Sascha O. Becker, Stephan Heblich, Daniel Sturm, 03 November 2020

Raising the level of public employment is a frequently used policy instrument to support economically lagging regions. This column evaluates the impact of changes in public employment on private sector activity using the creation of the West German government in Bonn as a source of exogenous variation. It finds that relative to a control group of cities, public employment increased substantially in Bonn, but this led to only a modest increase in private sector employment. This suggests that public sector jobs may not be a magic bullet to kickstart local economies.

Kyle Handley, Fariha Kamal, Ryan Monarch, 01 September 2020

The rise of global supply chains means that many firms that import are also exporters. This column uses confidential firm-trade linked transaction data to identify the firms facing new US import tariffs in the period 2018-2019. It shows that product exports with higher firm-level exposure to new import tariffs had weaker export growth after 2018 than less exposed products. This impact on export growth is equivalent to an ad valorem tariff on US exports of 2-4% for the average product.

Joel Mokyr, Assaf Sarid, Karine van der Beek, 30 January 2020

The consensus among economic historians has been that Britain’s leadership during the Industrial Revolution owed little to the school system. But recent work on human capital suggests that we should rethink this consensus on the role of human capital. This column shows how millwrights – highly skilled carpenters who specialised in constructing and repairing watermills – had a persistent effect on the mechanisation of textile- and iron-making and on the economic expansion that was taking place on the eve of the Industrial Revolution.

Steven Ongena, Raphael Auer, 14 January 2020

Targeted macroprudential policies may spill across sectors, but this does not mean that they are ineffective. This column shows how the effects of a countercyclical capital buffer designed to curb house price growth in Switzerland spilled over into commercial lending. But a model that matches the uncovered spillovers in volumes and interest rates shows that they by no means undermine the rationale for focusing policy measures on specific sectors. On the contrary, it suggests that regulators can avail themselves of this new tool to increase the overall resilience of banks

Aerdt Houben, Janko Cizel, Jon Frost, Peter Wierts, 05 November 2019

Macroprudential policies are being implemented around the globe. A key question is whether these policies prompt substitution toward the non-bank financial sector. This column presents compelling evidence of such ‘waterbed effects’ after macroprudential policy action. Substitution towards non-bank credit is stronger when policy measures applied to banks are binding and are implemented in countries with well-developed financial markets. While systemic risks may nonetheless decline, waterbed effects highlight the importance of developing macroprudential policies beyond banking. 

Drew Johnston, Theresa Kuchler, Johannes Stroebel, Arlene Wong, 18 September 2019

Our consumption decisions are affected by our friends, but how large is the effect? The column uses Facebook data to show that when a person buys a new phone, the peer effects that tempt friends to purchase too are large and long-lasting. The effects are strongest for the young and less educated. Peer effects may also cause friends to switch operating systems when they buy new phones.

Weiran Huang, Ashlyn Aiko Nelson, Stephen Ross, 01 February 2019

Heavily depressed housing prices and high contemporaneous rates of foreclosure have been observed in many low-income and minority neighbourhoods in US cities, suggesting foreclosures may have spillover effects within neighbourhoods. This column demonstrates that foreclosures affect the price of nearby homes and the risk of foreclosure on those homes. While our understanding of the aggregate impact of these spillovers is still limited, recent evidence suggests that it could be large. 

Samba Mbaye, Marialuz Moreno Badia, Kyungla Chae, 12 January 2019

Since the financial crisis researchers have extensively explored the dangers of excessive public debt, but excessive private debt has received less attention. This column documents a common form of indirect private sector bailout that goes largely unnoticed. Whenever households and firms are caught in a debt overhang and need to deleverage, governments come to the rescue through a countercyclical rise in public debt. This indirect substitution takes place even in the absence of a crisis.

Chih-Sheng Hsieh, Michael König, Xiaodong Liu, Christian Zimmermann, 26 November 2018

Through collaboration networks, researchers create spillovers for one another, and also other researchers indirectly linked to them. This column leverages co-authorship network data for economics to study the impact of these spillovers on total research output. Taking account of spillovers, the results show that the most productive researchers are not those with the most citations. Current funding schemes appear to be ill-designed to take advantage of the spillover effects generated in scientific knowledge production networks. 

Márta Bisztray, Miklós Koren, Adam Szeidl, 18 November 2018

Several recent studies have used network methods to explore the spatial spillovers within cities. This column adds to this literature by exploring how the spatial and managerial networks in Budapest influence firms’ import decisions. A peer in the same building with import experience from a specific country has a strong positive effect on the probability that a firm will start importing from that country. These findings point to the importance of social multipliers in facilitating the diffusion of good business practices. 

Giulia Giupponi, Stephen Machin, 11 August 2018

In 2016 the National Living Wage in the UK raised the minimum hourly wage for workers aged 25 and over. The column uses data from English care homes to analyse the impact of this policy, finding that the main non-wage effect has been a deterioration in quality of care. Younger colleagues also received wage rises, which seems to reflect a preference for fairness among employers.

Monika Schnitzer, Martin Watzinger, 31 October 2017

Conventional wisdom holds that venture capital-financed start-up companies generate positive spillovers for other businesses, but these spillovers are hard to measure accurately. This column uses a broader analysis of patent spillovers than previous studies to argue that venture capital-financed start-up companies help established companies innovate, and play a significant role in the commercialisation of new technologies. This suggests that subsidies for venture capital investment should be at least as large as current R&D subsidies.

Yusuf Soner Baskaya, Julian di Giovanni, Sebnem Kalemli-Ozcan, Mehmet Fatih Ulu, 01 September 2017

Most models assume capital flows are endogenous to the business cycle, and that inflows increase during an economy’s ‘boom’ periods. This column shows that the international no-arbitrage condition in fact does not hold, and that capital flows are pushed into an economy due to high global risk appetite. Controlling for domestic monetary policy responses to capital flows and changes in the exchange rate, exogenous capital inflows lower real borrowing costs and fuel credit expansion.

Asli Demirgüç-Kunt, Bálint Horváth, Harry Huizinga, 06 July 2017

Monetary policies pursued by lending countries may have negative spillovers for financial stability in emerging markets, because monetary policy is transmitted through its effect on the aggregate supply of cross-border loans. This column uses data on the international syndicated loan market to argue that foreign bank ownership in a borrower country reduces the negative impact of lender-country monetary policy on cross-border syndicated loan supply. This suggests that countries could stabilise their cross-border credit supply by reducing restrictions on foreign bank entry into local markets.

Randolph Bruno, Nauro Campos, Saul Estrin, 25 May 2017

The economic effects of foreign direct investment are generally expected to be positive for the host economy. However, this is usually conditional on certain thresholds of development being met, for instance in terms of human capital or institutional quality. This column argues that the economic impact of foreign direct investment is less ‘conditional’ than commonly thought, perhaps because below the thresholds, the difference between private and social returns is substantial, while above them it is smaller.

M. Ayhan Kose, Csilla Lakatos, Franziska Ohnsorge, Marc Stocker, 27 February 2017

A growth surge in the world’s largest economy could provide a significant boost to global activity. In contrast, uncertainty about the direction of US policies could have the opposite effect. This column investigates spillover channels linking the US and the global economy. An acceleration in US growth would have positive effects for the rest of the world if not counterbalanced by increased trade barriers. However, policy uncertainty could hamper global growth, and could have particularly bad effects on investment growth in emerging and developing economies.

Daron Acemoğlu, Ufuk Akcigit, William Kerr, 20 January 2017

Innovation is typically seen as a cumulative process, with new technologies building on existing knowledge - but our knowledge of how progress in a specific area is influenced by knowledge in other, ‘upstream’ areas is limited. Using US patent data, this column identifies a stable ‘innovation network’ that serves as a conduit for cumulative knowledge development. Technological advances in one field can advance progress in multiple neighbouring fields, but will have a stronger influence on more closely related areas.

Ralph De Haas, Steven Poelhekke, 22 September 2016

The extraordinary expansion in global mining activity over the last two decades, and its increasing concentration in emerging markets, has reignited the debate over the impact of mining on local economic activity. This column analyses how the presence of nearby mines influences firms in eight countries with large manufacturing and mining sectors. Mines are found to out-compete local manufacturing firms for inputs, labour, and infrastructure. However, mining activity is found to improve the business environment on a wider geographic scale.

Jan in 't Veld, 09 September 2016

The spillover effects of a fiscal stimulus in normal times are likely to be small, at best. This column argues, however, that when interest rates are stuck at the zero lower bound and monetary policy does not offset the expansion, public investment in surplus countries could have significant positive GDP spillovers to the rest of the Eurozone. Given current low borrowing costs, the increase in government debt for surplus countries would be modest, while debt ratios in the rest of the Eurozone could be improved.

Gaston Gelos, Jay Surti, 19 August 2016

International financial spillovers from emerging markets have increased significantly over the last 20 years. This column argues that growing financial integration of emerging economies is more important than their rising share in global trade in driving this trend, that firms with lower liquidity and higher borrowing are more subject to spillovers, and that mutual funds are amplifying spillover effects. Policymakers in developed economies should pay increased attention to future spillovers from emerging markets, particularly from China.



CEPR Policy Research