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16311. Fostering the Development of the Coffee Global Value Chain

Author:
Dennis Görlich, Aoife Hanley, Wan-Hsin Liu, and Finn Ole Semrau
Publication Date:
12-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
The overarching aim of the study is to investigate the key factors that determine how and how intensively countries can be integrated into the coffee global value chain (GVC) and thus can better reap the globalization benefits. The empirical analysis shows how the international trade in coffee has developed across regions/countries over the past three decades. It provides evidence-based insights into the key determinants of countries’ GVC integration in the coffee industry. It discusses countries’ functional and product upgrading for their GVC integration. Based on the empirical results obtained, policy implications are derived to support the further development of the coffee GVC. This study serves as a background study for the Coffee Development Report 2020 in preparation by the International Coffee Organisation.
Topic:
International Political Economy, Food, Global Value Chains, Coffee, and Value Chains
Political Geography:
Global Focus

16312. Foreign exchange intervention: A new database

Author:
Marcel Fratzscher, Tobias Heidland, Lukas Menkhoff, Lucio Sarno, and Maik Schmeling
Publication Date:
11-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
We construct a novel database of monthly foreign exchange interventions for 49 countries over up to 22 years. We build on a text classification approach that extracts information about interventions from news articles and calibrate our procedure to data about actual interventions. Our new dataset allows us to document stylized facts about the use of foreign exchange interventions for countries that neither publish their data nor make them available to researchers. Moreover, we show that foreign exchange interventions are used in a complementary way with capital controls and macroprudential regulation.
Topic:
Economics, Foreign Exchange, International Political Economy, Data, and Capital Controls
Political Geography:
Global Focus

16313. Populist Leaders and the Economy

Author:
Manuel Funke, Moritz Schularick, and Christoph Trebesch
Publication Date:
10-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Populism at the country level is at an all-time high, with more than 25% of nations currently governed by populists. How do economies perform under populist leaders? We build a new cross-country database identifying 50 populist presidents and prime ministers 1900-2018. We find that the economic cost of populism is high. After 15 years, GDP per capita is more than 10% lower compared to a plausible non-populist counterfactual. Rising economic nationalism and protectionism, unsustainable macroeconomic policies, and institutional decay under populist rule do lasting damage to the economy.
Topic:
Economics, Nationalism, Populism, and Economic Growth
Political Geography:
Global Focus

16314. Why are Africa’s Female Entrepreneurs not Playing the Export Game? Evidence from Ghana

Author:
Charles Ackah, Holger Görg, Aoife Hanley, and Cecília Hornok
Publication Date:
10-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
We explore the export performance of Africa’s underperforming female entrepreneurs, using the Ghanaian ISSER-IGC panel, a comprehensive dataset of manufacturing firms for 2011–2015. Uniquely, the data provides information about the severity of key business constraints, across both male and female entrepreneurs. We find that females are less likely to export (and optimize their exporting) than their male peers. Although reduced access to finance seriously constrains the exports of female entrepreneurs, this limitation does not explain their relative inability to leverage value from exports. Consistent with related work, we find that certain social and cultural constraints, in particular constraints linked to bribes and security concerns, are more deeply felt by female entrepreneurs. This may hint at the exclusion of Africa’s females (voluntarily or involuntarily) from male-dominated networks or business practices.
Topic:
International Political Economy, Women, Entrepreneurship, and Exports
Political Geography:
Ghana

16315. The Future of (Negative) Emissions Trading in the European Union

Author:
Wilfried Rickels, Alexander Proelß, Oliver Geden, Julian Burhenne, and Mathias Fridahl
Publication Date:
09-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Under the European Union Emissions Trading System (EU ETS), operators must surrender allowances corresponding to the emissions of greenhouse gases (GHG) from their installations. The supply of allowances in the EU ETS decreases linearly and, all else equal, is expected to end around 2057. An earlier cut-off date is likely to follow from the European Council’s recent decision that the EU should reach net-zero GHG emissions by 2050. Scenarios published by the European Commission even anticipate a net-negative cap in the EU ETS from 2045 onwards, generated through carbon dioxide (CO2) removals. Upholding emissions trading, in the long run, therefore entails significant use of credits resulting from atmospheric CO2 removal activities. However, in its current form, the ETS Directive does not contain any legal basis for generating CO2 removal credits. Integrating CO2 removal into the EU ETS would, thus, require fundamental amendments of the ETS Directive, waiving the currently mandatory association binding emitting activities to the adoption of emission abatement technologies. The next policy window for such amendments will open in 2021, following the decision on a more ambitious EU 2030 emission reduction target. This conceptual paper explores various design options for integrating negative emissions technologies (NETs) into the EU ETS. We discuss their potential implications for emissions trading at large and address the specificity of bioenergy with carbon capture and storage (BECCS); repealing the provision that installations exclusively using biomass are not covered by the ETS Directive, BE(CCS) installations could in principle fall within the scope of the ETS Directive. Theoretically, it would be possible to consider free allocation of biogenic credits to BE(CCS) installations. Bioenergy operators could avoid having to surrender these biogenic allowances through the use of CCS and instead sell them on the EU ETS market, having implicitly received credits for the removal of CO2 from the atmosphere.
Topic:
Climate Change, Green Technology, Trade, and Carbon Emissions
Political Geography:
European Union

16316. On the Heterogeneous Trade and Welfare Effects of GATT/WTO Membership

Author:
Gabriel Felbermayr, Mario Larch, Erdal Yalcin, and Yoto V. Yotov
Publication Date:
09-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
We build on the latest developments in the structural gravity literature to quantify the partial and general equilibrium effects of GATT/WTO membership on trade and welfare. Using an extensive database covering manufacturing trade for 186 countries over the period 1980-2016, we find that the average impact of GATT/WTO membership on trade among member counties is large, positive, and significant. We contribute to the literature by estimating country-specific estimates and find them to vary widely across the countries in our sample with poorer members benefitting more. Using these estimates, we simulate the general equilibrium effects of GATT/WTO on welfare, which are sizable and heterogeneous across members, and relatively small for non-member countries. We show that countries not experiencing positive trade effects from joining GATT/WTO can still gain in terms of welfare, due to beneficial terms-of-trade effects.
Topic:
International Political Economy, Trade, WTO, and GATT
Political Geography:
Global Focus

16317. Corona Politics: The cost of mismanaging pandemics

Author:
Helios Herrera, Maximilian Konradt, Guillermo Ordoñez, and Christoph Trebesch
Publication Date:
09-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
The Covid-19 pandemic is a major test for governments around the world. We study the political consequences of (mis-)managing the Covid crisis by constructing a highfrequency dataset of government approval for 35 countries. In the first weeks after the outbreak, approval rates for incumbents increase strongly, consistent with a global “rally around the flag” effect. Approval, however, drops again in countries where Covid cases continue to grow. This is especially true for governments that do not implement stringent policies to control the number of infections. Overall, the evidence suggests that loose pandemic policies are politically costly. Governments that placed more weight on health rather than short-term economic outcomes obtained higher approval.
Topic:
Government, Health, International Political Economy, Health Care Policy, Pandemic, and COVID-19
Political Geography:
Global Focus

16318. Covid-19 Shocking Global Value Chains

Author:
Peter Eppinger, Gabriel Felbermayr, Oliver Krebs, and Bohdan Kukharsky
Publication Date:
09-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
In early 2020, the disease Covid-19 caused a drastic lockdown of the Chinese economy. We use a quantitative trade model with input-output linkages to gauge the effects of this adverse supply shock in China on the global economy through international trade and global value chains (GVCs). We find moderate welfare losses in most countries outside of China, while a few countries even gain from the shock due to trade diversion. As a key methodological contribution, we quantify the role of GVCs (in contrast to final goods trade) in transmitting the shock. In a hypothetical world without GVCs, the welfare loss due to the Covid-19 shock in China is reduced by 40% in the median country. In several other countries, the effects are magnified or reversed for several countries. Had the U.S. unilaterally repatriated GVCs, the country would have incurred a substantial welfare loss while its exposure to the shock would have barely changed.
Topic:
International Political Economy, Trade, Pandemic, Global Value Chains, COVID-19, and Supply Chains
Political Geography:
China and Global Focus

16319. Institutional design and spatial (in)equality: the Janus face of economic integration

Author:
Ingrid Ott and Susanne Soretz
Publication Date:
08-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper analyzes within a spatial endogenous growth setting the impact of public policy coordination on agglomeration. Governments in each of the two symmetric regions provide a local public input that becomes globally effective due to integration. Micro-foundation of governmental behavior is based on three different coordination schemes: autarky, full or partial coordination. Scale effects act as agglomeration force and in addition to private capital agglomeration increase the concentration of the public input. Integration promotes dispersion forces with respect to the distribution of physical capital which are based on decreasing private returns. However, within the governments’ decision on the concentration of the public input, increasing integration reinforces agglomeration because it promotes the interregional productive use of the public input. Taking feedback effects between the private and the public sector into account leads to mutual reinforcement, hence agglomeration forces almost always dominate and the spreading equilibrium becomes unstable. If convergence is a separate (additional) political objective, it needs sustained additional political effort.
Topic:
Government, International Political Economy, Economic Growth, Public Policy, Private Sector, and Capital
Political Geography:
Global Focus

16320. Endogenous Growth, Skill Obsolescence and Output Hysteresis in a New Keynesian Model with Unemployment

Author:
Wolfgang Lechthaler and Mewael F. Tesfaselassie
Publication Date:
08-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
We embed human capital-based endogenous growth into a New-Keynesian model with search and matching frictions in the labor market and skill obsolescence from long-term unemployment. The model can account for key features of the Great Recession: a decline in productivity growth, the relative stability of inflation despite a pronounced fall in output (the "missing disinflation puzzle"), and a permanent gap between output and the pre-crisis trend output. In the model, lower aggregate demand raises unemployment and the training costs associated with skill obsolescence. Lower employment hinders learning-by-doing, which slows down human capital accumulation, feeding back into even fewer vacancies than justified by the demand shock alone. These feedback channels mitigate the disinflationary effect of the demand shock while amplifying its contractionary effect on output. The temporary growth slowdown translates into output hysteresis (permanently lower output and labor productivity).
Topic:
International Political Economy, Global Recession, Labor Issues, Economic Growth, Inflation, Keynes, and Capital
Political Geography:
Global Focus