The efficient use of inputs is essential to growth. Chang-Tai Hsieh explains why firms are more productive than others by comparing labour laws in India and the US. This video was recorded at the International Growth Centre.
, 16 November 2016
Emmanuele Bobbio, 05 November 2016
Tax evasion imposes substantial costs on economies around the world. Beyond equity concerns, it erodes the tax base, with indirect effects on public investment and service provision. This column uses a model calibrated on the Italian economy to assess the direct and indirect effects of tax evasion on economic growth. Enforcing taxes would force small businesses to innovate, putting pressure on larger businesses and clearing the market of poorly performing small firms. Tackling tax evasion is thus important not only for equity reasons, but also for efficiency.
Katherine Ho, Robin Lee, 16 September 2016
The US health insurance market is becoming less competitive due to mergers and withdrawal of services from certain states. This column examines how this affects consumers through insurance premiums and hospital reimbursement rates. Using employer-sponsored insurance data from California, it finds that the relationship between insurer competition and health care spending depends on institutional and market structure. If premiums can be constrained through effective regulation or negotiation, then reduced competition might lead to lower costs. Absent such constraints, consumers will likely be harmed.
Philippe Aghion, Ufuk Akcigit, Julia Cagé, William Kerr, 29 August 2016
The relationship between taxation and economic growth is complex, and relies in large part on the efficiency with which taxes are used. This column examines the impact of corruption on this relationship. The boost to welfare from reducing corruption is substantially larger than the marginal gains from optimising the tax rate for an existing level of government efficiency.
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.
Ulrik Beck, Benedikte Bjerge, Marcel Fafchamps, 06 February 2016
There are good reasons to think that social networks can reduce barriers to the exchange of production factors. Using data from 51 villages in Gambia, this column examines whether transfers of land between rural households improve efficiency, and whether social networks help or hinder such transfers. The results suggest that social ties may indeed be able to offset the negative impact of a limited or non-existing institutional framework.
Andrew Berg, Andrea Presbitero, Luis-Felipe Zanna, 05 January 2016
Recent policy recommendations suggest that the output growth ‘bang’ for each additional ‘buck’ of public investment depends on the efficiency of public investment spending. This column argues that high-efficiency and low-efficiency countries may have similar growth impacts from additional public investment spending. This is because efficiency and scarcity of public capital are likely to be inversely related across countries. Efficiency and the rate of return need to be considered together in assessing the impact of increases in investment.
Lucas Bretschger, 11 October 2015
There is reasonable hope that the upcoming United Nations Conference on Climate Change in Paris (COP21) will reach a consistent global climate agreement. What makes the negotiations particularly difficult is not economic efficiency, but the equity implications of climate policy. This column presents a framework for incorporating equity concerns into policy design. Building from four equity principles, it reduces the complex problem of international burden sharing to a simple rule tied to a single metric.
Jakob de Haan, Dirk Schoenmaker, 06 July 2015
The financial crisis brought with it many challenges, both to prevailing disciplinary tenets, and for research and policy more generally. This column outlines the lessons that can be drawn from the financial crisis – issues like financial market failures, macro-prudential policy, structural changes of the financial system, and the European banking union. It argues for the inclusion of these topics in curricula for the next generation of finance students.
Iftekhar Hasan, Tuomas Takalo, 24 January 2014
Efficient retail payments are associated not only with lower direct costs but also with indirect benefits, and ultimately – with enhanced economic growth. This column presents research on different retail payment habits in the Eurozone. A correlation exists between the forms of payment in a country and its recent economic fortune. There are a number of methods to promote more efficient payments. The biggest challenge to increase the efficiency of retail payments in Europe is the heavy regulation and barriers to entry of new payment methods.
Charles Manski, 18 August 2013
Economists usually think of taxation as inefficient. This column argues that the anti-tax rhetoric evident in much lay discussion of public policy draws considerable support from the prevalent negative language of professional economic discourse. Optimal income taxation doesn’t have to employ the pejorative concepts of inefficiency, deadweight loss and distortion; and this column argues that it is high time for economists to discard them and make analysis of taxation and public spending distortion-free.
Elke Jahn, Regina Riphahn, Claus Schnabel, 10 October 2012
Economic policymakers across Europe have sought to increase labour market flexibility by promoting the use of temporary employment. This column points to a possible trade-off between efficiency and equity when deregulating labour markets, suggesting that flexible forms of employment can be both a boon and a bane for labour markets and for society as a whole.
Xavier Freixas, 07 September 2012
Xavier Freixas talks to Viv Davies about the recent changes in the European banking resolution regime. They discuss the tension between ex ante incentives and ex post efficiency in banking. Freixas argues that the best way to analyse a bank resolution situation is to think of it as a bargaining game between the bank's shareholders and the treasury. The interview was recorded by phone on 6 September 2012.
Thomas Philippon, 02 December 2011
Has the financial industry become less efficient? This lead commentary in the Vox debate on the financial sector argues that, despite all of its fast computers and credit derivatives, the current financial system is no better at transferring funds from savers to borrowers than the financial system of 1910.
Anupam Jena, Jonathan Skinner, Amitabh Chandra, 19 June 2011
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.
Antonio Cabrales, Haydée Lugo, 04 April 2011
Are lotteries more efficient than voluntary contributions in funding public goods? The authors of CEPR DP8319 argue that they can be, as long as the lottery proceeds go to worthy causes that induce 'warm glow' altruistic preferences in lottery players.