July 2022

Herrera, Sethi, 31 July 2022

Citizens often seem to choose which political party to support by seeking out information based on their party affiliation, rather than based on informed opinion. Along with the explosion in new media in the US, trust in mainstream media has been decreasing, particularly amongst Republicans. This column presents a framework to analyse how beliefs regarding the mainstream media impact individual media choice and thereby influence electoral outcomes. A substantial political advantage accrues to the side with less exposure to or trust in mainstream media. This may provide one rationale for the fomenting of this distrust by party elites.  

van den Heuvel, Popp, 30 July 2022

Large investments in low-carbon technologies are needed to limit global warming. This column uses data on US start-ups over the past 20 years to analyse how venture capital in clean technologies can address the funding gap. It argues that unsuccessful nationwide US climate policy has dampened demand for clean energy technologies in the past. Moving forward, governments need to implement persistent demand-side policies, such as a carbon tax, to improve the expected performance of early-stage investors in clean energy, before using targeted public investments to fund the cleantech start-ups with limited potential for outsized returns. 

Hartmann, Molitor, Tanzarella, de Jong, 29 July 2022

Russia’s invasion of Ukraine added another one to a series of crises affecting Europe over the last decade and a half. This column finds that fragmentation of euro area financial markets has been relatively limited, as policymakers have benefitted from reforms after and experiences with past crises, European countries and authorities reacted with quite some unity, and direct financial exposures to Russia and Ukraine are relatively small. Cross-country divergences of euro area asset prices appear to have been particularly driven by bond markets and related to the countries with the greatest energy and financial exposures as well as to changes in economic uncertainty.

Novta, Pugacheva, 29 July 2022

Analysis of large-scale conflicts over the past 30 years can shed light on the range of possible economic outcomes for Ukraine. This column shows that, in general, the impact on GDP is very large, persisting even ten years after conflict onset, and affects all sectors of the economy. This is overwhelmingly driven by declines in private consumption and official trade. In addition, large-scale conflicts often lead to persistent long-term refugee outflows to both neighbouring non-advanced economies (given the location of most conflict-affected countries) and non-neighbouring advanced economies. As such, policies to absorb refugees and facilitate post-war reconstruction need to be long-term as well.

Fabre, 29 July 2022

Opposition to a carbon tax was at the root of the gilets jaunes protests in France. Did the protestors think the tax wouldn’t work, or that it wasn’t fair, or that they would personally lose out? Adrien Fabre talks to Tim Phillips about the link between tax and trust in government.

Bertoldi, Pesenti, Rey, 29 July 2022

In November 2021, the Federal Reserve Bank of New York, the European Commission, and CEPR brought together US- and European-based policymakers and economists from academia, think tanks, and international financial institutions to discuss issues that transatlantic policymakers are facing. This column summarises the principal themes and findings of the conference discussion on questions such as how to support growth while addressing inflationary pressures, facilitating the climate transition, and reducing economic inequalities; what the key changes are in the Federal Reserve’s and ECB’s new monetary policy frameworks; and how best to consolidate public finances.

Goldhaber, Kane, McEachin, Morton, Patterson, Staiger, 28 July 2022

There is robust evidence that children lost ground academically as a consequence of the pandemic, but less research into how the effects varied by school district and household demographics. Using test data from 2.1 million students across the US, this column finds that remote instruction was a primary driver of widening achievement gaps by race and poverty. The authors argue that low-income districts that taught remotely in 2020-21 will need to spend nearly all of their federal aid on academic recovery to help students recover from pandemic-related achievement losses.

Chen, Graff Zivin, Wang, Xiong, 28 July 2022

In order to improve the water quality of the downstream stretch of the Xin’an River, in 2011 China implemented the Ecological Compensation Initiative, a pioneering policy establishing side payments between upstream and downstream provinces. This column shows that the initiative mitigates cross-border externalities by sharply reducing water pollutant emissions by upstream firms and also induces firms to relocate to neighbouring cities. The findings highlight the potential for bilateral compensation for ecosystem services to reduce pollution.

Rohner, 27 July 2022

When aid donors are distracted by domestic concerns, do aid recipients take advantage to suppress political opposition? Data from Africa suggest that they do, Dominic Rohner tells Tim Phillips.

Bricongne, Carluccio, Fontagné, Gaulier, Stumpner, 27 July 2022

It is important to understand the micro drivers of the economy’s reaction to large macro shocks. This column uses French firm-level data from 1993-2020 to study the contribution of the largest exporters to aggregate export fluctuations. The authors find that top exporters explained over 40% of aggregate fluctuations and drove the export collapses during the Global Crisis and the pandemic. Moreover, the 2020 collapse of French exports was driven by the higher sensitivity of large firms to demand shocks rather than disruptions to global value chains.

Koster, van Ommeren, 27 July 2022

Recently, a range of countries have introduced laws prohibiting disadvantaged individuals from moving into public housing in specific areas, for example because they are unemployed or have too low an income, in an attempt to avoid the formation of ghettos and unwanted spatial disparities in the standards of living. This column studies one such law in the Netherlands and finds that it has not been effective in attracting households with higher income levels to targeted neighbourhoods. Moreover, it has had significant negative side effects due to the stigma attached to targeted neighbourhoods.

Lindé, Platzer, Tietz, 26 July 2022

Disagreement over future nominal interest rates is currently high, creating challenges for central banks. This column argues that the real neutral rate of interest has a slow-moving, long-run component as well as a short-run component. The long-run ‘natural rate’ is determined by demographic characteristics and income inequality, while the short-run ‘neutral rate’ can be affected by transitory economic shocks. In the current environment, the distinction might be important to explain part of the disagreement about future nominal short-term interest rates.

Kovak, Morrow, 26 July 2022

Increased import competition has been found to depress labour market outcomes, leading to pessimism that classic gains from trade are worth the accompanying labour market disruptions. This column examines the effect of the 1989 Canada-US Free Trade Agreement. While Canadian workers suffered short-run displacement and earnings losses in response to increased import competition, long-run labour market outcomes, such as years worked and cumulative earnings, were largely unaffected. Canadian workers in industries that obtained increased access to US markets experienced short-run gains, but these effects had largely disappeared by 2004.

Savini Zangrandi, 25 July 2022

There has been much debate over the intentions behind Russia’s March 2022 presidential decree requiring gas importers to settle gas payments in rubles. This column argues that the scheme is intended to protect the Moscow Stock Exchange from financial sanctions. The decree requires not only that gas payments are settled in rubles, but also that the rubles are obtained on the exchange, making it indispensable to the transactions. This prevents the exchange being placed under sanctions without gas supplies being cut off. This demonstrates the development of not only sanctions, but also sanction defences, that exploit interdependencies between countries. 

Blinov, Djankov, 25 July 2022

As Russia’s invasion continues to ravage many parts of Ukraine, the flow of official statistical data has been erratic. This column outlines an alternative approach to measuring private consumption during war times, using aggregated bank micro-level data. Commercial banks have mostly remained operational during the war. Moreover, the electronic payment system has functioned unceasingly throughout the war period, providing stability of bank payments. Bank card activity suggests that private consumption fell by half during the first month of the war and plateaued by June 2022 at 70–74% of the previous year’s level.

Akbulut-Yuksel, Mocan, Tumen, Turan, 24 July 2022

The impact of refugees on socioeconomic outcomes in destination countries, including crime, can be significant. This column finds that the increase in the refugee population in Turkey led to an increase in the incidence of crime of between 2% and 4.75% per year, corresponding to about 75,000-150,000 additional crimes per year. These results highlight the need to strengthen the social safety systems, take actions to counter the impact on the labour market, and provide support to the criminal justice system to mitigate the repercussions of massive refugee inflows.

Martin, Weder di Mauro, 23 July 2022

The EU's response to Russia’s invasion of Ukraine has been divided on energy, which may pose challenges for European unity. This column discusses several proposals to make sanctions more effective and cheaper for European households and firms. It argues that a temporary import tariff on Russian oil along with a price cap on Russian gas would be an effective and feasible option. The import tariff would promote substitution to alternative sources, while the price cap would remove the high uncertainty about future price spikes. To get through the winter, common energy buying, saving, and sharing arrangements need to be agreed and tested now.

Mattozzi, Nakaguma, 23 July 2022

Committees are often tasked with key decision making, yet a committee is not a singular unit but a group of individuals. This column provides a framework to assess the effect of making public individual votes in committees where members differ in competence and bias, and are concerned about external perceptions of their competence. While public voting attenuates the potential biases of competent members, secret voting attenuates the potential biases of incompetent members. Hence, transparency leads to better decisions when members are highly influenced by ideological or self-interested motives, and secret voting performs better otherwise. 

Braghieri, Levy, Makarin, 22 July 2022

Over the last two decades, the mental health of adolescents and young adults in many countries has worsened considerably. This column looks at the role that social media has played in this, focusing on Facebook. Using the gradual expansion of the website across US colleges as a natural experiment, the authors find that students were more likely to report that mental health issues negatively affected their academic performance after Facebook was introduced at their college, with evidence suggesting that the effects operated through unfavourable social comparison.

Hoang, Huynh, Ongena, 22 July 2022

Russia’s invasion of Ukraine in February 2022 has provoked wide-ranging financial and economic sanctions from the US, Europe, and various other countries worldwide. This column assesses the economic effects of almost two decades of earlier sanctions on Russian firms to shed light on the impacts of this new wave of sanctions. Sanctions adversely affect firm performance in general, yet there is no clear impact on energy and oligarch-related firms. Evidence of preparedness for sanctions by these firms during the Crimea event in 2014 suggests one mechanism by which the impact of sanctions may be muted. 

Parry, Black, Zhunussova, 22 July 2022

Carbon pricing, in the form of carbon taxes and emissions trading systems, is increasingly a centrepiece of countries’ emissions reductions strategies, but policymakers face a bewildering array of options and considerations. Getting the design basics right is critical, and entails ensuring pricing is robust in level and coverage, practical in administration, and addresses fiscal, distributional, and political economy objectives. This column discusses key design issues and to what extent they can be addressed under carbon taxes and emissions trading systems. 

Ambrocio, Ferrero, Jokivuolle, Ristolainen, 21 July 2022

A key question for any inflation-targeting framework is what the inflation target should be. This column reports findings from a survey of leading economists from around the world on the inflation target and related monetary policy issues. Overall, there was a strong preference for the status quo, with participants seeming to perceive high costs in terms of credibility from changing the current inflation target. However, participants concerned about the zero lower bound on the nominal interest rate were more likely to favour raising the target.

Didisheim, Kassibrakis, Somoza, 21 July 2022

Since the onset of the Covid-19 crisis in 2020, the correlation between cryptocurrency and equities went from low and negative to consistently high and positive. This column proposes a new mechanism to explain this new relationship. With investor-level holdings from a bank offering both trading accounts and cryptocurrency wallets, it shows that retail investors’ net trading volumes of stocks and cryptocurrencies are highly positively correlated. Theoretically, this micro-level pattern translates into a cross-asset class correlation. Evidence suggests that the pattern emerged in March 2020, and that stocks preferred by crypto-traders exhibit a stronger correlation with Bitcoin.

Ilzetzki, 20 July 2022

There are significant regional disparities in productivity levels across the UK. The June 2022 CfM survey asked the members of its UK panel to evaluate the reasons for these disparities and policies that might close the gaps. A majority of the panel believe that the productivity differences are attributable to either agglomeration effects or sorting, self-reinforcing phenomena that lead some regions to become productivity powerhouses and others to fall behind, while just under a third think that the differences are due to fundamental factors such as education, local infrastructure, or poor transportation links across regions. The productivity gaps should be addressed with a combination of public investments, incentives for private investment, and investments in skills and education. 

Atkeson, Heathcote, Perri, 20 July 2022

The US net foreign asset position – measuring the difference between its foreign assets and liabilities – was negative, yet small, until 2007. This column shows that since then, it has deteriorated sharply to negative 65% of GDP, mostly as a result of changes in the market value of US-owned assets abroad and foreign-owned assets in the US. These valuation effects are explained by rising US equity values disproportionately benefitting foreign owners of US firms. Whether this is beneficial for Americans depends on whether the profit rises are due to higher productivity or lower competition.

Gourinchas, Reis, 20 July 2022

Global real rates are stuck at a low level, and until recently policy rates everywhere were effectively zero. Can we use historical data to explain why this happened, and to predict whether we will be back at the ZLB when inflation falls? Pierre-Olivier Gourinchas and Ricardo Reis talk to Tim Phillips.

Daudin, Héricourt, Patureau, 19 July 2022

Although transport costs have decreased substantially over the past two centuries, they are still far from negligible. This column argues that in addition to standard ad-valorem transport costs, there is an important role for additive costs in trade models. The authors estimate that over the period 1974 to 2019, additive costs represented between 35% (in air transport) and 45% (in vessel) of total transport costs. Furthermore, accounting for additive transport costs helps characterise the downward trend in total transport costs since the 1970s and suggests that the gains from trade over the period have been larger than generally assumed. 

Diemer, Iammarino, Rodríguez-Pose, Storper, 19 July 2022

Many regions in Europe are stuck in a development trap and face significant structural challenges in retrieving past dynamism or improving prosperity for their residents. This column conceptualises what constitutes a development trap at a regional level in Europe and identifies which regions have been trapped or at risk of becoming trapped in recent years. Regional development traps can arise at many different levels of income. Springing these traps would improve overall European competitiveness and help quell the discontent and resentment of citizens living in these areas.

Galasso, Morelli, Nannicini, Stanig, 18 July 2022

How should traditional political parties counter narratives from populist parties? This column reports on an experiment during a constitutional referendum held in Italy in 2020 in which two different videos ads were broadcast to voters. A video with a direct attack on the credibility of the populist politicians was more effective in capturing viewers’ attention and in affecting the electoral results than a video providing partisan informational content. Given the low cost of advertising compared with the cost of face-to-face or phone canvassing for more votes, when devising their strategy to respond to populist parties on populist issues, traditional parties may wish to consider demobilisation rather than persuasion.

Masciandaro, Russo, 18 July 2022

Central banks in developed countries have launched cautious investigations into whether, how, and to what extent they should intervene in climate policy. This column shows that central banks would face trade-offs if they were to start tackling climate change, as the instruments overlap with those already used in their monetary and macroprudential mandates. Using a using a principal–agent setting, the authors argue that central banks’ effectiveness in addressing climate change will depend on capture risk and  calibration risk.

Verwey, Borg, Orsini, 18 July 2022

The shocks unleashed by Russia’s war on Ukraine are hitting the EU economy hard, setting it on a path of lower growth and higher inflation than expected in the previous European Commission forecast. Further upward pressures on energy prices, and even an outright cut in gas supply, represent concrete risks to the forecast. Against this backdrop, this column argues that EU Member States should implement the right policies to support vulnerable households while investing in measures to frontload the energy transition.

Ridolfi, Salvo, Weisdorf, 17 July 2022

Fears about the effects of mechanisation on societies are not new; technology has always generated cultural anxiety throughout history. This column considers one of the most significant waves of mechanisation in history – the rise and spread of steam power in 19th century France – to examine the influence of mechanisation on labour outcomes. Rather than cutting jobs and wages, the authors find that that steam-adopting industries ended up employing up to 94% more workers than their non-steam-adopting counterparts and paid wages that were up to 5% higher on average.

Sazedj, Tavares, 16 July 2022

The gender pay gap is well-documented, yet its source remains debated. This column uses data from Portuguese firms to analyse the role of professional networks in explaining the gender pay gap among top executives. The component of the pay gap which is unexplained by age, tenure, or education has remained persistently large over the period 1986 to 2017, reflecting a gender bias which can be partly explained by networks. Both female and male managers benefit most from connections to managers of their own gender. This implies positive spillovers from policies that favour increased female presence in leadership positions.

León-Ciliotta, Zejcirovic, Fernandez, 15 July 2022

There is growing concern that citizens around the world have declining trust in institutions such as public health agencies, private corporations, scientists, or vaccine manufacturers. This column focuses on a family planning campaign in Peru to examine how government actions in the implementation of public programmes can shape trust in institutions and thus affect demand for public services and welfare outcomes. After the public disclosure of alleged forced sterilisations, municipalities with more victims exhibited a steep decline in public health services and lower levels of trust in public institutions. The findings show how policy implementation failures can break down the social contract between citizens and their government.

Hanlon, Heblich, Monte, Schmitz, 15 July 2022

It seems obvious that lowering the cost of communication among innovators would facilitate scientific and technological progress. Yet, few studies examine this relationship. This column explores the introduction of the first modern postal system in Britain in 1840 and its effect on the number of citations between pairs of scientists and on patenting. The gradient with which citations declined with distance-based postage costs fell and patenting increased in locations that experienced more significant improvements in letter market access due to the reform.

Fink, Veugelers, 15 July 2022

The Covid crisis inspired extraordinary innovation. Carsten Fink and Reinhilde Veugelers are two of the editors of a new ebook from CEPR called Resilience and Ingenuity that examines how countries, organisations and industries were able to innovate. Tim Phillips asks them what worked, what didn’t, and whether we can keep up the pace of new ideas. 

Ardelean, León-Ledesma, Puzzello, 14 July 2022

The relationship between trade and volatility depends on a complex interaction between sectoral shocks, sectoral specialisation, and geographic diversification. This column uses a multi-country, multi-sector framework to study the main sources of risk for open economies and how trade determines the exposure to those risks through specialisation and diversification of sales. It shows that diversification reduces volatility, particularly in countries with higher output volatility. Furthermore, by increasing the co-movement between sectors, lower specialisation increases total risks, counter to conventional wisdom on this relationship.

Henkel, Kwon, Magontier, 14 July 2022

The federal government provided $296 billion in disaster relief for catastrophic events in the US between 2001 and 2019. However, excessive bailouts may encourage economic activity to remain in exposed areas. This column shows that increased post-disaster efforts due to political motives result in more people living in hazard-prone coastal regions. A dynamic spatial general equilibrium model predicts that current post-disaster policies improve aggregate welfare at the expense of overall GDP and productivity losses, and encourage sorting into exposed areas.

Fink, Ménière, Toole, Veugelers, 13 July 2022

How has the global innovation system fared in the wake of the Covid-19 crisis? A new eBook untangles how the COVID-19 shock affected innovation ecosystems in different parts of the world and how scientists, entrepreneurs, and creative professionals responded to the shock. Innovation not only proved crucial in finding solutions to the crisis, overall the innovation system proved more resilient to the pandemic’s fallout compared to previous crises.  

Schularick, Morelli, 13 July 2022

Recorded live at CEPR Paris Symposium 2022: Across Europe and beyond, populist movements have recently flourished. What does history teach us about the economic impact of populism – and is our taste for populists a bug or a feature of democracy? Tim Phillips talks to Moritz Schularick and Massimo Morelli.

Zenios, 13 July 2022

Evidence suggests that sovereign debt markets are taking climate effects into account in pricing, creating the potential for a climate-debt doom loop. However, climate risks to fiscal stability do not attract the same attention as climate risks to financial stability. This column discusses how integrated assessment models can be linked with stochastic debt sustainability analysis to inform our understanding of climate risks to sovereign debt. In a case study of Italy, introducing climate risks causes the debt dynamic to deteriorate and risk premia to increase non-linearly as a manifestation of the doom loop.

Attanasio, Meghir, Mommaerts, Zheng, 12 July 2022

Previous research has shown a substantial increase in income inequality between rural and urban China as well as across and within regions in China during its growth process. Focusing on rural China, this column provides further evidence that the formal and informal mechanisms that previously protected households against unanticipated income changes weakened considerably from the late 1980s to the late 2000s, especially those that help to insure against village-level aggregate income risk. Potential explanations for the weakening of within-village consumption insurance include declining collective productive activities and increased migration, while fiscal decentralisation is a potential explanation for the erosion of insurance against village-aggregate risk. 

Ha, Kose, Ohnsorge, 12 July 2022

The global economy is experiencing a toxic mix of slowing growth and rising inflation, bringing echoes of the stagflation of the 1970s. This column discusses how the resolution of that episode required steep increases in interest rates that marked the beginning of a decade of debt crises in emerging market and developing economies. If current stagflationary pressures intensify, some of these economies would likely face severe challenges again in rolling over their debt due to elevated financial vulnerabilities and weakening growth fundamentals. 

Hwang, Lustenberger, Rossi, 11 July 2022

Central banks are intensifying their efforts to communicate with laypeople. One goal is to raise trust in their policies. This column shows that more frequent Eurosystem speeches lowered citizens’ trust in the ECB. Central banks may wish to coordinate the quantity of public talks to enable market participants, professional forecasters, firms, and households to take their messages as intended.

Clemens, Hoxie, Veuger, 11 July 2022

Across four major Covid-19 relief bills, the US federal government allocated about $900 billion to state and local governments. This column exploits the fact that allocations of aid were more generous in states more favourably represented in Congress to analyse the consequences of this federal assistance. It finds modest positive effects of federal aid on local and state government employment, and almost no effects on broader economy outcomes. Still, it finds positive effects of federal aid on Covid-19 testing operations and more equitable vaccination patterns. 

Hermo, Päällysaho, Seim, Shapiro, 10 July 2022

A longstanding puzzle in cognitive science is the secular rise in cognitive skill across generations. Cognitive scientists emphasise explanations such as improvements in health and nutrition. This column describes research using an economic model and population administrative data from Sweden to argue that this ‘Flynn effect’ may originate in part from changes in economic incentives. Estimates suggest about a third of the rise in reasoning skill over the period studied is attributable to changes in labour market returns to different skills, with analytically intensive occupations having grown in relative importance. 

Cagé, Hervé, Mazoyer, 09 July 2022

Many recent papers have shown that social media has changed society, but the power of Twitter goes far beyond its impact on its users. This column reports on a new research project, relying on nearly two billion tweets and an innovative empirical approach, which shows that not only does Twitter set the agenda of media coverage in a quantitatively meaningful way, it also influences mainstream media due to short-term considerations generated by advertising revenue-bearing clicks. The findings also suggest that journalists’ reliance on Twitter might distort the information they produce compared to what citizens actually prefer.

Overman, 08 July 2022

Recorded live at CEPR Paris Symposium 2022: Inequality isn’t just between individuals, but between regions too. Henry Overman explains to Tim Phillips why these disparities exist, why they are so persistent, and whether regional policies to “level up” left-behind places will succeed.

Darmouni, Papoutsi, 08 July 2022

Historically, only very large firms issued in the European corporate bond market. However, recent years have seen the entry of many new players: small, private, and unrated issuers. This column uses firm-level data to show these new players face different game dynamics. They are disconnected from aggregate market movements and still depend heavily on banks. A better understanding of the differences between new and more established corporate bond issuers could help identify policy implications for financial stability, capital markets development, and growth.

Breinlich, Corradi, Rocha, Ruta, Santos Silva, Zylkin, 08 July 2022

Modern preferential trade agreements contain a host of provisions that go beyond tariff liberalisation. By adapting techniques from the machine learning literature, this column develops data-driven methods for selecting the most trade-increasing provisions and quantifying their impact on trade. The results suggest that provisions related to technical barriers to trade, anti-dumping, trade facilitation, subsidies, and competition policy are associated with enhancing the trade-increasing effect of preferential trade agreements. Based on these findings, the effects of individual agreements can be estimated.

Huang, Véron, 07 July 2022

Widespread narratives for China under Xi Jinping, especially in the past half-decade, emphasise a ‘pivot to the state’ and increasing repression of the private sector, in contrast with previous decades of more dynamic private sector development. But is China's private sector truly being crushed? This column uses company-level data for China’s largest companies, ranked by either revenue or (for listed ones) market capitalisation, to show that, in fact, the share of the private sector in that group has expanded rapidly and near-continuously over the past decade.

Guiso, Morelli, Sonno, Herrera, 07 July 2022

Financial crises have severe economic costs. This column shows that they also entail major political costs. It argues that the global financial crisis, and associated Great Recession, represents a watershed for populism in Europe, changing people’s views and the rhetoric of all parties. The crisis brought economic insecurity to  the middle classes, which had largely remained untouched by the globalisation and immigration shocks. Disillusionment with the status quo prompted parties to enter the political arena on populist platforms.

Panizza, di Mauro, 06 July 2022

Recorded live at CEPR Paris Symposium 2022: Researchers and policymakers need data, but in Europe, they often cannot access the right data at the right time. Filippo di Mauro and Ugo Panizza invite Tim Phillips for coffee to explain how these problems hold back research and decision-making – and suggest what can be done to close the economic data gap.

Giuntella, Rotunno, Stella, 06 July 2022

Germany's low natality rate has been a major source of concern for politicians for decades. Using longitudinal data from the German Socio-Economic Panel, this column analyses the effects of trade integration on family choices in Germany. The authors find that exposure to greater import competition from Eastern Europe led to worse labour market outcomes and lower fertility rates. The trade effects are concentrated among men, low-educated, and full-time employees.

Carranza, Morgan, Nolan, 06 July 2022

The problem of the ‘missing top’ in household income surveys has been highlighted by tax-based estimates of top income shares. This column shows that tax-based top income adjustments to EU Statistics on Income and Social Conditions surveys often make a substantial difference, but to an extent that varies widely across European countries and over time. Incorporating data from administrative sources in the surveys themselves helps to reduce the need for post-survey adjustment but may not eliminate it, and the nature of the country’s tax system and data are highly relevant for how best to combine data from both sources.

Mondria, Vives, Yang, 06 July 2022

It is commonly assumed that market participants are all equally and highly sophisticated and know the exact relationship between fundamentals and prices. But this ignores the reality that investors spend millions of dollars analysing market data to better understand and hopefully profit from any patterns in stock charts. This column presents a framework to relax these assumptions and explore how investor sophistication can affect market prices and trading volumes. The framework provides theoretical underpinnings to some of the most well-known anomalies in finance and can help explain trends in the asset management industry.

Kobayashi, 05 July 2022

The war in Ukraine has brought the use of nuclear weapons into the realm of possibility. This column points out weaknesses in the logic of mutually assured destruction that underlies nuclear deterrence strategies. Instead, it proposes a treaty to impose sanctions on pre-emptive uses of nuclear weapons to establish a new international norm in which all citizens of the world share the power to decide the fate of the planet.

Deshpande, Mueller-Smith, 05 July 2022

Cuts to welfare programmes have historically been motivated by concerns that they can discourage educational achievement and work. This column uses the natural experiment of the 1996 welfare reform law in the US to examine the effect of welfare programmes on a different type of ‘work’: criminal activity intended to generate income. The authors find that removing young adults from the US Supplemental Security Income programme increases criminal justice involvement, and especially illicit income-generating activity. While the programme does indeed discourage formal employment among young adults, its much larger effect is to discourage criminal activity.

Turner, Égert, Botev, 04 July 2022

The cost of living crisis is very apparent in the latest forecasts published by the OECD. This column identifies structural reforms, including raising in-kind family benefits and reducing the labour-income tax wedge, that tend to boost adjusted household disposable income more than GDP in the long run. In reaction to the unfolding cost of living crisis, governments should consider implementing these reforms to supplement fiscal support to vulnerable households. 

Derenoncourt, Kim, Kuhn, Schularick, 04 July 2022

Large and persistent wealth gaps between Black and white Americans have attracted considerable attention from researchers and policymakers. This column presents a new long-run time series of the per capita wealth gap, from before the Civil War to 2020. A key finding is that severe racial differences in initial conditions after Emancipation have contributed greatly to today’s stalled progress in closing the racial wealth gap. The authors discuss the implications of these findings for policies that seek to foster greater racial wealth equality in the near future. 

Verwimp, 04 July 2022

Since February, more than six million Ukrainians have left their country and as many have been internally displaced. As the Ukrainian army is an overwhelmingly male institution, the war has led to the separation of many men from their spouses and children. This column argues that this factor may have unintended, long-term consequences for the welfare of Ukrainian households. It warns that a protracted war creates risks of intra-household conflict and higher divorce rates among these transnational household units. 

Rauh, Renée, 03 July 2022

Parental time invested in the early years has an outsized impact on a child’s future. But measuring the effects of different parenting styles remains an elusive task, in part because self-reported survey questions are susceptible to misreporting bias. This column uses unsupervised machine learning to measure parenting styles applied to a panel of Canadian children from age five months to just over two years. The topic model classifies parenting into two styles – warm and cold – and finds that children of ‘warm’ parents achieve higher cognitive and non-cognitive scores at later ages. 

Chopra, Haaland, Roth, Stegmann, 03 July 2022

There are growing concerns about publication bias in academic studies, particularly against papers with small effects that are not statistically significant. Using a large-scale survey of academic economists, this column finds a substantial perceived penalty against null results. Respondents believe studies with a null result have a lower chance of being published and perceive those studies as having lower quality. Further analysis suggests the communication of statistical uncertainty and perceptions of statistical precision are important factors affecting the null result penalty, but finds no evidence of a bias towards surprising findings in the publication process.

Haylock, Kampkötter, Macis, Slonim, Wiesen, 02 July 2022

For patients suffering from leukaemia or other blood diseases, a hematopoietic stem cell transplant from a matching, unrelated donor offers the best chance of survival. But unlike other medical donations, a stem-cell donation is a multi-stage process that can take years to complete, and many donors fail to follow through on their initial commitment. This column investigates the impact of a German stem-cell donor registry initiative, and finds that an invitation to the initiative itself increased donors’ future availability, while participation had a direct and positive effect on donor readiness.

Gagliarducci, Tabellini, 02 July 2022

How ethnic religious organisations influence immigrants’ assimilation in host societies has been surprisingly understudied. This column looks at the effect of Italian Catholic churches in the US between 1890 and 1920 when four million Italians moved to America and anti-Catholic sentiments were widespread. Italian churches reduced social assimilation of Italian immigrants, lowering intermarriage, residential integration, and naturalisation rates. However, the churches had ambiguous effects on immigrants’ economic outcomes and increased children’s literacy and ability to speak English.

Kalemli-Ozcan, 01 July 2022

Recorded live at CEPR Paris Symposium 2022: Supply chain disruption caused by Covid-19 has fed inflation and hobbled stimulus policies. Sebnem Kalemli Özcan tells Tim Phillips about the only solution to this economic long Covid.

Arezki, Paduano, 01 July 2022

The invasion of Ukraine has produced a global energy crisis not seen since the 1970s. Policymakers are struggling to regain energy security and losing sight of the energy transition. This column argues that in the long run, however, policymakers will fail to achieve the former without committing to the latter. 

Ciapanna, Mocetti, Notarpietro, 01 July 2022

Structural reforms have been at the centre of the economic policy debate in advanced economies, and in Europe in particular, in the past two decades. This column assesses the macroeconomic effects of three economic policy packages introduced in Italy between 2011 and 2017, obtained using both microeconomic estimates and model-based simulations. The three reforms induced a progressive, sizeable increase in total factor productivity and reduction in firms’ market power. By the end of the current decade, Italian GDP could be about 6% higher than it would have been absent the reforms (and any other shocks), with positive effects on the labour market.


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