Read Eamon Quinn’s WSJ interview with Michael Noonan here.
Year: 2012
Further information on Geary Lecture and seminar by Tim Besley below. To reserve a place at either/both event(s) please email geary@esri.ie and state clearly which event(s) you wish to attend.
Geary Lecture: Tim Besley
4pm Friday 19 October at ESRI
Making and Breaking Tax Systems: The Institutional Foundations of Fiscal Capacity
We have become accustomed to governments having the fiscal capacity to support revenue raising of more than 40% of GDP. But such levels of taxation were unheard of before the 20th century. This lecture will review some of the trends in taxation over the past one hundred years and how the tax systems were created which support the needs of modern governments. It will use this historical perspective to reflect on the challenges that need to be confronted in trying to build a centralized fiscal state in Europe.
Research Seminar, 1pm Friday 19 October, at ESRI
The Welfare Cost of Lawlessness: Evidence from Somali Piracy
This paper estimates the effect of piracy attacks on shipping costs using a unique data set on shipping contracts in the dry bulk market. We look at shipping routes whose shortest path exposes them to piracy attacks and find that the increase in attacks in 2008 lead to around a eight to twelve percent increase in shipping costs. We use this estimate to get a sense of the welfare loss imposed by piracy. Depending on what is included, we estimate that generating around 120 USD million of revenue for pirates in the Somalia area led to a welfare loss of anywhere between 0.9 and 3.3 USD billion. Even at the lower bound, therefore, piracy is an expensive way of making transfers.
The latest overview of competitiveness for the 27 member states is here. Ireland gets a mixed review, with the Commission reporting:
Ireland has made good progress in achieving its adjustment programme’s goals. Despite the remaining challenges, these efforts have improved business prospects and strengthened competitiveness.The challenge for Ireland is to improve the prospects of the domestic SMEs. The sector is held back by weak domestic demand, lack of innovation, problems with access to finance, and rising costs of doing business at local level. The government should continue to keep a close eye on access to finance, as improvement in this area is crucial for future growth. The lack of domestic demand and lack of finance have lowered the level of investment in equipment, which remains under the EU average.
The Irish government’s ‘Action Plan for Jobs 2012’ is a broad-based plan to address these challenges. If implemented steadfastly, it could considerably reduce the differences in the competitiveness of the domestic and multinational sectors. The challenge is to avoid the fragmentation of efforts, and to increase policy focus on the most promising initiatives enhancing innovation and growth.
They show the following graph for Ireland, which makes for interesting reading.
Chapters and summary version available here.
The dataset underlying the empirical exercise is available here.
The general message that the IMF on average underestimated the impact of fiscal austerity on output growth is plausible; it is also important to acknowledge that the cross-country correlation between the scale of fiscal austerity during 2010-2011 and growth forecast errors is far from perfect.
Of the 9 countries with expected fiscal tightening of greater than 1 percent of GDP in 2010-2011, there was certainly overoptimism about Greece, Romania, UK, Slovenia and Portugal (growth undershoots of 7.1 percent, 5.2 percent, 1.1 percent, 2.0 percent and 1.1 percent respectively). The growth undershoot for Ireland was 0.1 percent (ie close to zero), while Spain had a slight overshoot (+0.2 percent) and Belgium a larger overshoot (+1.7 percent).
The empirical exercise is linear so the results are also influenced by the nature of growth forecast errors in countries experiencing fiscal relaxation. Of the 5 countries with expected fiscal relaxation above 1 percent of GDP in 2010-2011, there were positive growth surprises for 4 countries (Finland +3.2 percent; Austria +2.4 percent; Cyprus +0.4 percent; Germany +3.7 percent) while Denmark had a small growth undershoot (-0.4 percent).
(All numbers rounded to 1 decimal place.)
It will be interesting to see updates of this work in relation to fiscal adjustment and growth performance in 2012.