Spring 2023 - Issue 14

ISSUE NO.14

PRESIDENT’S LETTER

Daian Akand is the Co-President of the University of York Economics Society (2022/23). He’s reading BSc (Hons) Economics and Econometrics.

The Equilibrium Magazine is the Economics Society’s annual publication, publishing written pieces on economics from both students and faculty. We welcome each year people to submit articles or commentaries on things that are going in the world that they find interesting from an economics point of view.

Economics has never been as relevant as it has been in the post-Covid years. A decade of low interest rate consensus has come to an abrupt end, we’re witnessing a sharp departure from the Western economic consensus with an increasing number of countries moving towards autocratic systems of governance, and the world’s experiencing severe economic uncertainty from the illegal Russian invasion of the sovereign state of Ukraine.

The economics of it all has nonetheless been fascinating to observe, allowing us to pinpoint where theory is realized in real life – overshooting of FX rates from the “mini budget” disaster, for example. It is my view that through the volatility that the world is going through, it is important not to lose focus, or look at the glass half-empty; we’ve been through more tumultuous times, but from an economics viewpoint there has never been a more exciting time to be alive; the chance to observe macroeconomic phenomena (which thus far have been constrained to just theory for the last decade, or even longer) have not been as ripe as they are now. We are living through exciting times.

The cost of living: high inflation and increased poverty for lone parents and the single elderly

The cost of living is continually in the headlines. We are conscious of spending less and concerned about the rising costs of our energy bills, rents, and/or mortgages as well as the cost of our next food shop. However, recent price increases will have different consequences for a wide range of households, depending on the proportion of total income they spend on goods such as food or drink and essential services, such as energy.

This is because when the cost of living increases, households with 2+ adult earners can share the higher costs. Lone parents and single adults on the other hand, may be hit disproportionately by an increase in costs as they have no one to share their costs with. This not only makes it more difficult for these households to maintain the same living standards, but they also have fewer resources to fall back on when unexpected shocks occur.

Recent inflation

These recent price increases are reflected in the current consumer price inflation figures published by the Office for National Statistics (ONS) on 16th November 2022. From Table 1, we can see that the goods and services that have seen the largest increases in prices over the last 12 months are essentials, including housing (rent, mortgage, electricity, gas), food and drink, as well as clothing and other household durables.

Expenditure shares on essentials and other goods/services

Using the latest data from the Living Costs and Food Survey (LCFS) 2020/21, we can examine household expenditure on different goods and services to see where these price increases will hit households the hardest. Figure 1 shows that lone parent and working age single households devote over 50 percent of their total spending on essentials such as housing, food, and clothing. This is also true for elderly individuals living alone, where these categories make up 48 percent of total weekly expenditure. For dual parent households, as well as couples under and over pension age, the above categories count for just over 40 percent of total weekly expenditure.

This means that the increased cost of living may have a larger impact on overall expenditure for the more vulnerable single adult households.

Consequence of inflation on expenditure

How will the rising inflation affect expenditure patterns for the different household types? Figure 2 plots the average increases in costs for each type of household given their expenditure on different goods and services.

Lone parents, single working age individuals, and single pension age individuals, are hit disproportionately by the price increases in housing, energy, food and clothing. For couples and dual parent households, transport and recreational costs appear to be driving their high inflation rate.

How will this drive poverty rates?

The increased cost of essential goods and services is hitting different households disproportionately. The question now is, what will be the impact of recent price increases on poverty rates?

We can examine the impact of prices on relative income poverty. A household is in relative income poverty if their income is below 60 percent of the UK median income. We use disposable household income after housing costs (AHC) i.e. rent and mortgage payments, and equivalise income using the OECD modified companion scale.

Figure 3 presents the poverty rates across different household types. In the years 2020/21, lone parents had the highest relative income poverty rate (44.2 percent) among the households considered. Single individuals follow closely behind, both under and over pension age, with poverty rates of 29.5 percent and 31.3 percent respectively. Couples without children, dual parents, and elderly couples have relatively lower income poverty rates of 12.9 percent, 16.7 percent, and 13.4 percent respectively.

The poverty rates are simulated for 2022, assuming that income has remained the same between the two periods. As well as this, we adjust AHC income by deflating the values by the AHC CPI for June 2022 and redefine the relative poverty measure based on a 2020/21 poverty line. Inflation causes a large increase in relative income poverty among all households, but the largest increase has been for the most vulnerable households. Lone parents have the highest income poverty rate (61.5 percent), closely followed by an increase in rates for single adults (39.7 percent) and the single elderly (46.3 percent).

Overall, the recent price increases are eating into the disposable incomes of all households, but particularly lone parents and single individuals both over and under pension age. They simply have less money to buy other goods and services, leaving these households with a smaller proportion of their budgets to deal with further unexpected costs.

Even with the Chancellor announcing that the energy price guarantee will be raised to £3,000 from this April (where we also see the end of the energy rebate), an inflation adjustment for benefits and pensions by 10.1 percent alongside a new set of cost-of-living payments, this may not be enough, or come sufficiently soon. Winter is here, fuel poverty is on the rise, food bank usage is becoming an unwelcome part of day-to-day life for many. It may be expected that without further intervention, these price increases will continue to squeeze households’

BY Emma tominey and James Baraniak

The week of March 8th, which is International Women’s Day, is the peak time of the year for assessing progress towards gender equality. The era we live in today has definitely experienced a huge jump in the curve of strengthening women and their achievements over the past decades and undoubtedly women are equally progressing in all the areas which used to be male dominated before, we can see a raise in the graph of gender neutrality in almost all the activities and we can confidently say that our world is becoming progressive in acceptance and equal encouragement of all the achievements especially by women, but yet when it comes to science or the STEM, the numbers are still lagging behind, even today the numbers of women excelling in science and technology related field is comparatively minimal and the gap is yet to be filled. It’s mesmerizing how women are taking a great leap and winning in every career , we have women who are battling on the battle ground for their respective armed forces representing their country and on the other hand we have women running and cracking really difficult codes, complex numbers and the gigantic world of business and finance, and thus producing some of the best women who have taken the front seat in running the world , for example Jacinda Ardern being President of New Zealand , Gita Gopinath the first women economist chair of IMF, and the infamous Marie Curie being among the finest scientists in the world. Though, we have many names coming up and it might seems like it’s just a cake walk but in the larger context world is still struggling to accept that “Science and education has no gender’’ and a women is not just meant to be known for household responsibilities , there is more than just that. A recent article from the World bank mentions that especially in countries such as southern Africa bringing and encouraging women to be in STEM field is still a tough nut to crack, there are social and cultural barriers that often keep girls from entering STEM subjects and

Women in Stem; Education has no gender

A recent article from the World bank mentions that especially in countries such as southern Africa bringing and encouraging women to be in STEM field is still a tough nut to crack, there are social and cultural barriers that often keep girls from entering STEM subjects and careers. Quoting “Promoting women in science is a key focus of theAfrican Higher Education Centres of Excellence (ACE) program, launched in 2014 to support higher skills development in the areas of science, technology, engineering, and mathematics. And These fields tend to be male dominated, especially in Africa. Across the continent, the ACE program –supported by the World Bank – is more and more attracting female students for whom “sciencehas nogender”.

from the article, Therefore, from this Women’s day its our responsibility to push and to encourage more and more women to be in STEM related fields, as to science and education has no gender and its in the hands of this generation to make this world a much better place and much gender neutral.

By Sreenidhi Gad

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BY HAMZA MUNSHI

If we do see a rate hike of 0.5%, we expect to see upside for the cryptocurrency market. Therefore, a third consecutive 0.75% rate hike is already priced in, but 1% could result in the economy tipping into a recession, and further downside for the cryptocurrency markets. The inversion of the 2/10-year treasury yield supports this. Once we see inflation data peak, this would restore confidence in the markets to bottom and see upside. The FED promised quantitative tightening, with selling $17.5B worth of mortgage-backed-securities (MBS) per month. Resulting in a $53B decrease by now, however the size is unchanged. It has instead translated to higher mortgage rates, which I believe means more inflation and means the federal reserve is also lagging with their QT. Although in the long term we would expect the Ethereum merge be a bullish catalyst for the market, economic conditions prevail. We saw some upside before the merge, however most traders have profited post merge and sold. At present, we trade between the ~$19K - $24K region. If we see Bitcoin break the ~$19K demand level, we could see it test ~$14K at the 2019 highs. We would expect to see this play out if inflation and rate hikes are persistent. However, if we see Bitcoin break the $24K supply level, we could expect to test the $29K demand level. This would be expected if we see CPI data and inflation peak, and lower interest rate rises of 0.5% for September and 0.25% for November. Although markets are pricing in 0.75% and 0.5% respectively.

From a quantitative market sentiment model (C-Score) I built, utilising supply/demand side on-chain metrics we can see the cryptocurrency market is close but not quite at the bottom. Analysing the C-Score, we see most metrics mathematical ratios have come close to the bottom of their respective zones. MVRV Z-SCORE, PUELL MULTIPLE, DIFFICULTY MULTIPLE, RHOLD RATIO, RELATIVE UNREALISED PROFIT/LOSS & MAYER MULTIPLE. These ratios are close to bottom suggesting a potential buying opportunity and we are close to market bottom.

These economic conditions which prevail are a classic example of the Minsky moments cycle. Where investors money flow has pumped into overvalued US equities/cryptocurrencies (during Covid-19), with analyst earnings estimates decreasing post pandemic. As a result, nearly all companies within the SPX beating estimates, creating a larger influx of capital into US equities. Now we are beginning to see the same risk and margin spiral downwards, as markets are now being impacted from the effects of the FED’s prior QE, with 80% of all the USD in circulation being printed since the inception of Covid19.

The evolution of partner preferences

Marriage is one of the most significant events of anyone’s life. The institution of marriage has been around for at least 4000 years. But why do people marry? What do they look for in their partner? Have their preferences for a mate evolved over time? Answering these questions is important for understanding our societal structure.

Yet, little is known about how partner preferences have evolved over time. This is primarily because of data limitations. Most existing data collect information on couples after they have already married. Looking at marriage characteristics after it has already formed makes it challenging to disentangle the effect of preferences - whom one wants to marry from the effects of marriage market characteristicswhom one can marry. To overcome this challenge, in a recent work we assembled a new data set consisting of more than a million matrimonial ads. These ads provide a unique source of information about what individuals look for in their ideal partner. For younger readers unfamiliar with the concept, matrimonial ads were the predecessors of dating websites and used to be published in the classified ads section of printed news outlets (see Figure 1).

Figure 1: Matrimonial ads published by a woman (left) and a man (right) in Canada in 1955

Using data from major newspaper outlets in Canada, India and France, we study how partner preferences changed in the second half of the 20th century. We use dictionarybased methods to extract the information provided in the textual format. We classified the words appearing in the ads into four distinct categories - economic, personality, physical, and taste. For instance, words such as “income”, ”wage”, or “profession” would fall under the economic category. Words like “honest”, “romantic”, or “spiritual” would be classified under personality and “drinking”, “biking”, or “gardening” would be under the taste category. The frequency with which words from the four categories are used to describe an ideal partner would reflect how mate preferences changed over time.

Our results show that over the period 19501995, in the two Western countries (Canada and France), there was an unambiguous decline of the importance of economic criteria in the ads. For instance, in the early 1950s, about half of the words used by French women to describe a partner were from the economic category. By the mid-1990s, this reduced to less than 20% (see Figure 2).

What offsets the fall of

the economic criteria?

We find that the reduction in the use of economic-related words was accompanied by an increase in the demand for personality criteria. By the end of the 20th century, about 40 to 50% of the words used in the two Western countries were to describe the ideal partner’s personality. By contrast, trends in India do not exhibit the same pattern. Over the same period, the importance of economic criteria in India increased while personality criteria remained relatively stable.

What

can explain these patterns?

Evidence shows that Western societies have profoundly changed in the second half of the 20th century. Over this period, marriage rates dropped while divorce rates surged and cohabitation became commonplace. Our results suggest that the evolution of partner preferences in Western countries is closely linked to the profound transformations of the family in these countries during the same period. To explain these evolution, several factors have been advanced such as the legalisation of birth control methods, the rising participation of women in the labour market, and a shift in attitudes.

Figure 2: Evolution of the demand for economic criteria in the ads published by women

Figure 3: Evolution of the demand for personality criteria in the ads published by women

While the setting of our analysis does not allow us to precisely establish the causality between these determinants and the changes in the ads, we find that the timing of changes in the ad structure closely followed these important historic changes. For instance, Figure 4 shows that the sharp drop in the economic criteria among the Canadian ads occurred at the same time when the gender gap in labour force participation decreased. It should be noted that the participation of women in the labour market significantly increased in the two Western countries whereas it remained stable in India, suggesting that this could be a plausible explanation for the trends revealed by the matrimonial ads.

by Quentin Lippmann and Khushboo Surana

Figure 4: Evolution of the demand for economic criteria in Canada and the gap in Male-Female labour force participation rate

Cover PHOTO by Abhishek alex