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10512. Blending the physical and virtual: a hybrid model for the future of work
- Author:
- Monika Grzegorczyk, Mario Mariniello, Laura Nurski, and Tom Schraepen
- Publication Date:
- 06-2021
- Content Type:
- Policy Brief
- Institution:
- Bruegel
- Abstract:
- The pandemic has shown that many workers can efficiently work remotely, with benefits for wellbeing and even productivity. The European Union should develop a framework to facilitate hybrid work.
- Topic:
- European Union, Work Culture, Innovation, Strategic Competition, Pandemic, and COVID-19
- Political Geography:
- Europe and Global Focus
10513. Stability of collusion and quality differentiation: a Nash bargaining approach
- Author:
- Thanos Athanasopoulos, Burak Dindaroglu, and Georgios Petropoulos
- Publication Date:
- 06-2021
- Content Type:
- Working Paper
- Institution:
- Bruegel
- Abstract:
- How do incentives to collude depend on how asymmetric firms are? For low levels of differentiation, an increase in quality difference makes collusion less stable. The opposite holds for high levels of differentiation.
- Topic:
- Political stability, Business, and Economic Growth
- Political Geography:
- Global Focus
10514. Platform mergers and antitrust
- Author:
- Geoffrey Parker, Georgios Petropoulos, and Marshall Van Alstyne
- Publication Date:
- 06-2021
- Content Type:
- Working Paper
- Institution:
- Bruegel
- Abstract:
- Platform ecosystems rely on economies of scale, data-driven economies of scope, high quality algorithmic systems, and strong network effects that frequently promote winner-takes-most markets. Some platform firms have grown rapidly and their merger and acquisition strategies have been very important factors in their growth. Big platforms’ market dominance has generated competition concerns that are difficult to assess with current merger policy tools. We examine the acquisition strategies of the five major US firms—Google, Amazon, Facebook, Apple and Microsoft—since their inception. We discuss the main merger and acquisition theories of harm that can restrict market competition and reduce consumer welfare. To address competition concerns about acquisitions in big platform ecosystems we develop a four step proposal that incorporates: (1) a new ex-ante regulatory framework, (2) an update of the conditions under which the notification of mergers should be compulsory and the burden of proof should be reversed, (3) differential regulatory priorities in investigating horizontal versus vertical acquisitions, and (4) an update of competition enforcement tools to increase visibility into market data and trends.
- Topic:
- Markets, Digital Economy, Internet, Economy, and Innovation
- Political Geography:
- Global Focus and United States of America
10515. Reducing mobility of SARS-CoV-2 variants to safeguard containment
- Author:
- Martin Hellwig, Viola Priesemann, and Guntram Wolff
- Publication Date:
- 05-2021
- Content Type:
- Working Paper
- Institution:
- Bruegel
- Abstract:
- Escape variants can cause new waves of COVID-19 and put vaccination strategies at risk. To prevent or delay the global spread of these waves, virus mobility needs to be minimised through screening and testing strategies, which should also cover vaccinated people. The costs of these strategies are minimal compared to the costs to health, society and economy from another wave.
- Topic:
- Health, Governance, Global Political Economy, Vaccine, and COVID-19
- Political Geography:
- Global Focus
10516. Research and innovation policies and productivity growth
- Author:
- Reinhilde De Veugelers
- Publication Date:
- 05-2021
- Content Type:
- Working Paper
- Institution:
- Bruegel
- Abstract:
- We review the evidence on the impact of public intervention on private research and innovation, and how research and innovation and R&I policies affect growth in the applied macro models most commonly used in European Union policy analysis. The evidence suggests that R&I grants and R&I tax credits can have positive effects in terms of stimulating investment in innovation. In terms of the impact of public R&I interventions on economy-wide GDP growth and jobs, the available applied macro models predict positive effects over the long term. It therefore takes time before short-term negative effects associated with reallocations of high-skilled labour from other productive activities to generate the extra innovations, and the negative effects from displacing older, more labour-intensive production processes, are compensated for. To the question of whether R&I policies can serve to power growth, the answer can only be a timid yes at this stage. R&I policies certainly have the potential, but still too little is known of what drives their actual effects. More micro and macro evaluations are still needed.
- Topic:
- Economy, Research, Innovation, and Strategic Competition
- Political Geography:
- Global Focus
10517. The great COVID-19 divergence: managing a sustainable and equitable recovery in the European Union
- Author:
- Gregory Claeys, Zsolt Darvas, Maria Demertzis, and Guntram B. Wolff
- Publication Date:
- 05-2021
- Content Type:
- Policy Brief
- Institution:
- Bruegel
- Abstract:
- The COVID-19 pandemic has led to the biggest global recession since the Second World War. Forecasts show the European Union underperforming economically relative to the United States and China during 2019-2023. Southern European countries have been particularly strongly affected. While the ICT sector has benefitted from the COVID-19 crisis, tourism, travel and services have suffered. Business insolvencies have, paradoxically, fallen. While total employment has almost recovered, the young and those with low-level qualifications have suffered employment losses. Inequality could rise. The pandemic may lead to medium to long-term changes in the economy, with more teleworking, possibly higher productivity growth and changed consumer behaviour. Policymakers must act to prevent lasting divergence within the EU and to prevent scarring from the fallout from the pandemic. The first priority is tackling the global health emergency. Second, we warn against premature fiscal tightening and recommend instead additional short-term support from national budgets. Over the medium term, fiscal policymakers will need to gradually move away from supporting companies through subsidies, towards tax incentives for corporate investment. A review of the European fiscal framework is needed to achieve the EU’s green goals more rapidly. The quality of public finances, how policymakers spend resources and the associated reforms are of central importance to prevent scarring. Improving the efficiency of insolvency procedures will be crucial for speedy and effective recovery. Targeted labour market policies for the young and less-qualified are needed. As teleworking becomes a more permanent feature of the EU’s labour markets, it will be crucial to adapt social security and taxation systems in the context of the single market for labour. The EU should resist protectionist calls in the wake of the pandemic. Rigorous competition policy enforcement and an integrated EU market have been beneficial for European convergence and growth. Capital markets have an important role to play in a speedy recovery.
- Topic:
- Governance, European Union, Inequality, and COVID-19
- Political Geography:
- Europe
10518. How difficult is China’s business environment for European and American companies?
- Author:
- Uri Dadush and Pauline Weil
- Publication Date:
- 05-2021
- Content Type:
- Policy Brief
- Institution:
- Bruegel
- Abstract:
- Despite tensions over China’s discriminatory business practices, China’s trade continues to thrive, and the country has taken over from the United States as the first destination for foreign investment. American and European businesses continue to be engaged in China’s large and growing market, even amid a trade war between China and the United States. Drawing on surveys of companies and international comparisons, we show that – contrary to the prevailing narrative – China’s business practices have improved significantly in recent years. China’s business environment is today generally more favourable than that in other large countries at similar levels of development and, in some though certainly not all aspects, is in line with the Organisation for Economic Co-operation and Development average. Differences over geopolitics and human rights must be addressed, but it is clear that trade and investment agreements conditioned on accelerated reforms in China would yield substantial dividends. The benefits of such deals would accrue not only to foreign investors in China and exporters to China, but also to consumers and importers in the European Union and, especially, in the US, where punitive tariffs on China remain in effect. Critical aspects in the negotiations would include better access for American and European investors to China’s market for services and improved enforcement of rules and regulations in China. As in many middle-income countries, uneven enforcement of the law (rather than the law itself) remains a critical problem in China.
- Topic:
- Development, Bilateral Relations, European Union, Business, and Investment
- Political Geography:
- China, Europe, Asia, North America, and United States of America
10519. Accounting for climate policies in Europe’s sovereign debt market
- Author:
- Marta Dominguez-Jimenez and Alexander Lehmann
- Publication Date:
- 05-2021
- Content Type:
- Policy Brief
- Institution:
- Bruegel
- Abstract:
- International debt investors increasingly demand assets that are aligned with environmental, social and governance objectives. Sovereign debt is being belatedly swept up in this change. This huge asset class represents a uniquely long-term claim and funds a wide range of public expenditure, both brown and green. Public capital expenditures will be a central part of the roughly €3 trillion investment budget needed to pay for the European Green Deal. European Union countries have so far met investor appetite for climate-aligned assets through sovereign green bonds, the issuance of which has rapidly grown since 2017. The EU itself will also issue green bonds in large volumes. However, because of some inherent flaws in such instruments and as their still-weak frameworks, these bonds are unlikely to meet the environmental criteria demanded by investors, and will complicate established principles in sovereign debt management. Much more comprehensive information is needed on the climate related aspects of the public budgets of EU countries. Greater transparency in this respect would support stability and improve the functioning of capital markets, given that sovereign debt plays a pivotal role in all investor portfolios and also in regulatory and monetary policy. Adoption by sovereign issuers of green budgeting principles, based on a common taxonomy of sustainable activities, would enhance transparency. It could also be driven by investors who, under new EU rules, must disclose the climate-related aspects of all financial instruments offered in the capital market.
- Topic:
- Climate Change, Debt, Markets, Sovereignty, European Union, Finance, and Sustainability
- Political Geography:
- Europe
10520. Navigating through hydrogen
- Author:
- Ben McWilliams and Georg Zachmann
- Publication Date:
- 04-2021
- Content Type:
- Policy Brief
- Institution:
- Bruegel
- Abstract:
- Hydrogen is seen as a means to decarbonise sectors with greenhouse gas emissions that are hard to reduce, as a medium for energy storage, and as a fallback in case halted fossil-fuel imports lead to energy shortages. Hydrogen is likely to play at least some role in the European Union’s achievement by 2050 of a net-zero greenhouse gas emissions target. However, production of hydrogen in the EU is currently emissions intensive. Hydrogen supply could be decarbonised if produced via electrolysis based on electricity from renewable sources, or produced from natural gas with carbon, capture, and storage. The theoretical production potential of low-carbon hydrogen is virtually unlimited and production volumes will thus depend only on demand and supply cost. Estimates of final hydrogen demand in 2050 range from levels similar to today’s in a low-demand scenario, to ten times today’s level in a high-demand scenario. Hydrogen is used as either a chemical feedstock or an energy source. A base level of 2050 demand can be derived from looking at sectors that already consume hydrogen and others that are likely to adopt hydrogen. The use of hydrogen in many sectors has been demonstrated. Whether use will increase depends on the complex interplay between competing energy supplies, public policy, technological and systems innovation, and consumer preferences. Policymakers must address the need to displace carbon-intensive hydrogen with low-carbon hydrogen, and incentivise the uptake of hydrogen as a means to decarbonise sectors with hard-to-reduce emissions. Certain key principles can be followed without regret: driving down supply costs of low-carbon hydrogen production; accelerating initial deployment with public support to test the economic viability and enable learning; and continued strengthening of climate policies such as the EU emissions trading system to stimulate the growth of hydrogen-based solutions in the areas for which hydrogen is most suitable.
- Topic:
- Climate Change, Energy Policy, European Union, Carbon Emissions, Decarbonization, and Hydrogen
- Political Geography:
- Europe and Global Focus