CEPR News In focus this week: 15 December 15 Dec 2022 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 uneven effects of rising energy and consumer prices on poverty and social exclusion in the EU A study by Balint Menyhert finds that inflation has likely increased poverty and social deprivation by around 1–5 percentage points in the EU. Differences across member states are large and uneven, which increases inequalities and poses a threat to European social cohesion. This requires a strong and coordinated policy response, both of short-term emergency support measures and longer-term strengthening of social protection systems.
A proposal for reforming European electricity markets Writing at VoxEU, Natalia Fabra discusses a new electricity market architecture proposal that aims to strike the right balance between exposing firms and consumers to short-run price signals while efficiently and equitably de-risking long-run investments. The proposed architecture would facilitate the achievement of carbon-free and diversified power markets, allowing for substantial reductions in the cost of electricity for consumers.
Are elites unethical, driven by more selfish impulses than ordinary people? A study by Stefan Trautmann reviews research into the ethics of rich and poor Germans and finds no evidence that higher socioeconomic status is associated with a weaker moral compass. Still, high-status individuals are held to high ethical standards, making it easier for them to fall short and be perceived as unethical.
Language training and work placement best promote refugees’ long-run economic integration: Evidence from Denmark A study by Linea Hasager, Giovanni Peri and Mette Foged reviews how the economic integration of refugees is affected by active labour market policies, welfare cash payments, language classes, and initial placement in locations with strong labour markets or large networks of co-nationals. Evidence from Denmark indicates that language training and placement in strong labour markets are the most effective policies in promoting long-run refugee integration.
Flat tax reform in Ukraine: Lessons from Bulgaria Writing at VoxEU, Simeon Djankov argues that introducing a flat tax as a boost to the post-war recovery in Ukraine is feasible if such a reform can sustain fiscal neutrality. A similar reform in Bulgaria has achieved the desired goal of enlarging the tax base by limiting the size of the informal economy. The flat tax reform is considered fair since, in a progressive tax regime, rich individuals and large companies often take advantage of available loopholes and exceptions to avoid paying any tax at all.
The true cost of war: The conflict in Eastern Ukraine (2014-2019) Writing at VoxEU, Nicolas Gomez Parra, Harun Onder and Erhan Artuc describe a new method for estimating the impact of the conflict in Eastern Ukraine between 2014 and 2019 by using a preference-based approach as revealed by people’s mobility patterns. The research shows a large lower-bound welfare loss for Donetsk residents, equivalent to between 27.72% and 39.74% of income loss for a duration of ten years.
The economic consequences of war Writing at VoxEU, Zsoka Koczan and Maxim Chupilkin use data from 400 wars over the past two centuries to show that wars fought on a nation’s own territory result in significant GDP per-capita loss, civil wars have more persistent effects than interstate wars, and certain kinds of conventional research may have significantly understated the long-term economic scars of war.
International trade in the time of climate crisis Writing at VoxEU, José-Antonio Monteiro discusses a recent WTO report on the complex relationship between climate change and international trade. It shows that countries with greater trade openness tend to be less vulnerable to climate shocks. In addition, although international trade generates greenhouse gas emissions, it can also help accelerate the transition to a low-carbon economy. Ultimately, international cooperation on climate-related policies will be a key ingredient to limiting climate change in the future.
The political consequences of austerity: Evidence from across Europe A study by Mathias Klein, Ana Sofia Pessoa and Ricardo Duque Gabriel provides new evidence on the political consequences of austerity using data covering 200 elections across Europe. Results show that austerity measures lead to a significant increase in the vote shares of extreme parties, lower voter turnout, and a rise in political fragmentation. Austerity-driven recessions amplify the political costs of economic downturns considerably by increasing distrust in the political environment.