The Irish Economy

Stephen Collins reports that ‘project champions’ and their teams will be given large tax breaks to incentivize them to come to Ireland to set up projects that entail ‘new product development’.

Is this a good idea? Anyone know of any empirical evidence on the effectiveness of these types of tax breaks (assuming that they exist elsewhere)?

My invitation to the above event at the week-end being unaccountably delayed, it’s interesting to see the Irish Times relaying the views of colleague Professor Terrence McDonough (IT do note correct spelling please.) here.

In summary:

“He said the country should default on its debt, leave the euro, build a single public bank, provide a jobs guarantee for all workers and nationalise the Corrib gas field.”

One of the most disgraceful decisions of the last government was its U-turn on Assistant Secretaries’ pay. Personally, I wouldn’t blame any low-paid public servant from digging in their heels on pay and conditions when people at the top benefit from this kind of special consideration.

Guess what? They’ve gotten away with it again.

Kevin Myers had a piece in the Indo on Norman names the other day; here is a link to the underlying research, by Greg Clark.

While we are on the subject of what really matters for human welfare, many people expressed approval of the government’s decision to not allow class sizes to increase further. Kevin Denny has been talking about this issue for several years and basically arguing that the evidence on class sizes is mixed at best and that it is more of a teacher workload issue than a pupil welfare and performance issue. He has just put out a paper with colleague Veruska Oppedisano testing the effect of classsizes on pupil performance. According to his results, bigger class sizes are associated with better performance in the PISA data, even controlling for a wide range of controls and using different estimation techniques. I think Kevin would be the first to say that you should be careful about overinterpreting any individual data analysis but it certainly points away from any simplistic assertions about the effects of class-sizes.

For obvious reasons, Ireland has been a prominent feature of the Marginal Revolution blog, one of the best and most widely-read economics websites in the world. Tyler Cowen offers the following summary of Chapter 5 of Fintan O’Toole’s new book.

From Marginal Revolution:

“How Rich Was Ireland Really?

Not as rich as they thought. I’ve been reading Fintan O’Toole’s excellent Enough is Enough: How to Build a New Republic. Mostly it is an expose of Ireland’s crony capitalism and bad political institutions. On economic issues, chapter five offers up the following:

1. During the boom years, property accounted for 72 percent of all assets.

2. For infrastructure, Ireland ranked 26 out of 28 OECD countries.

3. Ireland had a higher share of slow fixed internet connections than in any other comparable country.

4. In terms of R&D or patents, Ireland was well below the OECD average in per capita terms.

5. In the OECD “human and income poverty” rankings, Ireland was 23 out of 25 countries, sandwiched between the United States and Mexico.

6. The country’s health care and educational systems are considered subpar.”

The overreliance on property is now something even the government takes as given but it is worth debating whether our health and education systems are really subpar in the sense mentioned and, in general, whether the whole Celtic Tiger was an illusion or not. There are plenty of things wrong with our education system in Ireland but is it really “subpar” in the sense of being worse than comparable countries? In terms of the health system, I will let commentors weigh in with opinions.

It is worth keeping in mind the substantial gains in life expectancy that occurred even during the late Celtic Tiger period. Life expectancy for people over 65 was the same in 1986 as it was at the foundation of the state and increased dramatically through the 90s and 2000s. We do not have precise evidence on what exactly drove these increases but it would be wrong, in my opinion, to say that we did not make health gains during this time. And this is not to excuse political decisions that saw vital vaccines and treatment of people with cystic fibrosis given lower prominence than the breeding of race horses. But it is worth having an open debate about where the country stands from a developmental perspective as well as a fiscal/monetary perspective. I released a paper recently called “From Angela’s Ashes to the Celtic Tiger: Early Life Conditions and Adult Health in Ireland“. Everytime I have presented it, someone says something like “it should be the other way around” or “you should add “and back again”". I find it hard to think of the broad progress in human development in Ireland in the last 50 years and not have some sense of belief in the potential of the country and some degree of pride of where it has come, even in the face of the current mess. If you look at the health of Irish migrants to the UK over the last 50 years you see huge improvements there also with recent migrants performing as well as or, to a large extent, outperforming natives compared to the 1950s and 1960s migrants who, as an average, are in far worse physical and mental health. It is worth beginning to ask whether what we are facing is a large fiscal and monetary blip with a forseeable exit point or a genuine developmental structural break where the real and profound gains in human welfare seen in Ireland are in danger of being reversed.

The CSO has just released the 2009 results of its annual Survey of Income and Living Conditions. SILC is the official source of data on household and individual income and also provides a number of key national poverty indicators, such as the at risk of poverty rate, the consistent poverty rate and rates of enforced deprivation. The accompanying press release highlights a number of the key findings.

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After the EIU, the WEF now also has a global report on equality between the sexes.

Ireland comes 6th out of 134 countries. That is great.

The build-up is peculiar, though. Ireland tops the bill on equality in educational attainment, although bonus points seem to be given for absent men at third level.

Ireland could do better on wage equality for similar work, on labour participation, and on senior jobs — but does rather well on uncorrected wage equality and on female professionals.

I guess that the data are somewhat older, and Ireland is getting points in gender equality because young men left school to be builders.

Ireland does well in political representation, primarily because of Mary Robinson and Mary McAleese. I would think that the largely ceremonial presidency should be discounted. Ireland does rather more poorly on female parliamentarians and ministers.

It gets strange on “health and survival”. Ireland ranks 89th. One subindex is female to male life expectancy. Irish women do not live long enough compared to men.The other subindex is male to female births — 106 boys for 100 boys, but surely not because of selective abortion or infanticide. [THIS PARAGRAPH WAS CORRECTED]

Not sure what to make of this. Ireland’s rank is too high and too low at the same time.

The BBC report on the UK Chancellor’s decision to axe child benefits from top-rate taxpayers. Rates in Ireland are approximately 150 per child per month (but vary with family size) and are paid universally regardless of family income for each child aged under 16 or under 18 and in full-time education. Like any universal payment of this nature, there is the obvious question as to why people on higher incomes should be receiving a transfer payment from the state. A less obvious question is what we mean by higher incomes and where the threshold should be set. Expenditure on this scheme is approximately 2.3 billion euro in Ireland. Those arguing to keep the benefit as it stands might question why we will end up subsidising John Terry’s wages (see Karl’s post below) while cutting benefits from mothers and children. I am not sure I have an answer to that one either. If we do have to cut, then I would rather it be from people like me with above average salaries and for schemes like child benefit that don’t have an obvious reason to be universal rather than from well-targeted schemes.

The Economist Intelligence Unit has a report on women’s economic opportunities, indexing and ranking countries’ relative performance. Leo Abruzzese discusses the general issues over at VoxEU. Let us focus on Ireland.

Ireland ranks 16th out of 113 countries. Better than most, worse than some. We cannot afford to hold back part of the workforce. Increasing productivity is one way of getting Ireland back on its feet.

Here are the factors that are keeping Ireland’s women down:

* Provisions for maternity and paternity leave

* Legal restrictions on job types

* De facto discrimination at work

* Access to child care

* Access to credit

* Adolescent fertility rate

* Non-ratification of the convention against all forms of non-discrimination against women

None of these issues were raised in the latest report on the Smart Economy. Making better use of existing resources is, apparently, not smart.

James Heckman’s work on human capital investment has been prolific over the last number of years and has major implications for a wide range of policy areas. His papers are rarely easy reading, drawing from detailed structural econometric models that he has developed over several years with colleagues. A new website outlines his basic ideas in short and accessible videos and documents (h/t Colm Harmon who is one of a number of colleagues in UCD working on this area in Ireland). This is as close as it gets to a clear answer to a major question in Economics and is essential for any policy people who read this blog across fields such as health, education, social policy, criminal justice and a range of other fields. Heckman has emphasised rigorously designed and evaluated early childhood interventions that promote a broad range of skills and personal development.

Edward Luce has a really good piece on this much-studied phenomenon here.