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An interesting piece in the Economist about the current state of the output gap – the difference between an economy’s actual output and its potential output.
Paul Ormerod argues that this value is almost impossible to estimate, so it is a pretty useless concept. Others think trying to estimate the size of the gap is valid, and knowing how much spare capacity the economy has could be a crucial guide to economic policy makers.
What are the thoughts of economists who have been looking at recent OECD data?read more...»
Question six for the RES competition in 2014 is bound to produce a large number of answers. Labour migration is an important economic, social and political issue and many students will have clear views on the issue. So what will make an essay stand out from the crowd?read more...»
The prospects of significant wage increases for typical UK workers are bleak, according to Professors David Blanchflower and Stephen Machin writing in the Spring 2014 issue of CentrePiece magazine from the London School of Economics.
It is quite clear that the economy is still well below full employment and there is a large amount of slack in the labour market, they say. There is little evidence of widespread skill shortages, which would push up wages; and public sector pay freezes with continuing redundancies continue to push down on workers’ bargaining power.read more...»
This is a revealing perspective on the challenges facing China in producing enough food to feed the hundreds of millions of Chinese squeezed into their ever growing cities.
China's policy makers are trying to increase the size of farms to exploit economies of scale and get their farmers to focus on cash crops. But the reality is that China will have to import a huge amount of food in the years to come - this creates big opportunities for farmers in China's trading partners.read more...»
In this session from our macro revision workshop, we are focus on the performance of the UK economy over recent years and see how economic growth appears to follow a cyclical patternread more...»
A revision presentation used at the workshop in Dubai on aspects of supply-side competitiveness in the UK economyread more...»
I thought it worthwhile sharing my resources which I have been collecting for students (and teachers alike). I have been promoting them on Twitter (@Economics_KSF) through scoop.it but for those of you not on there, the link for the scoop.it boards are here:read more...»
Showing critical awareness of economic statistics is an important skill for all economists.
A hat-tip to Fiona Quiddington for this article on youth unemployment from the Telegraph which analyses youth unemployment figures with a more critical eye.read more...»
Here is a revealing quote from a special study published in March 2014
"Simply put, too much of the city’s essential infrastructure remains stuck in the 20th Century—a problem for a city positioning itself to compete with other global cities in today’s 21st Century economy."
Which city do you think this report was referring to?read more...»
For years the government has tried to lift research and development spending as a share of national income - but seemingly to no avail. The latest data finds that the UK is spending less on R&D than any other EU country. What might this mean for the supply-side competitiveness of the economy?
The data finds thatread more...»
Here is a revision presentation for an AS Macro topic - macroeconomic equilibriumread more...»
Here is a revision presentation for an AS Macro topic - aggregate supplyread more...»
Robert Peston looks at the astonishing investment in urban infrastructure in China in recent years - 30 new airports, 26,000 miles of motorways and a new skyscraper every five days have been built in China in the last five years - required viewing for those interested in a key aspect of Chinese economic growth and development. Link to How China Ruled the World (BBC World)read more...»
Here are ten questions for students wanting to check their understanding on supply-side economic policies .... and improve their bobble shoot tekkers at the same time! Courtesy of our sister site Zondleread more...»
The concept of the 'output gap’ is central to mainstream macroeconomics. It is not merely of academic interest.
The Office for Budget Responsibility (OBR) has a specific requirement to estimate the output gap, which it defines formally as “the difference between the current level of activity in the economy and the potential level it could sustain while keeping inflation stable”.
The output gap is a key consideration for central banks around the world including the Bank of England. If output is well below its potential, nominal interest rates should be kept low, to try to stimulate the economy. And a large output gap should keep cost and price inflation low. Prices are hard to put up in a depressed economy.
See: http://www.bbc.co.uk/news/business-23145755 for a discussion of the changes made to the policy of forward guidance.read more...»
I hope I'm right about this, but there should be plenty of blogs in 2014 on the impact of any economic recovery on inflation, unemployment, trade and so on. At this stage, even the idea of an economic recovery might seem a bit optimistic (Paul Ormerod looks back over 2008-2013 here). After all, we're only talking about the economy getting back to where it was in 2008, in GDP terms.read more...»
If you didn't quite grasp the importance of agglomeration economies in driving and sustaining growth and wealth creation in cities, then this wonderful piece from Bridget Rosewall will do it I am sure! It highlights the importance of vision and a willingness to take risks in bond-funded infrastructure projects in London (and elsewhere). Bridget Rosewall's new short book is available direct from the publishers - click here for details
Here is a revision presentation on the economics of producer and consumer subsidies as forms of government intervention in markets. There are a number of up to date examples highlighted together with an evaluation of the benefits and costs of subsidy payments. This is designed as a revision aid for unit 1 students taking their microeconomics papers.read more...»
Long term youth unemployment is a persistent structural problem for the British economy - this BBC news article provides a ray of hope as Nestle announces extra investment in their training / apprenticeships schemes for younger workers. A more pro-active approach from larger businesses would be welcome - offering paid experience to help break the catch-22 of no job without experience, no experience without a job. Nearly one million young people (16-24) are unemployed in the UK, while youth unemployment in Ireland is 28 per cent with more than 65,000 young people out of work.read more...»
I've recently looked at the issue of a smaller slice of GDP going to wages, and here are a couple of links and updates on the minimum wage discussion. For those of you who follow this topic, you’ll also perhaps be familiar with the idea of a living wage, which is based around the argument that minimum wages are too low anyway.read more...»
This topic is of profound importance. It gets the heart of a fundamental economic issue: the distribution of income. When national income rises, does that extra income go into the pockets of workers or capitalists?
The answer is clear cut: labour is getting a smaller slice of the pie. How and why might that be happening, and what might be done? Here are links and summary of a couple of articles, plus a great Economist video clip.read more...»
UK immigrants who arrived since 2000 are less likely to receive benefits and less likely to live in social housing than UK natives. What’s more, over the decade from 2001 to 2011, they made a considerable positive net contribution to the UK’s fiscal system, and thus helped to relieve the fiscal burden on UK-born workers.
The positive contribution is particularly evident for UK immigrants from the European Economic Area (EEA – the European Union plus three small neighbours): they contributed about 34% more in taxes than they received in benefits over the period 2001-11.
These are the central findings of a comprehensive analysis of the fiscal consequences of immigration to the UK, published today by the Centre for Research and Analysis of Migration (CReAM) at University College London.read more...»
Suyash Raj Bhandari considers some of the ways in which the rapid expansion and adoption of mobile technology in Africa can act as a spur to growth and development on the continent. We link also to some useful background video resources on this issue.read more...»
This is an updated revision presentation covering some of the factors that determine short run aggregate supply (SRAS) in an economy. Click here to take a quick revision quiz on short run aggregate supply.read more...»
Young adults in England have scored almost the lowest result in the developed world in international literacy and numeracy tests. A study by the Organisation for Economic Co-operation and Development (OECD) shows how England's 16 to 24 year olds are falling behind their Asian and European counterparts. England is 22nd for literacy and 21st for numeracy out of 24 countries.
New Labour and the educational establishment harangued us for years about the stupendous success of the system, as record numbers of both passes and A-grades in GCSE and A-levels were registered year after year. The OECD study, by no means the first of its kind, confirms what many suspected. Grade inflation was rampant, and the statistics had as much meaning as the pronouncements about production levels made in the Soviet Union. Actually, that is unfair. When the Soviet Union said 10 million boots had been produced, they really had been. They might have been poor quality and all left-footed, but the boots did exist. It now turns out that many people with GCSE passes can barely read and are virtually unable to add up.read more...»
The entrepreneur is considered crucial in economics: so crucial that they are even described as a factor of production, listed alongside land, labour and capital. Supply side economic approaches often recommend policies that will encourage and support entrepreneurs, as a way of stimulating the economy.read more...»
On the World Bank twitter account, President Jim Kim is quoted as saying that "Properly managed, new minerals wealth could transform Africa’s development." Back in June 2013, a new report from the African Progress Panel looked at this important issue and set out an agenda for maximising Africa’s natural resource wealth and using it to improve well-being.
My own students have been researching the economics of natural resources and whether they can be a blessing and/or a curse to countries seeking sustained growth and development. I just wanted to share one or two of these essays with you because I was delighted with the depth of the independent research on show and the quality of evaluation in their arguments.read more...»
Does migration harm developing countries? Professor Paul Collier is interviewed by the Guardianread more...»
Here is an updated revision presentation on aspects of the natural resource trap or natural resource curse issue facing low (and also high) income countriesread more...»
A revision presentation on aspects of the links between investment and economic growth. Plus some slides on the causes of the so-called Middle Income Trapread more...»
Here are some video resources on Shanghai's new tree trade zone. The Financial Times reports that "The Chinese government has declared that it wants to use the zone – a small 28 sq km sliver of Shanghai – as a test bed for policies from interest rate liberalisation to capital account opening - There are no residents in the zone – only offices, factories and hotels" There is much debate about whether the creation of a new free trade zone will bring about greater digital freedom in China - allowing for example, freer access to social networks such as Facebook and Twitterread more...»
Mobile phones have changed how we negotiate our relationships with family, spouses and close friends. Increased levels of mobile phone subscriptions are linked with improvements in education, gender equality and political participation, particularly in developing countries. They are also associated with higher economic growth.read more...»
There are lots of resources out there for students and teachers wanting to cover the debate about HS2 - here is a brief selection of video clips on the debateread more...»
The Ethiopian government is ploughing up to 15% of her GDP into large-scale infrastructure development projects - will this kick start a renewed period of fast growth and development? The Grand Ethiopian Renaissance Dam will be the largest hydroelectric power plant in Africa when completed, delivering 6,000MW. The cost and the potential impact of diverting the Blue Nile have created controversy in the region. This FT video looks at some of the issues. This BBC news resource is also useful: The dam that divides Ethiopiansread more...»
With a deep recession and persistently high rates of unemployment among younger people. fears are growing about a brain drain in Portugal as highly qualified university graduates leave the country in search of a better life. Peter Wise, Financial Times Lisbon correspondent, reports on what the trend means for the troubled Portuguese economy. Losing "the best of a generation" poses important long-term threats to the competitiveness of the Portuguese economy. Some are moving to Angola and Brazil, the UK has also attracted skilled workers in health care, banking and IT.read more...»
Why is economic growth such a rare and elusive butterfly in the UK garden? What institutions and policies are needed to sustain UK economic growth in the dynamic global economy of the twenty-first century?read more...»
Here is a superb five minute news video from the Financial Times that could serve as an excellent introduction to both micro and macroeconomics. Helped by EU structural funds, Portugal has invested huge sums in their motorway network; indeed Portugal has four times more motorway road space per head of population than the UK. However beset by persistent recession and the lagged effects of high fuel prices, many of these gleaming new roads are virtually empty - a waste a scarce economic resources. Road traffic has fallen more in Portugal than in any other European country in the past 15 months. Peter Wise, Lisbon Correspondent, reports on why empty roads provide a revealing insight into the depth of the country's recession.read more...»
What effects does the rapid growth and development of the Chinese economy have on the prices we pay in the UK for different goods and services. This short video from the Bank of England looks at some research into the impact of China on our own consumer price index. It is good for deepening your understanding of the inter-connections between the two economies.read more...»
Access to affordable comprehensive child care and schooling is widely regarded as being crucial to improving the incentives for mothers to actively search for and take paid work. Effective early years education also has a long run positive effect on employment prospects and is important as part of the overall supply-side capacity of the economy.read more...»
In its annual assessment of the U.K. economy, the IMF called on the UK to invest in skills and infrastructure and increase banking sector competition in order to foster growth and achieve a sustainable recovery.
The report can be found here and contains plenty of relevant background information on the current situation facing the UK - here is a selection of quotes from their summary
We link here to a recent 45 minute illustrated lecture given by Professor James Sproule on the impact of demographic change on competitiveness and growth prospects for the UK and other economies.
Economic growth depends on productivity gains and changes to the workforce. With service sector productivity gains diminishing and baby boomers across Europe approaching retirement, businesses face crucial questions on how they will fare. What can be done to maintain levels of prosperity in the UK?
There is far more uncertainty in economics and policy-making than many would have us believe, according to Professor Charles Manski of Northwestern University. This RES Short Video introduces us to some examples of uncertainty in policy decisions such as the incentive effects of tax changes.
Every year billions of dollars in aid go to the world's poorest countries. But does it help these countries to grow out of poverty? The question is as old as foreign aid itself. In this RES short video, Michael Clemens of the Centre for Global Development presents award-winning research that offers a new way of answering this question
The scale of the new London Gateway Super deepwater Port is truly stunning and its importance to the economy as a trading nation is hard to underestimate - Britain will have a new world class hub port in a key location impacting on many trades and services in and around the South East and beyond. It has taken 10 years to establish and build this huge new infrastructure project, building eventually started in 2008.
Behind the port sits Europe's largest logistics park connected to the South east by road and rail.
This Financial Times news video looks at the background to the project - it is a good example to consider of the macroeconomic consequences of the investment. What price a new Thames Estuary airport (supported by Boris Johnson) to amplify the transformative impact in the years ahead?
Update: BBC news (November 2013) - click hereread more...»
The High Speed 2 rail project is under fire on many fronts. The Nimby protests in the affluent Home Counties have been augmented last week by more weighty criticism by the National Audit Office (NAO) of the scheme. At least, this is how the NAO’s work has come across in the media.
But the NAO review of the HS2 project is in many ways much more a criticism of the Department of Transport than it is of the high speed rail link itself. According to the NAO, ‘the Department’s methodology for appraising the project puts a high emphasis on journey-time savings, from faster and more reliable journeys’. Surely this is a sensible thing to do? Faster mean less journey time. It seems obvious.
This blog entry links to some of the significant UK infrastructure projects that are current or planned - all of which cover many aspects of economics including cost benefit analysis, public and private funding, the macro effects of major capital projects and regional / industry implications.read more...»
The annual NORFACE migration conference at University College London this week has generated plenty of new research papers on the economics of international migration, a topic that of growing significance for students of globalisation, competitiveness, innovation and growth. Some of the key findings are summarised below together with external links to relevant articles and news reportsread more...»
The European Union has just released some new figures on the spread of hourly labour costs among the member nations of the European Union. Labour costs are made up of wages & salaries and non-wage costs such as employers' social contributions e.g. national insurance payments in the UK. Students who have covered aggregate supply and demand theory might be able to consider why changes in labour costs can have an effect on key macroeconomic indicators such as inflation, demand, exports and growth.
Hourly labour costs are different from unit labour costs - the latter takes into account the productivity of people employed. For example, a 5% rise in hourly labour costs will leave unit labour costs unchanged if productivity rises by 5% over the same time period.read more...»
A recent World Bank report asked ‘Where is the Wealth of Nations?’ Calculations presented at the Economic History Society’s 2013 annual conference show that for Britain, the answer is undoubtedly in its people.
Dr Jan Kunnas and his colleagues calculate that Britain’s ‘human capital’ has grown by a multiple of 123 over the past 250 years. The main drivers of this phenomenal growth have been the growth in the workforce and the growth in wages.
The researchers define human capital as the knowledge and skills embodied in individuals – and they measure it by the discounted earnings the population is expected to earn during their time in the labour force.We have an extended revision note on human capital and economic growth - read it here
The Changing Wealth of Nations - World Bank reports can be accessed here
GDP per hour – labour productivity – in the UK remains lower than at the beginning of the recession in 2008. A special session at the Royal Economic Society on Friday 5 April held jointly by the Centre for Economic Performance (CEP) and Institute for Fiscal Studies (IFS) investigated the causes of this mystery. It was also the subject of BBC Rradio 4 In Business - click here
See also: the Job Rich Depression (The Economist)read more...»