Marek Ignaszak, Petr Sedláček, 02 July 2021

To gauge the efficacy of policies aimed at spurring growth, we must first fully understand the sources of aggregate growth. This column argues that understanding the drivers of economic growth requires paying attention not only to productivity and R&D dynamics at the firm level, but also to changes in demand for firms’ products. The authors provide a new perspective on commonly used supply-side pro-growth policies and open the door to analysing demand-side policies such as public procurement or product market regulation, which have been present in the policy debate but have largely escaped academic circles.

Miguel Ampudia, Thorsten Beck, Alexander Popov, 11 June 2021

The trade-off between stability and growth has long been a subject of policy debate and informs views on the extent to which the supervision of banks should be centralised. This column presents analysis of the ECB’s Single Supervisory Mechanism, using the announcement of the mechanism and its implementation as a quasi-natural experiment. It finds that centralised bank supervision is associated with a decline in lending to firms, which is accompanied by a shift away from intangible investment and towards more cash holdings and higher investment in easily collateralisable physical assets.

Martin Larch, Janis Malzubris, Stefano Santacroce, 19 May 2021

In 2020, EU member states launched massive fiscal measures to mitigate the economic and social fallout of the Covid pandemic. The activation of the severe economic downturn clause of the Stability and Growth Pact, coupled with a decisive intervention of the ECB, offered member states the flexibility to stage their fiscal response. As this column reveals, however, a closer look through the lens of an expenditure benchmark highlights important cross-country differences reflecting deeper issues. Countries with very high debt and/or high sustainability risks are bound by their meagre growth prospects. If unaddressed, future reviews of the EU fiscal rules may buy time, but not solve the underlying issues. 

Hans‐Helmut Kotz, Jan Mischke, Sven Smit, 03 May 2021

The future of productivity and economic growth in the US and Europe is uncertain. This column reviews evidence from eight economic sectors to lay out the key conditions for sustained recovery from the Covid-19 crisis. It suggests that the weak productivity growth that followed the Global Crisis can be averted if private and public sectors act together to strengthen demand and diffuse supply-side restructuring to all firms. 

Soeren J. Henn, James Robinson, 26 April 2021

Social science research has painted a dismal picture of Africa’s potential for sustained economic growth. But growth, such as that which happened in China after 1978, can be surprising and can tap into ‘latent assets’ in a society that might have not been previously evident. This column identifies three latent assets in Africa which the authors argue are highly propitious for its long run trajectory.

Jonathan Muringani, Rune Fitjar, Andrés Rodríguez-Pose, 20 April 2021

Social capital matters for economic growth and development, but different types of social capital matter in very different ways. This column examines how differences in social capital across Europe shape regional economic growth. While ‘bridging’ social capital is linked to higher regional economic growth, ‘bonding’ social capital leads to lower growth. This is particularly the case in less-developed regions and in regions with a lower endowment of human capital. As the level of education increases, the need for bridging social capital declines, implying that bridging social capital and human capital are, to a certain extent, substitutes.

Stephen Broadberry, Alexandra de Pleijt, 04 April 2021

Little is known about the role of capital in economic growth before the late 19th century. This column provides the first estimates of investment and the capital stock in Britain as far back as 1270. Although important changes did occur in the role of capital, such as the growing importance of fixed capital relative to working capital and a substantial increase in the investment share of GDP, growth accounting analysis shows that productivity growth was more important than capital deepening in explaining the growth of output per head.

Massimo Morelli, Matia Vannoni, 29 March 2021

The link between regulation and the economy has been central in political economy since the 1970s. Using data on US states from 1965 to 2012, this column argues that regulation may be good or bad for the economy depending on its type and the information and incentives of the regulators. More regulation leads to higher economic growth when that regulation is more detailed, when the current level of regulation is lower, when uncertainty is higher, and in contexts with greater competition and/or opportunity of experimentation among regulation proposers and greater accountability. 

Nauro Campos, Vera Eichenauer, Jan-Egbert Sturm, 03 August 2020

Economists have long assumed a virtuous cycle between integration and reforms. Implementing structural reforms helps maximise gains from integration, while the deepening of integration would foster reforms. This column discusses new research on European integration, its relationship with reforms and economic growth. It finds that integration triggered product market, but neither labour nor financial market, reforms. It also shows that, to understand the effects of reforms on economic growth, sectoral differences are less important than country heterogeneity. 

Felix Kersting, Iris Wohnsiedler, Nikolaus Wolf, 11 July 2020

Max Weber famously hypothesised that the Protestant work ethic fostered modern economic development. Does religion matter for economic success? This column revisits Weber’s hypothesis in the context of 19th-century Prussia. Protestantism did not matter for savings, literacy rates, or income levels across Prussian counties after 1870. Instead, there are large differences between ethnic groups, likely due to ethnic discrimination. Nationalism must be taken into account to understand Weber’s writings.

Masayuki Morikawa, 10 February 2020

Although long-term macroeconomic forecasts substantially affect the sustainability of government debt and the social security system, they cannot avoid significant uncertainty. This column assesses whether academic researchers in economics make accurate long-term growth forecasts, comparing ten-year growth forecasts made by Japanese economists in 2006–2007 with the realised figures. Even excluding the years affected by the Global Crisis, the results show that forecasts tend to be biased upwards and involve significant uncertainty, even for economics researchers specialising in macroeconomics or economic growth.

Mariarosaria Comunale, Francesco Paolo Mongelli, 27 January 2020

Over the past 30 years, euro area countries have undergone significant changes and endured diverse shocks. This column assembles a large set of variables covering the years 1990-2016 and investigates possible links to fluctuations and differences in growth rates. The findings suggest a significant positive role for institutional integration in supporting long-run growth, particularly for periphery countries. Competitiveness and monetary policy also matter for sustained growth in the long run, while higher sovereign stress, equity price cycles, loans to non-financial corporations and debt over GDP have either mixed or negative effects in core and periphery countries.

Piritta Sorsa, Jens Arnold, Paula Garda, 13 January 2020

Economic growth in Latin America has been persistently lower and more erratic than the emerging economies of Asia, largely due to low productivity borne out of both weak competition and a large informal economy. This column analyses the various factors that have caused these conditions to exist in several Latin American countries, and how policies to counteract them have fared. For significant progress, a detailed strategy of simplifying regulations, easing administrative burdens, encouraging market entry, and reducing trade barriers is required to formalise workers and encourage market competition.

Jakub Growiec, Peter McAdam, Jakub Mućk, 24 June 2019

The worldwide decline of the labour share is worrying, because the labour share is thought to be too low. This column attempts to derive an estimate of the socially optimal labour share. The calibration implies that the socially optimal share is 17% higher than the historical average. 

Marco Tabellini, 25 May 2019

Recent waves of immigration in the US and Europe have triggered debate around the economic and political impact. This column uses evidence from migration of Europeans to the US in the first half of the 20th century to show that large cultural differences can incite anti-immigrant sentiment despite their positive economic impact. Therefore, policymakers should give due attention to cultural assimilation and cohesion policies.

Jörg Baten, Alexandra de Pleijt, 11 February 2019

Empirical evidence suggests a positive relationship between gender equality and long-term economic growth, but establishing the direction of causality has been hampered by a lack of consistent data. This column uses historical evidence on dairy farming to examine the growth effects of gender equality. Countries with greater female autonomy allowed women to contribute more to human capital formation and prosperity, leading to greater economic development in the long run.

Emanuel Ornelas, Marcos Ritel, 08 November 2018

Generalised System of Preferences programmes, a form of nonreciprocal tariff cuts, have proliferated since the 1970s. Using a well-documented dataset of international trade agreements, this column studies the effectiveness of the system on beneficiaries’ aggregate exports. It finds that nonreciprocal tariff preferences can have a strong positive effect on the exports of least-developed countries, provided that they are WTO members. Conversely, other developing economies enjoying nonreciprocal preferences are able to increase exports only if they are not WTO members. 

Gail Cohen, Prakash Loungani, 23 October 2018

At first glance, emissions and economic activity appear to be positively linked. This column refutes this by re-examining emissions and real GDP data using trend/cycle decompositions. The evidence clearly demonstrates decoupling of emissions and real GDP in many richer nations. Furthermore, although decoupling does not yet appear in emerging markets, data from China show that trend elasticities initially increase with per capita real GDP but then decline, thus holding out the hope that the relationship between emissions and GDP growth will weaken as emerging market countries get richer.

Nikolaus Wolf, 11 June 2018

Ambrogio Cesa-Bianchi, M. Hashem Pesaran, Alessandro Rebucci, 24 April 2018

During 2016-17, market analysts and policymakers grappled with the puzzling coexistence of subdued market volatility and heightened policy uncertainty and geopolitical risk. The rise in world growth expectations can explain some but by no means all of the decline in market volatility during this period. This column argues that excess optimism about future growth prospects might have fuelled the decline in volatility. This would imply that gradual unwinding of such expectations could bring more bursts of market volatility, as we have begun to witness since the start of 2018.

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