Total Economy Level Research Articles

The effect of natural/human-made hazards on business establishments and their supply chains

This paper examines the impact of natural and human-made hazards on payroll, GDP, employment, and establishment survival/creation in the year of hazard occurrence in the U.S. economy and more specifically in the U.S. manufacturing/goods producing industry. Many of the papers that examine economic impacts of hazards consider upstream impacts of supply chain disruption. Measures of downstream impacts are often limited, particularly in measuring the short-term impacts. This paper examines how manufacturers and other establishments are impacted, at the industry and total economy level, by a disruption in supplies of goods with low substitutability, which is often referred to as the ripple effect. In this paper, eight models are developed to explore supply chain vulnerability, at the industry-level, to hazard events across geographic areas of the U.S. during the 2005 to 2016 time period. The most severe impacts are due to hazards in the manufacturing/goods industry supply chain, where payroll, GDP, and employment declined 2.9%, 3.9%, and 8.6%, respectively. For all establishments, payroll and employment declined 5.3% and 3.0%, respectively. The results further suggest that the compound effect of hazards through the supply chain possibly exceeds that of the local hazard (i.e., direct impact). This can create an incentive misalignment. The establishment that invests in mitigation efforts and experiences the hazard locally does not directly experience the majority of the net benefit. The findings also suggest there is a need to better understand the short-term downstream impacts from all hazards, especially at the aggregated national level.

Policy-Induced Expansion of Solar and Wind Power Capacity: Economic Growth and Employment in EU Countries

Given the intensifying debates on whether governments should promote particular renewable energy technologies, the main objective of this study is to investigate the long- and short-run effects of policy-induced expansion of renewable solar and wind technologies on economic growth and employment in 15 European Union (EU) member states during 1990-2013 by using panel-data time-series econometric techniques. Instead of relying on renewable energy consumption or generation as commonly done in the literature, we focus on the capacity for solar and wind power generation, which is largely a consequence of the EU’s renewable energy policies. In summary, we find that, to date, renewable energy policy- induced wind and solar power capacity promotes growth and/or employment in the short run, but these capacity increases do not stimulate economic growth in the long run in the EU-15 region. In fact, our results tend to support the opposite relationship: increases in wind and solar power capacity are associated with negative economic growth, at least at the total economy level.

10.3138/rijpm.2.1.64

Human capital is the present value of future wages, which can be a large component of the total wealth of active workers. This raises the question of whether labour income risk can be hedged by how the retirement savings of workers are invested. The answer is that it cannot be hedged if correlations between labour income and financial return fluctuations are zero, or close to it. Previous research suggests this is generally the case at the total economy level, when domestic investments are used. This article presents the results of a study addressing the above question at the industry level, using a menu of foreign investment indexes. Specifically, we examine the situations of American and Canadian workers in seven different industries whose pension funds can invest in the equity markets of ten countries, including their own. We find significant positive and negative correlations between wage and return fluctuations, which point to opportunities to hedge labour income risk at the individual industry level through the investment of industry pension funds.