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Economic Perspectives

Thomas H. Klier, and James M. Rubenstein

In this article, we suggest that the geography of battery electric vehicle (BEV) production is influenced by factors such as agglomeration economics and economies of scale that also underlie the location of internal combustion engine vehicle production. With several dozen vehicle assembly plants committed to producing BEVs as well as about two dozen battery pack plants currently in operation or on the drawing board, we find that despite all the disruptions that accompany the automotive sector’s transition toward electrification, the industry’s prevailing production footprint is expected to remain largely unaffected.

Andrea Ajello, Luca Benzoni, Makena Schwinn, Yannick Timmer, and Francisco Vazquez-Grande

Why does the short-term slope of the yield curve predict recessions? In this Economic Perspectives article, we explore the economic forces underlying Treasury yields’ fluctuations and highlight the roles of a tight monetary policy stance and expectations of lower inflation in predicting downturns. While the monetary policy stance is still accommodative, indicating a low recession probability, the negative inflation slope points to higher odds of a recession within a year. We find that an aggressive removal of policy accommodation increases the recession probability to 60%.

Gadi Barlevy

The author argues that while models of bubbles seem like a natural framework for studying asset booms, whether an asset is a bubble may not matter in determining if policymakers should intervene against the boom to mitigate the fallout should the boom turn into a bust.

Jason Faberman and Daniel Hartley

We examine how much racial and ethnic differences and the type of work done can explain disparities in Covid infection rates. We exploit variation in infection rates across zip codes in three large U.S. cities and across counties for the entire U.S., controlling for local demographic characteristics and employment composition. We find that neighborhoods with higher Black and Hispanic population shares and neighborhoods with higher shares of workers in high social contact jobs within essential businesses had disproportionately higher Covid infection rates around the weeks of peak infections. When we jointly estimate the relationships, we find that race and ethnicity remains strongly related to infection rates, but type of work does not. The results are most pronounced during the early wave of infections during the spring and summer of 2020.

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