This essay seeks to lay the foundation for an understanding of welfare state retrenchment. Previous discussions have generally relied, at least implicitly, on a reflexive application of theories designed to explain welfare state expansion. Such an approach is seriously flawed. Not only is the goal of retrenchment (avoiding blame for cutting existing programs) far different from the goal of expansion (claiming credit for new social benefits), but the welfare state itself vastly alters the terrain on which the politics of social policy is fought out. Only an appreciation of how mature social programs create a new politics can allow us to make sense of the welfare state's remarkable resilience over the past two decades of austerity. Theoretical argument is combined with quantitative and qualitative data from four cases (Britain, the United States, Germany, and Sweden) to demonstrate the shortcomings of conventional wisdom and to highlight the factors that limit or facilitate retrenchment success.

http://pluto.mscc.huji.ac.il/~mshalev/sem/Pierson_NewPolitics(1996).pdf

The New Politics of the Welfare State

We develop a cointegrating nonlinear autoregressive distributed lag (NARDL) model in which short- and long-run nonlinearities are introduced via positive and negative partial sum decompositions of the explanatory variables. We demonstrate that the model is estimable by OLS and that reliable long-run inference can be achieved by bounds-testing regardless of the integration orders of the variables. Furthermore, we derive asymmetric dynamic multipliers that graphically depict the traverse between the short- and the long-run. The salient features of the model are illustrated using the example of the nonlinear unemployment-output relationship in the US, Canada and Japan.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID2344046_code1643826.pdf?abstractid=1807745&mirid=5

Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Framework

This paper investigates the impact of tax changes on economic activity. We use the narrative record, such as presidential speeches and Congressional reports, to identify the size, timing, and principal motivation for all major post war tax policy actions. This analysis allows us to separate legislated changes into those taken for reasons related to prospective economic conditions and those taken for more exogenous reasons. The behavior of output following these more exogenous changes indicates that tax increases are highly contractionary. The effects are strongly significant, highly robust, and much larger than those obtained using broader measures of tax changes. (JEL E32, E62, H20, N12) Tax changes have been a major public policy issue in recent years. The tax cuts of 2001 and 2003 were passed amid firestorms of debate about their likely effects. Some policymakers claimed that the cuts would both stimulate the economy in the short run and increase normal output in the long run. Others argued that they would raise interest rates and lower confidence and thereby reduce output in both the short run and the long run. That views of the effects of tax changes vary so radically largely reflects the fact that measuring these effects is very difficult. Tax changes occur for many reasons. Some legislated tax changes are passed for philosophical reasons or to reduce an inherited budget deficit. Others are passed because the economy is weak and predicted to fall further, or because a war is in progress and government spending is rising. And many tax changes are not legislated at all, but occur automatically because the tax base varies with the overall level of income, or because of changes in stock prices, inflation, and other nonpolicy forces. Because the factors that give rise to tax changes are often correlated with other developments in the economy, disentangling the effects of the tax changes from the effects of these underlying factors is inherently difficult. There is pervasive omitted variable bias in any regression of output on an aggregate measure of tax changes. This paper suggests one way of dealing with this omitted variable bias. There exists a vast narrative record describing the history and motivation of tax policy changes. We first use this narrative history to separate legislated tax changes from those arising from nonpolicy develop ments. We then use the information on motivation to separate the legislated tax changes into those that are likely to be contaminated by other developments affecting output, and those that can legitimately be used to measure the macroeconomic effects of tax changes. Finally, we use the legitimate observations to derive estimates of the effects of tax changes on output that are likely to be less biased than previous estimates. Section I of the paper elaborates on the conceptual framework for this study. It emphasizes that what we seek to identify from the narrative record are tax changes that are not systematically

/pdf/the-macroeconomic-effects-of-tax-changes-estimates-based-on-2own874tku.pdf

The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks

The term ''neo-liberalism'' denotes new forms of political-economic governance premised on the extension of market relationships. In critical social science literatures, the term has usurped labels referring to specific political projects (Thatcherism, Regeanomics, Rogernomics), and is more widely
used than its counterparts including, for example, economic rationalism, monetarism, neo-conservatism, managerialism and contractualism.

/pdf/neo-liberalism-policy-ideology-governmentality-4zz4hkhjxh.pdf

Neo-liberalism: policy, ideology, governmentality

In the present paper we address the relationship between business ownership and economic development. We will focus upon three issues. First, how is the equilibrium rate of business ownership related to the stage of economic development? Second, what is the speed of convergence towards the equilibrium rate when the rate of business ownership is out-of-equilibrium? Third, to what extent does deviating from the equilibrium rate of business ownership hamper economic growth? Hypotheses concerning all three issues are formulated in the framework of a new two-equation model. We find confirmation for the hypothesized economic growth penalty on deviations from the equilibrium rate of business ownership using a data panel of 23 OECD countries. An important policy implication of our exercises is that low barriers to entry and exit of businesses are necessary conditions for the equilibrium seeking mechanisms that are vital for a sound economic development.

/pdf/economic-development-and-business-ownership-an-analysis-4a8kogxfbn.pdf

Economic Development and Business Ownership: An Analysis Using Data of 23 OECD Countries in the Period 1976–1996

This paper reassesses a finding by Martin Prachowny (1993) that the value of the Okun coefficient for the United States (linking unemployment changes to output changes) is only around −0.67 rather than around the more typical value of −2.25. Using a cointegration framework, and the same data sets as Prachowny, we find, for one of the data sets, that the Okun coefficient is much closer to a value of −2.25, which supports previous research work.

Okun's Coefficient: A Comment

Okun's law - the relationship between unemployment and output - is one of the best known empirical regularities in macroeconomics. It is an important relationship because the way in which unemployment reacts to changes in output has implications for labour market and monetary policies and for forecasting. Most specifications of Okun's law assume a symmetric relationship: expansions and contractions in output have the same absolute effect on unemployment. In this paper, we test this assumption against the alternative view that the relationship is asymmetric. We use New Zealand data from 1978 to 1999 and contemporary econometric techniques including asymmetric modelling. Our main finding is that changes in unemployment and output in New Zealand are related in both the long run and the short run but only if an asymmetric approach is taken.

Asymmetric adjustment of unemployment and output in New Zealand: Rediscovering Okun’s law

The qualitative responses that firms give to business survey questions regarding changes in their own output provide a real-time signal of official output changes. The most commonly used method to produce an aggregate quantitative indicator from business survey responses—the net balance or diffusion index—has changed little in 40 years. This paper investigates whether an improved real-time signal of official output data changes can be derived from a recently advanced method on the aggregation of survey data from panel responses. We find, in a New Zealand application, that exploiting the panel dimension to qualitative survey data gives a better in-sample signal about official data than traditional methods. Out-of-sample, it is less clear that it matters how survey data are quantified, with simpler and more parsimonious methods hard to improve. It is clear, nevertheless, that survey data, exploited in some form, help to explain revisions to official data. Copyright © 2009 John Wiley & Sons, Ltd.

Nowcasting and predicting data revisions using panel survey data

The quarterly change in the number of unemployed New Zealanders is usually quite small relative to the total number of people unemployed. For the year ended September 1994, for example, the absolute average quarterly change in Household Labour Force Survey (HLFS) unemployment was 10,500 people against a quarterly average unemployment pool of 145,000 people. These relatively small stock changes, however, conceal the much larger flows into and out of unemployment of possibly 70,000 people during each quarter of 1993194. The scale of these flows, and the associated probabilities of entering and leaving unemployment, are not widely known. Using data from the HLFS, this paper updates and extends the relatively small amount of New Zealand research on labour market dynamics. It begins with a definition and data on the unemployment stock-flow relationship in New Zealand. This is followed by a brief analysis of the flows between the major labour market states and the associated flow rates and cycles. The paper will indicate how gross flows data can be used to give insights into gender and age differences in unemployment and 'steady-state' outcomes. The accuracy of gross flows data and the formal modelling of unemployment inflows and outflows are on-going projects.

/pdf/unemployment-dynamics-in-new-zealand-1985-1994-zt0xokdznw.pdf

Unemployment Dynamics in New Zealand 1985-1994

The ANZ Bank publishes a monthly count of the number of job advertisements appearing in New Zealand newspapers and, more recently, internet sites. It is New Zealand's de facto vacancy or help-wanted series. Apart from its role in economic commentaries, there is very little published research using this data. This paper is a preliminary attempt to remedy this omission. It covers descriptive aspects of the ANZ job ads series including the vacancy rate, the hiring rate, regional characteristics and proxy vacancy series. This is followed by an outline of the vacancy-unemployment (Beveridge curve) and hiring frameworks and some initial econometric work. Overall, the paper highlights the importance of the vacancy rate and the hiring rate in any assessment of labour market conditions in New Zealand.

/pdf/help-wanted-in-new-zealand-the-anz-bank-advertisment-series-di5qbzrp87.pdf

Help Wanted in New Zealand: The ANZ Bank Advertisment Series

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