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81. 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

82. 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

83. 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

84. 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

85. 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

86. 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

87. 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

88. 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

89. 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

90. 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

91. 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

92. 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

93. 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

94. 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

95. 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

96. 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

97. 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

98. 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

99. 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

100. 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