The New Paradigm Papers of November

How buy-European rules can help save Europe’s car industry

Nils Redeker, Sander Todoir, Lucas Guttenberg

Europe’s car industry is – not entirely without its own fault – under massive pressure: Chinese exports and US tariffs are rising, while domestic demand is stagnating (20% below pre-pandemic levels). Instead of regulatory rollbacks and national unilateral efforts, the authors argue for a clearly European strategy: The EU should harness the power of its internal market and pool consumer subsidies through a “Buy European” clause. This could apply to private as well as corporate fleets and serve as a basis for reciprocal electric vehicle subsidy agreements with trustworthy trade partners. The timing is favorable: Germany, France, Italy, and Spain need to renew their subsidy programs in the coming months – together they account for 70% of European new car registrations. A coordinated approach could stabilize the entire sector.

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Other Revenue for the EU Budget – Status Quo and Potential

Margit Schratzenstaller, Philipp Heimberger, Veronika Kubeková, Margarita Sanz

As debates about the future of EU financing intensify, one previously overlooked category is receiving more attention: “Other revenue” — that is, funds arising from the EU’s regular activities, such as fines imposed on companies, interest earnings, refunds from EU programmes, revenues linked to the NGEU recovery instrument, or proceeds related to the immobilisation of Russian assets. These revenues make up only a small share of the EU budget but could play a greater role if traditional own resources come under pressure. The paper provides a systematic overview of definitions, categories, and long-term trends of these revenues. It also discusses options for how existing and potential new sources could be used to strengthen the EU’s financial autonomy.

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Capital and Labor Income Mobility

Marco Ranaldi, Joël Bühler, Roberto Iacono

How important is capital income for income mobility? The authors use comprehensive income registry data from Norway over 26 years to analyze the dynamics of intra-generational income mobility. The results are clear: Upward mobility is driven primarily by rising labor incomes (and joint upward movements of capital and labor). Downward mobility, by contrast, is driven mainly by falling capital incomes. The study develops a new conceptual framework and provides important empirical insights into the role of capital, labor, and “homoploutia” (high correlation of wage and capital income) in inequality dynamics — nationally and globally.

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Price Shocks are Redistribution Shocks

Jesús Lara Jáuregui, Isabella M. Weber, Luiza Nassif Pires, Lucas Teixeira

Price changes are not neutral — they can significantly influence inequality. A new study by Isabella Weber and co-authors develops a new empirical framework that uses consumption-basket analyses to simulate how sectoral price shocks alter income distribution. Some sectors — energy, food and agriculture, health, chemicals, and partly wholesale and housing — have particularly strong effects: When prices rise in these sectors, the Gini coefficient increases markedly. The authors also show that these “inequality-relevant” sectors strongly overlap with the “inflation-relevant” ones. Their conclusion: Traditional monetary policy reaches its limits when confronted with supply-driven price shocks — sectoral price stabilization becomes essential.

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