December 2007

Editors, 24 December 2007

The Editors wish to thank all our readers and wish them a healthful and restful holiday break.
Vox will start posting again on 2 January 2008.

Tabellini, 22 December 2007

Morality – defined as individual values and convictions about the scope of application of norms of good conduct – is an important factor in individual behaviour and thus economic outcomes. Such values evolve slowly so they are an important channel through which distant political history can influence current economic performance. Here is new evidence supporting this view.

Gros, 21 December 2007

Coal’s supply elasticity is much higher than that of oil, so rising demand encourages substitution to dirty coal from cleaner oil – and switching is easy ex ante but hard ex post. In the next 10 years, China will install more power-generation capacity than Europe’s current stock. If it is all coal-burning, emissions will be difficult to reduce for decades. High oil prices are not part of the solution; they are part of the problem.

Bauwens, Mion, Thisse, 20 December 2007

A new data set of highly cited researchers highlights Europe’s poor research performance. Empirical work suggests that the poor performance is not only due to low research budgets. Proficiency in English as well as the design and governance of academic institutions are likely to be more important.

Buiter, 19 December 2007

What caused the current North Atlantic financial crisis, how can it be fixed and how can the likelihood of future crises be reduced? This column introduces a new CEPR Policy Insight, 'Lessons from the 2007 Financial Crisis', which addresses these issues at length.

Geys, Heinemann, Kalb, 19 December 2007

Demographic change is old news in many fields (pensions, growth, etc.), but its impact on the economic geography of regions is understudied. Due to scale economies in the provision of public goods, regions with falling populations can experience declines in public amenities that accelerate the population drop. Here is some recent research on German municipalities illustrating problems that may soon face much of Europe.

Tekin, 18 December 2007

Most social science research on obesity, such as its impact on wages, uses the body mass index (BMI). BMI is imperfect since it fails to distinguish fat from lean body mass. Here is evidence that both men’s and women’s wages are lowered by body fat when a direct measure is used instead of the BMI.

Bordo, 17 December 2007

There is a strong tendency in the media and policy circles to view each crisis as totally new and unexpected. Financial crises, however, are as old as financial markets. Here are the lessons drawn by one of the world’s leading economic historians of financial crises.

Currie, Gahvari, 17 December 2007

Many countries provide large in-kind transfers although standard economic theory says cash transfers would be more efficient. Here is some new evidence evaluating the many justifications for in-kind transfers; it seems paternalism is the most likely explanation.

Cecchetti, 16 December 2007

The financial crisis of 2007 is bringing out the creative side of the worlds central bankers. Finding traditional instruments wanting, they spent the last month or so fashioning new tools and resurrecting old ones. Here are the FAQs on what they did, why and what it might mean.

Pelkmans, 16 December 2007

European business is concerned about EU leadership in climate strategies. The shortage of followers elsewhere in the world adds to nervousness about cost competitiveness and pass-through, which, in turn, may eventually undermine the credibility of EU strategies internally. It will be important to read the writing on the wall and respond if EU leadership in Bali is to continue.

Evenett, 15 December 2007

If the US and EU continue down the path of confronting China directly, they will face a choice between piecemeal trade actions that highlights the divergence between their words and deeds, or the imposition of a blatantly WTO-illegal restriction on Chinese exports that would ruin their reputations as good WTO members.

Monacelli, 14 December 2007

The ECB’s decision to leave interest rates unchanged lacks transparency and appears inconsistent with the specific policy framework that the ECB itself has decided to embrace. In the current period of great uncertainty, transparency would pay large dividends.

Machin, McNally, Silva, 14 December 2007

Do computers in schools help? Economists have long been sceptical, but new research finds that technology does have a positive effect on pupils’ performance.

Buti, Dierx, Ilzkovitz, Sousa, 13 December 2007

The EU has adopted a new approach to completing the Single Market. Choice of policy measures are not made ex-ante, but rather ex-post, following a period of market monitoring and analysis. Here are some of the new market-monitoring tools to be used.

Klemperer, 13 December 2007

No climate-change strategy will work unless it is consistent with developing countries' continued growth. So curbing emissions requires cheaper clean energy than is currently available. And that requires innovation.

Martin, 12 December 2007

A new climate change prediction market has been launched. Here are the details on motivation and participation.

Chou, Liu, Grossman, Joyce, 12 December 2007

The positive correlation between heath and education is well known. Establishing the direction of causality, however, is as difficult as it is important. Good policy design cannot rely on correlations. Here is evidence from a unique natural experiment that parental education, especially of mothers, causes good health in children.

Winters, 11 December 2007

Migration matters and will matter more as the lopsidedness of the world age-profile works its way through into labour and product markets. Surprisingly, there has been no global dataset on migration stocks until now. A new CEPR Policy Insight introduces the new database maintained at the University of Sussex.

Llussá, Tavares, 10 December 2007

We know too little about the causes and consequences of terrorism and what we do know is not listened to. For example, existing empirical and theoretical research on the economics of terrorism contradicts common wisdom that terrorists are irrational misanthropes with little education and low income. More research is needed.

van Pottelsberghe de la Potterie, 10 December 2007

Patent applications are booming, but many seem to be of low quality and/or strategically manipulated to hide the real invention within a myriad of claims. This delays the patent-granting process and hinders the system's ultimate goal of balancing incentives for knowledge creation with knowledge dissemination. Here are some ideas on how to fix the problem.

Nunn, 08 December 2007

Slavery, according to historical accounts, played an important role in Africa’s underdevelopment. It fostered ethnic fractionalisation and undermined effective states. The largest numbers of slaves were taken from areas that were the most underdeveloped politically at the end of the 19th century and are the most ethnically fragmented today. Recent research suggests that without the slave trades, 72% of Africa’s income gap with the rest of the world would not exist today.

Karlan, Mullainathan, 07 December 2007

A group of young(ish) scholars are revolutionising development economics using new data sets, randomised trials and the best available economic theory to find out exactly what works and why. Here is an example of some motivating questions about microfinance product design.

Lynch, 06 December 2007

Up to a third of US output growth stems from productivity-enhancing organisation innovations, but not all firms have embraced the innovations. Recent research on a unique longitudinal survey finds past investments in physical capital, IT, R&D and human capital as well as the exposure to trade were associated with more organisation innovation. These factors suggest US labour productivity growth should settle at 2-2.5%.

Saint-Paul, 06 December 2007

Many observers call for US interest rate cuts to avoid a recession, but this is likely to perpetuate the current imbalances in the US economy. The US probably needs a recession to get the required correction in house prices and consumer spending. The Fed should signal its intention to hang tough and start thinking about how big a fall in GDP it will tolerate before intervening.

Milanovic, Lindert, Williamson, 05 December 2007

Is inequality largely the result of the Industrial Revolution? Or were ancient incomes as unequal as they are today in poor pre-industrial societies? Looking at pre-industrial inequality from the Roman Empire in 14 AD to British India in 1947 generates new insights into the inequality and economic development connection over the very long run.

Ando, Kimura, 04 December 2007

Offshoring is not new. Kūdōka (hollowing-out due to offshoring) has worried Japan since the 1980s. Evidence from Japan presented in a new CEPR Policy Insight suggests that offshoring may help create domestic jobs, especially for SMEs.

Duflo, 04 December 2007

Resentment of immigrants is hard to explain on economic grounds, according to research on US data, and recent work on British data finds no real difference in assimilation rates between Muslim immigrants and other immigrants. Populist rhetoric may do more to create a rift than any religious or cultural feeling these immigrants have brought with them and transferred to their children.

Cecchetti, 03 December 2007

The final essay examines whether central bank actions have created moral hazard, encouraging asset managers to take on more risk than is in society’s interest; the answer is “no”.


CEPR Policy Research