Goran Dominioni, Dan Esty, 22 April 2022

The EU and the US are considering proposals for border carbon adjustment mechanisms to curtail the risk of carbon leakage. This column argues that these mechanisms can better mitigate climate change and more likely comply with WTO law when designed to account for effective carbon prices in exporting countries instead of focusing on explicit carbon prices alone. While there are administrative challenges to crediting effective carbon prices, existing trade accounting methods (notably from anti-dumping and countervailing duty subsidy cases) provide ample experience and know-how to overcome these difficulties.

Tommaso Frattini, Irene Solmone, 30 March 2022

More than three million Ukrainians have left their country since the start of the war on 24 February. Due to mandatory conscription of men in Ukraine, the majority of these refugees are women and children. This column explores the labour market integration of immigrant women in Europe using data from the past two decades. It shows that immigrant women face a double disadvantage determined by both their gender and immigration status, and their labour market outcomes have not improved over time. These disadvantages should be considered when designing policies to increase labour market participation and success. 

Cecilia Bellora, Lionel Fontagné, 26 March 2022

The proposed European Carbon Border Adjustment Mechanism seeks to curb carbon leakage, which undermines the EU’s ambitious goal of climate neutrality by 2050. This column explores whether the mechanism succeed in reducing carbon leakage, while at the same time restoring a level playing field for EU producers and minimising the likelihood of WTO panels or retaliation by trading partners. The authors argue that the mechanism will significantly curb European carbon leakages, but at a cost. EU member states will need at the very least to agree on how to end free allowances to be compatible with the WTO.

Kazunari Kainou, 16 March 2022

The Clean Development Mechanism under the Kyoto Protocol is the world’s first international carbon finance scheme. Companies can acquire tradeable certified emission reduction credits by investing in energy conservation and new energy projects in developing countries. Despite its early success, the scheme collapsed following a ‘carbon panic’ in 2012. This column reviews the collapse of the mechanism and its spillovers on Paris Agreement negotiations. While the scheme was unexpectedly revived thanks to interest from the US and developing countries, carbon financing remains structurally prone to panic.

Zsolt Darvas, Guntram Wolff, 07 March 2022

The EU’s ambitious emissions reduction targets will require a major increase in green investments. This column considers options for increasing public green investment when major consolidations are needed after the fiscal support provided during the pandemic. The authors make the case for a green golden rule allowing green investment to be funded by deficits that would not count in the fiscal rules. Concerns about ‘greenwashing’ could be addressed through a narrow definition of green investments and strong institutional scrutiny, while countries with debt sustainability concerns could initially rely only on NGEU for their green investment.

Barbara Baarsma, Roel Beetsma, 18 January 2022

An important vulnerability of the EU economy is high public debt levels. This column proposes revisions to the EU fiscal rules to stimulate debt reduction, which would create budgetary room for stabilisation and growth-promoting spending and also support growth convergence among member states. Climate investment should not interfere with the fiscal rules but be financed through an EU fund, in line with the idea of subsidiarity. It should co-exist with uniform pricing of all greenhouse gas emissions.

Peter Andre, Ingar Haaland, Chris Roth, Johannes Wohlfart, 23 December 2021

Inflation has recently surged in both the US and the EU. This column uses responses from surveys of a representative sample of the US population as well as academic economists and US firm managers to show that households and managers are more likely than experts to think that the current surge in inflation will be persistent. Since the narratives individuals use to explain movements in inflation appear central to whether inflation expectations remain anchored, communication strategies by policymakers could put emphasis on specific narratives that highlight that inflationary pressures are unlikely to persist.

Debora Revoltella, Julie Delanote, Tessa Bending, 03 December 2021

The European economic policy response to the COVID-19 pandemic has ensured business continuity and shielded investment, but digital and green transitions are now ever more urgent. This column uses data on 12,000 European firms from the European Investment Bank Investment Survey to show that the pandemic spurred many firms to start accelerating transformation efforts. Policy should seek to support this momentum amid post-pandemic economic recovery.

Timothy Hatton, 19 November 2021

Less than half of all applicants for political asylum in Europe gain some form of recognition that allows them to stay. Since the early 2000s, the EU has developed a common asylum policy with the aims of protecting the rights of refugees and mitigating the ‘asylum lottery’.  This column shows that the implementation of EU Directives contributed modestly to an overall increase in average recognition rates but has not reduced the variation in rates across countries.

Rigissa Megalokonomou, Marian Vidal-Fernandez, Duygu Yengin, 11 November 2021

Women are now more likely to pursue a university degree than men, but the proportion of women graduating in economics has decreased or remained stagnant over the past two decades. This column examines the representation of women in undergraduate economics degrees in 25 European countries during 2014–2018. The ratio of women to men in economics, controlling for gender differences in enrolment, has been around 0.6 on average and is stable or decreasing. Increased representation of women economists is important for more balanced policy recommendations, and the authors discuss how this might be achieved. 

Fabio Canova, Evi Pappa, 09 November 2021

In light of last year’s launch of the Next Generation EU funds, understanding the effectiveness of the EU’s use of structural funding has become even more important. This column examines the role of the European Regional Development Fund and the European Social Fund over time. While both have contributed to job creation and economic recovery, the former had a more short-term direct effect and the latter a more medium- to long-term indirect impact. There is significant regional heterogeneity in these impacts, driven by location, level of development, EU tenure, and euro area membership.

Nauro Campos, Fabrizio Coricelli, Emanuele Franceschi, 07 November 2021

Economic integration has certainly deepened and, more recently, changed enormously. Until the late 1990s integration was mostly trade-centred, while it now can be better described as institutions-centred. This column introduces the notion of ‘institutional integration’, identifies its main features, and provides estimates of its net benefits. With one of the first applications of the synthetic difference-in-differences estimator and using data from the 1995 enlargement of the EU, the authors find that the failure to embrace institutional integration by Norway (compared to ‘only’ embracing deep integration) generates yearly productivity losses of about 0.6 percentage points.

John Duca, John Muellbauer, Anthony Murphy, 13 September 2021

Research on house price cycles and their interactions with the economy has burgeoned since the Global Financial Crisis. This column draws five lessons from a recent comprehensive survey. It argues that conventional theories of house price dynamics are misleading. Shifts in credit conditions, together with differences in housing supply response across cities, regions and countries, account for much of the heterogeneity of house price outcomes. Finally, increased demand for space and unprecedented policy interventions together explain the very different house price experience in the pandemic compared with the Global Financial Crisis.

Randolph Bruno, Nauro Campos, Saul Estrin, 17 July 2021

Do different economic integration arrangements vary in terms of their capacity to attract foreign direct investment? This column uses a structural gravity framework on annual bilateral FDI data for 142 countries between 1985 and 2018 to revisit this question. It finds that deep integration in the form of EU membership increases FDI by about 60% from outside the EU and by about 50% from within the EU. The effect of EU membership on FDI appears to be significantly larger than that from the less deep integration arrangements (EFTA, NAFTA, or MERCOSUR), with the Single Market the cornerstone of this differential impact. 

Paul Hiebert, 13 July 2021

Climate change will impact those parts of the financial system most exposed to its disruptive effects. This column analyses a new financial stability risk mapping for the EU financial system, linking financial exposures of thousands of banks, insurance companies, and investment funds to millions of firms subject to climate risk. It highlights a high level of risk concentration, both in European regions subject to climate hazards as well as economic sectors with diverse carbon emission intensities. Long-term scenario analyses suggest that the risks will be best addressed through proactive policies that directly contain global temperature rises. 

Bernard Hoekman, Xinquan Tu, 12 July 2021

Rising geopolitical and geoeconomic tensions among major trade powers are undermining the rules-based multilateral trade order. A new VoxEU eBook brings together teams of mostly Chinese and European experts who focus on key challenges confronting the multilateral trading system. Pursuit of issue-specific negotiations on an open plurilateral basis offers prospects for revitalizing the WTO but does not remove the need for balance in the choice of issues put forward for negotiation and for systemic WTO reform. Joint leadership by China and the EU to establish a balanced work programme that spans both old and new issues of interest to all WTO members is a necessary condition to reboot the rules-based trade order.

Sebastian Siegloch, Nils Wehrhöfer, Tobias Etzel, 04 June 2021

Increasing regional inequality has become a major concern for policymakers both in the US and Europe. This column investigates the effects of a large place-based investment subsidy targeted at manufacturing firms in East Germany. It shows that a decrease in the subsidy rate leads to a decrease in manufacturing employment, highlighting spillovers to untreated sectors in treated counties and untreated counties connected via trade and local taxes. It also finds that the place-based policy is at least as efficient as cash transfers for the unemployed but is more effective in curbing regional inequality overall.

Päivi Leino-Sandberg, Vesa Vihriälä, 31 May 2021

The EU’s response to the COVID-19-induced economic crisis has been aggressive, but not without criticism. This column, part of the Vox debate on euro area reform, summarises some of the shortcomings of the way in which the EU’s Next Generation programme may play out, and suggests short- and longer-term considerations that need to be made in order to ensure that the programme strengthens the Union in the long run.

Ian Goldin, Pantelis Koutroumpis, François Lafond, Julian Winkler, 31 May 2021

Labour productivity is a key determinant in improving living standards. But in recent years, productivity has stagnated, if not declined, in many countries around the world. This column re-evaluates the various reasons as to why this might be, applying three criteria to the existing explanations for the slowdown. It finds that the slowdown in productivity can be attributed to numerous factors, ranging from mismeasurement to changes in trade patterns.

Gabriel Felbermayr, Aleksandra Kirilakha, Constantinos Syropoulos, Erdal Yalcin, Yoto Yotov, 18 May 2021

While the world experienced a golden age of international economic integration in the 1990s and the 2000s, in the more recent past there has been an emergence of interstate political conflicts, political polarisation, and extensive use of coercive sanctions intended to limit the international movement of goods, assets, and people. This column presents findings from the newly updated Global Sanctions Data Base, which now includes the years of the Trump presidency and provides a more comprehensive coverage of 1,101 sanction cases in the years from 1950 to 2019.



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