Overview publications

Is a fiscal stimulus of investment a viable complement to, or substitute for, monetary policy? The authors of this working paper show that, under a balanced-budget stimulus, investment acceleration may come at the expense of decreased total welfare and that where uncertainty is higher about private returns a net efficiency loss is more likely. However, the risk of such negative outcome strongly declines when the government spending is balanced by taxing both private and public returns on investment.

The Euro area is caught in a "maze of peculiar regulations" and referring to current account imbalances (CAI) as a catch-all indicator of financial efficiency may lead to seriously misplaced policies, according to Ronny Mazzocchi (European Parliament) and Roberto Tamborini (University of Trento), the authors of this latest EconPol working paper. The paper examines the controversial points about the causes, meaning and consequences of CAI, and discusses the alternative policy prescriptions that emerge.

The density of voters in polling regions limits the secrecy of voting and can affect the outcome of Italian elections, with the same impact on countries with a similar voting mechanism. In the first study to analyze the link between voter density and election bias, authors Mauro Caselli (University of Trento) and Paolo Falco (University of Copenhagen) examined all municipal elections conducted in Italy from 1989 to 2015. They found that lower voter density significantly increases the probability of re-election for an incumbent in a municipal office, while in areas with a higher number of voters the probability of re-election for an incumbent falls.

The view that deficits and higher public debt can be beneficial received an important boost via Olivier Blanchard’s 2019 presidential address at the American Economic Association (Blanchard 2019). In this opinion piece, which first appeared on VoxEU, Cinzia Alcidi and Daniel Gros examine Blanchard’s analysis and the longer-term link between risk premia and public finances.

Public dissatisfaction with politicians and representative democracy is widespread in Europe and should not be taken lightly. The enduring protest of the ‘Yellow Vests’ in France is just one prominent example of the popular view that elections regularly fail to select governments that are reliably responsive to the preferences of a large part of the population. EconPol researcher Michael Becher (IAST) says resolving this dilemma requires a value judgement. 

EconPol’s speaker Clemens Fuest says moderate politicians should compete with populists by offering realistic perspectives, and suggests Emmanuel Macron can serve as a role model in that regard. He also suggests that politics in Europe would benefit from putting in more effort to explain complex economic policy problems and pointing out where government action reaches its limits.

The creation of the European Monetary Union (EMU) in 1999 was expected to become a catalyst for real convergence in Europe. However, the authors of this policy report find that real divergence actually increased from the early 1990s, as evidenced by low productivity growth in the "periphery" of the Euro area relative to "core" countries. The report investigates the role of sectoral reallocation in this divergence, focusing on three archetypal countries: France, Germany, and Spain.

This EconPol paper evaluates the relevance of the taxation for public spending efficiency in a sample of OECD economies in the period 2003-2017. It finds that inputs could be theoretically lower by approximately 32-34%; the Malmquist indices show an overall decrease in technology and in TFP. Crucial for policymaking, the authors find that expenditure efficiency is negatively associated with taxation, more specifically direct and indirect taxes negatively affect government efficiency performance. The same is true for social security contributions.

The unanimity requirement for EU legislation on taxation in the Council has come under attack. Early this year, the European Commission launched an initiative to introduce majority voting for tax-policy decisions. Friedrich Heinemann analyses the arguments of the Commission and finds criticism unconvincing and misleading in this EconPol opinion.

Freedom of movement of workers is one of the fundamental ‘four freedoms’ of the European Union and has been in force for decades.  Economists have long considered that labour mobility is too low in EU, but this is changing as more and more EU citizens move to other Member States to work. Cinzia Alcidi and Daniel Gros examine the factors that have driven the growth in intra-EU labour mobility in this latest EconPol opinion.