December 2018

König, 28 December 2018

We measure the effectiveness of economists by how many papers they publish, or how many citations they get. But a new measure ranks them by their influence on the work of their colleagues too. Michael König explains to Tim Phillips how this works, and who gets to be number one.

Baldwin, 24 December 2018

2018 was a great year for Vox. Team Vox thanks all our readers and contributors for making it possible and we look forward to your cooperation in 2019. As is our tradition, we will post no new columns between 25 December and 2 January 2019. This column presents a few dozen ‘greatest hits’ from the year, arranged chronologically. Happy holidays from all of the VoxEU team.

Calomiris, Larrain, Schmukler, 24 December 2018

In emerging economies, studies of the relationship between foreign investor participation in public equity markets and aggregate economic activity find strong effects on productivity, investment, economic growth, and the price of publicly traded stocks. But it is not clear why. The column shows that equity capital inflows increase the supply of funding available to firms in emerging market economies, encouraging firms to obtain more equity financing to invest and expand. Large firms benefit most from those inflows. 

Sazedj, Amador, Tavares, 24 December 2018

When appointing a CEO, firms can choose a newcomer or someone who has been at the firm for a long time. Using data on Portuguese firms in the wake of the Global Crisis, this column finds no performance gap between newcomers and experienced CEOs in the period prior to the crisis. During the crisis, however, firms run by newcomer CEOs outperformed those run by experienced insiders. Newcomers attain higher productivity by making different decisions regarding personnel, expenditure, investment, and international trade. 

Agarwal, Gaulé, 23 December 2018

Exceptional mathematics talents generate breakthroughs that move the entire field forward. This column explores how the talent of exceptional mathematics students from several countries affects their outcomes and contributions to the field. Small differences in talent during adolescence are associated with sizeable differences in long-term achievements, from getting a PhD to receiving a Fields medal. The research highlights the social losses associated with the lack of opportunities available to students in low-income countries.

Wolff, 23 December 2018

Unlike income inequality, wealth inequality along racial lines in the US has received relatively little attention. This column presents new evidence on the changing landscape of relative wealth among whites, blacks, and Hispanics between 1983 and 2016. Using an augmented measure of wealth, it highlights how cuts to social security will disproportionately affect minorities.

Bughin, 23 December 2018

Advances in artificial intelligence have led to fears of job losses. This column uses a global survey covering more than 3,000 executives across 14 sectors and ten countries to examine the impact of AI on the demand side of the labour market. Ultimately, the effect on employment will depend on whether companies choose to use current forms of AI for innovation or pure automation, and whether they foresee a return from it.

Gershenson, Hart, Hyman, Lindsay, Papageorge, 22 December 2018

There have been many calls to increase the racial and gender diversity of teachers in US primary and secondary schools, with the evidence to date showing that improving the match between student and teacher demographics has significant positive effects on test scores. This column looks at the longer term effects of such changes. Random assignment to a black teacher in grades K–3 increased the chances that black students graduated from high school and enrolled in college. 

Belot, Kircher, Muller, 22 December 2018

Economic theory and the empirical evidence are mixed regarding the effect of wages on the volume of applications for job vacancies. This column presents the results of an experiment in which subjects saw artificial vacancies with randomly varying salaries. Results show that higher wages attract more interest on average, but that some job seekers prefer the lower wage jobs. Surveys suggest this is likely to be because they suspect less competition. 

Aizer, Devereux, Salvanes, 22 December 2018

It is well documented that children who are born to teenage mothers have worse outcomes in terms of health, education, and earnings. This column compares the outcomes for children of sisters in Norway to investigate the drivers of this. The results suggest that the ‘quality’ of the fathers explains as much of the difference in child outcomes as economic resources. Policies that consider the role that fathers play in teenage childbearing and its consequences may be more effective than those that consider mothers only.

Kempf, Tsoutsoura, 21 December 2018

Partisanship in the US is on the rise. With growing disagreement across voters of different political parties on key issues, understanding the potential implications of this trend for the US economy is of first-order importance. This column examines the degree to which partisan ideology affects the decisions of financial analysts. Using a novel dataset that links credit rating analysts to party affiliations from voter registration records, it shows that analysts who are not affiliated with the US president's party are more likely to downward-adjust corporate credit ratings.

Kashyap , Wetherilt, 21 December 2018

How should banks and their regulators manage cyber risk? A new discussion paper from the CEPR sets out six principles from an economist's point of view. Anil Kashyap of the University of Chicago and Anne Wetherilt of the Bank of England tell Tim Phillips what they are recommending. 

Frey, 20 December 2018

China's GNP is close to, or larger than, that of the US and the per-capita income gap between the countries is closing. Despite this, Chinese economists are absent from the rankings of top academic economists and none has received the Nobel Prize in Economics. This column offers several potential reasons for this, and also argues that the situation is likely to change in the future. Young scholars in particular may be well advised to take this into account, as their careers are likely to benefit if they link up to the Chinese academic market.

Koster, van Ommeren, Volhausen, 20 December 2018

Short-term rental platforms such as Airbnb have grown spectacularly in recent years, and local governments around the globe have responded differently in regulating such rentals. This column analyses the effects of a policy change in several cities of Los Angeles County that restricted short-term rentals of entire homes and apartments. Airbnb has led to an increase in house prices that is particularly pronounced in popular tourist areas, and homeowners in these areas lose out from the regulation. Renters, on the other hand, benefit from the regulation.

Gould, 19 December 2018

Declining manufacturing jobs in the US has a disproportionate impact on less-educated workers. Given that the black population is less educated than the white population, this will have a larger effect on blacks relative to whites. This column uses US Census data to show that the decline has increased inequality both within black and white communities and between black and white communities. It has also widened racial gaps in income, employment, health, marriage, and family formation.

Hackbarth, Rivera, Wong, 19 December 2018

For decades, academics and practitioners alike have argued that companies do not implement long-term strategies and that shareholders must cure the disease of short-termism to maximise shareholder value. This column examines the perils of short-termism in the context of investment policies and managers’ incentivisation. It finds that shareholder value maximisation for a typical S&P500 firm is not as straightforward as ‘no short-termism’, and depends on firm and investor characteristics.

Lundberg, Stearns, 18 December 2018

Although the share of women in top PhD-granting departments more than doubled between 1972 and 1993, this growth has stalled in recent years. This column reviews recent literature on women’s relative position in the discipline and assesses the evidence on barriers that female economists face in publishing, promotion, and tenure. It suggests that differentialassessment of men and women is one factor in explaining women’s failure to advance in economics and that continued progress toward equality in academic economics will require a concerted effort to remove opportunities for bias in the hiring and promotion processes.

Suesse, 17 December 2018

While much has been written on why states disintegrate, we know little about the consequences of state breakup. Using data from the breakup of the Soviet Union, this column studies the short-run economic costs of its collapse. It demonstrates how political disintegration can lead to the dissolution of trade links, and to a correspondingly large fall in output. In the Soviet case, this mechanism helps to explain the disappointing performance of its successor states in the 1990s. The uncertainty surrounding secessions is an important driver of the fall in present output.

Bloom, McKenna, Prettner, 17 December 2018

Future global employment needs are of central importance for policymakers. This column estimates that, based on growth in the working-age population, labour force participation rates, and unemployment, about three quarters of a billion jobs will need to be created in 2010–2030. It also discusses how automation will add to the number of jobs required.

Cai, Chen, Wang, 17 December 2018

R&D tax breaks are often offered to businesses to encourage innovation. This column uses evidence from a tax reform in China to study the relationship between tax enforcement and firm innovation. Lower taxes improve both the quantity and quality of firm innovation, and have a bigger impact on those firms that are either financially constrained or those that engage more in tax evasion. 

Antoniades, Clerides, 16 December 2018

Understanding how firms respond to demand shocks has important insights on firm and consumer behaviour. To date, firm responses have been mostly been examined in isolation. This column uses scanner data to explore how Danish firms and their competitors responded to a boycott in ten Arab states in 2006. Results show that Danish firms responded on the intensive margin by lowering prices, while their competitors responded on the extensive margin by introducing new products.

Siklos, St. Amand, Wajda, 16 December 2018

There is an ongoing debate regarding how far central bankers, as unelected technocrats, should go outside of their remit when communicating in public fora. This column uses a machine-learning algorithm to assess the topics of speeches by officials at the US Federal Reserve and Bank of Canada over the last two decades. It concludes that the topics of central bankers’ speeches have not significantly widened in scope relative to their mandate documents.

Asriyan, Laeven, Martin, 15 December 2018

Credit booms are perceived to fuel resource misallocation and often end in crises that are followed by protracted periods of low growth. This column investigates the macroeconomic effects of credit booms using a new theory of information production. The theory predicts that when the economy enters a collateral boom, the price of collateral rises and lenders rely more on collateralisation and less on information-producing screening of entrepreneurs. Empirical evidence based on US data confirms the model’s predictions. 

Kim, Chatterjee, Higgins, 15 December 2018

Investments in early-stage companies are declining, as venture capital firms find it hard to evaluate the risks and rewards from investing in the technologies. The column shows how the EU Orphan Drug Act caused a movement towards early-stage deals in affected sectors in both the EU and the US. Venture capital firms were more likely to invest at an early stage in sectors covered by the regulation and also made more early-stage investments.

Boffa, Jansen, Solleder, 15 December 2018

In a world where trade policies and trade alliances are changing, global value chains are likely to be affected, with implications for policymakers seeking economic development through value chain integration.This column combines information on the value-added decomposition of gross exports with information from the World Bank’s Content of Preferential Trade Agreements Database to examine which policy mixes are more conducive for value chain activity. Value-chain players are found to prefer more integrated regions. 

Decker, Goodhart, 14 December 2018

Credit mechanics and related approaches were developed by a group of German monetary economists during the 1920s-1960s. This column assesses the analysis of credit mechanics within the context of the current money supply debate, arguing that the theory qualified a one-sided, bank-centric view of money creation which is now often encountered in monetary theory. With the old standard textbook models of money creation now discredited, the authors advocate a more general approach to money supply theory involving credit mechanics. 

Siu, 14 December 2018

Women with college degrees are becoming more likely to get good jobs, but for college-educated men, the opposite is true. Henry Siu of the University of British Columbia tells Tim Phillips that the demand for social skills may explain the trend.

Evenett, Fritz, 14 December 2018

Presidents Trump and Xi effectively declared a truce in their trade war at the recent G20 Summit in Buenos Aires, giving their trade negotiators three months to settle their differences. This column argues that focusing on the bilateral trade war overlooks similarities in the trade distortions facing Chinese and American exporters worldwide in the form of export incentives, subsidies to domestic firms, and import tariff increases. It concludes that these two trading giants have more in common than they may realise.

King, Singh, 14 December 2018

Financial products with a cashback feature are increasingly popular, but typically cost consumers more in the long run. This column shows that consumers who are younger and less educated, and those affected by present bias and inattention, are more likely to choose more expensive 'cashback mortgages'. Advanced behaviourally informed disclosure improves consumer decision-making. Advertising in the form of a 'negative nudge' or sludge, however, encourages prospective buyers to choose more costly mortgages. 

Halla, Schmieder, Weber, 13 December 2018

For the optimal design of social insurance policy, policymakers must consider how public insurance interacts with family dynamics. This column reveals how in Austria, the impact of husbands losing their jobs on wives entering the workforce is generally weak compared to other countries. This may be explained by traditional gender norms and the importance of the male breadwinner model.

Yu, Cao, Kang, 13 December 2018

In a country where grandparents provide a significant amount of childcare, China’s plans to gradually delay retirement over the next few decades may significantly impact the labour supply and lifetime earnings of young women. Using the China Family Panel Studies survey data, this column demonstrates that the provision of grandparental childcare affects females’ income, in particular better-educated, urban females with younger children. An increase in public childcare subsidies may be required to complement the phasing-in of the retirement policy in China.

Hendry, 12 December 2018

The Industrial Revolution has been of vast benefit to humanity, but it came at the cost of a global explosion in anthropogenic emissions of greenhouse gases. The UK was the first country into the Industrial Revolution. Now it is one of the first countries heading out, with annual CO2 emissions per capita back below the levels of the 1860s. This column presents an econometric model of UK emissions over the last 150 years to establish what has driven them down and reveal the impacts of important policies, especially the Climate Change Act of 2008. Even so, large reductions in all the UK’s CO2 sources are still required to meet its 2050 target of an 80% reduction from 1970 levels.

Gürkaynak, Kısacıkoğlu, Wright, 12 December 2018

News affects the yield curve, but OLS regressions based on observed news have been able to explain only 40% of the movement, at best. This column proposes a method for estimating unobserved news as well. The results suggest that news explains more or less all of the yield curve changes in event windows, and that more should be done to understand the economics behind this relationship. 

Nakamura, Zeira, 11 December 2018

The fear that technological innovation will increase unemployment is not new, and various theories in response suggest technology does not necessarily pose a threat to jobs. This column goes one step further, arguing that because automation requires rising wages and that requires increasing the set of labour tasks, innovation should ultimately reduce unemployment.

Ayyagari, Beck, Martinez Peria, 11 December 2018

Macroprudential tools have been implemented widely following the Global Crisis. Using data from 900,000 firms in 49 countries, this column finds that such policies are associated with lower credit growth during the period 2003-2011. The effects are especially significant for micro, small and medium-sized enterprises and young firms that are more financially constrained and bank dependent. The results imply a trade-off between financial stability and inclusion.

Havrylchyk, 11 December 2018

Lending-based crowdfunding platforms represent an opportunity for financial intermediation that is less leveraged, less prone to runs, and easier to resolve. This column reviews the regulatory regimes for such platforms in OECD countries and the European Commission’s proposal for the EU-wide passporting regime. Regulation requires a balance to be struck between a flexible approach that allows experimentation and strong supervision to address market failures. 

Chen, Los, Timmer, 10 December 2018

Intangibles are on the rise, yet their measurement is elusive. This column argues that a global value chain perspective on factor incomes provides new insights. It documents a rapid increase in the share of ‘factorless’ income in global value chains in the 2000s and argues that this period should be seen as an exceptional period in the global economy during which multinational firms benefitted from reduced labour costs through offshoring, while capitalising on firm-specific intangibles at little marginal cost.

Laeven, McAdam, Popov, 10 December 2018

There are good arguments both in favour and against the idea that more labour market flexibility will deliver benefits to an economy during a downturn. This column presents novel evidence on this question, using data from Spain during the 2008–09 credit crunch. The results show that credit-constrained firms grow faster if they are subject to less strict firing and hiring restrictions, as long as they are technologically able to substitute labour for capital. The findings provide an argument in favour of more flexible labour laws.

Bian, He, Shue, Zhou, 09 December 2018

Excessive leverage and subsequent deleveraging-induced fire sales have been major contributors in past financial crises. This column explores the behaviour of two types of margin investors– brokerage-financed and shadow-financed – during a tumultuous period for the Chinese stock market. Results show that for accounts with exposure to fire sale risk, shadow-financed accounts account for a much higher proportion of the total stock market capitalisation than brokerage-financed accounts.

Amodio, Di Maio, 09 December 2018

The economic impact of conflict can be catastrophic, but disentangling and identifying the different ways in which conflict affects the economy is challenging. Using data from the Occupied Palestinian Territory during the Second Intifada, this column examines the specific mechanisms through which economic losses materialise in a conflict zone with low-intensity violence. The findings highlight the close interaction between security and trade issues, calling for an integrated policy approach acting on both fronts.

Martinez-Miera, Repullo, 08 December 2018

The current financial system is characterised by the coexistence of direct market finance, regulated banks, and shadow banks. This column looks at what gives rise to each of these sources of finance as well as the effect of bank capital regulation on the financing that flows through them. High 'flat' (or risk-insensitive) capital requirements shift intermediate-risk entrepreneurs from regulated banks to shadow banks, while high risk-based requirements do the same for high-risk entrepreneurs, increasing the risk of the corresponding loans. This result highlights the need to take into account the existence of shadow banks when designing bank capital regulation. 

Le Barbanchon, Sauvagnat, 08 December 2018

Despite many efforts to close the gender gap, women remain underrepresented in politics. This column shows that in the case of France, voters’ preferences towards gender shapes political selection and ultimately the gender composition of elected politicians. This suggests that gender parity in policymaking relies on improving the slow-changing attitudes of voters towards male and female political candidates.

Buti, Carnot, 07 December 2018

The debate continues over the needed ingredients for a stable Economic and Monetary Union. Some authors have argued that the completion of a financial union (banking union and capital markets union) together with sound national fiscal policies eliminate the need for common budgetary instruments. The authors of this column beg to disagree and re-state the case for a central fiscal capacity. In essence, whilst financial union and a euro area fiscal stabilisation are substitutes in normal times, they are complementary in bad times. 

Rojas-Romagosa, Bollen, 07 December 2018

Intra-EU migration stocks more than doubled between 1960 and 2015, with the EU's principle of free movement of people seen as one of the main drivers. The column shows that free movement on average increased the stock of intra-EU migrants by 28%, representing around one quarter of total intra-EU migration during this period. The free movement of people has had a substantial impact on migration originating from both old and new member states, with the vast majority of migrants going to the old member states. 

Jacks, Stuermer, 07 December 2018

There is a lack of consensus on the importance of various drivers of long-run commodity prices. This column analyses a new dataset of prices and production for 15 commodities, including metals, agricultural goods, and soft commodities, between 1870 and 2015. Demand shocks due to rapid industrialisation and urbanisation have driven a substantial amount of variation in commodity price booms. While demand shocks have gained importance over time, commodity supply shocks have become less relevant. 

Landais, Giupponi, 07 December 2018

Even though countries all over the developed world implemented short-time work policies during the great recession, we didn't know whether they worked. Now we do: Camille Landais and Giulia Giupponi of the London School of Economics tell Tim Phillips whether short-time work protects workers, firms or economies.

Bohacek, Bueren, Crespo, Mira, Pijoan-Mas, 06 December 2018

Comparing cross-country similarities and differences can be useful to understand the origins of health inequality, but is hampered by a lack of harmonised and comparable data. This column brings together panel data from ten countries in continental Europe, England, and the US to compare inequalities in total life expectancy, disability-free life expectancy, and years spent in disability across education levels and gender. Among the findings are that ‘women get sicker but men die quicker’ is to a large extent a low-education phenomenon.

Utar, 06 December 2018

The impact of trade shocks on labour market shifts is usually studied in the context of re-training and social welfare frictions. Using evidence from Denmark, this column shows how workers can experience long-run reductions in earnings no matter how easy it is to change sector. A sudden and obligatory shift toward a new sector may, by its nature, generate some worker dissatisfaction.

Lagarde, Ostry, 05 December 2018

The persistent gap between female and male labour force participation comes at a significant economic cost. This column argues that because women and men complement each other in the production process, the economic benefits from gender diversity are likely to be larger than suggested by previous studies. Gender complementarity also has important implications for the welfare costs from barriers to female labour force participation. The case for gender equity is even more compelling and pressing.

Granja, Leuz, Rajan, 04 December 2018

Risk taking was pervasive during the Global Crisis even in the most unlikely areas, such as stretching to lend at a distance. Using US data, this column examines the degree to which competition amongst lenders interacts with the cyclicality in lending standards using a simple and policy-relevant measure, the average physical distance of borrowers from banks’ branches. It finds that distances widen considerably when credit conditions are lax and shorten considerably when credit conditions become tighter. A sharp departure from the trend in distance between banks and borrowers is indicative of increased risk taking. 

Kindermann, Mayr, Sachs, 04 December 2018

Although inheritance taxes are of growing importance for Western economies in raising government revenue, little is known about how inheritance taxation affects individuals’ incentives to work. This column explores how much additional labour income tax revenue from heirs the government can expect to obtain for each euro of revenue raised directly through inheritance taxes. It concludes that additional labour tax payments from heirs, resulting from an increase in bequest taxes, are of sizable magnitude and should be taken into account in fiscal planning and welfare analysis.

Bloom, Kirby, Sevilla, Stawasz, 03 December 2018

Worldwide ageing trends are steering global demographics into uncharted territory, transforming populations and societies around the globe. Japan is leading the way in this growth wave as the world’s oldest population and is now grappling with the substantial socioeconomic burdens an ageing population places on society. This column discusses the coming challenges associated with population ageing alongside plausible solutions. While there is no magic bullet for these challenges, there is scope to devise a multi-pronged solutions portfolio of complementary initiatives that includes a number of measures to promote and protect elderly health.  

Eichenbaum, Rebelo, Wong, 02 December 2018

Mortgage rate systems vary in practice across countries, and understanding the impact of these differences is critical to the design of optimal monetary policy. This column focuses on the US, where most mortgages have a fixed interest rate and no prepayment penalties, and demonstrates that the efficacy of monetary policy is state dependent, varying in a systematic way with the pool of potential savings from refinancing. As refinancing costs decline, the effects of monetary policy become less state dependent.

Caron, Fally, 01 December 2018

With global emissions of CO2 still growing, understanding the determinants behind energy use and emissions is as relevant as ever. This column looks at the role of per capita income and consumption choices. It finds that the share of expenditures spent on energy and energy-intensive goods tends to decrease with income across a large set of countries. Simulations indicate that income growth shifts consumption patterns in a way which generally reduces emissions. However, increasing emissions in low- and middle-income countries as well as a shift from direct to indirect consumption of energy mean that the effect on total world emissions is modest.

Adrian, Kiff, 01 December 2018

The financial system has undergone far-reaching changes since the 2008 Global Crisis. This column casts those changes in terms of shifts in the way financial intermediaries manage their balance sheets, and also discusses the regulatory reform agenda and reviews the impact of regulations on market liquidity and credit availability. The current evidence suggests that the financial system has become safer, at limited unintended cost.


CEPR Policy Research