This EconPol Policy Brief reassesses the relationship between inequality and growth. In their empirical analysis network members Clemens Fuest, Florian Neumeier and Daniel Stöhlker show that there is no robust negative correlation between inequality and growth. For OECD countries, they find that higher inequality coincides with higher, not lower economic growth. The authors also caution against giving the observed correlation between inequality and economic growth a causal interpretation. Both inequality and economic growth are influenced by many policy variables, including education and redistributive taxation. In their view, portraying one of these outcomes as being ‘caused’ by the other is unconvincing. ...Details
What are the implications of Trump’s trade follies with tariffs for the rest of the world? EconPol network member Daniel Gros examines the nature of today’s trade wars by focusing on the high tech sector. He explains why differences in profit opportunities tend to escalate trade conflicts in a ‘winner takes all’ economy. Today, the US government is essentially lining up its diplomatic guns behind its internet giants, while Europe and China are baying for their monopoly profits. This is a zero-sum game, warns Gros, which can only turn negative sum through the collateral damage that it causes to the global trading system. ...Details
How does migration impact the labour market, public finance and the political landscape? In EconPol’s latest policy report network members Anthony Edo, Lionel Ragot, Hillel Rapoport, Sulin Sardoschau and Andreas Steinmayr, CEPII, show that immigration can create winners and losers in the host country’s native workforce by affecting the skill composition of receiving economies and changing wage dispersion. But cultural concerns emerge as the key driver of scepticism towards immigration. A deeper understanding of these concerns is a precondition for designing policies that foster a positive atmosphere and combat negative attitudes towards immigrants and extreme voting. ...Details
Clemens Fuest, Florian Neumeier and Daniel Stöhlker
In recent studies the IMF and the OECD claim that inequality has a negative impact on economic growth and conclude that redistribution policies have no adverse growth effects. We argue that this claim is misleading. We show that, for developed countries, the correlation between inequality and growth is positive, not negative. But this correlation cannot be given a causal interpretation.
The decision of the UK to leave the EU has given rise to a fundamental debate about the future of political and economic integration in Europe. In this debate the concept of a multi-speed Europe is finding increasing support. But a multi-speed Europe suggests that all countries are heading in the same direction, that is, towards more integration. One alternative would be a multi-tier EU, under which members can choose to belong to a variety of "country clubs". Each tier or "club" could then be characterised by a specific form of policy cooperation or integration like an internal market, a customs union, the Schengen zone with common external border controls and immigration policies, the Eurozone, possibly zones of tax coordination or fiscal integration with a common budget and so on.
Keynote speaker:Enrico Spolaore, Tufts University.
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