We examine the allocation of hours of work across industrial sectors in OECD countries. We find large disparities across three sector groups, one that produces goods without home substitutes, and two others that have home substitutes but treated differently by welfare policy. We attribute the...

Political economy factors tend to induce many governments to spend on private goods (non-social subsidies) to the detriment of spending on social and public goods. We show that this bias in spending patterns is particularly costly for economic growth when capital markets are imperfect. We thus...

This article provides a review of recent literature in economics on the effect of mass media on politics. The focus is on the welfare effects of mass media. I also discuss the likely implications of existing behavioral theories of media effects, developed outside of economics.

After the Global Financial Crisis a controversial rush to fiscal austerity followed in many countries. Yet research on the effects of austerity on macroeconomic aggregates was and still is unsettled, mired by the difficulty of identifying multipliers from observational data. This paper...

If productivity increases more slowly for services than for manufactured goods, then services suffer from Baumol’s cost disease and tend to become relatively more costly over time. Since the welfare state in all countries is an important supplier of tax financed services, this translates into...

Contrary to standard search model predictions, prior studies failed to estimate a positive effect of unemployment insurance (UI) on reemployment wages. This paper estimates a positive UI wage effect exploiting an age-based regression discontinuity in Austrian administrative data. A search model...

The paper studies the role of international implications after EU enlargement. Based on a formal model with migration costs for both capital and labor, it predicts a two-sided migration from the new to the old EU countries which is later reversed. As the migration pattern chosen by market forces...

Conventional economic wisdom suggests because of the aging process, social security systems will have to be retrenched. In particular, retirement age will have to be largely increased. Yet, is this policy measure feasible in OECD countries? Since the answer belongs mainly to the realm of...

The paper considers the case for an internationally coordinated further fiscal stimulus during the second half of 2009. Although this makes some of the analysis period-specific, most of the issues and principles considered are timeless. For a fiscal stimulus to be both effective there must be...

Large economic crises require quick policy reactions. They bring a sense of urgency by increasing the cost of the status quo, and may thus force policy-makers to reform. However, large crises increase also uncertainty for many individuals (entrepreneurs, workers, retirees), and thus induce more...