Stefano Federico, Fadi Hassan, Veronica Rappoport, 25 June 2020

In a period where the backlash against trade and globalisation is at historical high point, it is crucial to understand the frictions that prevent a full realisation of the gains from trade. This column takes evidence from Italy and contributes to the debate by identifying a novel channel: the endogenous funding constraint of banks whose loan portfolios are affected negatively by the liberalisation. There are spillovers between ‘losers’ and ‘winners’ from trade that operate through banks, which hinder the reallocation of resources towards firms that should actually expand after the liberalisation.

Elena Carletti, Tommaso Oliviero, Marco Pagano, Loriana Pelizzon, Marti Subrahmanyam, 19 June 2020

The COVID-19 induced crisis has caused severe distress for the economy. This column estimates the profit and equity shortfalls triggered by the COVID-19 shock for a representative sample of Italian companies, including large, medium and small companies. A three-month lockdown is found lead to an aggregate annual drop in profits of €170 billion, with an implied equity erosion of €117 billion. Some 17% of all firms, employing over 800,000 workers, are estimated to face severe distress. Small and medium enterprises are affected disproportionately, with 17.2% of affected compared with 6.4% of large firms.

Alina Kristin Bartscher, Sebastian Seitz, Sebastian Siegloch, Michaela Slotwinski, Nils Wehrhöfer, 18 June 2020

In the absence of viable medical responses to combat the ongoing Covid-19 pandemic, policymakers have appealed to the social responsibility of their citizens to comply with social distancing rules. This column explores how regional differences in social capital can affect the spread of Covid-19, focusing on seven European countries. The results suggest that areas with high social capital registered between 12% and 32% fewer Covid-19 cases from mid-March until mid-May. A case study of Italy validates the independent role of social capital, showing a consistent reduction in excess deaths and documenting a reduction in mobility prior to the lockdown as a mediating channel.

Annie Tubadji, Don Webber, Frederic Boy, 10 June 2020

The general public’s mental health can be affected by different public policy responses to a pandemic threat. Italy, the UK and Sweden implemented distinct approaches to the COVID-19 pandemic: early lockdown, delayed lockdown, and no lockdown. This column presents a novel culture-based Development approach using narrative economics of language and Google trend data. It is evident that countries had a pre-existing culturally relative dispositions towards death-related anxiety and their sensitivity to COVID-19 public policy was country-specific. Further, one country’s lockdown policy can affect another country’s mental health, suggesting that policymakers should account for this spillover effect.

Christelle Baunez, Mickael Degoulet, Stéphane Luchini, Patrick Pintus, Miriam Teschl, 10 May 2020

Tests are crucial to detect people who have been infected by COVID-19 and to observe in real time whether the dynamics of the pandemic are accelerating or decelerating. However, tests are a scarce resource in many countries. This column proposes a data-driven and operational criterion to allocate tests efficiently across regions, with a view to maximising the fraction of tested people who are positive. When applied to Italian regions, the criterion reveals that the shares of tests that should go to each region differ significantly from the present distribution.

Massimo Morelli, 08 May 2020

Political participation is an important, and often neglected, channel through which economic insecurity, reductions in trust, and changes in cultural attitudes all affect populism. This column argues both the demand for and supply of populism depend on mobilisation, and that populism can be seen as a mobilisation campaign strategy. While this framework explains the recent surge of populism, it also provides reasons to believe that the populism wave could be temporary. The column also discusses possible consequences of the Covid-19 crisis for populists in and out of power.

Teresa Barbieri, Gaetano Basso, Sergio Scicchitano, 27 April 2020

Many countries are now designing exit strategies from the sectoral lockdowns put in place to contain the outbreak of Covid-19. This column provides new evidence from Italy on the degree of workplace risk of exposure to the virus. Unsurprisingly, the health sector is the most exposed to diseases and infections, while the services sector is the most risky in terms of physical proximity. These and other findings can help in deciding which activities to reopen first and where to reinforce security measures.

Ester Faia, Maximilian Mayer, Vincenzo Pezone, 26 April 2020

Directors of corporations often sit on several boards at once. This column asks whether this connectivity is beneficial for firm value (due to a wider network of knowledge sharing), or if it is simply crony-capitalism built on a deep exclusivity at the board level. Exploiting data from Italy, the authors suggest that network centrality may not always translate into a gain for consumers, and that policymakers must be cautious in accommodating the appropriate reactions for cases that may have different implications for consumer welfare.

Gabriele Ciminelli, Sílvia Garcia-Mandicó, 22 April 2020

Among the many unknowns about COVID-19 are its true mortality rate and the speed at which it spreads across communities. This column analyses daily death registry data for a sample of 1,161 Italian municipalities in the seven regions most severely hit by COVID-19.  The findings suggest that the virus may have killed 0.1% of the local population in just over a month and that its mortality is vastly underreported in official statistics, plausibly by a factor of two. But there is also good news for policymakers – in the Veneto region, which has embraced mass testing, contact tracing, and at-home care provision, COVID-19-induced mortality is significantly lower than in neighbouring Emilia-Romagna and Lombardia.

Simona Bignami-Van Assche, Daniela Ghio, Ari Van Assche, 17 April 2020

It is well understood that COVID-19 severity varies with age. However, little consideration has been given to the differential trend of infections across age groups. By drawing from the Italian experience, this column shows how the effectiveness of strategies to ‘flatten the curve’ of COVID-19 infections crucially depends on workforce demographics. It suggests that restricting the age of essential workers may be useful to mitigate the work–security trade-off while keeping the economy going.

Ruben Durante, Luigi Guiso, Giorgio Gulino, 16 April 2020

Social distancing slows the spread of COVID-19. In regions that adopt social distancing practices early (i.e. before receiving explicit stay-at-home guidelines from their governments), the virus can be contained more quickly. Using Italian data from phone location tracking of movements made by individuals after the pandemic began, this column finds sharper drops in mobility in areas with higher ‘civic capital’, suggesting that civic values can mediate the social distancing process.

Antonio Accetturo, Michele Cascarano, Guido de Blasio, 15 April 2020

From the 16th to the early 19th century, coastal areas of Italy (especially in the south-west) were subject to attacks by pirates launched from the shores of northern Africa. To protect themselves, residents of coastal locations moved inland to mountainous and rugged areas. This column shows how relocation constrained local economic development for a long period after the piracy threat had subsided and may have had aggregate consequences on Italy’s post-WWII development.

B. Ravikumar, Guillaume Vandenbroucke, 17 April 2020

This column uses the actual number of COVID-19-related deaths to calculate projections for the US based on other countries’ experiences.

Stephanie Ettmeier, Chi Hyun Kim, Alexander Kriwoluzky, 09 April 2020

The ongoing COVID-19 pandemic in Europe is severe and spreads economic uncertainty. This column explores the evolution of financial market participants’ expectations during the COVID-19 pandemic, estimating yield curves of bonds in France, Germany, Italy, and Spain. The authors carry out an event study to investigate the potential impact of European fiscal and monetary policy measures on these yields. The results suggest that policy measures must be large and coordinated on the European level, and that fiscal and monetary policy must act jointly to fight the pandemic’s negative economic consequences

Daniel Gros, 05 April 2020

The countries hit hardest by the COVID-19 crisis already have too much debt. Lending from the European Stability Mechanism or via Coronabonds would add to that debt, potentially making it unsustainable. This column suggests that European solidarity should take the form of transfers, not credit. A substantial transfer could be organised via the EU budget simply by exempting the weakest countries from their contributions to the EU budget for the duration of the programming period 2012-2027.

Giulia Giupponi, Camille Landais, 01 April 2020

Short-time work is a subsidy for temporary reductions in the number of hours worked in firms affected by temporary shocks. Evidence suggests that it can have large positive effects on employment and can be more effective than unemployment insurance or universal transfers. This column discusses how the COVID-19 crisis – with its mandated reduction in hours of work and massive liquidity crunch for firms – is a textbook case for the use of short-time work. Taking into account available evidence and the current situation, it proposes guidelines to effectively implement short-term work.

Marianna Belloc, Paolo Buonanno, Francesco Drago, Roberto Galbiati, Paolo Pinotti, 28 March 2020

Italy has been hit particularly badly by the COVID-19 pandemic and has one of the highest case fatality rates. High levels of intergenerational interaction in the country have been identified as a potential contributor to this. This column cautions against drawing policy implications from simple cross-country correlation analysis. It argues instead that sound empirical analysis using detailed and harmonised microdata at the European level should be conducted to analyse the effectiveness of policy interventions. 

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.

Kym Anderson, 16 February 2020

Global alcoholic beverage markets have changed dramatically in recent years due to globalisation, income growth in emerging economies, changes in individual preferences, policy initiatives to curb socially harmful drinking, and, in particular, the dual trade policy shocks of Brexit and the US’s unilaterally imposed discriminatory tariffs. This column provides an overview of the major trends and projects the possible effects of Brexit and the US tariffs on the global alcohol market. It concludes that both shocks would reduce world trade in wine. Even countries not targeted by US tariffs can be worse off if those tariffs sufficiently reduce global consumption. 

Graziella Bertocchi, Marianna Brunetti, Anzelika Zaiceva, 07 February 2020

The financial decisions made by immigrants are likely to differ substantially from those made by natives. Using data from a Bank of Italy survey, this column compares native Italian and immigrant households and shows that immigrants find themselves worse-off both in terms of wealth holdings and allocation across assets. These gaps can affect immigrants’ wellbeing, inhibit integration, and have consequences for the country’s financial markets.


CEPR Policy Research