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  • Author: Ricardo Hausmann, Patricio Goldstein, Ana Grisanti, Tim O'Brien, Jorge Tapia, Miguel Ajgel Santos
  • Publication Date: 12-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: Jordan faces a number of pressing economic challenges: low growth, high unemployment, rising debt levels, and continued vulnerability to regional shocks. After a decade of fast economic growth, the economy decelerated with the Global Financial Crisis of 2008-09. From then onwards, various external shocks have thrown its economy out of balance and prolonged the slowdown for over a decade now. Conflicts in neighboring countries have led to reduced demand from key export markets and cut off important trade routes. Foreign direct investment, which averaged 12.7% of gross domestic product (GDP) between 2003-2009, fell to 5.1% of GDP over the 2010-2017. Regional conflicts have interrupted the supply of gas from Egypt – forcing Jordan to import oil at a time of record prices, had a negative impact on tourism, and also provoked a massive influx of migrants and refugees. Failure to cope with 50.4% population growth between led to nine consecutive years (2008-2017) of negative growth rates in GDP per capita, resulting in a cumulative loss of 14.0% over the past decade (2009-2018). Debt to GDP ratios, which were at 55% by the end of 2009, have skyrocketed to 94%. Over the previous five years Jordan has undertaken a significant process of fiscal consolidation. The resulting reduction in fiscal impulse is among the largest registered in the aftermath of the Financial Crises, third only to Greece and Jamaica, and above Portugal and Spain. Higher taxes, lower subsidies, and sharp reductions in public investment have in turn furthered the recession. Within a context of lower aggregate demand, more consolidation is needed to bring debt-to-GDP ratios back to normal. The only way to break that vicious cycle and restart inclusive growth is by leveraging on foreign markets, developing new exports and attracting investments aimed at increasing competitiveness and strengthening the external sector. The theory of economic complexity provides a solid base to identify opportunities with high potential for export diversification. It allows to identify the existing set of knowhow, skills and capacities as signaled by the products and services that Jordan is able to make, and to define existing and latent areas of comparative advantage that can be developed by redeploying them. Service sectors have been growing in importance within the Jordanian economy and will surely play an important role in export diversification. In order to account for that, we have developed an adjusted framework that allows to identify the most attractive export sectors including services. Based on that adjusted framework, this report identifies export themes with a high potential to drive growth in Jordan while supporting increasing wage levels and delivering positive spillovers to the non-tradable economy. The general goal is to provide a roadmap with key elements of a strategy for Jordan to return to a high economic growth path that is consistent with its emerging comparative advantages.
  • Topic: Government, International Trade and Finance, Finance, Economy
  • Political Geography: Middle East, Jordan
  • Author: Arvind Subramanian, Josh Felman
  • Publication Date: 12-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: We examine the pattern of growth in the 2010s. Standard explanations cannot account for the long slowdown, followed by a sharp collapse. Our explanation stresses both structural and cyclical factors, with finance as the distinctive, common element. In the immediate aftermath of the Global Financial Crisis (GFC), two key drivers of growth decelerated. Export growth slowed sharply as world trade stagnated, while investment fell victim to a homegrown Balance Sheet crisis, which came in two waves. The first wave—the Twin Balance Sheet crisis, encompassing banks and infrastructure companies—arrived when the infrastructure projects started during India’s investment boom of the mid-2000s began to go sour. The economy nonetheless continued to grow, despite temporary, adverse demonetization and GST shocks, propelled first by income gains from the large fall in international oil prices, then by government spending and a non-bank financial company (NBFC)-led credit boom. This credit boom financed unsustainable real estate inventory accumulation, inflating a bubble that finally burst in 2019. Consequently, consumption too has now sputtered, causing growth to collapse. As a result, India is now facing a Four Balance Sheet challenge—the original two sectors, plus NBFCs and real estate companies—and is trapped in an adverse interest-growth dynamic, in which risk aversion is leading to high interest rates, depressing growth, and generating more risk aversion. Standard remedies are unavailable: monetary policy is stymied by a broken transmission mechanism; large fiscal stimulus will only push up already-high interest rates, worsening the growth dynamic. The traditional structural reform agenda—land and labour market measures—are important for the medium run but will not address the current problems. Addressing the Four Balance Sheet problem decisively will be critical to durably reviving growth. Raising agricultural productivity is also high priority. And even before that, a Data Big Bang is needed to restore trust and enable better policy design.
  • Topic: International Trade and Finance, Economy, Global Political Economy, Economic growth, Global Financial Crisis
  • Political Geography: South Asia, India
  • Author: Anders Jensen
  • Publication Date: 10-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: This paper shows how the increase in information trails through the long-run transition from self-employment to employee-jobs explains the rise of the modern income tax system. I construct a new database which covers 100 household surveys across countries at different income levels and 140 years of historical data within the US (1870-2010). Using these data, I first establish four new stylized facts: 1) within country, the share of employees increases over the income distribution, and increases at all levels of income as a country develops; 2) the income tax exemption threshold moves down the income distribution as a country develops, tracking employee growth; 3) the employee share above the exemption threshold is maximized and remains constantly high; 4) decreases in the exemption threshold are strongly associated with increases in tax collection. These findings are consistent with a model where a high employee share is a necessary condition for effective taxation and where the rise in income covered by information trails through increases in employee share drives expansion of the income tax base. To provide a causal estimate of employee share on income tax systems, I study a state-led US development program implemented in the 1950s-60s which increased the level of employee share. The identification strategy exploits within-state changes in court-litigation status which generate quasi-experimental variation in the effective implementation date of the program. I find that the exogenous increase in employee share is associated with an expansion of the state income tax base and an increase in state income tax revenue.
  • Topic: Political Economy, Finance, Economy, International Development, Tax Systems
  • Political Geography: North America, United States of America
  • Author: Abhijit Banerjee, Amy Finkelstein, Rema Hanna, Benjamin A. Olken, Arianna Ornaghi, Sudarno Sumarto
  • Publication Date: 10-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: To assess ways to achieve widespread health insurance coverage with financial solvency in developing countries, we designed a randomized experiment involving almost 6,000 households in Indonesia who are subject to a nationally mandated government health insurance program. We assessed several interventions that simple theory and prior evidence suggest could increase coverage and reduce adverse selection: substantial temporary price subsidies (which had to be activated within a limited time window and lasted for only a year), assisted registration, and information. Both temporary subsidies and assisted registration increased initial enrollment. Temporary subsidies attracted lower-cost enrollees, in part by eliminating the practice observed in the no subsidy group of strategically timing coverage for a few months during health emergencies. As a result, while subsidies were in effect, they increased coverage more than eightfold, at no higher unit cost; even after the subsidies ended, coverage remained twice as high, again at no higher unit cost. However, the most intensive (and effective) intervention – assisted registration and a full one-year subsidy – resulted in only a 30 percent initial enrollment rate, underscoring the challenges to achieving widespread coverage.
  • Topic: Government, Health, Health Care Policy, Economy
  • Political Geography: Indonesia, Southeast Asia
  • Author: Timothy Besley, Anders Jensen, Torsten Persson
  • Publication Date: 09-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: This paper studies individual and social motives in tax evasion. We build a simple dynamic model that incorporates these motives and their interaction. The social motives underpin the role of norms and is the source of the dynamics that we study. Our empirical analysis exploits the adoption in 1990 of a poll tax to fund local government in the UK, which led to widespread evasion. The evidence is consistent with the model’s main predictions on the dynamics of evasion.
  • Topic: Political Economy, Economy, Financial Crimes, Tax Systems
  • Political Geography: United Kingdom, Europe, Global Focus
  • Author: Ali Tehrani, Azadeh Pourzand
  • Publication Date: 01-2019
  • Content Type: Journal Article
  • Journal: Harvard Journal of Middle Eastern Politics and Policy
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: Winter 2019 marked the 40th anniversary of the 1979 Islamic Revolution in Iran. The anniversary celebrations occurred in the midst of a difficult era of socio-economic turmoil, the return ofَ U.S. sanctions, and deepening political infighting in the Islamic Republic. Tensions between the government and the people are especially high. The tectonic plates of social change have been shifting below the surface in Iran over the past two decades, with major discontent erupting in the past year. While the country’s political facade appears largely unchanged, tensions and fragmentations among the ruling elite have deepened. Economic conditions are fast deteriorating for the average citizen, while political repression remains a harsh reality. Iran’s citizens, who have clung to hope and the possibility for change through decades of domestic repression and isolation from the global economy, struggle to remain hopeful. Collective fatigue stemming from years of isolation from the global economy, as well as domestic economic hardship, compounds the disappointment Iranians feel from unfulfilled political promises. The Iranian government has repeatedly failed to carry out promised reforms; in recent years alone, President Hassan Rouhani has proven unable to carry out his promises to “open up Iran politically, ease rigid social restrictions and address human rights abuses.” As this situation continues, Iran risks despair and chaos.
  • Topic: Government, Politics, Social Movement, Sanctions, Nuclear Power, Reform, Economy, Memory
  • Political Geography: Iran, Middle East
  • Author: David Díaz Arias, Luisa Cajamarca, Maya Collombon, Olivier Dabène, Gaspard Estrada, Manuel Gárate, Marie-Laure Geoffray, Damien Larrouqué, Frédéric Louault, Maria Teresa Martínez, Anaís Medeiros Passos, Kevin Parthenay, Gustavo Pastor, Carlos A. Romero, Pierre Salama, Sebastián Urioste
  • Publication Date: 01-2019
  • Content Type: Special Report
  • Institution: Centre d'Etudes et de Recherches Internationales
  • Abstract: Amérique latine - L’Année politique is a publication by CERI-Sciences Po’s Political Observatory of Latin America and the Caribbean (OPALC). The study extends the work presented on the Observatory’s website (www.sciencespo.fr/opalc) by offering tools for understanding a continent that is in the grip of deep transformations.
  • Topic: Conflict Resolution, Security, Civil Society, Corruption, Crime, Democratization, Nationalism, Political Economy, Religion, Governance, Peacekeeping, Economy, Political Science, Regional Integration, Memory, Transnational Actors
  • Political Geography: Brazil, Argentina, Colombia, Cuba, Latin America, Nicaragua, Caribbean, Venezuela, Mexico, Costa Rica, Chile, Peru, Paraguay, Bolivia
  • Publication Date: 10-2019
  • Content Type: Country Data and Maps
  • Institution: Economist Intelligence Unit
  • Abstract: No abstract is available.
  • Topic: Economy, Economic structure, Charts and tables, Annual indicators
  • Political Geography: Togo
  • Publication Date: 10-2019
  • Content Type: Country Data and Maps
  • Institution: Economist Intelligence Unit
  • Abstract: No abstract is available.
  • Topic: Economy, Outlook
  • Political Geography: Guinea-Bissau
  • Publication Date: 11-2019
  • Content Type: Country Data and Maps
  • Institution: Economist Intelligence Unit
  • Abstract: No abstract is available.
  • Topic: Economy, Economic structure, Charts and tables, Annual indicators
  • Political Geography: Djibouti