Economica最新文献

UK top income shares have varied hugely over the past two centuries, ranging from more than 30% to less than 7% of pre-tax national income allocated to the top 1 percentile. We build a congruent dynamic linear regression model of the top 1% income share allowing for economic, political and social factors. Saturation estimation is used to model outliers and trend breaks, proxying underlying structural changes driving income inequality in the UK. We use the model to forecast the top 1% income share over the last 15 years, and compare to a range of forecast devices. Despite a well-specified constant parameter model conditioning on significant explanatory variables, the best performing forecasts are obtained from a random walk and a smoothed random walk. These results are explained by the presence of shifts in the income share over the forecast period, resulting in forecasts from equilibrium correction models converging to the wrong equilibrium. Our best prediction for 2026 based on the most recent data from 2021 (a 5-year ahead projection) is that the pre-tax top 1% income share will remain at the most recent realized value of 12.7%, but there is a large degree of uncertainty, with a 95% confidence band ranging from 10% to 15.7%.

This paper revisits the conventional but unproven wisdom that voters penalize governments for adopting fiscal austerity in a sample of advanced economies. We consider the composition of the austerity package and the economic manifesto of the implementing government, and find that austerity packages consisting mostly of tax hikes have a significant electoral cost, which is larger for government parties that campaigned on a free-market manifesto. Conversely, expenditure-based austerity is costlier for government parties that did not run on a small-government platform, but may be beneficial for those that did.

Previous literature has identified income, health status and social relationships as the most important predictors of subjective wellbeing (SWB). In addition, the literature has identified a non-linear relationship between age and SWB, with a dip in SWB in midlife. Explanations of the non-linear age–SWB relationship include the notion of unmet aspirations and the idea that people's emotional response to the drivers of SWB changes with age. Against this background, we use representative longitudinal data for Germany (1992–2019) with about 570,000 observations for more than 88,000 individuals aged 16–105 years to investigate if and how the association between SWB and its main predictors changes over the lifecycle. Using fixed effects estimation to control for cohort effects and unobserved personal characteristics, we find that the marginal effects of income and social relationships vary with age in a wave-like fashion, while the positive marginal effect of good health status increases monotonically and progressively with age. Our results are similar for alternative measures of SWB (life satisfaction and living in misery), and for men and women separately. The age-related changes in the importance of income and social relationships for SWB found in this paper help to explain the relationship between age and SWB found in previous literature.

This paper explains the structure of corruption networks as response to ex ante transparency, defined as visibility of authorities whose cooperation clients may need, in due course, to execute corrupt transactions. It also characterizes the optimal transparency policy given the network response, as a function of connection costs, sanctions, the corruption surplus and the detection probability (hence the anti-corruption budget and ex post transparency). Corruption chains may emerge in equilibrium if authority is expected to be shared by multiple offices, where the office with higher solo assignment probability becomes the intermediary. Otherwise, clients penetrate the bureaucracy by inducing the star network, or contend with single connection. I show that the optimal policy always assigns one office, sometimes alone, sometimes jointly with others. It is often possible to deter corruption networks through an ex ante transparent policy that parcels out authority to multiple offices with probability 1—a common feature of many US bureaucracies. Decomposing transparency into its components reveals nuances in the transparency–corruption relationship, suggesting that ex ante transparency is instrumental except in environments in which anti-corruption enforcement is extremely effective or extremely ineffective.

With one-fifth of the UK labour force employed in the public sector, public sector pay and its interaction with private sector pay is an important driver of the macroeconomy. Using new data on sector-level earnings and sector–industry-level pay settlements, this paper addresses the fundamental question of which sector leads and which follows in terms of earnings determination. We find that in the long run, public sector wages adjust to wages set in the private sector, maintaining a consistent relationship. We further find that there can be significant wage spillovers from the public sector to the private sector in the short run. These tend to be more pronounced for private sector industries that are domestically facing, characterized by low worker bargaining power, or reliant on public sector inputs. This paper's findings have important implications for macroeconomic policy that aims to balance inflationary forces and fiscal funding pressures.

We present an easy-to-apply non-parametric revealed preference method to identify observed preference heterogeneity from cross-sectional data. Building on the partitioning approach that was developed by Crawford and Pendakur (Economic Journal, 2013, 123(567), 77–95) and Cosaert (Computational Economics, 2019, 53(2), 533–54), it quantifies the contribution of observable consumer characteristics to describing the identified preference heterogeneity. We demonstrate the practical usefulness of our method through an application to newly gathered experimental data on consumer choice behaviour in two types of decision situations: the allocation of money (choosing between two products) and the allocation of time (choosing between leisure and work). We investigate whether the same consumer characteristics drive the observed variation in choice behaviour in these two settings.

We use a randomized experiment (across 200 public primary schools in Puebla, Mexico) to study the impact of providing schools with cash grants on student test scores. Treated schools received on average $��\sim �$16 USD per student each year for two years, an increase of $��\sim �$20% in public spending per child, after teacher salaries. Overall, the grants had no impact on student test scores. Lack of a treatment effect does not seem to be driven by poor implementation or a substitution away from other inputs (e.g. household expenditure).

We estimate the importance of local labour structure in the spread of COVID-19 during the first year of the pandemic. We build a unique dataset across 6791 English neighbourhoods that distinguishes between people living (residents) and people working (workers) in a neighbourhood, and differentiate between jobs that can be done from home (homeworkers), jobs that likely continued on-site (keyworkers), and non-essential on-site jobs. We find that a 10 percentage points increase in keyworker jobs among residents is associated with 3.15 more cases per 1000 (4.8% relative to the mean), while a 10 percentage points increase in homeworker jobs among residents is associated with a decrease of 7.74 cases per 1000 (11.8% relative to the mean). Results for the composition of workers show the same sign, but smaller magnitudes. A dynamic analysis of the monthly incidence of reported cases shows that these relationships are particularly strong during lockdown periods. These results are heterogeneous across neighbourhoods, with larger positive effect of keyworkers, and lower protective effect of homeworkers, in higher deprivation areas. We explore the role of occupation skill intensity in driving these neighbourhood differences. These findings highlight important asymmetries in the distributional impact of the policy response to COVID-19.

This paper identifies how a rise in the deficit/debt impacts interest rates by looking at the high-frequency response of interest rates to fiscal surprises. The fiscal surprises are the unexpected components of deficit releases and the changes in official forecasts by the Congressional Budget Office and by the Office of Management and Budget. The paper estimates that a rise in the deficit-to-GDP ratio of 1 percentage point raises the 10-year nominal interest rate by 8.1 basis points. The response is similar quantitatively for other Treasury maturities and for corporate debt interest rates. The paper also investigates which theoretical channel drives this relationship, and whether surprises affect interest rate expectations or the term premium. These results are used to estimate how recent spending may have affected interest rates.

Further education and sixth form colleges are key institutions for facilitating skill acquisition among 16–19 year olds in the UK. They enrol half a school cohort after completion of their lower secondary education, and this includes a disproportionate number from low-income backgrounds. Yet little is known about what could improve performance in these institutions. We conduct the world's first management practices survey in such institutions, and match this to administrative longitudinal data on over 40,000 students. Value-added regressions with rich controls suggest that structured management matters for educational outcomes, especially for students from low-income backgrounds. For this group, in a hypothetical scenario where an individual is moved from a college at the 10th percentile of management practices to the 90th, this would be associated with 8% higher probability of achieving a good high school qualification, nearly half of the educational gap between those from poor and non-poor backgrounds. Hence improving management practices may be an important channel for reducing inequalities.