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This weekly press briefing highlights some of the latest research reports, discussion papers and other publications from CEPR. It also features some of the latest columns on VoxEU, as well as new blogs/reviews, audio interviews and short films.
The European Commission has opened an investigation into the proposed acquisition of Lagardère by Vivendi. Writing at VoxEU, Charles Angelucci and colleagues develop numerous arguments to inform the debate and highlight the importance of considering pluralism as one of the dimensions of the quality of the media.
A study by Nils Steiner et al. uses data from a survey of European university students to show that pro-European attitudes improved in the immediate aftermath of the Russian invasion of Ukraine. These effects are particularly strong for the societal aspects of European integration, rather than individual considerations. The invasion seems to have brought Europeans closer together, by rallying them around the common European flag.
A study by Simeon Djankov and Oleksiy Blinov estimates the economic impact of Russian rocket attacks on Ukraine’s power grid by using country-wide power supply data from 500 ATMs operated by one of Ukraine’s largest commercial banks. The data shows that Ukraine’s power grid withstood the first waves of attacks in September and October 2022, with quick re-establishment of electricity supply. The sustained damage grew exponentially in November when the Ukrainian economy lost 55% of its power supply in a single day. High-frequency economic data suggest that there has been sizeable effect on the economy so far.
Strengthening the banking sector and developing a well-functioning capital market will be essential for the successful reconstruction of Ukraine. Writing at VoxEU, Alexander Pivovarsky and Ralph De Haas set out an initial roadmap for this process, which includes planning for a comprehensive asset quality review and the subsequent recapitalisation of the banking sector; drawing up privatisation plans for some of the large state banks; designing efficient processes to handle the non-performing loans that will inevitably be a legacy of the war.
Writing at VoxEU, Suryaansh Jain and Ethan Ilzetzki present the results of a recent survey of UK economists regarding the need for deficit cuts following the mini-budget crisis. A large majority of panellists thought that deficit cuts were desirable or necessary in late 2022. A slightly smaller majority endorsed the pace of deficit reduction. Although a third of the panel thought the government got the mix of public spending reduction and taxes about right, more than 40% would have liked further tax increases to limit cuts to public spending.
A study by Nicola Gagliardi, Stéphanie Pamies and Pedro Arévalo Sánchez presents results of a first quantification, carried-out for selected EU countries, of the potential fiscal impact of acute physical risks from climate change. The results highlight that extreme weather events, whose frequency and magnitude should intensify in the coming decade(s), could lead to a significant increase of the public debt burden in some countries, thus adding to existing fiscal vulnerabilities.
In November 2022, the European Commission presented an ambitious plan to overhaul the existing economic governance framework for the EU which includes radical innovations both in the way in which national fiscal plans are formulated and in the governance structure that supports them. Writing at VoxEU, Guido Lorenzoni, Francesco Giavazzi, Veronica Guerrieri and Leonardo D'Amico argues that while the Commission is right to look at NextGenerationEU as a positive model for economic cooperation, a new system of fiscal rules that goes in this direction requires us to think boldly about further steps in the direction of a political and fiscal union.
It has been two decades since the BRICs acronym was coined, with projections that the size of these economies would overtake many of the G7 by 2050. Writing at VoxEU, Tadas Gedminas and Kevin Daly present updated and expanded projections to cover 104 countries out to 2075. Four major themes for the global economy are identified: (1) Slower potential global growth, led by weaker population growth. (2) Continued emerging market convergence, led by Asia’s powerhouses. (3) A decade of US exceptionalism that is unlikely to be repeated. (4) Less global inequality, but more local inequality.
Writing at VoxEU, Luigi Pistaferri, Giovanni Violante and Fatih Guvenen introduce the Global Repository of Income Dynamics, a longitudinal granular dataset currently harmonised across 13 representative countries. The selected countries do not display any discernible common trend towards rising income inequality, despite often-repeated assertions to that effect. The gap between the dispersion in women's and men's earnings has closed in many countries.
A study by Heike Vethaak and Bas van der Klaauw finds that a large-scale Dutch programme in which unemployed workers were required to search for and accept jobs unrelated to their former occupations, worsened labour market outcomes. Though there is ample evidence that caseworker meetings help the unemployed find work, forcing job seekers to conduct sub-optimal searches appears to decrease the likelihood of securing successful employment.
Fertility rates have fallen sharply in OECD countries over the last 60 years, a drop mirrored in diminished employment protection over the same period. Writing at VoxEU, Conchita D'Ambrosio, Anthony Lepinteur and Andrew Clark use a French labour market reform – a layoff tax that protected older workers at the expense of those under the age of 50 – to show that younger workers who felt less job security reduced their fertility by 3.7 percentage points. Though job insecurity reduced family size, it did not decrease the probability of parenthood itself.
A study by Orkun Saka and Barry Eichengreen uses hand-collected data on banks’ investments in European sovereign debt to show that trust importantly influences cross-border investment. Banks acquire a unique corporate culture by adopting and synthesising the cultures of their employees. As a result, when residents of the countries where a bank operates have a high level of trust in residents of another country, the bank is more likely to hold claims on that country. This is the first evidence of the role of trust, rooted in cultural stereotypes, in bank lending to governments.
Writing at VoxEU, Damiano Sandri and Francesco Grigoli use credit card data from Germany to show that monetary policy tightening has considerable contractionary effects on consumer spending, but the effects heavily depend on the maturity of the interest rate shock. The research shows that increases in short-term interest rates affect consumption rapidly, while increases in medium-term interest rates involve at least a six-month lag. There is also considerable heterogeneity in the effects across spending categories and a stronger impact on higher-income users. Monetary easing, in contrast, appears unable to boost consumption.
Why do residents oppose renewable investments, even those promising socioeconomic benefits such as new jobs? Using data from across Spain, a study by Natalia Fabra, Aitor Lacuesta, Eduardo Gutierrez and Roberto Ramos finds that new jobs from renewable investments do not always remain in the municipalities where the ventures are built. Public policies should therefore ensure that benefits from renewable investments are shared with the hosting communities.
Over the last two centuries, women have gradually gained rights in many areas of life, and this legal expansion has been closely intertwined with economic development. To understand the drivers behind reform, a study by Michèle Tertilt, Anne Hannusch, Laura Montenbruck and Matthias Doepke examines women’s and men’s economic incentives for supporting or opposing rights. The authors find that economic development can increase the benefits of women’s rights and can thus trigger reforms.
