Large price changes in industries affected by the COVID-19 pandemic caused erratic fluctuations in the U.S. headline inflation rate. This paper compares alternative approaches to filtering out the transitory effects of these industry price changes and measuring the underlying or core level of inflation over 2020- 2021, the height of the pandemic. The Federal Reserve’s preferred measure of core, the inflation rate excluding food and energy prices, performed poorly over that period: it was almost as volatile as headline inflation. Measures of core that exclude a fixed set of additional industries, such as the Atlanta Fed’s sticky-price inflation rate, were less volatile, but the least volatile were measures that filter out large price changes in any industry, such as the Cleveland Fed’s median inflation rate and the Dallas Fed’s trimmed mean inflation rate. These core measures followed smooth paths, drifting down when the economy was weak in 2020 and then rising as the economy rebounded.
The economic argument for globalization focuses on its aggregate economic gains. While economic models show that society benefits from trade integration overall, they also warn that there could be winners and losers. Economists have tended to assume that those left behind would be compensated or integrated in alternative productive activities. Yet, a vast empirical literature has established that in practice the benefits and costs of globalization have not been evenly shared across different groups of workers, industries, or locations.1 This in turn points to the limited or potentially ineffective use of supportive polices, such as trade adjustment programs, social protection, and place-based (regional) schemes. Globally, the median spending on active labor market programs, for example, is merely 0.3% of GDP, and 90% of countries spend less than 0.7% of GDP annually on such programs. Emerging markets typify this underinvestment, with annual spending in the bottom percentile of the global distribution. In this chapter, we zoom in on labor market policies as a tool to assist workers in their adjustment to globalization shocks. Specifically, we study the relationship between trade and technology shocks, labor market outcomes, and attitudes toward globalization. The underlying idea is that trade and technology shocks affect labor market outcomes and, in turn, these outcomes shape attitudes. Our interest is to better understand how labor market policies mediate these effects and can be leveraged to facilitate the adjustment to shocks and increase their political acceptability . To this end, we use a recent globalization and trade shock as case studies. The first is the large increase in imports from China in the 2000s across many countries (the so called “China shock”). We study the transmission of this trade shock to labor markets and in turn to trade attitudes; and how the sensitivity to labor outcomes differs depending on policy interventions. The second case study is the emergence of a new, less labor-intensive technology in vehicle production in the form of electric vehicles (EVs). We examine how the switch to producing electric vehicles impacted local labor markets across Europe, and how active labor market policies shaped the employment outcomes of affected workers.
We study online spending shares in 44 economies and 26 industries during the COVID-19 pandemic, using online transaction data from Mastercard. The online shares of total credit card transactions surged during the pandemic during lockdowns, but since returned to pre-pandemic trends in most countries. The differences between countries are strongly correlated with the mobility and fiscal measures. There is little evidence of permanent structural changes in e-commerce spending patterns. Finally, we estimate that COVID-19-related restrictions on in-person spending imposed average welfare costs of 7 percent.
This paper exploits the unanticipated sequestration of federal budget accounts in March 2013 to examine how contractors adjusted lobbying activities in response to the sequester. The sequestration reduced the funds disbursed through procurement. Firms with limited exposure to the cuts reduced lobbying spending after the event, whereas firms with high exposure maintained, or even increased, lobbying expenses. More affected firms appear to have intensified lobbying efforts to distinguish themselves, and to improve their chances of procuring a larger share of the reduced pie. These effects are stronger for government-dependent sectors and sectors where competition is more intense.
High public debt is urging policy makers to consider strategies to rebuild buffers and preserve debt sustainability. We focus on discretionary fiscal consolidation, defined as an increase in the ratio of primary balance (the difference between government revenues and non-interest expenditures) to GDP not driven by business cycle considerations, and evaluate whether—and under which conditions—it is likely to be associated with a durable reduction in public debt to GDP ratios. Our findings, based on a large sample of advanced and emerging countries, indicate that, on average, discretionary fiscal consolidation has a minimal impact on debt ratios. However, discretionary consolidations implemented during economic upturns or in scenarios where they can “crowd in” private investment, are more likely to be associated with sustained reductions in debt ratios.
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