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The effectiveness of Hong Kong’s 2022 E-cigarette ban | Economics HL’s Sample Extended Essays | Nail IB®

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Discover How Hong Kong’s 2022 E-Cigarette Ban Impacts Public Health And Economy
In This Insightful IB Economics HL Extended Essay Sample. Dive In For Key
Insights!

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IB Economics EE example: How has the 'Punjab Regulation of Wood Based Industries Rules, 2019' enacted by the Punjab Government had an effect on the Wood Furniture Manufacturers of Nabha ? | Clastify

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https://freyrenergy.com/why-is-india-promoting-solar-rooftop-system-adoption/

https://m.economictimes.com/industry/renewables/indias-solar-power-subsidies-for-homes-face-scepticism/articleshow/109994295.cms

https://www.scirp.org/journal/paperinformation?paperid=124306

https://earthjournalism.net/stories/solar-subsidy-delays-in-chennai-india-affect-consumers-and-developers

https://mnre.gov.in/policies-and-regulations/schemes-and-guidelines/schemes/

https://solstrom.in/accelerating-the-adoption-of-solar-power-in-chennai-the-mnre-solar-subsidy-game-changer/

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interest rate on home loan in india influence home purchase

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Mehr EE framework

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High scoring IB Economics Extended Essay examples. See what past students did and make your Economics EE perfect by learning from examiner commented examples!

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For more on reflection generally, see: Moon, JA. 2000. Reflection in learning and professional development: Theory and practice. New York, NY, USA. Routledge.

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https://www.ideasforindia.in/

https://www.thehindubusinessline.com/economy/gim2024-tn-releases-vision-document-to-achieve-1-trillion-economy-by-2030-a-semiconductor-and-advanced-electronics-policy-released/article67715530.ece

tamil nadu industrial policy 2021-2025

tamil nadu msme policy

https://www.youtube.com/watch?v=8SuoK1c181Y

PROMPT IN YOUTUBE: TAMILNADU RECENT ECONOMIC POLICY FOR THE RESEARCH WORK

ECONOMETRIC TOOL AND STATISTICAL METHODS AND CALCULATION FOR ECONOMICS DISSERTATION

https://www.youtube.com/watch?v=LQVABL3Q10c

https://www.youtube.com/watch?v=Ug4Yox-Jloo - Research Topics for Economics ||2023|

https://www.youtube.com/watch?v=_vHiuZ2O7SE

https://www.youtube.com/watch?v=Y9HnxL12sPM

https://www.youtube.com/watch?v=kwixjmiAHKA

https://www.youtube.com/watch?v=hXvoKE6_wQo&list=PLvcb33xNTVUnIJcFFbOEuKHLue9I4k0wr

https://www.youtube.com/results?search_query=ECONOMICS+LITERATURE+REVIEW+FOR+THE+IB+

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Ideas for India - for more evidence based policy

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I4I is a platform for economists, other social scientists, and practitioners to use their research and experience to weigh in on key policy issues of growth and development in India, in an accessible format.

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   EE MEETING- UPDATES ON COMPLETION STATUS OF THE RESEARCH WORK

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1. What conclusions did you arrive at during the research and writing of your EE?

2. What would you consider to be the most (and least) rewarding aspect of your research and writing process?

3. What figures or illustrations did you include? Why did you choose those?

4. What source contradicted the general ideas of your research? In what way specifically did the source contradict them? Did you include it? Why? Why not?

5. Which of your sources did you find to be the most helpful? Why?

6. Select a few sections from the work and ask the student questions pertaining to their meaning, why they were used and their relevance (for example, why did you select this source to support your points or what do you think X was getting at when he said “Y”?

7. What have you learned about your topic from researching and writing about it?

8. What challenges did you encounter when researching and writing the EE? How did you go about overcoming them?

9. What unanswered question are you left with?

10. How successful do you believe you’ve been with regards to answering your RQ?

11. Is there anything that contributed to the EE that is not immediately evident in the essay itself? (such as museum visits and email exchanges with participants, scientists and authors?

Source: Lekanides, Kosta. Extended Essay: Course Companion, Oxford: OUP, 2016. Print.

1. If you were to do this research again, what would you do differently and why?

2. Were there any surprises in your learning journey? What did you learn from this?

3. What does success mean to you in the process of producing your EE?

4. To what extent do you think you have been successful in this process?

5. Were the strategies you used for your research question the most appropriate for achieving success?

6. If you used alternative research methodologies and/or subject-specific theories, would this have led to a different outcome?

7. Are there any new or unanswered questions that emerged as a result of your research?

8. What advice would you give to next year’s students who have yet to write their EE?

Source: Hoang, Paul & Taylor, Chris. Extended Essay: Skills for Success, London: Hodder Education, 2017. Print.

Sure, here are some potential viva questions related to an IB Economics Extended Essay:

1. What motivated you to choose this particular topic for your extended essay?

2. Can you provide a brief overview of your research question and the main findings of your essay?

3. What was the significance or importance of your research question in the context of economics?

4. How did you go about collecting and analyzing data for your extended essay?

5. Were there any challenges or obstacles you encountered during the research process? If so, how did you address them?

6. Did your findings align with your initial hypotheses or expectations? If not, how did you reconcile any discrepancies?

7. Can you discuss any limitations or weaknesses of your research methodology or approach?

8. How do you think your research contributes to our understanding of the economic issue you investigated?

9. Are there any practical implications or real-world applications of your findings?

10. In hindsight, is there anything you would have done differently in terms of your research approach or methodology?

11. How does your extended essay relate to broader economic theories or concepts you've studied in the IB Economics curriculum?

12. What future research directions do you think could build upon or expand upon the findings of your extended essay?

13. How do you think your research could be applied to different economic contexts or situations?

14. Can you discuss any ethical considerations that arose during the course of your research?

15. What advice would you give to future IB Economics students who are considering writing an extended essay?

These questions are designed to probe your understanding of your research topic, your research methodology, and the implications of your findings. Be prepared to provide detailed and thoughtful responses based on your essay and your research experience.

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https://sturgischarterschool.libguides.com/EEcriteria/VivaVoce

https://isgibdiploma.weebly.com/uploads/2/3/5/7/23572084/for_students_-_reflection_sessions_-_final_session_viva_voce.pdf

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Aryan Joshi- TNEB report ( Compiled by the teacher)

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Here is a step-by-step structure you can follow to complete your Extended Essay in Economics. The layout has changed recently, for example in terms of the cover sheet requirements and the reflections, but this post is up-to-date (and it includes a lot of helpful links).

Before you start writing...

Here are a few key points and other helpful links you'll want to use:

Be careful about choosing your research question. You've got a lot of options, but these generally fall under two categories 1) Evaluating the effects of a policy or 2) Determining the structure of a certain market. There are a lot of aspects that go into choosing a perfect EE question and it's worth taking your time to do this properly. (I'd be happy to meet with you to help you get your question right.

Decide on your citation style. Most people go with MLA. It's best to decide this early on, so you gather the right info as you go. I recommend doing your citations as you write, so you don't loose track of which sources you used where. Aim for at least 5 cited sources on an average page. Here's a good guide from Purdue to help you. You can use Easybib, but it's just as easy to do it on your own.

The E.E. should be in 12-point font, preferably Arial or Times New Roman. And it should be double spaced, with numbered pages. This makes it easier for us when we're marking hundreds of EE pages in a row. 😄

Anything over the 4000 word limit won't be read by your marker, so you'll want to stick to a word-budget for each section. That's a big benefit of this document. I've noted below how many words I recommend for each section, which sections don't count in the word count, etc.

About 18% of your EE marks now come from your reflections, so those are also important. Here's how to do them: How to Write IB EE Reflections (IBM) so be careful with those too. (And of course, I'd be happy to meet you with to talk through your reflections. Most people don't realize that excellent reflections can almost boost your EE from a C to an A). 😮

Okay, here's the structure.

The Economics EE Structure

Title page

(Not included in your word count.)

The title page should include only the following information:

Include:

Your EE title. This part can be slightly confusing, because the title is not the same as your Research Question (RQ). The RQ is written in the form of a question, but the title should not be a question. Instead it is "a clear, focused summative statement of your research" (EE Guide, page 82). For example, "The market structure of supermarkets in Dubai."

Your Research Question. For example, "To what extent is the market structure of supermarkets in Dubai an oligopoly?"

Your word count

(Notice that you shouldn't put your name, date, candidate number, or school name on the EE.)

Table of Contents

(Not included in your word count.)

All parts of your EE, with page numbers of course. (You can just copy and paste my list to get you started).

(Do not include an Abstract. You'll find abstracts in a lot of the available sample EE, but the new E.E. Guide states that an Abstract should not be included in the EE.)

Explain what you're be researching (i.e. the policy or a market structure) and how.

Provide some context for your question. Provide a few key facts (i.e. statistics) that will set the stage for the upcoming investigation.

Define some of the main key words.

Explain why this research is interesting and worthwhile to be studied.

Indicate to us how you're going to be organizing your investigation (i.e. the 3 aspects of the question). This part is worth getting some advice on as well.

Near the end of the introduction, include your research question again and explain to us why it is important to answer.

I recommend your methodology have two major aspects. One for explaining your sources and one for explaining your tools.

You'll notice that, as much as you're telling us what you are going to use to answer the question (sources and tools), you should also point out a limitations and weaknesses of these.
Methodology Aspect 1: Sources

Describe each of your major sources of primary and secondary research. Tell us why they will be helpful and also a weakness or a limitation for each source. For example, how there may have been room for bias or a limited scope to your research sources. Or perhaps there are other reasons why other data you used could be unreliable or invalid.

Remember that the majority of your research for the EE (perhaps around 80%) should come from secondary sources.

Some helpful sources of

Secondary research are: academic sources (i.e. JSTOR or Google Scholar), industry sources, government reports, consumer reports, journalistic sources (i.e. news articles and magazine articles), Economics textbooks, and encyclopedias. More tips on using sources well here: How to Make Your Good Extended Essay Great (IBM).

Primary research are: Interviews, periodic recording of data (i.e. pricing changes) and surveys (but be very careful about how you go about gathering survey data. Otherwise you can waste quite a lot of time and actually reduce the quality of your EE findings).

Methodology Aspect 2: Graphs and concepts

Explain the concepts (i.e. Economics graphs) you're going to use (very briefly) and why (the purpose of each).

Clarify why you're using each in a way that shows you really understand them.

This is where you'll be sharing your research, analysis, discussion and evaluation.

Think of this section as also having two main parts.
Body Part 1: The "course concepts" part Body Part 2: The "beyond-the-course" stuff

1. The first is for your basic, 'course concepts research' (including your analysis and evaluations of them). This is where you show off that you understand how to do the things you've been taught in your IB Economics class.

2. The second is for your 'extended research'. Most students will only do the basic level, but this second level is where you get to wow us with all of the impressive extra research that you've done, which goes beyond what is taught in the course.

💡 Every single paragraph of the body needs to relate (in a very obvious way) to the research question , so don't include tools or research which aren't helping you to answer your question.

This is where you really get to impress us. Often this is the part where you'll actually teach the reader of your paper (an experienced Econ examiner) a thing or two. 💪

Share some more-advanced, yet relevant theories and concepts, showing us that you've really pushed yourself.

Impress us. Give us the sense that you really do know how some of the more-sophisticated/complicated economics works in this domain (i.e. anti-competitive behaviour or how economists accurately measure unemployment).

Make sure this section is analytical, rather than descriptive. Don't just explain the hard concept, but link it back to your Research Question. This can be hard, because the theories are challenging to even understand, but it can really raise your grade. Make sure all of your theories in this section are really helping you answer your RQ.

A graph or calculation of some kind is recommended here, if you can include one. However, overall impressiveness and usefulness (to your RQ) of your 'extended research' is what matters.

Sometimes you might learn that there is an analytical method which is commonly used in this specific domain (i.e. a ratio that isn't taught in the course, or a more advanced way of measuring consumer confidence). Feel free to include that in your EE here, as long as it links to your RQ.

If you can't think of what else to include, ask people for advice.

Take time with your conclusion, so you can emphasize and clarify the most important insights you've discovered and how it all fits together to answer your RQ.

Pull your previous mini-conclusions together (synthesize them), make some interesting insights based on them. This is where you really get to shine.

Include several of your most interesting evaluative insights (i.e. pros and cons, short-term vs long-term effects, possible stakeholder conflicts). Here is some more help on writing effective evaluations in Econ (CLASPPTM Economics Evaluation model again).

Don't include any new data in your conclusion.

Mention at least two weaknesses and limitations of your research. Show you have really reflected on your work. You could discuss possible inaccuracies in your analysis and the reasons for those. You'll do much more along these lines in your reflections, but it still helps to point out a few things here. For example, mention other information would it be very valuable to have, but which you was unavailable to you. Or you could explain some other "unresolved questions", which you weren't able to answer for some good reason.

There is a real art to conclusions and I'd be happy to talk you through yours to make sure you tick all the right boxes, in an easy-to-follow, logical way.

Note that you don't need to include any recommendations (i.e. to the government) in your EE.

(Not included in your word count. Aim for around 2-3 pages of sources)

This is where you reaffirm (remind the marker) all the great sources you used.

Include:

Remember that your EE is mostly focused on your secondary sources.

Include at least 3 books (one of these can be the textbook), 4 internet sources, and at least 3 sources which show your willingness to work hard and go beyond the minimum requirements (i.e. a trade journal, an advanced academic paper, an interview).

Generally you should have at least one primary source (i.e. an interview, a survey, observation data, focus group data), but it is not mandatory to have a primary source.

Make sure all of your bibliography sources are link to in-text references in your EE.

(Not included in your word count. Often this is around 3 or 4 pages)

The EE guide us us that "appendices are not an essential part of the extended essay and examiners will not read them, or use any information contained within them, in the assessment of the essay" ( EE guide, Page 87). And yet, they are still commonly used and I can tell you that I normally advise my students to include them and I often find them helping when I'm marking EEs).

I would say the best use of appendices is to include artefacts from your process, which help to show the hard work that you've done.

Include:

Transcripts from your interviews, questionnaire results, your raw pricing data table, additional analysis (i.e. calculations) you did which didn't fit in the body of your EE.

You won't exactly get "credit" for the work, but they can help to show how methodically you have worked and that cannot hurt your mark.

Cite this page as:
Woods, Tim. "How to Structure an Economics Extended Essay" IBMastery 2 March 2022. Web. [i.e. August 17, 2022 --> CHANGE THIS TO TODAY'S DATE] < https://www.ibmastery.com/blog/how-to-structure-an-economics-extended-essay>

Tim is available for private tutoring, almost every day, to support you in writing your best Economics Extended Essay. He's an expert Economics teacher (a fully IB-trained teacher and marker) with over 18 years of teaching experience. 🚀 Click here to meet with Tim on Zoom and talk through your work. 🚀

Tim also helps students with Theory of Knowledge, IB Business Management, IB Global Politics, IB History, IB English and College Admissions essays.

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How to Structure an Economics Extended Essay

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Here is a step-by-step structure you can follow to complete your IB Extended Essay in Economics. The layout has changed recently, for example in terms of the cover sheet requirements and the reflections, but this post is up-to-date (and it includes a lot of helpful links and tips you can use).

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https://docs.google.com/document/d/10iIawXTUHcoqWi_FnAPOwV36WrSS-eKxIGOGh6PKuhg/edit?usp=drivesdk

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https://docs.google.com/document/d/1YGQhkQ1SnadChVmD5b46X3twTb3673rftCKSU7arexc/edit?usp=drivesdk

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https://docs.google.com/document/d/1K9cdvpCKBhXnhhZLofeTukLk4cBsAOMq4Lud4aBNiQU/edit

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Create a new document and edit with others at the same time -- from your computer, phone or tablet. Get stuff done with or without an internet connection. Use Docs to edit Word files. Free from Google.

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Grade A in Economics ( outside school)

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Sample EE

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https://ibpublishing.ibo.org/extendedessay/apps/dpapp/sample.html?doc=d_0_eeyyy_gui_1602_1_e&part=1&chapter=5&sample-index=2

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Extended Essay: Grade and subject choice (Feedback by the experts)

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Extended Essay: Grade and subject choice (Feedback by the experts)

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EE meeting updates

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   EE MEETING- UPDATES ON COMPLETION STATUS OF THE RESEARCH WORK

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BHARATH AND SIBHI[ THEORETICAL FRAMEWORK]

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BHARATH AND SIBHI[ THEORETICAL FRAMEWORK]

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How effective is providing free Covid vaccinations in Tamil Nadu

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BHARAT AND SIBHI REFLECTION

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Student work

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EE reflection- Description and Word count- Sample

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EE reflection- Description and Word count- Sample

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Research Proposal and Feasibility Report - SOFIA

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Research Proposal and Feasibility Report (1)

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This is the 2nd of two excellent IB Economics Extended Essays that students have allowed ITS to published on our website. Janae was an IB student who sat her exams in May 2016. Janae received a 45/45 overall grade for her IB. This is the extended essay she did on the significant and topical issue of the lack of affordable housing in Hong Kong. This problem was viewed in HK as a contributing factor to the 'Occupy Central' movement of late 2014. This in my view is an excellent economics extended essay on the topic of market failure. I would like to thank Janae personally for allowing ITS to display this EE on our website. Gary Hadler
Director
ITS Education Asia
[ Economics EE - Theory of the Firm]

Research Question: Private home ownership is a merit good with a large amount of positive externalities. The lack of affordable housing in Hong Kong is a major social problem, so what can the Government do to improve Private Housing Affordability for Hong Kong Citizens?
By: Janae Wai
Abstract

High housing prices are a very significant issue in Hong Kong (HK). The lack of housing affordability in HK is among the most severe in the world. In addition to those who currently cannot afford housing, there are also worries among HK youth that they will not be able to afford their own home in the future. Private home ownership is a merit good that has high amounts of positive externalities. Therefore the government should do more to address the lack of affordable housing for HK residents. This leads to the research question: "What can the Government do to improve Private Housing Affordability for Hong Kong Citizens?"

Secondary research was gathered to demonstrate the types of market failure apparent in the HK housing market and to obtain information concerning the effectiveness of policies that have been used in both HK and elsewhere to deal with the problem. This secondary research was analysed in relation to the primary data collected. The primary research includes interviews with relevant experts and a survey of the HK public to ascertain: a) whether they believe that this is a major social problem b) whether the policies undertaken by the current government are effective, and c) what additional actions can be recommended to reduce the problem.

The investigation showed that market failure was indeed present in the HK housing market. Several solutions were also recommended based on the primary and secondary research. The most supported solutions were those aimed at increasing the supply of affordable housing in HK. Recommendations include that the government should build more low cost housing, establish new towns outside the central business area and reduce government regulations and restrictions that increase the cost of developing new affordable housing. There were fewer consensuses on measures to reduce demand.
i. Private Housing as a Merit Good (Positive Externalities of Consumption)
ii. Government Failure (Positive Externalities of Production)
iii. Negative Externalities of Consumption for Investment Properties
iv. Monopoly Power in the Housing Market
v. Negative Externalities of Construction
Introduction

The lack of housing affordability has been a significant issue in HK for over past three decades (Wong, D., 1998, p. 53). Following the Asian Financial Crisis, the government, fearing a fall in property prices, "virtually suspended (land sales) from 2000 to 2008", which restricted the land available for development and limited the housing supply (Yiu, E.C.Y., 2014, p. 25.). One possible effect of this decision could be the high prices experienced in HK today. HK housing in the private sector has been ranked the least affordable in the world, with housing prices over 17 times gross annual household earnings in 2014 (Cox, W. & Pavletich, 2015, p. 13). In addition, compared to other major cities, HK housing is shown to have the highest price to income ratio of 47.37 (Numbeo, 2015.- The Numbeo calculations assume that the net disposable family income is 1.5 x average net salary in a year and an average apartment is 90 square meters). A variety of different factors are responsible for the fall in housing affordability. This can be classified into supply and demand factors

Figure 1: ( Numbeo, 2015)

Private housing is a merit good with large amounts of positive externalities, and the consequences of this fall in housing affordability are becoming increasingly obvious. According to a survey conducted by the Children's Rights Association, housing is the greatest worry of underprivileged children in HK (Ngo, J, 2015). The lack of affordable private housing may be contributing to negative externalities, such as Occupy Central, as young people feel increasingly pessimistic about their future living standards and are dissatisfied with the direction the government is taking (Bush, R.C., 2014, Lee, B.E., 2014, Pau, J., 2014 & Woodhouse, A, 2015.). This can be seen from the following extract.

The decrease in housing affordability is illustrative of the need for the HK Government to take additional action to correct market failure in the private housing market. It may even be the case that the lack of sufficient action by the government is an example of government failure (Government failure is when government intervention (or lack of intervention) results in less efficient outcomes than what society could potentially achieve.), as the government owns all land in HK, is responsible for leasing it for development and regulates what can be built on it (Community Legal Information Centre & The University of Hong Kong, n.d.). There is a wide range of possible actions that the government could undertake to attempt to reduce the property market bubble. The government could refer to policies adopted in other locations that have been successful in improving housing affordability. Thus this paper will address the question
"What can the Government do to improve Private Housing Affordability for Hong Kong Citizens?
Methodology:

Both primary and secondary research will be conducted. Below is a list of secondary research that will be conducted:

1. Economic theory of market failure
2. HK Government statistics on housing
3. Academic research on housing affordability
4. Critical review of published materials on the problems in the HK housing market
5. Policies implemented by foreign countries to improve housing affordability

Primary research will be done through observations, surveys and interviews. Interviews will be conducted with the financial and administration director of the Urban Renewal Authority, Ms Wai, an economist, Mr Hadler (B. Ec., MBA.), and a professional real estate investor, Mr Cheung. Based on the above primary and secondary research, a stratified survey will be developed and conducted. It will target property owners and non-property owners over 35 or under 25. The purpose of this divide is to see if there are differences in opinions among the older and younger generation. The aim of the survey is to obtain insight on citizens' views of the lack of affordable housing in HK.

Research and Analysis:

The following section outlines the types of market failure apparent in the HK housing market using information obtained from secondary research and interviews.

Private Housing as a Merit Good (Positive Externalities of Consumption)

Numerous sources of secondary and primary research support the view that affordable housing is a merit good (Merit goods are goods or services that are determined to be desirable to consumers but are underprovided by the market.) with a large amounts of positive externalities (Hadler, G. 2015, Musgrave, R.A., 1959, pp. 13-14, Pettinger , T., 2011 & Paavola, J., 2008.). This is due to the following reasons:

Affordable housing can improve living standards. According to Pickles (2012, p. 12), "Housing is crucial for our social mobility, health and wellbeing."

Affordable private housing for middle and low income households can decrease inequality, as in the long run rising housing prices can lead to an increase in asset (Assets are economic resources that can be converted to cash) value, causing "most owner occupiers to become significantly wealthier" (AQA Education, 2011 & Hadler, G. 2015.).

Owning private housing is a source of financial security, especially for retirement (Cheung, P., 2015 & Hadler, G., 2015.). On the other hand, people who are unable to buy property are more vulnerable to inflation (Inflation is the increase in general price levels over a period of time) of housing and rental prices (AQA Education, 2011.).

The disposable income of households increase after meeting the necessary housing costs, which may lead to the creation of jobs and economic growth (Cohen, R. & Wardrip, K., 2011, p. 2, Hadler, 2015, & Wardrip, K., Williams, L. & Hague, S., 2011, p. 1.).

Children that grow in a stable home environment tend to receive better grades (Brennan, M, 2015).

Private and public rental housing may become more affordable as demand is reduced, and the waiting time of public rental housing may be shortened (Hadler, G, 2015.).

Therefore, the marginal private benefit, which is the additional benefit received by consumers who purchase their own home, is less than the marginal social benefit, which is the additional benefit to society from the consumption of an additional housing unit. This results in welfare loss (Welfare loss is the cost to society created by market inefficiencies), as there is a reduction in social benefits due to the misallocation of resources (Chart 1).

Key:

MPB= D= Marginal private benefit= demand

MSFigure 3:B= Marginal social benefit

MSC= S= MPC= Marginal social cost= Marginal private cost= Supply

Qm= Quantity produced under free market system

Qs= Socially optimal quantity [6]

Assumed as under ceteris paribus conditions

fn6 - The socially optimal quantity reflects the allocation of resources most desired by society as a whole
Government Failure (Positive Externalities of Production)

The low levels of supply can be partially attributed to government failure. Although HK is largely a market-based economy (A market based economy is organized so that prices and production are based on supply and demand), the government is involved in the housing market (Lam, P.L., 2014.). An example of this is the restrictive land use regulations placed by the Government (Cox, W. & Pavletich, 2015, p. 12). There is a large amount of spare capacity available for development, as over 60% of HK land is not utilized and is classified as "woodlands, shrub lands, wetlands, and marshlands", whereas only 6.9% of land is used as residential areas (figure 2). However, the Government favours environmental sustainability and is therefore unwilling to develop this land (Lam, C., 2011, Planning Department, 2014.). The opportunity cost (opportunity cost is the next best alternative forgone) of preserving marshlands has resulted in the under allocation of land resources towards the development of housing, leading to allocative inefficiencies (Allocative inefficiencies occur when resources are not allocated in the combination and quantity most desired by society as a whole).

Another instance of government failure may be its outdated policies that partially contribute to rising home prices. Currently, 6.1% of land is classified as "agriculture land" and is set-aside for native people as a part of the New Territories Small House Policy (For more information about agricultural land, native people and the small house policy, please see appendix I)(Leung, C. & Tang, E., 2014, Planning Department, 2014.). This can be seen as an inefficient use of resources, as these rights have been abused and monetized by villagers (Chan, O., 2014, Designing Hong Kong, 2014, Wai, F, 2015 & Cheung, P., 2015.). In addition, although the four largest developers in HK have purchased over 101.2 million square feet of agricultural land, they are reluctant to convert the undeveloped plots into residential areas, because to alter the purpose of land, they must pay a land premium (A land premium is a fee paid to the government in order to alter the purpose of the land) to the government (Leung, C. & Tang, E., 2014. & Brownlee, I, 2015.).

The effects of these policies can be analyzed using a diagram showing positive externalities of production for housing (Chart 2). Because of the low supply and restrictions on land use, the marginal private cost, which is the cost of producing one additional unit of housing to producers, is greater than the marginal social cost, which is the cost of producing one additional unit of housing to society. This results in welfare loss, as a lower quantity of housing is produced at a higher price.

Key:

D= MSB= MPB= marginal private benefit= marginal social benefit= demand

MSC= marginal social cost

MPC= S= marginal private cost= supply

Qg= Quantity produced under government intervention

Qs= Socially optimal quantity

Assumed as under ceteris paribus conditions

Planning Department, 2014.

Negative Externalities of Consumption for Investment Properties

Private housing is underprovided and unaffordable partially due to over speculation (Speculation is when investors have a high demand for a good based on its expected future price) of investors in the property market. In the interview, Ms Wai attributed the high prices to the high levels of demand from HK and Mainland Chinese investors (Wai, F. 2015). This leads to constraints in supply for those who wish to buy a home to live in. Over speculation has lead to negative externalities of consumption for private housing. Although there are currently enough units for each household (figure 3), the distribution of housing units is heavily unequal, and in 2011 only 36.50% of households own private housing (Yan, L., 2013.). This suggests that a significant portion of housing is being held by a relatively small amount of households for investment purposes.

Figure 3:

Key:

MPB =D = marginal private benefit= Demand

MSB= marginal social benefit

MSC=MPC= S= Marginal social cost =Marginal private cost= Supply

Qm= Quantity produced under free market system

Qs= Socially optimal quantity

As seen in the Chart 3, the marginal private benefit, which is the additional benefit to consumers from investing in one more unit of housing, is greater than the marginal social benefit, which is the additional benefit society receives from the consumption of one more housing unit for investment. This leads to welfare loss for the following reasons:

In many cases "sandwich class" HK citizens who cannot afford private housing but are unqualified or on the waiting list for public rental housing are forced to turn to cheaper sub-divided flats or cage homes (Enoch, N., 2013). This is a potential safety and health hazard (For a more detailed explanation of the dangers of subdivided flats, please see appendix II) (Hui, P., 2011, Zhao, S, 2014).

Overcrowding may occur as young people and married couples may not be able to afford their own house and have to share housing with other generations of the family (Brownlee, I, 2015.).

The retired elderly may have a lack of financial stability in the future as rental prices continue to rise (National Council On Aging, 2012.).

Thus, the overconsumption of property for investment purposes contributes to lower living standards and health problems for society.

Monopoly Power in the Housing Market
The real estate market in HK to some extent can be seen as an oligopoly (An oligopoly has several large firms with a dominating market share) (Cheung, P., 2015 & Hong Kong Real Estate Investor, 2014.). Firstly, the government owns all land and leases it at auctions to property developers at a high price (Community Information Legal Centre & The University of HK, n.d.). This is a significant source of Government revenue (Research Office & Legislative Council Secretariat, 2013, p. 12.). In addition, in the interview with Mr. Cheung, he claims that property developers are price makers and can restrict land and housing supply (Cheung, P., 2015). High real housing prices have been shown to have a positive correlation with stock prices of developers (Leung, C. & Tang, E., 2014.), and because the aim of developers is to maximize shareholder wealth, they have no incentive to greatly increase supply and hence allocate more weight to larger, luxurious housing units, instead of smaller flats, which are in higher demand (For more information about the allocation and demand for housing units, please see appendix III). There is therefore conflict between the private costs and the externalities associated with developing new housing, resulting in allocative inefficiency (Allocative inefficiency occurs when the economy fails to allocate resources in a combination and quantity most preferred by consumers). Although real estate developers receive a greater private benefit from maximizing profit through selling more large flats at a small supply, society would benefit more from an increase in supply of affordable private housing, leading to welfare loss.

Negative Externalities of Construction
When considering the level of market failure associated with housing, it should also be noted that the construction of housing also produces negative externalities. This may result in welfare loss, as illustrated by the table below:

Table 1: Welfare loss caused by the construction of new housing

Loss of natural resources

Increased noise pollution

Increased traffic congestion

Poor air circulation can trap pollution

May adversely affect scenery and lower people's assets value

The welfare loss caused may increase the difficulty of calculating the socially optimal level of housing.

Cause of Private Housing Unaffordability

In the interviews with Ms. Wai and Mr. Cheung, both parties have cited the high demand of housing and the insufficient supply as the primary cause behind the unaffordability of private housing (Cheung, P., 2015 & Wai, F., 2015). The shortage of housing leads to high prices and a loss in consumer surplus (Consumer surplus is the difference between the highest price consumers are willing to pay for the good and the actual price they pay for the good). Ms. Wai also identified other factors of production, particularly material and labour cost, to be a contributor to high housing prices (Wai, F. 2015). Due to "the reluctance of young people to join the (construction) industry", there is a shortage of construction workers in HK, and their wages have been pushed up as a result (Sito, P., 2014, Siu, P., 2014.). As a result, the cost of producing housing has further increased and is passed on to consumers due to the highly price inelastic (Consumer demand for the good is unresponsive to a change in price) demand for housing, making housing less affordable.

Measures to reduce Housing Unaffordability

Table 2: HK Government Policies that are currently used to improve Private Housing Affordability [20]

Supply Side Solutions

Sell flats at a discount to low income households

Selling land with restrictions on minimum number of units

Convert agricultural land into residential areas

Purchase and reconstruct old buildings

Allow people to buy flats rented from the government

Demand Side Solutions

Progressive tax [21] on the sale and transaction of property (Ad Valorem Stamp Duty)

Tax foreign buyers of property (Buyer's Stamp Duty)

Tax property sold within 3 years of being purchased (Special Stamp Duty)

(FN 20 For more information about the individual policies used, please see appendix IV)
(FN 21 As the value of the property purchased increase, the percentage paid in tax increases)

Although the government may have decreased the rate of growth in prices, housing prices has continued to rise (Global Property Guide, 2014). This suggests that the measures the government is currently taking are not enough to improve housing affordability. Therefore, the government should look into undertaking additional policies and evaluate whether they would be applicable to HK.

To assess the public view of the housing market and consider what policies should be used in the future, a survey of HK residents was conducted. The survey was given to residents 25 and under, as well as residents 35 and over. A total of 145 citizens were surveyed. It investigates what people think the government is currently doing about the housing problem, how successful they believe these policies are, and which other policies they believe would be effective at reducing housing unaffordability in HK. The survey also attempted to find out whether the HK population believes that the lack of affordable housing is a significant problem. The separation of age groups in the survey was chosen to see if there is divergence of opinions between the older and younger generation concerning this issue.

Survey Results:

Section A : Information concerning whether or not the people surveyed owns property

Chart 4.1

Chart 4.2

Chart 5

Key Points about Data
(1) A significant portion of people who owned their primary residence also owns a second piece of property.
(2) Those who did not own property were unlikely to purchase property in the near future.

Section C :
Both groups were then asked about whether or not they were aware of different housing policies that are currently in use in HK.

Key Points about data :
Both groups seemed to have a reasonable knowledge of the government policies that are being used. The older generation was generally more aware of housing policies used in HK. However, other than the tax on sale and transaction of property (stamp duty), over one in every four people were either unaware or unsure whether the individual policy is being used in HK..

Section D :
Both groups were then asked to rate the effectiveness of policies currently in use by the HK Government.

Key Points about Data :
Building Government subsidized housing was rated as the most effective policy in use, whereas decreasing the size of country parks and importing foreign workers for construction sector jobs were rated as the least effective policies in use.

Section E :
Both groups were asked to rate the effectiveness of alternate policies used by other governments to reduce housing unaffordability in HK

Key Points of Data :
Most people surveyed thought that all the different policy options available would be effective to a certain degree. The most signifcant polices that gained support among both groups surveyed were:

* Building more government subsidized housing
* Issuing government insured loans to first home buyers
* Streamlining the process to reconstruct old housing
* Devloping new towns
* Implementing a capital gains tax on investment proerties

Exempting first home buyers from stamp duty (had particularly strong support from younger HK residents).

Interview results:

The following section covers what policies those interviewed believe are effective.

Table 2: Expert Opinion regarding the which policies would be effective in increasing housing affordability

Policy

Urban Renewal Authority Director (Ms Wai)

Real Estate Investor (Mr Cheung)

Economist (Mr Hadler)

Data Analysis of Solutions (primary research):

A large proportion of people who are primary property owners also have investment property. The people who do not own property are pessimistic of their ability to enter the property market in the near future. This suggests that the property market is difficult to enter, which supports the secondary research found that the distribution of housing is uneven.

Both survey and interviews supported the government trying to reduce the problem by increasing the supply of lower cost housing. This was evidenced by the broad support by all for increasing land sales, building more subsidized housing for low income earners and developing new towns as a way of increasing the supply of low cost housing. Other measures suggested to increase the supply of housing also gained some support from the primary research, such as exempting first time homeowners from stamp duty.

The policies aimed at reducing demand gained greater levels of support from the survey respondents as compared to the expert interviews. There was strong support for a capital gains tax on investment properties from those surveyed, however Ms. Wai believed that it would be ineffective. Those interviewed were supportive of the government policy to import construction workers but this policy had limited support from those surveyed. The survey was strongly supportive of Government guaranteed loans for first homebuyers but those interviewed seemed to think that the problem was due to a shortage in supply, so the measure may simply increase prices and not address the problem. There also appeared to be disagreement among those surveyed and interviewed about whether or not the stamp duty effectively deals with this issue.

Data Analysis of Possible Solutions (Secondary Research):

In order to analyse the policies suggested, the data has been complied into a table and each policy represented is given a number.

Supply Side Solutions

1. End the Small House policy (Hopkinson, L. & Lao, M., 2003)

2. Increase the conversion of agricultural land into residential land (Lo, A., 2014.)

3. Reduce the land premium in order to sell land to developers at a lower price (Brownlee, I, 2015.).

4. Relax plot ratio and building height restrictions (Warren, D. & Transport and Housing Department, 2013.).

5. Increase production of flats by the government (Cheung, Anthony, B.L., 2014.)

6. Create a "rent to buy option" for all public housing, as done in Singapore (Yan, L, 2013.)

7. Increase reclamation, as done in Singapore (Yan, L, 2013.)

8. Develop more new towns, as carried out in areas surrounding London (Information and Services Department, 2014, The London Gazette, 1946.)

Demand Side Solutions

9. Subsidize low income households and first time homebuyers (Brownlee, I, 2015.).

10. Increase progressive stamp duty

11. Decrease/ Remove stamp duty

12. Provide government guaranteed mortgage loans for the promotion of homeownership (Hui, E. & Tse, D. (n.d.).)

13. Increase stamp duty for non-local residents

The majority of policy recommendations were extensions of current policies that are already being used to increase housing affordability in Hong Kong (P.16). This includes increasing taxation on foreign property buyers, increasing lower cost land sales to developers, increasing conversion of agricultural land to residential areas, and relaxing the plot ratio of buildings. Overall, there was greater consensus for policies that were aimed at increasing supply, whereas there was more divided opinions regarding the effectiveness of policies influencing demand. There were no major criticisms of the policies currently in use by the government, other than that the government should implement these policies on a greater scale. However, the effectiveness of the stamp duty policy remains somewhat controversial among the research published.

Policies that were recommended by both Government sources and professionals from the housing industry include (4), (5) and (10). Policies that were recommended by professionals but were opposed by the government include (1) and (10). The difference in opinions regarding (1) appears to be due to the political unpopularity of removing the small house policy among indigenous villagers. The government may be unwilling to carry out policy (3) and (11) on a greater scale due to budgetary reasons.

The research supported the government carrying out policies recommendation (6), (7) and (8), as they have been successful in increasing housing affordability in similar cities and may be applicable to HK.

Conclusion:

Based on the primary and secondary research conducted in investigating the question "What can the Government do to improve Private Housing Affordability for Hong Kong Citizens?", the following conclusions and recommendations have been arrived at.

The premise of the question was well proven. Private housing affordability in HK is one of the worst of any major city globally. As shown by the research, private housing in HK is significantly more unaffordable than any of the other major cities illustrated. This suggests that the free market quantity of private housing is lower than the socially optimum level, resulting in welfare loss. Both the primary and secondary research strongly supported that private home affordability in HK is a significant issue.

The research also strongly supported the view that the lack of housing affordability was an example of market failure. Both the primary and secondary evidence showed a variety of different market failures relating to this issue. The interview findings and secondary research supported the view that the ownership of private housing is a merit good that can be associated with financial security and personal happiness. Private housing affordability is also shown to have positive externalities such as economic growth and a more harmonious society. The research also supported that the under provision of private housing has to some extent led to negative externalities such as a more unequal income distribution and social discontent (especially among the young). This illustrates the need for the Government to increase private housing consumption to bring about welfare gain in HK.

Restrictive land regulations by the government may be a source of government failure, as it results in less housing being built. In relation to the specific issue of Occupy Central, while the older generation and the secondary research was sympathetic of the view that unaffordable housing contributed to public discontent with the government, a great proportion of the younger generation surveyed did not feel this was as a significant factor. This was interesting as the protests were largely driven by the younger generation.

In relation to the question about what the government can do to reduce the problem there was broad agreement in some areas and disagreement in others. The policies that had broad agreement were outlined in the data analysis of the primary and secondary research. Both generations surveyed generally agree about what should be done. The policies with the broadest public support were mainly aimed at increasing supply, for example, that the government should provide more low cost housing for those financially disadvantaged and make more land available for construction of low cost housing. These policies are largely supported by the experts interviewed and the secondary research.

However, the policy options aimed at reducing demand overall had less agreement. The public survey was much more supportive of these policy initiatives than some of the experts interviewed. There were some differences in what the experts thought should be done compared to what the people surveyed thought. There was a feeling among those interviewed that measures, such as stamp duty or a capital gains tax, may instead drive up prices rather than increase the supply of affordable housing. There were also some differences between what government sources believe is effective compared to what professionals from the private sector believe is effective. In addition, there were conflicts in opinion among professionals in some areas.

There did not seem to be a single measure that people thought would solve the problem, therefore any solutions are likely to need to be a combination of different policy measures.

Recommendations:

Based on the research, the following recommendations are offered.

(1) The government should for the most part continue with the actions that they are currently taking to reduce this problem.

(2) The government should make greater efforts to publicise and explain their policies (i.e. the importation of construction workers, the current rates of stamp duty) as some these policies does not have strong support.

(3) The government should expand the building of low cost housing for economically disadvantaged residents. This could be achieved by developing new towns outside the city area.

(4) The government should consider restricting the amount and type of home ownership allowable for non-permanent HK residents.

Unanswered Questions:

The problem of lack of affordable housing and the associated market failure problems that arise will not be easy to solve. Even if all of the above recommendations are adopted, the problem is unlikely to disappear completely. The fundamental issue is that supply is growing more slowly than demand for low cost housing. This is a market-based problem that the government can influence but may not be able to solve completely. There was no way to know, given the scope of this paper, to what extent the problem would be reduced, even if the government were to follow some or all of the above recommendations.

The theory suggests that there is a socially optimal quantity of private housing in HK and if this is not achieved there will be a welfare cost to HK. However it is not actually possible to know what this quantity is, and it is difficult to quantify how much quantity demanded and supplied has to be altered in order to achieve a socially optimal level.

The research has made no attempt to determine the cost of the above recommendations. While building more government subsided housing is a popular policy, it is also expensive to implement on a larger scale. No consideration has been given to possible opportunity cost of the government following some or all of the above recommendations. Building more housing may require higher tax rates, which HK citizens may be reluctant to pay. The negative externalities that arise from the construction of new housing have also not been taken into consideration.

Evaluation:

The survey was conducted using an online platform and does not reflect a scientific or systematic approach to finding targeted individuals, therefore it may contain bias and may not be reflective of the HK population in general or the specific age groups surveyed. Social media was to some degree used in order to encourage a larger survey response. In addition, the interview results could have been more comprehensive if more of the experts were willing to give their opinion about this issue. The ideological bias of the interviewees might also be limiting the validity of the conclusions drawn.

The depth of research was further limited by time constraints and the need to meet deadlines for drafts and final version of the essay.

Bibliography:

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WHAT CAN THE GOVERNMENT DO TO IMPROVE PRIVATE HOUSING AFFORDABILITY FOR HONG KONG CITIZENS?

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This is the 2nd of two excellent IB Economics Extended Essays that students have allowed ITS to published on our website. Janae was an IB student who sat her exams in May 2016. Janae received a 45/45 overall grade for her IB.