The labour market recovery in OECD countries has been steady but slow since the Great Recession. More worrying is the fate of wage growth over the same period. This column assesses the implications of stagnation in the labour market for growth, wages, and inequality. It finds that structural weaknesses in labour market performance have become more visible as markets recover from the Great Recession. The policy response must include macroeconomic policies aimed at strengthening investment, and structural policies to support growth while nudging workers towards higher-skilled jobs.
‘Defensive medicine’ refers to doctors performing excessive tests and procedures because of concerns about potential malpractice liability. Advocates for reform of the liability system typically argue that this raises healthcare costs with few expected benefits for patients. This column explores how tort reform laws designed to curb defensive medicine affect innovation in medical devices. US states that introduce such laws see a reduction in medical device patenting, suggesting that high liabilities actually encourage innovation.
New EU trade agreements could adversely affect Turkey as a non-EU member. This column presents new findings of an economic analysis in which different trade policy scenarios are considered. The results point to a clear policy recommendation – Turkey and the EU should mutually deepen their customs union by including the agriculture and service sectors as soon as possible.
The secular stagnation hypothesis suggests that low interest rates may be the new normal in years to come. This column argues that this prospect should not only lead to a major rethinking of policy from the perspective of individual economies, but also a major rethinking about monetary and fiscal policy in the international context, the role of international capital flows, and the role of policy coordination across borders. In times of secular stagnation, events such as Brexit or the recent turbulence in Turkey have much larger spillover effects than under normal circumstances.
Econophysics is an emerging field applying theories and methods from physics to economic problems and data. This column explores the collective motions of trade and the effects of trade liberalisation, using global data from the past two decades. Econophysics methods reveal how business cycles synchronise, and how economic risk propagates throughout the global economic network. The results also highlight inherent problems of structural controllability that are induced during economic crises.
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