News Archive

With negotiations between the EU and UK reaching deadlock, the only way forward seems to be a hard Brexit. In this policy brief, the authors suggest a model which will avoid a ‘no deal’ scenario and find that a minimum three-month extension is necessary in order to establish a European Customs Association.

A new policy report from EconPol Europe provides the first analysis to evaluate an unemployment re-insurance scheme for the euro area as regards potential stabilizing and redistributive effects. The novel feature of the study is that it separates the stabilization effects of the re-insurance scheme into two channels relevant to the current political debate: First, it indicates the potential for stabilization through payments between countries (so-called interregional stabilization). Second, the study estimates the so-called intertemporal stabilization potential. The distinction between the two stabilization channels is crucial for assessing the possible value added of different reform options.

A new working paper from EconPol Europe investigates the impact of import competition on rent sharing between firms and employees using a large panel of French manufacturing firms. By applying recent advances in the estimation of price-costs margins, authors classify each firm into labour- and product-market regimes based on the presence or absence of market power and estimate the degree of rent sharing among firms and workers. They investigate the hypothesis that import penetration acts as a discipline device on the labour market, reducing workers' bargaining power. Competition from OECD countries has a negative effect on bargaining power, they find, whereas imports from low-wage countries have a more muted impact. By providing firm-level evidence for the relationship between international trade and rent sharing, the paper sheds new light on the effect of trade liberalisation on the labour market.

Import tariffs introduced by the United States and China in September will see Chinese exporters bear approximately 75% of the costs, with the US extracting a net welfare gain of USD 18.4 billion, according to new research from EconPol Europe. The tariffs affect around 50% of Chinese products imported to the US, with a value exceeding USD 250 billion. The tariffs introduced by China affect around USD 60 billion worth of goods. The research shows these new tariffs, introduced on 24 September, will increase US consumer prices on affected Chinese products by an average of 4.5%, while the producer price of Chinese firms declines by 20.5%.

The lack of cross-border risk sharing in the banking sector is one of the biggest barriers to better integrated financial markets in Europe. In this EconPol policy brief, the authors emphasize the potential of the securitization market for bank-based financial integration. To effectively increase cross-border risk sharing through securitization in the EU, they suggest further improving the existing regulatory framework in order to reduce barriers to a thriving securitization market. A further recommendation is to introduce explicit incentives for risk sharing, and securitization in Europe entering EU regulation and EU programs.