Europe's nations and regions

Laurence Boone, Antoine Goujard, 04 March 2019

The ‘yellow vest’ demonstrations in France appear, at least in part, to be another example of the anti-globalisation sentiment that has emerged in a number of OECD countries. This column argues that the movement is also rooted in the country’s broken social elevator. Redistribution through taxes and social transfers is not sufficient to curb the inequality in opportunity, which is mostly linked to the educational system and perpetuates economic and social situations from one generation to the next.

István Székely, Melanie Ward-Warmedinger, 23 February 2019

While there is a large literature on the political economy of reforms, surprisingly little is known about reform reversal. Based on an investigation of reform reversals in former transition countries, this column argues that once reforms are introduced, self-enforcing social norms and social learning should catch up with the new reality to create domestic anchors. Social norms have not always been strong enough to outweigh the opportunistic behaviour of politicians seeking short-term windfall gains. External anchors, while helping to protect reforms, cannot replace domestic ones.  

Fabrizio Marongiu Buonaiuti, Filippo Vergara Caffarelli, 20 February 2019

The border between the Republic of Ireland and Northern Ireland has become a central issue in the Brexit negotiations between the UK and the EU. This column examines the proposals put forward by the two negotiating parties, and suggests two remedies that could make the European Commission’s initial ‘backstop’ proposal, whereby Northern Ireland would remain in the European Customs Union while the rest of the UK would be excluded from it, acceptable to the UK.  

Giancarlo Corsetti, Aitor Erce, Timothy Uy, 13 February 2019

During the euro area crisis, management of official loan maturities emerged as a critical item in the discussion on which instruments and strategies are most effective at ensuring debt sustainability. Using a theoretical model calibrated to Portugal and cross-country data, this column shows that lengthening loan maturities and managing debt repayment flows has substantial effects on sustainability. It also unveils a key policy trade-off in official lending between increasing the amount of safe debt (immune from rollover risk) and strengthening the incentive to default in response to negative shocks to fundamentals.

Gaetano Basso, Francesco D'Amuri, Giovanni Peri, 13 February 2019

The response of labour supply to negative shocks is different across regions due to varying levels of labour mobility. This column shows that the elasticity of labour supply in response to economic shocks is lower in the euro area than in the US, suggesting that a lack of labour mobility may be an obstacle to labour market adjustments in the euro area. Policies aimed at reducing the complexities of migrating for jobs could help ease this mobility gap.

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