The global nature of supply chains has rapidly come to dominate international trade. This column presents new evidence on production fragmentation and intra-firm trade. For US corporations, cross-country shipments of goods between units of the corporation are rare, despite the fact that most US manufacturing parents own foreign affiliates in upstream or downstream industries.
Controlled foreign company rules are implemented by countries to prevent adverse profit-shifting activities by multinationals. This column suggests there are unintended consequences of such rules for real investment activity. Using the case of German legislation, the authors find that fixed assets at foreign subsidiaries decline by about €7 million per subsidiary in response to controlled foreign company treatment.
The standard economic argument in favour of a uniform carbon price is efficiency – all agents face the same marginal cost of pollution. Such a price can be achieved either by an emissions trading (cap-and-trade) system or by imposing a tax. This column argues that whether a uniform policy or a mixture of both is optimal depends on a few factors, and most importantly on the nature of stochastic shocks affecting the economy.
The housing market is important for many developed economies, not least in the UK. This column presents new research in search and matching modelling suggesting that the quality of a house-buying match is important in understanding not only the time taken to sell a house, but also the length of time homeowners will live in the new house before their next move. The research should provide economists with new insights into housing market dynamics.
Most sub-Saharan African countries have adopted minimum wage laws. This column argues that this will become increasingly significant for the economy as a whole as the number of covered workers grows, with possible spillover effects to uncovered sectors. Importantly, sub-Saharan Africa displays a bias towards a more aggressive minimum policy relative to the rest of the world. Perhaps due to this, compliance is not very high and the economic consequences of minimum wages are not particularly strong.
Other Recent Columns:
- Fixing the global financial safety net
- Emerging economy corporate debt: The threat to financial stability
- Market liquidity in liquid markets: Pitfalls and trends
- Errors as a source of macroeconomic frictions
- Volatility, financial crises and Minsky's hypothesis
- A new international database on financial fragility
- The costs of interest rate liftoff for homeowners: Why central bankers should focus on inflation
- Policy-driven premature deindustrialisation in Malaysia
- ‘Home Affordable Refinancing Program’: Impact on borrowers
- Finance and growth – beware the measurement
- The diffusion of European diesel automobiles
- The political economy of liberal democracy
- Measuring the interest premium for past default
- Low interest rates, capital flows, and declining productivity in South Europe
- The state of climate negotiations
- Regulatory arbitrage in action: Evidence from cross-border lending
- Foreign entry and domestic innovation
- Retirement and changing lifestyle habits
- Emergency liquidity assistance and Greek banks’ bankruptcy
- Greek debt remains unsustainable