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  • Author: Scott Lincicome, Huan Zhu
  • Publication Date: 06-2021
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: In the wake of the COVID-19 pandemic and rising U.S.-China tensions, American policymakers have again embraced “industrial policy.” Both President Biden and his predecessor, as well as legislators from both parties, have advocated a range of federal support for American manufacturers to fix perceived weaknesses in the U.S. economy and to counter China’s growing economic clout. These and other industrial policy advocates, however, routinely leave unanswered important questions about U.S. industrial policy’s efficacy and necessity: What is “Industrial Policy”? Advocates of “industrial policy” often fail to define the term, thus permitting them to ignore past failures and embrace false successes while preventing a legitimate assessment of industrial policies’ costs and benefits. Yet U.S. industrial policy’s history of debate and implementation establishes several requisite elements – elements that reveal most “industrial policy successes” not to be “industrial policy” at all. What are the common obstacles to effective U.S. industrial policy? Several obstacles have prevented U.S. industrial policies from generating better outcomes than the market. This includes legislators’ and bureaucrats’ inability to “pick winners” and efficiently allocate public resources (Hayek’s “Knowledge Problem”); factors inherent in the U.S. political system (Public Choice Theory); lack of discipline regarding scope, duration, and budgetary costs; interaction with other government policies that distort the market at issue; and substantial unseen costs. What “problem” will industrial policy solve? The most common problems purportedly solved by industrial policy proposals are less serious than advocates claim or unfixable via industrial policy. This includes allegations of widespread U.S. “deindustrialization” and a broader decline in American innovation; the disappearance of “good jobs”; the erosion of middle‐​class living standards; and the destruction of American communities. Do other countries’ industrial policies demand U.S. industrial policy? The experiences of other countries generally cannot justify U.S. industrial policy because countries have different economic and political systems. Regardless, industrial policy successes abroad – for example, in Japan, Korea and Taiwan – are exaggerated. Also, China’s economic growth and industrial policies do not justify similar U.S. policies, considering the market‐​based reasons for China’s rise, the Chinese policies’ immense costs, and the systemic challenges that could derail China’s future growth and geopolitical influence. These answers argue strongly against a new U.S. embrace of industrial policy. The United States undoubtedly faces economic and geopolitical challenges, including ones related to China, but the solution lies not in copying China’s top‐​down economic planning. Reality, in fact, argues much the opposite.
  • Topic: Government, Industrial Policy, Manufacturing, COVID-19
  • Political Geography: China, Asia, North America, United States of America
  • 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: Marcus Noland, Eva (Yiwen) Zhang
  • Publication Date: 03-2021
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: By Election Day 2020, the COVID-19 pandemic had killed 234,244 Americans and caused the sharpest macroeconomic downturn in US history. Hypothetical calculations using county-level electoral data show that in a “no pandemic” scenario or a scenario in which the severity of the pandemic was mitigated by 30 percent, Donald Trump would have lost the popular vote but won the electoral vote. In the 20 percent mitigation scenario, the electoral vote would have been tied, giving Trump a presumptive victory in the House of Representatives. For the second time in a row (and the third time since 2000), the candidate who lost the popular vote would have been elected president of the United States.
  • Topic: Government, Politics, Elections, Donald Trump, COVID-19
  • Political Geography: North America, United States of America
  • Author: Julia Anderson, Francesco Papadia, Nicolas Véron
  • Publication Date: 04-2021
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: n 2020, European governments mitigated the economic impact of COVID-19 lockdowns and other pandemic-fighting programs through a host of initiatives, including efforts to support credit, such as guarantees for bank loans, particularly to small and medium-sized enterprises. This paper presents detailed information about these national credit support programs in the largest national economies of the European Union (France, Germany, Italy, and Spain) and the United Kingdom. The information was collected through thorough examination of published material and extended exchanges with national authorities and financial sector participants. The analysis focuses on (1) how countries positioned themselves on the many tradeoffs that emerged in designing and implementing the programs; and (2) what explains differences in usage across countries and its leveling off everywhere in the second half of 2020.
  • Topic: Government, European Union, Finance, Fiscal Policy, COVID-19
  • Political Geography: United Kingdom, Europe
  • Author: Anna Gelpern, Sebastian Horn, Scott Morris, Brad Parks, Christoph Trebesch
  • Publication Date: 05-2021
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: China is the world’s largest official creditor, but basic facts are lacking about the terms and conditions of its lending. Very few contracts between Chinese lenders and their government borrowers have ever been published or studied. This paper is the first systematic analysis of the legal terms of China’s foreign lending. The authors collect and analyze 100 contracts between Chinese state-owned entities and government borrowers in 24 developing countries in Africa, Asia, Eastern Europe, Latin America, and Oceania, and compare them with those of other bilateral, multilateral, and commercial creditors. Three main insights emerge. First, the Chinese contracts contain unusual confidentiality clauses that bar borrowers from revealing the terms or even the existence of the debt. Second, Chinese lenders seek advantage over other creditors, using collateral arrangements such as lender-controlled revenue accounts and promises to keep the debt out of collective restructuring (“no Paris Club” clauses). Third, cancellation, acceleration, and stabilization clauses in Chinese contracts potentially allow the lenders to influence debtors’ domestic and foreign policies. Even if these terms were unenforceable in court, the mix of confidentiality, seniority, and policy influence could limit the sovereign debtor’s crisis management options and complicate debt renegotiation. Overall, the contracts use creative design to manage credit risks and overcome enforcement hurdles, presenting China as a muscular and commercially savvy lender to the developing world.
  • Topic: Foreign Policy, Debt, Government, Banking
  • Political Geography: China, Asia
  • Author: John C. K. Daly
  • Publication Date: 02-2021
  • Content Type: Working Paper
  • Institution: The Jamestown Foundation
  • Abstract: Amidst growing political dissatisfaction, the Russian government is grappling with the apparent vulnerabilities of the country’s internet. On February 1, Dmitry Medvedev, the deputy chairperson of the Security Council of the Russian Federation, acknowledged during an extensive interview with Russian media what foreign analysts have long suspected: disconnecting Russia from the internet is possible (TASS, February 1). And as if to provide a rationale for such potential action, the previous week, the Federal Security Service’s (FSB) National Coordination Center for Computer Incidents (NKTsKI) reported a threat of possible cyberattacks by the United States and its allies against Russia’s critical infrastructure (Interfax, January 22).
  • Topic: Government, Internet, Repression
  • Political Geography: Russia, Eurasia
  • 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: Abigail Bellows, Nada Zohdy
  • Publication Date: 11-2020
  • Content Type: Working Paper
  • Institution: Carnegie Endowment for International Peace
  • Abstract: The pandemic is spurring elite and grassroots civic actors to cooperate more, but the gulf between them remains wide. Civic actors must seize the opportunity for reform on open government issues. From Africa to Latin America to Europe, the coronavirus pandemic has generated a surge in public demand for government transparency and accountability. To seize this window for reform, elite and grassroots civic actors concerned with open governance must overcome the cleavage that has long existed between them. Thus far, the pandemic has catalyzed some new civic collaborations, but not at the scale or depth needed to seize that window. In general, civil society groups report feeling more isolated during the pandemic. In some places, the urgency of tackling open government issues during the pandemic has helped overcome that isolation by deepening partnerships among existing networks. But in other places, those partnerships have yet to take shape, and new alliances are less likely to form without the benefit of face-to-face interactions. Even the partnerships that have crystallized or deepened do not appear to be changing the fundamental roles of elite and grassroots civic actors. It is possible that this shift may happen over time. Or it may be that the pandemic alone is not enough to dislodge structural barriers to deeper cooperation. The pandemic has dramatically changed the operations of elite and grassroots actors alike. The impact of those changes on collaboration between the two depends on preexisting levels of technological capacity. In places with limited connectivity, the pandemic has exacerbated the digital divide, adversely affecting grassroots actors. Meanwhile, in places with good connectivity, technology is enabling broader (though shallower) participation, laying the groundwork for more elite-grassroots collaboration. Although many civil society groups are struggling financially during the pandemic, those effects are mitigated to some degree by continuing donor interest in the open government sector. This is encouraging, as coalition building requires dedicated, flexible resources. Finally, it is a more dangerous time to be working on open government issues in general, and grassroots actors bear disproportionate risks in doing so. This underscores the need for more vertical alliances to mitigate civic space threats.
  • Topic: Civil Society, Government, Health, Pandemic, COVID-19
  • Political Geography: Global Focus
  • Author: Armenak Tokmajyan
  • Publication Date: 07-2020
  • Content Type: Working Paper
  • Institution: Carnegie Endowment for International Peace
  • Abstract: In southern Syria, the regime, opposition, foreign powers, and local groups navigate a contentious zone of conflict. Any shift in this delicate balance could mean yet another escalation. Syria’s conflict has transformed the country’s southern border region into a zone of regional contention. The status quo there, largely forged and maintained by Russia since 2018, aims to prevent expanded control by the regime of Syrian President Bashar al-Assad and Iranian and pro-Iranian military forces, which could trigger a regional confrontation. The south will remain a volatile area, probably for years, and its fate will be affected by regional politics, not the government’s will.
  • Topic: Government, Conflict, Syrian War
  • Political Geography: Iran, Middle East, Syria
  • Author: Hijab Shah, Melissa Dalton
  • Publication Date: 09-2020
  • Content Type: Working Paper
  • Institution: Carnegie Endowment for International Peace
  • Abstract: Following the August Beirut port explosion, the Lebanese Armed Forces must rebuild trust with the civilian population. The LAF can serve as a critical pillar in Lebanese government efforts to strengthen national security and identity in the midst of the crisis, in light of security sector assistance from the United States and other Western partners. The Lebanese Armed Forces (LAF), and Lebanon more broadly, is one of the largest recipients of foreign assistance in the Middle East. The United States and allied governments have sought to build the capabilities and professionalism of the LAF since the 2006 Israel-Hezbollah war, focusing primarily on counterterrorism and border security. The LAF stood in stark contrast to other Lebanese security services in their restraint vis-à-vis the civilian population during the 2019 protests. However, recent reported violent incidents against civilians, ambiguity of the role of police forces, and concerns about both recovery efforts following the August 2020 port explosion in Beirut and extended powers under the state of emergency established by the Lebanese parliament have raised international concerns about the role of Lebanon’s security services, including the LAF. The LAF has a critical role to play in stabilizing Lebanon through a multi-faceted crisis, but will need to take concrete steps to bolster its professionalism. Lebanon’s modern politics have long been defined by confessionalism, a reality that persists even as the country is engulfed in crisis. International assistance to the LAF over the last fourteen years had intended to support the LAF as a legitimate national institution transcending confessions and supporting a broader sense of Lebanese security and identity. In the midst of the ongoing crisis in Lebanon, political turmoil at the helm of the country, and the ongoing coronavirus pandemic, there is an important opportunity for the international community to support a new path for governance in the country—as shaped and envisioned by its populace. This opportunity hinges upon leveraging existing channels of support to the LAF and building in conditionality mechanisms that hold the LAF accountable for its actions, while continuing to promote a clear articulation of priorities for the LAF and a plan to improve military effectiveness through policy and doctrine; training and equipment, education, and exercises; operations; and institutional capacity building.
  • Topic: Security, Government, Politics, International Security, Military Affairs, Identity
  • Political Geography: Middle East, Lebanon