The Unassuming Economist

From Natural Resource Governance Institute: 

“Fiscal rules—permanent quantitative constraints on government finances—are an important tool to help mitigate the macroeconomic challenges associated with managing natural resource revenues. Partly inspired by successes in managing resource revenues in countries such as Chile, Peru and Norway (countries that have established fiscal rules and have abided by these budgetary constraints for over a decade), more countries have been adopting such rules.

The authors of this paper reviewed the use of fiscal rules across countries assessed in the Resource Governance Index (RGI). For each of the 34 RGI countries with fiscal rules, they reviewed the evidence on the rule’s characteristics, the compliance with the rule, and oversight of this compliance. They analyzed levels of compliance in 2015 and 2016, the years directly following the commodity price crash. The research provides new insight into how these fiscal rules performed during serious economic shocks.

The analysis sheds light on large gaps in compliance and oversight of fiscal rules, and the paper provides policy recommendations on how fiscal rules can be further strengthened.”

Continue reading here.

A new IMF working paper finds “striking differences in the evolution of labor force participation across countries, and even more across groups of workers. While the heterogeneous timing and pace of the demographic transition can explain part of the divergent trends, other factors, including policies and differential exposure to the global forces of technological progress, are also at play.”

“The findings of this paper suggest that many countries so far successfully counteracted the negative forces of aging on aggregate labor force participation by strengthening the attachment of specific groups of workers to the labor force. Changes in labor market policies and institutions, together with structural changes and gains in educational attainment, account for the bulk of the increase in the labor force attachment of prime-age women and older workers in the past three decades. Conversely, technological advances, namely automation, while beneficial for the economy as a whole, weighed on labor supply of most groups of workers, and can partially explain declining prime-age male participation. Individual-level evidence confirm the significant impact of vulnerability to routinization, and that detachment from the labor force is significantly more likely among individuals whose current or past occupations are more vulnerable to automation. But encouragingly, higher spending on education and active labor market programs, and access to more diverse labor markets, tend to attenuate this negative effect, at least for prime-age workers.”

From Tim Harford:

“My list of five of the best introductions to economics wasn’t exactly the usual suspects, but I wanted to stray a little further off the obvious territory and recommend six books you might want to read to give you an unusual introduction to economics.

A couple of years after the financial crisis I came across Charles Perrow’s Normal Accidents (UK) (US). Perrow is a sociologist who became fascinated by particular kinds of system, ones which were “complex” (meaning that consequences of error are unpredictable) and “tightly coupled” (meaning that the consequences unfold quickly and irreversibly). His case studies include terrible accidents such as the Challenger disaster and Chernobyl – hauntingly described – but I increasingly came to realise that economic and financial systems could and should be studied with the same eye.  (For the same reason, I’d also recommend anything by James Reason. (UK) (US).)

Yoram Bauman and Grady Klein’s Cartoon Introduction To Economics (UK) (US) is perfectly conventional in many ways – except that it’s a cartoon, and also pretty funny, as you might expect from Bauman, a stand-up comedian. Good stuff.”

Continue reading here. 

From a new post by Julia A. Seymour :

“New York Times economist Paul Krugman immediately reacted to the 2016 election of Donald Trump by warning of a possible “global recession.” Perhaps Yahoo! was taking pointers for its latest series. Even though the economy has been doing well, Yahoo! Finance just launched “Your Next-Recession Survival Guide” warning it is “time to prepare for the economic downturn, which could occur as early as 2020.” The new series began June 20.

[…]

In general, forecasting is unreliable. Financial Times wrote in 2014 that an analysis of all 1990s economic forecasts concluded there was great similarity between them and “the predictive record of economists was terrible.” Prakash Loungani, the author of the study, said “The record of failure to predict recessions is virtually unblemished.” ”

My paper is available here.

From a new IMF working paper:

“In this paper, we quantitatively investigate the macroeconomic and distributional impacts of fiscal consolidations in low-income countries through VAT, PIT, and CIT. We find that VAT has the least efficiency costs but is highly regressive, while PIT and CIT lead to higher output and consumption drop, but have better distributional implications. Further, we find that cash transfers targeting rural households are able to mitigate the negative distributional impacts of VAT, while public investment shows almost no distributional impacts.”

“Our results suggest that low-income countries indeed face very different equity-efficiency tradeoffs comparing to advanced economies due to their unique economic structure. It therefore is important to investigate quantitatively the impacts of other tax instruments that have been extensively studied under the environment of advanced economies. For instance, we believe that the optimal progressivity of income tax is also a critically important feature in low-income countries. It is also interesting to study whether and how will classical optimal taxation results under complete markets change when migrated to an economy resembling low-income countries. Another limitation of our study is the omission of transitional dynamics in our model, which is important to the evaluation of short-run welfare effects. We leave these extensions to future work.”