The Shape of the Irish Economy to 2040

  • Slides: 13
Download presentation
The Shape of the Irish Economy, to 2040 and beyond PPAN Workshop Ireland in

The Shape of the Irish Economy, to 2040 and beyond PPAN Workshop Ireland in 2040: Managing change over a generation Ronan C. Lyons, Trinity College Dublin

Ireland in the 20 th century was not an economic outlier, rather a demographic

Ireland in the 20 th century was not an economic outlier, rather a demographic one Average AGR in living standards (20 OECD countries, 1923 -2000) Change in persons/km 2 (20 OECD countries, 1923 -2000) 3. 5% 250% R² = 80% 3. 0% R² = 20% 200% 2. 5% 2. 0% 150% 1. 5% 100% 1. 0% 50% 0. 5% 0. 0% 0% $0 $2, 000 $4, 000 $6, 000 Living standards in 1923 (1990 US$) $8, 000 0 50 100 150 200 250 300 Persons per km 2, 1923 Source: Author calculations, based on Maddison, IMF WEO, Wikipedia, CIA World Factbook

With a swing towards population growth, Ireland’s outlier status is going to persist in

With a swing towards population growth, Ireland’s outlier status is going to persist in the 21 st century Average decadal change in population: 1850 -1980 15% 10% 5% 0% -5% Ireland France Sweden UK Austria Belgium Norway Spain Denmark Germany Hungary Finland Italy Netherlands Poland Portugal Romania Greece Bulgaria -10% Source: Author calculations, based on Maddison (2013), Eurostat Population Projections (2013)

With a swing towards population growth, Ireland’s outlier status is going to persist in

With a swing towards population growth, Ireland’s outlier status is going to persist in the 21 st century Average decadal change in population: 2015 -2080 forecast 15% 10% 5% 0% -5% Ireland France Sweden UK Austria Belgium Norway Spain Denmark Germany Hungary Finland Italy Netherlands Poland Portugal Romania Greece Bulgaria -10% Source: Author calculations, based on Maddison (2013), Eurostat Population Projections (2013)

With a swing towards population growth, Ireland’s outlier status is going to persist in

With a swing towards population growth, Ireland’s outlier status is going to persist in the 21 st century Average decadal change in population: 2015 -2080 vs. 1850 -1980 15% 10% 5% 0% -5% -10% -15% Ireland France Sweden UK Austria Belgium Norway Spain Denmark Germany Hungary Finland Italy Netherlands Poland Portugal Romania Greece Bulgaria -20% Source: Author calculations, based on Maddison (2013), Eurostat Population Projections (2013)

Ireland’s demographic outlier status is also evident in urbanization rates and in average household

Ireland’s demographic outlier status is also evident in urbanization rates and in average household size Urbanization rates, 1960 -2016 by country 90 80 1960 -2016 change 1960 urbanization 2. 8 2. 6 2. 4 70 2. 2 60 2. 0 50 1. 8 30 1. 6 20 1. 4 10 1. 2 0 1. 0 Ireland Portugal Italy Germany Greece France Spain OECD Norway Canada USA UK Finland Denmark Australia Luxembourg Netherlands Iceland Japan Belgium 40 Ireland Portugal Greece Spain Italy Luxembourg Belgium UK Switzerland France Netherlands Austria Sweden Norway Denmark Germany Finland Average 100 Average household size, by country (2014) Source: Author calculations, based on Hypostat (2016), UN WUP (2014)

Ireland’s under-urbanization is a housing market problem, not a labour market one Lorenz curves

Ireland’s under-urbanization is a housing market problem, not a labour market one Lorenz curves of place of residence and work, Ireland (2016) 100% Top 650 EDs account for: • 65% of residents • 83% of work/school 80% 60% Equality Residence 40% Work/School 20% 0% 0% 20% 40% 60% 80% 100% Source: Author calculations, based on CSO POWSCAR dataset (2016); excludes WFH/no fixed place of work; includes EDs with fewer than 10 returns

Little evidence that Dublin’s population share is too big – smaller populations mean bigger

Little evidence that Dublin’s population share is too big – smaller populations mean bigger share in largest city Share of population in largest city, European countries (n=42) 100% R² = 60% 80% Ireland (Rep) 60% Ireland (Island) 40% 20% 0% 12 13 13 = 0. 4 m 14 15 16 Population in logs 17 18 19 20 19 =178 m Source: Author calculations, based on jakubmarian. com, Wikipedia/CIA World Factbook

Over the last two decades, our housing output has been increasingly out of sync

Over the last two decades, our housing output has been increasingly out of sync with our household structure Number of households (000 s), by size and Census year New dwellings completed in Ireland, 1996 -2015 (thousands) 1, 800 75 1, 600 125 1, 400 228 741 1, 200 1, 000 800 120 215 505 600 886 400 237 53 499 Urban/GDA apts Urban/GDA houses 2016 Rural apts Rural one-offs 6+ persons Other rural 0 1996 1 -2 persons 3 -5 persons Source: Author calculations, based on CSO Census and Dept of Environment/Housing statistics

As suggested by its under-urbanization, Ireland is “missing” roughly 0. 5 m apartments Households

As suggested by its under-urbanization, Ireland is “missing” roughly 0. 5 m apartments Households by number of persons and related dwelling stock, 2016 Fraction of dwellings in apartments Latvia Estonia Italy Sp ain Switzerland Lithuania Iceland Finland Poland Germany Au stria Slovakia Czech Rep Bulgaria Sweden UK Greece France Liechtenstein Portugal Luxembourg Romania H u ngary Denmark Croatia Slovenia Cypru s N orway Belgiu m N etherlands Malta Ireland 600, 000 500, 000 400, 000 1 -2 households 1 -2 dwellings 3 -5 households 3 -5 dwellings 300, 000 200, 000 100, 000 0 0% 20% 40% 60% 80% GDA Ex-GDA Source: Author calculations, based on Eurostat and CSO Census 2016

The 550, 000 new homes planned in Ireland 2040 will not be enough to

The 550, 000 new homes planned in Ireland 2040 will not be enough to lower household size in coming decades Number of extra dwellings required (000 s) for a population of 5. 8 m vs. 4. 8 m, for different average household sizes (relative to 2. 75) Average household size in Ireland, by Census year 4. 5 1200 4. 0 3. 5 1000 3. 0 800 2. 5 Ireland 2040 600 2. 0 400 1. 5 1. 0 EU 2014 2040 e 2016 2011 2002 1991 1981 1971 1966 200 0 2. 75 2. 65 2. 55 2. 45 2. 35 2. 25 Source: Author calculations, including those based on Census of Ireland (various returns) and allowing for annual obsolescence of 0. 5%

Policy needs to recognise trade-offs: second tier cities, not third, and apartments, not houses

Policy needs to recognise trade-offs: second tier cities, not third, and apartments, not houses • Ireland 2040 recognises the role for Ireland’s ‘second tier’ cities • By the 2060 s, Ireland’s five largest cities are likely to have a population of 5 million • Policy is unlikely to have much impact ‘redirecting’ growth from Dublin to second tier – but can prioritize those four cities relative to the ‘third tier’ • Far more important than ‘Dublin vs. rest’ this is the prioritization of urbanization (of residence – urbanization of work is far ahead of this) • As population grows, Dublin’s share is likely to fall, based on patterns seen in other countries • Key to accommodating population growth efficiently will be the construction of apartments, to reflect demographics • Two alarming stats: Dublin (inside the M 50) needs 20 extra homes per acre by midcentury – translating into an apartment block every week for decades • Solutions: audit of construction costs and regulations, cost-rental (budget), LVT

Thank you! Key themes: • Ireland's long-term economic performance is very much in line

Thank you! Key themes: • Ireland's long-term economic performance is very much in line with its peers – but it remains a demographic outlier • Unusually among high-income countries, Ireland faces faster population growth in 21 C than in 19 C/20 C • Taking account of Ireland’s size (and island nature), Dublin is not too big • Ireland's “under-urbanization” reflects housing market problems, not labour market ones • Its high household size also reflects housing market problems - in particular not building enough apartments • This is supply, not demand – and thus one of the principal challenges for Ireland 2040 is to reform policy and taxation in order to provide the “missing” 500, 000 apartments