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102. The Sky is the Limit: The Azerbaijan-Israel-Türkiye Trio and the Greater Middle East
- Author:
- Rusif Huseynov
- Publication Date:
- 08-2022
- Content Type:
- Working Paper
- Institution:
- Moshe Dayan Center for Middle Eastern and African Studies
- Abstract:
- In our latest issue of Turkeyscope, the director of Azerbaijan's Topchubashov Center, Rusif Huseynov writes on the existing and potential security and economic cooperation between Israel and Azerbaijan, as well as the strategic link both countries share with Turkey.
- Topic:
- Security, Economics, Bilateral Relations, and Cooperation
- Political Geography:
- Turkey, Middle East, Israel, and Azerbaijan
103. Peace treaty between Azerbaijan and Armenia: Who will economically win?
- Author:
- Emin Mammadov and Nigar Islamli
- Publication Date:
- 10-2022
- Content Type:
- Working Paper
- Institution:
- Center for Economic and Social Development (CESD)
- Abstract:
- Following the recent September escalations along the Azerbaijan and Armenian border, in a way towards achieving a sustainable peace deal and long-lasting security in the Caucasus, the quadrilateral meeting in pragmatic terms is deemed to play a significant role in this vein putting an end to hostilities. The President of Azerbaijan and the Prime Minister of Armenia met in Prague on 6 October 2022 in the margins of the first European Political Community at the invitation of the President of the French Republic and the President of the European Council. Both sides reiterated their commitment to the Charter of the United Nations and the Alma Ata 1991 Declaration through which both recognize each other’s territorial integrity and sovereignty which will act as a legal basis for the work of the border delimitation commissions.
- Topic:
- Security, Economics, Sovereignty, Treaties and Agreements, Territorial Disputes, and Borders
- Political Geography:
- Caucasus, Armenia, and Azerbaijan
104. Eighth sanctions package: Which side will be the economic loser?
- Author:
- Nigar Islamli
- Publication Date:
- 09-2022
- Content Type:
- Working Paper
- Institution:
- Center for Economic and Social Development (CESD)
- Abstract:
- Since February 24, 2022, Russia's invasion policy towards Ukraine has been tried to be prevented by several series of sanctions by the European Union. These sanctions include trade, travel, asset freezes, oil, transport, and SWIFT bans. Since the start of the war, 7 sanctions packages have been presented and many of them are being implemented. In response to Russia's invasion policy against Ukraine, the European Commission presented the eighth package of sanctions covering visa issues and asset freezes.
- Topic:
- Economics, Sanctions, European Union, and Russia-Ukraine War
- Political Geography:
- Russia, Europe, and Ukraine
105. The economic impact of COVID-19 on Turkish-Azeri bilateral relations
- Author:
- Duncan Labadie
- Publication Date:
- 02-2022
- Content Type:
- Working Paper
- Institution:
- Center for Economic and Social Development (CESD)
- Abstract:
- While the economic instability of the international system resurrected debates about the future of the World Order, diving against the current and studying in a destabilizing pandemic context a bilateralism touted for its durability and solidity seemed academically attractive. Thus, the purpose of this research paper is to verify whether COVID-19 is causing fatal economic disruptions among the iron alliances, or if on the contrary one is witnessing an "unnatural" strengthening. By reconciling empirical data (reports of the Central Bank, the OSCE, press articles) and academic papers, this study analyzes the surprising Turkish-Azeri economic consolidation before questioning its still-perceptible limitsin the short and long term. This work concludes that through the neorealist prism, Ankara and Baku managed to transform Covidian negativity into an element of strategic economic cooperation aimed at repairing financial loopholes on a national scale.
- Topic:
- Economics, War, Bilateral Relations, Natural Resources, COVID-19, Liberalization, and Asymmetric Relations
- Political Geography:
- Turkey and Azerbaijan
106. Digitalization of Special Economic Zones in China
- Author:
- Jie (Jeanne) Huang
- Publication Date:
- 01-2022
- Content Type:
- Working Paper
- Institution:
- China Studies Centre, The University of Sydney
- Abstract:
- Special Economic Zones (SEZ) have become the forefront in China to test legal and technological reforms for digital trade. This chapter explores three cutting-edge case studies in China’s SEZs: the Beijing blockchain-based Single Window deposit box; newly established big data exchanges in Beijing, Tianjin, and Shanghai SEZs; and pilot projects in financial, medical care and automobile industries to flow data across the border in the Shanghai SEZ. It scrutinizes China's experiments in the context of its applications to join CPTPP and DEPA. It argues that the development of Chinese domestic law for digital trade is shifting away from the traditional paradigm that uses international commitments to push domestic reform or make domestic law according to international law. The development of Chinese domestic law for digital trade relies much more on China’s domestic needs than what FTAs negotiations require. FTAs are increasingly becoming a tool for China to shape international law rather than a benchmark for legislating domestic Chinese law.
- Topic:
- Development, Economics, International Trade and Finance, Hegemony, and Digitalization
- Political Geography:
- China and Asia
107. Public responses to foreign protectionism: Evidence from the US-China trade war
- Author:
- David Steinberg and Yeling Tan
- Publication Date:
- 06-2022
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- America's recent turn toward protectionism has raised concerns about the future viability of the liberal international trading system. This study examines how and why public attitudes toward international trade change when one's country is targeted by protectionist measures from abroad. To address this question, the authors fielded three original survey experiments in the country most affected by US protectionism: China. First, they find consistent evidence that US protectionism reduces Chinese citizens' support for trade. This finding is replicated in parallel experiments on technology cooperation, and further validated outside of the China context with a survey experiment in Argentina. Second, they show that responses to US protectionism reflect both a "direct reciprocity" logic—citizens want to retaliate against the United States specifically—and a "generalized reciprocity" logic that reduces support for trade on a broader, systemic basis.
- Topic:
- Economics, International Trade and Finance, Protectionism, and Competition
- Political Geography:
- China, Asia, North America, and United States of America
108. 25 years of excess unemployment in advanced economies: Lessons for monetary policy
- Author:
- Joseph E. Gagnon and Madi Sarsenbayev
- Publication Date:
- 10-2022
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- For about 25 years before the COVID-19 pandemic, inflation was very low and stable in most advanced economies. A little noticed dark side of this impressive achievement is that unemployment rates were almost always higher than needed to keep inflation low. This widespread and persistent policy error arose because of a major flaw in standard macroeconomic models—the use of a linear Phillips curve. This flaw would have been far less costly if central banks had not chosen such a low target for inflation. This paper thus adds to the arguments in favor of a moderately higher inflation target. Even without a higher target, central banks need to use a broader range of economic models and should verify their estimates of the natural rate of unemployment by running the economy hot from time to time in order to see nascent inflationary pressure before throttling back.
- Topic:
- Economics, Monetary Policy, Unemployment, and COVID-19
- Political Geography:
- Global Focus
109. How carbon tariffs and climate clubs can slow global warming
- Author:
- Shantayanan Devarajan, Delfin S. Go, Sherman Robinson, and Karen Thierfelder
- Publication Date:
- 09-2022
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Slowing global warming requires countries to reduce carbon emissions, which imposes costs on their economies. To be effective, most countries must agree collectively to participate (e.g., the Paris Agreement, COP26). However, every country has an incentive not to comply and still reap the benefits of other countries’ actions—a classic free-rider problem. This paper evaluates recent recommendations to use trade policy to solve the free-rider problem associated with climate mitigation strategies. It shows that the European Union’s carbon border adjustment mechanism (CBAM tariffs) are effective at offsetting the unfair competitive advantage of noncompliant countries in the markets of compliant countries but have little effect on the trade of noncompliant countries, who can divert trade to other noncompliers. CBAM tariffs alone have little impact on global CO2 emissions. The paper also examines “climate clubs” (coalitions of countries that agree to impose carbon taxes or other equivalent policies and impose punitive tariffs on non-club members to induce them to join the club). It finds that punitive climate club tariffs can be effective in inflicting significant damage on the economies of nonmembers, providing a strong incentive for them to join the club. The paper identifies trade dependence between club and non-club members as an important consideration for the success of a climate club. Club members that are strongly linked to non-club members suffer losses when the club punishes non-club members, which would make them hesitant to impose punitive tariffs on a major nonmember trading partner.
- Topic:
- Climate Change, Economics, Tariffs, and Carbon Emissions
- Political Geography:
- Global Focus
110. A reform strategy to transform energy: From piecemeal to systemwide change
- Author:
- Steven Fries
- Publication Date:
- 08-2022
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report on Climate Change Mitigation highlights the vast gap between climate change mitigation actions and climate stabilization goals. But its broad policy prescriptions are likely to leave policymakers pondering what specific actions to take. Informed by accumulating evidence on transforming aspects of energy systems like power generation from solar and wind resources and battery electric cars, this paper develops a more pointed energy reform strategy than that of the IPCC to deliver the necessary systemwide changes. It makes the case for two unorthodox policies. One is for governments to provide, in addition to R&D supports, market-creating supports for early deployment of low-carbon technologies in initial markets. The second is to sequence emissions pricing after innovation and market-creating supports and differentiate this pricing across key energy sectors rather than imposing one economywide price. Compared with a single price, targeting higher emissions pricing on sectors that are costlier to decarbonize still promotes cost-effective emission cuts but limits adverse distributional impacts. The paper also considers nonprice barriers to change and ways to coordinate domestic reforms across countries.
- Topic:
- Climate Change, Economics, Reform, Carbon Emissions, and Energy
- Political Geography:
- Global Focus
111. Green energy depends on critical minerals. Who controls the supply chains?
- Author:
- Luc Leruth, Adnan Mazarei, Pierre Régibeau, and Luc Renneboog
- Publication Date:
- 08-2022
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- In light of the transition away from fossil fuel–based energy, this paper highlights the importance of understanding who controls vital parts of the global supply chains of critical minerals and rare earth elements (REEs). Analysis of direct ownership does not reveal the real sources of control over the decisions of the company. To identify those sources, the authors use an index that measures the degree to which important shareholders can affect voting decisions. This analysis is not straightforward, because companies along the supply chain are not necessarily incorporated in the countries in which mining and production activities take place, and shareholders can exert influence through multiple layers of subsidiaries. The analysis reveals that China’s control over the global value chains involving critical minerals and REEs extends beyond what is commonly assumed. It also sheds light on environmental, social, and governance issues in the countries in which mining and/or production take place. The paper advocates increasing transparency regarding the sources of control to better assess and manage economic and geopolitical risks; enhancing recycling, to reduce dependency on foreign supply; avoiding protectionist and trade-reducing reactions; and encouraging research and development in order to speed up the adoption of technologies of substitution.
- Topic:
- Economics, Geopolitics, Supply Chains, Minerals, Energy, and Green Transition
- Political Geography:
- Global Focus
112. Why gender disparities persist in South Korea’s labor market
- Author:
- Karen Dynan, Jacob Funk Kirkegaard, and Anna Stansbury
- Publication Date:
- 07-2022
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Although the South Korean economy fared relatively well on the whole during the pandemic, the labor market consequences were uneven, with women experiencing worse outcomes than men. These gender disparities have reinforced and highlighted important longer-term gender-related challenges in the South Korean labor market. Despite an above-average level of female tertiary education, the gender pay gap in South Korea is at the top of the range among OECD countries. The labor force participation rate is 20 percentage points lower for women than for men, a difference that is about one-quarter larger than the average for high-income countries. These disparities—as well as fertility that is the lowest of any advanced economy country in the world—reduce South Korea's future economic prospects and will contribute to fiscal challenges as the population rapidly ages. The analysis in this paper suggests that the combination of low female employment and low fertility in South Korea reflects features of the traditional nature of work that create a particularly stark tradeoff for women between work and family and put pressure on women to choose one or the other. This tradeoff has increased in recent years because the opportunity cost of having a child has risen with the rapid growth in the tertiary education rate of South Korean women. Regressions based on individual-level data from the Korean Labor and Income Panel Study (KLIPS) show that the entire gap in female labor force participation is driven by married women, particularly women with children. Unmarried women with no children are just as likely to be employed as men. A sizable "child earnings penalty" for South Korean women is fully explained by women dropping out of the labor force after the birth of their first child rather than reducing hours or hourly wages. Although South Korea has made strides toward making work more family friendly, there is scope to do better.
- Topic:
- Economics, Inequality, Labor Market, Fertility, and Gender
- Political Geography:
- Asia and South Korea
113. “That’s a bridge too far!” The imperative for a feminist lens on infrastructure investment.
- Author:
- Mia Urbano and Beth Elson
- Publication Date:
- 10-2022
- Content Type:
- Working Paper
- Institution:
- International Women's Development Agency (IWDA)
- Abstract:
- International development cooperation is increasingly focused on infrastructure again. However, to achieve economic and social transformation these investments must recognise that infrastructure is not gender neutral. User priorities differ, and infrastructure choices can either bridge or deepen divides.
- Topic:
- Civil Society, Economics, Infrastructure, and Feminism
- Political Geography:
- Australia
114. Unravelling Africa’s raw material footprints and their drivers
- Author:
- Albert Kwame Osei-Owusu, Michael Danquah, and Edgar Towa
- Publication Date:
- 10-2022
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- This paper applies an environmentally extended input–output analysis, leveraging the Eora database, to estimate the global raw material footprints of 51 African nations from 1995 to 2015. It employs least absolute shrinkage and selection operator and panel regression models to quantify the effects of diverse variables on Africa’s raw material footprints. The findings show that the raw material footprints of Africa’s production and consumption soared by 41 per cent and 38 per cent, respectively, from 1995 to 2015, mainly driven by biomass and construction materials. They show that Africa outsources 25 per cent of its raw material footprints from consumption, while over 60 per cent of its footprints from production arise from its exports. Our findings beckon African governments to reduce the excessive focus on exploitation and concentrate on combatting corruption and extreme rent-seeking while decoupling Africa’s raw material footprints from rising public debt, carbon emissions, income levels, and population.
- Topic:
- Economics, Carbon Emissions, Public Debt, Income, Raw Materials, and Input-Output Analysis
- Political Geography:
- Africa
115. Gender preference at birth: A new measure for son preference based on stated preferences and observed measures of parents’ fertility decisions
- Author:
- Mehwish Ali, Ashton de Silva, Sarah Sinclair, and Ankita Mishra
- Publication Date:
- 09-2022
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- Investigating preference for sons is a continuing focal area of development economics and demographic research. Son preference presents a challenge in achieving the United Nations Sustainable Development Goals of ‘no poverty’, ‘good health and wellbeing’, and ‘gender equality’ by 2030. It is thus important to investigate son preference to inform policy-makers of the potential challenges in achieving these goals. Inaccurate interpretation of the mechanisms of son preference could misinform policy analysis and result in unintended consequences. Existing measures including sex ratios and gender composition of children do not reflect the true extent of son preference in high fertility countries such as Pakistan, where the success of policy action is limited and significant barriers to sex-selective technologies exist. Given the likely impact of son preference on fertility behaviour in Pakistan, accurate measurement of the forms this gender bias can take is necessary to appropriately gauge the influence of son preference on the fertility outcomes. The limited capacity of existing measures to accurately depict son preference in countries with high fertility combined with limited demarcation between pre- and post-birth son preference warrants development of a new measure for son preference to evaluate its effects. In this paper, a new measure of son preference called ‘gender preferences at birth’ (GPB) is presented. GPB combines stated fertility preferences and observed fertility outcomes to acknowledge that households in countries with high fertility and low contraception usage have less control over their fertility decisions.
- Topic:
- Economics, Sustainable Development Goals, Welfare, Family Planning, Fertility, and Gender
- Political Geography:
- Pakistan, South Asia, and Global Focus
116. Determinants of corporate cash holdings in South Africa
- Author:
- Ewa Karwowski, Hanna Szymborska, Keagile Lesame, and Tlhologelo Thoka
- Publication Date:
- 08-2022
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- Globally, corporate cash holdings have risen since the 1980s. In South Africa, some commentators have accused corporations of engaging in an ‘investment strike’, while others see corporate liquidity as a precaution against systemic uncertainty. We use the unique South African Revenue Service/National Treasury firm-level dataset to scrutinize corporate liquidity, using panel analysis. Relative to GDP, corporate cash and liquidity holdings have not increased between 2010 and 2017. However, corporate cash is high in international comparison and has grown at the firm level. We do not find evidence for the hypothesis that companies are engaging in an investment strike. Cash and liquidity are shaped by idiosyncratic and sectoral risk factors. In the short run, heightened uncertainty might reduce corporate cash and liquidity as firms struggle to adjust to an unexpected economic situation. In the medium run, we find a strong association between political uncertainty and corporate cash and liquidity holdings.
- Topic:
- Economics, Corporations, Liquidity, and Cash
- Political Geography:
- Africa, South Africa, and Global Focus
117. Illicit financial flows and country-by-country reporting in extractive industries
- Author:
- Saila Stausholm, Petr Janský, and Marek Šedivý
- Publication Date:
- 07-2022
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- Economic data are important in governing the international political economy. Some of the most widely used macro statistics risk being undermined by systematic misalignment in reporting of economic activity due to illicit financial flows, as well as tax-minimizing financial transactions by multinational corporations. Measuring these misalignments may prove a way to correct old statistical standards, if adequate data can be obtained. We evaluate whether new transparency and reporting regimes that require country-by-country reporting by multinational corporations could prove a feasible way to appropriate the amount of tax avoidance and use these figures to correct macro statistics. We evaluate the existing data for two of the standards through previous literature and provide original analysis of a third standard that is applied to the extractive industries. We find that the standards lack coherence and workability, and that particularly the extractive industry standard falls short of enabling thorough research on profit reporting and taxmotivated misalignments by multinational corporations.
- Topic:
- Economics, Tax Evasion, Extractive Industries, and Illicit Financial Flows
- Political Geography:
- Global Focus
118. Will economic statecraft threaten western currency dominance? Sanctions, geopolitics, and the global monetary order
- Author:
- Carla Norrlof
- Publication Date:
- 09-2022
- Content Type:
- Working Paper
- Institution:
- Atlantic Council
- Abstract:
- The return of great power rivalry is stoking renewed fears of weakening Western currency dominance. Financial sanctions are becoming the preferred economic tool for accomplishing geopolitical goals. These instruments are especially popular with the United States and Europe. In response, rival great powers, notably China and Russia, are diversifying away from Western currencies and developing counterstrategies to maintain economic and foreign policy autonomy. As other countries are hit by increasingly punishing Western sanctions, the incentive to join Russia and China’s alternative international monetary order increases. New analysis, published in this report, shows early signs that some countries may be trying to diversify away from the dollar. A growing circle of countries attempting to evade the Western-centric financial and currency order may over time erode the dollar and the euro’s sizeable lead, though will likely fall well short of ending their global dominance. This report analyzes these trends and quantifies the extent of reserve diversification following Russia’s 2022 war on Ukraine. It also assesses the polarity of the international currency order since the onset of the euro in 2002. Reserve diversification out of the dollar, and into the euro, has been modest, though Chinese renminbi reserves grew after Russia’s February offensive in Ukraine. Dollar unipolarity declined acutely in 2017 as the number of countries sanctioned by the United States increased and the US President Donald J. Trump threatened to revoke alliance commitments. Using economic statecraft while retaining global economic influence will require the United States to keep its economic house in order and allies close, if the current unipolar currency order is to survive.
- Topic:
- Economics, Monetary Policy, Sanctions, and Geopolitics
- Political Geography:
- China, Europe, and Asia
119. The Business Case for the Sustainable Development Goals: An Empirical Analysis of 21 Danish Companies' Engagement with the SDGs
- Author:
- Michael W. Hansen, Henrik Gundelach, and Erik Johnson
- Publication Date:
- 09-2022
- Content Type:
- Working Paper
- Institution:
- Centre for Business and Development Studies (CBDS), Copenhagen Business School
- Abstract:
- This paper explores why business engage with the SDG agenda, with a view to understanding the business case for the SDGs. Building on and extending the responsibility literature’s discussion of the business case for responsibility, the paper develops a conceptual framework for analyzing why business engage with the SDGs. This framework is employed to analyze why a sample of 21 Danish companies decided to engage with the SDG agenda. The analysis finds that most companies view the SDGs as a platform for achieving rather conventional business goals such as mitigating risk, saving costs, and differentiating products and services. However, in a few cases, companies use the SDGs as a lever for carving out uncontested positions in future markets. The paper concludes that companies overwhelmingly view the SDGs as a business opportunity rather than as a business responsibility, something that fundamentally may distinguish the SDG agenda from previous responsibility agendas. The paper fills a gap in the extant literature on business responsibility by developing and validating a classification of the business case for the SDGs based on economic value drivers, and by deepening the empirical understanding of, what precisely this business case may be.
- Topic:
- Development, Economics, Sustainable Development Goals, Business, and Social Responsibility
- Political Geography:
- Europe and Denmark
120. Egypt Faces Severe Economic Problems
- Author:
- Sara Nowacka
- Publication Date:
- 08-2022
- Content Type:
- Working Paper
- Institution:
- The Polish Institute of International Affairs
- Abstract:
- In August, a year before the end of his term of office, Tarek Amer, head of the Egyptian Central Bank, resigned. This was a consequence of the deepening economic crisis caused by a decline in the country’s currency reserves and the impact of global problems on Egypt, which is dependent on food imports. Capital-intensive investments, mainly in the energy and real estate sectors, will exacerbate Egypt’s situation. Given the size of its population, economic collapse would have a significant destabilising impact on the EU’s southern neighbourhood.
- Topic:
- Economics, Currency, Economic Stability, and Economic Crisis
- Political Geography:
- Middle East and Egypt
121. Legal Report – A Highlight on Political, Economic, and Social Rights in Palestine
- Author:
- Palthink
- Publication Date:
- 07-2022
- Content Type:
- Working Paper
- Institution:
- Pal-Think For Strategic Studies
- Abstract:
- Within the activities of PalThink Academy for Human Rights and Democracy, PalThink produced a report titled A Highlight on Political, Economic, and Social Rights in Palestine. The report mainly provided a profound analysis of the current public situation in the Palestinian territories from 2019 to 2022. Furthermore, the report was anchored on six indicators including good governance, political participation, public freedom, education, health, and labour. In addition, it gave an in-depth insight into the root causes and consequences of ongoing violations of human rights. To conclude, the report proposed recommendations pertaining to the needed interventions to alleviate the challenges facing human rights in Palestine. This project is supported by the ifa’s zivik Funding Programme and implemented by PalThink for Strategic Studies.
- Topic:
- Civil Society, Economics, Human Rights, and Social Order
- Political Geography:
- Middle East and Palestine
122. China’s Infrastructure Projects in the Middle East: Lessons from China’s Engagement Elsewhere
- Author:
- Dominika Urhová
- Publication Date:
- 12-2022
- Content Type:
- Working Paper
- Institution:
- Moshe Dayan Center for Middle Eastern and African Studies
- Abstract:
- In our latest issue of Iqtisadi, Ms. Dominika Urhova discusses the economic strategy and role of China in the Middle East, and analyzes the implications of China's growing influence in the region.
- Topic:
- Foreign Policy, Development, Economics, Belt and Road Initiative (BRI), and Strategic Engagement
- Political Geography:
- China, Middle East, and Asia
123. EU-Azerbaijan Economic Relations: New Perspectives and Targets
- Author:
- CESD Research Team
- Publication Date:
- 12-2022
- Content Type:
- Working Paper
- Institution:
- Center for Economic and Social Development (CESD)
- Abstract:
- The study is an example of the series on issues analyzing the EU-Azerbaijan economic relations which can be considered a step forward to empower economic approach in the policy-making process aiming to provide an alternative view in addressing current challenges and developments in Azerbaijan. The European Union’s relations with Azerbaijan have been formulated based on the EU-Azerbaijan Partnership and Cooperation Agreement which entered into force since 1999. In February 2017, the EU and Azerbaijan began negotiations on a new framework agreement designed to enhance the political dialogue, trade and mutually beneficial cooperation covering a wide range of economic aspects. One of the most important strategies of EU in the energy policy is to ensure energy security through diversification of energy routes. Azerbaijan is a strategically important energy partner for the EU and plays a significant role in bringing Caspian energy resources to the EU market. In 2018, the EU and Azerbaijan endorsed joint Partnership Priorities, along the four Eastern Partnership priorities that accompany the political dialogue and economic cooperation….
- Topic:
- International Relations, Economics, European Union, and Partnerships
- Political Geography:
- Europe, Caucasus, and Azerbaijan
124. German Economy Winter 2022: Inching through the energy crisis
- Author:
- Jens Boysen-Hogrefe, Dominik Groll, Nils Sonnenberg, Nils Jannsen, Stefan Kooths, Vincent Stamer, and Timo Hoffmann
- Publication Date:
- 12-2022
- Content Type:
- Working Paper
- Institution:
- Kiel Institute for the World Economy (IfW)
- Abstract:
- Wholesale prices for gas and electricity have fallen significantly in recent months - even though they are still at a high level. In addition, the burdens on private households and companies caused by high energy costs are to be cushioned by so-called price brakes. Overall, inflation in 2023 will be much lower at 5.4 percent than we had expected in our autumn forecast (8.7 percent). Although real disposable income and, as a result, private consumption are likely to decrease next year, the decline will be much smaller than had been expected a few months ago. As a result, we now expect a slight increase in GDP of 0.3 percent for 2023 (autumn: -0.7 percent). In 2024, GDP is expected to grow somewhat more strongly again at 1.3 percent (autumn: 1.7 percent). The labour market is robust despite the economic slowdown, partly because companies are still desperately seeking skilled workers. The public fiscal balance is likely to deteriorate significantly in 2023 due to the aid packages in response to the energy crisis and displays a deficit of around 4 percent relative to GDP. With the expiry of the aid packages, the deficit will decrease again in 2024.
- Topic:
- Economics, Monetary Policy, Budget, Business, Labor Market, Energy Crisis, Emerging Economies, and Advanced Economies
- Political Geography:
- Europe and Germany
125. Economic Zones and Local Income Inequality: Evidence from Indonesia
- Author:
- Cecília Hornok and Sidan Raeskyesa
- Publication Date:
- 06-2022
- Content Type:
- Working Paper
- Institution:
- Kiel Institute for the World Economy (IfW)
- Abstract:
- Economic zones can be powerful drivers of economic growth in developing countries. However, less is known about their distributional impact on the local society. This paper provides empirical evidence from Indonesian provinces on the relationship between economic zones and within-province income inequality. Estimates from panel regressions and synthetic control case studies suggest that this relationship is positive overall. The estimated rise in income inequality after a zone opens is relatively small on average and may be short-lived. However, the average estimate masks large regional differences, which suggests that the inequality implications of economic zone policies depend on local conditions. One explanation for the rise in inequality is that the unskilled population benefits disproportionately less from the policy. As a remedy, we propose education and training programs that target the poor and unskilled and in which companies also actively participate.
- Topic:
- Economics, Emerging Markets, Globalization, Economic Growth, and Income Distribution
- Political Geography:
- Indonesia, Asia, and Southeast Asia
126. International Managerial Skill and Big Colombian Exporting Firms’ Performance, 2006-2014
- Author:
- Federico Merchan
- Publication Date:
- 06-2022
- Content Type:
- Working Paper
- Institution:
- Kiel Institute for the World Economy (IfW)
- Abstract:
- This paper uses a sample of the biggest private Colombian exporting firms to propose and estimate a two-step methodology for measuring international managerial skill and calculating its impact on firm performance. The first step quantifies the manager’s organizational capital contribution to improvements in Bloom et al.’s (2021) production efficiency (ability to assemble inputs into final goods) and/or quality capacity (skill to make high quality goods) mechanisms, through the median of export unit value regression residuals at firm-year level (multiplying by -1 the price competition products’ residuals). The second step is regression analysis of firm performance. Results indicate that: i) international managerial quality has a significant and robust positive effect on total export value via the intensive margin, ii) exported value elasticity relative to international managerial quality is around 3 times larger than exported value elasticity relative to exogenous global demand shocks, and iii) better managers in the international market do not necessarily upgrade export quality.
- Topic:
- Economics, Emerging Markets, International Trade and Finance, Exports, Management, and Labor Market
- Political Geography:
- Colombia and South America
127. Does ethnic heterogeneity decrease workers’ effort in the presence of income redistribution? An experimental analysis
- Author:
- Christoph Schütt, David Pipke, Lena Detlefsen, and Gianluca Grimalda
- Publication Date:
- 07-2022
- Content Type:
- Working Paper
- Institution:
- Kiel Institute for the World Economy (IfW)
- Abstract:
- Ethnic discrimination is ubiquitous, and it has been shown to exert adverse effects on income redistribution. The reason is that a country’s ethnic majority, if richer than the average, may be unwilling to transfer resources to the country’s ethnic minorities if poorer than the average. A yet untested mechanism is that a country’s ethnic majority may reduce their work effort knowing that their income will finance redistribution to ethnic minorities. We test for this mechanism experimentally in triadic interactions. A German citizen acting as a worker is randomly matched with a recipient who can be another German, an economic migrant, or an asylum seeker in Germany. Workers know that another German citizen may transfer part of their earnings to the recipient. The recipient does not exert any work effort. Even if the recipient’s identity does not affect effort in the aggregate, social identity strongly moderates this relationship. Participants with a strong German identity, i.e., who report feeling close to other Germans, exert significantly less effort than other participants if the recipient is an asylum seeker. They also exert more effort when matched with a German recipient than an asylum seeker, while participants with a less strong German identity do the opposite. Moreover, participants with a strong German identity exert slightly more effort when matched with economic migrants than with asylum seekers, while others tend to do the opposite, albeit statistically insignificantly. Workers’ beliefs over the third party’s redistribution rate do not mediate such results and are generally inaccurate.
- Topic:
- Economics, Discrimination, Tax Systems, Labor Market, Redistribution, and Welfare State
- Political Geography:
- Global Focus
128. A Survey of Importers: Results of a Survey Conducted in Collaboration with the Ethiopian Economics Association
- Author:
- Ricardo Hausmann, Tim O'Brien, Tim Cheston, Nikita Taniparti, and Ibrahim Worku Hassen
- Publication Date:
- 11-2022
- Content Type:
- Working Paper
- Institution:
- The John F. Kennedy School of Government at Harvard University
- Abstract:
- Ethiopia suffers from a chronic shortage of foreign exchange (forex).[1] The resulting lack of access to imports prevents firms from accessing imported inputs required for production. This creates a vicious cycle as exporters are constrained by this same problem, which further reduces overall supply of foreign exchange in the Ethiopian economy. The inability to reliably access foreign exchange for imports affects firm decisions on sourcing, capacity, and output. While the cost of this constraint is known to be high on the Ethiopian economy and firms are known to use a range of measures to attempt to bypass this constraint, quantitative assessments of the problem and response actions by firms are limited. It is in this context that an importer survey was conducted with the goal of informing policy decisions. A total of 202 firms with an active importing license were interviewed in March-April 2022. These firms were randomly sampled from firms registered with an importer license. All firms interviewed reported that they were operating below capacity, often well below capacity. Foreign exchange shortages were the main reason respondent firms cited for not operating at full capacity (63% of firms reporting this as their biggest constraint). Forex shortages far surpass the second and third reasons cited for not operating at full capacity — constraints due to the conflict (13%) and COVID-19 restrictions (11%). Firms operating below capacity cited forex shortages as the main constraint, regardless of whether they imported or not in the previous year. This was the most pressing constraint reported by firms of all sizes and sectors surveyed. It was the most pressing constraint faced by exporters and by foreign-owned firms as well as non-exporters and domestic firms. Amongst the total sample of firms with a renewed importer license, more than one-third of respondent firms (37%) had not imported in FY2020-21. Overall, 74% of firms reported experiencing challenges in accessing forex. Access to forex was reported as most challenging for manufacturing firms and smaller firms but impacted all sectors and firm sizes. The losses attributed to forex scarcity at the firm level were largest for agricultural firms, for micro-firms, and for firms that did not import at all in the previous year. In general, the larger the firm sales, the higher the likelihood that they were able import. The survey found different types of imports for different sectors. Manufacturing firms imported a large share semi-finished goods as imports as compared to agricultural firms that primarily imported finished goods. The survey results find that foreign exchange shortages and an inability to import are most severe for the manufacturing and agriculture sectors, small and micro-sized firms, and all non-exporters. However, the constraint is also the top problem facing all firm types in the survey, including exporters and foreign-owned firms. The primary means of accessing foreign exchange where it did occur was through specialized forex accounts or ‘diaspora’ accounts. The second most common means of accessing foreign exchange was through retention accounts available to exporters. The black market featured in many responses, but questions across the survey suggest that self-reported use of the black market by survey participants is underreported versus actual usage. The ability to source foreign exchange differed significantly by firm size. Exporting firms primarily used retention account earnings, as compared to non-exporters, which relied more on forex accounts. For faster access to forex, most firms reported that they approach banks, followed by turning to the black market. Friends and family abroad also served as a source of forex for one-quarter of firm respondents, and that foreign exchange was often used immediately. Foreign exchange access from banks is nevertheless a major pain point for firms. Most firms (55%) requested forex from a bank in the past year. On average, fulfilled forex requests took three months to be processed when they were fulfilled, but many firms reported that they have an unfulfilled request that has been in the system for more than a year. These firms are especially likely to report foreign exchange access as their top challenge. The survey finds that individual firms do not tend to use both official and black-market foreign exchange sources but rather tend to access all their forex at the (lower) official rate or all at the (higher) black-market. Large firms import most of their products at the official rate. By contrast, most small and micro firms import through other means. Manufacturing firms are also more likely to import all their production through other means and outside of the banking system. Non-exporting firms tended to import through other means than the official rate and outside of the banking system at a higher prevalence than exporting firms. The survey gleaned new insights on the implicit exchange rate that firms face as they navigate official and black-market channels of foreign exchange access. The survey does not allow for a precise estimate of the transaction-weighted exchange rate facing the economy but finds firm-level estimates align with previous macro-level estimates. The implicit exchange rate was higher for non-exporting firms, which show a greater willingness to pay a higher exchange rate to access imports. This signals the importance of the retention account for exporters to guarantee an import price closer to the official exchange rate. When asked about the maximum rate firms would pay to guarantee access to forex, some groups of firms were willing to pay higher amounts, including all non-exporters, firms that imported in the past year, and those that declared forex access a challenge. When compared to the implied rate they paid in the past year, many firms are willing to pay more than the implied rate to guarantee access to forex. Firm perspectives on policy changes to the exchange rate underscored challenges faced by policymakers. Current policy has been one of a crawling peg, with changes within the last several years to increase the rate of devaluation. The survey asked respondents about their support for faster devaluation, for a one-off movement to unify the official rate with the black-market rate, or about alternative exchange rate systems such as a floating exchange rate. Most respondents (71%) opposed maintaining the current regime, yet no option received majority support. Most firms appear to want both a stronger exchange rate and easier access to foreign exchange despite a tradeoff between these two priorities. The largest share of support for policy change was to adjust the exchange rate such that the official rate matches the black-market rate.
- Topic:
- Development, Economics, Imports, and Collaboration
- Political Geography:
- Africa and Ethiopia
129. An Integrated Epidemiological and Economic Model of COVID-19 NPIs in Argentina
- Author:
- Adolfo Rubinstein, Eduardo Levy-Yeyati, Alejandro López Osornio, Federico Filippini, and Adrian Santoro
- Publication Date:
- 11-2022
- Content Type:
- Working Paper
- Institution:
- The John F. Kennedy School of Government at Harvard University
- Abstract:
- We added a multi-sectoral economic framework to a SVEIR epidemiological model, combining the economic rationale of the DAEDALUS model with a detailed treatment of lockdown fatigue and declining compliance with Public Health and Social Measures reported in recent empirical work, to quantify the epidemic and economic benefits and costs of alternative lockdown and PHSM policies, both in terms of intensity and length. Our calibration replicates key features of the case and death-curves and economic cost for Argentina in 2021. The model allows us to quantify the short-term policy trade-off between lives and livelihoods and show that it can be significantly improved with targeted pharmaceutical policies such as vaccine rollout to reduce mainly severe disease and the death toll from COVID-19, as has been highlighted by previous studies.
- Topic:
- Economics, COVID-19, and Epidemiology
- Political Geography:
- Argentina, South America, and Latin America
130. The Instability of Preferences: Uncertain Futures and the Incommensurable and Intersubjective Nature of Value(s)
- Author:
- Richard Bronk and Jens Beckert
- Publication Date:
- 03-2022
- Content Type:
- Working Paper
- Institution:
- Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)
- Abstract:
- The default assumption of standard economics is to treat preferences as exogenously ‘given’, consistent with one another, ‘revealed’ by past choices, and context independent. There has been increased interest recently (within behavioural economics) in the impact of inconsistent or irrational preferences and (more broadly) in dynamic and endogenous preferences. This paper builds on these challenges to standard assumptions by analysing the pivotal role of three aspects of preference formation in explaining capitalist dynamics and market instability. These are the constant creation of new preferences and the indeterminacy of choice sets in the context of widespread product innovation; the moral indeterminacy implied by conflicting and incommensurable social norms attaching to market goods where there is no single scale of value and hence no unique set of rational trade-offs; and, lastly, the contingent social and market construction of the product differentiation, quality attribution, and value assessments central to preference formation. The paper concludes by considering implications for economics as a discipline.
- Topic:
- Economics, Values, Endogenous Factors, and Preference Formation
- Political Geography:
- Global Focus
131. The Social and Economic Impacts of COVID-19 Mitigation Measures on Citizens and Permanent Residents During the Circuit Breaker Period in Singapore
- Author:
- Patrick Daly, Caroline Brassard, Jamie McCaughey, Reuben Ng, Laavanya Kathiravelu, and Benjamin Horton
- Publication Date:
- 08-2021
- Content Type:
- Working Paper
- Institution:
- Centre for Non-Traditional Security Studies, S. Rajaratnam School of International Studies
- Abstract:
- The Singapore government instituted a set of ‘Circuit Breaker’ (CB) measures in April 2020 to combat the COVID-19 pandemic. These included restricting international travel, closing non-essential businesses, telecommuting, home-based learning, wearing faces masks in public spaces, temperature screening, rigorous contract tracing, and isolating infected and exposed persons. The COVID-19 CB measures helped the government control COVID-19 transmission in Singapore but disrupted economic and social life. This NTS Insight presents data from a representative survey on the social and economic impacts of Singapore’s COVID-19 mitigation measures during the CB period on Singaporean citizens and permanent residents from 7 May to 16 July 2020. Our results show that the top three cited disruptions caused by the CB were all social in nature. However, just under half of all respondents reported some form of direct economic disruption – while up to 80% of respondents expressed concerns about their longer-term financial situation. Finally, our disaggregated analysis shows that some of the negative impacts of the CB period disproportionately impacted potentially vulnerable segments of the population.
- Topic:
- Economics, Public Health, Pandemic, and COVID-19
- Political Geography:
- Asia and Singapore
132. Zombies at Large? Corporate Debt Overhang and the Macroeconomy
- Author:
- Oscar Jorda, Martin Kornejew, Moritz Schularick, and Alan Taylor
- Publication Date:
- 11-2021
- Content Type:
- Working Paper
- Institution:
- Institute for New Economic Thinking (INET)
- Abstract:
- What are the macroeconomic consequences of business credit booms? Are they as dangerous as household credit booms? If not, why not? We answer these questions by collecting data on non- financial business liabilities (primarily bank loans and corporate bonds) for 17 advanced economies over the past 150 years. Unlike household credit, business credit booms are rarely followed by macroeconomic hangovers. Data on debt renegotiation costs—instrumented by a country’s legal tradition—show that frictions to debt resolution make recessions deeper and longer—an important factor in explaining the differences with household credit booms.
- Topic:
- Debt, Economics, Macroeconomics, and Corporations
- Political Geography:
- Global Focus
133. Can Panel Data Methodologies Determine the Impact of Climate Change on Economic Growth?
- Author:
- Richard A. Rosen
- Publication Date:
- 12-2021
- Content Type:
- Working Paper
- Institution:
- Institute for New Economic Thinking (INET)
- Abstract:
- Several major papers have been published over the last ten years claiming to have detected the impact of either annual variations in weather or climate change on the GDPs of most countries in the world using panel data-based statistical methodologies. These papers rely on various multivariate regression equations which include the annual average temperatures for most countries in the world as one or more of the independent variables, where the usual dependent variable is the change in annual GDP for each country from one year to the next year over 30-50 year time periods. Unfortunately, the quantitative estimates derived in these papers are misleading because the equations from which they are calculated are wrong. The major reason the resulting regression equations are wrong is because they do not include any of the appropriate and usual economic factors or variables which are likely to be able to explain changes in GDP/economic growth whether or not climate change has already impacted each country’s economy. These equations, in short, exhibit suffer from “omitted variable bias,” to use statistical terminology.
- Topic:
- Climate Change, Economics, Economic Growth, and Methodology
- Political Geography:
- Global Focus
134. Asset Prices Under Knightian Uncertainty
- Author:
- Roman Frydman, Søren Johansen, Anders Rahbek, and Morten Tabor
- Publication Date:
- 12-2021
- Content Type:
- Working Paper
- Institution:
- Institute for New Economic Thinking (INET)
- Abstract:
- We extend Lucas’s classic asset-price model by opening the stochastic process driving dividends to Knightian uncertainty arising from unforeseeable change. Implementing Muth’s hypothesis, we represent participants’ expectations as being consistent with our model’s predictions and formalize their ambiguity- averse decisions with maximization of intertemporal multiple-priors utility. We characterize the asset-price function with a stochastic Euler equation and derive a novel prediction that the relationship between prices and dividends undergoes unforeseeable change. Our approach accords participants’ expectations, driven by both fundamental and psychological factors, an autonomous role in driving the asset price over time, without presuming that participants are irrational.
- Topic:
- Economics, Models, and Price
- Political Geography:
- Global Focus
135. A Pacific Skills Visa: Improving Opportunities for Skilled Migration Throughout the Pacific Region
- Publication Date:
- 10-2021
- Content Type:
- Working Paper
- Institution:
- Center for Global Development
- Abstract:
- The demand for skills exceeds supply, both within the Pacific Islands and the high-income countries of the Pacific Rim. Enhancing skilled migration therefore has the potential to generate large economic gains. The Global Skill Partnership is a migration model that can support such mutually beneficial mobility by moving training into the country of origin. In this paper, we outline its regional application to the Pacific. To assess the potential economic gains from such a Pacific Skills Partnership, we present new data on earnings and the cost of training in the Pacific Islands for three qualifications—accountants, computer science graduates, and chefs—and explore how such training could be financed through loan schemes. Graduates could be provided with internationally accredited qualifications and a new Pacific Skills Visa, facilitating their access to work opportunities abroad, particularly in the regions’ high-income countries. This Pacific Skills Partnership could bring large economic benefits to countries of origin, destination, and the migrants themselves.
- Topic:
- Economics, Migration, Labor Issues, and Migrant Workers
- Political Geography:
- Asia-Pacific
136. Strengthening the Global Care Economy: A Roadmap for the Biden-Harris Administration
- Author:
- Megan O'Donnell, Mayra Buvinic, and Shelby Bourgault
- Publication Date:
- 10-2021
- Content Type:
- Working Paper
- Institution:
- Center for Global Development
- Abstract:
- In calling for large-scale investment in the United States’ care economy, the Biden-Harris administration has taken an unprecedented step in recognizing and addressing the constraints that American families, and particularly women, face in juggling paid and unpaid work within their own country. The administration now has an opportunity to translate its positioning of care as essential infrastructure within the US context into a complementary foreign and international development policy agenda. This can be done through (1) supporting existing global partnerships aimed at enabling families’ access to quality, affordable care services, and (2) complementing existing efforts through a US government-led initiative dedicated to strengthening the global care economy.
- Topic:
- Economics, International Cooperation, Hegemony, and Discrimination
- Political Geography:
- North America and United States of America
137. The Case for Transparency in Power Project Contracts: A Proposal for the Creation of Global Disclosure Standards and PPA Watch
- Author:
- Mohamed Rali Badissy, Charles Kenny, and Todd Moss
- Publication Date:
- 08-2021
- Content Type:
- Working Paper
- Institution:
- Center for Global Development
- Abstract:
- he purpose of a nation’s power sector is to deliver reliable electricity at the lowest cost and for the greatest benefit. At the heart of any private electricity generation project is a Power Purchase Agreement (PPA), a contract that contains key provisions such as price, payment stipulations, and obligations by the offtaker utility and/or host-government. Despite their significant effects on service quality and public finances, these contracts are often negotiated and signed in secret, with even the most basic terms shielded from the citizenry. This opacity has created risks and, in a growing number of cases, contributed to costly and damaging outcomes, such as overpayment, overcapacity, large debts, and grid instability. Drawing on examples from enhanced transparency in public budgets, sovereign debt, and extractive industries, we propose that governments agree to publish PPAs with any public sector obligation and that funders of private generation projects also agree to minimum disclosure standards. The objective is to create incentives for better practice, improve governance of the power sector, reduce transaction costs, and ultimately, to deliver cheaper and more reliable power for people and businesses. Transparency of PPAs would support the efforts of government policymakers and planners, investors, and development finance institutions to accelerate energy market development and to reap the benefits of open competition. Greater disclosure would also provide crucial information for citizens to hold their own governments accountable for the contracts they sign on behalf of the public.
- Topic:
- Economics, Energy Policy, Transparency, Electricity, and Purchasing Power
- Political Geography:
- Global Focus
138. A Decision Tree for Digital Payment Services: The Case of Mexico
- Author:
- Ivonne Acevedo and Miguel Szekely
- Publication Date:
- 07-2021
- Content Type:
- Working Paper
- Institution:
- Center for Global Development
- Abstract:
- This paper explores the reasons why digital payment services in Mexico are used to a much lower extent than would be expected considering the country’s level of development and the authorities’ efforts to expand these types of services during the past two decades. The paper applies the analytical framework proposed by Claessens and Rojas-Suarez (2020), which consists of identifying the binding constraints preventing an increase in the usage of digital payment services, among a set of alternative explanations. The methodology starts by evaluating the price and usage of digital payment services to discover whether constraints may be on the supply side, the demand side, or both. The main findings suggest that the crucial binding constraints on the expansion of digital payment services in Mexico are mainly on the supply side of the decision tree. Indeed, we identify the regulatory framework seems to be a binding constraint, since it creates an unlevel playing field among the providers of digital payment services. Current regulation could also be a constraint on increasing the provision of digital financial infrastructure, particularly for expanding cash-in and cash-out access points in rural areas. Thus, relaxing the regulatory constraint could enable the expansion of digital payment services. In addition, there is evidence suggesting that a coordination failure, reflected in a strong preference for transacting in cash, might be a binding constraint in the country. Perceived low or nonexistent benefits from using digital payment services could be the source of the coordination failure, since it prevents the formation of a critical mass of users, which in turn discourages suppliers from offering these services.
- Topic:
- Economics, Finance, Services, and Digitalization
- Political Geography:
- North America and Mexico
139. Iranian Public Opinion At the Start of the Raisi Administration
- Author:
- Nancy Gallagher, Clay Ramsay, and Ebrahim Mohseni
- Publication Date:
- 10-2021
- Content Type:
- Working Paper
- Institution:
- Center for International and Security Studies at Maryland (CISSM)
- Abstract:
- The Center for International and Security Studies at Maryland (CISSM) has been conducting in- depth surveys of Iranian public opinion on nuclear policy, regional security, economics, domestic politics, and other topics since the summer of 2014. Each survey includes a combination of trend-line questions, some going as far back as 2006, and new questions written to assess and inform current policy debates. This report covers findings from a survey fielded in late August and early September, shortly after Ebrahim Raisi was inaugurated as Iran’s new president on August 5, 2021. It provides insights into Iranian public attitudes regarding a wide range of foreign and domestic policy issues as Raisi takes office, eight months after we released a similar survey of Iranian attitudes in the early days of American president Joe Biden’s first term in office. Much has changed, and much has stayed the same since February 2021. Biden had campaigned on a pledge to rejoin the Joint Comprehensive Plan of Action (JCPOA) and lift sanctions imposed by the Trump administration, as a first step toward further negotiations, so Iranians were relatively positive in February about the prospects for reviving the nuclear deal and improving U.S.-Iranian relations. It took about ten weeks for the new administration to begin indirect negotiations with Iran on a mutual return to full compliance with the JCPOA. The Iranian parliament had responded to Trump’s maximum pressure campaign by passing a law specifying that if the Biden administration did not reverse that policy within weeks of taking office, Iran would exceed JCPOA-mandated limits on its nuclear program in more consequential ways and suspend special International Atomic Energy Agency access to Iran’s nuclear sites that were called for by the JCPOA. The economic, political, and public health crises confronting the new Biden administration precluded it from moving that quickly. The Iranian government promised to r The talks in Vienna made slow, but significant progress as preparations for Iran’s presidential election intensified. Members of the negotiating teams indicated that agreement had been reached by mid-June on some key issues, including the sequence of steps that Iran would take to resume fulfilling its JCPOA commitments and the corresponding sanctions relief it would get from the United States. Some important points of disagreement still needed to be resolved, though. Iran wanted reliable assurances that the United States would not withdraw again or take other steps to preclude Iran from receiving the promised benefits if it abided fully by its JCPOA obligations through October 2025, when the JCPOA specifies that many of Iran’s special nuclear commitments would end and it would have the same rights and responsibilities as other non- nuclear weapon states party to the 1968 Nuclear Nonproliferation Treaty. The United States also wanted assurance from Iran that once the JCPOA had been restored, it would start follow-on negotiations to address additional U.S. concerns.
- Topic:
- Security, Economics, Military Strategy, Public Opinion, and Nuclear Energy
- Political Geography:
- Iran and Middle East
140. How economic ideas led to Taiwan’s shift to export promotion in the 1950s
- Author:
- Douglas A. Irwin
- Publication Date:
- 08-2021
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Taiwan was the first developing country to adopt an export-oriented trade strategy after World War II. The factors usually associated with big shifts in policy—a macroeconomic crisis, a change in political power or institutions, lobbying by export interests, pressure from international financial institutions—were not present; it was ideas that were key. In 1954, economist S. C. Tsiang proposed that Taiwan boost export earnings rather than squeeze import spending to deal with its chronic shortage of foreign exchange. He recommended a currency devaluation to establish a realistic exchange rate and a market-based system of foreign exchange allocation to end the inefficient rationing by the government. Four years later, a policymaker, K. Y. Yin, fought for the adoption of Tsiang’s proposal, helping clear the way for Taiwan’s phenomenal growth in trade.
- Topic:
- Economics, History, Exports, and Trade
- Political Geography:
- Taiwan and Asia
141. From hermit kingdom to miracle on the Han
- Author:
- Douglas A. Irwin
- Publication Date:
- 09-2021
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- In 1960, South Korea’s exports were about 1 percent of GDP, and the country’s ability to import depended almost entirely on US aid. After changing its foreign exchange and trade policies in the mid-1960s, Korea saw a surge in exports to more than 10 percent of GDP by the end of the decade. What factors account for the shift in policy that enabled this dramatic export growth to occur? The United States helped initiate the process by withholding financial assistance, pressuring Korea to devalue its currency and reform its foreign exchange regime. Initially, the Korean government resisted taking these steps, but in 1964 it became firmly committed to an export promotion strategy to boost foreign exchange earnings and end its dependence on American aid.
- Topic:
- Economics, Foreign Exchange, Reform, Exports, and Trade
- Political Geography:
- Asia and South Korea
142. Low inflation bends the Phillips curve around the world: Extended results
- Author:
- Jami Forbes, Joseph E. Gagnon, and Christopher G. Collins
- Publication Date:
- 09-2021
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This paper revises and extends PIIE Working Paper 20-6. It continues to find strong support for a Phillips curve that becomes nonlinear when inflation is "low"—which our baseline model defines as less than 3 percent. The nonlinear curve is steep when output is above potential (slack is negative) but flat when output is below potential (slack is positive) so that further increases in economic slack have little effect on inflation. This finding is consistent with evidence of downward nominal wage and price rigidity. When inflation is high, the Phillips curve is linear and relatively steep. These results are robust to placing the threshold between the high and low inflation regimes at 2, 3, or 4 percent inflation or for a threshold based on country-specific medians of inflation. In this nonlinear model, international factors play a large role in explaining headline inflation (albeit less so for core inflation), a role that has been increasing since the global financial crisis.
- Topic:
- Economics, Financial Crisis, Inflation, and Philips Curve
- Political Geography:
- Global Focus
143. Assessing South Korea's Role in Promoting ESG Investing in the Asia-Pacific
- Author:
- William Grimes and Yaechan Lee
- Publication Date:
- 06-2021
- Content Type:
- Working Paper
- Institution:
- Korea Economic Institute of America (KEI)
- Abstract:
- This paper assesses the potential for South Korea to be a regional leader in advancing environmental, social, and governance (ESG) investing, and supporting sustainable development in the Asia-Pacific region. Many economies in the Asia-Pacific region are facing threats from climate change or other environmental limits to growth. Thus, the expansion of ESG investment and green infrastructure is a major regional challenge that must be addressed for sustainable growth. We argue that Korea can play a central role in overcoming this challenge based on the following conjectures. First, Korea’s developmental legacy has allowed it to reshape its financial market and investment habits to quickly expand its ESG market. This model is more relatable to developing economy governments than those offered by Western economies. Sharing Korea’s experience and know-how with the region’s developing economies can augment their ESG compliance capacities and make them a more attractive destination for sustainable infrastructure investments. Second, Korea’s significant presence in the region as a major creditor and exporter can induce ESG adherence from the private sector as Korean investors enhance their commitment to ESG principles. While questions remain about the sustainability of Korea’s ESG adherence due to the market’s heavy reliance on government agency finance and ad hoc pandemic response investments, the increasing global interest in the ESG market makes it likely that the Korean government will continue to incentivize adherence to ESG principles.
- Topic:
- Economics, Markets, Investment, and Regional Economy
- Political Geography:
- Asia and South Korea
144. Wages, Skills, and Skill-Biased Technical Change: The Canonical Model Revisited
- Author:
- Audra J. Bowlus, Lance Lochner, Chris Robinson, and Edna Suleymanoglu
- Publication Date:
- 03-2021
- Content Type:
- Working Paper
- Institution:
- Centre for Human Capital and Productivity (CHCP), Western University
- Abstract:
- The canonical supply–demand model of the wage returns to skill has been extremely influential; however, it has faced several important challenges. Several studies show that the standard approach sometimes produces theoretically wrong-signed elasticities of substitution, yields counterintuitive paths for skill-biased technical change (SBTC), and does not account for the observed deviations in college premia for younger vs. older workers. This paper shows that these failings can be explained by mis-measurement of relative skill prices and supplies (based on standard demographic composition-adjustments) and by inadequate ad hoc functional form assumptions about the path for SBTC. Improved estimates of skill prices and supplies that account for variation in skill across cohorts within narrowly defined groups help explain the observed deviation in the college premium for younger vs. older workers, even with perfect substitutability across age. Re-estimating the model with these prices and supplies produces a good fit with better out-of-sample prediction and robustly yields positive elasticities of substitution between high and low skill workers. The estimates suggest greater substitutability across skill and a more modest role for SBTC. We implement two new approaches to modelling SBTC. First, we study the extent to which recessions induce jumps or trend-adjustments in skill bias and find evidence that both features are important (but differ across recessions). Second, we link SBTC to direct measures of information technology investment expenditures and show that these measures explain the evolution of skill bias quite well. Together, these approaches suggest that the ad hoc assumptions for SBTC previously employed in the literature are too crude to fit the data well, leading to the incorrect conclusion that SBTC slowed during the early-1990s and under-estimates of the elasticity of substitution between high and low skill workers.
- Topic:
- Economics, Human Capital, Supply, Skills, and Wages
- Political Geography:
- Global Focus
145. Innis Lecture: Return on Student Loans in Canada
- Author:
- Lance Lochner, Qian Liu, and Martin Gervais
- Publication Date:
- 07-2021
- Content Type:
- Working Paper
- Institution:
- Centre for Human Capital and Productivity (CHCP), Western University
- Abstract:
- This paper uses new administrative data with detailed borrower information and lengthy repayment histories from the Canada Student Loans Program (CSLP) to measure rates of return on undergraduate student loans. We document substantial heterogeneity in returns based on information available at the time loans were disbursed, including province of residence, field of study, and institution of attendance. Field of study is a particularly important determinant of rates of return, explaining 22% of the variation in predicted returns across borrowers. We explore the implications of this variation for CSLP cross-subsidization across borrowers and potential risk-based loan limits. Given the variation in ex ante predicted returns across borrowers, using all available information at the time of loan disbursement, we study the implications of potential cream-skimming of high-return borrowers by private lenders.
- Topic:
- Debt, Economics, Investment, Higher Education, and Student Loans
- Political Geography:
- Canada and North America
146. Heterogeneous consumer preferences for product quality and uncertainty
- Author:
- Wolfgang Maennig and Steffen Mueller
- Publication Date:
- 12-2021
- Content Type:
- Working Paper
- Institution:
- Chair for Economic Policy, University of Hamburg
- Abstract:
- We provide evidence for heterogeneous consumer preferences for product quality and game outcome uncertainty (GOU) in Major League Baseball. Using attendance data from 2013 to 2019, we explore func-tional data clustering techniques to detect common patterns in predictive margins of team-specific win-ning probability. As a central result, we identify five groups of teams with similar GOU effects. However, only a few teams’ fans show GOU preferences that resemble the typical hump-shape that is postulated by the uncertainty of outcome hypothesis; the largest cluster is comprised of teams with fans whose at-tendance behavior is relatively insensitive to differences in GOU.
- Topic:
- Economics, Data, Consumer Behavior, and Uncertainty
- Political Geography:
- Global Focus
147. Consumer and employer discrimination in professional sports markets – New evidence from Major League Baseball
- Author:
- Wolfgang Maennig and Steffen Mueller
- Publication Date:
- 12-2021
- Content Type:
- Working Paper
- Institution:
- Chair for Economic Policy, University of Hamburg
- Abstract:
- We investigate the relationship between consumer discrimination, racial matching strategies, and employer discrimination in Major League Baseball (MLB) from 1985 to 2016. To this end, we assess the extent to which both fan attendance and team performance respond to changes in teams’ and their local market areas’ racial compositions. We innovate by using a significantly enhanced data basis with individual player data that we derive from combining web scraping and using facial recognition techniques to identify player race and using County-level Census data instead of Metropolitan Statistical Area data. We find that fans in both MLB Leagues developed a taste for racial diversity in the late 1980s; since the 2000s, discrimination starts to increase again. However, this discrimination is not fully rationalizing the performance gap across athletes of different race and ethnicity; employer discrimination is not primarily driven by fans’ racial preferences.
- Topic:
- Economics, Race, Employment, Sports, Ethnicity, Discrimination, Consumer Behavior, Facial Recognition, and Baseball
- Political Geography:
- Global Focus
148. Nudging for Recovery: Behavioral Economics and the implementation of the National Recovery and Resilience Plan
- Author:
- Demosthenes Kollias
- Publication Date:
- 10-2021
- Content Type:
- Working Paper
- Institution:
- Hellenic Foundation for European and Foreign Policy (ELIAMEP)
- Abstract:
- With the National Recovery and Resilience Plan, Greece is presented with yet another opportunity to catch up with global trends. At the same time, behavioral economics are being established worldwide as a valuable asset in the policy maker’s toolkit. The paper -mainly focusing on taxation, labor market policy, and climate change- aims to examine the behavioral conundrum that creates frictions and inefficiency in the domains outlined above and to offer concrete and quantifiable policy proposals, in accordance with the goals of Greece 2.0. Regarding tax evasion, for example, one can estimate at least €1 billion in additional tax revenue if the proposals are implemented.
- Topic:
- Climate Change, Economics, Tax Systems, Labor Market, and Economic Recovery
- Political Geography:
- Europe and Greece
149. EU-Turkey Economic Relations and the Customs Union: a rules-based approach
- Author:
- Dimitris Tsarouhas
- Publication Date:
- 05-2021
- Content Type:
- Working Paper
- Institution:
- Hellenic Foundation for European and Foreign Policy (ELIAMEP)
- Abstract:
- Trade and economic relations remain the cornerstone of EU-Turkey relations. The Customs Union (CU) is the sole institutionalized instrument that remains important for both sides. Launching negotiations on how to update its content offers a set of fresh opportunities for the EU to reintroduce political as well as economic conditionality in its relations with Turkey. A step-by-step approach based on monitoring and benchmarking can enhance EU leverage vis á vis Turkey and allow the EU to escape a cycle of ineffective policy interventions on Turkey’s political trajectory. The CU can also become a vehicle to assist the democratic segments of Turkey’s civil society as well as those EU member states who have found themselves searching for an alternative to Turkey’s failed Europeanization.
- Topic:
- Foreign Policy, Economics, Migration, and European Union
- Political Geography:
- Europe and Turkey
150. An Analysis of the Effects of Oil Price Fluctuations on the Conduct of Monetary Policy in the Economic
- Publication Date:
- 03-2021
- Content Type:
- Working Paper
- Institution:
- The Nkafu Policy Institute
- Abstract:
- For many years, the economies of the Economic and Monetary Community of Central Africa, like most of the world’s economies, have been confronted with numerous fluctuations in the price of raw materials on international markets. For these predominantly extroverted economies, that is, those dependent on export earnings, these price variations have consequences for their macroeconomic performance and the conduct of economic policy. Like most economic crises in the world in the past, the pandemic caused by the new Coronavirus that has been raging since 2020 has also brought with it many changes. Between the confinement measures taken by public authorities to curb the spread of the virus and the resulting slowdown in global economic activity, there has been an inevitable significant drop in global oil demand. The direct consequence of such a scenario is the fall in oil prices on world markets, which is very bad news for the public finances of oil-exporting countries. The main objective of this report is to analyze the effects of oil price fluctuations on the conduct of monetary policy in the CEMAC. We start from the observation that oil shocks are the source of strong inflationary pressures in these economies. It is the responsibility of monetary policy to ensure price stability. Thus, after analyzing the effects of oil price fluctuations on the world economy as well as the macroeconomic and financial implications of these fluctuations on the economies in 2020, we use a Vector Auto Regressive model to analyze the contribution of oil price shocks on the historical dynamics of macroeconomic variables in the various CEMAC countries between 2001 and 2020. Then, we use a Panel Smooth Transition Regression model to analyze the impact of oil price changes on monetary policy in the CEMAC.
- Topic:
- Economics, International Political Economy, Oil, Natural Resources, Monetary Policy, Global Markets, Inflation, and Macroeconomics
- Political Geography:
- Africa, Cameroon, and Central Africa