Jagjit Chadha's picture
Affiliation: 
National Institute of Economic and Social Research
Credentials: 
Professor of economics

Voting history

Wages and economic recoveries

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Question 2: Do you agree that the different behaviour of UK real wages relative to Eurozone wages during the Great Recession is in large part due to the UK having different labour market policies?

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Answer:
Neither agree nor disagree
Confidence level:
Confident
Comment:
Whilst it is reasonably clear we have different and arguably more flexible labour markets in the UK than in many Euro Area countries, it cannot be the whole story in explaining the response of real wages in the UK. That firms may have hoarded labour and lowered the capital-output ratio would seem to me, from the labour demand side, an equally important question. The capital-labour mix chosen by firms may have been distorted by a vulnerable financial sector constrained by new regulations but also the operation of monetary and fiscal policies that may not have encouraged investment.

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Question 1: Do you agree that lower real wage growth was beneficial for employment levels during the Great Recession?

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Answer:
Agree
Confidence level:
Confident
Comment:
Relatively more flexible labour markets in the UK meant that in the aftermath of the Great Recession real wages rather than employment took the main brunt of adjustment. Real wages are still broadly speaking at or below their pre-crisis peak, whilst employment numbers and hours have tracked output which is some 7% above the pre-crisis peak. The counterfactual can be debated as higher real wages might have meant more unemployment and also more pressure on elevated house prices leading to more mortgage delinquencies. But given the size of the shock, the labour market response was helpful with unemployment peaking at only 8.5% in late 2011.

Happiness and well-being as objectives of macro policy

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Question 2: Do you agree that quantitative well-being analysis should play an important role in guiding policy makers in determining macroeconomic policies?

 
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Answer:
Disagree
Confidence level:
Confident
Comment:
We do use well being analysis because we tend to examine the welfare of the median household using their utility function when we try to understand the implications of different policy plans. That said there may be case for looking at the utility of different parts of the income and wealth distribution but that should be related again to the utility function not some ad hoc subjective construct.

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Question 1: Do you agree that subjective well-being measures, or at least some of the subindices from the typical survey measures, are now reliable enough to give useful insights when used in macroeconomic empirical analysis?

 
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Answer:
Disagree
Confidence level:
Confident
Comment:
I am not at all sure that subjective measures or the self-reported sense of well being measure accurately material progress. if we are trying to understand output, income or expenditure there are other more obvious problems in the measurement of a digital, service sector economy.

A “new” UK industrial strategy ?

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Question 2: Do you agree that the UK needs a new regional policy?

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Answer:
Agree
Confidence level:
Confident
Comment:
Regional divides have been a staple of conversation in the UK since at least the 1980s. They are part of the story behind the referendum result of last year. We need to create more regional centres of employment and industrial excellence. Again we need to look carefully at each region or sub-region to try and understand what exactly is missing.

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