The Unassuming Economist

From McKinsey:

“Our newest McKinsey Global Institute (MGI) report, The next big arenas of competition, tells the story of “wizard” industries that grow at fantastic rates, spawn giants, and even shape-shift. We call them “arenas of competition,” and in the past 20 years, they have come to permeate the global economy.

“If I wind back the clock to 2005, the top ten titans of industry were oil companies, retailers, pharmaceuticals…and one software company, Microsoft. The average market cap was $250 billion,” recalls Chris Bradley, a McKinsey senior partner and MGI director. “Today, nine out of the top ten have been replaced by companies that are giant—eight times bigger in value—at 1.9 trillion, and almost all are driven by new technologies and business models. Under our noses, there’s been this radical shift in the industrial landscape, and we wanted to understand why and what it looked like.”

The report identifies 12 thriving arenas that began in 2005 and previews 18 that we think could shape the future. Here, four authors, Chris; Kweilin Ellingrud, a McKinsey senior partner and MGI director; Kevin Russell, an MGI senior fellow; and Suhayl Chettih, an engagement manager, share insights from the research.”

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From mint:

“There is a strong business case for inclusive leadership. Research carried out by BCG points out that inclusive leaders cut down employee attrition risk by as much as 76 per cent. Reports over the years have also correlated diverse leadership teams to not only a boost in morale, productivity, psychological safety, and belonging which results in talent retention, but also a significant improvement in financial performance.

While year-on-year business growth remains critical, McKinsey’s latest study also highlights how organisations today are keen on driving holistic impact. This values the interests and needs of all stakeholders – employees, customers and investors. Moreover, with GenZ entering the workforce, prioritising ESG goals, and a shift towards sustainable, inclusive growth become part of this changing picture.”

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From a paper by Iyanuoluwa Fatoba and Adewumi Otonne:

“This study aims to investigate fiscal policy shocks’ impact on Nigeria’s Income Inequality and
Household Poverty. Using the impulse response function and variance decomposition technique
within the Bayesian Vector Autoregressive framework (BVAR), findings from the study show that
from year 2 to 15, a 1% shock to tax revenue (i.e., when taxes are suddenly changed) generates a
reduced average impact of 0.036% on household poverty. In contrast, household poverty increases
with shocks to government expenditure (i.e., when government expenditures are suddenly altered) in
the short run, with an average impact of 0.022%. In other words, household poverty increases in the
short run (years 2 to 4) and decreases in the medium to long run (years 5 to 15) with shocks to
government expenditure. Similarly, the results show that shocks to tax revenue reduce income
inequality (years 2 to11), and it increases the gap between the rich and the poor in the long run (years
12 to 15). Meanwhile, shocks to government expenditure increase the gap between the rich and the
poor in the short to medium run (year 2 to 6) while decreasing the gap in the medium to long run
(year 7 to15). The implication of these findings suggests that shocks to tax revenue directly benefit
low-income families and individuals in Nigeria. Moreover, as unanticipated alteration of government
expenditure increases household poverty and income inequality in the short run to medium run, any
shock to government expenditure (internal or external) should be combated with pro-poor policy
action.”

From a paper by Jerome Creel, and Jonas Kaiser:

“This paper investigates the stabilization property of fiscal policy by revisiting the notion of
potential output via the use of Okun’s Law including the vacancy-to-unemployment ratio (V/U)
to proxy economic slack. We propose new measures of the US fiscal stance based on observable
data and transparent targets. Our results suggest that the US actually had a more conservative
fiscal stance than official data indicate. This paper also examines fiscal multipliers, which are
larger when V/U, rather than the unemployment rate, is used as measure of economic slack. We
find that state-dependence of fiscal multipliers is as sensitive to thresholds for bad years than
to the slack measure employed in Okun’s Law.”

From a paper by Jan Acedański and Marek A. Dąbrowski:

“This paper provides novel insights into the Feldstein-Horioka puzzle. The famous finding of Feldstein and Horioka (1980) is that despite perfect international capital mobility, domestic saving does not flow among countries to equalise yields but instead is tightly related to domestic investment. We observe that the link between empirical results and their theoretical foundations rarely goes beyond the saving-investment identity, and the research is dominated by empirical approaches coupled with advanced econometric techniques. This paper harnesses open economy macroeconomic models to demonstrate that the saving-retention coefficient informs about the relative importance of shocks rather than the degree of international capital mobility. Using the Monte Carlo experiments and the open economy RBC model, we show that the dominance of spending and foreign shocks moves the distribution of the estimated coefficient towards zero, whereas the prevalence of investment (productivity) shocks shifts the distribution towards one. On the empirical side, we proxy shocks to saving with debt and current account surprises constructed from the IMF’s forecasts and employ them to instrument the saving ratio. Using the CCE estimator, we uncover that, in line with the theoretical framework, the saving-retention coefficient is significantly lower in the instrumental variable regressions than in the regressions without instruments. Finally, we replicate the puzzling finding that investment-saving correlations are higher in advanced economies than in emerging market economies only in a few regressions without instrumentation and demonstrate that the difference disappears when the endogeneity of the saving rate is adequately remedied.”