News Archive

EconPol Speaker Clemens Fuest has called for the UK Government to abandon its plan to complete the Brexit transition by the end of 2020. Prof Fuest describes the UK’s decision to rule out a customs union and pursue its own trade policy as ‘regrettable’, highlights fears from both the UK and EU over the potential lack of a “level playing field”, calls tax policy “a minefield of disagreement” and says climate policy “poses a further challenge to the free trade agreement.”

In the 1930s, countries fought destructive trade conflicts – now we have a similar situation, but the conflicts are taking place in the tax system. These conflicts arise out of the twin impacts of globalization and digitalization. Once upon a time, there was an implicit understanding of fairness in taxation, meaning how countries tax within their borders and how the tax burden is distributed. More specifically, companies and individuals were taxed based on their residence and consumption in the destination country.

An expanding body of research finds a sharp increase in the average markups in the US and Europe, driven by firms located at the top of the markup distribution; other studies find that markups in the US and Europe have increased only moderately or even remained stable. These differing results have triggered a discussion on methodology, a key issue being the choice of the free input in the production function approach.

This paper from Štěpán Mikula (Masaryk University) and Mariola Pytliková (EconPol Europe, CERGE-EI) examines causal effects of air pollution on migration by exploiting a unique natural experiment of desulfurization of power plants in the region of North Bohemia in the Czech Republic after the fall of communism in 1989.

There is a clear consensus that stimulating firm R&D is welfare-increasing due to positive externalities and uncertainty, but the question about the most efficient way to do so is still open to debate: this paper from Leonie Koch (Ludwig Maximilian University of Munich) and Martin Simmler (EconPol Europe, Oxford University Centre for Business Taxation) analyzes the magnitude of local knowledge spillovers of public R&D in Germany and its determinants using patent application data.