The recent influx of refugees to Europe has stoked security fears and created anxiety about the social and economic consequences. This column provides new quantitative indicators for the intensity of migration-related fears and policy uncertainty, based on newspaper articles. The indices are presented for the US, UK, France, and Germany, and extend back to 1995. They show that recent levels of concern and uncertainty in European countries about migration are unprecedented.
Scott Ross Baker, Nicholas Bloom, Steven J. Davis, 15 December 2015
Dominika Langenmayr, 13 November 2015
Voluntary disclosure programmes offer tax evaders the opportunity to come clean with reduced penalties. This column uses data from the US and Germany to examine the merits of such programmes. They are found to increase tax evasion, but also to significantly lower administrative costs, leading to a net increase in tax revenues.
Gerlinde Sinn, Hans-Werner Sinn, 01 November 2015
With a European transfer union on the cards, we can learn a lot from Germany’s reunification – a transfer union of sorts. This column takes us through various lessons, concluding that transfers would cement southern Europe’s lack of competitiveness and drive Europe into permanent stagnation.
Michael Burda, 23 September 2015
Many analysts believe that German economists hold a very different view of macroeconomics. This column presents a personal view why this belief is wrong. The fact that Europe still consists of sovereign nations and that most Europeans still want to keep it that way informs much of what happens inside German economists' heads.
Timothy W. Guinnane, 13 August 2015
Greece’s crisis has invited comparisons to the 1953 London Debt Agreement, which ended a long period of German default on external debt. This column suggests that looking back, the 1953 agreement was unnecessarily generous given that Germany’s rapid growth lightened the debt repayment burden. Unfortunately for Greece, the motivations driving the 1953 agreement are nearly entirely absent today.
Francesco D'Acunto, Daniel Hoang, Michael Weber, 09 June 2015
Theory suggests that higher inflation expectations increase the likelihood that people will buy durable goods. This column presents evidence showing that this works for more educated, working-age, high-income, and urban households. A natural experiment from Germany shows us that the effect of inflation expectations on readiness to spend is causal and that monetary and fiscal policies that increase inflation expectations can therefore successfully spur aggregate consumption in the short run.
Niklas Gadatsch, Tobias Körner, Isabel Schnabel, Benjamin Weigert, 03 June 2015
There is a broad consensus that financial supervision ought to include a macroprudential perspective that focuses on the stability of the entire financial system. This column presents and critically evaluates the newly-created macroprudential framework in the Eurozone, with a particular focus on Germany. It argues that, while based on the right principles, the EU framework grants supervisors a high degree of discretion that entails the risk of limited commitment and excessive fine-tuning. Further, monetary policy should not ignore financial stability considerations and expect macroprudential policy to do the job alone.
Francesco D'Acunto, Marcel Prokopczuk, Michael Weber, 26 February 2015
Discrimination can be costly for both victims and perpetrators. This column uses the variation of historical Jewish persecution across German counties to proxy for localised distrust in financial markets. Persecution reduces the average stock market participation rate of households by 7.5%–12%. This striking effect is stable over time, across cohorts, and across education levels. The effect survives when comparing only geographically close counties. It suggests that the persecution of minorities may negatively affect societal wealth even far into the future through the channel of intergenerationally transmitted investment norms.
Philip Jung, Moritz Kuhn, 04 February 2015
Given the pressing need for labour market reforms in Europe, policymakers are looking to the Hartz I-IV reforms conducted in Germany in the mid-2000s for inspiration. To successfully apply their lessons one must understand why they worked. This column argues that the success of the Hartz reforms lay in improving matching efficiency between unemployed workers and vacancies – particularly effective in Germany where employment inflows are the main driver of labour market adjustment, in contrast to the US, where outflows play the primary role.
Arnaud Chevalier, Olivier Marie, 08 November 2014
Children born in crises face different initial conditions. Data on children born in East Germany just after the Berlin Wall came down confirms that this corresponds to worse adult outcomes. ‘Children of the Wall’ have 40% higher arrest rates, are 33% more likely to have repeated a grade by age 12, and are 9% more likely to have been put into a lower educational track. This column argues that these negative outcomes can be explained by the lower average parenting skills of those who decided to have children during a period of high economic uncertainty.
Harold James, 09 July 2014
The 1907 panic affected the world, demonstrating the fragility of the international financial system. This column discusses the steps the US and Germany took in fortifying their financial systems following 1907. There is a link between the financial crisis and the escalation of diplomatic relations that led to war in 1914. And this link has implications for today as the world is recovering from the 2008 crisis.
Holger Görg, Olivier N. Godart, Aoife Hanley, Christiane Krieger-Boden, 08 July 2014
Many firms are replacing traditional working hours with more flexible arrangements, reflecting new thinking on employee motivation. This column presents evidence from Germany that trust-based working time is associated with increased innovation. However, trust-based working hours also contribute to the blurring of workers’ professional and private lives, and may lead to excessive overtime. Careful design of trust-based working arrangements is required to reap the innovations gains while avoiding the health pitfalls.
Joshua Aizenman, 03 July 2014
After a promising first decade, the Eurozone faced a severe crisis. This column looks at the Eurozone’s short history through the lens of an evolutionary approach to forming new institutions. German dominance has allowed the euro to achieve a number of design objectives, and this may continue if Germany does not shirk its responsibilities. Germany’s resilience and dominant size within the EU may explain its ‘muddling through’ approach to the Eurozone crisis. Greater mobility of labour and lower mobility of under-regulated capital may be the costly ‘second best’ adjustment until the arrival of more mature Eurozone institutions.
Jacques Melitz, 02 July 2014
As the Eurozone cautiously implements stabilising reforms, Germany is forced to go further with concessions than it would prefer. This column suggests that it would be beneficial for discontented members to consider the formation of a second monetary union. The second euro can be constructed better than the first, bringing the discontented members exchange-rate adjustments relative to Germany, and avoiding competitive devaluations.
Mark Harrison, 03 June 2014
The Great War offers lessons for today. But this column argues from recent research that many so-called lessons are misunderstood. Secretive, authoritarian regimes become dangerous when they fear the future. Deterrence matters. Other aspects also demand re-evaluation.
Francesco Daveri , 28 May 2014
Eurosceptic parties have been popular in the recent European elections, many complaining that the euro has only served Germany's interests. This column points out that although data on aggregate trade flows show that Germany's trade surplus with the rest of the Eurozone is not excessive, the success of a Eurosceptic party is larger in countries where the bilateral trade deficit with Germany has increased in recent years. A gradual rebalancing of Germany's external accounts of Germany would bring with it not only a greater economic stability in the Eurozone but also greater political stability.
Hans-Joachim Voth, Nico Voigtländer, 22 May 2014
The Hitler government built the world’s first nationwide motorway network. We examine the impact of road-building on the popularity of the Nazi regime. Using shifts in electoral support between 1933 and 1934, we conclude that ‘pork-barrel’ spending worked in reducing opposition to the regime – wherever the new roads ran, fewer Germans voted against the government in elections and plebiscites. At least part of the regime’s popularity after 1934 can be explained by the popularity of the Autobahn.
George Kopits, 24 December 2013
Germany’s newly established Advisory Council – tasked with monitoring compliance with the constitutionally mandated balanced budget rule – lacks the analytical capacity and independence of its counterparts in the UK, the US, and the Netherlands. It is perhaps by virtue of the current government’s record of fiscal responsibility that a more comprehensive watchdog is not urgently needed, but the newly formed coalition should not miss the opportunity to establish comprehensive fiscal and banking oversight.
Tom Krebs, Martin Scheffel, 20 September 2013
Faced with stubbornly high and persistent unemployment in 2003-05 the German government implemented far-reaching labour-market reforms, the so-called Hartz reforms. This column shows that these reforms were highly successful in bringing down the non-cyclical component of unemployment in Germany but also argues that the Hartz reforms created winners and losers. This explains why these reforms have been hugely unpopular among the German public.
Hans-Joachim Voth, Nico Voigtländer, Shanker Satyanath, 05 August 2013
The collapse of the Weimar Republic was a turning point in world history, bringing the murderous Nazi regime to power. This column argues that contrary to most conceptions of social capital, there can be negative outcomes to well-connected societies. Independent of ideology, dense social networks in interwar Germany greatly helped the Nazi party to rapidly and widely disseminate its messages. Putnam’s claims about the benefits of social capital for democracy need to be reassessed.