How a host country can best assimilate immigrants is understandably on Western European governments’ minds. This column presents new evidence suggesting that immigrants in Italy who live in neighbourhoods with a large share of non-Italians are significantly less likely to be in employment than their counterparts in less segregated areas. The data suggests that policymakers should note that the negative effect of a large migrant share on employment is magnified by the presence of illegal immigrants.
Large exchange rate swings remain a prominent and recurring feature of the world economy. This column uses household consumption patterns to examine the distributional impact of the devaluation of the peso during Mexico’s ‘Tequila Crisis’. Cost of living increases are found to be 1.25 to 1.6 times higher for the poor compared to the rich. In the interests of equity, exchange rate policy should take account of such distributional impacts.
Indices of economic freedom refer mostly to the recent past, making policy prescriptions difficult to draw. This column presents a new historical index of economic liberty covering 21 OECD countries for the period 1850-2007. Over time, progress in economic liberty has derived from different factors, but improvements in legal structures and property rights emerge as the main forces behind the long-term gains.
Greece’s trade deficit declined by 10% of GDP between 2007 and 2012, removing one of the great imbalances of the pre-Crisis years. Exports actually fell over the period, however, worsening the country’s economic crisis. This column compares Greece’s actual export performance with a benchmark for the expected trade response to the reduction in net capital. Greece’s exports should have increased by 25%, and export underperformance was responsible for a third of the country’s GDP decline. While labour markets have adjusted to the new economic environment, product markets seem to be hindering the recovery of competitiveness.
Recent events in Europe provide ample evidence that the political aftershocks of financial crises can be severe. This column uses a new dataset that covers elections and crises in 20 advanced economies going back to 1870 to systematically study the political aftermath of financial crises. Far-right parties are the biggest beneficiaries of financial crises, while the fractionalisation of parliaments complicates post-crisis governance. These effects are not observed following normal recessions or severe non-financial macroeconomic shocks.
Other Recent Columns:
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