In international trade theory, countries are often treated as homogenous regions, with no account taken of their internal geography. This column uses evidence from China’s Treaty Port Era to show how domestic trade frictions shape welfare gains from trade. Gains from new technologies that lower trade costs are shared, but the gains are not evenly distributed. Lower trade costs can also mean lower welfare for productivity leaders, who may be replaced by low-cost suppliers from less productive regions as the costs of transport decline.
Wolfgang Keller, Javier Andres Santiago, Carol Shiue, 23 August 2016
Sari Pekkala Kerr, William Kerr, 10 August 2016
Increased hostility to immigration has been a key driver of the rise of right-wing populist movements across the world. At the same time, local governments – notably in the US – have designed work programmes to attract immigrant entrepreneurs to their areas. This column explores the types of businesses founded by immigrants and their growth patterns, and examines how these outcomes relate to immigrants’ age at arrival to the US. Immigrant entrepreneurs experience greater volatility – they fail more frequently, but those that persist experience greater employment growth than their native counterparts.
Decio Coviello, Andrea Guglielmo, Giancarlo Spagnolo, 07 August 2016
Open competition is regarded as a crucial ‘preventative tool’ that limits government discretion and abuse of power when awarding procurement contracts. However, various studies have identified numerous drawbacks to using open auctions when contracting is imperfect. This column discusses the effects of increased buyer discretion on public procurement in Italy. Increased discretion raises the number of repeated wins by contractors, suggesting long-term relationships between buyers and sellers. Furthermore, productive buyer-seller relationships appear to outnumber corrupt ones.
Stefano Scarpetta, Mark Keese, Paul Swaim, 25 July 2016
The labour market recovery in OECD countries has been steady but slow since the Great Recession. More worrying is the fate of wage growth over the same period. This column assesses the implications of stagnation in the labour market for growth, wages, and inequality. It finds that structural weaknesses in labour market performance have become more visible as markets recover from the Great Recession. The policy response must include macroeconomic policies aimed at strengthening investment, and structural policies to support growth while nudging workers towards higher-skilled jobs.
Toshihiro Okubo, Tetsuji Okazaki, Eiichi Tomiura, 19 July 2016
In the context of increased global trade and accompanying competition, firms are increasingly engaged in industrial clusters. This column uses firm-level transaction data to analyse the impact of firms’ relationships with financial institutions on their networking within clusters. Firms participating in government-supported cluster programmes increase their transaction networks significantly faster than those not in clusters. The column also finds that firms with expanding networks are mainly financed by regional banks, not national or global ones.
Tom Chang, Tal Gross, Joshua Graff Zivin, Matthew Neidell, 15 July 2016
The health effects of pollution in terms of hospitalisations, mortality and morbidity are well researched, but not so much is known about the less severe effects of pollution on workers’ health. This column uses evidence from China to analyse the impact of pollution on productivity, finding that high levels of pollution reduce the productivity even of indoor workers. Reducing pollution is not just welfare-improving for society, it is also of financial benefit to the economy.
Masayuki Morikawa, 10 July 2016
The service sector accounts for much of the output of many advanced economies, and maximising the sector’s output while also minimising regional disparities is an important policy challenge. This column analyses productivity in service sectors in Japan, focusing on economies of urban density. The higher the employment density of the cities in which service firms are located, the higher their productivity, but firms relocating to such cities negatively impacts regional disparity. Further, considerable differences in productivity improvements among sectors indicate there certain industries should be promoted in large cities, and others in smaller cities with lower employment density.
Nobuya Fukugawa, Akira Goto, 08 July 2016
Local public technology centres (Kosetsushi) in Japan have demonstrated notable success in fostering the development of regional industries. This column reports the results of the first branch-level survey of Kosetsushi, focusing on three areas: manufacturing, foods, and design. Kosetsushi are found to help clients through diverse, tailored technical consultations and, increasingly, by acting as a network hub for the transfer of symbolic and analytical knowledge. These findings have particular relevance for regional governments attempting to foster innovation through similar institutions.
Daron Acemoglu, Pascual Restrepo, 05 July 2016
Many economists throughout history have been proven wrong in predicting that technological progress will cause irreversible damage to the labour market. This column shows that so far, the labour market has always adapted to the replacement of jobs with capital, using evidence of new types of skilled jobs between 1970 and 2007. As long as the rate of automation of jobs by machines and the creation of new complex tasks for workers are balanced, there will be no major labour market decline. The nature of new technology, and its impact on future innovation potential, has important implications for labour stability.
Lukas Menkhoff, Lucio Sarno , Maik Schmeling, Andreas Schrimpf, 30 June 2016
Determining ‘currency value’ is a century-old topic on which there is little consensus among economists. This column proposes a novel way of adjusting real exchange rates for key country-specific fundamentals to obtain better gauges of currency valuation levels. Adjusting for productivity, export quality, foreign assets, and output gaps is shown to isolate information related to currency risk premia across countries. This can serve as a more precise input into investment and policy decisions.
The global financial crisis has had a profound impact on output and productivity in advanced and emerging economies. In response, policymakers around the world have acted boldly with monetary policy, macro-prudential policy and regulation.
Is productivity being held back by financial factors - such as the lack of long term finance for long term investment - or is productivity being held back by real economy factors, such as globalisation and demographics? The recent crisis has also spurred a reassessment of the relationship between the level (and type) of finance and growth. Could weak productivity growth owe in part to wasteful investment spending or an undersupply of financial services? How does the mix of early and late stage financing drive investment and productivity? This conference aims to bring together perspectives on these big questions, as they will provide important guidance for future policy actions.
Sara Calligaris, Massimo Del Gatto, Fadi Hassan, Gianmarco Ottaviano, Fabiano Schivardi, 28 June 2016
Many advanced economies have experienced a productivity slowdown in recent years. Italy, however, has been experiencing such a slowdown since the mid-1990s. This column provides a detailed analysis of Italy’s patterns of misallocation over this period. Firms in the Northern regions, as well as large firms, have experienced the sharpest increase in resource misallocation. To tackle the resulting productivity slowdown, reforms need to address unemployment benefits and higher education, as well as encouraging investment in intangible assets.
Daron Acemoglu, Jacob Moscona, James Robinson, 27 June 2016
The ‘great inventions’ view of productivity growth ascribes the excellent growth from 1920 to 1970 in the US to a handful of advances, and suggests that today poor productivity performance is driven by a lack of breakthrough discoveries. This column argues instead that the development of an effective governmental infrastructure in the 19th century accounted for a major part of US technological progress and prominence in this period. Infrastructure design thus appears to have the power to reinvigorate technological progress.
Peter Lindert, Jeffrey Williamson, 16 June 2016
Americans have long debated when the country became the world’s economic leader, when it became so unequal, and how inequality and growth might be linked. Yet those debates have lacked the quantitative evidence needed to choose between competing views. This column introduces evidence on American incomes per capita and inequality for two centuries before World War I. American history suggests that inequality is not driven by some fundamental law of capitalist development, but rather by episodic shifts in five basic forces: demography, education policy, trade competition, financial regulation policy, and labour-saving technological change.
Alessandro Maffioli, Carlo Pietrobelli, Rodolfo Stucchi, 14 June 2016
Cluster development programmes (CDPs) aim to support industrial clusters of agglomerated firms to achieve higher productivity and sustainable development. Such programmes have been prominent in Latin America over the past decade, but there have been few impact evaluations. This column presents the findings from an evaluation of Latin American CDPs. Various case studies show positive medium-term effects of the programmes on employment, exports, and wages. CDPs are also found to have positive spillover effects on untreated firms, and to improve the network connectivity and technology-transfer ties between firms.
Nicola Fuchs-Schündeln, Paolo Masella, 05 June 2016
There are strong links between the nature of education in a country and its political institutions, and an individual’s education can impact their lifetime labour market choices. This column examines how being educated under a socialist regime impacts individuals in a free labour market. Using data on students from East and West Germany in the 1970s, it finds that a socialist regime education led to a larger spread in labour market outcomes – more of these individuals were not employed, but conditional on being employed, had higher wages and a higher probability of achieving a professional status in the East.
Alexander Bick, Nicola Fuchs-Schündeln, David Lagakos, 04 June 2016
The development accounting literature tries to account for cross-country output per worker differences by taking stock of inputs per worker. The data employed are often measured without great precision, however, making comparisons difficult. This column presents a new, internationally comparable dataset of average hours worked per adult across the world income distribution. Adults in poor countries are found to work a lot more and with lower productivity than those in rich countries. The findings suggest that those from poorer countries are not only ‘consumption poor’, but also ‘leisure poor’.
Stefano DellaVigna, Devin Pope, 29 May 2016
Behavioural economics has made many gains in recent years, but much uncertainty persists about the effectiveness of different behavioural interventions. This column uses data from a large-scale experiment to find the relative effectiveness of multiple treatments within one setting, and to gauge the accuracy of academic experts’ forecasts of responses. It finds monetary incentives are strong motivators, non-monetary psychological inducements are moderately effective, and results using behavioural factors are generally consistent with models of social and time preferences. Further, the interviewed experts correctly anticipate several results, including the effectiveness of psychological inducements, but fail to predict other important features.
Gilles Duranton, Ejaz Ghani, Arti Grover Goswami, William Kerr, 27 May 2016
Optimising the allocation of factors of production improves productivity. In India, where evidence suggests land is severely misallocated to inefficient manufacturing firms, access to financing is disproportionately tied to access to land. This column examines the link between the misallocation of land and access to capital through financial markets. A very strong positive correlation emerges between the two, consistent with the fact that land and buildings can provide strong collateral support for accessing finance from the credit market.
Manuel García Santana, Josep Pijoan-Mas, Enrique Moral-Benito, Roberto Ramos, 23 May 2016
Spain enjoyed substantial growth in the decade prior to the Global Crisis, despite declining aggregate productivity. Recent research blames the poor productivity on different forms of a ‘financial resource curse’. This column argues that resource misallocation was particularly severe due to corruption and crony capitalism. This suggests future growth will require serious political reforms.