News Archive

A new working paper from EconPol Europe investigates the impact of import competition on rent sharing between firms and employees using a large panel of French manufacturing firms. By applying recent advances in the estimation of price-costs margins, authors classify each firm into labour- and product-market regimes based on the presence or absence of market power and estimate the degree of rent sharing among firms and workers. They investigate the hypothesis that import penetration acts as a discipline device on the labour market, reducing workers' bargaining power. Competition from OECD countries has a negative effect on bargaining power, they find, whereas imports from low-wage countries have a more muted impact. By providing firm-level evidence for the relationship between international trade and rent sharing, the paper sheds new light on the effect of trade liberalisation on the labour market.

Import tariffs introduced by the United States and China in September will see Chinese exporters bear approximately 75% of the costs, with the US extracting a net welfare gain of USD 18.4 billion, according to new research from EconPol Europe. The tariffs affect around 50% of Chinese products imported to the US, with a value exceeding USD 250 billion. The tariffs introduced by China affect around USD 60 billion worth of goods. The research shows these new tariffs, introduced on 24 September, will increase US consumer prices on affected Chinese products by an average of 4.5%, while the producer price of Chinese firms declines by 20.5%.

The lack of cross-border risk sharing in the banking sector is one of the biggest barriers to better integrated financial markets in Europe. In this EconPol policy brief, the authors emphasize the potential of the securitization market for bank-based financial integration. To effectively increase cross-border risk sharing through securitization in the EU, they suggest further improving the existing regulatory framework in order to reduce barriers to a thriving securitization market. A further recommendation is to introduce explicit incentives for risk sharing, and securitization in Europe entering EU regulation and EU programs.

The European Commission’s Allowance for Growth and Investment (AGI) has proposed investment incentives in its two-step approach towards the Common Consolidated Corporate Tax Base (CCCTB). In this latest EconPol working paper, the authors demonstrate that the AGI strengthens investment incentives in high-tax countries and decreases the CCCTB-induced investment push towards low-tax countries. They also demonstrate that the AGI decreases tax competition and that a sufficiently generous AGI reduces tax competition between countries when introduced with the CCCTB.

The agenda to fix the euro is hampered by conflicting national interests. Creditor countries demand fiscal house cleaning and debtor countries ask for risk sharing. There is currently a political deadlock about how the adjustment burden should be distributed, perpetuating a state of vulnerability that is not in the collective interest of euro area members. This column, part of the Vox debate on euro area reform, argues that overcoming this coordination failure requires reforming the political governance of the EU, rather than just its economic governance.