CentrePiece:
Autumn 2010 Issue Now Out: THE NHS WHITE PAPER: Evolution or Revolution?
9 November 2010
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After the worst recession since the Second World War, the problem of unemployment is perhaps the biggest challenge facing policy-makers. So far the extent of UK job losses has not been as bad as expected based on the experience of the previous three recessions. But many fear that unemployment will rise further, especially as the public spending cuts take effect. For those without a job for extended periods, there is a risk of permanent 'scarring', especially for young people without prior work experience.
So it is particularly timely that the 2010 Nobel prize in economics has been awarded for research that explains the process of search: how people look for work; how they are matched with job vacancies; and how various 'frictions' impede that outcome.
One of the three new laureates is the first economist based in Britain to receive the accolade in over a decade: Chris Pissarides, who has been a cornerstone of life at the Centre for Economic Performance (CEP) since its foundation in 1990 and for many years led the research programme on macroeconomics, particularly unemployment.
Professor Pissarides explains his work thus: 'Our research looks at what happens to someone who loses his or her job because of changes in the economic environment. We have created a model that allows us to analyse the processes and decisions, such as policy, which affect how long it is before someone finds productive employment again.'
This research has immediate implications for policy-makers at a time of economic weakness: 'One of the key things we find is that it is important to make sure that people do not stay unemployed too long so they don't lose their feel for the labour force. The ways of dealing with this need not be expensive training - it could be as simple as providing work experience.'
There'll be more on what the Nobel citation describes as 'analysis of markets with search frictions' in the next CentrePiece. Meanwhile, this issue examines many other current policy debates. A piece on the recent LSE report on The Future of Finance summarises its radical proposals for regulatory reform. And articles on the NHS White Paper and 'coalition academies' launch a series that will draw on CEP research to evaluate policy innovations by the new government.
Elsewhere, we report studies of the impact of China's rise on Western innovation; of the impact of new technology on demand for skills; and of the impact of the euro on trade within the European Union. Perhaps the most topical for the UK is a cross-country analysis of the effectiveness of fiscal policy. As the cuts to public spending start to be implemented, the key question is what will be the ultimate effects on growth and jobs.
Key Articles include:
'Does fiscal policy work?' - Ethan Ilzetzki; 'The NHS White Paper: evolution or revolution?' - Zack Cooper; 'Chinese ghosts in the Western machine' - John Van Reenen; 'Foreign takeovers of British companies' - Geoffrey Owen; 'Has the euro increased trade?' Joćo Santos Silva and Silvana Tenreyro; '"Revolving door" lobbyists' - Jordi Blanes i Vidal, Mirko Draca and Christian Fons-Rosen
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Romesh Vaitilingam, Editor. Email: romesh@vaitilingam.com