Macro-determinants of UK regional unemployment and the role of employment flexibility

This paper explores the macroeconomic determinants of UK regional unemployment and their relation to the influences on unemployment exerted by the levels and types of employment flexibility in the country. Theoretically the paper draws on Keynesian and monetarist explanations of unemployment and elaborates on how the two main theoretical approaches perceive the role of price stability, accumulation, macroeconomic shocks and labour market rigidities for unemployment. Empirically, the analysis relies on a novel set of flexibility indicators and examines their impact on regional unemployment, unemployment persistence, and adjustment to economic shocks. The results provide useful insights into the explored relationships and highlight the areas and conditions under which employment flexibility helps achieve favourable employment outcomes. The implications of the findings are discussed in the concluding section.Employment flexibility; regional unemployment; persistence; NAIRU and Keynesian explanations of unemployment

Without purpose and strategy?: a spatio-functional analysis of the regional allocation of public investment in Greece

We utilise a large database on public investment at the prefecture (NUTS-3) level in Greece for the period 1976-2008 to examine the spatial and functional allocation of public investment in the country. We investigate the extent to which expenditures in different types of public investment are complementary across space and over time and examine their redistributive character. We also analyse regional specialisations and the geographical concentration of public investments and complementarily use an exploratory spatial data analysis to examine the extent of clustering of public investment and identify possible patterns in the geography of clusters and hotspots. Although our analysis uses predominantly descriptive tools, our results have confirmatory power, as they reveal a surprisingly random pattern for the spatial and functional allocation of public investment in Greece, thus raising important questions about the rationale for these allocations and, by implication, about the geographical, political and economic dynamics that underlie them. These questions obtain an additional salience in light of the administrative and fiscal reforms pursued currently by the Greek government under the pressure of the country’s sovereign debt crisis

The Role of EU Integration in Accelerating Structural Reforms in the Western Balkans: Evidence, Theory and Policy. LEQS Paper No. 140/2019 January 2019

Integration with the European Union has been an important driver of economic, political and social transformation in the Western Balkans. In recent years, however, the pace of structural reforms in the region has decelerated and the trend of economic catch-up seen in the 2000s has not resumed after the slowdown of the global economic crisis. This has coincided – at least temporally, if not causally – with a ‘temporary freeze’ in the EU’s enlargement towards the region. Against this backdrop, this paper seeks to investigate the role of EU conditionality on economic reforms and convergence in the Western Balkans. To do so, it provides original, albeit descriptive, empirical evidence showing a strong link between EU-related structural reforms (towards the Copenhagen Criteria) and economic growth; and subsequently presents an analytical model demonstrating the mechanisms of policy decisions for reforms under EU conditionality. The model assumes away sectoral interests, policy uncertainty and coordination problems, allowing the analysis to focus specifically on the tension between two objectives: the pursuit of EU accession, through the implementation of jointly agreed reforms, and the accommodation of domestic policy concerns (maintaining policy stability and public support). Our results unveil a policy dilemma for the EU, having to choose between maximising the reform effort and minimising non-compliance. Drawing on this model, we discuss extensively the policy options that the EU faces in trying to enhance the reform performance, growth trajectories and, ultimately, European perspective of the countries in the region

Union Retreat and Regional Economic Performance: the UK in the 1990s

This paper uses a panel of regional data to investigate the impact that the well-documented decline in trade unionism in the UK had on the economic performance of its regions. The analysis employed here departs from the traditional firm-level and cross-sectional analyses and looks at the economy-wide effects of unionism. Our findings provide evidence in line with theory that predicts unions to increase wages and reduce labour demand, leading to higher unemployment, but they also indicate that unionism is positively related to productivity and incomes, although in all cases the effects are non-linear. We conclude that unionism is not necessarily a burden for the economy, so long that the beneficial wage/productivity effects overbalance the negative effects on employment.trade unions, regional economic performance, panel data

(When) does austerity work? On the conditional link between fiscal austerity and debt sustainability

The Eurozone crisis has given a new impetus to academic and policy debates about the merits and ills of fiscal consolidation policies (austerity). Fuelled by the huge contraction experienced by some ‘bailout countries’, and especially Greece, a new consensus seems to have emerged, that “austerity doesn’t work”. Yet, many Eurozone countries have seen a relatively fruitful implementation of fiscal consolidation programmes, with fiscal pressures being successfully curtailed and the adverse growth effects of austerity being very short-lived. The literature has only recently shifted its attention to the qualitative characteristics of fiscal consolidation to explain variations in economic performance (growth) across countries in the course of austerity. Still, attention to political-institutional and structural-economic factors is generally lacking. This paper makes a contribution in this direction, by showing that two domestic-context parameters – trade openness and quality of government – exert significant influence on the impact that austerity has on growth and debt-sustainability. Factoring-in these parameters allows us to contextualise a number of ‘stylised facts’ of the Eurozone crisis, including the huge recession and large snowball effect for Greece, the relatively painless fiscal consolidation in parts of the Eurozone north, and the surprising decline in nominal interest rates seen is some of the most agile Eurozone countries

Here we are nowhere …yet

I have no doubt that yesterday’s parliamentary vote was a good thing for Greece. Had the medium-term programme not gone through, Greece would have entered into an even deeper political, social and economic crisis, that would have made what the country has seen so far look like a minor hick-up. But this is not a victory. Irrespective of how critical one may choose to be of the opposition parties and the “infuriated” demonstrators, we shouldn’t lose sight of the fact that they both have a very valid point: these measures will throw the country deeper into recession and will do very little to address the long-run fiscal problem – while the vast majority of them are also regressively distributive

Deflation in Greece!? What do they (not) know?

The latest Interim Forecast by the European Commission makes some gloomy predictions for the Greek economy in 2012 but, interestingly, on the issue of inflation it states: Constant-tax inflation in 2011 was 1.2% in 2011. However, for an economy in deep recession, the inflation rate reveals deep inflexibility in product and services markets. In 2012 the price rise trend is expected to be reversed, resulting in slight deflation of 0.5%. The main driving force stems from anticipated falls in disposable income and consumer spending due to wage cuts in the private sector

No rest for the wicked…

So, after months and months of refusing to even discuss about doing the obvious, the ECB has now signalled that they will do a debt swap with Greece – this weekend. But those who for months now have been arguing that this is not only a moral, but also a financially sensible, thing to do should not start cheering as yet. For there is another twist to the story