Examining data for 79 immigrant source countries and six OECD member destination countries during the years 1975–2000, we find that source-destination cultural differences inhibit international migration. We also report that existing immigrant stocks act to offset, at least in part, the migration-inhibiting effects of cultural differences. Employing educational attainment as a proxy for skill, we find variation across low-, medium-, and high-skilled immigrant cohorts both with respect to the cultural distance-migration relationship and in terms of the extent to which existing immigrant stocks offset the influence of cultural differences. Our results appear robust to econometric techniques, sample composition, and endogeneity issues.

Modelling the monetary sector has long been seen as problematic. Conventional demand for money functions have typically failed to cope with the experience of the past 15 years (Judd and Scadding, 1982) and models based upon the counterparts to monetary growth have fared little better. The current interest in buffer stock money (see Cuthbertson and Taylor, 1987, for a recent survey) can be seen as a response to the failure of the more traditional approaches. We believe that the issues involved in the empirical implementation of the buffer stock hypothesis are subtle and that the literature to date has not dealt with them satisfactorily. In spite of the substantial difficulties involved, we think that a system approach to buffer stock modelling (for example, Davidson, 1987a) may be unavoidable to ensure theoretical consistency.

This article examines the accuracy of the National Institute's forecasts of incomes, inflation and employment from 1965 to 1975. It is found that in recent years the Institute has tended to underestimate inflation, although less seriously for the consumer price index than the other current price variables studied. The accuracy of the forecasts has generally increased in relative terms, although it has deteriorated in absolute terms. The forecasting performance in 1974 was particularly poor but there has been a distinct improvement in 1975 and 1976.

Over the past fifteen months oil prices have steadily risen from around $60 a barrel to over $100, as we can see from Figure 1. The projections in our forecast are based on information from futures markets and on projections by the US Energy Information Administration, and as prices have risen there has been increasing evidence that they are considered to be overshooting a sustainable position, as can be seen from our projections for oil prices. Oil prices are expected to fall back to $90 a barrel by the end of 2009. Hence the current oil price shock can be seen as a combination of a temporary increase and a permanent increase in oil prices. The impact of increases in oil prices on growth depends in part on the reasons for the increase, with the effects of supply reduction induced increases in prices being more negative than demand induced increases in prices. A supply reduction involves a loss of revenue for producers as compared to a fixed volume demand induced rise in oil prices, and hence a supply reduction would result in lower levels of imports by oil producers.

The Review has been appearing now for almost twenty five years. The assessments it has contained of the short-term prospects for the domestic economy have become progressively more quantitative and detailed, but have included from the beginning an explicit forecast of total output at least a year into the future.

This article calculates the equilibrium real exchange rate for the UK economy. The long-run trade and supply side relationships from HM Treasury's model are used to estimate the level of the real exchange rate consistent with the UK economy growing at its ‘natural’ rate while achieving a sustainable current account position. The model shows that the real exchange rate associated with macroeconomic equilibrium lies well below the actual rate for most of the 1990s. This result has important implications for possible UK participation in the single European currency as, once the nominal exchange rate is fixed, overvaluation can only be corrected by holding UK inflation lower than that elsewhere. Achieving this may be costly in terms of jobs and output.

We all recognise environmental problems—the pollution of air and rivers, the destruction of rain forests, global warming. The article argues that environmental problems are less the result of inappropriate values than of an incorrect calculus, and that economic evaluation and economic instruments have a major role to play in the correction of that calculus.

The green prescription of lower growth as a means of reducing environmental damage is dismissed—if higher output is often the cause of the problem, it is also what enables us to afford to deal with it. Policy should start from an adequate evaluation of the costs and benefits of action and inaction; the article instances nitrate in water, where the costs of rectification seem out of proportion to any likely benefit. Market mechanisms—such as taxes and tradeable licences—are often the best way of tackling environmental problems; but economists are sometimes as naive about their general applicability as non-economists about the effectiveness of prescriptive regulation.

This paper examines the background to calls for further fiscal decentralisation in Scotland in the light of theories of fiscal federalism. In particular, it examines whether spatial differences in preferences, which are central to ‘first generation’ theories of fiscal federalism can be argued to play a central role in the case for granting Scotland further tax and spending powers. ‘Second generation’ theories of fiscal federalism draw attention to the political economy of allocating tax powers to different levels of government. Some of the authors in this strand of theory argue that the case for allocating tax powers to subnational governments can be made in terms of ‘accountability’ – the notion that local politicians can be better held to account for the outcomes of policy actions. Our empirical analysis suggests that there is no clear difference in preferences between Scotland and the rest of the UK along a number of key political dimensions. However, the Scottish parliament enjoys substantially higher levels of trust among the Scottish electorate than does the UK parliament.

For some six years now the Federation of British Industries has been circulating a questionnaire to its members on industrial trends and prospects. The aim of this article is to assess the usefulness of the answers. The only practicable way to do this is to find a method of comparing the FBI results with official economic statistics. The FBI results will be helpful if they can be used to anticipate, confirm, supplement or on occasions correct the official series.

After the fall of the Conservative Government in February 1974, at the end of that period of incomes policy, the rise in average earnings in the UK went up to a figure of 30 per cent in the year to mid-1975. In the first stage of the incomes policy which followed, that figure was brought down to 14 per cent and in the second stage to 8 per cent. There can be no reasonable doubt that this deceleration was the consequence of the incomes policies adopted. None of the equations which have been put forward to represent the ‘normal’ movement of wage rates or earnings would have produced a deceleration of this kind. The third stage of incomes policy, now coming to an end, differed significantly from the first two. In the first two stages, the numerical limit set for earnings increases had the explicit backing of the General Council of the TUC. The third stage did not have this backing (although the General Council did support the twelve-month rule); it was left to the Government to try to hold the figure of a 10 per cent rise in average earnings, with a variety of ad hoc sanctions on employers who exceeded the figure, and with a number of exceptions for productivity agreements of varying degrees of genuineness. The resulting rise in average money earnings is likely to be of the order of 15 per cent.

In times of decreasing mortality, one way to stabilise a PAYG pension system is to interrelate the retirement age to the anticipated average lifespan. This paper investigates two approaches for Germany: one is to keep the average retirement duration constant, the other to define a constant share of the total lifespan for the retirement period. Our simulation model uses a Leslie matrix population projection, a Solow-Swan growth model and a detailed calculation of the German pension insurance budget. Our results show quite a significant impact on the insurance level and a rather small effect on the contribution rate, which is characteristic of a Bismarckian system.

Oil and gas from the North Sea will make the United Kingdom a net exporter of energy in the 1980s and supply a substantial portion of its needs through the 1990s. In value terms, the benefits are principally to the balance of payments and government revenue. The former is improved slightly relative to the pre-oil price rise position, but significantly compared with either the present balance or that of other industrial countries. The absolute size of these benefits and the share of the government in the total are extremely sensitive to the assumptions made about changes in the exchange rate, including those which result from the improvement in the balance of payments. Many decisions about the distribution of the benefits are already being taken, for example in policies for the energy sector and the exchange rate. It is therefore too late to plan to allocate all the benefits to a single purpose, and it may be undesirable to do so.

Since the mid-1990s the growth performance of the Euro Area as a whole, despite some good individual country performances, has failed to keep pace with developments elsewhere in the EU (including the UK) and also in the US. This is especially the case for a number of the larger Euro Area economies. Despite an encouraging performance in terms of its labour input trends, there has been a significant, offsetting, deterioration in the Euro Area's underlying productivity performance. This is driven in large part, worryingly, by a marked downward shift in the growth rate of total factor productivity. Looking to the future, no significant recovery is predicted in the Euro Area's underlying economic performance over the period 2007–11. While the policy challenge is a serious one, the Euro Area as a whole can take comfort from the fact that the gains from a successful refocusing of its overall reform agenda could be considerable. For example, the progressive introduction of the five key measures linked to the Lisbon strategy (i.e. the services directive; reduction of the administrative burden; improving human capital; 3 per cent R&D target; and increases in the employment rate) could boost the Euro Area's economic and employment growth rates by more than ½ a percentage point annually for more than a decade. Such an outturn would give the Euro Area a potential growth rate of around 2½ per cent, a rate of growth which in per capita terms would be broadly comparable to that of the US over the 2007–15 time period and, on the basis of current trends and policies, slightly better than that of the UK.

Restoring sustainable public finances in the aftermath of the Great Recession is a key challenge in most EU countries. In order to learn from history, our paper examines consolidation episodes in the EU since 1970. We shed light on the factors that favour the start of a consolidation episode and determine its success. Compared to the existing literature, we add a number of new dimensions in the analysis. First, we explore a broader set of potential ingredients of the ‘recipe for success‘, including the quality and strength of fiscal governance and the implementation of structural reforms. Secondly, we check whether the ‘recipe for success’ changed over time. Our analysis broadly confirms received wisdom concerning the conditions triggering a consolidation episode and the role of the composition of adjustment for success, with some qualifications related to the role played by government wages. In addition it provides evidence that well-designed fiscal governance as well as structural reforms improve the odds of both starting a consolidation episode and achieving a lasting fiscal correction. We also show that, over time, successful and unsuccessful consolidation episodes have become more similar in terms of adjustment composition.

In the UK already bad output figures for the first quarter were revised down in June to show a contraction of 2.4 per cent. While the national accounts indicate a larger fall (2.6 per cent) for the second quarter of 1958, methods of measurement were then different and it is probable that, were current statistical techniques used for the whole of the ONS quarterly data set which starts in 1955, the first quarter of this year would be the sharpest output fall recorded. It was probably the worst quarterly economic performance in the UK since the 1926 General Strike.

There is much debate at present about trends in public expenditure. The recent Green Paper on the longer-term outlook for public spending describes how public expenditure has risen faster than GDP in the past and raises the question whether total public spending need grow at all, in real terms, in future although the growth of GDP is projected at over 2 per cent a year. This article is not intended to offer any normative comment on future policy for government spending. Its purpose is to describe some preliminary results of a study of the growth of government spending and its relationship to GDP in the United Kingdom; it also makes some comparisons, in rather broad terms, of the experience of this country with that of some other countries.