Franck Portier, 03 May 2019

Business economists argue that the length of an expansion is a good indicator of when a recession will hit. Using both parametric and non-parametric measures, this column finds strong support for the theory from post-WWII data on the US economy. The findings suggest there is good reason to expect a US recession in the next two years.

Wolfram Schlenker, Charles Taylor, 02 May 2019

Understanding beliefs about climate change is important, but most of the measures used in the literature are unreliable. Instead, this column uses prices of financial products whose payouts are tied to future weather outcomes in the US. These market expectations correlate well with climate model outputs between 2002 and 2018 and observed weather data across eight US cities, and show significant warming trends. When money is at stake, agents are accurately anticipating warming trends in line with the scientific consensus of climate models.

Wilko Bolt, Kostas Mavromatis, Sweder Van Wijnbergen, 25 April 2019

Increasing protectionism will slow down world trade and may dampen global economic growth. This column examines the global macroeconomic consequences of a major trade conflict between the US and China, and shows that the two countries would be the biggest losers from a 10% ‘tit-for-tat’ trade war between them. As long as it does not get involved in the conflict, the euro area may temporally gain from trade diversion, as competitiveness improves and imports from regions whose exports are blocked elsewhere become cheaper.

Maggie R. Jones, 25 April 2019

Nearly 40% of documented new arrivals to the US in 2005 left within ten years, but who return migrates and why is often overlooked in policy debates regarding immigration. This column uses survey data and earnings records from 2005 to 2015 to show that a decline in earnings is a strong predictor of return migration. Those who stayed for the decade saw their wages reach parity with native-born workers, while those who left had seen a steep decline in wages in the years before departure. Further analysis shows that highly educated immigrants are more likely to leave the US within a decade of arrival.

Thiemo Fetzer, Carlo Schwarz, 23 April 2019

Tariff retaliation is widely believed to be politically motivated. This column presents evidence that retaliation against the Trump administration's tariff hikes seems to be systematically targeted against the Republican voter base. China appears to have been able to achieve a high degree of political targeting but likely harmed its own economy by targeting agricultural goods for which the US is a major supplier. The EU, on the other hand, appears to be more successful in navigating the trade-off. It also finds some evidence suggesting that Republican candidates fared worse in the mid-term elections in the US counties most exposed to retaliation.

Cecilia Bellora, Lionel Fontagné, 22 April 2019

Since 2018, the US administration has implemented several measures limiting free trade with China and other countries. Using cross-country data and a general equilibrium model, this column argues that a trade war hurts not only the targeted countries but also the country imposing the tariffs. Global value chains prompt countries to decrease tariffs when the domestic content of foreign-produced final goods and the imported content of domestic production of final goods are high. Once imposed, tariffs have an indirect effect on third sectors and countries through global value chains.

Thomas Blanchet, Lucas Chancel, Amory Gethin, 22 April 2019

Despite the growing importance of inequalities in policy debates, it is still difficult to compare inequality levels across European countries and to tell how European growth has been shared across income groups. This column draws on new evidence combining surveys, tax data, and national accounts to document a rise in income inequality in most European countries between 1980 and 2017. It finds that income disparities on the old continent have increased less than in the US and shows that this is essentially due to ‘predistribution’ policies.

David Laborde, William Martin, 18 April 2019

Raj Chetty, John Friedman, 18 April 2019

Using confidential data to publish statistics based on small samples is challenging due to privacy loss. This column introduces a simple method for dealing with this issue which adds noise to each statistic in proportion to its sensitivity to the addition or removal of a single observation from the data. The method generally outperforms widely used methods of disclosure limitation such as count-based cell suppression both in terms of privacy loss and statistical bias. As an illustration, the method is used to release estimates of social mobility by Census tract in the Opportunity Atlas. 

Mónica Correa-López, Beatriz de Blas, 23 April 2019

Since the end of WWII, advanced economies have experienced long-lasting swings in economic activity. This column takes a look at the historical data and finds that, over the medium term, output and investment fluctuations among European countries have been even more volatile and persistent than in the US. It also reveals that, by diffusing embodied technology through trade inintermediates, large US firms appear to drive Europe's output over the medium term. 

Eric Hanushek, Paul Peterson, Laura M. Talpey, Ludger Woessmann, 15 April 2019

For 50 years, anti-poverty government programmes in the US have focused on improving school outcomes for poor children. This column reports new evidence that, contrary to recent thinking that gaps in student achievement by socioeconomic status have increased over the years, the gaps have been essentially flat over the past half-century. New policies and new approaches seem called for if we wish to lessen these gaps.

Elizabeth Caucutt, Nezih Guner, Christopher Rauh, 06 April 2019

In 2006, 67% of white women in the US between the ages of 25 and 54 were married, compared with only 34% of black women. This column examines the link between this and the decline in low-skilled jobs and the era of mass incarceration that have disproportionately affected black communities. It finds that differences in incarceration and employment dynamics between black and white men account for half of the black–white marriage gap.

Alan Auerbach, Yuriy Gorodnichenko, Daniel Murphy, 04 April 2019

The strength of fiscal multipliers and spillovers have been the subject of intense debate in recent years.Using data on US Department of Defense contracts and income and employment outcomes, this column finds evidence of  strong positive spillovers across locations and industries, although the geographical spillovers appear to dissipate fairly quickly with distance. Both backward linkages and general equilibrium effects contribute to the positive spillovers.

Thor Berger, Per Engzell, 28 March 2019

There are striking regional variations in economic opportunity across the US. This column proposes a historical explanation for this, showing that local levels of income equality and intergenerational mobility in the US resemble those of the European countries that current inhabitants trace their origins from. The findings point to the persistence of differences in local culture, norms, and institutions.

Bo Becker, Victoria Ivashina, 28 March 2019

In the past 30 years, defaults on corporate bonds in the US have been substantially above the historical average. Using firm-level data, this column shows that the increase in credit risk can be largely attributed to an increase in the rate at which new and fast-growing firms displace incumbents, a phenomenon defined as ‘disruption’. Incumbent revenue growth suffers when there are many IPOs in an industry, and newly issued bonds in high-disruption industries have higher yields.

Manudeep Bhuller, Gordon Dahl, Katrine V. Løken, Magne Mogstad, 24 March 2019

Incarceration rates have tripled in the US and almost doubled in Western Europe over the past 50 years. This column uses data on the criminal behaviour and labour market outcomes of every Norwegian to show that in contrast to the US, where incarceration appears to encourage reoffending and damages labour prospects, the Norwegian prison system is successful in increasing participation in job training programmes, encouraging employment, and discouraging crime. It argues that Norway’s high rehabilitation expenditures are more than offset by the corresponding benefits to society.

Antonio Fatás, 14 March 2019

Sanjiv Das, Kris Mitchener, Angela Vossmeyer, 11 March 2019

The Global Crisis brought attention to how connections among financial institutions may make systems more prone to crises. Turning to a major financial crisis from the past, this column uses data from the Great Depression to study risk in the commercial banking network leading up to the crisis and how the network structure influenced the outcomes. It demonstrates that when the distribution of risk is more concentrated at the top of the system, as it was in 1929, fragility and the propensity for risk to spread increases.

Natasha Kalara, Lu Zhang, Karen van der Wiel, 09 March 2019

The Global Crisis has profoundly changed the financial landscape, including firm financing. This column examines the development of various channels of firm financing before and after the crisis among four groups of EU countries, the US, and Japan. While bank finance and, to some extent, equity finance are under pressure, alternative finance, although small, seems to be on the rise.

Olivier Dessaint, Thierry Foucault, Laurent Frésard, Adrien Matray, 05 March 2019

Stock prices respond to fundamental shocks (i.e. news) and non-fundamental shocks (noise). Using US data from 1996 to 2011, this column argues that stock prices are a ‘faulty informant’ for corporate managers because managers have limited ability to separate information from noise when using prices as signals about their prospects. The ensuing losses of capital investment and shareholders’ wealth are large and even affect firms that are not facing severe financing constraints or agency problems.



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