October 2021

Bobeica, Pérez-Quirós, Rünstler, Strasser, 31 October 2021

The Covid-19 pandemic shock, new shifting economic trends, and revisions in monetary policy by major central banks make macroeconomic forecasting a challenging task. This column reviews advancements in forecasting techniques that were discussed at the ECB’s 11th Conference on Forecasting Techniques, dedicated to “forecasting in abnormal times”. Researchers are currently advancing primarily on two fronts – either by sheltering linear models against extreme events or explicitly modelling the dynamics of the latter. New approaches and methods are rapidly developing, partly inspired by big data and machine learning techniques.

DeStefano, Timmis, 30 October 2021

Robots are rapidly becoming a key part of manufacturing in developed and developing economies.  This column examines a new channel for how automation can affect manufacturing exports – quality upgrading. The findings show that robot diffusion increases the quality of exports.  Global quality improvements are predominantly driven by the upgrading of developing country exports, while quality improvements within both developed and developing countries are driven by the catch-up of (initially) lower-quality exports. The authors also find that sophisticated or more basic robot applications are associated with quality gains in developed and developing economies, respectively.

Malmendier, 29 October 2021

When we live through a financial crisis, many of us think differently about money afterwards. Neuroscientists can show that the experience changes the physical structure of our brains, and Ulrike Malmendier tells Tim Phillips how this should also change the way that economists think about preferences for risk.

Read more about the research presented and download the free Discussion Paper

Malmendier, U. 2021. 'Experience Effects in Finance: Foundations, Applications, and Future Directions'.

Acharya, Lenzu, Wang, 29 October 2021

Banking crises of the past several decades have encouraged regulatory forbearance towards banks combined with accommodative monetary policy. This column argues that such policies, if used too aggressively, lead to ‘zombie lending’ – the extension of new credit or prolonging of existing loans to low-productivity firms. While such policies may stabilise the economy in the short run, they risk transforming transitory shocks into phases of delayed recovery and permanent productivity and output losses. 

Nielsen, 29 October 2021

European policymakers are considering whether to reinstate the existing fiscal rules with only the most necessary adjustments, or to put in place a better framework. This column proposes reform anchored in the most important economic criteria for public sector debt sustainability. First, ‘standards’ for a healthy budget composition that should include an agreed minimum ratio of investment relative to GDP and the principle that countries with public debt in excess of a certain level of GDP will reduce that ratio during ‘good years’. Second, a higher-frequency ‘rule’ to flag potential trends which might compromise future public debt sustainability, in the form of a cap on projected interest payments as a share of fiscal revenue.

Anayi, Bloom, Bunn, Mizen, Thwaites, Young, 28 October 2021

Covid-19 has had a sizeable impact on where people work and how they shop. This column uses data from the Decision Maker Panel business survey of 3,000 UK firms to assess the longer-run impact. The pandemic is expected to increase hours worked from home and sales made online. Firms will invest less in land and buildings but more in IT and software. The pandemic is also expected to reduce medium-term employment and sales, with some shift away from large urban areas towards more rural areas.

Borgonovo, Caselli, Cillo, Masciandaro, Rabitti, 28 October 2021

With the development of new forms of money such as cryptocurrencies and central bank digital currencies, the attention paid to their role as a store of privacy is increasing. This column asks whether privacy is relevant in shaping the demand for these currencies. The results of laboratory experiments show that anonymity does indeed matters and increases the overall appeal of a medium of payment. This effect is stronger for risk-prone individuals. 

Fatás, 27 October 2021

In 2019, the US economy had reached levels of employment that ensured that the gains of the economic expansion were shared across many segments of the labour market. Unfortunately, the benefits of this high-pressure economy were short-lived thanks to the recession that started in March 2020. This column argues that this pattern fits all previous US cycles. Expansions end too early to allow for long periods of stable and low unemployment. 

Kotlikoff, Kubler, Polbin, Scheidegger, 27 October 2021

The replacement of positive with normative economics has left climate policy in its sorry state – as a fight between generations, across regions, and even among economists over climate justice. This column uses a multi-region, overlapping generations model of climate change to study climate policy as an externality whose resolution can uniformly and equally benefit all humankind, regardless of year or place of birth. The optimal uniform welfare-improving policy, implemented via a time-varying global carbon tax plus region- and generation-specific net transfers, can materially limit global emissions, dramatically shorten the use of fossil fuels, and raise the welfare of all current and future agents by over 4%.

Tesei, Andersen, Nordvik, 26 October 2021

Violent conflict often centres around the control of critical resources, including fossil fuels such as oil. This column explores how the location of oil reserves can affect the likelihood of a particular tension descending into widespread civil violence or war. Using a Norwegian data set, the authors show that the presence of onshore oil has a greater effect than offshore oil in driving conflict. Where a resource is relatively straightforward to access (i.e. on land as opposed to out at sea), rebel groups will be more easily able to reap the benefits of taking control through violence.

Dougherty, de Biase, 26 October 2021

Following the global financial crisis, subnational governments engaged in pro-cyclical fiscal policy by reducing investment, drawing out the recovery. This column presents evidence suggesting that the Covid crisis has impacted the fiscal positions of subnational governments in the OECD far less than the previous crisis, which should mitigate this tendency towards pro-cyclicality. This is partly the result of central governments having provided substantial fiscal support, while at the same time subnational governments have relied heavily on relatively stable revenues from recurrent taxes on immovable property which, unlike in the previous crisis, are not expected to decline due to a housing market crash.

Kim, Lee, Shin, 25 October 2021

Industrial policy has divided economists for decades. This column evaluates Korean government's policy of promoting heavy and chemical industries in the 1970s, using plant-level output and productivity data. It shows that output and input use of targeted industries/regions grew significantly faster than those of non-targeted ones. However, total factor productivity did not increase because the misallocation of resources across plants within targeted industries/regions got significantly worse. 

Evenett, Fritz, 25 October 2021

Corporate subsidies are a major source of controversy in the world trading system, exacerbated by a lack of comparable and reliable information on subsidy schemes and awards. The latest Global Trade Alert report assembles an inventory of 18,137 corporate subsidies awarded by China, the EU, and the US since November 2008 to demonstrate that the cumulative effect of thousands of largely under-the-radar screen corporate subsidies has taken its toll on the competitive conditions faced by foreign manufacturers seeking to sell into the markets of China, the EU, and the US, and in third markets.

Goodhart, Pradhan, 25 October 2021

The current mini-surge in inflation is forecast to return to central bank targets towards the end of 2022, or shortly thereafter. However, there is also a risk of inflation remaining persistently high for longer. This column discusses the implications of such a contingency for central banks and monetary policy. The authors warn that sudden policy reversals could lead to severe downturns in financial markets and significantly damage public sector balance sheets. Instead, they call on central banks to develop concrete plans for dealing with persistently higher inflation, with a particular focus on their balance sheet policies in a world of rising nominal interest rates. 

Hashimoto, Takahashi, 24 October 2021

While large businesses in Japan have seen a gradual increase in labour productivity since the global financial crisis, the productivity of SMEs remains stagnant. This column investigates the effects of the Japanese government’s Business Sustainable Subsidy programme, launched in response to this situation, on SMEs’ performance. The findings suggest that application to the subsidy in itself promotes firms' voluntary activities to address their business issues through external support and improves their productivity.

Roland, 23 October 2021

The great Hungarian economist János Kornai, who passed away in October 2021, was a pioneering analyst of shortages, socialist economies and the economics of transition to a market economy. This column outlines what made him one of the most important intellectuals of the twentieth century.

Feyen, Frost, Gambacorta, Natarajan, Saal, 23 October 2021

Big Techs’ expansion into financial services can bring competition, efficiency, and inclusion, particularly in emerging market and developing economics. But it also gives rise to issues concerning a level playing field with banks, operational risk, too-big-to-fail issues, as well as challenges for antitrust rules and consumer protection. This column presents a policy triangle that highlights the trade-offs between three objectives: financial stability, competition, and data privacy. Handling these challenges requires more coordination on rules and standards, both between domestic authorities and across international borders. 

Kindermann, 22 October 2021

As life expectancy increases, so does the importance of a fair pension system that reflects our contribution but won't leave anyone in poverty. Can we create a progressive pension system that doesn't discourage work? Fabian Kindermann tells Tim Phillips how it could be designed.

Read more about the research presented and download the free Discussion Paper

Kindermann, F and Pueschel, V. 2021. 'Progressive Pensions as an Incentive for Labor Force Participation'. CEPR.

Bau, Khanna, Low, Shah, Sharmin, Voena, 22 October 2021

The COVID-19 pandemic represents a twin health and economic shock with devastating effects, particularly in low-income settings. This column uses a large phone survey and leverages the geographical variation in India's containment policies to examine how the pandemic and its containment policies affect women’s wellbeing. The authors find that stricter containment policies, while potentially crucial to stem the spread of COVID-19 cases, are associated with worse female mental health and increased food insecurity, particularly for the most vulnerable women.

Bryson, Blanchflower, 21 October 2021

Economic downturns are not as unpredictable as we once thought. There is mounting evidence that the expectations of consumers, workers and employers predict economic downturns, sometimes 12 to 18 months ahead. But we live in exceptional times. The COVID-19 pandemic and its aftermath have sown doubt and uncertainty among consumers and producers and may do so for some time to come. So what’s the economic prognosis? this column argues that expectations data for the US suggest the country is entering recession about now.

Verwey, Monks, 21 October 2021

On 19 October 2021, the European Commission adopted a Communication relaunching the public consultation on the EU’s economic governance framework. This consultation had been put on hold in March 2020 in order to focus on the Covid-19 pandemic. The Commission communication assesses the implications of the changed circumstances for economic governance following the COVID-19 crisis and sets out additional questions for the public debate. All stakeholders are invited to engage in the debate, which must be wide-ranging and inclusive to build a consensus on the way forward well in time for 2023.

Bertrand, Hsieh, Tsivanidis, 20 October 2021

Changes in contract labour regulation were introduced in India in the late 1940s. The hope was that controlling whether firms could downsize would reduce mass job losses as large British companies left the country post-independence. This column explores the effect of the Industrial Disputes Act on firms of different sizes. The authors find that smaller firms did not see much change, but larger firms did employ fewer contract workers as a result. However, this effect was driven by firms exploiting a loophole, rather than the law itself.

Bordo, 19 October 2021

Monetary transformations through history have been driven by changing technology, changing tastes, economic growth, and the demands to effectively satisfy the functions of money. This column argues that technological change in money and finance is inevitable, driven by the financial incentives of a market economy, and identifies four key lessons central banks could learn from history to enable them to provide digital currency to effectively fulfil their public mandates.

Ferrari, Mehl, Panetta, Van Robays, 19 October 2021

Central banks around the world are weighing the pros and cons of issuing their own digital currency. This column identifies open research questions around the international macro-financial dimension of central bank digital currencies, including what is different about them, and what the implications for international central bank cooperation are. Addressing these questions would not only push the frontier of knowledge, it would also provide the conceptual backbone and evidence that could usefully inform future policy decisions on CBDCs. 

Porcellacchia, 18 October 2021

Policy rates in advanced economies are unusually low. This phenomenon has competing effects: low rates harm bank profits by squeezing interest margins, but also boost the value of long-term assets held by banks. Using a standard banking model, this column determines the policy rate level at which these two forces cancel out, or the ‘tipping point’. Past this tipping point, the net effect of low rates on bank capital is negative. Applying the model to the US economy, the tipping point in August 2007 is estimated as a policy rate of 0.55%.

Cohen, Neeman, Auferoth, 17 October 2021

In many settings, independent decision makers employed to make determinations in disputes or contests between parties can be subject to public pressure  This column examines the extent to which crowd pressure affects referees’ decisions in Germany’s top football division, exploiting the introduction of video technology as well as the absence of crowds during the Covid-19 pandemic. It finds no evidence of bias in awarding goals or penalties, but a tendency for bias towards the home team when deciding whether or not to issue a yellow card, which disappears in the absence of a crowd. 

Eeckhout, Hedtrich, Pinheiro, 16 October 2021

The adoption of information technology can cause polarisation in the labour market via the displacement of routine cognitive jobs. This column uses data on over 200,000 firms in the US from 1990 to 2015 to show that the labour savings from IT are largest in big cities and metropolitan areas, where wages are higher, so urban firms have the biggest incentives to invest in these technologies. This in turn leads to the polarisation of occupations across geography and accounts for the rise in wage inequality within cities.

Pischke, 16 October 2021

The 2021 Nobel Prize in Economic Sciences has been awarded to David Card of the University of California, Berkeley, “for his empirical contributions to labour economics”, and to Joshua Angrist of MIT and Guido Imbens of Stanford University “for their methodological contributions to the analysis of causal relationships”. This column explains how the use of natural experiments in empirical economics has ushered in much progress in the analysis of causal relationships. The ensuing ‘credibility revolution’ over the past three decades has been transformational for the study of key policy challenges, including education, immigration and the minimum wage.

Obstfeld, 15 October 2021

Even after their role in the global financial crisis, globalised, minimally regulated financial markets are still regarded as inevitable and, on balance, good for us. Maurice Obstfeld of Berkeley tells Tim Phillips about the short but action-packed history of financial globalisation and asks whether we should be rethinking this aspect of capitalism too.

Read more about the research presented and download the free discussion paper:

Obstfeld, M. 2021. 'The Global Capital Market Reconsidered'. CEPR

Parchet, Robert-Nicoud, 15 October 2021

The development of the Swiss highway network from 1960 to 2010 influenced the residential and job compositions of municipalities. The advent of an entrance/exit ramp within 10 km of a municipality caused a long-term 24% increase in the share of top-income taxpayers. The welfare gains of residents of connected municipalities relative to residents in non-connected municipalities range from only 2% for the low-income group to 12% for the top-income group. Highways also contributed to job and residential urban sprawl.

Thorbecke, 15 October 2021

During the COVID-19 pandemic many countries experienced difficulty obtaining the semiconductors that are vital for smartphones, computers, cars, artificial intelligence, cybersecurity, and many other applications. This column looks at how Asia gained comparative advantage in this sector and identifies lessons for countries seeking to promote domestic semiconductor manufacturing.

Crumpton, Ilzetzki, 14 October 2021

In July, the ECB issued its first Strategic Review since 2003. The latest CfM-CEPR survey investigates one component of the announced policy shift: the new definition of price stability. Most members of the panel of experts on the European economy support the ECB explicitly allowing inflation to exceed its target for extended periods to make up for below-target inflation in the past. This 60% majority has divided views on the optimal alternative policies, with the largest share supporting average inflation targeting and some members supporting nominal GDP targeting or hybrid policies. 40% of the panel would prefer to maintain the current policy of traditional inflation targeting.  

Fujita, Fujiwara, 14 October 2021

The Japanese economy has experienced a prolonged slowdown in growth and persistent declines in the real interest rate, while at the same time the country’s labour force has been rapidly ageing. This column explores a novel causal link between the ageing labour force and the low-frequency declining trend in the real interest rate since the 1970s, and suggests that the ageing of the labour force accounts for 40% or more of the declines in the real interest rate observed between the 1980s and 2000s in Japan.

Boxell, 13 October 2021

With the array of television news networks, the expansion of internet services and the rise of social media, voters see more images daily than at any previous moment in history. And yet, the literature on media bias tends to focus far more on text than photos. This column constructs a dataset of nearly one million image files from the 2016 US election cycle and finds deeply partisan coverage of different candidates. Media bias also varied in response to electoral incentives – in particular when switching from the primaries to the general election.

Buti, Messori, 13 October 2021

The way European policymakers solve the policy mix trilemma of asymmetric fiscal rules, no central fiscal capacity and constrained monetary policy in the post-pandemic economy will define the resilience of the euro area in the face of future shocks and the transition to a more sustainable growth model. In a new CEPR Policy Insight, the authors argue that moving to a structured vertical coordination between national and EU budgets would help ensure an adequate fiscal stance and avoid the overburdening of the single monetary policy.    

Benzell, Ye, 12 October 2021

Despite clear economic benefits of new digital technologies, slow median wage growth has led many to worry that these new technologies are failing to deliver for the average worker. This column develops a new model of global automation and technological change to study the long-term consequences of these trends. It finds that automation can boost output and growth, but these benefits are not equally distributed across or within regions. Nevertheless, in developed countries smart fiscal policy, such as universal basic income, can make new technologies a win-win for all age and skill groups. 

Bielecki, Brzoza-Brzezina, Kolasa, 12 October 2021

By boosting labor incomes and asset prices, a monetary easing is often believed to benefit the vast majority of households. This column argues that this intuition is misleading, because the effect of asset price changes for households depends not just on asset holdings, but on their maturity structure, which is largely driven by life-cycle motives. A typical monetary policy easing redistributes welfare from older to younger generations. Moreover, the resulting asset price appreciation is harmful for households that accumulate housing and save for retirement.

Peri, Robert-Nicoud, 11 October 2021

Climate change is a defining challenge of our times. This column introduces a special issue of the Journal of Economic Geography on climate change, which provides foundations for well-informed policymaking by addressing two main themes of the economic geography of climate change. First, climate change yields heterogeneous effects across space. Second, a crucial aspect of human adaptation to climate change is geographic mobility. As a consequence, limitations to mobility will worsen the socioeconomic costs of climate change. Other margins of adjustment covered in the issue include fertility, specialisation, and trade.

Delis, Delis, Laeven, Ongena, 11 October 2021

Profit shifting has come to the fore with the recently released Pandora Papers. This column uses a new global profit-shifting database covering 95 countries to show that profit shifting on average has gradually declined since 2011 following efforts from governments and international organisations to contain the practice, most notably the OECD’s Base Erosion and Profit Shifting initiative. But firms across industries with high shares of intangible assets display an increase in profit shifting. 

Balatti, Carluccio, Chiacchio, Coimbra, Parraga, Siena, Stumpner, Venditti, Žumer, 11 October 2021

Since the start of the pandemic, inflation has re-entered mainstream discussion. This column reviews the analysis of globalisation and inflation conducted in the context of the ECB strategy review. Although global factors (mainly commodity prices) matter for inflation synchronisation, their role in lowering both inflation and its sensitivity to the business cycle in advanced economies has been limited since the late 1980s. Global shocks can exert temporary pressure on price dynamics, but the destiny of inflation remains in the hands of central banks.

Felbermayr, Sandkamp, 10 October 2021

The recent combination of resurging demand and continuing disruptions in supply chains has led to a worrying return of inflation. In the EU, industry producer prices increased by 12.2% year-on-year in July 2021. This column argues that removing EU antidumping duties would at least partially ease the pressure on input and consumer prices. In contrast, the recent abandonment of China’s differential treatment in the EU’s antidumping legislation might even have contributed to increasing import prices.

Robertson, 09 October 2021

US military spending is said to be greater than the next 11 countries combined. However, the conventional use of market exchange rates to compare across countries dramatically overstates US spending relative to other countries. This column introduces a military purchasing power parity exchange rate for 59 countries based on the relative unit cost ratio across counties. This ‘military PPP’ shows that the US military budget in 2019 was smaller than that of the next three largest military spenders – China, India, and Russia – combined.

Aminjonov, Bargain, Bernard, 09 October 2021

In many countries, poorer people have been more exposed to Covid-19 as they cannot afford to stay at home instead of going to work. This column shows that in low- and middle-income countries, emergency income support schemes have significantly reduced differences in rates of contagion due to wealth or poverty status by allowing poorer people to also stay at home. As well as preserving livelihoods and alleviating poverty, income support has also been successful in curbing the spread of Covid-19.

Caselli, Ludwig, van der Ploeg, 08 October 2021

The target for global warming agreed on in the 2015 Paris Agreement implies that effective policies must be implemented to reduce emissions for the whole planet as soon as possible and reach net zero in the second half of the 21st century. The contributions in a new CEPR eBook aim to identity, for each of the featured nations, which climate change policies will have the fastest and/or largest cumulative impact, and which are the most technically, financially, or politically feasible. Although the low-hanging fruit in climate policy vary across countries, this does not mean that one country cannot learn from the debates taking place in another.

Ubide, 08 October 2021

The euro area’s economic policy framework was created in the early 1990s, when neutral interest rates were positive and the main risk was excessive inflation. This column argues that today’s world is very different from the 1990s, and thus requires a new  economic policy framework where monetary and fiscal policy can work together effectively to support inflation and growth. The author identifies flaws in the current euro area fiscal framework and suggests how these could be fixed and complemented with a simple, state-contingent fiscal policy rule that achieves the right balance between supporting growth and inflation and ensuring debt sustainability.

Bonfiglioli, 08 October 2021

Robots and offshoring are blamed for destroying manufacturing jobs in advanced economies. But could automation also be a way to make domestic manufacturing more competitive? If so, those outsourced jobs may return. Alessandra Bonfiglioli tells Tim Phillips why there may be reasons to welcome our new robot overlords.

Read more about the research discussed and download the free discussion paper:
Bonfiglioli, A, Crinò, R, Gancia, G and Papadakis, I. 2021. 'Robots, Offshoring and Welfare'. CEPR

Djankov, 08 October 2021

More than 130 countries have lined up in favour of a global redesign of corporate taxes. The redesign calls for multinational giants to pay their ‘fair share’ of taxes rather than running off to tax havens. This column argues that as popular as this goal may be, finding practical ways to achieve it remains problematic. Simpler approaches have a better chance of succeeding.

Dustmann, Lindner, Schӧnberg, Umkehrer, vom Berge, 07 October 2021

In January 2015, Germany introduced a uniform minimum wage of €8.50. Many economists and media outlets predicted that this would have dire consequences for the German economy and result in substantial job losses. This column shows that, in fact, the introduction of the minimum wage boosted pay for low-wage workers without lowering their employment prospects. It also prompted a reallocation of staff towards more productive firms. Overall, the minimum wage helped reduce wage inequality while improving the quality of firms operating in the economy.

Gori, 07 October 2021

Once again, the US finds itself in the midst of a debt ceiling crisis, but what can we learn from previous instances? This column assesses the impact of the 2011 US debt ceiling crisis on US federal government credit risk and on US banks’ funding costs. It estimates that during the first two quarters of 2011, as a result of the disagreement between Republicans and Democrats over the rise in the US debt ceiling, US government credit default swaps increased by 46 basis points, while bank funding costs increased by about 18 basis points.  

Gersbach, 06 October 2021

Since the financial crisis of 2007/08, bank equity regulation has been tightened. This is one reason why broad money supply reacted only weakly to the enormous expansion of the monetary base. With the publication of a new CEPR Policy Insight, this updated column from February 2021 argues that the process of tightening bank equity regulation has come to an end and will not have the same disinflationary effects after the pandemic. The large reserve balances held by banks may become a greater concern and pose larger inflation risks in the years to come. 

Auer, Tercero-Lucas, 06 October 2021

Some see cryptocurrencies as a potential substitute for fiat money and commercial banking, a new form of exchange resistant to debasement and censorship by governments and financial institutions. This column examines whether cryptocurrency investors are motivated by distrust in fiat currencies or regulated finance, and finds that investors show no differences from the general population in their level of security concerns about either cash or commercial banking services. Cryptocurrency investors tend to be educated and young and to be digital natives. In recent years, a gap in ownership of cryptocurrencies across genders has emerged.

Chavleishvili, Fahr, Kremer, Manganelli, Schwaab, 05 October 2021

When managing financial imbalances, macroprudential policymakers face an intertemporal trade-off between facilitating short-term expected growth and containing medium-term downside risks to the economy. To help assess this trade-off, this column proposes a risk management framework which extends the well-known notion of growth-at-risk to consider the entire predictive real GDP growth distribution. The authors use a novel empirical model fitted to euro area data to study the direct and indirect interactions between financial vulnerabilities, financial stress, and real GDP growth, highlighting a number of key findings.

Demmou, Franco, 05 October 2021

Intangible assets are at the heart of firms’ competitiveness, but financing them is complex for many firms. This column examines the extent to which financing barriers affect productivity outcomes in intangible-intensive sectors, using sector- and firm-level data. The authors demonstrate the existence of a ‘financing gap’ which depresses aggregate productivity growth and resilience, and propose a set of policy options to make each source of external finance – government support, equity financing, and bank credit – more supportive of intangible investment.

Bolton, Reichelstein, Kacperczyk, Leuz, Ormazabal, Schoenmaker, 04 October 2021

The overwhelming majority of publicly listed companies around the world still do not disclose their carbon emissions, and even fewer privately held companies do so. This column introduces a new CEPR Policy Insight in which the authors argue that mandatory carbon disclosures can make an elementary but essential contribution to the global drive towards a net zero economy, and recommend a mandate for the governments represented at COP26 to adopt.

Paoli, van der Ploeg, 04 October 2021

Despite climate justice advocates continuing to highlight climate inequities along racial, gender and class dimensions and policymakers’ vague statements in support of a ‘just transition’, there are few concrete plans. This column uses microsimulations of household behaviour from UK data to investigate the efficiency and equity impacts of different ways of recycling carbon tax revenue, focusing on both horizontal and vertical equity dimensions, and their implications for political feasibility. The authors find that rebating carbon tax revenues through social security payments renders the policy progressive and benefits the highest share of households in their sample.

Gray, Leive, Prager, Pukelis, Zaki, 04 October 2021

Proponents of work requirements for social safety net programmes argue that they promote self-sufficiency by encouraging work, while opponents contend that they reduce benefits for the most vulnerable recipients in times of need. This column looks at the impact of the reinstatement of work requirements for the Supplemental Nutrition Assistance Program in the US following a hiatus during the Great Recession. The authors find that work requirements do not appear to improve economic self-sufficiency, while substantially reducing benefits paid to programme recipients.

van der Cruijsen, Samarina, 03 October 2021

In turbulent times, trust in our central banks is important. This column uses the survey data on consumer expectations to gauge trust in the ECB during the Covid-19 pandemic. The authors find that trust in the ECB depends on consumers’ financial knowledge and on how severely they are affected by the pandemic, and that this trust and financial knowledge both contribute to better anchoring of consumers’ inflation expectations around the ECB’s inflation target.  Possible routes to improve trust include activities that enhance financial knowledge, tailoring central bank communication in terms of content and targeting it at people with low trust.

Fouejieu, Kangur, Romero Martinez, Soto, 02 October 2021

The past three decades have witnessed reform efforts to contain pension expenditures, the cost of which is born mostly by younger generations. This column assesses the sustainability, fairness, and intergenerational equity of pension systems in Europe by comparing the pension contributions and benefits over the lifetime of different cohorts. Reforms legislated in the decade from the onset of the Global Crisis reduced the lifetime benefit-contribution ratio by nearly 25% for younger generations. However, subsequent policy reversals have partly eroded these gains, suggesting additional reforms are needed.

Blumenstock, 01 October 2021

There is often an urgent need for humanitarian assistance in low-income countries. But how can it be targeted efficiently and quickly? Joshua Blumenstock tells Tim Phillips how, in Togo, a combination of machine learning and mobile phone data dramatically increased the effectiveness of Covid assistance.

Read more about the research discussed and download the free discussion paper:

Aiken, E, Bellue, S, Blumenstock, J, Karlan, D and Udry, C. 2021. 'Machine Learning and Mobile Phone Data Can Improve the Targeting of Humanitarian Assistance'. CEPR

Bauer, Cahlíková, Chytilová, Roland, Želinský, 01 October 2021

Scapegoating refers to a social phenomenon whereby members of an aggrieved majority group retaliate against innocent third parties, usually members of vulnerable minority groups. This column uses an experiment set up between May and September 2017 in Eastern Slovakia – where a large Roma minority regularly suffers from discrimination – to measure how an injustice that affects a member of one’s own group shapes the punishment of an unconnected bystander (or scapegoat). The experiment shows that members of a majority group will systematically shift punishment onto innocent members of an ethnic minority. 

Dewatripont, 01 October 2021

The approval of several effective covid vaccines in record time shifted the emphasis in rich countries away from availability and the logistics of delivery to the issue of vaccine hesitancy. This column looks at vaccination rates across countries, with a special focus on the French experience. It finds that the introduction of a ‘corona pass’ had a much greater impact on France’s vaccination rate than it did in some other countries, possibly in part due to the way it was announced by President Macron. 

Farmer, Goodhart, Kleinnijenhuis, 01 October 2021

Since the Great Financial Crisis, bail-in has been introduced as an approach to address too-big-to-fail and contagion risk problems. This column uses a multi-layered network model of the European financial system to study the implication of bail-in design on financial stability. It shows that early implementation of a bail-in and stronger bank recapitalisation lead to lower contagion losses. However, current bail-in design seems to be in the region of instability and the political economy of incentives makes reforms unlikely in the near future. 


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