Martin Ellison's picture
Affiliation: 
University of Oxford
Credentials: 
Professor of economics

Voting history

Should the ECB Reformulate its Inflation Objective?

Question 1: Which of the following best reflects your opinion on the following statement? “The ECB should explicitly state that it will allow inflation to temporarily exceed the 2% target following extended periods of low inflation.”

Answer:
Agree
Confidence level:
Not confident
Comment:
The idea of letting inflation drift above 2% for a while after periods of low inflation is a poor man’s price level target. I’ve no objection to the ECB doing this, but I am doubtful that it will deliver very much. Average inflation has been well below 2% over the last decade, despite the best attempts of the ECB to follow unconventional policies. From that base it’s difficult to believe that a promise to support higher inflation after a period of low inflation will have much bite. There are so many things that can go wrong. What if the promise is not believed? What if people (possibly rationally) think that monetary policy is now so weak that the ECB can never get back to 2% inflation? Do we really trust policymakers not to turn hawkish as soon as inflation rises to 2%? There is a danger that price level targeting is a distraction that is “too clever by half”, a policy drawn up in academic models without sufficient regard for the real world. I get the math of how it is supposed to work in theory, but in practice its effects are likely to be diluted by general scepticism and a lack of credibility. More potent policies are needed.

The Economic Cost of School Closures

Question 3: To what extent will school closures increase gender inequality due to unequal gender distribution of the burden of school closures?

Answer:
To a small degree but persistently
Confidence level:
Confident
Comment:
The labour market outcomes of new mothers are heavily influenced by what happens in the years that immediate follow childbirth. If mothers retain a connection with the workplace, for example by working at least part-time, then it is possible to return to their previous career trajectory. However, if they spend time out of the labour force then they typically do not return to their previous position. In part this may be a conscious choice, but to the extent that it is forced upon mothers (e.g. by the lack of affordable childcare or other factors) it is likely to engender unwanted gender inequality. The danger with school closures is that it will lead to more of the latter compulsion. Gender norms are still deeply embedded in society, and the burden of childcare will often fall on the mother to the detriment of her career relative to men.

Question 2: To what extent will school closures increase inequality in human capital development?

Answer:
To a small degree but persistently
Confidence level:
Confident
Comment:
The UK already has significant within cohort inequality, with pupils having widely different educational experiences depending on socio-economic class, location, parental resources and engagement, and so on. School closures exacerbate these differences and add inequality across cohorts to the mix. A pupil from a disadvantaged background loses out two-fold, both relative to their peers is less-disadvantaged areas and relative even to other generations of disadvantaged pupils. Much will depend on the response of government policy, which unfortunately does not bode well for inequality (not providing laptops for disadvantaged pupils etc.). If the government was sufficiently committed to its “levelling up” agenda then the increase in inequality could conceivably be offset.

Question 1:What damage will school closures have on economic growth over a 10-15 year horizon?

Answer:
Minor
Confidence level:
Very confident
Comment:
There are not enough children in school for the damage to be large. Sianesi and Van Reenen (2003, Journal of Economic Surveys) estimate that an extra year of average education of the labour force raises output/capita by 3-6% and growth by 1%. The current UK workforce is about 30 million and just short of 9 million children are in UK schools, so even if all pupils lost a whole year of education the effect on GDP and growth would be limited. In 10 years’ time almost all of those affected by the school closures will be in the labour force, but there will be 20 million still in the labour force who are unaffected, so a generous upper bound on the size of the effect is 1/3 of what Sianese and Van Reenen estimate, i.e. GDP some 2% lower and growth reduced by 1/3%.

COVID-19 and UK Public Finances

Question 1: How urgently should the UK government address the rise in public debt?

Answer:
There is no need to take or announce any budgetary actions to reduce the deficit or the public debt until the end of the pandemic
Confidence level:
Very confident
Comment:
Now is not the time to worry about repaying the debt. HM Treasury has more important things to worry about.

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