Reinhilde Veugelers, 28 August 2014

The Crisis affected public spending. Research and innovation is one area often highlighted as needing protection. This column does not find strong evidence that European countries sacrificed research and innovation more than other government expenditure. However, there is strong heterogeneity across countries. Innovation lagging and fiscally weak countries cut R&I spending while innovation-leading forged it ahead. Research of this divide and long-term growth is still limited.

Nicholas Crafts, 27 August 2014

It is well-known that World War I was expensive for Britain.  The indirect economic costs were also huge.  This column argues that the adverse implications of the Great War for post-war unemployment and trade – together with the legacy of a greatly increased national debt – significantly reduced the level of real GDP throughout the 1920s.  A ballpark calculation suggests the loss of GDP during this period roughly doubled the total costs of the war to Britain.

Masayuki Morikawa, 26 August 2014

Headquarters play important strategic roles in modern companies, but downsizing of headquarters is often advocated as a cost-cutting measure. This column presents evidence from Japanese firm-level data that headquarters size is positively associated with firms’ overall productivity. Moreover, the benefits of ICT are greater for companies with relatively large headquarters. Downsizing headquarters to cut costs may thus be harmful for long-term company performance.

Philippe Bacchetta, Kenza Benhima, 24 August 2014

Among the various explanations behind global imbalances, the role of corporate saving has received relatively little attention. This column argues that corporate saving is quantitatively relevant, and proposes a theory that is consistent with the stylised facts and useful for understanding the current phase of global rebalancing. The theory implies that, while the economic contraction originating in developed countries has pushed interest rates towards the zero lower bound, the recent growth slowdown in emerging countries could push them out of it.

Yoshiyuki Arata, 23 August 2014

One of the main models in industrial organisation assumes that firms grow in a response to many small shocks that satisfy the central limit theorem. This column shows that if the shocks do not follow the central limit theorem, then the firm growth follows a jump process. Such large jumps could be due to radical innovation and are vital for the long-term success of a firm.

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