July 2019

Pac, Bartel, Ruhm, Waldfogel, 21 July 2019

Mothers in the US breastfeed their infants at higher rates today than at any point in documented history, but low-income mothers have become less likely to do so. A leading reason for mothers to stop breastfeeding is the need to return to work. This column uses data on over 270,000 mother-child pairs in California, which implemented paid family leave in 2004, to examine the relationship between paid family leave and breastfeeding. It finds that paid family leave significantly increases overall breastfeeding duration, suggesting that paid family leave may lead to longer-term health improvements for children and mothers, particularly among disadvantaged families. 

Avaro, Bignon, 20 July 2019

The payment landscape is changing. This column goes back to late 19th century France to explore the implications of this more decentralised and less banked landscape for the design of central banks’ interventions when fighting financial crises. The Banque de France operated a very wide discount window and used a variety of risk management techniques to effectively subdue risk-taking behaviours and to protect its balance sheet from taking any loss. This helped it to stabilise the economy and to overcome the consequences of negative income shocks.

Schwandt, 19 July 2019

Supposedly 'green' diesel engines with devices to cheat emissions tests have been polluting as much as 150 ordinary cars. Hannes Schwandt tells Tim Phillips about the staggering human cost of VW's fraud.

Arnold, 19 July 2019

In the early days of his administration, Brazilian President Jair Bolsonaro announced plans to privatise several of the country's largest state-owned enterprises and airports. Fearing such a move would lower both wages and employment, labour unions organised in opposition to Bolsonaro’s plans. This column looks anew at evidence testing whether privatisation offers more than merely an immediate infusion of revenue, and finds that while increases in efficiency might contribute to Brazil’s overall economic growth, privatisation could also expose the country’s most vulnerable workers to significant risk of decreased wages.

Datta, 19 July 2019

Is the rise of ‘atypical’ work arrangements – such as self-employment, freelancing, gig work and zero-hour contracts – a result of workers wanting such jobs or because they have no other choice? This column reports evidence from the UK and the US that while atypical workers may like flexibility, they would prefer a steady job. Indeed, workers would agree to earn less in order to increase their employment security.

Shirai, 18 July 2019

Modern monetary theory (MMT) has recently gained prominence in light of doubts about the effectiveness of monetary policy in addressing economic shortfalls. This column assesses the implications of implementing the theory’s policy prescriptions, and the challenges it presents in the case of Japan – an economy that some have argued has already been subject to such policy. Japan’s labour shortages and low inflation mean modern monetary theory’s fiscal stimulus suggestions may be harder to implement than they initially seem.

Courtemanche, Carden, Zhou, Ndirangu, 18 July 2019

Food security is a concern even in industrialised countries, with 14.5% of US households lacking food security during at least some of the year 2012. This column examines the impact of Walmart Supercenters’ entry into the local market and finds that it improves food security, especially among low-income households and households with children. It suggests that the unintended consequences of policies aimed at thwarting Walmart’s market entry may reduce food security for the most vulnerable segments of society.

Efstathiou, Wolff, 17 July 2019

In 2011, the EU introduced stricter rules to monitor the implementation of country-specific policy recommendations. Using a new dataset, this column investigates whether these new laws have increased national compliance. There is no evidence that these stricter processes matter for implementation rates, whereas macroeconomic fundamentals and market pressure are important determinants of implementation progress. These results suggest ways to improve the effectiveness of European policy coordination that go beyond stronger legal processes.

Ampudia, Van den Heuvel, 17 July 2019

The effects of interest rate surprises on banks are different when nominal interest rates are very low. This column reveals how, in ‘normal’ times, policy rate announcements that are below market expectations tend to boost banks’ stock prices on average. When interest rates are very low, however, there is a reversal of this effect, with negative rate surprises reducing banks’ stock prices. This negative impact is larger for banks whose funding relies more on retail deposits than on other sources of funding.

Fornaro, Romei, 16 July 2019

Fiscal and current account surpluses make sense from a national perspective. Prudential fiscal and financial policies lead to an increase in national savings and current account surpluses of booming countries. This column uses a model of the global economy to argue, however, that the world may become stuck in a global liquidity trap as a result. This paradox of global thrift may lead to a fall in global output and welfare.

Amstad, He, 16 July 2019

China’s corporate bond ratings are sharply skewed upward, which is partly explained by the large amounts of bonds by issuers who are mostly linked to the government. This column proposes credit spreads as an alternative, market-based measure of credit risk. It also argues that the main reason for the high credit ratings and low dispersion of credit spreads is the very short and limited history of defaults in China. The post-2014 sharp rise in corporate bond defaults is therefore essential for further market development, particularly because Chinese defaults remain low relative to global standards.

Peri, Sasahara, 15 July 2019

Though the economic consequences of climate change will be felt across the globe, not all populations will be affected equally. This column examines the impact of rising temperatures on migrant communities. Using historical data from three decades (1970-2000), it finds that higher temperatures increased the number of rural-to-urban migrations in middle-income countries while decreasing rural-to-urban migrations in poor countries. The prospect of climate change leaving large rural populations trapped in poverty adds urgency to the case for addressing the asymmetric effects of global warming. 

Kromann, Sørensen, 15 July 2019

The automation of production processes is an important topic on the policy agenda in high-wage countries, but evidence of the economic effects of automation at the firm level is limited. This column presents insights on automation from new survey data for Denmark. The findings reveal that variation in the adoption of automation technologies is high, the change in adoption over time is slow, and almost half of Danish manufacturing firms relied greatly on manual production processes in 2010. Increasing international competition from China is a driver for investments in automation.

Madsen, Robertson, Ye, 14 July 2019

The econometric evidence for the Malthusian trap in pre-industrial Europe has been weak. The column presents a new Malthusian model that, combined with new historical data for 17 countries, provides evidence of a much stronger Malthusian trap than the one found by previous research. This helps to explain the economic stagnation from the dark ages to the industrial revolution.

Acciari, Polo, Violante, 13 July 2019

Intergenerational mobility is viewed as a proxy for a fair and fluid society, as it sheds light on the extent to which individuals with different initial conditions are presented with equal opportunities to succeed. This column investigates intergenerational income mobility in Italy and finds income persistence to be quite linear, except at the very top of the income distribution. It also finds a steep difference by region, with provinces in the north being more egalitarian and more upwardly mobile than in the south.

Cornelissen, 12 July 2019

Children in different countries start school at very different ages. Thomas Cornelissen tells Tim Phillips about new research that suggests an early start may help their development.

de Soyres, Mulabdic, Ruta, 12 July 2019

Common transport infrastructure can improve welfare for participating countries, but they are costly undertakings with potentially asymmetric effects on trade and income of individual countries. This column uses new data on China’s Belt and Road transport projects to quantify the economic impact of the initiative. Welfare in participating countries could increase by 2.8% if all projects are implemented, but some countries have a negative welfare effect because of the high cost of the infrastructure. 

Melecky, 12 July 2019

There has been increasing interest in how infrastructure can help close gender gaps in developing countries. Based on studies of various highway investment programmes in Asia, this column reveals how highways can help women can seize better jobs if they are already employed. Compared with men, however, women have some distinct demands from road corridor programmes and could face gender-specific risks, notably during the construction of the highways. 

Liu, Shi, 11 July 2019

The US-China trade war has continued for almost a year, but its effectiveness in preventing some Chinese origin products reaching the US may not be as great as it seems. This column shows how trade re-routing has been used in the past to circumvent antidumping duties in the context of trade tariffs. Firms may be able to avoid tariffs by sending their products to a third country, where the goods are reissued certificates of origin and then sent to the final destination country without being subject to the same tariffs.

Cantarella, Fraccaroli, Volpe, 11 July 2019

'Fake news' has undeniably been biased in favour of populist or anti-establishment parties. As politically charged misinformation has been proliferating online, it is no wonder that many have been questioning whether the spread of fake news has affected the results of recent elections, contributing to the growth of populist party platforms. This column examines evidence from a natural experiment occurring in Italy and discusses how fake news might have played a less than obvious role in influencing political preferences during the general elections of 2018.

Goodhart, Schoenmaker, 11 July 2019

While banking is procyclical, the capital framework is largely static. The countercyclical capital buffer is discretionary, with potential danger of inaction, and is also limited in scale. This column proposes an expanded capital conservation buffer, which would act as an automatic stabiliser. This could incorporated in the next Basel review and the upcoming Solvency II review.

Espitia, Mattoo, Mimouni, Pichot, Rocha, 10 July 2019

Preferential trade agreements cover more than half of world trade. This column argues that while the 280 preferential trade agreements in existence have substantially widened the scope of free trade and reduced average applied tariffs, they have struggled against traditional bastions of protection in poorer countries and have not been able to eliminate the high levels of protection for a handful of sensitive products. While preference margins offered to partners in such agreements seem large, their significance shrinks when competition from both preferential and non-preferential sources is considered.

Shah, 10 July 2019

A decade ago, India joined a range of countries that mandate free, compulsory education for school-aged children. Passed in August 2009, India’s Right to Education Act was potentially transformative legislation, yet detailed analysis of its impact on the country’s educational outcomes has been slow to emerge. This column uses three national datasets to consider whether the Act is associated with changes in student enrolment, test scores, student-teacher ratios, school infrastructure, and other indicators of educational health and standing.

Otazawa, Ohira, van Ommeren, 09 July 2019

Relationship-based distance has become as important a determinant of firm interactions as physical distance in recent years. This column presents evidence to support the claim that firms physically locate closer to others that proximate in their transaction networks, though this effect varies across industries and by age of firms.

Garred, 09 July 2019

Like other countries participating in the multilateral trading system, China agreed to limit the use of import tariffs when it joined the WTO. As this column shows, however, it continued to employ other instruments of trade policy, including a new set of restrictions on exports which partly restored the asymmetric treatment of Chinese industries embodied in its pre-WTO import tariffs. Today's tariff wars appear to be just the latest example of an ongoing battle whose skirmishes have taken many forms.

Hamilton, 08 July 2019

Shipping costs offer a potentially attractive measure of world real economic activity. However, the popular approach of removing a deterministic trend is not consistent with the observed behaviour of shipping costs and results in an unrealistic measure in data since 2015. This column compares alternative monthly measures based on shipping costs with direct estimates of world industrial production in terms of coherence with world GDP and usefulness for forecasting commodity prices, and concludes that industrial production is a much better measure. If shipping costs are to be used, the cyclical component should not be calculated using residuals from a linear trend.

Campos, Coricelli, 08 July 2019

This year has seen the 20th anniversary of the euro, but so far we have not seen many articles that take stock of the accomplishments and disillusionments of the single currency, and of how to improve it. This column hopes to change this by picking and discussing 20 papers that economists and policymakers should read, or re-read, and reflect upon in this 20th anniversary year.

Kamal, 07 July 2019

‘Factoryless’ goods producing entities outsource physical transformation activities while retaining ownership of the intellectual property and control of sales to customers. Using 2012 data from the US Census Bureau, this column provides a new conceptual definition of factoryless activity. It also compares factoryless goods producer firms to service providers outside the manufacturing sector, and hybrid manufacturers to traditional manufacturers within the manufacturing sector. The analysis reveals several meaningful correlations between factoryless status at the firm level and conceptual variables such as employment mix, innovation, and importing activities.

Dow, Godøy, Lowenstein, Reich, 07 July 2019

Policymakers and researchers have sought to understand the causes of and effective policy responses to recent increases in mortality due to alcohol, drugs, and suicide in the US. This column examines the role of the minimum wage and the earned income tax credit – the two most important policy levers for raising incomes for low-wage workers – as tools to combat these trends. It finds that both policies significantly reduce non-drug suicides among adults without a college degree, and that the effect is stronger among women. The findings point to the role of economic policies as important determinants of health. 

Alesina, Hohmann, Michalopoulos, Papaioannou, 06 July 2019

Over the last few decades, education in Africa has been rising and living standards have been improving. Yet certain countries and regions face rampant conflict and persistent poverty. This column we uses individual-level data covering more than 20 million people spanning 26 African countries since the late 1960s to study intergenerational mobility in education across the continent. It uncovers large variation in upward and downward mobility both across and within countries.

Beuermann, Jackson, 06 July 2019

Most parents have strong views regarding which schools to send their children to. However, evidence shows that attending sought-after public secondary schools does not improve secondary-school examination performance. This column uses data from Barbados to show that secondary school choice does not appear to lead to improvements in exam performance. However, it does have a sizable effect on short-run non-cognitive outcomes that may affect longer-run outcomes.

Kelly, 05 July 2019

A large literature on persistence finds that many modern outcomes strongly reflect characteristics of the same places in the past. Although these regressions feature unusually high t statistics, they usually also display severe spatial autocorrelation in residuals. Exploiting data from 28 persistence studies published in leading journals, this column runs artificial regressions where both variables are spatial noise and shows that this produces severely inflated t statistics. Replicating published studies shows that in most cases the main persistence variable frequently has lower explanatory power than spatial noise but can, in turn, strongly predict spatial noise.

Hospido, Laeven, Lamo, 05 July 2019

The underrepresentation of women in economics is perhaps nowhere as visible as in central banks. This column uses anonymised personnel data to analyse the career progression of men and women at the ECB. A wage gap in favour of men emerges within a few years of hiring, with one important driver being the presence of children. Women were also less likely to be promoted to a higher salary band up until 2010, when the ECB issued a statement supporting diversity and took measures to support gender balance. Following this change, the promotion gap disappears. 

Habib, Venditti, 05 July 2019

There is a global cycle in capital flows that is intimately connected to global risk. This column argues that, contrary to common wisdom, US monetary policy is not the only factor, or even the main factor, behind global risk and this global cycle. Financial shocks matter more than US monetary policy. Domestic policies may still mitigate the cycle of global capital flows at the country level.

Ghironi, 05 July 2019

Are Italy's populist policies of miniBOTs and flat taxes the right medicine for its economic sickness? Fabio Ghironi tells Tim Phillips that, if Italy doesn't attempt fundamental structural reforms, it may be on the path to Eurexit.

Ahir, Bloom, Furceri, 04 July 2019

Recent developments have inspired efforts to measure trade uncertainty. This column presents a new index of world trade uncertainty for 143 countries, measured on a quarterly basis from 1996 onwards, using the Economist Intelligence Unit country reports. The index shows that uncertainty in trade is rising sharply. This has important implications for global economic prospects.

Gonzalez, Jansen, 04 July 2019

Economic governance is confronting the unfolding of three tectonic shifts: a digital revolution, an environmental revolution, and a social revolution. We are seeing the return of geopolitics. This column introduces a new book from CEPR, the International Trade Centre and the European University Institute that collects insights from 28 women policymakers and thought leaders on how to shape a system of global governance capable of managing those shifts and of rebuilding trust that voters appear to have lost in many countries.

Akcigit, Ates, 04 July 2019

The US economy has witnessed a number of striking trends that indicate rising market concentration and a slowdown in business dynamism in recent decades. This column uses a micro-founded model of endogenous firm dynamics to show that a decline in the intensity of knowledge diffusion from frontier firms to laggard ones plays a key role in the observed shifts. It presents new evidence on higher concentration of patenting in the hands of firms with the largest stock that corroborates declining knowledge diffusion in the economy. 

Brunnermeier, James, Landau, 03 July 2019

Thanks to digitalisation, we now can hold money on our mobile phones and transfer wealth in real time to almost every corner of the world. Currencies can be swapped within milliseconds on smart phones and people can hold many currencies simultaneously in digital wallets. This column considers how digitalisation will affect the international monetary system, arguing that a new kind of currency area will emerge, held together by digital interconnectedness. These digital currency areas will cut across borders, increase currency competition and, in the process, may redefine the international monetary system.

Ottaviano, 03 July 2019

Economic geography strikes back. After a couple of decades of easy talk about the ‘death of distance’ in the age of globalisation, the promise of a world of rising living standards for all is increasingly challenged by the resilience of regional disparities within countries. As long as many people and firms are not geographically mobile – and those who are tend to be the most skilled and productive – easier distant interactions can actually strengthen rather than weaken agglomeration economies. Recent electoral trends in Europe can be understood to a surprisingly large extent from this angle. 

de Ridder, 02 July 2019

The slowdown of productivity growth, the decline of business dynamism, and the rise of market power and firm concentration are three trends that have attracted a lot of attention in academic and policy debates. This column points to the rising use of intangible inputs as a unified explanation for these trends. Firms with high intangible adoption disrupt sectors and initially boost productivity, but negatively affect the entry of new firms and suppress the effect of R&D on innovation and growth in the long run.

Friberg, Steen, Ulsaker, 02 July 2019

Consumers often travel to neighbouring countries to shop at cheaper prices. This column uses sales data from a Norwegian grocery chain to examine how cross-border shopping into Sweden responds to changes in relative prices. It shows that the response to price changes is highest at some distance from the border, where consumers respond by reconsidering whether or not to travel abroad for their shopping.

Koch, Manuylov, Smolka, 01 July 2019

The rise of robots has sparked an intense debate about the labour market effects of their adoption. This column explores differences in robot adoption across firms and analyses the labour market effects of robot adoption at the firm level. It reveals a productivity-enhancing reallocation of labour and market shares across firms, with robot-adopting firms creating new job opportunities and expanding their scale of operations, while non-adopters experience negative output and employment effects in the face of tougher competition.

Evenett, Fritz, 01 July 2019

What is the practical and intellectual significance of the Sino-US tariff hikes of 2018? This column, taken from a recent Vox eBook, argues that the uncertainty engendered by the trade tensions is likely to have had a larger economic impact than the direct restrictive effect on international trade. The intellectual significance, meanwhile, lies in prompting the questions of what actions constitute a trade war and of whether trade policy analysts, in focusing on instances of brazen protectionism, have failed to spot more far-reaching commercial policy developments.

Di Tella, Rodrik, 01 July 2019

Economists have traditionally emphasised the benefits of openness to trade, but populists resist it. How generalised is the demand for trade protection? And how does it compare with other disruptions in the labour market? This column suggests that people often react by demanding trade protection when faced with shocks that generate unemployment, with the largest effects observed when it is caused by imports arriving from a poor country. 

Events

  • 17 - 18 August 2019 / Peking University, Beijing / Chinese University of Hong Kong – Tsinghua University Joint Research Center for Chinese Economy, the Institute for Emerging Market Studies at Hong Kong University of Science and Technology, the Guanghua School of Management at Peking University, the Stanford Center on Global Poverty and Development at Stanford University, the School of Economics and Management at Tsinghua University, BREAD, NBER and CEPR
  • 19 - 20 August 2019 / Vienna, Palais Coburg / WU Research Institute for Capital Markets (ISK)
  • 29 - 30 August 2019 / Galatina, Italy /
  • 4 - 5 September 2019 / Roma Eventi, Congress Center, Pontificia Università Gregoriana Piazza della Pilotta, 4, Rome, Italy / European Center of Sustainable Development , CIT University
  • 9 - 14 September 2019 / Guildford, Surrey, UK / The University of Surrey

CEPR Policy Research