Experimental economics opens the door to better policy design. Laboratory experiments should be used to try out proposed policy changes on a small scale before causing upheaval in the real economy - just as wind tunnels are used in car and plane design.
Spain’s new immigration policy is a step forward. An even better policy would be a system of temporary (three-year) work visas that were not tied to a specific job.
To help developing nations, the Doha Round should be wrapped up. Not because it will bring great and immediate pro-development benefits. Rather, it is time to shift the focus to an updated set of issues. Time to declare victory and start thinking about priorities for the next Round.
France should beware of comparisons with Germany’s 'social VAT': France’s VAT rate is already 5% above Germany’s, the share of public spending in GDP is already nine percentage points above Germany’s, and Germany, unlike France, is fully committed to structural balance by 2010.
Why are the markets for services so much more difficult to integrate internationally than goods markets?
Female tennis players play more conservatively and commit more unforced errors when playing critical points. Does this explain the upper-echelons wage gap?
Much of the substance of the Constitutional Treaty has been preserved, but since this is clear only to the initiated, it comes at a cost of considerably reduced transparency. And this is not complete; expect more Treaty revisions before all of the provisions of this one have been implemented.
An expansionary monetary policy and an historical conjuncture that happens to produce no inflation will lead to asset price inflation and deterioration of credit. At some stage, central banks will have to mop the liquidity or see inflation do it for them.
Quantitative emission targets for the 21st century must be set sequentially, a decade at a time, within a long-term framework. A good analogy is the GATT, which produced 50 years of trade liberalisation, the specifics of which the original signers could only have guessed.
Many worry that regionalism is undermining the multilateral trading system, but maybe past unilateral trade reform is the root of Doha’s problems.
Delaying the Constitution’s voting rules for 10 years is a nice way of saying they won’t be adopted. Either the current voting rules will produce Thatcher-sized blockages and have to be revised in the meantime, or the EU27+ will learn to work with them, in which case no one will want to switch in 2017.
The impact of oil price shocks on nations’ external imbalances is highly dependent on the underlying cause of the oil price increase. Policy-makers must identify the shock’s origin before they can assess their likely consequences.
Since 2000, East Asian countries have signed over 70 trade agreements. Is this ‘noodle bowl’ of regional agreements in the world’s most dynamic economic region a threat to the multilateral global trading system and to other regions’ economic prosperity?
Seigniorage is generated when a central bank creates money and gives it to the private sector in exchange for interest-bearing assets. Under the Maastricht Treaty, the interest earnings are distributed according to country size, but given the dominant role of the DM before the euro, this allocation rule cost Germany about €30 billion.
The rising cost of VAT fraud has forced its way onto the agendas of Europe’s highest levels of government. This final instalment considers the solution that the German Presidency is pushing and argues that this “solution” may cause as many problems as it fixes.
Regulating prices in the pharmaceutical markets can be rather ineffective from a welfare-enhancing viewpoint and the US, despite its complaints, does not seem to have significantly higher prices than other countries with similar income levels.
The Polish proposal on Council voting is not that far from the rules in the Constitution that the German Presidency is pushing. Does it still make sense to declare “square root or death”? How about “square root and compromise”?
Sarkozy’s de-taxing of overtime work adds a distortion on top of an already bad law and fails to address the real problem – the 35-hour week legislation. However, the idea is much less bad than it looks at first glance.
Sarkozy repeatedly criticised the European Central Bank during the campaign; his intuition was correct but his aim was off. By forcing the ECB to be more transparent and accountable, he would contribute to improving monetary policy in Europe.
Germany needs a radical cultural and economic revolution, one as courageous as – but not identical to – the one that occurred in Britain under Margaret Thatcher. After 50 years of progressive entanglement, Germany is ripe for this.
Successful financial globalisation has “collateral benefits” – catalytic, indirect benefits on the domestic financial sector, macroeconomic discipline, and public and corporate governance. This has powerful implications for empirical analysis of its benefits.
There is a clear positive relationship between an EU member’s power per person in the Council of Ministers and its receipts per person from the EU budget. If voting rules have such a clear effect on an easily measurable outcome like budget allocations, it is likely that votes matter for other more important issues.
When it comes to competition policy, the EU collaborates with its principal trade partners via a hodgepodge of bilateral and multilateral agreements. A better idea would be to create a new supranational structure grouping the competition authorities from countries such as the European Union, the United States and Japan.
Criminals soon learned that the Single Market’s removal of internal border checks made VAT fraud easier and more profitable. The problem was recognised a decade ago and proposals to fix it abound. This instalment considers various solutions to the problem.
Tax criminals employ a number of intricate schemes, some of which have been discovered and prosecuted. This third instalment in a five-part series looks at how the schemes work and at estimates of how much they are costing EU governments.
The US, EU, and other leading trading powers have pulled back on their negotiating offers. Either senior trade negotiators are planning an extraordinarily welcome summer surprise or they are positioning themselves for the blame game when the music finally stops.
Empirically, family structures affect economic choices such as labour market participation. This fact and the wide variety of family structures within the EU bring into question policies that seek to impose uniformity of social policies.
Data on 12,400 firms in 120 Chinese cities show that state-owned firms have lower marginal returns to capital than private or foreign firms. This inefficiency costs China 5% of its GDP and suggests there would be big gains to further financial and corporate-governance reforms.
EU governments are defrauded of millions of euros a year on intra-EU trade. This second instalment in a five-part series looks why VAT is especially vulnerable at the borders.
Rising American inequality stems from efficiency-enhancing policy changes in the 1970s and 1980s. There is growing recognition that the current free-market income distribution – the combination of large inequalities and stagnant wages for many workers – creates its own “soft” inefficiencies as people become disenchanted with existing economic arrangements.
It’s no longer safe to assert that trade’s impact on the income distribution in wealthy countries is fairly minor. There’s a good case that it is big, and getting bigger. I’m not endorsing protectionism, but free-traders need better answers to the anxieties of globalisation’s losers.
Poland insists that the EU allocate Council-of-Minister votes according to the sqaure root of each nation's population. There is a method to this madness, in fact it has a cherished place in voting game theory, but it takes some work to see why.
The dollar accounts for two-thirds of international reserves; the euro for about a quarter. But the euro’s share has already risen considerably from only a sixth in 2000, and recent research argues that the euro’s ascent to major international currency status may no longer be as implausible as many still believe.
Organised criminals earn millions from tax fraud while EU cooperation on the issue is gridlocked. This series of five columns looks at the problem and suggests that the German EU Presidency is pushing the wrong solution. This first instalment considers essential technical aspects of the VAT.
The new EU Treaty must be based on a compromise that does not cross member states’ red-lines while still delivering real improvement in the functioning and democratic accountability of the EU institutions.
Council voting reform is one change that must be in the new treaty to consider it a success. The impact of Turkish membership on the distribution of power could be the key to choosing from the options for Council voting reform
With inflation targets winning the world of Central Banking, methods for measuring inflation have direct policy consequences. The big question for inflation measurement is how to handle housing. The US methods are better than the ECB methods.
The French election shows mistakes by the Right won’t get the Left into power. It needs a "New Deal": to promote programmes that help people rather than regulate firms, to decouple public policies and the public sector - simple things to help the Left to become "modern".
Gender equality policies seek to shift market outcomes. Economic logic and empirical research suggest that such policies can help if they are applied consistently for a long period.
Our goals and motives
Many believe that migrants abuse the welfare state and encourage a race to the bottom. There are three ways to lessen the problem: close the welfare door, select migrants with a points system, or harmonise safety nets across the EU. With each, there is a need to integrate social policies and migration policies more closely.
It is easy to get misty-eyed about European ideals, but the reality is that the Constitution was just another big-package political compromise of the sort that has been put together at every step in Europe’s long history of integration.
Negotiations on the new treaty should focus on the rejected Constitution’s four key changes: new Council of Ministers voting rules, inclusion of the Charter of Fundamental Rights, removal of the ‘pillar’ system, and generalisation of the passerelle and flexibility clauses.
Public debate on the new treaty focuses on marketing issues (re-packing) or extreme generalities (mini-treaty), but there are important choices to be made, and the various reform elements – such as voting rules, the number of Commissioners and removal of the famous Maastricht pillars – interact in complex ways. First in a series of 4 columns on the issue.
GDP per capita is a poor measure since it leaves out home production and intangible investments. Considering these two items, however, suggests that if GDP were measured correctly, Europe’s relative decline might be even more pronounced.
France is keen on a new treaty for two reasons – its desire to be a leader in EU issues, and Sarkozy’s eagerness to clear his desk. The road to a treaty, however, is paved with difficulties.
Here is “fleshed out” version of the authors’ FT Comment on tax and gender; the Directors’ Cut, if you will.