goonix

France’s novel approach to the wage bargain: ‘boss-napping’

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In the face of increasingly uncertain economic times, the latest trend in France is for workers unhappy with their company’s position on labour to boss-nap,. Boss-napping entails workers disappointed with redundancies or payouts taking their bosses hostage as a bargaining tool! Recent kidnappings have involved 3M France’s industrial director and Sony France’s CEO and HR director.

Unfortunately it seems that the tactic is working, with 3M France’s industrial director being released after signing a deal which offered more favourable treatment for the 110 employees who faced losing their jobs. I’m not sure of the validity of such a contract made under duress over there – I doubt it would stand up here – but hey, they do things differently in France.

Matt Nolan

Support of inheritance tax in NZ and the UK

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Two of my favourite applied economists have come out in support of inheritance taxes (to some degree):

In NZ we have David Grimmond of Infometrics:

A means of correcting for dynastic privilege is to introduce a uniform tax on capital. The absence of bequest taxes, in combination with a lack of uniform tax on capital, is a stark aberration in the New Zealand tax system

Then in the UK we have Patrick Nolan of Reform:

In this environment it is unclear why reducing inheritance tax should be a priority. It could be argued that falling property prices mean it would now be relatively cheap, with some estimates indicating that the cost has fallen by almost half to £1.3bn for 2011-12. Yet this is money that could be put to better uses – including reducing other more harmful taxes.

I am a fan of inheritance taxes – as they don’t distort economic behaviour to the same degree as other taxes.  If we want to change the tax system this is the sort of tax we should be introducing – with a corresponding cut to the top tax rate.

Matt Nolan

Is New Zealand fighting a wave of protectionism?

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Protectionism is a scary thing during a global downturn. A bunch of nations trying to “protect” their own interests can turn a bad situation into a worse one.

New Zealand wants to fight off what it sees as protectionism – namely subsidies for dairy farmers in Europe. However, although there is too much protectionism out there I’m not sure our argument against this set of policies is watertight.

If we think that the current shock to dairy prices is temporary, and that dairy prices will come back when the current massive increase in supply works through the system, then it makes sense for Europe to temporarily subsidise farmers in the face of a MASSIVE CREDIT CONSTRAINT.

Industries all around the world are struggling to sort out their cash flow because of a freeze up in lending. If the firms are still profitable given the expectations of future prices, then it makes sense for domestic government to prevent the industries from failing.

Do you think this type of intervention is defendable – discuss 😉

Matt Nolan

British use the environment to promote protectionism

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So the British are increasing the international departure tax, and stating that it is an “externality tax”.  What spectacularly wrong-headed logic.

The externality they are talking about is “carbon emissions” – now as long as they tax the fuel that airlines use the externality is accounted for, as the carbon emissions stem from fuel use.  Adding a tax on top of an efficient externality tax is not efficient.

The real reason the British government is doing this is straight out protectionism – they believe that the impact on “outflows” from Britain will exceed the impact on tourist “inflows”, a factor that would improve net exports and help to “protect” the retail industry in Britain.  Beyond this, the increase in tax is also a simple tax grab – one that taxes tourist industries the rest of the world over.

No wonder we in New Zealand are unhappy (*, *)

Matt Nolan

Cross-country cash rates

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In the Financial Times, Martin Feldstein wrote about the difference between the EU and US monetary setting regimes – specifically he wanted to answer why the EU was lifting rates, while the US had been cutting. (ht Greg Mankiw).

Ultimately, he puts this difference down to a number of factors:

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Matt Nolan

Externalities and Fed monetary policy

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An interesting article by Sebastian Mallaby discussed the contrary monetary policy strategies of the US Federal Reserve (cut rates to avoid a recession) and the European Central bank (keep rates elevated to avoid inflation). (h.t. Greg Mankiw)

In the article, Mallaby alludes to the view that the US Federal Reserve might feel that it is the greater protector of the world economy – this takes for granted the positive externalities to the rest of the world from the Fed cutting rates. These are:

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