Emerging structural pressures in European labour markets

In recent years, a series of European labour market forecasts have been produced on behalf of, and have been published by, the European Centre for the Development of Vocational Training (Cedefop). These forecasts were generated using a modular modelling approach containing two major components, a multi-sector macroeconomic model (E3ME) for 29 European countries, and a labour market extension (WLME). The countries are treated as an integrated system in E3ME but the extension is applied to each country separately. Forecasts of employment by industry are determined by E3ME; forecasts of employment by occupation and qualification are determined by the extension. Both components rely mainly on time series econometric techniques to generate their forecasts. Meagher et al. (2014) describe how the WLME can be replaced with an alternative extension (MLME) which uses computable general equilibrium (CGE) modelling techniques. Compared to the WLME, the MLME relies less on time series analysis and more on explicitly modelled economic behaviour, based on theoretical considerations. In this paper, the design of the hybrid E3ME-MLME model is advanced in two ways. Firstly, MLME is configured such that, in the absence of any shocks and assuming that the occupational labour markets clear, it reproduces the forecasts derived using WLME. In that case, the MLME forecasts can be regarded as providing enhanced information about the WLME forecasts. In particular, MLME provides forecasts of changes in relative wage rates which can be used to identify structural pressures in the markets for labour, pressures which remain only implicit in the WLME employment forecasts produced for Cedefop. Secondly, when suitably configured, MLME can be used to determine the deviations to the WLME employment forecasts which would result if some of the conditions (either explicit or implicit) under which they were derived are relaxed. In particular, MLME is used to determine how the forecasts would be different if wage rates are not sufficiently flexible to clear the occupational labour markets. The attendant surpluses and shortages revealed by MLME provide corroborative evidence on the underlying structural pressures in the Cedefop forecasts. Results are reported for the United Kingdom, Greece and the Netherlands

Using Water Allocation in Israel as a Proxy for Imputing the Value of Agricultural Amenities

This paper uses the water allocation economy in Israel as a proxy for imputing the value of agricultural amenities. A general equilibrium model is developed, and incorporates agricultural amenities as byproducts of agricultural production, water trade channels, and multiple water types. The premise is that until a decade ago, water policy in Israel was interlinked with agricultural land-use policy. Integrating a Monte-Carlo analysis, the model searches for a baseline minimum value of agricultural amenity that makes household, in the counterfactual scenario, indifferent between the administrative and market mechanisms. The minimum imputed value is around 109% agricultural output. The intuition is that the gains in economic welfare, from improved water use efficiency, are offset by the losses in social welfare due to a reduction in available agricultural amenities

Essays in applied public economics using computable general equilibrium models

This thesis analyses two issues in public economics: (1) water allocation in Israel; and (2) malaria prevention in Ghana. In both cases a computable general equilibrium modelling approach has been applied for policy analysis. Part I: In Israel, parliamentary investigative committees and water researchers have concluded that for decades, the administrative water allocation mechanism has mismanaged water allocation. Over subsidising of the agricultural sector, and underfunding of desalination plants, had led to a severe hydrological deficit. Critics argue that a water market allocation could solve these issues. However, the administrative allocation is crucial because it protects social value, which is not represented in a market mechanism. Part I of the thesis compares these two alternative allocation mechanisms using a general equilibrium model, for the case of Israel. The model concludes that from 1995 to 2006, the upper-bound water misallocation in Israel was relatively small, on the average of 5.5% of the potable water supply. The lower-bound value of agricultural amenities is imputed at approximately 2.3 times agricultural economic output. At the margin, introducing a water market in Israel is not recommended, i.e., net-social welfare would fall. Part II: Research that links between malaria and economic growth have, so far, used econometric approaches. These provide results that are too broad, and not particularly useful for policy analysis. We, therefore, develop a multi-region multihousehold dynamic computable general equilibrium (DCGE) model, which is calibrated to Ghana as a case study. Households are disaggregated by five epidemiological malaria regions, urban-rural divide, and income level quintiles. The model links with malaria through regional demographic effects, and labour effectiveness indices. Hypothetical interventions simulate reducing malaria prevalence by 50%, for children under-five years with varying degrees of coverage. We find that even under this limited intervention, malaria prevention clearly adds to economic growth and reduces income inequality. Our approach is particularly useful for policy makers to compare alternative intervention strategies using cost-benefit methods, which are not commonly used in health policy

Imputing the Social Value of Public Health Care: a New Method with Application to Israel

Pre-COVID 19, countries with universal health care have experienced a rising demand for health care services without a corresponding rise in public supply. This has led to a debate on whether to increase private health care services - especially in hospitals and second-tier health care. Proponents for increasing private health care highlight gains in efficiency and innovation, while opponents emphasize its risk to social welfare. However, the monetary value of these gains and losses is seldom quantified. In this paper, we contribute to the debate by imputing the social value of public health care, which does not have a market and therefore cannot be monetized. Similar to contingent valuation methods that use hypothetical markets, we incorporate a hypothetical health care market into a general equilibrium model. Social value is modeled as a byproduct of health care services and enters a well-being household function. The model is calibrated to our unique Health Social Accounting Matrix of Israel. Using a Monte-Carlo method, we impute the minimum social value at around 26% of public health care financing. We furthermore simulate health care scenarios that internalize the social value to show that when assessing the best type, policymakers should weigh the economic gains of deregulation against the lost social value. We show that well-being may decrease in some cases from over-privatization

“You can’t always get what you want” : an optimal investment model for Georgia

This is a tool for the Government of Georgia to assist in investment planning at both an aggregate (macro) level and also a detailed regional-urbanity level. We develop an economywide computable general equilibrium model of Georgia. Given a certain level of funding, the model searches for the optimal investment strategy that maximizes specific social-economic targets. These include: GDP and welfare growth, income equality, employment creation, export promotion, as well as others. The small open economy is calibrated to a newly developed dataset of Georgia that includes 15 production sectors and 20 regional-urbanity households. A given amount of money is donated from abroad, i.e., it does not create distortionary wealth effects. Funding is placed into a Development Fund that channels it towards different production sectors to generate investment and promote growth. This paper summarizes the model, and focuses on the best investments at a macro-level. Officials in the government, however, have been trained to analyze various other scenarios and issues that are not covered in this paper. Overall, the paper finds that it is not possible to maximize all the social-economic targets at once. Different targets require different allocation strategies. Simply put: You can’t always get what you want

Do Bicycle Networks Have Economic Value? A Hedonic Application to Greater Manchester

This paper quantifies the association between proximity to bicycle networks and house prices in Greater Manchester using hedonic and spatial regressions. Given the challenges of congestion and pollution, many cities across the world are implementing policies to improve bicycling facilities and other active modes of transport. Bicycle lanes are a solution that could potentially provide significant amenities to residents, but they require investment and the appropriation of limited land. Drawing on a large dataset of approximately 253,000 transactions, over a 9-year period, we find that a 1 km reduction in distance to the nearest bicycle network is associated with property values being around 3.2% higher, on average, and 7.3% higher in the central borough of Manchester. We also provide an applied example to rank new bicycle routes by comparing their benefit-to-cost ratios

Blockchain in Financial Intermediation and Beyond: What are the Main Barriers for Widespread Adoption?

Blockchain-enabled cryptocurrency instruments have gradually filtered into financial intermediation, disrupting traditional institutions. This paper discusses the benefits of blockchain to household welfare, focusing on financial intermediation services (FIS). Its main aim is to highlight points of incompatibility with current institutional frameworks and outlines the greatest barriers for its widespread adoption (i.e., regulatory, technological, and environmental). To support our discussion, we develop a stylized general equilibrium model with two competing FIS technologies (i.e., traditional and blockchain). We show that removing these barriers could displace traditional institutions with blockchain technology and raise welfare. Finally, we argue that the 2022 and 2023 cryptocurrency scandals and the ongoing calls for comprehensive, cross-country, institutional changes will be remembered as a turning point in terms of serious efforts to integrate this new technology and make it more mainstream

Quantifying the macroeconomic cost of night-time bathroom visits: an application to the UK

Little is known on the impact that nocturia (the need to wake up at night to urinate) has on a nation’s economy. While there are many individual factors associated with inadequate sleep (e.g. bad sleep hygiene, chronic sleep disorders such as insomnia or sleep apnea), frequently having to wake up at night to urinate fragments sleep, with negative consequences on an individual’s health and well-being as well as daytime functioning. Using a large-scale UK workforce data, we estimate the prevalence of nocturia in the working population and quantify the lost worker productivity caused by nocturia, measured by absenteeism and presenteeism. This enters our multi-country general equilibrium model, which we calibrate to the UK economy, to estimate the annual macroeconomic cost of nocturia. We find the annual cost of clinically significant nocturia (waking up at least twice to urinate) is around £5.4 billion, or equivalently £1996 per worker with nocturia. This cost estimate is larger than previous estimates on the productivity effects of nocturia using cost-of-illness (COI) methods, suggesting the importance of taking into account general equilibrium effects when assessing the economic burden of health conditions