June 2019

Cherif, Hasanov, 16 June 2019

The 'Asian miracles' and their industrial policies are often considered as statistical accidents that cannot be replicated. The column argues that we can learn more about sustained growth from these miracles than from the large pool of failures, and that industrial policy is instrumental in achieving sustained growth. Successful policy uses state intervention for early entry into sophisticated sectors, strong export orientation, and fierce competition with strict accountability.

de la Escosura, 15 June 2019

The concept of human development views wellbeing as being affected by a wide range of factors including health and education. This column examines worldwide long-term wellbeing from 1870-2015 with an augmented historical human development index (AHHDI) that combines new measures of achievements in health, education, material living standards, and political freedom. It shows that world human development has steadily improved over time, although advances have been unevenly distributed across world regions.

Neary, 14 June 2019

David Ricardo was the first economist to think rigorously about international trade, and his theory of comparative advantage has stood the test of time. So why do so many politicians ignore it? And what would he do about Brexit? Peter Neary of the University of Oxford talks to Tim Phillips.

Vickers, 14 June 2019

The stability of the financial system depends on the capital of banks and other financial institutions. But the measurement of bank capital depends on regulatory accounting methods, which, as events a decade ago showed dramatically, do not always reflect economic realities in a timely fashion. This column argues that market-based measures should play a greater role in regulatory assessment than is current practice, in particular in stress tests.

Bown, 13 June 2019

For more than 20 years, the WTO’s dispute settlement system provided an orderly process for countries to resolve trade grievances and keep cooperation going. But in 2018, something broke down. This column, taken from a recent Vox eBook, explores why the inability to resolve underlying problems with the WTO itself deserves some of the blame and derives some potential lessons for a future system of dispute settlement.

Okimoto, 13 June 2019

Japan’s monetary policy has had to be unconventional in order to address the economic conditions the country has faced. This column assesses the Bank of Japan’s exchange-traded fund purchasing programme, which has been repeatedly expanded in recent years. The purchases have achieved some positive results, propping up stock prices but also increasing real output and inflation. But, given the increased risks the Bank faces as its purchases have grown, the time to unwind has come.

Evenett, Fritz, 13 June 2019

The next G20 Leaders’ Summit risks being overshadowed by the Sino-US Trade War. That needn’t happen as last year G20 Leaders called for reports on options to revive the WTO and are expected to discuss them in Osaka. This column introduces the latest Global Trade Alert report, which shows that current global trade rules don’t deliver and proposes a way forward. 

Eugster, Ho, Jaumotte, Piazza, 12 June 2019

Technology diffusion to emerging markets helps share growth potential across countries and lift global living standards. Using a global patent citation dataset, this column estimates the magnitude and impact of international knowledge and technology diffusion, as well as the role that globalisation has played. In emerging markets, knowledge flows have increased innovation and productivity. Competition from emerging markets benefits global innovation.

Cahuc, Malherbet, Prat, 11 June 2019

Standard economic models predict that employment protection legislation reduces both job destruction and job creation, with the negative impact on job creation caused by the anticipation of separation costs. This column shows that in France, this anticipation effect not only plays a key role in reducing job creation but also increases job destruction among low-skilled workers, an effect that is amplified by the presence of the minimum wage. This mechanism implies that job protection is strongly detrimental to employment in the French context.

Ito, Koibuchi, Sato, Shimizu, 10 June 2019

Japan exports to neither advanced nor Asian countries in yen, as would be expected. Using questionnaire data, this column shows why Japanese exporters tend to choose destination currencies in their exports to advanced countries and why the US dollar, rather than the yen, is more often used in their exports to Asia. It also presents new evidence that the share of local currency has recently increased markedly, while that of the US dollar has declined, in Japanese exports to Asia. 

Le Yaouanq, Schwardmann, 10 June 2019

Naiveté about one’s lack of self-control can result in costly mistakes. In order to shed his or her naiveté, an individual needs to learn from his or her past lapses in self-control. This column examines whether people are able to draw the correct inferences from their past behaviour. It reports on experimental evidence that people learn well from their past effort on a task and are able to transport what they learn to new environments. However, they appear to underappreciate how much self-knowledge experience with a task will provide.

Eslava, Haltiwanger, Pinzón, 09 June 2019

A key difference between more and less developed countries lies in the speed at which the average business grows over its life cycle. This column compares manufacturing firms in Colombia and the US, and concludes that average life cycle growth differences across countries with diverging income levels are largely driven by the superstars and the worst performers. Relative to the US, Colombia presents an overwhelming prevalence of microestablishments, a deficit of superstar plants, and less strict market selection pressure for underperforming plants.

Cornelissen, Dustmann, 08 June 2019

Primary education starts at age 6 or 7 in most OECD countries, but in the UK children start primary school at the age of 4 or 5. This column exploits local variation in school entry rules in the UK to investigate the effects of schooling at an early age on cognitive and non-cognitive development. It finds that early schooling boosts both cognitive and non-cognitive skills up until the age of 11. These effects tend to be strongest for boys from disadvantaged family backgrounds.

Shafik, 07 June 2019

This week UN special rapporteur claimed the UK's social safety net has been "replaced with a harsh and uncaring ethos". Dame Minouche Shafik, director of the LSE, talks to Tim Phillips about whether our welfare states can survive in their current form, and what might replace them.

Lian, Novta, Pugacheva, Timmer, Topalova, 07 June 2019

The dramatic decline in the relative price of capital goods has been an important – but overlooked – driver of real investment. This column analyses cross-country price data to establish that deepening trade integration and productivity growth have both contributed to this decline. The erosion of support for international trade and sluggish productivity growth may limit further declines in relative prices of capital goods, which could negatively affect real investment rates. 

Bordo, 07 June 2019

Growing international imbalances are widely understood to have led Nixon to end gold convertibility in 1971. This column argues that a key fundamental underlying these imbalances was the rising inflation in the US, in turn created by US macroeconomic policies. President Nixon blamed the rest of the world instead of correcting US monetary and fiscal policies. It also identifies similarities between the imbalances of the 1960s and 1970s and those of today, especially regarding fiscal policies and the use of tariff protection as a strategic tool.

İmrohoroğlu, Kitao, Yamada, 07 June 2019

Japan leads the advanced economies in the speed and magnitude of demographic ageing and has the highest debt-to-output ratio. Rising social insurance expenditures are projected to far outpace revenues and to create a fiscal burden. This column presents sobering projections for Japanese government debt in the absence of reform, but argues that a combination of policies, including policies to encourage greater labour participation by women and to enhance productivity, could achieve sustainability.

Islam, Ushchev, Zenou, Zhang, 06 June 2019

In many developing countries, agricultural productivity has remained very low due to sluggish diffusion and adoption of new efficient cultivation methods. This column describes the results of a field experiment in Bangladesh in which randomly picked farmers received training in a new technology. An increase in the number of farmers in a village who received training increased the adoption rate of the technology among ‘untreated’ farmers. The findings suggest that frequent information and training are the easiest ways to help disseminate a new technology and encourage its adoption.

Gennaioli, Tabellini, 06 June 2019

In recent decades, the political systems of advanced democracies have witnessed large changes, often in reaction to economic shocks due to globalisation and technology.  This column uses insights from the social psychology of groups to explain how when large shocks hit, new cleavages in society emerge. This causes individuals to shift their beliefs about themselves and others in the direction of new social stereotypes. If globalisation clusters society in a nationalist versus cosmopolitan cleavage instead of the traditional left versus right, this may dampen demand for redistribution despite potential increases in income inequality. 

Abrams, Galbiati, Henry, Philippe, 05 June 2019

The rule of law in advanced democracies is based on the assumption that the law and its application are the same for all citizens. But research has shown that judges respond to ideology or political biases in their sentencing decisions. This column examines how location can also influence criminal court sentences using data from the US state of North Carolina’s superior court system. It shows that, even after controlling for characteristics of judges, sentencing varies by location and responds to local norms.

Becker, Fernandes, Weichselbaumer, 05 June 2019

The arrival of a child affects women and men differently in terms of labour market outcomes, but it is difficult to separate out the causal impact of discrimination from other factors. This column uses empirical evidence from Germany, Switzerland, and Austria to show that women are most affected in part-time job applications if they signal a ‘risk’ of having young children soon.

Ma, 04 June 2019

Over the last four decades, China’s economy grew at an astonishing pace while remaining firmly in the grip of an authoritarian political regime, thereby upending long-settled economic models. But an earlier era in Chinese history tells a different story. This column examines the period from 1900 to 1937, when rules governing the treaty port of Shanghai attracted major Western banks (and sheltered the Bank of China’s Shanghai branch) by curbing or side-stepping state power. This is a rare glimpse into a period of Chinese history in which financial practices were largely freed from the constraints of authoritarian rule. 

Bolton, Cecchetti, Danthine, Vives, 03 June 2019

While the decade since the Global Crisis has seen clear improvements in financial regulation and supervision, there is still work to be done in several crucial areas, and political constraints may bite.This column introduces the first report in a new series on ‘The Future of Banking’, which tackles three important areas of post-crisis regulatory reform: the Basel III agreement on capital, liquidity and leverage requirements; resolution procedures to end ‘too big to fail’; and the expanded role of central banks with a financial stability remit.

Franzoni, 03 June 2019

The asset management industry has become increasingly concentrated in recent decades. Regulators are concerned about the systemic risks this may pose. Using data from the US, this column suggests that the increased concentration has led to more volatile prices of stocks held by large institutional investors. This poses challenges for regulators trying to weigh price efficiency and economies of scale.

Chwieroth, Walter, 03 June 2019

The accumulation of mass financialised wealth has transformed the politics of banking crises. This column shows that the rising wealth of the middle classes has generated great expectations that their wealth will be protected by the government. As a result, democracies perform more financial sector bailouts and are also more financially fragile and politically unstable. 

Cuberes, Roberts, Sechel, 02 June 2019

Richer households have typically chosen to live in the suburbs of big cities because of the lower prices and larger properties. This column reports evidence from England that multiple factors now influence household location, including such urban amenities as parks, monuments, restaurants, and public transport. Analysis of the eight largest cities outside London finds no systematic relationship between income and household distance to the city centre. Indeed, household heterogeneity is an important determinant of location: for example, on average households with heads who are migrants live 25% closer to the centre than non-migrants; and only households who are employed are influenced by the availability of public transport.

Ager, Boustan, Eriksson, 01 June 2019

One striking feature of many underdeveloped societies is that economic power is concentrated in the hands of very small powerful elites. This column explores why some elites show remarkable persistence, even after major economic disruptions, using the American Civil War’s effect on the Southern states. Analysis of census data shows that when the abolition of slavery threatened their economic status, Southern elites invested in their social networks, which helped them to recoup their losses fairly quickly.

Events

CEPR Policy Research