Content Type: Working Paper / Publication Year: within 10 Years

301. To Confront Rising Neofascism, the Latin American Left Must Rediscover Itself

Author:: Tricontinental: Institute for Social Research
Publication Date:: 08-2024
Content Type:: Working Paper
Institution:: Tricontinental: Institute for Social Research
Abstract:: This dossier presents a broad overview of the Latin American far right’s political, economic, and cultural programmes and how the absence of a real left political project that secures better living conditions has thrown different fractions of the working class into the grip of neofascism.
Topic:: Far Right, Leftist Politics, Progressivism, Neofascism, and Antifascism
Political Geography:: Latin America

302. The Telugu People’s Struggle for Land and Dreams

Author:: Tricontinental: Institute for Social Research
Publication Date:: 09-2024
Content Type:: Working Paper
Institution:: Tricontinental: Institute for Social Research
Abstract:: This dossier catalogues the immense cultural production of the Telangana armed struggle in India and how it inspired the people to participate in cycles of protest against colonialism, monarchy, and landlordism, building on the idea that art and culture are both produced by the class struggle and, in turn, produce the class struggle. In a society that was prevented from being fully literate, storytelling and songs played a key role in building confidence and organisation.
Topic:: Social Movement, Protests, Land Rights, and Telugu
Political Geography:: South Asia and India

303. Tracking the Trend of Quinoa Price in Bolivia: Structural Breaks and Persistence of Shocks

Author:: Javier Aliaga Lordemann, Ignacio Garrón Vedia, and María Cecilia Lenis Abastoflor
Publication Date:: 06-2024
Content Type:: Working Paper
Institution:: Institute for Advanced Development Studies (INESAD)
Abstract:: Quinoa has evolved considerably in the past decades, becoming consolidated as a fundamental pillar for Andean farming communities and emerging as a prominent actor in the global superfood market. Despite this, prices of this grain have been characterized by complex dynamics, with substantial fluctuations that directly affect smallholder income. The goal of this research is to analyze Bolivian quinoa price dynamics, identifying both the main events and factors that caused structural breaks in the price trend and the persistence of shocks in time. The approach employed combines, on the one hand, an analysis of the structural breaks by means of the Bai and Perron contrast, together with estimates of long memory using the 2ELW estimator. Also evaluated was the influence of exogenous variables that affect prices, for which the world commodity activity index (Index of Global Real Economic Activity), the Oceanic Niño Index and world quinoa production were considered. The findings show multiple structural breaks in the quinoa price series, related to certain key events. Among the latter are for example changes in research and development, the production and sales boom, and the boost prompted by State initiatives and international cooperation. These breaks are also related to different degrees of persistence in the shocks under the different regimes identified. Although the exogenous variables show no significant short-term effects, it is understood that they may have a relevant influence in different periods. The present study shows the complexity of Bolivian quinoa price dynamics, characterized by several structural breaks. To take proper advantage of this market, producers and policy makers must implement flexible strategies, as well as continuous monitoring of the sector’s progress, considering the key factors that induced price trend changes over the years.
Topic:: Markets, Memory, Price, Quinoa, and Structural Breaks
Political Geography:: South America, Bolivia, and Andes

304. Current Situation and Prospects of the Quinoa Sector in Bolivia

Author:: Rubén Collao P. and Beatriz Muriel Hernández
Publication Date:: 06-2024
Content Type:: Working Paper
Institution:: Institute for Advanced Development Studies (INESAD)
Abstract:: We analyze the quinoa sector situation and prospects in Bolivia, based on both secondary and primary information sources (i.e. surveys of producers and interviews to key actors). The quinoa sector has sustainability problems in production, market shares and price volatility. However, this grain – specifically the royal quinoa from the Southern Altiplano – has great potential to remain in the world market within niches that value organic or regenerative production, as well as to increase national consumption. In this regard, we believe that it is necessary to impulse the quinoa transformation with greater diversification, productive complementation and coordination between the various stakeholders. In this productive dynamics, small quinoa producers can insert themselves into the value chain, which requires the strengthening of their hard and soft skills, as well as greater technical assistance. Finally, the quinoa sector sustainability requires a comprehensive approach that includes good agricultural practices caring the environment, as well as more conscious consumption.
Topic:: Markets, Sustainability, Value Chains, and Quinoa
Political Geography:: South America and Bolivia

305. Engaging Gender Equality in the Economic-Productive Sphere

Author:: Beatriz Muriel and Daniel Romero
Publication Date:: 02-2024
Content Type:: Working Paper
Institution:: Institute for Advanced Development Studies (INESAD)
Abstract:: This study reviews the conceptual framework of the economic-productive sphere and of gender equality, the aim of which is to establish theoretical-practical lines allowing progress in engaging these two spheres. In this context, equality in opportunities and in rights can be harmonized, though equality of “responsibilities, resources and retribution” by gender are more difficult to reconcile. Also, women’s (economic) empowerment – seen as a way of promoting gender equality – possesses a degree of relation with the theory of growth and wellbeing when an individual has the role of consumer, for which “capabilities” are needed for selecting valuable “functionings”. However, when such a woman takes on the role of worker, producer or businesswoman, her seeking of a high level of economic-productive performance does not imply that she is empowered, nor does the latter imply the former; though there may be a positive correlation between the two. On this basis, economic-productive interventions may harmonize with equality of opportunities by gender.
Topic:: Economic Growth, Equality, Empowerment, Gender, and Well-Being
Political Geography:: Global Focus

306. The Impact of the 21st Century Commodity Supercycle on Natural-Resource Dependent Economies: The Case of Bolivia and Peru

Author:: Daniel Agramont-Lechín
Publication Date:: 01-2024
Content Type:: Working Paper
Institution:: Postgraduate Program on Sustainable Development and Social Inequalities in the Andean Region (trAndeS)
Abstract:: In the early 21st century, Bolivia and Peru experienced remarkable economic growth, coupled with notable reductions in poverty and inequality. However, the subsequent economic slowdown triggered by declining international commodity prices raised concerns about the sustainability of their progress. Historically, both nations have been vulnerable to fluctuations in global commodity prices, often resulting in social unrest and political instability. This study examines whether the significant influx of resources to Bolivia and Peru from 2003 to 2013, attributed to the commodity boom, fostered structural transformation or, on the contrary, reinforced their dependence on the global economy. Analyzing macroeconomic and productivity data, the research indicates a strong correlation between their economic performance and the commodity supercycle trend. A primary finding suggests that rather than fostering a more self-reliant economic integration, the 21st-century economic boom exacerbated the reliance of both nations on natural resource extraction. However, a more nuanced examination reveals divergent medium-term impacts driven by each nation’s development model. Peru, through diversification of international revenue streams and prudent macroeconomic policies, managed to mitigate the effects of declining commodity prices. In contrast, Bolivia’s economy bore the brunt of diminishing income, not only due to the end of the commodity boom but also due to insufficient investments in productive sectors.
Topic:: Natural Resources, Economy, Neoliberalism, Commodities, Extractivism, Economic Dependence, and Post-Neoliberalism
Political Geography:: South America, Peru, and Bolivia

307. Assessing the International Interlinkages and Dependencies of the EU27 ‘Energy-renewables’ Ecosystem

Author:: Francesca Guadagno and Robert Stehrer
Publication Date:: 05-2024
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: The energy-renewables ecosystem (ERES) plays a particularly important role in the green transition. This paper analyses its relevance in EU member states and the competitiveness for the EU27 as a whole vis-à-vis other global players and identifies structural dependencies and vulnerabilities. It does so by drawing on the Joint Research Centre’s FIGARO dataset and detailed trade data, and by developing a novel approach that adapts input-output indicators to the analysis of industrial ecosystems. A number of key findings emerge from our analysis. First, the ERES is particularly relevant in new member states, Austria and Germany. At the global level, the EU27 is the second most important exporter after China. Second, in 2020 the EU ecosystem was dependent on imports of coal and lignite from Russia, as well as on a variety of other products from China (including medium- and high-tech electronic products). Third, analysis on the basis of detailed trade data indicates that a few products in the ERES supply chain are delivered by only a handful of countries, which could indicate some vulnerability. Most of the partner countries supply some products that may be characterised as ‘risky’, but China is a main source of such products.
Topic:: European Union, Trade, Renewable Energy, Strategic Autonomy, Green Transition, and Dependency
Political Geography:: Europe

308. Can Multinationals Withstand Growing Trade Barriers?

Author:: Mahdi Ghodsi, Michael Landesmann, and Nina Vujanović
Publication Date:: 01-2024
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: Multinational enterprises (MNEs) are increasingly dealing with challenges shaped by the new geopolitical and trade environments. Besides traditional tariffs, exporting firms need to comply with regulatory non-tariff measures (NTMs) in the form of technical barriers to trade (TBTs) and sanitary and phytosanitary (SPS) measures. Although trade costs associated with these policy measures affect all firms, implications could be multifaceted for multinationals that base their international activities on exporting and importing and are important for the formation of global supply chains. Applying Poisson pseudo maximum likelihood to the unique Orbis dataset of firms on multinational subsidiaries, we show that NTMs pose a greater challenge to MNEs’ subsidiaries’ activity and performance than tariffs do. High-tech manufacturing subsidiaries of foreign MNEs are particularly vulnerable to these NTMs, as they suffer higher regulatory losses. However, multinational affiliates that have higher productivity, those with full foreign ownership representation, those that are embedded within a larger international network of subsidiaries, and those that are located in trading partners with deep preferential trade agreements can turn these trade challenges to their advantage. Our results have important implications for policy makers regulating trade in goods.
Topic:: International Trade and Finance, Foreign Direct Investment, Multinational Corporations, Tariffs, and Supply Chains
Political Geography:: Global Focus

309. Assessing the Impact of New Technologies on Wages and Labour Income Shares

Author:: Antea Barišić, Mahdi Ghodsi, and Robert Stehrer
Publication Date:: 01-2024
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: This paper advances the literature on the impacts of new technologies on labour markets, focusing on wage and labour income shares. Using a dataset from 32 countries and 38 industries, we analyse the effects of new technologies – proxied by patents, information and communication technology (ICT) capital usage, and robot intensity – on average wages and labour income shares over time. Our results indicate a positive correlation between patents and wage levels along with a minor negative impact on labour income shares, suggesting that technology rents are not fully passed on to labour. Robot intensity is positively associated with labour income shares, while ICT capital has an insignificant effect. These effects persist over time and are reinforced by global value chain (GVC) linkages. Our conclusions align with recent research indicating that new technologies have a generally limited impact on wages and labour income shares.
Topic:: Science and Technology, Labor Issues, Investment, Global Value Chains, Robotics, and Income
Political Geography:: Global Focus

310. Which Migrant Jobs are Linked with the Adoption of Novel Technologies, Robotisation, and Digitalisation?

Author:: Antea Barišić, Mahdi Ghodsi, and Robert Stehrer
Publication Date:: 02-2024
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: In recent decades, the development of novel technologies has intensified due to globalisation, prompting countries to enhance competitiveness through innovation. These technologies have significantly improved global welfare, particularly in sectors like healthcare, where they have facilitated tasks and boosted productivity, for example playing a crucial role in combating the COVID-19 pandemic. However, certain technologies, such as robots, can negatively impact employment by replacing workers and tasks. Additionally, the emergence of artificial intelligence as digital assets not only replaces specific tasks but also introduces complexities that may displace employees who are unable to adapt. While the existing literature extensively explores the heterogeneous effects of these technologies on labour markets, studies of their impact on migrant workers remain scarce. This paper presents pioneering evidence on the effects of various novel technologies on migrant employment in the European Union. The analysis covers 18 EU member states from 2005 to 2019 focusing on the impact of novel innovations, robot adoption, three types of digital assets, and total factor productivity, on migrant employment. The key findings reveal that innovations measured by the number of granted patents increase both the number and proportion of migrant workers relative to the overall workforce. While robots do replace jobs, their impact on native workers surpasses that of migrant workers, resulting in a higher share of migrant workers following robot adoption. Total factor productivity positively influences migrant workers, while the effects of digital assets are heterogeneous. Moreover, the impacts of these technologies on migrant workers vary significantly across different occupation types and educational levels.
Topic:: Migration, Labor Issues, European Union, Innovation, Robotics, Migrant Workers, Digitalization, and Income Distribution
Political Geography:: Europe

311. Technological Push and Pull Factors of Bilateral Migration

Author:: Antea Barišić, Mahdi Ghodsi, and Michael Landesmann
Publication Date:: 02-2024
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: This paper explores the complex interplay between technology adoption, specifically robotisation and digitalisation, and international migration within the EU and other advanced economies, including Australia, the UK, Japan, Norway and the US, over the period 2001-2019. Utilising a gravity model approach grounded in neoclassical migration theory, the study analyses how technological advancements influence migration flows. It examines two key technological variables: the extent of digitalisation, represented by ICT capital per person employed, and the adoption of industrial robots, measured by the stock of robots per thousand workers. The research uniquely integrates these technological factors into migration analysis, considering both push and pull effects. Additionally, it accounts for various other migration determinants such as macroeconomic conditions, demography and policy factors. The findings reveal insightful dynamics about the relationships between technological progress, labour market conditions and migration patterns, contributing significantly to the current literature and informing future migration policies and the impact of technology adoption.
Topic:: Migration, Labor Issues, Innovation, Robotics, Migrant Workers, and Digitalization
Political Geography:: Global Focus

312. Working from Home and Mental Well-being in the EU at Different Stages of the COVID-19 Pandemic: A Gendered Look at Key Mediators

Author:: Sandra Leitner
Publication Date:: 03-2024
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: This paper analyses the relationship between working from home (WFH) and mental well-being at different stages during the first two critical years of the COVID-19 pandemic, when governments repeatedly imposed lockdowns and enacted WFH mandates to contain the spread of the virus. Using data from a representative survey conducted at four different time periods in 2020 (first lockdown, subsequent gradual reopening), 2021 (further lockdown) and 2022 (restrictions widely lifted) in the 27 EU member states, it examines the potentially changing role of several mediators over time, such as work-family conflict, family-work conflict, stability, resilience, isolation, the importance of different support networks, workload, physical risk of contracting COVID-19 at work, and housing conditions. For the first lockdown, it also differentiates by previous WFH experience, in terms of WFH novices and experienced WFH workers. It differentiates by gender, in order to take the potential gendered nature and effect of COVID-19 measures into account. The results show that while there was no direct relationship between WFH and mental well-being, there are several important mediators whose relevance was specific not only to certain stages of the pandemic, but also to previous experience with WFH and gender. Stability is the only mediator that was relevant over the entire two-year pandemic period. Work-family conflict and family-work conflict were only relevant during the first lockdown, while resilience and isolation mattered especially when most of the EU economies had lifted most of their restrictions. Unlike established WFH workers, WFH novices had an advantage during the first lockdown, benefiting from lower family-work conflict and more helpful networks of family and friends. Moreover, our results differ by gender: for females who undertook WFH, important mediators were work-family conflict and family-work conflict. Both were related to adjustments they had to make in work and non-work hours in response to the enforced closure of schools and childcare facilities during the lockdowns, especially during the first. For males who undertook WFH, especially WFH novices, support from networks of family and friends was an important mediator.
Topic:: Labor Issues, European Union, Mental Health, COVID-19, Well-Being, and Working from Home
Political Geography:: Europe and Global Focus

313. How Far from Full Employment? The European Unemployment Problem Revisited

Author:: Meryem Gökten, Philipp Heimberger, and Andreas Lichtenberger
Publication Date:: 04-2024
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: This paper analyses deviations from full employment in EU countries, compared with the US and the UK. We apply the Beveridge (full-employment-consistent) rate of unemployment (BECRU), derived from the unemployment-vacancies relationship. The BECRU is the level of unemployment that minimises the non-productive use of labour. Based on a novel dataset for the period 1970-2022, we find full employment episodes in selected EU countries (Germany, Sweden, Austria, Finland) during the 1970s. The European unemployment problem emerged in the 1980s and 1990s, as Beveridgean full employment gaps increased. In the run-up to the global financial crisis, full employment gaps declined, then increased during the Great Recession. Slack in labour markets increased initially during the pandemic. Labour markets became tighter when recovering from the COVID-19 crisis, but few countries hit full employment. Panel regressions highlight that hysteresis, labour market institutions, structural factors, macroeconomic factors and political factors contribute to explaining full employment gaps.
Topic:: Migration, European Union, Employment, Macroeconomics, Unemployment, Labor Market, OECD, and Income Distribution
Political Geography:: Europe

314. The Path Through: Early COVID-19 Job Loss and Labour Market Trajectories in Austria

Author:: Stefan Jestl and Maryna Tverdostup
Publication Date:: 05-2024
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: This paper examines the socio-demographic disparities evident in the early labour market response to the COVID-19 pandemic in Austria, relying on the register-based labour market career dataset from the Austrian Micro Data Center (AMDC) for the 2018-2021 period. The analysis focuses on the divergences in out-of-unemployment transitions and medium-term employment stability among those who lost their jobs early in the pandemic in contrast to the group of the longer-term unemployed. We document that individuals affected by job loss during the initial phases of the pandemic did not exhibit enduring scarring effects. Unlike their longer-term unemployed counterparts, they did not demonstrate persistent labour market detachment, prolonged periods of unemployment or a diminished success rate in re-employment. However, certain socio-demographic cohorts – notably, women, parents with two or more young children, and individuals with lower levels of education – faced disproportionate challenges during the pandemic. They were more inclined to transition into precarious employment arrangements and experienced lower levels of employment stability in the months following re-employment.
Topic:: Employment, Inequality, Unemployment, COVID-19, Labor Market, and Gender
Political Geography:: Europe and Austria

315. The Factors Driving Migration Intentions and Destination Preferences in Central, East and Southeast European Countries

Author:: Antea Barišić, Mahdi Ghodsi, Alireza Sabouniha, and Robert Stehrer
Publication Date:: 05-2024
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: This paper analyses the determinants of outward migration decisions while focusing on CESEE countries and using data from the OeNB Euro Survey conducted by the Oesterrichische Nationalbank (OeNB), a data source that has yet to be exploited at the individual level. Applying a two-stage Heckman procedure, we identify the determinants of the intention to migrate, including age, gender, ties at home, household characteristics and income. In the second stage, we analyse the characteristics of those who expressed a desire to migrate and investigate the determinants of the choice of the respective destination, distinguishing between EU15, EU-CEE and extra-EU countries. The insights in this paper might help to inform fact-based migration and public policies in addition to laying some groundwork for further research (a) concerning the impact of new technologies and demographic trends on the intentions to migrate as well as (b) establishing a firmer link between the intention to migrate and actual migration.
Topic:: Migration, Labor Issues, European Union, Pull Factor, and Choice Model
Political Geography:: Europe

316. The Granular Trade and Production Activities (GRANTPA) Database

Author:: Sebastien Bradley, Javier Flórez Mendoza, Mario Larch, and Yoto V. Yotov
Publication Date:: 06-2024
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: This paper introduces the Granular Trade and Production Activities (GRANTPA) database, which covers international trade flows for 3,124 products and 247 countries over the period 1995-2019 as well as domestic trade flows and production data for the same number of products and years for a subset of 35 European economies. The original data sources that we employ are Eurostat’s Comext and Prodcom databases. A gravity application delivers a large set of product-level ‘home bias’ estimates, which cannot be obtained without domestic trade flows. The average estimates on the standard gravity variables in our model (e.g., distance) are comparable to those from the related literature. However, our disaggregated estimates are very heterogeneous across products, thus highlighting the importance of our new database.
Topic:: International Trade and Finance, European Union, Trade, Production, Gravity Data, Structural Gravity, Home Bias Estimates, and Disaggregated Gravity Estimates
Political Geography:: United Kingdom, Europe, Turkey, Norway, Serbia, Iceland, Montenegro, and North Macedonia

317. Full Employment: A Survey of Theory, Empirics and Policies

Author:: Aleksandr Arsenev, Meryem Gökten, Philipp Heimberger, and Andreas Lichtenberger
Publication Date:: 06-2024
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: The concept of full employment is associated with diverse economic, political and social aspects. We provide a survey of theory, empirics and policy issues related to full employment. We make a novel contribution by tying together multi-dimensional aspects of full employment regarding definitions, theoretical perspectives, empirical measurements, policy debates and real-world policy programs. We distinguish: concepts of full employment that provide systematic links to price stability; minimum unemployment and maximum employment approaches; and the unfilled vacancies perspective. Furthermore, we provide and discuss different empirical measures of full employment for selected economies, and we propose a new full employment typology. Based on our survey findings, we argue that conceptualising and measuring full employment is not merely a technical task, but inevitably involves normative judgments. Finally, we discuss avenues for future research.
Topic:: Labor Issues, European Union, Employment, Macroeconomics, OECD, Welfare State, and Jobs
Political Geography:: Europe

318. On Within-couple Time Allocation: Gendered Disparities in Paid Work and Housework in Europe

Author:: Alireza Sabouniha and Maryna Tverdostup
Publication Date:: 06-2024
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: This paper aims to pursue a deeper understanding of gendered within-couple allocation of time into paid work and housework in heterosexual dual-earner couples. Relying on the second wave of Harmonised European Time Use Survey (HETUS) data for 10 European countries, we estimate spousal relative worktime and housework to analyse within-couple time-use arrangements. The results show that the disparity between a wife’s and a husband’s workhours is gradually narrowing, yet housework remains firmly gendered even in couples in which the wife works more hours than the husband. We document strong inertia in the wife’s share of housework. Although it decreases as her labour market commitment increases, the decline is slow. In addition, even if it is approaching a gender-equal split, the within-couple division of housework barely passes the point at which the husband’s contribution to housework surpasses that of his wife. These results suggest that gendered time division aligns broadly with traditional theories of the household, yet the role of the ‘doing-gender’ hypothesis is non-negligible.
Topic:: Migration, Labor Issues, European Union, Income Inequality, Labor Market, Decision-Making, Gender, Income Distribution, and Unpaid Work
Political Geography:: United Kingdom and Europe

319. Gender and Education Gaps in Employment: New Evidence for the EU

Author:: Aleksandr Arsenev, Meryem Gökten, Philipp Heimberger, Andreas Lichtenberger, and Torben Schütz
Publication Date:: 06-2024
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: This paper analyses (age-adjusted) employment rates by gender and education. We find that male female gender gaps and high-low education gaps in employment vary markedly across European Union (EU) countries and regions, with larger gaps existing in Eastern and Southern Europe than in Nordic and Continental EU countries. We estimate that closing existing education gaps in employment between high and lower education levels would raise the employment rate in the EU for the year 2022 by 10.6 percentage points, whereas closing the gender gaps between men and women would lead to an increase of 2.5 percentage points. At the same time, closing both the gender and education gaps would raise the EU employment rate from 76% to 89% of the population. Furthermore, we provide new evidence on the cyclical behaviour of employment gaps, finding that gender gaps are procyclical. While female employment rates tend to be more resilient than male employment rates during economic downturns, male employment rates tend to grow at a faster pace than female employment rates during upswings. In contrast, education gaps are more countercyclical, as employment risks are more strongly concentrated where education is low.
Topic:: Education, Labor Issues, European Union, Employment, Inequality, Macroeconomics, Unemployment, Gender, and Income Distribution
Political Geography:: Europe

320. Competing Values Will Shape US-China AI Race

Author:: Valerie Shen and Jim Kessler
Publication Date:: 07-2024
Content Type:: Working Paper
Institution:: Third Way
Abstract:: President Biden’s AI executive order reflects a set of values recognizable to all Americans: Privacy, equal treatment and civil rights; free speech and expression; the rule of law; opportunity and free market capitalism; pluralism; and advancement of global leadership as the beacon of a free world. President Xi Jinping’s government has also issued AI regulations with values recognizable to China: Collectivism and obedience to authority; social harmony and homogeneity; market authoritarianism and rule of state; and digital world hegemony to restore China’s rightful place as the Middle Kingdom. The United States and China may share similar broad goals for “winning” AI along the lines of leading innovation and advancement, spurring broad-based economic growth and prosperity, achieving domestic social stability, and becoming the clear global influencer for the rest of the world—but they define those goals and seek to achieve those ends through very different values. Those values embedded in our respective AI policies and underlying technology carry high-stakes, long-term national and economic security implications as US and Chinese companies compete directly to become dominant in emerging global markets. They also share similar fears that reflect each country’s values. China worries that AI could cause social unrest if information to a sheltered population is too real and unfiltered. America fears that AI could cause social unrest if information Americans receive is too fake. And that massive disinformation and algorithms that rile the population could threaten our democratic system. Why do these value differences matter when it comes to the AI race? Below, we outline six contrasting values that we believe will be the most determinative in how the US-China AI competition plays out. We argue that understanding our different values-based approaches illuminates our respective advantages and disadvantages in this competition. It assesses who is currently set up to “win” across key metrics and determines how to lean into our democratic advantages or mitigate some practical disadvantages compared with the PRC, this will ultimately win the AI marathon.
Topic:: Science and Technology, Artificial Intelligence, and Strategic Competition
Political Geography:: China, Asia, North America, and United States of America

321. Rethinking Community Response Against Violent Extremism

Author:: Hippolyt Pul
Publication Date:: 05-2024
Content Type:: Working Paper
Institution:: Social Science Research Council
Abstract:: Governments of coastal states of West Africa have responded with military and non-military approaches to stem the southward drift of violent extremist groups (VEGs). However, the extent to which citizens in frontier communities are ready to engage in actions to prevent, pre-empt, protect and respond to attacks by violent extremists and terrorists (VET) in their communities remains an open question. Based on data from primary mixed methods research — in frontier communities in two administrative districts of the Upper West Region of Ghana — this paper argues that citizens’ awareness of the threats of VEGs and their preparedness to prevent, pre-empt, protect and respond to attacks by violent extremists and terrorists (VET1 ) in their communities is a mirage, as the findings from the use of the See Something, Say Something campaign is an ineffective tool for mobilizing citizens for anti-VET engagement. To engage citizens, anti-VET actors must compete with and beat the sophisticated propaganda machinery of VETs in both the traditional and non-traditional media. Critically, it is not enough to communicate facts and figures. Anti-VET messaging must move beyond the cognitive into the affective realm through incorporating the concerns, needs, and interests of citizens in the non-kinetic approaches. For communities along the frontiers, anti-VET activism must address their human and livelihood security concerns of food, income, health, and other livelihood security needs that drive their local political economy. Without this, citizens have little interest in participating in anti-VET actions that may be disruptive to their livelihood systems without the provision of alternatives.
Topic:: Security, Terrorism, Countering Violent Extremism, and Communities
Political Geography:: Africa and West Africa

322. Smart Operations: Rethinking Operational Art To Effectively Protect Civilians

Author:: Dan Kuwali
Publication Date:: 04-2024
Content Type:: Working Paper
Institution:: Social Science Research Council
Abstract:: The changing nature of armed conflict, where most of the victims are civilians accompanied by the devastation of civilian objects, requires rethinking the elements of operational art, which are adversary-centric at the expense of noncombatants who are ubiquitous in present-day battlefields. Respect for, and compliance with International Humanitarian Law (IHL) is a panacea to violations against noncombatants in contemporary warfare. The principle of distinction is a sine qua non for the protection of civilians. The rules of targeting are at the heart of IHL, while the principle of distinction is the keystone in targeting guided by rules of engagement as the practical application of the legal constraints to combat. As such, the cognitive skills of the military in IHL are vital to the prevention of civilian death, mitigate incidental injury, and limit collateral damage in hostilities. This paper addresses the issue of how to mitigate civilian harm in contemporary hostilities through discourse analysis and a desktop survey. It is noted that the failure to master IHL at the operational and strategic levels in professional military education—as evidenced by doctrinal gaps in the application of operational art and military decision-making processes—renders the integration of humanitarian norms utopian. The oversight also reinforces the reticence to mitigate civilian harm in modern-day conflicts. This paper, inspired by prospect theory in military decision-making processes, posits that effective civilian protection requires smart operations involving a framework for enhanced risk analysis and mitigation of civilian harm in military decision-making processes. In executing smart operations, belligerents demonstrate effective integration of IHL into strategy, operations, and tactics, thereby enhancing prospects of return to peace.
Topic:: Civilians, International Humanitarian Law (IHL), Armed Conflict, Decision-Making, Protection, and Risk Analysis
Political Geography:: Global Focus

323. Asset Price Changes, External Wealth and Global Welfare

Author:: Timothy Meyer
Publication Date:: 02-2024
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: U.S. equity outperformance and sustained dollar appreciation have led to large valuation gains for the rest of the world on the U.S. external position. The author constructs their global distribution, carefully accounting for the role of tax havens. Valuation gains are concentrated and large in developed countries, while developing countries have been mostly bypassed. To assess the welfare implications of these capital gains, the author adopts a sufficient statistics approach. In contrast to the large wealth changes, most countries so far did not benefit much in welfare terms. This is because they did not rebalance their portfolios and realize their gains, while they were further hurt by rising import prices from the strong dollar.
Topic:: Globalization, Financial Markets, Currency, Valuation, and Foreign Assets
Political Geography:: North America and United States of America

324. The Price of War

Author:: Jonathan Federle, André Meier, Steffen Müller, Willi Mutschler, and Moritz Schularick
Publication Date:: 02-2024
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: In an integrated global economy, the economic fallout of war is not confined to the country where the conflict is fought but spills over to other countries. We study the economic effects of large interstate wars using a new data set spanning 150 years of data for more than 60 countries. War on a country’s territory typically leads to an output decline of 30 percent and a 15 percentage point increase in inflation. We find large negative effects also for countries that are geographically close to the war site, irrespective of their participation in the war. Output in neighboring countries falls by more than 10 percent over 5 years, and inflation rises by 5 percentage points on average. Negative spillovers decline with geographic distance and increase in the degree of trade integration with the war site. For very distant countries, output spillovers can turn positive so that wars create winners and losers in the international economy. We rationalize these findings in an international business cycle model, calibrated to capture key features of the data. As the war destroys capital in the war site and productivity falls, trade with nearby economies decreases, generating an endogenous supply-side contraction abroad.
Topic:: International Trade and Finance, War, Business, Geoeconomics, Russia-Ukraine War, Spillovers, and Supply Shocks
Political Geography:: Russia, Ukraine, and Global Focus

325. Place-based Policies and Household Wealth in Africa

Author:: Matthew Amalitinga Abagna, Cecília Hornok, and Alina Mulyukova
Publication Date:: 02-2024
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: This paper provides empirical evidence on the impact of a prominent place-based policy - Special Economic Zones (SEZs) - on the economic well-being of African households. We compile a novel dataset on repeated cross-sections of households living in various distance bands around SEZs in 10 African countries over the period of 1990 to 2020. Exploiting time variation in SEZ establishment, the estimation yields that households in the vicinity of SEZs become significantly wealthier compared to the national average after SEZs are established. The effect is most pronounced for households within 10 km and decays rapidly with distance. We show that this result is not driven by the residential sorting of wealthier households in SEZ neighbourhoods. The rise in wealth is strongest towards the middle of the wealth distribution and goes hand in hand with increased access to household utilities, higher consumption of durable goods, higher levels of education, and a shift away from agricultural activities - patterns that we interpret as indicative of an urbanization trend and the strengthening of the middle class.
Topic:: Migration, Economic Growth, Special Economic Zones, Labor Market, Wealth, Opportunity, and Household Income
Political Geography:: Africa

326. Mild Deglobalization: Foreign Investment Screening and Cross-Border Investment

Author:: Vera Z. Eichenauer and Feicheng Wang
Publication Date:: 03-2024
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: Openness to foreign investments is associated with risks. To mitigate these risks, many high-income countries have strengthened the control of foreign investments over the last decade in an increasing number of sectors considered critical. Investment screening distorts the market for cross-border investments in controlled sectors, which might lead to unintended economic effects. This is the first cross-country panel study to examine the economic effects of investment screening mechanisms. We combine deal-level data on cross-border mergers and acquisitions (M&A) for the period 2007–2022 with information on sectoral investment screening. Using a staggered triple difference design, we estimate a reduction of 11.7 to 16.0 percent in the number of M&A in a newly screened sector. The effects are driven by minority acquisitions and deals involving a foreign government or state-owned enterprises or US firms as investors. There is no reduction in the number of deals within the EU/EFTA, most of which are not subject to screening. The findings call policymakers’ attention to weighing the benefits of national security and the economic costs of introducing investment screening.
Topic:: Globalization, International Trade and Finance, National Security, Foreign Direct Investment, Investment, Geoeconomics, Global Capital Allocation, and Deglobalization
Political Geography:: China, Europe, and United States of America

327. Paying Off Populism: How Regional Policies Affect Voting Behavior

Author:: Robert Gold and Jakob Lehr
Publication Date:: 03-2024
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: This paper shows that regional policies can decrease populist support. We focus on the “development objective” (Objective-1) of the European Regional Development Fund (ERDF), meant to support lagging-behind regions. For causal inference, we exploit three sources of quasi-exogenous variation in a Regression-Discontinuity-Design (RDD), a Difference-in- Differences framework (DiD), and with matching techniques. Using NUTS3-level panel data on the outcomes of elections to the EU parliament, observed over the period 1999-2019, we consistently find that Objective-1 transfers reduces the vote share of right-fringe parties by about 2.5 pp. Left-fringe party support is not affected. Complementary analyses of individual-level survey data from the Eurobarometer show that the European Regional Policy increases trust in democratic institutions and decreases discontent with the EU.
Topic:: Political Economy, European Union, Populism, Regional Integration, Currency, and Regional Politics
Political Geography:: Europe

328. What role for Chinese FDI in Africa? New survey evidence from Ethiopia and Ghana

Author:: Charles Ackah, Alemayehu Geda, Holger Görg, and Federico Merchan
Publication Date:: 04-2024
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: Foreign investments bring in not only new employment but also novel technology, managerial skill and know-how, that may also dissipate into the local economy. It is not clear whether this effect differs by the nationality of source countries, in particular between Chinese and non-Chinese firms. Based on a firm level survey on Ethiopia and Ghana, we found that all types of firms are engaged in limited R&D and innovation activity and their transfer to host countris in both countries. There is little difference between Chinese and non-Chinese foreign firms in such technology and managerial skill transfer once controlling for firm size and industry characteristics in the majority of metrices (R&D activities, horizontal & vertical spillover, directly adopting techniques). However, we found for Ghana that Chinese firms have more suppliers but are less likely to transfer technology to them. Chinese firms are more likely to transfer managerial skills than non-Chinese firms in Ghana though not in Ethiopia. Also, there is little evidence that foreign firms transfer technology via horizontal or backward spillovers in either countries. Finally, Chinese firms are much more likely to receive host country policy support than other foreign firms in Ghana but not in Ethiopia.
Topic:: Science and Technology, Foreign Direct Investment, Economy, and Technological Transfer
Political Geography:: Africa, China, Ethiopia, and Ghana

329. New Trade Models, Same Old Emissions?

Author:: Robin Sogalla, Joschka Wanner, and Yuta Watabe
Publication Date:: 04-2024
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: This paper investigates the elusive role of productivity heterogeneity in new trade models in the trade and environment nexus. We contrast the Eaton-Kortum and the Melitz models with firm heterogeneity to the Armington and Krugman models without heterogeneity. We show that if firms have a constant emission share in terms of sales — as they do in a wide range of trade and environment models — the three models’ emission predictions exactly coincide. Conversely, if firms have a constant emission intensity per quantity — a prominent alternative in the literature — the emission equivalence between the three models breaks. We provide a generalization that nests both constant emission shares in sales and constant quantity emission intensities as special cases. We calibrate the models to global production and trade data and use German firm-level data to estimate the key elasticity of how emission intensity changes with productivity. Our multi-industry quantification demonstrates that the role of firm heterogeneity depends both on the model and the estimated parameters. Moving from the Armington model to the EK model increases the emissions effect on trade, while moving from the Krugman model to the Melitz model decreases the emission effects on trade.
Topic:: Climate Change, Globalization, International Trade and Finance, Carbon Emissions, and Sustainable Development
Political Geography:: Global Focus

330. The Motives for Chinese and Western Countries’ Sovereign Lending to Africa

Author:: Eckhardt Bode
Publication Date:: 05-2024
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: This paper is one of the first to show systematically that the motives for sovereign lending to African countries differed considerably between China and Western countries during the last two decades. While Chinese lending mainly served its own economic or geopolitical objectives, which is well-known from the existing literature, Western countries’ lending also pursued objectives that appear to be at odds with their self-interests but whose precise nature is not yet well-understood. Using a new, da-taset on loans from China, Western countries and multilateral organizations to African countries, I empirically examine a broad variety of potential motives, aim at separating the motives pursued by the national governments from those pursued by their lending agencies, and employ an estimation strategy with increasingly complex fixed effects that yields additional interesting insights into the specificities of the motives.
Topic:: Economics, Emerging Markets, International Trade and Finance, Financial Crisis, Geopolitics, and Sovereign Lending
Political Geography:: Africa, China, and Global West

331. Sovereign Haircuts: 200 Years of Creditor Losses

Author:: Clemens M. Graf von Luckner, Josefin Meyer, Carmen M. Reinhart, and Christoph Trebesch
Publication Date:: 06-2024
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: We study sovereign external debt crises over the past 200 years, with a focus on creditor losses, or "haircuts". Our sample covers 327 sovereign debt restructurings with external private creditors over 205 default spells since 1815. Creditor losses vary widely (from none to 100%), but the statistical distribution has remained remarkably stable over two centuries, with an average haircut of around 45 percent. The data also reveal that “serial restructurings”, meaning two or more debt exchanges in the same default spell, are on the rise. To account for this trend toward serial renegotiation, we introduce the “Bulow-Rogoff haircut” – a cumulative measure that captures the combined creditor loss across all restructurings during a single debt crisis. Using this measure, we show that longer debt crises deliver larger haircuts and that interim restructurings provide limited debt relief. We further examine past predictors of the size of haircuts and identify “rules of thumb” applicable to future defaults. Poorer countries, first-time debt issuers, and those that borrowed heavily from external creditors all record significantly higher haircuts in case of a default. Geopolitical shocks – such as wars, revolutions, or the break-up of empires – deliver the deepest haircuts. Sovereign debt investment disasters are often linked to (geo-)political disasters.
Topic:: Monetary Policy, Financial Crisis, Geopolitics, Credit, Sovereign Debt, Emerging Economies, Debt Restructuring, and Sovereign Default
Political Geography:: Global Focus

332. International investment income: patterns, drivers, and heterogeneous sensitivities

Author:: Giovanni Donato and Cedric Tille
Publication Date:: 07-2024
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: Financial globalization has led to a large increase in international asset holdings. While the rise of associated dividend and interest flows has until now been muted by the decreasing trend in interest rates, this pattern could change, leading to a larger role of investment income flows in the balance of payments. We use a broad sample of countries to document the heterogeneous evolution of the various components of investment income flows, with a rising role of FDI and equity income, especially in advanced economies. We then assess the impact of various variables on yields with a panel analysis. Various drivers have highly heterogeneous effects across investment categories and country groups, often impacting the yields on both assets and liabilities. This translates into substantial heterogeneity in the response of countries’ income balance, due to different compositions of asset and liabilities. This heterogeneity is amplified if we consider country-specific estimates in complement to the panel ones. Focusing on the impact of changes in interest rates, we find that higher rates only had a limited impact in the 2013 taper tantrum, investment income balances are likely to benefit from higher US rates in the current phase of higher rates, with offsetting effects of higher domestic rates.
Topic:: International Trade and Finance, Foreign Direct Investment, Financial Markets, Investment, Interest Rates, and Financial Integration
Political Geography:: Global Focus

333. Optimal Investments in Africa’s Road Network

Author:: Sebastian Krantz
Publication Date:: 07-2024
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: This paper characterizes economically optimal investments into Africa's road network in partial and general equilibrium - based on a detailed topography of the network, road construction costs, frictions in cross-border trading, and economic geography. Drawing from data on 144 million trans-continental routes, it first assesses local and global network efficiency and market access. It then derives a large network connecting 447 cities and 52 ports along the fastest routes, devises an algorithm to propose new links, analyzes the quality of existing links, and estimates link-level construction/upgrading costs. Subsequently, it computes market-access-maximizing investments in partial equilibrium and conducts cost-benefit analysis for individual links and several investment packages. Using a spatial economic model and global optimization over the space of networks, it finally elicits welfare-maximizing investments in spatial equilibrium. Findings imply that cross-border frictions and trade elasticities significantly shape optimal road investments. Reducing frictions yields the greatest benefits, followed by road upgrades and new construction. Sequencing matters, as reduced frictions generally increase investment returns. Returns to upgrading key links are large, even under frictions.
Topic:: Emerging Markets, Globalization, International Trade and Finance, Infrastructure, Economic Growth, Investment, and Roads
Political Geography:: Africa

334. Beyond Borders: Do Gender Norms and Institutions Affect Female Businesses?

Author:: Holger Görg and Ina C. Jäkel
Publication Date:: 08-2024
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: In this paper, we investigate whether gender norms and institutions act as a constraint to the performance of female businesses. We exploit novel and unique micro data on start-ups in Denmark, which we combine with information on individual-level characteristics of the entrepreneur as main decision maker of the firm. We overcome the challenge of disentangling norms and institutional biases against women from other constraints and hurdles that female businesses might face by exploiting detailed trade data. In this trade context, we study the relative performance of firms across markets with varying institutions, while controlling for other factors that affect female businesses uniformly across all markets. We provide evidence that gender inequality and institutional biases against women in trade partner countries play an important role in explaining gender differences in export and import behaviour. We also perform an event study of a concrete policy change in a destination market – the introduction of quotas for the share of females on the boards of directors in Norway – and how it has affected the gender gap in trade participation.
Topic:: Globalization, International Trade and Finance, Inequality, Startup, Gender, Opportunity, and Firm Internationalization
Political Geography:: Global Focus

335. Urbanized and Savvy – Which African Firms are Making the Most of Mobile Money?

Author:: Charles Ackah, Aoife Hanley, Lars Hecker, and Michael Kodom
Publication Date:: 09-2024
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: Our analysis of over 500 Ghanaian firms sheds light, for the first time, on how certain firms managed to extract value from mobile money. Our regressions point to the usefulness of this form of cashless payments in stabilizing sales during the COVID pandemic. Perhaps the most important message from our analysis is the recognition that the benefits from mobile money extend beyond its purpose as a tool for transacting cashless payments. We reveal that firms using these additional tools supported by MoMo (e.g. for planning or saving purposes) report higher sales resilience, all things equal. Our findings appear to echo the literature on private householders (e.g. Jack and Suri, 2014). However, while the latter report a positive effect due to remittances, our finding is more likely driven by enhanced ability of businesses to streamline their planning and sales.
Topic:: Emerging Markets, Globalization, Urbanization, Money, Innovation, and Digitalization
Political Geography:: Africa

336. The EU and military AI governance: Forging value-based coalitions in an age of strategic competition

Author:: Katja Creutz, Ville Sinkkonen, Mahmoud Javadi, and Michal Onderco
Publication Date:: 02-2024
Content Type:: Working Paper
Institution:: Finnish Institute of International Affairs (FIIA)
Abstract:: The use of Artificial Intelligence (AI) has increased dramatically, driving discussion on the best way to govern it. While much of the discussion has focused on AI in the civilian domain, its usage in military applications raises distinct ethical and legal questions that actors increasingly seek to address. Governance initiatives are becoming more common, even though strategic competition between major powers remains a challenge. The EU navigates this governance landscape more hesitantly than in the civilian domain with its Artificial Intelligence Act (AIA). More information is needed regarding what kind of regulation, and especially with whom the Union could pursue such avenues. This paper seeks to address these questions by presenting and analyzing results from an expert survey conducted in autumn 2023 by researchers at Erasmus University Rotterdam. It argues that the EU needs to pursue a broad range of cooperation formats to advance its values and interests in the context of military AI. Strategic multilateralism is needed, especially with like-minded states that share values with the Union.
Topic:: Science and Technology, Governance, European Union, Artificial Intelligence, and Strategic Competition
Political Geography:: Europe

337. The EU’s accidental geopolitics: Europe’s geopolitical adaptation and its limits

Author:: Niklas Helwig
Publication Date:: 05-2024
Content Type:: Working Paper
Institution:: Finnish Institute of International Affairs (FIIA)
Abstract:: This Working Paper develops the idea that the EU is engaged in accidental geopolitics. There is a lack of consensus among EU institutions and members on the extent of the EU’s geopolitical role. The Union’s structures and strategic culture do not reflect a focus on geostrategy and power. Instead, the environment of strategic competition has pushed the EU to act in geopolitical ways, for example through the financing of military aid or the imposition of sanctions. The paper argues that these actions have been accidental rather than intentional. To substantiate this argument, the paper draws on an analysis of several key foreign and security policy developments during the EU’s outgoing institutional cycle (2019–2024). The analysis reveals the EU’s shortcomings in becoming an intentional geopolitical actor, and highlights the role of foreign policy agents within the Union in driving decisions. Accidental geopolitics and the reactive deployment of the EU’s international leverage underline the impact of the Union’s top jobs on its role in international politics.
Topic:: Foreign Policy, European Union, Geopolitics, and Adaptation
Political Geography:: Europe

338. Addressing the impacts of climate change in Africa: New urgency for international action

Author:: Maija Salonen and Antto Vihma
Publication Date:: 08-2024
Content Type:: Working Paper
Institution:: Finnish Institute of International Affairs (FIIA)
Abstract:: The drought in the Horn of Africa in 2020–2023 and the floods in Libya in September 2023 are recent examples of climate change-induced disasters that were exacerbated by a lack of adaptive capacity. In the Horn of Africa, up to 2.7 million people were displaced by extreme weather events, and the catastrophic floods in Derna, Libya, killed approximately 11,000 people. In addition to the direct impacts, there is a need to understand the cascading impacts of climate change, which are likely to increasingly affect societal security. At present, the risks are growing faster than societal preparedness. The EU should raise political awareness of climate disasters and their cascading impacts. The ground needs to be prepared for decisive and ambitious climate change mitigation, and developed countries should offer continuous support for adaptation and capacity building.
Topic:: Security, Climate Change, Natural Disasters, European Union, and Climate Governance
Political Geography:: Africa

339. From Gallipoli to Gaza: How Pan-Islamism Took Over Turkey’s Secular Education System

Author:: Hay Ertan Cohen Yanarocak
Publication Date:: 09-2024
Content Type:: Working Paper
Institution:: Moshe Dayan Center for Middle Eastern and African Studies
Abstract:: In the latest issue of Turkeyscope, Dr. Hay Eytan Cohen Yanarocak analyzes new educational initiatives led by the ruling AKP, including a recent pro-Palestinian classroom activity that links the ongoing conflict with Hamas in Gaza to the Ottoman defense of Gallipoli during the First World War.
Topic:: Education, History, AKP, Ottoman Empire, 2023 Gaza War, and Gallipoli
Political Geography:: Turkey, Middle East, Israel, and Palestine

340. Erdoğan and Asad’s Slow Rapprochement: Too Weak to Make a Deal

Author:: Joel Parker
Publication Date:: 08-2024
Content Type:: Working Paper
Institution:: Moshe Dayan Center for Middle Eastern and African Studies
Abstract:: In our latest edition of Turkeyscope, Joel Parker discusses the chances of a rapprochement between Turkey and Syria. He argues that the Syrian regime will not accept full normalization without an end to Turkish military presence in northeastern Syria, which is unlikely to happen.
Topic:: Foreign Policy, Bilateral Relations, Syrian War, Recep Tayyip Erdoğan, Normalization, Rapprochement, and Bashar al-Assad
Political Geography:: Turkey, Middle East, and Syria

341. The Seesaw Relationship between Turkey and Israel

Author:: Selin Nasi
Publication Date:: 06-2024
Content Type:: Working Paper
Institution:: Moshe Dayan Center for Middle Eastern and African Studies
Abstract:: In our latest issue of Turkeyscope, Dr. Selin Nasi discusses how Erdogan has limited Turkey's relevance to the Israeli-Palestinian conflict by openly supporting Hamas in recent months.
Topic:: Bilateral Relations, Recep Tayyip Erdoğan, Hamas, and 2023 Gaza War
Political Geography:: Turkey, Middle East, Israel, and Palestine

342. Comparing Israeli-Turkish Relations: The 1990s versus post-October 7

Author:: Jonathan Ghariani
Publication Date:: 04-2024
Content Type:: Working Paper
Institution:: Moshe Dayan Center for Middle Eastern and African Studies
Abstract:: In our latest issue of Turkeyscope Dr. Jonathan Ghariani analyzes the changes in Turkey's approach to Israel since October 7, 2023 in contrast to the pre-Erdogan era led by Necmettin Erbakan.
Topic:: Foreign Policy, Bilateral Relations, Partnerships, October 7, and 2023 Gaza War
Political Geography:: Turkey, Middle East, Israel, and Palestine

343. Antisemitism: The “New Normal” in Turkey

Author:: Betsy Penso
Publication Date:: 02-2024
Content Type:: Working Paper
Institution:: Moshe Dayan Center for Middle Eastern and African Studies
Abstract:: In our latest issue of Turkeyscope, Adv. Betsy Penso explains how antisemitism has risen in recent months in Turkey since the outbreak of the war in Gaza. From the government to the media and online networks, virulent anti-Israel speech increasingly threatens Turkey's Jewish minority.
Topic:: Minorities, Jewish community, October 7, 2023 Gaza War, and Antisemitism
Political Geography:: Turkey, Middle East, Israel, Palestine, and Gaza

344. Beyond the Battlefields: Practical Strategies to Halving Global Violence in Our Homes, Streets, and Communities

Author:: Center on International Cooperation
Publication Date:: 07-2024
Content Type:: Working Paper
Institution:: Center on International Cooperation (CIC)
Abstract:: In the report, “Beyond the Battlefields: Practical Strategies to Halving Global Violence in Our Homes, Streets, and Communities,” the Halving Global Violence Task Force at NYU’s Center on International Cooperation (CIC) presents a comprehensive roadmap to cut global violence by half. This pivotal analysis culminates a three-year collaborative effort involving international policymakers, distinguished researchers, field experts, and activists. The report emphasizes that halving global violence is not only a visionary goal but an actionable imperative. It outlines practical, evidence-based strategies to tackle violence across all spheres of society, underscoring the potential for significant economic and societal benefits. By adopting these strategies, the global community can forge a safer, more equitable society for future generations. Key highlights reveal that most violence occurs outside conflict zones, affecting diverse demographics worldwide. It also provides detailed strategies that have proven successful in various global cities, emphasizing low-cost, innovative solutions that can radically reduce violence. It is an essential read for leaders and policymakers committed to fostering international peace and security.
Topic:: Conflict Prevention, Security, International Cooperation, Violence, and Peace
Political Geography:: Global Focus

345. The Liquidity Crisis at the United Nations: How We Got Here and Possible Ways Out

Author:: Eugene Chen
Publication Date:: 08-2024
Content Type:: Working Paper
Institution:: Center on International Cooperation (CIC)
Abstract:: The United Nations (UN) is suffering from an acute liquidity crisis because its member states have not been paying the assessed contributions required to finance the budgets they have approved. A major part of the problem is the fact that the United States does not pay in full or on time. However, late payments in recent years by China and the closure of several large peacekeeping operations are exacerbating the liquidity challenges. The Secretary-General has proposed several measures to improve the financial position of the organization, but these are stopgap measures at best. The ongoing financial difficulties can only be resolved by member states paying in full and on time but getting there requires understanding the policy decisions and member state dynamics that led us to the current situation and developing recommendations designed around the constraints of the intergovernmental process.
Topic:: United Nations, Budget, Finance, and Liquidity
Political Geography:: China and Global Focus

346. Contemporary Trends in Militarisation

Author:: Institute for Economics and Peace (IEP)
Publication Date:: 07-2024
Content Type:: Working Paper
Institution:: Institute for Economics & Peace (IEP)
Abstract:: This report provides two new approaches to understand the capabilities of the world’s militaries by country. The first analyses and tracks changes in a range of militarisation indicators. The main finding of this approach is that while military expenditure is rising in absolute terms, as a percentage of GDP it has fallen and is around half of the peaks seen at the height of the Cold War. Concurrently, as military sophistication increases, troop numbers are declining, highlighting a growing reliance on technology. The second approach is the development of a new and original methodology that calculates the military capacity of countries by weighting the generations of their military assets. These capability scores substantially change the ranking of countries when compared to traditional approaches that count just the number of military assets, or compare military expenditure. The US has the highest capability score, well ahead of China, which ranks second. Russia follows China closely in third. Countries such as Iran and North Korea, despite having large fleets of fixed wing planes, drop considerably in the rankings, because their assets represent older technology. These trends occur as the world is at a crossroad with the number of conflicts, 59, at an all-time high since WWII. These conflicts are becoming more internationalised, with 92 countries involved in a conflict beyond their borders, rising competition between the major powers, and more middle level powers also becoming more assertive. Unresolved conflicts are at the highest levels since WWII, opening more opportunity for major conflicts to erupt.
Topic:: Armed Forces, Military Affairs, Conflict, Militarization, and Defense Spending
Political Geography:: Global Focus

347. Regressive income shocks during COVID‑9: Evidence from India

Author:: Amit Basole, Anand Shrivastava, Jay Kulkarni, and Akshit Arora
Publication Date:: 08-2024
Content Type:: Working Paper
Institution:: Centre for Sustainable Employment, Azim Premji University
Abstract:: Studies based on the Consumer Pyramids Household Survey (CPHS) in India have shown that the impact of the Covid-19 lockdown on household incomes was progressive in nature - richer households suffered more. But several media reports as well as purposive surveys carried out during the pandemic suggest that the poor suffered more than the rich. We use nationally representative panel data for urban India from the official Periodic Labour Force Survey (PLFS) to show that households that were relatively richer prior to the start of the pandemic suffered relatively less during the lockdown compared to households that were poorer. That is, the shock was regressive in nature. We also confirm that, as per CPHS, richer households did indeed experience higher drops in income than poorer ones. But we show that this progressivity is much less than what prevailed prior to the pandemic. Thus the pandemic either disrupted ongoing progressive income changes or was outright regressive in its impacts.
Topic:: Employment, COVID-19, Lockdown Policies, and Income Distribution
Political Geography:: South Asia and India

348. Exploring the Potential of Minilateralism for the Europe-Mediterranean Partnership

Author:: Roee Kibrik
Publication Date:: 02-2024
Content Type:: Working Paper
Institution:: IEMed/EuroMeSCo
Abstract:: The Mediterranean and Europe, as interconnected regions sharing geographical spaces and proximity, severe challenges, common interests and intertwined goals, present a compelling opportunity to explore minilateralism as a framework for fostering cooperation and developing resilience. This research examines the potential of minilateralism to contribute to the Europe-Mediterranean partnership, highlighting the rationale, objectives, potential areas of focus, and expected outcomes of promoting minilateral frameworks in this context. Two minilateral frameworks will be examined: Israel-Greece-Cyprus and Israel-Morocco-European Union (EU). Based on this examination, the research will discuss particular insights regarding these specific configurations, and general insights regarding characters, opportunities and challenges of minilateralism in the region as a way to foster the Europe-Mediterranean partnership.
Topic:: Regional Cooperation, European Union, Partnerships, Resilience, and Minilateralism
Political Geography:: Europe, Israel, Greece, Morocco, Cyprus, and Mediterranean

349. Europe as a Geopolitical Actor: Reforming the EU’s Narrative in North Africa

Author:: Zine Labidine Ghebouli
Publication Date:: 02-2024
Content Type:: Working Paper
Institution:: IEMed/EuroMeSCo
Abstract:: This paper will examine the gap between the promises and self-perception of the EU and its member states in North Africa, and the realities of implemented policies. It is true that the founding principle of the EU, i.e., to promote peace and prosperity, has never been more pivotal in policy frameworks. However, Europe on the level of both the EU and its member states is confronting complex post-COVID dynamics such as major life changes, further weakening of vulnerable economies, and deeper sociopolitical fractures. Added to this dangerous mix of challenges, the invasion of Ukraine is not only a violation of the latter’s territorial integrity and sovereignty but is also a symptom of an overall weakened security order both in Europe and abroad (De Clerck-Sachsse, 2022). At a time of multiple crises, it is imperative to reassess Europe’s partnerships in North Africa to develop a new narrative that is based on realistic advantages and limitations.
Topic:: Sovereignty, Reform, European Union, Geopolitics, and Russia-Ukraine War
Political Geography:: Europe and North Africa

350. Mask Off: Implications of the EU’s “Geopolitical Awakening” for its Relations with the MENA Region

Author:: Johannes Späth
Publication Date:: 02-2024
Content Type:: Working Paper
Institution:: IEMed/EuroMeSCo
Abstract:: Russia’s invasion of Ukraine has forced European foreign policy-makers to reassess their view of international relations and reconceptualise the European Union (EU)’s approach to it. A broad consensus has emerged that the foreign policy of the EU needs to become more geopolitical. A sentiment echoed and championed by Ursula von der Leyen, who, since assuming the role of President of the European Commission in December 2019, has actively advocated for a more assertive and strategic EU presence on the global stage (Bayer, 2019). The High Representative of the European Union for Foreign Affairs and Security Policy, Josep Borrell, has labelled these developments as “the awakening of geopolitical Europe” (Borrell, 2022). He further insisted that a more geopolitical European outlook on the world should not be temporary but should become the “new normal” (Borrell, 2022). This suggests a fundamental and lasting shift in the EU’s approach to external relations. Given the ambiguity of the term ‘geopolitics’, which has at least five different meanings (Kundani, 2023), many questions about the EU’s new normal remain to be answered: What does a more geopolitical foreign policy entail? What would be the implications of such a new approach regarding the European Neighbourhood, in particular the Middle East and North Africa (MENA) region? And how can such an approach be reconciled with the EU’s liberal principles? This paper aims to assess these questions from a realist perspective. The article proceeds as follows. The first part examines the different conceptualisations of geopolitics and assesses which of them EU policy-makers refer to. The second part examines whether a more geopolitical EU foreign policy towards the MENA region can be seen as a paradigm shift or rather a continuation of existing policies. The third part considers how the “geopolitical awakening” can be reconciled with the EU’s liberal principles. The paper concludes by drawing on the findings to develop concrete recommendations.
Topic:: International Relations, Foreign Policy, European Union, Geopolitics, and Russia-Ukraine War
Political Geography:: Middle East and North Africa

351. Türkiye-EU Relations and the European Political Community in the Aftermath of Russian Invasion: Is the Transactional Turn Here to Stay?

Author:: Başak Alpan
Publication Date:: 02-2024
Content Type:: Working Paper
Institution:: IEMed/EuroMeSCo
Abstract:: Bilateral relations between Türkiye and the European Union (EU) acquired an EU conditionality dimension with the 1999 Helsinki decision, granting the country the EU candidacy status. Nevertheless, especially since the March 2016 EU-Turkey Statement, also known as Türkiye-EU Refugee Deal, what we see is a thorough shift in Türkiye-EU relations from a conditionality perspective to transactionalism, coupled with several domestic and international developments. In the aftermath of the Russian invasion of Ukraine, the significance of geopolitics and the heightened relevance of realpolitik also contributed to a renewed focus on strategic and pragmatic issues, relegating normative concerns to the background within Türkiye-EU relations. All in all, the shift from a conditionality perspective to a security-based logic within the framework of Türkiye-EU relations was mainly determined and characterised by the so-called “transactional turn”. Within this very transactionalist paradigm, both the EU and Türkiye want to pursue their short-term interests at the expense of a long-term principled engagement for some time. The launch of the European Political Community (EPC) on 6 October 2022 with 44 European heads of state and government (including all 27 EU member states as well as Türkiye) also contributed to this transactional tide, which aimed to “emphasise European geopolitical cooperation in light of Russia’s aggression against Ukraine; to remedy enlargement fatigue by providing an additional forum for exchange between EU candidates and member states; as well as create a forum for exchange with non-EU security actors” (Tcherneva, 2023). The EPC’s rather flexible structure and focus on mini-lateralism, which could provide greater freedom for leaders to focus on their immediate concerns, also raises eyebrows about whether the EPC would be attentive enough (and even have the mandate) to safeguard human rights, democracy, and the rule of law (Jurkovic, 2023). In light of these debates, the aims of this paper are twofold. First, it aims to explore how recent transactional initiatives between Türkiye and the EU in general and the EPC initiative in particular have unfolded and have been perceived by the Turkish diplomats and foreign policy experts. This endeavour to understand the Turkish perceptions of Türkiye-EU relations mainly focusing on recent transactionalism between the parties will be explored with a particular focus on three thematic layers, namely the foreign policy, migration and energy through semi-structured interviews with Turkish diplomats and foreign policy experts. The main rationale behind picking up these thematic layers is to identify, analyse and describe better the complex nature of Türkiye-EU relations with a particular focus on these policy fields (namely foreign policy, migration and energy), which recently witnessed the highest intensity of interactions between two parties. Second, the paper discusses the significance of the EPC within this very transactional turn and aims to understand whether the EPC is another repercussion of the increasing transactionalism. The final aim of the paper will be to understand whether the EU foreign policy, on the one hand, and the bilateral Türkiye-EU relations, on the other, would evolve in a completely transactional and security-based manner leaving no room for normativity amidst the current global uncertainties and challenges, as well as bringing together policy recommendations for the future.
Topic:: Foreign Policy, Migration, Bilateral Relations, European Union, and Russia-Ukraine War
Political Geography:: Europe, Turkey, and Middle East

352. Securing European Interests from the Mediterranean to the Persian Gulf: Rethinking EU Strategic Autonomy at Sea

Author:: Jean-Loup Samaan
Publication Date:: 02-2024
Content Type:: Working Paper
Institution:: IEMed/EuroMeSCo
Abstract:: The discussion about the implications of an objective like strategic autonomy has primarily circled around the question, could the Europeans defend themselves against a Russian offensive without US support? (Barrie et al., 2019; Meijer & Brooks, 2021). This scenario is a critical one, especially considering the long-term implications of the Russia-Ukraine war. Nevertheless, it presents a narrow view of European security interests shaped only by challenges from its eastern flank. As a result, the debate tends to put an emphasis on the need to invest in European ground and air capabilities for a Cold War-like scenario of military operations on the continent. This paper does not discount the demands of the Russian challenge on Europe’s military posture, but it offers a different perspective by looking at an under-researched topic: the concurrent need to secure European interests in the maritime domain vis-à-vis threats originating from the area going from the Mediterranean to the Strait of Hormuz.
Topic:: Defense Policy, European Union, and Strategic Autonomy
Political Geography:: Europe and Mediterranean

353. The Migration Agreements in Euro-Mediterranean Relations for a Geopolitical Europe

Author:: Ezgi Irgil
Publication Date:: 02-2024
Content Type:: Working Paper
Institution:: IEMed/EuroMeSCo
Abstract:: The discussion about the implications of an objective like strategic autonomy has primarily circled the question, could the Europeans defend themselves against a Russian offensive without US support? (Barrie et al., 2019; Meijer & Brooks, 2021). This scenario is a critical one, especially considering the long-term implications of the Russia-Ukraine war. Nevertheless, it presents a narrow view of European security interests shaped only by challenges from its eastern flank. As a result, the debate tends to emphasize the need to invest in European ground and air capabilities for a Cold War-like scenario of military operations on the continent. This paper does not discount the demands of the Russian challenge on Europe’s military posture, but it offers a different perspective by looking at an under-researched topic: the concurrent need to secure European interests in the maritime domain vis-à-vis threats originating from the area going from the Mediterranean to the Strait of Hormuz.
Topic:: Security, Migration, Geopolitics, and Strategic Autonomy
Political Geography:: Europe and Mediterranean

354. Mapping Fragility – Functions of Wealth and Social Classes in US Household Finance

Author:: Orsola Costantini and Carlo D'Ippoliti
Publication Date:: 01-2024
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Which households are more exposed to financial risk and to what extent is their debt systemically relevant? To provide an answer, we advance a new classification of the population, adapted from Fessler and Schürz (2017), based on the type of wealth families own and their sources of income. Then, we investigate data from eleven waves of the Survey of Consumer Finances (SCF), a triennial survey run by the U.S. Federal Reserve, to explore the association of different debt configurations and motives to get into debt with our class distinctions. Our new approach allows us to assess competing hypotheses about debt and financial vulnerability that have so far been analyzed separately in disconnected strands of literature. The results of our study reinforce and qualify the controversial hypothesis that relative poverty and inequality of income and access to services have been important factors explaining household indebtedness and its relationship with economic growth over time.
Topic:: Debt, Poverty, Inequality, Finance, Fragility, and Income Distribution
Political Geography:: North America and United States of America

355. Labor Market Volatility and Worker Financial Wellbeing: An Occupational and Gender Perspective

Author:: Julie Yixia Cai
Publication Date:: 01-2024
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: One emerging but underexplored factor that is likely to contribute to group racial earnings disparity is unstable work schedules. This is often detrimental for hourly workers when volatility is frequent, involuntary, or unanticipated. Using data from 2005-2022 monthly Current Population Survey and its panel design, this study follows a group of hourly workers across a four-month period to assess whether labor market volatility relates to their financial well-being, focusing on low-wage care and service occupations as well as female workers and workers of color. The findings are threefold: In general, during economic expansion periods, nonwhite workers often benefit more in terms of wage growth compared to their white counterparts. Second, net of other characteristics, on average, greater volatility is associated with lower earnings, and this is mostly driven by those holding jobs in low-wage service sectors and healthcare support roles. Last, the earnings consequences of volatility vary significantly by the type of low-wage jobs a worker holds and their gender and race, but this is only true when volatility happens in a job. Specifically, when working within the same employment spell, female workers, particularly those of color and those working in low-wage service and care jobs, earn significantly less when facing greater volatility than their male counterparts or those working in non-service, non-care occupations.
Topic:: Economics, Inequality, Finance, Labor Market, and Gender
Political Geography:: Global Focus and United States of America

356. Bagehot’s Classical Money View: A Reconstruction

Author:: Perry Mehrling
Publication Date:: 01-2024
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Bagehot is difficult for modern economists to read with understanding, for three reasons. He was a classical economist not neoclassical, his orientation was global not national, and, most importantly, his intellectual formation was as a practicing country banker not an academic. This paper adopts all three perspectives, and uses this frame to reinterpret his mature work, both Lombard Street and the unfinished Economic Studies, as the origin of the key currency tradition which continues as a minority view in modern economics.
Topic:: Globalization, History, Macroeconomics, and Walter Bagehot
Political Geography:: Global Focus

357. Monetary Policy and Illiquidity

Author:: Jan Toporowski
Publication Date:: 01-2024
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: The discussion of financial stability, and the role of monetary policy, is incoherent because there is very little agreement on what constitutes financial stability (and, by implication, instability) - exchange rate stability, asset price stability, absence of debt default. By implication, there is a gap between the claims of various authors to the general applicability of their respective analyses, and the actual applicability of their conclusions, let alone the usefulness of some of their policy recommendations. The paper argues that the key issue is the regulation of the liquidity of all financial markets, and not just that of the banking system, through the markets for government securities. The paper examines the sources of this liquidity in the financial portfolios of the private sector, and how that liquidity may be managed through the open market operations of central banks and the debt management operations of governments. An implication of this approach is yield curve control and the use of (government) debt management to control the liquidity of the markets. These elements of monetary policy have been neglected in theory and policy since the 1950s.
Topic:: Debt, Economics, Monetary Policy, Banking, and Liquidity
Political Geography:: Global Focus

358. Considering Returns on Federal Investment in the Negotiated “Maximum Fair Price” of Drugs Under the Inflation Reduction Act: an Analysis

Author:: Edward W. Zhou, Paula G. da Silva, Debbie Quijada, and Fred D. Ledley
Publication Date:: 03-2024
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: The Inflation Reduction Act (IRA) of 2022 contained landmark provisions authorizing government to negotiate a “maximum fair price” for selected Medicare Part D drugs considering the manufacturer’s research and development costs, federal support for discovery and development, the extent to which the drugs address unmet medical needs, and other factors. This working paper describes federal investment in the discovery and development of the ten drugs selected for price negotiation in the first year of the IRA as well as the health value created through Medicare Part D spending on these drugs. We identified $11.7 billion in NIH funding for basic or applied research leading to approval of these drugs with median investment costs of $895.4 million/drug. This early public investment provided a median cost savings to industry of $1,485 million/drug, comparable to reported levels of investment by industry. From 2017-2021, Medicare Part D spent $126.4 billion (median $10.7 billion) for these products before rebates. Excluding two products for diabetes, Medicare Part D spending was $97.4 billion and the total health value created was 650,940 QALYs or $67.7 billion (WTP/QALY=$104K) representing a negative residual health value of -$29.7 billion (before rebates). We argue that a negotiated fair price should provide returns on both private and public investments in these products commensurate with the scale and risk of these investments, with the principal return on public sector investments being the residual health value (net price) accruing to those using the product. These empirical data provide a cost basis for negotiating a fair price that rewards early government investments in innovation and provides social value for the public.
Topic:: Economics, Health, Public Health, Pharmaceuticals, and Public Investment
Political Geography:: North America and United States of America

359. Tilting at Windmills: Bernanke and Blanchard’s Obsession with the Wage-Price Spiral

Author:: Servaas Storm
Publication Date:: 04-2024
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Bernanke and Blanchard (2023) use a simple dynamic New Keynesian model of wage-price determination to explain the sharp acceleration in U.S. inflation during 2021-2023. They claim their model closely tracks the pandemic-era inflation and they confidently conclude that “… we don’t think that the recent experience justifies throwing out existing models of wage-price dynamics.” This paper argues that this confidence is misplaced. The Bernanke and Blanchard is another failed attempt to salvage establishment macroeconomics after the massive onslaught of adverse inflationary circumstances with which it could evidently not contend. It misrepresents American economic reality, hides distributional issues from view, de-politicizes (monetary and fiscal) policy-making, and sets monetary policymakers up to deliver significantly more monetary tightening than can be justified on the basis of more realistic model analyses.
Topic:: Economics, Monetary Policy, Inflation, Macroeconomics, and Wages
Political Geography:: North America and United States of America

360. The Diffusion of New Technologies

Author:: Aakash Kalyani, Nicholas Bloom, Marcela Carvalho, Tarek A. Hassan, Josh Lerner, and Ahmed Tahoun
Publication Date:: 07-2024
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: We identify phrases associated with novel technologies using textual analysis of patents, job postings, and earnings calls, enabling us to identify four stylized facts on the diffusion of jobs relating to new technologies. First, the development of economically impactful new technologies is geographically highly concentrated, more so even than overall patenting: 56% of the most economically impactful technologies come from just two U.S. locations, Silicon Valley and the Northeast Corridor. Second, as the technologies mature and the number of related jobs grows, hiring spreads geographically. But this process is very slow, taking around 50 years to disperse fully. Third, while initial hiring in new technologies is highly skill-biased, over time the mean skill level in new positions declines, drawing in an increasing number of lower-skilled workers. Finally, the geographic spread of hiring is slowest for higher-skilled positions, with the locations where new technologies were pioneered remaining the focus for the technology’s high-skill jobs for decades.
Topic:: Development, Economics, Science and Technology, Innovation, and Labor Market
Political Geography:: North America and United States of America

361. Implications of the Inflation Reduction Act for the Biotechnology Industry

Author:: Cody Hyman, Henry Dao, Gregory Vaughan, and Fred D. Ledley
Publication Date:: 07-2024
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: The Inflation Reduction Act of 2022 contains landmark provisions authorizing the government to negotiate the price of selected drugs covered by Medicare Part D. The biopharmaceutical industry has criticized these provisions as a threat to innovation arguing that reducing future revenues could disincentivize equity investment in biotechnology. This research examines the sensitivity of private and public equity investment in the biotechnology industry to drug price indices and market conditions from 2000-2022. The analysis shows that equity financing and valuation in the biotechnology industry were strongly associated with equity market conditions but not indices of either producer or consumer drug prices. These results do not support claims of an association between changing drug prices and the availability of equity capital to emerging biotechnology companies, which currently sponsor the majority of all clinical trials. These results add to evidence that the IRA may not have a negative impact on pharmaceutical innovation.
Topic:: Economics, Health, Inflation, Innovation, Biotechnology, Public Investment, and Inflation Reduction Act
Political Geography:: North America and United States of America

362. Scale and Scope in Early American Business History: The “Fortune 500” of 1812

Author:: Richard Sylla and Robert E. Wright
Publication Date:: 08-2024
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Fortune magazine began publishing annual rankings of U.S. corporations by revenue in 1955. Ever since, scholars and forecasters have analyzed changes in the Fortune 500 to help inform their judgments about industry concentration and the relative importance of different sectors of the economy. Unfortunately, earlier data are scarce, especially before the Civil War. Through extensive research we have created a sort of historical “Fortune 500” going back to 1812, ranked by corporate capitalization, which we share here. Numerous insights can be drawn from this dataset, including the historical dominance of the banking and finance sectors and the early importance of manufacturing. Perhaps the larger significance of being able to come up with a Fortune 500 for 1812, though, is the fact that even with a population of only about 7.5 million, U.S. already had more business corporations than any other country, and possibly more than all other countries put together, securing its role as the world’s first “corporation nation.” The ease of incorporating businesses released a lot of entrepreneurial energy that helped to build an ever-expanding economy and by the end of the 19th century, the U.S. would be the world’s largest national economy with tens of thousands of corporations.
Topic:: Economics, History, Business, and Industry
Political Geography:: North America and United States of America

363. Tesla as a Global Competitor: Strategic Control in the EV Transition

Author:: Matt Hopkins and William Lazonick
Publication Date:: 09-2024
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: In this paper, we assess the implications of Elon Musk’s strategic control over Tesla, the pioneering company that has become central to the electric vehicle transition. We document how, as Tesla’s CEO for 16 years, Musk has exercised strategic control to direct the transformation of the company from an uncertain startup to a global leader. Now that Tesla is profitable corporate predators (aka hedge-fund activists) may challenge Musk’s strategic control—a possibility of which the CEO is well aware. To retain his control over Tesla as a publicly listed company, Musk depends on holding a sufficient proportion of Tesla’s shares outstanding to possess the voting power to fend off predatory value extractors. In addition to accumulating Tesla shares by investing $291.2 million at early stages of the company’s evolution, Musk has relied upon massive stock-option grants from the Tesla board, under the guise of “compensation”, in 2009, 2012, and 2018, to boost his shareholding and, with it, his voting power. Hence the Delaware Court of Chancery’s decision in January 2024 to rescind Musk’s 2018 stock-option package—by far the largest ever granted to a corporate executive—poses a threat to Musk’s strategic control at Tesla. As the “Technoking” of Tesla strategizes to maintain his control over the company’s decision-making, anyone concerned with the role that Tesla will play in the evolving EV transition should be asking how CEO Musk might use, or abuse, his powerful position.
Topic:: Science and Technology, Economic Competition, Electric Vehicles, Tesla, and Energy Transition
Political Geography:: Global Focus and United States of America

364. Setting Pharmaceutical Drug Prices: What the Medicare Negotiators Need to Know About Innovation and Financialization

Author:: Öner Tulum and William Lazonick
Publication Date:: 09-2024
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Mandated by the Inflation Reduction Act of 2022, the U.S. government through the Centers for Medicare and Medicaid Services (CMS) is negotiating with pharmaceutical companies over the “maximum fair price” of ten drugs in wide use by Medicare patients. Over the next few years, the number of drugs whose prices are subject to negotiations will increase. The pharmaceutical companies contend that a “fair” price would be a “value-based price” that enables the companies’ shareholders to capture the value that the drug creates for society. Invoking the dominant “maximizing shareholder value” ideology, the argument for value-based pricing assumes that it is only a pharmaceutical company’s shareholders who make the risky investments that fund drug innovation. Pharmaceutical executives and their lobbyists warn that a lowering of drug prices will reduce investments in new drugs. The purpose of this paper is to enable CMS negotiators to respond to these arguments by showing a) why drug-price regulation is required, given the relation between scale economies in supplying drugs and price inelasticity of drug demand; b) how the pharmaceutical companies with which they are negotiating prices are, in general, not using their profits from unregulated drug prices to fund drug innovation but rather to fund distributions to shareholders in the form of cash dividends and stock buybacks; c) that publicly listed pharmaceutical companies do not typically rely upon investment by shareholders to fund drug innovation; and d) that investment in drug innovation entails “collective and cumulative learning” in foundational and translational research that is both antecedent and external to the investments in clinical research that a pharmaceutical company may make to bring a safe and effective drug to market.
Topic:: Economics, Health, Finance, Innovation, Pharmaceuticals, and Medicare
Political Geography:: North America and United States of America

365. Good Policy or Good Luck? Why Inflation Fell Without a Recession

Author:: Thomas Ferguson and Servaas Storm
Publication Date:: 09-2024
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: This paper analyzes claims that the Federal Reserve is principally responsible for the decline of inflation in the U.S. We compare several different quantitative approaches. These show that at most the Fed could plausibly claim credit for somewhere between twenty and forty percent of the decline. The paper then examines claims by central bankers and their supporters that a steadfast Fed commitment to keeping inflationary expectations anchored played a key role in the process. The paper shows that it did not. The Fed’s own surveys show that low-income Americans did not believe assurances from the Fed or anyone else that inflation was anchored. Instead, what does explain much of the decline is the simple fact that most workers nowadays cannot protect themselves by bargaining for higher wages. The paper then takes up the obvious question of why steep rises in interest rates have not so far led to big rises in unemployment. We show that recent arguments by Benigno and Eggertson that shifts in vacancy rates can explain this are inconsistent with the evidence. The biggest factor in accounting for the strength in the economy is the continuing importance of the wealth effect in sustaining consumption by the affluent. This arises, as we have emphasized in several papers, from the Fed’s quantitative easing policies. Absent sharp declines in wealth, the continuing importance of this factor is likely to feed service sector inflation in particular.
Topic:: Economics, Monetary Policy, Federal Reserve, Inflation, and Macroeconomics
Political Geography:: North America and United States of America

366. Concentrating Intelligence: Scaling and Market Structure in Artificial Intelligence

Author:: Anton Korinek and Jai Vipra
Publication Date:: 10-2024
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: This paper examines the evolving structure and competition dynamics of the rapidly growing market for foundation models, focusing on large language models (LLMs). We describe the technological characteristics that shape the industry and have given rise to fierce competition among the leading players. The paper analyzes the cost structure of foundation models, emphasizing the importance of key inputs such as computational resources, data, and talent, and identifies significant economies of scale and scope that may create a tendency towards greater market concentration in the future. We explore two concerns for competition, the risk of market tipping and the implications of vertical integration, and use our analysis to inform policy remedies to maintain a competitive landscape.
Topic:: Markets, Economy, Business, Innovation, Artificial Intelligence, and Large Language Models (LLMs)
Political Geography:: Global Focus

367. Macroeconomic Modeling in the Anthropocene

Author:: Yannis Dafermos, Andrew McConnell, Maria Nikolaidi, Servaas Storm, and Boyan Yanovski
Publication Date:: 10-2024
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Recent years have seen an increasing use of environmental dynamic stochastic general equilibrium (E-DSGE) models for analyzing the macroeconomic effects of the climate crisis. This paper explores to what extent these models are fit for purpose. We identify the limitations of the benchmark E-DSGE framework and explain how these limitations restrict the ability of this framework to meaningfully capture the macroeconomics of the climate crisis. We then explain how the assumptions behind these limitations can be relaxed, but argue that simply relaxing some of these assumptions in isolation is insufficient to address the problem. We therefore call for a broader use of other macroeconomic models, such as ecological stock-flow consistent (E-SFC) and ecological agent-based (E-AB) models, that address these limitations simultaneously. We explain how these models do not suffer from the pitfalls of the E-DSGE framework and outline how they need to improve to increase their usefulness as tools that can inform macroeconomic policy making in the Anthropocene.
Topic:: Climate Change, Environment, Monetary Policy, and Macroeconomics
Political Geography:: Global Focus

368. Hitler and the German Coal Industrialists: Passing the Keys to A Kingdom

Author:: Karsten Heinz Schönbach
Publication Date:: 11-2024
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Ever since the publication of Henry Turner’s German Big Business and the Rise of Hitler, most historians in both Germany and the United States have dismissed the idea that support from German major industry played a key role in bringing Hitler to power. This consensus is wrong, as I have shown in a series of works that began with my doctoral dissertation at the Free University of Berlin and now extends to more than ten different works, including two books. These works rely extensively on archival resources that were either inaccessible or only selectively open to earlier researchers. This paper analyzes in detail one of the most crucial episodes in Hitler’s rise to power – one that previous historians, particularly Turner, have profoundly misjudged thanks in part at least to the shortcomings in the documentary sources available to them. This is the history of the political relations between Hitler, the NSDAP leadership, and the German “coal industrialists” in the period from 1926 to 1933 and the key role these firms played in supporting and financing the eventual Nazi triumph.
Topic:: History, Business, Coal, Industry, and Adolf Hitler
Political Geography:: Europe and Germany

369. Synergising DPI and digital commons

Author:: Vy Dang, Aliasger Bootwalla, Eva Maria Lynders, and Wulf Reiners
Publication Date:: 03-2024
Content Type:: Working Paper
Institution:: Gateway House: Indian Council on Global Relations
Abstract:: Digital Public Infrastructure (DPI) and digital commons have the potential to accelerate achievement of the sustainable development goals. Both India and the European Union recognise this: India is a pioneer in DPI, while the concept of digital commons is gaining better attention within the EU. The partners must now work towards a joint understanding of the core principles that govern digital resources.
Topic:: Infrastructure, European Union, Sustainable Development Goals, and Digital Policy
Political Geography:: Europe, South Asia, and India

370. The Washington Summit: Burden-sharing

Author:: Tony Lawrence
Publication Date:: 07-2024
Content Type:: Working Paper
Institution:: International Centre for Defence and Security - ICDS
Abstract:: NATO heads of state and government will gather in Washington on 9-11 July to mark the Alliance’s 75th anniversary. While a third year of full-scale war rages in Europe, they will need to guard the tone of their celebrations. But it would be remiss of the Allies not to recognise the importance and success of their organisation. NATO remains the essential transatlantic forum. It has had huge positive impact on security in Europe and elsewhere, built shared understanding and purpose among a growing number of members, and successfully adapted to decades of changing circumstances. There is much to applaud. But there is also work to be done. The summit’s main business will concern Ukraine, defence and deterrence, and burden-sharing. While there are unlikely to be big announcements, the summit should play a significant role in ensuring that the decisions taken in Madrid in 2022, and Vilnius in 2023 are properly implemented. This series of briefs examines some of the key issues for the Washington Summit. In the third brief of the series, Tony Lawrence looks at the perennial question of burden-sharing. The Allies will probably not agree to raise the 2% of GDP spending guideline. But in any case, their focus on this metric hides the real picture of how responsibility for security is shared across the Alliance. The European Allies certainly need to step up in all areas, but they should also consider reframing the burden-sharing discussion.
Topic:: NATO, Defense Spending, Russia-Ukraine War, and Burden Sharing
Political Geography:: Europe and United States of America

371. Lessons from China: How Soon Could Iran Get the Bomb? (Occasional Paper 2404)

Author:: Hui Zhang
Publication Date:: 12-2024
Content Type:: Working Paper
Institution:: Nonproliferation Policy Education Center
Abstract:: It’s unclear when Iran might get the bomb. In July, Secretary of State Blinken revealed that Iran was only one to two weeks away from producing enough weapons grade uranium for several bombs. The New York Times quoted experts who estimated it would take Iran up to another year to make a missile-deliverable weapon. A conservative estimate would be no more than five months but could be much less. In the attached historical analysis of China’s nuclear weapons program, Hui Zhang pegs the number at three to five weeks, and possibly less. It makes for interesting reading, not only on what China was able to accomplish so quickly sixty years ago, but on what Iran may do.
Topic:: Nuclear Weapons, Weapons, and Nonproliferation
Political Geography:: China and Iran

372. War Game Reveals Chinese Attacks on Communications Could Paralyze Taiwan’s Efforts to Resist

Author:: Henry Sokolski
Publication Date:: 09-2024
Content Type:: Working Paper
Institution:: Nonproliferation Policy Education Center
Abstract:: Top security analysts have long noted that if China disables Taiwan’s underseas cable and disrupts its microwave, cell and space-based communications systems, Beijing could secure a smokeless victory over the island. Over the last five to 10 years, however, private commercial space-based communications and internet services have grown dramatically in importance. The critical role of Starlink in supporting Ukrainian military operations amply demonstrates this point. This prompts several policy questions: What national security roles should governments require commercial space service providers to play during a security crisis or war? Should governments set minimum standards for cyber and physical hardening for commercial satcom providers to meet in order to be eligible to compete for government contracts? What is the proper response to repeated “accidental” or deniable assaults on commercial and military space systems? To find out, the Nonproliferation Policy Education Center conducted a space war game that focused on a near-term Taiwan-China scenario. It utilized the talents of current and retired officials, congressional staff, and outside experts to play the game. In the game, China cut communications cables, disrupted microwave and cellular services, attacked Taiwan’s electrical supply system locally and jammed its satellite communications. The United States and its space-faring allies acted slowly. Private space service providers were no quicker. Finally, the President of the United States authorized covert cyberattacks against China’s Beidou satellite ground stations. China responded by launching similar cyberattacks on U.S. GPS systems and the U.S., redoubling its attacks against the Beidou system. With U.S. naval forces closing in to disrupt a Chinese naval quarantine of Taiwan, Beijing called for a mutual ceasefire in exchange for bilateral talks to lock Taiwan’s future as a province of China. The U.S., allies and Taiwan rejected this offer, opening the door for further military escalation. In the hot wash, the players discussed three key findings: Washington, its space-faring allies and industry players must clarify how they might backfill Taiwanese communication systems well before China might try to disable them. The US and its allies must address Taiwan’s lack of legal recognition, which leaves it uniquely vulnerable to offensive Chinese space and terrestrial military actions against Taiwan’s communications systems. Washington and its space-faring allies must develop additional military space options with plausible deniability to deter and counter similar Chinese capabilities. The recommendations paired with each of these findings. Taiwan needs to be more vocal about its communications systems’ vulnerabilities and consider developing mechanisms to disable China’s satellites temporarily, in a deniable manner. The United States should lower the classifications associated with its non-kinetic anti-satellite systems and create an operational working group on space security that includes Taiwan.
Topic:: Nuclear Weapons, Communications, Nonproliferation, and War Games
Political Geography:: China and Taiwan

373. Gaming Israeli Nuclear Use: Pandora Unleashed

Author:: Henry Sokolski
Publication Date:: 02-2024
Content Type:: Working Paper
Institution:: Nonproliferation Policy Education Center
Abstract:: With the continued fighting in Gaza, a nuclear rubicon of sorts has been crossed: Elected Israeli officials — a deputy minister and a ruling party member of Parliament—not only have publicly referenced Israel’s possession of nuclear weapons, but suggested how such weapons might be used to target Gaza. This is unprecedented. More recently, Iran directly attacked an Israeli-manned intelligence outpost in Iraq and publicized a staged missile strike against a mock Israeli air base. Iran also has inched within weeks of making several nuclear weapons and made its military ever more immune to first strikes against its key missile and nuclear facilities. Iran and its proxies also now have long-range, high-precision missiles that can easily reach key Israeli targets. None of these developments is positive. For decades, most security analysts assumed Israel’s undeclared nuclear weapons were only deployed to deter attacks and that Iran would not dare to attack Israel directly. The attached war game report, “Gaming Israeli Nuclear Use: Pandora Unleashed,” directly challenges these assumptions. The game starts in 2027 with Israeli intelligence reporting that Iran is mating nuclear warheads to its long-range missiles. This prompts Israel to ask Washington to collaborate in a conventional military strike against key Iranian nuclear facilities and missile bases. Not wanting to be drawn into a major war with Iran, the United States, however, demurs and instead offers Israel U.S. standoff hypersonic missiles. Several moves later, Israel, isolated and desperate, launches two nuclear strikes against Iran to which Iran replies with a nuclear strike of its own. The game raised several basic questions. Would Israel or Iran conduct further military nuclear operations? Might Israel target Tehran with nuclear weapons? Might Iran target Tel Aviv with nuclear arms? Would Russia or the United States be drawn into the war? These and other unknowns informed the game’s key findings. These included: 1. The strategic uncertainties generated after an Israeli-Iranian nuclear exchange are likely to be at least as fraught as any that might arise before such a clash. 2. Although Israel and Iran might initially avoid the nuclear targeting of innocents, such self-restraint is tenuous. 3. Multilateral support for Israeli security may be essential to deter Israeli nuclear use but will likely hinge on Israeli willingness to discuss regional denuclearization. 4. Little progress is likely in reducing Middle Eastern nuclear threats if the United States continues its public policy of denying knowledge of Israeli nuclear weapons.
Topic:: Nuclear Weapons, Weapons, Nonproliferation, and War Games
Political Geography:: Iran, Middle East, Israel, Palestine, and Gaza

374. Populist Neo-Nationalism: The Example of Austria

Author:: Maria Marczewska-Rytko
Publication Date:: 01-2024
Content Type:: Working Paper
Institution:: Polish Political Science Association (PPSA)
Abstract:: This article aims to analyze the phenomenon of populist neo-nationalism in Austria and answer the following research questions: 1. How can populism and its type of populist neo-nationalism be characterized?; 2. What are the determinants of populist neonationalism in Austria? 3. What are the ways populist neo-nationalism has been utilized in Austria? The Chantal Mouffe thesis was verified, according to which the development of populism is a response to the shortcomings of liberal and deliberative democracies. The research process used a methodology typical of the social sciences, especially the political sciences. Since the 1980s, we have addressed the growing importance of radical right-wing populism in European politics. Some researchers refer to this phenomenon as new populism or populist neo-nationalism. The party’s growing importance since 1986 was related, among other things, to the principles of Euroscepticism it proclaimed and its demands to limit or even ban immigration. The FPÖ’s achieved the most tremendous success under the government of Jörg Haider. Its entry into the ruling coalition has confused international relations.
Topic:: Nationalism, Populism, and Neo-Nationalism
Political Geography:: Europe and Austria

375. Nuclear Verification’s Holy Grail: Verifying Nuclear Warheads — a new approach

Author:: Miles Pomper, William Moon, Marshall Brown, Ferenc Dalnkoki-Veress, Dan Zhukov, Dick Gullickson, and Yanliang Pan
Publication Date:: 12-2024
Content Type:: Working Paper
Institution:: Nonproliferation Policy Education Center
Abstract:: This study is the culmination of four years of work to think through what would be required to track and monitor nuclear warheads in a verification process. It first began in 2021, shortly after President Joe Biden of the United States and President Vladimir Putin of Russia extended the New START Treaty until February 2026; the two presidents also announced the launch of bilateral strategic stability talks. This positive moment in the U.S.-Russian relationship, which became almost unimaginable after the 2022 Russian invasion of Ukraine, was the original impetus for the project. It also launched in the aftermath of the U.S. withdrawal from the Treaty Between the United States of America and the Union of Soviet Socialist Republics on the Elimination of Their Intermediate-Range and Shorter-Range Missiles, commonly known as the INF Treaty. The Russians had been violating the Treaty with the production and deployment of the 9M729 missile, also known in NATO parlance as the SSC-8. All NATO allies concurred with the withdrawal, which the United States completed in August 2019. The effort began with two strands of activity. The study team knew that when the United States and Russia decided to return to the negotiating table, the United States would place a high priority on seeking direct limits on warheads. Prior treaties had focused on controlling and eliminating missiles but had not focused directly on the warheads that armed them. It had long been a goal of the United States to seek direct limits on warheads, in order to more accurately constrain a Russian preponderance in warheads designated for theaterand shorter-range systems.1 However, if such an agreement were negotiated, the European allies would be ill-equipped to participate. On-site inspections under the INF Treaty had ended on May 31, 2001, so it had been twenty years since the allies had had to participate in verification activities. Most had lost expertise and institutional memory; some had never participated at all. “Raising the IQ” of the NATO allies about participating in arms control implementation was thus the first strand of activity. The second strand grew up around a conviction in the study team that the well-practiced verification techniques that had been exercised in INF and strategic arms control treaties since the 1980s could be augmented with new technology and innovative techniques. Thus emerged the emphasis on using cryptography to underpin a unique warhead tracking system. This work took advantage of some of the finest experts in the field of cryptography at Stanford University, and also the extensive experience gained during the Defense Threat Reduction Agency’s many years of work to strengthen warhead protection, control and accounting in Russian Ministry of Defense nuclear warhead storage facilities. This work, which spanned a period of over fifteen years from 1995- 2013, provided the study team with a great depth of knowledge about the normal operating procedures in Russian military warhead facilities. This deep knowledge was vital to developing a concept for the tracking system, providing it with a realism and accuracy that otherwise would not have been possible. These two strands of work culminated in 2022 in a significant study, “Everything Counts: Building a Control Regime for Non-Strategic Nuclear Warheads in Europe.”2 However, the team realized that only one element of warhead verification had been touched—the broad outlines of a system for maintaining and exchanging information over the life of an agreement. Other verification elements such as on-site inspections and particular verification technologies had not been considered. They therefore resolved to expand the scope of work to imagine an entire closed system for nuclear warhead verification. With the cryptographic element as its foundation, the team reviewed the extensive experience of treaties, agreements and other activities such as exhibitions and joint experiments that had been built up over the many years of U.S.-Soviet and Russian cooperation on nuclear weapons control. From this, they created a comprehensive menu of measures that could be considered for a future warhead control regime, calibrating the measures according to the level of their intrusiveness.
Topic:: Arms Control and Proliferation, Nuclear Weapons, and Nonproliferation
Political Geography:: Russia and United States of America

376. Generative AI and WMD Nonproliferation: Why Diplomats and Policymakers Need to Pay Attention Now and Develop AI Literacy

Author:: Natasha Bajema
Publication Date:: 12-2024
Content Type:: Working Paper
Institution:: James Martin Center for Nonproliferation Studies
Abstract:: The rapid advancement of generative AI (e.g., ChatGPT) has opened a Pandora’s box of opportunities and risks for nuclear, biological, and chemical weapons. A new primer from the James Martin Center for Nonproliferation Studies by Dr. Natasha E. Bajema cuts through the hype to explain what policymakers and diplomats really need to know about generative AI to understand its impact on the WMD domain. While media attention has focused on ChatGPT and other generative AI models potentially helping bad actors develop weapons, the reality for the WMD domain is more nuanced. Predictive AI tools are already being deployed in military applications. These narrow, task-specific systems can analyze data patterns to support decision-making, but also introduce new risks through cyber vulnerabilities and data biases. Meanwhile, current generative AI models still struggle with accuracy and reliability—they are prone to making up false information and are not yet capable of transferring the tacit knowledge needed for weapons development. However, this could change as the technology advances.
Topic:: Science and Technology, Weapons of Mass Destruction, Nonproliferation, Artificial Intelligence, and Generative Models
Political Geography:: Global Focus

377. The Future of NATO’s Nuclear Posture and Arms Control in Today’s More Dangerous World

Author:: Miles Pomper, David Santoro, and Nikolai Sokov
Publication Date:: 09-2024
Content Type:: Working Paper
Institution:: Nonproliferation Policy Education Center
Abstract:: Since the late 1960s, NATO has sought to balance two objectives—maintaining a strong nuclear deterrent while supporting efforts to buttress strategic stability through arms control and advance nonproliferation and disarmament through the nuclear Nonproliferation Treaty process. The success of this strategy was most evident in the dual-track strategy of deployments and negotiations that led to the signing and implementation of the Intermediate-Range Nuclear Forces (INF) Treaty in 1987. The end of the Cold War also led to substantial cuts in U.S. and Russian strategic systems. Since then, NATO Allies have regularly voiced their support for continuing to pursue these two objectives, including supporting the goal enunciated by U.S. President Barack Obama in 2009 “to seek the peace and security of a world without nuclear weapons.”1 In the last decade, however, Russia’s malign behavior has undermined NATO arms control efforts to the point that it appears traditional arms control will be effectively dead when the New START agreement—already suspended by Russia—expires in 2026. Russian’s invasion of Ukraine, its repeated nuclear saber-rattling in that conflict, and the deployment of non-strategic nuclear weapons to Belarus has also forced the alliance to look to ways to enhance its deterrence, including its nuclear deterrence. Meanwhile, the massive increase in China’s nuclear arsenal and its growing partnership with Russia, is generating additional pressure to increase U.S. nuclear forces as well as questions about the ability of the U.S. to provide extended deterrence simultaneously to Allies in Europe and Asia. Those doubts have been reinforced by political developments in the United States—and in the war in Ukraine—that have raised anxieties about a decoupling of European and U.S. deterrence and defense and led to fresh discussion of a potential “Eurodeterrent.” Meanwhile, developments in North Korea and Iran—and their increasingly close ties with Moscow—further threaten the viability of the already shaky nuclear and missile nonproliferation regimes and have eroded longstanding cooperation between Washington and Moscow to manage nuclear nonproliferation risks in third countries. In response to these developments, Allies and experts, such as the Congressional Strategic Posture Commission, have proposed various adaptations to the alliance’s nuclear posture, including to its nuclear sharing arrangements. This report examines these deterrence proposals, particularly considering how they support the alliance’s other longstanding objectives of arms control, disarmament, and nonproliferation. The paper begins with some background on US/NATO nuclear policy from the end of the Cold War to the further invasion of Ukraine in February 2022. It then delves into changes in Russian nuclear doctrine, Moscow’s nuclear behavior during the Ukraine War, and the Kremlin’s views on future arms control. The report next discusses China’s nuclear modernization and views on arms control and the reaction among NATO and Asian Allies and the international community to these changes. It then discusses potential future U.S. and NATO posture options, including those already being undertaken by NATO or proposed by the US. Congressional Strategic Posture Commission and the State Department’s International Security Advisory Board. It concludes with an analysis of the potential impact of various options on arms control, disarmament, and nonproliferation and offers some policy recommendations.
Topic:: NATO, Arms Control and Proliferation, and Nonproliferation
Political Geography:: Russia, China, Europe, and United States of America

378. Iran-Russia Defense Cooperation: Current Realities and Future Horizons

Author:: Hanna Notte and Jim Lamson
Publication Date:: 04-2024
Content Type:: Working Paper
Institution:: James Martin Center for Nonproliferation Studies
Abstract:: Key Takeaways: (1) Big leap forward. Against the backdrop of Russia’s war against Ukraine, the Iran-Russia defense relationship has moved past the previous client-patron dynamic, with Iran emerging as an important provider of defense technology to Russia. Bilateral cooperation has expanded both in degree and in kind. In pre-existing areas of cooperation—such as electronic warfare, space, cyberspace, and military-to-military contacts—engagement has accelerated or deepened. Since 2022, Iran and Russia have also cooperated in entirely new areas. Those have included Iran’s provision of uncrewed aerial vehicles (UAVs), UAV production technology, and UAV training to Russia, alongside Iran’s multifaceted support for Russia’s ground war and assistance with expertise on evading sanctions. (2) The gloves are off. Since February 2022, what were historically key drivers of defense cooperation—a shared animosity toward the United States and the international order it promotes (including in the Middle East), and each side’s interest in military technology that the other side can offer—have increased in importance. Key constraints—Russia’s susceptibility to U.S. or Western pressure, causing it to limit cooperation with Iran; Russian concerns with adhering to nonproliferation norms and export control regimes; Russian reputational concerns over collaborating with Iran; Iran’s inability to pay for Russian technology; or historical mistrust—have become less relevant with Moscow’s growing dependence on Iran and its increased enmity toward the United States and Europe. (3) Growing institutionalization. Amid a general increase in numbers of mutual visits and high-level engagements among military and defense officials, Iran and Russia have taken steps to further institutionalize their defense relationship. Those have included work on a new strategic cooperation agreement to replace the one from 2001, forays into joint production of some weapon systems, and joint efforts to develop the International North-South Transport Corridor and other infrastructure that should provide a further boost to defense cooperation. (4) Thinking about the future in three steps. We propose a three-step methodology to think through the contours of bilateral defense cooperation over the next three to five years. It involves a) extrapolating from current trend lines, drivers, and constraints; b) drawing up inventories of future military needs for each country and identifying the areas in which the other country could help meet those needs; and c) accounting for potential high-impact scenarios and developments that may trigger dramatic shifts in cooperation. The latter include various scenarios of war in the Middle East, the end of Russia’s military campaign against Ukraine, and regime change in either Russia or Iran. (5) Neither a transactional relationship nor a military alliance. Present trend lines and drivers suggest that the relationship is no longer purely transactional and will probably not lapse back into the patron-client dynamic that characterized it prior to 2022, even once the war in Ukraine ends. Iran and Russia each have specific military-technical needs that the other might help meet. That said, beyond Russia’s campaign against Ukraine, Iranian needs from Russia will be greater than Russian needs for advanced technology from Iran. Other constraints—chiefly both countries’ challenges in procuring advanced components because of sanctions, Russia’s aversion to antagonizing the Gulf Arab states, and Russia’s enduring technological superiority in key areas—will also likely continue to act as brakes on the defense relationship, precluding it from developing into a full-fledged military alliance.
Topic:: Bilateral Relations, Nonproliferation, Russia-Ukraine War, and Defense Cooperation
Political Geography:: Russia, Iran, Eurasia, and Middle East

379. Nuclear China in the Twenty-First Century: Status and Implications for the World and Europe

Author:: David Santoro
Publication Date:: 07-2024
Content Type:: Working Paper
Institution:: James Martin Center for Nonproliferation Studies
Abstract:: In August 2021, shortly after new evidence surfaced that China might be expanding its nuclear arsenal much more extensively and rapidly than previously assumed, Admiral Charles Richard, Commander of the U.S. Strategic Command, described Beijing’s military investments as a “strategic breakout.” He underscored that the “explosive growth and modernization of [China’s] nuclear and conventional forces can only be what I describe as breathtaking,” adding that “that word, breathtaking, may not be enough.” Since then, several senior officials in the United States, Europe, and elsewhere have echoed that message and the final report of the bipartisan Congressional Commission on the Strategic Posture of the United States published in October 2023 concluded that at its current pace, China “will reach rough quantitative parity with the United States in deployed nuclear warheads by the mid-2030s.” The result has been the emergence of work, including by this author, to understand this unprecedented development. This work is in its infancy, however, and more is needed to grasp the scale and scope of Chinese nuclear modernization (especially given that much of it is shrouded in secrecy) as well as its implications for strategic stability, deterrence, and arms control and risk reduction. Existing work has focused primarily on the implications for the United States and, to some extent, the United States and Russia. Yet it is also important to grapple with the implications for Europe, especially the North Atlantic Treaty Organization (NATO), and reflect on actions that Europeans, individually or with others, should take in response.
Topic:: NATO, Nuclear Weapons, Nonproliferation, and Modernization
Political Geography:: China, Europe, and Asia

380. Russia, The Global South and Multilateral Nuclear Diplomacy after the Invasion of Ukraine

Author:: Hanna Notte
Publication Date:: 05-2024
Content Type:: Working Paper
Institution:: Nonproliferation Policy Education Center
Abstract:: Russia’s full-scale invasion of Ukraine in 2022 had a detrimental impact on multilateral nuclear diplomacy. The war caused an earthquake in procedure, paralyzing processes at the International Atomic Energy Agency, the United Nations First Committee, and meetings dealing with the Treaty on the Non-Proliferation of Nuclear Weapons. This was the case even as Russia’s nuclear saber-rattling and occupation of Ukrainian nuclear power plants, and Europe’s recommitment to nuclear weapons, demonstrated the ongoing need for nuclear dialogue. States from the Global South tended to navigate cautiously vis-à-vis Russia across the multilateral nuclear negotiating forums. Amid greater difficulties in forging common positions on nuclear issues related to the Ukraine war, these states were also frustrated with what they perceived as a deprioritization of their interests in multilateral nuclear diplomacy. Western states, especially during the first year of the war, were seen as exercising unwelcome pressure on the Global South to take sides against Russia. Russia, meanwhile, pursued a dual strategy, undermining nonproliferation efforts and chipping away at trust in legacy institutions, while also leveraging these forums in pursuit of greater alignment with states in the Global South. The implications of these different dynamics for the health of the nuclear order may take some time to fully play out, but will likely be profound.
Topic:: Diplomacy, Nuclear Weapons, Nonproliferation, Multilateralism, and Russia-Ukraine War
Political Geography:: Russia, Global Focus, and Global South

381. Protection of Geographical Indications in Trade Agreements: Is it worth it?

Author:: Charlotte Emlinger and Karine Latouche
Publication Date:: 03-2024
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: This paper estimates the impact of the inclusion of GIs in bilateral agreements on French exports of foodstuffs. We rely on a unique dataset of firms and products concerned by Geographical Indications (GIs) in the French agri-food industry (excluding wine) for 2012-2019, merged with firm-product-destination level data from French Customs and the French National Institute of Statistics. Controlling for market and firm characteristics, we compare the exports of GI firms with those of non-GI firms before and after the signing of the 13 agreements (25 destination countries) that include a list of GIs to be protected. We show that the protection of GIs in EU RTA helps French firms to reach new markets and to sell their products at higher price, but it depends on the level of protection provided by the agreement.
Topic:: Treaties and Agreements, Bilateral Relations, European Union, and Trade
Political Geography:: Europe

382. Reconciling Contrasting Views on the Growth Effect of Currency undervaluations

Author:: Cécile Couharde, Carl Grekou, Valérie Mignon, and Florian Morvillier
Publication Date:: 05-2024
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: This paper provides an in-depth analysis of the link between exchange rate misalignments and economic growth for a large sample of 170 countries over the 1973-2019 period. We rely on new cross-country data on multilateral currency misalignments and cross-quantile regressions to demonstrate that the seemingly divergent views of the Washington Consensus and the export-led growth theory on the role of currency undervaluations in promoting economic growth can be reconciled. Although any significant departures from the equilibrium exchange rate levels are found undesirable, we show that undervaluations are more likely to stimulate economic growth in developing countries. However, this positive impact is observed only up to certain thresholds of development level and currency undervaluation. Consequently, strategies in the poorest countries that systematically undervalue currencies in real terms to foster growth should be carefully tailored, as they raise the risk for these economies of switching from a positive to a less favorable growth regime, depending on both their specific wealth level and the extent of their currency undervaluation.
Topic:: Economic Growth, Currency, and Undervaluation
Political Geography:: Global Focus

383. The Industrial Cost of Fixed Exchange Rate Regimes

Author:: Blaise Gnimassoun, Carl Grekou, and Valérie Mignon
Publication Date:: 06-2024
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: Premature deindustrialization in most emerging and developing economies is one of the most striking stylized facts of the recent decades. In this paper, we provide solid empirical evidence supporting that the choice of a fixed exchange rate regime accelerates this phenomenon. Relying on a panel of 146 developed, emerging, and developing countries over the 1974-2019 period, we show that fixed exchange rate regimes have had a negative, significant, and robust effect on the size of the manufacturing sector —developing countries being the most affected by the industrial cost of such a regime. Additional gravity model regressions show that the impact of fixed regimes passes through the trade channel. In particular, this regime has kept countries with low relative productivity in a state of structural dependence on imports of manufactured products to the detriment of the emergence of a strong local manufacturing sector.
Topic:: Developing World, Manufacturing, Industrialization, Deindustrialization, Exchange Rates, and Emerging Economies
Political Geography:: Global Focus

384. The Percolation of Knowledge across Space

Author:: Pierre Cotterlaz and Arthur Guillouzouic
Publication Date:: 07-2024
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: This paper shows that the negative effect of geographical distance on knowledge flows stems from how firms gain sources of knowledge through their existing network. We start by documenting two stylized facts. First, in aggregate, the distance elasticity of patent citations flows has remained constant since the 1980s, despite the rise of the internet. Second, at the micro level, firms disproportionately cite existing knowledge sources, and patents cited by their sources. We introduce a framework featuring the latter phenomenon, and generating a negative distance elasticity in aggregate. The model predicts Pareto-distributed innovator sizes, and citation distances increasing with innovator size. These predictions hold well empirically. We investigate changes of the underlying parameters and geographical composition effects over the period. While the distance effect should have decreased with constant country composition, the rise of East Asian economies, associated to large distance elasticities, compensated lower frictions in other countries.
Topic:: Economy, Innovation, Patents, and Knowledge Diffusion
Political Geography:: East Asia and Global Focus

385. UIP Deviations in Times of Uncertainty: Not all Countries Behave Alike

Author:: Purva Gole, Erica Perego, and Camelia Turcu
Publication Date:: 07-2024
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: In this paper, we reconsider the role of uncertainty in explaining uncovered interest rate parity (UIP) deviations by focusing on 60 emerging and developing (EMDE) and advanced (AE) economies, over the period 1995M1--2023M3. We show that differentiating between EMDE currencies and AE currencies is crucial for understanding UIP deviations as the behaviour of excess returns differs in the two groups in periods of uncertainty: deviations become wider for EMDEs and narrow for AEs. These new results are consistent with the idea that in periods of uncertainty, global investors might change their risk preferences and move from high currency-risk investments in EMDEs towards less risky ones in AEs. This evidence holds for both the short-run and long-run UIP, and becomes stronger since the Global Financial Crisis (GFC).
Topic:: Interest Rates, Risk, Uncertainty, and Emerging Economies
Political Geography:: Global Focus

386. Beyond Target: Indirect Impacts of Antidumping

Author:: Sébastien Jean and Kevin Lefebvre
Publication Date:: 07-2024
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: This paper investigates the bilateral impacts of antidumping measures, beyond directly targeted products and exporting firms. It focuses on the country whose exports are most exposed to such measures, China. Productlevel analysis shows that export volumes are negatively affected for products similar to a product targeted by an antidumping case, i.e. belonging to the same tariff heading. Using firm-level data, we show that this impact is driven by within-firm contagion: targeted firms not only cut their exports of targeted products, they also reduce significantly their exports of non-targeted products. The decrease is half as large for the latter than for the former, but the total impact on bilateral trade is far larger, because the value of export flows affected by these indirect impacts is ten times larger than the value of directly targeted export flows. In addition, interestingly, this effect is more pronounced for small and private firms.
Topic:: Business, Exports, Trade, Spillovers, and Antidumping
Political Geography:: China and Asia

387. VIP Pass to Markets: When Customs Certification Helps Firms to Face NTMs

Author:: Charlotte Emlinger and Houssein Guimbard
Publication Date:: 10-2024
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: This paper aims to assess how trade facilitation measures reduce the costs induced by non-tariff measures (NTMs). It focuses on the Authorized Economic Operator (AEO) certification, a firm-level trade facilitation measure defined by the World Customs Organization. This status allows firms to benefit from customs simplifications at the border, reduced physical and document-based controls, and priority treatment. We use an original and exhaustive dataset of French firms certified as AEO by the European Customs, merged with firm level trade from the French Customs. Our empirical strategy is to compare the export structure of firms before and after their certification to see whether the impact of NTMs on trade can be reduced by trade facilitation measures. Our results show that the AEO status enhances trade, but only when facing NTMs in the destination market. This confirms that some of the trade costs generated by NTMs are administrative in nature and can be reduced by pre-certifying firms. Our conclusion is informative about the kind of trade cost reductions that could be achieved by trade agreements that go beyond tariff reductions, without hindering the level of actual regulation.
Topic:: Markets, Economy, Tariffs, Trade, and Customs
Political Geography:: Europe and France

388. Does Trade Exposure Explain Antiglobalization Votes?

Author:: Antoine Bouët, Anthony Edo, and Charlotte Emlinger
Publication Date:: 10-2024
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: We investigate the local effects of trade exposure and immigration on voting behavior in France from 1988 to 2022. We use the content of each candidate's manifesto to construct an anti-globalization voting index for each French presidential election. This index shows a significant increase in the anti-globalization positions of candidates, and a growing anti-globalization vote beyond the far right. We show that increasing local exposure to import competition and immigration increases anti-globalization votes, while increasing export exposure reduces them. We also find that imports have different effects depending on the products imported. While exposure to imports of final goods increases anti-globalization voting, exposure to imports of intermediate goods reduces it.
Topic:: Globalization, Political Economy, Immigration, Voting, and Trade
Political Geography:: Europe and France

389. The Collateral Channel within and between Countries

Author:: Jérôme Héricourt, Jean Imbs, and Lise Patureau
Publication Date:: 10-2024
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: We examine the response of investment to real estate prices among French firms from 1994 to 2015. Using newly introduced methods and specifications, we find that investment sensitivity to real estate prices decreases with firm size: The smallest firms are at least three times more responsive to changes in collateral value compared to the largest firms. We impute these estimates onto other countries where available data lack firm-level detail. This approach allows us to assess the aggregate sensitivity of investment to real estate prices across different countries. Our results indicate significant variation in the sensitivity of aggregate investment to real estate shocks, driven by cross country differences in the size distribution of firms.
Topic:: Investment, Real Estate, Collateral Channel, and Firm Heterogeneity
Political Geography:: Europe and France

390. The Great Depression as a Savings Glut

Author:: Victor Degorce and Éric Monnet
Publication Date:: 11-2024
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: New data covering 23 countries reveal that banking crises of the Great Depression coincided with a sharp international increase in deposits at savings institutions and life insurance. Deposits fled from commercial banks to alternative forms of savings. This fuelled a credit crunch since other institutions did not replace bank lending. While asset prices fell, savings held in savings institutions and life insurance companies increased as a share of GDP and in real terms. These findings provide new explanations of the fall in credit and aggregate demand in the 1930s. They illustrate the need to consider nonbank financial institutions when studying banking crises.
Topic:: History, Great Depression, Banking Crisis, Savings, and Thrift
Political Geography:: Global Focus and United States of America

391. Media Coverage of Immigration and the Polarization of Attitudes

Author:: Sarah Schneider-Strawczynski and Jerome Valette
Publication Date:: 01-2024
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: This paper investigates the effect of media coverage on immigration attitudes. It combines data on immigration coverage in French television with individual panel data from 2013 to 2017 that records respondents’ preferred television channel and attitudes toward immigration. The analysis focuses on within-individual variations over time, addressing ideological self-selection into channels. We find that increased coverage of immigration polarizes attitudes, with initially moderate individuals becoming more likely to report extremely positive and negative attitudes. This polarization is mainly driven by an increase in the salience of immigration, which reactivates preexisting prejudices, rather than persuasion effects from biased news consumption.
Topic:: Immigration, Media, Polarization, and Salience
Political Geography:: Europe and France

392. Pioneering a new classification: a comprehensive study of healthcare products in global trade

Author:: Pierre Cotterlaz, Guillaume Gaulier, Aude Sztulman, and Deniz Ünal
Publication Date:: 01-2024
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: International trade in healthcare products took off in the 2000s at the height of hyper-globalisation. Twenty years on, the Covid-19 shock drove home to governments the importance of health security and trained the spotlight on the industrial sovereignty issues raised by the international organisation of production. However, the tangled web of international value chains has compromised the traceability of the manufacturing of these essential goods. In addition, the classification of healthcare products across a multitude of industries in the trade and production nomenclatures makes them hard to identify and muddies the picture further. In this paper, we have painstakingly identified these products and classified them together in one industry grouping to assess the scale of and trends in trade to meet the needs of national health systems. Covering a vast range of products (medicinal products and their compounds, medical technology equipment and small medical materials), this healthcare industry grouping has posted the strongest relative growth since 2000, rising to take the number two share of world trade in 2021 just behind electronic products. This paper details the nature of world trade in the healthcare industry grouping and its five branches by production stage (intermediate and final), type of trade flows (one-way and two-way) and quality/price range. It goes on to present how the advanced countries are positioned compared with the rest.
Topic:: Health, International Trade and Finance, Developing World, Economy, and Emerging Economies
Political Geography:: Global Focus

393. Are Mass Layoffs Individually Costly But Socially Beneficial?

Author:: Axelle Arquie and Thomas Grjebine
Publication Date:: 01-2024
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: Relying on rich administrative data, this paper examines the adaptive capabilities of the French labor market in the aftermath of large-scale layoffs in the manufacturing sector. We assess both individual and aggregate effects of these shocks, using a unique quantitative definition of mass layoffs. We first show that displaced workers suffer a long-lasting increase in the probability of being unemployed and, for those who find a job, a decrease in their salary. While mass layoffs entail costs for displaced workers, there is a possible social benefit if they result in productive reallocation of workers to the most innovative companies and in the creation of new firms. Remarkably, our findings indicate that firms that hire displaced workers exhibit lower investment rates, decreased value added, and a reduced workforce, with a higher proportion of employees on fixed-term contracts. Additionally, mass layoffs do not contribute to the enhancement of allocative efficiency, as the most skilled workers are less likely to be matched with the most successful establishments. Furthermore, we assess the extent to which local economies adapt to these shocks, revealing that, six years after the mass layoff event, the local unemployment rate is 12% higher in comparison to unaffected regions. Lastly, the affected areas experience a diminished share of new establishment creation.
Topic:: Employment, Economy, and Layoffs
Political Geography:: Global Focus

394. Greening the implementation of the African Continental Free Trade Area Agreement

Author:: Lionel Fontagné, Stephen Karingi, Simon Mevel, Cristina Mitaritonna, and Yu Zheng
Publication Date:: 02-2024
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: The African Continental Free Trade Area (AfCFTA) Agreement aims to create a single market for goods and services, increase intra-Africa trade and promote sustainable socioeconomic development in Africa. African countries need to balance efforts to address these goals with the urgency of climate change. As of the 27th session of the Conference of Parties of the United Nations Framework Convention on Climate Change in 2022, most African countries had submitted their Nationally Determined Contributions (NDCs) to mitigate the impact of climate change. Establishing a carbon market is now on the policy agenda. This paper uses a dynamic general equilibrium model with different sources of energy (including renewable energy) and an in-depth presentation of greenhouse gas emissions to assess the economic and environmental impacts of implementing the AfCFTA Agreement and adopting various climate policies in Africa, including those NDCs and the International Monetary Fund’s proposal of carbon price floors. It shows that implementing the agreement and achieving Africa’s climate objectives are compatible. Continental coordination of emissions reduction among African countries proves most efficient for climate action.
Topic:: Climate Change, International Trade and Finance, Free Trade, and Carbon Emissions
Political Geography:: Africa

395. Automation, Global Value Chains and Functional Specialization

Author:: Lionel Fontagné, Ariell Reshef, Gianluca Santoni, and Giulio Vannelli
Publication Date:: 03-2024
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: We study how technology adoption and changes in global value chain (GVC) integration jointly affect labor shares and business function specialization in a sample of 14 manufacturing industries in 14 European countries in 1999– 2011. Our main contribution is to highlight the indirect effect of robotization on relative demand for labor via GVC integration. To do this, we develop a methodology to separately account for robots in the total capital stock. Increases in upstream, forward GVC participation directly reduce labor shares, mostly through reductions in fabrication, but also via management, marketing and R&D business functions. We do not find any direct effects of robot adoption; robotization affects labor only indirectly, by increasing upstream, forward GVC integration. In this sense robotization is “upstream-biased”. We also study novel channels through which rapid robotization in China shaped robotization in Europe and, therefore, GVC participation. This highlights an understudied way by which the global integration of China has affected relative demand for labor in its trading partners.
Topic:: Science and Technology, Labor Issues, Automation, and Global Value Chains
Political Geography:: Global Focus

396. Perils of the U.S. Defense Budget: Silver Lining or Dark Abyss?

Author:: German Marshall Fund of the United States (GMFUS)
Publication Date:: 03-2024
Content Type:: Working Paper
Institution:: German Marshall Fund of the United States (GMFUS)
Abstract:: “Don’t tell me what you value. Show me your budget and I’ll tell you what you value.” When President Biden said this in 2022, the world was in a different state. Russia’s full-scale invasion of Ukraine was struggling in the face of a surprisingly determined Ukrainian military. The Middle East had its unique but expected challenges, including Iran’s nuclear program. And President Xi Jinping of the People’s Republic of China (PRC) was seeking an unprecedented third term as Communist Party chief. Barely two years later, Ukraine is at best in a stalemate with Russia and, at worst, is faltering. Houthi militants, with materiel support from Tehran, have on a near-weekly basis attacked US and Western ships in the Red Sea. An emboldened Xi is becoming more assertive in the South China Sea, and the PRC has lobbed ballistic missiles over Taiwan for the first time. If the US defense budget in 2022 valued a set of national security priorities—funding Ukraine, countering the PRC, supporting NATO—those priorities are coming under threat in this year’s defense budget.
Topic:: Security, Budget, Geopolitics, and Defense Cooperation
Political Geography:: North America and United States of America

397. Prospects for EU-Türkiye Foreign Policy Cooperation at a Time of Geopolitical Turbulence

Author:: Ian Lesser, Kadri Tastan, Özgür Ünlühisarcıklı, and Paul T. Levin
Publication Date:: 04-2024
Content Type:: Working Paper
Institution:: German Marshall Fund of the United States (GMFUS)
Abstract:: Over more than six decades, the relationship between Türkiye and the EU has undergone a profound transformation. Just 20 years ago, Türkiye had real aspirations to join the EU. Today, that prospect is a distant memory, and political relations between the two parties are at an all-time low. Despite the prevailing challenges and areas of divergent interests, Türkiye-EU relations continue to exert a significant influence on domestic and foreign policies across much of Europe, particularly with regard to trade, border management, and migration. While the United States may view ties with Türkiye as discretionary at times, for both Türkiye and the EU, engagement remains unavoidable. Furthermore, against a backdrop of geopolitical turmoil and regional instability, the imperative for robust dialogue and collaboration between the EU and Türkiye has never been more pressing. With Türkiye‘s accession process stalled and geopolitical tensions on the rise, the need to reinvigorate and strengthen diplomatic ties has become increasingly evident. From the enduring conflicts in Syria and Iraq to the evolving dynamics surrounding Russia‘s aggression towards Ukraine, the prevailing geopolitical context necessitates a coordinated approach between the two parties. This political report examines the potential for collaboration between Türkiye and the EU, defining the essential preconditions for such cooperation and elucidating its mutual benefits. It also assesses the obstacles that stand in the way of such cooperation and proposes a framework for foreign policy dialogue between Türkiye and the EU, incorporating the views of Türkiye, the EU, and the United States.
Topic:: Security, Foreign Policy, European Union, and Geopolitics
Political Geography:: Europe, Turkey, and Middle East

398. Japan’s Approach to the Global South

Author:: Tobias Harris
Publication Date:: 04-2024
Content Type:: Working Paper
Institution:: German Marshall Fund of the United States (GMFUS)
Abstract:: Japanese Prime Minister Fumio Kishida, in a January 2023 speech in Washington, DC, stressed that if the G7 countries and their developed-world peers neglect the “Global South”, “we will find ourselves in the minority and unable to resolve mounting policy issues.” These remarks set the stage for a major theme of Japan’s G7 presidency that year, during which Tokyo continued to highlight the importance of more “humility” to strengthen relations between the group’s members and the “Global South”. The G7 leaders’ communiqué at their May 2023 Hiroshima summit did not refer explicitly to the Global South—the United States and other nations did not necessarily share Japan’s preference for the term, which risks treating as monolithic an enormously diverse array of countries—but the document stressed the importance of addressing the needs of middle- and low-income states, including a commitment to “continued efforts to scale up official development assistance (ODA)” and to adopting “innovative financing mechanisms”. This emphasis on outreach to the developing countries assumed greater urgency following Russia’s invasion of Ukraine, when they were often reluctant to support Western efforts to isolate and punish the Kremlin for its aggression. Japan’s approach to the “Global South” is not merely rhetorical. The Kishida government inherited a long-standing approach to developing nations, particularly those in Asia, that seeks to leverage Japanese ODA and public and private investment. The approach has two goals: to promote growth and strengthen economic ties with developing countries, and to foster trust and political credibility that can be translated into influence. The strategy is shaped by Japan’s national interests but seeks to address developing countries’ economic needs without drawing them into an anti-Beijing bloc. The approach has worked well in Southeast Asia, where, thanks to decades of efforts by successive governments, Japan is viewed particularly favorably. Tokyo now appears increasingly determined to pursue the same strategy in other parts of the “Global South”, including South Asia, the Pacific island states, and, to a lesser extent, Africa and Latin America. As Japan’s G7 peers seek to undertake their own initiatives to improve relations with the “Global South”, the key principles and successes of the country’s policies are worth examining.
Topic:: Foreign Policy, Economics, Democracy, Business, Global South, and Trade
Political Geography:: Japan, Asia, and Indo-Pacific

399. Refugees and Return: Resolving Ukraine's Human Capital Crisis

Author:: Markus Ziener and Dariia Mykhailyshyna
Publication Date:: 05-2024
Content Type:: Working Paper
Institution:: German Marshall Fund of the United States (GMFUS)
Abstract:: Ukraine is facing a human capital crisis of enormous proportions. Here, Dariia Mykhailyshyna of the Center for Economic Strategy in Kyiv presents the findings of three waves of surveys among Ukrainian refugees about their intentions to return to Ukraine or remain in their host countries. The report contains some recommendations for encouraging Ukrainians to return. Millions of its citizens fled the country after Russia launched its full-scale invasion in February 2022. To share best practices and generate possible solutions, the German Marshall Fund of the United States (GMF), along with its partners—the German Federal Ministry for Economic Cooperation and Development and the German Society for International Cooperation (GIZ), hosted a conference titled “Toward a Skilled Workforce: Rebuilding Ukraine’s Human Capital” in Berlin on April 25–26, 2024. To set the stage, Dariia Mykhailyshyna of the Center for Economic Strategy in Kyiv presented the findings of three waves of surveys among Ukrainian refugees. Those findings, as well as some recommendations, are detailed in this report.
Topic:: Reconstruction, European Union, Refugees, and Human Capital
Political Geography:: Europe and Ukraine

400. Rebuild, Decarbonize, and Integrate: Ukraine, the EU, and the Road to a Net-Zero Energy Sector

Author:: Jacob Kirkegaard
Publication Date:: 06-2024
Content Type:: Working Paper
Institution:: German Marshall Fund of the United States (GMFUS)
Abstract:: More than half of Ukraine’s power production capacity has been damaged by Russia since February 2022. Reconstruction is already underway, but to meet EU accession requirements, Ukraine will have to rapidly decarbonize as it rebuilds. As the frontline situation points to a longer war than was projected early on, uncertainties about Ukraine’s long-term economic path and prospects have inevitably increased. At the same time, noticeable political progress has been made given the EU’s agreement to start negotiations for full Ukrainian membership. This step provides the fighting Ukrainian people with a long-term perspective and a destination point as a prosperous, democratic, European market economy. Anchoring Ukraine’s economic future in the EU will have transformative implications for the country’s economy, not least its energy sector. That sector, which is still exposed to Russian military attacks, is now compelled to assimilate into the rapidly decarbonizing EU. More than half of Ukraine’s power production capacity has been damaged by Russia since February 2022 or is situated on territory now controlled by Russia. The Net Zero World Initiative (2023) estimated that 43% of nuclear, 68% of coal-fired, and 33% of combined heat and power generation was lost to the war as of mid-2023. Despite continuing attacks, more than two gigawatts (GW) of electricity production capacity were restored during 2023. Reconstruction of the Ukrainian energy sector is already underway despite the war. With it, the country’s energy transformation has begun. Yet, in March 2024, Russia returned to large- scale saturation missile attacks against Ukraine’s energy infrastructure, including its large hydropower plants and thermal power stations, inflicting further long-term damage. Putin seeks to exploit the apparent drop in Ukrainian air defense efficiency as Western supplies of air interceptor missiles have grown scarcer. Military risk consequently continues to cloud the outlook for Ukraine’s energy production. It also reduces the interest of foreign and domestic investors in committing resources to the sector. Uncertainty plagues the prospects for Western public support for Ukraine, too. Despite the recent passage of a funding package, future US funding will remain hostage to domestic politics. In Europe, various veto players—led by Hungary—as well as other internal divisions pose an ongoing political challenge to the EU’s financial support for Kyiv. The scarcity of public and private investment funding sources for Ukraine stands in stark contrast to the level of ambition for the energy- sector transition inherent in Ukraine’s EU accession process. One of the major energy- sector challenges facing Ukraine will be the expectation in Brussels that Ukraine will either enter fully into the EU Emissions Trading System (ETS) or implement an ETS-aligned national carbon-pricing system of similar ambition. It will not be possible for the Ukrainian economy to be granted a prolonged transition period here, and—for instance—enjoy free carbon-emission credits for affected industries, when these same industries will have been partially or fully phased out in the rest of the EU at the time of Ukraine’s EU accession. While the EU ETS price is currently adjusting to the new post-2022 energy shock demand level (for example, prices have declined so far in 2024 to around €60–65/ton), the ETS auction price forward curve slopes upward. This indicates that carbon market participants continue to believe that EU carbon prices will rise during Ukraine’s EU accession process. Adapting the economy to the EU’s carbon price level will require urgent action on the part of the Ukrainian government as it prepares the long-term National Energy and Climate Plan (NECP) that will lay out the country’s energy strategy for the rest of the 2020s. Certainly, Ukraine’s Environmental Protection Minister, Ruslan Strilets, displayed the necessary ambition when he spoke after the UN Climate Change Conference (COP28) in Dubai in late 2023. He reiterated earlier government statements from 2021 and committed Ukraine to launching a pilot emissions trading system in 2025 with a full launch in 2026. This would enable Ukraine’s entry into the ETS, and thus avoid negative effects of the EU’s Carbon Border Adjustment Mechanism (CBAM) for Ukrainian exports. This is a timetable that necessitates immediate and sizable climate investments in Ukraine. Ukraine has further committed itself in recent months to a significant scaling up of its already large nuclear power-generation capacity. The Ukrainian government has signed memoranda of understanding aiming at the construction of up to nine new power units using Westinghouse AP1000 technology. Just as the accelerated introduction of carbon pricing in Ukraine will be costly, construction of new nuclear power units, even if located at one of Ukraine’s existing nuclear plant facilities, will require large sums of capital investment upfront. The issue of upfront costs will similarly weigh on the broader issue of reconstruction of Ukraine, as more energy- efficient buildings will only gradually earn back the higher building and materials costs through lower long-term energy consumption. Ukraine must be applauded for aiming to seize the opportunity to rebuild its energy sector and integrate it with the EU as quickly as possible. This follows the recommendations of several expert groups, including GMF’s earlier (2023) report on this issue, which called for rapid Ukrainian adoption of carbon pricing and highlighted the need to phase in EU-level building codes expeditiously. This paper will focus on the implications for both Ukraine and the EU of the Ukrainian government’s recent energy-sector choices. What do these plans require institutionally and financially to succeed, and how will they alter not only the Ukrainian but the entire EU energy sector in the process?
Topic:: Climate Change, European Union, Decarbonization, Energy, Russia-Ukraine War, and Net Zero
Political Geography:: Europe and Ukraine

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COLUMBIA UNIVERSITY PRESS