This article describes research on the analysis of the consequences of changes in personal taxation and social security carried out as part of the SSRC Programme on Taxation, Incentives and the Distribution of Income. It shows how data from the Family Expenditure Survey can be used to see who gains and who loses from policy changes, illustrating this by an examination of proposals for a tax credit scheme. It discusses the incorporation of changes in behaviour, and the effect of taxes and benefits on incentives, including the ‘poverty trap’. Particular emphasis is placed on the accessibility of the analysis, and the last section describes a range of programs which are available for use on micro-computers.

This article examines the key features of the UK’s spatial productivity relationships and discusses some of the key questions currently being articulated or debated as they relate to potential devolution-related discussions. The paper demonstrates that the local productivity challenges facing UK regions are nationwide in nature rather than local, and systemic rather than specific. In particular, the scale-productivity relationships across cities and regions which are evident in almost all other OECD countries are largely absent in the UK. Instead, previous prosperity is the dominant marker of current local prosperity, suggesting that cumulative causation processes define the UK regional and urban economic landscape rather than scale relations. This article explains these features in a manner which is accessible to a wide audience, in order to provide greater clarity regarding the fundamental economic problems to be addressed and also the underlying objectives which the Levelling Up agenda needs to achieve.

EU Member States, particularly in the Euro Area, have been pushed to adopt more extensive and intrusive fiscal rules, but what is the evidence that the rules are succeeding? The EU level Stability and Growth Pact (SGP) has been – and remains – the most visible rule-book, but it has been complemented by a profusion of national rules and by new provisions on other sources of macroeconomic imbalance. Much of the analysis of rules has concentrated on their technical merits, but tends to neglect the political economy of compliance. This paper examines the latter, looking at compliance with fiscal rules at EU and Member State levels and at the rules-based mechanisms for curbing other macroeconomic imbalances. It concludes that politically driven implementation and enforcement shortcomings have been given too little attention, putting at risk the integrity and effectiveness of the rules.

Educational inequalities are evident even before children start school. Those connected to disadvantage widen out as children progress through the education system and into the labour market. We document various forms of educational inequality. We then review available evidence for England about the impact of school-level policies on achievement and their potential for reducing the socio-economic gap. We discuss evaluation evidence under four main themes: school resources; market incentives; school autonomy; and pedagogical approaches.

The performance of local tax offices of Norway is studied over a three-year period applying Data Envelopment Efficiency analysis and a Malmquist productivity index. The estimates are bias-corrected using a bootstrap approach recently developed for DEA models. The results show that bias correction and the construction of confidence intervals give a quite different picture without bootstrapping. A set of best practice offices is identified for future work on finding explanations for good performance. The productivity development of individual offices is classified into the four categories: productivity improving cost increase, productivity improving cost savings, productivity decreasing cost savings and productivity decreasing cost increase.

This article examines the extent to which differentials have been influenced by successive periods of incomes policies. The reason for interest in this subject is that one of the major supposed disadvantages of incomes policies is that they ‘distort differentials’. However we rarely get an explanation either of what these differentials are or in what way they are distorted. In this article we use various statistics on wages and earnings and attempt to find out whether incomes policies have had any noticeable impact on differences in pay between groups of workers.

This paper describes a fully behavioural microsimulation model that has recently been developed at the National Institute for considering responses to changes in pension policy of household savings and labour supply. The model generates household decisions regarding labour/leisure, and consumption/savings by solving a dynamic programming problem over the simulated lifetime. This analytical framework incorporates a degree of complexity that is usually omitted from econometric analyses that are common in the literature.

Given the long and variable time lags between interest rate changes and responses in output and inflation, an inflation forecast must lie at the heart of monetary policy. In the UK the Bank's inflation forecast and Report were developed when the interest rate decision still lay with the Chancellor. Its, largely unchanged, continuation has led to certain tensions once that decision was delegated to a Monetary Policy Committee of independently responsible experts. In this paper the question is raised whether such a Committee should be jointly and individually responsible for the inflation forecast, and what might be considered as alternative procedures.

The global financial crisis has had significant effects both on the prospects for output growth and projections for government borrowing and debt. We project that the UK government debt stock will rise to around 100 per cent of GDP and that output will be permanently scarred by around 4–5 per cent. The first is much more pessimistic than government projections, whilst the second is similar. In this note we explain a sequence of revisions we have made to our projections for trend growth as the crisis has unfolded, and also look at medium-term projections for the fiscal position. Not all of the deterioration in the budget has come from revisions to output, and not all of the changes to trend output result from the crisis, but the two are crucially linked.

This note presents the results of a questionnaire enquiry into replacement policies used in a sample of firms, mainly in the engineering industry.

The enquiry was made as one part of a study of strategic factors in economic growth. This broader study has been focussed on the question : what factors influence the pace at which new and more efficient units of production, whether whole plants or individual machines, are introduced into industry in place of old ones, thus giving rise to increased productivity ?

Housing policy has traditionally been highly specific, concentrating on providing decent affordable homes. Now, however, housing is being seen more as a major factor in locating wider problems of deprivation and social exclusion, as well as an important part in solutions, not only by increasing housing quality, but more widely through its impact on the neighbourhood, regeneration and even urban renaissance. The article reviews a range of research findings on the role that housing plays in concentrating problems of deprivation and decay, on the relationship between deprivation and housing conditions, on how the housing market operates in relation to successful area-based employment and regeneration policies, and the implications that these results have on how area-based policies should be evaluated.

In the January Review discussion of the US current account imbalances, we explored the links between the US current account deficit and exchange rates, and focused on the economic adjustments required to correct the US ‘triple’ deficits. Using NiGEM, we illustrated that a sustained adjustment in the US current account deficit cannot be achieved through a temporary nominal depreciation alone – whether risk or policy driven – but also requires a redressing of the government and household imbalances and a consequent increase in national savings.

Monetary unions have been a recurring element in European history, driven by the need to overcome obstacles to trade caused by the fragmentation of political authority. Between the 14th and the 19th centuries, a series of coinage unions were set up in the German speaking world, which served as models for the Latin and Scandinavian monetary unions in 1865 and 1872. With the growing size of participating states and the transformation of money, thanks to the end of bimetallism and the wider use of bank notes and deposits, the objectives and the practical management of monetary unions became more complex and more political. Monetary union became strictly associated with European federalism and required new common institutions after the end of the classical metallic standards in 1914.

We assess the performance of France, Germany and the United Kingdom over the period 1997-2002. Gross and net output per hour worked are considerably lower in the UK than in France and Germany. GDP in France and the UK have grown at the same rates over the period although real national income in the UK has grown considerably faster than in France. Seen from the supply side, French growth is substantially attributable to growth in total factor productivity while in the UK factor inputs are more important. There is, nevertheless, a concern that, at the margin, UK growth may be depreciation-intensive and therefore of poor quality. Germany's growth has been slow because productive inputs have grown only slowly and its weak performance is probably structural rather than cyclical. There does seem to be room for substantial increases in labour input in both France and Germany to be achieved through reform to labour market conditions such as tax rates on low paid workers.

This article analyses the properties of five major macroeconometric models of the UK economy in the light of the current debate over the setting of monetary and fiscal policy instruments. The broad objectives of current policy—sound public finances and low inflation—are reflected in a common operating environment for the models, with feedback rules for income tax and interest rates. Five standard simulation experiments demonstrate the consequences of these policy choices. The models disagree on several implications of this new policy framework, a critical parameter being the speed with which financial imbalances are rectified and inflation targets are met.

Against the background of the increasing services content of many manufactured goods, the paper attempts to assess the role of (domestically and internationally) purchased service inputs for the relative export performance of countries in a particular manufacturing industry. It estimates an empirical model of export market shares for EU15 countries and twelve disaggregated manufacturing industries over the period 1995 to 2007. Whereas most traditional explanations are based on the influence of relative costs and technology-related variables, this paper emphasises the importance of services as a determinant of both product quality and the sectors’ productivity. The service linkage variables are based on national input–output tables. The analysis finds a positive and highly significant impact of services on export market shares of manufactured goods. Distinguishing between domestically-sourced service inputs and imports results in a robust and highly significant impact of international service linkages, while the analysis finds no impact of domestic service linkages.

Two composite measures are calculated to map improvements in living standards over the 20th century: the Dasgupta–Weale index and the Human Development Index. A gendered version of the latter is also considered. Indicators of income, leisure, inequality, wealth, health, education and political rights are included. The indices reveal a century of progress. But progress has been neither continuous nor uniformly shared. Downturns are evident in some of the indicators since 1980, demonstrating that the gains are not immutable and need to be protected. Women‘s position has improved if the end of the century is compared to its beginning, but there has been little change in women's position relative to men's over the last few decades on the dimensions considered here.

As long as all interest rates move in tandem – including the rate of return on paper currency – economic theory suggests no important difference between interest rate changes in the positive region and interest rate changes in the negative region. Indeed, in standard models, only the real interest rate and spreads between real interest rates matter. Thus, in most respects, negative interest rate policy is conventional. It is only (a) what needs to be done with paper currency, (b) difficulties in understanding negative rates or (c) institutional features interacting with negative rates that make negative interest rate policy unconventional.

The National Institute has been producing forecasts since 1958, and they are an essential part of our contribution to the policy debate in the UK and elsewhere. Model-based forecasts for the UK have been published every quarter1 since the 1970s, whilst model-based forecasts for the US and the major Europeans started only in the late 1980s. The country coverage of the European forecasts has increased over the years, and Euro Area forecasts began as soon as membership was clear. There is a long enough history of forecasting to be able to evaluate our performance, and this note extends the work reported in Pain, Riley and Weale (2001), Barrell, Kirby and Metz (2005) and Barrell and Metz (2006). The Institute forecasts for the UK are the main focus of the analysis in this note, but evaluations of the US and Euro Area forecasts produced by the Institute are also undertaken. We focus on evaluating the last forecast undertaken (at T–1) before the start of the year being forecast (at T), as they contain as much information as was possible without using any from the year being forecast. We also look at the evolution of forecasts over the two years preceding the publication of the first outturn for the year being forecast in order to gauge at which point those forecasts become efficient in that the root mean squared deviation (RMSD) of the errors is smaller than standard deviation of the series.