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1. Fossil Fuel Industry Phase-Out and Just Transition: Designing Policies to Protect Workers’ Living Standards

Author:
Robert Pollin
Publication Date:
02-2023
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
This paper focuses on just transition policies targeted at supporting workers now employed in the fossil fuel industries and ancillary sectors within high-income economies. As a general normative principle, I argue that the overarching aim of such policies should be to protect workers against major losses in their living standards resulting through the fossil fuel industry phase-out. The impacted workers should be provided with three critical guarantees to accomplish this, in the area of jobs, compensation and pensions. Just transition policies should also support workers in the areas of job search, retraining and relocation, but these forms of support should be understood as supplementary. Within the framework of these broad principles, the paper first reviews experiences with transitional policies in Germany, the UK, the EU and, more briefly, Japan and Canada. A critical point that emerges is that these just transition policies do not provide the needed guarantees for assuring workers that they will not experience major living standard declines. The paper then describe an illustrative just transition program for workers that includes reemployment, income and pension guarantees, focusing on a case study for the U.S. state of West Virginia. The results show that the costs of the just transition program for West Virginia’s fossil fuel industry dependent workers will amount to an annual average of about $42,000 per worker, equal to about 0.2 percent of West Virginia’s GDP. I briefly summarize results from the seven other studies of U.S. states and for the overall U.S. economy. For the U.S. economy overall, the just transition program’s costs would total to about 0.015 percent of GDP. These findings demonstrate that providing a generous just transition program does not entail unaffordable levels of public spending. Robust just transition policies should therefore be understood as an entirely realistic prospect for all high-income economies.
Topic:
Political Economy, Labor Issues, European Union, GDP, Economy, and Fossil Fuels
Political Geography:
Japan, United Kingdom, Europe, Canada, and Germany

2. German Economy Summer 2022: Slowly progressing recovery

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

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

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

4. Amendments in the 2022 State Budget of Azerbaijan: Impacts and Perspectives

Author:
Nigar Islamli
Publication Date:
07-2022
Content Type:
Working Paper
Institution:
Center for Economic and Social Development (CESD)
Abstract:
After the global pandemic, rising global demand, as well as the impact of geopolitical and military tensions, have led to a significant rise in the prices of major energy carriers in recent years. In the context of this pandemic, the recession in the country's economy in 2020 was replaced by the process of rapid economic recovery in 2021. The significant increase in oil prices in Azerbaijan had a positive effect on the nominal amount of GDP, although the increase in nominal GDP was mainly due to the oil sector, the real growth was possible almost due to non-oil sectors. The economic situation for the past period of the current year, the medium-term socio-economic forecast indicators, and the performance of budget revenues more than expected made it necessary to revise the state budget for 2022.
Topic:
Oil, Budget, GDP, Economy, and COVID-19
Political Geography:
Azerbaijan

5. The Azerbaijani economy in the first four months of 2022: İndependent View

Author:
CESD Research Team
Publication Date:
05-2022
Content Type:
Working Paper
Institution:
Center for Economic and Social Development (CESD)
Abstract:
CESD – the Center for Economic and Social Development – concluded its macro-economic survey results for the first four months of 2022. According to the State Statistic Committee of Azerbaijan, Gross Domestic Product (GDP) increased by 7.2 % in January-April 2022 compared with the same period of previous year: The CESD’s figure for the same period was 6.5 %.
Topic:
Development, GDP, Economy, and Macroeconomics
Political Geography:
Azerbaijan

6. What Do We Really Know about Productivity Differentials across Countries?

Author:
Jayati Ghosh
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
This paper examines and critiques the most widely used measure of productivity (output per worker employed) and argues that this is a flawed, inadequate and even misleading measure of economic progress. In terms of cross-country comparisons and assessing trends over time, both the numerator (GDP or value added) and the denominator (number of workers or hours worked) have significant conceptual and measurement problems. These issues are considered in general, and also with regard to how they affect analyses of productivity differentials in the U.S. and India in the recent period.
Topic:
Political Economy, GDP, Employment, Economy, and Productivity
Political Geography:
South Asia, India, North America, and United States of America

7. Inconsistent Definitions of GDP: Implications for Estimates of Decoupling

Author:
Gregor Semieniuk
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Efforts to assess the possibilities for decoupling economic growth from negative environmental impacts have examined their historical relationship, with varying and inconclusive results. Part of the problem is ambiguity about definitions of environmental impacts, e.g. whether to use territorial or consumption-based measures of environmental impact. This paper shows that ambiguities arising from definitional changes to GDP are sufficiently large to affect the outcomes. I review the history of structural revisions to GDP using the example of the United States, and on international comparisons of purchasing power parity, compare decoupling results using various historical definitions of GDP on the same environmental indicator, and demonstrate that changing the GDP data vintage does impact decoupling results in qualitatively important ways, with and without purchasing power parity. Inconsistencies in economic measurement introduce an additional layer of ambiguity into historical decoupling evidence and model projection into the future. To advance debate and be clear about scenario assumptions, rigorous reporting of GDP definitions used and the sharing of data vintage for subsequent comparison and replication are urgently needed.
Topic:
Environment, Political Economy, GDP, and Economic Growth
Political Geography:
Global Focus

8. A Short Note on Debt-Neutral Fiscal Policy

Author:
Zico Dasgupta
Publication Date:
01-2021
Content Type:
Working Paper
Institution:
Centre for Sustainable Employment, Azim Premji University
Abstract:
One of the central concerns against increasing expenditures in the recent period has been the possibility of an adverse impact on debt-GDP ratio. Once stability of debt-ratio is regarded as a policy-objective, the aggregate expenditure that is consistent with the stability condition gets determined by the given level of output growth rate and revenue receipts. Instead of perceiving expenditures to be determined by the debt-stability condition, this short note attempts to lay bare the conditions under which the debt-stability condition is restored despite increasing the growth rate of non-capital primary expenditure to a targeted level. The targeted level of growth rate of non-capital expenditures can be perceived to be one which compensates for the income loss of labour during the pandemic. In contrast to conventional wisdom, the possibility of increasing such expenditures is explored not by reducing capital expenditures, but rather by increasing the latter. Using the multiplier value of capital expenditures estimated by the RBI, it is argued that the debt-ratio would remain unchanged despite increasing the growth rate of non capital primary expenditure if the capital expenditures growth rate is allowed to increase in a specific proportion.
Topic:
Debt, Economics, Political Economy, Labor Issues, GDP, Employment, and Fiscal Policy
Political Geography:
India

9. Notes on Covid-19, Potential GDP, and Hysteresis

Author:
Thomas Michi
Publication Date:
03-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
This note provides a model framework for thinking about stabilization policies in the presence of hysteresis after a negative shock like the Covid-19 pandemic. Headline measures of so-called potential GDP published by the Congressional Budget Office represent only one of many possible inflation-neutral trajectories for output. The term potential GDP is misleading since potential implies a unique limit on output. It is much more accurate to consider a range of possible trajectories or multiple equilibria. Repairing the damages from a shock will require overshooting the inflation target and running the economy above its inflation-neutral equilibrium in order to restore the status quo ante level of output and employment. The model assumes constant trend growth so that path dependence takes the form of pure output-level effects.
Topic:
Political Economy, GDP, COVID-19, and Financial Stability
Political Geography:
Global Focus

10. The Savings and Growth Nexus in Bangladesh

Author:
Sultan Hafeez Rahman and Md. Nahid Ferdous Pabon
Publication Date:
09-2021
Content Type:
Working Paper
Institution:
BRAC Institute of Governance and Development (BIGD), Brac University
Abstract:
The paper investigates the causal relationship between Bangladesh’s gross domestic savings (GDS) and gross domestic product (GDP) in the years 1980 to 2018. Using yearly time series data from the period, the authors employ one long-run and two short-run causality tests to identify the direction of causality between the two variables. Bangladesh experienced stellar GDP growth between 1990 and 2019, averaging 6.5 percent per year. In the latter years, this rate was over 7 percent per year. Despite that, its GDS rate only increased to 22 percent from 15 percent in the same period. This is in stark contrast to the scenario in countries like India, China, Indonesia, and Thailand. The Philippines, however, had a low savings rate like Bangladesh. A common feature of both countries is their large remittances and the broad-based growth effects in the economies. In both Bangladesh and the Philippines, gross national savings (GNS) rather than GDS caused greater investment. Thus, domestic savings were clearly not the key driver of growth in Bangladesh, which is inconsistent with the view of capital fundamentalists and neoclassical growth theory. The findings suggest that, in the short run, the direction of causality between savings and economic growth is unidirectional from economic growth to savings. And in the long run, there is no evidence of statistically significant causality in either direction. In other words, higher economic growth induced savings in Bangladesh in the studied period of time.
Topic:
Development, GDP, Economic Growth, and Savings
Political Geography:
Bangladesh and South Asia