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"Weale, Martin"
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Qualitative business surveys: signal or noise?
The paper identifies the information content at the firm level of qualitative business survey data by examining the consistency between these data and the quantitative data that are provided by the same respondents to the UK's Office for National Statistics in Official surveys. Since the qualitative data are published ahead of the quantitative data the paper then assesses the ability of the qualitative data to predict the firm level quantitative data.
Journal Article
The effect of lifelong learning on men's wages
This paper develops a model of earnings and applies this to an examination of the effect of lifelong learning on men’s wages. Using data from the British Household Panel Survey, a variant of the mover–stayer model is developed in which hourly wages are either taken from a stationary distribution (movers) or closely related to the hourly wage one year earlier (stayers). Mover–stayer status is not observed, and we therefore model wages using an endogenous switching regression, estimated by maximum likelihood. Methodologically, the results support the mover–stayer characterisation since the restrictions required for the simpler specifications popular in the literature are rejected. Substantively, simulation of the estimated model shows some statistically significant effects from acquiring qualifications of a higher level than those previously held, but not from acquiring qualifications of the same level.
Journal Article
This blessed plot
National balance sheets for a number of advanced economies show land to be a valuable form of natural capital, whose value has increased sharply over the last twenty years or so. This paper investigates when or whether capital gains on land should be counted as a component of income. While development projects can lead to increases in rental rates and land values, it is shown that, although the benefits any project should be counted as income, increases in rental rates and land values should not normally be seen as additional real income. However if land benefits from exogenous land-saving technical progress the resulting capital gains can be seen as income. Applying the same principle to human capital it is shown, on a steady growth path, that these capital gains are equal to Weitzman’s (1997) growth premium in the relationship between income and sustainable consumption.
Journal Article
EFFICIENT AGGREGATION OF PANEL QUALITATIVE SURVEY DATA
Qualitative business survey data are used widely to provide indicators of economic activity ahead of the publication of official data. Traditional indicators exploit only aggregate survey information, namely the proportions of respondents who report 'up' and 'down'. This paper examines disaggregate or firm-level survey responses. It considers how the responses of the individual firms should be quantified and combined if the aim is to produce an early indication of official output data. Having linked firms' categorical responses to official data using ordered discrete-choice models, the paper proposes a statistically efficient means of combining the disparate estimates of aggregate output growth which can be constructed from the responses of individual firms. An application to firm-level survey data from the Confederation of British Industry shows that the proposed indicator can provide early estimates of output growth more accurately than traditional indicators.
Journal Article
DO ECONOMISTS EXPECT TOO MUCH FROM EXPECTATIONS?
Modern economic theory gives an important role to expectations as an influence on outcomes. This paper reviews evidence on how well measures of expectations conform to outcomes. It confirms earlier results that measures taken from financial markets perform poorly as predictors of outcomes. Looking at the individual responses to the Confederation of British Industry’s Industrial Trends Survey, it does find, however, that there are significant correlations between expected and realised outcomes of wages, prices, costs orders and employment. It also finds some evidence that actual prices reflect expected future prices, but with a coefficient much lower than economic theory predicts. There is evidence that forecast errors are explained by past forecasts, as well as revisions to the economic outlook, casting doubt on the idea that firms’ forecasts make the best use of the information available at the time. The paper concludes by observing that, while expectations are undoubtedly important, economists need to build on work looking at how they are derived instead of simply assuming they are rational.
Journal Article
An Indicator of Monthly GDP and an Early Estimate of Quarterly GDP Growth
A range of monthly series are currently available giving indications of short-term movements in output in the UK. The main aim of this paper is to suggest a formal and coherent procedure for grossing these monthly data up to represent the whole of GDP. Although the resultant estimates of GDP would be worse than those obtained by direct measurement, they should be more satisfactory than simply making an informal inference from whatever monthly data are available. Our examination of the efficacy of the method for estimation of the state of economic activity indicates a rather satisfactory outcome.
Journal Article
Temporal disaggregation of overlapping noisy quarterly data
The paper derives monthly estimates of business sector output in the UK from rolling quarterly value-added tax based turnover data. The administrative nature of the value-added tax data implies that their use could ultimately yield a more precise and granular picture of output across the economy. However, they show two particular features which complicate their exploitation: they are overlapping and subject to substantial noise. This motivates our choice of a multivariate unobserved components model for filtering and disaggregating temporally the aggregate figures. After illustrating our method by using one industry as a case-study, we estimate monthly seasonally adjusted gross output figures for the 75 industries for which the data are available. Our results show material differences from the existing output profile.
Journal Article
FIRMS’ PRICE, COST AND ACTIVITY EXPECTATIONS
Firms’ expectations play a central role in modern macroeconomic models, but little is known empirically about them. Using panel data on manufacturing firms’ expectations about prices and wage rates, new orders, employment and unit costs for the United Kingdom, we document a range of stylised facts about firms’ expectations and their determinants. There iswide dispersion of expectations across firms. Firms’ expectations are influenced by both firm-specific factors and macroeconomic factors. We find a significant connection between past expected price and wage increases and their out-turns. Firms’ expectations are, however, clearly not rational.
Journal Article
The Economics of a Reduction in VAT
We explore the effects of a temporary cut in VAT, identifying three possible effects: an income effect as people benefit from a lower cost of living during the period of the reduction, a substitution effect as people bring their consumption forward and an arbitrage effect as people buy non-perishable goods before the end of the period of low VAT for consumption after the VAT rate has been raised. International evidence suggests a clear overall impact on consumption, although the nature of the pattern depends on the way in which the data are analysed. However, the key policy issue is the impact of the VAT change on output and, to examine that, a simulation model of the whole economy is needed. Evidence from the National Institute's Global Economic Model suggests that the impact of the recent VAT reduction is likely to build up during the course of 2009. The reduction in VAT from 17½ per cent to 15 per cent is likely to result in consumption being augmented by less than 1 per cent by the fourth quarter of 2009. However, GDP is likely to be raised by less than half a per cent relative to what would have happened without the VAT increase. After the temporary reduction is over, both consumption and GDP are depressed as a result of the policy.
Journal Article