Ronan Lyons | Personal Website
Ronan Lyons | Personal Website

Recommended Reading

Automobiles, e-commerce and immigration

This week’s recommended reading and some latest stats and facts…

First up, some research:

  • Economists almost always decline to involve themselves with the specifics of particular industries and goods, preferring instead to talk about widgets and other abstractions. However, that’s not very realistic when you look at economic history or think of, for example, the central nature of the construction and automobile industries in the ongoing economic downturn. In that vein, the OECD has just released a study called “The automobile industry in and beyond the crisis“. After setting out the importance of the industry, it examines the collapse in car sales during the crisis and looks ahead to the future of the industry, country by country. In particular, Western European manufacturers – and those in Japan and Korea – have capacity significantly above domestic demand, meaning that their export performance will be critical in determining the health of these industries. China – and to a lesser extent India – are not unpredictably growth markets for the industry.
  • Secondly, some interesting academic research in the Journal of International Economics on the long-term effects of colonialism. The paper, called “The erosion of colonial trade linkages after independence”, is available in its gated (official) form on ScienceDirect, but a just-as-good version is available to all from Sciences-Po. The authors use the fact that most countries today were part of empires as late as 1945 to examine bilateral trade since then. They find little short-run effect on trade, except in the case of “hostile separation”, but thirty years after independence, trade with the colonizer shrinks by more than 60%. It seems to be more the unwinding of trade diversion rather than economic revenge, as the effect extends to “Commonwealth partners”, fellow colonised countries.
  • Edgar Morgenroth presented a paper at the ESRI a couple of years ago on how immigration into Ireland has boosted imports of consumer goods from the home countries – think Polish food taking up Spar’s shelf real-estate. Giovanni Peri and Francisco Requena-Silvente consider the alternative: an increase in exports to home countries. They present evidence from Spain suggesting that doubling the number of immigrants leads to a 10% increase in exports to their country of origin, an effect that is larger when the countries are “culturally different”.
  • Lastly, the OECD welcomes Chile into its club of high-income members with an inaugural review, highlighting two priorities for its policymakers: solidifying its economic growth base and tackling inequality.

To close, a few things we didn’t know last week:

China, the EU (Greece), the US and the economics of paying for news online

To my shame, my Recommended Reading section on the blog has fallen somewhat by the wayside of late. While I can’t promise I’ll fully rectify that overnight, I can do my bit here and now. Without further ado, here are ten articles on the world economy that I’ve found interesting in the last week:

  1. From the excellent VoxEU, an important step in understanding some of the massive implications of urbanisation and economic growth in emerging markets comes in a paper called ‘How Green is China?‘. Per capita emissions in China’s most polluted city are still just a fraction of what they are in the typical US city.
  2. Patrick Love, over on the OECD Insights Blog, gives some perspective on the development of Haiti, formerly the Jewel of the Antilles.
  3. Some mildly good news – recessions won’t drive up violent deaths that much, according to researched cited on the Irish Economy blog.
  4. Over at Reuters, Felix Sammon discusses the economics of the New York Times’ generally much-discussed introduction of a paywall. It leads him to discuss the concept of bundling, itself closely related to price discrimination, for example in the digital TV market, as per the commentator a couple of days ago.
  5. Today, an Englishman, an Irishman and a South African had an exchange of views about which major currency has the best/worst long-term prospects, largely on the back of developments in relation to the Greek economy. None of us, however, thoguht to mention the Canadian and Australian dollars!
  6. Mark Perry is always good for a provocative post – he doesn’t disappoint on the EU-vs-US debate that seems to have risen, unprompted, in the past couple of weeks, as the successor to the Sachs-Easterly-Collier debate that raged among economists last summer. I have a whole host of reasons I disagree with him, but that’s the subject for a full blog-post in itself (makes note on to-do list).
  7. On a completely unrelated topic, Tim Harford, the Undercover Economist has a nice short explanation of heavy traffic on Mondays and rainy days.
  8. The Conference Board is one of the world’s premier sources for data on productivity. Their latest report on productivity shows the strong gains in emerging markets, some the WSJ views as an economic threat.
  9. All this talk of emerging markets and China – what with its booming economy at the moment, is China headed for a crash?
  10. And all this talk of productivity and competitiveness… I talked a couple of weeks ago about the 2010 Lisbon Strategy adopted by the EU almost 10 years ago, designed to make the EU the most competitive economy in the world by now. Charles Wyplosz argues it’s time for a new model of competitiveness for the EU.

And a non-economics link to boot: it turns out “status updates” are at least a hundred years old!

Teacher performance, class size? Does it even matter?

I came across this excellent review and discussion, by Andrew Leigh of economics.com.au (a great site) of a very interesting paper on education performance (by Brian Byrne of the University of New England), during the summer. Essentially, it uses that treasure trove of the social scientist – identical twins – to attempt to measure the effect of teacher performance on educational outcomes. The entire post and its various links and comments are all worth a read, because the more you read about the subject, the more fascinating it gets.

For example, the paper could easily have been publicised as a measure of the effect of class size but – tell this one to teachers and indeed parents out there – the literature is generally agreed that class size, for most age groups, has no distinguishable impact, hence the authors chose to focus on teacher quality, which after all is much harder to measure, instead.

There’s also a good discussion of what percentages count as not important. For example, even if the bulk of performance is determined by the child, not the teacher or the classroom, an 8% boost to performance is still better than none.

The importance - or not - of class size
The importance - or not - of class size

The ‘everything comes back to Bord Snip Nua’ digression: if indeed class size is not the be-all-and-end-all when it comes to our children’s future, perhaps it could take a slightly lower priority on the pecking order of What Must Not Be Touched in our public expenditure.

Environmental Pillar workshop on NAMA, the Irish property market and economic sustainability

From one EP to another! Following Electric Picnic at the weekend, which featured Leviathan political and economic discussions as well as more food stalls and music acts than you can shake a stick at, today it was back to business and off to another type of EP altogether.

That was the Environmental Pillar, part of Ireland’s Social Partnership framework which comprises about 30 organisations in the environmental space in Ireland. They held a workshop on NAMA, the Irish property market and economic sustainability in Dublin. There were four speakers including myself. The other three were NAMA tag team Brian Lucey and Constantin Gurdgiev as well as Feasta founder and environmental economist Richard Douthwaite.

There was a good attendance and a great degree of interaction. Fortunately for those who couldn’t make it, including many prominent member of the Pillar who were meeting Cabinet members at the time, the whole thing is recorded.

The talk I gave is available on these three videos:

Blog readers may be a bit tired of my thoughts on these matters, though, in which case I’d recommend watching the other talks. The full list is available on the Environmental Pillar’s channel on Youtube. Some of Brian and Constantin’s thoughts in relation to how the government could have reacted to criticisms of the original NAMA proposal are very interesting, while the panel discussion at the end covers a whole range of topics from ‘What can I do?’ to  ‘Does it matter if environmental armageddon is just around the corner anyway?’!

Some of the key things I took away from the talk:

  • It does seem bizarre that journalists, financial services executives and foreign politicians are all prepared to listen to the anti-NAMA side, while the only way those opposed to NAMA can get to speak to government is through the media.
  • “Long-term economic value” could actually mean larger falls than current market value, because it means using yields/net present value as opposed to the catch-the-falling-knife which could still give totally unrealistic yields by the time rents have stopped falling.
  • The idea of a public trust that owns NAMA and that can decide on what to do with NAMA land tracts, for example, is worth exploring, regardless of whether or not we own the banks.
  • Our current crisis presents a huge opportunity to reorder things the way we want them. To a lesser extent NAMA, but to a much greater extent the lack of a broad strategy for the next five years and the oddly between-two-stools Commission on Taxation report suggest to me that we are wasting this opportunity.
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From property taxes to Ireland in 2020 – a foray into vlogs

This post outlines the content of a video discussion between myself and Karl Deeter. Topics included everything from property tax to how to price services like water and roads. Karl and I nail our colours to the mast by making specific predictions about population, unemployment and output per capita in Ireland in 2020 and we wrap up with a VoxPop in Dublin on Ireland’s economic future. Read more

Understanding deglobalization – measuring tariffs and enabling trade

With trade falling faster than output, the world is – in a technical sense – deglobalizing to some degree. In truth, though, it represents less a conscious choice made by consumers in one economy to switch to domestic produce and instead reflects the highly integrated nature of product markets.

A cause of concern, however, would be if countries started to raise tariffs and other barriers to trade. Earlier this month, the WTO made available for researchers a very detailed database on tariffs at a country and product level.

If all that detail is a little to mind-boggling (or spreadsheet-breaking), the World Economic Forum also earlier this month launched their 2009 Global Enabling Trade Report. The rankings in full show that small open economies are the best for enabling trade. Of note is that all the EU countries score very poorly in the ‘Market Access’ heading, due no doubt to the difficulties faced by agricultural exporters in other countries when trying to get their goods in the EU.

It’s so cold and it’s so broken, Board Snip Nua!

I’ve always had a soft spot for song parodies, as longer established readers of the blog will probably ruefully attest. My last foray into this territory with my economic hat on was “Brother, Can you bail out my bank?” in the midst of our global financial excitement last Autumn (although I did try my hand at Copa-obama later last year). Anyway, with the launch of An Board Snip Nua’s report later today, that peculiarly Irish name, for a peculiarly Irish public sector expenditure body, will probably recede back into the depths of our subconscious until the next time national debt threatens to cripple us.

But before it does, I feel we should mark it in song. You can thank An Taoiseach’s about-turn on publication date for the missing fifth and sixth verses… but as it happens only die-hard Leonard Cohen fans know those anyway! Yes, today’s ditty is to the tune of Hallelujah, and while I think Cohen was most inventive to come up with no less than six sentences that sort of rhymed with the title word, surely An Board Snip Nua was made for rhyming with it! So, crank open your itunes and put on Cohen/Buckley/Wainwright/whatserface-from-X-factor – or else open the video below – and get singing…

Now I’ve read we are so short on bread
That even the Galway tent is dead
But you won’t really go for tax hikes, will you?
“You cut like this
Cut FAS, cut NESC
Cut the lads who print the car tax disc”,
The baffled Cowen is told by Board Snip Nua
Board Snip Nua, Board Snip Nua
Board Snip Nua, Board Snip Nua

Your vote was strong but you needed the youth
You cut stamp duty on the hoof
While the OAPs dreamt they overthrew you
They cried you
didn’t really care
They broke your vote, it collapsed in Clare
And the best that you could do was Board Snip Nua

In the 80s we were here before
We know this gloom, we left these shores
We used to live State-side before we knew you.
We’ve heard all about the ECB
But have you seen our GDP?
It’s so cold and it’s so broken; Board Snip Nua

What will you do-ah, Board Snip Nua?
Board Snip Nua, Board Snip Nua

It’s about time that you let us know
What’s really going on with our dough
But now you never tell it straight, do you?
We paid two mill to move in here
But NAMA’s going to cost us dear
And every budget cut by Board Snip Nua

Board Snip Nua, Board Snip Nua
Board Snip Nua, Board Snip Nua (repeat to fade…)

Youtube: Rufus Wainwright on Tubridy, getting the lyrics to An Board Snip Nua wrong

Asking prices down 20% in a year: Daft.ie House Price Report

The latest daft.ie House Price report was released this morning. It shows that asking prices have fallen 5.7% in the last three months and by almost one quarter since their 2007 peak. New figures on time-on-market are showing a growing gap between urban and rural markets, with properties in Dublin in particular falling more and moving faster and in greater numbers. Read more