Europe's nations and regions

Cecile Gaubert, 14 November 2018

In order to encourage economic growth and development, governments often put in place a range of policies aimed at attracting firms to specific areas of a country. Yet relatively little is known about their implications for efficiency.This column argues that such subsidies have costly long-run effects, both on the productive efficiency of the economy and in terms of welfare. Moreover, place-based policies do not necessarily decrease spatial disparities. 

Pierluigi Balduzzi, Emanuele Brancati, Fabio Schiantarelli, 09 November 2018

The Italian government has decided to pursue an expansionary fiscal policy, with increased welfare spending as its focus. This column uses evidence from the 2010-2012 sovereign debt crisis to explore the potential negative effects of this policy on private investment. It finds that an increase in a bank’s credit default swap spreads leads to lower investment and employment for younger and smaller firms and in the aggregate. These findings suggest the planned fiscal expansion could substantially crowd out private investment.

Marco Buti, Björn Döhring, 08 November 2018

GDP growth has become more uneven globally, and has shifted into a lower gear in Europe. So it is unsurprising that commentators have started warning about a more severe downturn. The Commission's autumn 2018 European Economic Forecast is no exception in highlighting an unusual amount of uncertainty clouding the economic outlook. The predominance of downside risks implies that macroeconomic outcomes could ex post be worse than our central scenario. This column discusses, on the basis of concrete examples, different types of uncertainty surrounding the still benign forecast baseline. Prudence requires economic policy to prepare for the eventuality of worse outturns. 

Barry Eichengreen, Rebecca Mari, Gregory Thwaites, 05 November 2018

In the UK’s 2016 referendum on EU membership, young voters were more likely than their elders to vote Remain. Applying new methods to a half century of data, this column shows that this pattern reflects both ageing and cohort effects.  Although voters become more Eurosceptical as they age, recent cohorts are also more pro-European than their predecessors, which will offset at least in part the ageing of the electorate going forward. However, the existence of large nationwide swings in sentiment that have little to do with either seasoning or cohort effects suggests that demographic trends are unlikely to be the decisive determinants of future changes in European sentiment. 

Christian Dustmann, Bernd Fitzenberger, Markus Zimmermann, 22 October 2018

There is a lot of concern about the rise in housing costs in many developed countries and the impact it has on living conditions and inequality. Yet, to date little evidence exists on how changes in housing costs affect the distribution of disposable income. This column draws on recent research for Germany to show that shifts in housing costs severely exacerbated the rise in income inequality net of housing expenditures, and discusses the reasons behind this and implications for inequality.

Other Recent Articles:

Events

CEPR Policy Research