The Unassuming Economist

A new paper from the King Abdullah Petroleum Studies and Research Center finds that:

“This paper identifies key determinants that appear to shape OPEC’s quota strategy and implementation. Using econometric estimations, it examines the factors that seem to most influence members’ adherence to their production commitments in the short term and what drives the organization’s quota decisions and level of compliance in the longer term

Key findings:

• Global oil market indicators such as oil price, global crude oil demand, six-month global demand projections, and the output of non-OPEC producers primarily drive OPEC’s quota decisions. Macroeconomic indicators, such as global gross domestic product growth and inflation, appear to play an insignificant role.

• The sampled OPEC member countries have different drivers of oil production. The output of the Gulf Cooperation Council countries and Iran is significantly affected by OPEC’s quotas and their reaction to the compliance levels of other OPEC members.

• The national oil production of Algeria, Nigeria and Venezuela appears to be primarily driven by a portfolio of economic, financial and political indices.

• Exogenous shocks impact OPEC quota levels and production. These mostly include country-specific shocks which can be external (e.g., sanctions) or domestic (crises, strikes or military conflicts). The impact of such events, however, is usually alleviated on the OPEC level, indicating the organization’s ability to balance its aggregate supply.”

From a new working paper by Priya Ranjan and Giray Gozgor:

“We construct a theoretical model to capture the compensation and efficiency effects of globalization in a set up where the redistributive tax rate is chosen by the median voter. The model predicts that the two alternative modes of globalization- trade liberalization and financial openness- could potentially have different effects on taxation. We then provide some empirical evidence on the relationship between taxation and the alternative modes of globalization using a large cross-country panel dataset. We make a distinction between de jure and de facto measures of globalization and find a robust negative relationship between de jure measures financial openness and tax rates. There is no robust relationship between de facto measures of finanical openness and taxation. As well, the relationship between trade liberalization (both de jure and de facto measures) and tax rates is not robust and depends on the measures of taxation as well as the time period of analysis.”

A new IMF working paper by Ezequiel Cabezon and Christian Henn says:

“Based on a permanent income analysis, Gagnon (2018) has prominently suggested that Norway has saved too much, thereby free-riding on the rest of the world for demand. Our public sector balance sheet analysis comes to the opposite conclusion, chiefly because it also accounts for future aging costs. Unsurprisingly, we find that Norway’s current assets exceed its liabilities by some 340 percent of mainland GDP. But its nonoil fiscal deficits have grown very large (to almost 8 percent of mainland GDP) and aging pressures are only commencing. Therefore, Norway’s intertemporal financial net worth (IFNW) is negative, at about -240 percent of mainland GDP. As IFNW represents an intertemporal budget constraint, this implies that Norway’s savings are likely insufficient to address aging costs without additional fiscal action.”

 

A new IMF country report says that “Saudi Arabia’s labor market is characterized by a persistently high unemployment rate, low private employment ratio, and a low labor participation rate for nationals. The authorities are undertaking a wide range of labor market interventions to address these issues. The analysis in this paper shows that these interventions are helping to reduce distortions in the labor market, including by boosting female labor force participation and reducing the wage gap between expatriates and nationals in the private sector, but the impact on the rest of the economy is not always positive as firms adjust to the higher cost of labor. Reforms should therefore be gradual to minimize their impact on growth. A comprehensive set of policies is also needed to foster job creation for nationals. Measures should include policies toward levelling the playing field between national and expatriate workers so that employers have less of a preference for employing expatriates, setting clear expectations about the limited prospects for public sector employment, boosting female labor force participation, and strengthening education and training to support increased productivity of nationals.”

On cross-country:

• Manufacturing decline reduces house price volatility – VOX
• How does the US-China trade war impact China’s real state market and beyond? – Knight Frank
• Tres estudios universitarios muestran que las plataformas de alquiler turístico han encarecido el mercado del alquiler en ciudades como Los Ángeles y Boston – El Pais

On the US:

• What’s up with housing investment? – Rutgers Center for Real Estate
• The Bipartisan Cry of ‘Not in My Backyard’ – New York Times
• Housing Is Back, But the American Dream Isn’t – Bloomberg
• Are More Adults Sharing Housing? – Harvard Joint Center for Housing Studies
• When the Federal Government Takes on Local Zoning – CityLab
• Where Black Homeownership Is the Norm – The Pew Charitable Trusts
• How HUD Can Help the Housing Market – Wall Street Journal
• Foreclosure Starts Increase in 44 Percent of U.S. Markets in July 2018 – ATTOM
• Investigating Metro-Area Home Improvement Spending Cycles – Harvard Joint Center for Housing Studies
• The rebounding mortgage market, in three charts – Urban Institute

On other countries:

• [Australia] That unfolding Australian house price crash – Financial Times
• [China] China Property: Monthly Report – Foresight
• [New Zealand] Will banning foreign buyers solve homelessness in New Zealand? – Reuters

Photo by Aliis Sinisalu