Current publications

Cover of EconPol opinion

How Corporate Debt Burdens Threaten the Economic Recovery After COVID-19 and Why Planning for Debt Restructuring Should Start Now

Bo Becker (Stockholm School of Economics, CEPR & ECGI), Ulrich Hege (EconPol Europe, Toulouse School of Economics, ECGI), Pierre Mella-Barral (Toulouse Business School)

EconPol Europe's Ulrich Hege (Toulouse School of Economics, ECGI) and co-authors Bo Becker (Stockholm School of Economics, CEPR & ECGI) and Pierre Mella-Barral (Toulouse Business School) discuss the economic risks of COVID-19 and the increasingly plausible steep protraction, examine the mitigating support programs governments are putting into place for households and firms, and explain why planning for debt structuring should start now.

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Cover of EconPol Policy Brief 21

The Economic Costs of the Coronavirus Shutdown for Germany: A Scenario Calculation

Florian Dorn, Clemens Fuest, Marcell Göttert, Carla Krolage, Stefan Lautenbacher, Sebastian Link, Andreas Peichl, Magnus Reif, Stefan Sauer, Marc Stöckli, Klaus Wohlrabe, Timo Wollmershäuser

This EconPol policy brief, using figures from the ifo Institute, calculates potential costs of coronavirus to the German economy of up to 729 billion, with up to 1.8 million jobs cut and six million workers affected by lower hours - however it stresses that the aim of any action must be to shorten the partial shutdown of the economy without compromising the fight against the epidemic, with strategies that combine a resumption of production with further containment of the epidemic.

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This Time is Different

Daniel Gros (EconPol Europe; Director, CEPS)

A recession is now inevitable, says Daniel Gros (CEPS, EconPol Europe), but it can be followed by a vigorous recovery. The memory of the financial crisis of 2008/9 is fresh enough to ensure the combined efforts of central bankers and governments can keep financial markets working and prevent mass bankruptcies. Policymakers at every level are using every lever at their disposal to avoid a repeat of the freezing of financial markets, which was so damaging ten years ago. The lesson was learned and is now being applied at a vast scale throughout Europe and the US. Containing the virus and protecting public health is where Western societies have to learn and adapt quickly.

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Cover of EconPol policy report 20

Supporting Firm Innovation and R&D: What is the Optimal Policy Mix?

İrem Güçeri (EconPol Europe, Oxford University), Marko Köthenbürger (EconPol Europe, ETH Zurich), Martin Simmler (EconPol Europe, Oxford University)

Existing literature suggests that firm R&D support policies stimulate private R&D within a country and that in most cases, the positive impact of government support is stronger on smaller firms. Recent evidence also indicates that some of the policy instruments, such as patent box policies, are tools that multinationals use to lower their total tax bill through profit shifting. In this policy report, İrem Güçeri (EconPol Europe, Oxford University), Marko Köthenbürger (EconPol Europe, ETH Zurich) and Martin Simmler (EconPol Europe, Oxford University) find that the most prevalent support policies are effective in fostering private enterprise sector R&D and small and young firms seem to benefit the most from both public R&D and R&D tax incentives.

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Challenges of Negotiating a Free Trade Agreement Between the UK and the EU

Clemens Fuest

EconPol Speaker Clemens Fuest has called for the UK Government to abandon its plan to complete the Brexit transition by the end of 2020. Prof Fuest describes the UK’s decision to rule out a customs union and pursue its own trade policy as ‘regrettable’, highlights fears from both the UK and EU over the potential lack of a “level playing field”, calls tax policy “a minefield of disagreement” and says climate policy “poses a further challenge to the free trade agreement.”

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Cover EEAG Report on the European Economy 2020

EEAG Report on the European Economy 2020: Fair Taxation in a Mobile World

Torben M Andersen, Giuseppe Bertola, Clemens Fuest, Cecilia García-Peñalosa, Harold James, Jan-Egbert Sturm, Branko Uroševic

In the 1930s, countries fought destructive trade conflicts – now we have a similar situation, but the conflicts are taking place in the tax system. These conflicts arise out of the twin impacts of globalization and digitalization. Once upon a time, there was an implicit understanding of fairness in taxation, meaning how countries tax within their borders and how the tax burden is distributed. More specifically, companies and individuals were taxed based on their residence and consumption in the destination country. Such an approach worked while these events were mostly perceived as national. However, the world has changed, and in an increasingly globalized, digitalized, and mobile world, these understandings no longer appear to work smoothly, efficiently, and uncontentiously.

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Cover of EconPol Working Paper 44

Markups in a Dual Labor Market: The Case of the Netherlands

Gerrit Hugo van Heuvelen, Leon Bettendorf, Gerdien Meijerink (EconPol Europe, CPB Netherlands Bureau for Economic Policy Analysis)

An expanding body of research finds a sharp increase in the average markups in the US and Europe, driven by firms located at the top of the markup distribution; other studies find that markups in the US and Europe have increased only moderately or even remained stable. These differing results have triggered a discussion on methodology, a key issue being the choice of the free input in the production function approach. Authors Gerrit Hugo van Heuvelen, Leon Bettendor and Gerdien Meijerink (EconPol Europe, CPB Netherlands Bureau for Economic Policy Analysis) show that the choice of the free input is crucial, and may explain at least some of the discrepancies in the findings in the recent literature. They illustrate this with the case of the Netherlands, which has a large share of flexible work arrangements and temporary labor contracts as well as fixed contracts.

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Cover of EconPol Working Paper 43

Air Pollution & Migration: Exploiting a Natural Experiment from the Czech Republic

Štěpán Mikula (Masaryk University), Mariola Pytliková (EconPol Europe, CERGE-EI)

This paper from Štěpán Mikula (Masaryk University) and Mariola Pytliková (EconPol Europe, CERGE-EI) examines causal effects of air pollution on migration by exploiting a unique natural experiment of desulfurization of power plants in the region of North Bohemia in the Czech Republic after the fall of communism in 1989. They find that anti-emigration policies had no impact on emigration decisions, but the effect of air pollution on emigration tended to be stronger in municipalities with weaker social capital and in municipalities less equipped with man-made amenities. These results suggest that strengthening social capital, investing into better facilities in the area of education, health and social care, and promoting sport and cultural activities can partially mitigate the migratory response to air pollution.

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Cover of EconPol Working Paper 42

How Important are Local Knowledge Spillovers of Public R&D and What Drives Them?

Leonie Koch ( Ludwig Maximilian University of Munich ), Martin Simmler (EconPol Europe, Oxford University Centre for Business Taxation)

There is a clear consensus that stimulating firm R&D is welfare-increasing due to positive externalities and uncertainty, but the question about the most efficient way to do so is still open to debate. This paper from Leonie Koch ( Ludwig Maximilian University of Munich) and Martin Simmler (EconPol Europe, Oxford University Centre for Business Taxation) analyzes the magnitude of local knowledge spillovers of public R&D in Germany and its determinants using patent application data. They find that firms file more patent applications when collaborating with (local) public institutions, that firms file more patent applications when citing a public patent, and that local public R&D seems to increase the number of patent applications by local firms. The authors conclude there is evidence for substantial local spillovers and that these are driven by non-specific knowledge spillovers.

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Cover of EconPol Working Paper 41

Taxation of Digital Platforms

Marko Köthenbürger (EconPol Europe, ETH Zurich)

Tech giants such as Google and Facebook generate significant amounts of advertising income, which is mainly reported in low-tax countries. This has created a policy discussion of how to re-align the location of value creation and taxation, says author Marko Köthenbürger (EconPol Europe, ETH Zurich). The success of the business model of these digital platforms relies on the existence of indirect network effects, which are the prime reason why platforms exist and generate advertising income. To account for these effects, conventional tax policy needs to be adjusted. This includes an adjusted concept of nexus that should rely on the location of users, which generate the relevant indirect network effects. The recent EU proposal of a digital service tax goes in this direction and constitutes a policy option for other countries.

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