Bookmarks (302)

Macroeconomic projections are an essential building block of any budgetary plan. This column studies the one-year-ahead budgetary projections from the Stability and Convergence Programmes of EU member states and finds that the most important variable explaining budget balance errors is GDP growth. More optimism in GDP growth projections produces more optimistic budgetary projections. The findings call for delegating the construction of output projections to...

Declining fertility rates and longer life expectancies are producing an ageing global population. This column investigates the challenges that rapidly ageing societies pose to systems of long-term care. To avoid shortages in the workforce, the long-term care industry should endeavour to improve working conditions while also recruiting workers from a larger pool. Investing in disability prevention and rehabilitation are also promising avenues to absorb pressure...

The war in Ukraine is destroying the educational opportunities of young people. Research from a conflict in the Middle East tells us about the likely scale and persistence of the loss.

Differences in labour market outcomes between East and West Germany persist, 30 years after reunification. Using high-quality administrative data from Germany, this column documents that East German plants face a steeper size–wage curve than West German ones, invest less in marketing, remain smaller, and, on average, pay lower wages. A model with labour market monopsony, product market power, and customer acquisition matching these features...

The April 2022 CfM survey asked members of its European panel to assess the effects of an embargo on Russian gas on the German and EU economies. The majority of panellists assesses that an embargo on Russian gas would cut one to three percentage points from German GDP growth in 2022-3, if the German government offsets the costs with well-targeted fiscal policy. Estimates increase...

Higher education programmes are essential for innovation and economic growth. This column introduces the education–innovation gap, a metric that captures the distance between education content and the knowledge frontier. Among US higher education institutions, the education–innovation gap is significantly lower for courses taught by instructors who are more active in producing research. The gap is higher in schools with students from lower socioeconomic status....

Mortgage payment holidays were introduced in the UK March 2020 to help households who might have struggled with mortgage payments during the Covid-19 pandemic. Using transaction-level data, this column finds that payment holidays supported consumption during the pandemic for more financially vulnerable households, while more financially stable households on a payment holiday increased their savings instead. These results suggests that payment holidays may have...

We tend to associate rioting and mass protest with cities, but a surge in agricultural commodity prices can incite social unrest in rural areas as well. This column shows that rising cereal prices pose an elevated risk of violence in Africa, where agriculture represents a large share of the economy. The authors find that attacks on civilians increase during the harvest season and dissipate...

A pessimistic view of Chinese agriculture development is based on a Malthusian trap, characterised by diminishing returns to agriculture and a declining land-labour ratio. This column presents stylised empirical facts of 19th and 20th century Chinese agriculture, focusing on the seasonality of labour demand and the resulting rise of sideline employment, to challenge the implications of this view. The reallocation of labour across idle seasons facilitated...

As Russia’s invasion of Ukraine continues and many call for a strengthening of sanctions, an alternative to a full energy embargo has been discussed in the form of EU tariffs on imports of Russian gas. The IGM Forum at Chicago Booth invited its panels of leading US and European economists to express their views. As this column reports, nearly three-quarters of the experts consider...

Russia’s invasion of Ukraine has led the European Commission to revise its EU growth outlook downwards, and the forecast for inflation upwards. As this column discusses, by exerting further upward pressures on commodity prices, causing renewed supply disruptions and increasing uncertainty, the war is exacerbating pre-existing headwinds to growth, which were previously expected to subside. Nevertheless, the economy is expected to keep expanding, and...

Participation in global value chains is commonly seen as an important driver of productivity growth. This column uses Japanese firm-level data to estimate the productivity-enhancing impacts of participation. On average, firms that form part of global value chains are found to exhibit higher productivity than non-participating firms. In addition, longer participation strengthens the productivity-enhancing effects. Policymakers should support firms by protecting intellectual property rights,...

A large part of the world operates under oligarchic and authoritarian regimes, where access to economic opportunities is not offered to all citizens. This column discusses the impact of such ‘extractive institutions’ in stifling innovation and future economic growth. Using novel hand-collected data, it documents that ‘inclusive institutions’, which promote equal access to economic opportunities, are a first-order determinant of innovation. Geographical regions with...

This week António Guterres, secretary-general of the UN, warned that the war in Ukraine would tip tens of millions into food insecurity. Guido Porto and Bob Rijkers tell Tim Phillips about who suffers and how much from food price inflation.

Web-based job platforms that match employers and workers around the world to trade tasks which are delivered online are becoming increasingly popular. This column uses a new dataset from one of the largest job platforms to examine remote wages across locations and offshorability of work. Remote wages are more equalised than local wages across countries, but wage gaps across locations are still large. Outside...

A large literature explores the implications of the introduction of robots into the workplace for the labour market, yet few studies exist which measure robot quality over time.  This column uses data from the Japan Robot Association and the Bank of Japan to document a significant decline in the improvement in robot quality in Japan in the last decade. The differences in the growth rates...

Whether economic sanctions against Russia have real effects has been increasingly called into question. This column suggests that changes in e-commerce can demonstrate whether and how the 2022 Western sanctions contributed to de-linking Russia from the West. An analysis of trends in cross-border international online retail based on digitally recorded daily transactions data from 2,288 international and Russian companies shows substantial declines in Russia’s...

The question of whether firms are able to adapt to a changing climate is central to understanding the long-run economic effects of climate change. This column presents evidence from Italy showing that high temperatures affect firm demography by reducing the entry of newborn firms in the market and increasing business closures, while relocation to colder areas plays a minor role. Balance sheet data reveal...

Researchers typically collect newspaper-based data for use as outcome, treatment, or control variables in statistical analysis. This column argues that data generated from historical newspaper articles can also be used as a low-cost alternative for resolving measurement errors. The authors illustrate their framework by replicating two recent studies of how the boll weevil – a beetle that infests cotton crops – affected economic outcomes in the US South from 1892 to 1922. The newspaper-based replications increase the effect sizes and strengthen the...

Concerns about international trade have grown, as recent studies document a negative effect of Chinese import competition on US labour markets. This column provides a new framework to explain this observation, which relies on the presence of downward nominal wage rigidity in US labour markets. The increased competition from China improves US terms of trade, but nominal wage frictions prevent the labour market from...

The recent surge in inflation has put central banks back into the spotlight. This column proposes a novel method to determine exogenous changes in monetary policy. Using information in the language of documents that economists at the Federal Reserve Board prepare for Federal Open Market Committee meetings, it predicts changes in the target interest rate and obtains a measure of monetary policy shocks as the...

Since the 1980s, the pay of superstar workers has increased sharply, closely linked to the performance of the superstar firms that hire them. This column examines the contribution of monopoly power to manager pay. As firms grow in size, the contribution of the manager to the value of a firm increases, and firms are willing to bid higher to poach the best manager. Top...

Member states supply budgetary projections as part of EU Stability and Convergence Programmes. How good are those projections, and how can we improve them? Download the free DP and read more about this research:Beetsma, R, Busse, M, Germinetti, L, Giuliodori, M and Larch, M. 2022. 'Is the Road to Hell Paved with Good Intentions? An Empirical Analysis of Budgetary Follow-up in the EU'. CEPR

Industry concentration leads to increased market power, but can it also lead to increased political power? This question, first asked by Brandeis in 1914, is receiving renewed attention. This column investigates the effect of a merger on the amount of political activity of the merging firms. While theoretical predictions are ambiguous, US data from the past 20 years indicate that the average merger involving...

Despite an increasing number of sanctions imposed on the Russian economy since its invasion of Ukraine in February 2022, the ruble has appreciated back to its pre-war level. This column argues that the prevalence of import over export sanctions and the financial repression imposed in Russia, which lowered the local demand for foreign currency, have driven the appreciation. Despite the opposite effects on the...

Voters often face a key choice between continuity and change. But does voting for change – voting incumbents out of office – deliver better livelihoods for citizens? This column uses data from national elections conducted worldwide since 1945 to show that electoral turnovers lead to improvements in governance, economic performance, and other measures of national performance over the subsequent years. These findings suggest that...

Many US school districts are currently weighing policies to improve racial integration in public schools. This column outlines research evaluating the short and long-run effects of school desegregation on the lives of majority and minority students. New research examining the impact of court-ordered desegregation plans – implemented in hundreds of US school districts after 1960 – shows that early exposure to desegregated schools resulted...

The literature on assortative mating has largely focused on whether children of wealthy parents tend to marry children of similarly wealthy parents. Using data from Norway, this column shows that people tend to match based on their own pre-marriage wealth, not their parent’s wealth, and that individuals also match based on their personal returns to wealth. Among wealthy couples, the partner with the highest pre-marriage return...

Spain was one of the world’s richest countries around 1500. Two centuries later, it was a backwater. This column discusses the long-run impact of the influx of precious metals from the New World on the economic development of Spain. Using an augmented synthetic control methodology, the authors show that in the long run the growth and price level trajectories evolved dramatically different in Spain...

If you're going to drop lots of money from a helicopter, what will happen to the economy? When would it make a difference, and to who? Helicopter money is increasingly being taken seriously as policy. Ricardo Reis tells Tim Phillips whether helicopter money really can solve our economic problems. Download the free DP and read more about this research:Reis, R and Tenreyro, S. 2022....

The rise of global value chains has led to a greater use of input-output tables to study international linkages. This column analyses cost-push inflation using world input-output tables. In the light of the recent surge in commodity prices, it explores which countries are most vulnerable to energy cost-push inflation and documents the large exposure of Eastern and central European economies to a rise in Russian...

On 10 May 2022, the price of TerraUSD, an algorithmic stablecoin operating on the Terra blockchain, fell and it lost its peg to one US dollar. Using the devaluation of the TerraUSD peg as a case study, this column shows how algorithmic stablecoins are vulnerable to speculative attacks when the system is under-collateralised. The authors point to solutions – stable collateral and over-collateralisation – to stabilise the peg.

The economic landscape has changed dramatically since the European fiscal rules were designed some 30 years ago. This column contributes to the debate on reform by proposing a two-tier fiscal framework combining an expenditure rule that accounts for the ECB’s inflation objective with a lower speed of adjustment under the Stability and Growth Pact’s debt rule. Counter-cyclicality may be improved by automatic modulation of...

Recent sanctions imposed by the US on Russia have called into question the US dollar’s dominant role as a reserve currency. This column argues that sanctions will, in fact, reinforce the dollar’s dominance rather than weakening it. It emphasises the importance of ‘collateral’ demand for reserves, especially by developing countries. Countries which choose to exit the dollar bloc will have restricted ability to reassure...

A burgeoning literature on rank effects in education has found that students who are highly ranked in their class or grade have better long-term outcomes, even after accounting for absolute levels of ability and performance. This column uses this finding to shed light on other educational phenomena, such as the impact of high-achieving peers and the persistent gender gap in STEM subjects. The sizeable effects of...

How does the productivity of different types of workers vary across countries? This column uses micro data from countries at different levels of development to document that highly educated workers are relatively more productive in rich countries. Exploiting variation in the skill premia of foreign-educated migrants, the author concludes that this is mostly due to the technological environment in rich countries being more complementary...

China’s high household savings rate remains a puzzle, with potential explanations including demographic, policy, and financial causes. This column investigates China’s savings rate using individual income and spending transactions linked to demographic characteristics and financial information on loan applications and credit availability. The authors match bank customers to administrative records covering marriage and births to obtain a unique insight into consumption and savings patterns...

Trade in goods has rebounded quickly from the pandemic, while trade in services has not. This column finds that the pandemic broke the old trade patterns and that lockdowns had unintended international spillovers. Although global value chains have adapted, ongoing supply disruptions and the risk of future adverse shocks point to the need for more resilient value chains. The authors argue that in contrast to...

The trade disruptions resulting from Russia’s invasion of Ukraine have revealed the vulnerabilities of relying on a limited range of suppliers for imports with few substitutes. This column shows that the impact of the war through Russia’s participation in global value chains relates to its ‘upstream’ position.  Countries in closer geographic proximity to Russia face higher risks due to their greater direct trade links with...

It is not only countries but also sub-national jurisdictions such as states that compete for high-income taxpayers. In recent decades, both tax competition as well as attempts to keep aggressive tax practices at bay have intensified. This column uses Swiss data on local tax changes to show that lower income taxes for high-income taxpayers do attract top earners. Nonetheless, the net effect on tax revenue...

The first of CEPR’s Rapid Response Economics series spells out a proposal to ensure that the economy of post-war Ukraine can recover. But what can the international community do, and how much will it cost?

The Russian invasion of Ukraine has forced millions of Ukrainian children to leave their schools and homes. Such adverse shocks early in life can have profound long-term effects. This column presents evidence from WWII and the Vietnam War of how childhood war exposure had detrimental effects on education, physical and mental health, and labour market outcomes, even decades after the conflicts. The effects were...

Existing research on the integration of refugees has focused on the impact on the refugees themselves. This column uses the random allocation of refugees in Switzerland to show how allocation has significant effects even on future generations. Compared to children of refugees allocated to regions with an unfamiliar language, the children of mothers allocated to a familiar language environment have a higher birth weight...

Recent research has highlighted the contribution that managerial decisions make to firms’ productivity. This column uses a novel measure of job-worker allocation quality to document how firms that match their employees to their most suitable jobs are more productive, and their ability to do so depends on the quality and experience of their management. The measure is helpful for uncovering a hitherto neglected dimension of...

What can explain the small or even negative effects of regional trade agreements on trade? Using trade data between Japan and other 68 countries from 2002 to 2018, this column argues that RTAs reduce fixed costs for foreign direct investment more than exporters. This could have a negative effect on trade. A simulation exercise indicates that introducing RTA between Japan and China would incentivise...

Recessions in Europe often pushed Europeans to migrate to the US in search of better economic opportunities. This column examines the effect of this on conflict with Native Americans in the western US during the late 19th century. The authors find that a recession in Europe significantly increased the probability of conflict between US soldiers and Native American tribes. As they were often driven...

Democracies around the world have instituted reforms to level their electoral playing fields. This column studies the impact of campaign finance regulations in French local elections. The authors find that such regulations, particularly state reimbursements of expenditures, can level the playing field and assist newcomers without decreasing the representativeness of elections.

Inflation has surged to historic levels around the globe. Designing the correct policy responses requires a deep understanding of how consumers form and update their inflation expectations, and how expectations influence economic behaviour. This column summarises key findings in the literature on inflation expectations, particularly how they deviate from the full-information rational expectations paradigm. Household inflation expectations are typically biased upwards, systematically skewed, and...

In the wake of widely publicised instances of police misconduct, calls to defund the police have gained currency in the US. Still, many Americans fear that crime will increase where police presence is decreased. This column argues that policing problems and crime rates can be reduced simultaneously. Variabilities in violent crime and police misconduct correlate with the tenures of police leaders. This suggests that many police departments...

Face-to-face interactions are critical for the cross-fertilisation of ideas. Yet, the share of geographically distributed teams in scientific research has steadily risen since the 1960s and accelerated with the ICT revolution of the 1990s. This column explores how the rise of remote collaboration has shaped disruptive discoveries in science between 1961 and 2020. Remote collaboration negatively impacted breakthrough discoveries, but the effect reversed after...