Royal Economic Society Newsletter:
Conference Report 2016
1 July 2016
Development Economics
In a separate session, there was one other interesting piece of work on development economics. A paper by Marco Manacorda and Andrea Tesei (both Queen Mary, University of London) looked at the role played by mobile phones in protests in Africa. It tests the widely-held hypothesis that mobile phones have acted as 'liberation technology', helping citizens who are dissatisfied with their governments to mobilise against them. The two authors find that on average mobile phone coverage does not lead to more protests. However, during a downturn, the spread of mobile phones is associated with more episodes of organised political discontent. One hypothesis is that portable devices make individuals better informed about the state of the economy. Technology may therefore allow the channelling of discontent when this is caused by some external factor, such as a recession.
Political Economy
John Van Reenen and Swati Dhingra (both LSE) presented a study from the Centre for Economic Performance looking at the costs of Brexit. They found that this could be between 1.3 per cent and 2.6 per cent of gross domestic product just from a simple static model that only looks at trade. However, the cost could rise to between 6.3 per cent and 9.5 per cent of GDP if the dynamic, long-term losses are included. While these estimates are obviously imperfect, their central finding that Britain would suffer non-trivial losses in case of exit appears hard to rebut.
Labour Economics
Stephen Machin (UCL, LSE) showed that in the UK the minimum wage has gone up since its introduction in 1999 by more than the average wage. Still, this increase has had no significant detrimental effects on employment. However, the introduction of the new 'living wage' announced by George Osborne this year poses significant challenges. The new minimum wage will be set at £7.20 an hour this year and will rise to £9 an hour by 2020, lifting the coverage of the living wage substantially. The question is therefore whether this new, higher, floor will have significant effects on employment and profits. The Office for Budget Responsibility only forecasts a reduction of around 60,000 jobs. Conversely, the value of shares of low-wage companies fell rather significantly on the day of Osborne's announcement, offering provisional evidence that profits may fall in the future. Machin has looked at the company accounts published since the announcement finding that, indeed, most companies plan to take a hit on profits. However, there may still be an adjustment in terms of employment for those companies that earn little or no profits at all, for example, care homes.
This Conference Report was published by The Royal Economic Society in its July Newsletter
Link to the Report here
Related publications
Liberation Technology: Mobile Phones and Political Mobilization in Africa, Marco Manacorda and Andrea Tesei, Centre for Economic Performance Discussion Paper No.1419, March 2016
BREXIT 2016: Policy Analysis from the Centre for Economic Performance, Holger Breinlich, Swati Dhingra, Saul Estrin, Hanwei Huang, Gianmarco Ottaviano, Thomas Sampson, John Van Reenen and Jonathan Wadsworth, CEP Brexit Analysis Series Paper No.08, June 2016
Related links
Swati Dhingra webpage
Stephen Machin webpage
Marco Manacorda webpage
John Van Reenen webpage
Growth Programme webpage
Labour Markets Programme webpage
Trade Programme webpage