Recent VoxEU Content

No solid scientific basis for degrowth

Ivan Savin, Jeroen van den Bergh — 2024-09-11T00:00:00+0000

In the last decade, many publications have appeared on degrowth as a strategy to confront environmental and social problems. This column reviews their content, data, and methods. The authors conclude that a large majority of the studies are opinions rather than analysis, few studies use quantitative or qualitative data, and even fewer use formal modelling; the first and second type tend to include small samples or focus on non-representative cases; most studies offer ad hoc and subjective policy advice, lacking policy evaluation and integration with insights from the literature on environmental/climate policies; and of the few studies on public support, a majority and the most solid ones conclude that degrowth strategies and policies are socially and politically infeasible.

The impact of wealth inequality on economic growth: Evidence from Italy during its structural transformation

Pablo Martinelli Lasheras, Dario Pellegrino — 2024-09-11T00:00:00+0000

Economic equality and growth are important policy objectives, but the relationship between the two aims is complex. This column examines how the distribution of land ownership shaped Italy’s structural transformation after WWII. A relatively egalitarian agrarian economy corresponded with higher levels of economic growth, fostering a successful entrepreneurial model with flexible networks of small and medium-sized firms. Redistributive policies can spur economic growth while reducing inequality, but they need to be sizeable, targeted, and well-calibrated to make the path out of disadvantaged living conditions sustainable.

Much money, little capital, and few reforms: The 2023 banking turmoil

2024-09-10T23:00:00+0000

The events of March 2023 in the US and Switzerland showed, once again, that banking systems remain fragile. The latest Geneva Report on the World Economy assesses whether reforms to date suffice to deal with a changing environment and ongoing structural changes, and what additional reforms may be necessary. While the specific causes of bank vulnerabilities differ between jurisdictions, many of the report’s lessons apply more generally.

Demographic change: Individual blessing, but headwinds for European growth

Thomas Cooley, Espen Henriksen, Charlie Nusbaum — 2024-09-10T00:00:00+0000

Developed countries are ageing fast. Although longer and healthier lives imply huge welfare gains for individuals, the effects on economic growth have been elusive. This column uses a structural model to estimate the contributions of demographic change to the historical and projected future economic growth in the four largest European economies. The model projects that the demographic headwinds for economic growth will be large in the coming decades. Several reforms have been suggested to increase growth. The welfare heterogeneity of these reforms across age, income, and wealth groups provides some insights into the opposition to their implementation.

The economics of organisational strategy

2024-09-09T00:00:00+0000

Many of today’s global problems, such as sustainability, technology, skills, and diversity can only be solved by organisations. This column argues that more work is needed to understand strategic management by firms, how firms behave, and how they respond to economic incentives. Future research should study strategic decisions by firms as well as their internal organisational choices. Filling this gap will help understand the persistent differences in performance across firms, how they might respond to new, disruptive technologies, and how to best design industrial policies for strategic sectors.

Religion matters for economic growth through various channels

Sascha O. Becker, Jared Rubin, Ludger Woessmann — 2024-09-08T00:00:00+0000

Though social scientists have long questioned how religion affects economic growth, a lack of accessible data hindered their efforts. Recently, advances in computing, novel econometric techniques, and the availability of new data have enabled researchers to test how religion has influenced growth in rich and poor countries, both historically and in the present. This column argues that religion is a ubiquitous social phenomena that can spur or impair economic growth by affecting four elements of the macroeconomic production function – physical capital, human capital, population/labour, and total factor productivity.

Online versus in-person services: Effects on patients and providers

Amanda Dahlstrand, Nestor Le Nestour, Guy Michaels — 2024-09-07T00:00:00+0000

Switching the delivery of one-to-one services from in-person to online offers potential cost savings and increased convenience, but what are the impacts on providers and consumers? This column studies the effects of online delivery of primary care doctor consultations in Sweden. The authors find that online consultations are delivered sooner, are shorter, and yield similar in-consultation outcomes, but are more likely to be followed up in person, which reduces their cost savings, though they find no adverse medium-term health effects.

Public investment: The orphan of politics

Martin Larch, Wouter van der Wielen — 2024-09-06T00:00:00+0000

If constrained by EU rules, fiscal policymakers will cut or postpone public investment. This seemingly obvious point came up regularly in the policy debate around the latest reform of the EU fiscal framework. This column argues that the reality is more complex. Governments lamenting a stifling effect of fiscal rules on public investment are often those that have a poor compliance record and, as a result, high debt. They tend to deviate from rules not to increase public investment but to raise other expenditure items.

Exchange rate models are better than you think, and why they didn’t work in the old days

Charles Engel, Steve Pak Yeung Wu — 2024-09-06T00:00:00+0000

It is generally believed that standard macroeconomic models of foreign exchange rates do not fit the data well. However, this column argues that a model that includes real interest rates, expected inflation, the US trade balance, and measures of global risk and liquidity demand fits the data for the US dollar against other G10 currencies in the 21st century. Both monetary and non-monetary variables help explain exchange rate movements. The model fit has improved gradually since the 1970s, likely linked to better monetary policy (inflation targeting), as the scope for self-fulfilling expectations has disappeared.

The economics of strategy

2024-09-05T23:00:00+0000

Organisations don’t just provide employment: they solve, or attempt to solve, important problems in our society. Organizational economics has made some impressive strides in recent years to show what choices organisations make. But there is much less research on how they come up with the strategies that guide those choices. Ghazala Azmat tells Tim Phillips about a new initiative that aims to deepen our knowledge of the economics of organisational strategy.

The urban wage premium for women: Evidence across the wage distribution

Eloiza Almeida, Solange Gonçalves — 2024-09-05T00:00:00+0000

The urban wage premium – the positive wage differential between more and less dense geographic areas – is rarely estimated separately for men and women. This column shows that, in Brazil, agglomeration economies benefit men and women differently in dense areas: the urban wage premiums for men and women change across the wage distribution and differ between formal and informal jobs. Studies focusing only on men may underestimate the premium.

Intended and unintended consequences of welfare cuts for refugees

Christian Dustmann, Lars Højsgaard Andersen, Rasmus Landersø — 2024-09-05T00:00:00+0000

Many governments have limited welfare benefits for refugee immigrants to encourage workforce participation. This column examines the effects of a large reduction in the cash transfers that non-employed refugee immigrants Denmark were eligible for. While triggering notable initial employment responses, the reform failed to sustain employment and self-sufficiency, particularly in areas where low-skilled work is in low demand. In addition, unintended adverse effects on children’s education, labour market performance, and crime rates outweighed, in the longer run, the short-term effects on the labour supply of their parents.

Macroprudential policies and industrial growth: Cross-country evidence over the last 30 years

Carlos Madeira — 2024-09-04T00:00:00+0000

Macroprudential policies have been part of the standard toolkit for central banks since the Global Financial Crisis. This column estimates the effect of macroprudential policies on real growth of 23 manufacturing industries across 89 countries. Macroprudential tightening measures negatively impact manufacturing growth, but only for industries with high external finance dependence. This effect is stronger for advanced economies, and it persists over several years. However, macroprudential policies can also have a positive growth impact, for example during banking crises and during the Covid-19 pandemic.

Good management practices are great for productivity… as well as profit shifting

Katarzyna Bilicka, Daniela Scur — 2024-09-04T00:00:00+0000

Following the release of the Panama Papers and the Pardise Papers, there has been renewed research into profit shifting by multinational firms. This column utilises a novel dataset to show that well-managed subsidiaries, independently of their headquarters, allow a company to be more responsive to tax changes, shifting more profits from high-tax to low-tax jurisdictions. The authors argue this is because better managed subsidiaries allow more effective tax planning by headquaters and are better placed to implement HQ directives.

Targeted restrictions on teenage drivers: A promising approach to improving road safety

Tim Moore, Todd Morris — 2024-09-03T00:00:00+0000

Traffic accidents are the leading cause of death among teenagers in most countries. This column examines the impact of a policy in Australia banning first-year drivers from carrying two or more passengers under the age of 21 at night. The authors estimate that the policy reduced reported nighttime multi-passenger crashes by 57%, casualties by 50%, and hospitalisations and fatalities by 58%. The findings highlight that effective road safety policies can achieve significant reductions in crashes without completely restricting teenagers’ ability to gain driving experience. They also emphasise the importance of focusing on specific risk factors, rather than implementing broad, less-targeted measures.

Wage insurance for trade-displaced workers: A middle-ground alternative to rising protectionism

Benjamin Hyman, Brian Kovak, Adam Leive — 2024-09-02T23:00:00+0000

Wage insurance that compensates those directly negatively affected by trade can cost-effectively help workers who most need assistance and allow them to move with less pain to new jobs. This column examines the wage insurance components of US Trade Adjustment Assistance, which offers wage subsidies to workers who find reemployment at a lower wage. The programme boosted workers’ employment probabilities and their earnings, and workers returned to work more quickly with no declines in job quality. Wage insurance appears to pay for itself, with tax receipts on increased earnings and reduced unemployment insurance payments fully offsetting the programme’s costs.

Understanding the effects of the cost-of-living crisis: The role of interest rates and mortgage debt

Boris Chafwehe, Mattia Ricci, Daniel Stöhlker — 2024-09-02T00:00:00+0000

The cost-of-living-crisis has been a major concern for households across the world. This column examines the impact of the crisis on household wealth across various demographic and income groups in six euro area countries, focusing on the role of households’ mortgage status. The findings indicate that working-age mortgage holders have experienced wealth gains despite higher interest payments, due to the reduction in the real value of their mortgage debt. The authors show that the relative gains recorded by mortgage-holders are a key factor in explaining differences in the effects of the crisis across demographic groups.

Using public debt to deliver long-term investments and reforms

Pierre Boyer, Brian Roberson — 2024-09-02T00:00:00+0000

Political incentives often push leaders toward policies that prioritise short-term gains over long-term benefits. This column argues that the decision to raise public debt plays a key role in shaping political incentives around implementing reforms. Beneficial reforms are more likely if sufficient debt can be raised and if enough of the future gains are of private good nature. Furthermore, soft debt limits are preferable over hard limits for efficient reform provision. Empirical evidence on debt capacity, public investment, and transfers from OECD countries is consistent with the theoretical predictions.

The persistent human costs of deindustrialisation: Lessons from the collapse of the British coal industry

Björn Brey, Valeria Rueda — 2024-09-01T00:00:00+0000

Industrial decline has been directly linked to a worsening of various social and economic indicators. This column examines how the impacts of deindustrialisation in the UK reverberate across generations, finding significant effects on the health, wealth, and living standards of those who grew up under industrial decline. The ability to migrate to wealthier parts of the country is not sufficient to offset these negative effects.

Resolving the stakeholder governance dilemma: An integrated performance approach

Dirk Schoenmaker, Willem Schramade — 2024-08-31T00:00:00+0000

The discourse on stakeholder governance has been a contentious issue in recent years. This column argues that the challenge of multiple goals in stakeholder theory can be addressed through an integrated performance measure that combines profit and impact. Recent advancements in impact accounting facilitate the quantification of stakeholder value, enabling a more comprehensive approach to corporate governance.

The macroeconomics of narratives

Joel Flynn, Karthik Sastry — 2024-08-30T00:00:00+0000

The idea of an episode of negative sentiment causing poor economic performance has gained prominence in the press and drawn attention from policymakers struggling to read contradictory macroeconomic signals. This column applies natural language-processing tools to assess the importance of narratives for the US business cycle. The analysis suggests that contagious narratives are an important driving force in the business cycle, but not all narratives are equal in their potential to shape the economy, and the fate of a given narrative may rest heavily on its (intended or accidental) confluence with other narratives or economic events.

The EU miracle

2024-08-29T23:00:00+0000

In 2004 75 million people in 10 countries joined the EU. Their GDP per capita has grown dramatically in the last 20 years – but how much of that is due to EU membership, and how much would have happened anyway? Basile Grassi tells Tim Phillips that the enlargement of the EU in 2004 was "a miracle" for the economies of these countries, even though nationalist politicians may argue otherwise.

The impact of political connections on firm outcomes: Evidence from Germany

Andre Diegmann, Laura Pohlan, Andrea Weber — 2024-08-29T00:00:00+0000

In the last 20 years, the share of German firms with political connections has increased, but the impact of political connections on firm growth is not clear. This column examines how German firm outcomes are affected when federal politicians serve as firm directors or officers. Firms appointing a politician to a corporate position are less likely to exit over the next five years than firms who appoint a non-politician, possibly due to better access to credit. Firms appointing a parliamentary politician also grow faster. However, productivity tends to slow down.

Economic consequences of US-China technological decoupling: An illustrative quantitative analysis

Naoto Jinji, Shunya Ozawa — 2024-08-28T00:00:00+0000

The impact of a US-China technological decoupling on trade, foreign direct investment, and welfare is quantified using a simple dynamic quantitative trade model that includes FDI as a channel of technology diffusion. By evaluating the impacts of restrictions on technology diffusion and export controls separately, this column suggests that the potential negative impact of a unilateral decoupling from China undertaken by the US on Chinese welfare would be mainly attributed to technology restriction. It also finds that the US, China, and many other countries would experience welfare losses from a decoupling, but the magnitude of the welfare loss could be relatively small if the decoupling is restricted to the two countries.

Financial crises and the global supply network: Evidence from multinational enterprises

Sergi Basco, Giulia Felice, Bruno Merlevede, Marti Mestieri — 2024-08-27T00:00:00+0000

Financial crises affect economic activity and may also distort global supply chains. This column estimates the network effects of crises by examining European multinational enterprises during the Great Recession in the 2000s. A larger network shock (captured using changes in risk premia across European countries) during the financial crisis led to lower growth in the number of affiliates, and parent firms also experienced lower revenue and employment growth. These effects were driven by parent companies with higher initial leverage. The results highlight the importance of a healthy financial system for international production organisation.

Exorbitant privilege and the sustainability of US public debt

Jason Choi, Duong Dang, Rishabh Kirpalani, Diego Perez — 2024-08-26T00:00:00+0000

Despite exceeding 100% of GDP, US public debt is considered safe due to the country’s role as a safe global asset and reserve currency supplier. This column uses a model to quantify the additional debt capacity generated by this ‘exorbitant privilege’ status. It finds that the special status of the US increases maximal sustainable debt by around 22% of GDP, mostly due to debt being liquid and widely used as collateral. Overall, the US’s status in global financial markets is crucial for debt sustainability, and efforts by other countries to establish competing safe assets could pose challenges to the US’s dominant position.

Found in translation: Why some countries learn from the West, and most don’t

Réka Juhász, David Weinstein — 2024-08-25T00:00:00+0000

The transfer of technical information is key to unlocking a country’s ability to develop. This column argues that ‘technical literacy’ is needed so the economy can effectively absorb these new technologies. Using the case study of Japan in the 1870s, the authors demonstrate that a state-organsed knowledge transfer, centred on improved education and translation of texts into Japanese, propelled the country’s rapid development as the country shifted its comparative advantage to those industries which benefitted from codified knowledge.

‘Connector’ countries in a geoeconomically fragmented world

Shekhar Aiyar, Franziska Ohnsorge — 2024-08-24T00:00:00+0000

As the global economy fragments along geopolitical lines, countries are seeking new ways to flourish, or at least insulate themselves against geopolitical shocks. Drawing from a newly constructed database, this column explores the concept of ‘connector’ countries, which can be vertical along supply chains or horizontal across markets. The authors argue that vertical connectors may increasingly come under political pressure, whereas horizontal connectors may be more resilient to geopolitical shocks. Countries that are more open to global trade and investment and have more efficient financial markets are better horizontal connectors.

Credibility, trust, and perception of authorities’ performance

Charles Goodhart, Ly Hoang Vu — 2024-08-23T00:00:00+0000

The credibility of an institution is, almost, synonymous with how well it is trusted. This column uses survey data to examine how trust in various institutions – the government, parliament, the EU, the IMF, and the World Bank – is affected by respondents’ views on aspects of the economy (their own financial situation, the need for economic growth, and the need to fight inflation). When respondents feel most concerned with the need to prevent inflation, trust in all the various institutions of authority has become lower, while it is marginally higher when respondents cite economic growth as one of their most important concerns.

The economic burden of burnout

2024-08-22T23:00:00+0000

Today doctors recognise the symptoms of burnout from work-related stress. It’s a common problem, but one that can have serious, long-term consequences for sufferers. New research shows that there are measurable consequences for partners and children too, and lasting effects on fertility. Arash Nekoei and Josef Sigurdsson talk to Tim Phillips about the scale of the burnout burden, and what can we do to identify the problem before it happens.

The geography and determinants of ‘new work’ in the United States

Gueyon Kim, Cassandra Merritt, Giovanni Peri — 2024-08-21T23:00:00+0000

The evolution and changing content of work is a defining feature of advanced economies. Jobs that did not exist in the US before 2000, for example, now employ millions of people. This column analyses the role of local factors and exposure to global shocks in generating ‘new work’. The findings point to the role of local human capital as a key element both in generating ‘new work’ as well as in turning some shocks, such as trade and technological change, into ‘new work’.

IMF lending and private sector investment decisions

Pietro Bomprezzi, Silvia Marchesi, Rima Turk-Ariss — 2024-08-20T23:00:00+0000

Financial support by the IMF aims to create breathing room for countries hit by crises and provide a seal of approval that appropriate policies are adopted, helping improve future prospects during periods of heightened risks. This column examines how IMF lending arrangements may impact a firm’s investment decisions. The authors find that lending from the General Resource Account increases investment significantly in the years after programme approval, and that firms that are more dependent on external finance, those that are more subject to uncertainty, and domestically owned firms invest more following the approval of a programme. The effect of lending from Poverty Reduction and Growth Trust on firm investment is much more muted and short-lived.

Trade effects of industrial policies: The shielding effect of preferential agreements

Alessandro Barattieri, Aaditya Mattoo, Daria Taglioni — 2024-08-19T23:00:00+0000

Industrial policy is in vogue among policymakers globally. This column examines the shielding effect that membership of a preferential trade agreement can have when a trade partner implements a new industrial policy. The authors find that the introduction of a new industrial policy measure in a destination market reduces export growth to that market. However, exports from fellow members of preferential trade agreements are not adversely affected and may even be positively affected if the agreements have deep disciplines on subsidies.

Inequality within countries is falling

Maxim Pinkovskiy, Xavier Sala-i-Martin, Kasey Chatterji-Len, Will Nober — 2024-08-18T23:00:00+0000

Tax data suggest that while inequality between countries has fallen dramatically, inequality within countries has risen. Household surveys point to much lower within-country inequality, but may suffer from underreporting of income. This column uses a new method to estimate the degree to which the rich report a lower fraction of income than the poor do, and then compute the path of global within-country inequality for the last 40 years. The authors find that not only has overall global inequality fallen, but within-country inequality has stopped rising and has been falling for the better part of a decade, if not more.

Robots and wage polarisation

Daisuke Adachi — 2024-08-17T23:00:00+0000

Industrial robots can have a transformative effect on employment and wages. This column studies how the rise of robot capital has influenced wage polarisation across different occupations in the US. It finds that the substitutability between robots and labour is heterogeneous across occupations, and particularly strong in production and material-moving jobs. Robotisation has led to slower wage growth for these occupations, and thus contributed to increasing wage polarisation. Potential policies to address these distributional effects include retraining programmes and tax policies to manage the pace of robot adoption without stifling innovation.

Burn now or never: The response of fossil fuel firms to climate policy

Jakob Feveile Adolfsen, Malte Heissel, Ana-Simona Manu, Francesca Vinci — 2024-08-16T23:00:00+0000

The prospect of stricter climate regulations may prompt some firms to scale back operations due to expected declines in demand and rising production costs from carbon taxes, while others might ramp up investment to exploit resources and secure profits before the regulations hit. This column leverages variation in climate change exposure within the industry to examine how fossil fuel firms are reacting to anticipated climate policies. Firms with high climate change exposure responded to the Paris Agreement by increasing investment relative to firms with low exposure, with this increase in investment primarily stemming from firms focused on fossil fuel extraction rather than those diversifying into alternative investments.

The economics of exempting green vehicles from congestion pricing

J Peter Nilsson, Matthew Tarduno, Sebastian Tebbe — 2024-08-15T23:00:00+0000

It is increasingly popular for cities to exempt clean cars from congestion pricing tolls. This column uses data from Stockholm to show that congestion pricing with exemptions for alternative vehicles can reduce traffic while incentivising green vehicle adoption, However, these exemptions are best employed when there are few existing electric vehicles on the road.

Getting cash transfers right

2024-08-15T23:00:00+0000

Sending regular small sums of money to households or individuals are go-to policy. Should these transfers be universal or targeted? And how big, and how regular, should the sums be? In another episode based on the most interesting presentations from the CEPR-PSE Symposium 2024, Paul Niehaus explains to Tim Phillips how cash transfers work best to relieve poverty.

An economic test for protecting consumers from AI-powered collusion

Joe Harrington — 2024-08-14T23:00:00+0000

With Big Data and artificial intelligence fuelling a growing market in the supply of algorithms by software and data analytic companies to assist firms in the pricing of their products and services, there are concerns that competitors contracting with the same third party could coordinate price increases. This column summarises a new approach for uncovering economic evidence of an unlawful agreement between competing firms to adopt a third party’s pricing algorithm. The economic test could be used to screen possible cases for investigation or used in conjunction with other evidence to prove a violation of Article 101 of the Treaty on the Functioning of the European Union.

Culture clash: What 14 million images tell us about times a-changin’

Hans-Joachim Voth, David Yanagizawa-Drott — 2024-08-13T23:00:00+0000

Style choices are an important dimension of culture and are often used to demonstrate individualism or belonging to a group. This column uses over 14 million images from high school yearbooks to track cultural change in the US over space and time. Style characteristics of men and women converged from the 1960s onwards, driven by higher individualism and lower style persistence for males. Furthermore, it shows that novel style innovations predict patenting rates, suggesting that cultural change can facilitate innovation in other areas later in life.

Skilled but struggling: The ‘brain waste’ dilemma of migrants in Europe

Angela Dalmonte, Tommaso Frattini — 2024-08-13T00:00:00+0000

Immigration flows can benefit host country economies and labour markets by addressing skill shortages and bolstering technological leadership. This column analyses the integration of highly educated immigrants into European labour markets. Although a similar share of immigrants and natives have a university education, tertiary-educated immigrants have a lower employment probability. Tertiary-educated immigrants are more likely to be over-educated for their jobs. Better identifying the causes of such skill waste and designing targeted policies would allow Europe to unlock the full potential of its diverse workforce.

From media narratives to racial equality: How Superman helped to pave the ground for Civil Rights

Alex Armand, Paul Atwell, Joseph Flavian Gomes, Giuseppe Musillo, Yannik Schenk — 2024-08-13T00:00:00+0000

Changing deep-rooted attitudes about race is a formidable challenge. Racist stereotypes often endure for decades or even centuries. But can narratives in popular media such as television, cinema, and radio be harnessed to combat prejudice and promote tolerance? This column explores this question by examining a unique historical experiment: a sudden shift in the narrative of the 1940s children’s radio program The Adventures of Superman. The authors show how this programme promoted racial tolerance and advanced civil rights in the post-WWII United States.

Jonathan Eaton, 1950-2024

Ana Cecilia Fieler, Felix Tintelnot — 2024-08-13T00:00:00+0000

Jonathan Eaton, who passed away in February 2024, was a pioneering scholar in international economics. This column outlines his many contributions to our understanding of the global economy, including his work with Samuel Kortum integrating theory and data, notably an influential framework for analysing trade flows that also became the cornerstone of research in spatial economics and on the production networks of multinationals; his development with Mark Gersovitz of the foundational model for analysing sovereign debt defaults; and many insights into trade policy, sanctions, growth and technology diffusion. In addition to his wide-ranging intellectual legacy, he will be remembered as a wise and generous mentor to his students and other young scholars.

Confronting low fertility rates and population decline

David Bloom, Michael Kuhn, Klaus Prettner — 2024-08-12T00:00:00+0000

Fertility rates have been declining in high-income countries for decades. This trend, along with increasing human longevity, poses a challenge for advanced economies. This column argues that a holistic set of policies can be implemented to address the economic risks. These policies should stimulate human capital accumulation and education, which are more important than population size for economic prosperity. Furthermore, polices should promote healthy aging and more choice over retirement decisions, and family-friendly policies to slow the fall in fertility should be enacted.

The effect of AI adoption on jobs: Evidence from US commuting zones

Alessandra Bonfiglioli, Rosario Crinò, Gino Gancia, Ioannis Papadakis — 2024-08-12T00:00:00+0000

Harnessing the potential of artificial intelligence has become one of the top priorities for policymakers around the world. Yet, doing so first requires a thorough understanding of the effects of these technologies on labour markets. Using data across US commuting zones over the period 2000-2020, this column presents evidence that AI adoption has reduced employment, except in high-paying occupations and those requiring a degree in STEM disciplines.

Inclusive labour force participation can reverse the economic consequences of population ageing

René Böheim, Thomas Horvath, Thomas Leoni, Martin Spielauer — 2024-08-11T00:00:00+0000

Demographic ageing is putting considerable pressure on the economic and social systems of industrialised countries. This column highlights that although the US is in a more favourable position than other OECD countries with respect to the expected future change in old-age dependency ratios, it is also characterised by large differences in labour market outcomes across population groups. In particular, disparities in labour force participation at the intersection of race/ethnicity and gender provide scope for policy aimed at reducing such gaps and thereby mitigating – or even offsetting – the effects of population ageing.

The effects of Tobacco 21 laws on tobacco product use: Comparing self-reports and biomarkers

Chad Cotti, Philip DeCicca, Erik Nesson — 2024-08-10T00:00:00+0000

Raising the legal age for purchasing tobacco products to 21 has emerged as a preferred strategy to reduce the rates of youth smoking and vaping in the US. This column uses both self-reported and biomarker measures to assess the impact of implementing such policies. The authors find that self-reported smoking rates decline markedly upon introduction of Tobacco 21 rules, but biomarker results reveal only mixed evidence of reduced tobacco exposure, suggesting fewer young smokers are identifying as smokers under the new rules. Tobacco 21 rules also encourage cross-border shopping to states with lower age restrictions. The overall findings for vaping are similarly mixed.

Different household, different inflation rate

Regina Kiss, Georg Strasser — 2024-08-09T00:00:00+0000

Households differ considerably in terms of the inflation they experience at any point in time. This column examines the nature and sources of inflation differences for purchases of supermarket goods across a large panel of French and German households. The main reasons for the differences are that prices (and thus price changes) differ from place to place and that households do not all buy the same products. Households adjust their purchases over time, but not enough to offset these differences.

Demand versus supply: Drivers of the post-pandemic inflation and interest rates

Kristin Forbes, Jongrim Ha, M. Ayhan Kose — 2024-08-09T00:00:00+0000

Whether post-pandemic inflation can be explained by demand-side versus supply-side factors is critical for setting monetary policy. Nevertheless, there is widespread disagreement about the underlying sources of recent inflation. This column argues that part of the disagreement is due to differences in (i) the variables being studied (inflation or interest rates), (ii) the countries analysed, and (iii) whether the focus is on domestic or global shocks. It finds that demand shocks were the primary driver of recent increases in interest rates, while supply shocks were the primary driver of post-pandemic inflation. However, there are important heterogeneities across countries, and in the contribution of domestic versus global shocks.

Do billionaires pay taxes?

2024-08-09T00:00:00+0000

More new research from the PSE-CEPR Policy Forum 2024.

Data about the personal finances of the richest people in our society is hard to find. A team of economists in France have attempted to answer a question that increasing preoccupies both policymakers and the public: how much tax do the ultra-rich actually pay? Antoine Bozio talks to Tim Phillips about why France’s tax regime is no longer progressive – and what would happen if progressivity was restored.