June 2011

Griffith, Miller, 30 June 2011, 50624 reads

Governments around the world are grappling with the question of how to tax the income from intellectual property. This column asks whether offering tax breaks – called Patent Boxes after the box companies must tick on their tax forms – will lead to a race to the bottom across Europe and who, if anyone, benefits.

Levy Yeyati, Martinez Peria, Schmukler, 29 June 2011, 29813 reads

As strikes and protests continue throughout Greece against the latest economic rescue plan, this column asks whether government inaction could lead to a run on Greek banks by ordinary depositors that would derail any existing restructuring plans and force Greece to default.

Bach, Corneo, Steiner, 29 June 2011, 27072 reads

With governments under pressure to lower their debt, they may look to increase revenue is by raising taxes for top earners. This column considers the viability of such a move in the case of Germany. It finds that the current top rate of tax of 45% is well below optimal.

Dadush, Shaw, 28 June 2011, 16383 reads

American policy discourse is notoriously preoccupied with the country's loss of competitiveness. This column argues that these fears are misplaced. Instead, faulty fiscal policies are to blame for the perception that the US has lost its edge.

Buiter, Rahbari, 28 June 2011, 29093 reads

The strong-dollar rhetoric of the US government contrasts with a weak-dollar reality. This column argues that talking a strong-dollar talk while walking a weak-dollar walk has damaged the reputational capital of the US monetary and fiscal authorities. That has reduced their ability to use statements of intent or announcements of future policy actions to influence markets.

Danielsson, 27 June 2011, 10843 reads

A debate is raging on capital adequacy requirements for banks. The UK wants to be allowed to “top up” the agreed levels, i.e. to impose stricter capital standards than the EU minimum. This column argues the UK is right, and that the German and French opposition might be motivated by weaknesses in their banking systems.

Ben-Shalom, Moffitt, Scholz, 27 June 2011, 26897 reads

What is happening to the US welfare state? According to this column, and contrary to the views of many, the US welfare state has not been going through a significant retrenchment over the last two decades but has in fact been growing. However, it adds that there has been a shift in who benefits over that period, with several types of families left behind.

Eichengreen, 26 June 2011, 22437 reads

Global imbalances remain a key issue for G20 leaders. This column evaluates the progress made by G20 leaders in the run up to their Cannes summit this November, concluding that the G20 process is unlikely to protect us from the risks posed by disorderly unwinding of imbalances.

Isakson, 25 June 2011, 11472 reads

In a world economy dominated by fragmented supply chains and trade in tasks, the direct contribution of exports to any national economy is overstated by gross-value measures. Since most measures do not properly account for imported inputs and severely underestimate the share of services in total exports, our view of world trade is distorted. This column says our trade policies risk being distorted too.

Bhatia, 25 June 2011, 10281 reads

If the doomed Doha Round threatens the existence of the WTO itself, can the two be separated? Several economists have argued that they should. This column looks at whether this is actually possible.

Lenza, Reichlin, 24 June 2011, 17459 reads

Should central banks use the headline or the core measure measure of inflation to track medium-term inflationary pressures? Lorenzo Bini Smaghi, board member of the ECB, recently argued in favour of using headline inflation. This provoked strong opposition from Paul Krugman, amongst others. This column assesses the two sides of the debate.

Niepelt, Gonzalez-Eiras, 24 June 2011, 20433 reads

Should developed countries raise their retirement ages to combat the economic effects of their ageing populations? This column presents a model suggesting that, viewed in isolation, putting off retirement will actually reduce growth. It is only when viewed along with other policies that the benefits for growth arise.

Besley, 24 June 2011, 10086 reads

Tim Besley of the London School of Economics talks to Romesh Vaitilingam about the importance of a country’s fiscal capacity and legal capacity for its development prospects – and the link to policy debates about ‘fragile states’. The interview was recorded in London in June 2011 after a ‘blue-sky’ conference on development policy-making organised by CAGE, the Centre for Competitive Advantage in the World Economy at the University of Warwick. [Also read the transcript.]

Kilian, 23 June 2011, 27870 reads

Reduced Libyan output, broader political unrest in the Middle East, and a slow global recovery have raised the uncertainty surrounding oil prices. This column discusses the challenges and value of forecasting future oil prices in real time, as opposed to fitting models to revised oil prices released months after economic decisions are made.

Frankel, Vegh, Vuletin, 23 June 2011, 29011 reads

With the ongoing financial turmoil in Europe, many emerging market countries are now deemed less risky than so-called “advanced” countries. This column examines why this is the case and finds that the cyclicality of a country’s fiscal policy – a sign of its riskiness – is inversely correlated with the quality of the country’s institutions.

Véron, 23 June 2011, 9002 reads

As the Eurozone crisis continues, politicians are blaming the markets and the markets are blaming politicians. This column argues that the uneasy relationship between the two is nothing new and that the markets have a point. It says the crisis is as much institutional as it is financial or fiscal.

Horváth, Matějů, 22 June 2011, 19435 reads

How are inflation targets set and why do they differ from country to country? This column suggests that macroeconomic characteristics such as inflation, inflation volatility, GDP growth, and foreign inflation matter for the process of inflation target setting. It also argues that central bank credibility is important but that the role of central bank independence and government political orientation is limited.

Gros, 22 June 2011, 13846 reads

Protests continue in Greece as its leaders debate the latest suggestions for dealing with its crippling debt. One proposal is for Greece to privatise several of its assets. This column argues that privatisation is a mirage. If solvency is the problem, privatisation will only make matters worse, especially if it has to be done at distressed prices.

Krugman, 21 June 2011, 92299 reads

Keynes’ General Theory is 75 years old. In this column, Paul Krugman argues that many of its insights and lessons are still relevant today, but many have been forgotten. A broad swath of macroeconomists and policymakers are applying old fallacies to today’s crisis. As the nostrums being applied by the “pain caucus” are visibly failing, Keynesian ideas may yet make a comeback.

Mees, 21 June 2011, 13016 reads

With the US economy still faltering, some are suggesting it may be time for a third round of quantitative easing. This column explores the transmission mechanism of monetary policy and how it has broken down in recent years. It argues that, in this climate, the Fed would be wise to avoid another bond-buying programme.

Allen, Beck, Carletti, Lane, Schoenmaker, Wagner, 20 June 2011, 26798 reads

The global crisis has provided compelling evidence of the need to understand the role of banks in international finance. This column introduces a new CEPR report analysing key aspects of cross-border banking taking a European focus. The report argues that policy reforms in micro- and macro-prudential regulation and macroeconomic policies are urgently needed for Europe to improve its efficiency and reduce its risk.

Jena, Skinner, Chandra, 19 June 2011, 14774 reads

How much healthcare to provide and how to pay for it are two questions at the heart of the public sector. This column argues that by using comparative effectiveness research, policymakers can better understand those healthcare initiatives that work and those that do not. In doing so, the research can give rise to the often-cited but rarely-seen efficiency gains.

de Mello, Padoan, Fache Rousová, 18 June 2011, 16179 reads

For developing and emerging economies, current-account reversals are rarely welcome news. Often they lead to financial ruin and political turmoil. This column explores what current-account reversals mean for the long run. It argues that they can cause structural breaks in trend GDP growth, rather than short-lived deviations.

Acharya, 17 June 2011, 11198 reads

Viral Acharya of New York University talks to Viv Davies about capital requirements and measuring systemic risk. Acharya describes the development of the NYU Stern systemic risk rankings of US financial institutions and what he considers to be the dismal failure of the Basel risk-weight approach to addressing systemic risk. He cautions against the blanket call for more capital and instead recommends for more capital against systemic risk contributions of financial firms. He also discusses the shadow banking sector and how banking risk and sovereign risk are becoming dangerously intertwined. The interview was recorded in London on 2 June 2011. [Also read the transcript]

Cabrales, Hauk, 17 June 2011, 19005 reads

The natural-resource curse is now a staple in the development economist’s diet. Natural resources have tended to lead to lower economic growth, except in democratic countries or those with robust institutions. This column presents a political economy model to explain this phenomenon, focusing on the threat of revolutions.

Danielsson, Macrae, 17 June 2011, 13322 reads

Financial risk models have been widely criticised for both theoretical and practical failures, especially during the recent financial crisis. In the second of two columns, the authors outline why the shortcomings of risk models matter before making suggestions for how the financial industry and supervisors should use models in practice.

Danielsson, Macrae, 16 June 2011, 21151 reads

Risk models are at the heart of the financial sector’s self-monitoring as well as supervision by regulators. This column, the first of two, addresses the question of how risk models are misused in practice by practitioners and supervisors alike. This misuse causes risk management to fail when it is most needed.

Chauffour, 15 June 2011, 13707 reads

The Arab Spring is again raising fundamental questions about the place of freedom and entitlement in economic development. Reviewing the performance of more than 100 countries over the past 30 years, this column finds evidence that economic freedom and civil and political liberties are the root causes of why certain countries achieve and sustain better economic outcomes than others.

Gancia, Bonfiglioli, 14 June 2011, 17126 reads

Most economists agree that the global crisis has exposed the need for economies to reform, particularly those along Europe’s periphery. The problem is making these reforms politically viable. This column notes that many governments fear electoral defeat if they enforce unpopular policies. But it also argues the risk of punishment in the polls is the lowest in times of crisis.

Sinn, 14 June 2011, 20355 reads

Since the crisis, substantial mismatches in intra-Eurozone payments have arisen, and these have given rise to so-called Target2 imbalances. In the original Vox column on this, Hans-Werner Sinn argued that they were a hidden bailout – an assertion that has been criticised. In this column, Sinn responds to the critics.

Andreoni, Gee, 14 June 2011, 21852 reads

How should a small organisation – a firm, a university, a sports team – encourage good behaviour? While punishment can often make things worse, this column proposes and tests a method the authors call the “hired gun”. By punishing only the worst offender, everyone is given an incentive to be the second-worst offender. If everyone follows that strategy, good behaviour soon follows.

Acemoglu, Jackson, 13 June 2011, 23417 reads

Economists are increasingly recognising the importance of social norms in determining economic outcomes. While some argue that these norms are set in stone, this column introduces a new framework exploring how these norms emerge, how they can change, and how leadership by individuals can play a pivotal role.

Meisenzahl, Mokyr, 13 June 2011, 19330 reads

The industrial revolution is, for many, the start of modern economic growth. But what started the industrial revolution? The consensus view is that scarce labour stimulated labour-saving inventions and induced innovation. This column begs to differ. It argues that it was the technical competence of the British mechanical elite that allowed great ideas to turn into economic realities.

Unteroberdoerster, Vichyanond, Mohommad, 12 June 2011, 17021 reads

Persistent global imbalances are raising concerns about the sustainability of the global recovery and economic growth in general. This column argues that a proper appreciation of the influence of exchange rates and demand on global imbalances requires taking into account an important feature of Asia’s trade – cross-border supply chains or “vertical integration”.

Wyplosz, 11 June 2011, 13469 reads

The outgoing president of the European Central Bank has floated the idea of a finance minister for Europe. This column argues that such a statement from someone who has been in charge through the worst financial crisis in living memory is significant. It asks what the academic literature has to say on the matter.

Etro, 11 June 2011, 10118 reads

The Internet has opened up a whole new realm in advertising, with Google at the helm. Within this, search advertising has recently come under investigation from competition authorities. This column seeks to aid the understanding of this special market, its definition, its structure, and the role of its leader.

Romer, 10 June 2011, 11703 reads

Paul Romer of NYU’s Stern School of Business talks to Romesh Vaitilingam about his vision of dysfunctional poor countries kick-starting their own development by creating new cities with new rules – what he calls ‘charter cities’. The interview was recorded in London in June 2011 at a ‘blue-sky’ conference on development policy-making organised by CAGE, the Centre for Competitive Advantage in the Global Economy at the University of Warwick. [Also read the transcript.]

Rausch, Metcalf , Reilly, 10 June 2011, 12592 reads

Many policy proposals to limit greenhouse-gas emissions revolve around efforts to tax carbon emissions. But many studies point out that such energy taxes are regressive. This column models the distributional impacts of carbon pricing on over 15,000 US households, challenging the view that the policy by itself is regressive.

Konrad, Zschäpitz, 10 June 2011, 21965 reads

A year after the rescue of Greece, the Eurozone is still on life support. This column argues that Europe’s policymakers have got their strategy desperately wrong.

Görg, Krieger-Boden, 09 June 2011, 16505 reads

The global financial crisis has raised the threat of protectionism. This column argues that the worst offenders will suffer a drop in foreign direct investment inflows.

Whelan, 09 June 2011, 29263 reads

In a recent Vox column, Hans Werner Sinn of the prestigious Institute for Economic Research claims that the German Bundesbank is effectively propping up banks across the Eurozone’s periphery. He adds that doing this risks a major crisis. Here, Karl Whelan of University College Dublin argues that Professor Sinn’s analysis is incorrect and that his policy prescriptions are extremely unhelpful and even dangerous.

Coibion, 08 June 2011, 12786 reads

What effect do interest-rate changes have on economic growth? Most studies suggest that the answer is “not much”. This column points out that a lot of these studies use US data from the early 1980s when monetary policy was under the “Volcker experiment”. When this episode is excluded, this column finds that the implied contribution of policy shocks to historical US business cycle fluctuations is much larger than found in much of the literature.

Johnson, Noguera, 07 June 2011, 36844 reads

Roughly two-thirds of international trade is in intermediate goods. As a result, measures of trade flows that tally the gross value of goods at each border crossing lead to a distorted view of world trade. Using a value-added measure, this column finds that the controversial US-China imbalance is in fact around 40% smaller than many people think.

Dadush, Ali, Odell, 07 June 2011, 32551 reads

The limited resort to protectionism during the financial crisis is often attributed to the WTO or to sensible macroeconomic policy. This column argues that there is more to the story. The combination of national laws, regional agreements, and powerful interest groups has worked to stop protectionism in its tracks.

Headey, 06 June 2011, 14111 reads

Have rising food prices hurt the world’s poorest? The broad consensus, which is based on simulation analyses, is that they have. This column begs to differ. Self-reported food insecurity data from the Gallup World Poll contradict the consensus, and this column argues that the FAO and the World Bank need to do a much better job of measuring the impacts of higher food prices on the poor.

Crafts, 05 June 2011, 22474 reads

Britain’s relative economic decline throughout the 20th century – the so-called “British disease” – was a national embarrassment that only went away in the 1980s. This column presents new research showing that competition provided the cure. Only when Britain returned to a regime of competition and openness similar to that which had prevailed before World War I did productivity growth resume.

Alho, 05 June 2011, 21434 reads

Even in times of crisis, there is room for looking at long-term prospects. This column tries to evaluate the likely effects of Sweden joining the Eurozone.

Persaud, 04 June 2011, 11083 reads

Competition in the banking sector is seen by many as a way to reduce the chances of instability and a repeat crisis. This column highlights one area – the market for securities exchange, clearing, and settlement – where such competition is at risk of being undermined.

Fortunato, Panizza, 04 June 2011, 17772 reads

Is democracy the most efficient method to guarantee good governance? This column argues that democratic institutions work well only when the electorate is sufficiently educated.

Goldin, 03 June 2011, 14997 reads

Ian Goldin, director of the Oxford Martin School at the University of Oxford, talks to Romesh Vaitilingam about his new book, ‘Exceptional People’, co-authored with Geoffrey Cameron and Meera Balarajan. They discuss how migrants have fuelled human progress over centuries, the benefits for sending and receiving countries, and why pressure from both demand and supply could lead to a doubling of cross-border migration flows over the next few years. The interview was recorded in Oxford in May 2011. [Also read the transcript.]

Pischke, 03 June 2011, 19408 reads

Economists have been venturing into the realm of human emotions for some years now. This column provides a unique approach to investigating the link between income and happiness. It finds that while money really can buy happiness, there are many other factors that can get in the way.

Peeters, 02 June 2011, 19477 reads

After the drama of Egypt’s revolution comes the economic reality – one of the catalysts for regime change was the country’s high unemployment. This column shows that the growing number of young people entering the job market will only add to the pressure. It argues that job creation in the private sector should be the number one priority for stimulating Egypt’s economic growth.

Editors, 02 June 2011, 12396 reads

Starting with The First Global Financial Crisis of the 21st Century in June 2008, Vox has published 12 titles with combined downloads of over 125,000. These books are now available in print format. This column outlines their main contributions.

Gylfason, 01 June 2011, 16600 reads

The global crisis has brought many countries to their knees, none more so than the small island of Iceland whose losses amount to seven times its GDP. Yet while Iceland’s recovery has in many ways been remarkable, this column argues that the country’s capital controls stand in the way of further progress.