Search Markets

In the context of the search model of the labour market, Peter Diamond (1971) raised the following critique: Firms have no incentive to offer a wage higher than the reservation wage. Discuss. Economic theory may initially have us believe that firms shouldn’t offer a higher wage than the reservation wage of workers. If they did Read more about Search Markets[…]

The Credit Channel

The credit channel is an enhancement mechanism for traditional monetary policy transmission, not a truly independent or parallel channel. Discuss The traditional monetary policy transmission works through a number of conventional channels: interest rate effect, exchange rate effect, asset price effect and through expectations. The stance of monetary policy acts as a signal to firms Read more about The Credit Channel[…]

The Relationship Between Debt and Growth

The debt-growth nexus has received renewed interest among academics and policy makers alike in the aftermath of the recent global financial crisis and the subsequent euro area sovereign debt crisis. Discuss whether there exists a tipping point, for public indebtedness, beyond which economic growth drops off significantly; and more generally, whether a build-up of public Read more about The Relationship Between Debt and Growth[…]

GDP Data Revisions

The importance of accurate GDP data is often understated and there is a need to document carefully the extent of revisions to statistics on economic activity and evaluate how this affects macroeconomic policy as well as examine ways to improve statistical methods. The Office for National Statistics (ONS) has a trade-off between providing estimates on Read more about GDP Data Revisions[…]

Why has wage inequality risen?

Wage inequality has increased in many economies in recent decades. Discuss the three leading hypotheses regarding the causes of this increase. What does the empirical evidence tell us about the quantitative importance of each of these factors? The US economy has almost double since the 1970s, and labour productivity has risen over this period. Yet real wages for Read more about Why has wage inequality risen?[…]

The Colonial Origins of Comparative Development: A Summary

Acemoglu, Johnson and Robinson (AJR) attempt to measure the effects of institutions on income differences by introducing an exogenous source of variation in institutions to measure their differing outcomes. They begin by pointing out that the history of colonisation resulted in different institutions being formed: some countries received extractive institutions (whereby the coloniser would simply Read more about The Colonial Origins of Comparative Development: A Summary[…]

Economic Growth: Where does it come from?

One of the fundamental questions of economics is why are some countries rich and others poor? Why do some countries experience heavy growth which allows them to catch-up with the economic giants of the world, whilst others are relegated to the bottom and are unable to jump on the growth train? Is it due to Read more about Economic Growth: Where does it come from?[…]

Did small scale firms inhibit Victorian Growth?

Britain’s manufacturing firms have been accused of remaining family-run and small scale in the period 1850-1914, so ignoring the benefits of the large corporation evident in the USA. Discuss whether this represents a form of entrepreneurial failure by the owners of British firms. Chandler identifies that corporation’s in America are vertically and horizontally integrated, invested Read more about Did small scale firms inhibit Victorian Growth?[…]

Negative Interest Rate Policy and the Zero Lower Bound

Neoclassical Story of the Monetary Policy Transmission Mechanism The traditional orthodox story tells us that interest rates affect the economy through a number of channels including (i) the investment channel whereby higher interest rates reduce investment, as it becomes more costly to invest thereby inducing firms to either invest with retained earnings or forego investment Read more about Negative Interest Rate Policy and the Zero Lower Bound[…]

International Trade and Economic Growth

Does international trade increase economic growth? In this context, what are the trade policies that have been followed by developing countries? Standard textbook economic theory tells us that international trade benefits both parties in the trade, based on the gains from comparative advantage as laid out by David Ricardo. However, recent research into New Trade Read more about International Trade and Economic Growth[…]