Domestic violence: the potential role of job loss and unemployment benefits34/2021 Sonia Bhalotra, Diogo Britto, Paolo Pinotti and Breno Sampaio
One in three women worldwide report having experienced domestic violence at some stage in their lives, and yet we do not have a clear understanding of the underlying causal mechanisms. Understanding causes is key to devising effective policy interventions. Using administrative data from Brazil, we investigate the role of unemployment, an economic shock, and whether unemployment benefits mitigate any impacts of job loss on domestic violence.
Fixing National Insurance: A better way to fund social care33/2021 Arun Advani, Helen Hughson, Andy Summers and Hannah Tarrant
Remote work and the post-pandemic UK labour market32/2021 Mirko Draca, Emma Duchini, Roland Rathelot and Giulia Vattuone
The ‘forced experimentation’ with remote work since March 2020, brought on by the COVID-19 pandemic, has led to predictions that the UK labour market will feature much higher levels of remote work from now on. As COVID restrictions in the UK are slowly lifted, the key questions are: how much remote work will remain and what will the consequences be for different types of workers? In this briefing, we provide some insights into the future of remote work in the UK based on recent data.
Do police reduce crime? Evidence from the 1829 introduction of the London Metropolitan Police31/2021 Anna Bindler and Randi Hjalmarsson
Professional police forces are a fundamental part of criminal justice systems today. But how successful are police forces in reducing crime? This can be difficult for policymakers to measure because of the nature of the crime–policing relationship: policing affects crime levels and crime levels affect policing. We study this question by looking at the origins of this modern-day institution: the introduction of the London Metropolitan Police (the Met) in 1829. The Met was the first professional police force tasked with deterring crime. Our research uses historical records to evaluate the causal impact of this new institution on crime. Using newly digitised and geocoded crime and police data, we find evidence of a significant reduction in violent crimes.
Learning about the effectiveness of contact tracing from when it failed – a natural experiment30/2020 Thiemo Fetzer and Thomas Graeber
Due to a technical error at Public Health England, at least 15,841 individuals who tested positive for COVID-19 between 20 September and 2 October had not been referred to the national contact tracing system on 3 October. The data glitch created a “natural experiment” that allows us to evaluate the effect of contact tracing.
How to get to Denmark: an assessment of Denmark as an economic model for developing countries29/2020 Markus Lampe and Paul Sharp
The social cohesion of Denmark, embodied in its strong tradition of rural cooperation, has often been promoted as a model for successful development. Francis Fukuyama (2011) described the issue facing developing countries as the problem of ‘getting to Denmark’, a metaphor for a society characterised by good governance, the rule of law, and related virtues leading to wealth and prosperity. But can and should developing countries aspire to ‘get to Denmark’? This briefing analyses the economic development of Denmark through history and concludes that the lessons from Denmark have been misunderstood.
How to keep up well-being during the COVID-19 Pandemic? Advice from the World Well-being Panel28/2020 Tony Beatton, Ada Ferrer-i-Carbonell, Paul Frijters, Arthur Grimes and Eugenio Proto
The isolation and social distancing measures many countries have been embracing over the last weeks are having an important impact on individuals’ mental health and wellbeing. In the latest World Wellbeing Panel (WWP), we asked 26 experts about how to maintain well-being during this time. This piece presents the advice from those experts. Although isolation measures are being relaxed, many countries still keep important restrictions on social interaction. The experts conclude that it is important to maintain social interaction (with special emphasis on giving to others), develop strategies to deal with negative thinking, reflect on one’s own life and future, structure the day to include health habits, and face the fear.
How much tax do the rich really pay? New evidence from tax microdata in the UK27/2020 Arun Advani and Andy Summers
This briefing summarises new research on the taxes paid by the UK’s richest individuals, using anonymised data collected from the personal tax returns of everyone who received over £100,000 in total remuneration (taxable income plus taxable capital gains). It shows how tax paid as a share of income or total remuneration varies across individuals.
How are workers searching for jobs during the COVID-19 crisis?26/2020 Lena Hensvik, Thomas Le Barbanchon and Roland Rathelot
The COVID-19 crisis has increased the number of job seekers, and reduced the number of jobs available. If job seekers continued to search in the same way they did before the crisis, these two facts combined would create more competition for any given job. More competition for jobs means that job seekers will take a longer time to find a job, but also that employers will find it easier to fill their vacancies. The latter is favourable to the labour market: if hiring is easier, employers will react by posting relatively more vacancies.
COVID-19: Six lessons for international trade25/2020 Dennis Novy
This briefing sets out six lessons for international trade in the wake of the COVID19 crisis.
Age, death risk, and the design of an exit strategy: A guide for policymakers and for citizens who want to stay alive24/2020 Andrew Oswald and Nattavudh Powthavee
Some commentators argue for a fairly general release from COVID-19 lockdown. That has a troubling flaw. It ignores the fatality risks that will then be faced by citizens in midlife and older. This paper provides information on the strong age pattern in the risk of death from three countries (China, Italy and the UK). If politicians want an imminent removal of the lockdown, the safest approach, in our judgment, would be a rolling age-release strategy combined with the current principle of social distancing. But even if that is not the policy adopted, citizens need to be shown graphs of the kind in this paper. Honest guidance ought to be given to those in midlife and beyond. Governments have to allow people to understand their personal risk after any release from lockdown.
Update on estimating the forecasting COVID-19 outbreak in the UK23/2020 Roberto Pancrazi
In a previous paper I estimated the Richards’ phenological model to forecast the Covid-19 evolution in the UK and in England’s NHS regions using data up to April 8th, 2020. This briefing updates the model, taking into account three important sets of information: first, new data are available; second, the number of tests have been increasing; and third, there was quite a significant revision on how the data on both cases and tests were reported. I also update the data up to April 24th, 2020. The new data shows that, under current lockdown conditions, the UK should reach zero new cases by 8th August.
Indian migrants caught in the lockdown: How many will return? Where will they come from? Where will they return to?22/2020 Clement Imbert
Since March 24th when the lockdown of India was announced, many migrant workers have been without work, and were prevented from going home. Without support from their family and networks back home, they have to rely on government assistance for food and shelter. The plight of migrants gathered in camps, protesting at train stations, or walking hundreds of kilometres, has moved the nation and the world. After May 3rd, once restrictions on mobility are lifted, they are expected to return home. This return migration poses the risk of carrying the virus to rural areas with poor public health provision. In the sectors where they would have been working, labour shortages are feared.
India's Lockdown21/2020 Debraj Ray, S Subramanian and Lore Vandewalle
This paper Is being regularly updated here https://cepr.org/sites/default/files/policy_insights/PolicyInsight102.pdf
Estimating and forecasting COVID-19 evolution in the UK and its regions20/2020 Roberto Pancrazi
Understanding and predicting the evolution of outbreaks is crucial for policymakers, as they face the trade-off between limiting social interaction and avoiding a further spread of the disease. Currently the UK is in lockdown and it will likely last until the severity of infections is sufficiently reduced. The length of the restrictions in place clearly has implications on total government budget, businesses' ability to stay afloat, consumer sentiment, etc. In addition, social restrictions tend to make the evolution of the epidemic location specific; therefore, some areas might be able to come out of lockdown before others. Hence, a key question for policymakers is when and where the epidemic will sufficiently slow down.
Capital Gains and UK Inequality: new evidence from tax microdata19/2020 Arun Advani and Andy Summers
This briefing summarises new research on the impact of capital gains – which are excluded from existing income statistics – on measured inequality in the UK.
The case for releasing the young from lockdown: A briefing paper for policymakers18/2020 Andrew Oswald and Nattavudh Powdthavee
The UK is ‘locked down’ because of coronavirus (COVID-19). No clear exit strategy currently exists. This paper suggests a possible way forward that combines elements from economics and epidemiology. The paper proposes as a policy a ‘release’ from lockdown of the young cohort of UK citizens aged between age 20 and 30 who do not live with parents. The paper calculates that there are approximately 4.2 million UK individuals who fall into this 20-30 age-band and who live outside the original parental home. Of those, 2.6 million work in the private sector, so unless some corrective action is taken they are likely to be extremely harshly affected, financially, when compared to employees in the public sector. The paper argues that a young-workforce release of this kind would lead to substantial economic and societal benefits without enormous health costs to the country. In this way, the nation might begin to move forward in the footsteps of the young. The paper’s key concept could in principle be implemented in other countries.
Driving change in the bus market: lessons from LondonMike Waterson, SMF-CAGE Global Perspectives Series: Paper 17, December 2019
This paper assesses the nature of bus market failures and considers some solutions, focusing on the larger urban bus markets.
Anarchy in the UK (and Everywhere Else): The Ideological Roots of PopulismMirko Draca and Carlo Schwarz, SMF-CAGE Global Perspectives Series: Paper 16, September 2019
In political terms, we are living in the midst of the proverbial 'interesting times'. The election of Donald Trump and the UK's Brexit Referendum in 2016 are being seen as turning points in modern democratic politics. As further evidence, new political forces seem to be at play with fresh citizen movements - ranging from France's 'Yellow Vests' to the UK's 'Extinction Rebellion' - emerging quickly and decisively. Politics appears to be dramatically more polarised, with movements based on populist messages being seen as key agents of this polarisation.
Discrimination in hiring based on potential and realised fertility: A field experimentSascha O. Becker, Ana Fernandes and Doris Weichselbaumer, The CAGE Background Briefing Series No. 99, June 2019
The arrival of a child affects women and men differently in terms of labour market outcomes, but it is difficult to separate out the causal impact of discrimination from other factors. This column uses empirical evidence from Germany, Switzerland, and Austria to show that women are most affected in part-time job applications if they signal a ‘risk’ of having young children soon.
Advertising as a major source of human dissatisfaction: Cross-national evidence on one million EuropeansChloé Michel, Michelle Sovinsky, Eugenio Proto and Andrew Oswald, The CAGE Background Briefing Series No. 98, May 2019
Although the negative impact of conspicuous consumption has been discussed for more than a century, the link between advertising and individual is not well understood. This column uses longitudinal data for 27 countries in Europe linking change in life satisfaction to variation in advertising spend. The results show a large negative correlation that cannot be attributed to the business cycle or individual characteristics.
Tariffs and politics: Evidence from Trump’s trade warsThiemo Fetzer and Carlo Schwarz, The CAGE Background Briefing Series No. 97, 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.
Austerity caused BrexitThiemo Fetzer, The CAGE Background Briefing Series No. 96, April 2019
A rich literature has emerged aiming to make sense of the causes behind the Brexit vote, but it has mainly been descriptive. This column uses regional-level data on spending and voting behaviour, as well as individual-level survey data, to argue that the austerity policies in place in the UK since 2010 were an important contributing factor to the vote to Leave. Estimates suggest that the close-run referendum could have resulted in a victory for Remain had it not been for austerity.
Voting with their money: Brexit and outward investment by UK firmsHolger Breinlich, Elsa Leromain, Dennis Novy and Thomas Sampson, The CAGE Background Briefing Series No. 95, February 2019
Media reports suggest that some UK firms have started to move production abroad in anticipation of Brexit. Using data on announcements of new foreign investment transactions, this column reports evidence that the Brexit vote has led to a 12% increase in the number of new investments made by UK firms in EU27 countries. At the same time, new investments in the UK from the EU27 have declined by 11%. The results are consistent with the idea that UK firms are offshoring production to the EU27 because they expect Brexit to increase barriers to trade and migration, making the UK a less attractive place to invest and create jobs.
Brexit: Blame it on the banking crisisNicholas Crafts, The CAGE Background Briefing Series No. 94, January 2019
Brexit in 2019 and the banking crisis in 2007 to 2009 are usually seen as unrelated events. This column argues that they are in fact closely connected. The austerity policies embarked on in response to the fiscal damage resulting from the banking crisis triggered the protest votes of left-behind voters, which at the margin allowed Leave to win the referendum vote. The implication is that the economic costs of the banking crisis are much larger than is usually supposed.
The economic effects of Brexit: Evidence from the stock marketHolger Breinlich, Elsa Leromain, Dennis Novy, Thomas Sampson and Ahmed Usman, The CAGE Background Briefing Series No. 93, October 2018
How did the stock market react to the Brexit referendum of June 2016? This column shows that initial stock price movements on the day after the Leave vote were driven by fears of an economic slowdown in the UK and by a sharp devaluation of the pound. Later movements following two speeches by Theresa May in October 2016 and January 2017 were more closely correlated with potential future changes to tariffs and non-tariff barriers on UK-EU trade. This indicates that these speeches led investors to update their assessment of the likelihood of a hard Brexit.
Currency unions mean more trade, but not for everyoneNatalie Chen and Dennis Novy, The CAGE Background Briefing Series No. 92, July 2018
Currency unions usually go hand in hand with deeper economic integration. But does that automatically mean more international trade? This column shows that since the end of WWII, currency unions have on average been associated with 40% more trade between member countries. The ‘thin’ relationships between countries who do not trade much with each other benefit the most from currency unions, with little in the way of a boost for more established trading relationships.
New eBook: The economics of the Great War: A centennial perspectiveStephen Broadberry and Mark Harrison, The CAGE Background Briefing Series No. 91, November 2018
November 2018 marks the 100th anniversary of the end of World War I. This column introduces a new VoxEU eBook which takes the opportunity to reflect on recent work that provides a reassessment of the role of economics in the war.
Politics in the Facebook era: How reading political ads on Facebook affects our voting behaviour (…and helped Trump to win the presidential election)Federica Liberini, Michela Redoano, Antonio Russo, Angel Cuevas Rumin and Ruben Cuevas Rumin, The CAGE Background Briefing Series No. 90, November 2018
The ways we access news and, with it, the nature of political communication have radically changed since the advent of social media. This column uses a unique dataset that matches individuals to Facebook audiences to examine the extent and intensity of online political campaigns conducted on the site before the 2016 US presidential elections. The social platform had a significant effect in persuading undecided voters to support Trump and in persuading Republican supporters to turn out on election day, but had no effect on Clinton’s side.
Uncollected tax revenue - who is underpaying and what we should do about itArun Advani, SMF-CAGE Global Perspectives Series: Paper 15, June 2019
Each year, Her Majesty's Revenue and Customs (HMRC), the UK agency responsible for collecting the nation's taxes, releases figures on how much tax is owed but not collected last year. For the last 10 years, this number has been around 6%, which means that £33 billion was not collected in the last year alone.
Austerity, Immigration or Globalisation: Was Brexit predictable?Thiemo Fetzer, SMF-CAGE Global Perspectives Series: Paper 14, November 2018
The UK vote to leave the European Union is widely seen as a watershed moment in UK history and European integration. Why did some areas vote to leave the EU, and others to remain? What lessons can be drawn from the referendum other than the result itself?
The UK’s ‘productivity crisis’: Why weakening the link between education and family background could help solve itClaire Crawford, SMF-CAGE Global Perspectives Series: Paper 13, October 2018
There has been much discussion in recent years about a 'productivity crisis' in the UK. Productivity 'measures how efficiently production inputs, such as labour and capital, are being used in an economy to produce a given level of output. Workers in the UK produce less per hour than workers in many other developed countries - 16% less than the G7 average according to the Office for National Statistics. Why is labour productivity in the UK so much lower than in comparable developed economies with similar access to capital and technology?
Productivity takes 'Leave'? The effect of maternity and paternity leave policy on our lives and the economyThe CAGE-Warwick in Brussels Series, No. 4, 11th July 2018
Motherhood and professional advancements often conflict, with many sectors demonstrating gender disparities in senior ranks. One explanation for this inequality is the unequal caregiving responsibilities borne by women, particularly early in their children's lives.
Judge, Jury, and EXEcute file: The Brave New World of Legal AutomationElliot Ash, SMF-CAGE Global Perspectives Series: Paper 12, June 2018
While (the option of) replacing a judge with a robot is still many years away, the technological trends that will lead to this eventuality have been in motion for decades.
The importance of frontier knowledge for the generation of ideasAlessandro Iaria, Carlo Schwarz and Fabian Waldinger, The CAGE Background Briefing Series No. 89, January 2018
Access to existing knowledge fuels basic scientific progress and is key to the development of new technologies. This column studies how the decline in scientific cooperation that occurred during and after WWI affected science and innovation. The interruption of international knowledge flows led to stark declines in both the volume and quality of scientific production. This points to the merits of opening up access to scientific journals and of discerning what constitutes frontier research.
Economists relaxed about Bitcoin: New CFM-CEPR expert survey on cryptocurrencies, the financial system, and economic policyWouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, The CAGE Background Briefing Series No. 88, December 2017
Cryptocurrencies have been a staple of news headlines in 2017. The latest Centre for Macroeconomics and CEPR survey suggests that the majority of leading European economists do not believe that these currencies are currently a threat to the stability of the financial system, or will be in the next couple of years. A majority of panel members, however, are in favour of greater regulatory oversight, primarily because of concerns that the anonymity and opacity of cryptocurrencies facilitate tax evasion and other criminal activities.
Moving around: The changing geography of US manufacturing during the 20th centuryNicholas Crafts and Alex Klein, The CAGE Background Briefing Series No. 87, December 2017
The geography of industrial production changed dramatically during the 20th century both across and within countries. This column provides new estimates of changes in the spatial concentration of US manufacturing from 1880 to 1997. The average level across all industries fell by more than half over the period. Although creative destruction has had a strong spatial component, almost all industries can be described as significantly spatially concentrated at all times.
The Soviet economy, 1917-1991: Its life and afterlifeMark Harrison, The CAGE Background Briefing Series No. 86, November 2017
Russia’s Soviet era was distinguished not by economic growth or human development, but by the use of the economy to build national power. On the centenary of the Bolshevik revolution of 1917, this column shows that while the education of women and better survival rates of children improved opportunities for many citizens, Soviet Russia was a tough and unequal environment in which to be born, live and grow old. The Soviet economy was designed for the age of mass production and mass armies. That age has gone, but the idea of the Soviet economy lives on, fed by nostalgia and nationalism.
Brexit was a cry of financial pain and not the influence of the oldFederica Liberini, Andrew Oswald, Eugenio Proto and Michela Redoano, The CAGE Background Briefing Series No. 85, October 2017
There has been much debate on the determinants of the vote for Brexit. This column uses newly released data from the Understanding Society study to examine the characteristics of individuals who were for and against Brexit. Unhappiness contributed to the vote to leave the EU, but this was driven by feelings about individual financial situations rather than a general dissatisfaction with life. Brexit does not appear to have been caused by the old – only those under the age of 25 were substantially pro-Remain.
Global risks from rising debt and asset prices: Views of leading economistsWouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon and Ricardo Reis, The CAGE Background Briefing Series No. 84, October 2017
The outgoing German finance minister, Wolfgang Schäuble, has recently expressed concerns about the risks posed to the world economy by high levels of debt. This column presents the latest Centre for Macroeconomics and CEPR survey of leading economists, in which a strong majority of respondents agree that an excess of public and private debt together with inflated asset prices mean that the world economy faces heightened risks. A similarly strong majority of the experts also agree that the loose monetary policy of major central banks is responsible for the recent increase in global leverage and asset values.
The midlife low in human beingsDavid Blanchflower and Andrew Oswald, The CAGE Background Briefing Series No. 83, September 2017
Most textbooks in social psychology teach students the idea that happiness and psychological wellbeing are essentially independent of age. Based on data on 1.3 million randomly sampled individuals across a large number of countries, this column argues instead that humans have a fundamental tendency to a midlife low which is apparently substantial and not minor. This puzzling phenomenon seems an important and fundamental one, and its existence should not be ignored.
Unemployment insurance and reservation wagesThomas Le Barbanchon, Roland Rathelot and Alexandra Roulet, The CAGE Background Briefing Series No. 82, June 2017
The generosity of unemployment insurance can influence the time and energy job seekers dedicate to searching for a job, as well as the jobs they are willing to accept. Yet we know little about how unemployment insurance affects the reservation wages of the unemployed. Using new French data, this column shows that increasing unemployment generosity does not affect the reservation wages or the ‘pickiness’ of job seekers.
The Bank of England, interest rates and the UK economyMichael McMahon, SMF-CAGE Global Perspectives Series: Paper 11, November 2017
The bank of England raised interest rates for the fist time in over 10 years on Thursday 2 November. This decision was unsurprising given that the Bank had signalled its likely intentions well in advance. And yet it doesn't feel like there is a huge amount of strong momentum in the economy that we might associate with rising interest rates. Here I explore five questions regarding the Bank of England's policy.
The role of lobbying in political decision makingThe CAGE-Warwick in Brussels Series, No. 3, September 2017
Lobbying and interest groups play a high-profile role in many advanced countries’ political decision making. At the same time, public confidence in political institutions is at an all-time low in many countries with recent referenda and election results a reflection of this sentiment.
A new bargaining perspective on sovereign debt restructuringMarcus Miller, Sayantan Ghosal, The CAGE Background Briefing Series No. 81, September 2017
Lacking some supra-national, overseeing authority, sovereigns in default typically renegotiate with their creditors. In these negotiations, the owed principal typically receives a ‘haircut’. This column explores whether overburdened sovereign debtors can strategically leverage delay as they bargain with their creditors. Under asymmetric information, a delay in the form of offers that the debtor knows won’t be accepted can work out in the debtor’s favour. The findings suggest that strategic delay can be used to show where restructuring is necessary.
The implications of Brexit for the CityMichael McMahon, The CAGE Background Briefing Series No. 80, September 2017
The UK’s membership of the EU has been a key factor behind the City of London’s emergence as a leading global financial centre. This column looks at the implications of Brexit for the City. While it is unlikely that many banks or other financial institutions will simply up and leave in the coming months, their expansion and hiring decisions may lean toward the remaining EU member states for some of their operations. And unless the politicians conducting the Brexit negotiations do their utmost to limit the damage, the loss of passporting rights is likely to have a significant negative impact on the UK financial sector.
Short-term migration, rural workfare programmes, and urban labour marketsClément Imbert, The CAGE Background Briefing Series No. 79, September 2017
Rural policies that affect migration to the cities may have significant impact on urban labour markets. However, there is little empirical evidence on the magnitude of these effects. This column argues that India’s rural employment guarantee – the world’s largest workfare programme – reduces short-term migration from rural areas. At the same time, it increases wages of urban unskilled workers.
Environmental economic historyJames Fenske, Namrata Kala, The CAGE Background Briefing Series No. 78, September 2017
A global literature has developed that illuminates the reciprocal and dynamic relationship between humans and their environment in other regions across the world. This column, which first appeared as a chapter in a recent Vox eBook, surveys on two topics in the literature: the impact of geographic endowments and the impact of environmental shocks on historical and long-run development.
Electoral accountability and the natural resource curseAmrita Dhillon, Pramila Krishnan, Manasa Patnam, Carlo Perroni, The CAGE Background Briefing Series No. 77, September 2017
The ‘curse’ of natural resources on economic development has been well documented, but there is no consensus on its underlying causes. Exploiting the formation of new Indian states in 2001, this column shows that the effects of state breakup on local economies differ systematically across natural resource rich and resource-poor areas, in line with the spatial distribution of natural resources within states. The relationship between resource abundance and economic outcomes flows, at least in part, through a political channel.
UK industrial strategy: Views of economists on its desirability and prospects for successWouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, The CAGE Background Briefing Series No. 76, September 2017
A majority of UK-based macroeconomists welcome the government’s new industrial strategy, but doubt that the government can deliver. This column, which presents the results of the latest Centre for Macroeconomics and CEPR survey, shows a large majority of economist think that the UK needs a new regional strategy to tackle inequality across different parts of the country.
The future of central bank independence: Results of the CFM–CEPR SurveyWouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, The CAGE Background Briefing Series No. 75, September 2017
Over the past 30 years, most central banks across the advanced economies have been given the ability to conduct monetary policy independently from interference by fiscal and political authorities. The latest Centre for Macroeconomics and CEPR expert survey invited views on whether this era of central bank independence is drawing to a close, particularly in Europe. Only 31 of the 70 respondents disagreed with the statement that there will be significant changes in the independence of monetary policy in the UK and the Eurozone in the foreseeable future. The survey also reveals that the well-established proposition among economists that a reduction in central bank independence will lead to higher inflation is no longer taken for granted, but maintaining central bank independence remains desirable.
The danger of Germany's current account surpluses: Results of the CFM and CEPR SurveyWouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, The CAGE Background Briefing Series No. 74, September 2017
The October 2016 expert survey of the Centre for Macroeconomics (CFM) and CEPR invited views from a panel of macroeconomists based across Europe on Germany’s trade surplus, its impact on the Eurozone economy, and the appropriate response of German fiscal policy. More than two-thirds of the respondents agree with the proposition that German current account surpluses are a threat to the Eurozone economy. A slightly smaller majority believe that the German government ought to increase public investment in response to the surpluses.
Happiness and wellbeing as objectives of macroeconomic policy: Views of economistsWouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, The CAGE Background Briefing Series No. 73, September 2017
Are quantitative measures of subjective wellbeing reliable enough to provide insights into empirical macroeconomic analysis, and should they influence the objectives of macroeconomic policy? The latest Centre for Macroeconomics and CEPR expert survey finds a reasonable amount of openness to wellbeing measures among European macroeconomists. On balance, though, there remains a strong sense that while these measures merit further research, we are a long way off reaching a point where they are widely accepted and sufficiently reliable for macroeconomic analysis and policymaking.
German Council of Economic Experts’ view of ECB policy: Results of the CFM–CEPR SurveyWouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, The CAGE Background Briefing Series No. 72, September 2017
A recent report by the German Council of Economic Experts argues that the current monetary policy of the ECB is no longer appropriate and is masking structural problems in Eurozone countries. The November 2016 Centre for Macroeconomics and CEPR expert survey invited views on the report. More than three-quarters of respondents disagree that ECB monetary policy should become less accommodating, and respondents also disagree that ECB policy is masking structural reforms. The panel is divided, however, on whether ECB policy is making implementation of structural reforms less likely.
Flexible labour markets, real wages, and economic recoveries: Views of economistsWouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, The CAGE Background Briefing Series No. 71, September 2017
Real hourly wage growth has behaved quite differently across countries over the past ten years. This column describes how the majority view of the latest Centre for Macroeconomics and CEPR expert survey is that low growth of real wages has had a positive impact on European employment rates during the recovery phase of the Great Recession. A strong majority of respondents also agrees that the dire performance of UK real wage growth relative to the big Eurozone economies is in large part due to the UK’s labour market policies, which provide workers with comparatively weak protection.
Brexit: The potential for a financial catastrophe and long-term consequences for the UK financial sectorWouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, The CAGE Background Briefing Series No. 70, September 2017
This week’s UK referendum on EU membership is likely to have both short- and long-term effects on the country’s financial sector. This column, which reports the views of panel members in the monthly Centre for Macroeconomics survey, finds that almost all think that a vote for Brexit would lead to a significant disruption to financial markets and asset prices for several months, putting the Bank of England on high alert. On top of the risk of a financial crisis in the near future, an unusually strong majority agrees that there would be substantial negative long-term consequences. No panel member expects the overall consequences of a Brexit outcome to be beneficial for the UK economy – the first time since this survey began that one side of the argument is supported by none of the respondents.
Brexit and the economics profession: Are academic economists out of touch with voters and politicians?Wouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, The CAGE Background Briefing Series No. 69, September 2017
The outcome of the UK’s referendum on EU membership has prompted much soul-searching in the economics profession, which was nearly unanimous in anticipating negative economic consequences from a vote for Brexit. This column presents the July 2016 Centre for Macroeconomics survey of experts, which asked for views on the role played by economic arguments in the referendum outcome, and whether institutional change is needed in the way that the findings of academic economic research – and the views of the profession as a whole – are communicated. While opinions are divided, many of the respondents who do not advocate institutional change still see considerable problems in the relationship of the academic macroeconomic community with policymakers and the public at large.
Economic models vs ‘techno-optimism’: Predicting medium-term total factor productivity rates in the USNicholas Crafts, Terence Mills, The CAGE Background Briefing Series No. 68, September 2017
Estimates of trend total factor productivity growth in the US have been significantly reduced, contributing to fears that the slowdown is permanent. This column provides an historical perspective on the relationship between estimated trends in total factor productivity growth and subsequent outcomes. It argues that In the past, trend growth estimates have not been a good guide for future medium-term outcomes, and ‘techno-optimists’ should not be put off by time-series econometrics.
Brexit: Lessons from historyNicholas Crafts, The CAGE Background Briefing Series No. 67, September 2017
Joining the EU raised the level of UK real GDP significantly. This column suggests that leaving the EU will very probably have a negative effect on UK GDP, but history does not tell us how strong this effect will be. However, history does suggest that the notion that there will be a faster rate of long-run trend growth facilitated by Brexit is not persuasive. The obstacles to better supply-side policy are, as ever, to be found in Westminster not in Brussels.
Brexit: A new industrial strategy and rules on state aidNicholas Crafts, The CAGE Background Briefing Series No. 66, September 2017
Depending on the outcome of negotiations, Brexit potentially changes the rules that govern the use of industrial policy. The UK government has in mind risky policy reforms that appear to be incompatible with EU rules on state aid. This column argues that this is an unheralded downside of a hard Brexit.
Growing, shrinking, and long-run economic performanceStephen Broadberry, John Joseph Wallis, The CAGE Background Briefing Series No. 65, September 2017
Most analysis of long-run economic performance abstracts from short-run fluctuations and seeks to explain improved performance through an increase in the rate of growth. Using data on annual rates of change of per capita income reaching back to the 13th century for some countries, this column show that improved long-run performance has actually occurred primarily through a decline in the rate and frequency of shrinking. Structural change, technological change, demographic change and the changing incidence of warfare offer at best a partial explanation; a full understanding requires a consideration of institutional change.
The fundamental factors behind the Brexit voteSascha O. Becker, Thiemo Fetzer, Dennis Novy, The CAGE Background Briefing Series No. 64, September 2017
In the Brexit referendum on 23 June 2016, the British electorate voted to leave the EU. The vote is widely seen as a watershed moment in British history and European integration. This column asks why some areas vote to leave the EU, and others voted to remain.
Happy voters (or why it's not always the economy, stupid)Eugenio Proto, SMF-CAGE Global Perspectives Series: Paper 10, May 2017
The research by Federica Liberini, Michela Redoano and Eugenio Proto challenges the notion, made famous by Democratic party strategist James Carville, that when it comes to voting intention, 'it's the economy, stupid'.
Let's stay together? Combating discrimination on AirbnbRoland Rathelot, SMF-CAGE Global Perspectives Series: Paper 9, December 2016
Airbnb was founded in 2008 and is now a major actor in the accommodation industry. However, the company has faced increasing criticism about the existence of ethnic discrimination on its platform, both on the host and guest sides. This has led Airbnb to react and design an anti-discrimination policy, made public in September 2016.
Are bad business practices holding back small firms in developing countries?David McKenzie, Christopher Woodruff, The CAGE Background Briefing Series No. 63, July 2016
Better management practices are associated with better firm performance, and the quality of management practices is also associated with per capita income. This column explores the effect of business practices on small firms in developing countries. The findings indicate that better business practices are correlated with higher productivity, higher firm profits, and higher rates of survival. Poor business practices are holding back small firms in developing countries.
Efficiency and welfare costs of VAT: Evidence from VAT notchesLi Liu, Ben Lockwood, The CAGE Background Briefing Series No. 62, July 2016
Most countries have a threshold below which businesses do not need to register for value added tax (VAT). This column looks at the costs and efficiency of VAT by analysing behavioural responses of firms to the registration threshold. Voluntary registration appears more likely when the cost of inputs is high or when the proportion of business-to-consumer sales is low. There is bunching around the threshold, and this is more likely when the cost of inputs relative to sales is low or the proportion of business-to-consumer sales is high.
US cities and productivity in the railroad eraNicholas Crafts, Alex Klein, The CAGE Background Briefing Series No. 61, July 2016
The Great Depression is considered one of the darkest times for the US economy, but some argue that the US economy experienced strong productivity growth over the period. This column reassesses this performance using improved measures of total factor productivity that allow for comparisons of productivity growth in the Depression era and in later decades. Contrary to Alvin Hansen’s gloomy prognosis of secular stagnation, the US economy was in a very strong position during the 1930s by today’s standards.
Historical analysis of national subjective wellbeing using millions of digitised books: Introducing the HPS IndexThomas Hills, Eugenio Proto, Daniel Sgroi, The CAGE Background Briefing Series No. 60, July 2016
With records of subjective wellbeing going back less than half a century, this column asks if we can know the impact of key past events on the happiness of our ancestors. It presents a new historical index that draws on millions of digitised books in the Google Books corpus of words using sentiment analysis. The index – which goes back to the 1776 US Declaration of Independence, 200 years earlier than any other index of happiness – makes it possible to analyse the historical drivers of happiness in France, Germany, Italy, Spain, the UK and the US.
Estimating border effects in international trade: User bewareCletus C. Coughlin, Dennis Novy, The CAGE Background Briefing Series No. 59, July 2016
Borders impede trade, and a major objective of research in international trade has been to identify by how much. This column argues that bilateral trade data can give a misleading picture. Larger countries have inherently smaller border effects because their data aggregate over more space and economic activity. Trade economists need to think harder about how slicing up the map at the level of countries drives estimates of important policy variables.
The political economy of liberal democracySharun Mukand, Dani Rodrik, The CAGE Background Briefing Series No. 58, July 2016
There are more democracies in the world than non-democracies, but few of the democracies go beyond electoral competition. This column highlights the contrast between electoral democracies and liberal ones, that is, those that protect civil rights in addition to political and property rights. Liberal democracies are rare because the failure to protect minority rights is a common consequence of the emergence of democracy. They are especially uncommon in the developing world, where decolonisation and identity cleavages sparked social mobilisation.
Cereals, appropriability, and hierarchyJoram Mayshar, Omer Moav, Zvika Neeman, Luigi Pascali, The CAGE Background Briefing Series No. 57, July 2016
Conventional theory suggests that hierarchy and state institutions emerged due to increased productivity following the Neolithic transition to farming. This column argues that these social developments were a result of an increase in the ability of both robbers and the emergent elite to appropriate crops. Hierarchy and state institutions developed, therefore, only in regions where appropriable cereal crops had sufficient productivity advantage over non-appropriable roots and tubers.
Farewell to the vultures? Argentine debt restructuring and bargaining theoryMarcus Miller, Sayantan Ghosal, The CAGE Background Briefing Series No. 56, July 2016
Shylock’s insistence in ‘The Merchant of Venice’ that his “pound of flesh” be paid as per the contract, regardless of the extreme and grotesque cost to the debtor, is an apt parallel with vulture funds holding out on Argentinian debt pay-outs. This column assesses the Argentinian debt situation and develops an accord that would create a compromise between the extremes on both sides.
The nature and effectiveness of central-bank communicationStephen Hansen, Michael McMahon, The CAGE Background Briefing Series No. 55, July 2016
In addition to setting interest rates, central banks also communicate with the public about economic conditions and future actions. While it has been established that communication can drive expectations, less is known about how it does so. This column attempts to shed light on this question. Applying novel measures to the content of Federal Reserve statements, it shows that forward guidance is a more important driver of market variables than disclosure of information about economic conditions.
The future role of unconventional monetary policy: CFM Survey resultsWouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, The CAGE Background Briefing Series No. 54, July 2016
Quantitative easing is called ‘unconventional monetary policy’, but monetary policy could get much more ‘unconventional’. Things like ‘helicopter money’, abolishing currency and negative nominal interest rates have entered the public policy debate. This column reports the views of leading experts on the future role of unconventional monetary policy, and what might be called ‘unconventional unconventional monetary policies’. Opinions are divided. There is a healthy dose of scepticism on the effectiveness of current and future policies, but also many respondents express urgency that central banks should have more policy tools to affect inflation and real activity when the need arises. Ultimately, the experts’ hesitations match those of central banks.
Taxing the foreign profits of multinational firmsMichael P. Devereux, Clemens Fuest, Ben Lockwood, The CAGE Background Briefing Series No. 53, July 2016
Tax avoidance by multinational firms is a complex challenge for national governments and the global tax system. Increasingly, high-income countries have been moving from foreign tax credit systems, to exempting foreign source ,income from domestic taxation. This column investigates how foreign profits should be taxed, taking into account the economic role of capital ownership. Domestic tax rates should ensure optimal allocation between domestic and foreign assets, while the tax base should be set to ensure asset purchases are undistorted. Countries may be forced to change their tax systems in more fundamental ways, however, as the mobility and flexibility of multinational corporations continues to grow.
Onwards and upwards: American productivity growth during the Great DepressionGerben Bakker, Nicholas Crafts, Pieter Woltjer, The CAGE Background Briefing Series No. 52, July 2016
The Great Depression is considered one of the darkest times for the US economy, but some argue that the US economy experienced strong productivity growth over the period. This column reassesses this performance using improved measures of total factor productivity that allow for comparisons of productivity growth in the Depression era and in later decades. Contrary to Alvin Hansen’s gloomy prognosis of secular stagnation, the US economy was in a very strong position during the 1930s by today’s standards.
The prices of higher quality goods respond less to exchange-rate movementsNatalie Chen, Luciana Juvenal, The CAGE Background Briefing Series No. 51, January 2014
Empirical research finds that import prices do not fully adjust to exchange-rate changes. In other word, there is a limited response of trade to exchange-rate fluctuations. This column argues that part of this pass-through puzzle is explained by quality. Exchange-rate movements are more strongly absorbed into the export prices of higher quality goods. Therefore, the volume of their exports would be less responsive to exchange-rate shocks, leading to an incomplete exchange-rate pass-through.
The UK's new National Living Wage: Likely impact on employment, wages, and pricesWouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, The CAGE Background Briefing Series No. 50, July 2016
A new National Living Wage (NLW) replaces the UK’s National Minimum Wage from April. This column reports the views of leading experts on its likely effects on employment, wages, and prices. A majority of respondents in the monthly Centre for Macroeconomics survey believe that the NLW will not lead to significantly lower employment; similarly, a majority of respondents believe that the NLW will only have a muted effect on wages and prices. The key unknown for many in considering the overall economic impact of the NLW is how quickly the UK economy will grow over the coming years.
The Brexit question will increase financial market volatilityWouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, The CAGE Background Briefing Series No. 49, July 2016
Sterling fell dramatically following the announcement of a date for the UK’s referendum on whether to remain an EU member. This column reports the views of leading experts on whether the possibility of ‘Brexit’ would lead to further volatility in financial markets and the broader economy. There is near unanimity in the monthly Centre for Macroeconomics survey that the Brexit question will increase financial volatility and will pose economic costs in the medium term. Financial volatility can be expected to be especially high if polls remain close. Lack of clarity about the UK’s economic arrangements with the EU following Brexit are the main concern for the medium term.
Market volatility: More likely ‘noise’ than reason for concernWouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, The CAGE Background Briefing Series No. 48, July 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.
Japan and the Great Divergence, 725 to 1874Jean-Pascal Bassino, Stephen Broadberry, Kyoji Fukao, Bishnupriya Gupta, Masanori Takashima, The CAGE Background Briefing Series No. 47, July 2016
Japan was the first Asian nation to achieve modern economic growth. This column discusses new evidence suggesting that Japan’s growth started from a lower level than Britain’s and grew more slowly until the Meiji Restoration. The key to understanding modern economic growth seems to lie in identifying the forces that dampened growth reversals, rather than the forces responsible for growth itself.
Trade and tasks over three decadesSascha O. Becker, Marc Muendler, The CAGE Background Briefing Series No. 46, July 2016
Offshoring and global value chains have reshaped global trade patterns. This column describes how the German economy has been exposed to significant offshoring for at least three decades. The authors find an increasing importance of high-end tasks in the country. Organising and consulting activities under deadlines, changing business conditions, and tougher performance standards are an increasingly common reality in German workplaces. Labour market institutions in German trade partners are largely unrelated to the changing content of German imports.
Make or Break: The Long Run Consequences of High-Stakes ExamsExamination candidates can have a bad day for many reasons unrelated to knowledge, skill, or cognitive ability. Possible causes include minor infection, migraine, hay fever, menstruation, disturbed sleep, and atmospheric pollution. When the stakes are high, as with exams used to rank students or admit them to further training or employment, there can be permanent consequences for the individual and for society.
Argentina, Debt Relief, and Vultures What are the lessons for Europe?Marcus Miller, The CAGE-Warwick in Brussels Series, No. 2, May 2016
Sovereign debt continues to hang over the Eurozone. Debt burdens have limited the fiscal options of member states. Debt and default, actual and feared, have embittered the relations among them. The legacy of Argentina’s 2001 default provides a cautionary tale for the Eurozone. In a final settlement, Argentina’s long-term holdout creditors – so-called vulture funds - have secured full compensation for the bonds they acquired for a fraction of their face value, and more in other charges and penalties.
The Growth Effects of EU Membership for the UK: Review of the evidenceNicholas Crafts, SMF-CAGE Global Perspectives Series: Paper 7, April 2016
This paper reviews the literature on the implications of EU membership for the UK. It concludes that membership has raised UK income levels appreciably and by much more than 1970s’ proponents of EU entry predicted. These positive effects stem from the EU’s success in increasing trade and the impact of stronger competition on UK productivity. The economic benefits of EU membership for the UK have far exceeded the costs of budgetary transfers and regulation. Brexit is risky and its impact would depend heavily on the terms negotiated and the use made of the policy space that it freed up.
It's Prices, Stupid: Explaining falling crime in the UKMirko Draca, SMF-CAGE Global Perspectives Series: Paper 6, February 2016
Crime has fallen across many countries since the early 1990s. A range of explanations have been put forward, including the level of police resources, the incidence of drug epidemics, demographic factors (including the effects of abortion and lead pollution on the crime propensity of different age cohorts), and incarceration rates.
Is Secular Stagnation the Future of the Eurozone?Nicholas Crafts, The CAGE-Warwick in Brussels Series No. 1, March 2015
Recovery from the financial crisis remains very sluggish in the Euro Area. Fears are growing that growth prospects in Europe over the medium term are significantly worse than anyone would have thought before the crisis. The concept of ‘secular stagnation’, which dates back to the 1930s, has been revived and was recently the topic of a recent e-book (Teulings and Baldwin, 2014). Indeed, relative to pre-crisis levels, real GDP in the Eurozone countries is similar to that of the hapless economies that remained in the gold standard to the bitter end (the ‘gold bloc’) rather than that of those who left gold early and experienced a strong recovery by the mid-1930s (the ‘sterling bloc’).
Opportunities and challenges in fostering growth in the EUNicholas Crafts, Sascha Becker and Vera Troeger, The Brussels Podium Series, April 2015
This week's CAGE Podium saw the Warwick Econ and CAGE team composed of Professors Crafts, Troeger and Becker present their research findings to a Brussels audience. Attendants included high-rank officials from various Directorates of the EU Commission as well as members from national representations in Brussels. The discussion was moderated by Richard Tuffs, the Director of the European Regions Research and Innovation Network. The panel discussion after the policy presentations was composed of the three speakers as well as MEP Malcolm Harbour (Chairman of the Internal Market and Consumer Protection Committee), Mr Vasco Cal (Economic Adviser, Bureau of European Policy Advisers (BEPA), European Commission), Mr Olivier Debande (Senior Economist - European Investment Bank), and Mr Daniel Mouque (Evaluation and European Semester Unit, DG for Regional and Urban Policy, European Commission).
Designing A Central Bank For The 21st Century EurozoneProfessor Kris Mitchener and Dr Michael McMahon, The Brussels Podium Series, 10 February 2014
The ongoing financial crisis in the Eurozone has focused attention on designing central banking institutions that promote sustainable economic growth, high employment, stable public finances, and financial stability. However, debates over the direction of monetary policy and responses to sovereign debt and banking crises point to the challenges of balancing national interests with pan European or Eurozone objectives. Recent research on institutional design sheds new light on these trade-offs and provides lessons for how European monetary policymaking and bank supervision might look in the twenty-first century.
Insights into Enterprise in Developing CountriesDr Rocco Macchiavello and Professor Chris Woodruff, The Brussels Podium Series, 2 December 2013
A majority of the world’s population makes their living from small businesses in developing countries. But sustained growth is associated with creation of stable jobs in larger firms. From this perspective, the role of enterprise is central to the future of emerging economies. Economic growth and poverty elimination cannot take place without developing enterprise capabilities in poor countries.
The Skills Gap: Is It a Myth?Thijs Van Rens, SMF-CAGE Global Perspectives Series: Paper 5, December 2015
Concern is growing in advanced economies, and in particular in the UK, about the skills gap: the growing gulf between the skills workers possess today and the skills businesses say they need. The concerns are often focused on shortages of workers with skills in subjects such as science, technology, engineering and maths (STEM), but increasingly also on ‘soft skills’ like problem solving, team working and communication. However, are we right to believe that the problem is one of insufficient supply of skills?
Happiness and productivity: Understanding the happy-productive worker“Happiness” is now an accepted and important policy objective for governments alongside big aggregate targets such as economic growth or unemployment. However, there is surprisingly little work on the importance of happiness as an input to economic processes or measures such as productivity; usually it is considered only as an output or consequence of higher growth or income and not just an output.
Behavioural Economics and Wellbeing
Doorstep banking in rural Sri Lanka increases customer savings...and incomeChristopher Woodruff, The CAGE Background Briefing Series No. 45, August 2015
Recent findings in development economics indicate that microloans are likely to perform best when accompanied by financial education, insurance, and savings products. This column presents evidence from a natural experiment in Sri Lanka, which involved door-to-door collection services among rural households. The evidence suggests that the programme increased both savings and income. In order to build up savings in the initial period, participants increased the hours worked. The treatment also triggered exit from self-employment. Financial service innovation can, therefore, have a major effect on the incentives to exit poverty.
Happiness and votingEugenio Proto, The CAGE Background Briefing Series No. 44, August 2015
Retrospective voting – voting for incumbents if one’s situation has improved under the politician’s watch – is a well-established pattern. This column shows that this pattern also applies when ‘improvement’ is measured by a subjective measure of well-being. Among the stark results discussed is the finding that newly widowed women are 10% less likely to be pro-incumbent than the control group.
GDP and life satisfaction: New evidenceEugenio Proto, The CAGE Background Briefing Series No. 43, August 2015
The link between higher national income and higher national life satisfaction is critical to economic policymaking. This column presents new evidence that the connection is hump-shaped. There is a clear, positive relation in the poorer nations and regions, but it flattens out at around 30,000–$35,000, and then turns negative.
The midlife crisis in humans and other apesAndrew Oswald, The CAGE Background Briefing Series No. 42, August 2015
Humans tend to go through midlife crises regardless of context. So too, it appears, do apes. This column draws on recent research showing apes’ midlives to be, like humans’, dogged by the same pattern of unhappiness.
High home ownership as a driver of high unemploymentAndrew Oswald, The CAGE Background Briefing Series No. 41, August 2015
Unemployment is once again the bane of the US and Europe. This column highlights an intriguing association between home ownership and high unemployment using US state-level data. Given the heavy subsidisation of and rise in home ownership, this association merits more attention from economists.
Money makes people right-wing and inegalitarianAndrew Oswald, The CAGE Background Briefing Series No. 40, August 2015
Rich people typically lean right politically. Are they motivated by deeply moral views or self-interest? This column argues that money makes you right-wing. It shows that lottery winners in the UK are more likely to switch their allegiance from left to right.
Uncertainty and the Great Trade Collapse: New evidenceDennis Novy, The CAGE Background Briefing Series No. 39, August 2015
The recent global crisis hit output, but the decline in international trade was twice as big. Standard models of trade fail to account for the severity of the event. This column proposes a new model that argues the great trade collapse was due to uncertainty. The uncertainty lead firms to postpone orders. As a result, trade declined substantially more than production. Data from the US for the past 50 years show quantitatively large effects of uncertainty shocks on the trade.
TTIP: Is free trade coming to the north Atlantic?Dennis Novy, The CAGE Background Briefing Series No. 38, August 2015
The negotiations for the Transatlantic Trade and Investment Partnership are about a year old and making only slow progress. This column argues that TTIP is a long-run project that will probably take several years to complete. Despite its significance to global trade, without support from the top echelons of government it might falter.
Saving the euro: self-fulfilling crisis and the 'Draghi put'Marcus Miller, The CAGE Background Briefing Series No. 37, August 2015
Like banks, indebted governments can be vulnerable to self-fulfilling financial crises. This column applies this insight to the Eurozone sovereign debt crisis, and explains why the ECB’s Outright Monetary Transactions policy reduced sovereign bond spreads in the Eurozone.
To exit the Great Recession, central banks must adapt their policies and modelsMarcus Miller, The CAGE Background Briefing Series No. 36, August 2015
During the Great Moderation, inflation targeting with some form of Taylor rule became the norm at central banks. This column argues that the Global Crisis called for a new approach, and that the divergence in macroeconomic performance since then between the US and the UK on the one hand, and the Eurozone on the other, is partly attributable to monetary policy differences. The ECB’s model of the economy worked well during the Great Moderation, but is ill suited to understanding the Great Recession.
Outright Monetary Transactions sterilised?Michael McMahon, The CAGE Background Briefing Series No. 35, August 2015
'Sterilisation' – where purchases of assets by a central bank are offset by withdrawals – may help the ECB to control inflation. This column discusses how the ECB’s current approach may be fraught with danger, however. In a world where sovereign default risk is perceived to be likely, the ECB’s only real hope is that its approach makes a Eurozone default impossible.
Could Obama buy Ohio votes?Michael McMahon, The CAGE Background Briefing Series No. 34, August 2015
With the US presidential election turning on a handful of swing states, suspicion arises that an incumbent could ‘buy’ the election by shifting the federal government’s state-level spending to critical states. This column reports ongoing research that suggests this is not likely to be the case. Voters do not seem to reward presidents for more federal spending on private contracts in a given state. As such, it does not seem that Obama could buy votes in swing states such as Ohio using his power as the incumbent.
Mark Carney and first impressions in monetary policyMichael McMahon, The CAGE Background Briefing Series No. 33, August 2015
Markets will be perusing the new Bank of England Governor’s comments for hints on his hawkishness. This column presents evidence showing that Monetary Policy Committee members tend to become more dovish as they become more experienced (i.e. after having participated in 18 or more meetings), with this tendency most marked in members with dovish preferences.
Central bank transparency and committee deliberationMichael McMahon, The CAGE Background Briefing Series No. 32, August 2015
Central bank transparency is essential to democratic accountability. Central bankers often limit it – fearing its stifling effect on frank debate. Yet transparency may induce monetary policy committee members to be better prepared. This column discusses evidence showing that the ‘better prepared’ effect is important empirically. Exploiting a natural experiment in the Fed Open Market Committee in 1993 – and using computational linguistics tools to measure the impact of transparency on deliberation – the research shows that the net effect is a more informative deliberation process.
Costing secrecyMark Harrison, The CAGE Background Briefing Series No. 31, August 2015
Democracy often seems bureaucratic with high ‘transaction costs’, while autocracies seem to get things done at lower cost. This column discusses historical research that refutes this. It finds empirical support from Soviet archives for a political security/usability trade-off. Regimes that are secure from public scrutiny tend to be more costly to operate.
Four myths about the Great War of 1914-1918Mark Harrison, The CAGE Background Briefing Series No. 30, August 2015
The Great War offers lessons for today. But this column argues from recent research that many so-called lessons are misunderstood. Secretive, authoritarian regimes become dangerous when they fear the future. Deterrence matters. Other aspects also demand re-evaluation.
Escaping liquidity traps: Lessons from the UK's 1930s escapeNicholas Crafts, The CAGE Background Briefing Series No. 29, August 2015
The UK escaped a liquidity trap in the 1930s and enjoyed a strong economic recovery. This column argues that what drove this recovery was ‘unconventional’ monetary policy implemented not by the Bank of England but by the Treasury. Thus, Neville Chamberlain was an early proponent of 'Abenomics'. This raises the question: is inflation targeting by an independent central bank appropriate at a time of very low nominal-interest rates?
Competing successfully in a globalising world: Lessons from LancashireNicholas Crafts, The CAGE Background Briefing Series No. 28, August 2015
Europeans worry about competition from low-wage economies. This column looks at the basis of the success of the 19th-century Lancashire cotton industry faced with a similar situation. The message is that the productivity benefits of a successful agglomeration can underpin both high wages and competitive advantage in world trade. Policymakers can support such agglomerations by easing land-use restrictions, promoting investments in transport, and providing local public goods.
The Eurozone: If only it were the 1930sNicholas Crafts, The CAGE Background Briefing Series No. 27, August 2015
This column argues that the legacy of public debt resulting from the crisis in the Eurozone is a serious threat. Both the size of the problem and the options to address it make life much more difficult for policymakers than was the case in the late 1930s after the collapse of the gold standard. For some countries, a ‘subservient’ central bank might be preferable to the ECB.
Walking wounded: The British economy in the aftermath of World War INicholas Crafts, The CAGE Background Briefing Series No. 26, August 2015
It is well-known that World War I was expensive for Britain. The indirect economic costs were also huge. This column argues that the adverse implications of the Great War for post-war unemployment and trade – together with the legacy of a greatly increased national debt – significantly reduced the level of real GDP throughout the 1920s. A ballpark calculation suggests the loss of GDP during this period roughly doubled the total costs of the war to Britain.
The prices of higher quality goods respond less to exchange-rate movementsNatalie Chen, The CAGE Background Briefing Series No. 25, August 2015
Empirical research finds that import prices do not fully adjust to exchangerate changes. In other words, there is a limited response of trade to exchangerate fluctuations. This column argues that part of this pass-through puzzle is explained by quality. Exchange-rate movements are more strongly absorbed into the export prices of higher quality goods. Therefore, the volume of their exports would be less responsive to exchange-rate shocks, leading to an incomplete exchange-rate pass-through.
Accounting for the great divergenceStephen Broadberry, The CAGE Background Briefing Series No. 24, August 2015
The economic divergence we observe today was existent even a thousand years ago. Thanks to recent work on historical data, we can now trace the economic development of different countries centuries back in the past. This column discusses the roots of the Great Divergence between European and Asian economies. The column argues that divergence is due to the differential impact of shocks that hit economies with different structural features.
World War I: Why the Allies wonStephen Broadberry, The CAGE Background Briefing Series No. 23, August 2015
In the massive circumstances of total war, economic factors play the deciding role. Historians emphasise size in explaining the outcome of WWI, but this column argues that quality mattered as well as quantity. Developed countries mobilised resources in disproportion to their economic size – the level of development acted as a multiplier. With their large peasant sectors, the Central Powers could not maintain agricultural output as wartime mobilisation redirected resources from farming. The resulting urban famine undermined the supply chain behind the war effort.
Do entrepreneurs matter?Sascha O. Becker, The CAGE Background Briefing Series No. 22, August 2015
Standard microeconomics ignores personalities, but business studies stress the importance of entrepreneurs. This column presents evidence that shows that personalities are important. Looking into the death of a firm’s founder during the first ten years of a company’s existence, the data suggest that entrepreneurs matter – they are the ‘glue’ that holds a business together.
Regional transfers in Europe: Do we need fewer of them or different ones?Sascha O. Becker, The CAGE Background Briefing Series No. 21, August 2015
The EU encourages regional cohesion through transfers for structural changes and development. This column presents new research suggesting that some poorer countries don’t benefit as well as we might expect. This is likely to be because of worse technological and institutional absorptive capacity. Structural transfers need reform, and policymakers would do well to focus on recipients’ absorptive capacity.
Can India grow faster? Answers from historyTirthankar Roy, SMF-CAGE Global Perspectives Series: Paper 3, July 2015
The Indian economy is growing at a respectable rate. IMF and the World Bank predict that Gross Domestic Product (GDP) will grow at 7.5-8 per cent in 2016, which is good news for Indians and for the world. Yet many people believe that the country can do better and change the lives of its citizens more rapidly than at present. Can India grow faster? I answer that India can, if Indians sort out their troubled relationship with the idea of globalisation.
The Challenge of Antimicrobial Resistance: Lessons from the Past for the Present and the FutureCormac Ó Gráda, SMF-CAGE Global Perspectives Series: Paper 2, April 2015
Concerns about the threat posed by antimicrobial resistance (AMR) are rising. There have been warnings of a retreat to ‘a health system not dissimilar to the early 19th century’ and of ‘a bleak post-antibiotic future, in which infectious diseases once again reign supreme’.
Institutional Corruption? The revolving door in American and British politicsMirko Draca, SMF-CAGE Global Perspectives Series: Paper 1, October 2014
Public confidence in political institutions in the US and the UK is currently at a striking low with a number of surveys showing falling levels of approval for key political institutions. A major current in public attitudes towards politics is a disapproval of the personal financial conduct of politicians.
The Power of Political Voice: How Women in Politics Can Help Tackle Gender CrimeDr Anandi Mani, The CAGE-Chatham House Series, No. 13, March 2014
Crimes against women are a persistent and even a growing problem in many developing countries. In India, research suggests that having female political representatives can be an effective tool to empower women in the battle against gender crime.
Human Development as Positive Freedom: A World View since 1870Leandro Prados de la Escosura, The CAGE-Chatham House Series, No. 12, February 2014
In this paper Professor Leandro Prados de la Escosura argues that substantial gains in world human development have been achieved since 1870, but research shows that the main improvement actually occurred between World War I and 1970. Despite initial successes in lifting human development, the socialist experiments of the 20th century failed to sustain momentum and then (with the exception of Cuba) stagnated and fell behind prior to the socialist model's ultimate demise. Since 1970, while most OECD countries have experienced a second (later life) health transition, all developing regions have fallen behind in this dimension.
Saving the Euro: A Pyrrhic Victory?Nicholas Crafts, The CAGE-Chatham House Series, No. 11, November 2013
The euro has survived a lengthy recession and an ominous legacy of public debt, but the fundamental flaws in its original design have not been corrected. Fiscal consolidation alone seems inadequate to address the fiscal sustainability problems of highly-indebted economies in the euro area. The author of the Chatham House-CAGE Briefing Paper Saving the Euro: A Pyrrhic Victory? will argue that the crisis has inflicted significant damage to future growth prospects in the eurozone, both through the debt legacy it has created and in terms of the impetus it has given to detrimental supply-side policies.
The Danger of High Home Ownership: Greater UnemploymentDavid G. Blanchflower and Andrew Oswald, The CAGE-Chatham House Series, No. 10, October 2013
'The evidence is that high home ownership weakens the vitality of the labour market and slowly grinds out greater rates of joblessness' Although encouraging home ownership has been a major policy objective for Western governments in recent decades, Professors Blanchflower and Oswald argue that evidence from the United States strongly suggests that high home ownership is a major reason for the high unemployment rates of the industrialized nations in the post-war era.
Fiscal Federalism in the UK: How Free is Local Government?Ben Lockwood, The CAGE-Chatham House Series, No. 9, September 2013
Looking at the effects of party control and performance management schemes on local government and its behaviour, Professor Lockwood’s work shows that in spite of the many constraints on local government in England and Wales, party control does appear to matter for expenditure, taxes, and local public employment. Focusing on performance management schemes, such as the Comprehensive Performance Assessment (CPA), the author will also argue that such schemes have increased local government spending and taxation but generally have failed to improve efficiency in the use of resources. A roundtable discussion will follow.
The Design of Pro-Poor Policies: How to Make Them More EffectiveSayantan Ghosal, The CAGE-Chatham House Series, No. 8, July 2013
A key policy concern in emerging-market economies is the appropriate design of policy interventions to alleviate chronic poverty. Largely missing from conventional analyses of poverty traps are the psychological mechanisms through which the experience of poverty forms the beliefs, values and aspirations of the poor Pro-poor policies tend to focus on relaxing external constraints that may perpetuate poverty traps, such as lack of credit or insecure property rights, but internal constraints such as learned helplessness, pessimistic beliefs and an external locus of control are also important These internal constraints are endogenous because they adapt to the experience of chronic poverty. Over time, however, they become an independent source of disadvantage for poor persons in their own right Pro-poor policies aimed at raising aspirations will alleviate poverty more effectively than those that address external constraints alone The ‘Dream Building’ sessions pioneered by the Durbar Foundation to empower a marginalised, stigmatized community of sex workers in Kolkata provides suggestive evidence of the potential impact of interventions in raising aspirations.
Registering for Growth: Tax and the Informal Sector in Developing CountriesChristopher Woodruff, The CAGE-Chatham House Series, No. 7, July 2013
Low- and lower-middle-income countries typically have a large informal sector, very high self-employment rates and low levels of tax collection. A recent project in Sri Lanka to induce small firms in the informal sector to register did little to change the trajectory of most, but registration did help some firms generate rapid growth – an outcome with important policy implications. For governments in developing countries, getting firms to register should not be simply a cost-benefit calculation involving a trade-off between enforcement costs and tax collection. Registration can also improve the attitude of small business owners towards the state and, more importantly, help stimulate economic growth. The tendency of small firms to remain in the informal sector may have an even more pervasive detrimental impact on growth than one might expect. Their informal status usually allows them to avoid taxes by keeping costs and revenues off the books. However, the lack of information arising from production costs, and the basic accounting systems on which they rely, mean many costly errors in pricing can be made, resulting in considerable lost business. Focusing on avoiding taxes in the informal sector can often distract firms’ attention away from important growth opportunities. Although taxes may discourage some economic activity, the problem in low-income countries is typically lack of capacity and under-enforcement, rather than over-taxation.
Soaring Dragon, Stumbling Bear: China's Rise in a New ContextMark Harrison and Debin Ma, The CAGE-Chatham House Series, No. 6, March 2013
The speakers will argue that in a historic reversal of fortunes, China has overtaken the territory of the former Soviet Union in GDP per capita. China’s model of rapid economic development offers powerful lessons for economies in transition, but they need to be seen in the country’s historical and political context. The conditions that enabled China’s success may not apply elsewhere and were not in evidence in the parallel case of the Soviet Union. China’s exceptional size and long history of regionally decentralized authoritarianism (RDA) provided perhaps the unique circumstances for this favourable outcome. The authors stress that the key to sustained economic development is continuous policy reform. Whilst China’s existing economic model has encouraged this in the past, current risks of the continuity of China’s economic modernization include two traps: complacency an conflict. As the country moves towards middle-income status there is the danger that its leaders will cease to pursue reforms that are in the national interest and will acquiesce to the private interests of bureaucratic or corporate incumbents.
Africa's Growth Prospects in a European Mirror: A Historical PerspectiveStephen Broadberry and Leigh Gardner, The CAGE-Chatham House Series, No. 5, February 2013
The relatively rapid growth rates achieved by many African countries in the last decade have raised hopes that the continent is finally on a path to economic convergence with Asia and Latin America, but history suggests that such optimism could be misplaced. Previous periods of rapid growth across Africa have often been followed by phases of economic decline which have erased many of the gains countries have achieved in per capita income. The continent's transition to modern economic growth will thus require a break in the boom-and-bust pattern which has characterized its economic performance during much of the 20th century. European experience since the Middle Ages suggests that the pattern of growth based on increasing demand for export staples, followed by economic reversals, has often resulted in limited overall gains in per capita income. This pattern was only broken following the introduction of significant institutional change. Placing Africa's recent economic performance in a wider historical perspective highlights the fact that the continent's level of per capita income is comparable to pre-industrial Europe and that the institutional changes needed to ensure sustained economic growth have yet to take place. Growth reversals remain a serious threat to Africa's future prosperity, and therefore it is incumbent on policy-makers to focus a great deal more on the introduction of measures that can encourage the development of a robust civil society.
Tax Competition and the Myth of the 'Race-to-the-Bottom': Why Governments Still Tax CapitalVera Troeger, The CAGE-Chatham House Series, No. 4, February 2013
The majority of OECD countries have only experienced minor effects of capital market integration and capital tax competition since the mid-1980s. There have undoubtedly been some winners, mainly capital owners in larger liberal market economies, and some losers, especially large continental European welfare states. Not only have the dire predictions of the early doom theories not materialized; they have failed. Therefore, there is much to be gained in making the key assumptions underlying traditional tax competition models much more realistic, particularly in terms of predicting the impact of globalization on Western democracies. Tax competition affects countries differently and does not lead to a ‘race to the bottom’ since capital remains incompletely mobile. The competitiveness of a country determines fiscal adjustment strategies by others. Cutting capital taxes, therefore, will not necessarily generate more capital inflows. Tax competition and taxation have broader implications for the fiscal responses of countries to globalization and their redistribution efforts. Given that tax competition affects countries differently, governments will choose diverse strategies to cope with these international pressures. Competition will more negatively affect income inequality in countries that predominantly redistribute via the tax system than in those that historically set up a welfare state by redistributing via social transfers.
EU Structural Funds: Do They Lead to More Growth?Sascha Becker, The CAGE-Chatham House Series, No. 3, December 2012
In this policy paper, Professor Sascha Becker argues that the EU transfer system, while currently yielding a certain amount of additional growth in some recipient regions, requires a degree of conditionality in order to deliver targeted results. In assessing the effectiveness of the EU's Regional Policy, the paper focuses on the Convergence Objective (formerly Objective 1) which suggests that, on average, it is successful at fostering growth in recipient regions, but that those with low levels of education and poor governance fail to make good use of EU transfers. For EU Structural Funds as a whole, a point is reached where returns begin to decline and additional funds do not lead to higher growth. Professor Becker argues that, in the future, EU transfers to regions should not exceed maximum desirable levels if inefficiency and misuse are to be avoided.
International Migration, Politics and Culture: the Case for Greater Labour MobilitySharun Mukand, The CAGE-Chatham House Series, No. 2, October 2012
A policy shift to liberalise global labour markets could be a key tool for development and poverty reduction. Given the significant benefits globally, economists and policy-makers should devote more attention than at present to the practicalities of relaxing barriers to international labour mobility. The potential gains from the globalisation of labour could dwarf those from foreign aid or even the liberalisation of trade and capital flows across borders. For example, a decision by developed countries to liberalise immigration restrictions by a mere 3% could result in an estimated output gain of more than $150 billion. Although immigration policy is always controversial, the absence of serious debate in international circles is not due entirely to the distributional impact of labour migration, but in large part to the perceived threat to national identity and culture in destination countries. While permanent migration would yield relatively larger economic gains, temporary labour migration programmes, targeted to specific sectors and more modest in scope, could be the answer and would be far more acceptable and politically sustainable in countries where citizens perceive migrants as a threat to culture and national identity.
Saving the Eurozone: Is a 'Real' Marshall Plan the Answer?Nicholas Crafts, The CAGE-Chatham House Series, No. 1, June 2012
‘Saving the Eurozone: Is a ‘Real’ Marshall Plan the Answer?’ by Nicholas Crafts, argues that the rationale for a new Marshall Plan would be both to reduce the chances of a chaotic break-up of the eurozone and to allow more time to prepare for this eventuality – while at the same time working to improve the medium term economic performance of the euro periphery. The objective of a Marshall Plan for crisis-hit countries in the euro periphery of southern Europe would be to underpin European economic integration and the survival of the eurozone by raising productivity growth. This would entail increased but not massive transfers of funds. However, this is not appreciated by most economists today, let alone the politicians who argue for such a plan. What was the original Marshall Plan and how did it work in practice?
The economic legacy of Mrs ThatcherNicholas Crafts, The CAGE Background Briefing Series, No. 20, July 2013
The death of Lady Thatcher makes it opportune to consider the difference that her governments made to the UK's economic performance. This column is an ‘economic obituary’.
Returning to growth in the UK: Policy lessons from historyNicholas Crafts, The CAGE Background Briefing Series, No. 19, July 2013
A return to growth is urgently needed in the UK. Recovery from severe recessions was achieved in the 1930s and the 1980s in the presence of fiscal consolidation. This column examines the lessons from those experiences for today’s policymakers.
Do falling trade costs benefit all countries equally?Dennis Novy, The CAGE Background Briefing Series, No. 18, July 2013
Trade barriers such as transportation costs and tariffs reduce international trade. But when these trade barriers come down, do they increase international trade equally among countries? This column presents evidence from OECD countries that trade costs have a differential impact depending on the trade intensity of the countries involved. When they already trade a lot, country pairs hardly benefit. But bilateral trade grows faster when the initial trade relationship was thin.
Russia's national income in war and revolution, 1913 to 1928Mark Harrison and Andrei Markevich, The CAGE Background Briefing Series, No. 17, July 2013
At the start of the 1920s, Russia’s economy suffered the greatest economic catastrophe of a turbulent 20th century. This column argues that measuring this experience yields lessons for the relationship between state capacity, government policies, and economic development.
Trade and global climate-policyJohn Whalley, The CAGE Background Briefing Series, No. 16, July 2013
In terms of new emissions reductions, little materialised at the climate-change negotiations in Durban in November. This column argues that trade policy could widen the range of jointly beneficial potential outcomes and in this sense be a potential facilitator of an agreed global climate regime. Moreover, trade provides a mechanism for achieving an internalisation outcome for the global externality that climate change represents.
The contribution of Chinese FDI to Africa's growthJohn Whalley and Aaron Weisbrod, The CAGE Background Briefing Series, No. 15, July 2013
In the three years before the global crisis, the average GDP growth in sub- Saharan Africa was around 6%. This period also saw significant Chinese foreign direct investment flowing into the continent. This column uses growth-accounting methods to assess what portion of this growth can be attributed to Chinese FDI. Although for some countries and years the effects were negligible, some countries saw total GDP growth from 2002 to 2009 increase by 0.5 percentage points due to Chinese FDI alone.
Making globalisation work for workersSascha O Becker, Marion Jansen, and Marc Muendler, The CAGE Background Briefing Series, No. 14, July 2013
As job losses continue to haunt the headlines, people are left asking if long- term unemployment is to be one of the so-called benefits from globalisation. This column reports on a conference aimed at understanding how globalisation can be made to work for workers.
When markets freeze: Tobin's q and QEMarcus Miller and John Driffill, The CAGE Background Briefing Series, No. 13, July 2013
Just what on earth is going on in the global economy? Rather than get caught up in the hysteria, this column says the answers are best found by looking through the pages of history and dusting down some old textbooks.
The ins and outs of UK unemploymentJennifer Smith, The CAGE Background Briefing Series, No. 12, July 2013
Labour-market policy can try to make it easier to get hired or harder to get fired. This column asks which of these approaches policymakers should prioritise. Focusing on the UK, it finds that while job-finding rates could be improved, policies aimed at reducing the amount of job losses during a recession play an equally important role despite being less in vogue.
Competition cured the "British disease"Nicholas Crafts, The CAGE Background Briefing Series, No. 11, July 2013
Britain’s relative economic decline throughout the 20th century—the so-called “British disease”—was a national embarrassment that only went away in the 1980s. This column presents new research showing that competition provided the cure. Only when Britain returned to a regime of competition and openness similar to that which had prevailed before World War I did productivity growth resume.
The Habsburg Empire and the long half-life of economic institutionsSascha O Becker and Ludger Woessmann, The CAGE Background Briefing Series, No. 10, July 2013
How the long-gone Habsburg Empire is still visible in Eastern European bureaucracies today.
Studying abroad and international labour market mobilityMatthias Parey and Fabian Waldinger, The CAGE Background Briefing Series, No. 9, July 2013
Is the ERASMUS scheme—where European students study for a year in a foreign country—just an excuse for a holiday or does it have some economic value? This column analyses how studying abroad affects labour-market mobility using the exposure to ERASMUS as an exogenous source of variation in studying abroad. It finds that studying abroad increases an individual's probability of working in a foreign country by about 15 percentage points.
Civil conflicts hurt firms - by displacing workersChristopher Ksoll, Rocco Macchiavello, and Ameet Morjaria, The CAGE Background Briefing Series, No. 8, July 2013
As unrest continues in the Arab countries, many are asking about the economic costs. While the macro effect of civil conflicts is widely studied, little is known of the micro effects. This column presents evidence from the short-term violence following the 2007 election in Kenya. It finds that firms providing cut flowers to Western markets saw a significant rise in costs, largely due to the displacement of workers.
An historical perspective on the Great RecessionNicholas Crafts, The CAGE Background Briefing Series, No. 7, July 2013
What started as a subprime crisis in the US soon spread to a global crisis resulting in what some have called the Great Recession. This column argues that economists spectacularly failed to take the prevention of financial crises seriously. But since then, economists have heeded the lessons from past crises and have helped avoid the worst.
A recession to remember: Lessons from the US, 1937 - 1938Nicholas Crafts and Peter Fearon, The CAGE Background Briefing Series, No. 6, July 2013
The global crisis has been frequently compared to the Great Depression. The recession of 1937 has been less widely discussed. This column asks what lessons it can teach today’s policymakers. Its key message is that while fiscal consolidation should not be postponed, the exit strategy needs to focus on providing monetary support for aggregate demand as fiscal stimulus is withdrawn.
China and antidumpingChunding Li and John Whalley, The CAGE Background Briefing Series, No. 5, July 2013
Over the last decade, China has been the target of more antidumping measures than any country in the world. This column examines the impacts and argues that China should be paying more attention to measures that come from its main trading partners.
Corruption as a barrier to entryNauro F Campos, Eugenio Proto, and Saul Estrin, The CAGE Background Briefing Series, No. 4, July 2013
Conventional wisdom says that corruption hurts the economy because it taxes investment and weakens public services. This column presents evidence from interviews with CEOs in Brazil. It argues that corruption acts as a barrier to entry, with potential entrants put off by the uncertainty over what bribes to pay and when to pay them.
Global imbalances: are we measuring the right thing?Chunding Li, John Whalley and Yan Chen, The CAGE Background Briefing Series, No. 3, July 2013
As the debate over global imbalances develops, this column asks whether the discussion is based on faulty data. Using data from the US, Japan, Germany, and the Czech Republic, it argues that not taking due account of foreign affiliate sales leads to a warped view of trade in goods and services.
"Happiness economics" in reverse: Does happiness affect productivity?Daniel Sgroi, The CAGE Background Briefing Series, No. 2, July 2013
Happiness economics typically looks at how macro-level variables such as economic growth affect happiness. This column turns such thinking on its head and asks whether a rise in happiness might change behaviour at the micro-level, looking specifically at productivity. Experiments suggest that happiness raises productivity by increasing workers' effort. Economists may need to take the emotional state of economic agents seriously.
Monetary theory from a Chinese historical perspectiveJohn Whalley , Zheng Xueyi and Yaguang Zhang, The CAGE Background Briefing Series, No. 1, July 2013
While many commentators focus on China’s future, this column draws economic theory insights from its past. It argues that Chinese monetary theory preceded Western thought and influenced the likes of Adam Smith and Karl Marx. Moreover, it says the Eastern emphasis on the pursuit of wisdom, as opposed to knowledge, has a role to play in today’s economic debate.