The Unassuming Economist

Source: VoxEU CEPR

“Early signs of a recession can lead to a negative feedback loop, with workers’ concerns about unemployment dampening demand and thus deepening the recession. This column uses a heterogeneous agent model to quantify the importance of the ‘unemployment-risk’ channel for business cycle fluctuations in the US economy. It shows that the channel accounts for around one-third of observed unemployment fluctuations. As the demand amplification through precautionary savings is inefficient, this finding provides an additional rationale for stabilisation policies by policymakers. “

Figure: Estimated response of unemployment to monetary policy and total factor productivity (TFP) shocks

Click here to read the full article.

On cross-country:

• How long can the global housing boom last? Three fundamental forces mean it could endure for some time yet – The Economist

On the US:   

• ‘There may be a slight correction in pricing.’ Real estate attorneys and economists on what buyers need to know about the housing market in 2022 – Market Watch
• Home Values in Already Hot U.S. Market to Surge 14% This Year, Zillow Says. Tampa and Jacksonville in Florida and Raleigh in North Carolina are projected to be most in-demand. – Bloomberg
• Why Tampa will be 2022’s Hottest Market – Zillow
• Real estate market in 2022 will ‘remain very strong,’ expert says – Yahoo Finance
• AEI housing market indicators, December 2021 – American Enterprise Institute 
• Home Ownership More Affordable Than Renting in Majority of U.S. Housing Markets – ATTOM
• What’s Going on With Housing Prices? A Deep Dive into the Discrepancy Between Home Price Indexes, Private Sector Rental Data, and Official CPI Rent Indexes – Apricitas

On China

• China Property Tax Trial Likely Delayed During Real Estate Slump – Bloomberg

On other countries:  

• [Australia] As stimulus wanes, focus on productivity and house prices – Financial Review
• [Australia] Australia Housing Boom Fades as Melbourne, Sydney Pull Back – Bloomberg
• [Australia] Australia’s housing market faces headwinds as supply likely to outpace demand, analysts say – South China Morning Post
• [Ireland] The impact of COVID-19 on house prices in Northern Ireland: price persistence, yet divergent? – Journal of Property Research
• [New Zealand] New Zealand Average Home Price Exceeds NZ$1 Million for First Time – Bloomberg
• [Taiwan] Taiwan Central Bank Split on Using Rates to Rein in Housing Market – Bloomberg   

Source: Financial Times

“Territorial inequality of productivity is the core problem; it is what causes inequality of incomes that can only partly be remedied by redistribution. It also suggests an enormous amount of waste — if lagging regions could close at least some of their productivity shortfall, a lot of prosperity would be gained.”

This article delves into ways in which policymakers can deal with regional inequality in the UK, as the wait for further governmental action on it continues. It discusses some aspects on which productivity growth depends, like “slow-to-acquire resources such as infrastructure and skilled labour” and “productive businesses choosing to expand”. Further, it goes on to suggest measures by which this regionally lagging productivity growth can be remedied and ways to target such policies better.

Click here to read the full article.

Related Reading:

The Great Divide: Regional Inequality and Fiscal Policy

Source: VoxEU CEPR

“The role of global value chains for development is often told from a manufacturing or agriculture perspective. This column discusses how the rise of global services value chains offers developing countries with new opportunities by providing jobs, revenue, and productivity growth. In addition, they do so in a more inclusive way than manufacturing. Policymakers need to invest in human capital and address regulatory barriers to services trade to make the most of this development.”

It draws examples of the Indian software services industry and business process outsourcing services in Philippines to expand on the idea of countries joining service GVCs. They find insights about themes like spillover benefits from trade in services and evidence about the relationship between trade and employment in the sector.

Click here to read the full blog.

Related Reads:

The Gains from (Services) Trade

From a NBER paper by Daniel E. Sichel:

“This paper focuses on the price of nails since 1695 and the proximate source of changes in those prices. Why nails? They are a basic manufactured product whose form and quality have changed relatively little over the last three centuries, yet the process for producing them has changed dramatically. Accordingly, nails provide a useful prism through which to examine a wide range of economic and technological developments that touch on multiple areas of both micro- and macroeconomics. Several conclusions emerge. First, from the late 1700s to the mid 20th century real nail prices fell by a factor of about 10 relative to overall consumer prices. These declines had important effects on downstream industries, most notably construction. Second, while declining materials prices contribute to reductions in nail prices, the largest proximate source of the decline during this period was multifactor productivity growth in nail manufacturing, highlighting the role of the specialization of labor and re-organization of production processes. Third, the share of nails in GDP dropped back from 0.4 percent of GDP in 1810—comparable to today’s share of household purchases of personal computers—to a de minimis share more recently; accordingly, nails played a bigger role in American life in that earlier period. Finally, real nail prices have increased since the mid 20th century, reflecting in part an upturn in materials prices and a shift toward specialty nails in the wake of import competition, though the introduction of nail guns partly offset these increases for the price of installed nails.”