Bookmarks (66)

International trade is a key determinant of firm profitability and survival, so it is natural to expect it to influence both incentives to innovate and the rate of creative destruction. This column highlights four key mechanisms through which international trade affects endogenous innovation and growth: market size, competition, comparative advantage, and knowledge spillovers. Each of these mechanisms offers potential static and dynamic welfare gains....

In order to limit global climate change, the world may eventually need to remove more carbon from the atmosphere than it puts in ('negative emissions'). Economists almost universally recommend pricing carbon emissions via a tax or cap, but this policy cannot achieve negative emissions unless paired with potentially massive government spending. This column argues that an alternate type of policy, called 'carbon shares', can limit emissions...

Trade in services is important but difficult to measure. This column introduces a new dataset that helps understand the contribution of services to global value chains and their role in the process of exporting goods. Firms with longer experience in exporting goods to a destination tend to source export-related service inputs from there rather than domestically, and do so within the boundaries of the...

Employers in the US are grappling with whether and how to bring employees back to the office or other place of work. Using survey-based evidence, this column finds that four in ten Americans who currently work from home at least one day a week would seek another job if employers require a full return to business premises, and most workers would look favourably on...

The strength of the US dollar in currency markets has drawn the attention of researchers, policymakers, and businesses for decades. This column examines the effects of the dollar on international trade, with a particular focus on exports. A strong dollar dampens trade volumes through the financial channel, outweighing any improvement in trade competitiveness. Trade activity is strong when the dollar is weak, but global...

As Covid-19 closed concert halls, galleries, and theatres it cut off the incomes of the people who worked in them. One year on, what has been the effect of the pandemic on artistic income? Alexander Cuntz of the World Intellectual Property Organisation has used unique incomes data from Germany to estimate how incomes have been affected, and how important states support has been for...

The policy framework developed so far on non-bank financial intermediation has been based mainly on microprudential tools, looking at individual institutions and activities. This column argues that the effectiveness of these tools could be strengthened if they are accompanied by a comprehensive framework to control systemic risk. This framework could be built around determining the correct pricing of backstops, resolving the trade-off between systemic risk...

The US dollar has a dominant role in currency invoicing of global trade, covering around 40% of international transactions, followed by the euro and the renminbi. This column analyses the effects of economic fundamentals and government policies on currency invoicing patterns. Strategic complementarities and integration in global value chains are both important determinants of dollar and euro invoicing in trade with the US and...

Central banks across the world are starting to experiment with digital currencies. This column summarises the findings from a survey of a CfM of experts on the UK economy, who were nearly unanimous in agreeing that a Bank of England-issued digital currency would benefit the British economy. Half of the panel also believed that a digital currency would have limited impact on the UK...

Newspapers have lost significant advertising revenues to competition from online platforms. How this affects local newspapers’ ability to inform citizens about political matters is important for democratic politics. This column studies the impact of the introduction of Craigslist on US newspapers and its political implications. After the opening of a Craigslist in a county, local newspapers cut staff, disproportionately affecting political desk editors. News...

Data on the US homeless population are sorely lacking, leaving key questions about their number, deprivation and mobility unanswered. This column introduces a new dataset that sheds new light on these questions by linking a census of the entire US homeless population with administrative tax and government programme data. One finding the data reveal is that while many homeless individuals work and the vast...

Same-sex marriage was legalised in the Netherlands in 2001. This column shows that this legislation improved the mental health of both married and non-married sexual minorities. It is likely to have improved societal tolerance of same-sex partnerships, impacting the discrimination experienced by sexual minorities.

The currency a firm chooses to invoice in reveals lessons on the prominence of that currency in the international sphere. This column presents survey data from Japanese overseas subsidiaries, highlighting how the use of Asian currencies has been growing steadily. The authors show that among Asian local currencies, Chinese renminbi and Thai baht are the most used currencies by Japanese subsidiaries. If these countries...

Imran Rasul tells Tim Phillips about new research that shows the fraction of published economics research devoted to the causes and consequences of racial inequality is much smaller than in political science or sociology - and that this inequality has been getting worse. Read more here: CEPR Discussion Paper, DP DP16115 Race-related Research in Economics and Other Social Sciences by Arun Advani, Elliott Ash, David Cai,...

Every year in the US around 5,000 cases are brought against defendants for violating federal environmental statutes, with defendants given the opportunity to volunteer ‘Supplemental Environmental Projects’ in lieu of a cash penalty. This column uses the history of US federal environmental cases between 1997 and 2017 to examine the implications of such in-kind settlements for firms and communities. The findings suggest that on...

Racism in football returned to the headlines recently following racial abuse of England players on social media after the final of the UEFA European Championship. How does the harassment of supporters affect discriminated athletes? Using the COVID-19 lockdown as a natural experiment, this column compares the performance of individual football players in the Italian Serie A with and without fans at the stadium. The...

That a shock the size of the Covid-19 pandemic would trigger distress in financial markets is far from surprising. What is surprising is how much of the distress arose in domains that could have been identified posing a potential threat to stability well before the pandemic hit. This column explores how the US financial regulatory regime is falling short and proposes reforms to increase...

The use of telemedicine rose sharply under the COVID-19 pandemic, and in the coming years we are likely to see more healthcare delivery that mixes in-person with remote care. But concerns remain over whether remote care might reduce care quality or increase costs. This column examines the effect of increased access to telemedicine on care cost and outcomes using data from Israel around the...

There is little consensus on the macroeconomic impacts of sovereign debt crises, despite the regularity of such events. This column quantifies the aggregate costs of defaults using a narrative approach on a large panel of 50 sovereigns between 1870 and 2010. It estimates significant and persistent negative effects of debt crises starting at 1.6% of GDP and peaking at 3.3%, before reverting to trend...

More than 4 million African Americans moved from the South to the North of the United States during the Second Great Migration between 1940 and 1970. This column argues that the Great Migration and support for civil rights are causally linked. It finds that Black in-migration increased demand for racial equality and encouraged pro-civil rights activism in non-Southern counties. These effects were not only driven...

In early 2020, Sweden left restaurants and schools open when the rest of Europe shut them. So which sectors of the workforce were more or less likely to lose their jobs afterwards? And was that outcome due to Sweden’s institutions or its policies? Pamela Campa of SITE talks to Tim Phillips.

The ‘right’ monetary policy response to COVID-19 has depended on any number of factors for central banks across the world. This column argues that some central banks in Latin American and Caribbean went beyond accommodating the increased demand for liquidity, inducing monetary injections that then returned through excess bank reserves and sterilisation liabilities for those central banks that fixed an interest rate, and through...

There has been ongoing debate over what type of lockdowns are warranted to counter Covid-19 and whether the benefits justify the accompanying economic contractions. This column uses a macro-susceptible-infected-recovered model to show that the impact of economic contractions on child mortality in poorer countries combined with their younger demographic composition, as well as the greater community-related transmission and lower healthcare capacity in these countries,...

How did past major pandemics affect inflation dynamics? This column estimates the long-run effects of pandemics on trend inflation in Europe using historical data since the 14th century. We find that, following a pandemic event, trend inflation falls steadily below its initial level for nearly a decade. This long-run depressing effect is also observed in major individual European countries – France, Germany, Italy, the Netherlands, and the...

Do different economic integration arrangements vary in terms of their capacity to attract foreign direct investment? This column uses a structural gravity framework on annual bilateral FDI data for 142 countries between 1985 and 2018 to revisit this question. It finds that deep integration in the form of EU membership increases FDI by about 60% from outside the EU and by about 50% from within...

Identifying the peaks and troughs of recessionary episodes helps economists to understand the conditions surrounding crises. But deciding when a recession starts or finishes is not straightforward, and several methods exist. This column presents the dating specification for the French Business Cycle Dating Committee, describing how the group identifies key phases in France’s economic performance based on a quantitative and a qualitative pillar. The...

People everywhere sometimes pretend to be sick on a Friday because a day off work means a three-day weekend. In Italy, sick workers may now get a surprise home visit from the doctor. Tito Boeri tells Tim Phillips how effective this has been as a cure for "Friday morning fever". The paper discussed is:Boeri, T, Di Porto, E, Naticchioni, P and Scrutinio, V. 2021....

As the economy locked down in March 2020, businesses across the UK struggled to operate. And yet, fewer firms declared bankruptcy during the pandemic than in preceding years. This column introduces a model designed to examine the economic impact of Covid-19. It determines that government assistance rescued previously profitable firms that might not have survived lockdowns, but also propped up weaker firms that would...

The outcome of the long-awaited second review of the ECB’s monetary policy strategy was communicated by the central bank on 8 July 2020. This column argues that the review constitutes a mixed bag. The asymmetry of the inflation target, a long standing source of ambiguity and potential policy mistakes, has been corrected by announcing a symmetric central target at 2%. But major ambiguities remain...

How CEO pay is set has been studied extensively, but most theoretical models do not capture whether real-world CEOs care about, for example, their reputation, fairness, or being appreciated by directors and investors. This column explores this using a survey of over 200 non-executive directors of FTSE All-Share companies and over 150 institutional investors in UK equities. While financial incentives are relevant to motivating...

Tariffs are often advertised as an effective tool to protect or even create jobs in specific industries. Empirical evidence suggests differently. Using data from a Chinese online job portal, this column documents how firms facing US tariff increases during the recent trade war posted fewer jobs and offered lower salaries, among other adjustments. Chinese retaliatory tariffs have not induced any systematic adjustments in firms’ vacancy...

An essential feature of the globalisation of the economy since the 1990s has been the growing importance of sea-borne container trade for supply chains. This column develops a monthly index of North American container trade since 1997 and incorporates it into a model of the US economy. It shows that rising and falling frictions in container shipping markets help explain the US business cycle...

Global inflation has rebounded from last year’s lows faster and sooner than after any previous global recession in the past five decades. This column presents model- and survey-based estimates which suggest that global inflation will rise by about 1-1.4 percentage points this year, pushing it above target in about half of inflation-targeting emerging market and developing economies. This may not be reason for concern...

What are the gains for workers from moving from a poor economy to a rich one? This column examines this question using the case of Palestinian workers who could decide to either work in the (poorer) local economy or commute to work in (richer) Israel. It finds productivity gains experienced by the migrants are largely offset by the low returns for the job tasks offered to...

While progress in closing gender gaps has been made, women around the world still earn less than men in the labour market. At the same time, income inequality across households has increased in recent decades. This column finds that the interaction of the marriage market and the labour market crucially impacts inequality across gender and within/between households. Policies that affect who marries whom (such...

Pricing carbon and placing a tax on industrial emissions could be a centrepiece of national climate policies going forward. This column uses simulations from a global trade model to show that the introduction of asubstantial carbon tax for Dutch industry strongly reduces domestic emissions, while production losses remain modest. However, significant carbon leakage of up to around half of the emissions reduction achieved in...

Climate change will impact those parts of the financial system most exposed to its disruptive effects. This column analyses a new financial stability risk mapping for the EU financial system, linking financial exposures of thousands of banks, insurance companies, and investment funds to millions of firms subject to climate risk. It highlights a high level of risk concentration, both in European regions subject to...

Many analysts expected Covid-19 to expose the contradictions of ‘populist’ politicians and cited various reasons for this, including short-sightedness, the lack of trust often associated with populist sentiments, unhelpful populist narratives, and a resistance to international cooperation. This column argues that there is no clear evidence that its handling of the pandemic has ‘killed’ populism. In fact, the pandemic crisis has spawned new political...

There are many ways to select and retain public officials in representative democracies, and considerable variation in the rules governing that process. This column discusses the literature on selection and retention procedures for low-information public office, and suggests a conceptual framework for assessing the advantages and disadvantages of direct elections. After summarising the historical origins of the institutional factors that influence elections, the authors...

Rising geopolitical and geoeconomic tensions among major trade powers are undermining the rules-based multilateral trade order. A new VoxEU eBook brings together teams of mostly Chinese and European experts who focus on key challenges confronting the multilateral trading system. Pursuit of issue-specific negotiations on an open plurilateral basis offers prospects for revitalizing the WTO but does not remove the need for balance in the choice of...

Over 90,000 Americans died from opioids in the year ending November 2020, bringing the death total since 1999 to over 850,000. This column argues that rather than rising demand for opioids for relief from pain or despair, it is supply-side innovations in the legal and illegal drug markets that have been the main driver of the opioid epidemic. The opioid cycle is a cautionary...

Textbook models predict that a monetary policy tightening should lift the exchange rate. Yet the empirical evidence for emerging market economies fails to support this prediction. This column uses data from Brazil to show that the exchange rate’s response to monetary policy shocks changes with the fiscal regime. A contractionary monetary surprise leads to an appreciation in normal times. By contrast, a depreciation results...

Joint leadership by China and the EU to establish a balanced work programme spanning old and new issues of interest to all WTO members is necessary to safeguard the rules-based trade order. This book, a product of a Horizon 2020 research project (RESPECT), brings together essays written by teams of European and Chinese trade policy experts, who explore possible paths to revitalise the WTO. 

Variants of the virus causing COVID-19 account for a large part of the resurgence of infections in many OECD countries since the latter part of 2020. By relating country-level daily reproduction numbers for OECD countries to several potential explanatory factors, this column shows that vaccination has been very effective at curbing COVID-19 infections and that a quick vaccine rollout can substitute for lockdown policies at...

Previous research in economics has focused on the causes of conflict, while the ending of military interventions has received less attention. This column examines the recent security transition from international troops to local forces in the ongoing civil conflict in Afghanistan using declassified data on conflict outcomes and perceptions of local security. It finds that a decline in violence during the initial phase of the security transfer was followed...

The Covid pandemic has helped to loosen the binds that previously tied a job to a specific geography and created a new class of work in the UK. ‘Anywhere jobs’ are non-routine service sector jobs that can be done from anywhere in the world, potentially for cheaper. This column shows that one in five workers in the UK are in an anywhere job and, in contrast to...

The economic shock triggered by Covid-19 shut down thousands of businesses and cost millions of workers their jobs. The goal of government response to this shock was simple: keep the lights on for as long as possible. This column describes how while some advanced economies have moved ahead with changes in their bankruptcy law to make it easier for distressed companies to keep running, developing...

If economists are going to be able to offer clear guidance about the appropriate ambition of climate change policy, we need firmer damage estimates. This column introduces a new model that prices farmers’ ex-post and ex-ante adaptations to weather changes and forecasts. When applied to US agriculture, the model shows a much more pessimistic outcome than currently expected, and encourages the consideration of substantial...

Although epidemics are frequently cited as inducing changes in economic behaviour and accelerating technological and behavioural trends, there may be important differences across socioeconomic groups in ability to utilise such new technologies. This column studies these issues in the context of fintech adoption and finds strong evidence of epidemic-induced changes in economic and financial behaviour, of differences in the extent of such shifts by...

If some kids lie a little, and some lie a lot, is that just the way they are, or can we increase a child’s honesty in day-to-day life? Johannes Abeler tells Tim Phillips about how mentors can create lasting behaviour change. The paper discussed is:Abeler, J, Falk, A and Kosse, F. 2021. 'Malleability of preferences for honesty'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=16164