Political Geography: Global Focus / Publication Year: within 10 Years / Topic: Economics

1. Good Intentions, Better Outcomes: Shifting the Debate About Social Protection and Informality

Author:: James Heintz and Jayati Ghosh
Publication Date:: 02-2024
Content Type:: Working Paper
Institution:: Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:: The introduction of social protections for individuals engaged in paid employment frequently comes up against arguments that such measures would have an adverse impact on employment, reduce access to formal jobs, and result in greater informality. The argument is that, while well intentioned, such policies distort labor markets and generate significant economic costs that either leave some workers worse off than they would have been in the absence of such protection, or the interventions become a drag on overall economic performance, encumbering the process of development. In what follows we critically evaluate such arguments and provide responses to the claim that social protections lead to higher informality. We also consider the challenges involved in providing social protection to different types of workers, including not only those employed by others but specifically the self-employed and unpaid workers.
Topic:: Economics, Employment, Labor Market, Informal Economy, and Protection
Political Geography:: Global Focus

2. Using Targeted Sanctions to Help Prevent Mass Atrocities: Results from Interviews with Experienced Practitioners

Author:: Tallan Donine, Kyra Fox, Daniel Solomon, Alex Vandermaas-Peeler, and Lawerence Woocher
Publication Date:: 01-2023
Content Type:: Special Report
Institution:: Simon-Skjodt Center for the Prevention of Genocide, United States Holocaust Memorial Museum
Abstract:: The Simon-Skjodt Center’s “lessons learned” project aims to understand better how policy makers, across all levels of government, can take effective action to prevent mass atrocity crimes and protect civilian populations in situations where they face serious threats of group-targeted, systematic violence. We have sought to identify, distill, and organize insights on a range of policy tools—ranging from “naming and shaming” to sanctions to prosecutions—which are sometimes used to help prevent or respond to mass atrocities. To complement our review of the empirical research literature on the use of targeted sanctions, we conducted interviews with people who had substantial policy or operational experience working in the US government on targeted sanctions prior to 2021. The premise for the interviews is that experienced practitioners have important insights about when and how targeted sanctions can be most effective in helping prevent mass atrocities.3 While one can find many ideas about how to use targeted sanctions most effectively, none that we are aware of are: (1) focused specifically on the use of targeted sanctions for mass atrocity prevention and (2) based on the collective perspectives of a set of experienced practitioners. This report summarizes the results of the interviews with experienced targeted sanctions practitioners. Details on the methods employed and the interview respondents are presented in appendices.
Topic:: Foreign Policy, Economics, Sanctions, and Atrocity Prevention
Political Geography:: Global Focus

3. Covid-19 Crisis and Shifts in the Corporate Competitive Landscape: Comparisons with Previous Economic Crises

Author:: Sang-Ha Yoon, Yaein Baek, Wontae Han, Yoonsoo Lee, and Daisoon Kim
Publication Date:: 04-2023
Content Type:: Policy Brief
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: In terms of economic fluctuations, it is well recognized that the effects of an economic crisis have a detrimental impact on the entry, growth, decline, and exit of firms. In addition, the magnitude of the impact varies both within and between industries depending on the size and other characteristics of the firm. The economy is going through significant changes due to the emergence of new industries and the decline or disappearance of current ones. This study looks at how big economic events like the COVID-19 pandemic and the global financial crisis have affected businesses and industries. After completing a study at several levels of top international corporations, larger domestic enterprises, and domestic small and medium-sized businesses, it attempts to draw policy implications. First, it is necessary to foster and support top-tier companies to defend against global economic fluctuations and strengthen international competitiveness. In particular, the institution in charge of competition policies domestically and the institution that helps companies improve their competitiveness are different and the focus of policies is distinctive, so comprehensive attention and perspective of policymakers are needed. Second, it is urgent to respond to new issues related to competition policy in the domestic market. The behavior of emerging big tech and platform companies is different from monopoly companies in the past, so consumer welfare is not impaired, but it burdens nearby and other market participants. Therefore, a view that deviates from the focus on monopoly pricing is also essential for competition policy. Third, measures to support global corporate growth and countermeasures against changes in the industrial landscape should be prepared. Investment and R&D expansion at the corporate level is essential for corporate growth, and measures are needed to boost investment in recently emerging intangible assets. In addition, it is important to revitalize the movement of economic resources to cope with changes in the inter-industry landscape accompanied by the crisis. Fourth, policies to revitalize start-ups and closures are required. The decline in new companies' market entry and exit rates is a symtom of an aging economy contributing to the overall decrease in productivity. Therefore, enhancing the revitalization of the corporate ecosystem and expanding the size of enterprises are essential to enhance the dynamics of the economy. Fifth, it is necessary to find an appropriate combination of government roles in times of crisis. In particular, it is important to grasp the detailed status of economic stabilization policies in relation to SMEs, and at the same time, clear judgments on the appropriate size of support measures, the period of support, and the timing of collection are urgently needed.
Topic:: Economics, COVID-19, Corporations, Economic Crisis, and Competition
Political Geography:: Global Focus

4. Analysis on the Determinants of Labor Share and Its Policy Implications

Author:: Yaein Baek, Minsoo Han, Wongi Kim, and Hyunsuk Kim
Publication Date:: 02-2023
Content Type:: Policy Brief
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: There has been a significant decline in the global labor share, leading to numerous studies about the cause of this drop. The labor share is used as one of the main indicators of inequality because a decrease in the labor share can lead to aggravation of income inequality. This is because low-skilled workers can be greatly affected by such a decline in the labor share and the main source of in-come for the low-income class, including the self-employed, is labor income. Among various indicators of inequality, this study analyzes the determinants of the change in labor share. Technological changes such as adoption of robots, advancements in information and communications technology (ICT) and the Fourth Industrial Revolution (4IR) are expected to change the labor market. Hence, this study analyzes the impact of technological changes on labor share and suggests policy responses.
Topic:: Economics, Science and Technology, Labor Issues, and Inequality
Political Geography:: Global Focus

5. Mitigating Global Fragmentation in Digital Trade Governance: A Case Study

Author:: Douglas Lippoldt
Publication Date:: 01-2023
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: Digital trade is growing rapidly, and regulators are trying to keep up. Concerns about privacy, consumer protection and national security demand regulatory attention, but too much regulation risks stifling digital trade. Current-generation trade agreements need to find the right balance between regulatory and liberal approaches to e-commerce. This paper looks at how five leading digital economies (Canada, the European Union, Japan, Singapore and the United States) are using regional trade agreements to address concerns while enhancing trade.
Topic:: Economics, International Cooperation, International Trade and Finance, Governance, and Digitalization
Political Geography:: Global Focus

6. Collective screening

Author:: Vincent Anesi and Peter Buisseret
Publication Date:: 03-2023
Content Type:: Working Paper
Institution:: Nottingham Interdisciplinary Centre for Economic and Political Research (NICEP)
Abstract:: We study a dynamic principal-agent model in which the principal is a group whose members hold heterogeneous and evolving values from an agreement with the agent. Learning about the agent’s private information reduces the principals’ conflicts over their joint offer, mitigating a principal’s losses if she is not decisive over future offers. As a consequence, a principal in a group prefers to screen the agent more aggressively than a single principal. We study the dynamics of the principals’ collective choice, and obtain conditions under which decisive members of the group successively trade away their decision-making authority, leading inexorably to the concentration of negotiation power in the hands of a single principal.
Topic:: Economics, Political Science, and Decision-Making
Political Geography:: Global Focus

7. Can the World Trade Organization be saved? Should it?

Author:: Alan Wm. Wolff
Publication Date:: 05-2023
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: Heads of state, trade ministers, and academics have repeatedly called for reforming the World Trade Organization (WTO), the institution charged with the stewardship of the global trading system. The durability and worth of the WTO are being increasingly questioned despite the fact that by almost all objective measures, it has been a great success, with world trade growing much faster than global GDP over the last 75 years. However, past success does not guarantee future performance. This Policy Brief examines the institution’s most serious defects and the multitude of challenges it faces. It suggests the institution needs to evolve to reach broad-based international trade agreements, adding much needed new rules to the world trade rulebook and developing effective means to settle disputes that would render the rules of the system enforceable once again.
Topic:: Economics, International Trade and Finance, Treaties and Agreements, and World Trade Organization
Political Geography:: Global Focus

8. The international tax agreement of 2021: Why it’s needed, what it does, and what comes next?

Author:: Kimberly Clausing
Publication Date:: 04-2023
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: In 2021, more than 135 jurisdictions agreed on transformative new international tax rules that would establish a minimum tax rate of 15 percent on multinational corporate income regardless of where it was reported. In December 2022, the European Union unanimously moved forward to implement this minimum tax, and other countries, including South Korea, Japan, Australia, Canada, and the United Kingdom, are also either implementing the tax or taking substantial steps toward implementation. In tandem, the United States should also reform its international tax system and adopt a stronger minimum tax. While the future of the international agreement is uncertain, it has important implications for the ability of governments worldwide to create tax systems that are administrable, fair, and efficient. The agreement also demonstrates important guiding principles for the future of multilateral cooperation on global collective action problems, including efforts to protect public health from future pandemics, address nuclear proliferation, and resolve territorial conflicts. US progress on international tax reform would enhance much needed international cooperation on these issues.
Topic:: Economics, Treaties and Agreements, Reform, European Union, and Tax Systems
Political Geography:: Europe and Global Focus

9. Carbon border adjustments, climate clubs, and subsidy races when climate policies vary

Author:: Kimberly Clausing and Catherine Wolfram
Publication Date:: 05-2023
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Jurisdictions adopt heterogeneous climate policies that vary in terms of both ambition and policy approach, with some jurisdictions pricing carbon and others subsidizing clean production. We distinguish two types of policy spillovers associated with diverse policy approaches to climate change. First, when countries have different levels of climate ambition, free riders will benefit at the expense of more committed countries. Second, when countries pursue different approaches, carbon-intensive producers within cost-imposing jurisdictions will be at a relative competitive disadvantage compared with producers in subsidizing jurisdictions. Carbon border adjustments and climate clubs are attempts to respond to these policy spillovers, but when countries have divergent policy approaches, one policy alone will not be able to address both types of spillovers. We also consider the policy dynamics that result from carbon border adjustments and climate clubs; both have the potential to encourage upward harmonization of climate policy, but they come with risks. Further, the pressures of international competition in the presence of divergent climate policy approaches may result in subsidy races, which come with their own potential risks and benefits.
Topic:: Climate Change, Economics, Carbon Emissions, and Production
Political Geography:: Global Focus

10. Saving the WTO from the national security exception

Author:: Warren Maruyama and Alan Wm. Wolff
Publication Date:: 05-2023
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: For any member of the World Trade Organization (WTO) not making alternative arrangements, enforceability of the rules of the global trading system, a distinguishing feature of the WTO, ceased to exist on December 11, 2019, because the United States blocked appointments to the Appellate Body of the WTO dispute settlement mechanism. A major obstacle to the United States accepting any resolution of this impasse—thus permitting dispute settlement to once again be binding on all WTO members—is settling the issue of whether claims of national security to legitimize trade measures are reviewable. This is a red line for the United States, which argues this claim is nonreviewable. In the emerging area of great power competition, the United States is unlikely to accept a return to fully effective WTO dispute settlement absent a compromise that finds determinations of national security nonjusticiable. This paper offers a compromise: There would be no adjudication of whether a trade measure was justified under the WTO’s national security exception, but those WTO members adversely affected would have an immediate right to rebalance trade concessions themselves by imposing retaliatory trade measures against the WTO member invoking the exception.
Topic:: Economics, International Trade and Finance, National Security, and World Trade Organization
Political Geography:: Global Focus

11. From Stunt to Substance: An assessment of IMF engagement with civil society

Author:: Nabil Abdo, Nadia Daar, and Alex Ray
Publication Date:: 01-2023
Content Type:: Policy Brief
Institution:: Oxfam Publishing
Abstract:: The International Monetary Fund (IMF) is doling out billions of dollars, influencing economies around the world through its finance, and through the policies it expects governments to implement in return for the funds. But who has a say in those decisions? This paper presents case study research from Pakistan, Tunisia, Egypt, Ecuador, Argentina, Zambia and Ghana to assess the extent and meaningfulness of IMF engagement with civil society. With findings on power, motivations, impact and the importance of civic space considerations, the paper makes the case for significantly improved engagement, and recommends how to do so systematically, meaningfully and safely.
Topic:: Civil Society, Economics, International Cooperation, and IMF
Political Geography:: Global Focus

12. The Future of the Digital Asset Space

Author:: Christian Catalini and Nicholas Sanzi
Publication Date:: 03-2023
Content Type:: Journal Article
Journal:: Brown Journal of World Affairs
Institution:: Brown Journal of World Affairs
Abstract:: Christian Catalini is founder of the MIT Cryptoeconomics Lab, and Research Scientist at MIT. He is also the Co-Founder and Chief Strategy Officer of Lightspark. Previously, he was a co-creator of Diem (formerly Libra), Chief Economist of the Diem Association, and Head Economist of Meta FinTech. While a Professor at MIT, Christian designed the MIT Digital Currency Research Study. In 2018, Christian was appointed as a Faculty Research Fellow in the Productivity, Innovation and Entrepreneurship Program at the National Bureau of Economic Research. He holds a PhD from the University of Toronto (Rotman School of Management), and MSc (summa cum laude) in Economics and Management of New Technologies from Bocconi University, Milan.
Topic:: Economics, Cryptocurrencies, Interview, Digital Currency, and Stablecoins
Political Geography:: Global Focus

13. Global Peace Index 2023

Author:: Institute for Economics and Peace (IEP)
Publication Date:: 01-2023
Content Type:: Special Report
Institution:: Institute for Economics & Peace (IEP)
Abstract:: This is the 17th edition of the Global Peace Index (GPI), which ranks 163 independent states and territories according to their level of peacefulness. Produced by the Institute for Economics and Peace (IEP), the GPI is the world’s leading measure of global peacefulness. This report presents the most comprehensive datadriven analysis to-date on trends in peace, its economic value, and how to develop peaceful societies. The GPI covers 163 countries comprising 99.7 per cent of the world’s population, using 23 qualitative and quantitative indicators from highly respected sources, and measures the state of peace across three domains: the level of Societal Safety and Security; the extent of Ongoing Domestic and International Conflict; and the degree of Militarisation. In addition to discussing the findings from the 2023 GPI, the report includes analysis of current conflicts and potential future conflicts, including an analysis of the likely economic impact of a Chinese blockade of Taiwan on the global economy. This year’s results found that the average level of global peacefulness deteriorated by 0.42 per cent. This is the thirteenth deterioration in peacefulness in the last fifteen years, with 84 countries improving and 79 deteriorating in peacefulness in 2022.
Topic:: Economics, Conflict, and Peace
Political Geography:: Global Focus

14. Global Terrorism Index 2023

Author:: Institute for Economics and Peace (IEP)
Publication Date:: 03-2023
Content Type:: Working Paper
Institution:: Institute for Economics & Peace (IEP)
Abstract:: The GTI report is produced by the Institute for Economics & Peace (IEP) using data from TerrorismTracker and other sources. TerrorismTracker provides event records on terrorist attacks since 1 January 2007. The dataset contains almost 66,000 terrorist incidents for the period 2007 to 2022. In 2022, deaths from terrorism fell by nine per cent to 6,701 deaths and is now 38 per cent lower than at its peak in 2015. The fall in deaths was mirrored by a reduction in the number of incidents, with attacks declining by almost 28 per cent from 5,463 in 2021 to 3,955 in 2022. However, if Afghanistan was removed from the index, terrorism deaths would have increased by four per cent. Afghanistan remained the country most impacted by terrorism for the fourth consecutive year, despite attacks and deaths falling by 75 per cent and 58 per cent respectively. The GTI does not include acts of state repression and violence by state actors and, as such, acts committed by the Taliban are no longer included in the scope of the report since they took control of the government.
Topic:: Climate Change, Economics, Science and Technology, Terrorism, Finance, and Peace
Political Geography:: Middle East, North Africa, and Global Focus

15. Safety Perceptions Index 2023 Foundation: Understanding the impact of risk around the world

Author:: Institute for Economics and Peace (IEP)
Publication Date:: 02-2023
Content Type:: Special Report
Institution:: Institute for Economics & Peace (IEP)
Abstract:: The Lloyd’s Register Foundation Safety Perceptions Index (SPI) provides a comprehensive assessment of worries and experiences of risk across 121 countries. The SPI is a unique body of work, providing a deeper understanding of citizens’ feelings of safety than any other publicly available source. The index is produced by the Institute for Economics and Peace (IEP) on the basis of data from the World Risk Poll, a global survey designed by the Lloyd’s Register Foundation and administered by Gallup. This is the second edition of the SPI. The report analyses two iterations of the World Risk Poll, the first conducted in 2019 and the second conducted in 2021; providing commentary, trends, and insights into these two sets of data. One of the defining features of the research is that one survey was administered prior to the onset of COVID-19 and the other was administered afterwards, allowing for an analysis of the effects of the pandemic on perceptions of risk. This report will be useful in the decades ahead as it will give insight into likely shifts in perceptions of risk for any future pandemics that may occur. The SPI measures two themes, worry about harm and recent experience of serious harm, analysing them across five domains: food and water, violent crime, severe weather, mental health, and workplace safety. These themes and domains are combined into a composite score which reflects perceptions of safety by country and region.The past several years have been characterised by rising feelings of uncertainty worldwide. Central to this shift has been the COVID-19 pandemic, which disrupted the functioning of social institutions as well as patterns of individual and collective behaviour in countless ways.1 Multiple studies have shown that the pandemic brought about increased levels of fear and anxiety across groups.2 Against this backdrop, there are two central findings of the 2023 SPI report. The first is that there were two parallel developments in people’s perceptions of safety over the last several years. On the one hand, the index showed no meaningful change in levels of worry and experience of harm in the aggregate, with an improvement of less than 0.1 percentage points recorded between 2019 and 2021. On the other hand, complementary data from the World Risk Poll points to a notable rise in generalised and non-specific feelings of fear and lack of safety throughout the world, with people becoming more fearful overall but less certain about the sources of potential threats.
Topic:: Economics, Infrastructure, Risk, Peace, Threat Perception, and Public Safety
Political Geography:: Global Focus

16. The Settlement of EEZ Fisheries Access Disputes under UNCLOS: Limitations to Jurisdiction and Compulsory Conciliation

Author:: Valentin J. Schatz
Publication Date:: 08-2023
Content Type:: Journal Article
Journal:: The Goettingen Journal of International Law
Institution:: The Goettingen Journal of International Law
Abstract:: This article revisits the scope of the limitation to jurisdiction ratione materiae under Article 297(3) of the 1982 United Nations Convention on the Law of the Sea (UNCLOS) in the context of Exclusive Economic Zone (EEZ) fisheries access disputes in the light of recent jurisprudence of UNCLOS tribunals. It first provides an overview over general aspects of Article 297(3) of UNCLOS in the compulsory dispute settlement mechanism of Section 2 of Part XV of UNCLOS. Next, it briefly considers the relationship between Article 297(3) and Article 297(1) of UNCLOS in order to clarify the former limitation’s role in the complex internal logic of Article 297 of UNCLOS. Thereafter, this article addresses the sometimes-overlooked function of Article 297(3) of UNCLOS as a confirmation of jurisdiction with respect to fisheries disputes that are not related to the EEZ. It then analyzes the scope of the limitation to jurisdiction ratione materiae of Article 297(3) of UNCLOS in the context of fisheries access disputes. Next, this article examines the potential and limits of the compulsory conciliation procedure under Article 297(3)(b) and Annex V of UNCLOS with a focus on the scope of the procedural mandate and subject-matter competence of such conciliation commissions.
Topic:: Economics, International Law, and Fishing
Political Geography:: Global Focus

17. Towards an Intersectional Feminist Development Policy for Germany

Author:: Aïssa Boodhoo and Damjan Denkovski
Publication Date:: 06-2023
Content Type:: Special Report
Institution:: Centre for Feminist Foreign Policy
Abstract:: In the development of Germany’s Feminist Development Policy Strategy, the Federal Ministry for Economic Cooperation and Development (BMZ) conducted a consultative process which included online consultations, a high-level conference, and civil society dialogues. While the broadest consultative process by the German government to date, the BMZ process had limitations in terms of Global South participation and language accessibility. To complement the official BMZ-led process, the Centre for Feminist Foreign Policy (CFFP) initiated a comprehensive co-creation process involving diverse feminist civil society organisations from the Global South, Germany, and other Global North countries. Guided by position papers from various perspectives, desk research, and interviews, the CFFP feminist convenings process involved over 100 feminists from diverse backgrounds, spanned over 25 countries, provided compensation to small and Global South organisations, and incorporated intersectional perspectives. The process consisted of in-person and online convenings held in multiple languages, ensuring broad accessibility. This report is a summary of the rich discussions and recommendations of feminists. It aims to influence policymakers and initiate action in shaping Germany's Feminist Development Policy. This report opens by discussing five action areas in chapter 1, which serve as comprehensive guidelines for immediate transformative action across policy areas. The second chapter discusses feminist reflections in six thematic areas: economic justice, climate justice, food sovereignty and agriculture, sexual and reproductive health and rights, protecting minority rights, and education.
Topic:: Foreign Policy, Agriculture, Climate Change, Development, Economics, Education, Minorities, Partnerships, Feminism, Reproductive Rights, Digitalization, Funding, and Food Sovereignty
Political Geography:: Germany and Global Focus

18. Exchange Rate Arrangements: Fix, Float, or Manage?

Author:: Nathaniel Cline, Carlos Schönerwald da Silva, and Matias Vernengo
Publication Date:: 10-2023
Content Type:: Working Paper
Institution:: Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:: The paper tries to provide a concise summary of the main debates on exchange rate arrangements. It a simple taxonomy of exchange rate arrangements, fixed, flexible and managed, and a brief analysis of the main debates about their advantages and disadvantages. It emphasizes the different policy objectives of mainstream and heterodox schools of thought, suggesting that they tend to be more relevant than the specific defense of one particular exchange rate arrangement. In that sense, there are divergences on their preferences within schools of thought. The paper also discusses the causes of currency crises and the role of the dollar in the international monetary system.
Topic:: Economics, Monetary Policy, Crisis Management, Exchange Rate Policy, and Currency
Political Geography:: Global Focus

19. Optimal Inflation Targeting With Anchoring

Author:: Thomas Michl
Publication Date:: 06-2023
Content Type:: Working Paper
Institution:: Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:: This paper presents an alternative foundation to the standard quadratic loss function characterizing central bank inflation policy. The alternative treats high employment as a social benefit. In recognition of the inherent asymmetry of the output gap, two self-imposed constraints provide guardrails that rule out excess unemployment and opportunistic reflation. The loss function includes a novel reverse discounting mechanism that penalizes the bank for more sustained inflation gaps that could undermine confidence in the central bank’s target. In the absence of anchoring, the central bank is obliged to use economic slack to accomplish a disinflation but the presence of anchoring creates greater policy flexibility freeing it from the tyranny of the sacrifice ratio. The central bank’s optimal policy differs dramatically from the standard Taylor Rule recommendation in choosing policy plans with higher employment, in its willingness to overshoot inflation targets, and in avoiding excess unemployment, all while observing the discipline needed for successful inflation targeting.
Topic:: Economics, Employment, Banks, and Inflation
Political Geography:: Global Focus

20. The Crisis of Capitalism, the Noun

Author:: Nancy Folbre
Publication Date:: 05-2023
Content Type:: Working Paper
Institution:: Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:: This paper explores the challenges that feminist theory, stratification economics, and intersectionality pose to the characterization of capitalism as a unitary system. Attention to the structural basis for inequalities based on gender and race weakens traditional Marxian concepts of exploitation based on the appropriation of surplus value. On the other hand, the continuing relevance of many forms of collective conflict heightens appreciation of the ways in which capitalist institutions discourage the forms of cooperation necessary to address both ecological threats and shortfalls in care provision.
Topic:: Economics, Race, Capitalism, Intersectionality, Gender, and Feminist Theory
Political Geography:: Global Focus

21. International Currency Instability and Food Security: Time to Rebuild “Real Food Economies”?

Author:: Jose M. L. Montesclaros
Publication Date:: 10-2022
Content Type:: Commentary and Analysis
Institution:: Centre for Non-Traditional Security Studies, S. Rajaratnam School of International Studies
Abstract:: Debt-distressed countries are handicapped in riding the rising costs of imported food and farming inputs amidst monetary policy shifts internationally. It is timely to rebuild “real food economies” to improve food availability and affordability, hence averting food crises and ensuing political and social instability.
Topic:: Economics, Monetary Policy, Food, and Food Security
Political Geography:: Global Focus

22. Is Doughnut Economics a Means Towards Achieving Planetary Health?

Author:: Jonathan Ramakrishna
Publication Date:: 11-2022
Content Type:: Working Paper
Institution:: Centre for Non-Traditional Security Studies, S. Rajaratnam School of International Studies
Abstract:: With the advent of climate change, the global focus is no longer lingering alone on climate change mitigation and has shifted towards climate adaptation as well. The 2015 Paris Agreement’s target of restricting the average temperature rise in the 21st century to well below two degrees Celsius compared to pre-industrial levels is increasing unlikely, given the inaction of states and the global lack of progress in meeting Paris Agreement goals. As nations scramble to meet Nationally Determined Contributions (NDCs) and effectively design climate policies, the global crisis has given rise to a new domain, Planetary Health. Planetary Health, an interdisciplinary field, is described as a solutions-focused discipline which aims to analyse, mitigate, and resolve human disruption to Earth’s natural systems in the new Anthropocene epoch. The Anthropocene epoch, on the other hand, is established as a geological climate where human activity is drastically altering earth’s systems to an extent that will be reflected in fossil records. Planetary Health inextricably links human health to the health of the planet and illustrates the interdependency of the two, and this relationship has been substantiated by findings which concur that countries with higher ecological threats concurrently experience greater social vulnerability. When climate-induced disasters occur due to human action, there are subsequent consequences on food, water, energy, and human security. The consequences are disproportionately felt by vulnerable communities in states that lack resources and capabilities to address the consequent impacts on human security, and climate instability is a driving force behind political instability. Thus, there is cause for concern not only for the planet’s health but also for human health as the environment’s health continues to dwindle in the Anthropocene Epoch. As such, the concept of Planetary Health is a response to threatened climate security and human security.
Topic:: Economics, Health, International Cooperation, and Strategic Stability
Political Geography:: Global Focus

23. Exchange Rate Predictability Based on Market Sentiments

Author:: Hyo Sang Kim, Eunjung Kang, Yuri Kim, Seongman Moon, and Huisu Jang
Publication Date:: 09-2022
Content Type:: Policy Brief
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: It is well-known that exchange rates are difficult to forecast using observed macro-fundamental variables. This discrepancy between economic theory and empirical results is called the Meese and Rogoff puzzle. The purpose of this study is to address this puzzle from a new approach. Rather than pursuing a linkage between macro-fundamentals and exchange rates, we focus on the market sentiment index as a factor that could possibly enhance exchange rate predictability. The analysis folds into three phases. First, we conducted an assessment of the traditional exchange rate predictability model, as well as the augmented traditional model incorporating the market sentiment index. Second, we predicted the exchange rate by applying the market sentiment index, based on the contrarian opinion investment strategy commonly used by foreign exchange dealers. Finally, we analyzed if the machine learning model incorporating both economic fundamentals and market sentiment index could enhance the predictability of the exchange rate.
Topic:: Economics, Markets, and Exchange Rates
Political Geography:: Global Focus

24. A Future Built on Data: Data Strategies, Competitive Advantage and Trust

Author:: Susal Ariel Aarsonson
Publication Date:: 06-2022
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: In the twenty-first century, data became the subject of national strategy. This paper examines these visions and strategies to better understand what policy makers hope to achieve. Data is different from other inputs: it is plentiful, easy to use and can be utilized and shared by many different people without being used up. Moreover, data can be simultaneously a commercial asset and a public good. Various types of data can be analyzed to create new products and services or to mitigate complex “wicked” problems that transcend generations and nations (a public good function). However, an economy built on data analysis also brings problems — firms and governments can manipulate or misuse personal data, and in so doing undermine human autonomy and human rights. Given the complicated nature of data and its various types (for example, personal, proprietary, public, and so on), a growing number of governments have decided to outline how they see data’s role in the economy and polity. While it is too early to evaluate the effectiveness of these strategies, policy makers increasingly recognize that if they want to build their country’s future on data, they must also focus on trust.
Topic:: Economics, Governance, Data, and Competition
Political Geography:: Global Focus

25. A Digital Loonie among Many Digital Currencies: Prospects and Outlook

Author:: Pierre L. Siklos
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: Global interest in digitalization is growing in response to the COVID-19 pandemic and driving central banks to introduce retail central bank digital currencies (CBDCs). The successful rollout of retail CBDCs will depend on each country’s institutional capacity and the scope of international cooperation and regulation. Retail CBDCs are unlikely to replace domestic currencies but instead complement notes and coins in circulation, offering greater convenience and lower transactions costs.
Topic:: Economics, Science and Technology, Digital Economy, Currency, and Digitalization
Political Geography:: Global Focus

26. Why Diagnostic Expectations Cannot Replace REH

Author:: Roman Frydman and Halina Frydman
Publication Date:: 01-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Gennaioli and Shleifer (GS) have proposed diagnostic expectations (DE) as an empirically-based approach to specifying participants’ expectations, which, like REH, can be applied in every model. Beyond its supposedly general applicability, GS’s formalization of DE implies that participants systematically and predictably overreact to news. Here, we present a formal argument that Kahneman and Tversky’s compelling empirical findings, and those of other behavioral economists, do not provide a basis for a general approach to specifying participants’ “predictable errors.” We also show that the overreaction of participants’ expectations is not a regularity, but rather an artifact of GS’s particular specification of DE.
Topic:: Economics, Models, and Predictability
Political Geography:: Global Focus

27. Why Diagnostic Expectations Cannot Replace REH

Author:: Roman Frydman and Halina Frydman
Publication Date:: 01-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Gennaioli and Shleifer (GS) have proposed diagnostic expectations (DE) as an empirically-based approach to specifying participants’ expectations, which, like REH, can be applied in every model. Beyond its supposedly general applicability, GS’s formalization of DE implies that participants systematically and predictably overreact to news. Here, we present a formal argument that Kahneman and Tversky’s compelling empirical findings, and those of other behavioral economists, do not provide a basis for a general approach to specifying participants’ “predictable errors.” We also show that the overreaction of participants’ expectations is not a regularity, but rather an artifact of GS’s particular specification of DE.
Topic:: Economics, Academia, and Models
Political Geography:: Global Focus

28. After the Allocation: What Role for the Special Drawing Rights System?

Author:: Tobias Pforr, Fabian Pape, and Steffen Murau
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: In August 2021, the IMF made a new SDR allocation to help ease pandemic-induced financial strains in the Global South. This paper assesses the potential of the SDR system to address debt- related problems in global finance. We analyze the SDR system as a web of interlocking balance sheets whose members can use SDR holdings—the system’s tradable assets—for conversion into usable currency as a perpetual low-interest loan or to make payments to each other. Using original IMF data, we study how the system has been practically used since 1990. Though widely perceived as a solution in search of a problem in the post-Bretton Woods era, we find that the SDR system provides three mechanisms through which IMF members borrow and lend usable currency to each other, with different strings attached: first, transactions by agreement; second, the IMF’s core lending facilities for which the SDR system offers additional resources; and third, IMF-sponsored Trusts which seek to harness the SDR system for development purposes and are the basis for the current idea of ‘voluntary channeling’. Overall, given the SDR system’s idiosyncratic accounting rules, the new allocation can improve the liquidity position of a country and offer some limited avenues for sovereign debt restructuring but comes with new interest and exchange rate risks. Voluntary channeling cannot happen without a wealth transfer, neither the SDR allocation nor the use of Trusts can overcome this problem. Still, Trusts can be a useful instrument to help with debt forgiveness and to ensure that borrowed funds are used for their intended purpose.
Topic:: Economics, International Cooperation, Finance, and IMF
Political Geography:: Global Focus

29. An Economic Defense of Multiple Antitrust Goals: Reversing Income Inequality and Promoting Political Democracy

Author:: Mark Glick
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Two recent papers by prominent antitrust scholars argue that a revived antitrust movement can help reverse the dramatic rise in economic inequality and the erosion of political democracy in the United States. Both papers rely on the legislative history of the key antitrust statutes to support their case. Not surprisingly, their recommendations have been met with alarm in some quarters and with skepticism in others. Such proposals by antitrust reformers are often contrasted with the Consumer Welfare Standard that pervades antitrust policy today. The Consumer Welfare Standard suffers from several defects: (1) It employs a narrow, unworkable measure of welfare; (2) It excludes important sources of welfare based on the assumption that antitrust seeks only to maximize wealth; (3) It assumes a constant and equal individual marginal utility of money; and (4) It is often combined with extraneous ideological goals. Even with these defects, however, if applied consistent with its theoretical underpinnings, the consideration of the transfer of labor rents resulting from a merger or dominant firm conduct is supported by the Consumer Welfare Standard. Moreover, even when only consumers (and not producers) are deemed relevant, the welfare of labor still should consistently be considered part of consumer welfare. In contrast, fostering political democracy—a prominent traditional antitrust goal that was jettisoned by the Chicago School—falls outside the Consumer Welfare Standard in any of its constructs. To undergird such important broader goals requires that the Consumer Welfare Standard be replaced with the General Welfare Standard. The General Welfare Standard consists of modern welfare economics modified to accommodate objective analyses of human welfare and purged of inconsistencies.
Topic:: Economics, Democracy, Income Inequality, and Antitrust Law
Political Geography:: Global Focus

30. Government Deficits and Interest Rates: A Keynesian View

Author:: Brett Palatiello and Philip Pilkington
Publication Date:: 04-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: We test the neoclassical loanable funds model which postulates that, ceteris paribus, government borrowing increases the long-term rate of interest. The empirical literature exploring such a connection remains largely mixed. We clarify the conflicting results by deploying an ARDL model to decompose the relationship in the United States into long and short-run effects across multiple measures of the government deficit and long-term interest rate. We find a tendency for changes in the deficit to increase long-term interest rates in the short run but the effect is reversed in the long run. We argue that these results are consistent with John Maynard Keynes’ view of the long-term rate as being heavily influenced by monetary policy, central bank credibility and market convention.
Topic:: Economics, Governance, Economic Theory, Keynes, and Deficit
Political Geography:: Global Focus

31. Setting the Record Straight on the Libertarian South African Economist W. H. Hutt and James M. Buchanan

Author:: William Darity Jr., M'Balou Camara, and Nancy MacLean
Publication Date:: 06-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: In their stormy response to Nancy MacLean’s book Democracy in Chains, some academics on the libertarian right have conducted a concerted defense of Nobel Laureate James Buchanan’s credentials as an anti-racist, or at least a non-racist. An odd component of their argument is a claim of innocence by association: the peripatetic South African economist and Mont Pelerin Society founding member William Harold Hutt was against apartheid; Buchanan was a friend and supporter of Hutt; therefore, Buchanan could not have been abetting segregationists with his support for public funding of segregationist private schools. At the core of this chain of argument is the inference that Hutt’s opposition to apartheid proves that Hutt himself was committed to racial equality. However, just as there were white supremacists who opposed slavery in the United States, we demonstrate Hutt was a white supremacist who opposed apartheid in South Africa. We document how Hutt embraced notions of black inferiority, even in The Economics of the Colour Bar, his most ferocious attack on apartheid. Whether or not innocence by association is a sound defense of anyone’s ideology or conduct, Hutt, himself, was not innocent of white supremacy.
Topic:: Economics, Discrimination, Racism, and Libertarianism
Political Geography:: Global Focus

32. Inflation in the Time of Corona and War

Author:: Servaas Storm
Publication Date:: 06-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Reliance on established macroeconomic thinking is not of much use in trying to understand what to do in response to the constellation of forces driving up inflation in these times of COVID-19 and war. This paper attempts to reduce the heat and turn up the light in the debate on the return of high inflation and looming stagflation—by providing evidence-based answers to the main (policy) questions concerning the return of high inflation: is the increased inflation due to (global) supply and/or demand factors? Is the inflation in the US exceptional or are other OECD and emerging economies experiencing similar inflationary pressures? Is the increase in inflation permanent or transitory? Can the Fed safely bring down inflation? Is fiscal policy the underlying cause of inflation? Are there alternative, less socially costly, ways to bring inflation down? And what will happen to inflation in the longer run, when the US and other economies will face the impacts of global warming?
Topic:: Economics, War, Inflation, and COVID-19
Political Geography:: Global Focus

33. Working Paper Permanent Scars: The Effects of Wages on Productivity

Author:: Claudia Fontanari and Antonella Palumbo
Publication Date:: 07-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: This paper explores how stagnating real wages may have contributed to the slowdown of US productivity. Through shift-share analysis, we find that after a sharp change in distribution against wages, some historically high-productivity sectors (like manufacturing) switched towards slower productivity growth. This supports our hypothesis that the anemic growth of productivity may be partly due to the trend toward massive use of cheap labor. Our estimation of Sylos Labini’s productivity equation confirms the existence of two direct effects of wages, one acting through the incentive to mechanization and the other through the incentive to reorganize labor use. We also show that labor ‘weakness’ may exert a further negative effect on labor productivity. On the whole, we find that a persistent regime of low wages may determine very negative long-term consequences on the economy.
Topic:: Economics, Labor Issues, Economic Theory, and Wages
Political Geography:: Global Focus

34. Monetary Policy for the Climate? A Money View Perspective on Green Central Banking

Author:: Jakob Vestergaard
Publication Date:: 07-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Central banks can potentially influence the investment decisions of private financial institutions, which in turn will create incentives towards green technology adoption and development of lower emission business models. This paper examines how monetary policies can be deployed to promote a greening of finance. To guide the efforts, the paper mobilizes the Money View literature. This enables a comparative assessment of different monetary policy options. The main finding is that a promising way forward for green monetary policy is to adopt a strategy of expanding collateral eligibility through positive screening and widening haircut spreads to change relative incentives in favor of green over brown assets.
Topic:: Climate Change, Economics, Monetary Policy, Banking, and Green Transition
Political Geography:: Global Focus

35. Inflation in the Time of Corona and War: The Plight of the Developing Economies

Author:: Servaas Storm
Publication Date:: 11-2022
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Reliance on established macroeconomic thinking is not of much use in trying to understand what to do in response to the constellation of forces driving up inflation and slowing down growth in these times of COVID-19 and war. This paper attempts to reduce the heat and turn up the light in the debate on the return of high inflation and looming stagflation—by providing evidence-based answers to key (policy) questions concerning the return of high inflation: How close are the parallels between the current conjuncture and the 1970s? What are the differences? Does what is currently happening already amount to stagflation? Can central bankers engineer a ‘soft landing’ of their economies or are we already poised for a deep (global) recession? What are the likely spill- over effects of monetary tightening in the US on the emerging economies? What, if anything, can we learn from the monetary and fiscal policy experiences and policy mistakes of the 1970s? And, finally, are there alternative, less socially costly, ways to bring inflation down?
Topic:: Economics, War, Conflict, Inflation, Pandemic, and COVID-19
Political Geography:: Global Focus

36. Imperial Preference

Author:: Sven Biscop
Publication Date:: 10-2022
Content Type:: Policy Brief
Institution:: EGMONT - The Royal Institute for International Relations
Abstract:: When the economy is globalised but decisions on policy are made in national capitals, states can choose to cooperate and run the global economy in their collective interest, even as they remain economic competitors. Or they can try to fence off their share of the market and force all others out – and economic competition quickly turns into geopolitical rivalry. Is this what will mark the 21st century?
Topic:: Economics, Globalization, International Cooperation, and Hegemony
Political Geography:: Global Focus

37. Polanyi, Market Fundamentalism, and the Institutional Structure of Capitalism

Author:: Leonardo Burlamaqui
Publication Date:: 03-2022
Content Type:: Special Report
Institution:: Brazilian Center for International Relations (CEBRI)
Abstract:: The basic proposition of this paper is that the so-called "new economic sociology", which is rooted in key ideas of Karl Polanyi, is an indispensable "tool" for two tasks: a) it provides us with a powerful critique of market fundamentalism, and b) it allows us to analyze the economic performance of contemporary capitalism by accessing the working of its institutional structure. From an analytical perspective, the paper suggests that Polanyian Economic Sociology is an essential complement to both the Schumpeterian and the Post-Keynesian perspectives in economics. This is especially so when it comes to the discussion of "socioeconomic stability" and, more precisely, as Keynes himself stated in the General Theory: to explain why capitalist economies manifest themselves in different ways and degrees, in spite of encompassing inherent elements of instability and unpredictability.
Topic:: Economics, Markets, Political Economy, Sociology, and Capitalism
Political Geography:: Global Focus

38. Impact of the Regional Comprehensive Economic Partnership (RCEP): A Global Computable General Equilibrium (CGE) Simulation

Author:: Ken Itakura
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This study estimates the potential economic effects of the Regional Comprehensive Economic Partnership (RCEP) by using a recursively dynamic computable general equilibrium (CGE) model, which incorporates the global supply chains (GSCs) structure, also referred as the global value chains (GVCs). The tariff reduction schedules for the RCEP agreement are incorporated in addition to other large FTAs, such as the CPTPP. Second, the structure of GSCs is included in the CGE model to take into account the importance of trade in intermediate goods and services. This study implements the RCEP simulation scenarios for tariff reductions, services trade liberalization, logistic improvements, and investment commitments. Results show that the real GDP of RCEP members increases by $675 billion in total, of which ASEAN grows by $160 billion
Topic:: Economics, International Trade and Finance, Tariffs, and Supply Chains
Political Geography:: Global Focus

39. Do Cash Transfers Deter Migration?

Author:: Michael A. Clemens
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Center for Global Development
Abstract:: Conditional Cash Transfers are increasingly used by development aid agencies to reduce the incentives for migration from low-income countries. The evidence to date suggests that such transfers typically increase the rate of migration when they are conditional on investment, such as investment in education. They do this primarily by facilitating acquisition of human capital and by lowering capital constraints—increasing both migration aspirations and the means to achieve them. But with certain design features, particular transfer programs have reduced the incentive to migrate. Broadly speaking, migration can be deterred by transfer programs that are conditional on presence in the origin country—provided that the condition is strict, targeted, and lengthy.
Topic:: Economics, Migration, Finance, and Investment
Political Geography:: Global Focus

40. Domestic Revenue Mobilization and Debt Relief: The Lack of Any Link

Author:: Mark Plant and Nancy Lee
Publication Date:: 02-2022
Content Type:: Working Paper
Institution:: Center for Global Development
Abstract:: As the global financial community considers how to extend debt relief accompanied by IMF adjustment programs to vulnerable low-income countries, the issue of policy conditions for fiscal adjustment will inevitably arise. This paper considers the effectiveness of conditions related to domestic revenue mobilization (DRM) in the last systematic round of debt relief in the early 2000s Highly Indebted Poor Countries Initiative and the Multilateral Debt Relief Initiative (HIPC/MDRI). We find that debt relief had no impact on low-income countries’ DRM. Countries benefitting from debt relief had roughly the same DRM as those that did not. And DRM grew only slightly over time for both sets of countries. In the months to come there will be pressure to use debt restructuring and leverage to accelerate fiscal reforms and boost domestic revenue mobilization so that LICs can be seen to be contributing “their fair share” to economic recovery and transformation. Experience with the HIPC/MDRI tells us that we must be realistic in our expectations: external forces have limited impact unless combined with strong internal will and implementation capacity.
Topic:: Debt, Economics, IMF, and Credit
Political Geography:: Global Focus

41. The international financial system after COVID-19

Author:: Maurice Obstfeld
Publication Date:: 02-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: In March 2020, international markets seized up with a violence unequaled since the global financial crisis nearly a dozen years before. As economies around the world locked down in the face of the potentially deadly but completely novel SARS-CoV-2 virus, stock markets fell, firms and governments scrambled for cash, liquidity strains emerged even in the market for US Treasurys, and capital flows to emerging-market and developing economies (EMDEs) reversed violently. This paper reviews the evolution of global financial markets since the global financial crisis, changes in academic thinking about these markets’ domestic impacts, the strains seen during the COVID-19 crisis, and perils that may lie ahead. A key theme is that stability will be enhanced if the global community embraces reforms that elevate market resilience, rather than depending on skillful policymakers wielding aggressive but ad hoc policy interventions to ride to the rescue again.
Topic:: Economics, Markets, COVID-19, and Financial Systems
Political Geography:: Global Focus

42. Socioeconomic diversity of economics PhDs

Author:: Robert Schultz and Anna Stansbury
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: It is well documented that women and racial and ethnic minorities are underrepresented in the economics profession, relative to both the general population and many other academic disciplines. Less is known about the socioeconomic diversity of the profession. In this paper, we use data from the National Science Foundation’s Survey of Earned Doctorates to examine the socioeconomic background of US economics PhD recipients as compared with US PhD recipients in other disciplines, proxying for socioeconomic background using PhD recipients’ parents’ educational attainment. We find that economics PhD recipients are substantially more likely to have highly educated parents, and less likely to have parents without a college degree, than PhD recipients in other disciplines. This is true both for US-born and non-US-born PhD recipients, but the gap between economics and other disciplines is starker for those born in the United States. The gap in socioeconomic diversity between economics and other PhD disciplines has increased over the last two decades.
Topic:: Economics, Women, Diversity, and Academia
Political Geography:: Global Focus

43. WTO 2025: Restoring binding dispute settlement

Author:: Alan Wm. Wolff
Publication Date:: 04-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Binding dispute settlement—the ability to obtain a final judgment of whether a member of the World Trade Organization (WTO) has acted inconsistently with its obligations—was the defining attribute of the WTO as created in 1995. Global commerce thrived on having the certainty provided by its taking place within this system. For well over a decade, the United States had complained that the dispute settlement system was undermining the trade remedies—antidumping, countervailing duties against subsidies, and safeguard actions against injurious imports—that were allowed under the WTO’s rules. When a populist US administration assumed office in 2017, it blocked appointments to the WTO’s Appellate Body. Today, the WTO dispute settlement system has become balkanized. The European Union and a number of other countries have banded together to put into place an alternative mechanism. Outside this system are the other two-thirds of the WTO members, including the United States. For most WTO members, no definitive result can be reached as to whether WTO obligations have been violated, as there is no assurance that WTO dispute settlement will be binding for them. This paper addresses how to reconstruct a system that the United States could join that would be broadly acceptable to others. It sets out a wide range of elements for negotiators to consider to rebuild the WTO dispute settlement system and make WTO agreements enforceable again.
Topic:: Economics, Trade, WTO, and Disputes
Political Geography:: Global Focus

44. WTO 2025: Enhancing global trade intelligence

Author:: Alan Wm. Wolff
Publication Date:: 04-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: International trade flows based on information. Is the foreign market open? What are the conditions for entry? Are there customs duties to be paid and other regulations that need to be satisfied? Businesses thrive on getting as much certainty as they can find, and this requires reliable information. Is the competition subsidized? Are the competitors favored state-owned companies? During the pandemic, governments needed to know if food and medical supplies were going to be available from foreign sources and, most importantly, how available vaccines would be as most of the world’s countries could not produce any. Effective public policy cannot be made in the dark. The World Trade Organization, and the General Agreement on Tariffs and Trade before it, were founded with the idea of providing transparency. But more is needed to understand why trade is taking place, and even more important, when it is not, why not?
Topic:: Economics, Markets, Trade, and WTO
Political Geography:: Global Focus

45. WTO 2025: Constructing an executive branch

Author:: Alan Wm. Wolff
Publication Date:: 05-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: The World Trade Organization (WTO) as an institution accords much less of a role to its chief officer and her staff, namely the WTO Director-General and the Secretariat, than do any of its sister international organizations—the World Bank, the International Monetary Fund, the Organization for Economic Cooperation and Development—to their chief officers and staff. The WTO Secretariat is much smaller than its peer international organizations and underfunded. In considering WTO reform, this deficiency needs to be rectified if the WTO’s performance is to live up to its Members’ needs.
Topic:: Economics, World Bank, IMF, WTO, and OECD
Political Geography:: Global Focus

46. Revisiting the links between economic inequality and political violence: The role of social mobilization

Author:: Patricia Justino
Publication Date:: 02-2022
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The main aim of this paper is to explore theoretically important mechanisms through which economic inequalities may affect the emergence of political violence given the forms of social mobilization they (may) generate. The paper identifies and explores two mechanisms under which social mobilization in unequal societies may result in either non-violent or violent collective action and, ultimately, in violent conflict. The first condition is the level of social cooperation between different social groups that are formed during the process of social mobilization. The second is the efficacy of collective action to drive change, which is in turn shaped by the ability of individuals within groups to coordinate their actions. Forms of social mobilization become violent when antagonism is the dominant form of social interaction between different social groups in unequal societies, and when each of these social groups exhibits high levels of internal coordination.
Topic:: Political Violence, Economics, Social Movement, Inequality, Mobilization, and Collective Action
Political Geography:: Global Focus

47. Immigrant entrepreneurship in startup cities — what works in which context?

Publication Date:: 02-2022
Content Type:: Video
Institution:: MIT Center for International Studies
Abstract:: Migrants are often considered to be ‘natural entrepreneurs’. This notion is based on a presumed inclination to take risks, an openness to new experiences, and a higher willingness to adapt than their local counterparts. Migrants found more businesses relative to the local population in many countries, despite facing additional challenges in the startup process. To support them in overcoming these challenges and to leverage their entrepreneurial potential, more and more organizations create targeted offers for this group of entrepreneurs — particularly in cities with vibrant entrepreneurial ecosystems. Increasingly, these ‘newcomer entrepreneurs’ find that their particular needs are better recognised and taken into account. Despite this, it is still unclear which interventions actually work for which target group, and in which context. Which role do the different stakeholders and systemic mechanisms in the local entrepreneurial ecosystem play?
Topic:: Economics, Entrepreneurship, Business, and Immigrants
Political Geography:: Global Focus

48. The Instability of Preferences: Uncertain Futures and the Incommensurable and Intersubjective Nature of Value(s

Author:: Richard Bronk and Jens Beckert
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: Max Planck Institute for the Study of Societies
Abstract:: The default assumption of standard economics is to treat preferences as exogenously ‘given’, consistent with one another, ‘revealed’ by past choices, and context independent. There has been increased interest recently (within behavioural economics) in the impact of inconsis- tent or irrational preferences and (more broadly) in dynamic and endogenous preferences. This paper builds on these challenges to standard assumptions by analysing the pivotal role of three aspects of preference formation in explaining capitalist dynamics and market insta- bility. These are the constant creation of new preferences and the indeterminacy of choice sets in the context of widespread product innovation; the moral indeterminacy implied by conflicting and incommensurable social norms attaching to market goods where there is no single scale of value and hence no unique set of rational trade-offs; and, lastly, the con- tingent social and market construction of the product differentiation, quality attribution, and value assessments central to preference formation. The paper concludes by considering implications for economics as a discipline.
Topic:: Economics, Capitalism, Norms, and Social Order
Political Geography:: Global Focus

49. World Economy Autumn 2022: Global growth falters

Author:: Klaus-Jurgen Gern, Ulrich Stolzenburg, Nils Sonnenberg, Stefan Kooths, and Jan Reents
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: In spring 2022, world economic growth came to a standstill amid high inflation, persistent supply bottlenecks and elevated uncertainty. In many countries real wages are declining significantly dampening private consumption even though extra savings accumulated during the pandemic are still available to mitigate the adverse impact to some extent. At the same time financial conditions have also deteriorated as central banks tightened their policies. In China, the strict zero-covid policy and problems in the real estate sector are slowing economic activity. Against this backdrop, the outlook for the global economy has deteriorated further. We have, again, lowered our forecast and are now expecting global output to increase by only 2.9 percent this year and 2.2 percent next year (calculated on a purchasing power parity basis). The forecast assumes that commodity prices will gradually decline in line with forward prices, which will over time reduce the upward pressure on prices and provides the foundations for an economic upturn in 2024. However, the pass-through of higher commodity prices into consumer prices is probably not yet complete and wage increases are likely to intensify in many countries. Consequently, underlying inflation is likely to remain higher than in the years before the Covid crisis and remain above central bank targets over the forecast horizon
Topic:: Economics, Globalization, Economic Growth, and COVID-19
Political Geography:: Global Focus

50. World economy in summer 2022: Inflation is curbing global growth

Author:: Klaus-Jurgen Gern, Ulrich Stolzenburg, Nils Sonnenberg, Stefan Kooths, and Jan Reents
Publication Date:: 06-2022
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: In a situation with already elevated inflation, the war in Ukraine and the zero-covid policy in China have led to additional upward pressures on prices and reinforced the global supply chain problems. Real wages are declining in many countries, dampening personal consumption expenditures even though households are often able to draw from a substantial amount of extra savings accumulated during the pandemic. Given the widespread inflationary pressures, central banks have shifted towards a more restrictive monetary policy stance. Against this backdrop, the outlook for global growth has weakened. We forecast global growth of 3.0 percent in 2022 and 3.2 percent in 2023 (measured in terms of purchasing-power parities), representing a reduction by 0.5 and 0.4 percentage points for 2022 and 2023, respectively. The forecast is based on the assumption that commodity prices have peaked, which would reduce inflationary pressures considerably going forward. However, there is the risk that inflation proves to be more persistent than central banks expect. In such a case, central banks would need to step on the brakes more than assumed, with the risk of a recession in advanced economies and a pronounced deterioration in financial conditions in emerging markets
Topic:: Security, Economics, Inflation, COVID-19, and Russia-Ukraine War
Political Geography:: Global Focus

51. New Global Progress Survey Highlights the Major Challenges of Global Inflation

Author:: John Halpin
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: Center for American Progress - CAP
Abstract:: The rising cost of living is hitting citizens everywhere.
Topic:: Economics, Globalization, International Cooperation, and Inflation
Political Geography:: Global Focus

52. Positive Peace Report 2022

Author:: Institute for Economics and Peace (IEP)
Publication Date:: 01-2022
Content Type:: Special Report
Institution:: Institute for Economics & Peace (IEP)
Abstract:: This report showcases the findings of the Institute for Economics and Peace’s (IEP) research, including its latest results on Positive Peace and systems thinking. Positive Peace is defined as the attitudes, institutions and structures that create and sustain peaceful societies. It is conceptually and empirically related to many constructive aspects of social development and can be used in multiple contexts. It can also be used to compile an index – the Positive Peace Index (PPI). This allows for the comparison and tracking of the factors that create flourishing societies. These and other concepts related to Positive Peace are covered in the first section of this report, as well as general PPI results, including rankings and changes over time. Positive Peace is closely associated with system concepts to the extent that it is difficult to separate the two. IEP has further deepened its unique understanding of how societal systems function and has developed a framework called Halo which provides a comprehensive approach to analysing societal systems.
Topic:: Economics, Business, Institutions, Peace, Resilience, COVID-19, and Positive Peace
Political Geography:: Global Focus

53. Global Peace Index 2022

Author:: Institute for Economics and Peace (IEP)
Publication Date:: 01-2022
Content Type:: Special Report
Institution:: Institute for Economics & Peace (IEP)
Abstract:: This is the 16th edition of the Global Peace Index (GPI), which ranks 163 independent states and territories according to their level of peacefulness. Produced by the Institute for Economics and Peace (IEP), the GPI is the world’s leading measure of global peacefulness. This report presents the most comprehensive data-driven analysis to-date on trends in peace, its economic value, and how to develop peaceful societies. The GPI covers 163 countries comprising 99.7 per cent of the world’s population, using 23 qualitative and quantitative indicators from highly respected sources, and measures the state of peace across three domains: the level of societal Safety and Security; the extent of Ongoing Domestic and International Conflict; and the degree of Militarisation. In addition to discussing the findings from the 2022 GPI, the report includes an analysis of the military conflict in Ukraine. It covers likely increases in military spending, new and emerging uses of technology in the war, its impact on food prices and global shipping routes. The report also contains a deeper analysis on violent demonstrations around the world.
Topic:: Foreign Policy, Political Violence, Economics, Terrorism, Military Spending, Conflict, Peace, and Instability
Political Geography:: Global Focus

54. Sanctions and the Economic Consequences of Higher Oil Prices

Author:: Christof Ruhl
Publication Date:: 04-2022
Content Type:: Commentary and Analysis
Institution:: Center on Global Energy Policy (CGEP), Columbia University
Abstract:: Sanctions against the Russian Federation are developing so fast that it is hard to keep track of them and even harder to see a consistent narrative as events unfold. But there is one. Russia is the world’s largest exporter of energy and commodities. A persistent balance of payment surplus is the source of its financial strength, in terms of both current income and the financial assets previously accumulated by “fortress Russia.” Oil, gas, and coal exports constitute the most valuable revenue streams and are therefore prime targets of sanctions policy.[1] The problem is that energy sanctions will backfire badly if they lead to price increases large enough to derail the economic performance of sanctioning countries.
Topic:: Economics, Energy Policy, Oil, Natural Resources, and Sanctions
Political Geography:: Global Focus

55. Impacts of New International Tax System on Multinational Firms’ FDI

Author:: Sangjun Yea
Publication Date:: 04-2022
Content Type:: Policy Brief
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: In this study, I present a theoretical model to quantitatively assess the economics impact of Pillar 1 and Pillar 2, especially focusing on the changes in the FDI patterns of multinational enterprises (MNEs). Pillar 1 offsets the incentives of MNEs' profits-shifting for tax-planning purposes, thereby reducing the inbound FDI into the countries with low corporate income tax rates. Pillar 2 burdens MNEs with 'top-up' taxes attributed from the subsidiaries in low tax countries. As the profits after tax (PAT) of MNEs shrink at the global level, innovation and R&D investment for new products will decrease, and as a result, global FDI flows will hamper.
Topic:: Economics, Foreign Direct Investment, Multinational Corporations, and Tax Systems
Political Geography:: Global Focus

56. How to save the WTO with more flexible trading rules

Author:: Robert Z. Lawrence
Publication Date:: 12-2022
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The clash between the Western and Chinese economic systems is threatening the world trading system, with countries increasingly using trade as a tool to coerce other countries. It is imperative to return to an inclusive, rules-based international trading order before the problems in trade spill over into the other geopolitical frictions that plague the world. This Policy Brief argues for a system that steers between two extremes that have emerged: “deep integration,” a single undertaking in which all members of the World Trade Organization (WTO) are expected to adhere to all rules regardless of their preferences and circumstances, and “decoupling,” in which groups of countries centered on the United States or China limit trade with each other. Instead, Lawrence says, the world trading system should have a “variable geometry” that allows open plurilateral agreements among self-selected members that desire deeper integration on particular issues while allowing members that prefer to implement distinctive domestic policies to remain outside some of these agreements and follow a set of more limited rules. The universal rules would permit diversity but still promote trade between all countries through measures such as safeguards that would deal mainly with the most harmful systemic frictions. If the multilateral system is not up to the task of creating such an approach, it is likely to lose its relevance as differentiated regional or topic groupings become increasingly dominant.
Topic:: Economics, International Trade and Finance, World Trade Organization, Reform, and Trade
Political Geography:: Global Focus

57. The online gig economy’s impact is not as big as many thought

Author:: Lee G. Branstetter
Publication Date:: 07-2022
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The explosive global growth of online ride-hailing platforms raised concern (and, in some quarters, optimism) that similar growth in other platforms could rapidly disrupt traditional labor arrangements on a large scale in advanced economies. But the evidence to date suggests no significant changes in the overall importance of “gig” work in the US labor market nor a significant decline in the importance of traditional employment relationships. Online platforms may play a growing role (relative to traditional “brick-and-mortar” intermediaries) in connecting gig workers to their customers, but that alone does not guarantee a large increase in the importance of gig work. Branstetter reviews this evidence, noting the gaps in labor market data series that make the measurement of this phenomenon so difficult. Even if traditional employment relationships are not likely to decline significantly in the near future, the rise of online gig work nevertheless highlights longstanding inadequacies of labor market regulations, which recognize employees and truly independent contractors but struggle with the intermediate kinds of worker-firm relationships the online platforms enable. Branstetter summarizes proposals for regulating gig economy work and the lessons policymakers in South Korea and other economies can learn from the literature he reviews in this Policy Brief.
Topic:: Economics, Employment, Labor Market, and Gig Economy
Political Geography:: Global Focus

58. 25 years of excess unemployment in advanced economies: Lessons for monetary policy

Author:: Joseph E. Gagnon and Madi Sarsenbayev
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: For about 25 years before the COVID-19 pandemic, inflation was very low and stable in most advanced economies. A little noticed dark side of this impressive achievement is that unemployment rates were almost always higher than needed to keep inflation low. This widespread and persistent policy error arose because of a major flaw in standard macroeconomic models—the use of a linear Phillips curve. This flaw would have been far less costly if central banks had not chosen such a low target for inflation. This paper thus adds to the arguments in favor of a moderately higher inflation target. Even without a higher target, central banks need to use a broader range of economic models and should verify their estimates of the natural rate of unemployment by running the economy hot from time to time in order to see nascent inflationary pressure before throttling back.
Topic:: Economics, Monetary Policy, Unemployment, and COVID-19
Political Geography:: Global Focus

59. How carbon tariffs and climate clubs can slow global warming

Author:: Shantayanan Devarajan, Delfin S. Go, Sherman Robinson, and Karen Thierfelder
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Slowing global warming requires countries to reduce carbon emissions, which imposes costs on their economies. To be effective, most countries must agree collectively to participate (e.g., the Paris Agreement, COP26). However, every country has an incentive not to comply and still reap the benefits of other countries’ actions—a classic free-rider problem. This paper evaluates recent recommendations to use trade policy to solve the free-rider problem associated with climate mitigation strategies. It shows that the European Union’s carbon border adjustment mechanism (CBAM tariffs) are effective at offsetting the unfair competitive advantage of noncompliant countries in the markets of compliant countries but have little effect on the trade of noncompliant countries, who can divert trade to other noncompliers. CBAM tariffs alone have little impact on global CO2 emissions. The paper also examines “climate clubs” (coalitions of countries that agree to impose carbon taxes or other equivalent policies and impose punitive tariffs on non-club members to induce them to join the club). It finds that punitive climate club tariffs can be effective in inflicting significant damage on the economies of nonmembers, providing a strong incentive for them to join the club. The paper identifies trade dependence between club and non-club members as an important consideration for the success of a climate club. Club members that are strongly linked to non-club members suffer losses when the club punishes non-club members, which would make them hesitant to impose punitive tariffs on a major nonmember trading partner.
Topic:: Climate Change, Economics, Tariffs, and Carbon Emissions
Political Geography:: Global Focus

60. A reform strategy to transform energy: From piecemeal to systemwide change

Author:: Steven Fries
Publication Date:: 08-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: The Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report on Climate Change Mitigation highlights the vast gap between climate change mitigation actions and climate stabilization goals. But its broad policy prescriptions are likely to leave policymakers pondering what specific actions to take. Informed by accumulating evidence on transforming aspects of energy systems like power generation from solar and wind resources and battery electric cars, this paper develops a more pointed energy reform strategy than that of the IPCC to deliver the necessary systemwide changes. It makes the case for two unorthodox policies. One is for governments to provide, in addition to R&D supports, market-creating supports for early deployment of low-carbon technologies in initial markets. The second is to sequence emissions pricing after innovation and market-creating supports and differentiate this pricing across key energy sectors rather than imposing one economywide price. Compared with a single price, targeting higher emissions pricing on sectors that are costlier to decarbonize still promotes cost-effective emission cuts but limits adverse distributional impacts. The paper also considers nonprice barriers to change and ways to coordinate domestic reforms across countries.
Topic:: Climate Change, Economics, Reform, Carbon Emissions, and Energy
Political Geography:: Global Focus

61. Green energy depends on critical minerals. Who controls the supply chains?

Author:: Luc Leruth, Adnan Mazarei, Pierre Régibeau, and Luc Renneboog
Publication Date:: 08-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: In light of the transition away from fossil fuel–based energy, this paper highlights the importance of understanding who controls vital parts of the global supply chains of critical minerals and rare earth elements (REEs). Analysis of direct ownership does not reveal the real sources of control over the decisions of the company. To identify those sources, the authors use an index that measures the degree to which important shareholders can affect voting decisions. This analysis is not straightforward, because companies along the supply chain are not necessarily incorporated in the countries in which mining and production activities take place, and shareholders can exert influence through multiple layers of subsidiaries. The analysis reveals that China’s control over the global value chains involving critical minerals and REEs extends beyond what is commonly assumed. It also sheds light on environmental, social, and governance issues in the countries in which mining and/or production take place. The paper advocates increasing transparency regarding the sources of control to better assess and manage economic and geopolitical risks; enhancing recycling, to reduce dependency on foreign supply; avoiding protectionist and trade-reducing reactions; and encouraging research and development in order to speed up the adoption of technologies of substitution.
Topic:: Economics, Geopolitics, Supply Chains, Minerals, Energy, and Green Transition
Political Geography:: Global Focus

62. Gender preference at birth: A new measure for son preference based on stated preferences and observed measures of parents’ fertility decisions

Author:: Mehwish Ali, Ashton de Silva, Sarah Sinclair, and Ankita Mishra
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Investigating preference for sons is a continuing focal area of development economics and demographic research. Son preference presents a challenge in achieving the United Nations Sustainable Development Goals of ‘no poverty’, ‘good health and wellbeing’, and ‘gender equality’ by 2030. It is thus important to investigate son preference to inform policy-makers of the potential challenges in achieving these goals. Inaccurate interpretation of the mechanisms of son preference could misinform policy analysis and result in unintended consequences. Existing measures including sex ratios and gender composition of children do not reflect the true extent of son preference in high fertility countries such as Pakistan, where the success of policy action is limited and significant barriers to sex-selective technologies exist. Given the likely impact of son preference on fertility behaviour in Pakistan, accurate measurement of the forms this gender bias can take is necessary to appropriately gauge the influence of son preference on the fertility outcomes. The limited capacity of existing measures to accurately depict son preference in countries with high fertility combined with limited demarcation between pre- and post-birth son preference warrants development of a new measure for son preference to evaluate its effects. In this paper, a new measure of son preference called ‘gender preferences at birth’ (GPB) is presented. GPB combines stated fertility preferences and observed fertility outcomes to acknowledge that households in countries with high fertility and low contraception usage have less control over their fertility decisions.
Topic:: Economics, Sustainable Development Goals, Welfare, Family Planning, Fertility, and Gender
Political Geography:: Pakistan, South Asia, and Global Focus

63. Determinants of corporate cash holdings in South Africa

Author:: Ewa Karwowski, Hanna Szymborska, Keagile Lesame, and Tlhologelo Thoka
Publication Date:: 08-2022
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Globally, corporate cash holdings have risen since the 1980s. In South Africa, some commentators have accused corporations of engaging in an ‘investment strike’, while others see corporate liquidity as a precaution against systemic uncertainty. We use the unique South African Revenue Service/National Treasury firm-level dataset to scrutinize corporate liquidity, using panel analysis. Relative to GDP, corporate cash and liquidity holdings have not increased between 2010 and 2017. However, corporate cash is high in international comparison and has grown at the firm level. We do not find evidence for the hypothesis that companies are engaging in an investment strike. Cash and liquidity are shaped by idiosyncratic and sectoral risk factors. In the short run, heightened uncertainty might reduce corporate cash and liquidity as firms struggle to adjust to an unexpected economic situation. In the medium run, we find a strong association between political uncertainty and corporate cash and liquidity holdings.
Topic:: Economics, Corporations, Liquidity, and Cash
Political Geography:: Africa, South Africa, and Global Focus

64. Illicit financial flows and country-by-country reporting in extractive industries

Author:: Saila Stausholm, Petr Janský, and Marek Šedivý
Publication Date:: 07-2022
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Economic data are important in governing the international political economy. Some of the most widely used macro statistics risk being undermined by systematic misalignment in reporting of economic activity due to illicit financial flows, as well as tax-minimizing financial transactions by multinational corporations. Measuring these misalignments may prove a way to correct old statistical standards, if adequate data can be obtained. We evaluate whether new transparency and reporting regimes that require country-by-country reporting by multinational corporations could prove a feasible way to appropriate the amount of tax avoidance and use these figures to correct macro statistics. We evaluate the existing data for two of the standards through previous literature and provide original analysis of a third standard that is applied to the extractive industries. We find that the standards lack coherence and workability, and that particularly the extractive industry standard falls short of enabling thorough research on profit reporting and taxmotivated misalignments by multinational corporations.
Topic:: Economics, Tax Evasion, Extractive Industries, and Illicit Financial Flows
Political Geography:: Global Focus

65. The Assault of Austerity: How prevailing economic policy choices are a form of gender-based violence

Author:: Dana Abed and Fatimah Kelleher
Publication Date:: 11-2022
Content Type:: Policy Brief
Institution:: Oxfam Publishing
Abstract:: This briefing paper argues that austerity measures are a form of gender-based violence against women, girls and non-binary people, and lays out clear examples of how fiscal consolidation affects them. Its core argument is that ending austerity must be a priority. The policies that deliver austerity’s deadly consequences can no longer be marketed as the ‘logical’ and ‘inevitable’ economic options that they have been for decades, and certainly not by any government that claims a commitment to gender equality or ending gender-based violence. Austerity takes away from those who need it most, while ignoring common-sense ways to improve both revenue and prosperity. The paper goes on to share feminist economic alternatives offer pathways that can protect the Majority World from completely avoidable suffering.
Topic:: Economics, Gender Based Violence, Identity, and Gender
Political Geography:: Global Focus

66. Comparative State Economic Interventions in the Carbon Capture and Storage Market

Author:: Dillon W. Smith, Umang Bhattarai, and Wake Smith
Publication Date:: 09-2022
Content Type:: Policy Brief
Institution:: Belfer Center for Science and International Affairs, Harvard University
Abstract:: An essential element in the portfolio of climate solutions required to rapidly achieve net zero emissions is flue gas carbon capture and storage, whereby carbon can be sifted from emission streams before it enters the atmosphere and safely sequestered in geologic storage systems. Despite its importance in the climate tool portfolio, flue gas capture capacity is currently much less than reasonable estimates of its potential. States around the world are searching for policies by which to incentivize emitters to invest in carbon capture and storage (CCS) and hasten the technology’s rollout. We survey five leading polities (United Kingdom, Netherlands, Norway, United States, and California) in their efforts to kick-start the deployment of CCS and assess the strengths and weaknesses of each territory’s scheme.
Topic:: Climate Change, Economics, and Carbon Emissions
Political Geography:: Global Focus

67. 2022 Retrospective and Trends for 2023

Author:: Sarah Cliffe, Marta Bautista Forcada, Symphony Chau, and Hanny Megally
Publication Date:: 12-2022
Content Type:: Commentary and Analysis
Institution:: Center on International Cooperation
Abstract:: One year ago, we started our analysis of trends in 2022 on a pessimistic note, including the long-lasting effects of the COVID-19 pandemic; macro-economic volatility; the risk of a war in Ukraine and escalating tensions over Iran and Taiwan; and increasing divisions between North and South and between China and the West. At the end of 2022, looking ahead to next year, we see some surprising grounds for optimism, even though many of the risks that we pointed to have come to pass. These trends include how multilateralism played a surprisingly successful role in Ukraine, as we consider the Black Sea Grain Initiative and the UN resolutions that passed relating to the conflict, along with agreements during the G20 summit in Bali. Other positive notes pertain to potentially transformative global agreements on damage and loss and international tax cooperation, and the absorption of longer-term lessons on inter-state aggression. However, on the negative end, we close the year facing multiple crises chasing the same (declining) pot of money—whether conflict, humanitarian, socio-economic or climate. For our team’s analysis of trends for 2023, there is a focus on nine areas where politics and economics are closely interlinked, and we expect this to be a dominant theme of 2023.
Topic:: Economics, Politics, United Nations, Multilateralism, and Russia-Ukraine War
Political Geography:: Global Focus

68. Global Peace Index 2022

Author:: Institute for Economics and Peace (IEP)
Publication Date:: 07-2022
Content Type:: Special Report
Institution:: Institute for Economics & Peace (IEP)
Abstract:: This is the 16th edition of the Global Peace Index (GPI), which ranks 163 independent states and territories according to their level of peacefulness. Produced by the Institute for Economics and Peace (IEP), the GPI is the world’s leading measure of global peacefulness. This report presents the most comprehensive data-driven analysis to-date on trends in peace, its economic value, and how to develop peaceful societies. The GPI covers 163 countries comprising 99.7 per cent of the world’s population, using 23 qualitative and quantitative indicators from highly respected sources, and measures the state of peace across three domains: the level of societal Safety and Security; the extent of Ongoing Domestic and International Conflict; and the degree of Militarisation. In addition to discussing the findings from the 2022 GPI, the report includes an analysis of the military conflict in Ukraine. It covers likely increases in military spending, new and emerging uses of technology in the war, its impact on food prices and global shipping routes. The report also contains a deeper analysis on violent demonstrations around the world. This year’s results found that the average level of global peacefulness deteriorated by 0.3 per cent. Although slight, this is the eleventh deterioration in peacefulness in the last fourteen years, with 90 countries improving, 71 deteriorating and two remaining stable in peacefulness, highlighting that countries tend to deteriorate much faster than they improve.
Topic:: Security, Economics, Peace, and Russia-Ukraine War
Political Geography:: Global Focus

69. Does ethnic heterogeneity decrease workers’ effort in the presence of income redistribution? An experimental analysis

Author:: Christoph Schütt, David Pipke, Lena Detlefsen, and Gianluca Grimalda
Publication Date:: 07-2022
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: Ethnic discrimination is ubiquitous, and it has been shown to exert adverse effects on income redistribution. The reason is that a country’s ethnic majority, if richer than the average, may be unwilling to transfer resources to the country’s ethnic minorities if poorer than the average. A yet untested mechanism is that a country’s ethnic majority may reduce their work effort knowing that their income will finance redistribution to ethnic minorities. We test for this mechanism experimentally in triadic interactions. A German citizen acting as a worker is randomly matched with a recipient who can be another German, an economic migrant, or an asylum seeker in Germany. Workers know that another German citizen may transfer part of their earnings to the recipient. The recipient does not exert any work effort. Even if the recipient’s identity does not affect effort in the aggregate, social identity strongly moderates this relationship. Participants with a strong German identity, i.e., who report feeling close to other Germans, exert significantly less effort than other participants if the recipient is an asylum seeker. They also exert more effort when matched with a German recipient than an asylum seeker, while participants with a less strong German identity do the opposite. Moreover, participants with a strong German identity exert slightly more effort when matched with economic migrants than with asylum seekers, while others tend to do the opposite, albeit statistically insignificantly. Workers’ beliefs over the third party’s redistribution rate do not mediate such results and are generally inaccurate.
Topic:: Economics, Discrimination, Tax Systems, Labor Market, Redistribution, and Welfare State
Political Geography:: Global Focus

70. The Instability of Preferences: Uncertain Futures and the Incommensurable and Intersubjective Nature of Value(s)

Author:: Richard Bronk and Jens Beckert
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)
Abstract:: The default assumption of standard economics is to treat preferences as exogenously ‘given’, consistent with one another, ‘revealed’ by past choices, and context independent. There has been increased interest recently (within behavioural economics) in the impact of inconsistent or irrational preferences and (more broadly) in dynamic and endogenous preferences. This paper builds on these challenges to standard assumptions by analysing the pivotal role of three aspects of preference formation in explaining capitalist dynamics and market instability. These are the constant creation of new preferences and the indeterminacy of choice sets in the context of widespread product innovation; the moral indeterminacy implied by conflicting and incommensurable social norms attaching to market goods where there is no single scale of value and hence no unique set of rational trade-offs; and, lastly, the contingent social and market construction of the product differentiation, quality attribution, and value assessments central to preference formation. The paper concludes by considering implications for economics as a discipline.
Topic:: Economics, Values, Endogenous Factors, and Preference Formation
Political Geography:: Global Focus

71. Zombies at Large? Corporate Debt Overhang and the Macroeconomy

Author:: Oscar Jorda, Martin Kornejew, Moritz Schularick, and Alan Taylor
Publication Date:: 11-2021
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: What are the macroeconomic consequences of business credit booms? Are they as dangerous as household credit booms? If not, why not? We answer these questions by collecting data on non- financial business liabilities (primarily bank loans and corporate bonds) for 17 advanced economies over the past 150 years. Unlike household credit, business credit booms are rarely followed by macroeconomic hangovers. Data on debt renegotiation costs—instrumented by a country’s legal tradition—show that frictions to debt resolution make recessions deeper and longer—an important factor in explaining the differences with household credit booms.
Topic:: Debt, Economics, Macroeconomics, and Corporations
Political Geography:: Global Focus

72. Can Panel Data Methodologies Determine the Impact of Climate Change on Economic Growth?

Author:: Richard A. Rosen
Publication Date:: 12-2021
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Several major papers have been published over the last ten years claiming to have detected the impact of either annual variations in weather or climate change on the GDPs of most countries in the world using panel data-based statistical methodologies. These papers rely on various multivariate regression equations which include the annual average temperatures for most countries in the world as one or more of the independent variables, where the usual dependent variable is the change in annual GDP for each country from one year to the next year over 30-50 year time periods. Unfortunately, the quantitative estimates derived in these papers are misleading because the equations from which they are calculated are wrong. The major reason the resulting regression equations are wrong is because they do not include any of the appropriate and usual economic factors or variables which are likely to be able to explain changes in GDP/economic growth whether or not climate change has already impacted each country’s economy. These equations, in short, exhibit suffer from “omitted variable bias,” to use statistical terminology.
Topic:: Climate Change, Economics, Economic Growth, and Methodology
Political Geography:: Global Focus

73. Asset Prices Under Knightian Uncertainty

Author:: Roman Frydman, Søren Johansen, Anders Rahbek, and Morten Tabor
Publication Date:: 12-2021
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: We extend Lucas’s classic asset-price model by opening the stochastic process driving dividends to Knightian uncertainty arising from unforeseeable change. Implementing Muth’s hypothesis, we represent participants’ expectations as being consistent with our model’s predictions and formalize their ambiguity- averse decisions with maximization of intertemporal multiple-priors utility. We characterize the asset-price function with a stochastic Euler equation and derive a novel prediction that the relationship between prices and dividends undergoes unforeseeable change. Our approach accords participants’ expectations, driven by both fundamental and psychological factors, an autonomous role in driving the asset price over time, without presuming that participants are irrational.
Topic:: Economics, Models, and Price
Political Geography:: Global Focus

74. The Case for Transparency in Power Project Contracts: A Proposal for the Creation of Global Disclosure Standards and PPA Watch

Author:: Mohamed Rali Badissy, Charles Kenny, and Todd Moss
Publication Date:: 08-2021
Content Type:: Working Paper
Institution:: Center for Global Development
Abstract:: he purpose of a nation’s power sector is to deliver reliable electricity at the lowest cost and for the greatest benefit. At the heart of any private electricity generation project is a Power Purchase Agreement (PPA), a contract that contains key provisions such as price, payment stipulations, and obligations by the offtaker utility and/or host-government. Despite their significant effects on service quality and public finances, these contracts are often negotiated and signed in secret, with even the most basic terms shielded from the citizenry. This opacity has created risks and, in a growing number of cases, contributed to costly and damaging outcomes, such as overpayment, overcapacity, large debts, and grid instability. Drawing on examples from enhanced transparency in public budgets, sovereign debt, and extractive industries, we propose that governments agree to publish PPAs with any public sector obligation and that funders of private generation projects also agree to minimum disclosure standards. The objective is to create incentives for better practice, improve governance of the power sector, reduce transaction costs, and ultimately, to deliver cheaper and more reliable power for people and businesses. Transparency of PPAs would support the efforts of government policymakers and planners, investors, and development finance institutions to accelerate energy market development and to reap the benefits of open competition. Greater disclosure would also provide crucial information for citizens to hold their own governments accountable for the contracts they sign on behalf of the public.
Topic:: Economics, Energy Policy, Transparency, Electricity, and Purchasing Power
Political Geography:: Global Focus

75. Do Evolving Digital Trade Rules Create an Uneven Playing Field? Understanding Global Perspectives

Author:: Michael Pisa and Ugonma Nwankwo
Publication Date:: 08-2021
Content Type:: Policy Brief
Institution:: Center for Global Development
Abstract:: This brief is based on a roundtable hosted by CGD as part of the Governing Data for Development project, which explores how governments can use data to support innovation, development, and inclusive growth while protecting citizens and communities against harm.
Topic:: Development, Economics, International Trade and Finance, and Digital Economy
Political Geography:: Global Focus

76. Are Current Models of Data Protection Fit for Purpose? Understanding the Consequences for Economic Development

Author:: Michael Pisa and Ugonma Nwankwo
Publication Date:: 08-2021
Content Type:: Policy Brief
Institution:: Center for Global Development
Abstract:: This brief is based on a roundtable hosted by CGD as part of the Governing Data for Development project, which explores how governments can use data to support innovation, development, and inclusive growth while protecting citizens and communities against harm.
Topic:: Development, Economics, Privacy, and Models
Political Geography:: Global Focus

77. Promoting Women’s Economic Empowerment in the COVID-19 Context

Author:: Megan O'Donnell, Mayra Buvinic, Charles Kenny, Shelby Bourgault, and George Yang
Publication Date:: 04-2021
Content Type:: Policy Brief
Institution:: Center for Global Development
Abstract:: As donor institutions and governments seek to provide relief and support recovery from the COVID-19 pandemic and global recession, CGD’s COVID-19 Gender and Development Initiative aims to ensure that their policy and investment decisions equitably benefit women and girls. We seek to support decision-makers in understanding the gendered impacts of the COVID-19 pandemic; assess health, economic, and social policy response measures with a gender lens; and propose evidence-based solutions for an inclusive recovery. Recognizing that the dialogue to date has largely emphasized challenges facing women and girls in high-income settings, our analysis centers on women and girls in low- and middle-income countries. In this policy brief, we summarize the findings of a CGD working paper, Promoting Women’s Economic Empowerment in the COVID-19 Context. We explore the impacts of the crisis on women’s economic opportunities and outcomes, document the extent to which governments and donors are taking action to respond to these impacts, and make recommendations for how decision-makers can elevate women’s economic empowerment as a priority in response and recovery efforts. Specifically, we examine the impact of the COVID-19 global recession on women’s work and employment in low- and middle-income countries, including entrepreneurship, wage and salaried work, work in subsistence and commercial agriculture, and unpaid housework and care work.
Topic:: Economics, Women, Inequality, Pandemic, COVID-19, and Gender
Political Geography:: Global Focus

78. The Development of Geo-Economics A Path Towards an Institutional Liberalism Approach

Author:: Ricardo Vega
Publication Date:: 01-2021
Content Type:: Journal Article
Journal:: AUSTRAL: Brazilian Journal of Strategy International Relations
Institution:: Postgraduate Program in International Strategic Studies, Universidade Federal do Rio Grande do Sul
Abstract:: Geo-economics mostly fall into the realist paradigm of International Relations since it is understood as the use of economic means under strategic military logic as principal instruments of statecraft. However, geo-economics is neither caused by states alone nor driven by multipolar rivalry solely. Instead, geo-economics requires a framework of study which considers that there are countless links of interdependence in the global economy that must be taken into consideration to explain state behaviour. Institutional liberalism provides geo-economics theoretical grounds to maintain cooperation and responsibility as central components of geo-economics.
Topic:: Economics, Geopolitics, Institutions, and Liberalism
Political Geography:: Global Focus

79. Low inflation bends the Phillips curve around the world: Extended results

Author:: Jami Forbes, Joseph E. Gagnon, and Christopher G. Collins
Publication Date:: 09-2021
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: This paper revises and extends PIIE Working Paper 20-6. It continues to find strong support for a Phillips curve that becomes nonlinear when inflation is "low"—which our baseline model defines as less than 3 percent. The nonlinear curve is steep when output is above potential (slack is negative) but flat when output is below potential (slack is positive) so that further increases in economic slack have little effect on inflation. This finding is consistent with evidence of downward nominal wage and price rigidity. When inflation is high, the Phillips curve is linear and relatively steep. These results are robust to placing the threshold between the high and low inflation regimes at 2, 3, or 4 percent inflation or for a threshold based on country-specific medians of inflation. In this nonlinear model, international factors play a large role in explaining headline inflation (albeit less so for core inflation), a role that has been increasing since the global financial crisis.
Topic:: Economics, Financial Crisis, Inflation, and Philips Curve
Political Geography:: Global Focus

80. Wages, Skills, and Skill-Biased Technical Change: The Canonical Model Revisited

Author:: Audra J. Bowlus, Lance Lochner, Chris Robinson, and Edna Suleymanoglu
Publication Date:: 03-2021
Content Type:: Working Paper
Institution:: Centre for Human Capital and Productivity (CHCP), Western University
Abstract:: The canonical supply–demand model of the wage returns to skill has been extremely influential; however, it has faced several important challenges. Several studies show that the standard approach sometimes produces theoretically wrong-signed elasticities of substitution, yields counterintuitive paths for skill-biased technical change (SBTC), and does not account for the observed deviations in college premia for younger vs. older workers. This paper shows that these failings can be explained by mis-measurement of relative skill prices and supplies (based on standard demographic composition-adjustments) and by inadequate ad hoc functional form assumptions about the path for SBTC. Improved estimates of skill prices and supplies that account for variation in skill across cohorts within narrowly defined groups help explain the observed deviation in the college premium for younger vs. older workers, even with perfect substitutability across age. Re-estimating the model with these prices and supplies produces a good fit with better out-of-sample prediction and robustly yields positive elasticities of substitution between high and low skill workers. The estimates suggest greater substitutability across skill and a more modest role for SBTC. We implement two new approaches to modelling SBTC. First, we study the extent to which recessions induce jumps or trend-adjustments in skill bias and find evidence that both features are important (but differ across recessions). Second, we link SBTC to direct measures of information technology investment expenditures and show that these measures explain the evolution of skill bias quite well. Together, these approaches suggest that the ad hoc assumptions for SBTC previously employed in the literature are too crude to fit the data well, leading to the incorrect conclusion that SBTC slowed during the early-1990s and under-estimates of the elasticity of substitution between high and low skill workers.
Topic:: Economics, Human Capital, Supply, Skills, and Wages
Political Geography:: Global Focus

81. Heterogeneous consumer preferences for product quality and uncertainty

Author:: Wolfgang Maennig and Steffen Mueller
Publication Date:: 12-2021
Content Type:: Working Paper
Institution:: Chair for Economic Policy, University of Hamburg
Abstract:: We provide evidence for heterogeneous consumer preferences for product quality and game outcome uncertainty (GOU) in Major League Baseball. Using attendance data from 2013 to 2019, we explore func-tional data clustering techniques to detect common patterns in predictive margins of team-specific win-ning probability. As a central result, we identify five groups of teams with similar GOU effects. However, only a few teams’ fans show GOU preferences that resemble the typical hump-shape that is postulated by the uncertainty of outcome hypothesis; the largest cluster is comprised of teams with fans whose at-tendance behavior is relatively insensitive to differences in GOU.
Topic:: Economics, Data, Consumer Behavior, and Uncertainty
Political Geography:: Global Focus

82. Consumer and employer discrimination in professional sports markets – New evidence from Major League Baseball

Author:: Wolfgang Maennig and Steffen Mueller
Publication Date:: 12-2021
Content Type:: Working Paper
Institution:: Chair for Economic Policy, University of Hamburg
Abstract:: We investigate the relationship between consumer discrimination, racial matching strategies, and employer discrimination in Major League Baseball (MLB) from 1985 to 2016. To this end, we assess the extent to which both fan attendance and team performance respond to changes in teams’ and their local market areas’ racial compositions. We innovate by using a significantly enhanced data basis with individual player data that we derive from combining web scraping and using facial recognition techniques to identify player race and using County-level Census data instead of Metropolitan Statistical Area data. We find that fans in both MLB Leagues developed a taste for racial diversity in the late 1980s; since the 2000s, discrimination starts to increase again. However, this discrimination is not fully rationalizing the performance gap across athletes of different race and ethnicity; employer discrimination is not primarily driven by fans’ racial preferences.
Topic:: Economics, Race, Employment, Sports, Ethnicity, Discrimination, Consumer Behavior, Facial Recognition, and Baseball
Political Geography:: Global Focus

83. Food for Thought: Investing in a sustainable food system

Author:: Marta Piazza
Publication Date:: 09-2021
Content Type:: Policy Brief
Institution:: Oxfam Publishing
Abstract:: The focus on profit maximization at the expense of workers, farmers, and women have helped companies reap huge profit margins in the short-term, but as COVID-19 has revealed, it has come at the cost of rights violations. Such costs are no longer considered an acceptable business risk. As human rights gains prominence in investor-company engagement, this briefing note provides information to investors about the risks of ignoring human rights impacts, evidence about the rights violations that persist in the food sector despite company action and charts a way for investors to build a resilient food system given their outsized influence.
Topic:: Economics, Business, Profit, and COVID-19
Political Geography:: Global Focus

84. The Global Economic Impact of the COVID-19 Pandemic: The Second Wave and Policy Implications

Author:: Gyeong Lyeob Cho, Minsuk Kim, and Yun Kyung Kim
Publication Date:: 09-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper examines the macroeconomic impact of the COVID-19 pandemic through the Computable General Equilibrium model. Due to a second wave and a subsequent delay in economic recovery, the pandemic could lead to a permanent shock in capital accumulation and productivity. This implies that the shock may not merely affect the short-term growth rate but also negatively impact the future economic growth path from its pre-pandemic trend. Through simulations, in the mild scenario, countries lose 0.10% to 0.31% of their future economic growth rates; in the severe scenario, they lose 0.21% to 0.69%.
Topic:: Economics, Globalization, International Trade and Finance, Public Health, Pandemic, and COVID-19
Political Geography:: Global Focus

85. Better Two Eyes than One: A Synthesis Classification of Exchange Rate Regimes

Author:: Cécile Couharde and Carl Grekou
Publication Date:: 10-2021
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: This paper proposes a new de facto classification of exchange rate regimes, the synthesis classification. The proposed framework has several advantages over existing de facto classifications. First, it offers a unified framework based on the most divergent classifications, the RR and LYS classifications, leading not only to a broader coverage but also to encompass a broad spectrum of exchange systems. Second, it fits better with the known history of exchange rate regimes developments in the post-Bretton Woods era. Among others, it brings an interesting nuance to the so-called hollowing-out hypothesis by showing that the evolution of de facto regimes —especially in emerging economies since the late 1990s— has essentially involved movement toward more tightly “managed” intermediate regimes and not a shift away from such regimes. As an illustration of the insightfulness of our classification, we empirically revisit the nexus between currency crises and exchange rate regimes. In addition to associate a higher probability of currency crisis to both intermediate and floating regimes, our classification, also displays better statistical performances than other classifications in predicting currency crises.
Topic:: Economics, International Cooperation, International Trade and Finance, Exchange Rate Policy, and Currency
Political Geography:: Global Focus

86. Poor Substitutes? Counterfactual methods in IO and Trade compared

Author:: Keith Head and Thierry Mayer
Publication Date:: 12-2021
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: Constant elasticity of substitution (CES) demand for monopolistically competitive firm-varieties is a standard tool for models in international trade and macroeconomics. Inter-variety substitution in this model follows a simple share proportionality rule. In contrast, the standard toolkit in industrial organization (IO) estimates a demand system in which cross-elasticities depend on similarity in observable attributes. The gain in realism from the IO approach comes at the expense of requiring richer data and greater computational challenges. This paper uses the dataset of Berry et al. 1995, who established the modern IO method, to simulate counterfactual trade policy experiments. We use the CES model as an approximation of the more complex underlying demand system and market structure. Although the CES model omits key elements of the data generating process, the errors are offsetting, leading to reasonably accurate counterfactual predictions. For aggregate outcomes, it turns out that incorporating non-unitary pass-through matters more than fixing over-simplified substitution patterns. We do so by extending the commonly used methods of Exact Hat Algebra and tariff elasticity estimation to take into account oligopoly.
Topic:: Economics, Business, Monopoly, Trade, and Models
Political Geography:: Global Focus

87. Long-Term Macroeconomic Projections of the World Economy

Author:: Lionel Fontagné, Erica Perego, and Gianluca Santoni
Publication Date:: 12-2021
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: What will the global economy look like in a generation? The answer depends on the multiple forces driving long-term growth (demography, education, diffusion of technical progress, energy costs, investment and saving behaviour, international capital mobility) and requires a comprehensive framework to conceptualise them. We re-estimate the three-factor (capital, energy, labour) MAcro-econometric model of the Global Economy (MaGE), initially developed by Fouré et al. (2013), with a database covering 170 countries using state-of-the-art methods. We thus establish the long-term structural relationships that drive the dynamics of the World economy. The model projections to 2050 illustrate the expected changes in the World economy and their driving forces. In light of the projected volume of energy consumption, making these projections compatible with climate imperatives calls for increased technology sharing at the international level in order to decouple economic growth from energy use.
Topic:: Economics, Energy Policy, International Trade and Finance, and Macroeconomics
Political Geography:: Global Focus

88. Melons as Lemons: Asymmetric Information, Consumer Learning and Seller Reputation

Author:: Jie Bai
Publication Date:: 03-2021
Content Type:: Working Paper
Institution:: The John F. Kennedy School of Government at Harvard University
Abstract:: There is often a lack of reliable quality provision in many markets in developing countries and firms generally lack a reputation for quality. One potential explanation is that mistrust due to past bad behavior can make reputation-building difficult. I examine this hypothesis in a setting that features typical market conditions in developing countries: the retail watermelon markets in a major Chinese city. I first demonstrate empirically that there is substantial asymmetric information between sellers and buyers on quality and a stark absence of quality premium at baseline. I then randomly introduce one of two branding technologies into 40 out of 60 markets–one sticker label that is widely used and counterfeited and one novel expensive laser-cut label. The experiment findings show that laser-branding induced sellers to provide higher quality and led to higher sales profits. However, after the intervention was withdrawn, all markets reverted back to baseline. I incorporate the experimental variation into an empirical model of consumer learning and seller reputation building. The results suggest that consumers are hesitant to upgrade their perception under stickers, which makes reputation-building a low-return investment. While the new technology enhances learning, the resulting increase in profits is not sufficient to cover the fixed cost of the technology for small individual sellers. Counterfactual analysis shows that information friction and fragmented market lead to significant under-provision of quality.
Topic:: Economics, Markets, and Developing World
Political Geography:: China, Asia, and Global Focus

89. Sorting, Matching and Economic Complexity

Author:: Muhammad A. Yildirim
Publication Date:: 03-2021
Content Type:: Working Paper
Institution:: The John F. Kennedy School of Government at Harvard University
Abstract:: Assignment models in trade predict that countries with higher productivity levels are assortatively matched to industries that make better use of these higher levels. Here, we assume that the driver of productivity differences is the differential distribution of factors among countries. Utilizing such a structure, we define and estimate the average factor level (AFL) for countries and products using only the information about the production patterns. Interestingly, our estimates coincide with the complexity variables of (Hidalgo and Hausmann, 2009), providing an underlying economic rationale. We show that AFL is highly correlated with country-level characteristics and predictive of future economic growth.
Topic:: Economics, Economic Growth, Trade, Industry, and Productivity
Political Geography:: Global Focus

90. National Development Delivers: And How! And How?

Author:: Lant Pritchett
Publication Date:: 05-2021
Content Type:: Special Report
Institution:: The John F. Kennedy School of Government at Harvard University
Abstract:: Core dual ideas of early development economics and practice were that (a) national development was a four-fold transformation of countries towards: (i) a more productive economy, (ii) a more responsive state, (iii) more capable administration, and (iv) a shared identity and equal treatment of citizens and (b) this four-fold transformation of national development would lead to higher levels of human wellbeing. The second idea is strikingly correct: development delivers. National development is empirically necessary for high wellbeing (no country with low levels of national development has high human wellbeing) and also empirically sufficient (no country with high national development has low levels of human wellbeing). Three measures of national development: productive economy, capable administration, and responsive state, explain (essentially) all of the observed variation in an omnibus indicator of wellbeing, the Social Progress Index, which is based on 58 distinct non-economic indicators. How national development delivers on wellbeing varies, in three ways. One, economic growth is much more important for achieving wellbeing at low versus high levels of income. Two, economic growth matters more for “basic needs” than for other dimensions of wellbeing (like social inclusiveness or environmental quality). Three, state capability matters more for wellbeing outcomes that depend on public production than on private goods (and for some wellbeing indicators, like physical safety, for which growth doesn’t matter at all). While these findings may seem too common sense to be worth a paper, national development--and particularly economic growth—is, strangely, under severe challenge as an important and legitimate objective of action within the development industry.
Topic:: Development, Economics, and Economic Growth
Political Geography:: Global Focus

91. Let’s Take the Con Out of Randomized Control Trials in Development: The Puzzles and Paradoxes of External Validity, Empirically Illustrated

Author:: Lant Pritchett
Publication Date:: 05-2021
Content Type:: Working Paper
Institution:: The John F. Kennedy School of Government at Harvard University
Abstract:: The enthusiasm for the potential of RCTs in development rests in part on the assumption that the use of the rigorous evidence that emerges from an RCT (or from a small set of studies identified as rigorous in a “systematic” review) leads to the adoption of more effective policies, programs or projects. However, the supposed benefits of using rigorous evidence for “evidence based” policy making depend critically on the extent to which there is external validity. If estimates of causal impact or treatment effects that have internal validity (are unbiased) in one context (where the relevant “context” could be country, region, implementing organization, complementary policies, initial conditions, etc.) cannot be applied to another context then applying evidence that is rigorous in one context may actually reduce predictive accuracy in other contexts relative to simple evidence from that context—even if that evidence is biased (Pritchett and Sandefur 2015). Using empirical estimates from a large number of developing countries of the difference in student learning in public and private schools (just as one potential policy application) I show that commonly made assumptions about external validity are, in the face of the actual observed heterogeneity across contexts, both logically incoherent and empirically unhelpful. Logically incoherent, in that it is impossible to reconcile general claims about external validity of rigorous estimates of causal impact and the heterogeneity of the raw facts about differentials. Empirically unhelpful in that using a single (or small set) of rigorous estimates to apply to all other actually leads to a larger root mean square error of prediction of the “true” causal impact across contexts than just using the estimates from non-experimental data from each country. In the data about private and public schools, under plausible assumptions, an exclusive reliance on the rigorous evidence has RMSE three times worse than using the biased OLS result from each context. In making policy decisions one needs to rely on an understanding of the relevant phenomena that encompasses all of the available evidence.
Topic:: Development, Economics, Education, and Public Policy
Political Geography:: Global Focus

92. Trade and the Spatial Distribution of Transport Infrastructure

Author:: Gabriel Felbermayr and Alexander Tarasov
Publication Date:: 04-2021
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: The distribution of transport infrastructure across space is the outcome of deliberate government planning that reflects a desire to unlock the welfare gains from regional economic integration. Yet, despite being one of the oldest government activities, the economic forces shaping the endogenous emergence of infrastructure have not been rigorously studied. This paper provides a stylized analytical framework of open economies in which planners decide non-cooperatively on transport infrastructure investments across continuous space. Allowing for intra- and international trade, the resulting equilibrium investment schedule features underinvestment that turns out particularly severe in border regions and that is amplified by the presence of discrete border costs. In European data, the mechanism explains about 16% of the border effect identified in a conventionally specified gravity regression.
Topic:: Economics, Infrastructure, Governance, Borders, and Trade
Political Geography:: Global Focus

93. Capitalism Recoupled

Author:: Dennis J. Snower and Colm Kelly
Publication Date:: 07-2021
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: This paper examines major forces that have decoupled economic and business prosperity from social prosperity and explores how recoupling can be promoted. Economists have specified well-known conditions under which free market enterprise with shareholder value maximization is efficient. These conditions are systematically violated by three forces – globalization, technological advance and financialization (GTF) – that have weakened the connections between economies and societies over the past four decades. Consequently, the recoupling process requires abandoning the default premise of economic decision making that social progress follows financial performance. For business, it calls for a move from shareholder to stakeholder value. For government, it calls for setting legal obligations, targets and incentives to ensure that stakeholder value is compatible with a rigorously defined concept of “societal and planetary value.”
Topic:: Economics, Globalization, Science and Technology, Capitalism, and Economic Theory
Political Geography:: Global Focus

94. Cordon of Conformity: Why DSGE models Are Not the Future of Macroeconomics

Author:: Servaas Storm
Publication Date:: 02-2021
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: The Rebuilding Macroeconomic Theory Project, led by David Vines and Samuel Wills (2020), is an important, albeit long overdue, initiative to rethink a failing mainstream macroeconomics. Professors Vines and Wills, who must be congratulated for stepping up to the challenge of trying to make mainstream macroeconomics relevant again, call for a new multiple-equilibrium and diverse (MEADE) paradigm for macroeconomics. Their idea is to start with simple models, ideally two-dimensional sketches, that explain mechanisms that can cause multiple equilibria. These mechanisms should then be incorporated into larger DSGE models in a new, multiple-equilibrium synthesis – to see how the fundamental pieces of the economy fit together, subject to it being ‘properly micro-founded’. This paper argues that the MEADE paradigm is bound to fail, because it maintains the DSGE model as the unifying framework at the center of macroeconomic analysis. The paper reviews 10 fundamental weaknesses inherent in DSGE models which make these models irreparably useless for macroeconomic policy analysis. Mainstream macroeconomics must put DSGE models, once and for all, in the Museum of Implausible Economic Models – and learn important lessons from non-DSGE macroeconomic approaches.
Topic:: Economics, Economic Growth, Macroeconomics, Money, Demand, and Models
Political Geography:: Global Focus

95. Country Risk

Author:: Tarek A. Hassan, Jesse Schreger, Markus Schwedeler, and Ahmed Tahoun
Publication Date:: 03-2021
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: We construct new measures of country risk and sentiment as perceived by global investors and executives using textual analysis of the quarterly earnings calls of publicly listed firms around the world. Our quarterly measures cover 45 countries from 2002-2020. We use our measures to provide a novel characterization of country risk and to provide a harmonized definition of crises. We demonstrate that elevated perceptions of a country's riskiness are associated with significant falls in local asset prices and capital outflows, even after global financial conditions are controlled for. Increases in country risk are associated with reductions in firm-level investment and employment. We also show direct evidence of a novel type of contagion, where foreign risk is transmitted across borders through firm-level exposures. Exposed firms suffer falling market valuations and significantly retrench their hiring and investment in response to crises abroad. Finally, we provide direct evidence that heterogeneous currency loadings on global risk help explain the cross-country pattern of interest rates and currency risk premia.
Topic:: Economics, Employment, Investment, Risk, and Contagion
Political Geography:: Global Focus

96. The Updated Okun Method for Estimation of Potential Output with Broad Measures of Labor Underutilization: An Empirical Analysis

Author:: Claudia Fontanari, Antonella Palumbo, and Chiara Salvatori
Publication Date:: 05-2021
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: This paper extends to different indicators of labor underutilization the Updated Okun Method (UOM) for estimation of potential output proposed in Fontanari et al (2020), which, from a demand-led growth perspective, regards potential output as an empirical approximation to fullemployment output, as in A.M.Okun’s (1962) original method. Based on the apparent incapability of the official rate of unemployment to fully account for labor underutilization, in this paper we offer estimates of Okun’s law both with broad unemployment indicators and with an indicator of ‘standardized hours worked’ which we propose as a novel measure of the labor input. The paper reflects on the possible different empirical measures of full employment. The various measures of potential output that we extract from our analysis show greater output gaps than those produced by standard methods, thus highlighting a systematic tendency of the latter to underestimate potential output. Output gaps that underestimate the size of the output loss or that tend to close too soon during recovery, may produce a bias towards untimely restriction.
Topic:: Economics, Labor Issues, Economic Growth, Demand, and Unemployment
Political Geography:: Global Focus

97. Bagehot for Central Bankers

Author:: Laurent Le Maux
Publication Date:: 02-2021
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Walter Bagehot (1873) published his famous book, Lombard Street, almost 150 years ago. The adage “lending freely against good collateral at a penalty rate” is associated with his name and his book has always been set on a pedestal and is still considered as the leading reference on the role of lender of last resort. Nonetheless, without a clear understanding of the theoretical grounds and the institutional features of the British banking system, any interpretation of Bagehot’s writings remains vague if not misleading—which is worrisome if they are supposed to provide a guideline for policy makers. The purpose of the present paper is to determine whether Bagehot’s recommendation remains relevant for modern central bankers or whether it was indigenous to the monetary and banking architecture of Victorian times.
Topic:: Economics, History, Central Bank, and Lending
Political Geography:: Global Focus

98. Why do Sovereign Borrowers Post Collateral? Evidence from the 19th Century

Author:: Marc Flandreau, Stefano Pietrosanti, and Carlotta E. Schuster
Publication Date:: 10-2021
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: This paper explores the reasons why sovereign borrowers post collateral. Such behavior is paradoxical because conventional interpretations of collateral stress repossession of the assets pledged as the key to securing lenders against information asymmetries and moral hazard. However, repossession is generally difficult in the case of sovereign debt and in some cases impossible. Nevertheless, such sovereign “hypothecations” have a long history and are again becoming very popular today in developing countries. To explain sovereign collateralization, we emphasize an informational channel. Posting collateral produces information on opaque borrowers by displaying borrowers’ behavior and resources. We support this interpretation by examining the hypothecation “mania” of 1849-1875, when sovereigns borrowing in the London Stock Exchange pledged all kinds of intangible revenues. Yet, at that time, sovereign immunity fully protected both sovereigns and their assets and possessions. Still, we show that hypothecations significantly decreased the cost of sovereign debt. To explain how, we stress the pledges’ role in documenting sovereigns’ wealth and the management of revenue streams. Based on an exhaustive library of bond prospectuses collected from primary sources, matched with a panel of sovereign bond yields and an innovative measure of sovereign fiscal transparency, we show that collateral minutely described in debt covenants served to document and monitor sovereign resources and development prospects. Encasing this information in contracts written by lawyers served to certify the quality of the resulting data disclosure process, explaining investors’ readiness to pay a premium.
Topic:: Economics, Finance, History, Innovation, Contracts, Sovereign Debt, and Collateral
Political Geography:: Global Focus

99. Inflation? It’s Import Prices and the Labor Share!

Author:: Lance Taylor and Nelson H. Barbosa-Filho
Publication Date:: 01-2021
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Recognizing that inflation of the value of output and its costs of production must be equal, we focus on a cost-based macroeconomic structuralist approach in contrast to micro-oriented monetarist analysis. For decades the import and profit shares of cost have risen, while the wage share has declined to around 50% with money wage increases lagging the sum of growth rates of prices and productivity. Conflicting claims to income are the underlying source of inflationary pressure. Inflation affects income (labor’s spending power) and wealth. Monetarist theory around 1900 concentrated on the latter (Bryan and the “Cross of Gold)” leading to the standard Laffer curve. It was replaced by the Friedman-Phelps model which has incorrect dynamics (labor payments do not fall during an expansion – they go up). Samuelson and Solow introduced a version of the Phillips curve that violates macroeconomic accounting. Rational expectations replaced Friedman but was immediately falsified by output drops after the Volcker shock treatment around 1980. There followed a complicated transition from rational expectations to inflation targeting, anchored by economists’ misunderstanding of the physical meaning of ergodicity and ontological blindness. It did not help that the real balance effect is irrelevant because money makes up a small part of wealth. Rather than issuing veiled threats of disaster if its policy advice is not followed, the Fed now announces inflation targets which it cannot meet. Contemporary structuralist theory suggests that conflicting income claims set the inflation rate. Firms can mark up costs but workers have latent bargaining power over the labor share that they can exercise. Import costs and policy repercussions complicate the picture, but a simple vector error correction model and visual analysis suggest that money wages would have to grow one percentage point faster than prices plus productivity for several years if the Fed is to meet a three percent inflation target. The results pose a Biden policy trilemma: (i) the only path toward a more egalitarian size distribution of income is through a rising labor share (money wage growth exceeds price plus productivity growth), (ii) which would provoke faster inflation with feedback to rising interest rates, and (iii) the resulting asset price deflation likely facing political resistance from Wall Street and affluent households.
Topic:: Economics, Labor Issues, Inflation, Imports, and Structuralism
Political Geography:: Global Focus

100. The Erroneous Foundations of Law and Economics

Author:: Mark Glick and Gabriel A. Lozada
Publication Date:: 02-2021
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: The fundamental originating principle of law and economics (L&E) is that legal decisions should be (and are) based on maximizing efficiency. But L&E proponents do not define “efficiency” in the way agreed to by most economists, as Pareto Efficiency. A Pareto optimal condition is obtained when no one can be made better off without making someone worse off. Pareto Improvements are win-win changes where no losers exist. In the judicial system, however, there are always winners and losers, because under Article III § 2 of the Constitution a legal case does not exist unless there is a justiciable “case or controversy” in need of resolution. Unable to use Pareto Efficiency, L&E scholars have been forced to adopt alternative definitions of efficiency. Most L&E scholars claim to define “efficiency” based on the work of Kaldor and Hicks, but (perhaps unwittingly) instead use a definition of “efficiency” derived from the 19th century idea of consumer surplus, which encompasses L&E notions such as “wealth maximization,” and “consumer welfare” in antitrust. Neither of these alternative definitions is viable, however. Outside of L&E, the Kaldor-Hicks approach has long been recognized to be riddled with logical inconsistencies and ethical failures, and the surplus approach is even more deficient. Remarkably, virtually none of the numerous L&E textbooks even hint at such problems. Critically, all definitions of efficiency improvements in economics are biased in favor of wealthy individuals or firms, either because they are dependent on the status quo ante distribution of assets, or because they bestow large advantages on parties with political influence or who can afford to bring lawsuits quickly. Many L&E practitioners treat efficiency improvements instead as being objectively good, an error revealing that L&E is primarily motivated by its neoliberal policy agenda.
Topic:: Economics, Law, Neoliberalism, and Efficiency
Political Geography:: Global Focus

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COLUMBIA UNIVERSITY PRESS