Mark Schankerman, Florian Schuett, 06 November 2020

In the last years, there has been substantial pushback against the patent system. Critics claim that patent rights are becoming an impediment to innovation, and an instrument to extract rents through patent litigation. This column develops a framework to quantitatively assess the effectiveness of the current US patent system and the welfare impact of reforms. It finds that the current system generates positive social value, and that the recent introduction of the Patent Trial and Appeal Board increased welfare. Intensifying patent office examination and imposing antitrust limits on patent licensing agreements would yield additional welfare gains.

Felix Bierbrauer, Pierre C Boyer, Andreas Peichl, 07 October 2020

The design of redistributive tax policies is an evergreen in the public discourse. This column proposes a new approach for the political economy analysis of tax policies based on examining the political support for reforms in contrast to the tax systems themselves. Focusing on monotonic tax reforms, it demonstrates that such reforms are only supported by a majority of the population if the voter with median income is among the beneficiaries. It also yields predictions on how sequences of politically feasible reforms should affect marginal taxes: (1) a shift towards lower marginal tax rates, even negative ones, for below median incomes; (2) pronounced progression for close to median incomes; and (3) a shift to higher and higher marginal tax rates for top earners, unless tax rates in the status quo are already over the top of the Laffer curve.

Tilman Tacke, Anu Madgavkar, Hans‐Helmut Kotz, 30 April 2020

The first two decades of the 21st century saw job opportunities expand and prices for discretionary consumer goods drop. But these gains came at the cost of social contracts in many countries, where working arrangements became more fragile, wages stagnated, and the labour share of income fell. This column argues that the severe economic consequences of the COVID-19 pandemic have revealed vulnerabilities in the social contract. When the immediate crisis is over, risk may need rebalancing towards an increasing role for institutions and mutualisation.

Jonathan Heathcote, Andrew Glover, Dirk Krueger, Víctor Ríos-Rull, 26 April 2020

Large portions of many countries’ economies have been shuttered to slow the spread of COVID-19. Why, three months into the pandemic, does the optimal policy response remain so controversial? This column examines how the welfare effects of shutdown policies vary across different types of households. The model predicts that some groups – young workers in sectors deemed non-essential – would benefit from ending the current shutdown, while others – the old – will surely lose. Current disagreements over when to end shutdowns are thus easy to understand.

Timothy J. Layton, Nicole Maestas, Daniel Prinz, Boris Vabson, 17 October 2019

There is much debate, and nowhere more than in the US, about whether public services such as healthcare should be provided by private companies, which may offer greater efficiencies but which are more susceptible to moral hazard and adverse selection of consumers. This column uses evidence from a provision change in Texas to show that contracting healthcare provision out to private companies increased the level of care patients received, but increased overall costs for the government.

James Anderson, Mario Larch, Yoto Yotov, 30 July 2019

Foreign direct investment has traditionally been viewed as a key driver of prosperity, and modern FDI has also become a vehicle for transferring intangible assets. This column uses a counterfactual experiment based on a hypothetical world with no outward or inward FDI to and from low-income and lower-middle-income countries to examine the effects of FDI on trade, domestic investment, and welfare. World welfare falls by about 6% and all countries lose out, with some poorer countries losing over 50%. World trade falls by 7%, with the losses again unevenly distributed.

Jacques Bughin, Christopher Pissarides , Eric Hazan, 28 May 2019

Artificial intelligence promises economic growth as well as creating fear for those whose jobs it may replace. This column takes a wider approach to examining how AI and other technologies will affect citizens’ welfare beyond just their income. It argues that the new technologies are intrinsically neither good nor bad, it is how they are deployed and how the transition is crafted that conditions the welfare dynamics of societies. 

Michael Keane, 26 May 2019

Launched in 2006, Medicare Part D allows beneficiaries to enrol in subsidised drug coverage plans sold by private insurers, but navigating the different plans can be complex and lead to sub-optimal choices. This column uses Medicare administrative data for 2006-2010 to understand the quality of consumer decision-making in the Part D marketplace. It finds that the vast majority of elderly place too much weight on premiums relative to out-of-pocket costs, care a great deal about the particular combination of plan features, and are highly likely to choose the same plan every year regardless of changes in prices and alternatives.

Sergi Basco, Martí Mestieri, 19 May 2019

Trade in intermediates (or ‘unbundling of production') and trade in capital have become increasingly important in last 25 years. This column shows that trade in intermediates generates a reallocation of capital across countries that exacerbates world inequality in both income and welfare. Unbundling of production hurts middle-income countries but helps those with high productivity. Trade in intermediates also increases within-country inequality, and this increase is U-shaped in the aggregate productivity level of the country. 

Martin Halla, Julia Schmieder, Andrea Weber, 13 December 2018

For the optimal design of social insurance policy, policymakers must consider how public insurance interacts with family dynamics. This column reveals how in Austria, the impact of husbands losing their jobs on wives entering the workforce is generally weak compared to other countries. This may be explained by traditional gender norms and the importance of the male breadwinner model.

Aleh Tsyvinski, Nicolas Werquin, 09 July 2018

Many economic disruptions create winners and losers. This column presents an analytical formula for tax reform to offset welfare losses by redistributing the winners’ gains when tax instruments are distortionary and wages are endogenous. It shows how the model can be applied to empirical data, for example to offset the impact of robots in the US and Germany.

Hamish Low, Costas Meghir, Luigi Pistaferri, Alessandra Voena, 13 May 2018

Changing the terms and rules governing welfare can have substantial effects on employment. This column explores how the imposition of time limits for welfare receipt affected the employment, marriage, and divorce rates of women in the US. As intended by the reform, time limits decreased welfare use and the divorce rate, while increasing employment. Despite this, those women who were worst off prior to the reform are found to be even worse off after it.

Camille Landais, Arash Nekoei, J Peter Nilsson, David Seim, Johannes Spinnewijn, 03 February 2018

Unemployment insurance is compulsory in almost all countries, with no choice for workers over the level of coverage. But why restrict choice if it can improve the targeting of individuals who value the insurance the most? This column uses evidence from Sweden to examine whether the issue of adverse selection justifies a universal mandate for unemployment insurance. Workers who purchased more generous unemployment insurance were more than twice as likely to be unemployed in the following year. A universal mandate combats such adverse selection, but forces workers to buy insurance even when insurance costs are higher than the value they assign to it.

Zovanga Kone, Maggie Y. Liu, Aaditya Mattoo, Çağlar Özden, Siddharth Sharma, 30 November 2017

Indians, and in particular men seeking education and jobs, display a puzzling reluctance to cross state borders. This column explores the reasons for this surprising migration pattern. A major culprit is India’s system of ‘fragmented entitlements’, whereby welfare benefits are administered at the state level, and state residents get preferential treatment when it comes to higher education and government employment. These administrative rules prevent the more efficient allocation of labour across the country.

Charles Manski, 27 October 2017

In medical treatment, it is assumed that adherence to clinical practice guidelines is always preferable to decentralised clinical decision-making, yet there is no welfare analysis that supports this belief. This column argues that it would be better to treat clinical judgement as a problem of decision-making under uncertainty. In this case there would be no optimal way to make decisions, but there are reasonable ways with well-understood welfare properties.

Tom Krebs, Pravin Krishna, William Maloney, 22 September 2017

Research on economic mobility has failed to disentangle the underlying economic drivers. In particular, opportunities for upward movement represent welfare-enhancing mobility, while risky income shocks represent welfare-reducing mobility. This column presents a framework for differentiating between these factors, and applies the model to Mexican data. Results show that opportunity and risk are equally important drivers of income mobility, with large but opposing welfare effects. This challenges the idea that societies with higher measured income mobility are better.

Martin Ravallion, Shaohua Chen, 15 September 2017

Past studies have measured poverty in either relative terms (mostly in the developed countries) or absolute terms (the developing world). This column presents a new unified approach to global poverty that assumes that people care about both their own income and their income relative to others in their country of residence. The study finds that global poverty has declined more in absolute terms than in relative terms. The vast bulk of the relatively poor now live in the developing world. The advanced countries have seen little progress against poverty, unlike the developing world.

Carol Graham, 28 July 2017

Despite the long-held belief that high levels of inequality in the US signal future opportunity, a number of studies suggest that this is no longer the reality. This column examines trends in inequality from the perspective of well-being and focuses on non-economic aspects of welfare, including hope. The results reveal stark differences across people, races, and places in the US. Poor minorities – and blacks in particular – are much more hopeful than poor whites, while urban places are more hopeful than are rural ones, as are places with higher levels of diversity.

Nezih Guner, Remzi Kaygusuz, Gustavo Ventura, 10 June 2017

Childcare subsidy provision in the US remains substantially lower than in many other developed economies. This column compares the potential effects of expanding three existing subsidy programmes in the US. It also argues, however, that amassing majority support for the expansion of any of the programmes would be difficult given the relatively few number of households the transfers benefit. 

Don Fullerton, Nirupama Rao, 03 May 2017

In the 2012 US presidential election, Mitt Romney famously asserted that 47% of the population were long-term dependents of the government – ‘takers’, not ‘givers’ to the system. This column examines this claim using long-spanning household-level data. Even though many households find themselves not paying tax or receiving public benefits in at least some years, only a small fraction consistently pay no tax or consistently receive public transfers.

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