Universal Basic Income: Our Solution to Automation?

By Kyla Fisher, Queen’s University

Over the past few years there has been increasing discussion in the media about the potential that technological change has in leading large portions of society to be unemployed. On one side, doomsayers point to the rapid progress in automation and artificial intelligence (AI) as signs that human workers will soon be replaced. Their opponents note that these same predictions were made in the past during the industrial revolution and turned out to be incorrect. One thing that does seem clear is that large numbers of jobs are susceptible to automation. A study by Carl Benedikt Frey and Michael Osborne found that 47% of U.S. workers had jobs at high risk of future automation (Frey & Osborne, 2017). The remaining question is whether enough new jobs will be created in other industries that can employ the displaced workers. Whatever your opinion, it is interesting to consider our options as a society if we had a major increase in unemployment. To consider this, let us assume that it’s 20 years in the future and that we are facing a significant reduction in the number of jobs available. What are options? In this article, we’ll consider two of the most popular solutions: universal basic income (UBI) and guaranteed basic income (GBI).

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Canadian Policy Responses to US Protectionism

By Ian Keay, Professor, Queen’s University

After tearing up a long-standing trade agreement between the United States and Canada, a deeply divided, Republican controlled Congress dramatically raises US tariff rates on products predominantly imported from Canada. The federal government in Canada is faced with an acute policy dilemma – there are strong domestic interests pushing for rapid and dramatic retaliation, while other groups, including farmers and landowners, are not nearly so enthusiastic about the prospect of a trade war with our largest and fastest growing trade partner. To complicate matters further, Canada’s European allies are keen to promote the continued globalization of international markets by keeping trade barriers low. The Canadian government ultimately decides to respond to these conflicting forces by re-writing virtually every line in the domestic tariff schedule, explicitly adopting protectionism as a primary policy goal, and increasing average tariffs by more than 50%.

This series of events probably sounds very familiar to Canadians today, but this particular episode in Canada-US trade relations took place over 150 years ago, during the late 1860s and 1870s. John A. Macdonald’s Conservative government introduced the National Policy tariffs as a response to US protectionism just months after his party won the 1878 federal election. Economists and historians have long understood that this response marked a sharp U-turn in Canada-US relations. However, our understanding of this policy, and its consequences for Canadian growth and development, has been hindered by researchers’ reliance on incomplete evidence.Read More »

What can the human genome project teach us about intellectual property policy?

By Kyla Fisher, M.A. Economics, Queen’s University

Innovation is one of the primary drivers of economic growth and improvements in living standards. It often produces larger social benefits than private benefits, leading firms to under-invest in R&D compared to the socially-optimal level. One of the ways that the government works to overcome this gap is through offering intellectual property (IP) protections, giving firms a temporary monopoly on commercializing their ideas. In addition, many governments allocate significant funds directly towards research through public research institutions or universities. However, it is difficult to determine the impact of these public efforts to stimulate innovation as we are unable to know the counterfactual. This article reviews the findings from an innovative study by Heidi Williams (2013) on the use of IP during the sequencing of the human genome. The study exploits the discrete nature of gene sequencing and the fact that it was researched both publicly and privately to evaluate the impact of IP on innovation outcomes. Despite the importance of IP policy for technological innovation there are relatively few empirical studies in this area. For this reason, Williams’ study generated quite a bit of interest at the time of publication and has been cited in multiple U.S. Supreme Court briefings.

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Can British Columbia’s Carbon Tax Success Happen Anywhere?

By Nikola Milutinovic, Queen’s University

Carbon taxes aren’t necessarily the job killer some provincial party leaders are making them out to be. Research by Ph.D. Candidate Akio Yamazaki of the University of Calgary should give Canadian politicians and pundits pause over the employment effects of carbon taxes. Yamazaki’s research suggests that British Columbia’s revenue-neutral carbon tax caused a net-gain in employment of 4.5% between 2007 and 2013. Governments can affect the labour market impact of carbon pricing by properly allocating their carbon tax revenues, according to Yamazaki.

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Queen’s Organizational Economics Conference

By Saad Khan, Queen’s University

On Thursday, June 14th, 2018, the Smith School of Business at Queen’s University hosted the Organizational Economics Conference. The conference covered a broad range of topics of particular interest to policy decisions related to the organization of businesses. The topics were as follows:  [1] growth prospects of franchises versus independent businesses, [2] the performance of serial entrepreneurs, [3] the effect of acquisitions designed to preempt competition on the continuation of the acquired project, [4] the effect of middle management treatment of employees on worker turnover and productivity, and [5] the optimal design of wage contract. This article summarizes the main findings of three papers presented at the conference and comments on policy implications.

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Smoking Bans Improve the Health of Children and Infants

By Fanny McKellips, Queen’s University

It is a well-accepted fact that smoking and second-hand smoke have harmful effects on health.

For this reason, many measures are taken by governments to decrease smoking and exposure to second-hand smoke. Canadian provinces, for instance, have banned smoking in all public places and workplaces. In the United States, 25 states have banned smoking in public places. While this limits exposure of non-smoking adults to secondhand smoke, it may create a displacement of smoking from public places to homes. Could this mean that children and infants, who cannot make their own decision to be exposed to second-hand smoke, are negatively affected by smoking bans? This issue is not well understood as the literature surrounding smoking bans tends to focus on the health impact on adults. Read More »

Closing the Income Sprinkling Loophole: Fair and Likely Efficient

By Frédéric Tremblay, Queen’s University

The Canadian government has recently announced that it intends to address what it considers to be three loopholes that allow tax planning using private corporations: income sprinkling, passive investments made by private corporations, and the conversion of a private corporations’ income into capital gains. This post will focus on the first form of tax planning, income sprinkling.

Income sprinkling refers to the use of the flexible structure of a Canadian-controlled private corporation (CCPC) to do income splitting with family members in lower tax brackets. This allows some Canadian small business owners to reduce their income tax burden in a way that is unavailable to other Canadians. Finance Canada estimates that closing the income sprinkling loophole would generate $250 million yearly in additional tax revenue[1]. Since the impact on federal finances is likely to be negligible, I focus my analysis on the issues of fairness and efficiency.

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Welcoming Brent Hickman

By Nora Ottenhof, Queen’s Universityhickman

Queen’s University Economics Department is thrilled to welcome assistant professor, and J. William and Marion E. MacKinnon Junior Fellow, Brent Hickman into the faculty. Brent joined the QED faculty last summer from the University of Chicago. We would like to take this opportunity to highlight some of Professor Hickman’s work and celebrate some of his career accomplishments so far.  

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Worker Mobility, Inequality, and Credit Scoring: Insights from the Macroeconomic Frontier

By Blair Long, Queen’s University

On Tuesday, May 11, the Queen’s Economics Department (QED) hosted the 12th Frontiers of Macroeconomics workshop (hereafter Frontiers). This conference brings together a diverse collection of contemporary research, exemplifying the frontier of modern macroeconomics. This article summarizes the objectives and findings of some of the conference’s presented work, and provides some commentary on the direction of both theory and methodology in macroeconomics.

What are the Determinants of Worker Job Matches?  

Ilse Lindenlaub’s “Multi-Dimensional Sorting of Workers and Jobs in the Data” (with Fabien Postel-Vinay) explores the mobility of workers and asks which worker skills are relevant in the sorting process. By sorting, economists mean how workers move from job to job, each time finding a “better” match, and ultimately finding one that is stable, in the sense that neither the worker nor the job (the firm) expects to prefer another working arrangement. The key methodological contribution is to develop a relatively simple test of how skills drive sorting behaviour, accounting for the considerable heterogeneity of skills. In doing so, the authors break from a standard simplification found in much economic theory: that worker ability (for instance) is one-dimensional. Of course, in the real world, we can group workers according to a near-infinity of skills, such as interpersonal, cognitive, non-cognitive, routine, manual, or creative. Read More »

Joint Conference on Financial Intermediation at Queen’s Economics Department

By Ken Chow, Queen’s University

On May 8th, 2018, the Queen’s Economics Department hosted the second annual workshop on Financial Intermediation and Regulation, jointly hosted by the Bank of Canada and the John Deutsch Institute. The conference brought together some of the world’s leading experts in finance and industrial organization to present and discuss their latest research. The conference covered interesting topics relating to finance and regulations including the impact of shadow banking on monetary policy [1], the strategic use of trade credit in retail supply chains [2], the dealers’ and investors’ bidding behaviour in Canadian treasury bills auctions [3], and how the current selection process of arbitrators in the US favours the repeat selection of industry-friendly arbitrators. [4]

A key feature of this conference is the emphasis put on the policy implications of academic research. In particular, the rise of the shadow banking sector in the last few decades have attracted the attention of academic researchers, central bankers and policymakers worldwide, making Kairong Xiao’s paper titled “Monetary Transmission through Shadow Banks” a very timely inclusion to the conference. To illustrate the importance of the shadow banking system, note that in the United States just prior to the onset of the great recession, the total shadow banking liabilities exceeded $20 trillion USD compare to $10 trillion USD liabilities in the traditional banking system. [5] Read More »