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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.
China's manufacturing sector, a historically important part of its economy, faced data challenges after 2007 due to problems with the National Bureau of Statistics' annual survey. A new CEPR study by Loren Brandt, Johannes Van Biesebroeck, Luhang Wang and Yifan Zhang uses an alternative data source from the State Taxation Administration for 2007-2013 to show that there has been a slowdown in total factor productivity growth across all sectors, ownership types, and regions. The private sector lost dynamism, and new firm contributions to productivity growth decreased.
A new CEPR study by Giacomo De Giorgi, Mauricio Prado and Battista Severgnini uses Danish administrative data reveals that parental deaths during early life have profound and lasting effects on various aspects of individuals' lives. When a parent dies in the first 1,000 days of a child's life, it leads to a significant (14%). The impact remains substantial for deaths occurring at later ages, resulting in at least 10 fewer months of education, an 11 percentage point lower probability of completing high school. Furthermore, individuals affected by early parental loss tend to reside in less vibrant labor markets at age 30, leading to weaker employment prospects.
Inefficient loan resolution regimes can lead to the creation of zombie firms, with negative spillover effects for the rest of the economy. However, Asli Demirgüç-Kunt, Bálint Horváth and Harry Huizinga argue that weak resolution regimes have the benefit of insulating weak firms from financial and macroeconomic shocks. Using firm-level and bank-level data from Europe, the authors show that zombie firm sales and employment are more stable in response to negative shocks when loan enforcement is weak. Despite these findings, reform of insolvency laws is still desirable and will likely lead to broader positive effects for the European economy.
Women entrepreneurs are less likely to engage in international trade, leaving them unable to capitalise on substantial benefits, such as greater profits and firm growth. A study by Jane Korinek, Annabelle Mourougane and Elisabeth van Lieshout analyses the factors inhibiting women-led firms from trading internationally and suggests policies to overcome them. Ensuring that businesses led by women are able to take advantage of international trade will foster gender equality, help close gender wage gaps, and contribute to more inclusive economic growth.
Evidence on the effectiveness of graphic warning labels to reduce smoking has been inconclusive. However, a study by Donald Kenkel, Alan Mathios, Grace Phillips, Revathy Suryanarayana and Hua Wang shows that compared to those who were shown a text warning, smokers who were shown graphic warnings were more likely to say they would avoid cigarettes, by choosing either the less-harmful e-cigarettes or quitting. However, graphic cigarette warnings influence choice largely because they generate fear or disgust rather than increasing awareness of health risks.
A study by Prottoy Akbar, Victor Couture, Gilles Duranton and Adam Storeygard provides new evidence on why travelling speed varies across cities using a novel global transportation database. Results show a strong relationship between a country’s income level and the travel speed of urban residents by motor vehicle. Richer countries are faster mainly because of more major roads and lower population density, leading to a higher uncongested speed, not lower congestion.
Economists conceptualise choice as an individual maximising utility. Virtue ethics distinguishes extrinsic rewards such as utility from intrinsic rewards associated with Aristotelian virtue. Writing at VoxEU, James Heckman, Bridget Galaty and Haihan Tian presents an economic approach to the study of virtue. It uses simple economic models to clarify the concepts of virtue ethics developed by Aristotle and places them in a well-defined economic framework.
The current monetary architecture features non-banks that transact with bank deposits, and banks that settle payments with central bank reserves. Writing at VoxEU, Dirk Niepelt compares the current regime with systems that also feature a central bank digital currency, to show that a system based on a central bank digital currency can be a less costly alternative to the current two-tier regime, particularly after accounting for direct and indirect costs. Furthermore, he argues that the interest rate on the digital currency should differ from zero and from the rate of interest on reserves.
A study by Filippo Mezzanotti and Timothy Simcoe uses US Census data from 2008 to 2015 to examine how firms appropriate the benefits of innovation. The findings suggest that many previously identified patterns have persisted – for example, most US firms still view trade secrecy as the most important type of intellectual property protection – but also uncover some new stylised facts and highlight a strong link between firm size and engagement with formal intellectual property protection.
IIndicators of trade in value added are often published with a long delay, limiting their relevance for policymaking. A study by Polina Knutsson, Annabelle Mourougane, Rodrigo Pazos, Julia Schmidt and Francesco Palermo nowcasts indicators for 41 economies and 24 sectors for 2021 and 2022, using a range of models, to show that the share of domestic value added in exports is estimated to have fallen in 2021-22, while domestic services value-added shares of exports are expected to have been broadly stable and the share of domestic value added embodied in foreign demand is nowcasted to have recovered over the period.
A study by Laura Alfaro and Davin Chor analyses the evolution of global supply chain patterns centred around the US over the last four decades, with a focus on the post-2017 period, to show that the ongoing reallocation of global value chain activity comes with costs that need to be monitored and assessed, and that policies to encourage shifts in sourcing patterns may ultimately fail in their objective to reduce US dependence on supply chains linked to China.
In a dynamic labour market, employer market power is jointly determined by the entry and exit margins of labour supply – i.e. the extent to which higher wages ease recruitment and improve rentention. A study by Ihsaan Bassier, Alan Manning and Barbara Petrongolo focuses on the entry margin, investigating the extent to which higher-wage firms in the UK can fill job vacancies faster, making recruitment easier. The findings reinforce the relevance of monopsonistic labour markets and the associated ability of firms to mark down the wages of workers.
A study by Elisabeth Artmann, Nicola Fuchs-Schündeln and Giulia Giupponi uses a 2014 German policy that increased pension wealth for mothers to illustrate that pension reforms alter not only the expenditure side but also the revenue side of budgets, as workers adjust their immediate labour supply in response to the income effects caused by changes to future pensions. The findings demonstrate how pension reforms affect workers who are still many years from retirement.
Opposition to asylum seekers has become a political and social media hot button issue in every high-income country. But does their presence also depress rental values for neighbouring properties? Marius Brülhart tells Tim Phillips about new research from Switzerland that uncovers the effect of immigration on rents.
€-coin went down to -0.79 in November, from -0.67 in October, reaching
its lowest figure since September 2022.