The financial transmission of housing bubbles: Evidence from Spain (VOX)

Housing bubbles may crowd out credit from other sectors, but they may also have a crowding-in effect by providing collateral to real estate-owning firms or generating attractive assets which banks can securitise and use to increase their credit supply. This column applies data from the Spanish housing bubble to a simple model of a closed economy to show that both effects were present. At first, the crowding-out effect dominated, but then crowding in occurred. This model can be applied to similar positive shocks in other sectors.

Alberto Martin, Enrique Moral-Benito, Tom Schmitz

Banks defy gravity (VOX)

Tax havens are estimated to concentrate 8% of global private financial wealth, reducing annual global tax revenues by about $200 billion. This column uses new country-by-country regulatory data on the foreign commercial presence of EU banks and compares it against gravity model predictions to examine the contribution of EU banks to tax evasion. It finds that bank activity in tax havens is three times larger than what is predicted by the gravity model, and that British and German banks are particularly present in tax havens.

Vincent Bouvatier, Gunther Capelle-Blancard, Anne-Laure Delatte


The transition to a banking union for the EMU (VOX)

The transition to a European banking union is not straightforward. A key issue is how to prioritise risk sharing and risk reduction. This column examines three possible approaches, describing the respective transition scenarios and analysing the consequences for banks during the transition phase. None of the scenarios is optimal for all countries, but waiting too long may lead to solutions needing to be found under the pressure of a new crisis.

Bert Smid, Beau Soederhuizen, Rutger Teulings

The ethnic segregation of immigrants in the US from 1850 to 1940 (VOX)

Those opposed to immigration often contend that immigrants are slow to assimilate. This column takes a longer-term view of assimilation by looking at the degree of ethnic spatial segregation in the US during and after the Age of Mass Migration. New methods and newly digitised data suggest that segregation in the US between 1850 and 1940 was both higher and more widespread than previously thought. However, despite slow rates of spatial assimilation, immigrants tend to assimilate culturally at a fast rate.

Katherine Eriksson, Zach Ward

On the prosperity of countries (VOX)

Between 1960 and 2008, only a dozen or so middle-income countries became prosperous. This column explores the factors affecting how and why some countries become prosperous, while others fail. Consistent with the theories of New Institutional Economics, economies that adopted the economic policies and institutional reforms of successful countries enjoyed the largest increases in prosperity. These successes point to the advantages of looking beyond the economic staples of capital, labour, and technology in fashioning growth policies.

Linda Yueh

Revisiting the cost of non-Europe (VOX)

Sixty years after the Treaty of Rome came into force, doubts about the benefits of trade openness are increasing among the general public and policymakers, with Brexit and calls from many governments for a reversal of key integration agreements painting a bleak picture of what may come next.  This column revisits the gains EU members have reaped from trade integration since 1957 and what would be the costs of going backwards.  The results suggest that the Single Market has increased trade between EU members by 109% on average for goods, with associated welfare gains reaching 4.4% for the average European country.

Thierry Mayer, Vincent Vicard, Soledad Zignago

Bank resolution and the structure of global banks (VOX)

When banks are too big to fail, resolution frameworks for are hobbled by the mismatch between their global nature and the national scope of regulators. This column argues that while a ‘single point of entry’ resolution is efficient, it is often incompatible with the interests of regulatory authorities, both ex ante and ex post. Taking the political constraints and incentives of national regulators into account implies that a credible resolution regime cannot be‘one size fits all’.

Patrick Bolton, Martin Oehmke

Misperceptions about immigration and support for redistribution (VOX)

The debate on immigration is often based on misperceptions about the number and character of immigrants. The column uses data from surveys in six countries to show that such misperceptions are striking and widespread. The column also describes how an experiment in which people were encouraged think about their perception of immigrants made them more averse to redistribution in general, suggesting that the focus on immigration in the political debate – without correcting the misperceptions respondents have about immigrants – could have the unintended consequence of reducing support for redistribution.

Alberto Alesina, Armando Miano, Stefanie Stantcheva

Making carbon pricing work for citizens (VOX)

Political acceptability is the biggest challenge to implementing ambitious carbon pricing schemes. This column argues that behavioural economics and political science provide new insights into the acceptability of carbon pricing which suggest that successful reforms are more likely when the revenues are recycled through lump-sum dividends to citizens. There is no ‘one size fits all’ solution, however, and revenue recycling strategies should account for different social and political contexts and will most likely be mixed in real-world carbon pricing schemes.

David Klenert, Cameron Hepburn

The big sort: The decline of northern England, 1780–2018 (VOX)

Northern England is now less educated and less productive than the south. This north-south divide is often characterised by policymakers as evidence of market failure. This column uses surname distributions to show that the northern decline can instead be explained by persistent outmigration of talent from the North. People of northern origin perform as well on average as those of southern origin. Talented northerners, however, are now mainly located in the south, where they are an economic elite.

Gregory Clark, Neil Cummins