The Unassuming Economist

From a paper by Angela Okeke, Constantinos Alexiou, and Joseph Nellis:

“We explore the long-term distributional consequences of fiscal adjustment episodes and the dynamic consequences of fiscal consolidation for countries with large sized consolidations vis-a-vis countries with small sized consolidations. In this direction, panel ARDL and impulse response functions using local projections are adopted for a panel of 16 OECD countries covering the period 1980 to 2019 based on a newly updated fiscal adjustment dataset, compiled by Gustavo Adler et al. (2024). The evidence suggests that adverse income disparities which tend to arise upon implementation of fiscal adjustments are dynamic and persist through the long run. While baseline results for the Gini suggest that long-term inequality levels hold at approximately the same as peak levels (by the 7th period), inequality measured by the bottom 40 income share appear to exhibit peak levels at the 14th period, suggesting a more persistent impact. Disaggregating impact by adjustment size, evidence is also offered for small-sized adjustment and large-sized adjustment countries showing that small-sized adjustments lead to gradual but prolonged inequality effects, while large-sized adjustments generate steeper but shorter-lived inequality increases.”

From a VoxEU post by Maarten Verwey and  Kristian Orsini:

“President Trump’s sweeping “reciprocal tariffs” announced on 2 April sent shockwaves through the global economy. This column introduces the European Commission’s Spring Forecast, which depicts a resilient EU economy. Yet growth is set to remain modest, reinforcing the image of a continent buffeted by external shocks and mired in low growth. Tariffs, and even more so, heightened uncertainty and tightening financial conditions weigh on trade and investment. While the labour market remains strong and inflation recedes, households still hesitate to spend, dimming prospects for a more substantial improvement in economic conditions. With policy buffers constrained, the margin for countercyclical support is limited. Still, by fully leveraging its strengths and addressing structural gaps, the EU can move beyond resilience – and thrive even in a more fragmented, volatile, and at times hostile world.”

From a paper by Michael Lloyd:

“In April 2023, Jake Sullivan, in a speech to the Brookings Institute, formally announced the replacement of what had become known since the1990s as the Washington Consensus with a New Washington Consensus. This paper defines and briefly describes the original Washington Consensus. It goes on to describe and discuss in detail the New Washington Consensus and its implications. Finally, the paper outlines the potential Trump approach to this specific Biden legacy, whether or not acknowledged. The broad geoeconomic and geopolitical implications of the unwinding of what is likely to transpire are explored briefly in the context of the Trump Presidency.”

On cross-country:

• How cohesion policy helps solve Europe’s housing crisis – European Commission
• Stronger Asian currencies a mixed blessing for region’s property markets. While currency appreciation may provide relief for property investors, economies reliant on trade and tourism should proceed with caution – South China Morning Post
• NIMBYism and how to resolve it. A diagnosis and a solution. – The Works in Progress Newsletter

Working papers and conferences:

• Bubbling Up? What Consumer Expectations Reveal About U.S. Housing Market Exuberance – Dallas Fed
• El Clasico of Housing: Bubbles in Madrid and Barcelona’s Real Estate Markets – Research Institute of Applied Economics
• Tax Preferences and Housing Affordability: Explorations using a Life-Cycle Model – NBER
• Income Inequality, Mortgage Debt and House Prices – SSRN
• Distributional effects of monetary surprises across regional housing markets – SSRN

On China:

• China’s developers at risk as young home buyers walk away. There are signs of hope for the market but not enough to help developers out of their current predicament – FT

On Australia and New Zealand:

• [Australia] RBA interest rate cuts expected to drive home-buyer activity but economists doubtful of ‘boom market’. Though analysts still expect multiple rate cuts this year, expectations for major drops are evaporating – The Guardian
• [Australia] House prices and Trump tariffs: what does the RBA’s rate cut mean for you? – video – The Guardian

On other countries:  

• [Canada] In Canada’s residential mortgage market, it’s the Big Banks against everyone else – The Globe and Mail
• [Hong Kong] Cheaper private flats in Hong Kong don’t erase need for subsidised housing. Although home prices have fallen, subsidised housing’s raison d’être remains, with larger units much in demand – South China Morning Post
• [Ireland] Ireland’s main banks flag lack of appetite for house building – Reuters
• [Norway] Nordea Questions Norway’s Data on Faltering Home Construction – Bloomberg
• [Spain] Spain Orders Airbnb to Take Down 66,000 Rental Listings. The government is widening a crackdown on tourist rentals as it seeks to alleviate a painful housing crunch. – New York Times
• [United Kingdom] How to fix the UK’s housing crisis. For young adults, property shortages reinforce the feeling that life is a zero-sum game – FT
• [United Kingdom] Average asking price for home in Great Britain hits new high of almost £380k. Rightmove says figure has risen in May by 0.6% compared with April despite lower demand from new buyers – The Guardian
• [United Kingdom] Owners of second homes in Wales are having to sell up. That’s no disaster: it’s a godsend. Council tax hikes on holiday homes aren’t ‘anti-English’ or detrimental to tourism. This is about preserving embattled communities – The Guardian
• [United Kingdom] UK house prices rose by most since 2022 in March, official data shows – Reuters
• [United Kingdom] Kensington and Chelsea house prices fall to lowest since 2013. Sharp decline comes as prime London market suffers effects of higher property taxes, Brexit and non-dom changes – FT

From a paper by Anita Szymanska, and Małgorzata Zielenkiewicz:

“Growing income inequality currently poses a significant threat to sustainable development.
Hence, it is important to monitor this phenomenon, in particular to identify determinants favouring
the deepening of income inequality. One of the significant determinants in this respect is the declining
labour income share in national income. The theoretical justification of the presumption of a negative
relationship between the share of labour in the national income and income inequality has strong
logical foundations. Existing studies indicate, however, some ambiguities as to the strength of this
relationship and the existence of various factors cancelling this relationship. The following study
attempts to verify the existence, direction, and intensity of the relationship between the labour
income share and income inequality in a relatively homogeneous group of 33 OECD countries
studied in 1990–2018. The main hypothesis verified in the study is the assumption that there is
a negative relationship between labour share and income inequality. Our results show that the
relationship between the share of employees’ and self-employed workers’ income in the national
income and income inequality at the general level (i.e., in a group study of 33 countries in total) exists,
is negative and statistically significant, but has a very small share in explaining the behaviour of
income inequality.”