The fragmentation of financial systems along national borders was one of the main handicaps of the Eurozone both prior to and in the initial phase of the crisis, hindering the shock absorption capacity of individual member states. The EU has taken important steps towards the deeper integration of Eurozone financial markets, but this remains incomplete. This column argues that a fully-fledged financial union can be an efficient economic shock absorber. Compared to the US, there is significant potential in terms of private cross-border risk sharing through the financial channel, more so than through fiscal (i.e. public) means.
Marco Buti, José Leandro, Plamen Nikolov, 25 August 2016
Laurence Ball, 24 August 2016
Much of the damage from the Great Recession is attributed to the Federal Reserve’s failure to rescue Lehman Brothers when it hit troubled waters in September 2008. It has been argued that the Fed’s decision was based on legal constraints. This column questions that view, arguing that the Fed did have the legal authority to save Lehman, but it did not do so due to political considerations.
Suresh Naidu, Noam Yuchtman, 23 August 2016
Today’s labour market in the US has much in common with that of the late 19th and early 20th centuries. Then, as now, there were few government protections for workers, fears over cheap immigrant labour, rapid technological change, and increasing market concentration. This column explores the lessons that can be drawn from the earlier ‘Gilded Age’. The findings suggests that even as markets play a greater role in allocating labour, legal and political institutions will continue to shape bargaining power between firms and workers.
Priyank Gandhi, Hanno Lustig, Alberto Plazzi, 21 August 2016
Governments and regulators are commonly assumed to offer special protection to the stakeholders of large financial institutions during financial crises. This column measures the ex ante cost of implicit shareholder guarantees to financial institutions in crises, and suggests that such protection affects small and large financial institutions differently. The evidence suggests that in the event of a financial crisis, stock investors price in the implicit government guarantees extended to large financial institutions, but not to small ones.
Melissa Dell, Pablo Querubin, 16 August 2016
The nature of US military interventions has become relevant in the face of new growing threats, particularly from so-called Islamic State. While top-down strategies that rely on overwhelming firepower are sometimes favoured by politicians, longer-term strategies use a bottom-up approach, gaining citizens’ support through civic engagement. This column introduces evidence from US actions during the Vietnam War to show that bottom-up approaches are more successful in countering insurgencies than violent, top-down interventions.
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.
Silda Nikaj, Joshua J. Miller, John Tauras, 28 July 2016
Progress in adopting smoking bans across the US has been slow, despite a majority of Americans supporting a ban in public places. This column uses aggregate and establishment-level data from Texas to examine the economic effects of smoking bans on bars and restaurants. The results suggest that bars and restaurants are not adversely affected by the adoption of a ban.
Marco Becht, Andrea Polo, Stefano Rossi, 20 July 2016
Many corporate acquirers impose losses on their shareholders. Conflicted or overconfident CEOs and boards embark on acquisitions that are not in the best interest of the owners of the firm. The governance tool of shareholder voting can represent a potential solution. This column shows that in the UK, where bids for relatively large targets require mandatory shareholder approval, shareholders gain when the transaction is conditional on a vote and lose when it is not. The evidence suggests that the vote puts a constraint on the amount the CEO can offer for the target.
Alisdair McKay, Ricardo Reis, 14 July 2016
Brexit has raised the possibility of a recession on both sides of the Atlantic. Unable to use traditional remedies like monetary or fiscal policy stimulus, policymakers may consider automatic fiscal stabilisers. This column examines the impact of automatic stabilisers through social insurance on the business cycle, and how its impact can be used to mitigate recession. Unemployment insurance or food stamps would be better than progressive taxes at stimulating aggregate demand. The main economic channels policymakers must consider are those related to risk and precautionary savings.
Ghazala Azmat, Rosa Ferrer, 12 July 2016
Gender gaps in earnings exist in high-skill industries despite male and female workers having similar educational backgrounds. This column uses evidence from the legal industry to assess how performance affects career outcomes across genders. Performance gaps, defined by hours billed and new revenue raised, explain a substantial share of the gender gaps in earnings, as women’s working hours are affected by having young children while those of men are not. An important implication is that gender-based inequality in earnings and career outcomes might not decrease in the near future as more high-skilled workers are explicitly compensated based on performance.
Stephen Billings , David Deming, Stephen Ross, 11 July 2016
The propensity for youths to commit crime has long been associated with where they live. This column looks at how the school they attend can shape this relationship. Exploiting changes to school catchment areas in a US school district, it shows that concentrations of students with similar characteristics and from similar neighbourhoods at the same school increase arrest rates, if these potential peers live close to each other. Moreover, youths who live near each other and are in the same school and grade are more likely to commit crimes together. Policies to decrease segregation in schools could thus be effective in reducing crime.
Sandra Black, Jason Furman, Emma Rackstraw, Nirupama Rao, 06 July 2016
Labour force participation among men ages 25-54 in the US has been falling for more than six decades. This column examines this longstanding decline, its potential causes, and its implications for public policy and the future of the US labour market.
Janet Currie, Hannes Schwandt, 02 July 2016
Inequalities in mortality rates are a good indicator of economic wellbeing, but most of the existing literature does little to distinguish between developments in infants and adults. This column uses extensive US data to analyse mortality trends across all age groups. It finds that the health of the next generation in the poorest areas of the US has improved significantly and the race gap has declined significantly. Underlying explanations include declines in the prevalence of smoking and improved nutrition, and a major cause is social policies that target the most disadvantaged.
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.
Dalia Marin, 23 June 2016
Income inequality is less severe in Germany than in the US. Part of this is due to CEO pay in the US growing faster than in Germany. This column offers some novel explanations for these observations. From the mid-1990s, Germany began offshoring managerial tasks to Eastern Europe, reducing demand for German managers. In addition Germany offshored skill-intensive jobs to Eastern Europe, reducing the skill premium.
David Autor, David Figlio, Krzysztof Karbownik, Jeffrey Roth, Melanie Wasserman, 22 June 2016
Around the world, girls tend to surpass boys in educational achievement. Early childhood inputs have been shown to be particularly important for the formation of children’s skills and behavioural patterns. Using US data, this column shows that in higher-quality schools the gender gap in terms of both skills and behaviour shrinks, with essentially no boy-girl disparity in outcomes at the very best schools. Better schools are thus an effective policy lever for reducing gender disparities in elementary and middle school outcomes.
Brandon Dupont, Joshua Rosenbloom, 19 June 2016
The long-run persistence of social and economic status has received substantial attention from economists of late. But the impact of economic and political shocks on this persistence has yet to be thoroughly explored. This column examines the disruptions from the US Civil War on the Southern wealth distribution. Results suggest that an entrenched southern planter elite retained their economic status after the war. However, the turmoil of the decade opened mobility opportunities for Southerners of more modest means, especially compared with the North.
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.
Ruben Durante, Ekaterina Zhuravskaya, 15 June 2016
Governments involved in conflict are often concerned with how their actions are perceived by the international community. This column uses evidence on the Israel-Palestine conflict and US news reporting between 2000 and 2011 to show how media considerations can impact military strategy. Israeli attacks are more likely to be carried out one day before the US news is expected to be dominated by important political or sport events. There is no evidence of a similar pattern to Palestinian attacks. The findings suggest that strategic behaviour could undermine the effectiveness of the mass media as a watchdog, and thus reduce citizens’ ability to keep public officials accountable.
Efraim Benmelech, Ralf R Meisenzahl, Rodney Ramcharan, 11 June 2016
The US government’s ‘bailout of bankers’ in 2008-09 remains a highly controversial moment in economic policy. Many critics suggest that intervention to relieve household debt may have been more effective in stimulating economic recovery. This column suggests that without federal intervention to stabilise financial markets and recapitalise some non-bank lenders, the magnitude of the economic collapse might have been much worse. While household debt was incredibly important in reducing demand, the financial sector dislocations and the lack of credit also played a critical role.