Economic and Social Review back in the Social Science Citation Index

Economic and Social Review has been accepted by Thomson Reuters for re-inclusion in the Social Science Citation Index (hence Web of Science).

We should  be  indebted to the work of Niamh Brennan, Programme Manager, Research Information Systems & Services, Trinity College Library Dublin, for her work that showed the citation and publication record of the Journal, during its time in exile, to be of the international standards required by Thomson Reuters.

I personally enjoy writing, teaching and publishing on Ireland.  Work on Ireland published in the ESR was beginning to be seen as not internationally recognized. Hence we saw promotion boards in Irish Universities not counting the publication, yet it was counted in the research assessment exercise in the UK.  This creates poor incentives for scholars to work on Ireland, when in reality it provides extremely fertile ground for economic and social research.

As shown by Lucy and Barrett (2003), the ESR since 1970 has mainly published papers by those that were also publishing in the best Journals in their field, Neary, Honohan, Lane and Whelan, to name a few.  Lane and Whelan also edited the journal when it out of the Web of Science. The ESR is an important outlet for Economic and Social research on Ireland. Hopefully, the economics community will now promote it and build up its citation record to become a leading economic journal.  The researchers in Ireland are as good as those in Australia, Canada and the UK but we are seriously disadvantaged by not having top “home” journals promoted on good digital platforms such as the Web of Science.  

 

 

Well done Niamh, Editors and Contributors

 

 

Alan Barrett and Brian Lucey  (2003). “An Analysis of the Journal Article Output of Irish-based Economists, 1970 to 2001,” The Economic and Social Review, Economic and Social Studies, vol. 34(2), pages 109-143

PSO levy (ctd)

My piece in yesterday’s Sunday Business Post builds on my post of last week. I also included elements of the discussion (thanks!), particularly expanding the bits on import substitution. Having studied in the Netherlands, import substitution was long ago and far away, so I would understand why the average Dutchie would be oblivious to its drawbacks. In Ireland, on the other hand, this policy was tried in living memory.

One of my recommendations is apparently already being followed up.

FT article on German growth

This FT article is well worth reading. It asks a question I had been idly wondering about: is German growth just a reflection of Chinese growth? If so, then the issue of whether Chinese (or more broadly, perhaps, Asian) growth can become self-sustaining, or will continue to largely depend on sales to over-indebted American households, is a question with major implications for the European economy.

Update: I have just come across this piece by David McWilliams on similar themes. I guess the hope for Germany is that their growth is based on more, ultimately, than Chinese exports to the likes of us.

Shanghai Jiao Tong University Rankings 2010

The 2010 rankings are available here, although the site is very busy.

As a semi-Dane, I am pleased to see two Danish universities in the top 100, along with a Norwegian university and a couple of Swedish ones.

TCD is in the 200-300 group, UCD in the 300-400 group.

OK, so all these rankings are to some extent silly, but at least in our field the ones repec put out are ‘order of magnitude sensible’. And given the government’s stress on the ‘knowledge economy’, and the amount of coverage the Times rankings get in Ireland, it seems worth pointing out that not all rankings show Irish universities in such a favourable light.

The Shanghai rankings have had a major influence in France, where policy makers were very shocked by how poorly French universities fared in the initial years of this index. The result was a major shake-up of the higher education sector there, with universities being given a lot more control of their budgets and hiring procedures.

New bibliometric tool

Scholarometer is a new tool to rank academics. It uses crowdsourcing to disentangle people with common names, and to attribute people to disciplines and subdisciplines. It has a widget to display your results on your homepage. And it uses the h_f index, which allows for the comparison of people across disciplines. Paul Krugman beats Stephen Jay Gould.

One for competition

This is old hat. Blame too much summer travel. It is worth highlighting nonetheless.

The High Court ruled in favour of a private bus company, trying to compete with Dublin Bus. The judge said the regulator was wrong to allow the subsidized, state-owned incumbent to share a route with a private operator. The judge berated the consultant to the regulator. The judge also ruled that the regulator wrongly delayed the processing of an application for a second license.

This is good news in itself, and it sets a precedent for future cases (although the legislation is about to change).

Note that the High Court implied that, for urban bus transport, competition should be for the market rather than in the market. That is right for all but the busiest routes.

National Consumer Agency report on grocery prices

Details of the latest NCA report on grocery prices here. Highlights include the fact that the prices of branded grocery products fell by 14% between between January 2009 and July 2010, the fact that there is almost no difference in the cost of a basket of branded grocery goods between the four main retailers (including SuperValu) and the fact that price competition in the Irish grocery market mainly takes the form of promotions and special offers and by juggling small price changes on specific items.

Six stores were visited, but because the multiples (though not SuperValu) operate a policy of national pricing, prices in any one store are representative for the group as a whole. The data collected is made available in an accompanying spreadsheet, although the link did not appear to be working when I accessed it this morning. The discounters Aldi and Lidl were not included in the survey. Conor Pope in his analysis piece on the survey in the Irish Times today suggests that retailers may be able to `play´ the survey by keeping prices low on the items likely to be included while giving prices free rein on less common items.

The NCA Chief Executive Ann Fitzgerald says that the findings suggest that competitive pricing is still not a feature of the Irish grocery market and to address this there is a real need for a new entrant to the market to offer consumers a real alternative. According to Paul Cullen’s report in the Irish Times, she called for a removal of the cap on the size of retail units under planning regulations, claiming this would stimulate competition by encouraging a big overseas retailer to come to Ireland.

In a variant of the glass half-full argument, one might argue that similar prices are actually a sign of a very competitive market and emphasise more the fall of 14% in prices of branded goods over the past 18 months. However, the previous discussion on this blog regarding Ireland’s high food prices in an  EU context suggests that Ann Fitzgerald has a point.

The cost of triple regulation

There has been some consternation about the announced energy levy. See Times, Examiner, and Independent (in decreasing order of accuracy).

The CER has announced an increase of the PSO levy (currently near zero) to a total of €157 mln a year. This is a levy on a connection, €33/yr for households and €99/yr for small businesses. Large companies pay a levy that depends on the capacity of their connection: €14/kVA/yr. The method of payment and the distribution of costs makes perfect sense if the PSO levy would be for security of supply (in the sense of avoiding black-outs), but that is only €14 of the €157 mln.

These are small amounts, but the costs are unnecessary. About €72 mln will be a subsidy for peat, and about €43 mln will be a subsidy for wind. That is, we subsidise carbon dioxide emissions and subsidise the reduction of carbon dioxide emissions at the same time!

Tuohy et al reckon that 0.9 mln tonnes of carbon dioxide can be avoided if we do away with the peat subsidies, and save €70 mln. On average, that is €78/tCO2, but their estimate of the marginal cost is €19,500/tCO2! Today’s spot price for emission permits is €14/tCO2.

I am not aware of a detailed study of the implications of the REFIT scheme on emissions and costs. REFIT is part subsidy and part price guarantee, so back of the envelop calculations are more likely to confuse than to illuminate. Suffice to say that REFIT subsidises carbon dioxide emission reduction.

The prime instrument for emission reduction is, of course, the EU ETS. I would think that that is enough. I do not understand why we would also subsidise emissions and emission reduction — and we would save €115 mln while simplifying regulations.

Some say that we need REFIT to meet the renewables obligation, but the EU will likely scrap that as some of the big Member States cannot meet theirs. Besides, it has yet to be established that REFIT is an effective and cost-effective way to meet the renewables obligation. Both renewables and peat are said to help with security of supply (in the sense of import dependence), but that is just another word for import substitution, and the available analysis has not gone much beyond hand-waving.

So, for now, I would think we would be better off without (most of) the PSO levy.

After catch-up

The Economist’s bloggers have a piece on China today which is relevant to Ireland. They ask what happens to an economy’s growth rate, in the long run, once it has caught up to the technological frontier. Their answer, correctly, is that “Historically speaking, the answer is clear—growth slows to 2-3% per year.”

This is a point which Cormac Ó Gráda and I made in a textbook chapter on long run Irish growth a decade ago. Very high growth rates characterise economies catching up to the frontier — Western Europe or Japan in the 1950s and 1960s, the Asian Tigers in the 1960s and 1970s, ourselves in the 1990s. Once you have caught up, 2-3% per annum is about as good as it gets. Allowing a bubble to inflate can obscure this reality over the short to medium run, but in the long run you won’t manage to grow more rapidly than the United States has done over the past century or so: to do so is a sign of an economy that is still in some sense backward.

These are relevant considerations when thinking about what sort of growth rates Ireland can reasonably be expected to achieve over the next decade or two.

Compensating Accident Victims

The President of the High Court, Justice Nicholas Kearns, has established a working group to explore the alternatives to Ireland’s system of lump-sum compensation for accident victims. The group is headed by another judge of the High Court, Justice John Quirke, and has been asked to report by end-year.

The lump-sum system has been modified across the water, where the courts can award recurring payments, in practice index-linked annuities, with or without the agreement of the parties. I argue in the paper below that we should consider following suit in this country.

 http://www.ucd.ie/t4cms/wp10_23.pdf

Good news on the farm

Teagasc colleagues have produced their mid-year assessment of the likely outturn for output and incomes in Irish agriculture in 2010. The main message is that there is a solid recovery in gross margins in dairy and cereals from the awful year in 2009 and also a positive outlook for sheep (helped by the recent announcement of support under the new Grassland Sheep Scheme), but no change is expected on cattle farms where low or negative profitability will continue.  Overall, the Teagasc assessment is that both total agricultural output and incomes should increase by around €300 million this year, which will be an increase of 18% on the operating surplus in agriculture in 2009. Continue reading “Good news on the farm”

Extending the Guarantees

In recent days the heads have AIB and Anglo have called for an extension of the bank guarantees.  (Colm Dohertys conference call transcript here; Mike Aynsleys interview with RTE here.) This has caused understandable dismay given the almost unimaginable costs the original blanket guarantee placed on Irish citizens.  But we should not allow the mistake of guaranteeing already lockedin funds for a period long enough to allow most of them to escape to colour the case against guarantees on new borrowing.   (It should be said that with the governments effective nocreditorleft-behind policy, it is not obvious that losses would have been imposed on long-term creditors with or without the original guarantee.) 

In looking at the case for continuing with prospective guarantees it is important to consider how the credit system would evolve without them.  Without guarantees the cost of new funds would increase, leading to increased pressure to raise rates on new business and household lending.  Moreover, without guarantees there would be greater market pressure to increase capital ratios, which in the current environment is likely to be met by greater deleveraging.    The credit squeeze would worsen. 

I have thought since the outset of the crisis that balance-sheet constraints on credit supply have received disproportionate blame for the credit collapse relative to credit demand and borrower creditworthiness considerations.  But one factor I didnt fully appreciate is how uncertainly about future credit supply can affect current demand.  Businesses will want to limit their debt exposure when there is a risk that their legs will be cut from under them when they try to refinance.   This may go some way to explaining Colm Doherty’s revelation that 40 percent of overdraft facilities are not being taken up.   (Simon Johnson makes a similar point in recent testimony before the U.S. Senate Budget Committee; this wide-ranging testimony is well worth a look more generally.)

The sustained deleveraging by banks, businesses and households risks a Japanesestyle lost decade for the Irish economy.   The recent soft numbers, which have come in despite the stronger performance of broader European economy, could be an early warning.  Restoring confidence in the stability of credit supply is an important part of the policy challenge.   Unfortunately, guarantees on new bank liabilities will probably have to remain a while longer. 

Eurostat: Irish Deficit 36% of GDP in 2010:Q1

I know that the NTMA have already admitted as much but just in case there were any remaining doubts that Eurostat are counting the promissory notes towards this year’s budget deficit, the picture below is a screencap from Eurostat’s publicly available database. Yes, our deficit in the the first quarter of 2010 was 36.51% of GDP. I believe the figure for the year will be about 20%. (Yes it’s my first time using a picture! Perhaps now you can see why.)

Some Lessons for Fiscal Policy from the Financial Crisis

In this new paper, I argue that the current crisis calls for a re-assessment of the optimal conduct of macroeconomic policies during non-crisis normal times. In particular, the risk and costs of crises can be mitigated by macroeconomic policies that lean against the wind in the face of cyclical, sectoral and external shocks. In this paper, I discuss the challenges involved in deploying fiscal policy in pursuit of a broad definition of macroeconomic stabilisation. The main policy conclusion is that pro-stabilisation fiscal policies are likely to be more effective if fiscal policy is determined under a formal fiscal framework that combines a set of fiscal rules and a substantive role for an independent fiscal policy council.  (Forthcoming in Nordic Economic Policy Review.)

The Cross-Country Incidence of the Global Crisis

In this new paper (joint with Gian Maria Milesi-Ferretti of the IMF), we empirically examine the factors explaining the cross-country variation in the severity of the global crisis.  We find that the pre-crisis level of income per capita, increases in the ratio of private credit to GDP, current account deficits, and openness to trade are helpful in understanding the intensity of the crisis. International financial integration did little to shield domestic demand from the country-specific component of output declines, while those countries with large pre-crisis current account deficits saw domestic demand fall by much more than domestic output during the crisis.  (Forthcoming in IMF Economic Review.)

July Unemployment and Exchequer Returns

For an economy that’s supposedly in recovery, the unemployment figures seem to be puzzlingly weak. The July Live Register figures show an increase in the standardised unemployment rate from 13.4% in June to 13.7% in July. Slightly less negative were the July exchequer figures: Tax revenues had fallen from being on target in April to 1.6% behind target in June. The July figures reversed that trend to be only 1.4% behind target.

Still, both sets of figures raise a question. We keep hearing about how GDP figures are supposed to be coming in better than the assumptions penciled into the last budget: How is that to be reconciled with tax revenues being behind budget target and the unemployment rate coming in higher?  (The budget assumed a year average unemployment rate of 13.2%, which is the average for the year so far with the figure now moving in the wrong direction.)

Update: I was interested to hear Minister Eamon O’Cuiv explain the increase in the seasonally adjusted unemployment rate on seasonal factors. Sure unemployment always goes up in July, I heard him say on the radio. You’d think the CSO boffins would have factored that in to their calculations …

The New Banking Data for Ireland

The aggregate banking data for Ireland has been difficult to interpret due to the large volume of international banking activity that is routed through Dublin but which has little to do with the domestic financial system. In a welcome development, the Central Bank has re-organised how it publishes the aggregate banking data. In addition to publishing data for ‘all credit institutions’, it now also publishes data for ‘credit institutions (domestic group)’.  Data and explanations are available here.

In approximate terms for June 2010, the domestic group accounts for 59 percent of the aggregate balance sheet of all credit institutions but 87 percent of domestic deposits and 87 percent of domestic loans (94 percent of loans to domestic private sector).

More Comments on AIB’s Half-Yearly Report

I surely have better things to do with my time but, yes, I spent the evening reading AIB’s half year report (with the Airtricity boys doing us proud in the background.) As John already noted, the report has a lot of pretty bad news in it, so I thought I’d point out some sort of positive news (before getting back to the bad stuff).

Liquidity Situation

The good news? Despite concerns that have been expressed about a looming “wall of cash” moment, AIB looks as though it’s in a position to get through to the end of the year paying back all its debts, though this may require ECB assistance.

Continue reading “More Comments on AIB’s Half-Yearly Report”

A Tough Half Year for AIB

“The six months to June 2010 was a very difficult period for AIB and its customers.”  So begins management’s overview of AIB’s interim results for 2010—and it’s hard to disagree.   Bank watchers were looking for news in three main areas: impairments on non-NAMA bound loans, operating profits, and progress on asset disposals.   Today’s release managed to disappoint on all three. 

Provisions for impairment were 2.3 bl. (including 1.2 bl. for loans “identified for potential transfer to NAMA”).   Operating profit before provisions fell 46 percent from the same period last year, with significant falls in the net interest margin.   And Colm Doherty was not especially forthcoming on how well the disposals of Polish, UK and US assets are going, although his presentation to analysts did give the sense that AIB were being forced into a fire sale in poor market conditions—hardly encouraging. 

Other “news” included the (inevitable) plan to follow BOI in raising the rate on variable-rate mortgages by about half a percentage point, and the (sensible) call to extend the guarantee on both shorter- and longer-term liabilities given the continuing difficult funding environment. 

The interim report is available here.   Colm Doherty’s presentation and Q&A is available here. 

Selling State Assets

Paul Sweeney criticises the idea of selling State-owned entities in today’s Irish Times: you can read his article here.   Paul Sweeney’s contribution is incomplete. In particular, he does not fully address some key issues (I raise these points as questions, without having answers)

  • Liquidity.  If a government faces funding risk, selling valuable-but-illiquid assets may reduce the risk of a funding crisis.
  • Ownership and firm performance.  While Paul Sweeney highlights the potential inefficiencies of privatised firms, he does not have much to say about the possible inefficiencies of State-owned firms where the management or workforce may have objectives that are not fully aligned with the common good.
  • Regulation.  Where monopoly power is a severe problem,  regulation is necessary. Can the Irish regulatory system be made more effective to ensure that sectors inhabited by monopoly-type firms deliver efficient outcomes? Does the identity of owners affect the effectiveness of regulation?

Paul Sweeney also highlights the increasing importance of State-owned firms in Asia, Russia and Latin America. It would be good to know the exact lessons to be drawn for countries such as Ireland from this development.

Eichengreen and Temin on systems failures

Barry Eichengreen and Peter Temin have written classic accounts of the Great Depression. If you haven’t read Golden Fetters, and Lessons from the Great Depression, you should.

But if you don’t have time for that, they have a piece on Vox which reprises the main conclusion of their work:

an international monetary system is .. a system in which countries on both sides of the exchange rate contribute to its smooth operation. Actions by surplus countries, and not just their deficit counterparts, have systemic implications. They cannot realistically assign all responsibility for adjustment to their deficit counterparts.

This is as true for EMU and “Bretton Woods II” as it was for Bretton Woods, or the Gold Standard, but it is a lesson that at times seems to have been completely forgotten.

DoF Document on Tax Reliefs

I wrote a couple of posts (here and here) earlier this year about a Department of Finance release that discusses the impact of restrictions on the use of tax breaks for higher earners via the imposition of a minimum effective tax rate. I pointed out that the document is very poorly worded and leaves itself open to being misinterpreted.

Well, the latest edition of this release is out and it’s still got the same poor wording and it’s still being misinterpreted. I had missed the release when it came out but realised that the DoF’s poor wording had struck again when I heard contributors to Sam Smyth’s Sunday morning radio show discussing the report and saying how puzzled they were at how few people seemed to be earning large salaries (e.g. puzzlement at the idea that only 23 people earned over €2 million in 2008).

Let’s recap on this report. The report does not purport to be a full accounting of the tax paid by rich people in Ireland. Rather, it only covers those who would have paid less than the minimum effective tax rates that have been introduced. So, the whole report relates only to the 423 people who earned over €500,000 and were subject to the minimum effective tax restriction.

The document should emphasise throughout that these 423 people represent only a small subset of those earning over half a million euros in 2008: Unpublished information from the Revenue Commissioners published in the Irish Times last year (nice table here) showed that there were 5,393 cases of people earning over that amount. However, the report does very little to emphasise this point, leaving itself open to misinterpretation.

Sure enough, many people reading the Sunday Tribune today would have been apalled to read this piece about the Department’s “analysis of high-income earners” informing them the report showed “most of those earning more than €500,000 paid tax at a rate between 15% and 20%” and also providing other estimated tax rates that are not at all representative of the rates being paid by average high earners. For example, the figures in the Irish Times table show that the correct figure for the average tax rate paid by those earning over half a million is 32%. Remember also that this doesn’t include PRSI and that these individuals are now paying an additional 6 percent levy on income over €175,000.

I’m not saying there isn’t room to raise more tax from the rich or that tax reliefs shouldn’t be closed but it hardly helps public debate about this issue when the Department issues documents that are so easily misinterpreted.

Update: Ian Guider who wrote the piece for the Tribune linked to above has written to me to point out that the piece mentions 423 individuals and so he reckons it should be clear that all subsequent statements in his article refer only to a small subset of high earning individuals.