The importance of contribution design for crowdsourcing
Barbosu, Gans, 30 November 2017
The design of the contribution mechanism for volunteers may affect the sustainability of crowdsourcing platforms. This column investigates how a change to the Zooniverse platform which meant that volunteers could no longer submit incomplete entries affected the number and quality of contributions. The results suggest that the total number of completed tasks by anonymous volunteers increased. The change in contribution design successfully encouraged them to channel their efforts into delivering fewer, higher-quality contributions, as intended.
How India's internal borders inhibit migration
Kone, Liu, Mattoo, Özden, Sharma, 30 November 2017
Indians, and in particular men seeking education and jobs, display a puzzling reluctance to cross state borders. This column explores the reasons for this surprising migration pattern. A major culprit is India's system of 'fragmented entitlements', whereby welfare benefits are administered at the state level, and state residents get preferential treatment when it comes to higher education and government employment. These administrative rules prevent the more efficient allocation of labour across the country.
Why poor countries invest too little in R&D
Cirera, Goñi Pacchioni, Maloney, 29 November 2017
Innovation is widely seen as central to the growth of developing countries, and available evidence suggests that the returns to R&D investment should be extremely high. Yet low-income countries invest very little. This column suggests that this is due to the increasing scarcity of a wide array of factors complementary to innovation, and that this explains the lack of convergence of low-income countries to the technological frontier.
The cash comeback: Evidence and possible explanations
Jobst, Stix, 29 November 2017
Many societies in the developed world have been shifting away from cash towards electronic alternatives. Despite this, there has been a remarkable increase in currency holdings over the past decade. This column looks at the evolution of cash holdings over time to shed light on this apparent contradiction. While circulating currency over GDP has been declining since WWII, there have been sizable increases in recent decades which are only partially explained by low interest rates.
House prices and the UK economy
den Haan, Ellison, Ilzetzki, McMahon, Reis, 28 November 2017
The usually buoyant London housing market is currently the weakest performing market in the UK. A majority of leading economists think that the phenomenon of declining prices will ripple out from London to the rest of the UK, according to the latest Centre for Macroeconomics and CEPR survey. Asked whether a widespread weakening of the housing market will slow GDP growth significantly, the experts are more divided. Several point to uncertainty about the eventual Brexit outcome making it very difficult to engage in predictions about house prices and growth; others suggest that lower house prices could be a good thing for the UK economy, especially for young people.
Diagnosing the Italian disease
Pellegrino, Zingales, 28 November 2017
Italy stands out among developed countries for its large public debt and chronically low productivity growth. The country's productivity growth disease cannot be addressed without understanding why aggregate labour productivity abruptly stopped growing around 1995. This column argues that the most likely cause is Italian firms' non-meritocratic managerial practices, which meant they failed to capitalise on the ICT revolution.
Global value chains and Brexit
Vandenbussche, Connell, Simons, 27 November 2017
Global value networks make it difficult to evaluate the trade impact of Brexit. Using a new model of trade that accounts for the indirect effect of these networks, this column delivers fresh bad news for the UK, and for the rest of Europe. Brexit cuts GDP more, and costs more jobs, if we also consider global value chains. A hard Brexit would destroy four times as much GDP, and four times as many jobs throughout Europe, as a soft Brexit.
Banks as buyers of last resort for government bonds
Gros, 27 November 2017
A key remaining issue for the completion of the Banking Union is the concentrated exposure of banks in many countries to their own sovereign. This column argues that the belief that banks should be allowed to buy large amounts of their own sovereign so they can stabilise the market in a crisis is mistaken for two reasons: banks are only intermediaries, and banks have higher cost of funding. The overall conclusion is that governments should make it more attractive for households (and other real money investors) to hold government debt directly.
Subjective wellbeing and partnership dynamics
Chen, van Ours, 26 November 2017
A host of empirical studies have found that people in partnerships tend to be happier than those who are single. This column uses panel data from the Netherlands to explore whether there is a causal effect of partnership on subjective wellbeing. The results suggest that both opposite-sex and same-sex marital partnership improves wellbeing, and the benefits of marriage appear to outweigh those of cohabitation.
Democracy by mistake
Treisman, 26 November 2017
Most research on the transition to democracy tries to explain why autocrats choose to democratise. Based on two centuries of data on democratisation, this column argues, however, that autocratic rulers overwhelmingly create democracies by mistake. Taking these mistakes into account during analysis may improve the predictive or explanatory power of existing models.
The impact of big research infrastructure facilities on local scientific output
Helmers, Overman, 25 November 2017
Highly localised research infrastructure investment, such as in the Large Hadron Collider, often leads to major scientific breakthroughs, but there is little evidence on the longer-term and wider geographical impacts on scientific output. This column uses the example of the UK's Diamond Light Source to study the impact of large facilities on where scientific research is conducted. Not only do such investments substantially increase directly related research in the local area, they also create spillovers on unrelated research through knowledge sharing.
Information inequality
Kennedy, Prat, 25 November 2017
Real news is an antidote to fake news, but how much political information do we access and where does it come from? Based on an analysis of news consumption in 18 countries, this column shows that low-income, low-education voters use fewer information sources. This pattern is reflected at the aggregate level, with countries with high income inequality also demonstrating high information inequality. News sources that cater to information-poor audiences have greater 'media power', and there is no evidence that public service broadcasting reduces information inequality.
Inflation targeting and interest rate procyclicality
Powell, 25 November 2017
The recent interest rate rise in the UK occurred despite negative economic news. This is not what conventional inflation-targeting policy would imply. This column argues that recent Latin American experience suggests the theory underlying inflation targeting may need to be reconsidered. Specifically, for small open economies, the role of the exchange rate and inflation expectations should be considered when deciding how to react.
Medicaid and the rise of common chronic childhood conditions
Chorniy, Currie, Sonchak, 24 November 2017
Diagnoses of asthma and ADHD among children in the US have increased over recent years. This column argues that one contributor to this increase has been a change in Medicaid from a fee-for-service model to a managed care model. This change created incentives that reward higher diagnosis and prescription rates, while not necessarily improving health outcomes.
Trump tax plan halts inversions but increases treaty shopping
Cnossen, Lejour, van 't Riet, 24 November 2017
Some US multinationals have displayed a willingness to relinquish their American nationality and move their headquarters abroad. Such 'inversions' generally aim to avoid and minimise taxes. This column argues that the new Trump tax plan is likely to halt tax inversions by US multinationals. However, the plan will increase treaty shopping, incentivising multinationals to redirect dividends through third-party countries with generous tax treaties.
Structuring versus restructuring sovereign debts in the Eurozone
Tabellini, 23 November 2017
In the debate on European reforms, a sovereign debt restructuring mechanism for the Eurozone is often proposed. This column argues that such a mechanism is not required. Instead, Eurozone member states should issue GDP-linked bonds, which would enact an implicit seniority structure on their sovereign debt and make the Eurozone more resilient to the next crisis.
Fostering breakthrough entrepreneurship
Färnstrand Damsgaard, Hjertstrand, Norbäck, Persson, Vasconcelos, 23 November 2017
Most developed economies provide significant subsidies to small businesses to encourage innovation. This column argues that while subsidies to reduce entry costs may increase entrepreneurial entry, they can also lead to a reduction in the likelihood of 'breakthrough' inventions. Entry costs, which are incurred when an innovation project is successful, prompt small firms and entrepreneurs to pursue high-risk, high-reward innovations.
New eBook: Ordoliberalism: A German oddity?
Beck, Kotz, 22 November 2017
The Eurozone crisis has opened fault lines between German economists and policymakers and those in a number of Eurozone (in particular periphery) countries.This column introduces a new eBook explaining the historical development of the ordoliberal school of economics and its influence on German policymaking, and contrasting it critically with what we like to call the Anglo-Saxon-Latin pragmatism of economic policymaking.
Populism and time inconsistency
Blejer, Nagy-Mohacsi, 22 November 2017
Global politics of late has been marked by the rise of anti-elite political movements and anti-establishment leaders. This column analyses the tactics of such populists through the lens of the 'time inconsistency' problem – that what is considered a long-term optimal policy today may not be optimal when that future arrives. Populist leaders seek to gain and increase their power by undermining democratic institutions and conventional commitment devices. Several 'second generation' institutional commitment devices to counter this are proposed.
The effects of employer payroll tax cuts
Saez, Schoefer, Seim, 22 November 2017
Cuts to the employer portion of payroll taxes are often discussed as a policy lever to reduce labour costs for firms. This column examines the effects of a Swedish experiment which dramatically cut employer payroll taxes for young workers between 2007 and 2015. The tax cut reduced youth unemployment by 2-3 percentage points, without any differential increase in wages of young workers. Firms used the tax windfall to expand employment and business activity, and firms with larger tax windfalls raised wages for workers – both young and old – collectively.
Economic implications of a protectionist US trade policy
Felbermayr, Steininger, Yalcin, 22 November 2017
The Trump administration intends to restructure US international trade relations with its major trade partners to correct what it perceives to be unfair trade and establish a 'level playing field'. This column uses a structurally estimated and simulated trade model to analyse three potential protectionist policies that have been discussed by the administration. The results suggest that the promise to create more jobs and investment in the US through such policies is a fallacy.
Redefining GDP
Coyle, Haskel, 21 November 2017
GDP is the default indicator we use to measure how well or bad a country is doing. Diane Coyle and Jonathan Haskel discuss how factors such as technological change, skills, or the economic structure should be taken into account. They jointly won the first Indigo Prize in October 2017, a competition asking participants to think about a new GDP measure.
Interviewer: Tim Phillips
Economic effects of natural disasters: New evidence from Japan
Kondo, 21 November 2017
Economists have studied extensively the direct impacts of natural disasters on local labour markets, but less is known about the knock-on consequences for wider markets. This column argues that although supply chain disruptions caused by the Great East Japan Earthquake increased job separation and geographical shifts, the effects on employment status were weak. The long-run impact of the earthquake on the labour markets outside of the directly affected areas appears to be limited, despite public concerns at the time.
Leverage and limited liability: A toxic cocktail
Danthine, 21 November 2017
There is little doubt that one of the main causes of the Global Crisis was excessive risk-taking by large international financial institutions. This column argues that the combination of very high leverage and limited liability continues to incentivise risky behaviour by bankers. Dealing with this problem requires the alignment of bankers' incentives with those of society, rather than of shareholders. Deferred compensation in the form of contingent convertibles presents one promising strategy.
Consequences of Brexit for UK inflation and living standards: First evidence
Breinlich, Leromain, Novy, Sampson, 20 November 2017
On 23 June 2016, the UK voted to leave the EU. As soon as the result became clear, sterling depreciated sharply and, since the vote, UK inflation has dramatically increased. This column asks how much of the rise in inflation is due to the referendum. It finds that the referendum result pushed up UK inflation by 1.7 percentage points, which amounts to an annual (and potentially permanent) cost of £404 for the average British household.
The rise and future of progressive redistribution
Lindert, 20 November 2017
There has been a blossoming of research into fiscal incidence by income class. This column combines century-long histories for Britain and South American countries with previous research to offer a global history of government income redistribution. Contrary to some allegations, the shift towards progressivity in government budgets over the last 100 years has not been reversed since the 1970s. The rise in inequality since the 1970s therefore appears to owe nothing to a net shift government redistribution toward the rich.
Silver mining's deadly dividend
Baier, Baten, 19 November 2017
Studies have found that the occurrence of natural resources can increase the risk of civil war and interstate conflict. This column uses data from 50 countries beginning in 1890 to show that silver mining can also have substantial effects on interpersonal violence during peacetime. Across many different countries and periods, an economy's increasing dependence on silver has increased the homicide rate.
Corporate governance and strategic shareholders
Ueda, Kobayashi, 18 November 2017
Strategic shareholding – companies holding minority shares in other companies for the sake of business relations – can be used for anticompetition purposes or to reduce pressure from shareholders. This column explores strategic shareholding in Japan. Roughly one third of shareholders are found to be strategic, with three quarters of these being business corporations. However, in Japanese corporate culture it is not uncommon for such shareholding to occur as part of technical or business partnerships without affecting managerial independence.
The origins of the Industrial Revolution
Heldring, Robinson, Vollmer, 18 November 2017
The Industrial Revolution is arguably the most important economic event in world history, and successful industrialisation continues to elude many developing countries today. This column argues that an important driver of industrialisation in England was the development of markets that allowed division of labour, innovation and, ultimately, social change. Institutional change, rather than advantageous geography, is the main driver of successful industrialisation in England.
How European integration builds up state capacity
Bruszt, Campos, 17 November 2017
The many benefits and costs of economic integration are notoriously difficult to pinpoint. This column introduces new institutional measures for 17 EU candidate countries since 1997 to explore whether deep integration helps the build-up of state capacity. Estimates highlight the relationship between judiciary capacity and bureaucratic independence as the key engine behind state capacity-building engendered by the prospect of EU membership.
Economics gets out more often
Angrist, Azoulay, Ellison, Hill, Lu, 17 November 2017
Economics, and economists, are often accused of insularity and hubris, and of talking primarily to themselves in their research. This column uses a recent analysis of citations to and from other disciplines to show that this is no longer the case. Economics papers increasingly cite non-economic research, and other disciplines cite economists more often too. The data suggest that the rising quantity and quality of empirical research in economics has increased the relevance of the field to non-economists.
Venture capital networks: An analysis
Koujaku, Miyakawa, 16 November 2017
Venture capital firms use a variety of accumulated resources to inform their investment activities, but do the rely solely on their own resources or do they employ other firms' resources to complement their own? This column examines the pattern of co-investments among venture capital firms and discusses the economic implications. Past experience of co-investments increases the likelihood of future co-investments among firms when the returns from these past co-investments were high, and also when the jointly invested venture business companies experienced greater growth after an IPO.
Does gentrification reduce crime?
Autor, Palmer, Pathak, 16 November 2017
Separating cause from effect is notoriously difficult when it comes to gentrification and neighbourhood amenities, including public safety. This column exploits the sudden ending of a rent control regime in Cambridge, MA to examine whether and by how much gentrification affects crime. In the years immediately following the end of rent control, crime fell significantly more in neighbourhoods that had been heavily rent controlled. But those neighbourhoods also saw the highest turnover in occupants, suggesting that incumbent renters in these areas were priced out of their properties and thus missed out on the benefits from gentrification.
Artificial intelligence and the stability of markets
Danielsson, 15 November 2017
Artificial intelligence is increasingly used to tackle all sorts of problems facing people and societies. This column considers the potential benefits and risks of employing AI in financial markets. While it may well revolutionise risk management and financial supervision, it also threatens to destabilise markets and increase systemic risk.
Banking on capital
Altunbaş, Manganelli, Marques-Ibanez, 14 November 2017
Prudential supervision of banks has increasingly relied on capital requirements. But bank capital played a relatively minor role in predicting bank solvency during the Global Crisis, except for scarcely capitalised banks. This column argues that while capital is a helpful tool to support bank financial stability, it is complex for supervisors to calibrate it precisely. Macroprudential authorities should be able to complement capital-based tools with additional, borrower-based prudential instruments.
Assessing the incidence of value-added taxes
Benzarti, Carloni, 13 November 2017
In the wake of the Global Crisis, some governments sought to stimulate demand through VAT cuts. This column assesses the success of these measures by investigating who benefited from a VAT cut on sit-down restaurant meals in France. The results show that restaurant owners captured the lions' share of the tax cut, while employees and consumers benefited substantially less. Further, following subsequent tax increases, restaurant owners increased their prices by four to five times more than they had decreased their prices following the original cut.
Drivers of pension reform measures in the OECD
Beetsma, Romp, van Maurik, 13 November 2017
Population ageing means that many current pension regimes are unsustainable, but the timing of pension reform measures is a political as well as an economic decision. This column uses new data on OECD pension reforms since 1970 to show that their timing has not been driven by projected demographic developments or political change, but by the state of the economy at the time when reforms were legislated. Pension systems have expanded more frequently during booms, and have contracted during economic downturns.
Parent firms' resources and productivity of foreign subsidiaries
Hosono, Miyakawa, Takizawa, 12 November 2017
Several studies have examined the profitability and productivity of foreign subsidiaries, but less is known about the determinants of success. This column looks at the contribution of resources from 3,800 Japanese parent firms to the business activities of their 20,000 overseas subsidiaries. The results suggest a positive contribution of parent firms' intangibles to subsidiaries' production, in particular for smaller subsidiaries.
The digital wealth management revolution
Braunstein, Laboure, 11 November 2017
Despite specialised press coverage, little is known about the potential wider socioeconomic implications of digital wealth management solutions. This column examines how 'robo-advisors' offer an opportunity to democratise finance and decrease wealth inequality. These algorithmic investment advisors stand to disrupt the wealth management sector through their 'low-cost, accessible to most' business models. However, the entrance of traditional wealth managers into the robo-advisor market could threaten this disruption.
The productivity slowdown and labour's income share
Grossman, Helpman, Oberfield, Sampson, 11 November 2017
Many countries have experienced both a slowdown in aggregate productivity growth and a decline in labour's share of national income in recent years. This column argues that the productivity slowdown may have caused the decline in labour's income. Calibrating the authors' model to US data suggests that a one percentage point decline in the productivity growth rate accounts for between half and all of the observed decline in the US labour share.
Population diversity and long-term prosperity
Rodríguez-Pose, von Berlepsch, 10 November 2017
Research on the economic impact of migration on hosts and the migrants themselves has tended to focus on the short term. This column traces the economic impact of population diversity in the US resulting from the Age of Mass Migration of the late 19th and early 20th centuries. High levels of population fractionalisation have had a strong, positive influence on economic development, while high levels of polarisation have undermined development. Despite a stronger effect on income levels in the first 30 years following the initial migration shock, the relationships are found to be extremely long-lasting.
Inequality and property in Russia, 1905-2016
Novokmet, Piketty, Zucman, 09 November 2017
Russia has undergone a dramatic economic and political transformation since the fall of the Soviet Union in 1990-1991, yet the consequences on the distribution of income and wealth are not very well documented and understood. This column attempts to combine the various available data sources in order to provide consistent series on the accumulation and distribution of income and wealth in Russia from the Soviet period until the present day.
How to measure the global business cycle
Kilian, Zhou, 09 November 2017
Global commodity prices surged across the board after 2003, with some observers claiming that this reflected a permanent increase in global real economic activity. This column argues that this was a persistent but transitory phenomena tied to rising commodity demand from Asia. It presents evidence of a global economic slowdown since 2011, with low real commodity prices likely to persist.
Survivors in export markets
Inui, Ito, Miyakawa, 09 November 2017
Economists have recently tried to identify why some firms survive longer than others in export markets. This column examines the firm-level determinants of the duration of Japanese manufacturing firms' exporting. It suggests that the degree to which products are differentiated matters for firms' survivability, and that policies to support R&D activities thus indirectly contribute to increasing firms' chances of survival in foreign markets.
The European Commission's autumn forecast
Buti, Döhring, 09 November 2017
The Eurozone economy is growing at its fastest rate in a decade, but the recovery remains incomplete. This column presents the European Commission's autumn forecast, and derives some policy considerations. Accommodative macroeconomic policies are still appropriate for now. The column also highlights the need for structural policies to increase the potential for growth and help to share the benefits more fairly.
The 2017 CEPR European Conference on Household Finance
Haliassos, 08 November 2017
The 2017 CEPR European Conference on Household Finance, held with the support of the Think Forward Initiative, took place on 6-7 October 2017 in Alghero, Sardinia. This column describes the papers that were presented at the workshop.
Brexit, the four freedoms, and the indivisibility dogma
Kohler, Müller, 08 November 2017
The EU's position in the Brexit negotiations is based on the premise that the four freedoms of the single market – goods, capital, services, and labour – are indivisible. This column argues that this indivisibility claim has no economic foundations, and that negotiating on this premise risks unnecessary harm. Reintroducing trade barriers will inflict damage on both sides of the Channel. The possibility that abandoning indivisibility may cause harm through cherry picking, or through potential further exits, doesn't justify a hard Brexit scenario.
The long-term consequences of short-term incentives
Edmans, Fang, Huang, 07 November 2017
Worries about the dangers of short-term incentives for CEOs are rarely backed by rigorous evidence. This column uses data over a ten-year period to show that short-term contracts lead CEOs to undertake repurchases and M&A activity that have negative long-term consequences. The results suggest that the horizon of CEO incentives is a more important dimension to reform than the size of pay packets.
The Soviet economy, 1917-1991: Its life and afterlife
Harrison, 07 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.
Disagreement and monetary policy
Falck, Hoffmann, Hürtgen, 06 November 2017
Existing theoretical and empirical evidence suggests that less expansionary monetary policies lead to lower inflation and dampened inflation expectations. This column considers how the dispersion of inflation expectations can affect this relationship. The results show that an increase in the policy rate can give rise to higher inflation in the short run if professional inflation forecasts differ widely. These findings highlight the importance of considering the amount of agreement about inflation expectations in monetary policy decision-making.
The origins of the Italian north-south divide
Federico, Nuvolari, Vasta, 06 November 2017
The origins of the Italian north–south economic divide have always been controversial. This column argues that using real wages in the 19th century, rather than output data, sheds new light on this debate. At unification, there was already a significant gap between real wages in the north and continental south, which widened as the north-west industrialised. The main driver of the growth of real wages in this period was human capital formation.
Labour coercion and outside options
Dippel, Trefler, 05 November 2017
One way employers can compel workers to accept contracts they otherwise would not accept is by limiting the outside options for those workers. This column explores this facet of labour coercion in the context of post-Emancipation Caribbean islands prior to WWI. On islands where freed slaves had options other than plantation work, sugar exports fell dramatically. Where geographic factors limited these outside options, such as Antigua and Barbados, the plantation system continued to prosper.
Tall buildings and land values
Ahlfeldt, McMillen, 04 November 2017
Cities around the world are experiencing unprecedented vertical growth, but there has been little study of the economics of tall buildings. This column summarises novel evidence on the determinants of the urban height profile and the cost of building tall, and derives implications for urban theory and policy. In contrast to standard urban economics models, there is a role for the supply side in determining horizontal land use patterns. Vertical expansion is unlikely to resolve affordability problems in growing cities.
Taxing marijuana
Hansen, Miller, Weber, 04 November 2017
Tax revenue has historically been one of the arguments in favour of legalising marijuana. This column uses a change in Washington's marijuana tax regime to explore how taxation affects industry and consumer behaviour. Gross receipts taxes encourage vertical as a form of tax avoidance and thus reduce expected revenue. The choice of what to tax (revenue versus weight) also has important implications for how the market evolves.
Government financing of R&D
Lach, Neeman, Schankerman, 03 November 2017
Understanding how the design of policy to support R&D influences its effectiveness, and how loan programmes should be optimally designed to maximise welfare, is critical to formulating effective, cost-efficient policies. This column uses mechanism design to analyse the optimal structure of R&D loan programmes. The results suggest that optimal policies should 'target the middle', as low-risk projects will be funded by the market and high-risk projects are not likely to generate sufficient social payoff to justify support. Moreover, the optimal policy is likely to differ across technology areas, and between industrialised and emerging economies.
Black Monday: Thirty years after
Cecchetti, Schoenholtz, 03 November 2017
Black Monday has been referred to as the first contemporary global financial crisis. This column reviews key aspects of the 1987 crash and discusses the subsequent steps taken to improve the resilience of the financial system. It also highlights a key lingering vulnerability – the lack of a mechanism for managing the insolvency of critical payment, clearing, and settlement institutions.
Increase trust to stem the rise of populist movements
Zoega, 03 November 2017
The vote for Brexit and the election of Trump are just two examples of the recent rise in populism. This column discusses how support for populist parties in Europe is closely correlated with a lack of trust in national parliaments and in the European Parliament. The EU must convince voters that it is acting in their interests and taking their concerns into account. At the same time, a distinction has to be made between decisions that should be taken at the EU level and those that are better left in the hands of the member states.
Kugler, Tinsley, Ukhaneva, 02 November 2017
Fake news and fact checking
Barrera, Guriev, Henry, Zhuravskaya, 02 November 2017
'Fake news' has become a key ingredient of Western political discourse. This column uses an experiment conducted during the 2017 French presidential election campaign to show that 'alternative facts' are highly persuasive. Voters exposed to a narrative based on misleading numbers shifted towards the populist's agenda, and fact checking did nothing to undo these effects. In fact, exposing voters only to official facts on a highly sensitive subject, such as the European refugee crisis, can backfire by increasing support for the extreme right.
Elusive inflation and the Great Recession
Reis, Miles, 01 November 2017
David Miles and Ricardo Reis discuss the 19th Geneva Report on the World Economy, which asks why inflation has remained in such a narrow range over the last decade.
Worker churn and employment growth at the establishment level
Bachmann, Bayer, Merkl, Seth, Stüber, Wellschmied, 01 November 2017
Many establishments both hire and lay off within a short time window, resulting in 'churn'. This column uses a newly constructed dataset to show that the rate of churn in Germany is high and can be up to 40% greater in booms compared to recessions. Both establishments that are shrinking and those that are growing hire more and lay off more in booms than in recessions.
Behavioural economics is also useful in macroeconomics
De Grauwe, Ji, 01 November 2017
Dynamic stochastic general equilibrium models are still dominant in mainstream macroeconomics, but they are only able to explain business cycle fluctuations as the result of exogenous shocks. This column uses concepts from behavioural economics to develop macroeconomic models with endogenous business cycle fluctuations. Application of the models highlights how the trade-off between output and inflation is moderated by the flexibility of the economy. The models further help to explain the international transmission of business cycle fluctuations.