Morten Ravn's picture
Affiliation: 
University College London
Credentials: 
Professor of economics
Head of Department

Voting history

National Living Wage and the UK economy

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Question 2: Do you agree that the new NLW will have a muted effect on wages and prices?

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Answer:
Agree
Confidence level:
Confident
Comment:
I would agree that it might be muted yet still positive. The wage and cost effects, though, might possibly vary over industries. One should also be aware that increases in wages may be associated with decreases in firms' investment in workers. At the end of the day, it would seem hopeful to believe that one can implement higher wages at the bottom of the wage distribution at no costs. This does not mean that the policy may not be right but it does mean that there will be costs.

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Question 1: Do you agree that the new National Living Wage is likely to lead to significantly lower employment?

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Answer:
Agree
Confidence level:
Not confident
Comment:
The cost of low skilled employment will rise and it is hard to believe in large monopsony power in all the industries concerned. So I think it is likely that employment will fall. One should also be aware of general equilibrium effects increasing costs of production in other industries making the UK less competitive. Of course, one also needs to look at how tax wedges are adjusted to get the full picture. So in the end, it is complicated but it would seem rather fairy-like to believe that a large increase in wages at the bottom of the distribution could be implemented at no cost of employment of the workers concerned.

Brexit and financial market volatility

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Question 2: Do you agree that the possibility of Brexit significantly increases uncertainty and volatility in financial markets and the economy in general?

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Answer:
Strongly Agree
Confidence level:
Extremely confident
Comment:
If it becomes likely that Brexit is the outcome, one has to start considering about the implications of this. It is unclear what kind of deal the UK will get and what will happen to the rest of the EU. It is also unclear whether Brexit will trigger another Scottish referendum. So if Brexit becomes likely, volatility will almost surely increase significantly.

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Question 1: The value of the pound fell sharply this week. Do you agree that the public debate on Brexit can be expected to (continue to) lead to a substantially higher level of exchange rate volatility in the upcoming months?

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Answer:
Agree
Confidence level:
Very confident
Comment:
There are two sources of uncertainty: (a) will the UK remain in the EU or vote to leave? and (b) what will happen if the UK votes to leave? Both sources have the power to create currency turmoil as it is unclear what will happen to the UK economy. Therefore, I think turmoil will persist unless the polls start to show voters solidly favouring the UK remaining in the EU.

Market Turbulence and Growth Prospects

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Question 2: Do you agree that the falls in share prices, low oil prices and the slowdown in some emerging market economies will have a significant negative impact on the UK’s economic recovery?

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Answer:
Neither agree nor disagree
Confidence level:
Confident
Comment:
I see many of these aspects as reflections of what is happening rather than causes. Commodity prices are low because of doubtful growth prospects and the same is the case for asset prices. Of course, should there be another crisis emulating what happened in 2008/09, the consequences could be very dire.

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