How to measure conflict?


If 1000 people were killed in conflict India, a country with a population of more than 1.2 billion inhabitants, would this have the same impact on the country as a whole as 1000 victims in Nicaragua, a country of 6 million inhabitants? The intuitive answer might be no, but this is exactly what most of the conflict literature is doing. Hannes Mueller makes a case for rethinking the approach of using a threshold of an absolute number of battle victims.

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Financial bubbles exist


In the economy we observe stock price booms and busts. How do these cycles come about, could there be a way of smoothing them and, in that case, should we? Klaus Adam, Johannes Beutel, and Albert Marcet show that a very simple model of stock prices can explain very well the stock price volatility found in the data assuming that investors do not understand perfectly well how prices are formed.

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The culture of effort and the US-EU divide in labour market and firm-level outcomes

Barcelona GSE research on by Alessandra Bonfiglioli and Gino Gancia

Differences in labour market and firm statistics between the US and Europe are easy to dismiss as cultural. This column applies an equilibrium model of worker screening and effort to cross-country data, showing that a large chunk of observed differences can be explained by the strategic interaction between firm and worker strategies. Evidence suggests that the US is in a high-screening, high-effort equilibrium, while southern Europe is in the complementary equilibrium. Perhaps culture is more economic than we might assume.

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Globalisation, job security, and wages

Barcelona GSE research on by Kerem Cosar, Nezih Guner, and James R. Tybout

Trade liberalisations are often accompanied by labour market reforms, making it difficult to isolate their effects. This column discusses the effects of trade liberalisation, globalisation, and labour-market reforms on the Colombian labour market. Reduced trade frictions increased cross-firm wage inequality and shifted the firm-size distribution rightward, with offsetting effects on overall wage inequality. Average income increased, but the gains were concentrated among employees of large, productive firms with access to export markets. Greater trade openness also increased job turnover.

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Managing credit bubbles

Barcelona GSE research on by Alberto Martín and Jaume Ventura

There is a widespread view among macroeconomists that fluctuations in collateral are an important driver of credit booms and busts. This column distinguishes between ‘fundamental’ collateral – backed by expectations of future profits – and ‘bubbly’ collateral – backed by expectations of future credit. Markets are generically unable to provide the optimal amount of bubbly collateral, which creates a natural role for stabilisation policies. A lender of last resort with the ability to tax and subsidise credit can design a ‘leaning against the wind’ policy that replicates the ‘optimal’ bubble allocation.

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