May 2022

Biasi, Ma, 23 May 2022

Higher education programmes are essential for innovation and economic growth. This column introduces the education–innovation gap, a metric that captures the distance between education content and the knowledge frontier. Among US higher education institutions, the education–innovation gap is significantly lower for courses taught by instructors who are more active in producing research. The gap is higher in schools with students from lower socioeconomic status. On average, exposure to frontier knowledge is associated with better student outcomes.

Albuquerque, Varadi, 23 May 2022

Mortgage payment holidays were introduced in the UK March 2020 to help households who might have struggled with mortgage payments during the Covid-19 pandemic. Using transaction-level data, this column finds that payment holidays supported consumption during the pandemic for more financially vulnerable households, while more financially stable households on a payment holiday increased their savings instead. These results suggests that payment holidays may have been instrumental in supporting household balance-sheets following the negative aggregate shock triggered by Covid-19. 

Ubilava, Hastings, Atalay, 22 May 2022

We tend to associate rioting and mass protest with cities, but a surge in agricultural commodity prices can incite social unrest in rural areas as well. This column shows that rising cereal prices pose an elevated risk of violence in Africa, where agriculture represents a large share of the economy. The authors find that attacks on civilians increase during the harvest season and dissipate as the year progresses – findings that can help pinpoint, on a yearly basis, when conflicts will worsen and where enhanced food security and civilian protections should be deployed.

Vaitilingam, 21 May 2022

As Russia’s invasion of Ukraine continues and many call for a strengthening of sanctions, an alternative to a full energy embargo has been discussed in the form of EU tariffs on imports of Russian gas. The IGM Forum at Chicago Booth invited its panels of leading US and European economists to express their views. As this column reports, nearly three-quarters of the experts consider that high tariffs would be an effective measure to reduce the flow of revenues to Russia while limiting disruption to supplies to Europe. Several panellists suggest the significance of the elasticities of demand for and supply of Russian gas, as well as the mechanisms by which prices are set. 

Ma, Peng, 21 May 2022

A pessimistic view of Chinese agriculture development is based on a Malthusian trap, characterised by diminishing returns to agriculture and a declining land-labour ratio. This column presents stylised empirical facts of 19th and 20th century Chinese agriculture, focusing on the seasonality of labour demand and the resulting rise of sideline employment, to challenge the implications of this view. The reallocation of labour across idle seasons facilitated commercialisation and higher population densities, yet it was industrialisation, occurring outside the agriculture sector, which enabled modernisation. 

Verwey, Bardone, Orsini, 20 May 2022

Russia’s invasion of Ukraine has led the European Commission to revise its EU growth outlook downwards, and the forecast for inflation upwards. As this column discusses, by exerting further upward pressures on commodity prices, causing renewed supply disruptions and increasing uncertainty, the war is exacerbating pre-existing headwinds to growth, which were previously expected to subside. Nevertheless, the economy is expected to keep expanding, and inflation is set to gradually decline towards, though remain above, 2% throughout the forecast horizon. Should further disruptions in energy markets occur, the economy would not escape stagflation.  

Porto, Rijkers, 20 May 2022

This week António Guterres, secretary-general of the UN, warned that the war in Ukraine would tip tens of millions into food insecurity. Guido Porto and Bob Rijkers tell Tim Phillips about who suffers and how much from food price inflation.

Urata, Baek, 20 May 2022

Participation in global value chains is commonly seen as an important driver of productivity growth. This column uses Japanese firm-level data to estimate the productivity-enhancing impacts of participation. On average, firms that form part of global value chains are found to exhibit higher productivity than non-participating firms. In addition, longer participation strengthens the productivity-enhancing effects. Policymakers should support firms by protecting intellectual property rights, ensuring competition, and lowering costs and risks associated with global value chain participation. 

Donges, Meier, Silva, 20 May 2022

A large part of the world operates under oligarchic and authoritarian regimes, where access to economic opportunities is not offered to all citizens. This column discusses the impact of such ‘extractive institutions’ in stifling innovation and future economic growth. Using novel hand-collected data, it documents that ‘inclusive institutions’, which promote equal access to economic opportunities, are a first-order determinant of innovation. Geographical regions with more inclusive institutions are able to produce more than twice as much innovation (proxied with patents per capita) as regions with worse institutions.

Brinatti, Cavallo, Cravino, Drenik, 19 May 2022

Web-based job platforms that match employers and workers around the world to trade tasks which are delivered online are becoming increasingly popular. This column uses a new dataset from one of the largest job platforms to examine remote wages across locations and offshorability of work. Remote wages are more equalised than local wages across countries, but wage gaps across locations are still large. Outside the US, local-currency remote wages are strongly affected by fluctuations in the dollar exchange rate. Whether a job is performed remotely is an imperfect proxy for whether a job can be easily offshored. 

Fujiwara, Kimoto, Shiratsuka, Shirota, 19 May 2022

A large literature explores the implications of the introduction of robots into the workplace for the labour market, yet few studies exist which measure robot quality over time.  This column uses data from the Japan Robot Association and the Bank of Japan to document a significant decline in the improvement in robot quality in Japan in the last decade. The differences in the growth rates of robot quality between the 2000s and 2010s are large, at around -3 percentage points per year.

Avdeenko, Kaiser, Kis-Katos, 19 May 2022

Whether economic sanctions against Russia have real effects has been increasingly called into question. This column suggests that changes in e-commerce can demonstrate whether and how the 2022 Western sanctions contributed to de-linking Russia from the West. An analysis of trends in cross-border international online retail based on digitally recorded daily transactions data from 2,288 international and Russian companies shows substantial declines in Russia’s e-commerce transactions. About five weeks after the war started, revenues from e-commerce imports to Russia had fallen by half, with no signs of compensation by Russian retailers in the sample studied.

Cascarano, Natoli, Petrella, 18 May 2022

The question of whether firms are able to adapt to a changing climate is central to understanding the long-run economic effects of climate change. This column presents evidence from Italy showing that high temperatures affect firm demography by reducing the entry of newborn firms in the market and increasing business closures, while relocation to colder areas plays a minor role. Balance sheet data reveal a dichotomy between large firms, which successfully adapt improving their profitability, and smaller ones for which negative temperature spillovers become entrenched.

Ferrara, Ha, Walsh, 18 May 2022

Researchers typically collect newspaper-based data for use as outcome, treatment, or control variables in statistical analysis. This column argues that data generated from historical newspaper articles can also be used as a low-cost alternative for resolving measurement errors. The authors illustrate their framework by replicating two recent studies of how the boll weevil – a beetle that infests cotton crops – affected economic outcomes in the US South from 1892 to 1922. The newspaper-based replications increase the effect sizes and strengthen the results obtained in both papers using US Department of Agriculture maps. 

Bao, De Loecker, Eeckhout, 17 May 2022

Since the 1980s, the pay of superstar workers has increased sharply, closely linked to the performance of the superstar firms that hire them. This column examines the contribution of monopoly power to manager pay. As firms grow in size, the contribution of the manager to the value of a firm increases, and firms are willing to bid higher to poach the best manager. Top managers are hired disproportionately by firms with market power in their sectors, and they get rewarded for it because better managers help increase the rents from market power.

Rodríguez-Clare, Ulate, Vasquez, 17 May 2022

Concerns about international trade have grown, as recent studies document a negative effect of Chinese import competition on US labour markets. This column provides a new framework to explain this observation, which relies on the presence of downward nominal wage rigidity in US labour markets. The increased competition from China improves US terms of trade, but nominal wage frictions prevent the labour market from adjusting, so that both employment and labour force participation fall in the short run. The welfare implications vary substantially across states, but the favourable terms-of-trade shock drives a positive overall effect.

Aruoba, Drechsel, 17 May 2022

The recent surge in inflation has put central banks back into the spotlight. This column proposes a novel method to determine exogenous changes in monetary policy. Using information in the language of documents that economists at the Federal Reserve Board prepare for Federal Open Market Committee meetings, it predicts changes in the target interest rate and obtains a measure of monetary policy shocks as the residual. The dynamic responses of macroeconomic variables to the identified shock measure are consistent with the theoretical consensus, and the estimated shocks are not contaminated by the ‘Fed information effect’.

Marx, Pons, Rollet, 16 May 2022

Voters often face a key choice between continuity and change. But does voting for change – voting incumbents out of office – deliver better livelihoods for citizens? This column uses data from national elections conducted worldwide since 1945 to show that electoral turnovers lead to improvements in governance, economic performance, and other measures of national performance over the subsequent years. These findings suggest that turnovers play a positive role by bringing in new leaders with better incentives to deliver tangible benefits for the electorate.

Itskhoki, Mukhin, 16 May 2022

Despite an increasing number of sanctions imposed on the Russian economy since its invasion of Ukraine in February 2022, the ruble has appreciated back to its pre-war level. This column argues that the prevalence of import over export sanctions and the financial repression imposed in Russia, which lowered the local demand for foreign currency, have driven the appreciation. Despite the opposite effects on the exchange rate, the sanctions on imports and exports are equivalent in terms of their impact on consumption, welfare, and government fiscal losses. Nonetheless, the level of the exchange rate remains relevant for imports, savings, and monetary policy.

Cowgill, Prat, Valletti, 16 May 2022

Industry concentration leads to increased market power, but can it also lead to increased political power? This question, first asked by Brandeis in 1914, is receiving renewed attention. This column investigates the effect of a merger on the amount of political activity of the merging firms. While theoretical predictions are ambiguous, US data from the past 20 years indicate that the average merger involving listed companies is associated with a 30% increase in lobbying spending. 

Anstreicher, Fletcher, Thompson, 15 May 2022

Many US school districts are currently weighing policies to improve racial integration in public schools. This column outlines research evaluating the short and long-run effects of school desegregation on the lives of majority and minority students. New research examining the impact of court-ordered desegregation plans – implemented in hundreds of US school districts after 1960 – shows that early exposure to desegregated schools resulted in better academic and economic outcomes for Black children in the US South, but that Black children in the North showed little benefit from comparable integration initiatives.

Guiso, Pistaferri, 14 May 2022

The literature on assortative mating has largely focused on whether children of wealthy parents tend to marry children of similarly wealthy parents. Using data from Norway, this column shows that people tend to match based on their own pre-marriage wealth, not their parent’s wealth, and that individuals also match based on their personal returns to wealth. Among wealthy couples, the partner with the highest pre-marriage return tends to manage the household’s assets, allowing the households to grow their assets even faster over time and boosting wealth concentration. 

Charotti, Palma, Pereira dos Santos, 14 May 2022

Spain was one of the world’s richest countries around 1500. Two centuries later, it was a backwater. This column discusses the long-run impact of the influx of precious metals from the New World on the economic development of Spain. Using an augmented synthetic control methodology, the authors show that in the long run the growth and price level trajectories evolved dramatically different in Spain relative to other Western European nations. Spain initially boomed but suffered from high inflation and became poorer as the result of a resource curse which had economic and political dimensions.

Reis, 13 May 2022

If you're going to drop lots of money from a helicopter, what will happen to the economy? When would it make a difference, and to who? Helicopter money is increasingly being taken seriously as policy. Ricardo Reis tells Tim Phillips whether helicopter money really can solve our economic problems.

Download the free DP and read more about this research:
Reis, R and Tenreyro, S. 2022. 'Helicopter money: what is it and what does it do?'. London, Centre for Economic Policy Research.

Daudin, Faubert, 13 May 2022

The rise of global value chains has led to a greater use of input-output tables to study international linkages. This column analyses cost-push inflation using world input-output tables. In the light of the recent surge in commodity prices, it explores which countries are most vulnerable to energy cost-push inflation and documents the large exposure of Eastern and central European economies to a rise in Russian hydrocarbon prices. Input-output tables are used to document the heterogeneous reactions of consumer prices to exchange rate variations across countries, reflecting differences in foreign product content of consumption and intermediate products.

Chaudhary, Viswanath-Natraj, 13 May 2022

On 10 May 2022, the price of TerraUSD, an algorithmic stablecoin operating on the Terra blockchain, fell and it lost its peg to one US dollar. Using the devaluation of the TerraUSD peg as a case study, this column shows how algorithmic stablecoins are vulnerable to speculative attacks when the system is under-collateralised. The authors point to solutions – stable collateral and over-collateralisation – to stabilise the peg.

Haroutunian, Hauptmeier, Leiner-Killinger, Muggenthaler, 13 May 2022

The economic landscape has changed dramatically since the European fiscal rules were designed some 30 years ago. This column contributes to the debate on reform by proposing a two-tier fiscal framework combining an expenditure rule that accounts for the ECB’s inflation objective with a lower speed of adjustment under the Stability and Growth Pact’s debt rule. Counter-cyclicality may be improved by automatic modulation of adjustment requirements, creating fiscal space when domestic inflation is low and constraining more when inflation is above target. The link to the debt anchor ensures a gradual phasing-in of debt reduction in the aftermath of COVID-19.

Delaney, Devereux, 12 May 2022

A burgeoning literature on rank effects in education has found that students who are highly ranked in their class or grade have better long-term outcomes, even after accounting for absolute levels of ability and performance. This column uses this finding to shed light on other educational phenomena, such as the impact of high-achieving peers and the persistent gender gap in STEM subjects. The sizeable effects of (sometimes misleading) academic rank raise policy questions about whether and how students should be informed of data that could influence their decisions about subject and career choices.

Dooley, Garber, Folkerts-Landau, 12 May 2022

Recent sanctions imposed by the US on Russia have called into question the US dollar’s dominant role as a reserve currency. This column argues that sanctions will, in fact, reinforce the dollar’s dominance rather than weakening it. It emphasises the importance of ‘collateral’ demand for reserves, especially by developing countries. Countries which choose to exit the dollar bloc will have restricted ability to reassure foreign investors, which could impact a growth strategy that involves participation of centre country capital.

Rossi, 12 May 2022

How does the productivity of different types of workers vary across countries? This column uses micro data from countries at different levels of development to document that highly educated workers are relatively more productive in rich countries. Exploiting variation in the skill premia of foreign-educated migrants, the author concludes that this is mostly due to the technological environment in rich countries being more complementary to high-skill labour.   

Winkler, Wuester, 11 May 2022

The trade disruptions resulting from Russia’s invasion of Ukraine have revealed the vulnerabilities of relying on a limited range of suppliers for imports with few substitutes. This column shows that the impact of the war through Russia’s participation in global value chains relates to its ‘upstream’ position.  Countries in closer geographic proximity to Russia face higher risks due to their greater direct trade links with Russia. But the countries that will be affected most severely are those in global value chains reliant on products from Russia with fewer substitutes, such as rare metals.

Lan, Malacrino, Mohommad, Presbitero, Sher, 11 May 2022

Trade in goods has rebounded quickly from the pandemic, while trade in services has not. This column finds that the pandemic broke the old trade patterns and that lockdowns had unintended international spillovers. Although global value chains have adapted, ongoing supply disruptions and the risk of future adverse shocks point to the need for more resilient value chains. The authors argue that in contrast to those calling for reshoring, a better way to build resilience is to diversify away from domestic sourcing of inputs and make it easier for producers to substitute between inputs supplied by different countries.

Baker, Benmelech, Yang, Zhang, 11 May 2022

China’s high household savings rate remains a puzzle, with potential explanations including demographic, policy, and financial causes. This column investigates China’s savings rate using individual income and spending transactions linked to demographic characteristics and financial information on loan applications and credit availability. The authors match bank customers to administrative records covering marriage and births to obtain a unique insight into consumption and savings patterns around important life events. The results point to income growth, financial instability, and credit access, rather than directives such as the one-child policy, as the primary drivers of high savings among Chinese households.

Martínez, 10 May 2022

It is not only countries but also sub-national jurisdictions such as states that compete for high-income taxpayers. In recent decades, both tax competition as well as attempts to keep aggressive tax practices at bay have intensified. This column uses Swiss data on local tax changes to show that lower income taxes for high-income taxpayers do attract top earners. Nonetheless, the net effect on tax revenue is not necessarily positive. The associated mechanical tax revenue losses that arise from lowering the tax rates may be so large that such tax cuts do not pay for themselves.

Auer, Kunz, 10 May 2022

Existing research on the integration of refugees has focused on the impact on the refugees themselves. This column uses the random allocation of refugees in Switzerland to show how allocation has significant effects even on future generations. Compared to children of refugees allocated to regions with an unfamiliar language, the children of mothers allocated to a familiar language environment have a higher birth weight on average, which is a predictor of outcomes including educational attainment, income, and health later in life. 

Akbulut-Yuksel, 10 May 2022

The Russian invasion of Ukraine has forced millions of Ukrainian children to leave their schools and homes. Such adverse shocks early in life can have profound long-term effects. This column presents evidence from WWII and the Vietnam War of how childhood war exposure had detrimental effects on education, physical and mental health, and labour market outcomes, even decades after the conflicts. The effects were most pronounced for girls and children of lower socioeconomic status. Policies that prioritise children are essential to reduce the enduring effects of war.

Baek, Hayakawa, 09 May 2022

What can explain the small or even negative effects of regional trade agreements on trade? Using trade data between Japan and other 68 countries from 2002 to 2018, this column argues that RTAs reduce fixed costs for foreign direct investment more than exporters. This could have a negative effect on trade. A simulation exercise indicates that introducing RTA between Japan and China would incentivise Japanese firms to set up production in China and sell locally rather than export from Japan.

Coraggio, Pagano, Scognamiglio, Tåg, 09 May 2022

Recent research has highlighted the contribution that managerial decisions make to firms’ productivity. This column uses a novel measure of job-worker allocation quality to document how firms that match their employees to their most suitable jobs are more productive, and their ability to do so depends on the quality and experience of their management. The measure is helpful for uncovering a hitherto neglected dimension of managerial practices, and could be particularly valuable at times when the need to cope with technological innovation, pandemics, climate change, or wars requires widespread firm restructuring and workers’ reallocation.

Broberg, Tricaud, Pons, McIntyre, 08 May 2022

Democracies around the world have instituted reforms to level their electoral playing fields. This column studies the impact of campaign finance regulations in French local elections. The authors find that such regulations, particularly state reimbursements of expenditures, can level the playing field and assist newcomers without decreasing the representativeness of elections.

Del Angel, Hess, Weidenmier, 08 May 2022

Recessions in Europe often pushed Europeans to migrate to the US in search of better economic opportunities. This column examines the effect of this on conflict with Native Americans in the western US during the late 19th century. The authors find that a recession in Europe significantly increased the probability of conflict between US soldiers and Native American tribes. As they were often driven off their land and relocated to areas with inferior land and rainfall, European immigration to the American west likely had long-term negative effects on economic conditions for Native Americans. 

Kapustin, Neumann, Ludwig, 07 May 2022

In the wake of widely publicised instances of police misconduct, calls to defund the police have gained currency in the US. Still, many Americans fear that crime will increase where police presence is decreased. This column argues that policing problems and crime rates can be reduced simultaneously. Variabilities in violent crime and police misconduct correlate with the tenures of police leaders. This suggests that many police departments perform poorly due to mismanagement and could be reformed in ways that reduce the harm they do without compromising their ability to keep people safe.

D'Acunto, Malmendier, Weber, 07 May 2022

Inflation has surged to historic levels around the globe. Designing the correct policy responses requires a deep understanding of how consumers form and update their inflation expectations, and how expectations influence economic behaviour. This column summarises key findings in the literature on inflation expectations, particularly how they deviate from the full-information rational expectations paradigm. Household inflation expectations are typically biased upwards, systematically skewed, and correlated with social/demographic characteristics. Studying these heterogeneities and their impact on aggregate outcomes is a key challenge for policymakers going forward. 

Raute, 06 May 2022

If fathers don't acknowledge paternity, it affects both mother and child. Should the state increase financial support for single parents, should we incentivise marriage – or is there another option? Anna Raute tells Tim Phillips that the surprising impact of an unrelated German social policy suggests there may be.

Download the free DP and read more about this research:
Raute, A, Weber, A and Zudenkova, G. 2022. 'Can public policy increase paternity acknowledgement? Evidence from earnings-related parental leave'. CEPR

 

Chepeliev, Maliszewska, Seara e Pereira, 06 May 2022

The Russian invasion of Ukraine is disrupting global supplies of essential commodities, pushing prices higher, slowing trade, and driving down incomes. This column argues that developing countries that are large agricultural and energy importers are being hit hardest. While some commodity exporters might be able to step up exports to benefit from increasing global prices, they could experience a restructuring of their trade patterns, resulting in a lower integration into global value chains. Consumers across the world are worse off, with the poorest being impacted the most adversely.

Frey, Presidente, 06 May 2022

Face-to-face interactions are critical for the cross-fertilisation of ideas. Yet, the share of geographically distributed teams in scientific research has steadily risen since the 1960s and accelerated with the ICT revolution of the 1990s. This column explores how the rise of remote collaboration has shaped disruptive discoveries in science between 1961 and 2020. Remote collaboration negatively impacted breakthrough discoveries, but the effect reversed after 2010, likely due to improvements in technologies that support effective remote collaboration at distance. 

Bénassy-Quéré, 06 May 2022

The role of fiscal rules is to ensure debt sustainability and predictability of fiscal policies. It is possible to make them simpler and more friendly to countercyclical policies. Rather than allowing for different investment priorities, this column argues that the Covid crisis, the climate emergency, and Russia's invasion of Ukraine and subsequent security concerns may require a holistic approach where better compliance with fiscal rules could be combined with a holistic definition of sustainability that would also include macroeconomic and green sustainability.

Mahlstein, McDaniel, Schropp, Tsigas, 06 May 2022

As relations between the West and Russia deteriorate, the imposition of a complete trade embargo by Allies on Russia appears increasingly likely. Using computable general equilibrium modelling, this column explores the short- to medium-term economic effects of such an Allied trade embargo. It finds that Russia would likely sustain sizable losses of upwards of 14% of real GDP. Allied economies are unevenly affected by the sanctions, with real GDP losses between 0.1% and 1.6%. Finally, if Russia were to impose countersanctions, rather than being a sanction target, losses to the Russian economy would be even greater.

Ruta, 05 May 2022

The war in Ukraine has suddenly increased geopolitical risks. This column argues that firms will respond to the shock by reassessing security-related risks, leading to changes in the structure of supply chains. But given the capital in place, the cost of searching for alternatives, and factors such as wage differentials across countries, this process is likely to be gradual rather than sudden and will affect different sectors and products differently. It will not result in a reversal of globalisation, unless it is supported by pronounced government intervention.

Andersen, Bhattacharya, Grodecka-Messi, Mann, 05 May 2022

Retirement saving is at the centre of the debate on rising income and wealth inequality. This column studies the role of the pension system in wealth accumulation and distribution in Denmark. The authors find that a pension reform in the late 1980s increased the savings rate and aggregate pension assets significantly by introducing mandated funded pensions. Moreover, it has had an equalising effect on the wealth distribution. The findings illustrate the importance of pension system design for the level and distribution of wealth. 

Robinson, 05 May 2022

Although a key determinant of poverty in Africa is the under-provision of public services, the preference for lower taxation and fewer public goods remains widespread. This column proposes a new explanation for why African tax revenues are so low. Rather than rely on standard arguments about accountability and governance, the author uncovers deep-seated ideas about the nature of the state and its threat to the autonomy of society. Historically, social contracts in Africa rarely featured taxation. Building fiscal systems is therefore not simply a technical or human resources problem, but a political one.

Pelosi, Rodano, Sette, 04 May 2022

Governments around the world enacted unprecedented measures to support firms impacted by the Covid-19 pandemic. This column focuses on Italy to examine the extent to which these measures ended up also benefitting non-viable but still active firms. The authors find that ‘zombie firms’ were less likely than healthy firms to access public support measures in the form of either grants, debt moratoria, or government-guaranteed loans, suggesting that these measures did not contribute to a zombification of the economy.  

Espitia, Evenett, Rocha, Ruta, 04 May 2022

Ukraine and Russia play an outsized role in global markets for key crops. Disruption to food prices and supplies arising from the conflict is being felt thousands of miles away, and not only in net food-importing countries. This column shows that governments are exacerbating matters through unilateral resort to export curbs. Bans on wheat exports alone are responsible for a 7 percentage point increase in world wheat prices (roughly one-sixth of the observed price surge) and risk igniting a multiplier effect. Assurances of adequate food supply must be provided by other suppliers.

Zamil, Lawson, 03 May 2022

Should tech firms be allowed to own banks? This question is part of a broader debate on whether non-financial companies can affiliate with banks. This column explores the merits of permitting tech firms to operate a licensed bank and outlines their state of play and regulatory environment in seven jurisdictions. It also proposes policy options to help mitigate their perceived risks, as some banking authorities look to tech firms to expand financial access and improve consumer outcomes.

Xu, Yang, 03 May 2022

Innovations in private money creation, such as stablecoins, can be economically useful because they improve efficiency in the payments system. However, if these currencies are not fully ‘stable’, uncertainty over their value may be a source of transactions friction that have real costs. The column discusses how the National Banking Act of 1864 in the US provides a natural experiment for evaluating the effects of stabilising the value of private money. The act introduced a new type of private money that was fully stable for the first time. Gaining access to the stable money generated growth in economic sectors that were sensitive to transaction costs. 

Baliga, 02 May 2022

The Russian invasion of Ukraine has been met with coordinated sanctions. Sanctions are designed to incentivise cooperation, but this column argues that those being used in practice are scattershot. Instead, sanctions on oil and gas exports are the most effective way to maximise the probability that Russia ceases its misguided attack on Ukraine. Such sanctions are most likely to target the elite who are closest to President Putin. Also, it is important that cooperation is defined clearly and to not go as far as regime change in Russia.

Abendschein, Luu, Causa, 02 May 2022

Labour market transitions matter for growth and inclusiveness, especially where labour shortages are coinciding with low employment in some countries recovering from COVID. This column provides new evidence on the role of a wide range of policies associated with hiring transitions into jobs, emphasising differences across socioeconomic groups. The results can help policymakers support an efficient and inclusive labour market recovery from the COVID crisis while addressing key longstanding structural challenges, such as slowing productivity and the labour market reallocations required by the green transition and digitalisation. 

Kanbur, Ortiz-Juarez, Sumner, 02 May 2022

Global inequality has fallen over the last three decades, despite a rise in inequality within some large countries. This column argues that the decline in global inequality will reverse in the coming years, due to a turnaround in the between-country component of inequality. This inequality ‘boomerang’ is forecast to happen near end-2020s or early-2030s, although an inequal recovery from the Covid crisis could hasten the reversal. Thus, the ‘sunshine’ narrative of declining global inequality could prove temporary, and a boomerang would require new policies to combat inequality in the future. 

Douenne, Fabre, 01 May 2022

While many economists are in favour of carbon taxation, the public often opposes this climate policy. This column uses data from a survey of 3,000 people in France to show that rejection of a carbon tax is driven by pessimistic beliefs regarding the properties of the tax. Even when revenues from the tax are redistributed to households so as to make the policy progressive, most people think that they and low-income households would lose out, and that the policy would not be effective at reducing emissions. Public investments and standards could help foster support for an ambitious climate policy.

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