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1661. COVID-19 vaccine supply chains and the Defense Production Act

Author:
Chad P. Bown
Publication Date:
06-2022
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
In response to the COVID-19 pandemic, the US government used novel policies to accelerate research, development, and production of a diversified portfolio of new vaccines. This paper begins by describing the Defense Production Act (DPA) of 1950 and the initial “priority-rated” contracts agreed to under Operation Warp Speed in 2020 to expedite manufacturing and achieve scale, which succeeded in producing hundreds of millions of doses of COVID-19 vaccines by early 2021. However, a puzzle soon emerged, as the scale of US vaccine production was shortly thereafter overtaken by plants in the European Union and India. The paper investigates the tradeoffs US policymakers faced in early 2021 once much of the initial uncertainty about the safety and effectiveness of many COVID-19 vaccines had been resolved—about whether to recalibrate contracts to expand production capacity to help meet global, instead of US, vaccine demand. It also examines the emergence of input shortages and assesses whether both the price constraints implicit in the 2020 DPA contracts and business decisions made to quicken the process of bringing new vaccine plants online globally inadvertently exacerbated them. It also explores the potential need for complementary, input capacity enhancing policies in the face of highly fragmented, cross-border COVID-19 vaccine supply chains.
Topic:
Crisis Management, Vaccine, COVID-19, and Supply Chains
Political Geography:
North America and United States of America

1662. Public responses to foreign protectionism: Evidence from the US-China trade war

Author:
David Steinberg and Yeling Tan
Publication Date:
06-2022
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
America's recent turn toward protectionism has raised concerns about the future viability of the liberal international trading system. This study examines how and why public attitudes toward international trade change when one's country is targeted by protectionist measures from abroad. To address this question, the authors fielded three original survey experiments in the country most affected by US protectionism: China. First, they find consistent evidence that US protectionism reduces Chinese citizens' support for trade. This finding is replicated in parallel experiments on technology cooperation, and further validated outside of the China context with a survey experiment in Argentina. Second, they show that responses to US protectionism reflect both a "direct reciprocity" logic—citizens want to retaliate against the United States specifically—and a "generalized reciprocity" logic that reduces support for trade on a broader, systemic basis.
Topic:
Economics, Political Economy, Public Opinion, Trade, and Protectionism
Political Geography:
China, Asia, North America, and United States of America

1663. Inter-Korean Reconciliation and the Role of the U.S.: Facilitator or Spoiler?

Author:
Gabriela Bernal
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
Although the Korean Peninsula has been divided for over 70 years, North and South have not been able to make lasting progress in terms of reconciliation. While there are multiple factors directly influencing the extent to which inter-Korean relations can progress, this paper focuses on the role of the United States. When it comes to inter-Korean reconciliation efforts, is the U.S. more of a facilitator or a spoiler? By looking at three case studies spanning three South Korean administrations—Roh Tae-woo, Roh Moo-hyun and Moon Jae-in—this paper attempts to find patterns and lessons related to Washington’s role in the complex inter-Korean reconciliation process. The cases reveal that the U.S. has played the role of both facilitator and spoiler in each case, and that whatever role the U.S. plays depends on its own relationship with North Korea at that time. The U.S. is most likely to play a facilitating role when the administrations in Washington and Seoul are both willing to engage diplomatically with Pyongyang, when progress is being made in denuclearization talks, when the geopolitical environment is conducive towards diplomacy and engagement with North Korea, and when the U.S. adopts a reciprocal negotiating strategy. The paper concludes by considering the conditions necessary to achieve inter-Korean reconciliation and to establish long-term peace on the peninsula. Key factors include the need for trust-building and reciprocity between the U.S. and North Korea, and adopting a more holistic approach that goes beyond the nuclear problem and aims to establish a lasting relationship between Washington and Pyongyang.
Topic:
International Relations, Security, Foreign Policy, Bilateral Relations, and Reconciliation
Political Geography:
Asia, South Korea, North Korea, and United States of America

1664. South Korea's Critical Moment in Digital Currency Policymaking: Between Regulating Cryptocurrencies and Launching a Central Bank Digital Currency (CBDC)

Author:
June Park
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
Why is South Korea pilot-testing its Central Bank Digital Currency (CBDC), and what made it shift from non-issuance to consideration? This paper investigates the Bank of Korea (BOK)’s CBDC-related developments amid the geopolitical contest between the U.S. and China. It examines the Moon Jae-in administration’s defiance of decentralized finance (DeFi) and the BOK’s sudden shift from non-issuance to potential issuance, which led to expedited research, development, and pilot-testing of CBDCs. As in the case of the digital yuan, the BOK envisions a hybrid architecture for the digital won, wherein central banks and associated partner institutions are CBDC distributors, though they are distinguished by placing the digital won on distributed ledger technology rather than by centrally controlling it. However, South Korea’s previously rash decision to forego DeFi under an undemocratic process has deprived the country of the time and opportunity to develop new innovations as a leading country in the digital frontier. By sticking only to digitalizing centralized finance, the country now aims to be in “standby” mode for its CBDC launch if and when required, so as not to fall behind in digital financial architecture. This paper scrutinizes the South Korean government’s moves on crypto and CBDCs and argues that 1) the Moon administration has shown incapability in addressing DeFi amid the crypto boom and bust, and 2) the BOK’s shift from non-issuance to potential issuance of the digital won is driven by its interest to uphold central bank independence amid swaying geopolitics between the U.S. and China and an unpredictable upcoming presidential election in South Korea.
Topic:
Economics, Elections, Finance, Cryptocurrencies, and Digital Currency
Political Geography:
China, Asia, South Korea, North America, and United States of America

1665. Taxless fiscal states: Lessons from 19th-century America and 21st-century China

Author:
Yuen Yuen Ang
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
How do modern fiscal states arise? Perhaps the most dominant explanation, based on the European experience, is that democratic institutions that limited the extractive power of states—exemplified by the 1688 Glorious Revolution in England—paved the way for the rise of fiscal capacity and subsequent prosperity. Revisionist accounts, however, reveal that this dominant narrative is flawed. In fact, numerous factors converged to enable the rise of European fiscal states, and in England, debt and land were particularly salient factors. Building off this literature, I bring attention to the role of ‘taxless public financing’ (i.e. financing public infrastructure through means other than taxation) in the making of fiscal states in two seldom compared cases: 19th-century America and 21st-century China. Both countries relied heavily on taxless financing to launch an infrastructure boom that spurred rapid growth along with massive corruption and financial risks.
Topic:
History, Finance, Tax Systems, and Land
Political Geography:
China, Asia, North America, and United States of America

1666. Cybersecurity for innovative small and medium enterprises and academia

Author:
Franklin D. Kramer, Melanie J. Teplinsky, and Robert J Butler
Publication Date:
01-2022
Content Type:
Special Report
Institution:
Atlantic Council
Abstract:
Innovation is fundamental to United States global leadership, critical both for the economy and for national security. Yet the resilience of the US innovation ecosystem against adversary cyber espionage and attack—most specifically from China—has not received the attention required, particularly given the essential innovation roles played by small and medium-sized enterprises (SMEs) and by academia. In response to that challenge, this report sets forth a proposal for expert-provided cybersecurity resilient architectures for SMEs and academia that are engaged in the development and operation of key emerging and advanced technologies. Such cybersecurity resilient architectures would be operated by the private sector and funded through the establishment of transferable cybersecurity investment tax credits. The use of such architectures for the protection of emerging and advanced technologies would play a key role in ensuring that the United States maintains its worldwide innovation leadership.
Topic:
Cybersecurity, Innovation, Academia, and Resilience
Political Geography:
China, Asia, North America, and United States of America

1667. What do we know about cyber operations during militarized crises?

Author:
Michael Fischerkeller
Publication Date:
01-2022
Content Type:
Policy Brief
Institution:
Atlantic Council
Abstract:
The Department of Defense (DoD) will soon kick off the drafting of its cyber strategy and cyber posture review to align US cyber capabilities and operating concepts with the foreign policy objectives of the Joseph Biden-Kamala Harris administration. Given that the administration describes China as the “pacing threat,” debates over the best use of cyber operations and campaigns will likely be framed by US-China interaction in day-to-day competition, and by a potential militarized crisis and war over the status of Taiwan. This essay focuses on how cyber operations employed during militarized crises are likely to impact escalation management. Policymakers may be attracted to the idea that cyber operations could serve as de-escalatory offramps in a crisis. Such expectations should be tempered, if not completely set aside, for two reasons. First, there is no experience with cyber operations employed during a militarized crisis between two nuclear-armed peers. Absent direct experience, all one can rely on is academic research. Yet, secondly, deductive and empirical academic research provides no basis for confidence that cyber operations are either de-escalatory or non-escalatory in the context of militarized crises.
Topic:
Foreign Policy, Cybersecurity, Crisis Management, and Militarization
Political Geography:
China, Taiwan, Asia, North America, and United States of America

1668. US-China vaccine diplomacy: Lessons from Latin America and the Caribbean

Author:
María Eugenia Brizuela de Ávila, Bosco Marti, Riyad Insanally, and Claudia Trevisan
Publication Date:
02-2022
Content Type:
Special Report
Institution:
Atlantic Council
Abstract:
COVID-19 has laid bare the competing strategies and practices of the United States and China to amass further clout in Latin America and the Caribbean (LAC). In many ways, the pandemic is quickly accelerating a regional trend seen over the last decade: China uses its growing economic and diplomatic muscle to provide an alternative to US activities and interests. The implications of diverging COVID-19 responses, notably at the onset of the pandemic’s rise in the region, will reverberate beyond the health sector. What might the differing US and China pandemic approaches portend for future influence in the region? For the United States and China, the pandemic has opened new opportunities to deepen regional ties. Both countries’ assistance eventually centered on vaccine diplomacy, but China was first out of the gates in offering vaccinations beyond its borders. For LAC, its interactions with the United States and China during the pandemic are emblematic of broader trends: China provides an alternative to LAC during crisis moments; and regional leaders use US-Chinese competition to their advantage. Both instances are visible in the region, including in the four geographic areas analyzed in the following pages: Central America, Trinidad and Tobago (T&T), Brazil, and Mexico. In each case, distinct US and Chinese engagement at various stages of the pandemic—along with the host countries’ own actions and reactions—have yielded short-term results and some that are likely to persist. In Central America, China provided strategic diplomatic messaging alongside vaccine shipments, but the United States donated more vaccines. In T&T, Chinese vaccines were accompanied by a new loan, and the country’s prime minister applied a pragmatic approach to acquire vaccines from both the United States and China. For Brazil, laboratory-to-laboratory agreements highlighted a different version of vaccine diplomacy: one that occurs at the subnational level. In Mexico, numerous diplomatic exchanges occurred alongside substantial vaccine purchases from US and Chinese manufacturers. Vaccine-related diplomacy also contributes to an evolving discussion about the different ways China and the United States more broadly engage the region—and vice versa. Starting from a low base, Chinese engagement with LAC has focused on and grown significantly in diplomacy, trade, and investment over the last decade. China is either the first- or second-largest trading partner for many countries in the Americas and a top source of foreign direct investment among its allies. Current US strategy in the region similarly reflects a new sense of deploying diplomatic tools to advance hemispheric prosperity, while doing so as part of a broader vision that reflects partnering to address global challenges—from climate change and the instability that sparks migration to shoring up democracy and addressing corruption. Overall, the region’s proximity, shared peoples, history, and borders with the United States provide greater depth and multidimensionality to the relationship. Consequently, vaccine diplomacy represents a greater marginal opportunity for China to broaden and deepen regional ties.
Topic:
Diplomacy, Bilateral Relations, Vaccine, and COVID-19
Political Geography:
China, Latin America, Caribbean, and United States of America

1669. THE DAY AFTER: Anticipating trouble in the event of a US withdrawal from Syria

Author:
Jomana Qaddour
Publication Date:
03-2022
Content Type:
Policy Brief
Institution:
Atlantic Council
Abstract:
With approximately nine hundred troops in northeastern and southeastern Syria, the United States ostensibly aims to prevent the reemergence of the Islamic State group (IS). The withdrawal of US forces from Afghanistan, initiated by the Trump administration and completed by the Biden administration, was followed by the rapid collapse of the pro-Western government of Afghanistan and its replacement by the Taliban. This has led to questions about what will happen if and when US forces withdraw from northeastern Syria. A new issue brief by Atlantic Council’s Senior Fellow Jomana Qaddour examines the social, political, and economic implications and the challenges to US presence in Syria. While the US military presence remains limited in number, this report also underscores how aggregate US influence is much more potent than a force number of nine hundred suggests. US troop presence has enhanced counterterrorism operations, obstructed IS and Iranian smuggling routes, and facilitated humanitarian aid and economic benefits to a population in Syria that would be languishing under even more dire conditions. It can be argued that it has also limited local violence and halted a resurgence of public IS activities. According to the most recent Syria policy review, US presence is limited to the goal of counterterrorism operations, which implies that it is a conditions-based, not calendar-based deployment. Those conditions should include local Syrian forces that can reasonably deny IS a safe haven from which to plot terrorist attacks against the United States and its allies. It is well known that the Assad regime is not likely to provide the necessary capability to assure the United States and its allies that it can prevent IS’s return. In reality, there is little room to positively read the reassertion of Syrian government control over northeastern Syria; and withdrawal from Syria would be a serious gamble for US national security concerns in Syria and the region.
Topic:
Foreign Policy, Armed Forces, Military Affairs, Islamic State, and Syrian War
Political Geography:
Middle East, Syria, and United States of America

1670. Afghanistan: Where US-Iranian interests may yet intersect

Author:
Borzou Daragahi
Publication Date:
05-2022
Content Type:
Policy Brief
Institution:
Atlantic Council
Abstract:
A new issue brief, Afghanistan: Where US-Iranian Interests May Yet Intersect, authored by Atlantic Council senior fellow Borzou Daragahi delves into the Taliban takeover of Afghanistan and how the swift collapse of the US-backed government in Kabul last summer not only shocked the United States and its allies in the 20-year struggle in that country, but also Afghanistan’s influential neighbor, Iran. As refugees continue to stream into Iran, the government in Tehran has still not recognized the Taliban regime and remains worried about a further deterioration in Afghanistan’s economy and social cohesion, as well as the growing presence of Sunni Jihadi militants. As Iran-Afghan relations evolve, will US concerns about Afghanistan’s fragile state provide a basis for tacit cooperation between Washington and Tehran, similar to what existed when the Taliban was last in power?
Topic:
Government, Taliban, Geopolitics, Economy, and Strategic Interests
Political Geography:
Afghanistan, Iran, South Asia, and United States of America

1671. Toward a Framework for Transatlantic Cooperation on Non-State Armed Groups

Author:
Lauren Mooney and Patrick Quirk
Publication Date:
05-2022
Content Type:
Policy Brief
Institution:
Atlantic Council
Abstract:
Non-state armed groups (NSAGs) pose a thorny policy dilemma for US and European officials trying to stabilize fragile states. NSAGs are far from homogenous in their motivations, tactics, and structure, resulting in highly varied roles in either perpetrating or mitigating violence, with many playing a part in both. On one side, NSAGs can create instability by using violence to advance a range of interests, from political influence and financial gain to challenging a central government’s legitimacy or territorial control. Many NSAGs are directly responsible for civilian harm, including perpetrating targeted violence, persecuting, killing and committing brutal abuses against citizens.2 There is no shortage of examples of NSAGs that fit this mold. From Boko Haram in Northeast Nigeria to Katibat Macina in Mali, armed groups have wreaked havoc on the lives of civilians as well as US and European security interests.
Topic:
Security, Non State Actors, Armed Forces, Violence, Boko Haram, and Katibat Macina
Political Geography:
Europe, North America, Nigeria, Mali, and United States of America

1672. Entangling alliances? Europe, the United States, Asia, and the risk of a new 1914

Author:
Bruno Tertrais
Publication Date:
06-2022
Content Type:
Special Report
Institution:
Atlantic Council
Abstract:
How has alliance formation and maintenance changed since the Cold War? As Russia invades Ukraine, China threatens Taiwan, Iran harasses Gulf States, and Turkey’s neighbors worry about Ankara’s designs, it is a good time to reassess the validity of alliances for global security. Some believe that traditional military alliances are getting weaker or outmoded, and will increasingly be replaced by looser ad hoc groupings such as the Quad, the defense-alliance trio known as AUKUS, or coalitions for given operations such as those in Kosovo, Afghanistan, Iraq, or Libya. However, standing alliances are proliferating (increasing in numbers), widening (welcoming new members), and deepening (reinforcing solidarity and cooperation). The result is a network of interlocking defense relationships, to which an ever-thicker layer of new security groupings and quasi alliances is being added. The emerging system is complex, and policymakers would do well to think through possible future crises to imagine how the various moving parts would end up interacting. They should avoid drawing on the Cold War as a guiding epoch, as it was a comparatively stable and predictable bipolar order. Alliances will also be consistently tested as well, because, as alliances are created or reinforced, adversaries react and probe their limits. Will this expanding network of alliances create more stability or more instability? Does alliance proliferation reduce or increase the risk of war? And if war erupted somewhere, what would be the risks of escalation? The dawning multipolar world, featuring an increasingly dense network of security arrangements, uncomfortably remind us of the years 1912-1914, shortly before the outbreak of World War I. A definitive answer may be impossible to arrive at, but evidence suggests that the current proliferation of alliances is, on balance, more stabilizing to world order than not. The broad set of alliances, suballiances, and security arrangements act as a “safety belt” for world order, rather than as a “conveyor belt” to catastrophe.
Topic:
Defense Policy, Military Affairs, Alliance, and Instability
Political Geography:
Europe, Asia, and United States of America

1673. Palestinian Expectations from The Biden Administration

Author:
Rawan AbuJulia
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
Mitvim: The Israeli Institute for Regional Foreign Policies
Abstract:
The United States’ (US) foreign policy trend of intervention in the Middle East has long been accepted as a truism in international relations and politics. For decades, the US has demonstrated a steadfast commitment to peace in the Middle East and has made commendable efforts to mediate the Israel-Palestine conflict. While Washington-Palestinian relations experienced tension during Trump presidency, the victory of Biden left the Palestinians upbeat. Today, one year into Biden’s tenure, the Palestinians continue to hold mixed expectations of the Biden administration’s ability to advance the peace process. This paper attempts, in particular, to analyze the Palestinians’ expectations of the of the Biden Administration, as articulated by high officials and leaders of the Palestine Liberation Organization (PLO): a legitimate authority representing the Palestinian people recognized by Israel in 1993.[1] An approach that aims to understand Palestinian expectations can yield major benefits: it can contribute to making progress toward better conflict resolution, help advance the peace process, and likely revive the two-state solution. In fact, ignoring Palestinian expectations might lead to misunderstanding, miscommunication and could perhaps interrupt or even thwart the peace process entirely. To identify these expectations, this paper relies on Palestinian and international news sources, along with open governmental data published by the US government and the Palestinian Authority. This paper is divided into four sections. The first section presents the efforts that different US administrations made to advance the Israeli-Palestinian peace process. The second section summarizes President Trump’s policy towards the Palestinians, highlighting actions that provoked strong condemnation by the Palestinians. The third section presents President Biden’s policy toward the Palestinians in the first year of his administration, emphasizing the main differences between Biden and Trump’s decisions. The fourth and final part presents the overarching Palestinian expectations from the Biden administration.
Topic:
International Relations, Foreign Policy, Media, News Analysis, Peace, and Joe Biden
Political Geography:
Middle East, Israel, Palestine, and United States of America

1674. Sanctions, Economic Statecraft, and Venezuela’s Crisis

Author:
César Rodríguez
Publication Date:
01-2022
Content Type:
Special Report
Institution:
Fourth Freedom Forum
Abstract:
This case study summarizes the evidence on the effect on Venezuela’s economic and social conditions of economic sanctions and other actions of economic statecraft taken by the United States and its allies in response to the country’s political crisis. The preponderance of evidence indicates that sanctions and other statecraft measures—including the formal recognition of a government with no de facto control over the territory—have had a strong and significant negative effect on the Venezuelan economy. These actions have made a sizable contribution to declining oil production, exacerbating the country’s fiscal crisis, and contributing to one of the largest documented peacetime economic contractions in modern history. Many arguments commonly voiced to dispute the effects of sanctions, such as those that appeal to temporal precedence of other causes of the country’s crisis, are either factually incorrect or premised on fallacious logic. Reforming the sanctions regime will be a complex task, given the interaction with other statecraft measures and a broader toxification of the country’s economic relations. Reform attempts should include the introduction of an oil-for-essentials program, support for political humanitarian agreements, issuance of clearer compliance guidelines, introducing an explicit differentiation between strategic and nonstrategic sanctions, and seeking multilateral alignment with international actors on key strategic issues including that of government recognition.
Topic:
Security, Diplomacy, Economics, Sanctions, and Humanitarian Crisis
Political Geography:
South America, Venezuela, and United States of America

1675. US Arms Sales Reveal Discord in Taiwan's Defense Strategy

Author:
Ethan Kessler
Publication Date:
10-2022
Content Type:
Special Report
Institution:
Chicago Council on Global Affairs
Abstract:
Washington has started selling arms that serve a "porcupine" defense strategy to Taiwan. Whether Taipei fully embraces this new approach remains to be seen. Taiwan, claimed by China as a rogue province and armed by the United States, is at a crossroads. Should it continue buying big-ticket US arms, such as advanced fighter jets and tanks, to counter Chinese forces in case of a blockade or invasion? Taipei’s longstanding conventional strategy, which calls for these kinds of arms, views the ambiguous US defense commitment as concerning. Since Washington may not intervene against a Chinese attack, conventionalists want to hold on to Taiwan’s traditional, long-range weapons. Conventionalists also claim that buying big-ticket arms strengthens Washington’s political commitment to Taiwan. However, officials and experts increasingly see another strategy as prudent. Recent Chinese economic growth and military modernization have greatly enhanced Beijing’s capabilities, to the point that many believe Taiwan could not hold out alone against a Chinese invasion. Reformers thus argue that Taiwan needs to start building its forces around small, easily distributed weapons such as mobile anti-ship missiles and patrol boats and make greater investments in reserve forces and territorial defense. This “porcupine” defense strategy can theoretically buy more time for US forces to arrive in a war. The fate of Taiwan’s military strategy, which also depends greatly on political relations between Beijing, Taipei, and Washington, will help determine the strength of deterrence in the Taiwan Strait. A breakdown in this deterrence could lead to US-China war. The United States not only influences Taiwan’s strategy, but has a great stake in its future.
Topic:
Foreign Policy, Defense Policy, Military Affairs, Budget, Defense Spending, and Arms Sales
Political Geography:
China, Taiwan, Asia, North America, and United States of America

1676. World Economy Winter 2022: Strong headwinds for global economic activity

Author:
Klaus-Jurgen Gern, Stefan Kooths, Ulrich Stolzenburg, Jan Reents, and Nils Sonnenberg
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Global growth has decelerated over the course of the year under the impact of high energy prices and great uncertainty. Monetary policy, which is being tightened very quickly in view of high inflationary pressure across the board, is now also putting a drag on economic activity. Overall, production remained on an upward trend into the fall, with impetus coming from easing supply bottlenecks and the continuing normalization of activity in those sectors of the economy particularly affected by the Covid-19 pandemic. Towards the end of the year, however, economic momentum weakened noticeably further. The major advanced economies in particular are currently facing a period of weak economic activity despite considerable fiscal support measures. At the same time, the problems for the Chinese economy remain significant. While global output (measured on a purchasing power parity basis) at 3.2 percent is expected to grow by 0.3 percentage points more this year than expected in September, we continue to forecast an increase of only 2.2 percent next year. For 2024, our expectation has even been reduced slightly to 3.2 percent, mainly because we do expect the US economy to recover slowly. Inflation is likely to have peaked and is expected to slow significantly over the forecast horizon thanks to lower commodity prices and easing economic tensions. However, underlying inflation is not likely to return to target levels until the end of the forecast period.
Topic:
Monetary Policy, Economy, Business, COVID-19, and Emerging Economies
Political Geography:
China, Europe, Asia, North America, and United States of America

1677. World Economy Autumn 2022: Global growth falters

Author:
Klaus-Jurgen Gern, Stefan Kooths, Ulrich Stolzenburg, Jan Reents, and Nils Sonnenberg
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:
Monetary Policy, Business, COVID-19, Zero-COVID, Emerging Economies, and Advanced Economies
Political Geography:
China, Europe, Asia, North America, and United States of America

1678. Why do Preferences for Redistribution Differ Across Countries?

Author:
Gianluca Grimalda, Francesco Farina, Anna Conte, and Ulrich Schmidt
Publication Date:
07-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
We test for different theories purporting to explain cross-country differences in income redistribution through standardized experimental choices. US Americans and Italians demand less redistribution than Norwegians and Germans, regardless of whether self-interest is relevant. Those earning (or expecting to earn) below-median incomes behave as "libertarians" more frequently in the US and Italy than in Germany and Norway. Above-the-median earners behave similarly across countries. Higher overconfidence by US Americans and Italians further reduces their demand for redistribution under uncertainty. The "Prospect of Upward Mobility" hypothesis holds similarly in all countries. US Americans do not reward individual merit more than others.
Topic:
Economic Mobility, Redistribution, Income Distribution, and Behavioral Economics
Political Geography:
Europe, Italy, North America, and United States of America

1679. Regional Deprivation and Populism - Evidence from Germany and the U.S.

Author:
Michael Bayerlein
Publication Date:
07-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
A widely held view is that increasing globalisation and inequality are fostering support for populist actors. Surprisingly, when focusing on Germany and the U.S., populist voting is highest in less globalised regions with rather equal income distributions. Addressing this puzzle, I ask how the regional variance in populist voting can be explained. In my answer, I introduce the concept of spatial inequality, which describes the regional inequality within countries, and construct a measure of public goods scarcity. I argue that the spatial inequality induced feeling of being left behind is positively correlated with populist voting and that this effect is mitigated by public goods provision. Using county level data to develop spatial inequality and public good scarcity indices, I can provide empirical support for these arguments. The findings have important implications for understanding the sub-national variance in populist voting and the role of relative economic deprivation as well as public goods provision.
Topic:
Globalization, Inequality, Populism, Voting, Regional Economy, and Public Goods
Political Geography:
Europe, Germany, North America, and United States of America

1680. Brothers in arms: The value of coalitions in sanctions regimes

Author:
Sonali Chowdhry, Julian Hinz, Katrin Kamin, and Joschka Wanner
Publication Date:
10-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper examines the impact of coalitions on the economic costs of the 2012 Iran and 2014 Russia sanctions. By estimating and simulating a quantitative general equilibrium trade model under different coalition set-ups, we (i) dissect welfare losses for sanction-senders and target; (ii) compare prospective coalition partners and; (iii) provide bounds for the sanctions potential — the maximum welfare change attainable — when sanctions are scaled vertically, i.e. across sectors up to an embargo, or horizontally, i.e. across countries up to a global regime. To gauge the significance of simulation outcomes, we implement a Bayesian bootstrap procedure that generates confidence bands. We find that the implemented measures against Iran and Russia inflicted considerable economic harm, yielding 32 – 37% of the vertical sanctions potential. Our key finding is that coalitions lower the average welfare loss incurred from sanctions relative to unilateral implementation. They also increase the welfare loss imposed on Iran and Russia. Adding China to the coalition further amplifies the welfare loss by 79% for Iran and 22% for Russia. Finally, we quantify transfers that would equalize losses across coalition members. These hypothetical transfers can be seen as a sanctions-equivalent of NATO spending goals and provide a measure of the relative burden borne by coalition countries.
Topic:
Globalization, International Trade and Finance, Markets, Sanctions, Alliance, and Embargo
Political Geography:
Russia, China, Europe, Asia, North America, and United States of America