The Unassuming Economist

From a paper by Gabriel Caldas Montes, Helder Ferreira de Mendonça, and Matheus Rosa Ribeiro:

“Fiscal transparency is essential for the expectations formation process, as governmental fiscal opacity often leads to forecast errors due to insufficient information. This study examines the relationship between fiscal unpredictability, particularly related to the primary budget, and the lack of consensus in expectations for external sector variables in Brazil. Specifically, based on several regression models considering different expectations horizons, we investigate whether fiscal opacity generates a lack of consensus in expectations for the trade balance, foreign direct investment and exchange rate. Additionally, we propose a composite indicator for the lack of consensus in external sector expectations derived from principal component analysis of related variables. The findings indicate that fiscal opacity increases the lack of consensus in expectations for the external sector. In brief, our results highlight the need for greater fiscal transparency to reduce uncertainty and improve consensus in economic expectations, particularly in expectations for external sector variables.”

From a paper by Julien Pascal:

“This paper provides a comprehensive review of the fast-expanding literature on household heterogeneity in macroeconomic models. It not only examines the main mechanisms through which household heterogeneity affects the transmission of monetary policy, but also offers a unified framework for understanding the main analytical and numerical approaches used to solve macroeconomic models with heterogeneity. These include limited-heterogeneity, history-truncation, and no-trade equilibria on the analytical side; forecasting-rule, linearization (state-space or sequence-space), and global methods on the numerical side. By highlighting the links and trade-offs among these approaches, the paper provides guidance for selecting appropriate solution techniques depending on the structure and purpose of the model.”

From a paper by John Iselin, and Daniel Reck:

“We analyze how tax noncompliance modifies the dynamics of the income distribution. Relative
rates of misreporting (RRMs) between the top 1% and bottom 99% are sufficient to answer this
question. The essential unknown dynamically is the RRM for pass-through income. Reviewing
available evidence, we argue that plausibly, this RRM is between 0.3 and 1.0 and constant over
time. Including misreporting changes the difference in the top 1% share of fiscal (pre-tax national)
income from 1962 to 2019 by -0.1 to 0.8 percentage points (0.2-0.8pp), compared to -0.7pp (-0.3)
with Auten and Splinter’s approach and 1.0pp (0.6) with Piketty, Saez, and Zucman’s.”

From a paper by Mulu Gebreeyesus, and Getachew Ahmed Abegaz:

“This paper analyzes Ethiopia’s structural transformation from 2000 to 2022 across four
dimensions: employment, productivity, skill intensity, and tradability. While the country achieved
strong economic growth, averaging 8.9 percent annually, its structural transformation has been
uneven and incomplete. Labor has shifted out of agriculture, but mainly into low-productivity
informal services, while manufacturing’s employment share declined despite policy support.
Aggregate productivity growth, though substantial, was driven largely by within-sector gains, with
minimal contribution from labor reallocation. High-productivity sectors, including manufacturing
and modern services, remain small, capital-intensive, and poorly connected to employment and
exports. Ethiopia’s tradable sector is narrow, dominated by agricultural commodities and air
transport, with limited value-added in manufacturing and ICT. Comparative analysis shows that
while Ethiopia has outpaced many African peers in productivity, it lags in employment absorption
and export diversification, contrasting sharply with East Asia’s inclusive, manufacturing-led
growth. The findings point to a disconnect between output growth and structural inclusion.
Addressing this requires a hybrid strategy that expands labor-intensive manufacturing, upgrades
informal services, aligns skills with market demand, and diversifies tradable activities. Ethiopia’s
experience offers a critical lesson for other developing countries: sustained transformation
depends not only on growth, but on how this growth reallocates labor and resources toward more
productive sectors.”

From a paper by Saeeda Batool, and Saira Tufail:

“This study examines the link between the energy market dynamics and labor market outcomes with a focus on the impact of oil market shocks, energy-related uncertainties, and risks on labor income share. Utilizing Panel Structural Vector Autoregression (PSVAR) for a group of 29 OECD countries over the period of 1999 to 2021, this research offers key insights for economies navigating the challenge of ensuring energy security while safeguarding workers’ incomes amid evolving energy markets. The results of the impulse response analysis revealed that among different energy market dynamics, the oil price has a strong negative impact on labor income, whereas higher aggregate demand tends to increase the share of labor income. Similarly, shocks to energy security risks and energy-related uncertainties reduce labor income. The variance decomposition analysis confirms that oil supply shocks are the main factor accounting for the variability in labor income, followed by oil demand shocks. Additionally, energy security risks and economic uncertainty significantly shape the labor income variability, particularly in the medium to long term, by increasing the volatility and unpredictability in labor markets. These findings underscore the critical need for policies that address the vulnerabilities of the labor income share against these shocks.”