Question A:
All else equal, there are substantial advantages to having much of Europe’s human capital and infrastructure for international financial activity clustered in a single city, as they are at present in London.
Responses
Responses weighted by each expert's confidence
Question B:
All else equal, Britain’s rules on hiring, firing and working hours are significantly more conducive to financial activity than those in other large European countries.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
 Philippe Aghion |
Harvard | Did Not Answer | Bio/Vote History | |
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 Franklin Allen |
Imperial College London | Bio/Vote History | ||
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There are huge agglomeration effects from having clusters of expertise.
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 Pol Antras |
Harvard | Bio/Vote History | ||
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Agglomeration economies in this industry appear to be pervasive (New York City, Singapore, Hong Kong, etc.)
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 Richard Baldwin |
The Graduate Institute Geneva | Did Not Answer | Bio/Vote History | |
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 Timothy J. Besley |
LSE | Bio/Vote History | ||
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 Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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 Nicholas Bloom |
Stanford | Bio/Vote History | ||
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There are large spillovers in finance - I worked in McKinsey in London and saw this first hand. Europe needs to compete with the US & Asia.
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 Richard William Blundell |
University College London | Bio/Vote History | ||
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Strong international nature of the city, the institutional structure and the levels of expertise work well together. Let's hope that remains
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 Agnès Bénassy-Quéré |
Paris School of Economics | Bio/Vote History | ||
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There are economies of scale, but concentration also increases the risks related to size and possible collusion.
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 Elena Carletti |
Bocconi | Bio/Vote History | ||
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 Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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 Paul De Grauwe |
LSE | Did Not Answer | Bio/Vote History | |
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 Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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 Ernst Fehr |
Universität Zurich | Did Not Answer | Bio/Vote History | |
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 Xavier Freixas |
Barcelona GSE | Bio/Vote History | ||
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Competition from virtual trading platforms limits the monopolistic effect while centralization increases liquidity
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 Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Bio/Vote History | ||
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 Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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There may be a tradeoff involving competition, economies of scale and regulatory/political risk. Two or three financial centers may be best.
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 Luis Garicano |
LSE | Bio/Vote History | ||
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There exist some agglomeration economies. It is unclear however how substantial they are, with ICT playing a growing role in Finance
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 Francesco Giavazzi |
Bocconi | Bio/Vote History | ||
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Enrico Morretti's work on cities (The New Geography of Jobs) is a good starting point
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 Rachel Griffith |
University of Manchester | Bio/Vote History | ||
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 Veronica Guerrieri |
Chicago Booth | Bio/Vote History | ||
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 Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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 Martin Hellwig |
Max Planck Institute for Research on Collective Goods | Bio/Vote History | ||
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Advantages from economies of scale and scope may well be matched by disadvantages from herding and systemic risk.
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 Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
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Some economies of agglomeration are evident - but seem to be eubsector-specific.
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 Henrik Kleven |
Princeton | Did Not Answer | Bio/Vote History | |
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 Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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For hub-and-spoke structure, we need to balance agglomeration synergy against systemic risk externality (created at hub, borne by spokes).
-see background information here |
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 Per Krusell |
Stockholm University | Bio/Vote History | ||
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It's not clear to me what the positive agglomeration activities are. Agglomeration can be bad too. But I'm far from an expert on this!
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 Botond Kőszegi |
Central European University | Bio/Vote History | ||
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 Eliana La Ferrara |
Harvard Kennedy | Bio/Vote History | ||
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 Christian Leuz |
Chicago Booth | Bio/Vote History | ||
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Substantial agglomeration benefits in cities (Krugman, 1991); applies esp. to financial services and skilled labor
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 Costas Meghir |
Yale | Bio/Vote History | ||
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 Peter Neary |
Oxford | Bio/Vote History | ||
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Local costs (high house prices, inequality) but clear EU-wide gains to agglomeration. Unsustainable outside the Single Market however.
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 Kevin O'Rourke |
Oxford | Bio/Vote History | ||
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 Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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There are efficiency advantages, due to the externalities and fixed costs in finance. But there can be distributional disadvantages.
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 Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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A single city offers economies of scale, deep pool of talent, strong external services. But 2-3 cities could also work.
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 Torsten Persson |
Stockholm University | Did Not Answer | Bio/Vote History | |
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 Christopher Pissarides |
London School of Economics and Political Science | Bio/Vote History | ||
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the vast majority of transactions nowadays are done electronically and I don't see big advantages to having them done from a single centre.
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 Richard Portes |
London Business School | Bio/Vote History | ||
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Agglomeration benefits and externalities are why London is currently top of global financial centers. Brexit is a serious threat to this.
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 Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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 Lucrezia Reichlin |
London Business School | Bio/Vote History | ||
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 Rafael Repullo |
CEMFI | Bio/Vote History | ||
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 Hélène Rey |
London Business School | Bio/Vote History | ||
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There are probably synergies between financial activities but no evidence that they should ALL be clustered together for efficiency,
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 Antoinette Schoar |
MIT | Bio/Vote History | ||
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Krugman (1991) suggests agglomeration in financial services is stronger than other industry due to knowledge spill overs, talent acquisition
-see background information here -see background information here |
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 John Van Reenen |
LSE | Bio/Vote History | ||
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 John Vickers |
Oxford | Bio/Vote History | ||
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Large economies of agglomeration. But caveat that the hub is sensibly regulated and not prone to collusion.
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 Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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Wholesale financial services naturally congregate in a handful of locations....that's why there are financial centers in the first place.
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 Beatrice Weder di Mauro |
The Graduate Institute, Geneva | Bio/Vote History | ||
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 Karl Whelan |
University College Dublin | Bio/Vote History | ||
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There may be some wider advantages for Europe due to the clustering of financial service activity in London but it is likely to be small.
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 Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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We need to balance the benefits from local networks with the consequences of Brexit.
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 Fabrizio Zilibotti |
Yale University | Bio/Vote History | ||
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Philippe Aghion |
Harvard | Did Not Answer | Bio/Vote History | |
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Franklin Allen |
Imperial College London | Bio/Vote History | ||
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Most other large European countries have higher social payments, taxes and more secure employment. Providing incentives is more difficult.
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Pol Antras |
Harvard | Bio/Vote History | ||
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I'm no expert on labor market regulations. But I'd imagine that other factors were more important in making London Europe's financial center
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Richard Baldwin |
The Graduate Institute Geneva | Did Not Answer | Bio/Vote History | |
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Timothy J. Besley |
LSE | Bio/Vote History | ||
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Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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Nicholas Bloom |
Stanford | Bio/Vote History | ||
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They are right now, but nobody knows what will happen post Brexit. We have been surveying firms and they know as little as the government.
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Richard William Blundell |
University College London | Bio/Vote History | ||
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London currently provides a good international environment for the kind of mobility essential for a flourishing financial industry.
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Agnès Bénassy-Quéré |
Paris School of Economics | Bio/Vote History | ||
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Differences in labour flexibility are less marked for executives. Other factors are also important for the location of financial activity.
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Elena Carletti |
Bocconi | Bio/Vote History | ||
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Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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Paul De Grauwe |
LSE | Did Not Answer | Bio/Vote History | |
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Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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Ernst Fehr |
Universität Zurich | Did Not Answer | Bio/Vote History | |
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Xavier Freixas |
Barcelona GSE | Bio/Vote History | ||
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Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Bio/Vote History | ||
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Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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Luis Garicano |
LSE | Bio/Vote History | ||
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The legal environment, safe, fast and low cost in the UK, is key. This goes beyond labor costs into Secutities and IPO cost etc.
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Francesco Giavazzi |
Bocconi | Bio/Vote History | ||
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no brainer
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Rachel Griffith |
University of Manchester | Bio/Vote History | ||
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Veronica Guerrieri |
Chicago Booth | Bio/Vote History | ||
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Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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Rules in some other European countries - e.g. Ireland - are not worse
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Martin Hellwig |
Max Planck Institute for Research on Collective Goods | Bio/Vote History | ||
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If "financial activity" refers to trading, the statement is probably true, if to funding of the real economy, the matter is not so clear.
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Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
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...But from social welfare perspective, macho investment bank culture (facilitated by such labour market practices) can be questioned
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Henrik Kleven |
Princeton | Did Not Answer | Bio/Vote History | |
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Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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For non-tariff employees, income tax law and conducive (friendly) regulatory policies are way more important than hiring and firing rules.
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Per Krusell |
Stockholm University | Bio/Vote History | ||
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Not obvious that labor regulation is that relevant in this particular sector. It is in others but finance is full of other incentives.
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Botond Kőszegi |
Central European University | Bio/Vote History | ||
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Eliana La Ferrara |
Harvard Kennedy | Bio/Vote History | ||
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Christian Leuz |
Chicago Booth | Bio/Vote History | ||
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Not clear that significantly so; depending on dimension of labor law, NL, IE, DE, CH can be close. And, less flex can be good for innovation
-see background information here |
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Costas Meghir |
Yale | Bio/Vote History | ||
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Peter Neary |
Oxford | Bio/Vote History | ||
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Balance in UK labour markets is more tilted towards employers: ironically this also makes incumbent firms less likely to stay post-Brexit
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Kevin O'Rourke |
Oxford | Bio/Vote History | ||
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Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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Labor contract flexibility is very important in finance, both for incentive reasons and to reallocate labor swiftly as opportunities change.
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Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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Flexible labor markets are particularly valuable to cyclical industries such as finance.
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Torsten Persson |
Stockholm University | Did Not Answer | Bio/Vote History | |
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Christopher Pissarides |
London School of Economics and Political Science | Bio/Vote History | ||
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Financial institutions need flexibility above all and Britian offers it. But so does, e.g., Ireland.
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Richard Portes |
London Business School | Bio/Vote History | ||
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Overall, I doubt labour market regulation makes much difference in financial sector. No evidence. English language and time zone important.
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Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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Lucrezia Reichlin |
London Business School | Bio/Vote History | ||
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Rafael Repullo |
CEMFI | Bio/Vote History | ||
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Hélène Rey |
London Business School | Bio/Vote History | ||
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Labour laws are being changed in a number of countries so it is hard to know.
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Antoinette Schoar |
MIT | Bio/Vote History | ||
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John Van Reenen |
LSE | Bio/Vote History | ||
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John Vickers |
Oxford | Bio/Vote History | ||
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Ratio of value of flexibility to that of working terms regulation is relatively high in finance. UK is somewhat freer than most of EU.
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Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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I think this is really secondary; "light touch" regulation and the lock-in from pre-existing activity are much more important.
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Beatrice Weder di Mauro |
The Graduate Institute, Geneva | Bio/Vote History | ||
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Karl Whelan |
University College Dublin | Bio/Vote History | ||
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I don't believe labour laws in France, Germany or Ireland, for example, will be a deterring factor for financial service firms.
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Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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One should add the prejudices against finance and wealth that permeate the continent.
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Fabrizio Zilibotti |
Yale University | Bio/Vote History | ||
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