Overview publications

Paolo Savona will now become Minister for EU affairs in the new Lega/5 stars government. He has been the main author of a plan for Italy’s exit from the euro. This Plan, which has now been made public, is briefly analysed here to shed some light on the strategy that has apparently been adopted by the Lega Party which has insisted on his participation in the government.

The first part of this short report uses the newest available data from the Bureau of Economic Analysis (BEA), an agency of the US Department of Commerce, to analyse economic relations between the US and the EU. The data is used to decompose the components of the US current account balance, and to analyse the bilateral balance of payments with the European Union, the Euro Zone and Germany. In the second part, we use data provided by Eurostat to mirror US figures. We find  enormous discrepancies between what the EU and the US report, particularly with respect to primary income.

The European Commission has proposed to inaugurate a European Minister of Economy and Finance with the broad purpose of streamlining the complex and fragmented decision-making processes within the European Monetary Union. This policy report discusses the potential role the Minister could play in the development of the European Fiscal Union. The report lays out the main challenges along the current institutional solutions facing several dimensions of the Fiscal Union, in particular related to fiscal sustainability, macroeconomic shocks, incentives of structural reforms, and the optimum provision of European public goods. The report then discusses whether and to what degree the new European Minister of Economy and Finance can provide appropriate solutions to these challenges for the Fiscal Union.

We study whether and to what extent the electoral dynamics in Italy over the 1994-2008 period can be explained by the development of economic factors associated with globalization. To measure the level of exposure to globalization for local labor markets, our main unit of analysis, we use the intensity of import competition from China and the presence of immigrants.

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.

Trump’s trade follies have attracted the attention of policy makers and markets across the world. This is only natural given that the US has switched from being a major underwriter of the global multilateral trading system to its number one enemy. But dramatic changes like this rarely happen without some deeper undercurrent that enables erratic politicians to overturn long-established structures and mechanisms. A closer look at the key issue between the US and China reveals that today’s ‘trade war’ is taking place in a different economic framework than in the past.

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.

What are the potential advantages and drawbacks of proposals to create a Capital Market Union in the EU? This Policy Brief discusses the long-term implications of perfectly integrated capital markets, ignoring crises but taking population aging into account. Recent research shows that redistribution would take place, from fast aging to slow aging countries, because investors seek access to the largest labour markets that deliver the highest returns on their investments. In some countries like Austria social security reforms like raising the retirement age would play a crucial role in maximizing the benefits of CMU, or minimizing related losses.

How can the European Union tackle its aging populations? Network member Thomas Avoine, IHS, investigates international spillovers due to capital market integration when populations age and the cross-country redistribution that this generates. Using a multi-country overlapping-generations model, he finds that labour supply drops more in rapidly aging countries, pushing up the capital-labour ratio, lowering returns on investment and generating capital flows towards countries with younger populations. The author looks at how governments can reform tax and pension policy to influence redistribution patterns and how rapidly aging countries can promote immigration to mitigate the negative redistributive effects of capital market integration.

What will be the impact of the latest US tax reform adopted on 1 January 2018? In this EconPol Working Paper Jack Mintz, President’s Fellow, School of Public Policy, University of Calgary, looks at the key features of the US Tax Cuts and Jobs Act, assesses its implications for global growth and speculates on how other countries are likely to respond to this ground-breaking reform.