February 2020

Heise, Porzio, 29 February 2020

Thirty years after reunification, a stark and persistent wage gap between East Germany and West Germany remains. This column studies why East Germans do not migrate to the West to take advantage of the higher real wages there. Analysing data from more than 1 million establishments and almost 2 million individuals over 25 years, it suggests that moving people across space is difficult and costly. Reallocating workers to better jobs at their current location could be a more cost-effective avenue to increase aggregate wages, and even accelerate regional convergence.

Howell, Nanda, 29 February 2020

Venture capital remains a critical source of financing for new ideas and technologies, but only 10-15% of venture capital-backed entrepreneurs are women. Using data from the Harvard Business School’s New Venture Competition, this column shows that networking frictions play a significant role in the gender gap, and that structural solutions focused only on providing women entrepreneurs with more exposure to VCs may not be enough to eliminate it. Instead, networking opportunities should be encouraged or even formalised, particularly in the realm of new venture competitions and accelerators.

Duso, 28 February 2020

In the last decade, global digital giants have snapped up hundreds of smaller, innovative companies. Should competition authorities have intervened more often? Tomaso Duso tells Tim Phillips about new research that suggests they should.

Bussolo, de Nicola, Panizza, Varghese, 28 February 2020

Firms can use political connections to gain an unfair advantage in resource allocation, such as easier access to credit. This column examines around 460,000 firms from six central and eastern European economies and shows that political connections ease credit constraints, distort capital allocation, and may have large welfare costs. Connected firms do not always borrow to invest and, when they do invest, they are likely to misallocate capital.

Bahar, Choudhury, Rapoport, 28 February 2020

There is considerable historical and contemporary evidence of the linkages between skilled migration and innovation, suggesting that one of the most important engines of economic growth stands to be strongly negatively affected by the growing backlash against migration around the world. Based on a 95-country sample spanning several decades, this column shows that migrant inventors play an important role in shaping the patent production of their destination countries. Arguably, these dynamics – driven by migrant inventors – can also affect broader economic outcomes, given the secondary effects of patenting and innovation on productivity and firm performance.

Morikawa, 27 February 2020

Japanese listed companies are recruiting many more outside directors to their boards in response to changes in corporate law and governance codes. The column uses data on firm performance to show that these changes have had no impact yet on the risk-taking behaviour or performance of firms. One-size-fits-all regulation may not be in the best interests of all firms.

Fetzer, Sen, Souza, 27 February 2020

Homelessness and precarious living conditions are on the rise across much of the Western world. This column examines the impact of a shock to the affordability of rent in the private sector in the UK, in the form of a cut in housing subsidies for low-income households, on homelessness and insecure living conditions as well as on democratic participation. The findings suggest that the cut was, to a large extent, a false economy. The net fiscal savings for the central government were markedly offset by significantly higher local government spending to meet statutory obligations for prevention of homelessness. The cut also led to widespread distress among benefit claimants, some of whom went into rent arrears and were forcefully displaced from their homes.

Broadbent, Di Pace, Drechsel, Harrison, Tenreyro, 26 February 2020

The UK economy has experienced significant macroeconomic adjustments following the 2016 referendum on its withdrawal from the EU. This column documents these macroeconomic adjustments systematically and demonstrates that the effects of the referendum result on the UK economy can be conceptualised as news about a future slowdown in tradable productivity growth.

Bayer, Born, Luetticke, 26 February 2020

How much does inequality matter for the business cycle and vice versa? This column explores the two-way relationship using a heterogeneous agent New Keynesian model estimated on both the macro and micro data. Although adding data on wealth and income inequality may not materially change the estimated shocks driving the US business cycle, the estimated business cycle shocks themselves are useful for explaining the evolution of US wealth and income inequality from the 1950s to today.

Albertazzi, Barbiero, Marques-Ibanez, Popov, Rodriguez d'Acri, Vlassopoulos, 25 February 2020

The response of major central banks to the Global Crisis has rekindled the debate on the interactions between monetary policy and financial stability. This column reviews empirical evidence on how monetary policy affects bank stability, focusing on unconventional monetary policy measures deployed by the ECB during the crisis. It argues that by stabilising the economy and averting a systemic crisis, these measures helped shore up stability, with the positive effects outweighing the adverse spillovers on banks’ intermediation capacity and risk-taking. However, such measures may need to be complemented with counterbalancing actions that go beyond monetary policy. 

Bloom, Bunn, Chen, Mizen, Smietanka, 25 February 2020

After months of political stalemate, Boris Johnson’s decisive victory in the December UK general election cleared the way for the UK to leave the EU. This column uses data from the Decision Maker Panel, a monthly survey of CFOs from around 3,000 UK businesses, to show that Brexit-related uncertainty has fallen since the election. The fall in uncertainty has been larger among more domestically focused businesses, however, and substantial uncertainty remains around the future trading relationship between the UK and the EU. There are some signs that this fall in uncertainty may lead to a modest pickup in investment, but it is still early days. 

Aastveit, Albuquerque, Anundsen, 25 February 2020

Housing supply elasticities can help explain why house prices differ across locations. This column uses a rich dataset and a novel identification method to show that US housing supply has become less elastic since the Global Crisis, with bigger declines in places where land-use regulation has tightened most and in areas that had larger price declines during the crisis. This new lower elasticity means US house prices should be more sensitive to changes in demand than before the crisis.

Malakotipour, Perotti, de Weijs, 24 February 2020

In 2019 the EU published its directive on bankruptcy reform, which national parliaments must now consider. This column argues the Relative Priority Rule that the reforms propose is unfair, would reduce financial stability, and may lead to a regulatory race to the bottom. The rule would aggravate risk-taking because returns would be captured by shareholders while losses would be borne by unsecured creditors. 

Arrigoni, Beck, Ca' Zorzi, Stracca, 24 February 2020

Governments are increasingly confronted with the task of preserving the positive effects of increased global integration while also managing their manifold side effects. This column looks at the effects of globalisation on inflation and financial stability and the role for central banks. It concludes that central banks are far from immune from the forces of globalisation and should continue to evolve and reassess their role and instruments in a changing world.

Klenert, Fernández-Macías, Antón, 24 February 2020

Opinion polls reveal that Europeans are greatly concerned about the economic consequences of advanced technologies, but our understanding of this relationship is still incomplete. This column assesses the impact of one such technology – industrial robots – on employment in Europe over the last two decades. Combining industry-level data on employment with data on robot adoption, it finds that robot use is linked to a small but significant increase in employment. Contrary to some previous studies, it does not find evidence of robots reducing the share of low-skill workers across Europe.

Cowan, Tefft, 23 February 2020

Over the past decade, there has been increasing interest in expanding access to college education in the US. This column examines how changes in college access in the US at the end of the 20th century affected schooling and health-related behaviours and outcomes. Increased access to two-year college, in particular, has had a positive impact on health-related behaviours such as smoking or exercising for some sub-populations. There is also some evidence that more years of schooling improved health outcomes, although more research is needed to understand the longer-term effects.

Caprettini, Voth, 22 February 2020

Governments of modern states need to convince men and women to fight and possibly to die for their country, putting aside their ‘selfish’ instinct to stay alive. This column examines whether welfare spending under Roosevelt’s New Deal boosted US patriotism during WWII. It finds that higher welfare spending prior to 1940 is positively correlated with greater patriotism, as measured by war bond purchases, volunteering for the US Army, and exceptionally brave acts in battle. The findings suggest that when the federal government looks out for its citizens’ needs, men and women who benefit repay the largesse by becoming more patriotic.

Ivlevs, Nikolova, Popova, 21 February 2020

Following the collapse of communism in Central and Eastern Europe, many former Communist Party members launched businesses. This column relies on individual-level survey data to document how entrepreneurial activity was driven by the connections, resources, and opportunities associated with former membership of the ruling party rather than by entrepreneurial skills or individual talent. The findings underscore the fact that former Communist Party networks continue to affect business practices in Central and Eastern Europe. 

Boustan, 21 February 2020

A century ago, American nativists succeeded in establishing immigration quotas to drive up the wages of US workers. What happened next? Not what you might think, Leah Boustan tells Tim Phillips.

Balduzzi, Brancati, Brianti, Schiantarelli, 20 February 2020

The effects of shocks to political risk can be captured by the change in the spread of sovereign credit default swaps. This column shows how the rise of populist movements in Italy following the financial crisis and sovereign debt crisis affects domestic and euro area financial markets, and also impacts the Italian real economy. Italy has been an ideal laboratory to explore and learn about the economic consequences of political risk shocks, and the instability there implies that this is likely to continue to be the case in the future.

Kotlikoff, 19 February 2020

The US has spent the entire post-war period running a massive and ever-growing Ponzi scheme that takes from the young and gives to the old. This column discusses how the scheme has been and is being run by expanding take-as-you-go-financed Social Security, Medicare, and Medicaid systems, by running huge official deficits, and by imposing a larger share of taxes on the young and a smaller share on the old. Take as you go, whether done on or off the books, has done precisely as theoretically predicted – reduced the US’s national saving rate from 13% in the 1950s and 1960s to 3% in the last two decades. This underlies, in large part, a commensurate drop in the domestic investment rate, which was also 13% between 1950 and 1969 and is now running at 4%. The textbook predicted consequence? Lower median labour productivity and median real wage growth.

Gehring, Schneider, 18 February 2020

Secessionist parties draw upon rhetoric on cultural identity and political autonomy to garner votes. However, the parties’ electoral success is also influenced by the availability of regional resources. This column examines two secessionist parties in the UK – the Scottish National Party and the Welsh Plaid Cymru – and the divergence in their performance following the discovery of oil within Scotland’s hypothetical maritime borders. It finds that a 10% increase in relative regional wealth is associated with an increase of 3 percentage points in the vote share of secessionist parties. Relative regional resource wealth is more important than absolute wealth, and changes in regional resource wealth only play a role when there is baseline support for secession.

Perotti, Soons, 18 February 2020

A monetary union among diverse economies enhances trade and financial integration, but also has redistributive effects. The column argues that the euro led to implicit devaluations and revaluations, boosting the productive incentives and fiscal capacity of strong members at the cost of others. The euro was thus a transfer union from the start, with implicit flows from the periphery to the core. 

Baskaran, Hessami, 18 February 2020

The fact that women are underrepresented in politics is often viewed as an important social problem. But why should it be a problem? This column argues that when too few women hold political office, political decisions may not adequately reflect women’s needs and preferences. Using the example of the public provision of childcare in Germany, it shows that municipalities with a higher share of female councillors expand public childcare more quickly. The fact that the presence of women has substantive effects on policies should be taken into account in current debates around the introduction of gender quotas in politics.

Cuñat, Zymek, 17 February 2020

Most countries exhibit large variation in bilateral trade balances across their trade partners. This column argues that it is possible to use gravity trade models to describe the sources of this variation with greater clarity, but that a large portion of the variation still remains poorly understood. It also shows that tariffs imposed during the US-China trade war will reduce the US-China trade deficit in the long run, but only by worsening the US trade balance with other trade partners almost one-for-one.

Manasse, Moramarco, Trigilia, 17 February 2020

The pound depreciated overnight by about 7% against the euro and other main currencies following the Leave victory in the UK’s EU referendum, suggesting that the markets expected Brexit to harm the British economy. Yet currency markets hailed the overwhelming victory of Brexiter Boris Johnson’s Conservative Party in the 2019 general election with a 2% appreciation of the pound. This column argues that this apparent contradiction can be explained by disentangling the effects that politics has on exchange rate expectations and a political risk premium.

Anderson, 16 February 2020

Global alcoholic beverage markets have changed dramatically in recent years due to globalisation, income growth in emerging economies, changes in individual preferences, policy initiatives to curb socially harmful drinking, and, in particular, the dual trade policy shocks of Brexit and the US’s unilaterally imposed discriminatory tariffs. This column provides an overview of the major trends and projects the possible effects of Brexit and the US tariffs on the global alcohol market. It concludes that both shocks would reduce world trade in wine. Even countries not targeted by US tariffs can be worse off if those tariffs sufficiently reduce global consumption. 

Ku, Schӧnberg, Schreiner, 15 February 2020

Previous research has told us little about whether place-based payroll tax incentives successfully boost employment. The column estimates their effect using a natural experiment in Norway, which was temporarily forced to abolish its place-based incentives. It finds that a rise in payroll taxes reduced employment. Downward wage rigidity meant that employers could not simply pass the tax increase on to workers.

Rohner, 14 February 2020

New research shows how a school-building programme in Indonesia successfully reduced conflict. Dominic Rohner tells Tim Phillips about this unanticipated peace dividend, and how the CEPR's research and policy network on conflict reduction will help policymakers.

Besley, Fetzer, Mueller, 14 February 2020

Reporting on violence draws attention to countries not typically covered by international news outlets. This leads to a ‘bad news’ bias, which can affect not only how people view these countries, but whether they choose to visit. Using aggregated spending data to proxy tourist activity, this column documents a robust relationship between the intensity of reporting on violence and subsequent drops in tourist spending, suggesting that a bad news bias can have serious economic consequences for the countries that suffer from it. 

Abramitzky, Boustan, Eriksson, Feigenbaum, Pérez, 14 February 2020

A number of vital questions in the social sciences, relating to intergenerational mobility or assimilation of migrants for example, require data that follow individuals over time. The recent digitisation of historical population censuses for the US and other countries has increased their availability, but linking such historical data is challenging. This column compares the performance of various linking methods and concludes that automated methods perform no worse on key dimensions than (more expensive) hand linking using standard linking variables.

Conti, Guglielminetti, Riggi, 13 February 2020

The weak relationship between wage dynamics and unemployment in the euro area since the Global Crisis is widely perceived as one of the main causes of the ‘twin puzzle’ of missing disinflation between 2009 and 2011, and missing inflation thereafter. This column attributes the weak response of nominal wage growth to employment dynamics since 2008 to the countercyclical behaviour of labour productivity, which is driven, in turn, by the exceptionally high persistence of the downturn and the subsequent recovery.

Borio, McGuire, McCauley, 13 February 2020

Foreign exchange swaps and forwards are a key instrument in the global financial system for hedging, position-taking and short-term funding. They involve the exchange of notional amounts at a future date and, as funding vehicles, they are akin to other forms of collateralised borrowing (e.g. repo). The amounts involved are huge, but the instruments remain mysterious in some ways: because of an accounting peculiarity, they are treated very differently from other forms of collateralised debt. This column examines their geography and draws implications for both academics and policymakers. It finds that non-US residents’ US dollar forward payment obligations arising from foreign exchange swaps and forwards are likely to be even larger than the corresponding on-balance sheet US dollar debt. It also highlights the favourable regulatory treatment that these instruments receive, and argues that they represent a critical pressure point in international financial markets.

Barwick, Li, Lin, Zou, 12 February 2020

During 2013–2014, China launched a nationwide, real-time air quality monitoring and disclosure programme which substantially expanded public access to pollution information. This column analyses the impact of the programme and finds that it triggered a cascade of changes in household behaviour, prompting people to find out more online about pollution-related topics, adjust their day-to-day consumption to avoid exposure to pollution, and exhibit a higher willingness to pay for housing in less-polluted areas. The programme’s estimated annual health benefits far outweigh the combined costs of the programme and associated pollution-avoidance behaviours.

Erbahar, Zi, 12 February 2020

Less than two years after his steel and aluminium tariffs came into effect, President Trump decided to increase the coverage of these tariffs to several downstream products whose domestic producers were hurt by the original tariffs. This column, first published in 2016, presents evidence for such ‘cascading protection’, showing how US protection of inputs increases the probability of petitions for protection by their downstream users.

Motta, Peitz, 11 February 2020

Big Tech mergers increasingly require regulatory authorities with enhanced toolboxes. To ensure genuine competition in the digital marketplace, novel theories of harm will need to be elaborated and applied. This column provides guidance on these issues, arguing that to properly investigate Big Tech mergers, competition law will need to restructure the standards and burden of proof.

Goda, Levy, Flaherty Manchester, Sojourner, Tasoff, 11 February 2020

A default effect in retirement saving is well established in the literature, but less is known about why this effect exists. This column examines US employees’ retirement contributions and default behaviour over a period when their employer moved from opt-in (i.e. a default savings rate of 0%) to automatic enrolment at 3%.  The findings suggest that rather than there being a single character trait that leads to default behaviour in retirement savings, the features of the plan interact with individual traits to determine behaviour.  Low financial literacy leads to default behaviour when the default is no contribution, but when the default is 3%, present bias leads to default behaviour.  

Morikawa, 10 February 2020

Although long-term macroeconomic forecasts substantially affect the sustainability of government debt and the social security system, they cannot avoid significant uncertainty. This column assesses whether academic researchers in economics make accurate long-term growth forecasts, comparing ten-year growth forecasts made by Japanese economists in 2006–2007 with the realised figures. Even excluding the years affected by the Global Crisis, the results show that forecasts tend to be biased upwards and involve significant uncertainty, even for economics researchers specialising in macroeconomics or economic growth.

Gans, 10 February 2020

Economists have argued that zero is just another price, and not a lower bound. The column describes a framework in which a monopoly has negative net costs, and can price below zero if it chooses. In these markets, setting a negative price would reduce the monopolist's profit. The model additionally implies that the assumption that more competition always improves welfare is false. 

Gomes, Kilic, Plante, 09 February 2020

A joint resolution of US Congress in June 1933 invalidated gold clauses, which allowed for repayment in gold as well as paper, in public as well as private debt contracts. A series of lawsuits ensued, but in 1935 a complex and confused ruling by the Supreme Court determined that Congress’s action, while unconstitutional, could be maintained. This column argues that about one-third of the dramatic drop in the aggregate investment of public firms over 1933 and 1934 is explained by these events. By 1936 nearly all of the, now positive, net investment is accounted for by the elimination of these leverage risks to corporate balance sheets.

He, Kang, Lacetera, 08 February 2020

Many work environments require their employees to apply for promotions, a process that results in fewer women opting to compete. This column presents evidence to suggest that changing promotion schemes to a default where everyone is considered but has the option to ‘opt out’ could help close the gender gap in applications to compete for promotions. 

Haldane, 07 February 2020

Is regional inequality a problem that central banks should worry about? Andy Haldane of the Bank of England tells Tim Phillips why he thanks the answer is yes: but why we also need to think about what, and how, we measure.

Brei, Borio, Gambacorta, 07 February 2020

In the aftermath of the Global Crisis, both short-term and also long-term interest rates have fallen to historically low levels. This column sheds light on how banks adjust their business in a very low interest rate environment. The results are mixed news for financial stability and for banks’ capacity to support economic activity through lending. A shift to less risky portfolios, combined with higher capitalisation, strengthens banks’ resilience and lending capacity. But lower profitability due to the lower net interest margins may make them more vulnerable and less able to provide loans in the longer term.

Bertocchi, Brunetti, Zaiceva, 07 February 2020

The financial decisions made by immigrants are likely to differ substantially from those made by natives. Using data from a Bank of Italy survey, this column compares native Italian and immigrant households and shows that immigrants find themselves worse-off both in terms of wealth holdings and allocation across assets. These gaps can affect immigrants’ wellbeing, inhibit integration, and have consequences for the country’s financial markets.

Ariu, Mayneris, Parenti, 06 February 2020

Many large and successful firms sell both goods and services; yet economists and policymakers continue to consider the two as distinct sectors subject to their own market adjustments and specific policies. Based on Belgian data, this column argues that the most successful manufacturing firms thrive through selling services that are associated with their goods. Services increase the appeal of a firm’s products, thus allowing it to sell more and at higher prices in international markets. Considering goods and services separately in trade agreement negotiations is likely to miss part of the business and welfare gains and losses. 

Rapanos, Sommer, Zenou, 06 February 2020

Information and social norms matter in people’s decisions whether to commit crimes. Strategic interactions in networks influence the gap between the actual and perceived risks and costs of being caught. The column sets out a game framework in which the expectations of potential criminals are influenced by their peers. Surprisingly, severing these information links – even between relatively active offenders – does not necessarily lead to a decrease in the aggregate level of crime.

Gans, Gandal, 06 February 2020

Cryptocurrencies such as Bitcoin rely on a ‘proof of work’ scheme to allow nodes in the network to ‘agree’ to append a block of transactions to the blockchain, but this scheme requires real resources (a cost) from the node. This column examines an alternative consensus mechanism in the form of proof-of-stake protocols. It finds that an economically sustainable network will involve the same cost, regardless of whether it is proof of work or proof of stake. It also suggests that permissioned networks will not be able to economise on costs relative to permissionless networks.

Phillips, 05 February 2020

In richer developed nations almost 90% of people are online, but this number is less than 20% in the least-developed countries. This column presents the Pathways for Prosperity Commission’s final report, which offers pragmatic suggestions to help developing countries make the most of technological change. It proposes a ‘digital compact’, with countries working towards a shared vision for the future crafted with the input of industry, civil society, and other national leaders.

Ehrmann, Jarociński, Nickel, Osbat, Sokol, 05 February 2020

Inflation in advanced economies fell by less than expected in the wake of the financial crisis, while more recently, measures of slack and underlying inflation in the euro area have seen a disconnect. These and other inflation developments since the Global Crisis have surprised policymakers, practitioners, and academics alike. This column outlines the evidence presented at a recent ECB conference which aimed at enhancing collective understanding of the drivers and dynamics of inflation. 

Ariel Aaronson, 05 February 2020

Individuals, citizens and firms have become increasingly dependent on data-driven services such as artificial intelligence and apps, and the same is true of defence and national security officials. This column argues that the US failure to adequately govern how firms use and monetise data affects national security in many ways. It also examines specific examples of the misuse of data and assesses the responses by the US and the EU.

Ball, Mazumder, 04 February 2020

Inflation did not fall as much as the textbook Phillips curve would predict during Europe’s recessions of 2008 and 2011, and it has not risen as much as the theory would predict during recovery. This column argues that adapting the Phillips curve to use a weighted median of industry inflation rates results in a much better fit with observed inflation. Adding the effect of headline inflation shocks improves the fit further.

Albanese, Barone, de Blasio, 04 February 2020

There is a rapidly growing empirical literature on the causes of the recent rise of populism in Western countries, but much less is known about solutions. This column, part of the Vox debate on populism, shows that in areas facing similarly adverse economic shocks, the exposure to the EU regional redistribution policy has helped lowering the support for populist parties. This suggests that, at least in the short term, fiscal policy can be an effective tool against the populist backlash.

Gelos, Gornicka, Koepke, Sahay, Sgherri, 04 February 2020

Capital flows to emerging markets have continued to be highly volatile since the Global Crisis. This column uses a new framework to show that country characteristics and policy responses matter for risks to future capital flows. It finds that good institutions support stable capital flows over the medium horizon, and while foreign exchange interventions seem to help mitigate downside risks to inflows caused by worsening global conditions, a tightening of capital flow measures in response to an adverse global shock is found to be counterproductive.

Niepelt, 03 February 2020

Central banks already issue digital money, but only to a select group of financial institutions. Central bank digital currency would extend this to households and firms. This column examines the proposal for such currency and assesses the opportunities and risks. It argues that while preparations for the launch of Libra have not proceeded according to plan, it has become clear that for central banks, maintaining the status quo is not an option.

Gadenne, Rathelot, 03 February 2020

VAT may act to segment firm-to-firm trade in developing economies into VAT-paying and non-VAT-paying networks. This column presents evidence of this from India and argues that the higher the rate of VAT, the greater the effect. This segmentation decreases the output of non-VAT-paying firms, whose sourcing choices have been distorted by VAT, by between 7% and 10%.

Dingel, Miscio, Davis, 02 February 2020

Nearly three billion more people are expected to join the world’s urbanised population over the coming decades, most of them in developing countries. In order to compare the spatial distribution of economic activity in different cities as they evolve, this column begins with a deceptively simple question: what constitutes a city? Using satellite imagery of lights at night to define cities, this approach finds that in Brazil, China, and India, agglomeration appears to be skill-biased, as it is in developed economies.

Picchio, van Ours, 02 February 2020

Retirement is a major professional and personal milestone, and the welfare effects are varied and complex. This column exploits data from the Netherlands to investigate the impact on mental health. While retirement appears to have positive mental health effects for partnered men and their partners, the effects are often negative for single men. For both partnered and single women, retiring appears to have fewer mental health implications. The findings suggest that allowing for greater overall flexibility in the retirement process could have welfare-improving effects.

Liu, Niepmann, Schmidt-Eisenlohr, 02 February 2020

After the Global Crisis, accommodative monetary policy also eased financial conditions in emerging market economies. This column shows that US banks contributed to the transmission of US monetary policy and that regulation and supervision attenuated it. Only US banks that performed well in the Fed’s annual stress tests expanded their lending to emerging markets in response to monetary easing. Banks that performed poorly left their lending unchanged.

Gokmen, Vermeulen, Vézina, 01 February 2020

Throughout history, empires have facilitated trade within their territories by building and securing trade and migration routes, and by imposing common norms, languages, religions, and legal systems, all of which led to the accumulation of imperial capital. This column, based on novel data on the rise and fall of empires over the last 5,000 years, shows that imperial capital has a positive effect on current trade beyond historical legacies such as sharing a language or a religion. This suggests a persistent and previously unexplored influence of long-gone empires on current trade.

Calderon, Fouka, Tabellini, 01 February 2020

The 1940-1970 Great Migration of African Americans was one of the largest episodes of internal migration in the US. This column examines how resulting changes in the racial composition of local constituencies affected voters’ preferences and politicians’ behaviour. It finds that Democrats and union members supported blacks’ struggle for racial equality, but that backlash against civil rights erupted among Republicans and among whites who more exposed to racial mixing of their neighbourhoods. It also shows that politicians largely responded to demands of their constituencies. The findings suggest that under certain conditions, cross-race coalitions can emerge, but they also indicate that changes in the composition of the electorate can polarise both voters and politicians.

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