Bailing out the people: The public cost of excess private debt

a column by Samba Mbaye, Marialuz Moreno Badia and Kyungla Chae for VOX: CEPR’s Policy Portal

Since the financial crisis researchers have extensively explored the dangers of excessive public debt, but excessive private debt has received less attention.

This column documents a common form of indirect private sector bailout that goes largely unnoticed. Whenever households and firms are caught in a debt overhang and need to deleverage, governments come to the rescue through a countercyclical rise in public debt. This indirect substitution takes place even in the absence of a crisis.

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Changing the structure of minimum wages: Firm adjustment and wage spillovers

a column by Giulia Giupponi and Stephen Machin for VOX: CEPR’s Policy Portal

n 2016 the National Living Wage in the UK raised the minimum hourly wage for workers aged 25 and over.

The column uses data from English care homes to analyse the impact of this policy, finding that the main non-wage effect has been a deterioration in quality of care. Younger colleagues also received wage rises, which seems to reflect a preference for fairness among employers.

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