Economics

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    Income inequality has been growing for decades and Americans are taking note

Income inequality has been growing for decades and Americans are taking note

While income inequality is largely unavoidable, the magnitude of inequality in the US today is staggering. For context, CEO compensation in the 1960s was around 20 times more than the average American worker. Using the same metric, today’s CEOs are paid over 270 times more than the typical worker. Some analysts suggest that this massive gap between the rich and […]

E-government can be good for business

Many developing countries face significant challenges associated with collecting taxes and tendering public contracts. High tax compliance costs due to cumbersome regulations and harassment by tax officials deter investment, encourage tax evasion, and undermine economic growth. The public procurement of goods and services is often rife with collusive practices and corruption, resulting in the misallocation or waste of resources […]

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    News of defence spending changes the economic behaviour of people and firms

News of defence spending changes the economic behaviour of people and firms

Announced changes in US public spending on defence have a significant impact on the economic behaviour of firms and households. In particular, anticipated increases in defence spending induce a significant and persistent increase in output, hours worked, the interest rate and inflation, as well as significant impact responses for consumption and investment.

In the light of these findings, we argue […]

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    Adam Posen: ‘There are many echoes between Brexiteers and the Trump way of thinking’

Adam Posen: ‘There are many echoes between Brexiteers and the Trump way of thinking’

Adam S. Posen has worked for central banks on both sides of the Atlantic – the US Federal Reserve and the Bank of England – and has written extensively about fiscal and monetary policies, Japan, the Eurozone and the US. Since 2013 Mr Posen has been the president of the think-tank Peterson Institute for International Economics (PIIE.) He is currently concerned […]

Can mobile roaming be saved after Brexit?

The issue of roaming has had far greater visibility in the UK than in the EU, because the price increases that can be expected have proportionally far greater impact on UK subscribers than on EU subscribers. With that in mind, this post is largely written from the UK’s perspective.

We begin with a quick guide to this complex subject matter:

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Introducing the Brexit readiness score

If you believe Prime Minister Theresa May the United Kingdom will be ready to exit the European Union in April 2019. If you believe UK businesses Britain is falling behind in its preparations. The next round of Brexit negotiations, and the first since the summer recess, was delayed by a week to September 25, 2017, suggesting that businesses may […]

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    Expert panel: People from small, socially cohesive countries are happier

Expert panel: People from small, socially cohesive countries are happier

Among the world’s rich countries, those that are smaller and more socially cohesive tend to have happier populations on average. That is the consensus finding of a survey of leading researchers on wellbeing from around the world.

But opinion is divided among the experts on whether the break-up of large, diverse countries into smaller, less diverse ones can be expected to […]

Understanding musical copyright in the digital age

Copyright appears in one of two guises. It is either the backdrop to arguments about plagiarism – about how ‘Blurred Lines’ was stolen from Marvin Gaye, or about how Donald Trump is making (allegedly) illegitimate use of Adele and others to accompany his rallies. Or copyright is seen as central to the development of the digital economy – hence, […]

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    Where industry is strong and where it’s weak: Key facts of UK business geography

Where industry is strong and where it’s weak: Key facts of UK business geography

The UK’s financial services industry is not nearly as London-centric as the creative industries. Rather than the South East of England being the country’s productivity engine, it is a band stretching west from the capital along the M4 corridor towards Bristol. The East of England stands out nationally in terms of the intensity of local investment in research and […]

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    Canada’s big challenge: The long list of trade barriers between its own provinces

Canada’s big challenge: The long list of trade barriers between its own provinces

President Trump on the campaign trail promised to ‘renegotiate or rip up’ the North American Free Trade Agreement. As the US signals its intention to renegotiate this free trade agreement with Canada and Mexico, Trump’s tweets have focused on the Canadian dairy sector, where a stand-off between politicians on both sides of the border highlights the continued importance of the agricultural […]

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    Leaving a trade area can substantially reduce innovation and productivity

Leaving a trade area can substantially reduce innovation and productivity

The advantage of being in a trade area like the European Union is that a company can sell its products and services to a larger pool of customers. These are the usual gains from trade: each company/country specializes in what it does best, and by doing so, increases consumer welfare. By selling to a larger pool of customers, companies […]

Towards a modern UK industrial strategy

Every government has an industrial strategy however it is articulated: government affects the investment climate for business through tax and regulation; establishes national priorities; invests in skills, infrastructure and research; and procures outputs from the private sector – all of which influence the evolution of the private economy.

In the UK, business and politics have always been intertwined. The desire […]

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    UK finance needs radical reform to upgrade the post-Brexit economy

UK finance needs radical reform to upgrade the post-Brexit economy

At a recent event marking the 10-year anniversary of the financial crisis, the Governor of the Bank of England Mark Carney said the UK’s banking sector could be “15 to 20 times GDP” in just a “quarter of a century”. But such proclamations beg a big question: what is the value of all this activity and wealth to the rest of […]

Economists for Free Trade: the case for Brexit

Distinguished economists (let’s call them Economists for Remain) challenge the argument made by Economists for Free Trade that leaving the EU will be positive for the UK economy. In particular, even under the best case assumptions, exit from the EU, according to these economists, will lead to a loss of trade, a loss of investment and a loss of welfare to […]

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    The ‘cleansing effect’ of recessions: Inefficient firms fail, average productivity goes up

The ‘cleansing effect’ of recessions: Inefficient firms fail, average productivity goes up

During the Great Recession, the percentage of US establishments going bankrupt increased from 11.8 per cent to 13.5 per cent. Similar increases in business failures have been observed in other countries hit by the recession. The conventional view is that the increase in the exit rate (when firms fail and thus exit the market) raises average productivity, because the […]

Brexit is chasing EU talent away from the UK

Since the beginning of the year, several reports have surfaced of UK companies and employment agencies having difficulty recruiting a sufficient number of foreign (EU) workers, such as fruit-pickers and health care providers. During the referendum campaign, business representatives also stressed the importance of the EU labour pool for the UK economy and voiced concerns that Brexit could potentially stifle this inflow.

Brexiteers […]

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    Great progress can be achieved when scientists are unaware of each other’s work

Great progress can be achieved when scientists are unaware of each other’s work

Scientific progress can accelerate when scientists are less than fully informed about the advances their peers are achieving. The successes of particle physicists in the Soviet Union during the cold war, who worked in isolation from their Western counterparts, furnish a prominent example.

My work shows that even though isolated scientists may have to work on projects whose productivity is […]

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    With fewer immigrants, the UK economy will need a lot more state intervention

With fewer immigrants, the UK economy will need a lot more state intervention

The desire to lower immigration was one of the main drivers behind the Brexit vote. Now, Theresa May’s cabinet has signaled its resolve to cut numbers significantly, a longstanding pledge that the Conservatives had failed to make good on until now. With Brexit becoming a reality, however, the UK can expect lower inward migration, and numbers have been falling already.

Reduced […]

Is the IMF rethinking austerity?

In an apparent break with its past practices, the IMF’s policy advice shifted towards being more open to fiscal stimulus packages during the global financial crisis in 2008-2009, especially for large economies that are systemically important as growth engines for the world economy. There was evidence of an incremental change underway in the IMF’s policy paradigm and how staff […]

What are economists for?

When you meet someone at a cocktail party who learns you are an economist, the inevitable question follows, “What’s the stock market going to do?” That’s an excellent question. If, on the day I was born, my parents had invested $100 for me in Altria, the top-performing stock since then, I would be a millionaire.

Of course, most of us […]