Margaret Kyle, David Ridley, Su Zhang, 14 December 2017

Governments use various tools to promote scientific research, and the resulting innovations or knowledge can cross borders. This column examines whether governments and organisations adjust their funding of medical research in response to the funding decisions of others. The results suggest an increase in US government funding is associated with a decrease in funding by others. While this evidence is consistent with free riding, qualitative evidence suggests it reflects the optimal reallocation of funds.

Atsushi Ohyama, 14 December 2017

The length of time industries prosper varies significantly. This column examines why some industries grow and prosper for a long period of time through the lens of submarket creation and destruction. Using data from the Japanese Census of Manufacture, it shows that the creation and the destruction of products allow an industry to continue attracting new entrants, that start-up and spinoff firms are more likely to enter a newly created submarket than incumbent firms, and that new entry is encouraged when unrealised business opportunities are reallocated smoothly.

Giancarlo Corsetti, Meredith Crowley, Oliver Exton, Lu Han, 13 December 2017

As the recent UK Parliament Select Committee hearing revealed, there is a dearth of analysis of the sector-level risk to exports of a ‘no deal’ Brexit scenario. This column presents an analysis by sector and product, and delivers both good and bad news. In a scenario where trade reverts to WTO rules, the good news is that one-third of UK exports to the EU will remain tariff-free. The bad news is that one-quarter of exports will face high tariffs and/or the risk of restrictive quotas or antidumping duties.

Ricardo Caballero, Emmanuel Farhi, Pierre-Olivier Gourinchas, 13 December 2017

The US has seen a fall in real interest rates but stable real returns on productive capital in the last few decades. This column argues that these divergent trends are inherently interlinked, and arise from a combination of a rise in the capital risk premium, an increase in monopoly rents from mark-ups, and capital-biased technical change. With these secular trends unlikely to reverse anytime soon, we are likely to live in a prolonged era of low interest rates, high capital risk premia, and low labour share.

Simon Evenett, Johannes Fritz, 12 December 2017

The focus of much of the literature on the trade impact of crisis-era protectionism on import restrictions is misplaced. This column introduces the latest Global Trade Alert report, which shows that while import restrictions played their part in holding back European exporters, trade-distorting subsidies were more important.

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