Keynes in Ireland

Keynes’ famous lecture on economic experimentation, delivered at UCD in April 1933, has recently become available online.

The New UK Government and Northern Ireland Corporation Tax

Northern Irish economists and politicians were delighted to have secured a commitment in the Conservative Party election manifesto (here) to “produce a government paper examining the mechanism for changing the corporation tax rate in Northern Ireland”.   There is cross-party agreement in the Assemby for adoption of the Republic’s 12.5% rate.  An interesting paper by the Northern Ireland Economic Reform Group (here) explores the legal issues, drawing heart from the European Court of Justice’s “Azores Judgement”.

More on Bank Executive Pay

The comedy of errors continues.

From a recent Irish Times article by the forensic and understated Colm Keena: “Lenihan said he was going to seek a cap of 500,000 euro on the salaries of the chief executives of Bank of Ireland and AIB… When the then governor of the Bank of Ireland wrote to Lenihan about Boucher’s pay arrangements, he suggested pay of 500,000 euro and a “pension cash allowance” of 123,000 euro. The Minister did not want the new chief executive getting any allowance that had been criticised in the (Covered Institution Remuneration Oversight) Committee report, and the amount ended up being rolled into a salary of 623,000 euro. Ironically, this appears to have been an improvement in Boucher’s terms, as the salary amount is pensionable, while the cash allowance is not”.

Ireland’s inward-FDI sectors over the recession

Adele Begin and I have just issued a working paper (available here) on the performance of foreign-owned industry and services over the recession, and prospects for the future.

The non-technical summary reads as follows:

The current global downturn has been accompanied by a collapse in international foreign direct investment (FDI) flows.  Having reached an all-time high in 2007, worldwide flows fell by 14 per cent in 2008 and by a further 30 percent in 2009.  Given the FDI intensity of the Irish economy, this collapse might be thought to have particularly adverse implications for Ireland.  FDI inflow data however are the outcome of complex MNC financial decisions and bear only a very weak relationship to MNC employment, investment and export activities in FDI destination economies.

The analysis presented here of the recent performance of Ireland’s inward FDI sectors shows them to have played an important role in helping to stabilise the economy in the face of severe downturns in both export and domestic markets. A critical factor in this has been the particular sectors in which foreign-owned MNCs in Ireland operate.  Export demand for pharmaceutical products and medical devices in particular has remained relatively buoyant.  Employment in Irish-owned exportables (i.e. in Enterprise Ireland-assisted firms), on the other hand, fell more over the course of the downturn than did employment in the entire private sector, which is largely ascribable to the weakness of sterling

The paper also explores the country’s medium-term prospects in key foreign-dominated sectors such as ICT, pharmaceuticals and international financial services, which are experiencing substantial structural change.  The consequences of ongoing developments in the global FDI market – such as the growth of China – and in the international regulatory and corporation-tax environments – including recent and prospective policy changes on the part of the new US administration – are also assessed.

Politics and Economic Policymaking

This field of study addresses issues such as the factors militating against the adoption of growth-enhancing policies, even when politicians themselves might favour them, and the various sources of political cover that might be available to help resist such pressures.  (Some of the bigger questions can be intuited from the way I’ve phrased these particular ones).  A former student of mine emailed me recently to say that she found these topics “ridiculously interesting; it’s almost like reading gossip”.  (Thank you, N!)  I haven’t yet begun to model these processes (spent the semester boning up on game theory with the intention of doing so) but some of my musings on the topic (in the context of the last 50 years of Irish economic history) are available in this recent paper.  I have discussed other examples of available political cover, such as the “golden straightjacket” of EU and WTO rules (to use Thomas Friedman’s phrase from The Lexus and The Olive Tree) , in other recent writings.