Dellepiane and Hardiman Working Paper: Ireland's Triple Crisis

Governing the Irish Economy: A Triple Crisis

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Author Info
Sebastian Dellepiane (University of Antwerp)
Niamh Hardiman (University College Dublin)
Abstract

The international economic crisis hit Ireland hard from 2007 on. Ireland’s membership of the Euro had a significant effect on the policy configuration in the run-up to the crisis, as this had shaped credit availability, bank incentives, fiscal priorities, and wage bargaining practices in a variety of ways. But domestic political choices shaped the terms on which Ireland experienced the crisis. The prior configuration of domestic policy choices, the structure of decision-making, and the influence of organized interests over government, all play a vital role in explaining the scale and severity of crisis. Indeed, this paper argues that Ireland has had to manage not one economic crisis but three – financial, fiscal, and competitiveness. Initial recourse to the orthodox strategies of spending cuts and cost containment did not contain the spread of the crisis, and in November 2010 Ireland entered an EU-IMF loan agreement. This paper outlines the pathways to this outcome.

Grounds for Pessimism

Lets not get carried away on the optimism front

Economic crisis and our elites

Ken McKenzie, formerly of the Geary Institute, offers an interesting psychological perspective on how the crisis might change how our elites do their business.

"Key to boosting job hopes lies in training and placement"

As part of an Irish Times series on the unemployment crisis, equally neglected by government and commentators, the Geary Institute's Liam Delaney discusses the contribution of active labour market policies.

Suicide and employment status during Ireland’s Celtic Tiger economy

A recent publication in the European Journal of Public Health might be of interest to you. This research examines CSO data from 1996 to 2006 and finds that unemployment status is associated with a two to three-fold increased risk of suicide for men and a four to six-fold increased risk for women. This research also indicates that the highest male suicide rate was in the 15-34-year-olds, and unemployment was the stronger risk factor for suicide in men aged 35-54.

Irish Unemployment

Whilst today's new GDP figures will officially take us out of recession, our GNP growth (-0.5) and new, all-time-high, unemployment figures (13.4%) are stark proof of a so called "jobless recovery".

To me, the Irish economy is looking a lot like a ravaged rose garden; first attacked by an infection of black-spot and then plowed by a herd of bison. The chief gardener responded with sense; mends the fence, treats the infection, and prunes whats left back to strength. Now, afterwards, there are no green-shoots and all the gardener can think of is more pruning. I believe today's figures suggest that it's time we put the pruning scissors aside and consider adding some required nitrogen and phosphorus to the soil, and maybe investing in some new plants.

It is also worth noting that our unemployment rate is now almost double that of N.Ireland.

Your Country, Your Call

Your Country, Your Call is a competition to ignite imaginations and inspire thinking.

The goal is to pick two truly transformational proposals so big that, when implemented, could secure prosperity and jobs for Ireland. Proposals that could help change the way we do things, allow businesses to grow, employment to be created and prosperity to flourish.

There will be two competition winners and each will receive a prize of €100,000. A development fund of up to €500,000 is committed for the implementation of each of the winning proposals.

The closing date is April 30th 2010 and more information is available here: http://www.yourcountryyourcall.com/

The Technology Safety Net

We're constantly told that the SmartEconomy is the key to getting Ireland out of the doldrums. I generally agree with the idea, but not with the bulk of the documents associated with it. The facts about the smart economy, innovation and technology in Ireland would suggest that we have a long way to go to realise progression. For one, we have a relatively low level of broadband penetration in Ireland. The most recent figures show that about 58% of Irish households have access. The debate about the government doing more to help with the roll out is well advanced but to little avail in terms of action or policies. No doubt much progress is required on the demand side but the part of the 'build it they will come' nonchalance that is conveniently overlooked is the issue of price (As i recall that event was free). It's generally agreed that more needs to be done on broadband at this level.

Related to this is the issue of dissemination is household technology. CSO figures tell us that about 35% of households in the country don't have a computer! Imagine. With computing technology experiencing huge reductions in price it might be worth considering the feasibility of a tax-initiative to bolster demand among these households. If we can do a 'bikes to work' scheme then why not a 'computers to learn, connect, search, explore, find' scheme. The bike idea is capped at 1,000 euro (aside: surprising how many 800 euro imported bikes are being bought at the moment, given recessionary times!) and offered over five years, as i understand. It is available at both the higher and lower tax bands. The computer scheme might be targeted best at the lower band. Understandably, tax expenditures are not the flavour of the month but one has to wonder... if we're serious about the SmartEconomy and technology/information lead recovery then we need to be proactive and have national policy guide the way in practical ways. I don't think we need to read about the benefits of having a computer with internet access but it might be worth considering some for a moment - information, training, education, job-search, social connection. Even a basic-user level it's utility is clear and potential enormous. I think in any CBA it would look quite good against tax relief on a car scrappage scheme, to mention one wonderful idea thats out there at the moment.
I'd like to hear your thoughts on this, good, bad, or indifferent.

Finally, to declare a particular interest, one associated benefit that you may not be thinking of is the ability to participate in National Household Panel Surveys which are the backbone of statistics gathering in the 20 most developed countries internationally. Or should I say 21. Go Geary, go!

Google Trends and Irish Unemployment: Searching For The "Dole"?

Liam recently mentioned some new research by Google that forecasts unemployment. The Google research notes that one of the strongest leading indicators of economic activity is the number of people who file for unemployment benefits. Google forecast initial claims (for unemployment benefit) using the past values of the time series, and then add Google Trends variables to see how much they improve the forecast. They find a 15.74% reduction in mean absolute error.

The relevant data-source in Ireland is the Live Register. In the comments section of this earlier post, I discuss the various definitions of claims for unemployment benefit in Ireland. Unfortunately Google Trends only provides information on search volume in Ireland for "job seekers benefit" since near the end of the first quarter in this year. There is data on search volume in Ireland for "job seekers allowance" since the start of this year. For the latter term there is spike at the end of the first quarter this year, which may be related to the supplementary budget of April 7th.

There is a longer time series for search volume in Ireland related to the term "dole". This data is available since the end of 2007; there appears to be an upward trend in place since last summer, as shown below.

Data on Discussions and Social Networks from the Last 10 Years

Ten years of discussions from the Irish forum site boards.ie are available in SIOC format; more details are available here. The FOAF files link to each other, describing a social network based on the users' buddy lists.

The data in total (over 10 years) is around 9 million documents and takes about 50 gigabytes of disk space - it's all in RDF/XML file format. This resource is supported by Science Foundation Ireland under grant number SFI/02/CE1/I131 at the Digital Enterprise Research Institute (DERI), National University of Ireland, Galway.

Health reform can boost economy - Obama aide

Christina Romer, White House economic adviser, says overhauling health care may juice GDP and boost labor. More on this story from CNN.

Reminder: iQ Prize of €10,000 to Help A Good Idea

I mentioned before that Irish firm iQ Content are offering €10,000 for a good business idea. They are offering the iQ Prize for the country’s best new tech idea. The idea can be anything that’s internet-based; more details are available from www.iqprize.ie (no strings attached). There are 76 entries so far and 3 days to go. The closing date is Tuesday May 12th. See the video below to hear Morgan from iQ Content discuss why the competition was set up.

How Applied Research Can Help To Revive The Economy

Damien Mulley links to the new Enterprise Ireland blog on research commercialisation. The blog mentions that Enterprise Ireland are currently working on getting this year’s applied research forum organised (to be held on June 18th). The website is live and posters have gone out to the colleges to advertise it. The main focus is on how applied research can help to revive the economy.

Also, Enterprise Ireland has commissioned a special award called 'One to Watch'. The 2009 winner will be announced at this year's Applied Research Forum. The winner of 'One to Watch' 2008 was Dr. Declan Dagger from Trinity College Dublin. Dr. Dagger and his team developed a new personalised e-learning tool to tackle the challenges presented by the fact that no two people learn the same way. A new company called Empower the User has since been formed around the technology with Dr. Dagger in the position of CEO.

HEA Report on Career Opportunities in Computing & Technology

This HEA report is available here.

"At an overall level, this research suggests that the challenges in encouraging more young people to consider a career in computing and technology are more extensive than what can be addressed in a single communications campaign. A number of individual challenges need to addressed in a variety of ways."

The report mentions that Higher level maths and certain science subjects (i.e. physics and chemistry) are seen by many students to be particularly difficult and requiring a level of work that is not conducive to the objective of maximising CAO points. (The same issue was raised by me this week on this blog). The report suggests that a key challenge lies in making these subjects more relevant to students, perhaps through more practical or relevant teaching methods, or developing interest from an earlier age, as per the objective of the Primary Science Initiative. In the aforementioned post from this week, I also flagged the challenge of making these subjects more relevant to students, and I suggested that moves towards compulsory Leaving Cert. Applied Maths and CBEL might be worth considering.

Also, the report documents that for many secondary students, their first exposure to career guidance comes in fifth year after having made their Leaving Certificate subject choices. This presents a further challenge for communication as it can mean that many may have already closed-off particular third level possibilities (for example, by switching to ordinary level maths or not selecting particular science-based subjects).

(How) Does the Leaving Cert. Prepare You For The Labour Market?

At the ESRI Labour Market Conference last week, Philip O'Connell discussed how the educational profile of unemployed males has evolved such that the biggest increases (between 2006 and 2008) in unemployment for males occur for those with Leaving Certificate and PLC qualifications. In the recent New York Times interview with Obama (that Colm mentioned), the U.S. President states that "I think the big challenge that we’ve got on education is making sure that from kindergarten or prekindergarten through your 14th or 15th year of school, or 16th year of school, or 20th year of school, that you are actually learning the kinds of skills that make you competitive and productive in a modern, technological economy." So are graduates of Ireland's Leaving Cerificate (Leaving Cert.) and PLC programmes getting the skills they need for the modern economy? There is also the vocational Leaving Cert. and Applied Leaving Cert. to bear in mind - see link here.

As the majority of students take the conventional Leaving Cert., and what I have to suggest may benefit all students, I will orientate my comments on Leaving Cert. curriculum-reform to the conventional programme. It should be noted that Senior Cycle education (i.e. Transition Year and Leaving Cert. programmes) is currently the subject of a major review by the National Council for Curriculum and Assessment (NCCA), including curriculum re-structuring and re-balancing. One example is that the NCCA has developed a draft syllabus for a new subject in the area of social and political education, called Politics and Society. This could be an engaging optional subject for many Leaving Cert. students.

In the review of senior cycle education, there is a particular focus on the role of ICT in the review of subjects and the development of short courses. It is proposed that some of the short courses developed will have a significant ICT focus, for example: "Media Communications Technology". Curriculum, Assessment and ICT in the Irish Context: A Discussion Paper sets forth the NCCA vision for Information and Communication Technology (ICT) in curriculum and assessment in Irish primary and post-primary schools. "This document was developed to stimulate discussion and deliberation regarding the potential of ICT to support and extend the curriculum development and assessment work of the NCCA."

The comments I make below bear in mind exisiting developments in Senior Cycle curriculum strategy and are largely motivated to address the question - (how) does the Leaving Cert. prepare students for the labour market? This includes concerns about:
(i) those whose education stops at Leaving Cert.
(ii) those whose higher education options are restricted by Leaving Cert. subject choices
(iii) those who enter higher education but subsequently drop out and find they have to mostly use what they learned in their Leaving Cert.
(iv) those who might consider returning to higher education as a mature student

Some motivation for addressing these concerns is provided by Obama in the recent NYT interview: "My grandmother never got a college degree. She went to high school... She went to work as a secretary. But she was able to become a vice president at a bank partly because her high-school education was rigorous enough that she could communicate and analyze information in a way that, frankly, a bunch of college kids in many parts of the country can’t...we’ve got to — in our education-reform agenda — we’ve got to focus not just on increasing graduation rates, but we’ve also got to make what’s learned in the high-school and college experience more robust and more effective..."

The main suggestion that I want to propose is to re-orientate the Leaving Cert. curriculum to have four compulsory subjects: English, Maths, Applied Maths (geared towards information technology) and the “Chemistry and Biology of Everyday Life” (CBEL was discussed on the blog before - here). Having four compulsory subjects at Leaving Cert. (geared towards the needs of the economy) is suggested because (a) the economy is suffering a massive unemployment shock, and (b) there are many potential problems with subject choice at Leaving Cert., including the possibilities that:

- there is only partial information available until the student enters the college course of their choice (in other words, they may not know what they would really like to do)
- students may choose “high points” courses simply because they are “high points” courses (and not true preferences)
- another problem is exemplified by the applicant who decides to look only at courses within a certain points-band. For example, let us say that a student anticipates getting 340 points. He or she will scour the lists of last year's cut-off points, picking courses that "cost" 340 points or thereabouts, almost regardless of the content of the course

An article from Science describes the CBEL initiative as a potential solution to preference misalignmnet - at least in the specific subject domain of science. The article describes how some American universities have been trying to match science students to their interests. The course called “The Chemistry and Biology of Everyday Life” (CBEL) was developed using students’ interests in everyday life as the starting point for instruction. Of course, the American higher education system is largely non-specialised at entry to under-graduate level (see more on this here), which allows for initiatives such as CBEL post high-school. But why not have something similar for Leaving Cert. in Ireland, which builds on what students learned in the Junior Cert.? This would keep students exposed to science after the Junior Cert. (if they are not doing any science subjects as options).

One question arises which is obvious enough: "Where do we have time to fit in CBEL during 5th and 6th year?". This may be bring us onto some very difficult questions about the economic returns to certain courses of education at Leaving Cert. While Irish language is important for heritage (and knock-on effects on tourism), do we not get enough of that benefit by schooling students in the Irish language up until Junior Cert.? Why not have students take CBEL instead of Irish for Leaving Cert.? Those who want to study Irish at third-level (and I can see the need for this) could enter third-level courses that pick up where Junior Cert. Irish left off.

The fourth compulsory subject that I suggest is the Applied Mathematics course, geared strongly towards information technology. I suggest that this could be taken at Higher or Ordinary Level, but the hope would be that more students would take it at Higher Level compared to the existing (abstract) course on Maths. Take-up of the exisiting Maths course at Higher Level is extremely low, so it may be more realistic to accept that some students will continue to take the abstract Maths course at Ordinary Level (where they will still get a Maths work-out). But that they will persist with Higher Level in a new "applied" Maths course with real-world focus. This course could be useful for securing IT employment (especially for those whose education stops at Leaving Cert.) or for securing entry onto IT courses in higher education (and critically, performing well on those courses).

So the situation I suggest would be as follows - students have to take Maths, Applied Maths, CBEL and English. And then they would choose three additional courses. Looking at Leaving Cert. subject choice between 1997 and 2005 (based on anslysis I conducted on the blog before), we know that most students choose Geography, Business Studies, French and Biology for their optional subjects. The following are the most popular subjects, in order. (I should point out that after Accounting, the numbers taking any subject are quite low):

1. Geography
2. Business Studies
3. French
4. Biology
5. Home Econ.
6. History
7. Art
8. Construction
9. Physics
10. Chemistry
11. German
12. Accounting

I should also point out that there is a sizeable fall of about 50% in the numbers taking any subject after Home Economics. We can see that the top four (Geography, Business Studies, French and Biology) include one of Hist/Geog, one "Business" subject, one language and one science subject. I think that having (only) three of these "broad choices" alongside Maths, Applied Maths, CBEL and English would be a very rounded preparation before doing anything after second-level. And this might also be a better preparation for entering the labour market, which is what this argument is all about.

My hunch is that Geography, Business Studies, French, Biology and Home Econ are being chosen because they are easier exams to score more points from. I suspect that French is being chosen to get into NUI colleges, but that Home Econ would be a higher preference if the NUI language rule did not exist. Under the scope of my suggested curriculum-reform, Leaving Cert. students can still choose a language given that they have three optional choices. It could also be argued that having four (instead of three) compulsory choices might be fairer, in that it could be viewed as a more level playing-field.

TalentTank.ie provides free workers to firms

According to this news story, dozens of Irish companies have registered with TalentTank.ie, a new website that provides employers with direct access to hundreds of professionals offering their services free of charge. The founders of the website believe that it could help to get Ireland's struggling economy back on track.

Commenting on the initiative, one of the founders explains that "Individuals have the opportunity to network with potential employers while employers benefit from higher productivity without incurring the labour costs. This initiative will allow Irish businesses to become more competitive and begin to set the foundation for future growth. As these businesses grow, so too will the need for new employees."

Among the professionals already registered with TalentTank.ie to provide services free of charge are Accountants, Engineers, Architects, Sales and Marketing Consultants, Graphic and Web Designers, IT Consultants, Electricians, and Hotel and Catering workers.

How To Improve Econometric Analysis Using Data from Google Trends - They Can Predict The Flu

In the current edition of the Economist, there is an article on how data from Google Trends can help predict economic statistics before they become available. For example, using data on searches for trucks and SUVs to predict the monthly sales of motor vehicles reduces the average error by up to 18% compared with the predictions from a model that did not incorporate the search data. These findings are from a new economics paper written Hal Varian, the Chief Economist at Google, with Hyunyoung Choi, also at Google. (There is a link to the Google working paper here on the Google Research Blog).

The authors argue that fluctuations in the frequency with which people search for certain words or phrases online can improve the accuracy of the econometric models used to predict, for example, retail-sales figures or house sales. "Actual numbers for such things are usually available only with a lag. But Google’s search data are updated every day, so they can in theory capture shifts in consumer behaviour before official numbers are released."

These data are available through a site called Google Trends; this software has been discussed on the blog quite a few times: here in relation to predicting economic sentiment from search engine behaviour.

I mentioned Gord Hotchkiss from searchengineland.com, who asked in the middle of 2008 "what if our mood turns to anxiety about the future? We still search, but we search for different things. We search for information needed to help us weather the storm. Or, we search out of a desperate desire need to know just how bad things are." To illustrate, Hotchkiss presents the following Google Trend graph which shows the relative search volume and news coverage volume of "house plans" (blue line) and "foreclosures" (red line) in America over the last few years:




The Varian and Choi paper discusses how for some things, like retail sales, the categories into which Google classifies its search-trend data correspond closely to what people may want to predict, such as the sales of a particular brand of car. For others, like sales of houses, things are less clear. It appears that searches for estate agents work better than those for home financing.

Some experimentation that I have done with with the Trends software has convinced me that the selection of the keyword is a crucial consideration when trying to analyse search volume. For example, the use of "Bush", "George Bush" and "George Bush Jr" produces very different results. So how can this issue be addressed? The answer may be to find the most popular keywords related to a core question, and to aggregate these for analysis. I have yet to find an aggregation function for keywords in Google Trends, but I have discovered a website that provides information about the most popular keywords used in web searches: www.Sitepsych.com

A list of the top 200 search terms that people use, week by week or month by month, is available for free from Sitepsych. A casual inspection of the top 200 list over a 90 day period, quickly tells you that the most popular things that people are looking for on the web are sex, music, games, dogs, golf, the weather and map-directions. Sex and music dominate.

Getting back to the Google Trends software, I noted before that Google lets users get their hands dirty with the secondary data. In fact, Varian and Choi write on the Google Research Blog that they want forecasting wannabes to download some Google Trends data and try to relate it to other economic time series. If you find an interesting pattern, they invite you to post your findings on a website and send a link to econ-forecast@google.com. They will report on the most interesting results in a later blog post.

I'm thinking of putting together something on when the recession entered the public consciousness, with particular reference to Ireland. Was this a slow-burning process or where there shocks? I suspect it was largely the former but with a preliminary shock in August 2007, a subsequent shock in August 2008 and a critical threshold in November 2008. Did it come through media reference first or through search volume? Again, I suspect that it was largely the former but that there was convergence over time. If the temporal evolution is distinct, can I show that one affected the other? This seems tricky. Should I expect non-stationarity in both series? I definitely think so.

For a list of links to all the software mentioned above, and a discussion of how online search statistics may help drive Irish economic recovery, see this post from earlier on the blog: Web-based Technology and the Recovery - What Do Irish Consumers Want?

Finally, below is a video from Google.org which shows that certain search terms are good indicators of flu activity. Google Flu Trends uses aggregated Google search data to estimate flu activity up to two weeks faster than traditional flu surveillance systems. There was an article published about this in Nature during February: Detecting influenza epidemics using search engine query data.

Economists & the recession

One of the consequences (co-morbidities perhaps..) of the recession is the rise to prominence of economics & economists in Irish public life. Normally we enjoy a distinct obscurity but economists are now front page stuff, the subject of media profiles, a slightly higher role in government and the source of numerous quotes. One might take a certain pride that economists are the new rock stars. It is perhaps opportune to reflect on this new found status. For that reason it is worth reading an interesting piece in last Tuesday's Irish Times by Fintan O'Toole censuring stockbroker economists in Ireland for their conduct particularly in the last days of the "Celtic Tiger" [link below].
It is, in my view, a fair criticism. My only problem is that he doesn't go far enough.

The same point could be made of most, or all, of the economists working in financial institutions and the property sector here like the banks, building societies and estate agents. They all, it seemed to me, queued up to serve as cheerleaders for the property bubble. Whether they are fools or knaves is an interesting, albeit moot, point. What it is particularly galling is to see some of these so-called "leading economists" re-inventing (or re-deeming?) themselves as experts on health, taxation and anything else. Hopefully policy makers and the public generally will realise what their credability is (zero).
Independent economists, you may remember, who pointed out that the property market was a bubble & was going to burst were derided of course (I was not one incidentally).

link to article here

Where are the Jobs for PhD graduates?

So asks the Irish Times

here

Budget Measures on Employment

Would strongly encourage everyone who reads this blog, who is working on education, labour, behavioural and so on, to look at this document closely. It outlines a range of measures for addressing unemployment. The total budget allocated for these measures is 128 million. The packages are essentially a combination of back-to-work incentives, training schemes, incentives for training, extra third level places and so on.

linked here

One part that we should follow closely is the provision for 2,000 work experience places.

"Work Experience Scheme: Provide 2,000 places on a new Work Experience Scheme on a cost neutral basis where the State’s payment will be equivalent to social welfare Job Seeker Benefit/Assistance weekly rates. The details of this scheme will be finalised between the Department of Enterprise, Trade and Employment, and the Department of Social and Family Affairs with a view to early implementation."