How to use this Page

Today, 10 October, is World Homeless Day. This day is dedicated to increasing awareness of the global issues surrounding homelessness, as well as getting people involved in their community to help meet the needs of homeless people locally. The increased publicity and solidarity of the global platform helps to strengthen grassroots campaigns at the most local level. The problems regarding homelessness are multifaceted.

The post Homelessness: issues by the numbers and how you can help appeared first on OUPblog.

By William Chislett

The good news is that Spain has finally come out of a five-year recession that was triggered by the bursting of its property bubble. The bad news is that the unemployment rate remains stubbornly high at a whopping 26%, double the European Union average.

The scale of the property madness was such that in 2006 the number of housing starts (762,214) was more than that of Germany, France, and Italy combined. This sector, to borrow the title of a novel by Gabriel García Márquez, was a Chronicle of a Death Foretold. There are still an estimated more than one million new and second hand unsold homes.

The excessive concentration on the property sector, as the motor of an economy that boomed for a decade, created a lopsided economic model and fertile ground for corruption. When the sector crashed as of 2008 and house prices plummeted, 1.7 million people lost their jobs in construction out of a total of 3.7 million job losses in the last six years, households were left with mortgages they could not pay and property development companies unable to service their bank loans. This, in turn, severely weakened parts of the banking system which had to be rescued by the European Stability Mechanism with a €42 billion bailout programme. Spain exited the bail-out in January, but bad loans still account for more than 13% of total credit, up from a mere 0.7% in 2006.

Spain has emerged from recession thanks largely to an impressive export performance, achieved through an “internal devaluation” (lower unit labour costs stemming from wage cuts or a wage freeze and higher productivity). As a euro country, Spain cannot devalue. Merchandise exports rose from €160 billion in 2009 to €234 billion in 2013, an increase equivalent to more than 7% of GDP. This growth has been faster than the pace of powerhouse Germany, albeit from a smaller base. Exports of goods and services rose from 27% of GDP in 2007 to around 35% last year. The surge in exports combined with the drop in imports and a record year for tourism, with 60 million visitors, turned around the current account, which was in surplus for the first time in 27 years. In 2007, the current account recorded a deficit of 10%, the highest in relative terms among developed countries.

Unemployment is the most pressing problem. The depth of the jobs’ crisis is such that Spain, which represents 11% of the euro zone’s economy and has a population of 47 million, has almost 6 million unemployed (around one-third of the zone’s total jobless), whereas Germany (population 82 million and 30% of the GDP) has only 2.8 million jobless (15% of the zone’s total). Germany’s jobless rate is at its lowest since the country’s reunification, while Spain’s is at its highest level ever.

Mariano Rajoy

Young Spanish adults, particularly the better qualified, are increasingly moving abroad in search of a job, though not in the scale suggested by the Spanish media which gives the impression there is a massive exodus and brain drain. One thing is the large flow of those who go abroad, especially to Germany, and return after a couple of months; another the permanent stock of Spaniards abroad (those who stay beyond a certain amount of time), which is surprisingly small. According to research conducted by the Elcano Royal Institute, Spain’s main think tank, between January 2009 and January 2013, the worst years of Spain’s recession, the stock of Spaniards who resided abroad increased in net terms by a mere 40,000, which is less than 0.1% of Spain’s population, to 1.9 million. These figures are based on official Spanish statistics cross-checked with data in the countries where Spaniards reside. The number of Spaniards living abroad is less than one-third the size of Spain’s foreign-born population of 6.4 million (13.2% of the total population). Immigrants in Spain are returning to their country of origin, particularly Latin Americans.

Spain’s crisis has also resulted in a long overdue crackdown on corruption. There are around 800 cases under investigation, most of them involving politicians and their business associates. Spain was ranked 40th out of 177 countries in the 2013 corruption perceptions ranking by the Berlin-based Transparency International, down from 30th place in 2012. Its score of 59 was six points lower. The nearer to 100, the cleaner the country. Spain was the second-biggest loser of points, and only topped by war-torn Syria. The country is in for a long haul.

William Chislett, the author of Spain: What Everyone Needs to Know, is a journalist who has lived in Madrid since 1986. He will be talking on his book at the Oxford Literary Festival on 29 March. He covered Spain’s transition to democracy (1975-78) for The Times of London and was later the Mexico correspondent for the Financial Times (1978-84). He writes about Spain for the Elcano Royal Institute, which has published three books of his on the country, and he has a weekly column in the online newspaper El Imparcial. He has previously written on Spanish unemployment and Gibraltar for the OUPblog.

Subscribe to the OUPblog via email or RSS.
Subscribe to only business and economics articles on the OUPblog via email or RSS.
Image credits: (1) Spanish Falg By Iker Parriza. CC-BY-SA-3.0 via Wikimedia Commons (2) Mariano Rajoy By Gilad Rom. CC-BY-SA-3.0 via Wikimedia Commons

The post What does the economic future hold for Spain? appeared first on OUPblog.

        

Related Stories

• The Ukraine crisis and the rules great powers play by
• Monetary policy, asset prices, and inflation targeting
• A hidden pillar of the modern world economy

 

By Maisy Wong

 
There are many policies around the world designed to encourage ethnic desegregation in housing markets. In Chicago, the Gautreaux Project (the predecessor of the Moving To Opportunity program) offered rent subsidies to African American residents of public housing who wanted to move to desegregated areas. Germany, the United Kingdom, and Netherlands, impose strict restrictions on where refugee immigrants can settle. Many countries also have “integration maintenance programs” or “neighborhood stabilization programs” to encourage desegregation. These policies are often controversial as they are alleged to favor some ethnic groups at the expense of others. Regardless of the motivation behind these policies, knowing the welfare effects is important because these desegregation policies affect the location choices of many individuals.

I am interested in one such desegregation policy in Singapore: the ethnic housing quotas. Using location choices, I analyzed how heterogeneous households sort into neighborhoods as the ethnic proportions in the neighborhood change. To do this at such a local level I had to assemble a dataset of ethnic proportions by hand-matching more than 500,000 names to ethnicities using the Singapore residential phonebook.

The ethnic housing quotas policy in Singapore is a fascinating natural experiment. It was implemented in public housing estates in 1989 to encourage residential desegregation amongst the three major ethnic groups in Singapore: Chinese (77%), Malays (14%), and Indians (8%). The quotas are upper limits on the proportions of Chinese, Malays, and Indians at a location. Locations with ethnic proportions that are at or above the quota limits are subjected to restrictions designed to prevent these locations from becoming more segregated. For example, non-Chinese sellers living in Chinese-constrained locations are not allowed to sell to Chinese buyers because this transaction increases the Chinese proportion and makes the location more segregated.

Using transactions data close to the quota limits and controlling for polynomials of ethnic proportions calculated using the phonebook, I documented price dispersion across ethnic groups that is consistent with theoretical predictions of the policy’s impact. The findings suggest a model where Chinese and non-Chinese buyers have different preferences for Chinese neighborhoods.

Indeed, my estimates show that all groups have strong preferences for living with members of their own ethnic group but the shapes of the preferences are very different across the three ethnic groups. All groups have ethnic preferences that are inverted U-shaped but with different turning points. This means that once a neighborhood has enough members of their own ethnic group, households want new neighbors from other ethnic groups. Finding tastes for diversity and differences in the shapes of ethnic preferences is consistent with previous research using data on racial attitudes from the General Social Survey in the United States and also surveys of ethnic relations in Singapore.

I used these estimates of ethnic preferences to perform welfare simulations. The seminal work by Thomas Schelling on tipping showed that externalities exist in a model with ethnic preferences because a mover affects the utility of his current and future neighbors by changing the ethnic composition of the neighborhood. Due to these externalities, Schelling showed that policies such as the ethnic quotas could potentially be used as a coordination mechanism to achieve equilibrium with integrated neighborhoods. My welfare estimates show that under the quota policy, about one-third of neighborhoods are close to the optimal allocation of Chinese, Malays, and Indians respectively.

Maisy Wong is Assistant Professor in Real Estate at Wharton, University of Pennsylvania. Her paper, ‘Estimating Ethnic Preferences Using Ethnic Housing Quotas in Singapore’ can be read in full and for free in The Review of Economic Studies.

The Review of Economic Studies aims to encourage research in theoretical and applied economics, especially by young economists. It is widely recognised as one of the core top-five economics journal, with a reputation for publishing path-breaking papers, and is essential reading for economists.

Subscribe to the OUPblog via email or RSS.
Subscribe to only business and economics articles on the OUPblog via email or RSS.
Image credit: HDB flats at Tampines New Town. By Terence Ong. [Creative Commons], via Wikimedia Commons.

The post Do people tend to live within their own ethnic groups? appeared first on OUPblog.

Animator Mike “Beeple” Winkelmann invites you to “watch the American housing market spiral out of control” in Subprime, a stylish and slightly hypnotic animated short.