Macroeconomic Perspectives

A One-Day Conference in Honour of Brendan M. Walsh

Geary Institute, University College Dublin, Friday, 7 October 2005

 

 

 

 

Conference Overview

 

            Brendan Walsh retired in May 2005 from the Chair of Applied Economics and the National Economics of Ireland which he held at University College Dublin since 1980. During that time his academic and popular writings have confirmed his position as a scholar of international renown and the foremost commentator on the Irish economy. To commemorate this event and to celebrate Brendan’s achievements, a conference will be held at UCD on October 7th 2005, at which papers will be presented covering a wide range of topics relating to the Irish and world economies. Speakers include Mick Devereux (UBC), Richard Disney (Nottingham), Patrick Honohan (The World Bank), Ian Irvine (Concordia), Peter Neary (UCD), Cormac Ó Gráda (UCD), and Mark Wynne (Federal Reserve Bank of Dallas). An edited version of the conference, following refereeing, will be published in the Economic and Social Review.

 

 

Conference Programme

 

 

8.45-9.15:  Coffee

 

 

9.15 Conference Opening:

Dr. Philip Nolan, Registrar, University College Dublin

 

 

9.30-11.00:  Session 1

Chair: Paddy Geary (NUI Maynooth)

 

Ian Irvine (Concordia University, Montreal)

The Top Tail of the Canadian Earnings Distribution” (with Ross Finnie)

Discussant: David Madden (University College Dublin)

 

Richard Disney (University of Nottingham and Institute for Fiscal Studies, London)

Macroeconomic Performance and the Design of Public Pension Programmes

Discussant: Tiziana Brancaccio (University College Dublin)

 

 

11.00-11.30:  Coffee

 

 

11.30 p.m.-1.00 p.m.:  Session 2

Chair: Moore McDowell (University College Dublin)

 

Cormac Ó Gráda (University College Dublin)

“Dublin Jewish Demography a Century ago”

Discussant: Morgan Kelly (University College Dublin)

 

J. Peter Neary (University College Dublin)

“Measuring Competitiveness”

Discussant: John FitzGerald (ESRI)

 

 

1.00-2.15 p.m.:  Lunch

 

 

2.15-3.45 p.m.:  Session 3

Chair: Joe Durkan (University College Dublin)

 

Mark Wynne (Federal Reserve Bank of Dallas)

“Ireland's Great Depression” (with Alan Ahearne & Finn Kydland)

Discussant: Vincent Hogan (University College Dublin)


Frank  Barry (University College Dublin)
“A Theoretical Growth Model for Ireland” (with Michael Devereux)

Discussant: Ivan Pastine (University College Dublin)

 

 

3.45-4.15 p.m.:  Coffee

 

 

4.15-5.00 p.m.:  Session 4

Chair: John Sheehan (University College Dublin)

 

Patrick Honohan (The World Bank) and Anthony Leddin (University of Limerick)

“Ireland in EMU: More Shocks, Less Insulation?”

Discussant: Rodney Thom (University College Dublin)

 

 

5.00 p.m.: Concluding Remarks

Brendan Walsh (University College Dublin)

 

 

 

Paper Abstracts

 

Frank  Barry (University College Dublin) and Michael Devereux (University of British Columbia)
A Theoretical Growth Model for Ireland

 

This paper attempts to give a quantitative accounting of the Irish growth experience over the past twenty years, from the perspective of neo-classical economic growth theory.  Similar to the East Asian `Economic Miracle', the Irish experience is difficult to fit into the standard convergence model simply because the sustained rates of economic growth in Ireland have been larger than can be explained by the standard model.  It has been suggested by many commentators that Ireland's growth experience was uniquely distinguished by a combination of open capital markets (and in particular openness to FDI), open labour markets (the presence of a common labour pool with the UK, and more generally unimpeded labour mobility within Europe), and the special role of the European Single Market.  Our paper constructs a simple open economy growth model in which each of these three factors can be separately incorporated.  Our results suggest that all three play a key role in a quantitative accounting of the Irish experience.  As in Honohan and Walsh (2002), we conclude that there is no monocausal explanation of Ireland's economic transformation.

 

 

Richard Disney (University of Nottingham and Institute for Fiscal Studies, London)

Macroeconomic Performance and the Design of Public Pension Programmes

 

The ageing of OECD populations and consequent rising costs of pension provision have brought into focus the need to reform public pension programmes.  Several reform strategies have evolved – one for example intends to make public programmes imitate several features of private retirement saving accounts (such as in Italy and Sweden), another to target benefit payments more closely on poorer pensioners (such as the UK). Advocates typically argue that their particular reform will have desirable macroeconomic consequences – increasing employment, raising private retirement saving, and so on.  This paper focuses on how the design of public pension programmes affects economic activity rates and household saving rates, both in theory and in practice, using regression estimates derived from a large sample of OECD countries over time.  It exploits time variation in the design features of public pension programmes to identify parameter estimates. The findings suggest that more actuarially-based public programmes (that is, reformed as in Italy and Sweden) are treated by participants as a mandatory saving programme rather than as a tax-and-transfer system, so raising economic activity rates but also increasing the substitutability of public pension contributions for private retirement saving.  The reverse is true for programmes that have moved towards greater redistribution towards low income households.

 

 

Patrick Honohan (The World Bank) and Anthony Leddin (University of Limerick)

Ireland in EMU: More Shocks, Less Insulation?”

 

EMU has triggered sizable exchange rate and especially interest rate shocks to the Irish economy albeit not appreciably greater than those experienced under previous exchange rate regimes.   Interest rate movements have deviated widely from what a standard Taylor monetary policy rule would have counseled – though here again the deviations have been no worse in this regard than those of the previous regime. The most important shock has been associated with the large and sustained initial fall in nominal interest rates as EMU began. Through mechanisms which we formally model, the interest rate fall has had a lasting effect on property prices, construction activity and on the capacity of the labour market to absorb sizable net immigration, despite a sharp deterioration in wage competitiveness since 2002.  As the long-drawn impact of this shock subsides, the failure of the wage-bargaining system promptly to claw back the loss of competitiveness resulting from exogenous exchange rate movements

 

 

Ian Irvine (Concordia University, Montreal)

"The Top Tail of the Canadian Earnings Distribution"


Like a small number of other English-speaking economies, Canada has witnessed a radical increase in the share of total income accruing to the very top earners since the 1980s. This change went largely unnoticed until recently. The objective of this paper is to explore some of the details of this development by using tax-based micro data files. (1) We explore the variability in inequality over time using a top-tail sensitive measure, and find that variability and secular growth in inequality are strong for all major definitions of income. (ii) A decomposition of income by source of income indicates that dividends are surprisingly important in explaining the observed patterns. (iii) The growth in the share of the top tail does indeed reflect a growth in its ‘permanent’ share, and does not reflect an increase in the transitory variance of top tail incomes. (iv) We provide evidence on why income taxes have not been responsible for the recent trends. (v) We explore the degree to which women have participated in the explosion of top tail shares. (vi) Social mobility among top young earners is explored by matching earners with their parents twenty years earlier in the longitudinal data base.

 

 

Mark Wynne (Federal Reserve Bank of Dallas)

Ireland's Great Depression” (with Alan Ahearne & Finn Kydland)


We argue that Ireland experienced a Great Depression in the 1980s comparable in severity to the better known and more studied depression episodes of the interwar period. Using the business cycle accounting methodology of Chari, Kehoe and McGrattan (2005), we examine the factors that led to the depression and the subsequent recovery in the 1990s. We calculate efficiency, labor, investment and government wedges, and evaluate the contribution of each to the downturn and subsequent recovery.

 

 

J. Peter Neary (University College Dublin)

Measuring Competitiveness

Competitiveness is an elusive concept, much studied by business theorists and much invoked by politicians and commentators, but frequently dismissed as irrelevant or unimportant by economists. This paper reviews alternative approaches to measuring an economy's cost competitiveness and proposes some new measures derived from the theory of index numbers. The indexes provide a theoretical justification for estimated real effective exchange rates, but differ from standard measures in that they are based on marginal rather than on average trade shares. The use of the new indexes is illustrated by some simple calculations which highlight the potential exposure of Irish manufacturing to fluctuations in the euro-sterling exchange rate.

 

 

Cormac Ó Gráda (University College Dublin)

Dublin Jewish Demography a Century Ago

 

The paper exploits a census-derived dataset of Jewish and non-Jewish households living in the same part of Dublin in 1911 to analyze the demography of Irish Jewry.  It focuses in turn on two key characteristics of East European Jewish communities a century ago: their low infant and child mortality and their high marital fertility.  While in Dublin both characteristics were present and can be partly explained in socio-economic terms, the distinctive culture of the immigrants was a powerful influence on their demography.

 

 

 

Practical Information

 

            The conference will be held at the Geary Institute at UCD. For information about the academic programme contact the conference organisers, David Madden david.madden@ucd.ie and Peter Neary peter.neary@ucd.ie. For information about practical aspects of the conference contact geary@ucd.ie.

 

            The conference is open to all. However, as space is limited, participants should register in advance by sending an email to geary@ucd.ie with “Please reserve place in 7 October Conference” in the subject field.

 

 

Acknowledgements

 

            The organisers wish to thank Allied Irish Banks for their generous support for this conference.

 

 

Contacts and Further Information

 

            Geary Institute, University College Dublin