Angus Armstrong, 09 March 2016

The upcoming vote on the UK’s membership of the EU has sparked a vibrant debate on topics ranging from sovereignty and sterling to migrants and the military. This column discusses evidence on the economics of Britain’s EU membership drawn from a recent conference where both sides of the debate were represented. 

Swati Dhingra, Thomas Sampson, 04 March 2016

In June, UK voters will decide whether to remain part of the EU. This column explores the UK’s options if a majority votes in favour of Brexit. One possibility is for the UK, like Norway, to join the European Economic Area and thereby retain access to the European Single Market. An alternative would be to negotiate bilateral treaties with the EU, as Switzerland has done. All options, however, involve a trade-off between political sovereignty and economic benefits.

Nauro Campos, Corrado Macchiarelli, 03 March 2016

There seems to be a robust consensus that the relationship between the countries in the EU that use the euro as their currency (‘euro-ins’) and those that do not (‘euro-outs’) is the most important of the four areas in the ‘new settlement’ between the UK and the EU. This column presents new econometric estimates showing that, after the introduction of the euro, the UK and Eurozone business cycles became significantly more synchronised. It is likely this upsurge in synchronisation increased the costs of a potential UK exit from the EU. 

Peter Egger, Martin Ruf, Valeria Merlo, Georg Wamser, 09 February 2016

Many countries exempt foreign-sourced income from taxation at home, with income taxed only in the source country. In 2009, the UK moved from a system of tax credit to a system of tax exemption of foreign-earned income of firms. This column looks at the effects of this reform on firm behaviour. Immediately following the reform, firms were induced to pay significantly more dividends to the UK and decreased their investments. But neither effect persisted in the long run.

Alessandro Gavazza, Mattia Nardotto, Tommaso Valletti, 31 January 2016

The internet is lauded for increasing access to information, but it is unclear whether this translates into a better-informed and more engaged voting populace. This column uses UK data to determine how the internet has changed voting patterns and aggregate policy choices. Internet penetration is found to be associated with a decrease in voter turnout, mainly among the lower socioeconomic demographic. Internet diffusion is also found to reduce local government expenditure, in particular on policies targeting less-educated voters. These findings point to a trade-off between the ‘digital divide’ and the ‘political divide’.

Wouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, 28 January 2016

The beginning of 2016 has seen dramatic developments in key markets, including falls in share prices, low oil prices, and a slowdown in some emerging market economies. This column summarises the views expressed on these issues by leading experts in the monthly Centre for Macroeconomics survey. While all recognise the considerable uncertainty in the world economy, fewer than a third fear that these events will have a significant negative impact on the UK’s economic recovery. The prevailing argument is that any negative effects of lower foreign demand and market instability will be compensated by the benefits of lower oil prices.

Scott Baker, Nicholas Bloom, Steven Davis, 15 December 2015

The recent influx of refugees to Europe has stoked security fears and created anxiety about the social and economic consequences. This column provides new quantitative indicators for the intensity of migration-related fears and policy uncertainty, based on newspaper articles. The indices are presented for the US, UK, France, and Germany, and extend back to 1995. They show that recent levels of concern and uncertainty in European countries about migration are unprecedented. 

Nauro Campos, Fabrizio Coricelli, 11 December 2015

Whatever the result of Britain’s upcoming in-or-out referendum on EU membership, its relationship with the EU will change substantially. To assess these changes, it is important to understand how Britain has benefited from EU membership. This column argues that EU membership has brought benefits through three key mechanisms – trade, foreign investment, and finance. The current focus on UK exports to and imports from the EU may severely underestimate the true potential costs to Britain of Brexit.

Facundo Alvaredo, Tony Atkinson, Salvatore Morelli, 08 December 2015

The concentration of personal wealth has received a lot of attention since the publication of Thomas Piketty’s Capital in the 21st Century. This column investigates the UK and finds wealth distribution to be highly concentrated. The data seem to suggest that the top wealth share has increased in the UK over the first decade of this century. 

Italo Colantone, Rosario Crinò, Laura Ogliari, 04 December 2015

Influential studies have shown that trade liberalisation is associated with substantial adjustment costs for workers in import-competing jobs. This column uses UK data to shed light on one such cost that has not been considered to date – subjective well-being. Import competition is found to substantially raise mental distress, through worsened labour market conditions and increased stress on the job. These findings provide evidence of an important hidden cost of globalisation.

Angus Armstrong, Francesco Caselli, Jagjit Chadha, Wouter den Haan, 02 August 2015

Does monetary policy really face a zero lower bound or could policy rates be pushed materially below zero per cent? And would the benefits of reforms to achieve negative policy rates outweigh the costs? This column, which reports the views of the leading UK-based macroeconomists, suggests that there is no strong support for reforming the monetary system to allow policy rates to be set at negative levels.

Terence Cheng, Joan Costa-i-Font, Nattavudh Powdthavee, 31 July 2015

Economists have traditionally viewed healthcare as a luxury good – consumption of it will increase more than proportionally as income rises. This column challenges this view, exploiting the windfall of lottery winnings to estimate elasticities for healthcare demand in the UK. Results suggest that income elasticities for public healthcare services are close to zero. A medium to large windfall is found instead to increase the uptake of private health insurance and preventative services. This suggests that rising incomes will increase private sector demand, but will leave public healthcare demand unchanged.

Jim Tomlinson, 05 July 2015

In Britain today, a majority of those in poverty live in working, rather than non-working, households. This challenges the long-held notion that paid work offers a route out of poverty. This column argues that structural changes in the labour market have brought about profound changes in the social security system. A failure to acknowledge these underlying changes means that dialogues about the political direction of the British economy can be problematic and potentially misleading.

Gianmarco Ottaviano, Giovanni Peri, Greg Wright, 17 June 2015

International trade in services and immigration are among the fastest growing aspects of globalisation. Using UK data, this column explores the links between these phenomena. Immigrants promote exports of final services to their home countries, while also reducing imports for some intermediate services, and bringing productivity gains to the labour market. In designing immigration policies, it is important that the potential impact on exports and offshoring activities are carefully considered.

Rena Conti, Ernst Berndt, David Howard, 25 March 2015

Total US prescription drug spending rose 13% in 2014, the biggest increase in a decade. Driving this trend is spending on branded specialty drugs, which rose an unprecedented 31%. This column discusses recent research into the relationship between inflation-adjusted launch prices and survival benefits and approval year for 58 anticancer drugs approved in the US between 1995 and 2013. The authors find that launch prices are going up by $8,500 per year, approximately 12% year over year.

Neil Lee, Andrés Rodríguez-Pose, 17 February 2015

Creativity is assumed to be the mother of invention, but research testing whether this is the case is surprisingly rare. This column addresses this gap in the literature by assessing whether firms in creative industries in the UK are more innovative than firms outside creative industries. The authors also examine whether the location of creative-industry firms in creative cities – and the size of creative cities – matters for the innovative capacity of these firms.

Shiv Chowla, Lucia Quaglietti, Łukasz Rachel, 26 November 2014

The importance of world shocks for the UK economy has been demonstrated by the events since 2007. This column suggests that world shocks are likely to have driven around two-thirds of the shortfall in output since 2007. Trade linkages are an important channel for the transmission of world shocks to the UK, but financial linkages and spillovers through uncertainty are likely to account for the majority of the impact.

Charles Goodhart, Jonathan Ashworth, 08 October 2014

Despite the growth of online and card payments, the ratio of currency to GDP in the UK has been rising. This column argues that rapid growth in the grey economy has been a key cause. The authors estimate that the grey economy in the UK could have expanded by around 3% of UK GDP since the beginning of the Global Crisis.

David Blanchflower, Stephen Machin, 29 September 2014

Real wages continue to fall in the UK and elsewhere, yet despite this striking feature of the labour market, some commentators anticipate resurgent pay growth in the near future. This column argues that the absence of any improvement in the UK’s productivity performance – together with evidence that nominal wage growth is flatlining and real wage growth is falling – make it highly unlikely that wage growth is about to explode upwards.

Joanne Lindley, Steven McIntosh, 21 September 2014

Individuals who work in the finance sector enjoy a significant wage advantage. This column considers three explanations: rent sharing, skill intensity, and task-biased technological change. The UK evidence suggests that rent sharing is the key. The rising premium could then be due to changes in regulation and the increasing complexity of financial products creating more asymmetric information.

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