Content Type: Working Paper / Publication Year: within 25 Years / Topic: Markets

1. The Polish Economy 2023 and Beyond: How to Mend Home Loans

Author:: Andrzej Reich, Dariusz Filar, and Michal Polasik
Publication Date:: 01-2024
Content Type:: Working Paper
Institution:: Center for Social and Economic Research - CASE
Abstract:: The subject of this publication, reflecting the discussion held between experts on 30 March 2023, is that of housing loans in Poland. The publication focuses primarily on discussing the state of mortgages (at the end of the first quarter of 2023). This state is the effect of (a) legislation, (b) institutional solutions, (c) past processes in the financing of housing loans, and recently also (d) the high level of inflation dampening both lending by the banks and the level of interest among bank customers. The publication's second purpose is to present recommendations which, once put into effect, could rectify today’s lamentable situation. All of the proposals presented in this publication lead to one general recommendation: the answer to the current shortcomings lies not in isolated, single changes; what is essential is a new system for the market. This new system should be (a) flexible, (b) free of legal risk while at the same time (c) better protected against market risk, and (d) it should also contain a more comprehensive range of products; on this market (e) the state, as the regulator, should intervene ex-ante and not only ex-post (as has been the case in Poland for the last 20 years), while (f) customers should have the essential minimum of financial knowledge, first and foremost regarding awareness of the risk related to, which by their very nature are long-term loans.
Topic:: Markets, Economy, Interest Rates, Risk, Mortgages, Banking, Loans, and Financial Education
Political Geography:: Europe and Poland

2. In Support of Market-Driven Standards

Author:: Matthias Bauer, Fredrik Erixon, Oscar Guinea, and Vanika Sharma
Publication Date:: 03-2023
Content Type:: Working Paper
Institution:: European Centre for International Political Economy (ECIPE)
Abstract:: The EU published its new Standardisation Strategy in 2022. The strategy contains some good ideas to improve the way European standards are set. However, in its attempt to gain more control over technical standards, the EU risks killing the goose that lays the golden egg. The primary motivation behind the strategy is the belief that the process governing the way CEN, CENELEC, and ETSI – the three European Standardisation Organisations – take decisions over EU standards favours non-EU multinationals. To address this perceived imbalance, EU National Standardisation Bodies will have the exclusive power to accept standardisation requests, and adopt, revise and withdraw European technical standards. These changes are particularly significant for ETSI, Europe’s Standardisation Body in charge of telecommunication standards and one of Europe’s most successful organisations. ETSI is a prime example of EU normative power since it hosts companies from more than 60 countries, while retaining a large membership of EU firms. The regulatory changes included in the strategy are not risk-free. There could be unintended consequences that may undermine a standardisation system that has delivered significant economic benefits for the EU and the world. First, giving more responsibility to EU’s National Standardisation Organisations will turn a European discussion into 30 (EU and EEA) national debates. As a consequence, small companies will not be able to contribute to each and every one of the National Standardisation Organisations, diluting their contribution, while multinational companies, with the resources needed to cooperate with a larger number of bodies, will benefit from an expanding role in the EU standard setting process. Second, if standards are fragmented along national borders and companies must multiply their efforts to take part in several Standardisation Development Organisations, there will be less resources for Research and Development spending. Finally, if each and every National Standardisation Organisation needs to have a position with regards to the acceptance of a standardisation request, or adoption, revision and withdrawal of European technical standards, the time period required to adopt a technical standard may be extended rather than shortened, which is the exact opposite of what the European Commission wants to achieve. The regulatory changes included in the EU Standardisation Strategy are akin to cracking a nut with a sledgehammer. If the European Commission is concerned about the influence of non-EU companies in European Standardisation Bodies, it does not need to overhaul their governance systems. Supporting greater participation of European firms in the European standard system will ease EU’s concerns without the downside risks associated with changing the rules of the game that govern Europe’s Standardisation Bodies. The success of the European standardisation system, which is market-driven and based on consensus, has had significant economic benefits in the development of specific industries, like the European Information and Communication Technologies (ICT). Technical standards in ICT have shaped a European industry that is not only dynamic and international but also enjoys some of the highest levels of wages and Research and Development spending. Moreover, if technical standards are not developed through an open, consensus-based, and industry-led voluntary process, they will be developed in different ways. For instance, governments and private companies can develop standards by themselves. Both solutions are inferior to the current market-driven approach that governs European standards. However, the European market-driven approach to set standards is voluntary, and its success and continuation must not be assumed. European policymakers should be worried about tinkering with a European standardisation system which has produced economic specialisation and innovation to the benefits of EU firms and consumers.
Topic:: Markets, European Union, Regulation, Economy, and Standardization
Political Geography:: Europe

3. What is Wrong with Europe’s Shattered Single Market? – Lessons from Policy Fragmentation and Misdirected Approaches to EU Competition Policy

Author:: Matthias Bauer
Publication Date:: 04-2023
Content Type:: Working Paper
Institution:: European Centre for International Political Economy (ECIPE)
Abstract:: What is wrong with Europe’s Single Market? The brief answer to that question is that it does not really exist – it is unsingle. The Single Market is in many ways a political illusion. It exists only nominally. Any company doing business in Europe faces significant barriers to cross-border exchanges within the EU, and it is these barriers that hamper companies’ ability to scale and compete internationally on the back of innovation and economic integration. We outline that Brussels and national governments need to beat the drum for eliminating policy fragmentation in Europe’s internal market and at the same time change course in competition policy to sufficiently support investments in innovation, business growth, and the adoption of advanced technologies across industries. Major economic indicators show that Europe is caught in a protracted corporate and technology crisis. The EU has for a very long time now been tailing US corporate and innovation leadership. At the same time, competition with technology-intensive imports from China is getting increasingly intense. Europe’s underperformance is rooted in a legally fragmented internal market which is disincentivising business growth and innovation. On top of that, an outdated approach to competition policy is discouraging businesses from adopting innovation and scaling across national borders, risking that EU companies continue to lose clout and international competitiveness. 30 years have passed since the formal establishment of Europe’s Single Market. Data reveals that regulatory convergence has reversed or come to a halt in most policy areas. Recent policies for technologies and digital business models, which are key sources of cross-industry competitiveness, created new layers of regulation and legal uncertainty in EU and Member State law. Overall, EU policies have not significantly helped European companies, large and small, to do business in another Member State or use advanced technology-enabled services. EU competition policy does not live up to its promise to “enable the proper functioning of the EU’s internal market”. Europe’s competition policy is still fragmented along national borders and largely ignorant to dynamic effects of competition, especially investments in innovation. Due to mixed legal competences, competition rules are often enforced differently by Member States’ national authorities and can be appropriated to support protectionist industrial policy ambitions. The recently enacted Digital Market Act (DMA) demonstrates that the European Commission and Member State authorities favour protection and discretionary enforcement over innovation and economic disruption, without providing solid evidence of abusive business behaviour and consumer harm. With the DMA, the EU introduced legislation with serious ambiguities in objectives, concepts, and rules, and explicitly allows national Member States to regulate competition at their own discretion. A recent attempt by Germany’s competition authority, the Bundeskartellamt, to enforce its own rulebook for large digital companies (Section 19a of the German Competition Act) risks creating a patchwork of competition rules for large providers of advanced digital services across the EU. Local adopters of advanced digital services, particularly small businesses, that use advanced technology services to compete in their markets would be confronted with less choice and quality. Recently imposed policies under the umbrella of European Strategic Autonomy will hardly help policymakers in their ambition to achieve “innovation and technology leadership”. The paramount task for the EU and national governments is to eliminate policy fragmentation in Europe’s internal market, accompanied by an approach to competition policy that embraces investments in innovation and business growth while accounting for the substantial value created through the adoption of innovative technologies and disruptive business models across industries in the EU.
Topic:: Markets, European Union, Economy, and Competition
Political Geography:: Europe

4. Pro- and anti-competitive provisions in the proposed European Union Data Act

Author:: Bertin Martens
Publication Date:: 01-2023
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: The proposed European Union Data Act gives users access and portability rights to the data generated by their use of tangible digital products and devices. This pro-competitive measure weakens the de-facto monopolistic control product manufacturers have over product data. However, the Data Act would also grant manufacturers a de-jure right to monopolistic pricing of data transfers to third-party service providers, restoring their control over data markets. Other anti-competitive provisions include restrictions on the use of data for competition purposes and a prohibition on transfering data to platforms identified as gatekeepers under the EU Digital Markets Act. Unnecessarily fuzzy definitions of products and data that fall under the Data Act would create uncertainty in implementation and incoherence with other EU data regulations. The Data Act should be simplified by dropping anti-competitive provisions and granting users and third-parties selected by users free access to all data generated by the use of a product or a service. This would increase competition in data-driven services and prevent users paying twice for their data. It would not disincentivise producers from investing in data-driven products and services. A further step could be the creation of a level playing field between producers and users in data-access rights. This can be achieved by introducing the principle of mutual exhaustion of data rights at point of sale. This would put all data co-generating parties in a position to generate economies of scale and scope in data aggregation, or data-driven externalities, to maximise innovation.
Topic:: Markets, Governance, European Union, and Digital Economy
Political Geography:: Europe

5. Phased European Union electricity market reform

Author:: Georg Zachmann and Conall Heussaff
Publication Date:: 03-2023
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: In an environment of record-breaking electricity prices driven by a gas supply shock and below-average electricity generation, reforming the design of the European electricity market is seen as a means to delink consumer costs from volatility in short-term power markets. Electricity markets should meet three objectives: fairness, optimal investment and optimal operation. The current market design has achieved these objectives to varying degrees. Faced with the unprecedented shock, the electricity system has operated well, but electricity markets have struggled to achieve fair outcomes and investments have not been driven by market-based cashflows. Further complicating market reform, the power system is being changed radically by decarbonisation. The electricity system is becoming more decentralised and digitalised, with an active demand side. These transformations will have consequences for the optimal electricity market design in the later stages of the energy transition. Reform proposals have focused on increasing the share of long-term contracts in the remuneration of generation technologies. Different long-term contracting regimes have structural implications for the functioning of electricity markets, especially in relation to the roles of the state and the market, and the responsibilities of national governments and European Union institutions. A phased approach should be taken to EU electricity market design reform. In the near-term, reform should seek to protect consumers and drive investment. An assessment should also be made of what market design will best meet the fairness, investment and operational objectives in a decarbonised system, and what the conceptual role of electricity markets should be during the transition. This process should start as soon as possible so well thought-through proposals are available when the next European Commission takes office.
Topic:: Markets, Reform, European Union, Electricity, and Green Economy
Political Geography:: Europe

6. The Pathway to an Effective ETS and Power Market Interaction: The Case of the Korean ETS

Author:: Alistair Ritchie
Publication Date:: 03-2023
Content Type:: Working Paper
Institution:: Asia Society
Abstract:: The power sector is one of the most important areas to cover in any emissions trading system (ETS), due to the scale and abatement potential of greenhouse gas (GHG) emissions in that sector. However, some critical challenges need to be overcome before an ETS can fulfil its emissions-reduction potential by driving fuel switching away from coal and toward renewables and low-carbon fuels. This is one of the most important topics for ETS development in Asia given the tight controls on power markets. The case of the Korean ETS (K-ETS) provides valuable insights for the pathway to an effective interaction between an ETS and the power market to support power sector decarbonization, based on recent developments and potential next steps. The Pathway to an Effective ETS and Power Market Interaction: The Case of the Korean ETS describes the details of recent developments in Korea's power market and the emission trading system to address insufficient emission reductions in the power sector, key future developments required, and learning points for ETSs in other Asian jurisdictions.
Topic:: Energy Policy, Markets, Carbon Emissions, and Decarbonization
Political Geography:: Asia and South Korea

7. Exchange Rate Pass-Around

Author:: Matthieu Crozet, Julian Hinz, and Federico Trionfetti
Publication Date:: 04-2023
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: In January 2015, The Swiss Franc (CHF) appreciated unexpectedly against the Euro by approximately 15%. We document a new fact: French firms that exported to both the Swiss market and the Eurozone also exhibited a sudden change in their export prices to the Eurozone. We coin this the “exchange rate pass-around” effect. We rationalise this fact with a simple model based on the endogenous decision of some firms to give up pricing-to-market and opt for single-pricing to all markets. An important implication of this finding is that single-pricing may be one of the causes of the incomplete pass-through. This mechanism has so far remained unexplored in the literature, which may have led to overestimating the importance of other factors. Based on monthly French export data, our empirical analysis confirms the existence of the pass-around. Firms directly affected by the CHF exchange rate shock increased their prices in neighboring markets by 0.8% compared to other exporters. The effect was stronger for firms with lower ex-ante price heterogeneity across markets and for firms with smaller trade costs to Switzerland. However, the effect was short-lived. As time passed, exporters tended to decouple the prices they set on the Swiss market from those for the Eurozone, and the pass-around effect faded.
Topic:: International Trade and Finance, Markets, Monetary Policy, European Union, and Exchange Rate Policy
Political Geography:: Europe

8. India’s Regulatory Shift: An Examination of Five Agencies of the Post- Liberalisation Era

Author:: Arkaja Singh
Publication Date:: 02-2023
Content Type:: Working Paper
Institution:: Centre for Policy Research, India
Abstract:: This paper explores the design of Indian regulatory agencies established post-liberalisation from an administrative perspective. Regulatory agencies were set up to replace state inefficiencies, and to discipline profligate state agencies, even as much as they were a response to state-market reorganisations and the challenge of privatization. Regulation provided an opportunity for upper levels of the Indian bureaucratic state to recast their power, with the idea that it would provide a framework for economic rationality, independence and technical specialization to take centre-stage. In actual practice however, the design of each of the regulatory agencies is shaped largely by pre-existing legal frameworks and institutions, and the agencies have remained quite tied in with their counterpart departments and on retired bureaucrats. However, in spite of these limitations, these agencies have some common features imbued by legislative mandate and organisational design which are unique in the context of the Indian state. They have focus and stability, a degree of functional independence, and most importantly, a concentration of power, which enables them to think through and implement complex policy transitions from multi-year and context-specific perspectives. The paper builds on learnings from a series of conversations with regulatory agency chairpersons in order to identify what regulatory governance is, in terms of the powers and mandate of the regulatory agencies and what makes them distinctive from the rest of public administration.
Topic:: Markets, Governance, Regulation, Bureaucracy, and Liberalization
Political Geography:: South Asia and India

9. China’s Changing COVID-19 Policies: Market and Public Health

Author:: Zhun Xu
Publication Date:: 05-2023
Content Type:: Working Paper
Institution:: Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:: After the outbreak of COVID-19 in early 2020, China took fast and decisive measures to successfully contain the spread of the virus within its borders. While the rest of the world saw huge human and social costs in the pandemic, the Chinese mainland for about two years was largely free from COVID. The zero-COVID model, however, met great challenges by early 2022. Despite some efforts to save the zero-COVID model, in November 2022, the Chinese government abruptly abandoned its signature COVID controls during the pandemic and switched to the opposite. This article reviews the evolution of the Chinese COVID policies and places the dramatic turns in the context of the changing Chinese political economy. The findings show that the shifting class interests and actions were an important force behind China’s retreat from zero- COVID.
Topic:: Markets, Political Economy, Public Health, and COVID-19
Political Geography:: China and Asia

10. The Effects of a Private-Sector-Driven Smallholder Support Programme on Productivity, Market Participation and Food and Nutrition Security: Evidence of a Nucleus-Outgrower Scheme from Zambia

Author:: Tekalign Gutu Sakketa, Raoul Herrmann, Chewe Nkonde, Mwelwa Lukonde, and Michael Brüntrup
Publication Date:: 01-2022
Content Type:: Working Paper
Institution:: German Institute of Development and Sustainability (IDOS)
Abstract:: Nucleus-outgrower schemes (NOSs) are supposed to be a particularly effective private-sector mechanism to support smallholder farmers and contribute towards mitigating the problematic aspects of pure large-scale agricultural investments. This discussion paper uses panel household survey data collected in two rounds in Zambia to analyse some agro-ecological and socio-economic impacts of the outgrower programme of one of the largest agricultural investments in Zambia: Amatheon Agri Zambia (AAZ) Limited. The descriptive results show that the type of participation in the programme varies across participants and components, with most participating in trainings. Econometric results suggest the following key findings. First, although the overall impact of the AAZ outgrower programme on the uptake of conservation agriculture practices is robust and promising, impacts on the adoption of other agricultural technologies is less obvious and the effect depends on the type of support provided. Second, the programme has had a significant impact on maize productivity promoted in the initial phase but not on the other crops – mainly oilseeds – promoted later. Third, the initially less productive farmers seem to benefit slightly more than already better performing ones. Fourth, although the impact on overall household security was insignificant, there is some suggestive evidence (although the effect is weak) that the programme has a positive effect on improving women’s uptake of micronutrients. Finally, our findings show that the three components of the programme (trainings, seed loans and output purchases) have different effects on the adoption of sustainable agricultural practices and productivity, and to some extent on food security. Overall, the results suggest that NOSs, with all their risks, can play a role in the adoption of sustainable agricultural practices, improving farm-level agricultural technologies, providing input credit, and thereby improving productivity and smallholder livelihoods. However, this is not automatically the case, as it crucially depends on the design and management of the project; the availability of good policies and institutions governing the rules of operation; the types of crops promoted; the duration of the project; and the political commitment of host countries, among others.
Topic:: Markets, Food Security, Participation, Farming, and Productivity
Political Geography:: Africa and Zambia

11. The international financial system after COVID-19

Author:: Maurice Obstfeld
Publication Date:: 02-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: In March 2020, international markets seized up with a violence unequaled since the global financial crisis nearly a dozen years before. As economies around the world locked down in the face of the potentially deadly but completely novel SARS-CoV-2 virus, stock markets fell, firms and governments scrambled for cash, liquidity strains emerged even in the market for US Treasurys, and capital flows to emerging-market and developing economies (EMDEs) reversed violently. This paper reviews the evolution of global financial markets since the global financial crisis, changes in academic thinking about these markets’ domestic impacts, the strains seen during the COVID-19 crisis, and perils that may lie ahead. A key theme is that stability will be enhanced if the global community embraces reforms that elevate market resilience, rather than depending on skillful policymakers wielding aggressive but ad hoc policy interventions to ride to the rescue again.
Topic:: Economics, Markets, COVID-19, and Financial Systems
Political Geography:: Global Focus

12. WTO 2025: Enhancing global trade intelligence

Author:: Alan Wm. Wolff
Publication Date:: 04-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: International trade flows based on information. Is the foreign market open? What are the conditions for entry? Are there customs duties to be paid and other regulations that need to be satisfied? Businesses thrive on getting as much certainty as they can find, and this requires reliable information. Is the competition subsidized? Are the competitors favored state-owned companies? During the pandemic, governments needed to know if food and medical supplies were going to be available from foreign sources and, most importantly, how available vaccines would be as most of the world’s countries could not produce any. Effective public policy cannot be made in the dark. The World Trade Organization, and the General Agreement on Tariffs and Trade before it, were founded with the idea of providing transparency. But more is needed to understand why trade is taking place, and even more important, when it is not, why not?
Topic:: Economics, Markets, Trade, and WTO
Political Geography:: Global Focus

13. After the DMA, the DSA and the New AI regulation: Mapping the Economic Consequences of and Responses to New Digital Regulations in Europe

Author:: Fredrik Erixon, Oscar Guinea, Erik van der Marel, and Elena Sisto
Publication Date:: 04-2022
Content Type:: Working Paper
Institution:: European Centre for International Political Economy (ECIPE)
Abstract:: The European Union (EU) has pursued an ambitious agenda for regulating the digital economy, and it is now planning to establish a new package of regulations, including the Digital Markets Act (DMA), the Digital Services Act (DSA), and a new regulation of Artificial Intelligence (AI). These regulations build on an already established structure of digital and business regulations in Europe that is comparatively restrictive but that varies substantially between EU member states. In this study, we take stock of the new incoming regulations and review their effect on EU member states’ economies. More precisely, the paper considers how different countries in Europe will be affected by the regulations and how they should balance these effects with policies that help the economy to prosper. The European Commission’s economic analyses and impact assessments of the new regulations are thin. In fact, they are grossly inadequate for the purpose at hand: to better understand how the economy will change because of these regulations. The Commission identifies some benefits – for instance, positive competition outcomes from reduced network effects and more trust in AI-based goods and services. There are good reasons to think that these benefits are real. However, these regulations will also lead to new costs and have broader consequences for firms and resource allocation in the economy. Remarkably, the only costs identified in the impact assessments are direct compliance and administrative costs. Obviously, for far-reaching regulations such as the DMA, the DSA and the AI regulation, the main costs will not be the direct compliance burden, but the dynamic and downstream economic effects spurred by their implementation. This is because these regulations will prompt firms and markets to change their current and future behaviour: these changes are likely to define the most important costs. Furthermore, it is important to get a better idea of the distribution of these costs. It is highly unlikely that all sectors and countries will be affected equally. Some sectors will be more affected than others just as some countries will experience economic consequences that are bigger than in other countries. The question is: what factors will lead to the expected variation in the costs and consequences of the three new regulations? In this paper, we argue that two factors are important for grasping the distributive patterns of costs from digital regulations. First, the industry structure of a country is key. In the economy, countries have different endowment structures, and the modern European economy is defined by factor endowments such as data and digital competences. These factor endowments are exploited in the economy by firms and organisations that use them to create different comparative advantages. In turn, these advantages influence how a firm and a country market, sell and trade. Second, the existing structure of a country’s business and digital regulations will influence how an economy will respond to new and additional digital regulations. In fact, the restrictiveness of regulations that we know to impact on the digital economy vary substantially in the European Union – both between countries and between sectors. This variation will have consequences for the distribution of the costs of the three new regulations that are going to be implemented. This paper maps countries and country groups in the digital economy: their endowments, advantages, and flows. Especially, it evaluates the digital performance of countries in a number of key indicators and data points, and anchors the analysis in the academic literature. The paper points to some specific consequences of the DMA, the DSA and the AI regulation, and how different regulations will affect endowments structures and advantages. One key finding is that the distributive effects of the regulations will depend on size advantages and disadvantages. In short, small economies and small firms will likely carry a disproportionate part of the cost of new digital regulations. Furthermore, countries that have used their endowments to specialise in the digital economy will be more affected than others. On this score, there is a vast difference between EU countries. For instance, countries in Europe’s North – generally small, competitive, and open economies – will be most affected by these new regulatory burdens. Countries in Central and Eastern Europe will also be negatively affected, especially through risks of market exclusion effects for small firms. It is important for European policymakers to now consider how they can avoid that these new digital regulations continuously reinforce size advantages for big economies and big firms. There are some policy strategies that should be considered. First, regulations can be changed to better fit the overwhelming evidence that young, dynamic, and innovative firms drive a substantial part of productivity growth in the economy. Second, EU and national policymakers can pursue policies that make the transition into a more size-balanced economy easier, for instance by taxing and regulating small firms differently. Smaller economies can also be helped by having corporate taxes that are lower than in big economies. Third, EU and national policymakers can reform other digital and business regulations and make them less burdensome. Fourth, the EU can help to support the build-up of digital advantages in smaller economies.
Topic:: Markets, European Union, Regulation, and Digital Economy
Political Geography:: Europe

14. A Gravity Theory of Subordinate Financialisation

Author:: Photis Lysandrou
Publication Date:: 01-2022
Content Type:: Working Paper
Institution:: City Political Economy Research Centre (CITYPERC), University of London
Abstract:: Recent decades have marked both the globalisation of capitalism following the collapse of communism and its financialisation following the rapid growth of the world's securities markets. These developments have impacted the core-periphery divide in capitalism. In the case of globalisation, the entry of the ex-communist countries into the world capitalist system has swelled the ranks of the emerging capitalist economies (ECEs) that are kept subordinate through the pressures from the advanced capitalist economies (ACEs). In the case of financialisation, the growth of the securities markets has led to a palpable change in the pressures that perpetuate subordination. Where previously the use of authority was the chief source of those pressures, it now plays a secondary role. Absent that authority, and the ECEs would still be held in a subordinate position in global capitalism through the gravitational pull of the ACEs' financial securities markets. The central purpose of this paper is to explain this gravitational pull.
Topic:: Markets, Political Economy, Capitalism, Finance, and Financial Globalization
Political Geography:: Global Focus

15. The COVID-19 Pandemic in Latin American and Caribbean countries: The Labor Supply Impact by Gender

Author:: Mariana Viollaz, Mauricio Salazar-Saenz, Luca Flabbi, Monserrat Bustelo, and Mariano Bosch
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:: We study the labor supply impact of the COVID-19 pandemic by gender in four Latin American and Caribbean (LAC) countries: Brazil, Chile, Dominican Republic, and Mexico. To identify the impact, we compare labor market stocks and labor market flows over four quarters for a set of balanced panel samples of comparable workers before and after the pandemic. We find that the pandemic has negatively affected the labor market status of both men and women, but that the effect is significantly stronger for women, magnifying the already large gender gaps that characterize LAC countries. The main channel through which this stronger impact is taking place is the increase in child care work affecting women with school-age children.
Topic:: Gender Issues, Markets, Labor Issues, Inequality, and COVID-19
Political Geography:: Latin America and Caribbean

16. What happened to the Turkish Lira?

Author:: Güven Sak
Publication Date:: 02-2022
Content Type:: Working Paper
Institution:: Moshe Dayan Center for Middle Eastern and African Studies
Abstract:: In our latest issue of Turkeyscope, Dr. Guven Sak delves into the core reasons for Turkey's current currency and economic crisis along with an explanation for the political reforms needed to stabilize the Turkish markets.
Topic:: Markets, Politics, Reform, Currency, and Economic Crisis
Political Geography:: Turkey, Middle East, and Mediterranean

17. The European Banks’ Role in the Financial Crisis of 2007-8: A Critical Assessment

Author:: Photis Lysandrou
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: City Political Economy Research Centre (CITYPERC), University of London
Abstract:: Since the outbreak of the financial crisis in 2007, opinion has been divided over whether its root cause was credit arbitrage or safe asset demand. New research on the European banks' role in the crisis may finally help to resolve the issue. Far from being peripheral players in the crisis, European banks were deeply implicated in its causal origins as evidenced by their activities in the two US debt markets that were at the heart of the crisis: those for collateralised debt obligations (CDOs) and for asset backed commercial paper (ABCP). These activities would seem to lend weight to the credit arbitrage story, a conclusion that has been reached by several authors. However, it is a conclusion only made possible by ignoring the connection between the federal funds rate and the rate of ABCP demand from the institutional money market mutual funds (MMMFs) in the pre-crisis era. This paper argues that when this connection is closely examined, it turns out that the evidence surrounding the European banks' role in the financial crisis gives greater weight to the safe asset demand explanation of the crisis.
Topic:: Markets, Financial Crisis, Banks, Debt Securities, Assets, and Federal Funds Rate
Political Geography:: Europe and United States of America

18. Current Capabilities and Future Potential of African Textile & Apparel Value Chains: Focus on West Africa

Author:: Lindsay Whitfield
Publication Date:: 12-2022
Content Type:: Working Paper
Institution:: Centre for Business and Development Studies (CBDS), Copenhagen Business School
Abstract:: African countries export very little of what is traded within apparel global supply chains and across the African continent, except in the case of cotton, but import a large amount of what the rest of the world produces. Africa’s fabric and apparel production is biased towards cotton, especially in yarn and fabric production, with little participation in production and export of man-made fibre, yarn and fabric. Most apparel exports from the continent come from North Africa, followed far behind by East and Southern Africa. Apparel exports from the African continent go largely to Europe and then North America. Currently, only 8% of Africa’s textile and apparel imports are supplied by other African suppliers. Southern Africa and especially South Africa is the largest supplier of intra-African imports of apparel. Inputs and intermediate textile products account for a significant share of intra-African textile and apparel imports in Southern, East and North Africa. Notably, under the free trade area in the Southern African Development Community, trade in clothes and home textiles increased, but trade in fibre, yarn and fabric did not significantly change. Overall, intra-African sources still account for a small share of these countries’ overall supplies of imported inputs, which indicates a substantial untapped potential. West Africa produces about 60% of Africa’s cotton but accounts for the bulk of its exports outside the continent, accounting for about 5% of the world cotton production and about 15% of world exportation. However, West African countries have little modern production capabilities in spinning, weaving, knitting or dyeing. A significant portion of the population in West Africa buys wax print cloth and has their clothes tailor made. The majority of the greige fabric used by the wax printing companies in Cote d’Ivoire and Ghana, which supply the rest of the sub-region, is imported from Asia. Only Ghana has industrial or mass apparel production for export, and it is small, comprised largely of two firms that started exporting in the late 2010s with foreign investment. Ghana and Cote d’Ivoire have some small-scale local firms producing for the domestic market, but most of these firms do not have the capabilities to grow into large firms that could produce using industrial methods. The governments of Togo, Cote d’Ivoire and Ghana are adopting new strategies to develop apparel exports in their countries. However, only the Togolese government has started implementing its strategy, which centres on an eco-industrial park and vertically integrated knit factories established through a public-private partnership with Arise Integrated Industrial Platform. Given the disruptions to globalized apparel supply chains during the Covid-19 pandemic and the resulting increased cost of shipping, buyers in the US and Europe are looking for shorter supply chains that are more resilient in the face of global shocks. Localization and regionalization of apparel production closer to end-markets are attractive to global apparel brands and retailers. However, global apparel buyers are no longer concerned just with cost, quality and speed to market when making sourcing decisions. They now must balance those criteria with sustainability goals. CBDS Working Paper 2022/3 5 Given the global trends outlined in this report that will reshape textile and apparel global supply chains over the next five to ten years, the textile and apparel industry should be reconceived as a sunrise and not a sunset industry. New fibre and recycling technologies are in a phase of fast innovation to produce more sustainable and circular man-made fibres. The raw material for clothing production will become manufactured fibres that rely on advancements in chemical technologies and biofabrication. Virgin cotton will be of less importance, as it is replaced by natural fibres that are less resource intensive and by manmade cellulosic fibres that feel like cotton. In the transition stage, cotton will move to organic and regenerative as well as become blended with other natural and man-made cellulosic fibres. Future fibres will have a high technology content and require licensing technology, both man-made cellulosic fibres and the new wave of synthetics that seek to replace polymers. African countries have the opportunity to build sustainable textile and apparel industries from the start, which can give them a competitive advantage as apparel-supplying countries in South and Southeast Asia do not (yet) have ‘green’ industries. The cost of renewable energy technology is falling and renewable energy technologies to power industries are evolving. New fibre and recycling technologies also offer a window of opportunity to leapfrog into the next generation of technologies. Taking advantage of this window of opportunity requires that the African government look forward and not backward, that they think in terms of building new and not rebuilding the existing textile industries. African textile and apparel domestic and regional value chains should be based on mastering the next generation of fibre production and recycling technologies. Such a strategy involves taking risks to invest in building the knowledge and skills required for this new technology, but not taking risks will mean that African countries miss the opportunity to move to the technological frontier. Furthermore, African countries can go beyond becoming competitive in the new textile and apparel global supply chains but also use them to drive broader green industrialization processes. Such a strategy also involves building diversified regional textile bases as well as regional value chains, which can harness the efforts of more economies and larger market demand as well as create a stronger platform of capabilities with which to engage in global export markets. AfCFTA negotiations on the rules of origin for the textile and apparel sector are on-going, and the AfCFA Council of Ministers responsible for trade is still working on reaching a consensus. The evidence assembled in this report shows that the textile production capabilities in the major apparel producing and exporting countries in Sub-Saharan Africa are not significant enough to support trade under a double transformation rule. Therefore, major investments in spinning, knitting, weaving, dyeing, and finishing are required before countries could take advantage of the preferential market access for textile and apparel in the AfCFTA with a double transformation rule. The quantitative and qualitative evidence presented in this report on the impact of the double transformation rule under SADC indicates that it did not encourage new investments in textile production, and thus regional integration was limited by existing textile production capabilities. CBDS Working Paper 2022/3 6 Trade rules are not strong enough incentives to encourage investments in textile production. In general, trade policy is a rather blunt instrument for addressing a task that requires a range of more sophisticated industrial policy tools. Instead of relying solely on trade policy tools, governments should design and develop industrial policies that actively support the learning processes of local firms. Part of the industrial policy tool kit to support local firm learning is attracting the ‘right kind of foreign direct investment’ and assisting local firms in leveraging technology from these foreign firms. Governments also need to make public investments in creating the industry-specific knowledge and skills for textile and apparel, which includes building the foundation for moving into new fiber and recycling technologies through investment in basic chemistry education and supporting partnerships in research between local and foreign firms and researchers.
Topic:: Markets, Business, Trade, Supply Chains, Value Chains, and Textile Industry
Political Geography:: Africa and West Africa

19. Microchips and Semiconductors: The U.S. Seeks Autonomy

Author:: Andrzej Dąbrowski
Publication Date:: 11-2022
Content Type:: Working Paper
Institution:: The Polish Institute of International Affairs
Abstract:: The United States has turned to support of the domestic microchip industry in response to the increased risk of Chinese aggression against Taiwan, one of the leading producers, as well as to address disruptions in supply chains caused by the COVID-19 pandemic. A law on this passed with bipartisan consent and is intended to help finance a more resilient American sector towards global changes in manufacturing these components. Thanks to the CHIPS Act, the U.S. can reduce its dependence on microchip imports and undermine China’s ability to dominate the market.
Topic:: Markets, Science and Technology, Autonomy, Industry, Supply Chains, Semiconductors, and Microchips
Political Geography:: China, Asia, North America, and United States of America

20. China’s National ETS and the Power Market: How the ETS Can Achieve Significant Emission Reductions

Author:: Yan Qin, Alistair Ritchie, and Yi Chen
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Asia Society
Abstract:: China’s newly established national emissions trading system (ETS) is intended to serve as the primary tool in assisting China in meeting its "dual carbon" target of CO2 peaking before 2030 and carbon neutrality by 2060. It is the largest ETS globally, accounting for 40 percent of China's CO2 emissions and more than 10 percent of worldwide emissions, with the potential to double its current size once industrial sectors are added. In its initial phase, it covers the power sector, particularly more than 2,000 enterprises operating coal- and gas-fired power stations. However, some critical challenges need to be overcome before the ETS can fulfill its emissions reduction potential in the power sector by driving fuel switching away from coal and toward renewables and low-carbon fuels through the carbon price. China's National ETS and The Power Market: How the ETS Can Achieve Significant Emission Reductions examines these challenges in relation to both the ETS itself and its interactions with the power market. It also proposes a policy pathway to address these challenges and unlock their potential to drive significant and cost-effective CO2 emissions reductions in the power sector and raise large amounts of revenue to fund the transition to carbon neutrality across the expanding ETS sectors.
Topic:: Climate Change, Markets, Carbon Emissions, and Energy
Political Geography:: China and Asia

21. Brothers in arms: The value of coalitions in sanctions regimes

Author:: Sonali Chowdhry, Julian Hinz, Katrin Kamin, and Joschka Wanner
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: This paper examines the impact of coalitions on the economic costs of the 2012 Iran and 2014 Russia sanctions. By estimating and simulating a quantitative general equilibrium trade model under different coalition set-ups, we (i) dissect welfare losses for sanction-senders and target; (ii) compare prospective coalition partners and; (iii) provide bounds for the sanctions potential — the maximum welfare change attainable — when sanctions are scaled vertically, i.e. across sectors up to an embargo, or horizontally, i.e. across countries up to a global regime. To gauge the significance of simulation outcomes, we implement a Bayesian bootstrap procedure that generates confidence bands. We find that the implemented measures against Iran and Russia inflicted considerable economic harm, yielding 32 – 37% of the vertical sanctions potential. Our key finding is that coalitions lower the average welfare loss incurred from sanctions relative to unilateral implementation. They also increase the welfare loss imposed on Iran and Russia. Adding China to the coalition further amplifies the welfare loss by 79% for Iran and 22% for Russia. Finally, we quantify transfers that would equalize losses across coalition members. These hypothetical transfers can be seen as a sanctions-equivalent of NATO spending goals and provide a measure of the relative burden borne by coalition countries.
Topic:: Globalization, International Trade and Finance, Markets, Sanctions, Alliance, and Embargo
Political Geography:: Russia, China, Europe, Asia, North America, and United States of America

22. Yet it Endures: The Persistence of Original Sin

Author:: Barry Eichengreen, Ricardo Hausmann, and Ugo Panizza
Publication Date:: 11-2022
Content Type:: Working Paper
Institution:: The John F. Kennedy School of Government at Harvard University
Abstract:: Notwithstanding announcements of progress, "international original sin" (the denomination of external debt in foreign currency) remains a persistent phenomenon in emerging markets. Although some middle-income countries have succeeded in developing markets in local-currency sovereign debt and attracting foreign investors, they continue to hedge their currency exposures through transactions with local pension funds and other resident investors. The result is to shift the locus of currency mismatches within emerging economies but not to eliminate them. Other countries have limited original sin by limiting external borrowing, passing up valuable investment opportunities in pursuit of stability. We document these trends, analyzing regional and global aggregates and national case studies. Our conclusion is that there remains a case for an international initiative to address currency risk in low- and middle-income economies so they can more fully exploit economic development opportunities.
Topic:: Markets, Economy, Investment, and Sovereign Debt
Political Geography:: Global Focus

23. 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

24. Improving access to the EU’s market for services

Author:: Marc Luban
Publication Date:: 06-2021
Content Type:: Working Paper
Institution:: Mitvim: The Israeli Institute for Regional Foreign Policies
Abstract:: Regulatory heterogeneity between Israel and its key trading partners restricts the potential for bilateral trade. Approximation of the European Union’s regulatory standards would contribute to increased trade and investment. Upgrading Israel’s 1995 trade agreement with the EU could provide the optimal response to the regulatory heterogeneity and improve mutual access to markets for services.
Topic:: Markets, Bilateral Relations, European Union, and Trade
Political Geography:: Europe, Middle East, and Israel

25. Towards efficient information sharing in network markets

Author:: Georgios Petropoulous, Bertin Martens, Marshall Van Alstyne, and Geoffrey Parker
Publication Date:: 11-2021
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: Digital platforms facilitate interactions between consumers and merchants that allow collection of profiling information, which drives innovation and welfare. Private incentives, however, lead to information asymmetries resulting in market failures both on-platform, among merchants, and off-platform, among competing platforms. This paper develops two product-differentiation models to study private and social incentives to share information within and between platforms. We show that there is scope for ex-ante regulation of mandatory data sharing that improves social welfare better than competing interventions, such as barring entry, break-up, forced divestiture or limiting recommendation steering. These alternate proposals do not make efficient use of information. We argue that the location of data access matters and develop a regulatory framework that introduces a new data right for platform users, the in-situ data right, which is associated with positive welfare gains. By construction, this right enables effective sharing of information together with its context, without reducing the value created by network effects. It also enables regulatory oversight but limits data privacy leakages. We discuss crucial elements of its implementation in order to achieve innovation-friendly and competitive digital markets.
Topic:: Markets, Science and Technology, Data, and Information
Political Geography:: Global Focus

26. Market power and artificial intelligence work on online labour markets

Author:: Néstor Duch-Brown, Estrella Gomez-Herrera, Frank Mueller-Langer, and Songül Tolan
Publication Date:: 12-2021
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: The views are those of the authors and should not be regarded as stating an official position of the European Commission. Frank Mueller-Langer gratefully acknowledges financial support from a research grant of the University of the Bundeswehr Munich. We investigate three alternative but complementary indicators of market power on one of the largest online labour markets (OLMs) in Europe: (1) the elasticity of labour demand, (2) the elasticity of labour supply, and (3) the concentration of market shares. We explore how these indicators relate to an exogenous change in platform policy. In the middle of the observation period, the platform made it mandatory for employers to signal the rates they were willing to pay, as given by the level of experience required to perform a project: entry, intermediate or expert level. We find a positive labour supply elasticity ranging between 0.06 and 0.15, which is higher for expert-level projects. We also find that the labour demand elasticity increased while the labour supply elasticity decreased after the policy change. Based on this, we argue that market-designing platform providers can influence the labour demand and supply elasticities on OLMs with the terms and conditions they set for the platform. We also explore the demand for and supply of AI-related labour on the OLM under study. We provide evidence of a significantly higher demand for AI-related labour (ranging from +1.4 percent to +4.1 percent) and a significantly lower supply of AI-related labour (ranging from -6.8 percent to -1.6 percent) than for other types of labour. We also find that workers on AI projects receive 3.0 percent to 3.2 percent higher wages than workers on non-AI projects.
Topic:: Markets, Science and Technology, Internet, Artificial Intelligence, and Labor Market
Political Geography:: Global Focus

27. Melons as Lemons: Asymmetric Information, Consumer Learning and Seller Reputation

Author:: Jie Bai
Publication Date:: 03-2021
Content Type:: Working Paper
Institution:: The John F. Kennedy School of Government at Harvard University
Abstract:: There is often a lack of reliable quality provision in many markets in developing countries and firms generally lack a reputation for quality. One potential explanation is that mistrust due to past bad behavior can make reputation-building difficult. I examine this hypothesis in a setting that features typical market conditions in developing countries: the retail watermelon markets in a major Chinese city. I first demonstrate empirically that there is substantial asymmetric information between sellers and buyers on quality and a stark absence of quality premium at baseline. I then randomly introduce one of two branding technologies into 40 out of 60 markets–one sticker label that is widely used and counterfeited and one novel expensive laser-cut label. The experiment findings show that laser-branding induced sellers to provide higher quality and led to higher sales profits. However, after the intervention was withdrawn, all markets reverted back to baseline. I incorporate the experimental variation into an empirical model of consumer learning and seller reputation building. The results suggest that consumers are hesitant to upgrade their perception under stickers, which makes reputation-building a low-return investment. While the new technology enhances learning, the resulting increase in profits is not sufficient to cover the fixed cost of the technology for small individual sellers. Counterfactual analysis shows that information friction and fragmented market lead to significant under-provision of quality.
Topic:: Economics, Markets, and Developing World
Political Geography:: China, Asia, and Global Focus

28. Changes in Oil Markets and New Technology: The Effects of COVID-19 and Climate Change

Author:: Paul Rivlin
Publication Date:: 03-2021
Content Type:: Working Paper
Institution:: Moshe Dayan Center for Middle Eastern and African Studies
Abstract:: In our latest issue of Iqtisadi: The Middle East Economy, Paul Rivlin discusses the near and long term prospects for oil pricing, with special attention to new technologies being developed in wealthy Gulf States. In the first two months of 2021, the price of oil rose by almost 38 percent to just over $65/barrel. Was this because of rising demand, supply constraints or increased confidence? All these factors were relevant, but a glance at the OPEC basket price of oil over the past decade puts the rise in prices into perspective. At the end of February, the oil price was well below its 2011-2014 and 2018 highs both nominally terms and even more so when inflation is considered.
Topic:: Climate Change, Energy Policy, Markets, Oil, Science and Technology, Economy, and COVID-19
Political Geography:: Saudi Arabia, United Arab Emirates, and Gulf Nations

29. Economic Sentiment Indicators and Foreign Direct Investment: Empirical Evidence from European Union Countries

Author:: Andrzej Cieślik and Mahdi Ghodsi
Publication Date:: 07-2021
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: This paper studies the role of business sentiment in the decisions of multinational enterprises (MNEs) to undertake foreign direct investment (FDI) across European Union (EU) member states. Based on the knowledge-capital model, the study employs the Pseudo Poisson Maximum Likelihood (PPML) estimator and panel data to examine empirically the determinants of FDI across EU member states during the period 2003-2017. The empirical evidence suggests that better economic sentiment in an EU Member State induces MNEs to undertake FDI in that country, while worse economic sentiment in an EU member state motivates an MNE in that country to invest abroad.
Topic:: Economics, Markets, Foreign Direct Investment, European Union, Business, and Multinational Corporations
Political Geography:: Europe

30. The (Im-)Possibility of Rational Socialism: Mises in China’s Market Reform Debate

Author:: Isabella Weber
Publication Date:: 10-2021
Content Type:: Working Paper
Institution:: Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:: Investigate the long first decade of reform in China (1978-1992) to show that Mises, in particular his initiating contribution to the Socialist Calculation Debate, became relevant to the reconfiguration of China’s political economy when the reformers gave up on the late Maoist primacy of continuous revolution and adhered instead to an imperative of development and catching up. During the Cultural Revolution, Mao had rejected the notions of efficiency and rational economic management. In the late 1970s, the reformers under Deng Xiaoping’s leadership elevated these notions to highest principle. As a result, Mises’ critique that socialism could not achieve a rational economic order came to be debated throughout the 1980s and Chinese economists developed their own reading of Mises and the Socialist Calculation Debate. When Deng Xiaoping reinstated market reforms in the early 1990s after the Tiananmen crackdown, a history of thought review of the possibility of rational socialism and socialist markets helped to justify the Socialist Market Economy with Chinese Characteristics the official designation of China’s economic system to this day.
Topic:: Markets, History, Reform, Economy, and Socialism
Political Geography:: China and Asia

31. Regulated Market, Trapped Workers: The Impacts of the "Tolerant and Prudent" Policy on Labour Precarity in China’s Online Ridehailing Sector

Author:: Wei Zhang, Hao Qi, and Zhongjin Li
Publication Date:: 11-2021
Content Type:: Working Paper
Institution:: Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:: Since 2017, China has adopted the "tolerant and prudent" policy in regulating emerging digital platform industries. The impacts of this policy on labour precarity have been rarely studied. Drawing on an original survey of over 600 ridehailing drivers in two Chinese cities, Nanjing and Beijing, we conduct a political economy analysis for a three-party framework involving the municipal government, capital, and labour. We find that, in accordance with the "tolerant and prudent" principle, municipal governments stipulated regulations regarding the qualifications of ridehailing vehicles and drivers. These regulations, although they can help reduce labour precarity in the marketplace for licensed drivers, have exacerbated precarity in the workplace. Specifically, in response to the regulations, the ridehailing platforms aligned with thirdparty rental companies that provided licensed vehicles. This arrangement has effectively trapped many ridehailing drivers in the industry: our quantitative analysis shows that drivers bounded by a rental or rent-toown agreement worked significantly longer hours than counterparts who steered their own vehicles.
Topic:: Markets, Labor Issues, Regulation, Digital Economy, and Precarity
Political Geography:: China and Asia

32. The State-Constituted Market Economy: A Conceptual Framework for China’s State–Market Relations

Author:: Isabella Weber and Hao Qi
Publication Date:: 12-2021
Content Type:: Working Paper
Institution:: Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:: China has created a distinct economic system. Yet despite a growing literature with valuable contributions on the institutional arrangements under ‘capitalism with Chinese characteristics,’ the precise economic mechanisms underpinning China’s state–market relations remain undertheorised. In this paper we develop a conceptual framework of what we call China’s state-constituted market economy. We define essential as ‘systemically significant from the perspective of the state.’ We argue that the Chinese state ‘constitutes’ the market economy by creating, participating and steering markets for essentials in order to stabilise and guide the economy as a whole. We draw on China’s statecraft tradition as well as on proposals for financial policy reform in the U.S. to conceptualise the state market-constitution in China.
Topic:: Markets, Economy, and State-Market Relations
Political Geography:: China and United States of America

33. 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

34. Platform mergers and antitrust

Author:: Geoffrey Parker, Georgios Petropoulos, and Marshall Van Alstyne
Publication Date:: 01-2021
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 typically promote winner-take-most markets. Some platform firms have grown rapidly and their merger and acquisition strategies have been very important factors in their growth. Market dominance by big platforms has led to competition concerns that are difficult to assess with current merger policy tools. In this paper, we examine the acquisition strategies since their inception of the five major US firms – Google, Amazon, Facebook, Apple and Microsoft. We discuss the main merger and acquisition theories of harm that can restrict market competition and reduce consumer welfare. To address competition concerns arising from acquisitions in big platform ecosystems this paper sets out a four-step proposal that incorporates: (1) a new ex-ante regulatory framework, (2) an updating 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 updating of competition enforcement tools to increase visibility of market data and trends.
Topic:: Markets, Regulation, Digital Economy, Economy, Business, and Innovation
Political Geography:: Global Focus

35. What is Social Finance? Definitions by Market Participants, the EU Taxonomy for Sustainable Activities, and Implications for Development Policy

Author:: Sören Hilbrich
Publication Date:: 01-2021
Content Type:: Working Paper
Institution:: German Institute of Development and Sustainability (IDOS)
Abstract:: The market for social financial instruments is rapidly growing. The issuance of social bonds, for instance, reached $149.4 billion in 2020, showing an extraordinary growth of 720% compared to 2019 (ADB, 2021, p. 14). By providing capital for certain types of investments associated with positive social impacts, these instruments are intended to close funding gaps that hamper the realisation of social goals, as laid down, for instance, in the 2030 Agenda for Sustainable Development. In addition, social finance might set incentives for enterprises to engage in more sustainable business models that would give them access to social financial instruments potentially associated with a lower cost of capital. However, the magnitude of the potential contribution to society of social finance is a matter of debate. This paper focuses on an important challenge for social finance that concerns the plurality of existing definitions of social investments. The paper provides an overview of the definitions followed by market participants, describes the EU taxonomy for sustainable activities as a potential standard in this context, and discusses implications for development policy.
Topic:: Development, Markets, European Union, Sustainability, Bonds, and Social Finance
Political Geography:: Global Focus

36. Yemeni Border Markets: From Economic Incubator to Military Frontline

Author:: Ahmed Nagi
Publication Date:: 06-2021
Content Type:: Working Paper
Institution:: Carnegie Endowment for International Peace
Abstract:: A string of border markets on Yemen’s northwestern border with Saudi Arabia turned the confluence of two countries’ peripheries into a center, gave rise to a distinct economic system, and bridged cross-border communities. The ongoing war in Yemen has either destroyed these markets or forced their closure. An end to the hostilities is unlikely to restore the status quo ante, owing to Saudi Arabia’s desire to establish a buffer zone. This would militarize the borderlands in perpetuity.
Topic:: Markets, Economy, Borders, and Military
Political Geography:: Yemen, Saudi Arabia, and Gulf Nations

37. Financial Markets and Social Media: Lessons From Information Security

Author:: Claudia Biancotti and Paolo Ciocca
Publication Date:: 11-2021
Content Type:: Working Paper
Institution:: Carnegie Endowment for International Peace
Abstract:: On January 28, 2021, stocks in U.S.-based video game retailer GameStop Corp. reached an all-time high of $483. Two weeks earlier, they had been trading at $20. Two weeks later, they were down again, and a congressional hearing on the matter was underway in Washington. Wild swings are hardly uncommon in financial markets. This episode, however, had novel characteristics. In a recent report, the U. S. Securities and Exchange Commission states that “GameStop Corp and multiple other stocks experienced a dramatic increase in their share price in January 2021 as bullish sentiments of individual investors filled social media.” 1 Retail traders congregating on the Reddit platform were key in both price formation and the emergence of a “Main Street versus Wall Street” narrative around the stock.2 The influence of social media on financial markets is here to stay, as younger generations start saving and investing. This carries both opportunities and risks. Information sharing and discussion on internet platforms can improve market transparency and efficiency. On the other hand, social media platforms are known vehicles of disinformation and manipulation of human behavior. They could be weaponized by malicious actors, ranging from state-sponsored groups to crime syndicates, looking to compromise market integrity and financial stability. For liberal democracies with independent financial watchdogs, a complex policy challenge follows. In order to fight information operations, financial authorities will need to cooperate with intelligence communities and other relevant parts of executive branches. This requires rules that clearly define each party’s role and encourage reciprocal trust. In many jurisdictions, cybersecurity statutes provide a starting point. They are, however, limited in scope, only covering cooperation vis-& agrave;-vis traditional cyber attacks. In this paper, we argue that the model must evolve to help prevent or defend against malicious information operations.3 We highlight, as a first step, the importance of organizational modules that allow entities with different levels of access to classified information to work together to assess and inform responses to hostile operations.
Topic:: Security, Markets, Finance, and Social Media
Political Geography:: Global Focus and United States of America

38. Cashing in: Turning challenges into opportunities when evaluating humanitarian cash assistance

Author:: Neil Dillon, Ruth McCormack, Amelie Sundberg, Samir Hafiz, Paul Harvey, and Gabrielle Smith
Publication Date:: 04-2021
Content Type:: Working Paper
Institution:: ALNAP: Active Learning Network for Accountability and Performance
Abstract:: The use of cash transfers in humanitarian action has implications for evaluative activity. On the one hand, the utility of some evaluations has been strengthened by the increased attention that has been paid to evaluating cash transfers, the agreement of common outcome indicators and the creation of value-for-money methodologies. On the other hand, the programming approaches that are increasingly common to cash assistance – such as multipurpose and unconditional transfers, linkages with social protection systems and the digitalisation of transfers in partnership with financial service providers – present particular challenges for understanding humanitarian outcomes, delineating response scope, analysing different operational models and analysing new data sources. This discussion paper explores the challenges faced when evaluating cash assistance based on research activities by ALNAP along with substantive inputs from CaLP drawing on their wider research, such as the State of the World's Cash 2020 Report.
Topic:: Humanitarian Aid, Markets, Partnerships, Public-Private Partnership, and Cash Transfers
Political Geography:: Global Focus

39. The Organizational Roots of Market Design Failure: Structural Abstraction, the Limits of Hierarchy, and the California Energy Crisis of 2000/01

Author:: Georg Rilinger
Publication Date:: 12-2021
Content Type:: Working Paper
Institution:: Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)
Abstract:: Economic sociologists have rarely studied organizational reasons why market design processes fail. Drawing on the organizational literature on mistakes and accidents, the paper identifies such reasons for a fatal design decision during the creation of California’s first electricity markets. Designers proposed weak oversight structures even though their models called for active and permanent regulatory control. Sellers like Enron could therefore manipulate the market without fear of detection, prolonging the western energy crisis. A process of “structural abstraction” explains this mistake. Designers were split into three groups that worked in different divisions and relied on local frames to understand the oversight requirements. Each group missed information the others were aware of and arrived at the conclusion that minimal oversight would suffice. Higher levels of the hierarchy should have discovered and resolved these discrepancies. However, these levels considered the issue at a higher level of abstraction. Such structural abstraction made room for ambiguities that obscured the local disagreements.
Topic:: Economics, Markets, Sociology, Hierarchy, and Energy Crisis
Political Geography:: California, North America, and United States of America

40. Overcoming Taiwan’s Energy Trilemma

Author:: Evan A. Feigenbaum and Jen-Yi Hou
Publication Date:: 04-2020
Content Type:: Working Paper
Institution:: Carnegie Endowment for International Peace
Abstract:: Taiwan needs to look not just to the energy it needs right now but also to the energy it will need ten to twenty years from now if it is to power its future. This paper focuses on two elements of the paradigmatic transformation that are especially relevant to Taiwan’s future: (1) the rise of new energy and storage technologies, and (2) the dynamics of liquefied natural gas pricing. In particular, it looks at several ways in which new investment partnerships between Taiwan and U.S. players could bolster Taiwan’s ambitious effort to build out renewable energy as a source of industrial and residential power.
Topic:: Energy Policy, Markets, Science and Technology, Investment, and Fossil Fuels
Political Geography:: Middle East, Taiwan, and United States of America

41. Scaling up Private Investment in Low-Carbon Energy Systems through Regional Cooperation: Market-Based Trade Policy Measures

Author:: Kaliappa Kalirajan, Huong Thi Thu Tran, and Yochang Liu
Publication Date:: 01-2020
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This study aims to analyse the possibility and challenges of encouraging private sector investment in low-carbon energy systems in Asia, particularly across the Regional Comprehensive Economic Partnership (RCEP) member countries, and to suggest an effective policy framework that governments could apply to improve the development and dissemination of low-carbon energy goods and technologies. The research questions examined in this study are: What type of policy measures affect trade in low-carbon energy systems transition, particularly the renewable energy transition? How can investment signals and incentives be reframed to scale up private finance in renewable energy through regional cooperation? The objective is to investigate and provide several market-based feasible trade policy and investment policy tools for both national and regional markets that governments could adopt to accelerate the speed of private financing of the low-carbon energy industry, particularly the renewable energy industry.
Topic:: Energy Policy, Markets, Trade, and Renewable Energy
Political Geography:: South Asia, East Asia, Asia, and Southeast Asia

42. Does Home (Output) Import Tariff Reduction Increase Home Exports? Evidence from Korean Manufacturing Plant–Product Data

Author:: Chin Hee Hahn and Ju Hyun Pyun
Publication Date:: 02-2020
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This study examines the effects of domestic output import tariff reduction on domestic plant export dynamics and clarifies the underlying mechanism, using rich plant–product data from the Republic of Korea for 1991–2002. We find that home import liberalisation increases domestic plants’ export market participation (extensive margins), particularly for industry where markup growth is more negative during tariff reductions. However, we do not find evidence that cutting import tariffs significantly affects incumbent home exporters’ export volume (intensive margins). This study unveils a new mechanism – ‘escape competition’ to foreign markets – by showing that reducing import tariffs leads domestic firms under heightened industry competition to look for an opportunity in foreign markets via export inauguration.
Topic:: Markets, Tariffs, and Imports
Political Geography:: Asia and South Korea

43. How Market Sentiment Drives Forecasts of Stock Returns

Author:: Roman Frydman, Nicholas Mangee, and Josh Stillwagon
Publication Date:: 05-2020
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: We reveal a novel channel through which market participants’ sentiment influences how they forecast stock returns: their optimism (pessimism) affects the weights they assign to fundamentals. Our analysis yields four main findings. First, if good (bad) “news” about dividends and interest rates coincides with participants’ optimism (pessimism), the news about these fundamentals has a significant effect on participants’ forecasts of future returns and has the expected signs (positive for dividends and negative for interest rates). Second, in models without interactions, or when market sentiment is neutral or conflicts with news about dividends and/or interest rates, this news often does not have a significant effect on ex ante or ex post returns. Third, market sentiment is largely unrelated to the state of economic activity, indicating that it is driven by non-fundamental considerations. Moreover, market sentiment influences stock returns highly irregularly, in terms of both timing and magnitude. This finding supports recent theoretical approaches recognizing that economists and market participants alike face Knightian uncertainty about the correct model driving stock returns.
Topic:: Economics, Markets, and Stock Markets
Political Geography:: United States

44. The Future of the Automotive Industry: Dangerous Challenges or New Life for a Saturated Market?

Author:: Annamaria Simonazzi, Jorge Carreto Sanginés, and Margherita Russo
Publication Date:: 11-2020
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: The automotive industry is undergoing a radical transformation. New social, technological, environmental and geopolitical challenges are redefining the characteristics of a saturated market, opening new scenarios while offering opportunities for the entry of new players. These challenges are bound to trigger reorganization of the global value chain between old and new suppliers and car makers and their suppliers, affecting the distribution of employment, the regionalization of production and the dynamic evolution of the comparative advantage of nations. In this paper we address the issue of the reorganization of global value chains in the face of these challenges. The analysis will compare the relative position of core and peripheries in the North-American and European macro-regions, focusing on Mexico, which represents a significant case study for analysis of the impact of the digital transformation on the domestic value chain in an “integrated periphery”, and of trade agreements on the location policies of big multinationals. The dependency of the Mexican automotive industry on the strategic decisions of global players is considered a factor of great vulnerability, especially in a context of rapid change in the patterns of consumption, technologies and international trade agreements. For Mexico, as for European producers in the integrated and semi-peripheries, the main challenge in the near future will be posed by the radical transformation the industry is going through in electrical and autonomous-driving vehicles, which sees regions and players outside the traditional automotive clusters in the lead. The transformations taking place are bound to change the global structure of automotive production. The rise of new competitors from the emerging economies and would-be entrants from other sectors, competing in mastering the new digital and software technologies, threatens the established structure of the industry. The pandemic has led to a spectacular acceleration in the process of change, while heightening uncertainty about future developments. This is why the governments of leading countries are joining in the race, wielding carrots and sticks in support of their industries and in the endeavor to encourage risk-taking and investment in research and innovation, step up e-vehicle production while providing for the necessary infrastructures, and guarantee their companies a place in the new industry.
Topic:: Markets, Networks, Integration, Decarbonization, Digitalization, Production, and Automotive Industry
Political Geography:: Europe, North America, and Mexico

45. The political economy of competition, regulation and transformation: Black Economic Empowerment (BEE) and quota allocations in South African industrial fisheries

Author:: Thando Vilakazi and Stefano Ponte
Publication Date:: 09-2020
Content Type:: Working Paper
Institution:: Centre for Business and Development Studies (CBDS), Copenhagen Business School
Abstract:: Power asymmetries in value chains mean that inequalities in returns, access to key resources and share of value added are reinforced and skewed against smaller players. Policies put in place to enforce market rules and ensure fairness can be ineffective in the context of entrenched market power, lack of competition, and high levels of control by lead firms over key resources and rights – necessitating different rules of the game to change the inequalities. Under these circumstances, transformation and economic participation of marginalized groups are unlikely to be achieved, with important socio-economic and political implications. South Africa’s Black Economic Empowerment (BEE) policies and competition laws target economic redress and inclusion of historically disadvantaged people in the ownership and control of economic activity and productive assets. BEE criteria have been embedded in a number of industry empowerment charters, a Broad-Based BEE Act and a series of codes of implementation. South Africa’s competition law is well-established and effectively implemented. Yet, the impacts of these instruments have been frustratingly limited and slow, especially in sectors where a few companies dominate. The paper draws on secondary sources and in-depth interviews with industry players in the South African Hake Deep Sea Trawl (HDST) fishery to examine the interactions between industrial fishery quota allocations by the government, BEE policy, and competition dynamics as they impact on allocation of finite access to national resource endowments. It shows that, even in one of the most regulated sectors of South Africa’s economy, large incumbents maintain a disproportionate amount of bargaining power vis-à-vis smaller players in HDST fishery, both upstream and downstream, and throughout the domestic and global value chains. We conclude that as long as rules protect incumbency, inequality will be sustained. Even where scale economies are at play, quota allocation, transformation and competition regulation should go hand in hand to facilitate the effective participation of black-owned businesses as competitors in the hake value chain.
Topic:: Economics, Markets, Race, Economic Inequality, Economic Policy, Participation, Fishing, and Value Chains
Political Geography:: South Africa

46. Not every time is the right time for real-time marketing: branding in the COVID-19 pandemic

Author:: Lisa Ann Richey and Maha Rafi Atal
Publication Date:: 08-2020
Content Type:: Working Paper
Institution:: Centre for Business and Development Studies (CBDS), Copenhagen Business School
Abstract:: As the global Covid-19 pandemic spread through Europe and North America, companies raced to communicate how they were responding to the crisis. Advertising that focuses on a company’s response to humanitarian crises is hardly new. Every holiday season features a parade of brands touting their seasonal partnerships with charitable causes. Yet these exercises in “Covid-branding” struck a particular nerve with both consumers and media commentators because so many of the brands stuck to the same script.
Topic:: Economics, Markets, Communications, and Advertising
Political Geography:: Europe, North America, and Global Focus

47. Transcending History’s Heavy Hand The Future in Economic Action

Author:: Jens Beckert and Timur Ergen
Publication Date:: 03-2020
Content Type:: Working Paper
Institution:: Max Planck Institute for the Study of Societies
Abstract:: This paper discusses sociological analyses of the formation and role of expectations in the economy. Recognition of the social constitution of expectations advances the understand- ing of economic action under conditions of uncertainty and helps to explain core features of modern capitalist societies. The range of applications of the analytical perspective is il- lustrated by closer examination of three core spheres of capitalist societies: consumption, investment, and innovation. To provide an idea of core challenges of the approach, three major research questions for the sociological analysis of expectations are presented.
Topic:: Economics, Markets, Sociology, Capitalism, and Innovation
Political Geography:: Global Focus

48. COVID-Induced Sovereign Risk in the Euro Area: When Did the ECB Stop the Contagion?

Author:: Aymeric Ortmans and Fabien Tripier
Publication Date:: 10-2020
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: This paper studies how the announcement of the ECB’s monetary policies stopped the spread of the COVID-19 pandemic to the European sovereign debt market. We show that up to March 9, the occurrence of new cases in euro area countries had a sizeable and persistent effect on 10-year sovereign bond spreads relative to Germany: 10 new confirmed cases per million people were accompanied by an immediate spread increase of 0.03 percentage points (ppt) that lasted 5 days, for a total increase of 0.35 ppt. For periods afterwards,the effect falls to near zero and is not significant. We interpret this change as an indicator of the success of the ECB’s March 12 press conference, despite the “we are not here to close spreads” controversy. Our results hold for the stock market, providing further evidence of the effectiveness of the ECB’s March 12 announcements in stopping the financial turmoil. A counterfactual analysis shows that without the shift in the sensitivity of sovereign bond markets to COVID-19, spreads would have surged to 4.2% in France, 12.5% in Spain, and 19.5% in Italy by March 18, when the ECB’s Pandemic Emergency Purchase Programme was finally announced.
Topic:: Debt, Economics, International Political Economy, Markets, Central Bank, COVID-19, and Banking
Political Geography:: Europe

49. Corporate tax avoidance and industry concentration

Author:: Farid Toubal, Mathieu Parenti, and Julien Martin
Publication Date:: 07-2020
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: This paper argues that tax avoidance by large corporations has contributed to the 25% increase in concentration among U.S. firms since the mid-1990s. Corporate tax avoidance gives large firms a competitive edge, which translates into larger market shares and an increase in the granularity of the economy. We develop IV and difference-in-differences strategies that show the causal impact of tax avoidance on firm-level sales. Had firms not resorted to tax avoidance in 2017, our results imply that the average industry concentration would have been 8.3% lower, which is around its early 2000 level.
Topic:: Economics, International Political Economy, Markets, Tax Systems, Corporations, Tax Evasion, and Corporate Tax
Political Geography:: United States and Global Focus

50. Canada’s Historical Search for Trade Markets

Author:: David J. Bercuson
Publication Date:: 08-2020
Content Type:: Working Paper
Institution:: Canadian Global Affairs Institute (CGAI)
Abstract:: When U.S. President Donald Trump was elected in 2016 on a promise to cancel the North American Free Trade Agreement (NAFTA), Canada risked losing the free-trade regime that it had enjoyed with the U.S. since the original U.S.-Canada Free Trade Agreement took effect in 1989. Those who came to Canada’s rescue, by persuading the Trump administration to eventually make a new deal, the United States-Mexico-Canada agreement, were Canada’s trading partners in the United States, whose interests were threatened: Nearly two-thirds of U.S. states now have Canada as their most important trading partner. This was indicative of a long-term trade pattern of an ever-increasing closeness in trade between the U.S. and Canada. It is a pattern that started since before Confederation and in spite of not a few attempts in Canada to diversify exports away from the U.S. However, that simply cannot happen in any meaningful way: The 170-year-old pattern of Canada-U.S. trade is now so permanent as to be utterly irreversible. Since the decision by Britain to end tariff preferences for its colonies in the mid-19th century, Canada has naturally sought to penetrate the U.S. market for its exports. The desire has not always been mutual: American protectionism has, at times, hampered the export of Canadian products to the U.S., although tariff barriers have failed to stop what is a seemingly natural and, in many ways, necessary north-south flow of goods and services. Even Canadian attempts to reorient its own trade emphasis to enhance domestic east-west trade, or to expand into countries beyond the United States have made little difference. The trading relationship between Canada and the U.S. has endured through wars and in peacetime, through Republican administrations and Democratic ones. It will only continue to grow. Fantasizing about some markedly different trading future is therefore a waste of Canada’s time and energy, which should instead be expended on further penetrating the American marketplace and solidifying ties with state and local governments, local manufacturing associations, Congress and new industries. Canada should take advantage of its new trade deal with the U.S. to integrate the Canadian economy as fully into that of the U.S. as possible. There may be others like President Trump or some like him in Canada, who try to disrupt the trade relationship. That even Trump eventually was persuaded to agree to free trade with Canada is evidence, however, that an ever-closer trading relationship is simply a reality that cannot be stopped.
Topic:: Markets, History, Trade, and Donald Trump
Political Geography:: Canada, North America, and United States of America

51. Labor force participation, job search effort and unemployment insurance in the laboratory

Author:: Wolfgang Lechthaler and Patrick Ring
Publication Date:: 03-2020
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: How the provision of unemployment benefits affects employment and unemployment is a debated issue. In this paper, we aim at complementing theoretical and empirical contributions to this debate with a laboratory experiment: We simulate a job market with search effort and labor force participation decisions while varying the maximum length of unemployment benefit eligibility. Our results reveal two separable, opposing effects: Individuals within the labor force search with lower effort when unemployment benefits are extended. However, individuals are more likely to participate in the labor force and to actively search for a job. Concerning employment, the second effect dominates so that unemployment benefits raise employment.
Topic:: Economics, International Political Economy, Markets, Labor Issues, Employment, Unemployment, and Job Creation
Political Geography:: Global Focus

52. Financing Public Private Partnerships (PPPs) in Botswana Through The Capital Market

Author:: Kelesego Mmolainyane
Publication Date:: 03-2020
Content Type:: Working Paper
Institution:: Botswana Institute for Development Policy Analysis
Abstract:: In her quest to further graduate to the high-income status, Botswana seeks to invest more in infrastructure development for both productive and social use. An efficient and effective infrastructure provision is fundamental to excellent public service delivery and access. Sadly, Botswana, like many other world economies, has a challenge of having an infrastructure financing gap. One of the innovative ways to fill this gap is through public private partnerships (PPPs) with the capital market that has excess liquidity. Infrastructure PPPs are complex and capital intensive projects that require project finance experts to advise parties involved regarding returns and risks associated with each project. Various project-financing models can be designed to suit project specifications and they cannot be over-generalised for all PPP projects. Nevertheless, given the tight fiscal space, Botswana now, more than ever, should consider issuing PPP bonds and applying user changes model to finance economic PPP infrastructure for sustainable and inclusive economic growth.
Topic:: Markets, Infrastructure, Finance, Capital, and Public-Private Partnership
Political Geography:: Africa and Botswana

53. Transcending History’s Heavy Hand: The Future in Economic Action

Author:: Jens Beckert and Timur Ergen
Publication Date:: 03-2020
Content Type:: Working Paper
Institution:: Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)
Abstract:: This paper discusses sociological analyses of the formation and role of expectations in the economy. Recognition of the social constitution of expectations advances the understanding of economic action under conditions of uncertainty and helps to explain core features of modern capitalist societies. The range of applications of the analytical perspective is illustrated by closer examination of three core spheres of capitalist societies: consumption, investment, and innovation. To provide an idea of core challenges of the approach, three major research questions for the sociological analysis of expectations are presented.
Topic:: Markets, Innovation, Social Change, Economic Sociology, Expectations, and Firms
Political Geography:: Global Focus

54. Towards 2022: Options for paying back Zambia's Eurobond Debt

Author:: Mbewe Kalikeka, Shebo Nalishebo, and Florence Banda-Muleya
Publication Date:: 12-2019
Content Type:: Working Paper
Institution:: Zambia Institute for Policy Analysis and Research (ZIPAR)
Abstract:: On 20th September 2022, Zambia’s first Eurobond will mature. The Government will be required to settle its principal payment amounting to US$750 million in full. Twenty months later in April 2024, the Government will have to settle the second Eurobond worth US$1 billion. The third US$1.25 billion Eurobond will be paid back in three instalments in July of 2025, 2026 and 2027. With less than three years before the first Eurobond matures, there is no clear indication of how and where the money to pay back these Eurobonds is going to come from. This paper considers several options that will mitigate the possibility of a default when the principal payments on the Eurobonds are due. The lack of a payment strategy has made the bondholders jittery about whether they will get their money back. Bondholders have communicated their consternations by dumping the Zambian bonds which are perceived to be risky. With increasing yield rates on the three Eurobonds, of about 17% by end-September 2019, the market seems to have already priced in a default – only nations already in default, such as Venezuela, have yields as high as Zambia’s1. The yield rate is the barometer used to assess the risk inherent in the bond. In general, higher yields mean the bond has higher risk and corresponds to a decline in the value of the bond. There have been efforts made towards establishing a Eurobond Redemption Strategy, but its contents are yet to be publicised. Also, the failure to release the 2020-2022 Medium Term Expenditure Framework by September 2019, and the absence of the 2020-2022 Medium Term Debt Strategy to show a clear borrowing plan have added to the market apprehension. By just about every measure, the Zambian economic fundamentals are fragile. Growth is ailing, prompting the authorities to revise their growth projection targets from 4% to 2% in 2019. Agriculture has been in recession for several quarters now. The 2019 mining fiscal regime that has significantly raised the tax burden on mining companies to unsustainable and uncompetitive levels, coupled with reduced ore grades, has resulted in 8.4% reduction in mining value added in the second quarter of 2019. The electricity load management which commenced in mid-2019 continues to have adverse economy-wide effects. This has implications on revenue targets. Tax revenues in September 2019 were 17% lower than projected, a trend likely to continue at least up to the end of the year. Further, the recent weakness of the Kwacha is not helping either as it has increased the cost of external borrowing and debt servicing, making it prohibitively more expensive to service foreign-currency denominated loans, which include the Eurobonds.
Topic:: Debt, Economics, Markets, Public Debt, and Eurobonds
Political Geography:: Africa and Zambia

55. Making Basel III Work for Emerging Markets and Developing Economies

Author:: Thorsten Beck and Liliana Rojas-Suarez
Publication Date:: 04-2019
Content Type:: Working Paper
Institution:: Center for Global Development
Abstract:: A sound financial regulatory framework is critical for minimizing the risk imposed by financial system fragility. In the world’s emerging markets and developing economies (EMDEs), such regulation is also essential to support economic development and poverty reduction. Meanwhile, it is increasingly recognized that global financial stability is a global public good: recent decades have seen the development of new international financial regulatory standards, to serve as benchmarks for gauging regulation across countries, facilitate cooperation among financial supervisors from different countries, and create a level playing field for financial institutions wherever they operate. For the worldwide banking industry, the international regulatory standards promulgated by the Basel Committee on Banking Supervision (BCBS) stand out for their wide-ranging scope and detail. Even though the latest Basel recommendations, adopted in late 2017 and known as Basel III, are, like their predecessors, calibrated primarily for advanced countries, many EMDEs are in the process of adopting and adapting them, and many others are considering it. They do so because they see it as in their long-term interest, but at the same time the new standards pose for them new risks and challenges. This report assesses the implications of Basel III for EMDEs and provides recommendations for both international and local policymakers to make Basel III work for these economies.
Topic:: Development, Economics, Emerging Markets, and Markets
Political Geography:: Global Focus

56. Collective Reputation in Trade: Evidence from the Chinese Dairy Industry

Author:: Jie Bai, Ludovica Gazze, and Yukun Wang
Publication Date:: 10-2019
Content Type:: Working Paper
Institution:: The John F. Kennedy School of Government at Harvard University
Abstract:: Collective reputation implies an important externality. Among firms trading internationally, quality shocks about one firm’s products could affect the demand of other firms from the same origin country. We study this issue in the context of a large-scale scandal that affected the Chinese dairy industry in 2008. Leveraging rich firm-product level administrative data and official quality inspection reports, we find that the export revenue of contaminated firms dropped by 84% after the scandal, relative to the national industrial trend, and the spillover effect on non-contaminated firms is measured at 64% of the direct effect. Notably, firms deemed innocent by government inspections did not fare any better than noninspected firms. These findings highlight the importance of collective reputation in international trade and the challenges governments might face in signaling quality and restoring trust. Finally, we investigate potential mechanisms that could mediate the strength of the reputation spillover. We find that the spillover effects are smaller in destinations where people have better information about parties involved in the scandal. New firms are more vulnerable to the collective reputation damage than established firms. Supply chain structure matters especially in settings where firms are less vertically integrated and exhibit fragmented upstream-downstream relationships.
Topic:: International Trade and Finance, Markets, Business, Global Political Economy, and Accountability
Political Geography:: China and Asia

57. Smart Development Banks

Author:: Eduardo Fernández-Arias, Ricardo Hausmann, and Ugo Panizza
Publication Date:: 04-2019
Content Type:: Working Paper
Institution:: The John F. Kennedy School of Government at Harvard University
Abstract:: The conventional paradigm about development banks is that these institutions exist to target well-identified market failures. However, market failures are not directly observable and can only be ascertained with a suitable learning process. Hence, the question is how do the policymakers know what activities should be promoted, how do they learn about the obstacles to the creation of new activities? Rather than assuming that the government has arrived at the right list of market failures and uses development banks to close some well-identified market gaps, we suggest that development banks can be in charge of identifying these market failures through their loan-screening and lending activities to guide their operations and provide critical inputs for the design of productive development policies. In fact, they can also identify government failures that stand in the way of development and call for needed public inputs. This intelligence role of development banks is similar to the role that modern theories of financial intermediation assign to banks as institutions with a comparative advantage in producing and processing information. However, while private banks focus on information on private returns, development banks would potentially produce and organize information about social returns.
Topic:: Development, Industrial Policy, Markets, and Banks
Political Geography:: Global Focus and Global Markets

58. Europe 1957 to 1979: From the Common Market to the European Monetary System

Author:: Joseph Halevi
Publication Date:: 11-2019
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: This essay deals with the contradictory dynamics that engulfed Europe from 1959 to 1979, the year of the launching of the European Monetary System. It focuses on how the macroeconomic frame- work of stop-go policies in the 1960s ended up privileging external – intra-European - exports at the expense of domestic demand. The paper offers a very tentative explanation as to why stop-go policies, by weakening domestic demand, did not put an end to the to the ‘long boom’ earlier as they should have. The French crisis of 1968-69 leading to the demise of De Gaulle is discussed at length, as is the renewal of the German export drive in the wake of a nominal revaluation of the D-Mark in 1969. Finally, the revival of labor struggles in Italy in the same year is put in the context of the structural weaknesses of the Italian economy as analyzed by the late Marcello de Cecco. The conclusion is that European countries had neither the political culture nor the institutional mechanisms to coordinate mutually advantageous policies. Their so-called cooperation was an exercise in establishing hegemony while defending the interests specific to the dominant economic groups of each country. The essay then deals with the formation of the EMS as an expression of efforts to establish and enforce economic dominance.
Topic:: Economics, Markets, History, Monetary Policy, Capitalism, Common Market, and Macroeconomics
Political Geography:: Europe

59. The Knightian Uncertainty Hypothesis: Unforeseeable Change and Muth’s Consistency Constraint in Modeling Aggregate Outcomes

Author:: Roman Frydman, Søren Johansen, Anders Rahbek, and Morten Tabor
Publication Date:: 03-2019
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: This paper introduces the Knightian Uncertainty Hypothesis (KUH), a new approach to macroeconomics and finance theory. KUH rests on a novel mathematical framework that characterizes both measurable and Knightian uncertainty about economic outcomes. Relying on this framework and John Muth’s pathbreaking hypothesis, KUH represents participants’ forecasts to be consistent with both uncertainties. KUH thus enables models of aggregate outcomes that 1) are premised on market participants’ rationality, and 2) yet accord a role to both fundamental and psychological (and other non-fundamental) factors in driving outcomes. The paper also suggests how a KUH model’s quantitative predictions can be confronted with time-series data.
Topic:: Economics, Markets, Economic Theory, Macroeconomics, and Mathematics
Political Geography:: United States

60. Oh Mother: The Neglected Impact of School Disruptions

Author:: David Jaume and Alexander Willén
Publication Date:: 03-2019
Content Type:: Working Paper
Institution:: Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:: Temporary school closures (TSC) represent a major challenge to policymakers across the globe due to their potential impact on instructional time and student achievement. A neglected but equally important question relates to how such closures affect the labor market behavior of parents. This paper provides novel evidence on the effect of temporary school closures on parental labor market behavior, exploiting the prevalence of primary school teacher strikes across time and provinces in Argentina. We find clear evidence that temporary school closures negatively impact the labor market participation of mothers, in particular lower-skilled mothers less attached to the labor force and mothers in dual-income households who face a lower opportunity cost of dropping out of the labor force. This effect translates into a statistically significant and economically meaningful reduction in labor earnings: the average mother whose child is exposed to ten days of TSCs suffers a decline in monthly labor earnings equivalent to 2.92% of the mean. While we do not find any effects among fathers in general, fathers with lower predicted earnings than their spouses also experience negative labor market effects. This suggests that the parental response to TSCs depend, at least in part, on the relative income of each parent. A back-of-the-envelope calculation suggest that the aggregate impact of TSCs on annual parental earnings is more than $113 million, and that the average mother would be willing to forego 1.6 months of labor earnings in order to ensure that there are no TSCs while her child is in primary school.
Topic:: Economics, Education, Markets, Political Economy, and Labor Issues
Political Geography:: United States

61. Education and Labour Market Activity of Women in Botswana

Author:: Goitseone Khanie
Publication Date:: 03-2019
Content Type:: Working Paper
Institution:: Botswana Institute for Development Policy Analysis
Abstract:: This study examines the prevalence of female participation in labour market activities and investigates the role played by education in this participation. Using the 2015/16 Botswana Multi Topic Household Survey data and a multinomial logit model, the study found that women with tertiary education are more likely to be wage employed relative to self-employment, whereas those with lower to no education are more likely to be unemployed or out of the labour force. This is because higher education is normally considered a prerequisite for most wage jobs. It is therefore imperative for the government to continue educating women beyond secondary level as it will better equip them to participate in more meaningful labour market activities. On the other hand, there is need to stimulate the demand side of the labour market in order to accommodate the rising numbers of women with high levels of education. In order to encourage participation of women in high rewarding self-employment activities, there is need to intensify empowerment schemes that are largely oriented towards their self-employment.
Topic:: Education, Markets, Labor Issues, and Women
Political Geography:: Africa and Botswana

62. Approaches to Price Formation in Financialised Commodity Markets

Author:: Sophie van Huellen
Publication Date:: 04-2019
Content Type:: Working Paper
Institution:: School of Oriental and African Studies - University of London
Abstract:: A recent debate over the financialisation of commodity markets has stimulated the development of approaches to price formation which incorporate index traders as a new trader category in commodity futures markets. I survey these new approaches by retracing their emergence to traditional price formation models and show that these new models arise from a synthesis between commodity arbitrage pricing and asset pricing theories in the tradition of Keynesian inspired hedging pressure models. Based on these insights, I derive testable hypotheses to provide guidance for a growing literature that seeks to empirically evaluate the effects of index traders on price discovery and risk management in commodity futures markets.
Topic:: Markets, Finance, Investment, Commodities, and Price
Political Geography:: Global Focus

63. The Impact of Macroeconomic Variables on Capital Market Development in Botswana’s Economy

Author:: Koketso Molefhi
Publication Date:: 03-2019
Content Type:: Working Paper
Institution:: Botswana Institute for Development Policy Analysis
Abstract:: The study examines the impact of macroeconomic variables on stock and bond markets development in Botswana using Autoregressive Distributed Lag (ARDL)-Bounds Test. The results indicate that macroeconomic variables have an impact on capital market development in Botswana. In the short run, real output, money supply and inflation have a positive influence on the development of the stock market, while real exchange rate retards its development. Real output further supports the development of the stock market in the long run. For the bond market, only two variables, inflation rate and lending rate have positive and negative impact on the bond market in the long run respectively, while none of the variables influence the bond market in the short run. Policy implications include increased efforts by policy makers to increase money supply, gross domestic product for the development of stock market, while the bond market development requires a decrease in lending rates.
Topic:: Economics, Markets, Capital Flows, Macroeconomics, and Economic Development
Political Geography:: Africa and Botswana

64. Lessons Learned and Evolving Practices of the TIBER Framework for Resilience Testing in the Netherlands

Author:: Petra Hielkema and Raymond Kleijmeer
Publication Date:: 10-2019
Content Type:: Working Paper
Institution:: Carnegie Endowment for International Peace
Abstract:: Financial institutions face an evolving threat landscape with a wide range of hostile actors targeting them. Regulators and consumers reasonably expect the institutions to make themselves more secure. The question then emerges as to whether financial institutions are complying with the different standards, rules, and regulations regarding their security. International standard-setting bodies have recognized the need to raise the bar higher for the resilience of financial institutions. The publication of the Committee on Payments and Market Infrastructures-International Organization of Securities Commissions (CPMI-IOSCO) guidance on cyber resilience in June 2016 has been pivotal in emphasizing the need to have an integrated approach for financial market infrastructures, with the institution’s board being ultimately responsible and accountable for cyber resilience.1 Increasingly, authorities and financial institutions alike recognize that, in addition to assessing the overall resilience posture of a financial institution against sophisticated attacks, it will be important to actually test this posture. The CPMI-IOSCO guidance includes a chapter dedicated to testing, containing several examples of activities to that end. Recently, frameworks for testing the resilience posture of institutions in practice have been developed internationally.
Topic:: Markets, Science and Technology, Finance, and Resilience
Political Geography:: Europe, Netherlands, and Global Focus

65. Inflation Targets in Latin America

Author:: José De Gregorio
Publication Date:: 11-2019
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Many emerging-market economies have adopted inflation targeting regimes since they were introduced by New Zealand in 1990. Latin America has not been the exception. Currently eight Latin American countries conduct monetary policy through inflation targeting regimes: Brazil, Chile, Colombia, Guatemala, Mexico, Paraguay, Peru, and Uruguay. This paper reviews the history of chronic inflation in Latin America and describes these countries’ experience with inflation targets and their performance during the global financial crisis.
Topic:: Markets, Developing World, Economies, and Inflation
Political Geography:: Brazil, Colombia, Uruguay, Latin America, Central America, Mexico, Chile, Peru, Guatemala, and Paraguay

66. Natural gas pricing GSA Bolivia: Brazil using virtual hub and expected monetary value instruments

Author:: Sergio M. Medinaceli and Jorge L. Gumucio
Publication Date:: 11-2019
Content Type:: Working Paper
Institution:: Institute for Advanced Development Studies (INESAD)
Abstract:: The purpose of this paper is to show the shortcomings of incentive policies, specifically competitiveness, if they are designed without considering fundamentals of market development such as, level of demand, level of investment, and availability of alternative sources of supply. We focus on the analysis of the main market, financial, and economic variables in the Bolivia-Brazil Gas Supply Agreement, their relationship, development and dynamics through time and the current situation before the contract is renegotiated in 2019. Our analysis centers on the effective negotiation margin that Bolivia has calculated from the overall production costs of Bolivian gas (using EMV) vis a vis the opportunity cost of Brazil importing LNG. Using 10%-15% as discount rates and WTI prices between $50 and $60/bbl, the natural gas price result of EMV is between $ 4.96 and $ 7.99/MMbtu. Using the Bolivian tax incentive gas price should be between $2.29 and $5.16/MMbtu. Under the assumptions that WTI levels would be around $ 60/bbl, investors use a 15% discount rate to invest in Bolivia, incentive policy is in place, and the price of LNG is around $ 6.84/MMbtu; the opportunity cost of Brazil importing gas from Bolivia is $ -0.55/MMbtu. The same case without incentive policy will yield a $ -3.38/MMbtu. On the other hand, if the transport tariff is reduced the margin becomes positive under the assumption that the incentive policy is still in place. Therefore, as the price of LNG becomes more competitive through increase in supply (worldwide), Brazil will set its negotiation position around the price that they could import LNG on the short to medium term.
Topic:: Markets, Regional Cooperation, Natural Resources, Monetary Policy, Gas, Macroeconomics, and Economic Development
Political Geography:: Brazil, Latin America, and Bolivia

67. How does China fare on the Russian market? Implications for the European Union

Author:: Alicia Garcia-Herrero and Jianwei Xu
Publication Date:: 11-2019
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: China’s economic ties with Russia are deepening. Meanwhile, Europe remains Russia’s largest trading partner, lender and investor. An analysis of China’s ties with Russia, indicate that China seems to have become more of a competitor to the European Union on Russia’s market. Competition over investment and lending is more limited, but the situation could change rapidly with China and Russia giving clear signs of a stronger than ever strategic partnership.
Topic:: Economics, Markets, Bilateral Relations, Governance, Investment, and Exports
Political Geography:: Russia, China, Europe, Eurasia, and Asia

68. Globalization and Its ‘Born Throwaways’: Exploring the Impact of Neo-Liberal Reforms on Irregular Migration in Africa

Author:: Elias Chukwuemeka Ngwu, Anthony Chinedu Ugwu, and Emeka Charles Iloh
Publication Date:: 10-2019
Content Type:: Working Paper
Institution:: African Heritage Institution (AfriHeritage)
Abstract:: Policies of free trade and the adoption of neoliberal economic models, which are important aspects of globalization, have caused major disruptions in labor markets around the world. In the less developed regions of the world, relatively unskilled agricultural hands have been rendered redundant in production processes while in the more technologically advanced countries, several long-stable industries closed down while some others were outsourced to less developed countries in a bid to maintain competitiveness. As the flow of material and cultural goods and services accelerated over time under the rubrics of globalization, human beings dislodged from their various productive bases became important components of the exchange. However, whereas the process of globalization appears to be bringing humanity closer together due to advances in transportation and communication technologies, this apparent physical closeness has created social distance between individuals and groups across territorial boundaries. Large numbers of mostly economic migrants from the less developed regions have ossified into an army of social outcasts, born throwaways, in various destination and transit countries. This paper explored the contradictions and tensions arising from globalization-induced migration within and out of Africa. It found that the massive outflow of irregular migrants from Africa has fed into the stream of modern day slavery in transit and destination countries that is unlikely to abate even in the face of apparent repudiation of globalization by its avid promoters, the United States and Great Britain.
Topic:: Development, Globalization, Markets, Migration, Neoliberalism, and Economic Development
Political Geography:: Britain, Africa, and United States

69. Do Patents Lead to Market Concentration and Excess Profits?

Author:: Padmashree Gehl Sampath and Walter Park
Publication Date:: 04-2019
Content Type:: Working Paper
Institution:: Global Development and Environment Institute at Tufts University
Abstract:: Market concentration in technology intensive industries has been a subject of interest to both scholars and policy analysts. This paper provides a first empirical assessment on how the patenting system contributes to market concentration and the generation of economic rents in three key sectors – pharmaceuticals, chemicals and ICTs. Using data for US multinationals and their foreign affiliates on the one hand, and locally registered private and public companies in Brazil, India and China, we conclude that the concentration of patent ownership is found significantly to relate to market concentration in the USA. In developing countries such as Brazil, India, and China, a strengthening of patent rights has contributed to greater returns for affiliates of U.S. companies but has not stimulated their R&D intensity. The affiliates of U.S. multinationals have enjoyed greater profitability relative to their local competitors in Brazil, India, and China. The paper draws implications for the setting of intellectual property policy and offers suggestions on the role of competition policy in curbing market concentration and related effects on inequality and access.
Topic:: Markets, Inequality, and Patents
Political Geography:: Global Focus

70. Roads and jobs in Ethiopia

Author:: Matteo Fiorini and Marco Sanfilippo
Publication Date:: 12-2019
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: We look at how improving roads can affect jobs and structural transformation. We use a novel geocoded dataset covering the universe of Ethiopian roads and match this information with individual data to identify the effects of improvements in road infrastructure on the creation, quality, and sectoral distribution of jobs over the period 1994–2013. We find that, at the district level, higher market potential due to better roads contributes to the creation of new jobs, reduces the share of agricultural workers, and increases that of workers in the services sector but not in manufacturing. The latter experiences a relative increase in the share of informal workers. Finally, investigating the underlying mechanisms, we show that patterns of internal migration and changes in economic opportunities can help to rationalize our findings.
Topic:: Markets, Infrastructure, Transportation, and Roads
Political Geography:: Africa and Ethiopia

71. Petro Dollar. Petro Yuan. Petro Rupee?

Author:: Amit Bhandari
Publication Date:: 08-2019
Content Type:: Working Paper
Institution:: Gateway House: Indian Council on Global Relations
Abstract:: Over the last two decades, every component of the global energy scenario has changed: demand, supply and energy-type. The only constant has been the U.S. Dollar as the currency of energy trade. Lately, the Chinese Yuan has emerged to challenge the Dollar. Can the Indian Rupee be a third player? India is now the world’s third-largest consumer and second-largest importer of energy. Its open market, transparent regulation and growing demand give it an opportunity to become the hub of a vibrant new oil market, simultaneously ensuring its energy security and raising the international profile of the Rupee. This paper explores the possibility the Rupee could be the third currency in which energy is traded, and the challenges and opportunities it presents.
Topic:: Security, Energy Policy, Markets, Oil, Currency, and Trade
Political Geography:: China, South Asia, India, Asia, North America, and United States of America

72. How Market Sentiment Drives Forecasts of Stock Returns

Author:: Roman Frydman, Nicholas Mangee, and Josh Stillwagon
Publication Date:: 04-2019
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: We reveal a novel channel through which market participants’ sentiment influences how they forecast stock returns: their optimism (pessimism) affects the weights they assign to fundamentals. Our analysis yields four main findings. First, if good (bad) “news” about dividends and interest rates coincides with participants’ optimism (pessimism), the news about these fundamentals has a significant effect on participants’ forecasts of future returns and has the expected signs (positive for dividends and negative for interest rates). Second, in models without interactions, or when market sentiment is neutral or conflicts with news about dividends and/or interest rates, this news often does not have a significant effect on ex ante or ex post returns. Third, market sentiment is largely unrelated to the state of economic activity, indicating that it is driven by non-fundamental considerations. Moreover, market sentiment influences stock returns highly irregularly, in terms of both timing and magnitude. This finding supports recent theoretical approaches recognizing that economists and market participants alike face Knightian uncertainty about the correct model driving stock returns.
Topic:: Economics, Markets, Financial Markets, Econometrics, and Stock Markets
Political Geography:: United States

73. Exchange Rate Flexibility, Financial Market Openness and Economic Growth

Author:: Il Houng Lee, Eunjung Kang, and Kyunghun Kim
Publication Date:: 04-2019
Content Type:: Working Paper
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: With global recovery not in sight, along with calls for stronger structural reform, international policy coordination is again under spotlight. Correcting global imbalance would contribute towards closing the demand gap. Emerging economies in particular should allow greater exchange rate flexibility and not intervene in the foreign exchange market to reflect fundamentals. Yet, the impact of greater exchange rate flexibility is unclear as they also struggle to keep their growth momentum alive and hedge against greater exposure to potential capital reversal than ever before. With the loss of monetary policy independence, emerging markets (EMs) are running out of policy options. Against this background, unless international policy coordination is fundamentally recast, a comprehensive review of all emerging market economies’ policy options are in order, including both macro policy instruments, micro measures, and global safety net aimed at attaining the best possible solution to escaping global recession.
Topic:: Markets, Finance, Economic Growth, and Exchange Rate Policy
Political Geography:: Global Focus

74. Uncertain Futures: Imaginaries, Narratives, and Calculative Technologies

Author:: Jens Beckert and Richard Bronk
Publication Date:: 12-2019
Content Type:: Working Paper
Institution:: Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)
Abstract:: Dynamic capitalist economies are characterised by relentless innovation and novelty and hence exhibit an indeterminacy that cannot be reduced to measurable risk. How then do economic actors form expectations and decide how to act despite this uncertainty? This paper focuses on the role played by imaginaries, narratives, and calculative technologies, and argues that the market impact of shared calculation devices, social narratives, and contingent imaginaries underlines the rationale for a new form of ‘narrative economics’ and a theory of fictional (rather than rational) expectations. When expectations cannot be anchored in objective probability functions, the future belongs to those with the market, political, or rhetorical power to make their models or stories count. The paper also explores the dangers of analytical monocultures and the discourse of best practice in conditions of uncertainty, and considers the link between uncertainty and some aspects of populism.
Topic:: Economics, Markets, Capitalism, Innovation, Uncertainty, and Calculation
Political Geography:: Global Focus

75. An Overview of German New Economic Sociology and the Contribution of the Max Planck Institute for the Study of Societies

Author:: John Wilkinson
Publication Date:: 02-2019
Content Type:: Working Paper
Institution:: Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)
Abstract:: New economic sociology (NES) in Germany has many similarities with economic sociology in the United States in its conscious efforts to institutionalize its presence within the broader sociology community, its promotion of a canon via handbooks, and its focus on the sociology of markets. At the same time, it differs in its stronger connections to the German classics, the greater vitality of a macrosociological tradition in Germany, the prior existence of a “bridging” generation of economic sociologists, and its later consolidation in a period of neo-liberal globalization, all of which have given NES in the German-speaking world a distinctive character. In addition, it has been influenced by successive waves of French economic sociology – Bourdieu, convention, and actor-network theory – and its bilingual academic tradition has ensured its integration into English-speaking NES. In its contribution to the sociology of markets, the fact that NES emerged later in Germany than in the US led to a greater concern with quality markets rather than commodity markets, and a concomitantly greater attention to issues of value and price. These latter themes, in their turn, establish a continuity with German economic sociology’s enduring concern with understanding the role of money. Not surprisingly, therefore, German NES is now making key contributions to discussions on the sociology of money and is increasingly situating its analysis within the broader dynamic of capitalism and current processes of financialization.
Topic:: Economics, Markets, Sociology, and Discipline
Political Geography:: Europe and Germany

76. Beyond International Standards: Mapping the Future of Capital Markets Regulation

Author:: Cally Jordan
Publication Date:: 09-2018
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: As a response to multiple financial shocks, international standards have disappointed. Consensus seeking has stifled innovation, perpetuating outdated regulatory concepts at a time of rapid market change. Markets are complex and idiosyncratic; they may not be receptive to efforts toward producing regulatory harmonization and convergence. Alternatives to international standard setting should be explored. Possibilities include fora for experimentation in capital markets regulation, the creation of a set of variegated model capital markets laws and a “restatement”-like treatise.
Topic:: Markets, Financial Crisis, Regulation, and Capitalism
Political Geography:: Global Focus

77. Price Discovery in Commodity Futures and Cash Markets with Heterogenous Agents

Author:: Sophie van Huellen
Publication Date:: 11-2018
Content Type:: Working Paper
Institution:: School of Oriental and African Studies - University of London
Abstract:: The paper develops a price discovery model for commodity futures markets that accounts for two forms of limits to arbitrage caused by transaction costs and noise trader risk. Four market regimes are identified: (1) effective arbitrage, (2) transaction costs but no noise trader risk, (3) no transaction costs but noise trader risk and (4) both transaction costs and noise trader risk. It is shown that commodity prices are driven by both market fundamentals and speculative trader positions under the latter two regimes. Further, speculative effects spill over to the cash market under regime (3) but are confined to the futures market under regime (4). The model is empirically tested using data from six grain and soft commodity markets. While regime (4) is rare and short lived, regime (3) with some noise trader risk and varying elasticity of arbitrage prevails
Topic:: International Trade and Finance, Markets, Investment, Commodities, and Price
Political Geography:: Global Focus

78. Egypt, a future gas supplier to the European Union?

Author:: Jan Mazač and Lukáš Tichý
Publication Date:: 04-2018
Content Type:: Working Paper
Institution:: Institute of International Relations Prague
Abstract:: The main objective of the external dimension of the EU energy policy in line with the Energy Union strategy is primarily to ensure energy security by diversifying external energy supplies, transport routes and suppliers, mainly in the gas domain. Egypt’s recent offshore and onshore gas discoveries increased its natural gas reserves estimate. Its natural gas production is thus expected to double in 2020 and transform the country back into a gas supplier in the eastern Mediterranean region. The European Union (EU) should thus strengthen its relations with Egypt to allow its gas production to reach European markets.
Topic:: Energy Policy, Markets, Oil, European Union, and Gas
Political Geography:: Europe, Middle East, North America, and Egypt

79. A Comprehensive Cyber Security Approach: Bolstering Cybersecurity Capacity through Industrial Policy

Author:: Melissa Griffith
Publication Date:: 09-2018
Content Type:: Working Paper
Institution:: Berkeley APEC Study Center
Abstract:: Finland, at the easternmost border of the European Union (EU), has set itself apart as a global leader in cybersecurity technology. However, there is a distinction between the presence of technical expertise and the effective deployment of that technology throughout industry, government, and the broader civilian population. This broader deployment is essential because for advanced industrial economies, the ability to protect and defend their use of cyberspace is just as vital to a flourishing economy as it is to mounting an effective national defence. How has Finland leveraged existing cybersecurity expertise in a manner that protects both civilian and government use of cyberspace? The government has approached this task by utilizing an existing logic for market intervention: Finland’s geopolitical position and its corresponding defence doctrine’s emphasis on defence of society by maintaining society-wide resilience in the event of a crisis. In comprehensive security (kokonaisturvallisuus), which includes cybersecurity, the responsibility for and the safeguarding of the vital functions of society are jointly held by private and public actors, industry and government, defence forces and citizens. Given this focus on industry and civil society’s role within the provision of security, Finland’s approach is well suited to the realities of addressing cybersecurity.
Topic:: Security, Defense Policy, Markets, Cybersecurity, Geopolitics, and Industry
Political Geography:: Europe and Finland

80. China's plans and direction for further opening-up

Author:: Yang Panpan
Publication Date:: 08-2018
Content Type:: Working Paper
Abstract:: This year marks the 40th anniversary of China's reform and opening-up, and will be the first year for China to hold the international import expo. This signals that China is further opening up its domestic market and striving to be more integrated with the world. Meanwhile, China is enduring the external uncertainties mainly from its biggest trade partner -- the U.S. One question should be asked: What is China's plan and direction for further opening-up? Since China is shifting from a mid-high-income country to a high-income country, the trajectory of other major developed countries may be a reference for China's further opening-up process. With this in mind, it's necessary to compare the opening-up pattern of these countries with China. One variable might fit this kind of observation -- the foreign value added in one country's final demand. This represent the amount of foreign input used in a country's consumption and investment. Examples include final goods consumed by households, capital goods invested by firms, or intermediate goods used to make products.
Topic:: Markets, Reform, Finance, and Economy
Political Geography:: China and Asia

81. The Impact of Trade Liberalization in Africa

Author:: Jae Wook Jung
Publication Date:: 11-2017
Content Type:: Working Paper
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: Africa is one of the most economic-integrated continents by a number of regional trade agreements in the continent. There are about 30 bilateral and multilateral trade agreements within the continents so that each African coun-try is a member of at least one regional trade agreement. Trade between Afri-can countries, however, barely exceeds 10% of the total trade of Africa, which is much lower than other continents’ intra-regional trade share. This discrepancy between many regional trade agreements and small intra-continent trade share tells that regional economic integrations in Africa are very unsuccessful trade liberalization policies to promote trade. This paper examines a reason why trade liberalization policies in Africa fail. In particular, we investigate the impact of trade agreements in Africa on trade conditional on financial market development and political instability. An empirical study finds that Africa countries’ poor financial market accessibility and political instability are key barriers to trade integration in the region. These two factors can explain most disadvantage of African countries in their intra-regional trade. In a dynamic regression, the two factors depress the long-run growth of trade due to trade liberalization in the region significantly, while African continent dummy variable that captures other unobserved trade obstacles in the region has much less effect on trade compared to the literature on African regional economic integration.
Topic:: Markets, Treaties and Agreements, Economic Policy, and Trade Liberalization
Political Geography:: Africa and South Korea

82. Electrification in Nigeria: Challenges and Way Forward

Author:: Joseph Ishaku
Publication Date:: 06-2017
Content Type:: Working Paper
Institution:: Centre for the Study of the Economies of Africa (CSEA)
Abstract:: Although electricity has been generated in commercial quantities in Nigeria for over a century, the rate of electricity infrastructure development in the county is low and power supply remains inadequate. Prior to reforms, the central challenges of the Nigerian power sector was the vertically integrated monopoly of government in power generation, transmission and distribution. While the reforms was successful in privatizing the generation and distribution segments of the Nigerian Electricity Supply Industry (NESI), the overbearing problems in the sector persists –with privatization only changing the dimensions of the challenges. Financing remain a major problem across all the segments of the NESI partly due to non-cost reflective tariff. Yet each segment of the NESI also faces its unique challenges. The generation segment is riffed with the problems of energy security and inefficiencies in other segments. The challenges in the transmission segment lies in the lack of modern transmission lines and equipment, gross mismanagement, poor maintenance of available infrastructure and inefficient grid design. Distribution companies face the problem of huge Aggregate Technical, Commercial, and Collection (ATC&C) losses. In terms of electricity access, 46.09 percent of the Nigerian population remains unconnected to the national grid, representing 83.98 million people. Further, electricity demand is estimated at 24,380 MW as at 2015 compared to NESI’s available generation capacity of 7,139.6 MW. In terms of energy use, Nigeria has the lowest in the world – 80 percent below its energy use based on income levels. In a bid to tackle aforementioned challenges, the Federal Government of Nigeria (FGN) set ambitious targets for the country’s energy mix. This should allow Nigeria exploit its potential for coal, solar, wind, biomass, as well as small and large hydroelectric power electric generation, while reducing the prevalence of self-generation, which constitute two-thirds of present energy mix. By 2020, the FGN targets to achieve up to 75 percent access to electricity by connecting 1.5 million households annually. While Nigeria’s energy mix targets are desirable, the prospect of success remain bleak on account of financial constraints, pricing policy and lack of policy coordination. Improving electricity supply in Nigeria and addressing barriers to achieving the energy mix targets will entail: addressing payment risk, financing power sector investment, as well as improving the pricing and tariff structure, gas pricing and allocation, and market regulation.
Topic:: Development, Markets, Infrastructure, Regulation, and Electricity
Political Geography:: Africa and Nigeria

83. American Nuclear Diplomacy

Author:: Daniel Poneman
Publication Date:: 08-2016
Content Type:: Working Paper
Institution:: Belfer Center for Science and International Affairs, Harvard University
Abstract:: Today, as a species, we face two existential threats: nuclear annihilation and catastrophic climate change. Both stem from human origins. We need to fight both threats aggressively. There are many things we can and should do to tackle the climate threat, beginning with putting a price on carbon emissions, promoting market mechanisms that reward efficiency, leveling the playing field for all lower-carbon energy sources, and leveraging the Paris Climate Agreement into more effective international action. But even adding up all existing national commitments to curtail greenhouse gas emissions, and assuming perfect execution, the world falls far short of the cuts needed to avoid catastrophic climate change. The expanded use of nuclear energy can make a major contribution to closing that gap and meeting our climate goals. But inherent in the use of atomic fission is the risk that the technology and materials can be diverted to terrorists or hostile nations.
Topic:: Climate Change, Energy Policy, Environment, Human Welfare, Markets, Nuclear Weapons, International Security, and Global Markets
Political Geography:: Global Focus

84. American Nuclear Diplomacy

Author:: Daniel Poneman
Publication Date:: 08-2016
Content Type:: Working Paper
Institution:: Belfer Center for Science and International Affairs, Harvard University
Abstract:: Today, as a species, we face two existential threats: nuclear annihilation and catastrophic climate change. Both stem from human origins. We need to fight both threats aggressively. There are many things we can and should do to tackle the climate threat, beginning with putting a price on carbon emissions, promoting market mechanisms that reward efficiency, leveling the playing field for all lower-carbon energy sources, and leveraging the Paris Climate Agreement into more effective international action. But even adding up all existing national commitments to curtail greenhouse gas emissions, and assuming perfect execution, the world falls far short of the cuts needed to avoid catastrophic climate change. The expanded use of nuclear energy can make a major contribution to closing that gap and meeting our climate goals. But inherent in the use of atomic fission is the risk that the technology and materials can be diverted to terrorists or hostile nations.
Topic:: Climate Change, Energy Policy, Environment, Human Welfare, Markets, Nuclear Weapons, International Security, and Global Markets
Political Geography:: Global Focus

85. American Nuclear Diplomacy

Author:: Daniel Poneman
Publication Date:: 08-2016
Content Type:: Working Paper
Institution:: Belfer Center for Science and International Affairs, Harvard University
Abstract:: Today, as a species, we face two existential threats: nuclear annihilation and catastrophic climate change. Both stem from human origins. We need to fight both threats aggressively. There are many things we can and should do to tackle the climate threat, beginning with putting a price on carbon emissions, promoting market mechanisms that reward efficiency, leveling the playing field for all lower-carbon energy sources, and leveraging the Paris Climate Agreement into more effective international action. But even adding up all existing national commitments to curtail greenhouse gas emissions, and assuming perfect execution, the world falls far short of the cuts needed to avoid catastrophic climate change. The expanded use of nuclear energy can make a major contribution to closing that gap and meeting our climate goals. But inherent in the use of atomic fission is the risk that the technology and materials can be diverted to terrorists or hostile nations.
Topic:: Climate Change, Energy Policy, Environment, Human Welfare, Markets, Nuclear Weapons, International Security, and Global Markets
Political Geography:: Global Focus

86. Porous Borders: The Study of Illegal Markets from a Sociological Perspective.

Author:: Matias Dewey
Publication Date:: 02-2016
Content Type:: Working Paper
Institution:: Max Planck Institute for the Study of Societies
Abstract:: State concerns about crime and security issues have strongly affected conceptions of economic action outside the law, a traditional field of research in sociology. This increasing encroachment by policy-related concerns on the intellectual framework of the discipline has led, on one hand, to an almost exclusive focus on criminal organizations in the analyses of illegal economic activity. On the other hand, it has led to the downplaying of the importance of classic topics of sociological reflection, such as the embeddedness of action, the moral dimension of illegal products, or the relationship between social change and the spread of illegal exchanges. This short paper problematizes economic action outside the law by taking legal definitions and their effects seriously. It begins with the problem of naturalizing state definitions. This is followed by a discussion of the illegality of illegal markets, which illustrates sociological contributions. Finally, three dimensions of the study of illegal markets are suggested. Overall, the paper lays out a research program for this field of sociological inquiry.
Topic:: Security, Economics, Markets, and Sociology
Political Geography:: Global Focus

87. Illegal Markets: Boundaries and Interfaces between Legality and Illegality.

Author:: Renate Mayntz
Publication Date:: 03-2016
Content Type:: Working Paper
Institution:: Max Planck Institute for the Study of Societies
Abstract:: In sociology generally, the infringement of legal norms is not treated as a special kind of norm violation, the sociology of law being an obvious exception. The study of illegal markets therefore faces the challenge of distinguishing illegality from legality, and relating both to legitimacy. There is no conceptual ambiguity about the distinction between legal and illegal if legality is formally defined. In practice, (formal) legality and (social) legitimacy can diverge: there is both legitimate illegal action and illegitimate legal action. Illegal markets are a special kind of illegal social system, constituted by market transactions. Illegal markets are empirically related to organized crime, mafia and even terrorist organizations, and they interact both with legal markets and the forces of state order. Where legal and illegal action systems are not separated by clear social boundaries, they are connected by what has come to be called “interfaces”: actors moving between a legal and an illegal world, actions that are illegal but perceived as legitimate or the other way around, and a gray zone of actions that are neither clearly legal nor illegal, and neither clearly legitimate nor illegitimate. Interfaces facilitate interaction between legal and illegal action systems, but they are also sources of tension and can lead to institutional change.
Topic:: Crime, Markets, Sociology, and Law
Political Geography:: Global Focus

88. A Deeper Look at China’s “Going Out” Policy

Author:: Hongying Wang
Publication Date:: 03-2016
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: In recent years, the world has seen rapid growth in China’s financial reach beyond its borders. Following the announcement of a “going out” strategy at the turn of the century, many Chinese enterprises have ventured to invest and operate abroad. After three decades as primarily a recipient of foreign direct investment (FDI), China has now emerged as a major FDI-originating country as well. Much of China’s foreign aid is closely entangled with its outgoing FDI, and it has also been rising. Since 2013, the Chinese government has been pushing for a new One Belt, One Road (OBOR) initiative, aiming to connect China with countries along the ancient Silk Road and a new Maritime Silk Road via infrastructure investment. In addition, since 2009, China has actively promoted the internationalization of its currency, the renminbi (RMB). There has been a great deal of anxiety about the motivations behind China’s going out policy and its possible international consequences. Many view it as an expression of China’s international ambition and a strategy that threatens the existing international order; however, that is not the whole story. An equally important but often less understood issue is the role of China’s domestic politics and political economy in shaping its new activism in foreign financial policy. Moreover, it is unclear how successful the going out policy is. The complexity of China’s going out policy was the topic for a recent round table discussion hosted by the Centre for International Governance Innovation and the Foreign Policy Institute at the School of Advanced International Studies of Johns Hopkins University in Washington, DC.[1] Participants discussed a number of issues around two broad themes: the impact of domestic political economy on China’s foreign economic policy and the challenges for China’s external financial strategy — in particular, its OBOR initiative.
Topic:: Markets, Political Economy, Monetary Policy, Infrastructure, Foreign Direct Investment, and Financial Markets
Political Geography:: China

89. Canadian Trade Negotiations in an Era of Deep Integration

Author:: Patricia Goff
Publication Date:: 02-2016
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: The Canada-European Union Comprehensive Economic and Trade Agreement (CETA) is noteworthy for the expanded role that Canadian provinces and territories played in the negotiation. In this particular instance, these sub-federal actors had a seat at the negotiating table at the request of their European Union partners. However, this paper argues that CETA is exceptional in this regard. Despite the fact that regional trade agreements increasingly contain provisions that relate to areas of provincial and territorial jurisdiction, each trade negotiation is distinct. The CETA experience should not create the expectation that provinces and territories will always participate in the same capacity. Any enhanced role will depend on the federal government’s strategic assessment of any specific trade negotiation.
Topic:: International Trade and Finance, Markets, Political Economy, Treaties and Agreements, and Regulation
Political Geography:: Canada and European Union

90. Assessing the Effects of the Multifibre Arrangement after Its Termination

Author:: John Whalley and Daqing Yao
Publication Date:: 03-2016
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: The effects of the termination of the Multifibre Arrangement (MFA) on the trade of clothing and textiles are assessed in this paper, based on world trade date and US trade data. The findings from the data analyzed indicate that the effects of the termination of the MFA on the clothing trade was more significant for clothing than for the textiles trade. With the end of the MFA, the freer trade in these sectors shed light on other sectors that are still protected under trade agreements.
Topic:: International Trade and Finance, Markets, Treaties and Agreements, and Regulation
Political Geography:: Global Focus

91. CETA and Financial Services: What to Expect?

Author:: Patrick Leblond
Publication Date:: 02-2016
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: The Canada-European Union Comprehensive Economic and Trade Agreement (CETA) is possibly the most ambitious regional free trade agreement that Canada and the European Union have negotiated so far. One of its main components is a chapter that seeks to liberalize trade and investment in financial services between Canada and the European Union, while ensuring that markets and their agents will be properly regulated and protected through prudential regulation. However, this chapter is unlikely to have a significant impact on the financial services sector in Canada and the European Union in the short and medium term. Although some observers fear that CETA might undermine the high quality of financial regulations in Canada or the European Union, this paper’s analysis demonstrates that such concerns are unfounded.
Topic:: International Trade and Finance, Markets, Treaties and Agreements, and Regulation
Political Geography:: Canada and European Union

92. The Impact of Sustainability Codes of Conduct in the Financial Sector

Publication Date:: 02-2016
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: This paper analyzes the impact of four major financial sector sustainability codes of conduct, the UN Environmental Programme Finance Initiative, the UN Principles for Responsible Investment, the Equator Principles and the Global Alliance for Banking on Values with regard to their impact on the sustainability of their members. The codes of conduct focus on the integration of environmental, social and governance criteria into financial decision making in lending, investment, asset management and project finance. corporate sustainability voluntary codes of conduct have a positive impact on their members. The effectiveness, however, depends on the quality and content of a code, as well as on implementation and compliance mechanisms.
Topic:: Economics, International Trade and Finance, Markets, United Nations, and Ethics
Political Geography:: Global Focus

93. S-Japan Relations and Southeast Asia: Meeting Regional Demands

Author:: Saul P. Limaye and Tsutomu Kikuchi
Publication Date:: 01-2016
Content Type:: Working Paper
Institution:: East-West Center
Abstract:: Until recently, Southeast Asia had not been a region of sustained focus for the US-Japan relationship. But the situation is changing. The international relations of the Asia-Pacific is becoming more "multipolarized." This requires the US and Japan to think about the future of the region beyond the issue of US-China relations, which has preoccupied past discussions. A number of nations and institutions in the Asia-Pacific region will substantially affect the region's future. Southeast Asian nations and the Association of Southeast Asian Nations (ASEAN) are among them. A new era of more coordinated, sustained, and combined commercial and security involvement by the US and Japan in Southeast Asia may be at hand. In light of these changes, the East-West Center in Washington (EWCW), in collaboration with the Japan Institute of International Affairs (JIIA), and through the support of the Sasakawa Peace Foundation (SPF), initiated a dialogue with Southeast Asians about their perspectives on how the US-Japan relationship and alliance could or should approach cooperation with the region.
Topic:: Security, Economics, Markets, and Peacekeeping
Political Geography:: United States, Japan, China, and Asia-Pacific

94. From Catching Up to Forging Ahead in Advanced Manufacturing—Reflections on China’s Future of Jobshina's Evolving Role in Latin America: Can it Be a Win-Win?

Author:: Dieter Ernst
Publication Date:: 03-2016
Content Type:: Working Paper
Institution:: East-West Center
Abstract:: This paper explores what we know about possible employment effects of the 10-year plan, issued by the State Council on May 19, 2015, entitled Made in China 2025. MIC2025 was designed to address China’s emerging labor shortage challenge. To achieve this goal, the plan seeks to boost labor productivity through an increased use of robots and through network-based upgrading of the entire industrial value chain and related services. How might the projected increase in labor productivity affect the creation and quality of jobs in China? Will China’s push into advanced manufacturing now move the country’s manufacturing employment closer to the pattern of “employment de-industrialization” observed in the US and other industrialized countries? How China will cope with the advanced manufacturing challenge for employment will have major implications not only for the US and other industrialized countries, but also for emerging economies and, most importantly for the majority of developing countries that are still struggling as latecomers to labor-intensive industrial manufacturing. The paper lays out objectives of the MIC 2025 plan and highlights a failure of Chinese policy makers to take into account employment effects and other labor market issues when they design their grand visions of industrial policy. The paper finds that until 2014, manufacturing has acted as an employment absorber in China. However new data on unemployment, labor force participation and income inequality signal that China may now be moving towards an “employment de-industrialization” pattern, unless enough knowledge-intensive service jobs will be created in China’s growing information economy. The paper concludes with implications for policy and further research.
Topic:: Economics, International Political Economy, Markets, and Labor Issues
Political Geography:: China

95. Predictive Macro-Impacts of PLS-Based Financial Conditions Indices: An Application to the USA

Author:: Duo Qin
Publication Date:: 01-2016
Content Type:: Working Paper
Institution:: School of Oriental and African Studies - University of London
Abstract:: This investigation seeks to construct financial conditions indices (FCIs) by the partial least squares (PLS) method with the aims (i) that the FCIs should outperform interest rate, which is conventionally used in small VAR (Vector Auto-Regression) models to present the predictive macro-impacts of the financial markets, and (ii) that the FCIs are adequately invariant during regular updates to resemble non-model based aggregate indices. Both aims are shown to be attainable as long as the FCIs are tailor-made with carefully selected components and suitably targeted macro variables of forecasting interest. The positive outcome sheds light on why the widely used principal component analysis (PCA) approach is ill-suited to the tasks here whereas why the PLS route promises a fruitful way forward.
Topic:: Economics, Markets, Finance, and Macroeconomics
Political Geography:: North America and United States of America

96. Stock-Market Expectations: Econometric Evidence that both REH and Behavioral Insights Matter

Author:: Roman Frydman and Josh Stillwagon
Publication Date:: 06-2016
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Behavioral finance views stock-market investors’ expectations as largely unrelated to fundamental factors. Relying on survey data, this paper presents econometric evidence that fundamentals are a major driver of investors’ expectations. Although expectations are also in part extrapolative, this effect is transient. The paper’s approach underscores the central importance of opening models to structural change and imposing discipline on econometric analysis through specification testing. Our findings support the novel hypothesis that rational market participants, faced with unforeseeable change, base their forecasts on both fundamentals - the focus of the REH approach - and the psychological and technical considerations underlying behavioral finance.
Topic:: Markets, Economic Theory, Survey, and Stock Markets
Political Geography:: Global Focus

97. Innovation and Access to Finance

Author:: Michele Cincera and Arabela Santos
Publication Date:: 01-2016
Content Type:: Working Paper
Institution:: Institute for Development and International Relations (IRMO)
Abstract:: Promoting Research and Development (R&D) activities is the main goal of the EU 2020 Strategy in order to achieve an R&D spending at least 3% of GDP. The Innovation Union is one of the seven flagship initiatives of the EU 2020 Strategy, which has the aims: to improve access to finance for R&D; to get innovative ideas to market; to ensure growth and jobs (European Commission, 2014b). The aim of the present paper is to identify and explain the main mechanisms related to four commitments of Innovation Union: i) Commitment 10 (Put in place EU level financial instruments to attract private finance); ii) Commitment 11 (Ensure cross-border operation of venture capital funds); iii) Commitment 12 (Strengthen cross-border matching of innovative firms with Investors); iv) Commitment 13 (Review State Aid Framework for Research, Development and Innovation). To this purpose, a review of both theoretical and empirical literatures about ’Innovation, Access to Finance and SMEs’ based on more than 80 scientific and other articles and analyses is presented. The paper provides an analysis of the main alternative financial instruments to bank loans, namely Risk-Sharing Facility Financing, Venture Capital, Business Angels and public subsidies. We found some evidence in the literature that Venture Capital could have a limited impact in enhancing innovation in the long- term and that some public support schemes could be more effective than other, depending on the firm’s maturity state.
Topic:: Development, Markets, European Union, and Research
Political Geography:: Europe and Global Focus

98. Transfer of Improved Varieties in Informal Markets and the Diffusion of Embedded Innovation: Experimentation with Genetic Resources in Uganda

Author:: Bozzola Martina, Tim Swanson, and Helena Ting
Publication Date:: 01-2016
Content Type:: Working Paper
Institution:: Centre for International Environmental Studies, The Graduate Institute (IHEID)
Abstract:: We look at the diffusion of seed technology among Ugandan farmers. We present a targetinput model to conceptualize the adoption decisions of a new technology in which the best use of inputs is unknown. In this framework, there is path dependency in the adoption process. We show that the group of innovators is well-defined but too small to overcome the system’s inertia. We find little evidence that seed policy reforms implemented in Uganda in the past 20 years boosted agricultural productivity, largely on account of a lack of local experimentation and inadequate use and diffusion of new seed varieties.
Topic:: Markets, Farmers, Peer Effects, and Seeds
Political Geography:: Uganda and Africa

99. Impact of Illegal Gambling in Hong Kong

Author:: Andrew Tessler
Publication Date:: 09-2016
Content Type:: Working Paper
Institution:: Oxford Economics
Abstract:: Gambling is a regulated market in Hong Kong, with the Hong Kong Jockey Club (HKJC) being the only authorised operator. However, a substantial illegal market, exists alongside the legal market. This report examines the social and economic harms which illegal gambling imposes on Hong Kong. Using survey evidence it finds that illegal gamblers tend to include a high proportion of excessive gamblers amidst their ranks, and therefore tend to be more susceptible to the social harms (e.g. debt, bankruptcy, family problems) that excessive gambling brings. In addition, it explores the financial and economic implications of reducing the size of the illegal gambling market.
Topic:: Markets, Regulation, Gambling, and Illegal Trade
Political Geography:: Asia and Hong Kong

100. Constructing Quality: Producer Power, Market Organization, and the Politics of High Value-Added Markets.

Author:: Elizabeth Carter
Publication Date:: 12-2015
Content Type:: Working Paper
Institution:: Max Planck Institute for the Study of Societies
Abstract:: Economists assume increased producer flexibility creates production advantages. So why do inefficient French quality wine producers dominate their flexible, efficient Italian counterparts? French AOC wine producers created “corporatist” producer organizations which served three purposes: encouraged increased product quality information across the supply chain; allowed for the emergence of a unique production style; and enabled producers to define their production methods as “quality” via state regulation. Italian DOC wine producers have fragmented political structures at both the regional and national levels, causing producers to rely more on the price mechanism and less on political structures to coordinate supply chain transactions. Market asymmetries persist across the supply chain, making it difficult for producers to guarantee quality and adversely shaping their potential production and brand strategies. Solving supply chain problems through representative political institutions yields superior economic outcomes than uncoordinated market transactions because the former corrects market power asymmetries.
Topic:: Economics, International Trade and Finance, Markets, Politics, and Regulation
Political Geography:: France, Italy, and Global Focus

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