CEPR News In focus this week: 17 November 18 Nov 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.
A three-step emergency plan for an EU-level gas price cap and gas saving targets Writing at VoxEU, Natalia Fabra, Karsten Neuhoff and Nicolas Berghmans propose an emergency gas policy package to deal with the energy crisis that threatens European economies and security of supply. The proposal combines an EU-wide gas price cap with binding gas-saving targets and a continued strong price incentive for users to cut gas consumption. The authors explain how these three policy measures would work together, enhance credibility, address concerns about implementing a price cap, and could accommodate the needs of different EU member states.
Climate finance for developing countries is not just equitable, it is self-interest A new study by Patrick Bolton, Alissa Kleinnijenhuis and Tobias Adrian conservatively estimate that the net global economic gain from replacing coal with renewables is around $85 trillion, and suggest that the most effective way to make “finance flows a reality” at COP27 may be to make countries aware of the net gain they can reap from financing the phase out of coal.
The good news and bad news about international environmental agreements Do stronger environmental standards put countries at a competitive disadvantage? A study by Mihai Paraschiv, Maurizio Zanardi and Josh Ederington examines the impact of ratifying an international environmental agreement on a country’s competitiveness in world markets. The research shows that There is little evidence that the ratification of such agreements contributes to an overall decline in manufacturing exports and there are only small and insignificant effects of ratification on the median-polluting manufacturing industry. There are, however, significant compositional shifts towards exporting cleaner and importing dirtier manufacturing goods, suggesting that such international environmental agreements might be leading to pollution leakage.
Misery of middle-aged in rich countries remains a serious yet under-recognised phenomenon Wiritng at VoxEU, Ahmed Tohamy et al. document extreme distress among middle-aged adults in many affluent countries. Despite the fact that people’s earnings tend to be near their lifetime maximum, mental distress and suicidal behaviour seem to peak in people’s late 40s or early 50s. Moreover, at that stage of life in rich countries, only a small proportion of citizens have experienced serious health problems. So it would be expected that middle-aged citizens in the developed world should have extremely pleasurable and cushioned lives. Yet that is not what the data show.
A fresh approach to climate action Writing at VoxEU, Dennis Snower argues that Olaf Scholz’s ‘Climate Club’ offers a promising approach new to climate action by suggesting a new type of multilateralism that gives countries the latitude to pursue a common climate goal – articulated in the Paris Climate Agreement – through diverse policy pathways. It also creates space to support emerging and developing countries, all within a framework based on monitoring and accountability and incentives to prevent members of the Club from suffering a competitive disadvantage relative to non-members.
Long-term political consequences of immigration A study by Giovanni Peri, Riccardo Turati and Simone Moriconi shows that the political inclinations of second-generation immigrants in Western Europe show a stronger preference for left-wing policies than the native-born population. By settling permanently in a country, immigrants can influence the long-run political landscape in ways distinct from the initial reaction of natives.
Ukraine’s monetary-financial vulnerabilities, and how to mitigate against them Writing at VoxEU, Yevhenii Skok and Oliver de Groot explore the growing risk of uncontrolled inflation in Ukraine, what is causing it, and how it can be stopped. The research shows that the unsatiated demand for foreign currency is putting pressure on the fixed exchange rate. In the longer term, the war has significantly increased the government budget deficit, raising concerns of monetary financing. Whether the war ends soon or not, the transition back to normality and stability is fraught with uncertainty.
Ukraine’s wages and job loss trends during the war Using wage payments data from one of Ukraine’s largest commercial banks to overcome a lack of available data on labour markets, a study by Simeon Djankov and Oleksiy Blinov finds that since the start of the war, nominal wages have managed modest growth, amounting to 3% by end-October. However, wages dropped 11% in real terms over the January to October period and their decline has accelerated to 18% in the past month. Furthermore, 13% of hired employees have lost their job since the start of the war and there is evidence of a downward trend in job losses.
The role of inflation in debt consolidations over the last 220 years A study by Rui Esteves and Barry Eichengreen assembles a worldwide history of successful debt consolidations since 1800 and highlights the role of inflation. The research shows that although inflation facilitated large debt consolidations in the past, the frequency of these was lower in periods of high inflation, when interest rates quickly caught up. The largest concentration of debt consolidations in fact coincides with periods of low and stable inflation in the context of credible monetary and fiscal policies.