This week from CEPR: August 1st

Thursday, August 1, 2019

Highlights from some of the latest research reports published in the Centre for Economic Policy Research (CEPR) network’s long-running series of discussion papers, as well as some other recent CEPR publications.

Also, links to some of the latest columns on Vox, the Centre’s policy portal, which provides ‘research-based policy analysis and commentary from leading economists’.

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  • ONLINE ADVERTISING: Greater buyer power hits search engines’ revenues 

From Mad Men to Maths Men: Concentration and buyer power in online advertising
Francesco Decarolis and Gabriele Rovigatti  
CEPR DP No. 13897 28 July 2019

Advertising in the internet era increasingly requires both detailed data to tailor the ad to the right consumers (‘targeting’) and fast algorithms to bid on the online auction platforms where ad space is sold. These needs have given rise to a major shift from advertisers' individual bidding to delegated bidding by highly specialised intermediaries. In turn, by concentrating the demand of many advertisers within a few large intermediaries, this development has triggered the emergence of buyer power and counterbalanced the highly concentrated supply of online advertising.

A new CEPR study analyses the impact of intermediaries and increased buyer power on the revenues of online platforms such as Google. The findings indicate that they have a significant negative impact on search engine revenues. Despite the potential benefits for the search engine from the increased efficiency that intermediaries bring to the market, especially through enhanced speed and better data, the negative revenue result is indicative of the intermediaries' ability to reduce average prices. This is a novel insight into what is currently one of the largest and fastest growing advertising markets.

Figure 1: Number of Advertisers per Industry: Redbooks data

Note: Number of unique advertisers per industry according to Redbooks data. 


The Entertaining Way to Behavioral Change: Fighting HIV with MTV in Nigeria
Abhijit Banerjee, Eliana La Ferrara and Victor Orozco
CEPR DP No. 13892 25 July 2019

A new CEPR study tests the effectiveness of an ‘edutainment’ TV series called MTV Shuga, which aims to provide information and change attitudes and behaviour related to HIV/AIDS across sub-Saharan Africa. The researchers conducted a ‘randomised controlled trial’ in urban Nigeria where young viewers were exposed to MTV Shuga or a placebo TV series. Among those who watched Shuga, there was additional variation in the social messages they received and in the people with whom they watched the show. Among the findings:

  • There were significant improvements in knowledge and attitudes towards HIV and risky sexual behaviour. Treated subjects were twice as likely to get tested for HIV eight months after the intervention. There were also reductions in sexually transmitted diseases among women.
  • These effects were stronger for viewers who reported being more involved with the narrative, consistent with the psychological underpinnings of ‘edutainment’. 
  • Experimental manipulations of the social norm component did not produce significantly different results from the main treatment. The ‘individual' effect of edutainment thus seems to have prevailed in the context of the study. This suggests that, at least in the context of HIV-AIDS, people react to the messages they see on TV regardless of what others say.



Global Dimensions of U.S. Monetary Policy
Maurice Obstfeld 
CEPR DP No. 13887 22 July 2019

A new CEPR study by former IMF chief economist Maurice Obstfeld explores how global factors influence the trade-offs facing US monetary policy-makers. It considers three main channels: 

  • The first is the determination of domestic inflation in a context where international prices and global competition play a role, alongside domestic slack and inflation expectations. 
  • The second channel is the determination of asset returns and financial conditions, given integration with global financial markets. 
  • The third channel is the potential spillback onto the US economy from the disproportionate impact of US monetary policy on the outside world. 

In themselves, global factors need not undermine a central bank's ability to control the price level over the long term -- after all, it is the monopoly issuer of the numeraire in which domestic prices are measured. Over shorter horizons, however, global factors do change the trade-off between price-level control and other goals such as low unemployment and financial stability, thereby affecting the policy cost of attaining a given price path. 

Figure 2: US Exports and Imports (GDP shares, percent) 


ECONOMIC PERFORMANCE AND SOCIAL PROGRESS: Closing the gap between experts and the public

Joseph Stiglitz, Martine Durand, Jean-Paul Fitoussi
29 July 2019

If what experts say has little or no relation to what people feel or can see all around them, it is inevitable that they stop believing the experts and the politicians they advise, and look for answers elsewhere.

Writing at Vox, Joseph Stiglitz, Martine Durand and Jean-Paul Fitoussi introduce the work of the High-Level Expert Group on the Measurement of Economic Performance and Social Progress, which argues that we need to develop datasets and tools to examine the factors that determine what matters for people and the places in which they live. Having the right set of indicators, and anchoring them in policy, will help close the gap between experts and the public that are lies at the root of today’s political crisis.

THE DECLINING LABOUR SHARE OF INCOME: Accounting for the main factors

Jan Mischke, Hans‐Helmut Kotz, Jacques Bughin 
26 July 2019

Since the 1980s, labour compensation relative to aggregate output has been on an inexorable downward trend across major developed economies. In a new study, Jan Mischke, Hans-Helmut Kotz and Jacques Bughin deploy a simple accounting technology to tease out the driving factors of this trend, focusing on the United States. 

The findings highlight the key role of under-appreciated factors, including supercycles, boom-bust effects and rising depreciation. The analysis suggests that while the effect of some factors may dampen or reverse, others are likely to continue at an uncertain pace.


Agnès Bénassy-Quéré, Olivier Blanchard, Laurence Boone, Gilbert Cette, Chiara Criscuolo, Anne Epaulard, Sébastien Jean, Margaret Kyle, Philippe Martin, Xavier Ragot, Alexandra Roulet, David Thesmar  
24 July 2019

In September 2016, the European Council invited all Eurozone members to set up a National Productivity Board to offer a diagnosis and analysis that ‘spans a comprehensive notion of productivity and competitiveness’. The first report of the Conseil National de Productivité analyses the causes of the French productivity slowdown that are common to other OECD countries and those specific to France.

The report also proposes a definition of competitiveness that should be useful for Eurozone macroeconomic policy debates and explains why current account imbalances in the Eurozone are both a sign of deficient adjustment mechanisms and a cause of concern.

TRADE WARS MAY ‘BLOC UP’ WORLD TRADE: Lessons from the 1930s

David Jacks, Dennis Novy 
23 July 2019

Against the backdrop of new tariffs imposed by the Trump administration and retaliation from targeted countries, notably China, the trade wars of the 1930s have received renewed attention. A new study by David Jacks and Dennis Novy argues that the interwar trade wars mainly served to intensify an existing trend towards the formation of trade blocs. The trade wars of the present day may serve a similar purpose – that is, the intensification of China- and US-centric trade blocs.


Alma Cohen, Moshe Hazan, Roberto Tallarita, David Weiss  
24 July 2019

The CEOs of US public companies have a significant preference for Republican politicians over Democrats, according to research by Alma Cohen, Moshe Hazan, Roberto Tallarita and David Weiss. Those politicians may benefit from public companies’ expanded freedom to spend money on politics.

The study examines the political donations of more than 3,800 US CEOs of S&P 1500 companies to analyse their political preferences over time, across industries and geographical regions, and by gender. 

VALUE OF DATA: There’s no such thing as a free lunch in the digital economy

Wendy Li, Makoto Nirei, Kazufumi Yamana 
23 July 2019


Many online platforms have been providing digital goods and services to consumers at zero monetary cost. But consumers, in fact, exchange their personal data for 'free' digital goods and services. As large data holders, online platform firms can get significant economic benefits by monetising data. The proliferation of 'free' digital goods and services challenges policymakers who rely on prices to indicate a good’s value, and also corporate managers and investors who need to know how to value data, which is a crucial input for the innovation and production of digital goods and services. 

Research by Wendy Li, Makoto Nirei and Kazufumi Yamana proposes a new method to value this data, based on firm investments in organisational capital. The method also captures the social value of consumer data. Producing accurate estimates could well guide future investment and improve national accounts.

UNPACKING E-COMMERCE: The rise of new business models

Molly Lesher, Jan Tscheke  
25 July 2019

E-commerce facilitates trade across borders, increases convenience for consumers, and enables firms to reach new markets. Molly Lesher and Jan Tscheke identify a range of digital technologies and the new business models they enable, that are driving dynamism in e-commerce markets.

Despite this dynamism, however, the authors note important gaps remain with regard to e-commerce participation among firms and different groups of individuals. Targeted polices are needed to provide the regulatory flexibility for new business models to thrive and to ensure that e-commerce becomes more inclusive.


Robert Barro 
25 July 2019

Much of macroeconomic analysis and policy relies on calculated aggregates, such as GDP and national income. Proper ways to construct the national income and product accounts to measure these aggregates were once at the forefront of economic research. But economic analysis underlying the national income accounts has largely disappeared as a field of research at leading academic institutions. This situation is unfortunate because there remain major conceptual economic issues in the national accounts, one of which concerns the treatment of investment. 

Under the current system, GDP counts investment twice – when it occurs and when rental income results. Robert Barro proposes an amendment; the ‘permanent income measure’, to the national accounting system that only includes investment once. This would ensure that national income accounts do not overstate the resources available for consumption and also has major implications for the estimation of the capital share in income.

IF MONEY COULD BUY HAPPINESS: The determinants of utility of international currencies

Eiji Ogawa, Makoto Muto 
26 July 2019

Given the US dollar’s historical prominence in international currency systems, it can be argued that a large part of its present-day importance is due to inertia. 

A study by Eiji Ogawa and Makoto Muto explores the importance of liquidity premium on the utility of key currencies, which represents a liquidity shortage in terms of an international currency. They analyse the determinants of the utility of four international currencies: the US dollar, the euro, the Japanese yen, and the British pound, by conducting an empirical analysis of whether the liquidity risk premium in an international currency affects its utility.

Their analysis shows that while inertia does have a strong effect on a currency’s utility, a liquidity shortage can also reduce the utility of an international currency. 

LEGAL ORIGINS: Colonial era legacies and their influence on modern economics

Rafael La Porta, Florencio Lopez de Silanes, Andrei Shleifer, Robert Vishny
27 July 2019

Colonisation created ‘legal families’ of laws which were substantially influenced by the origin countries. Research by Rafael La Porta, Florencio Lopez de Silanes, Andrei Shleifer and Robert Vishny explores how these legal families often exhibit substantively different legal rules and approaches, which then have a significant influence on economic outcomes.

Legal traditions exhibit distinctive formal features as well as substantive approaches to how the law regulates economic life. These are profound historically shaped features of the stance of the law, which, through transplantation, have continued to run in legal families. Legal traditions are associated with distinctive formal and substantive approaches to solving legal problems, and that these approaches are associated with some distinctive economic outcomes.


Jeppe Drudahl, Mette Ejrnæs, Thomas H. Jørgensen 
28 July 2019

The European Parliament recently proposed a requirement that each parent have the right to two months of non-transferable or ‘earmarked’ paid leave. Jeppe Drudahl, Mette Ejrnæs and Thomas Jørgensen analyse the effects of earmarking parental leave for fathers on the relative income of women within couples in Denmark.

The stark difference in average earnings between men and women in many western countries hovers around 15% and one of the most important drivers of gender inequality in the labour market is argued to be the arrival of children. The recent proposal by the European Parliament to earmark parental leave could potentially decrease gender inequality in the labour market by increasing the incentives for fathers to take more parental leave, as well as enabling future research on the impact of earmarked parental leave outside a Scandinavian welfare model. 




Laurence Boone interviewed by Tim Phillips, 26 July 2019

France has surprisingly low social mobility. OECD chief economist Laurence Boone tells Tim Phillips why this is the case, how the problem fuels the ‘gilets jaunes’ protests, and what can be done about it.


Lucrezia Reichlin, 25 July 2019

Lucrezia Reichlin of the London Business School is the third economist to be the focus of the CEPR/UBS Women in Economics series. She is one of the pioneers of Big Data and, along with her co-authors, has revolutionised how models are built.

Here she argues that in an increasingly globalised world, there is more need than ever for Europeans to work together in order to make our currencies robust, to cope with the refugee crisis, and to defend ourselves from the threat of protectionism. 


Oriana Bandiera, Fraser Clark 22 July 2019

Oriana Bandiera and Fraser Clark give a brief and engaging guide to economics in this video from the LSE.