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1. Getting Off the Back Foot: Guiding Principles for a Proactive Western Strategy on Belarus

Author:
Artyom Shraibman
Publication Date:
04-2024
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
For decades, the West has been unable to build an effective strategy on Belarus due to the country’s limited geopolitical importance, an inexorably deeper dependence on Moscow, and the glaring absence of leverage over Minsk’s strategic decisionmaking. This paper proposes a different paradigm for approaching the issue. Instead of passively reacting to Minsk’s actions, the West should broaden its planning horizon and create more specific incentives for Belarus to follow a different trajectory in the future. The overriding goal of a more proactive Western strategy should be the eventual emergence of a democratic Belarus that is no longer fully dominated by Moscow in the military and political realms. Such an ambitious goal would have tangible and lasting benefits for the new European security landscape amid the prospect of a long war in Ukraine. Skepticism in Western policy circles about the viability of such a scenario is entirely understandable. Yet it is not entirely clear whether Western policymakers have registered the significant differences between Russia and Belarus at the societal level and divergent strategic interests of the Russian and Belarusian regimes. At the same time, it is essential for Western policymakers to keep their expectations in check and to avoid an overestimation of their capabilities. The Belarusian crisis cannot be resolved in the foreseeable future by Western efforts alone. Moreover, there should be no illusions about the fact that Belarus, much like Ukraine, holds a special place in the worldview of the Russian ruling elite and President Vladimir Putin personally. The Kremlin’s long-standing obsession with keeping the North Atlantic Treaty Organization (NATO) away from Russia’s borders plays into the same attachment to keeping the Belarusian regime in as tight an embrace as possible. Therefore, until Moscow either changes its foreign policy priorities under a new leadership or simply becomes unable to keep Minsk under its control, it would be naïve to expect that the Russian leadership will simply offer any Belarusian government greater leeway to shift its geopolitical orientation. At the same time, it is conceivable that a qualitative increase in military assistance to Ukraine and a more effective economic pressure campaign against Russia could disrupt Belarus’s trajectory and make Minsk more amenable to the incentives that the West can already offer. But an overnight breakthrough seems highly unlikely. This paper, therefore, focuses on more realistic recommendations with longer-term effects.
Topic:
Foreign Policy, Economics, Geopolitics, and Russia-Ukraine War
Political Geography:
Russia, Eastern Europe, and Belarus

2. What works for working couples? Work arrangements, maternal labour supply, and the division of home production

Author:
Ludovica Ciasullo and Martina Uccioli
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
Nottingham Interdisciplinary Centre for Economic and Political Research (NICEP)
Abstract:
We document how a change to work arrangements reduces the child penalty in labor supply for women, and that the consequent more equal distribution of household income does not translate into a more equal division of home production between mothers and fathers. The Australian 2009 Fair Work Act explicitly entitled parents of young children to request a (reasonable) change in work arrangements. Leveraging variation in the timing of the law, timing of childbirth, and the bite of the law across different occupations and industries, we establish three main results. First, the Fair Work Act was used by new mothers to reduce their weekly working hours without renouncing their permanent contract, hence maintaining a regular schedule. Second, with this work arrangement, working mothers’ child penalty declined from a 47 percent drop in hours worked to a 38 percent drop. Third, while this implies a significant shift towards equality in the female- and male-shares of household income, we do not observe any changes in the female (disproportionate) share of home production.
Topic:
Economics, Labor Issues, Women, Work, and Home Production
Political Geography:
United Kingdom and Europe

3. Navigating the treacherous political economy of structural reform

Author:
Davide Furceri, Jonathan Ostry, and Chris Papageorgiou
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
We examine the economic and electoral effects of liberalisation measures using newly-constructed databases on structural economic reforms and the outcome of democratic elections since the 1970s. The data shows a remarkable slowdown in the pace of liberalisation in both advanced and emerging market and developing countries since the 1990s. A debate has emerged about the causes of this slowdown, including the possibility that reforms do not deliver the economic benefits that advocates, including the multilateral financial institutions, trumpeted. Some have pointed to the fact that the current and previous United States administrations have abandoned neoliberal policies in favour of more government intervention in the economy, and the effect has been globally contagious. Our empirical analysis suggests that the growth dividend from liberalisation is economically and statistically significant, but it emerges only slowly over time. Because of this delay, liberalising reforms are costly to democratic incumbents when they are implemented close to elections. Reforms may generate immediate concentrated losses, which elicit an electoral backlash, especially when the aggregate gains are only visible several years after the reform’s implementation. The electoral penalty is also sensitive to overall business-cycle conditions, being much larger when an economy is in recession. Electoral effects also differ depending on the type of reform. Notably, financial reforms generate more perceptible growth-equity trade-offs than real-economy reforms, especially when implemented during weak economic conditions. The political economy of reform is treacherous. To avoid adverse electoral effects, timing reform early in the electoral term and when business-cycle conditions are favourable is critical. So too is avoiding reforms that generate large distributional costs in the face of small aggregate gains (an adverse growth-equity trade-off). Focusing on these considerations is critical to reinvigorate support for structural reform.
Topic:
Economics, Political Economy, Reform, Elections, and Liberalization
Political Geography:
Global Focus

4. Good Intentions, Better Outcomes: Shifting the Debate About Social Protection and Informality

Author:
James Heintz and Jayati Ghosh
Publication Date:
02-2024
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
The introduction of social protections for individuals engaged in paid employment frequently comes up against arguments that such measures would have an adverse impact on employment, reduce access to formal jobs, and result in greater informality. The argument is that, while well intentioned, such policies distort labor markets and generate significant economic costs that either leave some workers worse off than they would have been in the absence of such protection, or the interventions become a drag on overall economic performance, encumbering the process of development. In what follows we critically evaluate such arguments and provide responses to the claim that social protections lead to higher informality. We also consider the challenges involved in providing social protection to different types of workers, including not only those employed by others but specifically the self-employed and unpaid workers.
Topic:
Economics, Employment, Labor Market, Informal Economy, and Protection
Political Geography:
Global Focus

5. Global Terrorism Index 2023

Author:
Institute for Economics and Peace (IEP)
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
Institute for Economics & Peace (IEP)
Abstract:
The GTI report is produced by the Institute for Economics & Peace (IEP) using data from TerrorismTracker and other sources. TerrorismTracker provides event records on terrorist attacks since 1 January 2007. The dataset contains almost 66,000 terrorist incidents for the period 2007 to 2022. In 2022, deaths from terrorism fell by nine per cent to 6,701 deaths and is now 38 per cent lower than at its peak in 2015. The fall in deaths was mirrored by a reduction in the number of incidents, with attacks declining by almost 28 per cent from 5,463 in 2021 to 3,955 in 2022. However, if Afghanistan was removed from the index, terrorism deaths would have increased by four per cent. Afghanistan remained the country most impacted by terrorism for the fourth consecutive year, despite attacks and deaths falling by 75 per cent and 58 per cent respectively. The GTI does not include acts of state repression and violence by state actors and, as such, acts committed by the Taliban are no longer included in the scope of the report since they took control of the government.
Topic:
Climate Change, Economics, Science and Technology, Terrorism, Finance, and Peace
Political Geography:
Middle East, North Africa, and Global Focus

6. Is the supermultiplier nil? - A Replication Study of Deleidi and Mazzucato (2021)

Author:
Jens Boysen-Hogrefe
Publication Date:
05-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Analyzing US macro data via a structural vector-autoregressive model, Deleidi and Mazzucato (2021) find strong positive spillover of mission-oriented government spending on private research and development activity and on overall economic dynamism ("crowding in"). However the result hinges on specific transformation of the data. Deleidi and Mazzucato deflate all variables in their model via the GDP deflator. Applying originally price adjusted data a spillover on GDP cannot be found. Estimating the model with data starting in 1984, the results point at “crowding out” of private research and development activity.
Topic:
Economics, Fiscal Policy, Innovation, and Fiscal Multipliers
Political Geography:
North America and United States of America

7. The path of economics research production: Insights into the seesaw between theory and empirics

Author:
João Ricardo Faria, Rajeev K. Goel, and Neela D. Manage
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper provides insights into the apparent seesaw between the generation of theoretical versus empirical economics research over time. A dynamic model considers the incentives of researchers to focus on empirical versus theoretical papers. It yields the main characteristics of the path-changing of economics research, from theoretical-intensive to empirical-focused. The model has two equilibria, one with a higher proportion of theoretical papers and another with a higher proportion of empirical papers. Curiously, the equilibrium with greater theoretical papers is stable, while the one with more empirical papers is a saddle point. This suggests that the current trend of increasing empirical research is unlikely to last.
Topic:
Economics, Research, and Innovation
Political Geography:
Europe, North America, and United States of America

8. The Ukraine Support Tracker: Which countries help Ukraine and how?

Author:
Christoph Trebesch, Ariana Antezza, Katelyn Bushnell, Andre Frank, and Pascal Frank
Publication Date:
02-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper presents the Ukraine Support Tracker, which lists and quantifies military, financial and humanitarian aid to Ukraine in the context of the Russia-Ukraine war. Since the third update we track support by 41 countries, specifically the EU member states, other members of the G7, as well as Australia, South Korea, Turkey, Norway, New Zealand, Switzerland, China, Taiwan, India and Iceland. The database is intended to support a facts-based discussion about support by other countries to Ukraine. Private donations and aid through non-governmental organizations are not included due to a lack of systematic data. To value in-kind support like military equipment or weapons, we rely on government statements as well as own calculations using market prices. We find significant differences in the scale of support across countries, both in absolute terms and as percent of donor country GDP.
Topic:
Economics, War, Foreign Aid, Military Aid, Geoeconomics, and Russia-Ukraine War
Political Geography:
Russia, Europe, Ukraine, Germany, and United States of America

9. Governance Practices in Turkey: A Comparative Perspective

Author:
Dimitris Tsarouhas
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
Hellenic Foundation for European and Foreign Policy (ELIAMEP)
Abstract:
Turkey’s latest National Development Plan seeks to attain economic and social development equal to that of the world’s most prosperous states. By structuring expectations and incentives for economic and political actors, institutions play a key role in achieving sustainable, long-term development. This paper provides a systematic longitudinal analysis of core governance indicators which shed light on Turkey’s evolution over time from a comparative perspective. The results point to a sharp decline in the institutional efficacy of the Turkish apparatus of state vis a vis core aspects of the country’s development agenda, especially with regard to the rule of law, public administration, regulatory capacity, and predictability. Turkey’s declining scores in recent years fly in the face of its political agenda and severely undermine welfare gains made in the early 21st century.
Topic:
Development, Economics, Governance, and Domestic Politics
Political Geography:
Turkey and Middle East

10. Quantum technologies and value chains: Why and how Europe must act now

Author:
Georg Riekeles
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
European Policy Centre (EPC)
Abstract:
As next-generation foundational technologies, quantum computing, communication, and sensing carry significant economic and security implications that go to the core of today’s strategic competition. In contrast with the US, where Big Tech actors dominate, Europe’s strengths lie in a vibrant ecosystem of research organisations and start-ups. This growing ecosystem is now at a critical juncture to develop into an internationally competitive European industry. This paper is based on research and a series of workshops conducted with European policymakers, stakeholders and industry actors looking into Europe’s technological position in contested international value chains. It proposes ten recommendations for the EU’s industrial policy mix under the following headings: KNOW – Embrace tech forecasting at the EU level COOPERATE – Combine European efforts in an EU Quantum Industrial Alliance INVEST – Mobilise European public-private capital for industrial scale-up PROTECT – Deploy Europe’s defensive toolbox prudently In a year that will see the launch of the EU Sovereignty Fund and adoption of the European Chips Act, quantum stands as a test case for the EU’s technological competitiveness and industrial policy agenda.
Topic:
Security, Economics, European Union, Industry, Quantum Computers, and Value Chains
Political Geography:
Europe

11. RCEP and Indonesia: Economic Reform and Prospects for Implementation

Author:
Yose Rizal Damuri and Deni Friawan
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
The conclusion of the Regional Comprehensive Economic Partnership (RCEP) is very important for Indonesia as it may bring many benefits to the country. This paper is an attempt to see the role of domestic political-economy dynamics in facilitating and constraining Indonesia’s decision to join, ratify, and implement a free trade agreement (FTA). It also seeks some understanding on whether an FTA can bring significant market liberalisation. This paper focuses on two areas of observation. First, it discusses the current progress of the legislative process and public acceptance of the RCEP agreement in Indonesia and how the process is influenced by the political-economy dynamics of the country. Second, the paper also looks at the potential impacts of the agreement on Indonesia’s current reform agenda, especially the recently passed Jobs Creation Law (Law No. 11/2020). For these observations, we conduct a content analysis on RCEP-related news published in two newspapers in Indonesia, namely Kompas and the Jakarta Post. In addition to content analysis, we also conducted interviews with stakeholders, including parliament members and government officials from the Ministry of Trade who have been actively involved in RCEP negotiations and the ratification process. The paper provides some remarks and recommendations for the future agenda of RCEP ratification and implementation in Indonesia.
Topic:
Economics, Reform, Policy Implementation, Free Trade, and Trade
Political Geography:
Indonesia and Southeast Asia

12. What Japanese Tourism Amenities are Influenced in Terms of Affecting Inbound Tourist Demand?

Author:
Yoko Konishi and Takashi Saito
Publication Date:
08-2023
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
Since 2012, the number of inbound tourists to Japan has increased every year, and new records of tourism-related economic indicators are being updated. On the other hand, the sudden inbound boom has led to a concentration of travel destinations, and over-tourism has become a problem. In this paper, we first statistically observe the concentration of tourists by accommodation type for each country of origin. Second, by identifying tourism amenities that contribute to inbound demand, we gain the knowledge necessary to shift demand from facilities with a high concentration of inbound tourists to facilities with lower occupancy. For the analysis, we utilised establishment data from the Online Travel Agency ‘Accommodation Travel Statistics Survey’ and data on tourism resources by region. The results show that the number of rooms, average price, membership of the hotel in a chain, internet availability, room type, number of World Heritage sites, and number of direct flights positively affect inbound demand. In particular, for ryokan (Japanese-style inns) with low occupancy rates and inbound guest ratios, their independence, internet availability, Western-style room availability, number of World Heritage sites, and hot spring facilities are effective in capturing demand.
Topic:
Economics, Tourism, Hospitality, and Travel
Political Geography:
Japan and Asia

13. Housing in Wyoming: Constraints and Solutions

Author:
Thảo-Nguyên Bùi, Tim Freeman, Ricardo Hausmann, Farah Kaddah, Lucas Lamby, Tim O'Brien, and Eric Protzer
Publication Date:
04-2023
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
Quantitative evidence supports the contention that Wyoming’s housing market is constrained, to a greater degree than many other parts of the US. Prices are persistently above expectations given economic fundamentals in most parts of the state, and the supply of new housing in Wyoming is on average less responsive to price increases than in other US counties. This has undermined natural population growth and contributed to a low amount of population density close to city centers in Wyoming, as compared to other US cities with comparable population levels. Importantly, this phenomenon is not simply the result of pandemic-era economic frictions. The evidence shows that these constraints have durably persisted in Wyoming. This housing constraint weighs heavily on the broader Wyoming’s economy, and chokes off growth in new industries that could add to the Wyoming economy beyond its natural resource base. Businesses consistently report a lack of access to workforce as a leading problem that ultimately results from a lack of housing. Some businesses have even tried to create their own housing for employees, and news reports abound of teachers and nurses who secure jobs in Wyoming communities but then have to leave because they cannot find housing. Key problems behind Wyoming’s housing constraints include excessive regulations concerning housing density and insufficient investment in arterial infrastructure. For example, there is evidence that over-regulated minimum lot sizes in Wyoming are blocking the creation of supply to match free-market demand for houses with smaller amounts of land. Other areas of over-regulation include those concerning allowable housing types, building height, parking spaces per dwelling, and the housing approval process itself. This may be seen as surprising given Wyoming’s reputation as a low-regulation state, but Wyoming maintains restrictions that other states and countries have discarded as outdated and highly counterproductive. Besides outright restrictions on housing development, we find that the most common cost driver undermining the housing development has to do with low public investment in needed arterial infrastructure, especially water systems. Land supply as well as material and construction costs are not primary constraints to housing development across the state, but may matter for select communities. We suggest a portfolio of policy changes for the state of Wyoming to explore in order to solve its housing constraints. One category of changes is regulatory, and focuses on deregulation, reducing bureaucratic overhead, and shifting from veto-cratic to democratic housing approval procedures. Another category is focused on investment on infrastructure to support housing, and exploration of state-local funding structures to facilitate continuous infrastructure improvement. If implemented, these changes will not only help to solve Wyoming’s housing constraints but also facilitate housing development in a way that combats urban sprawl, and in doing so protects open spaces outside of cities that Wyomingites value.
Topic:
Development, Economics, Public Policy, and Housing
Political Geography:
North America and United States of America

14. Income shocks, political support and voting behaviour

Author:
Richard Upward and Peter Wright
Publication Date:
12-2023
Content Type:
Working Paper
Institution:
Nottingham Interdisciplinary Centre for Economic and Political Research (NICEP)
Abstract:
We provide new evidence on the effects of economic shocks on political support, voting behaviour and political opinions over the last 25 years. We exploit a sudden, large and long-lasting shock in the form of job loss and trace out its impact on individual political outcomes for up to 10 years after the event. The availability of detailed information on households before and after the job loss event allows us to reweight a comparison group to closely mimic the job losers in terms of their observable characteristics, pre-existing political support and voting behaviour. We find consistent, long-lasting but quantitatively small effects on support and votes for the incumbent party, and short-lived effects on political engagement. We find limited impact on the support for fringe or populist parties. In the context of Brexit, opposition to the EU was much higher amongst those who lost their jobs, but this was largely due to pre-existing differences which were not exacerbated by the job loss event itself.
Topic:
Economics, Politics, European Union, Brexit, Income, and Voting Behavior
Political Geography:
United Kingdom and Europe

15. Can competition reduce conflict?

Author:
Teevrat Garg, Caterina Gennaioli, Stefania Lovo, and Gregor Singer
Publication Date:
07-2023
Content Type:
Working Paper
Institution:
Nottingham Interdisciplinary Centre for Economic and Political Research (NICEP)
Abstract:
We examine the effect of inter-group fiscal competition on within-group violent conflict. Using a triple difference design, we exploit exogenous variation in the degree to which villages in sub-districts compete for public funds. We find that higher competition between villages reduces conflict but only up to moderate levels of competition. The conflict-reducing effects of competition are largest in the most ethnically fractionalized and segregated villages and exist regardless of the eventual outcome of the competition. Our results are consistent with external competition favoring coordination within otherwise divided communities and boosting village identity relative to ethnic identity.
Topic:
Economics, Armed Conflict, Identity, Public Finance, Competition, and Fiscal Competition
Political Geography:
Global Focus

16. Garbling an evaluation to retain an advantage

Author:
Ascencion Andina-Diaz and Jose A. Garcia-Martinez
Publication Date:
07-2023
Content Type:
Working Paper
Institution:
Nottingham Interdisciplinary Centre for Economic and Political Research (NICEP)
Abstract:
We study the effects of introducing interpersonal comparisons on the decisions made by career concerned experts. We consider competition between two experts who may differ in their initial reputation. We obtain that whereas full transmission of experts' private information is an equilibrium when experts have the same initial reputation, this is not necessarily the case when they are heterogenous. In this case, we identify an incentive for the stronger expert to deliberately misreport her signal, aiming at garbling the evaluation of the principal to retain her advantage. In equilibrium, this expert may even completely contradict her signal and the other experts' decision. We discuss the implications of our results to different contexts, such as reaching consenses in a society, competition for attention, and misconception of the market's evaluation system.
Topic:
Economics, Markets, Experts, Career, Reputation, and Competition
Political Geography:
Global Focus

17. A reform option for pension fund contribution as tax expenditure in South Africa

Author:
Ada Jansen, Winele Ngobeni, and Wynnona Steyn
Publication Date:
11-2023
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
South Africa has a progressive broad-based personal income tax system with relatively few tax expenditures. The two most important are the medical contribution plus additional tax credits for medical expenses, and the deductions allowed for retirement contributions. A pertinent question for tax reform in South Africa is whether redistributive gains can be achieved by restructuring expenditures in the personal income tax system. This paper considers the redistributive implications of converting the tax deduction for retirement contributions to a tax credit. This would build on the gains achieved by introducing a medical tax credit system in 2012. We analyse the tax revenue gains/losses of income groups and in total in terms of distributional effects and progressivity outcomes using a static microsimulation model based on data for the 2019/20 tax year. We find a high concentration of taxpayers in terms of taxable income and retirement contributions. The concentration of contributions is highly skewed towards lower- and middle-income earners, whose annual contribution amounts are low compared with higher-income earners. We recommend a conversion rate that considers the current distribution of taxpayers contributing to retirement funds. Converting the pension contribution deduction to a tax credit would raise additional revenue and make the tax system more progressive, benefiting low-income earners with marginal tax rates of less than the proposed conversion rate. The revenue gained would provide increased fiscal space to fund social expenditure or reduce government debt. Further distributional and behavioural analyses are needed on low-income earners and those earning below/above the minimum tax threshold, to refine understanding of the impact on low-and middle-income earners’ contributions to retirement funds.
Topic:
Economics, Reform, Tax Systems, and Pension
Political Geography:
Africa and South Africa

18. Differential bunching impacts across the income distribution: Evidence from Zambian tax administrative data

Author:
Samuel Bryson, Kwabena Adu-Ababio, Evaristo Mwale, and John Rand
Publication Date:
12-2023
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
We investigate the behavioural responses of individual taxpayers to changes in marginal personal income tax rates applying empirical bunching methodology to tax administrative data from Zambia over the period from 2014 to 2021. We find evidence for excess bunching at the first kink in the tax schedule for all years but less evidence of bunching at the second and third thresholds. While bunching is considerable and behavioural responses are observed to changes in the location of the kinks over time, bunching at reference points (‘round-number bunching’) also appears large. Implied elasticities of taxable income are however not remarkable, and comparing actual and estimated counterfactual wage distributions reveal that missed tax revenue arising from the excess bunching is limited. This is consistent with the observed bunching reacting sharply and immediately to changes in the location of the kink points over time, suggesting that observed behavioural change is driven by reporting behaviour rather than real economic responses.
Topic:
Economics, Tax Systems, Income, and Income Distribution
Political Geography:
Africa and Zambia

19. Adverse Selection Among Early Adopters and Unraveling Innovation

Author:
Rory McGee
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
Centre for Human Capital and Productivity (CHCP), Western University
Abstract:
I provide an equilibrium analysis of “selection markets”: where consumers not only vary in how much they are willing to pay, but also in how much they cost to the seller. The model provides a joint explanation for three empirical phenomena: low uptake of existing products, slow demand for new products, and market inactivity despite unmet demand. I characterize when early adopters are more adversely selected in new markets. This lowers demand, increases costs, and leads markets to unravel prematurely. With endogenous market entry for new products (e.g., reverse mortgages, annuities), extended patents serve as de facto time-varying subsidies.
Topic:
Economics, Markets, and Innovation
Political Geography:
Global Focus

20. Does Gravity Matter for Trade in Intermediate Services?

Author:
Anmol Kaur Grewal
Publication Date:
09-2023
Content Type:
Working Paper
Institution:
Centre for Trade and Economic Integration, The Graduate Institute (IHEID)
Abstract:
This paper makes a twofold contribution to the literature on trade in services. First, I construct a novel bilateral dataset of trade in services differentiating between final consumption and intermediate consumption following the most recent classification of UN’s Broad Economic Categories (BEC Rev. 5). Second, I use this dataset to estimate a gravity model of trade in intermediate and final services for a sample of 48 economies for the time period 2010-2019. Using a robust model specification consistent with the recent advancements in the gravity literature, I find that trade in services exhibits a sensitivity to bilateral distance between trading partners, similar to trade in goods. Intermediate services tend to be more sensitive to distance relative to final services due to the distinct nature of these services (B2B versus B2C). Common language and common borders are important determinants of both trade in intermediate and final services. I also find evidence of non-linear effects of time zone differences on trade in services.
Topic:
Economics, Services, Trade, and Consumption
Political Geography:
Global Focus

21. Exchange Rate Arrangements: Fix, Float, or Manage?

Author:
Nathaniel Cline, Carlos Schönerwald da Silva, and Matias Vernengo
Publication Date:
10-2023
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
The paper tries to provide a concise summary of the main debates on exchange rate arrangements. It a simple taxonomy of exchange rate arrangements, fixed, flexible and managed, and a brief analysis of the main debates about their advantages and disadvantages. It emphasizes the different policy objectives of mainstream and heterodox schools of thought, suggesting that they tend to be more relevant than the specific defense of one particular exchange rate arrangement. In that sense, there are divergences on their preferences within schools of thought. The paper also discusses the causes of currency crises and the role of the dollar in the international monetary system.
Topic:
Economics, Monetary Policy, Crisis Management, Exchange Rate Policy, and Currency
Political Geography:
Global Focus

22. Optimal Inflation Targeting With Anchoring

Author:
Thomas Michl
Publication Date:
06-2023
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
This paper presents an alternative foundation to the standard quadratic loss function characterizing central bank inflation policy. The alternative treats high employment as a social benefit. In recognition of the inherent asymmetry of the output gap, two self-imposed constraints provide guardrails that rule out excess unemployment and opportunistic reflation. The loss function includes a novel reverse discounting mechanism that penalizes the bank for more sustained inflation gaps that could undermine confidence in the central bank’s target. In the absence of anchoring, the central bank is obliged to use economic slack to accomplish a disinflation but the presence of anchoring creates greater policy flexibility freeing it from the tyranny of the sacrifice ratio. The central bank’s optimal policy differs dramatically from the standard Taylor Rule recommendation in choosing policy plans with higher employment, in its willingness to overshoot inflation targets, and in avoiding excess unemployment, all while observing the discipline needed for successful inflation targeting.
Topic:
Economics, Employment, Banks, and Inflation
Political Geography:
Global Focus

23. The Crisis of Capitalism, the Noun

Author:
Nancy Folbre
Publication Date:
05-2023
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
This paper explores the challenges that feminist theory, stratification economics, and intersectionality pose to the characterization of capitalism as a unitary system. Attention to the structural basis for inequalities based on gender and race weakens traditional Marxian concepts of exploitation based on the appropriation of surplus value. On the other hand, the continuing relevance of many forms of collective conflict heightens appreciation of the ways in which capitalist institutions discourage the forms of cooperation necessary to address both ecological threats and shortfalls in care provision.
Topic:
Economics, Race, Capitalism, Intersectionality, Gender, and Feminist Theory
Political Geography:
Global Focus

24. The Effects of Robotization on Foreign Direct Investment

Author:
Sungwoo Hong, Wongi Kim, and Yeo Joon Yoon
Publication Date:
08-2023
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
This study aims to investigate the effects of robotization on foreign direct investment (FDI). We address this research question by providing a theoreti-cal prediction derived from a simple model and then empirically testing our prediction. Theoretically, we found that an exogenous rise in industrial robots depresses both the robot rental rate and the domestic cost of task execution. Thus, it is more profitable to perform more tasks at home, leading to a de-crease in FDI. Empirical results are summarized as follows. First, an increase in robotization in source countries negatively affects outward FDI. Second, this negative effect is not consistent across global regions.
Topic:
Economics, Foreign Direct Investment, and Industrial Structure
Political Geography:
Global Focus

25. An Analysis on the Regional Integration of Northeast Asia by Developing NARCI (Northeast Asia Regional Cooperation Index)

Author:
Ji Young Moon, Jehoon Park, and Sung-Hoon Park
Publication Date:
10-2023
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
This paper aims to develop an index to analyze regional cooperation in Northeast Asia, which is Northeast Asia Regional Cooperation Index(NARCI). NARCI evaluates intra-regional cooperation and integration in four areas, which are functional cooperation, politico-security cooperation, socio-cultural cooperation, and institutionalization, in order to identify the conflict and cooperation situation in the Northeast Asian region. The analysis of economic integration found that Northeast Asian regional cooperation is characterized by a high level of integration in goods trade and regional value chain cooperation, but a relatively low level of integration in intra-regional direct investment and energy supply chain cooperation. The analysis of the political and security cooperation shows that the intensification of U.S.-China competition and the factional confrontation between Korea, U.S., Japan, and North Korea, China, Russia have had a significant impact on regional cooperation in political and diplomatic security. The result shows that the level of integration is low, with all evaluation indicators being negative. The analysis of the socio-cultural integration shows a relatively low level of integration in civil society cooperation and intergovernmental exchanges, a relatively high level of integration in cultural and educational exchanges and study abroad, and a neutral level of integration in information technology cooperation, labor mobility, and the share of tourists in the region. Finally, the analysis of institutional integration shows a relatively high level of integration in the bilateral channels between governments and the institutionalization of regional cooperation in the socio-cultural field, and half of the countries had institutional integration in financial integration and regional cooperation in the economic field. The level of integration in the political and security field was low due to the existence of only multilateral meetings. The analysis of NARCI shows that the impact of geopolitical conflicts on the economy and socio-culture has been expanding in recent years. However, the low level of political and diplomatic cooperation in the region and related institutional deficiencies are considered to be insufficient to buffer these risks, and efforts are needed to address them.
Topic:
Economics, Industrial Policy, Regional Cooperation, Economic Growth, and Regional Integration
Political Geography:
Asia and Northeast Asia

26. A Review of Changes in the Global Value Chain of Latin America

Author:
Sungwoo Hong
Publication Date:
05-2023
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
Based on the findings of the value chain analysis conducted on major Latin American countries, it suggests that these countries may have derived certain economic benefits. This can be attributed to the increased exports to the United States and China, where Latin American countries served as substitute countries for imports during the intensifying competition between the two nations. Amidst the U.S.-China hegemony race and the supply chain disruptions caused by the COVID-19 pandemic, there is a notable shift in focus. Particularly, the United States is actively working to establish secure and stable supply chains, primarily centered around its own country and allied nations, with the intention of reducing dependence on China. As part of this process, the United States advocates for reshoring or near-shoring, which involves relocating production facilities to its home country or neighboring nations. Additionally, the U.S. is implementing various incentives to support this objective. If near-shoring takes place in Latin America, they can be regarded as favorable locations for establishing a foothold to access North America or securing key minerals. Additionally, Latin American countries with substantial backward linkages should be prioritized in trade with the United States. Among them, Mexico and Brazil, which exhibit relatively high levels of backward linkage within Latin America, are considered suitable hubs due to their capacity for generating significant foreign added value in their exports to the United States.
Topic:
Economics, Trade, Global Value Chains, COVID-19, and Minerals
Political Geography:
Latin America and United States of America

27. How Well Does Korea's Employment Insurance System Support Workers Facing Trade Shocks?

Author:
Kyong Hyun Koo
Publication Date:
05-2023
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
This study uses worker-level longitudinal panel data and trade data to conduct an analysis of the performance of Korea's employment insurance system in supporting trade-affected workers. We find that the rapid economic growth of China and Vietnam since the 2000s has subjected some Korean industries to heightened import competition. The Korean workers who were employed in these industries in their earlier careers tended to experience a long-term (10-year) decline in the growth rate of labor income and a relative deterioration in their employment security as the probability of involuntary job separation increased. With an increased probability of involuntary job separation, workers in import-competing industries were more likely to receive unemployment benefits. This implies that the unemployment benefit system in Korea was relatively effective in the short term to alleviate employment shocks triggered by trade shocks. Nevertheless, the trade adjustment support function of the unemployment benefit system had certain limitations in that the receipt of unemployment benefits could not ultimately counteract the downward trend in long-term labor income for workers in import-competing industries. In contrast to unemployment benefits, government-supported vocational training holds the potential to increase the long-term earnings of workers more exposed to import competition. However, workers employed in import-competing industries were not more likely to participate in government-supported vocational training; on the contrary, workers in export-expanding industries were more likely to participate in government-supported vocational training. This finding implies that the jobs of workers in import-intensive industries were less likely to be covered by employment insurance than those in export-intensive industries. Consequently, workers in import-intensive industries, who are at greater risk of trade shocks, may be less safeguarded than their counterparts in export-growing industries under the prevailing employment insurance system.
Topic:
Economics, Employment, Trade, and Insurance
Political Geography:
Asia and South Korea

28. 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

29. 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

30. 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

31. 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 (CIGI)
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

32. 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 (CIGI)
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

33. 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

34. 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

35. 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

36. 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

37. 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

38. China’s Infrastructure Projects in the Middle East: Lessons from China’s Engagement Elsewhere

Author:
Dominika Urhová
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
Moshe Dayan Center for Middle Eastern and African Studies
Abstract:
In our latest issue of Iqtisadi, Ms. Dominika Urhova discusses the economic strategy and role of China in the Middle East, and analyzes the implications of China's growing influence in the region.
Topic:
Foreign Policy, Development, Economics, Belt and Road Initiative (BRI), and Strategic Engagement
Political Geography:
China, Middle East, and Asia

39. EU-Azerbaijan Economic Relations: New Perspectives and Targets

Author:
CESD Research Team
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
Center for Economic and Social Development (CESD)
Abstract:
The study is an example of the series on issues analyzing the EU-Azerbaijan economic relations which can be considered a step forward to empower economic approach in the policy-making process aiming to provide an alternative view in addressing current challenges and developments in Azerbaijan. The European Union’s relations with Azerbaijan have been formulated based on the EU-Azerbaijan Partnership and Cooperation Agreement which entered into force since 1999. In February 2017, the EU and Azerbaijan began negotiations on a new framework agreement designed to enhance the political dialogue, trade and mutually beneficial cooperation covering a wide range of economic aspects. One of the most important strategies of EU in the energy policy is to ensure energy security through diversification of energy routes. Azerbaijan is a strategically important energy partner for the EU and plays a significant role in bringing Caspian energy resources to the EU market. In 2018, the EU and Azerbaijan endorsed joint Partnership Priorities, along the four Eastern Partnership priorities that accompany the political dialogue and economic cooperation….
Topic:
International Relations, Economics, European Union, and Partnerships
Political Geography:
Europe, Caucasus, and Azerbaijan

40. German Economy Winter 2022: Inching through the energy crisis

Author:
Jens Boysen-Hogrefe, Dominik Groll, Nils Sonnenberg, Nils Jannsen, Stefan Kooths, Vincent Stamer, and Timo Hoffmann
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Wholesale prices for gas and electricity have fallen significantly in recent months - even though they are still at a high level. In addition, the burdens on private households and companies caused by high energy costs are to be cushioned by so-called price brakes. Overall, inflation in 2023 will be much lower at 5.4 percent than we had expected in our autumn forecast (8.7 percent). Although real disposable income and, as a result, private consumption are likely to decrease next year, the decline will be much smaller than had been expected a few months ago. As a result, we now expect a slight increase in GDP of 0.3 percent for 2023 (autumn: -0.7 percent). In 2024, GDP is expected to grow somewhat more strongly again at 1.3 percent (autumn: 1.7 percent). The labour market is robust despite the economic slowdown, partly because companies are still desperately seeking skilled workers. The public fiscal balance is likely to deteriorate significantly in 2023 due to the aid packages in response to the energy crisis and displays a deficit of around 4 percent relative to GDP. With the expiry of the aid packages, the deficit will decrease again in 2024.
Topic:
Economics, Monetary Policy, Budget, Business, Labor Market, Energy Crisis, Emerging Economies, and Advanced Economies
Political Geography:
Europe and Germany

41. Economic Zones and Local Income Inequality: Evidence from Indonesia

Author:
Cecília Hornok and Sidan Raeskyesa
Publication Date:
06-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Economic zones can be powerful drivers of economic growth in developing countries. However, less is known about their distributional impact on the local society. This paper provides empirical evidence from Indonesian provinces on the relationship between economic zones and within-province income inequality. Estimates from panel regressions and synthetic control case studies suggest that this relationship is positive overall. The estimated rise in income inequality after a zone opens is relatively small on average and may be short-lived. However, the average estimate masks large regional differences, which suggests that the inequality implications of economic zone policies depend on local conditions. One explanation for the rise in inequality is that the unskilled population benefits disproportionately less from the policy. As a remedy, we propose education and training programs that target the poor and unskilled and in which companies also actively participate.
Topic:
Economics, Emerging Markets, Globalization, Economic Growth, and Income Distribution
Political Geography:
Indonesia, Asia, and Southeast Asia

42. International Managerial Skill and Big Colombian Exporting Firms’ Performance, 2006-2014

Author:
Federico Merchan
Publication Date:
06-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper uses a sample of the biggest private Colombian exporting firms to propose and estimate a two-step methodology for measuring international managerial skill and calculating its impact on firm performance. The first step quantifies the manager’s organizational capital contribution to improvements in Bloom et al.’s (2021) production efficiency (ability to assemble inputs into final goods) and/or quality capacity (skill to make high quality goods) mechanisms, through the median of export unit value regression residuals at firm-year level (multiplying by -1 the price competition products’ residuals). The second step is regression analysis of firm performance. Results indicate that: i) international managerial quality has a significant and robust positive effect on total export value via the intensive margin, ii) exported value elasticity relative to international managerial quality is around 3 times larger than exported value elasticity relative to exogenous global demand shocks, and iii) better managers in the international market do not necessarily upgrade export quality.
Topic:
Economics, Emerging Markets, International Trade and Finance, Exports, Management, and Labor Market
Political Geography:
Colombia and South America

43. Does ethnic heterogeneity decrease workers’ effort in the presence of income redistribution? An experimental analysis

Author:
Christoph Schütt, David Pipke, Lena Detlefsen, and Gianluca Grimalda
Publication Date:
07-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Ethnic discrimination is ubiquitous, and it has been shown to exert adverse effects on income redistribution. The reason is that a country’s ethnic majority, if richer than the average, may be unwilling to transfer resources to the country’s ethnic minorities if poorer than the average. A yet untested mechanism is that a country’s ethnic majority may reduce their work effort knowing that their income will finance redistribution to ethnic minorities. We test for this mechanism experimentally in triadic interactions. A German citizen acting as a worker is randomly matched with a recipient who can be another German, an economic migrant, or an asylum seeker in Germany. Workers know that another German citizen may transfer part of their earnings to the recipient. The recipient does not exert any work effort. Even if the recipient’s identity does not affect effort in the aggregate, social identity strongly moderates this relationship. Participants with a strong German identity, i.e., who report feeling close to other Germans, exert significantly less effort than other participants if the recipient is an asylum seeker. They also exert more effort when matched with a German recipient than an asylum seeker, while participants with a less strong German identity do the opposite. Moreover, participants with a strong German identity exert slightly more effort when matched with economic migrants than with asylum seekers, while others tend to do the opposite, albeit statistically insignificantly. Workers’ beliefs over the third party’s redistribution rate do not mediate such results and are generally inaccurate.
Topic:
Economics, Discrimination, Tax Systems, Labor Market, Redistribution, and Welfare State
Political Geography:
Global Focus

44. A Survey of Importers: Results of a Survey Conducted in Collaboration with the Ethiopian Economics Association

Author:
Ricardo Hausmann, Tim O'Brien, Tim Cheston, Nikita Taniparti, and Ibrahim Worku Hassen
Publication Date:
11-2022
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
Ethiopia suffers from a chronic shortage of foreign exchange (forex).[1] The resulting lack of access to imports prevents firms from accessing imported inputs required for production. This creates a vicious cycle as exporters are constrained by this same problem, which further reduces overall supply of foreign exchange in the Ethiopian economy. The inability to reliably access foreign exchange for imports affects firm decisions on sourcing, capacity, and output. While the cost of this constraint is known to be high on the Ethiopian economy and firms are known to use a range of measures to attempt to bypass this constraint, quantitative assessments of the problem and response actions by firms are limited. It is in this context that an importer survey was conducted with the goal of informing policy decisions. A total of 202 firms with an active importing license were interviewed in March-April 2022. These firms were randomly sampled from firms registered with an importer license. All firms interviewed reported that they were operating below capacity, often well below capacity. Foreign exchange shortages were the main reason respondent firms cited for not operating at full capacity (63% of firms reporting this as their biggest constraint). Forex shortages far surpass the second and third reasons cited for not operating at full capacity — constraints due to the conflict (13%) and COVID-19 restrictions (11%). Firms operating below capacity cited forex shortages as the main constraint, regardless of whether they imported or not in the previous year. This was the most pressing constraint reported by firms of all sizes and sectors surveyed. It was the most pressing constraint faced by exporters and by foreign-owned firms as well as non-exporters and domestic firms. Amongst the total sample of firms with a renewed importer license, more than one-third of respondent firms (37%) had not imported in FY2020-21. Overall, 74% of firms reported experiencing challenges in accessing forex. Access to forex was reported as most challenging for manufacturing firms and smaller firms but impacted all sectors and firm sizes. The losses attributed to forex scarcity at the firm level were largest for agricultural firms, for micro-firms, and for firms that did not import at all in the previous year. In general, the larger the firm sales, the higher the likelihood that they were able import. The survey found different types of imports for different sectors. Manufacturing firms imported a large share semi-finished goods as imports as compared to agricultural firms that primarily imported finished goods. The survey results find that foreign exchange shortages and an inability to import are most severe for the manufacturing and agriculture sectors, small and micro-sized firms, and all non-exporters. However, the constraint is also the top problem facing all firm types in the survey, including exporters and foreign-owned firms. The primary means of accessing foreign exchange where it did occur was through specialized forex accounts or ‘diaspora’ accounts. The second most common means of accessing foreign exchange was through retention accounts available to exporters. The black market featured in many responses, but questions across the survey suggest that self-reported use of the black market by survey participants is underreported versus actual usage. The ability to source foreign exchange differed significantly by firm size. Exporting firms primarily used retention account earnings, as compared to non-exporters, which relied more on forex accounts. For faster access to forex, most firms reported that they approach banks, followed by turning to the black market. Friends and family abroad also served as a source of forex for one-quarter of firm respondents, and that foreign exchange was often used immediately. Foreign exchange access from banks is nevertheless a major pain point for firms. Most firms (55%) requested forex from a bank in the past year. On average, fulfilled forex requests took three months to be processed when they were fulfilled, but many firms reported that they have an unfulfilled request that has been in the system for more than a year. These firms are especially likely to report foreign exchange access as their top challenge. The survey finds that individual firms do not tend to use both official and black-market foreign exchange sources but rather tend to access all their forex at the (lower) official rate or all at the (higher) black-market. Large firms import most of their products at the official rate. By contrast, most small and micro firms import through other means. Manufacturing firms are also more likely to import all their production through other means and outside of the banking system. Non-exporting firms tended to import through other means than the official rate and outside of the banking system at a higher prevalence than exporting firms. The survey gleaned new insights on the implicit exchange rate that firms face as they navigate official and black-market channels of foreign exchange access. The survey does not allow for a precise estimate of the transaction-weighted exchange rate facing the economy but finds firm-level estimates align with previous macro-level estimates. The implicit exchange rate was higher for non-exporting firms, which show a greater willingness to pay a higher exchange rate to access imports. This signals the importance of the retention account for exporters to guarantee an import price closer to the official exchange rate. When asked about the maximum rate firms would pay to guarantee access to forex, some groups of firms were willing to pay higher amounts, including all non-exporters, firms that imported in the past year, and those that declared forex access a challenge. When compared to the implied rate they paid in the past year, many firms are willing to pay more than the implied rate to guarantee access to forex. Firm perspectives on policy changes to the exchange rate underscored challenges faced by policymakers. Current policy has been one of a crawling peg, with changes within the last several years to increase the rate of devaluation. The survey asked respondents about their support for faster devaluation, for a one-off movement to unify the official rate with the black-market rate, or about alternative exchange rate systems such as a floating exchange rate. Most respondents (71%) opposed maintaining the current regime, yet no option received majority support. Most firms appear to want both a stronger exchange rate and easier access to foreign exchange despite a tradeoff between these two priorities. The largest share of support for policy change was to adjust the exchange rate such that the official rate matches the black-market rate.
Topic:
Development, Economics, Imports, and Collaboration
Political Geography:
Africa and Ethiopia

45. An Integrated Epidemiological and Economic Model of COVID-19 NPIs in Argentina

Author:
Adolfo Rubinstein, Eduardo Levy-Yeyati, Alejandro López Osornio, Federico Filippini, and Adrian Santoro
Publication Date:
11-2022
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
We added a multi-sectoral economic framework to a SVEIR epidemiological model, combining the economic rationale of the DAEDALUS model with a detailed treatment of lockdown fatigue and declining compliance with Public Health and Social Measures reported in recent empirical work, to quantify the epidemic and economic benefits and costs of alternative lockdown and PHSM policies, both in terms of intensity and length. Our calibration replicates key features of the case and death-curves and economic cost for Argentina in 2021. The model allows us to quantify the short-term policy trade-off between lives and livelihoods and show that it can be significantly improved with targeted pharmaceutical policies such as vaccine rollout to reduce mainly severe disease and the death toll from COVID-19, as has been highlighted by previous studies.
Topic:
Economics, COVID-19, and Epidemiology
Political Geography:
Argentina, South America, and Latin America

46. Gendering the Indo-Pacific Dialogue: Opportunities for India and Australia

Author:
Priyanka Bhide and Aditi Mukund
Publication Date:
06-2022
Content Type:
Working Paper
Institution:
International Women's Development Agency (IWDA)
Abstract:
Viewing the confluence of the Indian Ocean and Pacific Ocean as a distinctive and interdependent strategic and economic space is fundamentally changing the way both India and Australia think about and examine their relationship with the broader region.i The Indo-Pacific as a strategic construct has grown in prominence in global geopolitical discourse, especially over the last five years. The EU, USA, and several countries in Europe have in place or are developing their own strategies for engagement in the Indo-Pacific region. The European Union collectively advocates for a ‘Free and Open IndoPacific’, designed to foster a ‘rules-based international order, a level playing field, as well as an open and fair environment for trade and investment, tackling climate change and supporting connectivity.’ii For France, the Indo-Pacific is at the heart of its vision for a stable multipolar order, and the Indo-Pacific is listed as a ‘priority and essential partner’.iii Germany too is making an active contribution to shaping the international order in the Indo-Pacific, so that it is ‘based on rules and international cooperation, not on the law of the strong.’iv The significance of the construct is varied for countries that are part of the region. The scope of the conversation in the Indo-Pacific is widening, with more diverse and varied perspectives being brought to the forefront. In this paper, against the backdrop of global Feminist Foreign Policy conversations, we focus on how Australia and India view the Indo-Pacific; marking the shifts in both countries’ approaches, along with bringing in important aspects of their bilateral relationship, highlighting how the Indo-Pacific has grown in significance to become a foreign policy priority, how both India and Australia have incorporated a gender lens in their actions, and what could be the avenues for Australia and India to apply such a lens in their collaborations.
Topic:
Foreign Policy, Economics, Geopolitics, Multipolarity, Dialogue, and Gender
Political Geography:
India, Australia, and Indo-Pacific

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, Sanctions, Engagement, and Dependency
Political Geography:
Africa and North Korea

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

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

49. Analyzing DPRK's Food Supply and Demand Condition with Food Culture

Author:
Jangho Choi and Bum Hwan Kim
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
Estimation of food supply and demand in North Korea follows the FAO/WFP calorie standard at least 1,640 kcal per person per day. This method is useful in that it can estimate the minimum amount of food shortage for survival, but has a limitation in that it does not accurately reflect real life in that it ignores the food culture of North Korean residents. In this study, the amount of food supply and demand in North Korea was estimated by considering the food culture. The amount of food shortage was calculated by the difference between food consumption and supply. For food consumption, South Korea’s food supply and demand tables (1970 and 1990) and North Korean population were used to consider food culture. The amount of food supply considered North Korean food production, imports, and exports. As a result of the estimation, first, when the food shortage in North Korea in 2014 was estimated by reflecting South Korea’s food supply table in 1970, 2,388.4 thousand tons were oversupplied, resulting in a food supply and demand rate of 1.26. Second, assuming that North Korea’s food culture changes similarly to that of South Korea in 1990 due to the spread of marketplaces or the unification of South and North Korea, total food consumption increased by 33.3%, and the food supply and demand rate fell from 1.26 to 0.95. The results of this study have two implications. First, it is possible that the cereals shortage estimated by FAO/WFP based on the minimum calorie required for survival was overestimated. Second, North Korea’s carbohydrate-oriented food aid does not take North Korea’s food culture into account, so it is necessary to increase support for fish, meat, fruits and vegetables.
Topic:
Economics, Culture, Food Security, Consumption, and Supply and Demand
Political Geography:
Asia and North Korea

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. The Business Case for the Sustainable Development Goals: An Empirical Analysis of 21 Danish Companies' Engagement with the SDGs

Author:
Michael W. Hansen, Henrik Gundelach, and Erik Johnson
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Centre for Business and Development Studies (CBDS), Copenhagen Business School
Abstract:
This paper explores why business engage with the SDG agenda, with a view to understanding the business case for the SDGs. Building on and extending the responsibility literature’s discussion of the business case for responsibility, the paper develops a conceptual framework for analyzing why business engage with the SDGs. This framework is employed to analyze why a sample of 21 Danish companies decided to engage with the SDG agenda. The analysis finds that most companies view the SDGs as a platform for achieving rather conventional business goals such as mitigating risk, saving costs, and differentiating products and services. However, in a few cases, companies use the SDGs as a lever for carving out uncontested positions in future markets. The paper concludes that companies overwhelmingly view the SDGs as a business opportunity rather than as a business responsibility, something that fundamentally may distinguish the SDG agenda from previous responsibility agendas. The paper fills a gap in the extant literature on business responsibility by developing and validating a classification of the business case for the SDGs based on economic value drivers, and by deepening the empirical understanding of, what precisely this business case may be.
Topic:
Development, Economics, Sustainable Development Goals, Business, and Social Responsibility
Political Geography:
Europe and Denmark

91. Egypt Faces Severe Economic Problems

Author:
Sara Nowacka
Publication Date:
08-2022
Content Type:
Working Paper
Institution:
The Polish Institute of International Affairs
Abstract:
In August, a year before the end of his term of office, Tarek Amer, head of the Egyptian Central Bank, resigned. This was a consequence of the deepening economic crisis caused by a decline in the country’s currency reserves and the impact of global problems on Egypt, which is dependent on food imports. Capital-intensive investments, mainly in the energy and real estate sectors, will exacerbate Egypt’s situation. Given the size of its population, economic collapse would have a significant destabilising impact on the EU’s southern neighbourhood.
Topic:
Economics, Currency, Economic Stability, and Economic Crisis
Political Geography:
Middle East and Egypt

92. Legal Report – A Highlight on Political, Economic, and Social Rights in Palestine

Author:
Palthink
Publication Date:
07-2022
Content Type:
Working Paper
Institution:
Pal-Think For Strategic Studies
Abstract:
Within the activities of PalThink Academy for Human Rights and Democracy, PalThink produced a report titled A Highlight on Political, Economic, and Social Rights in Palestine. The report mainly provided a profound analysis of the current public situation in the Palestinian territories from 2019 to 2022. Furthermore, the report was anchored on six indicators including good governance, political participation, public freedom, education, health, and labour. In addition, it gave an in-depth insight into the root causes and consequences of ongoing violations of human rights. To conclude, the report proposed recommendations pertaining to the needed interventions to alleviate the challenges facing human rights in Palestine. This project is supported by the ifa’s zivik Funding Programme and implemented by PalThink for Strategic Studies.
Topic:
Civil Society, Economics, Human Rights, and Social Order
Political Geography:
Middle East and Palestine

93. 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

94. 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 (CIGI)
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

95. 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 (CIGI)
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

96. 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 (CIGI)
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

97. 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

98. 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

99. 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

100. 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