Request for Indicators: Annual Competitiveness Report, Benchmarking Ireland’s Performance 2010

The National Competitiveness Council reports on key competitiveness issues facing the Irish economy together with recommendations on policy actions required to enhance Ireland’s competitive position.

One of the NCC’s annual publications is Benchmarking Ireland’s Performance. In 2009, this analysis of Ireland’s competitiveness performance used approximately 140 indicators to see how Ireland compares internationally on, for instance, living standards, export performance, prices and costs, productivity, innovation and infrastructure. Now, in preparation for the 2010 report, the NCC would welcome suggestions for additional/alternative internationally comparable indicators that could further our understanding of Ireland’s relative competitiveness.

If you are aware of such indicators and would like to suggest them for inclusion, please email ncc@forfas.ie .

Previously used indicators can be seen in the Annual Competitiveness Report 2009, Volume One: Benchmarking Ireland’s Performance.

Administrators Appointed to Quinn Insurance

RTE and the Irish Times are reporting that administrators have been appointed to Quinn Insurance. RTE report

Mr Justice John Cooke made the order following an application by lawyers on behalf of the Financial Regulator.

The application was made under the 1983 Insurance act.

The court heard the Regulator took this action following serious concerns about the way the group was managing its affairs.

The Times reports

The court heard that the company had moved from a position where it had an excess of assets over liabilities of more than €200 million to a position where it had €200 million of liabilities over assets.

As if today wasn’t busy enough already.

Macroeconomics of Public Sector Reform

Without knowing the details of today’s deal, it is still worth thinking about the macroeconomics of public sector reform.  I will take it that the deal delivers widespread productivity growth in the public sector.

All else equal, an improvement in the quality or output of public services should be valued by the population. It is desirable that this be reflected in the measurement of GDP and various countries are attempting to capture quality and output measures for public services to this end. (The alternative is to measure public sector output by the volume of inputs – but this cannot capture productivity growth.)  The value to the population of extended opening hours, for example, should be considerable.  It would be helpful if Ireland made efforts to improve the measurement of the public sector contribution to GDP.

Next, for given levels of output and quality, an improvement in productivity means that the public sector requires fewer workers.  This expands the supply of labour to the private sector.  This will benefit private-sector enterprises, including via the attendant downward pressure on wage levels.  A cautionary note:  the initial impact of technological progress can be contractionary, since rigidities in the labour market may mean that it takes time for private-sector employment to expand to absorb the extra supply of workers.

Next, the financial savings from the reduction in public sector numbers [and/or the elimination/reduction of premium payments for some types of overtime] can be allocated in several ways:  (a) reduce the deficit; (b) increase the provision of public services [equivalently, avoid service reductions] ; (c) reduce taxes [equivalently, avoid tax increases beyond what is inevitable]; or (d) increase public sector pay levels [equivalently, partial or full restoration of previous pay cuts].

It is currently unclear about the intended allocation of savings across (a) through (d).

I further note that uncertainty in the provision of public services is damaging for the population, such that the commitment to avoid strike action and other types of service interruption is very welcome.

Finally, as part of the overall package, a commitment to no further pay reductions is also welcome by providing certainty to public sector workers  – this should reduce the level of excess precautionary savings. (I made this point back in January 2009 in my paper “A New Fiscal Strategy for Ireland”  –  the ideal time profile for pay cuts is to make a significant initial cut but not to pursue a sequential process of gradual pay cuts.) Since there are likely still significant pay premia for many public sector occupations, it will be important to closely monitor future public pay dynamics by reference to labour market conditions across the economy.

Progressive taxation of incineration

The Minister for the Environment has made another announcement on municipal waste policy.

There are two components. One is not new: There is to be a cap on incineration. There is no rationale for creating an artificial scarcity, as explained by Gorecki and Lyons. Using both price and quantity instruments is double regulation. Tinbergen (1952) shows that this is unnecessarily costly.

The new element in the latest announcement is that the incineration levy is not constant, but increases with the size of the incinerator. Both the ESRI and the Eunomia report recommend an incinerator levy, albeit at different levels. However, they recommend the same levy, per tonne, regardless of the size of the incinerator — although one could argue that larger incinerators burn cleaner and therefore should have a lower levy.

There is no economic or environmental rational for putting a higher levy on larger incinerators.

UPDATE: Story in the Irish Times

UPDATE2: PJ Rudden says the proposed levies may be illegal. I’ve heard say that it would be anti-competitive to put one levy on a small incinerator in Cork and another levy of a big incinerator in Dublin, but as inter-county trade in waste will be verboten too, I’m not convinced that that argument holds.

UPDATE3: RTE looked at the letters between the City Manager of Dublin and the Minister for the Environment; they are not particularly friendly to one another.

Public Sector Deal

The main points are summarised in this IT article.