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  • Author: Zainab Usman, David Landry
  • Publication Date: 04-2021
  • Content Type: Working Paper
  • Institution: Carnegie Endowment for International Peace
  • Abstract: Many African countries have placed economic diversification high on the policy agenda, yet they first need to define what it means in their specific structural and socioeconomic contexts. For decades, economic diversification has been a policy priority for low- and middle-income economies. In the words of former managing director of the International Monetary Fund (IMF), Christine Lagarde, “We know that economic diversification is good for growth. Diversification is also tremendously important for resilience.” Unfortunately, this goal continues to elude many African countries. In fact, the continent is home to eight of the world’s fifteen least economically diversified countries. This reality weakens the foundation of their economic transfomation and slows their pace of progress. It also makes these countries particularly vulnerable to sudden external shocks, as the pandemic-induced disruption of tourism and oil-dependent economies has illustrated. Given the importance of diversifying African economies, it is critical to recognize how various dimensions of diversification can have different implications for the menu of policy options. Closely associated with the process of structural transformation from lower to higher productivity sectors, economic diversification has three evident dimensions. The first relates to the expansion of economic sectors that contribute to employment and production or gross domestic product (GDP) diversification, and the second is associated with international trade or exports diversification. This paper, however, focuses on a third dimension that the economics literature pays scant attention to: fiscal diversification. This fiscal element involves expanding government revenue sources and public expenditure targets and can therefore play a central role in helping to catalyze broader economic transformation through the expansion of activity in specific industries and sectors. It is also critical that policymakers effectively measure the extent to which this objective is being achieved. Both the expansion of existing economic sectors and the creation of new ones may diversify an economy. But these processes are vastly different in practice and will garner distinct outcomes. Of the main tools used by economists to measure diversification, the Theil Index differentiates between the respective contributions of new economic sectors and existing ones to overall diversification. Another tool widely used by development practitioners—the Public Expenditure and Financial Accountability (PEFA) framework—has significant potential for evaluating fiscal diversification but would need to capture more information on government revenue collection and spending and link them to policy objectives.
  • Topic: Economics, Governance, Diversification, Trade
  • Political Geography: Africa
  • Author: Vijay Singh Chauhan, Sruti Vijayakumar
  • Publication Date: 05-2021
  • Content Type: Working Paper
  • Institution: Carnegie Endowment for International Peace
  • Abstract: The World Trade Organization’s Trade Facilitation Agreement has placed trade facilitation initiatives high on the agenda of international governments. This case study of India studies what trade facilitation may mean for a fast-paced economy. In this paper the authors use the trigger presented by the World Trade Organization’s (WTO’s) Trade Facilitation Agreement (TFA) to undertake a comprehensive review of various publicly available studies for India relating to performance measurement of the ecosystem that handles the cross-border movement of goods, focusing on the period since 2015. The paper summarizes the results of six key composite performance indicators—namely, (1) the Organisation for Economic Co-operation and Development’s (OECD’s) trade facilitation indicators (TFIs); (2) the World Bank’s Ease of Doing Business (EODB) Index; (3) the World Bank’s Logistics Performance Index (LPI); (4) the World Economic Forum’s (WEF’s) Global Competitiveness Index (GCI); (5) the World Bank’s World Governance Indicators (WGIs); and (6) the United Nations’ Global Survey on Trade Facilitation and Paperless Trade Implementation (GSTF-PTI). This paper, by examining these composite survey-based indicators and the intertemporal trends they exhibit for India, reveals that they have not been moving in agreement with each other and that some of the trends are evidently counterintuitive. A comparison between delineated subindicators of select composite indicators sometimes indicates surprising trends. Import cargo release times (a performance measurement prescribed by the TFA) for the largest containerized port in the country, the Jawaharlal Nehru Port Trust (JNPT), have been extracted from various studies that have relied on the data from the customs automation system; the container tracking system, which employs radio-frequency identification (RFID); and survey-based studies, including the Trading Across Borders (TAB) component of the World Bank’s EODB Index. These import cargo release time studies present a consistent trend of improvement since 2017. The paper, therefore, highlights the greater robustness of cargo release time trends, based particularly on technology-enabled data-driven studies as a more meaningful metric for measurement of performance of border management agencies and practices vis-à-vis survey or perception-based indicators representing “enablers” of trade facilitation.
  • Topic: Economics, Trade, WTO
  • Political Geography: South Asia, India
  • Author: Risto Rönkkö, Stuart Rutherford, Kunal Sen
  • Publication Date: 03-2021
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: In this paper, we examine the economic impact of the COVID-19 pandemic on the livelihoods of the poor. We use an unusually rich data set from a ‘financial diaries’ study known as the Hrishipara Daily Diaries Project. The data set tracks the economic and financial transactions of 60 individuals and their families in a semi-rural setting in Bangladesh on a real-time basis from October 2019 to September 2020. We document individual diarists’ behavioural responses to COVID-19, which reveal the varied experiences of the poor during the pandemic. We find that the pandemic and associated government lockdowns had significant negative effects on the livelihoods of the poor in our study, with financial inflows and outflows, incomes, and household expenditures below pre-pandemic levels during the pandemic period. To cope with the pandemic, households drew down on their cash reserves at home, as well as cutting down on non-food expenditures to protect their spending on food.
  • Topic: Economics, Government, Finance, Pandemic, COVID-19
  • Political Geography: Bangladesh, South Asia
  • Author: Annalena Oppel
  • Publication Date: 06-2021
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: Community or interpersonal support as a critical source of livelihood sustenance in the Global South can exhibit unequal dynamics. An understanding of these practices is primarily tied to the conceptual space of poverty or small communities. Less is known about how social support systems might respond to structural inequalities. I address this by exploring how support practices might be shaped by inequalities in the Namibian context. I draw on primary network data to assess inequality as a social dynamic within the space of support and evaluate whether providing worse-off others corresponds to former discriminatory practices under the apartheid regime. My results suggest that inequality has normalized a sense of support as necessity for black but not white Namibians. More broadly, by recognizing differences in group practices, I evidence that exploring support practices across structural inequalities can enhance insights on the social replication of inter- and intragroup-based inequalities.
  • Topic: Economics, Race, Inequality, Social Networks
  • Political Geography: Africa, Namibia
  • Author: Mehdi Lahlou
  • Publication Date: 02-2021
  • Content Type: Working Paper
  • Institution: Istituto Affari Internazionali
  • Abstract: The coronavirus pandemic has turned into a global economic crisis with severe social effects in the least developed countries, particularly in Africa. Pre-existing challenges related to widespread poverty, demographic growth, food insecurity and governance issues have been exacerbated by the pandemic. While migration remains one of the key elements of the partnership agenda between Africa and the European Union, the aggravating socioeconomic situation in the African continent due to the impact of COVID-19 and its implications for migration dynamics requires going beyond business-as-usual approaches. The renewed scenario calls for a more comprehensive and development-oriented approach to migration, requiring new policy initiatives addressing the wider set of conditions that, beyond constituting developmental challenges in their own right, also drive migration in North Africa as well as in Sub-Saharan African countries.
  • Topic: Economics, Migration, European Union, Mobility, Asylum, COVID-19
  • Political Geography: Africa, Europe, North Africa
  • Publication Date: 01-2021
  • Content Type: Working Paper
  • Institution: Korea Economic Institute of America (KEI)
  • Abstract: The Korea Economic Institute of America (KEI), with the generous support of the Korea Foundation, organized six “Vision Group” roundtable conversations with leading American scholars and commentators to discuss the United States’ relationship with the Republic of Korea. The first was held in December 2019, the last in November 2020. The intent was to consider the future of relations during a time of change. The Vision Group comprised a wide range of expertise and opinion. This record conveys some of the insights and recommendations that arose during the conversations.
  • Topic: International Relations, Security, Foreign Policy, Economics, Human Rights
  • Political Geography: China, Asia, South Korea, North Korea, United States of America
  • Author: Maximilian Ernst
  • Publication Date: 04-2021
  • Content Type: Working Paper
  • Institution: Korea Economic Institute of America (KEI)
  • Abstract: This paper examines South Korea’s foreign policy towards China before, during, and after the Terminal High Altitude Area Defense (THAAD) missile defense dispute to investigate the limits of South Korea’s public diplomacy and soft power. South Korea’s official public diplomacy has the objective to “gain global support for Korea’s policies,” following Joseph Nye’s narrow definition of soft power. South Korea furthermore ranks high in the most relevant soft power indices. Based on the case of Chinese economic retaliation against South Korea in response to THAAD deployment, this paper argues that public diplomacy and soft power only work in the absence of traditional security contentions, but fail in the presence of such security contentions. The THAAD case also demonstrates the utility of traditional diplomacy, based on high-level summits and negotiations, to solve the very disputes that South Korea’s latent public diplomacy and soft power were unable to alleviate.
  • Topic: International Relations, Foreign Policy, Diplomacy, Economics, Weapons
  • Political Geography: China, Asia, South Korea, Korea
  • Author: Troy Stangarone, Juni Kim
  • Publication Date: 05-2021
  • Content Type: Working Paper
  • Institution: Korea Economic Institute of America (KEI)
  • Abstract: KEI’s 2021 Report on American Attitudes on the U.S.-ROK Alliance and North Korea Policy summarizes results from a survey commissioned by KEI and conducted by YouGov on May 6th to May 10th, 2021 in advance of the U.S.-ROK summit on May 21st, 2021. The survey asked Americans their views on the U.S.-South Korea relationship, North Korea policy, and the U.S.’ role in the East Asian region.
  • Topic: International Relations, Security, Foreign Policy, Economics, Domestic politics
  • Political Geography: Asia, South Korea, North America, United States of America
  • Author: Katrin Klöble
  • Publication Date: 01-2021
  • Content Type: Working Paper
  • Institution: German Development Institute (DIE)
  • Abstract: This paper addresses the self-selection of potential migrants. In particular, the study examines whether risk and time preferences explain a significant proportion in the movement heterogeneity of individuals. It is further intended to shed light on the role of social preferences (trust, altruism, reciprocity) as potential migratory determinants. By making use of a unique cross-sectional data set on migration intentions (Gallup World Poll) and experimentally-validated preferences (the Global Preference Survey) covering 70 countries worldwide, a probit model is estimated. The empirical results provide evidence that potential migrants exhibit higher levels of risk-taking and patience than their counterparts who stay at home (the stayers). This holds true across differing countries with various cultural backgrounds and income levels. Trust and negative reciprocity are found to be significantly related to migration aspirations as well. Yet conclusive clarifications still remain necessary, providing impetuses for future research.
  • Topic: Economics, Migration, Risk, Polls
  • Political Geography: Global Focus
  • Author: Benjamin Crost
  • Publication Date: 03-2021
  • Content Type: Working Paper
  • Institution: Empirical Studies of Conflict Project (ESOC)
  • Abstract: This paper provides evidence that adverse economic conditions contributed to the rise of anti-democratic extremism in the United States. A state-level analysis shows that increases in the unemployment rate during the Great Recession led to a large increase in the number of anti democratic extremist groups. The effect is concentrated in states with high pre-existing racial resentment, as proxied by racist web searches, and strongest for the male unemployment rate and the white unemployment rate. If unemployment had remained at its pre-recession level, the increase in anti-democratic groups between 2007 and 2010 could have been reduced by more than 60%.
  • Topic: Economics, Democracy, Inequality, Far Right, Economic Inequality, Political Extremism
  • Political Geography: United States
  • Author: Mma Amara Ekeruchera
  • Publication Date: 04-2021
  • Content Type: Working Paper
  • Institution: Centre for the Study of the Economies of Africa (CSEA)
  • Abstract: The COVID-19 outbreak began in December 2019 in the Wuhan city of China and has continued to spread globally. As of this writing, 28.2 million cases have been recorded globally with 910,000 deaths. Aside the health impact, the pandemic has led to an unprecedented disruption in economic activities, initiating a sudden demand, supply, and financial shock. The mitigation strategies put in place by governments across the world to curb the virus as well as the uncertainty associated with the pandemic has led to a reduction in the consumption of non-essential commodities. Meanwhile, disruptions to global supply chains in a closely connected world as well as the reduced demand have necessitated a slowdown in production. Furthermore, investors have become more risk averse with the prices of risk assets falling to levels experienced in the 2007-20008 global financial crisis. To counteract the fall in private sector demand, stabilize the financial system, and ensure economic recovery, governments and central banks across the world have deployed a range of policies and programmes. Central banks are cutting policy rates and providing direct liquidity to the financial system. Federal and sub-national governments are providing tax relief, cash transfers, and employee retention schemes to alleviate the burden on affected individuals and businesses. Africa is not left behind as governments have increased spending plans (about 1.9% of their GDP) and central banks are adopting more accommodating monetary policies.
  • Topic: Economics, Health, Monetary Policy, Central Bank, Macroeconomics, Pandemic, COVID-19, Socioeconomics , Supply Chains
  • Political Geography: Africa
  • Author: Hubert Gabrisch
  • Publication Date: 01-2021
  • Content Type: Working Paper
  • Institution: The Vienna Institute for International Economic Studies (WIIW)
  • Abstract: This study attempts to identify uncertainty in the long-term rate of interest based on the controversial interest rate theories of Keynes and Kalecki. While Keynes stated that the future of the rate of interest is uncertain because it is numerically incalculable, Kalecki was convinced that it could be predicted. The theories are empirically tested using a reduced-form GARCH-in-mean model assigned to six globally leading financial markets. The obtained results support Keynes’s theory – the long-term rate of interest is a nonergodic financial phenomenon. Analyses of the relation between the interest rate and macroeconomic variables without interest uncertainty are thus seriously incomplete.
  • Topic: Economics, International Political Economy, Economic Theory, Interest Rates, Macroeconomics, Keynes, Models, Michał Kalecki
  • Political Geography: Global Focus
  • Author: Artem Kochnev
  • Publication Date: 01-2021
  • Content Type: Working Paper
  • Institution: The Vienna Institute for International Economic Studies (WIIW)
  • Abstract: The paper investigates determinants of investments in state capacity and institutional change in contemporary Ukraine. After formulating a simple sequential two-stage model of investments in state capacity, the paper estimates autoregressive distributed lag and vector autoregressive models to verify its predictions. The paper finds little evidence for the impact of conflict intensity and access to international credit on the pace of reform progress. It finds a statistically significant effect for the intensity of political competition and changes of real wages, albeit these results are sensitive to robustness checks.
  • Topic: Economics, International Political Economy, War, Labor Issues, Credit, International Business, State Capitalism, Models
  • Political Geography: Ukraine
  • Author: Petar Jolakoski, Branimir Jovanovic, Joana Madjoska, Viktor Stojkoski, Dragan Tevdovski
  • Publication Date: 02-2021
  • Content Type: Working Paper
  • Institution: The Vienna Institute for International Economic Studies (WIIW)
  • Abstract: If firm profits rise to a level far above than what would have been earned in a competitive economy, this might give the firms market power, which might in turn influence the activity of the government. In this paper, we perform a detailed empirical study on the potential effects of firm profits and markups on government size and effectiveness. Using data on 30 European countries for a period of 17 years and an instrumental variables approach, we find that there exists a robust relationship between firm gains and the activity of the state, in the sense that higher firm profits reduce government size and effectiveness. Even in a group of developed countries, such as the European countries, firm power may affect state activity.
  • Topic: Development, Economics, Government, International Political Economy, Profit
  • Political Geography: Europe, Global Focus
  • Author: David Pichler, Robert Stehrer
  • Publication Date: 02-2021
  • Content Type: Working Paper
  • Institution: The Vienna Institute for International Economic Studies (WIIW)
  • Abstract: This paper analyses the impact of ICT-skills on individuals’ labour market mobility patterns, in particular job-to-job, employment- to-unemployment and unemployment-to-employment transitions. Based on the OECD’s Programme for the International Assessment of Adult Competencies (PIAAC) and longitudinal EU-SILC data, individuals’ labour market outcomes are examined over the period 2011-2017 in nine EU countries and the UK. Our results indicate that individuals with strong ICT skills have better opportunities and are therefore not only more likely to change jobs more frequently but are also less likely to face unemployment. Furthermore, ICT skills support unemployment exit towards medium and high digital occupations. A certain minimum level of ICT skills also supports unemployment exit towards low digital occupations but seems to make employment in such occupations less likely once this threshold is crossed. Overall, ICT skills have less predictive power for transition towards medium digital occupations. Thus, while ICT skills appear to improve labour market opportunities significantly, it seems that there are still jobs that require relatively few ICT skills.
  • Topic: Economics, International Political Economy, Science and Technology, Digital Economy, Labor Market, Information Technology , Skilled Labor
  • Political Geography: Global Focus
  • Author: Mahdi Ghodsi
  • Publication Date: 02-2021
  • Content Type: Working Paper
  • Institution: The Vienna Institute for International Economic Studies (WIIW)
  • Abstract: Regulative non-tariff measures (NTMs), such as technical barriers to trade (TBTs) and sanitary and phytosanitary (SPS) measures, have frequently been imposed to regulate the quality of imported goods when the market fails to address some issues of concern regarding harmful products with low standards. The impact of NTMs on trade values and trade volumes has been extensively modelled and analysed in the literature, while their quality impact has usually been studied using the unit values of imports. In this paper a monopolistic competition framework is presented, in which firms choose both the quality and the price of their exports subject to the compliance costs of NTMs behind the border and a fixed cost of technological change. Using the solutions of this model including NTMs, the quality of products at the six-digit level of the harmonised system (HS) traded globally and bilaterally during the period 1996–2017 is estimated. Using these estimates, the impacts of TBTs and SPS measures on trade values, volume, unit value and quality are estimated. On average and across all global bilateral trade, TBTs restrict imports while improving quality significantly. SPS measures stimulate trade and improve the average imported quality. Then, by estimating the importer-specific impact of NTMs on traded value, quantity, unit value, quality, and quality-adjusted price for each product, the ‘NTM Black Box’ is opened and analysed. This provides evidence of whether the quality of traded goods to an importing country has been upgraded despite the trade restrictiveness of NTMs.
  • Topic: Economics, International Political Economy, International Trade and Finance, Non-Tariff Measures
  • Political Geography: Global Focus
  • Author: Sandra Leitner
  • Publication Date: 03-2021
  • Content Type: Working Paper
  • Institution: The Vienna Institute for International Economic Studies (WIIW)
  • Abstract: In view of the scarcity of reliable and detailed data on migration this paper develops the novel cohort approach, which allows us to deduce from annual Labour Force Surveys (LFS) the extent and skill composition of net migration. It is based on representative age cohorts who are followed over time and whose change in size and composition provides information about the extent and skill composition of net migration. As concerns skill composition, the analysis differentiates between four educational levels (Low, Medium-general, Medium-VET and High). The analysis is applied to the six Western Balkan countries (for the period 2010-2019), which lack official, comprehensive and domestic migration statistics, particularly in terms of the skill composition of migrants. The analysis shows that during the period analysed all six Western Balkan countries experienced net emigration which, however, differs across countries in terms of magnitude and particular age pattern. A further breakdown of net migration by highest level of education shows that net emigration in the region mainly occurs among the medium- and low-educated. Contrary to widespread perception, the analysis finds evidence of brain gain in terms of partly substantial net immigration of the highly educated in all countries except Albania, Bosnia and Herzegovina and Kosovo. Brain gain is highest among those in their early to mid-20s to early 30s. As this is the age at which students usually complete tertiary education, this is likely to be related to students returning to their home countries after graduating from tertiary education abroad.
  • Topic: Economics, International Political Economy, Migration, Labor Issues, Skilled Labor
  • Political Geography: Balkans
  • Author: Michael Landesmann, Isilda Mara
  • Publication Date: 05-2021
  • Content Type: Working Paper
  • Institution: The Vienna Institute for International Economic Studies (WIIW)
  • Abstract: The South-North migration corridor, i.e. migration flows to the EU from Africa, the Middle East and EU neighbouring countries in the East, have overtaken the East-West migration corridor, i.e. migration flows from Central and East European countries to the EU15 and the European Free Trade Association (EFTA). This is likely to dominate migration flows into the EU+EFTA over the coming decades. This paper applies a gravity modelling approach to analyse patterns and drivers of the South-North migration corridor over the period 1995-2020 and explores bilateral mobility patterns from 75 sending countries in Africa, the Middle East and other EU neighbours to the EU28 and EFTA countries. The study finds that income gaps, diverging demographic trends, institutional and governance features and persisting political instability, but also higher climate risks in the neighbouring regions of the EU, are fuelling migration flows along the South-North corridor and will most likely continue to do so.
  • Topic: Economics, International Political Economy, Migration, Labor Issues, European Union, Human Capital, Labor Market
  • Political Geography: Europe
  • Author: Björn Brey
  • Publication Date: 02-2021
  • Content Type: Working Paper
  • Institution: Nottingham Interdisciplinary Centre for Economic and Political Research (NICEP)
  • Abstract: Did recent technological change, in the form of automation, affect immigration policy in the United States? I argue that as automation shifted employment from routine to manual occupations at the bottom end of the skill distribution, it increased competition between natives and immigrants, consequently leading to increased support for restricting low-skill immigration. I formalise this hypothesis theoretically in a partial equilibrium model with constant elasticity of substitution in which technology leads to employment polarization, and policy makers can vote on immigration legislation. I empirically evaluate these predictions by analysing voting on low-skill immigration bills in the House of Representatives during the period 1973-2014. First, I find evidence that policy makers who represent congressional districts with a higher share of manual employment are more likely to support restricting low-skill immigration. Second, I provide empirical evidence that representatives of districts which experienced more manual-biased technological change are more likely to support restricting low-skill immigration. Finally, I provide evidence that this did not affect trade policy, which is in line with automation having increased employment in occupations exposed to low-skill immigration, but not those exposed to international trade.
  • Topic: Economics, Immigration, Economic Policy, Automation, Technocracy, Skilled Labor
  • Political Geography: United States
  • Author: Samer Matta, Michael Bleaney, Simon Appleton
  • Publication Date: 01-2021
  • Content Type: Working Paper
  • Institution: Nottingham Interdisciplinary Centre for Economic and Political Research (NICEP)
  • Abstract: An extensive literature has examined the economic effects of non-violent political instability events. Nonetheless, the issue of whether economies react differently over time to such events remains largely unexplored. Using synthetic control methodology, which constructs a counterfactual in the absence of political instability, we estimate the output effect of 38 regime crises in the period 1970-2011. A crucial factor is whether crises are accompanied by mass civil protest. In the crises accompanied by mass civil protest, there is typically an immediate fall in output which is never recovered in the subsequent five years. In crises unaccompanied by protest, there are usually no significant effects. Furthermore, this paper provides new evidence that regime crises (with and without mass civil protest) have heterogeneous (country-specific) effects on output per capita.
  • Topic: Economics, Political Economy, Regime Change, Political stability, Economic Growth, Protests, Economic Policy, Civil Unrest
  • Political Geography: Global Focus