Interpretation in fiscal space

The suspension of belief is commonly needed for science fiction.  Most space dramas require alien races to speak English or the existence of some form of instantaneous universal translator.  It now seems that something similar is required when moving in fiscal space.  Fiscal space is the money available for new measures while achieving minimum compliance with the rules.   Lots of words are being used to describe this but can we tell what they actually mean?

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Recent Research on Income-Contingent Student Loans

(This is a joint post with Darragh Flannery of UL and Kevin Denny of UCD).

Income-contingent loans (ICLs) for students were one of the options proposed by the Cassells Report on Future Higher Education Funding when it was published last year (see here). The topic has been back in the news again in recent weeks because of the dissemination of a paper[1] by Shaen Corbet and Charles Larkin, which claims to show that an ICL could not work in Ireland.

Two of us (Doris and Flannery) have done research directly in the area of ICLs – indeed Doris’s research ended up being used by the Cassells Expert Group to provide illustrations of how an ICL might work in Ireland. We both found, using different data sets and different ICL parameters (income thresholds, repayment rates etc.) that the discounted value of loan repayments would be about 75% of the loan values, even when accounting for graduate emigration.[2] Under these repayment rates, there would be no problem operating an ICL in Ireland.

The third poster (Denny) has written papers on the determinants of participation in higher education (HE), the returns to education and related topics and so has a strong research interest in the effects of funding on access to HE.

We were all surprised by the reports of Larkin and Corbet’s results and so went off to read the paper. This had added interest as the research appears to be influencing policy makers.  Given this context and with apologies for the length of the post, we have decided to make our assessment of it public.

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Paper on the recovery in the public finances following the crisis

Next Thursday (May 25) I will present a paper to The Statistical and Social Inquiry Society of Ireland (SSISI) on the recovery in the public finances following the financial crisis. The meeting takes place at the Royal Irish Academy on Dawson Street at 5.30pm. Details (including the paper) are available on the SSISI website here.

 

Producing Short-Term Forecasts of the Irish Economy: A Suite of Models Approach.

A new working paper from Niall Conroy and Eddie Casey of the Fiscal Council Secretariat.

Abstract:

The Council’s mandate includes endorsing, as it considers appropriate, the official macroeconomic forecasts of the Department of Finance on which the annual Budget and Stability Programme Update are based. As part of the endorsement process and for the purposes of its ongoing monitoring and analysis of the Irish economy, the Council’s Secretariat produces its own Benchmark macroeconomic projections. This paper describes the short-run forecasting models used by the Secretariat for producing these projections. The general forecasting approach can be described as follows. Equations are used to forecast each component of the expenditure side of the Quarterly National Accounts. Multiple models are estimated for most components, with the simple model average used as an initial input into the formulation of the Benchmark projections. The out-of-sample forecasting performance of these models is assessed at each endorsement round. In addition to these model-based projections, other elements are considered. Discussions with the Council and other forecasting agencies help to guide any judgement that may be applied before arriving at the final Benchmark projections.

Mortality and Morbidity in the 21st Century

In 2015 Anne Case and Angus Deaton wrote a paper documenting mortality increases among white middle-aged lower socio-economic status people in the United States. The paper attracted a lot of debate both in terms of its political implications and the complexities of the statistical analysis used to calculate the trends (see e.g. Gelman and Auerbach reply, Case and Deaton reply; Noah Smith summary of the debate).

Case and Deaton have recently released another working paper that increases the scope of their original work, including the addition of a wider set of comparison groups, including Ireland. The paper is available at this link. The key table that includes Ireland is below, showing the well-documented declines in mortality during this period, that were partly offset by increases in deaths from drugs, alcohol, and suicide. The late Brendan Walsh had an excellent paper that shows what lies beneath the suicide aspect of most of these trends for Ireland, in particular the competing roles of high but declining rates of alcohol consumption and initially low but then sharply increased rates of unemployment. Richard Layte and others have written about the patterns of mortality during the bulk of this period. The declines in mortality from heart disease among this age group really gives some pause for thought.