The fiscal effects of immigration to the UK
Christian Dustmann, Tommaso Frattini, 13 November 2013
The immigration debate has focused on immigrants’ net fiscal impact – whether they receive more in welfare payments and other benefits than they pay back in taxes. This column summarises recent research showing that – contrary to popular belief – immigrants who arrived in the UK since 2000 have contributed far more in taxes than they have received in benefits. Compared with natives of the same age, gender, and education level, recent immigrants are 21% less likely to receive benefits.
The impact of immigration on the tax and welfare system and the net fiscal consequences is perhaps the single most prominent economic issue in the public debate over the pros and cons of immigration.
Topics: Migration, Welfare state and social Europe
Tags: benefits, fiscal burden, immigration, migration, UK, welfare state
Monetary policy in the UK: Time for change?
David Cobham, 16 September 2013
The Bank of England is searching for an alternative activist monetary policy. This column argues that inflation targeting is better than previous frameworks but there is room for improvement. Faced with exchange rate and housing prices problems, the Bank was unable to modify the framework to suit. To avoid such problems, the Bank should be given more goal-independence as well as instrument-independence.
Before the Global Crisis it seemed as though the problems of monetary policy in the UK had been solved:
Topics: Monetary policy
Tags: Bank of England, inflation targeting, QE, UK
Language barriers? The impact of non-native English speakers in the classroom
Charlotte Geay, Sandra McNally, Shqiponja Telhaj, 14 September 2013
Are children who are non-native speakers making education worse for native speakers? Presenting new research on England, this column uses two different research strategies showing that there are, in fact, no spillover effects. These results support other recent studies on the subject. The growing proportion of non-native English speakers in primary schools should not be a cause for concern.
In the UK, as in other countries, there has been a rapid increase in the number of non-native speakers. In England the number of non-native speakers has increased by a third in the last decade. Now, roughly one in nine children between the ages of five and 11 do not speak English as a first language.
Tags: immigration, UK
Export-market exit during the crisis: Evidence from the UK
Holger Görg, Marina-Eliza Spaliara, 13 September 2013
International trade declined dramatically during the Global Crisis. This column focuses on UK firms that exited from exporting during the Global Crisis. The evidence clearly points to the importance of financial factors. Firms that exited were more heavily indebted, less liquid, and faced higher firm-specific interest rates.
International trade declined dramatically during the Global Crisis (WTO 2012). Economists have offered various explanations for this (see Baldwin 2009):
Topics: Europe's nations and regions, International trade
Tags: exports, UK
A new age of uncertainty? Measuring its effect on the UK economy
Abigail Haddow, Chris Hare, John Hooley, Tamarah Shakir, 27 August 2013
Economic uncertainty is not good for GDP growth. This column presents a new, UK-specific measure of economic uncertainty. It shows that UK economic uncertainty is now at historically high levels and that it has been unusually persistent in recent years. There is evidence that elevated uncertainty has been a factor restraining the UK recovery. What happens to uncertainty going forward will be important for growth.
Previous analysis has shown that the global financial crisis led to a rise in global macroeconomic uncertainty. Nick Bloom and others have highlighted the adverse effect of heightened uncertainty on economic activity – in particular by causing firms to cut back on hiring and investment, and leading households to become more cautious in their spending (Bloom 2011, Baker et al. 2011).
Topics: Europe's nations and regions
Tags: growth, UK
When is the time for austerity?
Alan Taylor, 20 July 2013
Recent austerity policies have been guided by ideology rather than research. This column discusses research that reconciles disparate estimates of fiscal multipliers in the literature. It finds that common identification assumptions are problematic. Matching methods based on propensity scores show how contractionary austerity really is, especially in economies operating below potential.
In 1809, on a battlefield in Portugal, the first recognisable medical trial evaluated bloodletting on a sample of 366 soldiers allocated into treatment and control groups. The cure was shown to be bogus. It was the beginning of the end of pre-modern medicine.
Topics: Macroeconomic policy
Tags: austerity, fiscal policy, UK
Escaping liquidity traps: Lessons from the UK’s 1930s escape
Nicholas Crafts, 12 May 2013
The UK escaped a liquidity trap in the 1930s and enjoyed a strong economic recovery. This column argues that what drove this recovery was ‘unconventional’ monetary policy implemented not by the Bank of England but by the Treasury. Thus, Neville Chamberlain was an early proponent of ‘Abenomics’. This raises the question: is inflation targeting by an independent central bank appropriate at a time of very low nominal-interest rates?
In mid-1932, the UK had experienced a recession of a similar magnitude to that of 2008-09, was engaged in fiscal consolidation that reduced the structural budget deficit by about 4% of GDP, had short-term interest rates that were close to zero, and was in a double-dip recession (Crafts and Fearon 2013).
Topics: Europe's nations and regions
Tags: Britain, Eurozone crisis, house building, housing, UK
Do elite universities admit the academically best students?
Debopam Bhattacharya, 13 April 2013
Elite universities’ admission policies are perennially surrounded by controversy given the thorny efficiency and equity issues involved. This column discusses research into such policies focusing on the degree of meritocracy and non-academic bias. It suggests that men and private-school applicants have somewhat higher application success rates despite being held to higher academic admission standards.
The undergraduate admissions process at elite universities, owing to its implications for socioeconomic mobility, is subjected to significant public scrutiny in the UK.
Tags: education, elite universities, UK
Another look at Ricardian equivalence: The case of the European Union
Thomas Grennes, Andris Strazds, 28 February 2013
Can European countries share their debts? This column argues that higher government indebtedness means larger household net financial assets. Thus, any pooling of European legacy debt would be considered unacceptable by countries with less government debt unless it also involved the pooling of households’ financial assets. Yet, this would be legally and technically insurmountable. The EU must face forced Ricardian equivalence: the countries with the largest legacy-debt burdens must reduce them by increasing the tax burden or, alternatively, reduce their budget expenditure.
The so-called Ricardian equivalence suggests that a government will have the same effect on private spending whether it raises taxes or takes on additional debt to finance higher government spending. The logic behind it is that as the government gets more indebted, people would put aside more money in expectation of higher taxes in the future.
Topics: Europe's nations and regions
Tags: Eurozone crisis, Germany, Greece, Ricardian equivalence, Spain, UK
Winners of a European banking union
Dirk Schoenmaker, Arjen Siegmann, 27 February 2013
So far, discussions around Europe’s prospective banking union have focused only on the supervision of banks. This column argues that policymakers must also think about the resolution of banks in distress. While national governments confine themselves to the domestic effects of a banking failure, a European Resolution Authority could incorporate domestic and cross-border effects. A cost-benefit analysis of a hypothetical resolution of the top 25 European banks shows that the UK, Spain, Sweden, and the Netherlands would be the main winners.
The aim of the prospective banking union is to foster financial stability in Europe. The euro sovereign debt crisis has shown that financial stability cannot be managed effectively at the national level, because of the diabolic loop between national governments and banks (Alter and Schüler 2012).
Topics: EU institutions, EU policies, Europe's nations and regions
Tags: Bailouts, banking union, Eurozone crisis, Netherlands, Spain, Sweden, UK