Analysis

Gains from trade: International transport costs still matter

Although transport costs have decreased substantially over the past two centuries, they are still far from negligible. This column argues that in addition to standard ad-valorem transport costs, there is an important role for additive costs in trade models. The authors estimate that over the period 1974 to 2019, additive costs represented between 35% (in air transport) and 45% (in vessel) of total transport costs.

Central banks and climate policies

Central banks in developed countries have launched cautious investigations into whether, how, and to what extent they should intervene in climate policy. This column shows that central banks would face trade-offs if they were to start tackling climate change, as the instruments overlap with those already used in their monetary and macroprudential mandates. Using a using a principal–agent setting, the authors argue that central banks’ effectiveness in addressing climate change will depend on capture risk and  calibration risk.

Russia’s war worsens the outlook: The Commission’s Summer Interim Forecast

The shocks unleashed by Russia’s war on Ukraine are hitting the EU economy hard, setting it on a path of lower growth and higher inflation than expected in the previous European Commission forecast. Further upward pressures on energy prices, and even an outright cut in gas supply, represent concrete risks to the forecast. Against this backdrop, this column argues that EU Member States should implement the right policies to support vulnerable households while investing in measures to frontload the energy transition.

The impact of mechanisation on wages and employment

Fears about the effects of mechanisation on societies are not new; technology has always generated cultural anxiety throughout history. This column considers one of the most significant waves of mechanisation in history – the rise and spread of steam power in 19th century France – to examine the influence of mechanisation on labour outcomes. Rather than cutting jobs and wages, the authors find that that steam-adopting industries ended up employing up to 94% more workers than their non-steam-adopting counterparts and paid wages that were up to 5% higher on average.

The gender gap at the top: The role of networks

The gender pay gap is well-documented, yet its source remains debated. This column uses data from Portuguese firms to analyse the role of professional networks in explaining the gender pay gap among top executives. The component of the pay gap which is unexplained by age, tenure, or education has remained persistently large over the period 1986 to 2017, reflecting a gender bias which can be partly explained by networks. Both female and male managers benefit most from connections to managers of their own gender.

Policymaking, trust, and the demand for public services

There is growing concern that citizens around the world have declining trust in institutions such as public health agencies, private corporations, scientists, or vaccine manufacturers. This column focuses on a family planning campaign in Peru to examine how government actions in the implementation of public programmes can shape trust in institutions and thus affect demand for public services and welfare outcomes.

Communication costs, science, and innovation

It seems obvious that lowering the cost of communication among innovators would facilitate scientific and technological progress. Yet, few studies examine this relationship. This column explores the introduction of the first modern postal system in Britain in 1840 and its effect on the number of citations between pairs of scientists and on patenting. The gradient with which citations declined with distance-based postage costs fell and patenting increased in locations that experienced more significant improvements in letter market access due to the reform.

Covid-19’s impact on innovation

The Covid crisis inspired extraordinary innovation. Carsten Fink and Reinhilde Veugelers are two of the editors of a new ebook from CEPR called Resilience and Ingenuity that examines how countries, organisations and industries were able to innovate. Tim Phillips asks them what worked, what didn’t, and whether we can keep up the pace of new ideas. 

Trade, volatility, and the role of specialisation and diversification

The relationship between trade and volatility depends on a complex interaction between sectoral shocks, sectoral specialisation, and geographic diversification. This column uses a multi-country, multi-sector framework to study the main sources of risk for open economies and how trade determines the exposure to those risks through specialisation and diversification of sales. It shows that diversification reduces volatility, particularly in countries with higher output volatility.

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