Canada’s Economy in 2021: Exiting the “Pandemic” Recession

The article analyses the dynamics of the Canadian economy in 2020-2021, during the unprecedented global “pandemic” recession. It is shown that like in many other countries, the economic ups and downs in Canada closely followed the waves of the COVID-19 infection spreading across the regions and the subsequent rounds of regulatory restrictions on “high-contact” economic activities, citizens’ travel inside and outside the country, international trade, and etc. In the latter half of the 2020 several goods-producing industries showed signs of recovery which continued through the following year. However, it was only mass vaccination of Canadians in all provinces and territories that created conditions for sustained re-opening of businesses in most sectors of the national economy by the end 2021. The author looks at the internal and external drivers of recovery and continued growth. It is shown that on the whole the federal emergency plan proved to be successful in providing income support for Canadians and preventing bankruptcies among small and medium-sized businesses. The 2021 Federal Budget includes more than $100 billion in new spending over three years. It is expected that massive fiscal stimulus coupled with pent-up demand will sustain strong consumer spending after the speedy vaccine rollout allows businesses to fully reopen. At the same time, non-residential capital expenditures by private sector companies will increase only moderately in most sectors after a sizable decline in 2020. This year Canada’s resource-based industries are benefiting from the growing global demand for oil and gas, base metals, forest and agricultural products. The concluding part of the article analyses the major risks which can slow the economic recovery: the global supply-chain bottlenecks, labour market imbalances, growing inflation pressures, and massive federal budget deficit.

Too much mortgage debt? The effect of housing financialization on housing supply and residential capital formation

This article argues that the explosion of mortgage finance has not led to a proportional expansion of housing supply across 17 countries in a historical perspective (1913–2016). Based on a collection of housing construction data, it shows that the co-cyclical behavior of construction, prices and mortgage credit has been followed by a decoupling of house-price mortgage spirals from the underlying stagnating or declining construction activity since the 1980s. Mortgage debt is nonlinearly associated with new construction: positive up to a threshold, negative thereafter. The article argues that the increasing use of housing as an asset, or housing financialization, can explain why mortgages grow without construction, i.e. through privatization of state housing and supply restrictions as a result of rentier strategies of housing-market insiders and private developers. Private mortgage markets have thus been a less reliable policy alternative to traditional state-led housing construction policies. The article confirms for housing what has previously been found for growth or capital formation: beyond a certain threshold, there is a curse of too much finance.

Immigration Wave: Soviet Jew Exodus

The disunion of the Soviet Union and the destruction of communism in the USSR 1987-1991 triggered the recent emigration wave of Soviet Jews to various parts of the world, primarily to Israel. The professional, social, attitudinal and behavioral characteristics of the 1990s Jewish exodus cohort proved to be distinctive. Immigrants came mostly from urban areas, with advanced education systems. Immigration produced massive investments, both in residential structures and in non-residential capital. These investments were so substantial that they increased the capital to labor ratio and facilitated economic growth, aided by the remarkable human capital brought by the immigrants. The massive investments in physical capital and infrastructures were financed by capital imports as immigrants themselves fled their former homes almost penniless and credit constrained so that they hardly saved.

Fostering Democracy? Associations and Local Politics in Nineteenth-Century The Hague

This case study of the Dutch residential capital of The Hague explores the relationship between nineteenth-century associational life and local politics, testing the well-known argument of scholars such as Robert Putnam, that high numbers and high levels of participation in local voluntary associations are often positively correlated with processes of local political democratization. A quantitative analysis of (double) membership in the city's most prominent social clubs and cultural associations, and a qualitative analysis of the political culture within these clubs, offer a better understanding regarding why the impact of a vibrant local associational culture on local democracy has not always been as positive as political scientists have often tended to assume.

Quasi-Experimental Evidence on the Connection between Property Taxes and Residential Capital Investment

Do low property taxes attract new home construction? This question is answered using a large shock to property tax burdens caused by an unusual school finance reform in the state of New Hampshire. The estimates suggest that, in most of the state, communities with a reduced tax burden experience a substantial increase in residential construction. In the area of the state near the region's primary urban center (Boston), however, the shock clears through a price adjustment—i.e., by capitalizing into property values. The differing responses are attributed to differing housing supply elasticities. (JEL H71, H73, R31)