set of policy instruments to include a consumption tax and government debt. It also parameterizes the extent to which the productivity of public educational expenditures depends on the individual's effective learning. The second contribution of this paper is to determine the dynamic path of private debt between individuals in the economy when the degree of congestion in learning varies by region.Finally, empirical studies have shown that credit constraints are prevalent in many developing economies. The existence of imperfect credit markets implies that some agents who would otherwise invest in human capital will remain uneducated due to the inability to borrow or self-finance out of wealth. My fourth chapter investigates the consequence of moving from autarky to free trade in an economy with credit constraints. In particular, I look at how trade impacts wealth, income, and investment in human capital