Volker Nocke, Michael D. Whinston, 26 August 2020

Concentration measures such as the post-merger Herfindahl-Hirschman index as well as the merger-induced change in the index are usually key determinants in the review of horizontal mergers by competition agencies and courts. This column studies whether the magnitude of the efficiencies required for a merger not to hurt consumers may be related to the change and the level of the Herfindahl-Hirschman index. On the basis of theoretical analysis substantiated by empirical evidence, it finds that while the critical level of efficiencies depends on the change in the index, it is independent of level of the index. Hence current guidelines should be changed so as to emphasise the change more and the level less.

Robert McCauley, 26 August 2020

On 23 March 2020, the Federal Reserve announced that it would buy investment grade corporate bonds, and on 9 April set the amount at up to $250 billion and extended the purchase to junk bonds. This column shows that these interventions succeeded in stabilising credit markets: prices lifted and dealing spreads narrowed. However, emergency lending powers provide an inadequate basis for Federal Reserve operations in corporate bonds. In light of these findings, congressional authority to buy and to sell corporate bonds alongside US Treasuries would help to align Federal Reserve operations with what has become a capital-market centred financial system

Peter Klenow, Huiyu Li, 18 August 2020

There is much concern that the Covid-19 crisis may be particularly tough for relatively young firms to survive. Given that much innovation is attributed to young firms, this could then harm overall productivity. This column uses the dynamics of various firms’ market shares in order to infer their growth contributions. Compared to studies focusing on patents and R&D spending, the authors find a much bigger role for new and young firms in terms of accounting for productivity growth. Protecting young firms is therefore essential to mitigating the productivity damage of Covid-19.

Teresa Fort, Justin Pierce, Peter Schott, 18 August 2020

Although it is well documented that US manufacturing employment has been falling since 1979, the causes of this trend are still unclear. This column argues that examining how and where the decline in US manufacturing employment occurs provides important insights in this regard. Using US Census Bureau’s Longitudinal Business Database, it highlights three important trends post 1979 which suggest substantial increases in labour productivity, and an evolution of US manufacturing in line with US comparative advantage. 

Michael Gapen, Jonathan Millar, Blerina Uruçi, Pooja Sriram, 14 August 2020

As the COVID-19 pandemic continues, US policymakers must consider containment measures while weighing adverse health outcomes against forgone economic activity. This column uses panel data to evaluate alternative strategies to keep COVID-19 in check. Viable options to keep new case counts on a downward trajectory without economically costly shutdowns include more testing (at least 1.8 million per day for the US, used in isolation) and either mask requirements or indoor-dining restrictions. The US is nowhere near the point where herd immunity alone can control infections.

John McLaren, 11 August 2020

In the US, COVID-19 tends to magnify inequalities by disproportionately hitting minorities, particularly African Americans, who suffer from higher COVID-19 mortality rates. Higher rates of infection appear to be the cause rather than factors related to treatment. Using an indirect approach, this column uses census data to identify the socioeconomic factors that cause different racial groups to be differentially exposed to the virus. Very strong racial disparities in COVID-19 mortality rates are seen for African-American and First Nations populations. Occupation, income, poverty rates, or access to healthcare insurance appears to matter little. Pre-COVID-19 use of public transport, however, may be a significant factor.

Caitlin Brown, Martin Ravallion, 10 August 2020

Income is linked to COVID-19 risk factors: poorer people are less likely to be able to socially distance or telework. However, higher-income areas tend to have more in-person interactions. This column disentangles the socioeconomic influences on COVID-19 behaviour and outcomes across the 3,000 counties of the US. Counties with higher overall income inequality tend to have higher infection rates. A higher population share of Black Americans and Hispanics is associated with higher infection rates. These effects do not fade over time from the first infection.

Akos Horvath, Benjamin Kay, Carlo Wix, 08 August 2020

The COVID-19 pandemic and the ensuing public health interventions have disrupted economic activity in the US. This column examines the impact of the COVID-19 shock on the use and availability of consumer credit through March 2020. In counties affected by the pandemic, creditworthy borrowers reduced their credit use, but riskier borrowers increased their outstanding credit card balances. While both pandemic severity and non-pharmaceutical interventions negatively affected credit use, the pandemic itself was the main driver. Banks reduced the credit limits and increased the APR spreads of newly issued cards to riskier borrowers, consistent with a flight-to-safety response.

Joshua P. Meltzer, 05 August 2020

The Court of Justice of the European Union recently delivered its verdict in the Schrems II case, ruling that the EU-US Privacy Shield is invalid. This column addresses the implications for adequacy and standard contractual clauses as well as the broader issue of how to balance national security and privacy goals. It concludes with observations about the potential impact of the decisions for the US and beyond and suggests some ways forward.   

Graziella Bertocchi, Arcangelo Dimico, 29 July 2020

COVID-19 pandemic is having a disproportionate impact on African Americans, who are dying at a rate two to three times higher than their population share. This column uses a detailed individual-level dataset from Cook County, Illinois, to explore the relationship between COVID-19 mortality and race. Not only are Black Americans disproportionally affected by COVID-19, but they also started to succumb to it earlier than other groups. Such asymmetric effects can be traced back to racial segregation introduced by discriminatory lending practices in the 1930s.

Robert Feenstra, Chang Hong, 25 July 2020

In December 2019, the US and China reached a Phase One agreement, which mandates China to purchase additional imports from the US worth $200 billion in 2020 and 2021. This column shows that the most efficient way for China to increase imports from the US is to mimic the effects of an import subsidy. For agricultural products, this subsidy would need to be as high as 42% for 2020 and 59% for 2021 in order to meet the target. Such subsidies would divert agricultural imports away from other countries, especially decreasing Chinas imports from Australia and Canada.

Michèle Belot, Syngjoo Choi, Egon Tripodi, Eline van den Broek-Altenburg, Julian C. Jamison, Nicholas W. Papageorge, 24 July 2020

Almost all countries in the world have implemented drastic measures to contain the COVID-19 pandemic. This column documents the effects of the epidemic and containment measures using representative individual data on age and income from three Western and three Asian countries. Younger groups in all countries have been affected more, both economically and non-economically. Differences across income groups are less clear and less consistent across countries. The young are less compliant and supportive of the containment measures, no matter how hard they have been affected by them.

Dimitris Papanikolaou, Lawrence D.W. Schmidt, 23 July 2020

COVID-19 has massively disrupted the supply side of the world economy, shutting down entire industries. This column analyses how these disruptions affected different types of firms and workers by looking at how effectively different sectors can shift to remote work. While the major policy interventions in the US have treated all types of business as equivalent, industries which are not able to do their work remotely have been hit much harder than business that can. This cross-sectional dispersion shows up across a variety of measures, including changes in employment, revenue projections, likelihood of default, current liquidity, and stock returns. Going forward, aid that targets disrupted sectors may be a more cost-effective means to alleviate the impacts of COVID-19.

Egor Malkov, 22 July 2020

The lockdown measures have brought to light the importance of the nature of work. This column discusses how teleworkability and contact intensity of different jobs both shape the distribution of risks created by the pandemic. The existing distribution of working couples suggests that two-thirds of the US ‘dual-earner’ couples are exposed to greater intra-household contagion risk. About one-fourth are exposed to greater labour income risk. Patterns in skill requirements increase the likelihood of skill mismatch for the newly unemployed. These observations have direct policy implications whilst highlighting potential constraints on their effectiveness.

Qing Hu, Ross Levine, Chen Lin, Mingzhu Tai, 18 July 2020

The financial conditions facing parents can have effects on children’s education outcomes, both in terms of schooling and parental support at home. This column presents evidence from the US, arguing that changes in banking regulation across states can cause changes in the experience of children through a number of channels. These effects are not uniform across household income brackets and can be mitigated when there are other family members such as grandparents that are able to help children with their personal development.

Victor Chernozhukov, Hiro Kasahara, Paul Schrimpf, 15 July 2020

Faced with COVID-19, people rationally and voluntarily respond to information on risks, making it difficult to distinguish the effect of containment policies from that of voluntary behavioural responses. This column examines the effect of mandatory mask policies on COVID-19 cases and deaths in the US. If the US had on 1 April 2020 universally mandated that employees of public-facing businesses use masks, there could have been nearly 40% fewer deaths by the start of June. Containment policies had a large impact on the number of COVID-19 cases and deaths, directly by reducing transmission rates and indirectly by constraining people’s behaviour, and account for roughly half the observed change in the growth rates of cases and deaths.

Jose Maria Barrero, Nicholas Bloom, Steven Davis, 14 July 2020

One of the most urgent economic impacts of the Covid-19 crisis is on labour markets. Widespread job losses, drastic increases in unemployment benefit claims, and the rise of working from home have dominated the discussion during the pandemic so far. This column presents evidence from the US, arguing that the pandemic itself represents reallocation of labour within the economy. As different sectors and occupations are hit with variable severity, the authors argue that policymakers should be wary of this variation, responding with policies that will hold firm over time.

Peter Petri, Michael Plummer, 09 July 2020

The US-China trade war has negatively affected global growth and trade prospects, redirecting supply chains and leading to inefficiencies. However, this column suggests that emerging mega-regional trade agreements, including the Comprehensive and Progressive Agreement on Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership, have the potential to compensate for the trade war by reducing regional costs. Such agreements are likely to lead to deeper integration within Asia, especially among Japan, China, and Korea. They could also trigger further economic distancing between Asia and the US, and a large increase in the influence of China.

Ulrich J. Eberle, Vernon Henderson, Dominic Rohner, Kurt Schmidheiny, 09 July 2020

Urbanisation is a major driver of economic development. Agglomeration forces that make cities productive and dispersion forces that limit their growth have been extensively studied, but the effect of ethnolinguistic diversity has been largely overlooked. This column shows that more diverse regions tend to experience more social tensions and conflict, less urbanisation, less urban concentration, and hence potentially less economic growth. This effect is however more confined to intermediate political regimes like fragile democracies, whereas a mature degree of democracy helps to defuse the negative impact of diversity on urbanisation.

Giovanni Facchini, Brian Knight, Cecilia Testa, 07 July 2020

The disproportionate arrest rates of black Americans is well established, but the relationship between racist police practices and political accountability is not. This column examines whether black voter turnout – which soared following the Voting Rights Act of 1965 – affected police departments in the southern US. It finds that an historically oppressed minority’s enfranchisement can lead to their improved treatment by police, but only when the chief law enforcement officers in a district are elected rather than appointed. While historical in nature, the findings have significant policy implications given ongoing debates about policing, race, and voting.

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