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Begin New Search Content Type Policy Brief Publishing Institution Peterson Institute for International Economics Publication Year within 5 Years Publication Year within 25 Years

21. Bad news for the Fed from the Beveridge space

Author:
Olivier Blanchard, Alex Domash, and Lawrence H. Summers
Publication Date:
07-2022
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The Federal Reserve seeks to cool an overheated US labor market to ease wage hikes and reduce job vacancies, without a painful spike in unemployment. But empirical evidence indicates that these goals have never been accomplished together and remain unlikely now. In fact, fighting inflation will require a reduction in job vacancies and also an increase in unemployment. The inverse relationship between job vacancies and unemployment is measured by the Beveridge curve, named after a British economist. Blanchard, Domash, and Summers find that the Fed’s hope that vacancies can be decreased without increasing unemployment flies in the face of historical empirical evidence. The current low unemployment rate and the very high vacancy-to-unemployment ratio suggest that the labor market is overheating and the natural unemployment rate has increased. It has increased about 1.3 percentage points from its pre-COVID level, implying the labor market is even more overheated than suggested by the current unemployment rate.
Topic:
Economy, Unemployment, and Labor Market
Political Geography:
North America and United States of America

22. South Korea should prepare for its exposure to US-China technology tensions

Author:
Mary Lovely and Abigail Dahlman
Publication Date:
07-2022
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The stated goal of the US-led Indo-Pacific Economic Framework for Prosperity (IPEF) is to create standards that enhance and elevate regional trade and investment flows, but it is clearly aimed at reducing the role of China in global supply chains. As China is Korea’s largest trading partner, US policy discouraging Chinese participation in supply chains has immediate detrimental implications for Korean manufacturers. The United States is the second-most important destination for Korean exports. Given the values of these triangular trade flows, Lovely and Dahlman assess South Korea’s exposure to US demands to remove or reduce Chinese participation in the manufacture of exports destined for the US market. The reliance of the proposed framework on certain standards will likely reduce Chinese participation in IPEF trade networks. Korea may benefit from this trend, but IPEF could also increase production costs for Korean companies, especially in the electronics sector, a problem that would worsen if China retaliates against these companies. To reduce these risks, Korea might find it prudent to reduce its reliance on intermediate goods from China for products it produces for export to the United States. The Korean government should also seek to better understand its exposure to US–China trade tensions and diversify its trade relations. Korean firms should start preparing for supply chain disruptions, perhaps by making investments at home. Korea could also help other IPEF members reduce supply chain disruptions while addressing security concerns over China.
Topic:
Economics, Science and Technology, Supply Chains, and Competition
Political Geography:
China, Asia, South Korea, North America, and United States of America

23. China's CPTPP bid spurs South Korea to act on Asia-Pacific trade pacts

Author:
Jeffrey J. Schott
Publication Date:
06-2022
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
China’s sudden application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in September 2021 has broad implications for South Korea’s economic relations with China, Japan, and the United States. In the past, Korea frequently debated but invariably postponed deciding whether to participate in negotiations on the CPTPP, despite the substantial benefits to be gained from doing so. However, China’s application has prompted Korean officials to get off the fence and apply as well. As China moves to deepen its ties to regional partners, Korea needs to follow suit, complementing the ongoing implementation of the Regional Comprehensive Economic Partnership (RCEP) with expedited negotiations to join the CPTPP and participation in the US-led Indo-Pacific Economic Framework for Prosperity (IPEF). Korean participation in the RCEP, CPTPP, and IPEF is desirable and mutually reinforcing and should allow Korea to sustain its strong commercial interests in both the US and Chinese markets.
Topic:
Economics, International Trade and Finance, Treaties and Agreements, and Trade
Political Geography:
China, South Korea, and Asia-Pacific

24. The pandemic’s long reach: South Korea’s fiscal and fertility outlook

Author:
Jacob Funk Kirkegaard
Publication Date:
06-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
South Korea was one of the first countries affected by the COVID-19 pandemic in early 2020. A combination of high societal discipline and competent and prompt government actions on mass testing capacity and technologically enabled tracing and quarantines enabled South Korea to quickly control the pandemic. Consequently, South Korea did not need to enter into full economic lockdown in early 2020 and needed only much smaller fiscal stimulus than most other advanced economies. The limited fiscal impact of COVID-19 is fortuitous for South Korea, as the pandemic coincided with the country’s dramatic demographic transition to a future of rapidly shrinking working-age population and accelerating overall aging. South Korea recorded the lowest total fertility rate of any advanced economy in 2020. Unless fertility rates rise, the country will not escape large and negative economic effects from what will be a rapidly declining total and working-age population. Kirkegaard proposes several policy reforms for South Korea, while arguing that the direct role of government action in increasing the South Korean fertility levels is likely to be modest.
Topic:
Demographics, Economy, Fiscal Policy, COVID-19, and Fertility
Political Geography:
Asia and South Korea

25. RCEP Is Not Enough: South Korea Also Needs to Join the CPTPP

Author:
Jeffrey J. Schott
Publication Date:
07-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The benefits of the Regional Comprehensive Economic Partnership (RCEP) for South Korea are limited and need to be supplemented by more comprehensive agreements that deepen Korea’s ties to strategic allies in the Asia-Pacific region. RCEP's most important achievement is its new regional content rule that will encourage deeper integration of supply chains across the 15 markets, a key benefit for Korean industries invested in the region. But Schott notes that the pact also has significant limitations. To complement RCEP, he recommends that South Korea move forward with two other trade negotiating priorities, membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and upgrading the Korea-US Free Trade Agreement (KORUS), the latter aimed at encouraging US reengagement in the Asia-Pacific integration pact.
Topic:
Markets, Treaties and Agreements, Partnerships, Regional Integration, and Economic Policy
Political Geography:
Asia and South Korea

26. Collateral benefits? South Korean exports to the United States and the US-China trade war

Author:
Mary Lovely, David Xu, and Yinhan Zhang
Publication Date:
07-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
This Policy Brief assesses the extent to which the United States increased its imports from South Korea after the US imposition of tariffs on Chinese exports. Korea benefited from this shift in US imports, although the increase was relatively small in most sectors. The authors use highly disaggregated US import and tariff data to examine adjustments in US purchases of manufactured goods from its trade partners. Their analysis indicates that Korea made a small gain in the US market following the levying of US tariffs on Chinese exports, with Korea’s share of overall US manufacturing imports rising 0.9 percent and its share of US manufacturing imports subject to trade war tariffs rising 1.0 percent. Gains were spread across a variety of manufacturing sectors—such as wood products, textiles and apparel, and machinery—reflecting both the choices made by US officials regarding which Chinese exports to tax and the nature of preexisting trade relationships between South Korea and the United States.
Topic:
Markets, Economy, Trade Wars, and Exports
Political Geography:
China, Asia, South Korea, and United States of America

27. Another reason to raise the Fed's inflation target: An employment and output boom

Author:
David Reifschneider and David Wilcox
Publication Date:
08-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
In 2012, the Federal Reserve formally adopted an inflation target and set it at 2 percent, in line with the level chosen by many other central banks. In hindsight, this setting left policymakers with too little room to cut interest rates when they want to fight recessions. Many researchers have noted that if central banks raised their inflation targets—either individually or in concert—they could do a better job in the long run of keeping inflation near its target and the workforce fully employed. Reifschneider and Wilcox highlight an additional and less-noted consequence of raising the inflation target modestly: The economy could enjoy a temporary but substantial boom in employment and output as it adjusted to the increase in the target. Critical to generating this favorable outcome would be decisive action by monetary policymakers to ensure that the higher inflation target is achieved in a reasonably timely manner. In light of substantial transition benefits, as well as the long-run improvement in economic performance, the authors recommend that the Federal Reserve raise its inflation target to 3 percent as part of its next framework review.
Topic:
Federal Reserve, Employment, Economy, and Inflation
Political Geography:
North America and United States of America

28. Climate policy is macroeconomic policy, and the implications will be significant

Author:
Jean Pisani-Ferry
Publication Date:
08-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
For all the long-term benefits of urgently addressing climate change, economic policymakers must plan for a challenging transition to carbon neutrality. Pretending that the costs will be trivial is dangerous. Estimates by the Intergovernmental Panel on Climate Change of the United Nations indicate that emergency action is indispensable to limit catastrophic climate disruption. Because of the magnitude of the efforts involved and the pace of the transformation implied, the accelerated transition to a carbon-neutral economy is bound to have serious, immediate economic implications, warns Pisani-Ferry. Some equipment will lose economic value. Some plants will have to close. Employees will have to be reallocated to other occupations. Investment will have to increase, to repair or rebuild infrastructure and the capital stock. He argues that so far policymakers have not addressed these implications in a systematic manner. It is high time policymakers realize that climate policy is also macroeconomic policy and design transition strategies now.
Topic:
Climate Change, Macroeconomics, and Carbon Emissions
Political Geography:
Global Focus

29. An Uneven Global Rebound Will Challenge Emerging-Market and Developing Economies

Author:
Maurice Obstfeld
Publication Date:
10-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
As the US economy rebounds amid elevated inflationary pressures and Europe grows at a rapid clip, an uneven global rebound looms. Although emerging-market and developing economies (EMDEs) generally retain good access to global capital markets for now, their relatively slow pace of COVID-19 vaccination will continue to hamper their economic recoveries and strain their public finances—already stretched owing to the fiscal pressures of the pandemic over the past year and a half. Higher interest rates in the rich countries, particularly the United States, could tip EMDEs into liquidity and even solvency crises. The likelihood of crises is higher if advanced-economy central banks move abruptly, surprising markets. Global policymakers should prepare now by enhancing mechanisms for providing liquidity to EMDEs and, in cases of insolvency, for restructuring their sovereign debts. Perhaps even more important, the scope for uneven recovery can be limited if rich countries make an all-out effort to deliver vaccines globally and enhance less prosperous countries’ infrastructures for getting shots into arms.
Topic:
Emerging Markets, Inflation, Economic Development, COVID-19, and Economic Recovery
Political Geography:
Global Focus and United States of America

30. Digital agreements: What’s covered, what’s possible

Author:
Gary Clyde Hufbauer and Megan Hogan
Publication Date:
10-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Rapidly expanding digital flows have significantly contributed to world economic growth. The exponential expansion of digital flows since 2005 has partially compensated for lethargic growth in global conventional trade and foreign direct investment flows. COVID-19 accelerated the digital revolution in 2020, as businesses and consumers increasingly “went digital” in everything from online education and work to shopping. Many countries, particularly the United States, have enormous commercial and cultural interests in preserving the freedom of cross-border digital traffic. Strong international agreements can keep digital highways open, but agreements reached so far do too little to discipline government practices that threaten to restrict digital flows, allowing ample room for ideological and protectionist obstacles. A new and better agreement is necessary to safeguard the growth of digital flows.
Topic:
Treaties and Agreements, Economic Growth, COVID-19, and Digital Policy
Political Geography:
Global Focus and United States of America

31. Can EU carbon border adjustment measures propel WTO climate talks?

Author:
Gary Clyde Hufbauer, Armen Hovakimian, and Jeffrey J. Schott
Publication Date:
11-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Reforms proposed in the European Union’s “Fit for 55” climate policy package are likely to sharply increase the cost paid by European firms for their greenhouse gas (GHG) emissions. Recognizing that increased carbon prices would put European firms at a disadvantage in competing with imports from countries that produce without incurring these costs, the European Commission has proposed a Carbon Border Adjustment Mechanism (CBAM) requiring that the most carbon-intensive EU imports either incur comparable carbon charges as EU firms or pay the equivalent of a carbon-based tariff. The CBAM aims to deter carbon leakage, which could arise if firms shift carbon-intensive production out of Europe to facilities in countries that do not tax GHG emissions (or tax at a low rate) and then export the goods to Europe. European production and output would suffer and global climate efforts to reduce GHG emissions would be undercut. The loftier goal is to encourage other countries to follow the European example and strengthen their own national decarbonization policies, which in turn would exempt their goods from CBAM charges. The CBAM would cover five carbon-intensive industries: iron and steel, aluminum, fertilizer, electricity, and cement. Countries most affected by the CBAM include Russia, China, Turkey, the United Kingdom, Ukraine, South Korea, and India. Some are likely to contest the policy, claiming that the CBAM is a unilateral measure that violates World Trade Organization rules and bolsters protectionism while hampering rather than encouraging efforts in other countries to tackle climate change. A better and more feasible approach would be adoption of a CBAM moratorium while negotiations are conducted to promote carbon abatement policies that comply with the rules-based global trading system.
Topic:
Climate Change, European Union, Economy, Carbon Emissions, and Imports
Political Geography:
Europe

32. Raising a caution flag on US financial sanctions against China

Author:
Jeffrey J. Schott
Publication Date:
01-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
China’s policies in Xinjiang, Hong Kong, and the South China Sea and its ongoing support for Iran, North Korea, and Venezuela pose major challenges for the United States, where bipartisan pressure is growing to ramp up punitive sanctions against leading Chinese firms and financial institutions. Financial sanctions freeze the US assets or bar US entry of the targeted individuals and firms and prohibit US financial firms from doing business with them. Schott explains why US officials should carefully weigh the risks to international financial markets and US economic interests before imposing punitive sanctions on major financial institutions engaged with China. The collateral costs of such sanctions would be sizable, damaging US producers, financial institutions, and US alliances. By restricting access of major banks to international payments in US dollars and barring use of messaging systems like SWIFT, tougher US financial sanctions would effectively “weaponize” the dollar; friends and foes alike would be pushed to seek alternatives to dollar transactions that, over time, would weaken the international role of the dollar. Instead of doubling down on current unilateral financial sanctions, US policy should deploy sanctions in collaboration with allies and calibrate trade and financial controls to match the expected policy achievements.
Topic:
Human Rights, Sanctions, Finance, and Economy
Political Geography:
China, Asia, North America, and United States of America

33. Fiscal resiliency in a deeply uncertain world: The role of semiautonomous discretion

Author:
Peter R. Orszag, Robert E. Rubin, and Joseph E. Stiglitz
Publication Date:
01-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Orszag, Rubin, and Stiglitz outline a new fiscal framework that they argue would better equip policymakers to face deep uncertainties about future interest rates (which, they say, may not remain low forever), hard-to-predict global shocks, and climate risks. They reject fiscal anchors—simple limits on deficits or debt as a share of GDP that governments adopt to check their spending and borrowing—that have historically guided fiscal policy and believe any attempts to modify such targets for the current period of low interest rates are likely to fail. Instead they propose making the budget respond more automatically to economic distress (through stronger automatic stabilizers) and to long-term fiscal pressures (e.g., embedding adjustment mechanisms in health care and pension programs), as well as creating an infrastructure program and extending debt maturities to insure against interest rate changes. Such a "streamlined dashboard" would then allow policymakers to use discretion as necessary to take any additional actions—either to provide more stimulus during short-term difficulties or to adjust the automatic features themselves—rather than adhering to fiscal targets that may no longer be appropriate when economic conditions change.
Topic:
Financial Crisis, Economy, Fiscal Policy, and Fiscal Deficit
Political Geography:
Global Focus

34. Uncertain prospects for sovereign wealth funds of Gulf countries

Author:
Julien Maire, Adnan Mazarei, and Edwin M. Truman
Publication Date:
02-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Among the best-known sovereign wealth funds (SWFs)—government-owned or controlled investment vehicles—are those funded by hydrocarbon revenues in the member economies of the Gulf Cooperation Council (GCC), which comprises all the Arab countries in the Persian Gulf except Iraq, namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. This Policy Brief compares the GCC SWFs with each other and with other funds in terms of their transparency and accountability on the fifth SWF scoreboard, available here. Several factors, including the decline in oil prices in recent years, have slowed the growth of the GCC’s SWFs. This slower growth could further diminish their governance and transparency standards, which are already weaker than those of other SWFs. Efforts to improve their governance and accountability will be important to garner public support for these SWFs.
Topic:
Energy Policy, Government, Markets, Governance, Regulation, and Capital Flows
Political Geography:
Middle East and Gulf Nations

35. Sovereign wealth funds are growing more slowly, and governance issues remain

Author:
Julien Maire, Adnan Mazarei, and Edwin M. Truman
Publication Date:
02-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
In the last two decades, sovereign wealth funds (SWFs)—funds accumulated by a government that are invested in whole or in part abroad to benefit the country in the future—have faced increased public scrutiny over their investment patterns, financial results, and governance. This Policy Brief updates and expands a prototype scoreboard rating the transparency and accountability of SWFs, which Truman established in 2007. This fifth edition of the scoreboard shows that the average scores continued to improve for the 64 SWFs examined, but governance issues remain. New funds have emerged—many of them government holding companies or strategic investment funds—but the growth of assets under management by SWFs has slowed, in some cases partly because of withdrawals to help finance expenses related to the COVID-19 pandemic, raising questions about their future role.
Topic:
Government, Markets, Sovereign Wealth Funds, Governance, Regulation, and Capital
Political Geography:
Global Focus

36. Will industrial and agricultural subsidies ever be reformed?

Author:
Gary Clyde Hufbauer
Publication Date:
03-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Open Sub-navigation BackOpen Sub-navigation Publications Back Policy Briefs Working Papers Books PIIE Briefings Open Sub-navigation Commentary Back Op-Eds Testimonies Speeches and Papers Topics & Regions PIIE Charts What Is Globalization? Educational Resources Open Sub-navigation Back Senior Research Staff Research Analysts Trade Talks Open Sub-navigation Back RealTime Economic Issues Watch Trade & Investment Policy Watch China Economic Watch North Korea: Witness to Transformation 中文 Open Sub-navigation Back All Events Financial Statements Global Connections Global Economic Prospects Stavros Niarchos Foundation Lectures Trade Winds Open Sub-navigation Back News Releases Multimedia Media Center Open Sub-navigation Back Board of Directors Staff Employment Contact Annual Report Transparency Policy POLICY BRIEF VIEW SHARING OPTIONS Will industrial and agricultural subsidies ever be reformed? Gary Clyde Hufbauer (PIIE) Policy Brief21-5 March 2021 Photo Credit: REUTERS/Denis Balibouse One economic argument for government subsidies is that they are necessary to compensate firms and industries for benefits they provide to society at large but cannot capture in the prices they charge for goods or services. For example, subsidies to renewable energy are defended because renewable energy limits carbon emissions. When a major economy subsidizes extensively, however, its trading partners are drawn into the game, with losses all around. As the prisoner’s dilemma suggests, a better outcome would entail mutual restraint. But the goal of mutual restraint is no less difficult in international trade than it is in international arms control. Both the European Union and the US federal system try, in different ways, to regulate industrial subsidies. Hufbauer examines efforts to contain unjustifiable subsidies and proposes modest improvements, bearing in mind that as countries struggle to overcome the global economic downturn resulting from the COVID-19 pandemic, there is little appetite for restoring a free market economy—one in which firms compete with minimum government assistance or regulation. Selective upgrading of the rulebook may nevertheless be possible.
Topic:
Agriculture, Government, Reform, European Union, Regulation, Manufacturing, Industry, COVID-19, and Subsidies
Political Geography:
Europe, North America, and United States of America

37. The unappreciated trend toward unilateral trade liberalization

Author:
Robert Z. Lawrence
Publication Date:
03-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Afrequently voiced complaint from the Trump administration was that US firms have faced a competitive disadvantage in exports because the US market is open and US tariffs are low but US trading partners protect their markets with high tariffs. The administration used this concern to justify raising US tariffs whenever it could. Lawrence argues that these claims should be more nuanced and account for the extensive unilateral liberalization by many countries over the past 30 years and that the grievances that motivated the Trump trade policies are increasingly misplaced. Many developing countries have reduced their tariffs unilaterally to rates that are far lower than they applied three decades ago and far less than the bound rates reflected in their World Trade Organization (WTO) obligations. Globally, on average, tariffs were not raised during the global financial crisis of 2008 and continued to decline through at least 2018. Even when shocks from imports resulted in serious injury to domestic industries, several developing countries temporarily provided safeguard protection but at levels that were lower than their WTO bound rates. This evidence of import liberalization also suggests that rising protectionism was not responsible for the slow growth in world trade that has been evident since 2011. It remains uncertain whether countries will now respond to disruptions to global supply chains since 2018 caused by Trump’s trade policies and the COVID-19 pandemic by reversing their tariff liberalization stance, but the sustained enthusiasm for new megaregional trade agreements suggests many countries will not.
Topic:
Emerging Markets, World Trade Organization, Trade Wars, and Protectionism
Political Geography:
China, Asia, North America, and United States of America

38. Does the new fiscal consensus in advanced economies travel to emerging markets?

Author:
Olivier Blanchard, Josh Felman, and Arvind Subramanian
Publication Date:
03-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Anew consensus on fiscal policy has emerged in advanced economies, that stimulus is both needed and feasible. At first blush, the scope for stimulus seems even greater in emerging markets, since their primary deficits are smaller and interest-growth differentials more favorable, suggesting that they can sustain much higher levels of debt. But more careful analysis suggests that this is not the case. The authors point out that what matters for debt sustainability are not current conditions but rather the range of possible future outcomes. And prospects for interest rates and growth are more uncertain in emerging markets, while primary balances are more difficult to adjust. As a result, debt limits are in fact tighter than advanced economies. Taking India as a case study, the authors argue that what is needed in the current situation is responsible, slow fiscal adjustment. More generally, one should be careful about importing wholesale the new fiscal consensus into emerging markets.
Topic:
Emerging Markets, Monetary Policy, Fiscal Policy, and Consensus
Political Geography:
Global Focus

39. The evolving gender gap in labor force participation during COVID-19

Author:
Simeon Djankov, Pinelopi Koujianou Goldberg, Lisa Hyland, and Eva (Yiwen) Zhang
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Despite many significant gains by women in the paid workforce in recent decades, the percentage of women participating in the labor force has remained lower than the percentage of male participants. Now, in response to the COVID-19 pandemic and the global economic downturn it precipitated, the gap in labor force participation between men and women in some economies has actually widened, with potentially damaging repercussions for women’s career prospects and pay. The pandemic has disproportionately affected sectors employing more women, such as retail stores, restaurants, and the hotel and hospitality business. An increase in family caregiving responsibilities because of school and childcare closures has also fallen on working mothers' shoulders. Both factors have pulled women out of the labor force. The authors track trends in male and female labor force participation in 43 countries and find substantial differences across countries in the way women’s participation has been affected relative to that of men. In some countries, such as Colombia, Chile, and Cyprus, the gender gap in labor force participation widened the most during the pandemic. The gender gap also widened in the United States, driving 2.5 million women from their jobs in what Vice President Kamala Harris called a “national emergency” for women. In other economies, such as Luxembourg and Lithuania, the gender gap in labor force participation, unexpectedly, shrank during the early period of the pandemic. On average, female employees have fared better in countries where women are less concentrated in the services sector, less likely to be employed as temporary workers, and where laws supported greater equality at the onset of the crisis. Greater government expenditure on childcare in the pre-COVID-19 era, however, does not appear to have insulated female workers from the damaging repercussions of the pandemic.
Topic:
Economics, Gender Issues, Labor Issues, Women, Services, COVID-19, and Empowerment
Political Geography:
Colombia, Chile, Cyprus, Global Focus, and United States of America

40. Startups in the United States during the pandemic reflect some dynamism amid job losses

Author:
Simeon Djankov and Eva (Yiwen) Zhang
Publication Date:
05-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
New business applications have surged in the United States since the start of the COVID-19 pandemic. The growth is driven largely by startups in online retail, transportation, and personal services. Many of these new entrepreneurs are self-employed and were likely laid off and forced into entrepreneurship by necessity. No official data are available yet on the number of businesses destroyed in 2020, because business data for firms that close without entering bankruptcy are lagging. But the authors calculate that firm births may have surpassed firm deaths during the pandemic. While this boom in business entry is a tribute to the adaptability and potential innovative spirit in US capitalism, one should not be overly optimistic about jobs created in this wave of startups. As many of these new startups are by people forced to strike out on their own, the number of jobs created per new firm is even smaller than it was during previous US recessions. And like online businesses started around the last recession (e.g., Uber, Airbnb, and Venmo), some of these new firms may turn out to be major contenders in their sectors, displacing workers employed by their traditional rivals.
Topic:
Science and Technology, Labor Issues, Financial Crisis, and COVID-19
Political Geography:
North America and United States of America