The role of trade in adaptation to climate change (VOX)

Given our collective failure to mitigate greenhouse gas emissions, the world will have to adapt to a certain level of climate change. This may mean that as climate change affects crops’ yield potential, new patterns of comparative advantage, and hence new trade flows, will emerge. This column examines the importance of the market adaptations in mediating welfare losses in the agricultural sector. The findings suggest a large role for international trade: when adjustments in trade flows are constrained, global welfare losses from climate change increase by 76%.

Christophe Gouel, David Laborde

Make-or-buy decisions of multinational firms depend on the technological importance of the product (VOX)

The civicness drain (VOX)

Although differences in social capital have been linked to a variety of outcomes, we know little about why it varies in the first place. Using experimental data from high schools in the north and south of Italy, this column argues that migration is one possible explanation. It finds that civic students in the south are more likely to emigrate when the local share of civic peers is either low or high compared to when it takes an intermediate value, while the opposite happens for uncivic students. Migration thus causes a ‘civicness drain’.

Marco Casari, Andrea Ichino, Moti Michaeli, Maria De Paola, Ginevra Marandola, Vincenzo Scoppa

Winners, losers and future prospects: The economic geography of transition countries (VOX)

The economic geography of transition economies has changed dramatically over the last quarter century, with large urban areas growing fast and many smaller places facing declining populations. Using a high-resolution spatial growth model, this column projects the transition economies as a whole to perform economically well over the next decades, especially the region’s densest places. Large-scale infrastructure projects such as the Belt and Road Initiative will have a positive impact, but not more so than modest reductions of general trade frictions.

Klaus Desmet, Dávid Krisztián Nagy, Dzhamilya Nigmatulina, Nathaniel Young

Export booms in sluggish economies: The (missing) venting-out mechanism (VOX)

The recommendation that firms reduce unit and labour costs to gain international competitiveness in response to domestic economic crises is based on the assumption that domestic and foreign supply decisions are not linked at the firm level. This column shows that in a monetary union, exports can have a significant impact in mitigating domestic slumps through the ‘venting-out’ mechanism. By reducing their use of flexible inputs relative to fixed, firms can achieve a short-term decrease in marginal costs to gain competitiveness abroad. This explains how an economic crisis and an export boom can take place at the same time.

Miguel Almunia, Pol Antràs, David Lopez Rodriguez, Eduardo Morales

Artificial intelligence, algorithmic pricing, and collusion (VOX)

Antitrust agencies are concerned that the autonomous pricing algorithms increasingly used by online vendors may learn to collude. This column uses experiments with pricing algorithms powered by AI in a controlled environment to demonstrate that even relatively simple algorithms systematically learn to play sophisticated collusive strategies. Most worrying is that they learn to collude by trial and error, with no prior knowledge of the environment in which they operate, without communicating with one another, and without being specifically designed or instructed to collude.

Emilio Calvano, Giacomo Calzolari, Vincenzo Denicolò, Sergio Pastorello

Gentrification and businesses (VOX)

Urban planners are increasingly willing to adopt policies to temper neighbourhood changes and to assist potential losers from these changes, but how can future spots of gentrification be anticipated? This column studies gentrification in New York and Philadelphia between 1990 and 2010 to provide evidence on the micro-geographic scale of the process and the role that businesses play in it. It identifies a small group of about 20 industries whose presence in a poor neighbourhood increases its likelihood of gentrifying.

Kristian Behrens, Brahim Boualam, Julien Martin, Florian Mayneris

Ownership structure and productivity of multinationals (VOX)

Çağatay Bircan

The ideas of Harold Demsetz, 1930-2019 (VOX)

Harold Demsetz, who passed away earlier this year, was an enormously influential figure in industrial organisation, the economics of organisation, and law and economics. This column, written by a friend and colleague, outlines some of his most influential ideas and characterises his thinking as rigorous, insightful and highly relevant to central problems in industrial organisation and business strategy today.

Thomas N. Hubbard