Content Type: Working Paper / Topic: Economics

1. Entrepreneurship, Youths, and Women Economic Inclusion in Cameroon

Author:: Laurent Brice Nsengue, Bin Joachem Meh, and Jean-Cedric Kouam
Publication Date:: 01-2023
Content Type:: Working Paper
Institution:: The Nkafu Policy Institute
Abstract:: Bentham’s theory of utilitarian morality leads us to know that the purpose of economic activity is to ensure social progress for the happiness of the greatest number. Thus, excluding people from an economic system without considering their interests is considered a destruction of the common good. According to the United Nations (1962), population is one of the most important factors of economic productivity, as it influences the rate of development of a country. Women represent 49.6% of the world’s population and young people aged 10 to 24 represent 15.5% of the world’s population (UN World Youth Report, 2020; World Bank, 2020). In Cameroon, youth and women represent more than 60% of the population, but remain the most economically excluded (BUCREP, 2005). This reality appears to be a challenge for a country that wants to be an emerging country by 2035. The main objective of this paper is to show the role that entrepreneurial development could play in promoting the economic inclusion of youth and women in Cameroon. It is expected to raise awareness among public authorities as well as the private sector of the importance of economic inclusion of youth and women through entrepreneurship development. Based on studies carried out by credible international and local institutions, we focus on the challenges of entrepreneurship in the context of the economic inclusion of youth and women and the opportunity of entrepreneurship for the economic inclusion of young people and women in Cameroon.
Topic:: Economics, Women, Entrepreneurship, Discrimination, Youth, Equality, and Inclusion
Political Geography:: Africa and Cameroon

2. Mitigating Global Fragmentation in Digital Trade Governance: A Case Study

Author:: Douglas Lippoldt
Publication Date:: 01-2023
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: Digital trade is growing rapidly, and regulators are trying to keep up. Concerns about privacy, consumer protection and national security demand regulatory attention, but too much regulation risks stifling digital trade. Current-generation trade agreements need to find the right balance between regulatory and liberal approaches to e-commerce. This paper looks at how five leading digital economies (Canada, the European Union, Japan, Singapore and the United States) are using regional trade agreements to address concerns while enhancing trade.
Topic:: Economics, International Cooperation, International Trade and Finance, Governance, and Digitalization
Political Geography:: Global Focus

3. An Economic Mirage: How Canadian Universities Impact Freedom to Operate

Author:: James Hinton, Mardi Witzel, and Joanna Wajda
Publication Date:: 04-2023
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: Canada’s universities drive research and innovation, but when publicly funded institutions partner with foreign firms and countries, who is the biggest beneficiary? Not Canada or the Canadian economy. According to the authors of this paper, foreign entities that invest in Canadian research often take their intellectual property (IP) (and the money it generates) out of the country, leaving Canadian taxpayers holding the bill, unable to benefit from the economic return on their investment. This paper looks at the U15, a collective of some of Canada’s most research-intensive universities, accounting for 79 percent of all competitively allocated research funding in Canada and 83 percent of all contracted private sector research in Canada. With a focus on research outcomes, specifically IP, this paper examines patent data; IP ownership; and the impact on freedom to operate, an indicator of Canadian firms’ ability to commercialize their technology, to maximize Canada’s return on investment.
Topic:: Economics, Education, Higher Education, and Freedom
Political Geography:: Canada and North America

4. Collective screening

Author:: Vincent Anesi and Peter Buisseret
Publication Date:: 03-2023
Content Type:: Working Paper
Institution:: Nottingham Interdisciplinary Centre for Economic and Political Research (NICEP)
Abstract:: We study a dynamic principal-agent model in which the principal is a group whose members hold heterogeneous and evolving values from an agreement with the agent. Learning about the agent’s private information reduces the principals’ conflicts over their joint offer, mitigating a principal’s losses if she is not decisive over future offers. As a consequence, a principal in a group prefers to screen the agent more aggressively than a single principal. We study the dynamics of the principals’ collective choice, and obtain conditions under which decisive members of the group successively trade away their decision-making authority, leading inexorably to the concentration of negotiation power in the hands of a single principal.
Topic:: Economics, Political Science, and Decision-Making
Political Geography:: Global Focus

5. Carbon border adjustments, climate clubs, and subsidy races when climate policies vary

Author:: Kimberly Clausing and Catherine Wolfram
Publication Date:: 05-2023
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Jurisdictions adopt heterogeneous climate policies that vary in terms of both ambition and policy approach, with some jurisdictions pricing carbon and others subsidizing clean production. We distinguish two types of policy spillovers associated with diverse policy approaches to climate change. First, when countries have different levels of climate ambition, free riders will benefit at the expense of more committed countries. Second, when countries pursue different approaches, carbon-intensive producers within cost-imposing jurisdictions will be at a relative competitive disadvantage compared with producers in subsidizing jurisdictions. Carbon border adjustments and climate clubs are attempts to respond to these policy spillovers, but when countries have divergent policy approaches, one policy alone will not be able to address both types of spillovers. We also consider the policy dynamics that result from carbon border adjustments and climate clubs; both have the potential to encourage upward harmonization of climate policy, but they come with risks. Further, the pressures of international competition in the presence of divergent climate policy approaches may result in subsidy races, which come with their own potential risks and benefits.
Topic:: Climate Change, Economics, Carbon Emissions, and Production
Political Geography:: Global Focus

6. Saving the WTO from the national security exception

Author:: Warren Maruyama and Alan Wm. Wolff
Publication Date:: 05-2023
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: For any member of the World Trade Organization (WTO) not making alternative arrangements, enforceability of the rules of the global trading system, a distinguishing feature of the WTO, ceased to exist on December 11, 2019, because the United States blocked appointments to the Appellate Body of the WTO dispute settlement mechanism. A major obstacle to the United States accepting any resolution of this impasse—thus permitting dispute settlement to once again be binding on all WTO members—is settling the issue of whether claims of national security to legitimize trade measures are reviewable. This is a red line for the United States, which argues this claim is nonreviewable. In the emerging area of great power competition, the United States is unlikely to accept a return to fully effective WTO dispute settlement absent a compromise that finds determinations of national security nonjusticiable. This paper offers a compromise: There would be no adjudication of whether a trade measure was justified under the WTO’s national security exception, but those WTO members adversely affected would have an immediate right to rebalance trade concessions themselves by imposing retaliatory trade measures against the WTO member invoking the exception.
Topic:: Economics, International Trade and Finance, National Security, and World Trade Organization
Political Geography:: Global Focus

7. Macro-financial implications of public debt in South Africa: The role of financial regimes

Author:: Theshne Kisten
Publication Date:: 06-2023
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper examines the role of financial frictions in the public debt–growth nexus, documenting that a public debt shock has different macro-financial implications dependent on the state of financial markets in South Africa. A non-linear vector autoregression model is estimated which allows the transmission mechanism to be characterized by two distinct financial regimes: stressful versus normal. The empirical results suggest that a public debt shock has a broadly insignificant impact on economic growth over the full sample, reflecting the ineffectiveness of government borrowing in stimulating the economy, and could suggest that the high and growing debt service costs faced by the government reduces funds available for investment purposes. Debt shocks are found to be deflationary in both regimes, lending support to the precautionary savings effect and the existence of a well-developed financial market, while interest rates decline with the immediate impact being moderately larger in the stress regime, providing evidence of the accommodative stance between fiscal policy and monetary policy. In response to a public debt shock, financial conditions show an immediate and transitory improvement in the high-stress regime; however, in the low-stress regime there is an immediate yet negligible improvement in financial conditions. Lastly, the responses evolve over time, with fiscal policy being less effective in stimulating the economy in the post-crisis period, but it has been effective in reducing financial stress in the high-stress regime.
Topic:: Economics, Finance, Economic Growth, and Public Debt
Political Geography:: Africa and South Africa

8. Increasing Systemic Legal Risks in the EU: The Economic Impacts of Changes to the EU’s Product Liability Legislation

Author:: Matthias Bauer and Elena Sisto
Publication Date:: 06-2023
Content Type:: Working Paper
Institution:: European Centre for International Political Economy (ECIPE)
Abstract:: The EU’s Product Liability Directive (PLD) determines the rules for strict product liability in the EU. It establishes a framework in which manufacturers’ liability is determined solely based on the presence of defects in the product, regardless of the manufacturer’s fault. The PLD is intended to serve as a “safety net” when fault-based or contractual liability rules do not offer sufficient compensation to consumers. It operates independently from contractual arrangements between businesses and consumers, and it cannot be weakened by contractual agreements between businesses and consumers. The PLD is a horizontal regulation that applies to a wide range of industries in the EU because it applies to all products available on the EU market. The recently proposed changes by the European Commission would increase systemic legal uncertainty for producers and sellers of technology-intensive goods and services in the EU. The impact assessment of the European Commission does not sufficiently account for changes to the PLD proposed in 2022. Nor does it sufficiently account for the major impacts of increased legal uncertainty for European businesses. Legislators in the Council and the European Parliament should slow negotiations to allow time for policymakers to collect more evidence on the impacts on businesses, insurers, and courts we detail in this paper. This would be an opportunity to improve regulatory quality in light of the high levels of legal uncertainty associated with the changes proposed by the Commission.
Topic:: Economics, European Union, Legislation, and Risk
Political Geography:: Europe

9. Refugees from Ukraine Adapting to the European Labour Market

Author:: Jolanta Szymańska
Publication Date:: 03-2023
Content Type:: Working Paper
Institution:: The Polish Institute of International Affairs
Abstract:: Due to the length of the war in Ukraine, more and more refugees from this country have decided to take up employment in the EU. Preliminary data indicate that they are integrating into European labour markets faster than refugees from other regions. However, the mismatch between their jobs and qualifications remains a challenge. Despite the refugees’ inclusion, the deteriorating economic situation in Europe may lead to negative perceptions in host countries.
Topic:: Economics, European Union, Refugees, and Labor Market
Political Geography:: Russia, Europe, and Ukraine

10. US-ASEAN Digital Economy Cooperation

Author:: Hanh Nguyen
Publication Date:: 07-2023
Content Type:: Working Paper
Institution:: Pacific Forum
Abstract:: Long criticized for its lackluster record in economic engagement with Southeast Asia, the US is now looking to bolster digital economy cooperation with the region as part of its Indo-Pacific strategy. Both sides have already engaged in several cooperation initiatives to strengthen Southeast Asia’s digital capacities. These actions/engagements aim to help the region capture the immense benefit and respond to potential socioeconomic disruptions brought by the digital economic boom. However, US-ASEAN cooperation will have to deal with two challenges. First, China has already established a comprehensive and prevalent presence in the region’s digital economy, from hard infrastructure and customer-facing businesses to developing digital standards. Second, Southeast Asia’s diversity in economic development leads to varied capacities among its members. These attributes carry certain security complications for Southeast Asia and the US in the long run. Addressing them will require both sides to further boost cooperation, particularly in shaping regional digital standards.
Topic:: Economics, International Cooperation, Digital Economy, and ASEAN
Political Geography:: North America, Southeast Asia, United States of America, and Indo-Pacific

11. Cutting Putin’s Energy Rent: ‘Smart Sanctioning’ Russian Oil and Gas

Author:: Ricardo Hausmann, Agata Łoskot-Strachota, Axel Ockenfels, Ulrich Schetter, Simone Tagliapietra, Guntram Wolff, and Georg Zachmann
Publication Date:: 04-2022
Content Type:: Working Paper
Institution:: The John F. Kennedy School of Government at Harvard University
Abstract:: Following the Russian aggression against Ukraine, major sanctions have been imposed by Western countries, most notably with the aim of limiting Russia’s access to hard international currency. However, Russia remains the world’s first exporter of oil and gas, and at current energy prices this provides large hard currency revenues. As the war continues, European governments are under increased pressure to scale-up their energy sanctions, following measures taken by the United States, the United Kingdom, Canada and Australia. This piece argues that given the inelasticity of Russia’s oil and gas supply, for Europe the most efficient way to sanction Russian energy would not be an embargo, but the introduction of an import tariff that can be used flexibly to control the degree of economic pressure on Russia.
Topic:: Economics, Oil, Sanctions, Exports, Currency, Energy, and Russia-Ukraine War
Political Geography:: Russia, Europe, Ukraine, and North America

12. Regional Diffusion of Foreign Demand Shocks Through Trade and Ownership Networks

Author:: Lionel Fontagné and Gianluca Santoni
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: International demand shocks are transmitted within the trade and ownership firms' networks and impact directly or indirectly domestic firm productivity and labor misallocation. Considering manufacturing firms for Italy, Spain and France over the period 2009-2017, we quantify these transmission channels from the global economy to the domestic firms, and within the domestic economy across locations, sectors and firms. We compute in a shift share fashion international demand shock at the district-sector-year level as plausibly exogenous to individual firms. Our results confirm that global shocks are transmitted through trade networks and that this transmission is largely mediated by firms' ownership networks both across and within the borders of the three countries.
Topic:: Economics, International Trade and Finance, Demand, and Productivity
Political Geography:: Europe, France, Spain, and Italy

13. Current Account Balances’ Divergence in the Euro Area: an Appraisal of the Underlying Forces

Author:: Emmanuelle Faure, Carl Grekou, and Valérie Mignon
Publication Date:: 12-2022
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: This paper revisits the crucial issue of current account imbalances and focuses on the determinants of their gaps between eurozone Member States. We conduct robust estimations of the current account balances for a panel of ten founding euro area economies and construct a measure that allows us to diagnose why some countries have started to diverge from the eurozone mean in the last two decades. Our findings show evidence of remaining differences in countries’ economic development, meaning that real macroeconomic convergence has failed in the zone. Price and cost competitiveness, as well as fiscal balances, have also participated in this growing macroeconomic divergence. Overall, while the European authorities cannot influence the part of the current account gaps due to demographic factors, the role of fiscal redistribution and investment at the euro area level could help achieve macroeconomic convergence and thus reduce current accounts’ divergence in the zone.
Topic:: Economics, Regional Cooperation, European Union, Eurozone, and Regionalism
Political Geography:: Europe

14. Algeria’s social support policy: Economic costs and the need for reform

Author:: Hami Hassan
Publication Date:: 02-2022
Content Type:: Working Paper
Institution:: Arab Reform Initiative (ARI)
Abstract:: With the ratification of the 2022 budget in Algeria, the issue of budget allocations for social support and social benefits has resurfaced once again. This paper attempts to understand the repercussions of state intervention in economic affairs, and the historical and ideological underpinnings of the welfare state in Algeria as a rentier state based on the nationalization of all economic relations in crisis political contexts, the effects of which extended to the state’s relationship with society and the relations of production within it.
Topic:: Economics, Reform, Finance, and Social Order
Political Geography:: Africa and Algeria

15. Analysis of Cameroon – Nigeria Trade and Prospects for the African Continental Free Trade Area

Author:: Henri Kouam and Vera Kum
Publication Date:: 01-2022
Content Type:: Working Paper
Institution:: The Nkafu Policy Institute
Abstract:: Free trade between Cameroon and Nigeria is about reducing barriers to cross-border trade between the two countries by allowing traders on both sides of the spectrum to explore a larger market and private sector producers to expand their business. This policy brief examines the nature of Cameroon and Nigeria’s trade whilst illustrating the benefits of free trade on living standards, employment, and income inequality. It recommends that Cameroon and Nigeria cooperate on trade facilitation measures to increase the benefits of the African Continental Free Trade Area.
Topic:: Economics, International Trade and Finance, Regional Cooperation, Bilateral Relations, and Free Trade
Political Geography:: Africa, Nigeria, and Cameroon

16. Trade Liberalization and Economic Development: Lessons for Africa

Author:: Henri Kouam and Fabien Sundjo
Publication Date:: 01-2022
Content Type:: Working Paper
Institution:: The Nkafu Policy Institute
Abstract:: What happens when countries lower their tariff & import duties and open up their economy to other countries? This policy brief looks at the impact of trade liberalization on economic development, drawing from broad-based international literature. It shows how free trade can positively impact economic development, boost incomes, and improve standards of living. The African Continental Free Trade Area will stimulate intra-regional trade and help countries like Cameroon address acute development challenges. However, the expected positive results will depend on its successful implementation.
Topic:: Development, Economics, Regional Cooperation, Trade Liberalization, Trade, Economic Development, and Liberalism
Political Geography:: Africa

17. Assessing the economic, societal and cultural impact of YouTube in India

Author:: Oxford Economics
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: Oxford Economics
Abstract:: Recent research by Oxford Economics suggests YouTube contributed 6,800 Cr to the Indian economy in 2020 and supported 6,83,900 jobs. But its impact goes further, bringing a rich array of economic, cultural and societal benefits to India. YouTube generates substantial revenue for creators, artists, and media companies, who in turn support a broad ecosystem of employees and businesses in India. Creators deliver a wealth of educational tools and materials, which are valued by students, parents, and teachers alike.
Topic:: Economics, Mass Media, Social Media, and YouTube
Political Geography:: India and Asia

18. Cumulative climate shocks and migratory flows: evidence from Sub-Saharan Africa

Author:: Salvatore Di Falco, Anna B. Kis, and Martina Viarengo
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: Centre for Trade and Economic Integration, The Graduate Institute (IHEID)
Abstract:: We re-examine the effects of negative weather anomalies during the growing season on the decision to migrate in rural households in five sub-Saharan African countries. To this end we combine a multi-country household panel dataset with high-resolution gridded precipitation data. We find that while the effect of recent adverse weather shocks is on average modest, the cumulative effect of a persistent exposure to droughts over several years leads to a significant increase in the probability to migrate. The results show that more frequent adverse shocks can have more significant and long-lasting consequences in challenging economic environments.
Topic:: Climate Change, Economics, Migration, and Drought
Political Geography:: Sub-Saharan Africa

19. The Instability of Preferences: Uncertain Futures and the Incommensurable and Intersubjective Nature of Value(s

Author:: Richard Bronk and Jens Beckert
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: Max Planck Institute for the Study of Societies
Abstract:: The default assumption of standard economics is to treat preferences as exogenously ‘given’, consistent with one another, ‘revealed’ by past choices, and context independent. There has been increased interest recently (within behavioural economics) in the impact of inconsis- tent or irrational preferences and (more broadly) in dynamic and endogenous preferences. This paper builds on these challenges to standard assumptions by analysing the pivotal role of three aspects of preference formation in explaining capitalist dynamics and market insta- bility. These are the constant creation of new preferences and the indeterminacy of choice sets in the context of widespread product innovation; the moral indeterminacy implied by conflicting and incommensurable social norms attaching to market goods where there is no single scale of value and hence no unique set of rational trade-offs; and, lastly, the con- tingent social and market construction of the product differentiation, quality attribution, and value assessments central to preference formation. The paper concludes by considering implications for economics as a discipline.
Topic:: Economics, Capitalism, Norms, and Social Order
Political Geography:: Global Focus

20. Digitalization of Special Economic Zones in China

Author:: Jie (Jeanne) Huang
Publication Date:: 01-2022
Content Type:: Working Paper
Institution:: China Studies Centre, The University of Sydney
Abstract:: Special Economic Zones (SEZ) have become the forefront in China to test legal and technological reforms for digital trade. This chapter explores three cutting-edge case studies in China’s SEZs: the Beijing blockchain-based Single Window deposit box; newly established big data exchanges in Beijing, Tianjin, and Shanghai SEZs; and pilot projects in financial, medical care and automobile industries to flow data across the border in the Shanghai SEZ. It scrutinizes China's experiments in the context of its applications to join CPTPP and DEPA. It argues that the development of Chinese domestic law for digital trade is shifting away from the traditional paradigm that uses international commitments to push domestic reform or make domestic law according to international law. The development of Chinese domestic law for digital trade relies much more on China’s domestic needs than what FTAs negotiations require. FTAs are increasingly becoming a tool for China to shape international law rather than a benchmark for legislating domestic Chinese law.
Topic:: Development, Economics, International Trade and Finance, Hegemony, and Digitalization
Political Geography:: China and Asia

21. China’s increased presence in Latin America: Win-win relations or a new dependency? A state of the art

Author:: Daniel Agramont Lechín
Publication Date:: 01-2022
Content Type:: Working Paper
Institution:: Postgraduate Program on Sustainable Development and Social Inequalities in the Andean Region (trAndeS)
Abstract:: The rise of the Popular Republic of China (PRC) is one of the most significant events in contemporary international relations. However, at the global level, the “reemergence of China as a major global power has led to a considerable debate over the likely consequences for the rest of the world” (Jenkins, 2010: 810). China’s growing power raises questions as to the meaning of its superpower status as a nation, and the impact of its newfound influence in not only the Asia-Pacific region, but also the Global South (Dessein, 2015). In the specific case of Latin America and the Caribbean (LAC), the debate centers on the potential disadvantages that China’s vast supply of financial resources might bring for the region. Accordingly, the current paper is intended to examine the debate that has arisen in recent literature around the impact of China’s increased economic presence on Latin America –with win-win relations on the one hand and new dependency on the other.
Topic:: International Relations, Economics, Investment, and Dependency
Political Geography:: China, Asia, and Latin America

22. The Israeli Economy in an Uncertain Global Environment

Author:: Tomer Fadlon and Esteban F. Klor
Publication Date:: 08-2022
Content Type:: Working Paper
Institution:: Institute for National Security Studies (INSS)
Abstract:: Economic uncertainty has increased in recent months following the macroeconomic figures published by the major economies. The return of inflation, the supply chain crisis, and the war in Ukraine are leaving their mark on the global economy and arouse concern among both politicians and central banks. In contrast to most of the world's countries, Israel seems like an island of economic stability: inflation is relatively low, and while Western countries are posting negative growth, second-quarter growth in Israel exceeded the expectations. Yet despite the positive data, the slowdown among Israel's main trading partners is expected to affect the local economy, which will have to contend with a challenging economic environment in the coming months.
Topic:: Economics, Globalization, International Trade and Finance, Inflation, and Supply Chains
Political Geography:: Middle East and Israel

23. Improving the Palestinian Authority’s Fiscal Outlook

Author:: Haggy Erkes and Esteban F. Klor
Publication Date:: 06-2022
Content Type:: Working Paper
Institution:: Institute for National Security Studies (INSS)
Abstract:: Recent reports by the IMF and the World Bank emphasized the dismal fiscal situation of the Palestinian Authority, and recommended boosting foreign aid and implementing structural spending reforms. This article proposes an additional policy: a tax on work permits for Palestinians working in the Israeli econony. This measure stands to reduce the Palestinian deficit by one third, and offset some of the adverse effects of employment in Israel.
Topic:: Economics, Leadership, Fiscal Policy, and Palestinian Authority
Political Geography:: Middle East, Israel, and Palestine

24. A Gateway to Africa? Economic Opportunities in Israel-Morocco Relations

Author:: Morr Link
Publication Date:: 05-2022
Content Type:: Working Paper
Institution:: Institute for National Security Studies (INSS)
Abstract:: Since renewing diplomatic relations between Jerusalem and Rabat, the scope of trade indeed has grown between the two countries, but the full potential still has not been realized. How can the economic cooperation be improved, which also entails many policy opportunities for both Israel and Morocco?
Topic:: Economics, International Cooperation, International Trade and Finance, Bilateral Relations, and Economic Cooperation
Political Geography:: Africa, Middle East, Israel, and Morocco

25. Demonstrations in Iran in Protest of the Sharp Rise in Prices of Basic Goods

Author:: Raz Zimmt
Publication Date:: 05-2022
Content Type:: Working Paper
Institution:: Institute for National Security Studies (INSS)
Abstract:: At least three people were killed and dozens were injured and arrested in protests that erupted in southwestern Iran due to a controversial move by the government in Tehran. Until now, the scope of the protest is very limited and does not threaten the regime’s stability, but it is additional evidence of the severe economic crisis, which can be added to the long list of challenges facing President Raisi
Topic:: Economics, Protests, Demonstrations, and Standard of Living
Political Geography:: Iran and Middle East

26. Iraq-Gulf Relations: An Anchor for Stability and Restraining Iranian Involvement in the Region?

Author:: Yoel Guzansky and Yaron Schneider
Publication Date:: 05-2022
Content Type:: Working Paper
Institution:: Institute for National Security Studies (INSS)
Abstract:: While weathering a political crisis, Iraq is now at a crossroads regarding the future of the state. In tandem, neighboring Sunni states, led by Saudi Arabia, are moving closer to Baghdad. What are the reasons for this development, and how is it likely to affect the Middle East, Iran’s expansion in the area, and Israel?
Topic:: Economics, International Cooperation, Economic Stability, and Regional Power
Political Geography:: Iraq, Iran, Middle East, and Gulf Nations

27. MF Dollars for Dictators? The Allocation of SDR to Moderate and Isolated Countries

Author:: Haggy Etkes
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: Institute for National Security Studies (INSS)
Abstract:: “The International Monetary Fund assisted radical regimes, including the Russian government and the Taliban in Afghanistan”: This claim was made given the allocation of Special Drawing Rights (SDR) by the IMF to states in the region. Is there truth to this charge?
Topic:: Economics, International Cooperation, Finance, and IMF
Political Geography:: Afghanistan, Russia, Europe, and Middle East

28. World Economy Autumn 2022: Global growth falters

Author:: Klaus-Jurgen Gern, Ulrich Stolzenburg, Nils Sonnenberg, Stefan Kooths, and Jan Reents
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: In spring 2022, world economic growth came to a standstill amid high inflation, persistent supply bottlenecks and elevated uncertainty. In many countries real wages are declining significantly dampening private consumption even though extra savings accumulated during the pandemic are still available to mitigate the adverse impact to some extent. At the same time financial conditions have also deteriorated as central banks tightened their policies. In China, the strict zero-covid policy and problems in the real estate sector are slowing economic activity. Against this backdrop, the outlook for the global economy has deteriorated further. We have, again, lowered our forecast and are now expecting global output to increase by only 2.9 percent this year and 2.2 percent next year (calculated on a purchasing power parity basis). The forecast assumes that commodity prices will gradually decline in line with forward prices, which will over time reduce the upward pressure on prices and provides the foundations for an economic upturn in 2024. However, the pass-through of higher commodity prices into consumer prices is probably not yet complete and wage increases are likely to intensify in many countries. Consequently, underlying inflation is likely to remain higher than in the years before the Covid crisis and remain above central bank targets over the forecast horizon
Topic:: Economics, Globalization, Economic Growth, and COVID-19
Political Geography:: Global Focus

29. German Economy Summer 2022: Slowly progressing recovery

Author:: Jens Boysen-Hogrefe, Nils Jannsen, Saskia Meuchelbock, Dominik Groll, Stefan Kooths, and Nils Sonnenberg
Publication Date:: 06-2022
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: The German economy navigates troubled waters. The catch-up process in the contact-intensive service industries is continuing at a fast pace and companies in the manufacturing sector are sitting on well-filled order books. However, high inflation is reducing the purchasing power of disposable incomes and thus dampening the recovery in consumption. In addition, supply bottlenecks have recently worsened again due to the war in Ukraine. As a result, the recovery will regain strength only in the second half of the year, when prices will no longer rise as rapidly and supply bottlenecks will begin to ease. Overall, we expect GDP to increase by 2.1 percent this year, as in our spring forecast. In 2023, GDP will grow by 3.3 percent (spring forecast: 3.5 percent). At 7.4 percent, inflation in the current year will be higher than ever before in reunified Germany. Next year, inflation will probably remain high with 4.2 percent. The recovery in employment continues. Effective earnings will rise strongly, also because labor shortages have reached an all-time high. In the current year, however, the increase of about 5 percent will lag behind the rate of inflation. Public budget deficits will decline as revenues increase strongly and pandemic-related expenditures are reduced. In 2023, public debt in relation to GDP is expected to be slightly above 60 percent.
Topic:: Economics, GDP, Inflation, and Russia-Ukraine War
Political Geography:: Europe and Germany

30. World economy in summer 2022: Inflation is curbing global growth

Author:: Klaus-Jurgen Gern, Ulrich Stolzenburg, Nils Sonnenberg, Stefan Kooths, and Jan Reents
Publication Date:: 06-2022
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: In a situation with already elevated inflation, the war in Ukraine and the zero-covid policy in China have led to additional upward pressures on prices and reinforced the global supply chain problems. Real wages are declining in many countries, dampening personal consumption expenditures even though households are often able to draw from a substantial amount of extra savings accumulated during the pandemic. Given the widespread inflationary pressures, central banks have shifted towards a more restrictive monetary policy stance. Against this backdrop, the outlook for global growth has weakened. We forecast global growth of 3.0 percent in 2022 and 3.2 percent in 2023 (measured in terms of purchasing-power parities), representing a reduction by 0.5 and 0.4 percentage points for 2022 and 2023, respectively. The forecast is based on the assumption that commodity prices have peaked, which would reduce inflationary pressures considerably going forward. However, there is the risk that inflation proves to be more persistent than central banks expect. In such a case, central banks would need to step on the brakes more than assumed, with the risk of a recession in advanced economies and a pronounced deterioration in financial conditions in emerging markets
Topic:: Security, Economics, Inflation, COVID-19, and Russia-Ukraine War
Political Geography:: Global Focus

31. German Economy Spring 2022: Recovery at risk – Soaring Inflation

Author:: Jens Boysen-Hogrefe, Nils Jannsen, Saskia Meuchelbock, Jan Reents, Dominik Groll, Stefan Kooths, Martin Ademmer, and Nils Sonnenberg
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: The German economy is once again facing strong headwinds. The war in Ukraine is leading to rising commodity prices, new supply bottlenecks and dwindling sales opportunities. These factors will affect the German economy in different ways. Higher commodity prices reduce the purchasing power of disposable incomes and thus dampen private consumption. Moreover, new supply bottlenecks will dampen industrial production in the coming months. Finally, sales opportunities will deteriorate at least temporarily due to the sanctions and the increased uncertainty caused by the war. All this is hitting the economy in a phase in which the dampening effects of the pandemic are fading out and a strong recovery has begun to emerge. The dampening factors are cushioned because private households have accumulated large amounts of extra savings since the beginning of the pandemic, so that high inflation does not fully impact private consumption. In addition, industrial firms have an unusually high stock of orders, which will cushion the temporarily lower sales opportunities. As a result, the recovery is likely to continue this year, albeit at a noticeably slower pace than expected in winter. Overall, we now expect GDP to rise by 2.1 percent in this year (winter forecast: 4 percent) and by 3.5 percent in 2023 (winter forecast: 3.3 percent). With 5.8 percent inflation is likely to be higher this year than ever before in reunified Germany. Even if commodity prices stop rising and supply bottlenecks gradually ease, inflation is still likely to be unusually high at 3.4 percent next year, also because recent producer price increases are only gradually being passed through to consumers. The labor market is expected to remain robust. Public spending will rise in response to the war and its economic consequences, so that budget deficits will remain at elevated levels for a longer period.
Topic:: Economics, GDP, Inflation, and Purchasing Power
Political Geography:: Europe and Germany

32. Place-based policies and agglomeration economies: Firm-level evidence from Special Economic Zones in India

Author:: Holger Görg and Alina Mulyukova
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: This paper exploits time and geographic variation in the adoption of Special Economic Zones in India to assess the direct and spillover effects of the program. We combine geocoded firm-level data and geocoded SEZs using a concentric ring approach, thus creating a novel dataset of firms with their assigned SEZ status. To overcome the selection bias we employ inverse probability weighting with time-varying covariates in a difference-in-differences framework. Our analysis yields that conditional on controlling for initial selection, SEZs induced no further productivity gains for within SEZ firms, on average. This effect is predominantly driven by relatively less productive firms, whereas more productive firms experienced significant productivity gains. However, SEZs created negative externalities for firms in the vicinity which attenuate with distance. Neighbouring domestic firms, large firms, manufacturing firms and non-importer firms are the main losers of the program. Evidence points at the diversion of inputs from non-SEZ to SEZ-firms as a potential mechanism.
Topic:: Economics, Business, Special Economic Zones, and Geography
Political Geography:: India and Asia

33. Who Lends to Africa and How? Introducing the Africa Debt Database

Author:: David Mihalyi and Christoph Trebesch
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: Africa’s sovereign debt markets are not well understood, partly due to a lack of data. This paper introduces the Africa Debt Database (ADD), the most granular and comprehensive dataset on external borrowing by African governments thus far. Our project moves beyond existing aggregate datasets and instead releases information on individual loans and bonds, in particular on the financial terms of each instrument. Taken together, we cover nearly 7000 loans and bonds between 2000 and 2020, with a total volume of 644 billion USD. Using this data, we study Africa’s record lending boom of the 2010s in detail. The debt boom was mainly driven by large sovereign bond issuances in London and New York, as well as growing lending by Chinese state-owned banks. The micro data also reveal a large variation in lending terms across countries, time, and creditors. Sovereign external bonds have interest rates of 6 percent, on average, Chinese banks charge 2-4 percent, and multilateral organizations just 1 percent. Strikingly, many governments in Africa simultaneously borrow large amounts from both private and official creditors, at vastly different rates. The large differences in debt servicing costs are indicative of a cross-creditor subsidy, as cheap concessional loans can be used to pay the high interest to private or Chinese creditors.
Topic:: Economics, Foreign Aid, Credit, and Influence
Political Geography:: Africa, China, and Asia

34. Exchanging Money for Love? A Regional Analysis of EU Cohesion Policy on Euroscepticism

Author:: Michael Bayerlein and Matthias Diermeier
Publication Date:: 04-2022
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: In the past, the European Union seems to have been able to tame Euroscepticism through regional 'convergence' funding. After the Eastern enlargement of the Union, however, this relationship needs to be put to the test. Not only have the new member states become the main recipients of EU funding, Eastern Europe has also changed from once being the most integration-friendly region to displaying the most integration-hostile attitudes in the EU. Motivated by this empirical puzzle, we revisit the relationship between structural 'convergence' funding and Euroscepticism and ask where - if at all - is the EU's convergence spending still able to tame Euroscepticism. Most surprisingly, correlation analyses reveal that between 2006 and 2018 larger regional subsidies go along with increasing opposition to EU integration. We can rebut this counterintuitive finding by a Diff-in-Diff approach that reveals an increasing Euroscepticism in Eastern European regions between 2006 and 2014. Nevertheless, also these more advanced models fail to establish a positive relationship between regional funding eligibility and pro-integrationist attitudes. Finally, fuzzy RDD models exploit the funding assignment rule and corroborate that the EU is no longer able to pacify integration-critical regions by their simply increasing 'convergence' funding. Nevertheless, the EU has won support in Eastern Europe where EU investments are perceived (positively). In designing a strategy to win back support for EU integration, Brussels does not need more fiscal capacity but rather has to design 'convergence' funding that is visible as well as clearly attributable to its donor.
Topic:: Economics, Regional Cooperation, Foreign Aid, European Union, and Eurocentrism
Political Geography:: Europe

35. New Global Progress Survey Highlights the Major Challenges of Global Inflation

Author:: John Halpin
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: Center for American Progress - CAP
Abstract:: The rising cost of living is hitting citizens everywhere.
Topic:: Economics, Globalization, International Cooperation, and Inflation
Political Geography:: Global Focus

36. The Sky is the Limit: The Azerbaijan-Israel-Türkiye Trio and the Greater Middle East

Author:: Rusif Huseynov
Publication Date:: 08-2022
Content Type:: Working Paper
Institution:: Moshe Dayan Center for Middle Eastern and African Studies
Abstract:: In our latest issue of Turkeyscope, the director of Azerbaijan's Topchubashov Center, Rusif Huseynov writes on the existing and potential security and economic cooperation between Israel and Azerbaijan, as well as the strategic link both countries share with Turkey.
Topic:: Security, Economics, Bilateral Relations, and Cooperation
Political Geography:: Turkey, Middle East, Israel, and Azerbaijan

37. Peace treaty between Azerbaijan and Armenia: Who will economically win?

Author:: Emin Mammadov and Nigar Islamli
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Center for Economic and Social Development (CESD)
Abstract:: Following the recent September escalations along the Azerbaijan and Armenian border, in a way towards achieving a sustainable peace deal and long-lasting security in the Caucasus, the quadrilateral meeting in pragmatic terms is deemed to play a significant role in this vein putting an end to hostilities. The President of Azerbaijan and the Prime Minister of Armenia met in Prague on 6 October 2022 in the margins of the first European Political Community at the invitation of the President of the French Republic and the President of the European Council. Both sides reiterated their commitment to the Charter of the United Nations and the Alma Ata 1991 Declaration through which both recognize each other’s territorial integrity and sovereignty which will act as a legal basis for the work of the border delimitation commissions.
Topic:: Security, Economics, Sovereignty, Treaties and Agreements, Territorial Disputes, and Borders
Political Geography:: Caucasus, Armenia, and Azerbaijan

38. Eighth sanctions package: Which side will be the economic loser?

Author:: Nigar Islamli
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: Center for Economic and Social Development (CESD)
Abstract:: Since February 24, 2022, Russia's invasion policy towards Ukraine has been tried to be prevented by several series of sanctions by the European Union. These sanctions include trade, travel, asset freezes, oil, transport, and SWIFT bans. Since the start of the war, 7 sanctions packages have been presented and many of them are being implemented. In response to Russia's invasion policy against Ukraine, the European Commission presented the eighth package of sanctions covering visa issues and asset freezes.
Topic:: Economics, Sanctions, European Union, and Russia-Ukraine War
Political Geography:: Russia, Europe, and Ukraine

39. The economic impact of COVID-19 on Turkish-Azeri bilateral relations

Author:: Duncan Labadie
Publication Date:: 02-2022
Content Type:: Working Paper
Institution:: Center for Economic and Social Development (CESD)
Abstract:: While the economic instability of the international system resurrected debates about the future of the World Order, diving against the current and studying in a destabilizing pandemic context a bilateralism touted for its durability and solidity seemed academically attractive. Thus, the purpose of this research paper is to verify whether COVID-19 is causing fatal economic disruptions among the iron alliances, or if on the contrary one is witnessing an "unnatural" strengthening. By reconciling empirical data (reports of the Central Bank, the OSCE, press articles) and academic papers, this study analyzes the surprising Turkish-Azeri economic consolidation before questioning its still-perceptible limitsin the short and long term. This work concludes that through the neorealist prism, Ankara and Baku managed to transform Covidian negativity into an element of strategic economic cooperation aimed at repairing financial loopholes on a national scale.
Topic:: Economics, War, Bilateral Relations, Natural Resources, COVID-19, Liberalization, and Asymmetric Relations
Political Geography:: Turkey and Azerbaijan

40. Trump ended WTO dispute settlement. Trade remedies are needed to fix it.

Author:: Chad P. Bown
Publication Date:: 01-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Unhappy with the rulings of the WTO dispute settlement system, which disproportionately targeted US use of trade remedies, the United States ended the entire system in 2019. There are multiple hurdles to agreeing to new terms of trade remedy use and thus potentially restoring some form of binding dispute settlement. First, a change would affect access to policy flexibility by the now large number of users of trade remedies. Second, although China’s exports are the overwhelming target of trade remedies, exporters in other countries increasingly find themselves caught up in trade remedy actions linked to China. Third, critical differences posed by China’s economic model may call for new rules for trade remedies, but no consensus on those rules has emerged. Even some of the most promising reforms have practical limitations, create additional challenges, or may be politically unviable.
Topic:: Economics, Trade, Donald Trump, and WTO
Political Geography:: China and United States of America

41. 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

42. Socioeconomic diversity of economics PhDs

Author:: Robert Schultz and Anna Stansbury
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: It is well documented that women and racial and ethnic minorities are underrepresented in the economics profession, relative to both the general population and many other academic disciplines. Less is known about the socioeconomic diversity of the profession. In this paper, we use data from the National Science Foundation’s Survey of Earned Doctorates to examine the socioeconomic background of US economics PhD recipients as compared with US PhD recipients in other disciplines, proxying for socioeconomic background using PhD recipients’ parents’ educational attainment. We find that economics PhD recipients are substantially more likely to have highly educated parents, and less likely to have parents without a college degree, than PhD recipients in other disciplines. This is true both for US-born and non-US-born PhD recipients, but the gap between economics and other disciplines is starker for those born in the United States. The gap in socioeconomic diversity between economics and other PhD disciplines has increased over the last two decades.
Topic:: Economics, Women, Diversity, and Academia
Political Geography:: Global Focus

43. WTO 2025: Restoring binding dispute settlement

Author:: Alan Wm. Wolff
Publication Date:: 04-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Binding dispute settlement—the ability to obtain a final judgment of whether a member of the World Trade Organization (WTO) has acted inconsistently with its obligations—was the defining attribute of the WTO as created in 1995. Global commerce thrived on having the certainty provided by its taking place within this system. For well over a decade, the United States had complained that the dispute settlement system was undermining the trade remedies—antidumping, countervailing duties against subsidies, and safeguard actions against injurious imports—that were allowed under the WTO’s rules. When a populist US administration assumed office in 2017, it blocked appointments to the WTO’s Appellate Body. Today, the WTO dispute settlement system has become balkanized. The European Union and a number of other countries have banded together to put into place an alternative mechanism. Outside this system are the other two-thirds of the WTO members, including the United States. For most WTO members, no definitive result can be reached as to whether WTO obligations have been violated, as there is no assurance that WTO dispute settlement will be binding for them. This paper addresses how to reconstruct a system that the United States could join that would be broadly acceptable to others. It sets out a wide range of elements for negotiators to consider to rebuild the WTO dispute settlement system and make WTO agreements enforceable again.
Topic:: Economics, Trade, WTO, and Disputes
Political Geography:: Global Focus

44. 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

45. WTO 2025: Constructing an executive branch

Author:: Alan Wm. Wolff
Publication Date:: 05-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: The World Trade Organization (WTO) as an institution accords much less of a role to its chief officer and her staff, namely the WTO Director-General and the Secretariat, than do any of its sister international organizations—the World Bank, the International Monetary Fund, the Organization for Economic Cooperation and Development—to their chief officers and staff. The WTO Secretariat is much smaller than its peer international organizations and underfunded. In considering WTO reform, this deficiency needs to be rectified if the WTO’s performance is to live up to its Members’ needs.
Topic:: Economics, World Bank, IMF, WTO, and OECD
Political Geography:: Global Focus

46. Public responses to foreign protectionism: Evidence from the US-China trade war

Author:: David Steinberg and Yeling Tan
Publication Date:: 06-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: America's recent turn toward protectionism has raised concerns about the future viability of the liberal international trading system. This study examines how and why public attitudes toward international trade change when one's country is targeted by protectionist measures from abroad. To address this question, the authors fielded three original survey experiments in the country most affected by US protectionism: China. First, they find consistent evidence that US protectionism reduces Chinese citizens' support for trade. This finding is replicated in parallel experiments on technology cooperation, and further validated outside of the China context with a survey experiment in Argentina. Second, they show that responses to US protectionism reflect both a "direct reciprocity" logic—citizens want to retaliate against the United States specifically—and a "generalized reciprocity" logic that reduces support for trade on a broader, systemic basis.
Topic:: Economics, Political Economy, Public Opinion, Trade, and Protectionism
Political Geography:: China, Asia, North America, and United States of America

47. Defying United Nations Sanctions: Three Reasons for African Engagement with North Korea

Author:: Tycho van der Hoog
Publication Date:: 06-2022
Content Type:: Working Paper
Institution:: Korea Economic Institute of America (KEI)
Abstract:: The United Nations (UN) sanctions against North Korea are weakened by structural evasion techniques and weak enforcement. The African continent is a crucial node in the global illicit networks of North Korea. This paper examines three motives for African states to cooperate with North Korea, with a particular focus on the context of southern Africa: historical affinity (reciprocity), the practical issue of maintenance dependency (necessity), and the presence of weak enforcement regimes (opportunity). Based on a deep reading of UN Panel of Experts reports, academic literature and policy papers, novel archival material, and an interview with a defected North Korean diplomat, this paper argues that solutions to strengthen the sanctions regime can be successful only if they are grounded in African initiatives.
Topic:: Security, Economics, United Nations, and Sanctions
Political Geography:: Africa, Asia, and North Korea

48. South Korea's Critical Moment in Digital Currency Policymaking: Between Regulating Cryptocurrencies and Launching a Central Bank Digital Currency (CBDC)

Author:: June Park
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: Korea Economic Institute of America (KEI)
Abstract:: Why is South Korea pilot-testing its Central Bank Digital Currency (CBDC), and what made it shift from non-issuance to consideration? This paper investigates the Bank of Korea (BOK)’s CBDC-related developments amid the geopolitical contest between the U.S. and China. It examines the Moon Jae-in administration’s defiance of decentralized finance (DeFi) and the BOK’s sudden shift from non-issuance to potential issuance, which led to expedited research, development, and pilot-testing of CBDCs. As in the case of the digital yuan, the BOK envisions a hybrid architecture for the digital won, wherein central banks and associated partner institutions are CBDC distributors, though they are distinguished by placing the digital won on distributed ledger technology rather than by centrally controlling it. However, South Korea’s previously rash decision to forego DeFi under an undemocratic process has deprived the country of the time and opportunity to develop new innovations as a leading country in the digital frontier. By sticking only to digitalizing centralized finance, the country now aims to be in “standby” mode for its CBDC launch if and when required, so as not to fall behind in digital financial architecture. This paper scrutinizes the South Korean government’s moves on crypto and CBDCs and argues that 1) the Moon administration has shown incapability in addressing DeFi amid the crypto boom and bust, and 2) the BOK’s shift from non-issuance to potential issuance of the digital won is driven by its interest to uphold central bank independence amid swaying geopolitics between the U.S. and China and an unpredictable upcoming presidential election in South Korea.
Topic:: Economics, Elections, Finance, Cryptocurrencies, and Digital Currency
Political Geography:: China, Asia, South Korea, North America, and United States of America

49. Revisiting the links between economic inequality and political violence: The role of social mobilization

Author:: Patricia Justino
Publication Date:: 02-2022
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The main aim of this paper is to explore theoretically important mechanisms through which economic inequalities may affect the emergence of political violence given the forms of social mobilization they (may) generate. The paper identifies and explores two mechanisms under which social mobilization in unequal societies may result in either non-violent or violent collective action and, ultimately, in violent conflict. The first condition is the level of social cooperation between different social groups that are formed during the process of social mobilization. The second is the efficacy of collective action to drive change, which is in turn shaped by the ability of individuals within groups to coordinate their actions. Forms of social mobilization become violent when antagonism is the dominant form of social interaction between different social groups in unequal societies, and when each of these social groups exhibits high levels of internal coordination.
Topic:: Political Violence, Economics, Social Movement, Inequality, Mobilization, and Collective Action
Political Geography:: Global Focus

50. Why Diagnostic Expectations Cannot Replace REH

Author:: Roman Frydman and Halina Frydman
Publication Date:: 01-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Gennaioli and Shleifer (GS) have proposed diagnostic expectations (DE) as an empirically-based approach to specifying participants’ expectations, which, like REH, can be applied in every model. Beyond its supposedly general applicability, GS’s formalization of DE implies that participants systematically and predictably overreact to news. Here, we present a formal argument that Kahneman and Tversky’s compelling empirical findings, and those of other behavioral economists, do not provide a basis for a general approach to specifying participants’ “predictable errors.” We also show that the overreaction of participants’ expectations is not a regularity, but rather an artifact of GS’s particular specification of DE.
Topic:: Economics, Models, and Predictability
Political Geography:: Global Focus

51. Why Diagnostic Expectations Cannot Replace REH

Author:: Roman Frydman and Halina Frydman
Publication Date:: 01-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Gennaioli and Shleifer (GS) have proposed diagnostic expectations (DE) as an empirically-based approach to specifying participants’ expectations, which, like REH, can be applied in every model. Beyond its supposedly general applicability, GS’s formalization of DE implies that participants systematically and predictably overreact to news. Here, we present a formal argument that Kahneman and Tversky’s compelling empirical findings, and those of other behavioral economists, do not provide a basis for a general approach to specifying participants’ “predictable errors.” We also show that the overreaction of participants’ expectations is not a regularity, but rather an artifact of GS’s particular specification of DE.
Topic:: Economics, Academia, and Models
Political Geography:: Global Focus

52. After the Allocation: What Role for the Special Drawing Rights System?

Author:: Tobias Pforr, Fabian Pape, and Steffen Murau
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: In August 2021, the IMF made a new SDR allocation to help ease pandemic-induced financial strains in the Global South. This paper assesses the potential of the SDR system to address debt- related problems in global finance. We analyze the SDR system as a web of interlocking balance sheets whose members can use SDR holdings—the system’s tradable assets—for conversion into usable currency as a perpetual low-interest loan or to make payments to each other. Using original IMF data, we study how the system has been practically used since 1990. Though widely perceived as a solution in search of a problem in the post-Bretton Woods era, we find that the SDR system provides three mechanisms through which IMF members borrow and lend usable currency to each other, with different strings attached: first, transactions by agreement; second, the IMF’s core lending facilities for which the SDR system offers additional resources; and third, IMF-sponsored Trusts which seek to harness the SDR system for development purposes and are the basis for the current idea of ‘voluntary channeling’. Overall, given the SDR system’s idiosyncratic accounting rules, the new allocation can improve the liquidity position of a country and offer some limited avenues for sovereign debt restructuring but comes with new interest and exchange rate risks. Voluntary channeling cannot happen without a wealth transfer, neither the SDR allocation nor the use of Trusts can overcome this problem. Still, Trusts can be a useful instrument to help with debt forgiveness and to ensure that borrowed funds are used for their intended purpose.
Topic:: Economics, International Cooperation, Finance, and IMF
Political Geography:: Global Focus

53. An Economic Defense of Multiple Antitrust Goals: Reversing Income Inequality and Promoting Political Democracy

Author:: Mark Glick
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Two recent papers by prominent antitrust scholars argue that a revived antitrust movement can help reverse the dramatic rise in economic inequality and the erosion of political democracy in the United States. Both papers rely on the legislative history of the key antitrust statutes to support their case. Not surprisingly, their recommendations have been met with alarm in some quarters and with skepticism in others. Such proposals by antitrust reformers are often contrasted with the Consumer Welfare Standard that pervades antitrust policy today. The Consumer Welfare Standard suffers from several defects: (1) It employs a narrow, unworkable measure of welfare; (2) It excludes important sources of welfare based on the assumption that antitrust seeks only to maximize wealth; (3) It assumes a constant and equal individual marginal utility of money; and (4) It is often combined with extraneous ideological goals. Even with these defects, however, if applied consistent with its theoretical underpinnings, the consideration of the transfer of labor rents resulting from a merger or dominant firm conduct is supported by the Consumer Welfare Standard. Moreover, even when only consumers (and not producers) are deemed relevant, the welfare of labor still should consistently be considered part of consumer welfare. In contrast, fostering political democracy—a prominent traditional antitrust goal that was jettisoned by the Chicago School—falls outside the Consumer Welfare Standard in any of its constructs. To undergird such important broader goals requires that the Consumer Welfare Standard be replaced with the General Welfare Standard. The General Welfare Standard consists of modern welfare economics modified to accommodate objective analyses of human welfare and purged of inconsistencies.
Topic:: Economics, Democracy, Income Inequality, and Antitrust Law
Political Geography:: Global Focus

54. Investing in Innovation: A Policy Framework for Attaining Sustainable Prosperity in the United States

Author:: William Lazonick
Publication Date:: 04-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: “Sustainable prosperity” denotes an economy that generates stable and equitable growth for a large and growing middle class. From the 1940s into the 1970s, the United States appeared to be on a trajectory of sustainable prosperity, especially for white-male members of the U.S. labor force. Since the 1980s, however, an increasing proportion of the U.S labor force has experienced unstable employment and inequitable income, while growing numbers of the business firms upon which they rely for employment have generated anemic productivity growth.
Topic:: Economics, Labor Issues, Economic Inequality, and Sustainability
Political Geography:: North America and United States of America

55. Government Deficits and Interest Rates: A Keynesian View

Author:: Brett Palatiello and Philip Pilkington
Publication Date:: 04-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: We test the neoclassical loanable funds model which postulates that, ceteris paribus, government borrowing increases the long-term rate of interest. The empirical literature exploring such a connection remains largely mixed. We clarify the conflicting results by deploying an ARDL model to decompose the relationship in the United States into long and short-run effects across multiple measures of the government deficit and long-term interest rate. We find a tendency for changes in the deficit to increase long-term interest rates in the short run but the effect is reversed in the long run. We argue that these results are consistent with John Maynard Keynes’ view of the long-term rate as being heavily influenced by monetary policy, central bank credibility and market convention.
Topic:: Economics, Governance, Economic Theory, Keynes, and Deficit
Political Geography:: Global Focus

56. Setting the Record Straight on the Libertarian South African Economist W. H. Hutt and James M. Buchanan

Author:: William Darity Jr., M'Balou Camara, and Nancy MacLean
Publication Date:: 06-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: In their stormy response to Nancy MacLean’s book Democracy in Chains, some academics on the libertarian right have conducted a concerted defense of Nobel Laureate James Buchanan’s credentials as an anti-racist, or at least a non-racist. An odd component of their argument is a claim of innocence by association: the peripatetic South African economist and Mont Pelerin Society founding member William Harold Hutt was against apartheid; Buchanan was a friend and supporter of Hutt; therefore, Buchanan could not have been abetting segregationists with his support for public funding of segregationist private schools. At the core of this chain of argument is the inference that Hutt’s opposition to apartheid proves that Hutt himself was committed to racial equality. However, just as there were white supremacists who opposed slavery in the United States, we demonstrate Hutt was a white supremacist who opposed apartheid in South Africa. We document how Hutt embraced notions of black inferiority, even in The Economics of the Colour Bar, his most ferocious attack on apartheid. Whether or not innocence by association is a sound defense of anyone’s ideology or conduct, Hutt, himself, was not innocent of white supremacy.
Topic:: Economics, Discrimination, Racism, and Libertarianism
Political Geography:: Global Focus

57. Inflation in the Time of Corona and War

Author:: Servaas Storm
Publication Date:: 06-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Reliance on established macroeconomic thinking is not of much use in trying to understand what to do in response to the constellation of forces driving up inflation in these times of COVID-19 and war. This paper attempts to reduce the heat and turn up the light in the debate on the return of high inflation and looming stagflation—by providing evidence-based answers to the main (policy) questions concerning the return of high inflation: is the increased inflation due to (global) supply and/or demand factors? Is the inflation in the US exceptional or are other OECD and emerging economies experiencing similar inflationary pressures? Is the increase in inflation permanent or transitory? Can the Fed safely bring down inflation? Is fiscal policy the underlying cause of inflation? Are there alternative, less socially costly, ways to bring inflation down? And what will happen to inflation in the longer run, when the US and other economies will face the impacts of global warming?
Topic:: Economics, War, Inflation, and COVID-19
Political Geography:: Global Focus

58. Working Paper Permanent Scars: The Effects of Wages on Productivity

Author:: Claudia Fontanari and Antonella Palumbo
Publication Date:: 07-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: This paper explores how stagnating real wages may have contributed to the slowdown of US productivity. Through shift-share analysis, we find that after a sharp change in distribution against wages, some historically high-productivity sectors (like manufacturing) switched towards slower productivity growth. This supports our hypothesis that the anemic growth of productivity may be partly due to the trend toward massive use of cheap labor. Our estimation of Sylos Labini’s productivity equation confirms the existence of two direct effects of wages, one acting through the incentive to mechanization and the other through the incentive to reorganize labor use. We also show that labor ‘weakness’ may exert a further negative effect on labor productivity. On the whole, we find that a persistent regime of low wages may determine very negative long-term consequences on the economy.
Topic:: Economics, Labor Issues, Economic Theory, and Wages
Political Geography:: Global Focus

59. Monetary Policy for the Climate? A Money View Perspective on Green Central Banking

Author:: Jakob Vestergaard
Publication Date:: 07-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Central banks can potentially influence the investment decisions of private financial institutions, which in turn will create incentives towards green technology adoption and development of lower emission business models. This paper examines how monetary policies can be deployed to promote a greening of finance. To guide the efforts, the paper mobilizes the Money View literature. This enables a comparative assessment of different monetary policy options. The main finding is that a promising way forward for green monetary policy is to adopt a strategy of expanding collateral eligibility through positive screening and widening haircut spreads to change relative incentives in favor of green over brown assets.
Topic:: Climate Change, Economics, Monetary Policy, Banking, and Green Transition
Political Geography:: Global Focus

60. China’s Development Path: Government, Business, and Globalization in an Innovating Economy

Author:: Yin Yi and William Lazonick
Publication Date:: 08-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: We employ the “social conditions of innovative enterprise” framework to analyze the key determinants of China’s development path from the economic reforms of 1978 to the present. First, we focus on how government investments in human capabilities and physical infrastructure provided foundational support for the emergence of Chinese enterprises capable of technological learning. Second, we delve into the main modes by which Chinese firms engaged in technological learning from abroad—joint ventures with foreign multinationals, global value chains, and experienced high-tech returnees—that have contributed to industrial development in China. Third, we provide evidence on achievements in indigenous innovation—by which we mean improvements in national productive capabilities that build on learning from abroad and enable the innovating firms to engage in global competition—in the computer, automobile, communication-technology, and semiconductor-fabrication industries. Finally, we sketch out the implications of our approach for current debates on the role of innovation in China’s development path as it continues to unfold.
Topic:: Development, Economics, Globalization, Infrastructure, Hegemony, and Innovation
Political Geography:: China and Asia

61. Inflation in the Time of Corona and War: The Plight of the Developing Economies

Author:: Servaas Storm
Publication Date:: 11-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Reliance on established macroeconomic thinking is not of much use in trying to understand what to do in response to the constellation of forces driving up inflation and slowing down growth in these times of COVID-19 and war. This paper attempts to reduce the heat and turn up the light in the debate on the return of high inflation and looming stagflation—by providing evidence-based answers to key (policy) questions concerning the return of high inflation: How close are the parallels between the current conjuncture and the 1970s? What are the differences? Does what is currently happening already amount to stagflation? Can central bankers engineer a ‘soft landing’ of their economies or are we already poised for a deep (global) recession? What are the likely spill- over effects of monetary tightening in the US on the emerging economies? What, if anything, can we learn from the monetary and fiscal policy experiences and policy mistakes of the 1970s? And, finally, are there alternative, less socially costly, ways to bring inflation down?
Topic:: Economics, War, Conflict, Inflation, Pandemic, and COVID-19
Political Geography:: Global Focus

62. Rethinking EU economic governance: The foundation for an inclusive, green and digital transition

Author:: Francesco De Angelis, Laura Rayner, and Frederico Mollet
Publication Date:: 02-2022
Content Type:: Working Paper
Institution:: European Policy Centre (EPC)
Abstract:: The European Union is undertaking a comprehensive review of its economic governance framework, to address longstanding criticisms, respond to the impact of COVID-19, and prepare for the challenges posed by the twin green and digital transitions. This Discussion Paper represents the final instalment of an EPC Task Force series that examined the current approach and proposes 10 concrete policy recommendations to make EU economic governance stronger, greener and fairer: Establish a central investment capacity for green and digital investments (including associated social investments) or, alternatively, a golden rule modelled on the governance of the Recovery and Resilience Facility. Introduce a single net expenditure rule with a country-specific debt target based on nationally designed expenditure and debt plans to enhance political ownership. Shift to a multiannual supervision and assessment framework and introduce fixed medium-term budgetary plans, with a control account tracking deviations. Reform the sanctions regime to increase proportionality, perceived fairness and political enforceability. Differentiate country-specific supervision based on a clear risk threshold. Introduce ‘National Reform and Investment Plans’ modelled on the National Recovery and Resilience Plans, using a commitments-based approach to operationalise social, fiscal, macroeconomic and structural country-specific recommendations. The plans’ components with strong links to fiscal sustainability should govern the use of Stability and Growth Pact (SGP) flexibilities. Reform the Stability and Convergence Programmes (SCPs) to focus more on the investment composition of national fiscal plans and their link to broader policy objectives. Introduce an opinion on the individual and joint impact of the SCPs on imbalances into the Macroeconomic Imbalances Procedure to strengthen its link with the SGP. Introduce new processes into the European Semester to assess non-macroeconomic structural risks, such as climate and environmental risks. Build on the success of the temporary Support to mitigate Unemployment Risks in an Emergency (SURE) programme to create insurance-based mechanisms to support national fiscal policy during downturns.
Topic:: Economics, Governance, European Union, and Digital Transition
Political Geography:: Europe

63. Japan and the Regional Comprehensive Economic Partnership (RCEP)

Author:: Mie Oba
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper aims to clarify the role of Japan in the process leading up to the establishment of the Regional Comprehensive Economic Partnership (RCEP). While emphasising that respect for the centrality of the Association of Southeast Asian Nations (ASEAN) was a principle of RCEP, Japan played a leading role in the process of RCEP negotiations. For Japan, RCEP is one of the fruits of its strategy in East Asia/Asia-Pacific that began the mid-1990s to protect and increase the interests and advantages of Japanese business and retain Japan’s political leverage in the region. When substantial negotiations for RCEP began in 2013, its importance for Japan was secondary to other free trade agreements (FTAs) including the Trans-Pacific Partnership, China–Japan–Korea FTA, and Japan–European Union FTA. However, the Government of Japan and the business community had set a lot of economic and strategic goals in promoting RCEP. After the withdrawal of the United States (US) from the Trans-Pacific Partnership, RCEP was seen as an essential framework for establishing a rules-based regional order in the Indo-Pacific region. Although it was after India’s withdrawal from the RCEP negotiations, Japan further emphasised the importance of RCEP as the measure to sustain and foster the rule-based regional order and simultaneously pursued the conclusion of negotiations and the establishment of high-level rules, achieving some success. Ultimately, the havoc brought about by the coronavirus disease (COVID-19) pandemic and the sense of crisis in the traditional liberal international order caused by the intensifying strategic competition between the US and China, drove the conclusion of RCEP. RCEP will be increasingly important for economic order in Japan and Asia in the coming years. Ironically, as the strategic competition between the US and China escalates and leads to a surge in protectionism, the economic and strategic importance of RCEP – an FTA that incorporates China – is becoming more significant as a measure to counter unilateralism and protectionism. In addition, RCEP needs elements that address globalisation’s adverse effects and pitfalls, in areas such as the environment, labour rights, and a reduction in the disparity between the rich and poor.
Topic:: Development, Economics, International Trade and Finance, and Regional Cooperation
Political Geography:: Japan and Asia

64. Impact of the Regional Comprehensive Economic Partnership (RCEP): A Global Computable General Equilibrium (CGE) Simulation

Author:: Ken Itakura
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This study estimates the potential economic effects of the Regional Comprehensive Economic Partnership (RCEP) by using a recursively dynamic computable general equilibrium (CGE) model, which incorporates the global supply chains (GSCs) structure, also referred as the global value chains (GVCs). The tariff reduction schedules for the RCEP agreement are incorporated in addition to other large FTAs, such as the CPTPP. Second, the structure of GSCs is included in the CGE model to take into account the importance of trade in intermediate goods and services. This study implements the RCEP simulation scenarios for tariff reductions, services trade liberalization, logistic improvements, and investment commitments. Results show that the real GDP of RCEP members increases by $675 billion in total, of which ASEAN grows by $160 billion
Topic:: Economics, International Trade and Finance, Tariffs, and Supply Chains
Political Geography:: Global Focus

65. International Production Network in the Next Generation and the Role of RCEP

Author:: Mitsuyo Ando, Fukunari Kimura, and Kenta Yamanouchi
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper attempts to discuss the potential role of RCEP from the perspective of two kinds of international division of labor, i.e., machinery international production networks (IPNs) and digital-related services trade. To consider the possible contribution of RCEP to the widening and deepening of IPNs, we first provide an overview of machinery IPNs in ASEAN and East Asia by employing international trade data, a value-added based index for global value chain (GVC) activities using international input–output tables, and a gravity equation exercise. Then, we focus on trade in two global innovator services – information and communication technology (ICT) services and other business services exports – to foresee the future of the new international division of labour and highlights some policy issues. RCEP should be an evolving, living one. In terms of liberalisation and facilitation as well as international rule-making, which cover the whole region, RCEP is expected to revise and upgrade the contents to support the dynamic international division of labour in East Asia. At the same time, RCEP may play an important role in reducing policy risks due to ad hoc trade policies based on political intension and defending the rules-based trading regime for the regional economy.
Topic:: Economics, International Trade and Finance, Labor Issues, and Digital Economy
Political Geography:: Asia and ASEAN

66. Potential Impact of RCEP and Structural Transformation on Cambodia

Author:: Shandre Mugan Thangavelu and Vutha Hing
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper examines the potential impact of the Regional Comprehensive Economic Partnership (RCEP) on the Cambodian economy in terms of trade, output growth, and employment. It also provides quantitative (structural gravity model estimation and simulation) and qualitative trade policy evaluation in terms of exports, output, and the structural transformation of the economy in global and regional value chains. The results highlight the importance of RCEP for the pandemic and post-pandemic recovery and the structural transformation of the Cambodian economy. The paper also provides key policy recommendations to fully maximise the benefits of RCEP for Cambodia for inclusive and sustainable growth.
Topic:: Economics, International Trade and Finance, Regional Cooperation, and Global Value Chains
Political Geography:: Asia and Cambodia

67. The Implications of the Regional Comprehensive Economic Partnership (RCEP) for Asian Regional Architecture

Author:: Shiro Armstrong and Peter Drysdale
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: East Asia’s Regional Comprehensive Economic Partnership (RCEP) came into force in 2022 as the world’s largest free trade agreement. RCEP was concluded, signed and brought into force in the face of major international uncertainty and is a significant boost to the global trading system. RCEP brings Australia, China, Japan, South Korea and New Zealand into the same agreement with the ten member ASEAN group at its centre. It keeps markets open and updates trade and investment rules in East Asia, a major centre of global economic activity, at a time of rising protectionism when the WTO itself is under threat. The agreement builds on ASEAN’s free trade agreements and strengthens ASEAN centrality. One of the pillars of RCEP is an economic cooperation agenda which has its antecedents in ASEAN’s approach to bringing along its least developed members and builds on the experience of capacity building in APEC and technical cooperation under the ASEAN Australia-New Zealand Free Trade Agreement. There is an opportunity to create a framework that facilitates deeper economic cooperation that involves experience-sharing, extending RCEP’s rules and membership at the same time as strengthening political cooperation. The paper suggests some areas that might be best suited to cooperation — that is confidence and trust building instead of or before negotiation — and discusses how non-members such as India may be engaged and the membership expanded. Options such as multilateralising provisions and becoming a platform for policy convergence and coordinating unilateral reforms are canvassed.
Topic:: Economics, International Trade and Finance, Regional Cooperation, and Architecture
Political Geography:: Asia and ASEAN

68. Restrictiveness of RCEP Rules of Origin: Implications for Global Value Chains in East Asia

Author:: Archanun Kohpaiboon and Juthatip Jongwanich
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This chapter aims to examine the restrictiveness of rules of origin (RoO) in the Regional Comprehensive Economic Partnership (RCEP) and other key multilateral free trade agreements (FTAs) in East Asia with a view to facilitating the operations of existing global value chains (GVCs). The analysis begins with dissecting PSRs in the RoO Chapter in these FTAs and quantifying them. The key finding is that product-specific rules in RCEP are the most flexible compared to the other multilateral FTAs and more facilitative to GVC operations. This is driven by RCEP-specific features, such as high intra-member trade and the member coverage. The main policy inference is that a full cumulation clause is needed in RCEP to allow a regional value content alternative to be in full effect. Harmonisation in RoO provision across these multilateral FTAs remains a challenge for ongoing negotiation. Monitoring the dynamics of RoO as well as the FTA utilisation is needed so that these multilateral FTAs could be a true stepping stone for trade liberalisation in the broader World Trade Organization multilateral trading system.
Topic:: Economics, International Trade and Finance, Regional Cooperation, and Global Value Chains
Political Geography:: Asia and ASEAN

69. Centrality and Community: ASEAN in the Regional Comprehensive Economic Partnership

Author:: Soo Yeon Kim
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper examines the Association of Southeast Asian Nations’ (ASEAN) role in the formation of the Regional Comprehensive Economic Partnership (RCEP) agreement. The RCEP project proceeded as trade governance has shifted from the multilateral trade regime under the World Trade Organization to free trade agreements and where the geopolitics of Asia has cast a shadow on the progress of regional integration efforts. The analysis in this paper focuses on ASEAN centrality, both as a concept and practice, in influencing the launch and progress of RCEP. Conceptually, ASEAN centrality is about the capacity of the 10-member group to help launch negotiations for the RCEP agreement and to shape its provisions for governing trade. In practice, the RCEP agreement consolidates and significantly unravels the numerous overlapping trade agreements between ASEAN, 38 in all between individual ASEAN members and its five RCEP partners, Australia, China, Japan, the Republic of Korea, and New Zealand. The paper also examines the relationship between the ASEAN Economic Community (AEC) and RCEP. RCEP provides for further tariff liberalisation between ASEAN members and its five RCEP partners and thus expands the zone of preferential treatment for goods exported from ASEAN and other RCEP members. RCEP also consolidates rules of origin requirements under one agreement, providing for diagonal cumulation and common rules of cumulation for agreement partners. The RCEP provisions can greatly facilitate production and trade along regional supply chains, thus accelerating the progress of the AEC as a single market and production base. Moving forwards, RCEP and ASEAN’s place in it, is likely to be shaped by challenges and opportunities from the Comprehensive and Progressive Transpacific Partnership and the Biden administration’s Indo-Pacific Economic Framework (IPEF) initiative. The ASEAN members with overlapping membership in the IPEF and RCEP will be pivotal in determining areas of cooperation. Regional integration will thus continue to be shaped by ASEAN centrality, and its progress will shape the ASEAN community.
Topic:: Diplomacy, Economics, International Trade and Finance, and Regional Cooperation
Political Geography:: Asia and ASEAN

70. Regional Comprehensive Economic Partnership: Economic Backgrounds of ASEAN and Its Dialogue Partners

Author:: Keita Oikawa, Fusanori Iwasaki, and Shujiro Urata
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: We overview the economic backgrounds of the countries participating in the Regional Comprehensive Economic Partnership (RCEP) negotiations and two Association of Southeast Asian Nations (ASEAN) Dialogue Partners – the United States (US) and the European Union (EU) – to understand their economic relationships before the signing of the RCEP and their economic interests in the RCEP. We discover that the 16 countries participating in RCEP negotiations vary in terms of economic size, income level, growth pattern, share of trade in the economy, and foreign direct investment (FDI) flows. Additionally, both lower- and higher-income ASEAN Member States (AMS) have received a large amount of FDI, in contrast to Japan and the Republic of Korea (henceforth, Korea), which have seen more FDI outflows from their countries than inflows. In terms of bilateral FDI inflows and outflows, as a centre for regional FDI, Singapore attracts FDI from developed countries (including the US and the EU) and reinvests it in India and other AMS. As an FDI hub, Singapore promotes liberalised regional markets to attract advanced country investors. By examining bilateral trade relationships, we find that as the centre of manufacturing in the world, ASEAN and China have participated in international production networks that also include Japan and Korea since 2000. Japan and Korea have maintained competitiveness in intermediate goods in the region’s production networks, while China notably exports final products to the US and the EU. Amongst the 16 countries participating in RCEP negotiations, India has not had a significant presence in the production networks. Indeed, India has expanded its bilateral trade deficit with China, which probably caused India to withdraw from RCEP negotiations to protect its manufacturing industry. Simulation results of the impacts of the RCEP, using a computable general equilibrium (CGE) model (Global Trade Analysis Project model), show that the countries participating in RCEP negotiations – particularly the less developed AMS – would gain greatly from lowering services trade costs and investment liberalisation. India would also gain significantly from the RCEP. In contrast, countries not participating in RCEP negotiations (the US and the EU) would experience small negative impacts of the RCEP through trade diversion effects.
Topic:: Diplomacy, Economics, International Trade and Finance, and Regional Cooperation
Political Geography:: Asia and ASEAN

71. Regional Comprehensive Economic Partnership, ASEAN’s Agency, and the Role of ASEAN Members in Shaping the Regional Economic Order

Author:: Huong Le Thu
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: The Regional Comprehensive Economic Partnership (RCEP) – a mega free trade agreement comprising 15 countries – the 10 Association of Southeast Asian Nations (ASEAN) Member States and the dialogue partners (China, Japan, the Republic of Korea, Australia, and New Zealand) was finalised in November 2020. This paper looks at the process of the RCEP negotiations as an example of an ASEAN exercising agency. This paper also argues that RCEP asserts the agency of smaller powers within the trade network – ASEAN and its member states – particularly the more active role of individual members, including Viet Nam and Singapore amongst the most diplomatically supportive of the deal. The circumstances under which RCEP came to life is not trivial. Under Viet Nam’s ASEAN chair in 2020, and amidst the global pandemic, RCEP was finalised. RCEP’s political and geo-economic significance arguably can overtake its economic role. In the time of great power competition where China becomes one of the key economic centres of the world, and the United States (US) competes with a vision of Indo-Pacific, the region’s middle and smaller powers are anxious about becoming ‘collateral damage’, particularly in the process of US–China ‘decoupling’. The ASEAN countries have emphasised the reluctance to ‘choose a side’. RCEP shows that they can show agency in carrying out trade liberalisation at the time when the global leader of the US in this field is missing. A mega-trade deal can be successfully led by smaller, and even developing, economies.
Topic:: Economics, Regional Cooperation, Social Order, and Strategic Interests
Political Geography:: Asia and ASEAN

72. Trade Facilitation in RCEP Countries

Author:: Weixiang Wang and Shandre Mugan Thangavelu
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: The trade facilitation under the Regional Comprehensive Economic Partnership (RCEP) is critical for regional trade and economic cooperation amongst the 15 member countries. This chapter examines the trade facilitation under RCEP using the available datasets on the trade facilitation index and compares the current trends in trade facilitation across RCEP countries in terms of four dimensions: the World Trade Organization’s Trade Facilitation Agreement, digital trade streamlining, ease of doing business, and trade logistics performance. The study finds that RCEP countries have improved significantly in trade facilitation measures, but they vary across the countries. For example, China should further enhance its performance in cross-border paperless trade, whilst the Association of Southeast Asian Nations countries should improve their performance in the documentary compliance of trade, the infrastructure of trade, and trade logistics performance.
Topic:: Economics, International Trade and Finance, Regional Cooperation, and Regionalism
Political Geography:: Asia and ASEAN

73. Opportunities and Challenges for ASEAN and East Asia from the Regional Comprehensive Economic Partnership on E-Commerce

Author:: Jane Kelsey
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: The Regional Comprehensive Economic Partnership (RCEP) is a microcosm of the current tensions in negotiations on digital trade involving parties that have divergent positions on the digital economy, data, and regulation, including within the Association of Southeast Asian Nations (ASEAN) itself. It adopts a prudent approach that recognises the state parties need flexibility and policy space at the national and regional levels to develop of policy and regulation in the rapidly changing digital ecosystem and seeks to advance their collective interests through dialogue and cooperation. This paper contrasts that approach with the disciplinary nature of binding legal obligations that are enforceable by other states and their investors, as in the Trans-Pacific Partnership Agreement and similar recent treaties. The analysis of key differences focuses on matters of particular importance to ASEAN, such as local content and government procurement, data rules and flexibilities, financial data, source codes, and transparency. RCEP’s cautious approach enables ASEAN members to deepen their national and regional understanding of the opportunities and challenges these agreements present, whilst developing and implementing their own digital development strategies. Yet those good efforts may be undermined through the binding and enforceable trade in services rules.
Topic:: Economics, Regional Cooperation, Digital Economy, and Economic Cooperation
Political Geography:: Asia and ASEAN

74. Traditional Services Trade in the Regional Comprehensive Economic Partnership

Author:: Zhang Yan and Shandre Mugan Thangavelu
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: Traditional services trade (TST), including tourism and transport services, is the basic and key component of services trade in the Regional Comprehensive Economic Partnership (RCEP). The implementation of RCEP will provide a platform for further liberalisation in TST, thus effectively promoting the growth of the whole service trade and the development of the travel and transportation industry. In this paper we will first show the trade pattern of TST in RCEP. Then, the commitments by each RCEP member will be thoroughly analysed, and the Hoekman index will be constructed to measure the liberalisation levels for the RCEP members. In the last section, we outline some impacts of the COVID-19 pandemic on TST and propose policy implications for RCEP in the post pandemic era.
Topic:: Economics, Tourism, Services, and Transportation
Political Geography:: Asia and ASEAN

75. The Investment Chapter in the Regional Comprehensive Economic Partnership: Enhanced Rules without Enforcement Mechanism

Author:: Henry Gao
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper examines the legal rules in the investment chapter in the Regional Comprehensive Economic Partnership (RCEP). It starts with an overview and summary of the main provisions in the chapter, followed by an assessment of the rules by comparing established free trade agreements (FTAs), especially the Comprehensive and Progressive Trans-Pacific Partnership. In particular, it notes that the chapter, whilst largely following the established approaches to investment in other FTAs, also includes important twists to the common rules to favour the host states. The last part discusses the conspicuous absence of an investor–state dispute settlement mechanism, its pros and cons, and wider implications on regional integration, then concludes with some thoughts on future developments.
Topic:: Economics, Regional Cooperation, Economic Cooperation, and Strategic Interests
Political Geography:: Asia and ASEAN

76. The Regional Comprehensive Economic Partnership Agreement and Europe: Impact and Implications

Author:: Haans Gunther Hilpert
Publication Date:: 08-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: In the first 2 decades of the millennium, European Union (EU) trade policy underwent historic changes, amongst them an explicit pivot to Asia. Along with continued firm support of the rules-based World Trade Organization (WTO)-centred multilateral trading system, important new directions in the EU’s trade policy included a turn to competitive bilateralism, a strong focus on values, an ambition to protect and to promote European trade standards as well as the politicisation of trade policy. Asia’s outwards looking economic growth, the increasing trade interdependence in Asia as well as the various bilateral and multilateral trade agreements in the region, notably amongst them the Regional Comprehensive Economic Partnership (RCEP), attracted the EU’s attention, and have helped cause and drive these changes. There was no particular Asian influence on the EU’s own regionalisation, however. Meanwhile, trade and investment relations between Europe and Asia have intensified greatly over this period. But the EU has been slow and late to formulate a comprehensive strategy for the Indo-Pacific region. In spite of some notable successes, the EU’s trade policy remains fragmented with differentiated approaches for each trading partner. Opinions on the RCEP’s relevance and importance for Europe are divided. RCEP sceptics point to the overall shallow nature of the agreement. RCEP optimists emphasise the future potential of trade and investment integration within the newly established RCEP economic area and warn of the discriminatory effects for Europe’s economy and businesses. So, Europe’s business will have to invest in the new RCEP free trade zone to overcome trade diversion risks and to benefit from the RCEP market integration. More worrying from Europe’s perspective is RCEP’s potentially negative policy impacts: a relative loss in the EU’s trading power, the risk of Europe being sidelined in the make-up of future trade rules, and RCEP’s future impact on rules based multilateralism and the WTO. The EU has various trade policy options with regard to the Indo-Pacific trade area and RCEP in particular. The most promising options include the conclusion of free trade agreements with as many RCEP member countries as possible, with the Association of Southeast Asian Nations as a group (as a region-to-region agreement), with other trading partners (from the Indo-Pacific or from other world regions), or with the Comprehensive and Progressive Agreement for Transpacific Partnership area.
Topic:: Diplomacy, Economics, Regional Cooperation, and Economic Cooperation
Political Geography:: Asia and ASEAN

77. The Story of RCEP: History, Negotiations, Structure, and Future Directions

Author:: Aladdin D. Rillo, Anna Maria Rosario D. Robeniol, and Salvador Buban
Publication Date:: 08-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper is about the story of the Regional Comprehensive Economic Partnership (RCEP), including the history, dynamics of negotiations, and structure of this multilateral framework. Issues related to ASEAN centrality, sensitivities of negotiations, and other challenges are also highlighted and analysed. Nearly a decade in the making, RCEP represents a significant achievement for the region. As an ASEAN-led process, RCEP supports not only the region’s market integration but as well as ASEAN’s economic relations with the rest of the world, particularly with the 5 RCEP FTA Partners. Beyond the impact of RCEP in supporting the multilateral trading system, it is also intended to address the current challenges in the region, including the COVID-19 pandemic crisis. Thus, the narrative of RCEP provides a comprehensive overview of, and considers the potential implications for, trade in the region; for economic integration, and for the future of trade policy.
Topic:: Diplomacy, Economics, Regional Cooperation, Regionalism, and Economic Cooperation
Political Geography:: Asia and ASEAN

78. FDI Spillover Effects: Evidence from the Philippines

Author:: Rafaelita Aldaba and Angel Derrickvhel Quejada
Publication Date:: 08-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: Using firm-level data in manufacturing, this chapter examines the impact of foreign direct investment (FDI) spillover effects on domestic firm performance. Through knowledge spillovers, FDI inflows affect the performance of domestic firms. Overall, there is some evidence to show that horizontal and forward spillovers from FDI have a significant positive impact on the performance of domestic firms. However, in terms of backward spillovers, the impact of FDI on the performance of domestic firms is negative and significant. The diffusion of backward spillover effects to domestic firms has remained limited due to the weak competitiveness of domestic firms and their inability to absorb the technology or knowledge being transferred. To strengthen the absorptive capacity and productivity of domestic firms, the chapter suggests a more comprehensive approach that would combine industrial policy to improve and develop domestic parts and supplier firms with measures to create an environment conducive to the creation and expansion of FDI backward spillovers. These include upgrading industry participation towards higher segments of global value chains, innovation, human resource development, upskilling and reskilling the workforce, and liberalising ecozone regulations affecting the transactions between multinational corporations and companies outside the economic zones.
Topic:: Economics, International Trade and Finance, Foreign Direct Investment, and Investment
Political Geography:: Philippines and Oceania

79. Prediction Errors of Macroeconomic Indicators and Economic Shocks for ASEAN Member States, 1990‒2021

Author:: Masahito Ambashi, Fusanori Iwasaki, and Keita Oikawa
Publication Date:: 05-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: In this study, economic shocks on six selected Association of Southeast Asian Nations (ASEAN) Member States (i.e. Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Viet Nam) are analysed in three dimensions: global, domestic, and uncertainty. Annual actual and prediction values from 1990–2021 macroeconomic indicators – from international organisations such as the Asian Development Bank – were collected, and macroeconomic shocks were calculated based on prediction errors (i.e. actual values minus prediction values). The first finding is that if prediction errors of the real gross domestic product (GDP) growth rates are negative, on average, the countries were significantly subjected to negative economic shocks that were not anticipated. Second, according to a correlation analysis of the actual values and prediction errors of real GDP growth rates, economic fluctuations and shocks are highly synchronised within the countries as well as with the world, as previous literature has indicated. Finally, by conducting regression analyses regarding the prediction error of real GDP growth rates separately for each country, (i) variations of the global real GDP growth rate are positively associated with countries’ economic shocks; (ii) the previous estimates have different quantitative significance amongst the countries; (iii) residual variations approximate country-specific, domestic shocks; and (iv) global and country-level uncertainty indices are correlated with negative economic shocks in some countries. Based on this dataset, the effect of the COVID-19 pandemic is also reviewed, and economic and historical backgrounds are examined that caused past economic shocks to these ASEAN Member States.
Topic:: Economics, Regional Cooperation, Macroeconomics, and Economic Cooperation
Political Geography:: Asia and ASEAN

80. Entry Mode Choice and Performance of Foreign Direct Investment Firms in Emerging Economies: Micro-evidence from Viet Nam

Author:: Linh Bui, Huyen Hoang, and Hang Bui
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: Does the right entry mode choice help foreign direct investment (FDI) firms to perform efficiently in emerging economies? This study attempts to answer this question by examining the impact of the entry mode choice made by FDI firms on their post-entry performance in emerging markets. Using a dataset derived from specific firms for the period 2002–2016, this study accounts for the selection biases and inherent differences of FDI firms that affect their selection of entry strategies. The study found that, with regard to the manufacturing sector, the ownership type with a wholly owned subsidiary (WOS) had negative impacts on either the technical efficiency or the total factor productivity (TFP) of firms. Conversely, regarding all sectors in the economy, the WOS is likely to have a positive role on technical efficiency and TFP. It is also interesting to see that for firms with an equity joint venture (EJV) type, the higher proportion of capital contribution from domestic firms might lead to lower technical efficiency and TFP. It implies that the higher degree of management and control by the domestic firms compared with foreign firms would have negative impacts on the EJV firms’ performance.
Topic:: Economics, Foreign Aid, Foreign Direct Investment, and Emerging Powers
Political Geography:: Asia and Vietnam

81. Projecting Infrastructure Needs and the Financing Mechanism: A Review of Estimations by ADB, McKinsey, and the OECD

Author:: Fauziah Zen and Michael Regan
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: How much does a country, a region, and the world need to spend on infrastructure development to fulfil demand? This question has been asked frequently because governments try to see it as a reference for budget allocation and evaluation of development progress. Since infrastructure consists of a wide range of types, qualities, and sizes, it is difficult to come up with a number that represents these variants. Several widely cited attempts have been made to provide estimations of infrastructure needs. This paper aims to assess the features, scope, methods, and suggested financing mechanism of the projections made by the Asian Development Bank (2017), the Organisation for Economic Co-operation and Development (2017), and the McKinsey Global Institute (2016). It is not meant to focus on the limitations of these projections, but to understand the process used to put these estimates together and the extent to which they provide comparative information.
Topic:: Development, Economics, Emerging Markets, and Infrastructure
Political Geography:: Asia and ASEAN

82. Economic Integration of Venezuelan Immigrants in Colombia: A Policy Roadmap

Publication Date:: 12-2022
Content Type:: Working Paper
Institution:: Center for Global Development
Abstract:: This paper studies the formal labor market integration and firm creation of Venezuelan immigrants and refugees in Colombia between late 2019 to late 2021. It applies a novel framework to identify segments of the Colombian economy where Venezuelan immigrants and refugees are lagging behind. When it comes to labor market dynamics, we identify professional services as one of the sectors where Venezuelan workers are not integrating fast enough consistently across different parts of the country, hinting that the recognition of professional credentials might be an important bottleneck to effective integration. As for entrepreneurship, we find that sectors where there are fewer firm creations by foreigners as compared to locals include commerce and service industries all across the nation. This paper is accompanied by a set of downloadable files which list sectors of the economy in each geographic department with poor integration of Venezuelan immigrants both for labor markets and firm creation. These lists are meant to be used by national and local policymakers for further investigation of possible market failures or distortions hindering immigrant integration, given our results.
Topic:: Economics, Labor Issues, Immigration, and Economic Integration
Political Geography:: Colombia, South America, and Venezuela

83. Do Cash Transfers Deter Migration?

Author:: Michael A. Clemens
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Center for Global Development
Abstract:: Conditional Cash Transfers are increasingly used by development aid agencies to reduce the incentives for migration from low-income countries. The evidence to date suggests that such transfers typically increase the rate of migration when they are conditional on investment, such as investment in education. They do this primarily by facilitating acquisition of human capital and by lowering capital constraints—increasing both migration aspirations and the means to achieve them. But with certain design features, particular transfer programs have reduced the incentive to migrate. Broadly speaking, migration can be deterred by transfer programs that are conditional on presence in the origin country—provided that the condition is strict, targeted, and lengthy.
Topic:: Economics, Migration, Finance, and Investment
Political Geography:: Global Focus

84. Beyond India’s Lockdown: PMGKY Benefits During the COVID-19 Crisis and the State of Digital Payments

Author:: Alan Gelb, Anurodh Giri, Anit Mukherjee, Ritesh Rautela, Mitul Thapliyal, and Brian Webster
Publication Date:: 04-2022
Content Type:: Working Paper
Institution:: Center for Global Development
Abstract:: India imposed a lock-down in response to the COVID-19 pandemic in March 2020 and began a gradual re-opening in June. A telephonic survey in April examined the early effectiveness of information and the massive PMGKY social protection program (Policy Paper 217). This paper analyzes a second-round survey, conducted six months later. Logistical and information constraints had relaxed, and incomes and jobs had begun to stabilize for some. There were not strong indications of differential access to benefits by income or location, but constraints to providing public employment had tightened in the face of increased demand, resulting in greater job rationing. Men made more use of digital channels, with a clear smartphone ownership hierarchy between men and women; this divide carried over into the growing autonomous use of digital payments which is conditioned on access to smartphones. Survey results confirm strong local agglomeration effects in digital payments, mirroring the general pattern with higher use in states hosting India’s major technology hubs. At the same time, trust-based concerns reduced the use of assisted digital cash-outs through agents.
Topic:: Economics, Pandemic, COVID-19, and Digitalization
Political Geography:: India and Asia

85. Domestic Revenue Mobilization and Debt Relief: The Lack of Any Link

Author:: Mark Plant and Nancy Lee
Publication Date:: 02-2022
Content Type:: Working Paper
Institution:: Center for Global Development
Abstract:: As the global financial community considers how to extend debt relief accompanied by IMF adjustment programs to vulnerable low-income countries, the issue of policy conditions for fiscal adjustment will inevitably arise. This paper considers the effectiveness of conditions related to domestic revenue mobilization (DRM) in the last systematic round of debt relief in the early 2000s Highly Indebted Poor Countries Initiative and the Multilateral Debt Relief Initiative (HIPC/MDRI). We find that debt relief had no impact on low-income countries’ DRM. Countries benefitting from debt relief had roughly the same DRM as those that did not. And DRM grew only slightly over time for both sets of countries. In the months to come there will be pressure to use debt restructuring and leverage to accelerate fiscal reforms and boost domestic revenue mobilization so that LICs can be seen to be contributing “their fair share” to economic recovery and transformation. Experience with the HIPC/MDRI tells us that we must be realistic in our expectations: external forces have limited impact unless combined with strong internal will and implementation capacity.
Topic:: Debt, Economics, IMF, and Credit
Political Geography:: Global Focus

86. Embedding Human Rights in European and US China Policy

Author:: Malin Oud
Publication Date:: 05-2022
Content Type:: Working Paper
Institution:: German Marshall Fund of the United States (GMFUS)
Abstract:: Europe and the United States share an interest in promoting human rights in China but often struggle to affect change in this regard. Because of ineffective approaches and low political commitment, human rights are a marginalized issue in transatlantic China policy and an afterthought to commercial interests. European and US policymakers have attempted to compartmentalize their approach to China, keeping human rights separate from commercial and other interests. This does little to advance human rights, and it only seems to encourage more assertive and coercive behavior by China. During the last few years, the Western assumption that trade and foreign capital would transform China into a more open and democratic society has been replaced by a disillusioned realization that its rise as a superpower is reshaping the international order. Under President Xi Jinping, China has evolved from its previous position as rule-taker and status quo-keeper at the UN to become an assertive rule-maker and international norm entrepreneur. Its vulnerability to external pressure has declined while its power to exert pressure and economic coercion on others has increased. China no longer presents its political and economic model merely as different from but as superior to that of the liberal democracies in the West. For several years now, European and US policymakers have declared an “end of naivety” in relation to China. After years of debating how to make the EU more resilient and robust, Russia’s invasion of Ukraine has “given birth to geopolitical Europe,” in the words of its chief diplomat, Josep Borrell. It remains to be seen whether this moment of clarity will translate into a more principled defense of human rights and investment in democratic resilience. For this to happen, there needs to be a broader reckoning with how Western countries for decades mishandled the authoritarian challenge to the international order, often because they were pursuing stronger economic ties with the same governments they now see as systemic rivals.
Topic:: Foreign Policy, Economics, Human Rights, Business, and Trade
Political Geography:: China, Asia, North America, and United States of America

87. How Its War on Ukraine Killed Russia’s Hydrogen Ambitions

Author:: Aliaksei Patonia
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: German Marshall Fund of the United States (GMFUS)
Abstract:: Hydrogen looks like the fuel that can facilitate global decarbonization because it can be used in diverse applications—such as heat and power generation, transport, and manufacturing—without any carbon emissions. But, while many countries (including in Europe) view renewables-based, zero-carbon hydrogen as the ultimate goal in transitioning to a hydrogen economy, today most hydrogen is produced from natural gas. Thus, it is unlikely that the hydrogen transition will happen without relying on this fossil fuel. Russia is the country with the world’s largest natural gas deposits, and it has been exploring ways to adjust its energy sector to the needs of the emerging global hydrogen one. In 2021, it announced the goal of capturing up to 20 percent of the world’s hydrogen market by 2030. This came after all the major importers of Russia’s energy products had developed their hydrogen strategies, and its key energy companies started to explore new opportunities. Having signed memoranda of understanding with some of the world’s major energy companies to jointly develop Russia’s hydrogen export potential, they focused on Europe as the key destination. Some of Asia’s hydrogen pioneers and most promising future importers, such as Japan and South Korea, were also included among Russia’s potential partners. These steps could have resulted in long-lasting and fruitful collaborations generating large profits for Russia, but its ambitions have been jeopardized by its invasion of Ukraine in February 2022. This has led to Russia losing key political and economic partners in Europe and also in Asia, which—in combination with being the target the toughest sanctions in its history—is likely to cripple its nascent hydrogen sector. Having planned to convert its natural-gas pipelines to transport hydrogen to future buyers in Europe, Russia is unlikely to be able to use this infrastructure for this purpose anymore. The EU will be an unlikely buyer of Russian hydrogen for the foreseeable future. Turning to Japan and South Korea would not be a success either, since they have joined the sanctions regime against Russia and, like the EU, have been officially labeled as unfriendly by Moscow. This will make the transfer of the technologies critical for the production of low- and zero-carbon hydrogen from the world leaders to a technologically backward Russia very problematic. Europe will also feel long-lasting repercussions of Russia’s war in Ukraine in the energy and hydrogen sectors. With no steady supplies of cheap Russian gas or hydrogen, Europe’s decarbonization efforts and building up its hydrogen industry will be inhibited and require a lot more effort and money. Russia will have to seek alternative markets for its energy commodities and it will seek deals with China, the only country whose energy consumption can rival that of Europe. But, as one of the world’s largest producers of electrolysers and of conventionally manufactured hydrogen, China probably will not need to import Russia’s hydrogen to build up its own hydrogen sector. Possessing critical technologies of its own, it will instead increase imports of Russian primary energy sources (such as natural gas) that it can use for producing hydrogen. The influx of huge volumes of cheap Russian feedstock will speed up China’s transformation from a country with a nascent hydrogen sector into a dominant player on the global hydrogen market. If the EU or the United States—the only two actors comparable to China in economic, technological, and geopolitical strength—do not develop similarly strong hydrogen sectors, Beijing could end up dominating the global energy landscape. To avoid the geopolitical consequences of this and for global balance to be maintained, further cooperation between the EU and the United States will be needed to speed up the creation of strong hydrogen sectors for both.
Topic:: Foreign Policy, Economics, Business, Trade, Hydrogen, and Russia-Ukraine War
Political Geography:: Russia, Europe, and Ukraine

88. Russian Strategic Interest in Arctic Heats Up as Ice Melts

Author:: Robert Jr. McVey
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: LSE IDEAS
Abstract:: In this latest Strategic Update, Col Robert A. McVey Jr addresses why Russia has dramatically changed its Arctic strategy since 2007, committing significant military and fiscal resources to the region. McVey additionally describes the diplomatic, information, legal, and military tools of national power that Russia is craftily employing to pursue, promote, and protect its growing strategic economic interests in the Arctic, finding that the possibility of conflict between great powers remains ever present, regardless of the potential for cooperation or competition. Given that Russia’s Arctic strategy is primarily driven by economic interests, this paper makes five key recommendations for U.S. policymakers and military leaders, focusing on security cooperation programmes with NATO allies and the Arctic states.
Topic:: Security, NATO, Economics, and Strategic Interests
Political Geography:: Russia and Arctic

89. ASEAN’s Cambodian Stress Test

Author:: Tan Sri Munir Majid
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: LSE IDEAS
Abstract:: The Association of Southeast Asian Nations (ASEAN), has faced an unprecedented challenge since the military junta seized power in a coup in Myanmar in 2020. Departing from its initial premise of ‘non-interference’ in the domestic policies of its member states, the regional group decided to ban Myanmar’s military representatives from meetings and summits. The five-point plan for consensus was supported by most members, however, Cambodia’s tenure as Chair of this organisation has brought the plan’s efficacy and longevity into question. At a time when Europe stands united against Russian actions in Ukraine, with a coherent and consistent response from states across the continent, can ASEAN do the same as it seeks to find a peaceful solution in the case of Myanmar?
Topic:: Foreign Policy, Economics, ASEAN, Regional Politics, and Russia-Ukraine War
Political Geography:: Cambodia and Southeast Asia

90. Is Doughnut Economics a Means Towards Achieving Planetary Health?

Author:: Jonathan Ramakrishna
Publication Date:: 11-2022
Content Type:: Working Paper
Institution:: Centre for Non-Traditional Security Studies, S. Rajaratnam School of International Studies
Abstract:: With the advent of climate change, the global focus is no longer lingering alone on climate change mitigation and has shifted towards climate adaptation as well. The 2015 Paris Agreement’s target of restricting the average temperature rise in the 21st century to well below two degrees Celsius compared to pre-industrial levels is increasing unlikely, given the inaction of states and the global lack of progress in meeting Paris Agreement goals. As nations scramble to meet Nationally Determined Contributions (NDCs) and effectively design climate policies, the global crisis has given rise to a new domain, Planetary Health. Planetary Health, an interdisciplinary field, is described as a solutions-focused discipline which aims to analyse, mitigate, and resolve human disruption to Earth’s natural systems in the new Anthropocene epoch. The Anthropocene epoch, on the other hand, is established as a geological climate where human activity is drastically altering earth’s systems to an extent that will be reflected in fossil records. Planetary Health inextricably links human health to the health of the planet and illustrates the interdependency of the two, and this relationship has been substantiated by findings which concur that countries with higher ecological threats concurrently experience greater social vulnerability. When climate-induced disasters occur due to human action, there are subsequent consequences on food, water, energy, and human security. The consequences are disproportionately felt by vulnerable communities in states that lack resources and capabilities to address the consequent impacts on human security, and climate instability is a driving force behind political instability. Thus, there is cause for concern not only for the planet’s health but also for human health as the environment’s health continues to dwindle in the Anthropocene Epoch. As such, the concept of Planetary Health is a response to threatened climate security and human security.
Topic:: Economics, Health, International Cooperation, and Strategic Stability
Political Geography:: Global Focus

91. A Future Built on Data: Data Strategies, Competitive Advantage and Trust

Author:: Susal Ariel Aarsonson
Publication Date:: 06-2022
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: In the twenty-first century, data became the subject of national strategy. This paper examines these visions and strategies to better understand what policy makers hope to achieve. Data is different from other inputs: it is plentiful, easy to use and can be utilized and shared by many different people without being used up. Moreover, data can be simultaneously a commercial asset and a public good. Various types of data can be analyzed to create new products and services or to mitigate complex “wicked” problems that transcend generations and nations (a public good function). However, an economy built on data analysis also brings problems — firms and governments can manipulate or misuse personal data, and in so doing undermine human autonomy and human rights. Given the complicated nature of data and its various types (for example, personal, proprietary, public, and so on), a growing number of governments have decided to outline how they see data’s role in the economy and polity. While it is too early to evaluate the effectiveness of these strategies, policy makers increasingly recognize that if they want to build their country’s future on data, they must also focus on trust.
Topic:: Economics, Governance, Data, and Competition
Political Geography:: Global Focus

92. Merger Policy for a Dynamic and Digital Canadian Economy

Author:: Keldon Bester
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: As an element of competition and antitrust law frameworks, merger policy plays an important role in preventing acquisitions that would otherwise allow incumbent firms to extinguish competitive threats and entrench their dominance. But evidence suggests that current approaches to merger law in Canada and abroad have underestimated the harms these transactions can pose to competition and overestimated the effectiveness of the remedies intended to mitigate those harms. Although relevant across the Canadian economy, this permissive treatment of mergers is particularly pronounced in digital markets, where platform business models, the importance of potential competitors and the role of intangible assets such as data as a barrier to entry test the assumptions underlying the country’s merger law. Canada’s current law and jurisprudence mean the Competition Bureau, Canada’s sole competition authority, is limited in its ability to detect potentially harmful transactions, faces material barriers to intervening and fully remedying the harms of those transactions, and is unable to assess the outcome of previous action or inaction. This paper provides recommendations for Canada to ensure its merger law is calibrated for a modern economy.
Topic:: Economics, Regulation, Digital Economy, and Digitalization
Political Geography:: Canada and North America

93. A Digital Loonie among Many Digital Currencies: Prospects and Outlook

Author:: Pierre L. Siklos
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: Global interest in digitalization is growing in response to the COVID-19 pandemic and driving central banks to introduce retail central bank digital currencies (CBDCs). The successful rollout of retail CBDCs will depend on each country’s institutional capacity and the scope of international cooperation and regulation. Retail CBDCs are unlikely to replace domestic currencies but instead complement notes and coins in circulation, offering greater convenience and lower transactions costs.
Topic:: Economics, Science and Technology, Digital Economy, Currency, and Digitalization
Political Geography:: Global Focus

94. Public responses to foreign protectionism: Evidence from the US-China trade war

Author:: David Steinberg and Yeling Tan
Publication Date:: 06-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: America's recent turn toward protectionism has raised concerns about the future viability of the liberal international trading system. This study examines how and why public attitudes toward international trade change when one's country is targeted by protectionist measures from abroad. To address this question, the authors fielded three original survey experiments in the country most affected by US protectionism: China. First, they find consistent evidence that US protectionism reduces Chinese citizens' support for trade. This finding is replicated in parallel experiments on technology cooperation, and further validated outside of the China context with a survey experiment in Argentina. Second, they show that responses to US protectionism reflect both a "direct reciprocity" logic—citizens want to retaliate against the United States specifically—and a "generalized reciprocity" logic that reduces support for trade on a broader, systemic basis.
Topic:: Economics, International Trade and Finance, Protectionism, and Competition
Political Geography:: China, Asia, North America, and United States of America

95. 25 years of excess unemployment in advanced economies: Lessons for monetary policy

Author:: Joseph E. Gagnon and Madi Sarsenbayev
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: For about 25 years before the COVID-19 pandemic, inflation was very low and stable in most advanced economies. A little noticed dark side of this impressive achievement is that unemployment rates were almost always higher than needed to keep inflation low. This widespread and persistent policy error arose because of a major flaw in standard macroeconomic models—the use of a linear Phillips curve. This flaw would have been far less costly if central banks had not chosen such a low target for inflation. This paper thus adds to the arguments in favor of a moderately higher inflation target. Even without a higher target, central banks need to use a broader range of economic models and should verify their estimates of the natural rate of unemployment by running the economy hot from time to time in order to see nascent inflationary pressure before throttling back.
Topic:: Economics, Monetary Policy, Unemployment, and COVID-19
Political Geography:: Global Focus

96. How carbon tariffs and climate clubs can slow global warming

Author:: Shantayanan Devarajan, Delfin S. Go, Sherman Robinson, and Karen Thierfelder
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Slowing global warming requires countries to reduce carbon emissions, which imposes costs on their economies. To be effective, most countries must agree collectively to participate (e.g., the Paris Agreement, COP26). However, every country has an incentive not to comply and still reap the benefits of other countries’ actions—a classic free-rider problem. This paper evaluates recent recommendations to use trade policy to solve the free-rider problem associated with climate mitigation strategies. It shows that the European Union’s carbon border adjustment mechanism (CBAM tariffs) are effective at offsetting the unfair competitive advantage of noncompliant countries in the markets of compliant countries but have little effect on the trade of noncompliant countries, who can divert trade to other noncompliers. CBAM tariffs alone have little impact on global CO2 emissions. The paper also examines “climate clubs” (coalitions of countries that agree to impose carbon taxes or other equivalent policies and impose punitive tariffs on non-club members to induce them to join the club). It finds that punitive climate club tariffs can be effective in inflicting significant damage on the economies of nonmembers, providing a strong incentive for them to join the club. The paper identifies trade dependence between club and non-club members as an important consideration for the success of a climate club. Club members that are strongly linked to non-club members suffer losses when the club punishes non-club members, which would make them hesitant to impose punitive tariffs on a major nonmember trading partner.
Topic:: Climate Change, Economics, Tariffs, and Carbon Emissions
Political Geography:: Global Focus

97. A reform strategy to transform energy: From piecemeal to systemwide change

Author:: Steven Fries
Publication Date:: 08-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: The Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report on Climate Change Mitigation highlights the vast gap between climate change mitigation actions and climate stabilization goals. But its broad policy prescriptions are likely to leave policymakers pondering what specific actions to take. Informed by accumulating evidence on transforming aspects of energy systems like power generation from solar and wind resources and battery electric cars, this paper develops a more pointed energy reform strategy than that of the IPCC to deliver the necessary systemwide changes. It makes the case for two unorthodox policies. One is for governments to provide, in addition to R&D supports, market-creating supports for early deployment of low-carbon technologies in initial markets. The second is to sequence emissions pricing after innovation and market-creating supports and differentiate this pricing across key energy sectors rather than imposing one economywide price. Compared with a single price, targeting higher emissions pricing on sectors that are costlier to decarbonize still promotes cost-effective emission cuts but limits adverse distributional impacts. The paper also considers nonprice barriers to change and ways to coordinate domestic reforms across countries.
Topic:: Climate Change, Economics, Reform, Carbon Emissions, and Energy
Political Geography:: Global Focus

98. Green energy depends on critical minerals. Who controls the supply chains?

Author:: Luc Leruth, Adnan Mazarei, Pierre Régibeau, and Luc Renneboog
Publication Date:: 08-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: In light of the transition away from fossil fuel–based energy, this paper highlights the importance of understanding who controls vital parts of the global supply chains of critical minerals and rare earth elements (REEs). Analysis of direct ownership does not reveal the real sources of control over the decisions of the company. To identify those sources, the authors use an index that measures the degree to which important shareholders can affect voting decisions. This analysis is not straightforward, because companies along the supply chain are not necessarily incorporated in the countries in which mining and production activities take place, and shareholders can exert influence through multiple layers of subsidiaries. The analysis reveals that China’s control over the global value chains involving critical minerals and REEs extends beyond what is commonly assumed. It also sheds light on environmental, social, and governance issues in the countries in which mining and/or production take place. The paper advocates increasing transparency regarding the sources of control to better assess and manage economic and geopolitical risks; enhancing recycling, to reduce dependency on foreign supply; avoiding protectionist and trade-reducing reactions; and encouraging research and development in order to speed up the adoption of technologies of substitution.
Topic:: Economics, Geopolitics, Supply Chains, Minerals, Energy, and Green Transition
Political Geography:: Global Focus

99. Why gender disparities persist in South Korea’s labor market

Author:: Karen Dynan, Jacob Funk Kirkegaard, and Anna Stansbury
Publication Date:: 07-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Although the South Korean economy fared relatively well on the whole during the pandemic, the labor market consequences were uneven, with women experiencing worse outcomes than men. These gender disparities have reinforced and highlighted important longer-term gender-related challenges in the South Korean labor market. Despite an above-average level of female tertiary education, the gender pay gap in South Korea is at the top of the range among OECD countries. The labor force participation rate is 20 percentage points lower for women than for men, a difference that is about one-quarter larger than the average for high-income countries. These disparities—as well as fertility that is the lowest of any advanced economy country in the world—reduce South Korea's future economic prospects and will contribute to fiscal challenges as the population rapidly ages. The analysis in this paper suggests that the combination of low female employment and low fertility in South Korea reflects features of the traditional nature of work that create a particularly stark tradeoff for women between work and family and put pressure on women to choose one or the other. This tradeoff has increased in recent years because the opportunity cost of having a child has risen with the rapid growth in the tertiary education rate of South Korean women. Regressions based on individual-level data from the Korean Labor and Income Panel Study (KLIPS) show that the entire gap in female labor force participation is driven by married women, particularly women with children. Unmarried women with no children are just as likely to be employed as men. A sizable "child earnings penalty" for South Korean women is fully explained by women dropping out of the labor force after the birth of their first child rather than reducing hours or hourly wages. Although South Korea has made strides toward making work more family friendly, there is scope to do better.
Topic:: Economics, Inequality, Labor Market, Fertility, and Gender
Political Geography:: Asia and South Korea

100. “That’s a bridge too far!” The imperative for a feminist lens on infrastructure investment.

Author:: Mia Urbano and Beth Elson
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: International Women's Development Agency (IWDA)
Abstract:: International development cooperation is increasingly focused on infrastructure again. However, to achieve economic and social transformation these investments must recognise that infrastructure is not gender neutral. User priorities differ, and infrastructure choices can either bridge or deepen divides.
Topic:: Civil Society, Economics, Infrastructure, and Feminism
Political Geography:: Australia

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COLUMBIA UNIVERSITY PRESS