June 2020

Causa, Cavalleri, 30 June 2020

The Covid-19 pandemic risks exacerbating existing inequalities. This column analyses distributional aspects of the crisis by focusing on non-standard workers, whose limited access to social protection and job retention schemes make them particularly vulnerable to labour market disruptions. The authors discuss which policy actions governments have taken thus far and which policies they can pursue further in order to support vulnerable workers and avert the risk of a pandemic inequality feedback loop.

Pisch, 30 June 2020

The Covid-19 pandemic has re-opened debate about the merits and drawbacks of highly coordinated global supply chains in manufacturing. This column documents the economic relevance, geographical properties and ownership structure of French manufacturing firms in international just-in-time supply chains – as well as potential implications for global value chains in a post-Covid-19 world. Just-in-time supply chains are likely to become more prevalent, contribute to further regionalisation of international trade, and generate an increase in multinational production.

Kleinnijenhuis, Kodres, Wetzer, 30 June 2020

The COVID-19 induced ‘Great Lockdown’ has cast doubt on the efficacy of bank buffers in supporting the real economy in times of crisis. Despite accommodative regulatory and supervisory action, banks remain hesitant to draw on their buffers to maintain credit provision. Recognising the difficulty in judging the demand for credit in the midst of the COVID-19 crisis, this column focuses on the potential supply of credit and explores the obstacles to ‘usability’ of bank capital. It concludes that the current capital framework falls short: there is not enough ‘usable capital’, and the disincentives to actually draw it down are too strong. Finally, it recommends improvements in current capital framework to overcome these issues.

Caldera, Koirala, 30 June 2020

International cooperation amplifies individual countries’ efforts; in the fight against the COVID-19 pandemic, international cooperation is not only useful, but indispensable. This column discusses eight priorities to strengthen international cooperation against COVID-19, both in the short term for crisis response, and to facilitate an inclusive and sustainable recovery. In the short run, cooperation between governments is needed to curb the pandemic and expedite exit from the crisis. In the medium and long run, internationally coordinated policies can facilitate recovery and the rebuilding of socioeconomic systems in inclusive and sustainable ways and help prepare for future risks and pandemics.

Davillas, Jones, 30 June 2020

The economic and policy response to COVID-19 has created specific gradients in both exposure to the disease itself and in exposure to the economic impact of the lockdown. This column uses survey data to show that inequality in psychological distress has increased since the pandemic in the UK. However, the proportion of inequality explained by observed individual circumstances has decreased. Pre-pandemic, the largest contributors were financial, employment and housing conditions. By April 2020, age and gender accounted for a larger share, through the impact of the pandemic on mental wellbeing among young people. Working in COVID-affected industries, household composition and parental occupation have also increased their association with the inequality in psychological distress. 

Baqaee, Farhi, 29 June 2020

Covid-19 is an unusual combination of supply and demand shocks. These shocks propagate through supply chains, causing different sectors to become demand-constrained or supply-constrained. This column uses a disaggregated Keynesian model to identify the shocks, classify the sectors, and draw implications for policy. Negative sectoral supply shocks and shocks to the sectoral composition of demand generate more than 7% inflation, and this inflation is kept in check by a large negative aggregate demand shock. There is considerable slack in economy, with 6% Keynesian unemployment, but it is concentrated in certain sectors. As a result, untargeted aggregate demand stimulus, while desirable, is less effective than in a typical recession. 

Benigno, Hartley, García-Herrero, Rebucci, Ribakova, 29 June 2020

Emerging economies are fighting COVID-19 and the economic sudden stop imposed by the containment and lockdown policies, in the same way as advanced economies. However, emerging markets also face large and rapid capital outflows as a result of the pandemic. This column argues that credible emerging market central banks could rely on purchases of local currency government bonds to support the needed health and welfare expenditures and fiscal stimulus. In countries with flexible exchange rate regimes and well-anchored inflation expectations, such quantitative easing would help ease financial conditions, while minimising the risks of large depreciations and spiralling inflation. 

Bredemeier, Juessen, Winkler, 28 June 2020

The COVID-19 crisis has disproportionately affected different occupations in the labour market. Workers in contact-intensive and personal-service oriented sectors bear the brunt of the COVID-19 recession, but blue-collar workers suffer heavy job losses as well. This column uses a multi-sector, multi-occupation macroeconomic model to study how different fiscal stimulus measures can boost aggregate demand and help the economy recover faster. It finds that a cut in taxes on labour income outperforms other stimulus plans in promoting job creation for those who lost their jobs in the COVID-19 downturn.

Bennedsen, Larsen, Schmutte, Scur, 28 June 2020

Much of the economic turmoil caused by the COVID-19 pandemic is channelled through firms and their managers’ decisions. Responding to the pandemic, governments have closed non-essential workplaces and imposed social distancing measures while offering firms various forms of aid. Using firm-level survey data from Denmark, this column examines the impact of these measures on firms, and the uptake and effects of certain policy tools used in Denmark, which are similar to those used in many other countries. It shows that while most firms suffered pronounced revenue declines, targeted government policy helped many stay afloat, and created incentives for job retention.

Brown, Ravallion, van de Walle, 27 June 2020

Recommendations to limit the spread of COVID-19 call for social distancing, washing, and access to information and treatment. However, people need to be in household environments that allow them to follow those recommendations. This column examines the relationship between poverty and the adequacy of the home environment. There is a strong wealth effect both within and between countries, where the poor are less likely to have the kind of dwellings and infrastructure to follow WHO recommendations. Complementary policies to address such inadequate home environments are needed.

Edlund, Machado, 27 June 2020

The urban renewal that transformed many US inner cities may have hit its first major speed bump with the outbreak of Covid-19. The ‘space versus commute’ trade-off has been thrown into doubt and confusion by work-from-home orders. This column draws on socioeconomic history, arguing that a mass exodus of skilled professionals to the suburbs could have major implications for inner city areas. Although this could spell the return to the homicidal days of the 1980s, the authors argue that this may not be the case – the reason being: cell phones and how they have impacted illicit drug retailing.

Berden, Francois, Erixon, 26 June 2020

Calls for more protectionism have been on the rise for some time now, and have surged again with the Covid-19 pandemic. This column points to similar policies and their negative consequences during the Great Depression. Discussing similarities and differences of the economic situation between then and now and drawing on lessons from the Great Depression, it highlights the very negative consequences of increasing protectionism.

Piguillem, Shi, 26 June 2020

Given the wide range of strategies pursued by governments coping with COVID-19, the question of ‘who got it right’ is unavoidable. This column argues that the combination of issues at stake – the chance to eliminate the virus, the statistical value of life, and the behavioural reactions to social distancing – makes it possible to rationalise quite different government reactions. Nevertheless, one tool could have substantially reduced the economic cost of quarantines and was vastly underutilised by most countries: testing.

Alon, Kim, Lagakos , VanVuren, 26 June 2020

The COVID-19 pandemic has led to dramatic policy responses in most advanced economies, and in particular sustained lockdowns matched with sizable transfers to workers. This column discuss the extent to which developing countries should try to replicate these policies. Due to differences in labour market informality, fiscal capacity, healthcare infrastructure, and demographics, blanket lockdowns appear less effective in developing countries. Age-targeted policies – where the young are allowed to work while the old are shielded from the virus – can potentially save both more lives and livelihoods.

Imbs, Pauwels, 26 June 2020

Exposure to foreign shocks is often thought to be highly dependent on foreign trade and measures of openness usually build exclusively on measures of direct trade. This column argues that in a world of global value chains, focusing on direct trade gives a distorted view of the exposure to foreign shocks. It proposes a new measure of openness which computes the fraction of gross output sold to downstream customers located abroad. This measure finds most sectors to be more open and this increased openness is estimated to cause rises in productivity and contagion, without observable effects on growth.

Choi, Furusawa, Ishikawa, 26 June 2020

To address the issue of tax avoidance by multinational enterprises, governments impose transfer-pricing rules to control transfer-price manipulation. Using a theoretical framework allowing for the possibility of profit shifting, this column explores the interplay between transfer-pricing regulations and tax competition. It finds that the nature of tax competition can depend on the tightness of transfer-pricing regulation, and a tax-haven country does not always prefer lax transfer-pricing regulation. Thus, the incentives of the host and FDI source country can be aligned to set up global regulatory standards for transfer pricing.

Panizza, 26 June 2020

A new ebook from the CEPR and the International Development Policy Journal discusses the threat to developing and emerging economies from the pandemic, and what we can do about it. Ugo Panizza is one of the editors, and he joins Tim Phillips to discuss capital flight, conflict, and what advanced economies and can do to help.
Download Covid-19 in Developing Economies here, for free

Bloom, Prettner, 25 June 2020

Over the last decade there has been a tremendous progress in automation. Many tasks previously seen as un-automatable can now be performed without human labour, and the number of industrial robots in use has increased sharply. This column describes the recent trends in automation and argues that its principal effects are to increase output per capita at the expense of rising inequality. Advancing technologies have mainly replaced the routine tasks of low-skilled workers, while the incomes robots generate flow to wealthier capital owners. The current COVID-19 pandemic is likely to reinforce these trends, raising the need for a policy response.

Okubo, 25 June 2020

The Japanese government’s policy response to the COVID-19 pandemic was to ask people to refrain from leaving their homes and to encourage teleworking. This column examines the effect of COVID-19 on the uptake of teleworking in a country that has the lowest use among developed countries. Overall, teleworking increased about 4 percentage points from January to March 2020, driven by industries and occupations related to information and located in the Tokyo metropolitan area. Teleworking is not suited to face-to-face services and manual labour, which saw substantial declines in worker incomes.

Federico, Hassan, Rappoport, 25 June 2020

In a period where the backlash against trade and globalisation is at historical high point, it is crucial to understand the frictions that prevent a full realisation of the gains from trade. This column takes evidence from Italy and contributes to the debate by identifying a novel channel: the endogenous funding constraint of banks whose loan portfolios are affected negatively by the liberalisation. There are spillovers between ‘losers’ and ‘winners’ from trade that operate through banks, which hinder the reallocation of resources towards firms that should actually expand after the liberalisation.

Aghion, Maghin, Sapir, 25 June 2020

The COVID-19 pandemic has shed light on the structural dichotomy between the models of capitalism operating in Europe and the US; the former offers better protection for its citizens while the latter shows greater economic dynamism. This column argues that for all the harm COVID-19 has caused, the crisis has also provided an opening to rethink the versions of capitalism practised on both sides of the Atlantic. Some degree of convergence towards a better model is desirable, the authors suggest, and perhaps even possible.

Hall, Kudlyak, 24 June 2020

The global COVID-19 pandemic has led to job loss of catastrophic proportions in the United States. This column looks at recoveries from recessions over past 70 years to assess how the US labour market might recover from this job loss of unprecedented magnitude. Remarkably consistent recoveries have occurred in the US after every recessionary shock that caused a spike in unemployment, and there are reasons to believe that the recovery from the current shock will be more rapid, because unemployment contains a much larger fraction of workers on temporary layoff than in previous recoveries. However, there is a great deal of uncertainty about the possible recovery rate.

Albuquerque, Iseringhausen, Opitz, 23 June 2020

The COVID-19 shock has ended the eight-year long US housing market expansion. At the same time, the Federal Reserve and the US Government have deployed significant resources to help weather the ongoing crisis. But the trajectory of the post-COVID-19 recovery remains uncertain. Using a time-varying parameter model, this column suggests that the next US housing recovery may exhibit similar features to the 2012-19 expansion: a sluggish response of housebuilding to rising demand, but a strong response of house prices.

Revoltella, Maurin, Pál, 23 June 2020

COVID-19 and the related lockdowns have taken their toll on the EU corporate sector. This column uses an accounting approach and ORBIS firm-level data to assess the medium-term strategic choices for firms. Assuming three months of lockdown and under different normalisation scenarios, cumulative net revenue losses of EU companies are estimated in the range of 13-24% of EU GDP. These losses create a difficult trade-off for firms between protecting investments and increasing their leverage. To properly accompany the recovery, policies to ease access to credit should be matched to enhanced instruments for long-term, equity-type financing.

Calvino, Criscuolo, Verlhac, 23 June 2020

Start-ups play a key role in OECD economies, but the COVID-19 crisis is reducing their creation, challenging their survival, and limiting their growth. Business registrations have been dropping significantly in recent months and a missing generation of new firms has significant implications for economic outcomes, notably employment. This column argues that these can be mitigated by taking steps to support existing start-ups and the creation of new firms. Policymakers should tackle short-term challenges, supporting short-term liquidity and availability of funding, but also and importantly foster the ability of start-ups to grasp new business opportunities. Policies that reduce barriers to entrepreneurship, provide incentives for start-ups, and boost entrepreneurial potential could help speed up the recovery and preserve aggregate employment in the long term.

Landau, 23 June 2020

The simultaneous increase in public debt and central banks' balance sheets in advanced economies results in important policy trade-offs. In effect, the ‘monetisation’ of government debts by central banks transforms current credit and funding risks into future inflation risk. Low interest rate and inflation rate create a conducive policy space for financing exceptional public expenditures in response to the COVID-19 shock. This column argues that, in the presence of very low and stable inflation expectations, this is an optimal policy mix. To be sustainable, the perspective of fiscal dominance must be eliminated and central banks' independence must be respected and reinforced.

Beck, Mazzaferro, Portes, Quin, Schett, 23 June 2020

On 27 May, the ESRB General Board adopted a wide-ranging recommendation to suspend pay-outs across different segments of the European financial system until the end of 2020. This column discusses why arguments for such restrictions weigh stronger than ownership and management rights during these unprecedented times. It provides a rationale for why the recommendation is a wide-ranging one, including banks, investment firms, insurance companies and CCPs and referring to all voluntary pay-outs, including dividends, share buy-backs and variable remuneration to material risk-takers.

Gilhooly, Martinez, Watt, 22 June 2020

China has implemented a wide range of measures to support the economy through the ongoing coronavirus shock. This column examines China’s policy response, and suggests that the recent loosening in financial conditions should support activity over the next six to nine months, but it will only be at best half that seen in 2016 and a third of that after the Global Crisis given the relative change in financial conditions thus far. Moreover, the policy levers are at best only 40% of that deployed during the Global Crisis. This contrasts with the approach of many other countries, which have reacted more aggressively to the coronavirus shock. 

Mitze, Kosfeld, Rode, Wälde, 22 June 2020

Confronted with a novel, aggressive coronavirus, Germany implemented measures to reduce its spread since March 2020. Requiring people to wear face masks in public places has, however, been a subject of controversy and isolating the effect of mask-wearing on the spread of COVID-19 is not simple. This column looks at the town of Jena and other German regions that introduced face masks before the rest of the country to see whether the requirement makes a difference in the number of new COVID-19 cases. Requiring face masks to be worn decreases the growth rate of COVID-19 cases by about 40% in Germany.

Yamamura, Tsutsui, 22 June 2020

Japan has had relatively few victims of COVID-19, even though the Japanese government has adopted more modest measures than other nations. Nonetheless, the pandemic has been a substantial strain on citizens' mental health, which may have triggered rises in domestic violence. This column presents evidence from various Japanese prefectures, focusing on people’s mental wellbeing before and after the state of emergency was declared. Results indicate that the announcement led citizens to take preventive steps, but caused them to experience certain heightened emotions. Crucially, the importance of mental healthcare should not be overlooked as an additional policy consideration.  

Niepelt, 22 June 2020

Notoriously inconclusive policy recommendations and the failure to foresee the Great Recession have caused many commentators to voice doubts about the usefulness of macroeconomics. This column argues that macroeconomics can offer a coherent framework to understand and evaluate policy options, but macroeconomists need to explain the field’s subject matter and findings better to both policymakers and the general public. A new textbook aims at closing the gulf between macroeconomic research and widespread misconceptions about it by providing a concise and rigorous introduction to modern macroeconomic theory.

Djankov, Panizza, 22 June 2020

At the beginning of the COVID-19 pandemic, it was hoped that warm weather and younger populations would shield many developing countries from the virus. This hope has not been in realised. Infected cases in Africa, South Asia and Latin America are still growing, with Latin America having surpassed the number of cases in Europe and growing rapidly. This column introduces a new eBook that describes the early work focusing on developing and emerging markets. It concludes that the international community should step up, by providing aid, technical assistance and debt relief so that countries will not need to decide between saving lives and servicing their debts.

Leiva-León, Pérez-Quirós, Rots, 21 June 2020

The Global Weakness Index (GWI) is a real-time measure of how weak the global economy is. This column uses GWI to assess the repercussions of the coronavirus (COVID-19) crisis in real time. It finds that, after the release of certain soft indicators on 2 March 2020, the GWI increased sharply – much faster than in the 2008 crisis. Moreover, the index remained at a record high at the time of writing, 14 May 2020.

Garikipati, Kambhampati, 21 June 2020

The effectiveness of female leaders in handling the COVID crisis has received a lot of media attention. This column examines whether the gender of the national leader truly makes a significant difference to the number of COVID-19 cases and deaths in the first quarter of the pandemic, with differences in lockdown timing examined as a plausible explanation for these patterns. The findings show that COVID outcomes are systematically better in countries led by women. Insights from behavioural studies and leadership literature are used to speculate on the sources of these differences, as well as on their implications. 

Hosono, Takizawa, Yamanouchi, 21 June 2020

How do firms grow as they age after establishment? What drives high growth rates for young firms? Using a large dataset from Japan for the period from 1995 to 2015, this column argues that the accumulation of intangible capital plays a significant role in the growth of physical productivity, which, in turn, accounts for a major part of sales growth as firms age. Of the three types of intangible capital – organisational capital, software, and R&D stocks – organisational capital explains a large part of the sales growth.

Kirti, Shin, 20 June 2020

The grim impact of COVID-19 – extensive financial dislocations across asset classes and potentially large increases in morbidity and mortality – could pose a challenge to the insurance industry, particularly life insurers. This column urges central banks looking to preserve credit supply to account for changes in insurer risk appetite, which could take place well before capital levels approach regulatory thresholds. Financial stability assessments should examine the implications of the pandemic for insurers, which operate in some countries on a comparable scale to banks.

Borchert, Magdeleine, Marchetti, Mattoo, 20 June 2020

Despite the growing importance of services in output and trade, there has been relatively little information on how services policies have evolved over the past decades. This column presents evidence on services trade policies from a new database created by the World Bank and WTO. It reveals that higher income economies are more open on average than developing economies, but the chronology of reform varies across sectors. In addition, while explicit restrictions are being lowered, regulatory scrutiny is increasing in most sectors, especially in higher income economies.

Fabrizio, Malta, M. Tavares, 20 June 2020

The COVID-19 crisis is depressing growth globally, and lockdown measures are causing widespread job losses. This column illustrates that women are amongst the worst affected. Women are vulnerable not only because of their jobs, but also because of gender inequalities within housework division, education, and health. There is an urgent need to support women, repair gender disparities aggravated by crisis, and to reduce women’s vulnerability going forward. Gender-responsive fiscal measures are viable tools that work in the interests of women, as well as supporting economic growth and reducing poverty and inequality.

Coibion, Gorodnichenko, Weber, 19 June 2020

The COVID-19 pandemic has resulted in some of the largest monetary and fiscal policy responses around the world. This column uses a large-scale survey of US households during the pandemic to study how new information about the coronavirus and associated policy responses affect households’ expectations. It finds that such information treatments have little effect on both households’ economic beliefs and future spending plans. This result is a fundamental challenge to workhorse models used by macroeconomists in which the rapid and endogenous adjustment of household expectations is a key driver of macroeconomic outcomes.

Del Boca, Oggero, Profeta, Rossi, 19 June 2020

The social distancing measures adopted to slow the spread of COVID-19 have placed a particular burden on families. Using survey data collected in April 2020 from a representative sample of Italian women, this column asks how working from home – combined with school closures – has affected the working arrangements, housework, and childcare provisions of couples in which both partners are employed. Most of the additional responsibilities have fallen to women, though childcare activities are shared more equally than housework.

Capelle-Blancard, Desroziers, 19 June 2020

During the COVID-19 pandemic and the related economic fallout, the response of the stock markets has raised concerns as well as questions. This column explores the surprising trends. There is some evidence that shareholders have favoured the less vulnerable firms, and that credit facilities and government guarantees, lower policy interest rates, and lockdown measures mitigated the decline in stock prices. However, fundamentals only explain a small part of the stock market variations at the country level. Overall, it is hard to deny that the links between stock prices and fundamentals have been loose at best.

Carletti, Oliviero, Pagano, Pelizzon, Subrahmanyam, 19 June 2020

The COVID-19 induced crisis has caused severe distress for the economy. This column estimates the profit and equity shortfalls triggered by the COVID-19 shock for a representative sample of Italian companies, including large, medium and small companies. A three-month lockdown is found lead to an aggregate annual drop in profits of €170 billion, with an implied equity erosion of €117 billion. Some 17% of all firms, employing over 800,000 workers, are estimated to face severe distress. Small and medium enterprises are affected disproportionately, with 17.2% of affected compared with 6.4% of large firms.

Almagro, Orane-Hutchinson, 19 June 2020

Different countries and cities have different rates of Covid exposure, but what can explain the difference in incidence between neighbourhoods? New York residents Milena Almagro and Angelo Orane-Hutchinson tell Tim Phillips what made the difference in their city.
Read their research in Covid Economics 13.

De Lyon, Dhingra, 19 June 2020

Despite the Covid-19 pandemic, the UK has been continuing its preparations to leave the EU by the end of 2020. Covid-19 has had a huge negative impact on the UK economy and Brexit will present another profound change in circumstances for UK businesses. Analysing real-time business survey data from the UK, this column shows that sectoral impacts of Covid-19 and Brexit are very different. Sectors that have suffered less during the lockdown are the ones that are exposed to bigger negative impacts from Brexit, as measured by actual effects since the Brexit vote and predicted effects from higher trade barriers with the EU.

Mayhew, Wills, 18 June 2020

Inequality within most developed countries is higher today than it was 30 years ago. Growth in emerging economies has reduced inequality between nations, but the benefits have been unevenly spread within those economies. This column analyses what has happened, why we should care, and what can be done about inequality. Governments have not focused enough on pre-market policies that prevent inequality arising in the first place. Post-market interventions should be seen as too little, too late. Instead, we need a call-to-arms for governments to re-focus on the deep underlying drivers of inequality.

Giuliano, Rasul, 18 June 2020

If social distancing is crucial to slow the spread of Covid-19, it is important to know what determines whether individuals will effectively adopt the practice. This column draws on real time data collected across many different countries to document important drivers of compliance with social distancing. These drivers are found to vary with social capital, trust in government and political beliefs.

De Grauwe, Diessner, 18 June 2020

There is growing acceptance that some form of monetary finance is needed, if not inevitable, in light of the severity of the downturn in the euro area. This column argues that while a monetisation of the deficits induced by the COVID-19 crisis would eventually increase the price level so that, after a return to economic normalcy, inflation would rise for a couple of years, this is a price worth paying to avoid future sovereign debt crises in the euro area. Moreover, the ECB, as the most independent central bank in the world, would be well equipped to prevent the inflationary upsurge from becoming permanent.

Jonung, 18 June 2020

The Swedish policy response to Covid-19 is exceptional by international comparison. This column explains how the approach is decided by three articles in the Swedish constitution. The first guarantees the freedom of movement for Swedish citizens, ruling out nationwide lockdowns. The second establishes unique independence for public agencies, allowing them to design the policy response to the pandemic. The third grants exceptional powers to local government. In addition, the Swedish approach is fostered by strong trust in the government.

Bartscher, Seitz, Siegloch, Slotwinski, Wehrhöfer, 18 June 2020

In the absence of viable medical responses to combat the ongoing Covid-19 pandemic, policymakers have appealed to the social responsibility of their citizens to comply with social distancing rules. This column explores how regional differences in social capital can affect the spread of Covid-19, focusing on seven European countries. The results suggest that areas with high social capital registered between 12% and 32% fewer Covid-19 cases from mid-March until mid-May. A case study of Italy validates the independent role of social capital, showing a consistent reduction in excess deaths and documenting a reduction in mobility prior to the lockdown as a mediating channel.

Miroudot, 18 June 2020

Some governments assert that global value chains create economic vulnerabilities in times of a pandemic. This column, taken from a recent Vox eBook, examines recent experiences and the risk-management literature. It concludes that it is a mistake to equate self-sufficiency with robustness – putting all the eggs in one basket is still not a good idea.  It is also a mistake to focus on production location when the imperative is to radically scale up production of vital medical supplies. Importantly, international supply chains will be needed to produce the billions of doses of COVID-19 vaccine we will soon need to manufacture and distribute. 

Carletti, Claessens, Fatás, Vives, 18 June 2020

The Covid-19 pandemic has induced a deep global economic crisis. While so far banks have shown their resilience, partly thanks to major reforms after the crisis of 2007-2009, the crisis will put them under stress. Moreover, the traditional banking model was already being challenged pre-Covid by three trends: persistently low interest rates, enhanced regulation, and increased competition from shadow banks and digital entrants. This column introduces the second report in the Future of Banking series from the IESE Business School and CEPR, which provides a perspective on how the current crisis and these trends will shape the future of the banking sector.

Brinca, Duarte, Faria e Castro, 17 June 2020

Recent academic discussions have sought to understand whether the economic impact of the COVID-19 crisis and associated lockdown should be ascribed to demand or supply shocks. This debate is of some importance since the underlying shock can have significant implications for stabilisation policy. This column tries to answer these questions by using data on hours worked and wages to estimate labour demand and supply shocks for the aggregate economy and for different sectors through an econometric model. It finds that while labour supply shocks accounted for a larger share of the fall in hours, both shocks were important.

Faia, Laffitte, Mayer, Ottaviano, 17 June 2020

Understanding the effects of automation and offshoring on labour markets and growth has been a significant topic of interest. This column argues that automation and offshoring fundamentally affect the matching between firms and workers and do so in contrasting ways. It predicts that automation will increase firms’ and workers’ job selectivity and decrease employment, while offshoring will have the opposite effect. Empirical evidence as well as a quantitative model support this hypothesis and provide a mechanism of technological change typically missed in standard neoclassical reasoning.

Deb, Furceri, Ostry, Tawk, 17 June 2020

Containment measures to halt the spread of the 2019 coronavirus pandemic entail large short-term economic costs. This column attempts to quantify these effects using daily global data on real-time containment measures and daily indicators of economic activity. Over a 30-day period from implementation, containment measures have, on average, led to a loss of about 15% in industrial production. Macroeconomic policy measures have however mitigated some of these economic costs. Stay-at-home requirements and workplace closures are most effective in curbing both infections and deaths but are also associated with the largest economic costs.

Baker, Farrokhnia, Pagel, Meyer, Yannelis, 17 June 2020

After a steep decline in spending, US households responded rapidly to the receipt of COVID-19 stimulus payments. Still, relative to similar programs in 2001 and 2008, spending on durables decreased. This column uses high-frequency transaction data to analyse consumption responses to shelter-in-place orders and government-issued stimulus checks across income levels and locations. It shows that larger increases in spending on food and payments – from credit cards to rents and mortgages – reflect a short-term debt overhang and suggest that direct payments failed to stimulate aggregate consumption.

Lacroix, 17 June 2020

Last December, the US House of Representatives passed a bill to restore some of the provisions of the 1965 Voting Rights Act, which had been nullified in a 2013 Supreme Court decision. This column exploits variation resulting from the Act’s coverage formula to show that the Act decreased violence by both pro-segregationists and anti-segregationists, particularly before elections. The passing of the Act in 1965 thus appears to offer an example from US history of enfranchisement curbing political violence.

Burgess, 16 June 2020

As policy attention in countries around Europe shifts to mitigating the longer-run impacts of the COVID-19 pandemic, a central concern will be to prevent this one-off event from permanently blighting the life chances of the millions of children who missed weeks of school due to the lockdown. Focusing on the UK, this column suggests a way to repair some of the educational damage using small group tutoring, a method with widely proven effectiveness, at a modest cost, and on a rapid but feasible timescale.

Palomino, Rodríguez, Sebastian, 16 June 2020

Enforced social distancing and lockdown measures to contain COVID-19 restrict economic activity, especially among workers in non-essential jobs who cannot ‘telework’. These have implications for inequality and poverty. This column analyses the capacity of individuals in 29 European countries to work under lockdown and the potential impact of a two-month lockdown on wages and inequality levels. There will be substantial and uneven wage losses across the board and poverty will rise. Inequality within countries will worsen, as it will between countries although to a lesser extent.

Acharya, Rajan, Shim, 16 June 2020

While many theories of international borrowing emphasize its advantages, it has proven difficult to empirically establish a correlation between a developing country’s use of foreign financing and good outcomes such as stronger growth. This column proposes a theoretical framework that reconciles the above puzzle. It establishes that a developing country’s propensity to save is essential in determining whether the government’s ability to borrow in international markets is welfare improving for its citizens or not. Hence, debt is not always 'odious' and alternative policies such as debt ceilings may prove more useful, especially in the midst of the current pandemic.

Sevilla, Smith, 16 June 2020

The closure of schools and nurseries during the current pandemic has led to a huge burden of additional childcare for parents. This column discusses how survey data collected at the beginning of May 2020 that asked about employment and childcare pre- and post-COVID to shows that women have borne the majority of this burden and many have been left juggling work and childcare. However, fathers have also increased the time they spend on childcare and, when they are not working, there is an equal allocation.

de Groot, Haas, 16 June 2020

The magnitude of the COVID-induced economic downturn is forcing central banks around the world to rethink the set of monetary policy tools available to them. Many central banks have long shied away from negative interest rates, concerned about the impact on bank profits and financial stability. This column explores how negative interest rate policies can be used by central banks to signal a commitment to a prolonged period of monetary accommodation. Using a quantitative monetary model, it shows that the signalling channel of negative interest rates can result in a rise in banks’ net worth even if net interest margins shrink.

Aksoy, Eichengreen, Saka, 15 June 2020

What will be the political legacy of the COVID-19 pandemic? This column uses data from the 2006-2018 Gallup World Polls to show that epidemic exposure during an individual’s ‘impressionable years’ of 18 to 25 has a persistent negative effect on trust in political institutions and leaders, especially in democracies. Combined with other evidence that trust is important for limiting the spread of infection, this raises the spectre of a circular, self-reinforcing spiral in which poor public health policy leads to deeper distrust, further undermining the effectiveness of public health policy.

Levine, Lin, Wang, 14 June 2020

There is ample evidence of the negative effects of pollution on health, with about one in six deaths worldwide attributed to air pollution. However, the effect of one firm’s toxic emissions on neighbouring firms’ employees and profits are not known. This column examines whether opening toxic pollution-emitting plants affect the career paths of executives at S&P 1500 firms in the US. The opening of such plants triggers substantial increases in executive migration from neighbouring firms. Corporations exposed to toxic emissions from other firms lose talented individuals and suffer stock-price declines.

Leibovici, Santacreu, 14 June 2020

The ongoing COVID-19 pandemic has led to a massive increase in the demand for essential medical equipment. This column discusses recent findings on the role of international trade of essential medical goods in exacerbating or mitigating the impact of a pandemic. The effects depend crucially on the countries’ trade imbalances in essential medical goods. Net importers of these goods are relatively worse off during a pandemic than net exporters. Although the welfare losses of net importers are lower in a world with high trade barriers, they benefit from reducing barriers once the pandemic arrives.

Leduc, Liu, 14 June 2020

The COVID-19 pandemic has raised concerns about the future of work. The pandemic may become recurrent and necessitate repeated adoptions of social distancing measures, creating substantial uncertainty about worker productivity. This column presents a theoretical framework suggesting that such job uncertainty reduces aggregate demand, and dampens business investment in general. However, automation may provide one way for businesses to cope with the uncertainty about worker productivity. It appears that pandemic-induced job uncertainty could stimulate automation investment, despite declines in aggregate demand.

Goodhart, 13 June 2020

The correlation between monetary growth and inflation has an historic pedigree as long as your arm. This column argues that rejecting the likelihood of (eventually) rising velocity following the current massive monetary expansion requires an alternative theory of inflation that has successfully eluded all of us thus far. Ignoring the potential inflationary dangers is the equivalent to an ostrich putting its head in the sand, and while the path towards disinflation may be well known, it simply isn’t available today.

Bertocchi, Dimico, 12 June 2020

The Covid-19 outbreak and the murder of George Floyd have dramatically exposed the racial inequalities in US society. This column studies the association between the historical experience of slavery and the African American family structure. Results indicate that the extreme demographic conditions prevailing among slaves on sugar plantations in the US South may have persistently shaped African American family formation. Over the period of 1880-1940, higher sugar suitability is associated with a higher likelihood of single female headship among black households.

Brotherhood, Kircher, Santos, Tertilt, 12 June 2020

Governments worldwide locked down their economies in response to the COVID-19 pandemic. This column considers two lockdown policies – a stay-at-home order and a test-and-quarantine approach – and their projected effects on deaths and GDP. Adjustments in individual behaviour, especially by the elderly, can save many lives, while lockdown policies targeted at the young prolongs the time need to reach herd immunity and could lead to more deaths in the long run. Testing and quarantining is an effective policy but requires about 10 million tests each week for the US alone.

Brzezinski, Kecht, Van Dijcke, 12 June 2020

Lockdown policies have been found to be effective in promoting social distancing and slowing down the spread of COVID-19. Yet, such measures are often blamed for downturns in the economy. This column argues that the lockdowns in the US are in fact efficient in minimising the costs of the epidemic, once both the economic and medical burden that would arise in the absence of such policies are considered. Estimates from a controlled SIR model, which includes the possibility for changes in behaviour, suggest that lockdowns reduce the costs of the pandemic by at least 1.7% of annual GDP compared to a no-lockdown scenario.

Manski, 12 June 2020

Formation of COVID-19 policy must cope with many substantial uncertainties about the nature of the disease, the dynamics of the pandemic, and behavioural responses. This column argues that instead of making policy that is optimal in hypothetical scenarios but potentially far from optimal in reality, it is more prudent to approach COVID-19 policy as a problem in decision making under uncertainty. Under ‘adaptive diversification’, a range of policies would be implemented across locations and policymakers would be able to revise the proportion of locations assigned to each policy as evidence accumulates.

Bodenstein, Corsetti, Guerrieri, 12 June 2020

Drastic public health measures such as social distancing or lockdowns can reduce the loss of human life by keeping the number of infected individuals from exceeding the capacity of the health care system, but they are often criticised because of the social and the economic cost they entail. This column shows that the high peak of an infection not mitigated by social distancing may cause very large upfront economic costs in terms of output, consumption and investment that are amplified by supply disruptions as workers in essential industries become ill. Social distancing measures can reduce these costs, especially if skewed towards non-essential industries and occupations with tasks that can be performed from home, helping to smooth the surge in infections among workers in the essential sector.

Philippon, 12 June 2020

Thomas Philippon's new book argues that in the last 20 years the US has “given up” on free markets. As a result, he tells Tim Phillips, American families are each $5,000 a year poorer.

Attar, Tekin-Koru, 11 June 2020

As governments begin to ease lockdown measures over the coming months, understanding how effectively countries have applied social distancing practices will be essential. This column introduces a Model-Inferred measure of latent social DIStancing (MIDIS) and calculates the measure for 44 countries using daily data and an epidemiology model. Mobility data from Apple and Google indicate that the measure can accurately measure distancing, and the measure also reflects governmental and behavioural responses while maintaining a robust relationship with daily output losses.

Shenoy, 11 June 2020

Even as governments relax their lockdowns, they are considering how quickly to re-impose social distancing in response to a possible new outbreak. This column studies the impact of rainfall-induced social distancing in the days prior to official lockdown. A rainy weekend just prior to lockdown causes people to start staying home sooner, which has persistent impacts on the trajectory of COVID-19 cases and deaths. The impact is largely due to a reduction in the risk of a very big outbreak. Imposing social distancing only a few days sooner may thus help better control the epidemic.

Pagano, Wagner, Zechner, 11 June 2020

Whether COVID-19 will trigger a massive reallocation of capital and labour is a key question for policymakers and investors alike. This column shows that asset markets reveal large cross-sectional differences in the repricing of industries before, during, and after the onset of COVID-19. Firms that are more resilient to social distancing significantly outperformed in the six years before and during the COVID-19 outbreak. Looking into the future, stock options imply that investors require significantly lower returns from more pandemic-resilient firms. Governments would be unwise to ignore these signals, directing public financial resources mainly to prop up ailing low-resilience firms.

Plümper, Neumayer, 11 June 2020

Is Covid-19 a ‘rich man’s disease’, as many citizens in poorer countries believe it to be? This column descibes how in Germany, infections began with individuals returning from skiing holidays. In the first phase of the pandemic, infection rates were higher in richer areas and lower in more socially deprived districts. In the second phase, the ability to socially distance oneself mattered more – an ability that is itself socioeconomically stratified. Richer districts are now seeing fewer new infections, and the initial safety advantage of more socially deprived districts has disappeared.

Ilzetzki, 11 June 2020

Public debt has risen to unprecedented peacetime levels, due to policies put into place to address the economic fallout from COVID-19. Nevertheless, as this column reveals, the Centre for Macroeconomics panel was nearly unanimous that the Treasury should not take any action to decrease the deficit in the upcoming budget. The panel is split on when it would be wise to publicly announce long-run plans to address the deficit and the debt. The majority of the panel supports a mix of financing options when action is taken, with tax increases receiving strong support and not a single panellist supporting public spending cuts.

Tubadji, Webber, Boy, 10 June 2020

The general public’s mental health can be affected by different public policy responses to a pandemic threat. Italy, the UK and Sweden implemented distinct approaches to the COVID-19 pandemic: early lockdown, delayed lockdown, and no lockdown. This column presents a novel culture-based Development approach using narrative economics of language and Google trend data. It is evident that countries had a pre-existing culturally relative dispositions towards death-related anxiety and their sensitivity to COVID-19 public policy was country-specific. Further, one country’s lockdown policy can affect another country’s mental health, suggesting that policymakers should account for this spillover effect.

Borgonovi, Andrieu, 10 June 2020

Reducing social contacts can slow the spread of COVID-19. This column examines mobility patterns across US counties between mid-February and mid-May 2020. It finds that reductions in mobility differed across counties, and that community-level social capital can explain the geographic variations in mobility trends. Individuals reduced mobility earlier and to a higher degree in counties with high levels of social capital. Many counties, particularly in the Southeast US, may be especially vulnerable to COVID-19, matching low levels of social capital with high rates of chronic disease.

Gujral, 10 June 2020

A quarter of all rural US hospitals, most of which are highly essential to their communities, are at high risk of closing.Hospital closures may increase transport time and delay treatment. This column examines hospital closures in California from 1995 to 2011 to assess the effects of rural and urban hospital closures on inpatient mortality. Mortality increases after a rural hospital closure not only in the local rural area but in the neighbouring urban areas as well. This adverse effect is larger for Medicaid patients and racial minorities.

Giuliano, Tabellini, 10 June 2020

Immigration to Europe and the US has met with a heated political backlash in recent decades, but the long-term impact of immigration on political ideology not well understood. This column focuses on the migration of millions of Europeans to the US between 1900 and 1930, and finds that the historical presence of European immigrants encouraged a more liberal political ideology and stronger preferences for redistribution among the native-born population. The difference is due in part to inter-group contact, which allows for the transmission (or ‘melting’) of immigrants’ experiences and ideas.

Carrieri, De Paola, Gioia, 10 June 2020

The management of the Covid-19 health emergency implies a challenging health/wealth trade-off for governments that will persist until a medical solution becomes available. This column argues that people’s preferences regarding policies to restart the economy depend to a large extent on how this trade-off is communicated to the public. A field experiment in the south of Italy finds that framing the measures as ‘protective’ for health induces people to place more weight on health than economic concerns. This could increase individual compliance with the appropriate preventive behaviours.

Fasani, Frattini, Minale, 09 June 2020

The COVID-19 pandemic has brought to light how much societies rely on migrants for key labour while highlighting the vulnerabilities of already weaker groups. Easing the socio-economic integration of migrants is beneficial to both migrants and host countries; yet, many European countries ban asylum seekers from legal employment upon arrival. This column examines the effect of such employment bans. The bans have large and lasting negative effects on refugees’ future labour-market integration and constitute an economic loss for the host country. Allowing early labour market access is an easily implementable and financially costless policy that effectively accelerates refugee integration.

Barnes, Casey, 09 June 2020

The Covid-19 crisis has highlighted the role of fiscal policy and transformed the outlook for public finances. This column explores economic and fiscal scenarios for a small euro area country to 2025. Due to the high uncertainty, it argues for a state-contingent approach to policy. Low interest rates, if maintained, along with ‘high-altitude’ debt dynamics could create substantial headroom for the fiscal response and make future adjustments to put the debt ratio on a downward path more manageable.

Verwey, Langedijk, Kuenzel, 09 June 2020

As Member States start to ease restrictions linked to the COVID-19 pandemic on citizens and businesses, EU leaders and institutions have turned their attention towards the medium-term recovery of their economies. In late May, the Commission presented its proposals for a recovery plan. This column provides a brief overview of the economic rationale for collective action and an assessment of the expected impact of the recovery plan proposed by the Commission.

Bentzen, 09 June 2020

In times of crisis, humans have a tendency to turn to religion for comfort and explanation. The COVID-19 pandemic is no exception. Using daily data on Google searches for 95 countries, this column demonstrates that the COVID-19 crisis has increased Google searches for prayer (relative to all Google searches) to the highest level ever recorded. By the end of March 2020, more than half of the world population had prayed to ‘end the coronavirus’. Prayer searches rose at all levels of income, inequality, and insecurity, but not for the 10% least religious countries.

Kroll, 09 June 2020

Concerns are growing that the COVID-19 crisis could be exploited by populists claiming to be the voice of those who have been ‘left behind’. This column presents a new framework which could help shed light on the relationship between sustainable development and populism. Progress on the Sustainable Development Goals may be associated with diminishing electoral support for populism, but humanity must still get better at turning the trade-offs between SDGs into synergies. During the COVID-19 recovery, an effective way to prevent populists from exploiting the crisis may involve making the SDGs the policy blueprint. 

D'Acunto, Hoang, Weber, 08 June 2020

The German administration has just released their €130 billion economic stimulus package, the most prominent measure of which is an unconventional fiscal policy in the form of a sudden drop in VAT. The aim is to create a future path of increasing sales taxes by increasing prices and hence stimulating inflation expectations and aggregate demand today. This column argues that earlier episodes have shown that unconventional policy is effective because it is easily understood by non-expert households and households react to it strongly. Alternative unconventional measures, instead, such as forward guidance, are largely ineffective in part because households do not understand what such policies imply for their consumption.  

Snower, 08 June 2020

Contact-tracing and risk-tracing technologies could help ease the ‘health–wealth trade-off’ confronting many countries in the wake of COVID-19. But privacy and security concerns are preventing such technologies from being widely adopted. This column suggests a way to ease those concerns by endowing individuals with property rights to the digital information that concerns them. A ‘self-sovereign identity system’ could assure users that their data would be exploited only for specified purposes, such as containing a pandemic. The data would revert to being private property once the pandemic is over. 

, 08 June 2020

Targeting policy responses to Covid- 19 appropriately is important but requires information such as which groups in society are most affected by the pandemic. This column uses data on Covid-19 infections and mortality for small local areas in England and Wales to study the link of Covid-19 with socioeconomic factors. The findings suggest that areas with larger households, worse levels of self-reported health and a larger fraction of people using public transport have higher infection rates. Areas with an older population, a larger black or Asian population and worse levels of self-reported health have higher mortality rates. Particular attention should hence be paid to reducing the risk of infection on public transport when relaxing lockdown measures.

Barba Navaretti, Calzolari, Dossena, Lanza, Pozzolo, 07 June 2020

The effects of the Covid-19 lockdowns have been severe worldwide. Although most activities were reopened in May, Italian GDP is expected to drop by around 10% in 2020. This column argues that a targeted exit from the lockdown in Italy could have been implemented instead. It identifies those activities with the greatest impact on the national economy, but with low risks for those returning to work and for the country at large. The methodology could also be applied in other countries and in the in the unfortunate event of a new wave of contagion and a new lockdown.

Pichler, Pangallo, del Rio-Chanona, Lafond, Farmer, 07 June 2020

Many governments are slowly unwinding their economies from nationwide lockdowns. However, re-opening the economy entails a serious trade-off between fostering economic output and keeping the spread of infection low. This column reports several re-opening scenarios for the UK economy, documenting their projected impacts on both GDP and the spread of the virus. The results suggest that it is best to re-open upstream industries first, as they provide a large direct and indirect economic boost at a relatively lower cost in terms of further epidemic spreading.

Oswald, Powdthavee, 06 June 2020

Reopening universities for the autumn term will be risky for individuals' health and safety. This column describes the latest epidemiological evidence and argues that the biggest influence on individuals’ risk of severe illness is age. Individuals in their sixties face a 30 times higher fatality risk from COVID-19 than individuals in their thirties. Being obese, non-white, a man, and having an underlying health condition also matter – each roughly doubles the fatality risk.  But chronological age still remains the biggest risk – a fact that universities should keep in mind when planning their autumnal schedules.

Bluhm, Pinkovskiy, 06 June 2020

The prospect that BCG – a vaccine used primarily against tuberculosis – might offer protection from COVID-19 has become an understandably popular hypothesis. This column finds that hope misplaced. The authors exploit a natural experiment, overlaying the large difference in BCG vaccination rates with the large differences in COVID-19 infection rates between the former East and West Germany. They find that the differences are attributable not to BCG, but to the West’s copious commuter flow patterns and the fact that the epidemic arrived there first.

Hargreaves Heap, Koop, Matakos, Unan, Weber, 06 June 2020

The behavioural interventions to control the spread of COVID-19 present trade-offs between health and wealth. To be successful, an understanding of how the public currently values lives over economic loss is needed. A survey experiment in the US and UK finds that people highly prioritise saving lives, but this valuation will change as economic losses mount. Individual differences in valuation also predict individual compliance with COVID-19 policies, and information on COVID-19 deaths and income losses can affect valuations. Caution in relaxing the lockdown will help build public support and mitigate polarising effects and, through increasing compliance, improve its economic efficacy.

Ajzenman, Aksoy, Guriev, 05 June 2020

The impact of the 2015 refugee crisis on sending and receiving societies has received significant scholarly attention. But there is little research on how the crisis affected ‘transit countries’ through which migrants travelled. This column studies 800 localities in 18 European countries to discover how local populations responded to the temporary presence of forced migrants. Data show that entrepreneurial activity of residents living closer to refugee routes fell considerably, and while anti-migrant sentiment increased in these areas, attitudes towards other minorities remained unchanged.

Deb, Furceri, Ostry, Tawk, 05 June 2020

Countries have implemented several containment measures to halt the spread of COVID-19 and limit the number of fatalities. This column, using daily data on coronavirus cases and deaths as well as on real-time containment measures implemented by countries, argues that containment measures have been very effective in flattening the ‘pandemic curve’. The effects have been stronger in countries where containment measures have been implemented faster and in those with a larger share of an elderly population, stronger health systems, lower temperatures, and lower population density.

Askitas, Tatsiramos, Verheyden, 05 June 2020

In an attempt to mitigate the spread of COVID-19, countries around the world have implemented a number of lockdown policies, which varied in timing and intensity. This column presents the findings of an evaluation study across 135 countries on the effects of these policies on the daily incidence of COVID-19 and on various population mobility patterns. Policies preventing close contacts in large groups, such as public events, private gatherings, and schools are the most effective in reducing new infections. These effects are mediated by changes in population mobility patterns, which are consistent with time-use and epidemiological factors.

Niepelt, Gonzalez-Eiras, 05 June 2020

The COVID-19 shock has changed the discipline of economics in that it has brought an interest in epidemiology into the foreground of economic analysis. This column explores how traditional models of infectious diseases can be combined with an additional economic layer on top. This hybrid approach can help draw accurate predictions for the long run impact of the crisis, without substantive loss in terms of ‘realism’ or flexibility.

Geoffard, 04 June 2020

The health costs of the Covid-19 pandemic are considerable, and the economic and social costs of lockdown policies are even larger. This column calls for an innovative mechanism to foster the development of a vaccine against Covid-19. Governments would commit now to buy back any patent obtained by a private firm which would discover an effective vaccine, at a price of €60 billion, and would grant the right to produce the vaccine to any firm able to do so. This mechanism would provide strong incentives to innovate, while protecting firms from the political risk of expropriation.

Castle, Hendry, 04 June 2020

The UK’s 2008 Climate Change Act has led to a 34% fall in CO2 emissions by 2019, while real GDP per capita had risen by more than 10% following the crash into the ‘Great Recession’. Can the UK achieve its recent net-zero emissions target by 2050 while still growing? This column describes some speculative routes to such a decarbonised future.

Wyplosz, 04 June 2020

Within a few days of the publication of the first Vox eBook on Covid-19, the authorities came up with a raft of decisions that were coherent with the economists’ analyses. But there is a risk that moral hazard considerations derail the policy responses. This column, taken from the second Covid-19 eBook, argues that casting moral hazard aside will be the acid test of the ability of member countries of the euro area to coordinate in a meaningful way when needed.

Gandal, Riordan, Bublil, 04 June 2020

As digitalisation grows, cyber risks pose serious threats to businesses and consumers alike. However, the precautions taken to deal with these threats are often insufficient. This column examines the relationship between cyber vulnerabilities, (attempted) attacks, and precautions using firm-level data from the UK. More than 80% of the sampled firms have at least one vulnerability, and these firms were more than twice as likely to experience an incident compared to firms without vulnerabilities. Reducing vulnerabilities is key to dealing with cyberattacks and reducing cyber risks in the future.

Caffarra, Etro, Latham, Scott Morton, 04 June 2020

There is a developed public discourse on the need for more enforcement, regulation and legislation of digital platforms. Regulating ‘gatekeeper platforms’ has emerged as a major plank of the new European Commission mandate, with a consultation process underway this week for a plan to introduce both ex-ante regulation and a new market investigation tool with quasi-regulatory powers. This column asks how economists can contribute to rationally progressing the debate, so that it is not based on subjective priors, but uses applied theory to make testable predictions, and data to discriminate between theories.

Bircan, De Haas, Schweiger, Stepanov, 03 June 2020

As lockdown measures continue, or are relaxed only gradually, many small businesses continue to experience significantly reduced turnover. This column reports on a firm-level analysis across 16 emerging markets, and three Western European comparator countries, in order to gauge the potential risks associated with debt-driven COVID-19 support. The overall goal is to prevent a wave of bankruptcies that could break valuable relationships between firms and their suppliers and employees. However, liquidity support in the form of additional bank lending may create debt-overhang problems in the future and therefore requires careful targeting.

Baek, Hayakawa, Tsubota, Urata, Yamanouchi, 03 June 2020

Anti-globalisation sentiment has been spreading around the world in recent years. Since trade liberalisation is one of the representative characteristics of globalisation, investigating who benefits from it, and to what extent, can be an important starting point in analysing the causes of anti-globalisation sentiment and promoting liberalisation. This column explains how the rent from trade liberalisation, in the form of tariff reductions, is distributed among foreign producers, wholesalers, and consumers by investigating the tariff pass-through for each player.

Makridis, Wang, 03 June 2020

Aggregate consumption has seen an unprecedented drop as a consequence of COVID-19 and the resulting lockdowns. Rather than focus on ways that specific policies or the spread of the virus have altered consumption patterns during the pandemic, this column explores the impact of social networks. Combining card transaction data with indices of social connectedness from Facebook shows that a 10% increase of infections in socially connected counties is associated with a 0.64% decline in local consumption expenditures, suggesting that social networks can sharply amplify the effects of an underlying shock.

Gourinchas, 03 June 2020

Public health policy, at least in all semi-decently run countries, has aimed to ‘flatten the Covid-19 curve’ by imposing drastic social distancing measures and promoting health practices to reduce the transmission rate. This column, taken from a VoxEU eBook, explains how, in the short run, flattening the infection curve inevitably steepens the macroeconomic recession curve. Fortunately, economic policy can act decisively to also flatten this curve.

Glennerster, Gollin, 03 June 2020

This week the CEPR launches a new research programme called STEG - Structural Transformation and Economic Growth. Ahead of the kick-off workshop on June 4 and 5, Joe Kaboski and Doug Gollin tell Tim Phillips what STEG hopes to achieve, and Rachel Glennerster explains why DFID is funding it.
Register for the workshop or discover STEG here.

Schwandt, 02 June 2020

Worries about the impact of COVID-19 on pregnant mothers and their offspring are wide-spread. As a comparison, the Spanish Flu pandemic had devastating health impacts on pregnant mothers and in-utero exposure to influenza is known to have negative short- and long-term consequences for children. This column, however, argues that the existing evidence from the COVID-19 pandemic allows for cautious optimism about the impacts of COVID-19 on pregnant women and their children.

Stansbury, Summers, 02 June 2020

Since the early 1980s, the US has seen a falling labour share and slow wage growth for typical workers, while measures of corporate valuations and measured markups have increased. A number of papers have argued that increasing monopoly or monopsony power can explain these trends. This column argues instead that the decline in worker power in the US economy is a more compelling explanation for recent macro trends than a broad-based rise in monopoly power.

Berglöf, Brown, Clark, Okonjo-Iweala, 02 June 2020

Our world is at a critical moment. May 30th saw the highest daily figure recorded worldwide for new cases of COVID-19, with countries on every continent attempting to stop the transmission of the virus and save lives. In this letter to world leaders, more than 230 former world leaders and leading global health experts and economists underline the urgency of addressing the medical emergency and providing debt relief to the poorest countries and more resources to the international financial institutions delivering immediate relief to countries facing the effects of an unprecedented, global crisis. They also call for the global health and financial architecture to be further strengthened, and in parts redesigned, to enhance our preparedness and capacity to act with speed and at scale to fight future crises. 

Portes, 01 June 2020

Both economists and policymakers have highlighted the danger that the short-term measures taken to limit the spread of Covid-19 could lead to lasting economic damage. This column identifies and discusses five conceptually separate channels that could lead to such ‘scarring’ and attempts a very rough quantification of the potential impacts in both the short to medium term and longer term.  Policy will eventually need to ‘pivot’ from helping firms survive and preserving jobs to helping workers into new jobs.

Morikawa, 01 June 2020

The impact of new automation technologies on the labour market has attracted the attention of researchers and policymakers. This column presents new survey-based evidence on the complementarity between automation technologies and human skills. The proportion of high-skilled workers is higher in firms using AI and big data technologies, but lower in those using robots. The Covid-19 shock may have long-lasting impacts on the structure of the labour market through the diffusion of new automation technologies.

Peri, Rasul, 01 June 2020

Economists can play a key role in helping policymakers and the public understand the unfolding economic effects of the crisis. In March 2020, the European Economic Association established a registry of COVID-19-related projects, inviting research teams working with real-time data during this crisis to share their work. This column gives an overview of the registered projects, highlighting topics economists are working on and methods being used. It also calls attention to areas and topics that are relatively understudied.

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