QED Research Spotlight by JDI Research Associate Brock Mutic summarizes recent research by QED Professors Allen Head and Huw Lloyd-Ellis in collaboration with former PhD student Derek Stacey
Deciding whether to buy or rent a home is one of the largest financial decisions many people make. Across cities in the United States, however, this decision is not made equally, as the affordability of homeownership varies; in different cities, it is relatively more or less affordable to buy a home, compared with renting. Although economists hypothesize these differences are driven by local economic conditions, understanding which local factors are at play is no easy task: the effects in question lay submerged in the depths of the economic ocean, driven by the rough currents of the dynamic and complex housing market, and are not easily visible from the surface. Wading through the tide, and pulling the relevant effects up from below, is a task requiring a very precise net, and a very steady hand.
Recognizing that the determinants of home affordability are relevant for millions of people however, as everyone needs a home, Queen’s Economics Department researchers Dr. Allen Head and Dr. Huw Lloyd-Ellis, in collaboration with Dr. Derek Stacey of the University of Waterloo, were undeterred by the waves. Setting their boat on the water, they engaged in research to study the question, in a paper recently published in International Economic Review. The team built a ‘frictional assignment’ model of the housing market to study the factors affecting inter-city home affordability, calibrated it, and tested it against observational data. Ultimately, they produced insightful results, with relevance for housing policy.
QED Research Spotlight article by JDI Research Associate Brock Mutic highlighting recent research by QED Professor Sitian Liu
The COVID-19 pandemic upended our lives and the economy in unprecedented ways. Institutions and ways of organizing society which had previously been ubiquitous, had to be rethought and reworked on a dime, because of a deadly virus. One such institution was the office: although once a quintessential symbol of modern economic life, and an unquestioned premise of the modern labour market, the pandemic dissolved the office’s status as a synecdoche of work. In particular, it caused workers in unprecedented volumes and variations of jobs to transition to remote work, and to work-from-home models. The office was dead in the era of COVID-19, and Zoom had killed it.
Although remote workers gained increased work flexibility and safety from the virus, they lost their physical connectedness to each other. Coworkers were no longer separated by floors or cubicles, nor firms by blocks or kilometers. Economic relations, while previously physical and direct, became abstract and mediated; instead of relating directly to other people, remote workers separated by an unquantifiable digital distance could only directly relate to the shadows of the people on their screens.
JDI Research Associate Brock Mutic interviews Queen’s Economics Department (QED) Professor Allen Head about ongoing research and Canadian public policy
Queen’s Economics Department Professor Allen Head, in an ongoing research project in collaboration with Professor Beverly Lapham and former Queen’s Ph.D. student Dr. Alex Chernoff, has been investigating how productivity is distributed, and how consumers search for products, across the Canadian retail market. The research, in uncovering how Canadian retail prices are affected by cost pass-through and demand changes, has the potential to improve our understanding of how inflation operates in the Canadian context. This summer, the QED blog caught up with Dr. Head, in anticipation of his forthcoming research, to learn more about his exciting project.
QED Blog: It’s great to speak with you, Professor Head. Can you please tell us a bit about your current research project?
Dr. Allen Head (A.H): As you explained, the new research, in collaboration with Professor Lapham and Dr. Chernoff, jointly estimates the productivity distributions and consumer search processes for retail industries in Canada. We do this using detailed firm-level data on Canadian retail firms, including information on their revenue, costs of goods sold, and profits.
A PhD student research profile featuring Frédéric Tremblay, who completed his PhD at Queen’s in 2021 and is currently a postdoc at Queen’s for the NSERC One Society Network. Image provided by USAID.
Frédéric Tremblay’s research on savings groups grew out of work with Limestone Analytics on projects for organizations such as USAID and World Vision. Such organizations want to quantify the impact of their international development programs, but traditional tools for measuring such impact tend to underestimate the benefits of financial inclusion interventions. In his PhD dissertation, Tremblay proposed a new method for modelling the welfare gains from savings groups in developing countries.
Savings groups (SG) are institutions where small groups of people come together to save and take out loans. These simple, member-owned institutions can provide rudimentary financial services to communities who are marginalized or otherwise lack access to such services, often in the developing world. Queen’s Economic Department (QED) postdoc and former PhD student Frédéric Tremblay developed a model of SGs capable of capturing their core features and design elements in his PhD dissertation. His research has policy relevance for NGOs and policymakers hoping to better understand these institutions, and how they can help the most marginalized communities around the globe access basic financial services.
By Christopher Cotton, Queen’s Economics Department
Limestone Analytics engaged several researchers from the Queen’s Economics Department to contribute to the Malawi Priorities project, which compared alternative social investments to determine which offer the greatest social and economic benefits per $1 spent. The analysis finds that investments focused on children tend to offer the largest benefits to society per dollar spent. Supporting community dialogues on child marriage results in $114 in benefits for every $1 spent. Investing in technology assisted learning in schools results in $106 worth of benefits to the community. Other promising investments involve maternal and neonatal health and nutrition, land and market reforms, and providing energy sector technical support.
Image from the Malawi Priorities Project, 2022
Malawi remains one of the world’s poorest countries. A landlocked country in Sub-Saharan Africa whose economic opportunities depend heavily on its neighbors. A country whose population is largely rural and dependent on agriculture, while facing water shortages and environmental challenges. A large youth population whose rapid growth outstrips growth in school capacity and formal employment opportunities.
Malawi faces many challenges. Because of this, there are countless opportunities for governments, NGOs, and social sector organizations to undertake investments that may have lasting effects on Malawi and its people. There are many opportunities, but few resources. Which raises the question: which opportunities result in the greatest social benefit and offer the greatest value for money? Which opportunities should be prioritized over others?
These are the questions asked by the Malawi Priorities project led by the Copenhagen Consensus Center and the National Planning Commission of Malawi, with support of the African Institute for Development Policy and the JBJ Foundation. The Malawi Priorities project worked to identify the most promising social investment opportunities across the country, from those focused on infrastructure and energy to agriculture and environment to public health and education to social inclusion and employment. It then applied rigorous, evidence-based cost-benefit analysis (CBA) of these opportunities for a head-to-head comparison of the society-wide benefits and costs of the alternative opportunities.
The research team at Limestone Analytics was engaged by the project to lead the assessment of nine separate research questions on behalf of the group. The team, which included Queen’s researchers Huw Lloyd-Ellis, Christopher Cotton, Ardyn Nordstrom, Frederic Tremblay, and Bahman Kashi, worked with Malawi based experts to identify the most promising solutions, and then conducted detailed CBAs for each opportunity. The questions how Malawi can improve outcomes on a range of dimensions, from the primary school education quality, secondary school retention, gender empowerment and inclusion, industrialization, youth employment, public utility reliability, and national resource management. Our team also provided macroeconomic projections for the project and the National Planning Commission the project to map out alternative COVID-19 recovery paths over the next five years.
Over the past year or so, most Canadians have experienced situations that appear to be associated with shortages of labour in various sectors of the economy. Whether they’ve been unable to obtain certain goods and services, have observed construction projects sitting idle or, most recently, have lost their luggage while travelling through Pearson airport, many experiences point to significant problems in the labour market. These issues are not unique to Canada, however, and similar trends are being observed in several other OECD countries (especially the USA, the UK and Australia).
Measuring Labour Shortages
While we all have anecdotes and there is ample discussion of the issue in the media, it is useful to have quantitative measures of labour shortages. This allows us to gauge more clearly (1) how significant these shortages are, (2) in what industries they are most acute and (3) the variation that has occurred over time. Understanding these features is essential for determining the underlying causes of labour shortages and therefore the likely role of policy in mitigating them. A labour shortage essentially means that employers have jobs that they want to fill but there are relatively few workers who are looking to take those jobs. Economists therefore typically measure the extent of such a shortage using “market tightness”: the ratio of the vacancy rate to the unemployment rate.[1] While unemployment rates across industries are commonly available via Statistics Canada’s Labour Force Survey (LFS), measures of vacancy rates that are comparable across industries and over time have only been available relatively recently through their Job Vacancy and Wage Survey (JVWS).
By Senthujan Senkaiahliyan, Queen’s University Smith School of Business
As Ontario begins to slowly enter a post COVID-19 world, we see priorities shifting from the health system to other avenues. Although on paper, COVID-19 may seem manageable, it remains a significant burden to our health system with a reported 0.4 hospitalization rate this past month. (Public Health Ontario, COVID-19 Data Tool) As health systems shift priorities to resilience, research has begun to take place into assessing our current health workforce to help manage and better protect it from further shocks. However, as we fight one war, another one emerges and that is the increasing inflation within our province and nation. Statistics Canada recently reported that annual inflation rate has jumped to 7.7% in May, which is the fastest it has increased since 1983.
In our previous article, we highlighted how Bill 124 has effectively capped healthcare workers from compensation increases to 1% annually. This moderation period is to last for three years with some employer groups ending their moderation period in 2024. It was projected that due to these caps and increased workloads, we will see nurses leaving the bedside in favour of care-coordination or administrative roles that are less taxing mentally and physically. The currently released Health workforce Crisis report by the Canadian Nurses Association has confirmed that projection in which they highlighted that all three stages of the nursing profession (early, mid, and senior) have been critically impacted by the pandemic.
With inflation reaching almost 8% as of this month (and expected to be a lot higher by the end of the year) and nurses only receiving a 1% adjusted wage for this fiscal year, they are facing what amounts to more than an estimated 7% pay cut in our current economic situation. These effective reductions in salary for nurses and other healthcare workers send out a clear message that this is no longer a sufficiently compensated or valued profession. As certain industries are attempting to offset inflation by promising increases and bonuses to employees, Bill 124 bars hospital management from properly compensating their nurses for their services.
So, what does this mean? Already, the Ontario Nurses’ Association has noticed a “mass exodus” of nurses leaving the bedside but now with inflation we will see them leave the profession entirely. The clinical skills that nurses possess are highly valued in other industries, noticeably the technology sector. Clinical Informatics has been massively growing and mid to senior-level nurses have been utilizing their skills to build and serve growing IT infrastructure among healthcare practices. Another growing field is clinical research, in which nurses often can wear multiple hats such as coordinating studies as well performing many of the clinical duties required in clinical trials. Previously we reported a skills gap for entry-level nurses as they move towards care coordination and vaccination centre roles where they do not receive adequate bedside training but in a post-COVID world, we will see a training gap in which mid and senior level nurses who are often the backbones of preceptor training leaving their roles to pursue other avenues in which they are fairly compensated for their time and skills.
Among the public, healthcare workers have been hailed as heroes and many young students look at nursing as a career that is respected and a contribution to societal good. The Canadian Nurses Association has seen a rise in young people applying to nursing schools, but this trend has not translated into an increase in nursing school class sizes. With the lack of experienced nurses in the field, it will be very hard to support an increase in clinical placements to help support these new graduates. Without adequate clinical training, we can very well see many nurses graduating from school without establishing the core critical competencies.
We must look to innovative solutions to combat this national nursing shortage crisis. Pre-pandemic policies and health systems have been proven to be ineffective when faced with external shocks. To truly build resilience in our future healthcare system, an evaluation of all policies, including Bill 124 must be immediately conducted to ascertain if the short-term savings in health workforce dollars will translate into the long-term of effects of an inefficient and poorly staffed healthcare system.
Senkaiahliyan was a masters student in the Smith School of Business at Queen’s University. Image from Shutterstock.
This research summary first appeared on the Limestone Analytics Impact Blog. Photo of Gonoshasthaya Community Health Center outside of Dhaka by Rama George-Alleyne/World Bank Photo Collection
By Christopher Cotton, Queen’s Economics Department, and Zuzanna Kurzawa, Limestone Analytics
Despite significant investments in micronutrient programs targeting pregnant women, the nutrition of pregnant women and their children continues to be a substantial concern in many developing countries. In Bangladesh, for example, there has been significant health infrastructure investment and a widespread iron and folic acid (IFA) supplementation program in place since 1988. Yet, the rate of anemia among pregnant women remains at nearly fifty percent, contributing to the relatively high prevalence of poor nutrition and health among mothers and children (DFID 2018; WHO 2017).
The science clearly suggests that the IFA supplements can work: if consumed regularly during pregnancy, the supplements can reduce anemia and improve the nutrition of mother and newborn child, reducing the risks of stunting and other indicators of poor nutrition among children (Peña-Rosas, De-Regil, Garcia-Casal & Dowswell, 2015; Rasmussen & Stoltzfus, 2003).
If the science is sound, then why are these programs not more effective? Why does the rate of anemia, stunting, and other indicators of poor nutrition among women and children remain so high despite the widespread distribution of IFA supplements?
Using data collected by Nutrition International in Bangladesh, a recent academic study (Kurzawa et al., 2020) based on Limestone Analytics’ evaluation provides insight into these questions.
By Senthujan Senkaiahliyan, Smith School of Business at Queen’s with Christopher Cotton, Queen’s Economics Department and School of Medicine
As the government and society works to address the challenges of COVID-19 pandemic’s Omicron wave, there has been a lot of discussion around the capacity of the healthcare system to deal with the increased number of cases. Much of the public discussion around these issues have focused on well recognized contributing factors such as vaccine hesitancy and the emergence of increasingly-contagious variants. However, there are many other less-discussed factors that have reduced the capacity of the healthcare system to deal with COVID.
Some of Ontario’s policies have contributed to reduced healthcare capacity in this time of crisis. Bill 124 is one of the measures enacted by the Ontario Government to limit wage increases in the public sector. What was first introduced as a fiscally responsible management plan to protect the sustainability of public services has, however, impacted the ability of the health system to respond to staffing shortages and capacity needs during the COVID-19 pandemic.
Bill 124 applies to most organizations under the public sector, including most provincial healthcare institutions. It effectively limits salary and wages increases for public sector workers including healthcare workers. An excerpt from Bill 124 (Article 10 (I)):
“No collective agreement or arbitration award may provide for an increase in a salary rate applicable to a position or class of positions during the applicable moderation period that is greater than one per cent for each 12-month period of the moderation period, but they may provide for increases that are lower.”
This effectively caps annual pay increases to 1%, substantially below Ontario’s annual rate of inflation, which was estimated at 4.9% this past October. This cap is in place for the moderation period of three years starting in 2019.
The labour market constraints have contributed to a mass exodus of nurses either leaving the profession or utilizing their clinical skills in non-bedside roles. The bill was introduced prior to the onset of the pandemic and claims to be investing in a sustainable Ontario however we can see through this graph, that Ontario is well on its way to a severe nursing crisis exacerbated by this bill.
Sustainable health care is the appropriate balance between the cultural, social, and economic environments designed to meet the health and health care needs of individuals and the population without compromising the outcomes and ability of future generations to meet their own health and health care needs. Under Bill 124, the marked increases for the next three years are highlighted for nurses.
Newly graduate nurses are the most inclined to take on bedside roles due to their willingness to get direct patient experience. However, with these wage forecasts for the next three years and no discrepancy in pay between patient facing and non-patient facing roles, new graduates will choose the less burdensome route, which is what we are witnessing in Ontario with new graduates being employed at vaccination centres and in care coordination roles. With every passing year, we will begin to witness a skills gap in which these nurses will not be equipped with the right clinical skills to take on bedside care. Without direct action, such as incentivizing bedside care, prioritizing nursing mental health, and providing adequate support, Ontario is heading towards a very unsustainable healthcare future.
Senthujan Senkaiahliyan is an MBA and Masters in Artificial Intelligence candidate in the Smith School of Business at Queen’s. He has worked in the healthcare sector since 2017. Christopher Cotton is a Professor at Queen’s with appointments in the Department of Economics, the School of Policy Studies, and the School of Medicine. He has worked on COVID-19 policy since 2020.
In the Globe and Mail’s Report on Business (December 2, 2020), Patrick Brethour suggests that the increase in Ottawa’s transfers to private-sector households during the pandemic so far amounted to $7 for every $1 of income lost.
To calculate this number, the article compares the change in government transfers to the change in primary household income between the first and third quarters of 2020. However, these values from Statistics Canada represent quarterly flows, not stocks, meaning that such an analysis misses the employment losses and transfers in the second quarter, when both values were at their highest levels.
Economics and Policy 
