Innovative activity is unevenly distributed geographically, with regional characteristics such as global market accessibility or an innovation-promoting policy environment affectingthe spatial distribution. Using global data on regional characteristics, regional patenting output, and innovation-promoting policy environments, this column examines the origins of innovation clusters, and particularly the role of R&D tax policy instruments, in attracting innovative firms. It estimates that innovation-promoting R&D tax policy instruments contribute to about one-tenth of the long-term economic growth around the globe.
Brexit in 2019 and the banking crisis in 2007 to 2009 are usually seen as unrelated events. This column argues that they are in fact closely connected. The austerity policies embarked on in response to the fiscal damage resulting from the banking crisis triggered the protest votes of left-behind voters, which at the margin allowed Leave to win the referendum vote. The implication is that the economic costs of the banking crisis are much larger than is usually supposed.
The Stability and Growth Pact has been criticised by some for imposing fiscal tightening during recessions, and by others for a lack of compliance. Using a database of all country-specific Excessive Deficit Procedure recommendations since the introduction of the euro, this column shows that the corrective arm of the pact, which is procyclical by design, is an important driver of euro area fiscal policy. The preventive arm, which is designed to avoid the need for such procyclical policies, is much less effective and reform of the pact should focus on addressing this.
Euro area corporate sector investment collapsed post-crisis, especially in periphery countries. The column uses firm and bank data to investigate whether corporate debt accumulated during the boom years was responsible. Firms with higher leverage or firms that borrowed more decreased investment more, especially when linked to weak banks. These channels explain about 60% of the decline in aggregate corporate investment during the crisis.
A vigorous debate exists about the economic benefits of building a border wall between the US and Mexico. Yet, empirical evidence to guide the debate has lagged behind. This column studies the economic impact of the Secure Fence Act of 2006, which built 550 new miles of fence on the US–Mexico border. At a construction cost of $7 per person, the fence led to a small reduction in migration but had negligible effects on the economy, with high-skilled US workers losing $4.60 per year in income, and low-skilled US workers gaining just $0.36 per year.
Other Recent Columns:
- The ECB’s performance during the crisis
- Social security reforms and elderly employment in Japan
- Political donations and public procurement
- The public cost of excess private debt
- Breaking the Brexit impasse
- Populism and civil society
- The effect of machine learning on credit markets
- Banking integration in the EMU: Let’s get real!
- Inequality in the joint distribution of consumption and time use
- Retail investors are not noise traders
- The powers and pitfalls of quantitative easing
- Leverage, financial shocks, and firm growth in the US
- The economics of cryptocurrency pump and dump schemes
- The role of high deductibles in healthcare spending growth
- The short-run effects of GDPR on technology venture investment
- The return on information technology
- Assortative matching in cities
- Repayment flexibility and risk taking
- Joining a group makes us nastier to outsiders
- The gains from economic integration in the EU
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15 - 15 March 2019 / London, Royal Society / UK Network of Environmental Economists (UKNEE)
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16 - 17 May 2019 / University of Minho, Guimarães, Portugal / School of Engineering, University of Minho
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21 - 23 May 2019 / Berlin, Germany / Innovation Growth Lab (IGL)
