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1. Trade Liberalization along the Firm Size Distribution: The Case of the EU-South Korea FTA

Author:
Sonali Chowdhry and Gabriel Felbermayr
Publication Date:
02-2021
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
In 2011, the EU-South Korea Free Trade Agreement (EUKFTA) entered into force. With its focus on non-tariff barriers (NTBs), it is a leading example of a deep new generation agreement. Using detailed French customs data for the period 2000 to 2016, we investigate how exporters of different size have gained from the agreement. Applying a diff-in-diff strategy that makes use of the rich dimensionality of the data, we find that firms with larger pre-FTA sizes benefit more from the FTA than firms at the lower end of the size distribution, both at the extensive (product) and the intensive margins of trade. The latter finding is in surprising contrast to leading theories of firm-level behavior. Moreover, we find that our main result is driven by NTB reductions rather than tariff cuts. In shedding light on the distributional effects of trade agreements within exporters, our findings highlight the need for effective SME-chapters in FTAs.
Topic:
Economics, International Political Economy, Treaties and Agreements, Tariffs, and Trade
Political Geography:
Europe, South Korea, and European Union

2. The Impact of Sanctions Imposed by the European Union against Iran on their Bilateral Trade: General versus Targeted Sanctions

Author:
Mahdi Ghodsi and Hüseyin Karamelikli
Publication Date:
05-2020
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
Economic sanctions are intensively used by international institutions to enforce political objectives. Since 2006 the EU has been implementing general sanctions against the whole economy of Iran, affecting their trade relations. Since 2007, and following the imposition of sanctions by the UN Security Council, the EU has also implemented smart sanctions targeting Iranian entities and natural persons associated with its military activities. In a non-linear autoregressive distributed lag (NARDL), this paper investigates the impact of general and targeted EU sanctions against Iran on quarterly bilateral trade values between the 19 members of the euro area (EA19) and Iran between the first quarter of 1999 and the fourth quarter of 2018. The results indicate that general sanctions have strongly hampered trade flows between the two trading partners. The impact of general sanctions on the total imports of the EA19 from Iran is more than four times stronger than on the total exports of the EA19 to Iran. Moreover, the EU’s general sanctions have hampered trade in almost all sectors, except for the primary sectors. Furthermore, our study finds that the impact of smart sanctions targeting Iranian entities and natural persons is much smaller than the impact of general sanctions on total trade values and the trade values of many sectors. Smart sanctions affect the exports of most sectors from the EA19 to Iran, while they are statistically insignificant for the imports of many sectors from Iran. Thus, this paper provides evidence on the motivations behind smart sanctions, which target specific individuals and entities rather than the whole economy, unlike general sanctions, which have a negative impact on ordinary people.
Topic:
United Nations, Sanctions, Trade, and Trade Policy
Political Geography:
Europe, Iran, United Nations, and European Union

3. The Investment Screening Regulation and its screening ground "security or public order": how the WTO law understanding undermines the Regulation's objectives

Author:
Jens Velten
Publication Date:
01-2020
Content Type:
Working Paper
Institution:
Centre for Trade and Economic Integration, The Graduate Institute (IHEID)
Abstract:
The EU adopted Regulation 2019/452 (Regulation) as part of a more robust Common commercial policy to strengthen and defend its interests in a shifting global order. More concretely, the Regulation has two objectives: protecting domestic assets from harmful foreign investor interests, and equipping the EU with leverage to achieve more favourable treatment of EU investors abroad. Therefore, the Regulation provides Member States with an option to adopt foreign direct investment (FDI) screening mechanisms on the grounds of “security or public order”. However, the Regulation misses its objectives. The Regulation’s vague screening ground “security or public order” must be interpreted in accordance with WTO law. A detailed analysis finds that the relevant WTO notions of essential security interests and public order are rather narrow. The Regulation’s screening ground “security or public order” therefore only allows the screening of a few, high-profile cases of FDI. Such a narrow scope undermines the Regulation’s objectives.
Topic:
International Political Economy, International Trade and Finance, Foreign Direct Investment, and WTO
Political Geography:
Europe and European Union

4. On the Economic Effects of a Reallocation of EU Cohesion Policy Expenditures

Author:
Stefan Jestl and Roman Römisch
Publication Date:
08-2020
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
This paper analyses the economic effects of a reallocation of Cohesion Policy expenditures across EU countries. We evaluate a shift from stronger (i.e. older) Member States to less-developed EU economies (i.e. CEE countries) and vice versa. On top of that, we also assess the effects of a general reduction in the Cohesion Policy budget. For evaluation, we construct a demand-driven macroeconomic model which spans country models of 21 EU economies and is calibrated based on empirical data for the period 1995-2018. Our results suggest that a shift of Cohesion Policy funds to more (less) developed countries would result in a higher (lower) overall economic performance. However, the reallocation would affect economic outcomes in EU economies unevenly. In addition to direct effects on demand and production, it is pivotal to take into account indirect effects via trade as well. As a result, Cohesion Policy seems to be confronted with a trade-off between long-run convergence and short-run economic performance.
Topic:
Economics, International Political Economy, European Union, Economic Growth, Investment, and Economic Cooperation
Political Geography:
Europe and European Union

5. 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

6. Comparative Advantage in (Non-)Routine Production

Author:
Liza Archanskaia, Johannes Van Biesebroeck, and Gerald Willmann
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
We illustrate a new source of comparative advantage that is generated by countries’ different ability to adjust to technological change. Our model introduces substitution of workers in codifiable (routine) tasks with more efficient machines, a process extensively documented in the labor literature, into a canonical 2 × 2 × 2 Heckscher-Ohlin model. Our key hypothesis is that labor reallocation across tasks is subject to frictions, the importance of which varies by country. The arrival of capital-augmenting innovations triggers the movement of workers out of routine tasks, and countries with low labor market frictions become relatively abundant in non-routine labor. In the new equilibrium, more flexible countries specialize in producing goods that use non-routine labor more intensively. We document empirically that the ranking of countries with respect to the routine intensity of their exports is strongly related to labor market institutions and to cultural norms that influence adjustment to technological change, such as risk aversion or long-term orientation. The explanatory power of this mechanism for trade flows is especially strong for intra-EU trade.
Topic:
International Political Economy, Science and Technology, Innovation, Trade, and Trade Policy
Political Geography:
Global Focus and European Union

7. New Directions for EU Civil Society Support: Lessons From Turkey, the Western Balkans, and Eastern Europe

Author:
Richard Youngs
Publication Date:
02-2020
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
As the European Union (EU) debates its new post-2020 funding instruments, EU civil society support faces a pivotal moment. The union has been fine-tuning this support in recent years and is now contemplating further reforms. Civil society around the world is undergoing far-reaching changes as new types of informal activism emerge, governments try to constrict civic activity, and digital technology has major political implications. Against this backdrop, this analysis proposes ten practical ideas for how EU civil society assistance needs to evolve. It focuses on the countries that fall under the EU’s Instrument for Pre-Accession Assistance (IPA)—Turkey and the countries of the Western Balkans—and the six states of the EU’s Eastern Partnership (EaP): Armenia, Azerbaijan, Belarus, Georgia, Moldova, and Ukraine. This research examines how EU funding mechanisms need to change and assesses whether current financing proposals are likely to be beneficial or damaging. It suggests how the EU can overcome the main challenges of supporting newer forms of activism. And it explores how the EU can best help civil society to resist the heightened repression it faces in most IPA and EaP states. To improve its civil society assistance, the EU should: 1. tie critical measures to civil society support; 2. set minimum thresholds for mainstreaming; 3. engage with unfamiliar civil society partners; 4. define clearer rules on government-organized nongovernmental organizations (GONGOs); 5. focus on systemic resilience; 6. help local fund raising; 7. widen support networks; 8. better connect civil society to politics; 9. assess the civil society impacts of other EU policies; and 10. link civil society to foreign policy. This publication does not attempt to give a comprehensive or detailed account of all aspects of EU civil society support—something Carnegie has covered elsewhere.1 Rather, it offers a snapshot of the current state of play in this area of policy at a moment when the EU is debating significant changes and is set to make decisions that will affect the future course of its civil society support.
Topic:
Civil Society, Social Movement, and Political Activism
Political Geography:
Turkey, Eastern Europe, Balkans, and European Union

8. EU Code of Practice on Disinformation: Briefing Note for the New European Commission

Author:
James Pamment
Publication Date:
03-2020
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
The EU Code of Practice on Disinformation (COP) produced mixed results. Self-regulation was a logical and necessary first step, but one year on, few of the stakeholders seem fully satisfied with the process or outcome. Strong trust has not been built between industry, governments, academia, and civil society. Most importantly, there is more to be done to better protect the public from the potential harms caused by disinformation. As with most new EU instruments, the first year of COP implementation has been difficult, and all indications are that the next year will be every bit as challenging. This working paper offers a nonpartisan briefing on key issues for developing EU policy on disinformation. It is aimed at the incoming European Commission (EC), representatives of member states, stakeholders in the COP, and the broader community that works on identifying and countering disinformation. PCIO is an initiative of the Carnegie Endowment for International Peace and does not speak on behalf of industry or any government.
Topic:
Civil Society, International Cooperation, and Disinformation
Political Geography:
Europe and European Union

9. Toward a New EU Democracy Strategy

Author:
Ken Godfrey and Richard Youngs
Publication Date:
09-2019
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Ten years ago, the European Union’s (EU’s) member governments agreed on important council conclusions designed to raise the profile of the union’s support for democracy across the world. In late 2019, EU member states are likely to agree on new democracy conclusions and then, in 2020, on an updated and more operational action plan. They recognize that the strategic context has changed dramatically in the last decade, and the union needs to take on board many lessons about what has worked and not worked in its policies since 2009. Many policymakers hope that the change in leadership of the EU institutions in late 2019 might rejuvenate the bloc’s commitment to international democratic norms, after a period in which the priority has shifted to security issues. This working paper assesses the evolution of EU democracy support policies in recent years and proposes a number of improvements that a new policy framework might offer. The union has focused on improving microlevel tactics, but it most urgently needs a rethink at the macrolevel of its democracy strategies. Ironically, in the last ten years EU approaches to democracy have slowly become more sophisticated and sensitive at the implementation level yet have lost traction because they have failed to keep up with larger political and strategic changes within and beyond Europe. The paper proposes ten action points built around the need for the EU to be more proactive and flexible in supporting democracy and to link democracy support to the union’s changing approach to geopolitical challenges.
Topic:
Governance, Democracy, and Geopolitics
Political Geography:
Europe and European Union

10. Six Ideas for Rejuvenating European Democracy

Author:
Richard Youngs, Stephen Boucher, Israel Butler, Maarten De Groot, Elisa Lironi, Sophia Russack, Corina Stratulat, and Anthony Zacharzewski
Publication Date:
11-2019
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
n recent years some European states have suffered dramatic regression, while others have experienced more subtle forms of democratic erosion. Several EU governments have constricted civic liberties. There has been lively debate about how much European citizens are losing faith in core democratic values. In general, the demand for democratic participation is outstripping its supply at both the national and EU levels. In recent years some European states have suffered dramatic regression, while others have experienced more subtle forms of democratic erosion. Several EU governments have constricted civic liberties. There has been lively debate about how much European citizens are losing faith in core democratic values. In general, the demand for democratic participation is outstripping its supply at both the national and EU levels.
Topic:
Politics, Governance, Reform, and Democracy
Political Geography:
Europe and European Union

11. EU Defense Cooperation: Progress Amid Transatlantic Concerns

Author:
Erik Brattberg and Tomáš Valášek
Publication Date:
11-2019
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
European defense cooperation has made unprecedented strides since 2014 and further progress is expected under the new European Commission. Driving these developments are a combination of internal and external factors. Among them is a more challenging security environment in Europe, the disruptive impact of the Brexit negotiations and the election of U.S. President Donald Trump, demands for deeper European Union (EU) integration in the wake of the 2009 eurozone debt crisis, and defense industrial rationales. As the 2016 European Global Strategy makes clear, the EU’s ambition is to become a more strategically autonomous security player capable of taking more independent action, especially in its own neighborhood. But this will require the decisionmaking structures that can act swiftly and autonomously in crises, the necessary civilian and operational capabilities to carry out these decisions, and the means to produce the necessary capabilities through a competitive high-tech European defense industrial base. The evolving EU defense cooperation goes far beyond crisis management operations. At its core, it has the goal of leveraging EU tools to strengthen European security. In particular, new EU defense initiatives such as Permanent Structured Cooperation (PESCO) and the European Defense Fund (EDF), though still nascent, are potential game changers in this regard. PESCO operates as a platform for groups of member states to cooperate on defense capability projects. The EDF, as an internal market instrument backed up by European Commission co-funding, has the potential to spur and incentivize collaboration on the development and acquisition of new capabilities between member states. These initiatives lay a framework upon which stronger cooperation can gradually be structured. Nevertheless, these new European defense schemes will have to have the right level of ambition, be successfully implemented, and contribute to strengthening both European and transatlantic security.
Topic:
Security, Defense Policy, and Transatlantic Relations
Political Geography:
Europe and European Union

12. Climate Politics in a Fragmented Europe

Author:
Heather Grabbe and Stefan Lehne
Publication Date:
12-2019
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Europe’s “‘man on the moon’ moment” was how European Commission President Ursula von der Leyen spoke on December 11, 2019, of the European Green Deal, a comprehensive program for a fair transition to a low-carbon economy.1 Rarely has the EU undertaken such an ambitious project requiring such a massive mobilization of resources and fundamental changes to most of its policies. The political momentum behind the transition is strong because the vast majority of Europeans, especially young ones, feel a sense of urgency to take action to prevent catastrophe. But political obstacles will rise again as the EU starts to implement practical measures. The union already has a long track record of climate change policy, both as a leader of international climate diplomacy and through the creation of laws and innovative policies such as the Emissions Trading Scheme. However, its efforts have suffered from significant deficits. Clashing interests of member states, some of which still heavily depend on coal, and industrial lobbies raising concerns about international competitiveness and jobs have constrained the EU’s ambitions. Insufficient mechanisms for monitoring and compliance have handicapped the implementation of these policies. The ongoing fragmentation of Europe’s political scene poses additional hurdles. Divisions between Eastern and Western Europe and Northern and Southern Europe hinder efficient decisionmaking. Populist parties already are mobilizing resistance to the necessary policies. Under these circumstances, the EU’s traditional method of depoliticizing difficult issues and submitting them to long technocratic discussions is unlikely to deliver results. To sustain democratic consent, there is no alternative to building public support for a fair climate transition and to deepening democratic engagement.
Topic:
Climate Change, Environment, Politics, and Democracy
Political Geography:
Europe and European Union

13. WTO'ing a Resolution to the China Subsidy Problem

Author:
Chad P. Bown and Jennifer A. Hillman
Publication Date:
10-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The United States, the European Union, and Japan have begun a trilateral process to confront the Chinese economic model, including its use of industrial subsidies and deployment of state-owned enterprises. This paper seeks to identify the main areas of tension and to assess the legal-economic challenges to constructing new rules to address the underlying conflict. It first provides a brief history of subsidy disciplines in the General Agreement on Tariffs and Trade and the World Trade Organization (WTO) predating any concerns introduced by China. It then describes contemporary economic problems with China’s approach to subsidies, their impact, and the apparent ineffectiveness of the WTO’s Agreement on Subsidies and Countervailing Measures to address them. Finally, it calls for increased efforts to measure and pinpoint the source of the problems—in a manner analogous to how the Organization for Economic Cooperation and Development took on agricultural subsidies in the 1980s—before providing a legal-economic assessment of proposals for reforms to notifications, evidence, remedies, enforcement, and the definition of a subsidy.
Topic:
Economics, World Trade Organization, Tariffs, and Trade
Political Geography:
Japan, Europe, Asia, North America, United States of America, and European Union

14. EU Trade Policy amid the China-US Clash: Caught in the Cross-Fire?

Author:
Ana González and Nicolas Véron
Publication Date:
08-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
China's rapid rise and unique economic system and the increasingly aggressive and disruptive US trade policy are posing an unprecedented threat to the global rules-based trading and economic system. The European Union has critical interests at stake in the current escalation, even as it has so far been comparatively spared from US trade policy belligerence and China's reactions. In this context, the European Union should adopt an independent and proactive stance, building on recent efforts and going beyond them. The European Union, even more than the United States or China, has a strategic interest in the preservation of the global rules-based order embodied by the World Trade Organization (WTO). It must play a leading role in steering WTO reform and modernization, working closely with broadly aligned third countries such as Japan and other players. It should expand its outreach beyond its immediate negotiating counterparts in both the United States and China, and leading European officials at both the EU and member state levels should work at better understanding China. While strengthening its domestic policy instruments to address new challenges, such as the screening of foreign direct investment for security purposes, the European Union must also resist its own temptations of protectionism and economic nationalism. In support of these objectives, the European Union should prepare itself for difficult decisions, which may involve revising some of its current red lines in international trade negotiations. Conversely, the European Union should stand firm on principles such as refusing one-sided agreements and rejecting abusive recourse to national security arguments in trade policies. The European Parliament, in working with the European Council and the European Commission, will have a critical role to play in steering the European Union through these challenging times.
Topic:
Bilateral Relations, Economy, Trade Wars, and Trade Policy
Political Geography:
China, Asia, North America, United States of America, and European Union

15. Brexit: Everyone Loses, but Britain Loses the Most

Author:
Maria C. Latorre, Zoryana Olekseyuk, Hidemichi Yonezawa, and Sherman Robinson
Publication Date:
03-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper examines 12 economic simulation models that estimate the impact of Brexit (Britain’s exit from the European Union). Most of the studies find adverse effects for the United Kingdom (UK) and the EU-27. The UK’s GDP losses from a hard Brexit (reversion to World Trade Organization rules due to a lack of UK-EU agreement) range from –1.2 to –4.5 percent in most of the models analyzed. A soft Brexit (e.g., Norway arrangement, which seems in line with the nonbinding text of the political declaration of November 14, 2018, on the future EU-UK relationship) has about half the negative impact of a hard Brexit. Only two of the models derive gains for the UK after Brexit because they are based on unrealistic assumptions. The authors analyze more deeply a computable general equilibrium model that includes productivity and firm selection effects within manufacturing sectors and operations of foreign multinationals in services. Based on this latest model, they explain the likely economic impact of Brexit on a wide range of macroeconomic variables, namely GDP, wages, private consumption, capital remuneration, aggregate exports, aggregate imports, and the consumer price index.
Topic:
Economics, World Trade Organization, Brexit, and Multinational Corporations
Political Geography:
Britain, Europe, and European Union

16. EU Trade Policy amid the China-US Clash: Caught in the Cross-Fire?

Author:
Felipe González and Nicolas Véron
Publication Date:
08-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
China's rapid rise and unique economic system and the increasingly aggressive and disruptive US trade policy are posing an unprecedented threat to the global rules-based trading and economic system. The European Union has critical interests at stake in the current escalation, even as it has so far been comparatively spared from US trade policy belligerence and China's reactions. In this context, the European Union should adopt an independent and proactive stance, building on recent efforts and going beyond them. The European Union, even more than the United States or China, has a strategic interest in the preservation of the global rules-based order embodied by the World Trade Organization (WTO). It must play a leading role in steering WTO reform and modernization, working closely with broadly aligned third countries such as Japan and other players. It should expand its outreach beyond its immediate negotiating counterparts in both the United States and China, and leading European officials at both the EU and member state levels should work at better understanding China. While strengthening its domestic policy instruments to address new challenges, such as the screening of foreign direct investment for security purposes, the European Union must also resist its own temptations of protectionism and economic nationalism. In support of these objectives, the European Union should prepare itself for difficult decisions, which may involve revising some of its current red lines in international trade negotiations. Conversely, the European Union should stand firm on principles such as refusing one-sided agreements and rejecting abusive recourse to national security arguments in trade policies. The European Parliament, in working with the European Council and the European Commission, will have a critical role to play in steering the European Union through these challenging times.
Topic:
International Relations, Economics, Trade Wars, and Trade Policy
Political Geography:
China, Europe, Asia, North America, United States of America, and European Union

17. L’ambivalence de la politique d’armement britannique vis-à-vis de l’Europe (The Ambivalence of British Arms Policy Towards Europe)

Author:
Samuel B. H. Faure
Publication Date:
05-2019
Content Type:
Working Paper
Institution:
Centre d'Etudes et de Recherches Internationales
Abstract:
Published in the context of Brexit, this research paper analyses the ‘double relationship’ between Britain and Europe: being ‘in’ by taking part in co-operation with other European states, and at the same time being ‘out’ by staying away from or even leaving multilateral programmes in Europe. This dilemma is worked on from the case of defence procurement policy. How does the British government decide to be both ‘in’ and ‘out’ of Europe by participating in the A400M military transport aircraft programme and withdrawing from the EuroMale UAV programme? Based on exclusive data, the decision in favour of the A400M (‘in’) is explained by the action of political, administrative and industrial actors who perceive the A400M as a ‘truck’ rather than a ‘race car’. As for the British State’s decision not to participate in the EuroMale programme (‘out’), it is conditioned by a weakening of the political will of political actors, and at the same time by a strengthening of conflicting relations between French and British administrations and industries. In doing so, this research contributes to the literature on the acquisition of armaments in strategic studies, and to the literature on differentiated integration in European studies.
Topic:
Security, Defense Policy, Political Economy, European Union, Brexit, Conflict, and Europeanization
Political Geography:
United Kingdom, France, Western Europe, and European Union

18. The Global Impact of Brexit Uncertainty

Author:
Tarek A. Hassan, Laurence van Lent, Stephan Hollander, and Ahmed Tahoun
Publication Date:
01-2019
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
Using tools from computational linguistics, we construct new measures of the impact of Brexit on listed firms in the United States and around the world: the share of discussions in quarterly earnings conference calls on costs, benefits, and risks associated with the UK’s intention to leave the EU. Using this approach, we identify which firms expect to gain or lose from Brexit and which are most affected by Brexit uncertainty. We then estimate the effects of these different kinds of Brexit exposure on firm-level outcomes. We find that concerns about Brexit-related uncertainty extend far beyond British or even European firms. US and international firms most exposed to Brexit uncertainty have lost a substantial fraction of their market value and have reduced hiring and investment. In addition to Brexit uncertainty (the second moment), we find that international firms overwhelmingly expect negative direct effects of Brexit (the first moment), should it come to pass. Most prominently, firms expect difficulties resulting from regulatory divergence, reduced labor mobility, trade access, and the costs of adjusting their operations post-Brexit. Consistent with the predictions of canonical theory, this negative sentiment is recognized and priced in stock markets but has not yet had significant effects on firm actions.
Topic:
Economics, Political Economy, Regional Cooperation, Brexit, Global Political Economy, and Economic Policy
Political Geography:
Britain, United States, United Kingdom, Europe, and European Union

19. The Impact of the State on the Quality of an Economic System: A Cross-Country Analysis

Author:
Maciej Bałtowski and Piotr Kozarzewski
Publication Date:
08-2019
Content Type:
Working Paper
Institution:
Center for Social and Economic Research - CASE
Abstract:
The paper discusses the role of the state in shaping an economic system which is, in line with the welfare economics approach, capable of performing socially important functions and achieving socially desirable results. We describe this system through a set of indexes: the IHDI, the World Happiness Index, and the Satisfaction of Life index. The characteris-tics of the state are analyzed using a set of variables which describe both the quantitative (government size, various types of governmental expenditures, and regulatory burden) and qualitative (institutional setup and property rights protection) aspects of its functioning. The study examines the “old” and “new” member states of the European Union, the post-communist countries of Eastern Europe and Asia, and the economies of Latin America. The main conclusion of the research is that the institutional quality of the state seems to be the most important for creation of a socially effective economic system, while the level of state interventionism plays, at most, a secondary and often negligible role. Geographical differentiation is also discovered, as well as the lack of a direct correlation between the characteristics of an economic system and the subjective feeling of well-being. These re-sults may corroborate the neo-institutionalist hypothesis that noneconomic factors, such as historical, institutional, cultural, and even genetic factors, may play an important role in making the economic system capable to perform its tasks; this remains an area for future research.
Topic:
Demographics, Economy, Economic Growth, State, Economic Policy, Institutions, Trade, and Welfare
Political Geography:
Europe, Eastern Europe, Asia, Latin America, and European Union

20. Conceptualising Differentiated Integration: Governance, Effectiveness and Legitimacy

Author:
Sandra Lavenex and Ivo Križić
Publication Date:
12-2019
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
In light of rising internal cleavages and centrifugal tendencies, differentiated integration (DI) has (re)arisen as a major topic in debates on the future of the European Union. As new forms of participation below the threshold of full membership are needed, this paper provides a conceptualisation of effective and legitimate DI. Going beyond existing scholarship’s focus on the legal dimension of DI, the paper emphasises its organisational component, meaning the variegated participation of EU member states, sub-state entities and third-country actors in the panoply of EU policy-making institutions, such as regulatory agencies and transgovernmental networks. The paper subsequently discusses how to measure effectiveness of such differentiated arrangements in terms of their output, outcome and impact, before theorising under what conditions we are likely to see effective DI. Finally, the paper turns to the question of legitimacy of DI, discussing its meaning, measurement and determinants.
Topic:
Governance, Democracy, Regional Integration, Accountability, and Legitimacy
Political Geography:
Europe and European Union