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The Power of Price Indexes
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Raymond Cheung and Mike Waterson
World Economics, March 2011
Price indexes are the most important of all economic indicators simply because they are the tool used to calculate the real size, speed and direction of all forms of economic activity. Price indexes are compiled almost everywhere, but with major differences in method and sampling procedures. Some methods and procedures have led to significant errors. Even in the case of a country as advanced as Japan, critics have calculated that imperfections in method have led to a rate of price inflation around 1.8% per year above the level a true cost of living index would have shown. Further research undertaken by World Economics has attempted to make estimates for changes in discounting and promotional practices at the retail level. The conclusion is that, in reality, the overestimation of price changes by the Japanese CPI in recent years may well have been in excess of 2% per annum, and could have been significantly more. Different CPI assumptions change economic growth estimates dramatically. Using World Economics estimates, adding in a minimum figure for marketing and retail changes seen in recent years suggests, contrary to official data, that Japanese consumption growth exceeded that of the US.
How Many US Jobs Might be Offshorable?
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Alan S. Blinder, World Economics, June 2009
Using detailed information on the nature of work done in over 800 US Bureau of Labor Statistics occupational codes, this paper ranks those occupations according to how easy/hard it is to offshore the work – either physically or electronically. Using this ranking, it is estimated that somewhere between 22% and 29% of all US jobs are or will be potentially offshorable within a decade or two. (No estimate is made of how many jobs will actually be offshored.) Since the rankings are subjective, two alternatives are presented – one is entirely objective, the other is an independent subjective ranking. In general, they corroborate the rankings, albeit not perfectly. It is found that there is little or no correlation between an occupation’s ‘offshorability’ and the skill level of its workers (as measured either by educational attainment or wages). However, it appears that, controlling for education, the most highly offshorable occupations were already paying significantly lower wages in 2004.

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