Politics and economics

Nicholas Bloom, Philip Bunn, Scarlet Chen, Paul Mizen, Pawel Smietanka, 25 February 2020

After months of political stalemate, Boris Johnson’s decisive victory in the December UK general election cleared the way for the UK to leave the EU. This column uses data from the Decision Maker Panel, a monthly survey of CFOs from around 3,000 UK businesses, to show that Brexit-related uncertainty has fallen since the election. The fall in uncertainty has been larger among more domestically focused businesses, however, and substantial uncertainty remains around the future trading relationship between the UK and the EU. There are some signs that this fall in uncertainty may lead to a modest pickup in investment, but it is still early days. 

Bruno Caprettini, Hans-Joachim Voth, 22 February 2020

Governments of modern states need to convince men and women to fight and possibly to die for their country, putting aside their ‘selfish’ instinct to stay alive. This column examines whether welfare spending under Roosevelt’s New Deal boosted US patriotism during WWII. It finds that higher welfare spending prior to 1940 is positively correlated with greater patriotism, as measured by war bond purchases, volunteering for the US Army, and exceptionally brave acts in battle. The findings suggest that when the federal government looks out for its citizens’ needs, men and women who benefit repay the largesse by becoming more patriotic.

Artjoms Ivlevs, Milena Nikolova, Olga Popova, 21 February 2020

Following the collapse of communism in Central and Eastern Europe, many former Communist Party members launched businesses. This column relies on individual-level survey data to document how entrepreneurial activity was driven by the connections, resources, and opportunities associated with former membership of the ruling party rather than by entrepreneurial skills or individual talent. The findings underscore the fact that former Communist Party networks continue to affect business practices in Central and Eastern Europe. 

Pierluigi Balduzzi, Emanuele Brancati, Marco Brianti, Fabio Schiantarelli, 20 February 2020

The effects of shocks to political risk can be captured by the change in the spread of sovereign credit default swaps. This column shows how the rise of populist movements in Italy following the financial crisis and sovereign debt crisis affects domestic and euro area financial markets, and also impacts the Italian real economy. Italy has been an ideal laboratory to explore and learn about the economic consequences of political risk shocks, and the instability there implies that this is likely to continue to be the case in the future.

Thushyanthan Baskaran, Zohal Hessami, 18 February 2020

The fact that women are underrepresented in politics is often viewed as an important social problem. But why should it be a problem? This column argues that when too few women hold political office, political decisions may not adequately reflect women’s needs and preferences. Using the example of the public provision of childcare in Germany, it shows that municipalities with a higher share of female councillors expand public childcare more quickly. The fact that the presence of women has substantive effects on policies should be taken into account in current debates around the introduction of gender quotas in politics.

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