Search Results
Briefing
Tariffs: Estimating the Economic Impact of the 2025 Measures and Proposals
Tariffs are taxes imposed by a government on imported goods, typically calculated as a percentage of the import's value (known as an ad valorem tax). Governments use tariffs for various purposes, such as raising revenue, protecting domestic industries from foreign competition and influencing international trade patterns. By increasing the cost of imported products, tariffs encourage consumers to shift toward domestically produced goods, thus supporting local businesses and potentially stimulating domestic economic activity.However, the overall impact of tariffs depends critically on how much ...
Briefing
Tariff Update: Incorporating the April 9 Announcements
This article updates our previous analysis covering the potential effects of announced tariffs by the U.S. As the analysis is quite similar to our previous analysis, much of the text of the article is drawn from the previous article.In our April 2 article examining recent tariff announcements, we constructed a benchmark measure of the average effective tariff rate (AETR) based on detailed trade data for 2024. The analysis quantified the fiscal and trade effects of newly proposed tariffs through a series of counterfactual scenarios. These included tariffs on aluminum and steel, renewed duties ...
Working Paper
The dynamics of public investment under persistent electoral advantage
This paper studies the effects of asymmetries in re-election probabilities across parties on public policy and their subsequent propagation to the economy. The struggle between groups that disagree on targeted public spending (e.g., pork) results in governments being endogenously short-sighted: Systematic underinvestment in infrastructure and overspending on targeted goods arise, above and beyond what is observed in symmetric environments. Because the party enjoying an electoral advantage is less short-sighted, it devotes a larger proportion of revenues to productive investment. Hence, ...
Report
Pandemic Control in ECON-EPI Networks
We develop an ECON-EPI network model to evaluate policies designed to improve health and economic outcomes during a pandemic. Relative to the standard epidemiological SIR set-up, we explicitly model social contacts among individuals and allow for heterogeneity in their number and stability. In addition, we embed the network in a structural economic model describing how contacts generate economic activity. We calibrate it to the New York metro area during the 2020 COVID-19 crisis and show three main results. First, the ECON-EPI network implies patterns of infections that better match the data ...
Working Paper
The political economy of labor subsidies
We explore a political economy model of labor subsidies, extending Meltzer and Richard's median voter model to a dynamic setting. We explore only one source of heterogeneity: initial wealth. As a consequence, given an operative wealth effect, poorer agents work harder, and if the agent with median wealth is poorer than average, a politico-economic equilibrium will feature a subsidy to labor. The dynamic model does not have capital, but it has perfect markets for borrowing and lending. Because tax rates influence interest rates, another channel for redistribution appears, since a decrease in ...
Briefing
Partisan Conflict in the U.S. and Potential Impacts on the Economy
Partisan conflict is not new, either in American politics or elsewhere. For economists, politics per se is not of central interest, but its implications for economic activity are. The more specific step we take in this article is to relay how partisan legislative disagreement has evolved and how that may affect the economy. Of particular interest are the effects on how businesses delay hiring and investment when facing high policy uncertainty. We will focus on fiscal policy since it, unlike monetary policy, must be negotiated in legislative settings. We will also concentrate attention here on ...
Briefing
Tariffs Update: Potential Effects of the April 2 Announcements
Our previous article presented a benchmark measure of the average effective tariff rate (AETR) based on detailed trade data for 2024. The analysis quantified the fiscal and trade effects of newly proposed tariffs through a series of counterfactual scenarios. These included tariffs on aluminum and steel, renewed duties on Chinese imports, and new levies on products from Canada, Mexico and the European Union (EU). The study showed that the AETR could rise significantly, moving up from a benchmark of 2.3 percent to as high as 15.0 percent under proposed policies.In this article, we build on this ...
Briefing
Economic Policy Uncertainty in Election Years
In this article, I focus on the measurement techniques and historical trends of a specific form of uncertainty: economic policy uncertainty, as measured by the EPU index. I describe how the EPU index has behaved during presidential election years, offering insights into its potential evolution.
Working Paper
Optimal public investment with and without government commitment
We analyze the problem of optimal public investment when government purchases of productive capital assets are financed through income taxes. Virtually all previous work in this literature has prescribed a share of public investment in GDP that is both constant and time consistent. This paper shows that this straightforward prescription derives from specific assumptions relating to preferences and technology. In a more general framework, the optimal policy is neither constant nor time consistent. With full commitment, a policymaker will typically choose a tax rate, or alternatively a share of ...