Retail trade is regulated in all European economies. This column studies a 1998 Italian reform that delegated regulation to local authorities and therefore generated regional variation in barriers to entry. It shows that entry restrictions favour incumbent shops and reduce productivity and employment in the sector. Consumers pay for all this through higher prices.
Why do public and private insurance coexist in all countries? This column analyses the determinants of the optimal insurance mix. It reveals how public insurance schemes are constrained if available information on private insurance transactions is incomplete. It discusses how the optimal insurance mix strikes a balance between the overall costs and benefits of insurance as well as the preservation of work incentives.
How much more do you have to earn to compensate for a higher bodyweight and still find a desirable marriage partner? Sonia Oreffice of the University of Alicante talks to Romesh Vaitilingam about her research on physical and socio-economic characteristics, marriage markets and the potential impact on family outcomes. The interview was recorded at the Royal Economic Society’s annual conference at Royal Holloway, University of London, in April 2011. [Also read the transcript.]
Restructuring is a taboo word in Brussels. This column argues that debt restructuring may be a viable option for some of the countries on Europe’s highly indebted periphery.
Lampedusa is a small Italian island close to Tunisia. A recent influx of migrants has prompted Messrs Berlusconi and Sarkozy to call for a temporary suspension of the free mobility from countries receiving large waves of refugees and illegal migrants. This column argues that such a step would be madness. The EU needs more mobility, not less.
For developing countries, following the principles of sound economic policy and establishing the appropriate institutions of a functioning market economy is a very challenging task. This column says that completing the Doha Round could help them follow at least some of the principles of sound economic policy and establishing some of the appropriate institutions of functioning market economies.
The Doha Round is again in a crisis. What is left to say after so many disappointments and loss of credibility? This essay argues that concluding the Doha Round in 2011 presents many unique opportunities on the economic front, on the symbolic front, and on the systemic front. But asking the key players behind today’s deadlock to move would be naive.
The Doha Round has been going on for ten years and its fate is now in jeopardy. This column argues that governments should not let it fail as it could bring down with it the whole WTO-based world trade system. As there is no potential replacement for the WTO, and without it the threat of trade wars would become more serious.
At the end of this week the world will know whether, after ten years of negotiations, the Doha Round is still stuck in a “game of chicken”. This column argues that the agreement in goods still offers a good basis for a deal as it provides the most precious virtue, i.e. certainty and insurance. Moreover the likely alternative to Doha – rampant regionalism – will not help the US and China achieve more than they could with Doha because their trade partners find FTAs with these two particularly difficult.
America’s best chance at getting better access to the world’s fastest growing economies is on the table – it is called the Doha Round. The US should push hard for a conclusion as the alternatives are much worse. The US faces great domestic and foreign problems in pursuing the regionalism alterative. In particular, US faith in the Trans-Pacific Partnership seems to be based on unclear thinking about political constraints at home and political reactions abroad.
The Obama Administration seems to view Doha delay as a minor issue since they view the export gains from the current package as small. This column argues that this calculation is based on a false premise that the status quo would continue even if the Round dragged on for years. Nations respect the WTO’s Dispute Settlement Mechanism verdicts in order to remain as members in good standing; this allows them to reap the benefits of the WTO as a negotiating forum. If the WTO collapses as a negotiating forum, nations may move towards a crass calculus that assesses verdicts only on the basis of the threats that back them. This would be a deeply regrettable move away from a rules-based global trading regime.
Another suspension of the Doha Round is the likely outcome of the upcoming meeting. This essay argues that such a failure is now more dangerous than ever. For domestic political reasons unrelated to trade, the US will be in no position to lead on international trade issues for some years. As the US is still the “indispensable nation” for WTO talks, this means 2011 is the last good opportunity for many years.
What is needed for the Doha Round of trade negotiations to reach a satisfactory end? This essay argues that the talks need nothing less than the involvement of heads of government. Deepening economic integration requires improved global governance and completing the Doha Round must be part of this. Failure would put globalisation, and the enormous benefits it has brought about, at serious risk.
The eight trade rounds that have taken place to date have helped define the world we live in. This essay argues that political leaders must now commit resources and time to concluding the Doha Round or they will bear the responsibility for serious damage being caused not merely to globalisation but to the process of multilateralism more generally.
The Doha Round of trade negotiations began nearly ten years ago with a focus on lowering trade barriers, particularly for the sake of developing countries. Today, the Doha Round is stuck in limbo. This column argues that both developed countries as well as developing countries stand to gain from moving the discussions forward – particularly those in the Asia Pacific region.
If trade diplomats thought they knew one thing, it was how to cut industrial tariffs. Yet the Doha deadlock rests squarely on the inability to compromise on industrial tariff cuts. This column says that the arguments made for higher levels of ambition don't stand up to much scrutiny and should not be allowed to provide a basis for a continuing impasse.
If the Doha deadlock is to be broken this year, US and Chinese leaders must find more room for compromise by loosening their domestic political constrains. To do this, they must challenge the premise on which the deadlock is based – the view held by special interest groups that Doha is mostly about tariff cuts. These narrow special interests should not be allowed to jeopardise the world trading system and the benefits Doha would bring to all nations. This is critical; the eBook argues that if Doha fails this year, it can’t be done before 2020.
This column summarises the arguments in the latest eBook. If the Doha deadlock is to be broken this year, US and Chinese leaders must find more room for compromise by loosening their domestic political constrains. To do this, they must challenge the premise on which the deadlock is based – the view held by special interest groups that Doha is mostly about tariff cuts. These narrow special interests should not be allowed to jeopardise the world trading system and the benefits Doha would bring to all nations. This is critical; the eBook argues that if Doha fails this year, it can’t be done before 2020.
Why should policymakers bother to conclude the Doha Round? This column argues that the benefits for agricultural trade provide reason enough. Developed countries would benefit from more competitive products entering their market and developing countries would benefit from having access to these markets for export.
The Doha Round is in peril. This essay argues that if the impasse is intractable, world leaders face three choices: to quickly finish the low-ambition package on the table, to explicitly terminate the Doha Round, or to let it die a slow death. It says the last option would be by far the worst – even if it is the most likely.
The consequences of the tragic disaster in Japan are many. This column examines the trade effects. It suggests that Japanese exports will fall by 0.5–1.6% and its imports will rise by 0.4–1.3%. Despite the devastation in Japan, the effects on global trade will be relatively small.
Illegal immigration is widespread. In 2008, approximately 12 million immigrants lived unlawfully in the US alone. This column argues that illegal immigration is largely a tale of political failure. It shows that governments find it best to “talk tough but do nothing”. By imposing quotas but not effectively enforcing them they can mislead the public that want a limit on migration while appeasing those who want more migrants.
The Doha Development Agenda (DDA) has made very little progress in ten years. If it fails to be completed, the impact on world trade and the global economy could potentially be very damaging, with serious implications for the credibility and future of the WTO. Many commentators suggest that the Doha Round is dying of political neglect and that its revival requires the immediate intervention and committed support of G20 leaders; others argue that gaining such support at this very late stage is unrealistic. CEPR held a high-level trade seminar in London on 14th April to discuss the issue.
The global crisis has called into question how banks are run and how they should be regulated. Highly leveraged banks went under, threatening to drag down the entire financial system with them. Here, David Miles of the Bank of England’s Monetary Policy Committee, shares his personal views on the optimal leverage for banks. He concludes that it is much lower than is currently the norm.
Icelanders have voted against providing a government guarantee for claims made by the UK and the Dutch governments against Iceland’s deposit insurance fund. This column argues that the heated debates surrounding the referendum may provide a glimpse into the challenges that lie ahead for European policymakers as they attempt to allocate losses suffered by banks between the taxpayers of different countries.
On 11 April, the Independent Commission on Banking in the UK, chaired by Oxford economist John Vickers, published its much-awaited interim report on reform options for British banking. This column argues that despite its critics, the policy proposals are a significant milestone not only for the UK, but for European and global banking reform.
What next for Ireland? This column by CEPR President Richard Portes makes the case that the country should restructure its debt.
Political drama continues to unfold in the Middle East. This column uncovers education’s role in the recent uprisings. It finds that one unforeseen effect of increased investment in education has been the creation of a generation of well-educated but frustrated political activists. It concludes that – in more ways than one – the Middle East autocrats have contributed to their own downfall.
President of the European Central Bank, Jean Claude Trichet, was once head of the Paris Club – the group of government creditors who negotiated debt restructuring during the Latin American debt crisis of the 1980s. This column asks how such experience will help Europe now that the problems are on its doorstep. It introduces a Trichet Plan for the Eurozone.
Smallholders are a defining feature of African agriculture. This column argues that they deserve special attention by donors and policymakers. But simply relying on the smallholder business model is unlikely to prepare African agriculture for future challenges. Instead, smallholders should be supported to engage in commercial farming or to move out of the agricultural sector.
Which countries will drive growth for the next 40 years? This column introduces a new Policy Insight in which Citi economists Willem Buiter and Ebrahim Rahbari investigate the likely future sources of global economic growth between 2010 and 2050. They come up with 11 global growth generators, i.e. 11 3Gs. Surprisingly, Brazil and Russia do not make the cut while two Africans countries are in.
Japan’s trio of tsunami, earthquake, and nuclear disaster has left the world stunned. As this column points out, even the experts were shocked. But while these events were highly unlikely, they were still possible. This column uses evidence from the Danish lottery to show that people tend to adjust their expectations of future events based on only small pockets of recent experience, often at their cost.
Diane Coyle talks to Viv Davies about her new book 'The Economics of Enough: How to Run the Economy as if the Future Matters'. The book addresses the need to create a sustainable economy - how to consider tomorrow's needs as well as today's. It covers a broad range of issues, from the banking crisis to climate change, and sets out some of the initial, practical steps that will be needed to build a future economy that is based on a true sense of value. The interview was recorded in London in April 2011. [Also read the transcript.]
Fiscal councils are independent bodies set up by governments to evaluate fiscal policy. As problems with debt and deficits have taken hold, they have become increasingly popular. This column looks at what existing councils do and what dangers they face. It argues that, with the right guarantees of their independence in place, independent fiscal councils can make a significant positive contribution to fiscal policy.
With discontent at the current state of the international monetary system still lingering, is there an alternative to the decades-old discussions about gold, Bretton Woods Systems, and Special Drawing Rights? This column claims there is. It proposes a new IMF reserve currency with the creation of Special Transaction Rights.
When a crisis hits, how should policymakers move to save jobs? This column reviews the evidence from policy responses to recent crises, highlighting the importance of being prepared. It finds that countries with prudent fiscal management and sound policy infrastructure tend to suffer relatively smaller and shorter negative shocks than others.
What does inflation predictability reveal about the conduct of monetary policy? This column examines the ability of money growth and output growth to forecast inflation across a century of US data. It uncovers a robust link between the nature of the monetary regimes and the ability to predict inflation several quarters ahead.
The recent bleak news on the Doha Round of trade discussions has thrown its future into doubt once again. This column discusses ways to salvage the talks and the World Trade Organisation itself, arguing that it is time to start thinking about changing the way the organisation does business in order to reflect the changing circumstances of the 21st century.
The economic fate of developing countries since the global crisis has been in doubt. In the second of two columns on the “Seoul Consensus”, the authors argue that industrialised economies are not in a position to take the lead in initiatives to strengthen economic policy rationality on a global scale. Emerging economies should take the lead and push for the conclusion of the Doha Round.
The global financial crisis also struck many developing countries, particularly in sub-Saharan Africa. In 2010, the G20 agreed on a “Seoul Action Plan”, which addresses the problems of the world’s poorest. This column analyses its message for sub-Saharan Africa. It argues that the G20 should really start energising the Doha round, taking fiscal stabilisation seriously, ensuring that exchange rates float, and guaranteeing that quantitative easing stops.
Per Krusell of the Institute for International Economic Studies talks to Romesh Vaitilingam about his work modelling the impact of climate change on the world economy. They discuss the differential effects of global warming on different regions of the world, and the policy options for taxes on fossil fuels. The interview was recorded at the annual congress of the European Economic Association in Glasgow in August 2010. [Also read the transcript.]
Are banks too big to fail? This column suggests now is the time for Europeans to ask this question. It argues that given the potential risks to systemic stability, there is a case for policy action even in the absence of analytical certainty.
“The Office”, a popular British television programme, has been shown in more than 50 countries. Its international appeal likely stems from its universal theme: managerial incompetence. This column looks at the case of India and shows how the poor management of its companies is holding the country back.
With the global crisis affecting demand in all major markets, is export-led growth dead? This column argues to the contrary. It claims that the open, rules-based trading system centered on the WTO has proved remarkably resilient to recent shocks, with relatively little resort to protectionism to date. As a result, many developing countries are likely to persist with strategies of export-led growth, although their nature will change.
People critical of global imbalances often blame the surplus countries and their currency manipulation. This column introduces a Policy Insight that argues that the basic problem has been the inefficiency of the world’s financial sector, which led to unfruitful investment in the US rather than productive investment in emerging economies.
What can the iPhone tell us about the trade imbalance between China and the US? This column argues that current trade statistics greatly inflate the value of China’s iPhone exports to the US, since China's value added accounts for only a very small portion of the Apple product's price. Given this, the renminbi’s appreciation would have little impact on the global demand for products assembled in China.
Derivatives markets are a controversial member of the financial-sector family. This column looks at derivatives markets across the world and notes the wide discrepancy in regulatory frameworks. It argues that this calls for the “synergistic coordination” of regulators – first at the national level and then at the global level – to ensure these markets operate efficiently and without imposing excessive risk on the wider economy.
Michael Spence of Stanford University talks to Viv Davies about growth prospects in the US and developing countries. He describes the current divergence between growth and employment in the US economy. They also discuss global imbalances, fiscal coordination in Europe, the global investment rate and the threat of rising oil prices to global growth. The interview was recorded in Washington DC in March 2011 at the IMF conference, ‘Macro and Growth Policies in the Wake of the Crisis’. [Also read the transcript.]
Before the Great Recession, Denmark’s “flexicurity” model had been lauded as an example of how to achieve outstanding labour-market performance. This column takes a closer look at Denmark’s labour-market response during the recent global crisis. Although it is too early to draw ultimate conclusions, it says some challenges are already visible.
Over the last three decades the US financial sector has grown six times faster than nominal GDP. This column argues that there comes a point when the financial sector has a negative effect on growth – that is, when credit to the private sector exceeds 110% of GDP. It shows that, of the advanced countries currently suffering in the fallout of the global crisis were all above this threshold.
With job losses, debt crises, budget cuts, and the ongoing debate on financial regulation, the question of what the global crisis means for development aid has been pushed to one side. This column argues that unless we keep a closer eye, donor countries are likely to shun their aid commitments, cutting them back disproportionately with the world’s poorest forced to suffer.
When an economy's working-age population rises, so can its growth rate – a result known as the “demographic dividend”. Using state-level data from India, this column finds that its demographic dividend has already been substantial. It played a key role in India's accelerating growth since the 1980s and will add 2% to annual income growth for the next two decades.
The meeting of the European Council on 24-25 March focused on shoring up the battered Eurozone infrastructure through the European Stability Mechanism. This column argues that the mechanism is seriously flawed. It says it is unlikely to withstand the shock of a severe financial crisis and may even spread the damage to high-debt countries, while leaving the Eurozone in the grip of paralysing vetoes.
Few things divide the economics profession more than this question: How much economic activity does $1 of government spending generate? This column provides a new angle. Looking at local councils in Italy between 1990 and 1999, it examines variation in budgets due to the removal of funds by central government if mafia involvement is suspected. It finds that the fiscal multiplier starts at 1.4 and rises to 2.0.
Conventional wisdom states that financial globalisation has been advancing since the mid-1980s, particularly in developing countries. It also states that this should have fostered international portfolio diversification and consumption smoothing. But this column takes a closer look at the data and argues that neither financial globalisation nor portfolio diversification has grown significantly in emerging markets over that period.
When banks failed, the government paid up. But the bankers responsible kept their bonuses from the years of excess. This column argues for “crisis contracts”. Such contracts require that, in the event of a crisis, bank managers forfeit a portion of their past earnings to rescue the banking system.
The services sector accounts for almost three-quarters of GDP in developed countries and nearly half of GDP in the developing world. This column asks why the WTO trade negotiations have made such little progress on liberalising trade in services and outlines a package that could get the support required to change this.
Robert Solow of MIT talks to Viv Davies about discretionary fiscal policy, the fiscal multiplier and automatic stabilisers in light of the financial crisis. They also discuss growth prospects for the US, the importance of international coordination of fiscal policy in Europe, the need for a more sophisticated industrial policy and the issue of global imbalances. The interview was recorded in Washington DC in March 2011 at the IMF conference, ‘Macro and Growth Policies in the Wake of the Crisis’. [Also read the transcript]