Factor Utilisation and Productivity Estimates for the United Kingdom

This paper derives series for capital utilisation, labour effort and total factor productivity from a DGE model with variable utilisation and labour adjustment costs. Capital utilisation tracks survey-based measures closely, while movements in total hours worked drive our labour effort series. TFP is less cyclical than the traditional Solow residual, though a weighted average of capital utilisation and labour effort - aggregate factor utilisation - and the Solow residual are not closely related. Rather, aggregate factor utilisation is correlated with detrended labour productivity, providing more evidence that differences in average and marginal labour productivity may be linked to factor hoarding.

Quarterly Economic Commentary, October 1997

It now seems likely that real GNP will increase by about 7% per cent in 1997, marginally above the average growth rate of the pas.t three years. Growth will again be balanced, with both exports and domestic demand contributing strongly. As a consequence employment will also rise rapidly, with a net increase of over 50,000 in the annual average number at work. Despite the prolonged boom, inflation remains subdued, with the annual average increase in the consumer price index forecast at under 1% per cent, and average pay rises still generally conforming to the moderate terms of Partnership 2000. Improved collection, allied to the rapid growth of domestic demand, is leading to a massive rise in tax receipts, and a General Government Surplus in 1997 seems assured

The Revival of Irish Indigenous Industry 1987-1997. Quarterly Economic Commentary Special Article, April 1998

From the 1960s until the mid-1980s, most of the growth of employment, output and exports in manufacturing industry in Ireland occurred in foreignowned multinational companies, while the performance of native Irish-owned or indigenous industry was relatively poor. Consequently, foreign-owned firms came to account for a large proportion of manufacturing in Ireland by 1987, with 43 per cent of manufacturing employment, 52 per cent of manufacturing gross output and 74 per cent of exports of manufactured products. In the period since 1987, the foreign-owned multinational component of industry in Ireland has continued to contribute most to Irish industrial growth, with the result that by 1995 its share of total manufacturing employment increased to 47 per cent, its share of gross output increased to 65 per cent, and its share of exports increased to 82 per cent.1 Despite this continuing increase in the relative importance of foreign-owned industry, however, a major change since about 1987 has been the fact that there has been a substantial and sustained improvement in the growth performance of Irish indigenous industry. This article aims to show that, not only has the record of Irish indigenous industry been greatly improved by comparison with its own previous experience, but its growth performance over the past decade has also been stronger than that of industrial countries generally. Thus, since about 1987, the record of Irish indigenous industry has changed from one of relatively weak growth trends by international standards to one of relatively strong growth by international standards. This article brings together and analyses information from a variety of sources to document this improvement in indigenous industry, primarily by examining trends in employment, output and exports, but with reference to some other indicators as well. This involves making some estimations to fill a few important gaps in the existing data

THE COSTS TO IRELAND OF GREENHOUSE GAS ABATEMENT. ESRI Policy Research Series. 1997

Most scientists believe and most governments seem to accept that global warming poses a threat to the world environment. Although there are residual uncertainties in tile scientific community as to the nature and gravity of tile global warming threat (Broecker, 1995), the solution to this problem can not be found in changes ill behaviour of individual countries or even individual trading blocks acting on their own. Instead, any programme of action to fend off the threat to tile world environment will ultimately depend on an agreement or agreements at a world level, which involve all the major economies, developed and underdeveloped. This makes the process of designing an effective strategy exceptionally difficult. (see Box A for a discussion of global warming). With the objective of reaching an initial agreement, a major international conference will be held in Kyoto in December 1997 under the auspices of the United Nations. This will be the second such UN conference to be held in the 1990s and it seems likely that the evolving policy debate will continue for many years afterwards, paralleling the continuing development of understanding of the problem in the scientific community. The role of the conference is to agree among tile major players in tile world economy a first policy response to tile problem which will lead eventually to an agreed comprehensive plan for action at a world level. The EU, as part of its negotiating position for the conference, has agreed a policy that would require a cut of 15 per cent in EU-wide emissions of greenhouse gases between 1990 and 2010. This proposed restriction on emissions is at tile more ambitious end of tile range of proposals being put toward by the major economies of the developed world. However, it must be seen as but one of many different inputs into what will be an exceptionally difficult set of negotiations. Any agreement reached in Kyoto will involve not only the restriction of emissions of greenhouse gases but it will also have important implications for tile distribution of income between the developed and the underdeveloped world and among individual trading blocks or countries within the developed world itself

Medium-Term Review: 1997-2003, No. 6 April 1997

The ESRI's Medium-Term Review is unique in presenting a comprehensive assessment of the prospects for tl1e Irish economy over the next decade. It benefits from the wide range of research carried out in the ESRI since its last publication in 1994 and it takes account of latest thinking about the prospects for tl1e wider EU economy. The Review cU1alyses tl1e reasons why tl1e Irish economy is growing more rapidly than the rest of the EU and it presents a detailed forecast for the period to 2003. The cU1alysis highlights a range of strategic issues which arc crucial for the long-term development of the economy, issues which are often ignored in tl1e debate on economic policy in Ireland

Pricing to market, exchange rate changes and the transmission of inflation

This paper examines the short-run pass through of exchange rate changes to consumer prices in Ireland. Reflecting the importance of exchange rate expectations, we develop a model of inflation where the deviation of the UK price level from its equilibrium level affects the rate of pass through of external shocks into Irish inflation. This model explains better the behaviour of the Irish rate of inflation in the 1990s and it indicates a reduction in the speed of adjustment of prices to their equilibrium after the ERM crisis

Factor utilisation and productivity estimates for the United Kingdom

In this paper series are derived for capital utilisation, labour effort and total factor productivity (TFP) from a general equilibrium model with variable factor utilisation and labour adjustment costs. Impulse responses from the model show that firms initially respond to unanticipated shocks by altering factor utilisation rates. In subsequent periods, firms adjust observable inputs such as physical capital and employment. As a result, utilisation rates are a leading indicator of firms hiring of both capital and labour. The estimate of capital utilisation is found to track survey-based measures quite closely, while movements in total hours worked drive the labour effort series. The estimate of TFP growth is found to be less cyclical than the rate of growth of a traditional Solow residual. Nevertheless, a weighted average of capital utilisation and labour effort - aggregate factor utilisation - is not closely related to the detrended Solow residual. This suggests that measures that conflate capacity utilisation and temporary deviations in TFP from its steady-state growth rate may be misleading indicators of excess demand pressure. Rather, the measure of aggregate factor utilisation is correlated with detrended labour productivity, providing more evidence that differences in average and marginal labour productivity may be linked to factor hoarding. Labour productivity, when calculated as output per unit of effective labour input, is less cyclical than a simple measure of output per hour.