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1. Global supply chains: lessons from a decade of disruption

Author:
Luca Léry Moffat and Niclas Poitiers
Publication Date:
03-2024
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
This paper explores both the character and impact of three recent shocks to global supply chains: the COVID-19 pandemic, the Russian invasion of Ukraine and the US-China trade war. These were large shocks which have had significant impacts on domestic and international supply chains, but these impacts have differed in their longevity, economic impact and policy responses. We show that supply chains were remarkably resilient against shocks of such magnitude. However, this resilience was also achieved thanks to the equally remarkable size and scope of policy responses and global supply chain reorganisation. We recommend that pre-emptive policies may be justified to shield households and industry from future shocks. Given the entangled nature of these shocks and that their effects continue to reverberate, we emphasise the need for extensive future research to understand the nature of these shocks and the effectiveness of policy responses.
Topic:
Global Markets, Trade Wars, Trade, COVID-19, Supply Chains, and Russia-Ukraine War
Political Geography:
China, Global Focus, and United States of America

2. China’s quest for innovation: progress and bottlenecks

Author:
Alicia Garcia-Herrero and Robin Schindowski
Publication Date:
06-2023
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
As the Chinese economy continues to decelerate, the central government is investing heavily in innovation, doubling down on research and development (R&D) spending and STEM-oriented human capital. In this paper, we assess China’s progress so far, looking at the inputs to innovation (R&D and human capital) as well as intermediate targets, such as scientific research and patents. We then evaluate how China has fared with respect to the ultimate goal of commercialising this progress, by looking at the value-added of Chinese exports and the overall productivity of the economy. We identify three potential bottlenecks that might be hindering the translation of China’s innovation efforts into productivity growth.
Topic:
Industrial Policy, European Union, Economic Growth, Innovation, and COVID-19
Political Geography:
China, Europe, and Asia

3. The hidden inequalities of digitalisation in the post-pandemic context

Author:
Cristiano Cadagnone and Maria Savona
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
Digitalisation has a ‘hidden’ impact on employment, particularly on the invisible conditions of some jobs, as perceived by workers, that are relatively less explored in the literature and that could represent a substantial social cost, particularly in the aftermath of the financial crisis and the COVID-19 pandemic. We start by summarising a few main challenges of digitalisation, with a focus on the additional challenges brought about by the pandemic, the rise of platforms and alternative work arrangements, and the current attempts to regulate these. We then discuss the hidden aspects of inequality linked to the unmeasured side effects of digitalisation. Mental health in particular should be taken into account, particularly in the post-pandemic context, which has led to a significant amount of working from home. Also, the reduction of tasks previously done in the workplace in favour of remote working might limit social interactions, creativity and innovation potential. We conclude by suggesting areas for policy interventions.
Topic:
Labor Issues, Economy, Automation, and COVID-19
Political Geography:
Europe and Global Focus

4. Can Chinese growth defy gravity?

Author:
Alicia Garcia-Herrero
Publication Date:
06-2023
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Chinese growth, astounding since the beginning of the reform era, has slowed in the last decade. We offer a baseline estimate (based on the current trend) of China’s medium-term growth rate, which we project to fall to 2.4 percent by 2035. Several factors create uncertainty around this baseline. China’s rapid aging is already incorporated into our long-term growth scenario, but its impact on growth will depend on how China’s remaining urbanisation process spreads over time, how the shrinking labour supply affects labour productivity and whether the decline in total factor productivity growth, reflecting the lack of reform during the last decade and possibly the rising role of the state, can be reversed. Investment in China, for decades the largest factor in China’s growth, is expected to contribute less to growth given the increasingly low return on assets, particularly on state-led investment. The rapid piling up of public debt is also becoming a heavy burden for the Chinese economy. Finally, the COVID-19 pandemic may have left significant scarring effects, such as structurally high youth unemployment and low investment confidence. On the upside for China, the rise in human capital and research and development expenditure may support innovation and growth, but the magnitude of this effect is uncertain, because it is unclear if higher innovation will translate into higher total factor productivity, and because of the United States’s push to contain China technologically.
Topic:
Industrial Policy, European Union, Economic Growth, and COVID-19
Political Geography:
China, Europe, and Asia

5. The effect of COVID certificates on vaccine uptake, public health, and the economy

Author:
Philippe Aghion, Guntram Wolff, Philippe Martin, Lionel Guetta-Jeanrenaud, Bary Pradelski, Miquel Oliu-Barton, Nicolas Woloszko, Patrick Artus, and Arnaud Fontanet
Publication Date:
01-2022
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
In the COVID-19 pandemic, governments have, among other measures, mandated the use of COVID certificates to prove vaccination, recovery or a recent negative test, and have required individuals to show certificates to access shops, restaurants, and education or workplaces. While arguments for and against COVID certificates have focused on reducing transmission and ethical concerns, the incentive effects of COVID certificates on vaccine uptake, health outcomes and the economy has not yet been investigated. To estimate these effects, we construct counterfactuals based on innovation diffusion theory for France, Germany and Italy. We estimate that the announcement of COVID certificates during summer 2021 led to increased vaccine uptake in France of 13.0 (95% CI 9.7–14.9) percentage points (p.p.) of the total population up to the end of the year, in Germany 6.2 (2.6–6.9) p.p., and in Italy 9.7 (5.4–12.3) p.p. Further, this averted an additional 3,979 (3,453–4,298) deaths in France, 1,133 (-312–1,358) in Germany, and 1,331 (502–1,794) in Italy; and prevented gross domestic product (GDP) losses of €6.0 (5.9–6.1) billion in France, €1.4 (1.3–1.5) billion in Germany, and €2.1 (2.0–2.2) billion in Italy. Notably, the application of COVID certificates substantially reduced the pressure on intensive care units (ICUs) and, in France, prevented occupancy levels being exceeded where prior lockdowns were instated. Varying government communication efforts and restrictions associated with COVID certificates may explain country differences, such as the smaller effect in Germany. Overall, our findings are more sizeable than predicted. This analysis may help inform decisions about when and how to employ COVID certificates to increase vaccine uptake and thus avoid stringent interventions, such as closures, curfews, and lockdowns, with major social and economic consequences.
Topic:
Government, Economy, Public Health, Vaccine, and COVID-19
Political Geography:
Europe

6. Does Europe need a Health Union?

Author:
Anne Bucher
Publication Date:
02-2022
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Health outcomes in the European Union are good by international standards, even compared to other developed economies, and improved continuously before COVID-19. This reflects the alignment of the objectives of improving health and wellbeing with the overall socio-economic objective of prosperity, and suggests that a radical overhaul of EU health policy is not needed. However, the EU could benefit from closer integration in some areas and be more effective in delivering a high level of health protection. Action could be taken in the following areas: The European Commission’s November 2020 Health Union package to increase resilience to cross-border health threats is ambitious, in particular with the establishment of the Health Emergency Response Authority, which extends the scope of cooperation in health emergencies. The EU should pursue further the Health Union approach to address cross-border externalities and enhance health security. It could, for instance, do more to tackle anti-microbial resistance, or define minimum requirements for the resilience of health systems. For non-communicable diseases, the EU should tap the economies of scale of research and knowledge organised at EU level, and put in place systems for the surveillance of non-communicable diseases and consolidation of scientific knowledge. This could be achieved through an extension to non-communicable diseases of the European Centre for Disease Prevention and Control mandate. The ‘Health in all Policies’ principle is a key channel to deliver good health outcomes at EU level. EU scientific agencies provide health risk assessments in a number of areas, but the EU should better organise, coordinate and consolidate the scientific knowledge that underpins health-protection measures in sectoral legislation, and should more systematically apply better regulation rules to the health impacts of EU policies. The EU should support the digital transformation of health systems and set high targets for the European Health Data Space initiative, which is a critical infrastructure for the future of health research, regulation and policymaking. Several non-health EU policy objectives (cohesion policies, European Pillar of Social rights, economic governance) are linked to the performance of health systems. A common understanding on how to measure this performance would inform these policies in a consistent way. Moreover favourable health outcomes in the EU have not reduced health inequalities, which remain high between and within EU countries. Monitoring of health inequalities, including those related to access to and quality of healthcare, should be improved as an initial step.
Topic:
Health, European Union, Regional Integration, and COVID-19
Political Geography:
Europe

7. The failure of global public health governance: a forensic analysis

Author:
Jean Pisani-Ferry, Anne Bucher, and George Papaconstantinou
Publication Date:
02-2022
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
COVID-19 has underlined that in a context of recurring pandemics, public health is a basic global public good, the provision of which presupposes effective and timely collective action at global level. It has exposed the limitations of the prevailing framework. This Policy Contribution positions global public health governance in the wider debate on the reform of international governance arrangements. It distinguishes between the ‘before’ phase of pandemic preparedness, characterised by ‘denial and neglect’; the first phase (‘addressing the outbreak’), with scientific cooperation and an uncoordinated response to the outbreak; the second phase (‘responding and containing’), with a scaling up of testing, but also competition for scarce equipment and slow development of tests; the third ‘protecting’ phase, with the exceptional development of new vaccines but also rival vaccine diplomacy; and the final ‘exit’ phase, with ramping up of vaccine distribution, but also a glaring failure to vaccinate poor countries. In the evolution of global governance arrangements in different policy areas, six ingredients have been important, and two were clearly present in public health: joint identification of the problem, and shared expertise, as demonstrated especially in the scientific and institutional response. This was much less the case with two others: common action principles, and transparent reporting mechanisms. Finally, there have been significant problems with the last two ingredients: there is no accepted outcome-evaluation process to assess results and adapt instruments, while trust issues continue to hamper the work of the World Health Organisation. The decision to work towards a new pandemic treaty should be assessed against the reform agenda of global health security governance. Four proposals can be made. The WHO should be turned it into a strong and independent standard-setting and surveillance authority for preparedness, prevention, and response, while existing institutions and initiatives should be streamlined and consolidated to better provide essential medical supplies globally. Meanwhile, a G20-type body should be established to provide leadership and ensure a whole-of-government approach that repositions global health governance in the world order and puts it on par with economic interdependence or financial stability in terms of governance, institutional backing and resources. Adequate funding should be provided through a self-standing fund to address the shortfalls COVID-19 has revealed in preparedness of national health systems, detection and containment, and shortages and misallocations of critical medical supplies.
Topic:
Governance, Public Health, COVID-19, and Forensic Science
Political Geography:
Global Focus

8. Measuring the intangible economy to address policy challenges

Author:
Marie Le Mouel
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
European economies exhibit the so-called ‘productivity puzzle, whereby investments’ in digital technologies and intangible assets have not delivered the hoped-for productivity gains. Explanations for this puzzle lie in the unequal ability of companies to make use of these technologies, and resulting patterns of market concentration, productivity divergence and dampened business dynamism. Access to firm-level data is essential to properly understand these rich dynamics. The purpose of the first work package of the MICROPROD project was to improve the firm-level data infrastructure, expand the measurement of intangible assets and enable cross-country analyses of these productivity trends. The MICROPROD researchers developed the Micro Data Infrastructure (MDI), a centralised platform that harmonises access to the firm-level data gathered by national statistical institutes. The data infrastructure developed through this work package offers valuable insights into the evolution of productivity across the European Union and into the effects of digitalisation and globalisation. It can thus generate important evidence for designing policies to support the European Commission’s policy objectives, especially for achieving the digital and green transitions. In addition, the research enabled by this data infrastructure and carried out within the context of MICROPROD can provide valuable lessons about the response of European economies to the COVID-19 pandemic and its aftermath.
Topic:
Infrastructure, European Union, Digital Economy, Economy, and COVID-19
Political Geography:
Europe and Global Focus

9. COVID-19 and the shift to remote work

Author:
Scott Marcus
Publication Date:
06-2022
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
COVID-19 has accelerated the shift to remote work. Enabling knowledge workers to do their jobs from home or elsewhere brings benefits by increasing labour participation, avoiding unproductive commuting time (thus reducing the carbon footprint), and reducing the gender gap by enabling single parents or partners with domestic-care responsibilities to work. Not all jobs are suitable for remote work, but far more remote work is feasible than was typical prior to the pandemic. The post-pandemic new normal is sure to differ both from the pre-pandemic normal and from current arrangements. Hybrid arrangements in which part of the week is spent at the office, and part at home, are likely to become the norm. Employers, workers, educators, trade unions and governments will need to adapt to the new normal. For employers and managers, the change emphasises the need to manage based on results rather than hours worked, and likely implies many changes in how they manage their employees. Workers will need to be flexible in order to capitalise on the new opportunities in the evolving world of work, and to ensure they have suitable skills for remote work. Educators will need to further emphasise digital skills, and to accelerate the shift from traditional education to lifelong learning. Trade unions will need to re-think how they recruit workers who do not see each other every day, and how they can respond to evolving social protection needs. Policymakers will need to deal with distributional effects driven by the shift to remote work, to protect the work-life balance that remote work potentially erodes, and to seek to ensure that the shift to remote work does not erode social protection.
Topic:
Employment, Work Culture, COVID-19, and Remote Work
Political Geography:
Global Focus

10. COVID-19 in the European Union: health impacts and effects on economic activity

Author:
Leonardo Cadamuro, Scott Marcus, and Francesco Papadia
Publication Date:
07-2022
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
This paper quantitatively describes different aspects of the COVID-19 pandemics: new cases, hospitalisations, intensive-care admissions and deaths, while illustrating their changing relationships over time. It then assesses how the different variables have affected relevant sectoral and macroeconomic indicators. Finally, it concludes that, from an economic perspective, what matters when it comes to managing the pandemic is to prevent intensive-care admissions and deaths arising from COVID-19. The success of vaccination should be measured in terms of its ability to prevent the most serious consequences, rather than its ability to prevent infections and hospitalisations.
Topic:
Health, European Union, Economy, Macroeconomics, and COVID-19
Political Geography:
Global Focus