Publication Year: within 3 Years - CIAO Search Results

8501. Section 232 reloaded: the false promise of the transatlantic ‘climate club’ for steel and aluminium

Author:: David Kleimann
Publication Date:: 07-2023
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: In using the removal of Section 232 ‘national security’ tariffs on steel and aluminium imports as a bargaining chip, the United States demands that the European Union engage in negotiations on “global steel and aluminium arrangements to restore market-oriented conditions and address carbon intensity”. The US demand has reportedly been inspired by a blueprint that would establish an international institutional arrangement – labelled a ‘climate club’ – which would externalise market-access restrictions afforded by US Section 232 tariffs to the customs borders of club members. While the declared objective is to incentivise non-members to adopt low-carbon steel (and aluminium) production methods the US blueprint suffers from various design flaws including inefficient incentives, WTO inconsistency and incompatibility with the EU Carbon Border Adjustment Mechanism. The effectiveness of the proposed US scheme is severely compromised by the plethora of policy objectives it pursues, which go far beyond the goal of incentivising industrial decarbonisation in third countries, including secondary (ie protectionism) and tertiary (ie global power competition with China) objectives. The initial negotiation proposal submitted by the United States Trade Representative (USTR) to European Commission trade negotiators incorporates many if not all the problematic elements of this blueprint, setting the US on a collision course with the negotiation proposal put forward by the European Commission. This paper concludes that the adoption of the scheme proposed by USTR would result in a step backwards for international climate and trade cooperation, whereas not adopting the EU proposal would make for a missed opportunity. Given the sharply diverging negotiation positions and associated respective domestic constraints on both sides, however, policymakers should start to engage stakeholders now to manage expectations towards a low-ambition negotiation result, if any.
Topic:: Security, Climate Change, Industrial Policy, Governance, European Union, Economy, Trade Policy, and Transatlantic Relations
Political Geography:: Global Focus

8502. What should be done about Google’s quasi-monopoly in search? Mandatory data sharing versus AI-driven technological competition

Author:: Bertin Martens
Publication Date:: 07-2023
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: The first part of this paper focuses on competition between search engines that match user queries with webpages. User welfare, as measured by click-through rates on top-ranked pages, increases when network effects attract more users and generate economies of scale in data aggregation. However, network effects trigger welfare concerns when a search engine reaches a dominant market position. The EU Digital Markets Act (DMA) imposes asymmetric data sharing obligations on very large search engines to facilitate competition from smaller competitors. We conclude from the available empirical literature on search-engine efficiency that asymmetric data sharing may increase competition but may also reduce scale and user welfare, depending on the slope of the search-data learning curve. We propose policy recommendations to reduce tension between competition and welfare, including (a) symmetric data sharing between all search engines irrespective of size, and (b) facilitate user real-time search history and profile-data portability to competing search engines. The second part of the paper focuses on the impact of recent generative AI models, such as Large Language Models (LLMs), chatbots and answer engines, on competition in search markets. LLMs are pre-trained on very large text datasets, prior to usage. They do not depend on user-driven network effects. That avoids winner-takes-all markets. However, high fixed algorithmic learning costs and input markets bottlenecks (webpage indexes, copyright-protected data and hyperscale cloud infrastructure) make entry more difficult. LLMs produce semantic responses (rather than web pages) in response to a query. That reduces cognitive processing costs for users but may also increase ex-post uncertainty about the quality of the output. User responses to this trade-off will determine the degree of substitution or complementarity between search and chatbots. We conclude that, under certain conditions, a competitive chatbot markets could crowd out a monopolistic search engine market and may make DMA-style regulatory intervention in search engines redundant.
Topic:: Science and Technology, Governance, European Union, Digital Economy, Innovation, Artificial Intelligence, and Competition
Political Geography:: Europe

8503. What would Europeans want a European defence union to look like?

Author:: Francesco Nicoli, Brian Burgoon, and David Van der Duin
Publication Date:: 06-2023
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: While the Russian invasion of Ukraine has created a new momentum for EU defence integration, the political feasibility of such integration remains disputed, as it may entail both additional financial costs and a loss of sovereignty. Furthermore, design of defence integration is inherently multidimensional, differing in terms of scope and level, governance and sources of financing, among other dimensions. To determine the extent of public support for European security cooperation, we conducted the first conjoint experiment ever fielded on public support for alternative defence union designs. We carried out a pre-registered, randomised conjoint experiment on a highly representative sample of the French, German, Italian, Dutch and Spanish populations in November 2022. This multidimensional conjoint experiment allows us to determine the causal link between policy features of potential defence pacts, and public support or opposition to such policy. Our results show that policy packages receiving the most support require joint EU-level governance, joint purchases of military equipment through joint procurement, and repurposing of existing national expenditure as the preferred form of financing. All in all, our results show not only that there is considerable cross-border support for defence integration in Western Europe, but also that citizens in different Western European countries have generally aligned preferences regarding the actual design of such policy, indicating that a compromise policy is feasible and publicly supported. Furthermore, our results support ongoing research on the nature of European solidarity at times of crisis, suggesting that European citizens are willing to support the creation of joint institutions and policies to face issues of common concern, and therefore indicating that major crises open important windows of opportunity to re-shape EU-level policies and institutions.
Topic:: Defense Policy, Governance, European Union, and Regional Security
Political Geography:: Europe

8504. China’s quest for innovation: progress and bottlenecks

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

8505. Antitrust issues raised by answer engines

Author:: Christophe Carugati
Publication Date:: 06-2023
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: Rapid development of generative artificial intelligence chatbots like ChatGPT is leading search engine providers to move from search to answer engines. Unlike search engines, which provide search results in the form of blue links to content creators, answer engines generate personalised answers through a conversation with end users. This revolution impacts the internet ecosystem of content creators and the digital advertising market. This paper outlines some early antitrust issues related to answer engines, from the transition from search to answer engines (sections 2 and 3) and the response competition authorities should adopt (section 4). It finds that search and answer engines complement and compete with each other. While the answer-engine market is still at an early stage of development, it already raises some competition issues in relation to data scraping, vertical integration and unfair terms and conditions. Intervention by competition authorities is more likely than not to prevent market power in this new market. In this regard, competition authorities should act to preserve dynamic competition and minimise adverse effects on content creators. Finally, the paper concludes with several research questions for future research (section 5).
Topic:: Science and Technology, Governance, European Union, Digital Economy, Innovation, Artificial Intelligence, and Competition
Political Geography:: Europe

8506. A new measure of aggregate trade restrictions: cyclical drivers and macro effects

Author:: Julia Estefania-Flores, Davide Furceri, Swarnali A. Hannan, Jonathan Ostry, and Andrew K. Rose
Publication Date:: 06-2023
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: This paper presents a new measure of aggregate trade restrictions (MATR) using data from the International Monetary Fund’s Annual Report on Exchange Arrangements and Exchange Restrictions. MATR is strongly correlated with existing measures of trade restrictiveness but is more comprehensive in terms of country and time coverage. It is available for an unbalanced sample of up to 157 countries during 1949-2019. We use MATR to re-examine how trade restrictiveness varies with the business cycle, and how the macroeconomy looks in the aftermath of changes in trade restrictiveness. For the sample as a whole, MATR is typically a-cyclical but this average finding is heterogeneous across income groups: aggregate trade restrictions are a-cyclical in advanced economies but are counter-cyclical in emerging market and developing economies, especially in response to increases in unemployment. As to macroeconomic effects, increases in MATR are robustly associated with declines in GDP and in labour productivity (as well as being adverse for a range of other macroeconomic indicators).
Topic:: Industrial Policy, Economy, Multilateralism, and Trade Policy
Political Geography:: Global Focus

8507. Employer perspectives on employee work location: collaboration, culture and control

Author:: Diane Mulcahy and Tatiana Andreeva
Publication Date:: 05-2023
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: This paper discusses employers’ experience of working fully remotely during the pandemic, and their approaches to returning to the office following the pandemic. We chose to focus on the point of view of the employer since it is relatively less explored; much more is available and written on the views and opinions of employees about remote work and return to office. To understand the employer’s perspective, we reviewed existing research evidence, and carried out eleven structured interviews with corporate leaders about their experiences with remote, in-office and hybrid work. Our literature review suggests that remote work does not have negative effects on performance. Similarly, the small sample of employers we interviewed experienced very strong company and employee performance while operating their businesses fully remotely. All employers we interviewed are implementing a hybrid return-to-office policy, although the specifics of the policies are different for each company. No employer was returning to full in-office work. We focused our literature review and interviews on the impact of remote work on employee collaboration, firm culture and manager control, which we call ‘the 3 Cs’. We found that leaders maintain a belief that employee collaboration is negatively impacted by remote work, but the evidence to support this assumption is mixed. Firm culture is often cited by employers as an important rationale for bringing employees back to the office, but the research evidence and our interviewees suggest that the notion of culture is vague and the idea that better culture is supported by in-office work is not supported by any data. Finally, the shift to remote work caused corporate leaders and front-line managers to worry about effectively managing employees they couldn’t see every day. We found that companies did not widely begin implementing employee monitoring systems in lieu of onsite management. Our interviews suggest that much learning remains to transition managers and leaders to effectively managing remote or hybrid employees and teams.
Topic:: Science and Technology, Employment, Innovation, Labor Market, and Remote Work
Political Geography:: Global Focus

8508. Global trends in countries‘ perceptions of the Belt and Road Initiative

Author:: Alicia Garcia-Herrero and Robin Schindowski
Publication Date:: 04-2023
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: Drawing on global media reports, we conduct a sentiment analysis of the image of China’s Belt and Road Initiative (BRI) and the evolution of its image over time. Our main finding is that perceptions of the initiative deteriorated significantly in many geographies from 2017 to 2022. The notable exception is in sub-Saharan Africa where the BRI’s image remains positive, even if slightly less so than in the past. This is notwithstanding increases in debt levels with China, much of which now face potential restructuring. Furthermore, we find significant inter- and intra-regional differences in the average sentiment towards China’s landmark project, as well as a much worse image of the initiative in countries which, until today, are not part of the BRI. Finally, we focus on the European Union, Africa and China’s immediate neighbourhood to better understand the complexities behind the perceived benefits and challenges associated with China’s Belt and Road Initiative.
Topic:: Bilateral Relations, European Union, Geopolitics, Economy, and Trade
Political Geography:: China, Europe, and Asia

8509. Artificial intelligence adoption in the public sector: a case study

Author:: Laura Nurski
Publication Date:: 03-2023
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: This case study illustrates the drivers of and barriers to artificial intelligence adoption by organisations, and acceptance of AI by workers in the public sector. Several factors were crucial in the successful adoption of a human-centred approach to AI, including a fast discovery phase that involved workers (or end users) in the development early on, and aligning human resources, information technology and business processes. Subsidy support mechanisms were also specifically targeted and acquired to support the adoption. However, making AI support available to workers proved insufficient to ensure its widespread usage throughout the organisation. The slow adaptation of existing work processes and legacy IT systems was a barrier to the optimal usage of the technology. Moreover, the usefulness of the technology depended on both the task routineness and worker experience, thereby necessitating a rethinking of the work division between technology and workers, and between junior and senior workers. Successful human-centred roll-out of AI in Europe will therefore depend on the availability of, or investments in, complementary intangible organisational capital. Very little is currently known about these investments.
Topic:: Digital Economy, Economic Growth, Public Sector, Innovation, Artificial Intelligence, Inclusion, and Work
Political Geography:: Global Focus

8510. The hidden inequalities of digitalisation in the post-pandemic context

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

8511. Pro- and anti-competitive provisions in the proposed European Union Data Act

Author:: Bertin Martens
Publication Date:: 01-2023
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: The proposed European Union Data Act gives users access and portability rights to the data generated by their use of tangible digital products and devices. This pro-competitive measure weakens the de-facto monopolistic control product manufacturers have over product data. However, the Data Act would also grant manufacturers a de-jure right to monopolistic pricing of data transfers to third-party service providers, restoring their control over data markets. Other anti-competitive provisions include restrictions on the use of data for competition purposes and a prohibition on transfering data to platforms identified as gatekeepers under the EU Digital Markets Act. Unnecessarily fuzzy definitions of products and data that fall under the Data Act would create uncertainty in implementation and incoherence with other EU data regulations. The Data Act should be simplified by dropping anti-competitive provisions and granting users and third-parties selected by users free access to all data generated by the use of a product or a service. This would increase competition in data-driven services and prevent users paying twice for their data. It would not disincentivise producers from investing in data-driven products and services. A further step could be the creation of a level playing field between producers and users in data-access rights. This can be achieved by introducing the principle of mutual exhaustion of data rights at point of sale. This would put all data co-generating parties in a position to generate economies of scale and scope in data aggregation, or data-driven externalities, to maximise innovation.
Topic:: Markets, Governance, European Union, and Digital Economy
Political Geography:: Europe

8512. The EU can manage without Russian liquified natural gas

Author:: Ben McWilliams, Giovanni Sgaravatti, Simone Tagliapietra, and Georg Zachmann
Publication Date:: 06-2023
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: The European Union has committed to eliminate all Russian fossil-fuel imports by 2027. Progress has been made, with sanctions on oil and coal already introduced. The glaring exception is natural gas, on which the EU has so far refrained from imposing limitations, owing to greater dependence on Russia. Nevertheless, pipeline gas imports have fallen by four-fifths following Russia’s weaponisation of gas supplies. However, Russia’s exports of liquified natural gas (LNG) to the EU have increased since the invasion of Ukraine. The EU needs a coherent strategy for these LNG imports. Our analysis shows that the EU can manage without Russian LNG. Anticipated impacts are not comparable to those felt in 2022 as Russian pipeline gas dried up. The regional impact would be most significant for the Iberian Peninsula, which has the highest share of Russian LNG in total gas supply. Meanwhile, the global LNG market is tight, and we anticipate that Russia would find new buyers for cargos that no longer enter Europe. We discuss the options available to the EU. Wait-and-see implies delaying any action until 2027, while soft sanctions would discourage additional purchases but not break long-term contracts. We argue instead for an EU embargo on Russian LNG, to reduce exposure to an unreliable and adversarial entity, and to limit the extent to which EU consumers fund the Russian state. The embargo may be designed to allow purchases only if they are coordinated via the EU’s Energy Platform, with limited volumes and below market prices. This could be accompanied by the implementation of a price cap on Russian LNG cargos that use EU or G7 trans-shipment, insurance or shipping services.
Topic:: European Union, Gas, Energy, and Green Economy
Political Geography:: Russia and Europe

8513. Rebooting the European Union’s Net Zero Industry Act

Author:: Simone Tagliapietra, Reinhilde Veugelers, and Jeromin Zettelmeyer
Publication Date:: 06-2023
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: In March 2023, the European Commission published a legislative proposal for an EU response to the US Inflation Reduction Act: the Net Zero Industry Act (NZIA). It is an unconvincing policy proposal, both for what is in it and for what is not in it. The proposal has five problematic aspects. First, it takes a top-down approach, in which specific technologies are selected for preferential treatment. Preferable would be a technology-neutral approach open to all current and future technologies that help tackle the net-zero challenge. Second, its blanket 40 percent self-sufficiency benchmark for EU domestic cleantech manufacturing by 2030 sends a protectionist signal, is poorly defined and does not reflect the differences in EU capacity in the cleantech sector. Third, it relies on the acceleration of permitting procedures as the main policy instrument, although this is not the main obstacle to cleantech investment in the EU. Fourth, it proposes more strategic use of public procurement. While this is an objective to be supported, the specific proposals are likely to be ineffective because of the way they are designed. Fifth and not least, the NZIA would lack a governance structure that would ensure effective implementation. In addition, the NZIA does not tackle three critical issues. It does not address investment obstacles related to failures of the single market. It does not tackle the coordination problem at the core of developing an EU green industrial policy. Finally, it does not develop an EU-level funding strategy, but rather relies on state aid, with the related risk of fragmentation. The European Parliament and EU countries in the Council of the EU should reboot the proposal and refocus its objectives, sharpening its limited instruments, improving its governance, and adding financial incentives to ensure implementation. In parallel, the EU should develop a broader green industrial policy strategy that leverages the single market in a credible manner, building a solid new governance framework and a new EU-level funding approach.
Topic:: Climate Change, Industrial Policy, Governance, European Union, Trade Policy, and Industry
Political Geography:: Europe

8514. Can Chinese growth defy gravity?

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

8515. The value added of central bank digital currencies: a view from the euro area

Author:: Maria Demertzis and Catarina Martins
Publication Date:: 06-2023
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: Different jurisdictions have set out different reasons for creating central bank digital currencies (CBDCs). Some countries, particularly those with already-operational CBDCs for retail purposes, aim to to promote financial inclusion. But in countries where most citizens have access to financial services, central banks are interested in CBDCs as an aspect of the increasing digitalisation of finance. Central banks could also choose to use CBDCs to guarantee in full citizen’s holdings (currently, deposits in commercial bank are only partially guaranteed), but this would trigger major changes in the financial system in terms of the role of commercial banks in intermediation and the role of fiat money. So far, central banks have not opted to go this way. In the euro area, consumers have multiple payment options and a very efficient retail payments system. The currency enjoys high levels of trust and is not challenged by the emergence of private currencies, such as Bitcoin, or by the risk that cash, a monetary system’s anchor, will disappear. Therefore, creating a CBDC for retail purposes in the euro area offers little obvious value added, at least for the foreseeable future. However, there is a strong case for building a CBDC that banks could use for cross-border wholesale purposes (ie with other currencies). Wholesale CBDCs could revolutionise the way that cross-border, cross-currency payments are made for two reasons. Cross-border payments are currently slow and inefficient. Pilot projects have shown that wholesale payments with CBDCs can generate substantial time and cost savings. Any two central banks that have operational wholesale CBDCs could settle transactions between themselves. This would be very different from the current system, as most settlements today are done via the dollar (and then the euro) infrastructure and use correspondent banks. The euro area and the United States would have to consider carefully from a geopolitical perspective how wholesale CBDCs might affect their global economic standing. By developing a CBDC for wholesale purposes, the European Union would be able to contribute to developing the global standard.
Topic:: Monetary Policy, Governance, Regulation, Central Bank, Digital Currency, and Euro
Political Geography:: Europe

8516. The rising cost of European Union borrowing and what to do about it

Author:: Gregory Claeys and Conor McCaffrey
Publication Date:: 05-2023
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: Debt issuance by the European Commission on behalf of the European Union has increased massively. Of the approximately €400 billion in outstanding EU debt as of May 2023, 85 percent has arisen from borrowing since 2020. Large-scale borrowing is expected to continue until 2026 to fund the remainder of NextGenerationEU, and concessional loans to support Ukraine. When these programmes were launched, interest rates were at historic lows – even negative for maturities below 10 years. However, interest rates rose sharply in 2022. Beyond the widespread rise in euro-denominated interest rates due to monetary tightening by the European Central Bank in response to the inflation surge, the EU has also faced a widening of the spread between its yields and those of major European issuers, including France and Germany. This widening is driven by a combination of market features, circumstantial factors and institutional features. The EU cannot affect the overall cyclical movement of interest rates and will have to learn to live with it, like sovereigns do. However, the European Commission should continue to try to narrow the spread with major European sovereigns by further developing the relevant market infrastructure and improving its issuance strategy. The Commission will not be able to do this alone. Institutional developments, including progress on the development of new own resources and a long-term substantial presence in the bond market, will be necessary to fully reap the benefits of EU borrowing. A large share of EU borrowing (around €421 billion in total by the end of 2026, in current prices) is intended to finance unprecedented non-repayable support: Recovery and Resilience Fund grants and additional funding for existing EU programmes under the EU budget. The interest costs associated with this part of the debt lie with the EU budget. Our estimates suggest that, because of the high current and expected levels of interest rates, this cost could be twice as high as what was initially estimated at the start of the EU’s 2021-27 budget cycle. As a result, because interest costs for the borrowing of the non-repayable support are accounted for under the EU budget’s ‘expenditure ceiling’, this will exert further pressure on the funding of important EU programmes, which are already affected by inflation. The EU should thus quickly review how interest costs are accounted for in its budget and financial framework.
Topic:: Debt, Budget, European Union, and European Commission
Political Geography:: Europe

8517. Adjusting to the energy shock: the right policies for European industry

Author:: Giovanni Sgaravatti, Simone Tagliapietra, and Georg Zachmann
Publication Date:: 05-2023
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: In 2022, overall European Union industrial employment and output increased above 2021 levels, despite rocketing energy prices. However, output declined from energy-intensive industries including basic metals, chemicals, non-metallic minerals and paper, for which energy costs represent a much bigger share of production costs than for less energy-intensive manufacturing. Energy prices are likely to remain above historic levels for the foreseeable future. In its industrial strategy response to this context, the EU must ask first whether the energy-intensive parts of the value chain should be outsourced permanently. Conditional on the answer being no, the second question is how to reduce energy prices to ensure the competitiveness of the energy-intensive productions stages that remain in the EU. First, the EU could bridge the high energy price period with unconditional subsidies, which seems to be the preferred strategy currently. This will avoid irreversible large-scale relocation abroad but is expensive, does not help to drive down energy prices and poses risks of fragmentation within the EU. It will only succeed if internationally competitive energy supplies are made available quickly. Second, the EU could support decarbonised production processes built on large-scale deployment of domestic renewables, grid interconnectors and storage. This would accelerate the green transition and reduce clean-tech prices worldwide. However, EU taxpayers would bear the cost of new technologies, without any guarantee of solving the current cost-competitiveness issue. Third, the EU could facilitate imports of energy-intensive products, while helping EU industry move to higher value-added parts of the value chain. Subsidies could be given directly to industrial sectors that have not become structurally uncompetitive, while bringing down energy demand and thus energy prices. However, this strategy would result in temporarily higher unemployment and factory closures in energy-intensive industries, would need to accommodate concerns over excessive reliance on imports and would need to be engineered to address carbon leakage. Policymakers should implement a mix of these policies. The EU should subsidise existing energy-intensive industries only in clearly justified cases, while deciding which energy-intensive products can be left to international market forces. By choosing which decarbonisation investments should be supported in Europe, the EU can combine industrial competitiveness and environmental sustainability.
Topic:: Industrial Policy, European Union, Value Chains, Energy, and Green Economy
Political Geography:: Europe

8518. The longer-term fiscal challenges facing the European Union

Author:: Jeromin Zettelmeyer, Gregory Claeys, Zsolt Darvas, Lennard Welslau, and Stavros Zenios
Publication Date:: 04-2023
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: The pandemic and subsequent price shocks triggered by Russia’s invasion of Ukraine, have increased longer-term fiscal pressures in the European Union through higher debt, higher expected real interest rates and higher public investment needs. This Policy Brief makes some simple quantitative assessments of those effects and discusses policy implications, with the following results. First, long-term increases in primary fiscal balances required to offset higher debt and higher expected real interest rates are in the range of 0.5 percent to 1.5 percent of GDP for most EU countries. However, because of pre-existing differences in fiscal space, not all countries will need to undertake that adjustment, while some countries may need to adjust by substantially more. Among the 21 EU countries for which we have data to undertake this analysis, 14 will need to adjust by more than they were planning to do by 2025. Second, the required additional fiscal adjustment looks manageable, although it is substantial in some cases. To achieve medium-term debt-reducing primary balances, several EU countries will need to raise primary balances by more than 2 percent of GDP above their 2025 target, but no country will need additional fiscal adjustment of more than 3 percent of GDP. Third, market data suggests that the future path of real interest rates is very uncertain. Compared to the period immediately preceding the pandemic, longer-term expected real interest rates have increased by about 2 percentage points but remain low on average, at about 1 percent in real terms. Future developments depend on whether the structural factors that led to low interest rates in the first place persist or unwind. While interest rates might decline again, fiscal policymakers should not make plans that assume such a decline. Fourth, public spending needs for additional defence and climate spending run well above 1 percent of GDP per year. These needs do not appear to have been incorporated into current fiscal baselines, and hence will come on top of the adjustment described above. To ensure that fiscal adjustment does not defeat its purpose by slowing growth, it is essential that it is conducted gradually. In countries that require such adjustment, it should start as soon as cyclical conditions allow.
Topic:: Governance, European Union, Finance, and Fiscal Policy
Political Geography:: Europe

8519. Decentralised finance: good technology, bad finance

Author:: Maria Demertzis and Catarina Martins
Publication Date:: 04-2023
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: The emergence of cryptocurrencies/crypto assets has allowed the provision of a new form of financial services, including payments and loans, known as decentralised finance (DeFi). Crypto assets currently represent only about 1 percent of total global financial assets and it is unlikely, in its current form, that DeFi will become a substitute for the traditional financial system, for three reasons. First, while decentralisation is very innovative, in practice the technology required to replace the role of intermediary is slow and costly in terms of energy use. This has led some crypto networks to adopt more centralised solutions to the problem of verification. Second, the automaticity behind the transactions does not allow for any legal recourse. If something goes wrong, there is no way to stop or reverse a transaction once it has been initiated. It is very difficult to imagine DeFi scaling up without the ability to challenge outcomes. Third, and perhaps most importantly, DeFi is for the most part self-referential. Crypto assets are exchanged for other crypto assets without being employed in activities that stimulate economic growth by creating jobs or facilitating investment. It is not likely for DeFi to grow enough to replace traditional finance unless it helps growth. Nevertheless, the technology that enables DeFi and crypto assets, distributed ledger technology (DLT), is very innovative and has managed to remove the intermediary without compromising the safety and finality of financial transactions. Hence, it is likely that the technology behind crypto assets and DeFi will feed into the mainstream and offer efficiency gains.
Topic:: Science and Technology, Regulation, Finance, Digitalization, and Digital Currency
Political Geography:: Global Focus

8520. Will China’s new financial regulatory reform be enough to meet the challenges?

Author:: Martin Chorzempa and Nicolas Veron
Publication Date:: 03-2023
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: Effective financial supervision plays a crucial role in maintaining financial stability and a healthy financial system. China’s leadership has made financial risk a core priority, and in reforms approved in March 2023, it reassigned regulatory responsibilities, creating a new supervisory body that will take over some responsibilities from the central bank, the banking and insurance regulator, and the securities regulator. The aim is that a change to the financial supervisory architecture (who does what in financial supervision) will make China’s system more effective and stable. In this policy brief, we argue that this incremental reform will not solve the core issues China faces in financial supervisory effectiveness. We provide an overview of China’s large and complex financial system, including its largely state-owned banks (some of which are the largest in the world by assets), securities markets and other financial intermediaries. Traditional divisions between different types of activities and institutions have been blurred by the rise of large financial conglomerates, risk-transfer techniques and internet-based finance. Reforms in 2018 to China’s supervisory architecture did not eliminate perceived shortcomings, including failures to effectively regulate financial conglomerates, fintech and regional banks. We then survey global benchmarks against which China’s financial supervisory architecture can be compared, including the United States and European Union. China’s supervisory system is already more streamlined, at least on paper, than either of these most comparable global counterparts. Like them, China’s system does not correspond exactly to any of the three textbook archetypes of supervision: sectoral, twin-peaks or integrated supervision. Ultimately, the effectiveness of China’s financial supervisory architecture suffers from excessive state intervention in the financial system through other channels, including through the unique and pervasive influence of the communist party, which hampers supervisory independence and makes it difficult to establish accountability for regulatory failures. While the recently announced reform may improve coordination across supervisory bodies, coordination within the new quasi-integrated supervisor, across central departments, and between them and local branches, will remain a challenge.
Topic:: Reform, Regulation, Finance, and Financial Stability
Political Geography:: China and Asia

8521. The potential of sovereign sustainability-linked bonds in the drive for net-zero

Author:: Alexander Lehmann and Catarina Martins
Publication Date:: 03-2023
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: European Union governments have for some years issued green bonds that raise funds for climate-related spending. These bonds have been received well in capital markets but because they promise a certain use of proceeds, they complicate budget management and may not match investors’ claims of having an impact on national climate policies. Public commitments made by major investors and asset owners suggest that limiting climate transition risks and the assessment of the alignment of sovereigns with net-zero targets will now become key determinants of portfolio allocation. Yield differentials in bond markets are already beginning to reflect transition risks that arise from the inadequate pursuit by issuers of climate targets. Unlike standard green bonds, sustainability-linked bonds (SLBs) create a link between performance (outcome) indicators and the financial terms of the bonds. SLBs have grown rapidly in importance in private markets and are now being assessed by sovereign issuers. We show that sovereign SLBs could help incentivise climate policies in EU countries, and accelerate emission reductions. They would be an effective tool for signalling commitment. A common EU framework for issuance by EU countries would enhance capital market integration and the transparency of national policies, and would limit climate transition risks in EU capital markets more broadly.
Topic:: Climate Change, European Union, Finance, Carbon Emissions, and Sovereign Bonds
Political Geography:: Europe

8522. Phased European Union electricity market reform

Author:: Georg Zachmann and Conall Heussaff
Publication Date:: 03-2023
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: In an environment of record-breaking electricity prices driven by a gas supply shock and below-average electricity generation, reforming the design of the European electricity market is seen as a means to delink consumer costs from volatility in short-term power markets. Electricity markets should meet three objectives: fairness, optimal investment and optimal operation. The current market design has achieved these objectives to varying degrees. Faced with the unprecedented shock, the electricity system has operated well, but electricity markets have struggled to achieve fair outcomes and investments have not been driven by market-based cashflows. Further complicating market reform, the power system is being changed radically by decarbonisation. The electricity system is becoming more decentralised and digitalised, with an active demand side. These transformations will have consequences for the optimal electricity market design in the later stages of the energy transition. Reform proposals have focused on increasing the share of long-term contracts in the remuneration of generation technologies. Different long-term contracting regimes have structural implications for the functioning of electricity markets, especially in relation to the roles of the state and the market, and the responsibilities of national governments and European Union institutions. A phased approach should be taken to EU electricity market design reform. In the near-term, reform should seek to protect consumers and drive investment. An assessment should also be made of what market design will best meet the fairness, investment and operational objectives in a decarbonised system, and what the conceptual role of electricity markets should be during the transition. This process should start as soon as possible so well thought-through proposals are available when the next European Commission takes office.
Topic:: Markets, Reform, European Union, Electricity, and Green Economy
Political Geography:: Europe

8523. A model for a participative approach to digital competition regulation

Author:: Christophe Carugati
Publication Date:: 02-2023
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: Digital competition regulations often put in place participative approaches to ensure competition in digital markets. The participative approach aims to involve regulated firms, stakeholders and regulators in the design of compliance measures. The approach is particularly relevant in complex and fast-evolving digital markets, where whole industries often depend on the behaviours of the regulated firms. The participative approach enables stakeholders and regulated firms to design compliance measures that are optimal for all because they ensure legal certainty for regulated firms, save time for regulators and take into account the views of stakeholders. However, the participative approach is subject to regulatory capture. The regulated firms and stakeholders might try to promote their interests to the regulator. This could result in endless discussions at best, and the adoption of inappropriate solutions following intense lobbying at worst. A governance model is necessary to ensure that the participative approach works without risks of regulatory capture. The model should define clearly each participant's role, duties and rights. There should be: 1) equal and transparent access of all stakeholders to the dialogue; 2) the presentation of tangible and evidence-based solutions from stakeholders and regulated firms; 3) public decisions from the regulator that contain assessments of the proposed solutions, with guidance to clarify rules; and 4) compliance measures proposed by the regulated firm in line with the guidance. The model should provide an assessment framework for the proposed solutions to identify the most effective. The assessment should rely on the principle of proportionality to assess whether the proposed compliance measure is proportionate, to ensure the effectiveness of the regulation. Finally, the model should safeguard against regulatory capture thanks to transparency rules and external monitoring.
Topic:: Regulation, Digital Economy, Innovation, Stakeholders, and Competition
Political Geography:: Global Focus

8524. How Europe should answer the US Inflation Reduction Act

Author:: David Kleimann, Niclas Poitiers, André Sapir, Simone Tagliapietra, Nicolas Veron, Reinhilde Veugelers, and Jeromin Zettelmeyer
Publication Date:: 02-2023
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: The 2022 United States Inflation Reduction Act (IRA) is a significant and welcome climate law. It also includes trade-distortive subsidies, including local-content requirements prohibited under World Trade Organisation rules – the first time the US has done this and a blow to the international trading system that could trigger protectionism in other countries. The expected IRA green subsidies are of similar size to those available in the European Union, except in renewable energy production, where EU subsidies remain far larger. However, there are important qualitative differences. Some IRA subsidies discriminate against foreign producers while EU subsidies do not. IRA clean-tech subsidies are simpler and less fragmented, and they focus mainly on mass deployment of green technologies rather than innovation. The IRA will likely harm Europe through its competitiveness effect, while it will likely benefit climate transition in Europe and most of the rest of the world. However, the magnitude of both effects is very uncertain, partly because the IRA will induce substitution away from Chinese inputs. By forcing the reorganisation of supply chains, the IRA may make the EU and other economies more competitive relative to China. It may also initially slow the green transition. But in the longer run, this effect should be outweighed by the reduction in the cost of clean tech driven by the IRA. In responding to the IRA, the EU should not just seek to protect its competitiveness relative to the US but to pursue broader aims, including competitiveness in general, speedy decarbonisation and broad foreign policy and development policy goals. These aims imply that the EU should not impose local-content requirements of its own, should not loosen state-aid rules and should not mimic the IRA’s approach to manufacturing subsidies. Rather, it should focus on boosting its structural competitiveness, formulate a trade policy response that includes reform of the international subsidies regime, and develop an instrument for EU-level subsidies that focuses on early-stage development and increasing EU resilience to trade disruptions.
Topic:: Governance, European Union, Inflation, and Trade
Political Geography:: Europe

8525. Climate versus trade? Reconciling international subsidy rules with industrial decarbonisation

Author:: David Kleimann
Publication Date:: 02-2023
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: The vast environmental subsidies that may be required for the transition to net-zero greenhouse gas emissions are starting to generate international trade and political frictions between the world’s largest economies. This puts (supra-)national industrial decarbonisation efforts on a collision course with international subsidies rules and national countervailing duty (ie anti-foreign subsidy) laws and regulations. International cooperation will be essential to defuse such tensions before they escalate and impede effective climate policy rollouts, and before they lead to economic countermeasures that create new barriers to trade in environmental goods. This requires agreement on permissible environmental subsidy practices that minimise distortions. Meanwhile, it will be crucial to provide financial transfers to assist poorer economies with industrial decarbonisation at the same time as those poorer economies are suffering from the cross-border negative economic impacts of otherwise net-global-welfare enhancing environmental subsidies paid out by wealthy countries. Various forums can host the technical and political negotiations necessary to set the parameters of net global-welfare enhancing subsidies. These include the G7, the G20, the Organisation for Economic Co-operation and Development, the World Trade Organisation’s Trade and Environment Committee and WTO Trade and Environmental Sustainability Structured Discussions, and the Coalition of Trade Ministers on Climate.
Topic:: Climate Change, Political Economy, Trade, Carbon Emissions, Subsidies, and Decarbonization
Political Geography:: Global Focus

8526. How best to ensure international digital competition cooperation

Author:: Christophe Carugati
Publication Date:: 02-2023
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: Large digital firms pose similar competition issues worldwide, such as promoting their own services over those of rivals, or imposing unfair terms and conditions. Competition authorities have opened several antitrust investigations and policymakers have proposed digital competition regulations to tackle these issues. G7 competition authorities have called for several years for international cooperation on digital markets. They want competition cases and laws around the world that are consistent and work together. However, the question of how this can be done remains. A toolbox for international cooperation in competition enforcement already exists, but it does not provide for cooperation in competition policy and has shortcomings in relation to competition enforcement. Current and proposed legislation targets the largest digital firms to tackle the characteristics of digital markets, such as multi-sidedness, and the same or very similar behaviours, such as self-preferencing. Legislation in different jurisdictions addresses these issues with similar rules. While there is some convergence, some rules diverge in substance and some are at high risk of divergence in interpretation. Inconsistency is thus likely to arise from a divergence of interpretation rather than substance. The solution would be to ensure a coherent approach to competition in digital markets. This could be done by developing a framework based on four elements: (1) adoption of common legal phases for future digital competition laws to ensure clarity; (2) adoption of a common legal interpretation through guidance drafted by international forums, such as the International Competition Network (ICN); (3) adoption of common technical requirements developed in the context of ICN technical workshops, when the rules require it; and (4) the implementation of an international monitoring committee within the ICN to evaluate whether competition authorities and courts enforce the rules consistently. The impact of the framework might be limited because of the non-binding nature of the approach, and the focus on specific competition-related legislation, excluding laws that can also address the issues, such as civil law. Countries can overcome these limitations if they are willing to cooperate to ensure a consistent approach.
Topic:: Markets, Digital Economy, Digital Cooperation, and Competition
Political Geography:: Global Focus

8527. Preparing for the next winter: Europe’s gas outlook for 2023

Author:: Ben McWilliams, Simone Tagliapietra, Georg Zachmann, and Thierry Deschuyteneer
Publication Date:: 02-2023
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: The European Union has so far weathered the energy crisis brought on by Russia’s invasion of Ukraine in February 2022 and will manage winter 2022/23 even if Russia abruptly halts all pipeline gas flows. However, preparations must be made for winter 2023-24. In particular, gas storage facilities should be 90 percent full by 1 October 2023. We assess the demand reduction needed if the 90 percent storage target is to be achieved. Our assessment takes into account EU imports, exports to refill gas storage facilities in Ukraine and Moldova, the weather and the situation in power markets, where gas demand is highly dependent on non-gas energy sources. Assuming limited Russian exports continue, and weather conditions are typical, demand up to 1 October 2023 must remain 13 percent lower than the previous five-year average. The EU should therefore extend its demand-reduction target, which is currently set to expire on 31 March 2023. Two variables will determine how easily the target can be met: 1) liquified natural gas (LNG) supply, and 2) the nature of demand reductions. Plans for rapid deployment of regasification units will alleviate concerns over LNG import infrastructure capacity. However, the EU will continue to compete internationally for LNG cargoes, and will remain vulnerable to global dynamics. Strong economic growth in China, for example, could further tighten markets. The way demand is reduced will determine the economic consequences. So far, large reductions in industrial gas demand have not been accompanied by dramatic drops in industrial output, suggesting good substitution options. However, hardly any gas was saved in the power sector last year, because of weak nuclear and hydro output. The return of French nuclear output will therefore be a huge positive. Finally, households have reduced gas demand, partly driven by warmer than usual weather. Record numbers of heat pumps were deployed in 2022, suggesting the start of a structural shift away from gas demand for heating. Policy should support a continued structural shift away from gas. This involves enabling rapid deployment of renewables and the accompanying grid infrastructure, energy-efficiency measures, help for households that want to switch to cleaner heating, and collaboration with industry to accelerate adoption of new low-carbon production methods.
Topic:: Security, Gas, Energy, Russia-Ukraine War, and Green Economy
Political Geography:: Europe

8528. Mateship Amongst Competition: Recommendations for the U.S.-Australia Alliance

Author:: Randall G. Schriver and Wallace "Chip" Gregson
Publication Date:: 01-2023
Content Type:: Working Paper
Institution:: Project 2049 Institute
Abstract:: The U.S.-Australia alliance is one of the deepest and most comprehensive alliances in existence. In this report, a bipartisan study group co-chaired by Project 2049 Chairman Hon. Randall Schriver and LtGen Wallace “Chip” Gregson identify three key priorities for the U.S.-AUS alliance. Then, they explore recommendations to address these priorities in four main spheres: political, defense, trade, and resource security. Their recommendations range from minor adjustments of current alliance institutions to expansive changes such as the broadening of ITAR. They conclude by reaffirming the current strength of the U.S.-AUS alliance, and that its current challenges present an opportunity to demonstrate how like-minded allies can “lift as one” and deliver a robust, agile, and sustainable response in the face of an increasingly unstable security environment.
Topic:: Security, Foreign Policy, Bilateral Relations, Alliance, and Strategic Competition
Political Geography:: Australia, North America, and United States of America

8529. The Long‐Run Effects of Immigration: Evidence across a Barrier to Refugee Settlement

Author:: Antonio Ciccone and Jan Nimczik
Publication Date:: 02-2023
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: Some 280 million people around the world are first‐generation immigrants; in Organisation for Economic Co‐operation and Development countries, first‐generation immigrants make up around 14 percent of the population. The economic effects of immigration have become better understood in recent decades. A new focus of research on the effects of immigration is its long‐run impact on productivity, wages, and income. We contribute to this research by examining the long‐run economic effects of the arrival of refugees in what would become West Germany after the end of World War II (WWII) in 1945. This period was characterized by one of the largest population movements in modern times. Between 1945 and 1949, millions of people from Czechoslovakia, Hungary, Poland, Romania, and eastern parts of prewar Germany were displaced westward. When the Federal Republic of Germany (West Germany) was founded in 1949, these refugees made up around 15 percent of the country’s population.
Topic:: History, Immigration, Refugees, Resettlement, and World War II
Political Geography:: Europe, France, Germany, and United States of America

8530. The Political Economy of Anti‐bribery Enforcement

Author:: Lauren Cohen and Bo Li
Publication Date:: 02-2023
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: A level playing field for firm competition is a fundamental requirement for any market to maximize its potential and achieve productive efficiency. When government favors a set of firms or individuals over others, distortions arise that reverberate throughout entire industries, affecting sales, production, innovation, and more. This is not to say that barriers to firms may not sometimes naturally arise, but if a finger is placed on the scale by government to allow certain firms to gain some unerodable advantage, this can have large implications on allocation and overall economic development.
Topic:: Corruption, Political Economy, Law Enforcement, Accountability, and Bribery
Political Geography:: Global Focus

8531. The Economic Effects of the English Parliamentary Enclosures

Author:: Leander Heldring, James A. Robinson, and Sebastian Vollmer
Publication Date:: 03-2023
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: In 1808, the English agriculturist Arthur Young stumbled on something interesting. He noticed that the adjacent Cambridgeshire parishes of Childersley and Hardwicke in England had startlingly different economic outcomes, even though they were divided only by a hedgerow. In Hardwicke, wheat yields were 16 bushels per acre, whereas in Childersley, on the other side of the hedgerow, they were 24 bushels per acre—50 percent higher. What could explain the difference? It wasn’t economic fundamentals, because Childersley consisted of similar soil. Rather, Young attributed the difference to the fact that the land in Hardwicke remained in “common field” while the land in Childersley was enclosed.
Topic:: Agriculture, History, Economy, Enclosure, and Parliament
Political Geography:: Europe and England

8532. Uncle Sucker: Why U.S. Efforts at Defense Burdensharing Fail

Author:: Justin Logan
Publication Date:: 03-2023
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: In 2022, the United States counted 50 of the world’s 195 countries as formal treaty allies, not including dozens more informal security relationships. U.S. allies do not carry a proportionate share of the burden of their defense; Washington’s allies account for roughly 36 percent of world economic output but only 24 percent of world military spending. In every alliance, the United States is the most important member and gives more than it gets in return. American politicians and the American public regularly express frustration with allies’ behavior. In 1959, for example, President Dwight D. Eisenhower lamented that the insufficient defense efforts of U.S. allies in Europe meant that the Europeans were close to “making a sucker out of Uncle Sam.” Things have gotten worse since 1959. Today, America’s alliances act as transfer payments from U.S. taxpayers to taxpayers in allied countries. History and theory both suggest that hectoring allies is unlikely to produce much change. Allies know that they can pocket the gains from U.S. commitments, then spend their own money in the ways they believe benefit them most. Policymakers should evaluate alliance commitments in the context of the net contributions of U.S. allies to U.S. defense, weighed against the costs and benefits of a non‐alliance. The only way to produce more equitable burdensharing is to make allies doubt the strength of the U.S. commitment: the stronger the belief in the U.S. commitment, the harder it is to get allies to defend themselves. Unless policymakers fundamentally change their approach to alliances, there is little hope that defense burdens can be spread more equitably.
Topic:: History, Alliance, Defense Spending, Military, and Burden-sharing
Political Geography:: North America and United States of America

8533. Disease Mix and How Economic Freedom Matters for Health Outcomes

Author:: Vincent Geloso, Kelly Hyde, and Ilia Murtazashvili
Publication Date:: 03-2023
Content Type:: Working Paper
Institution:: The Cato Institute
Abstract:: We investigate the institutional foundations of public health. We argue that a key distinction in analysis of disease is between diseases of commerce (diseases associated with movement of people and with affluence) and diseases of poverty (primarily noncommunicable diseases that depend on wealth and income). We show that the mix of disease – the ratio of communicable diseases and those associated with longevity to diseases of poverty – increases in economically free countries. We argue that increasing burdens of diseases of commerce reflects the quality of institutions, as those diseases are better than living shorter, brutish lives where diseases of poverty claim many lives. This analysis also highlights an institutional trade‐off: economically free institutions reduce certain types of disease while contributing to others.
Topic:: Health, Infectious Diseases, Economy, Institutions, and Public Health
Political Geography:: Global Focus

8534. The Fiscal Impact of Immigration in the United States

Author:: Alex Nowrasteh, Sarah Eckhardt, and Michael Howard
Publication Date:: 03-2023
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: The National Research Council and the National Academy of Sciences (NAS) published groundbreaking investigations into the economics of immigration in 1997 and 2017. Both publications contained thorough literature surveys compiled by experts, academics, and think tank scholars on how immigration affects many aspects of the U.S. economy. The 2017 NAS report included an original fiscal impact model as a unique contribution to immigration scholarship. Its findings have been used by policymakers, economists, journalists, and others to debate immigration reform. Here, we acquired the exact methods used by the NAS from its authors to replicate, update, and expand upon the 2017 fiscal impact model published in the NAS’s The Economic and Fiscal Consequences of Immigration. This paper presents two analyses: a measure of the historical fiscal impacts of immigrants from 1994 to 2018 and the projected long‐term fiscal impact of an additional immigrant and that immigrant’s descendants. An individual’s fiscal impact refers to the difference between the taxes that person paid and the benefits that person received over a given period. We use and compare two models for these analyses: the first follows the NAS’s methodology as closely as possible and updates the data for more recent years (hereafter referred to as the Updated Model), and the second makes several methodological changes that we believe improve the accuracy of the final results (hereafter referred to as the Cato Model). The most substantial changes made in the Cato Model include correcting for a downward bias in the estimation of immigrants’ future fiscal contributions identified by Michael Clemens in 2021, allocating the fiscal impact of U.S.-born dependents of immigrants to the second generation group, and using a predictive regression to assign future education levels to individuals who are too young to have completed their education. Other minor changes are discussed in later sections. Immigrants have a more positive net fiscal impact than that of native‐born Americans in most scenarios in the Updated Model and in every scenario in the Cato Model, depending on how the costs of public goods are allocated. The Cato Model finds that immigrant individuals who arrive at age 25 and who are high school dropouts have a net fiscal impact of +$216,000 in net present value terms, which does not include their descendants. Including the fiscal impact of those immigrants’ descendants reduces those immigrants’ net fiscal impact to +$57,000. By comparison, native‐born American high school dropouts of the same age have a net fiscal impact of −$32,000 that drops to −$177,000 when their descendants are included (see Table 31). Results also differ by level of government. State and local governments often incur a less positive or even negative net fiscal impact from immigration, whereas the federal government almost always sees revenues rise above expenditures in response to immigration. With some variation and exceptions, the net fiscal impact of immigrants is more positive than it is for native‐born Americans and positive overall for the federal and state/local governments.
Topic:: Immigration, History, and Fiscal Policy
Political Geography:: North America and United States of America

8535. The Impact of Regulation on Innovation

Author:: Philippe Aghion, Antonin Bergeaud, and John Van Reenen
Publication Date:: 04-2023
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: There is considerable research on the economic impacts of regulations but relatively few studies about their impact on technological innovation. Moreover, most analyses focus on the costs and benefits of regulation at a point in time, rather than on its effects over time. Yet potential effects on economic growth are likely to be much more pronounced in the long run. Many scholars have been concerned that slower growth in countries with heavy labor regulations could be due to firms’ reluctance to innovate given the burden of red tape. For example, the slower growth of Southern European countries and parts of Latin America have often been blamed on onerous labor laws.
Topic:: Labor Issues, Regulation, Economic Growth, and Innovation
Political Geography:: Global Focus

8536. Balance of Trade, Balance of Power: How the Trade Deficit Reflects U.S. Influence in the World

Author:: Daniel Griswold and Andreas Freytag
Publication Date:: 04-2023
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: The U.S. trade deficit is a misunderstood symbol of U.S. economic strength and influence in the world. The deficit is not driven by unfair trade abroad or industrial weakness at home and, as the Trump years show, cannot be “fixed” through higher tariffs. Instead, the trade deficit is driven by a persistent net inflow of foreign capital, which reduces interest rates and fuels economic output. Contrary to myth, the trade deficit is not a cause of deindustrialization or a loss of manufacturing jobs. In fact, the current balance of trade points to America’s continuing influence in global affairs—as a haven for global investment, as a robust producer and buyer of global goods and services, and as the provider of a strong dollar that remains at the center of the global economy. Policymakers should reject measures that restrict trade and foreign investment and instead seek to expand America’s commercial ties to the rest of the world.
Topic:: Foreign Policy, Economy, Trade, and Trade Deficit
Political Geography:: North America and United States of America

8537. Course Correction: Charting a More Effective Approach to U.S.-China Trade

Author:: Clark Packard and Scott Lincicome
Publication Date:: 05-2023
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: Over the past several years the U.S.-China economic relationship has soured and become subordinated to broader concerns about national security and geopolitics. After a decades‐long reform agenda in China that lifted hundreds of millions out of grinding poverty, Chinese president Xi Jinping has increasingly turned inward—reembracing Maoist socialism and heavy‐handed central planning. Washington’s response to these worrisome developments has been reflexively hawkish economically, scattershot, and woefully inadequate for the economic challenge that China presents.
Topic:: National Security, Bilateral Relations, Economy, and Trade
Political Geography:: China, Asia, North America, and United States of America

8538. The Vagaries of the Sea: Evidence on the Real Effects of Money from Maritime Disasters in the Spanish Empire

Author:: Adam Brzezinski, Yao Chen, Felix Ward, and Nuno Palma
Publication Date:: 05-2023
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: The Columbian voyage of 1492 marked the beginning of three centuries in which vast amounts of monetary silver were shipped from America to Spain. During that time, Spain’s money supply was subjected to the vagaries of the sea. Maritime disasters that resulted in the loss of silver‐laden ships gave rise to random contractions in the amount of money that arrived in Spain. We studied these maritime disasters to obtain estimates of the causal effects of changes in the money supply on economic output and prices.
Topic:: Imperialism, History, Economy, and Maritime
Political Geography:: Europe and Spain

8539. The Future of the WTO: Multilateral or Plurilateral?

Author:: James Bacchus
Publication Date:: 05-2023
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: Since its 1947 inception as the General Agreement on Tariffs and Trade, the World Trade Organization (WTO) has generally practiced an all‐or‐nothing approach to multilateral negotiations in which the consensus of all WTO members was for trade liberalization. Although this approach worked throughout the second half of the 20th century, its shortcomings were laid bare by the failure of the Doha Development Agenda and the inability of WTO members to achieve further broad, multilateral trade liberalization. Today, amid heightened animosity toward additional trade liberalization, prospects for the traditional consensus‐based approach seem dimmer than ever.
Topic:: Treaties and Agreements, World Trade Organization, Multilateralism, and Trade
Political Geography:: Global Focus

8540. The Regressive Nature of the U.S. Tariff Code: Origins and Implications

Author:: Lydia Cox
Publication Date:: 06-2023
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: Tariffs are often thought of as taxes that fall uniformly across goods or industries. In reality, however, the U.S. tariff schedule is extremely complex—the modern‐day tariff code comprises 4,394 pages of tariffs on 19,347 varieties of goods. As a result, there is a lot of variation in tariff rates, even within narrowly defined categories of goods. We study this complexity through the lens of a little‐known but consequential pattern in the modern U.S. tariff schedule: tariff rates are systematically higher on low‐value versions of goods relative to their high‐value counterparts. For example, the tariff on a $400 handbag made of reptile leather is 5.3 percent, while the tariff on an $8 plastic‐sided handbag is 16 percent. Through a comprehensive analysis of U.S. tariffs over the past 100 years, we show that this regressive pattern is, and has been, a systematic feature of tariffs for decades. Our findings are emblematic of a more fundamental feature of U.S. tariff policy: tariffs set to meet policy objectives of the past have persisted through vast changes in the economic landscape and, despite their historical origins, are still affecting consumers today.
Topic:: Economics, Tariffs, and Trade Policy
Political Geography:: North America and United States of America

8541. Global Inequality in Well‐Being Has Decreased across Many Dimensions: Introducing the Inequality of Human Progress Index

Author:: Chelsea Follett and Vincent Geloso
Publication Date:: 06-2023
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: The world has seen dramatic, global human progress across a broad range of indicators in recent decades, but have those gains been widely shared? The Inequality of Human Progress Index (IHPI) measures relative gaps in global development. It surveys international inequality across a greater number of dimensions than any prior index. By analyzing inequality in a multidimensional way, the IHPI takes inequality more seriously than those indexes that focus on income inequality alone. The IHPI considers material well‐being and seven additional metrics: lifespan, infant mortality, adequate nutrition, environmental safety, access to opportunity (as measured by education), access to information (as measured by internet access), and political freedom. Across all but two of those dimensions, the world has become more equal since 1990. Globalization and market liberalization over the past few decades have not only raised absolute living standards but also reduced overall inequality.
Topic:: Development, Inequality, Economy, and Well-Being
Political Geography:: Global Focus

8542. Information Manipulation and Repression: A Theory and Evidence from the COVID-19 Response in Russia

Author:: Natalia Lamberova and Konstantin Sonin
Publication Date:: 06-2023
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: The COVID-19 pandemic has called for provision of public goods and services that require a high state capacity, including producing and distributing vaccines, enforcing mask mandates, limiting potential super‐spreader events, and so on. The rationale for public intervention was that private actions, such as getting vaccinated, wearing masks, and avoiding large gatherings, have benefits to broader society, so they are likely to be undersupplied by individuals on their own. In these circumstances, one might expect the power of the state coercing others into compliance to be beneficial. Are authoritarian leaders, less constrained by institutions and less accountable to voters, better equipped to deal with health emergencies?
Topic:: Authoritarianism, Repression, Public Health, and COVID-19
Political Geography:: Russia and Eurasia

8543. Indian Nationalism and the Historical Fantasy of a Golden Hindu Period

Author:: Swaminathan S. Anklesaria Aiyar
Publication Date:: 06-2023
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: India’s ruling Bharatiya Janata Party (BJP) promotes its Hindu nationalist agenda by claiming that India was the world’s richest region under glorious Hindu rule for thousands of years before being conquered by Muslim invaders in the 11th century and British invaders in the 18th century. BJP politicians say foreign invaders transformed a “golden bird” into an impoverished chattel. Prime Minister Narendra Modi has promised to restore India to its historical eminence. To support their narrative, BJP partisans often cite historian Angus Maddison, who estimated that India accounted for 32 percent of the world’s gross domestic product in 1 CE (during the Hindu period), but this number plummeted to 4 percent by the time British rule ended in 1947. But a closer look at Maddison’s work shows that the BJP is cherry‐picking data to create a bogus historical narrative. In 1 CE, India’s per capita income was below the world average, at a pathetic $450. It did not rise at all during the following thousand years of Hindu rule. It did not worsen after the Muslim and British conquests, as BJP partisans claim, though it improved very slowly. The supposedly golden Hindu period was one of stark poverty and economic stagnation. Disease, drought, and war kept India’s population stagnant at 75 million people throughout a thousand years of Hindu rule in India, when just staying alive was a challenge. Under Muslim and British rule, death rates fell and the population grew, and it grew still more after independence. Both in terms of income and life expectancy, the “golden period”—if it can be called that—is today, not in the Hindu era.
Topic:: Nationalism, Economy, Domestic Politics, and Bharatiya Janata Party (BJP)
Political Geography:: South Asia and India

8544. Skilled Immigration, Task Allocation, and the Innovation of Firms

Author:: Anna Maria Mayda, Gianluca Orefice, and Gianluca Santoni
Publication Date:: 06-2023
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: Immigration continues to be a hotly debated topic in several destination countries. Policy and academic discussions have focused on different types of immigration, depending on the host country. While research is voluminous on the United States and countries with skill‐points‐based immigration systems, the discussion in Europe has mostly centered on lesser‐skilled migrants and political refugees, as they represent the largest proportion of arrivals. However, Europe has been receiving skilled migrants in increasing numbers. For example, in France, the share of college‐educated immigrants is 23 percent— lower than in the United States, Canada, or the UK—but it increased by 11 percentage points between 1995 and 2010.
Topic:: Immigration, Economy, Innovation, and Skills
Political Geography:: Global Focus

8545. Rational Eviction: How Landlords Use Evictions in Response to Rent Control

Author:: Eilidh Geddes and Nicole Holz
Publication Date:: 07-2023
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: As housing prices rise, cities are turning to rent control policies, hoping to ensure longterm affordable housing. Typically, rent control policies require leases to be renewed at statutorily limited rent increases. Rent control policies reduce the returns from operating in the rental market, creating well‐studied incentives for landlords to leave the rental market. Many rent control policies—including San Francisco’s—feature vacancy decontrol provisions, which allow landlords to reset rents to market rates when tenants move. These policies limit the reductions in returns to operating in the rental market but create incentives for landlords to induce tenant turnover, possibly through evictions. The more tenants move, the more often a landlord can raise rents to market rates.
Topic:: Markets, Economy, Eviction, Housing, and Rent
Political Geography:: North America and United States of America

8546. Central Bank Digital Currency: The Risks and the Myths

Author:: Nicholas Anthony and Norbert Michel
Publication Date:: 01-2023
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: Central bank digital currencies (CBDCs) have the potential to radically transform the American financial system—ultimately usurping the private sector and endangering Americans’ core freedoms. Although CBDCs have gained the attention of politicians, central bankers, and the tech industry, this experiment should be left on the drawing board. This paper provides a summary of why Congress should explicitly prohibit the Federal Reserve and the Department of the Treasury from issuing a CBDC.
Topic:: Finance, Economy, Fiscal Policy, Banking, and Digital Currency
Political Geography:: North America and United States of America

8547. Self‐Service Bans and Gasoline Prices: The Effect of Allowing Consumers to Pump Their Own Gas

Author:: Vitor Melo
Publication Date:: 01-2023
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: Billions of people live in countries that ban self‐service fueling at gasoline stations, including some of the world’s largest countries by population, including China, India, and Brazil, among many others. The impact of these bans is largely understudied despite their prevalence presumably because this policy is often implemented at the national level and because there have been no policy changes in these countries that allow for an assessment of these bans on gasoline prices.
Topic:: Gas, Regulation, Economy, and Consumer Behavior
Political Geography:: North America, Global Focus, and United States of America

8548. Formula for a Crisis: Protectionism and Supply Chain Resiliency—the Infant Formula Case Study

Author:: Scott Lincicome, Gabriella Beaumont-Smith, and Alfredo Carrillo Obregon
Publication Date:: 01-2023
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: It has become accepted wisdom in Washington that the COVID-19 pandemic revealed how openness to international trade and investment increases U.S. vulnerability to economic shocks and contributes to widespread shortages of food, medicine, and other essential goods. This official narrative, however, ignores ample economic research showing that, while disruptions are inevitable in a modern economy, the alternative to free trade—a protectionism‐driven onshoring of global supply chains—carries its own risks and can even heighten vulnerability by inhibiting natural market adjustments to economic shocks. The infant formula crisis, which lasted for most of 2022 and was unique to the United States, provided an unfortunate real‐world lesson in this regard.
Topic:: International Trade and Finance, Free Trade, Resilience, COVID-19, and Supply Chains
Political Geography:: North America and United States of America

8549. The Ukraine effect: demise or rebirth of the global order?

Author:: Bobo Lo
Publication Date:: 05-2023
Content Type:: Commentary and Analysis
Institution:: Lowy Institute for International Policy
Abstract:: The Russian invasion of Ukraine has sharpened the commitment of Western governments to a liberal vision of international order. But it is a different story elsewhere. Many countries, particularly in the Global South, regard the rules-based order as an artificial Western construct, and the Ukraine war as a matter of geopolitics rather than norms and principles. Events in Ukraine have reinforced Washington’s views about two competing visions of global order — one democratic, the other autocratic. However, such binarism has little resonance beyond the West. For the Global South, the divide that matters is with the Global North. This is not only about relative influence and status in the international system, but also diverging priorities. A rules-based international order is achievable, but not as commonly imagined in the West. The post-Cold War template of unalloyed US global leadership and Western-dominated institutions is no longer tenable. The only viable order is one that is more inclusive and representative, reflecting a world where power is increasingly diffuse, and global cooperation is critical in meeting threats such as climate change and human insecurity.
Topic:: Multilateralism, International Order, and Russia-Ukraine War
Political Geography:: Russia and Ukraine

8550. Chips, subsidies, security, and great power competition

Author:: John Edwards
Publication Date:: 05-2023
Content Type:: Commentary and Analysis
Institution:: Lowy Institute for International Policy
Abstract:: Government subsidies to industry in leading economies are large and growing, with potentially deep, wide-ranging, and unpredictable consequences for the world. It is not clear what rules, if any, will apply in this new era of industry competition, nor whether the measures will be effective in denying frontier technology to rival economies. The impacts of industry subsidies and export controls, including for countries such as Australia, hang on their implementation — beneficial in so far as they speed tech innovation, but detrimental if they split the global economy into competing blocs.
Topic:: Security, Economy, Subsidies, Competition, and Microchips
Political Geography:: Australia and Global Focus

8551. Southeast Asia Aid Map - Key Findings Report

Author:: Alexandre Dayant, Grace Stanhope, and Roland Rajah
Publication Date:: 06-2023
Content Type:: Commentary and Analysis
Institution:: Lowy Institute for International Policy
Abstract:: Official development finance plays an important role in financing Southeast Asia’s development, equivalent to around 10% of total government development spending in the region. China is Southeast Asia’s single largest development partner and leads infrastructure financing. Yet, implementation problems have seen the scale of China’s financing decline in recent years. Traditional development partners collectively still dominate development financing in Southeast Asia at 80% of the total. The multilateral development banks lead the way, followed by Japan, Europe, and South Korea. The United States and Australia are mid-sized players. India and the Middle East have become notable sources of non-traditional development finance, with the Islamic Development Bank playing an important role. Climate development finance is increasing, but Southeast Asia will need more support if it is to transition towards resilient, low-carbon development. Intraregional development cooperation is growing, but only makes up a small part of development finance in Southeast Asia.
Topic:: Climate Change, Development, Humanitarian Aid, Finance, and Economy
Political Geography:: Asia and Southeast Asia

8552. Follow the money: connecting anti-money laundering systems to disrupt environmental crime in the Amazon

Author:: Melina Risso, Carolina Andrade Quevedo, Lycia Brasil, Vivian Calderoni, and Maria Fe Vallejo
Publication Date:: 06-2023
Content Type:: Working Paper
Institution:: Igarapé Institute
Abstract:: Environmental crime became the world’s third most lucrative illicit economy after drug trafficking and smuggling, with estimates of $110 to $281 billion in annual profits. Between 2006 and 2016, environmental crimes grew at a rate of 5% to 7% per year, a pace two or three times faster than that of global GDP growth. Money laundering is part of the criminal machinery that plunders the Amazon Rainforest. The study “Follow the Money: connecting anti-money laundering systems to disrupt environmental crime in the amazon” reveals the need for systems, agencies, and institutions responsible for preventing money laundering to turn their attention to the connections between this illicit practice and environmental crimes. The Igarapé study shows that the money laundering cycle follows three stages before the laundered funds can enter the financial system: placement, layering, and integration. However, not all proceeds from criminal activity are directly laundered into the formal financial system. Thus, informal diversification constitutes the process of moving illegal flows into the informal economy. It is estimated that 30% of the money to be laundered is used to pay the operating expenses of illicit economies. Cash transactions, divided into small amounts and deposited by “money mules,” are used to finance the hiring of precarious labor, accommodations, food, security, transportation, health services, leisure, and machinery, for example. The remaining 70% of illicit proceeds are formally inserted into the financial system. The study also recalls that the World Bank estimated in 2019 that governments lose between 6 and 9 billion dollars in tax revenue each year due to illegal logging. Similarly, other environmental crimes such as illegal mining, especially of gold and diamonds, generate between 12 and 48 billion dollars in revenue. In 2018, Interpol’s Global Illicit Flows Atlas found that illegal logging accounted for a percentage between 15% and 30% of the global timber trade, calculated between 51 billion and 152 billion dollars per year. The illegal logging industry is responsible for up to 90% of deforestation of tropical forests in African countries such as the Democratic Republic of Congo. Combating illicit financial flows is a powerful tool for dismantling illegal economies. It becomes even more relevant when it is identified that illicit financial flows fuel an ecosystem of environmental crime composed of a convergence of environmental and non-environmental crimes, such as corruption, fraud, tax evasion, and others.
Topic:: Security, Environment, Financial Crimes, Money Laundering, and Illicit Financial Flows
Political Geography:: Brazil, South America, and Amazon Basin

8553. Harnessing Public Employment Programmes' Potential: An Intervention Brief Focusing on Youth Inclusion in South Africa's Community Work Programme

Author:: M. Langa
Publication Date:: 01-2023
Content Type:: Policy Brief
Institution:: Centre for the Study of Violence and Reconciliation (CSVR)
Abstract:: Youth continue to be worst affected by social and economic issues such as unemployment, substance abuse and violence (ILO, 2021; United Nations, 2011). South African youth are no exception to this claim, experiencing the world’s highest rate of unemployment as well as some of the highest rates of homicide and gender-based violence (Clifford, 2020; Rebello, 2021). These challenges have gained increased recognition from stakeholders, such as the South African government, with the Presidential Youth Employment Initiative representing one of many recent initiatives. This intervention brief aims to contribute to conversations around how to better address the challenges faced by South African youth. It builds on research conducted by the Centre for the Study of Violence and Reconciliation (CSVR), which focused on how public employment programmes, specifically the Community Work Programme (CWP), may contribute to youth social and economic inclusion, which may further assist in reducing the vulnerability of South African youth. This brief highlights how some youth have negative perceptions of the CWP, which primarily stem from the nature of the activities carried out by the CWP and a lack of accurate knowledge about the programme. Examples from four CWP sites highlight how youthoriented activities may attract greater interest in the programme among youth. It also highlights how youth have benefitted and can continue to benefit from the programme.
Topic:: Government, Employment, Youth, Unemployment, and Inclusion
Political Geography:: Africa and South Africa

8554. Trade Shocks and Social Mobility: The Intergenerational Effect of Import Competition in Brazil

Author:: Andrés César, Matias Ciaschi, Guillermo Falcone, and Guido Neidhöfer
Publication Date:: 07-2023
Content Type:: Working Paper
Institution:: Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:: This paper investigates whether the impact of trade shocks on employment and wages persists across generations. Using an instrumental variable strategy on survey data with retrospective information on parental employment, we study the consequences of increased Chinese import competition in Brazilian industries on individuals with differently exposed fathers. Results show that several years after the shock, children of more exposed fathers have lower education and earnings, lower chances of formal jobs, and are more likely to rely on social assistance. These effects are substantial for children from disadvantaged background, indicating that the shock had a negative impact on intergenerational mobility.
Topic:: Trade, Imports, Economic Competition, and Social Mobility
Political Geography:: Brazil and South America

8555. The Effects of Differential Exposure to COVID-19 on Educational Outcomes in Guatemala

Author:: Andres Ham, Emmanuel Vazquez, and Monica Yanez-Pagans
Publication Date:: 05-2023
Content Type:: Working Paper
Institution:: Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:: This paper studies the effects of differential exposure to COVID-19 on educational outcomes in Guatemala. The government adopted a warning index (ranging from 0 to 10) to classify municipalities by infection rates in 2020, which was then used by the Ministry of Education in 2021 to establish a “stoplight” system for in-person instruction. Using administrative panel data for all students in Guatemala, the study employs a difference-in-differences strategy that leverages municipal differences over time in the warning index to estimate the effects of the pandemic on dropout, promotion, and school switching. The results show that municipalities with a higher warning index had significantly larger dropout, lower promotion rates, and a greater share of students switching from private to public schools. These effects were more pronounced during the first year of the pandemic. The findings show differential effects by the level of instruction, with greater losses for younger children in initial and primary education. The results are robust to specification choice, multiple hypothesis adjustments, and placebo experiments, suggesting that the pandemic has had heterogeneous consequences.
Topic:: Education, Government, COVID-19, and Schools
Political Geography:: Central America and Guatemala

8556. The Impact of Robots in Latin America: Evidence from Local Labor Markets

Author:: Irene Brambilla, Andrés César, Guillermo Falcone, and Leonardo Gasparini
Publication Date:: 04-2023
Content Type:: Working Paper
Institution:: Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:: We study the effect of robots on labor markets in Argentina, Brazil, and Mexico, the major robot users in Latin America, during the period 2004{2016. We exploit spatial and time variations in exposure to robots arising from initial differences in industry specialization across geographic locations and the evolution of robot adoption across industries, to estimate a causal effect of robots on local labor market outcomes. We find that district’s exposure to robots causes a relative deterioration in labor market indicators such us unemployment and labor informality. We document that robots mainly replace formal salaried jobs, affecting young and semi-skilled workers to a greater extent, and that informal employment acts as a buffer that prevents a larger increase in unemployment.
Topic:: Unemployment, Robotics, Labor Market, and Informal Economy
Political Geography:: Brazil, Argentina, Latin America, and Mexico

8557. Inequality of Opportunity and Income Redistribution

Author:: Marcel Preuss, Germán Reyes, Jason Somerville, and Joy Wu
Publication Date:: 01-2023
Content Type:: Working Paper
Institution:: Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:: We examine how people redistribute income when there is uncertainty about the role luck plays in determining opportunities and outcomes. We elicit redistribution decisions from a U.S.- representative sample who observe worker outcomes and whether luck magnified workers’ effort (“lucky opportunities”) or determined workers’ income directly (“lucky outcomes”). We find that participants redistribute less and are less reactive to changes in the importance of luck in environments with lucky opportunities. Our findings have implications for models that seek to understand and predict redistribution attitudes, and help to explain the gap between lab evidence on support for redistribution and U.S. inequality trends.
Topic:: Inequality, Redistribution, and Income
Political Geography:: North America and United States of America

8558. Do Minimum Wage Hikes Lead to Employment Destruction? Evidence from a Regression Discontinuity Design in Argentina

Author:: Nicolás Abbate and Carlos García Jiménez
Publication Date:: 02-2023
Content Type:: Working Paper
Institution:: Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:: In this study, we examine the impact of eight minimum wage increases in Argentina during the early 21st century by analyzing administrative records of registered employment. Utilizing a regression discontinuity design, we compare job separation rates between a group affected by the minimum wage hikes and a control group slightly out of their legal scope. We show that this method improves upon previous methods by reducing the likelihood of Type-I error. Overall, we find that the minimum wage hikes had no significant effect on job separation rates. However, the increases implemented in 2008 resulted in a decrease of 4.8 percentage points (19%) in separations, indicating that the employment effects of minimum wages may not necessarily lead to job loss.
Topic:: Employment, Economy, and Minimum Wage
Political Geography:: South Asia and Argentina

8559. Inequality of Opportunity and Income Redistribution

Author:: Marcel Preuss, Germán Reyes, Jason Somerville, and Joy Wu
Publication Date:: 01-2023
Content Type:: Working Paper
Institution:: Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:: We examine how people redistribute income when there is uncertainty about the role luck plays in determining opportunities and outcomes. We elicit redistribution decisions from a U.S.- representative sample who observe worker outcomes and whether luck magnified workers’ effort (“lucky opportunities”) or determined workers’ income directly (“lucky outcomes”). We find that participants redistribute less and are less reactive to changes in the importance of luck in environments with lucky opportunities. Our findings have implications for models that seek to understand and predict redistribution attitudes, and help to explain the gap between lab evidence on support for redistribution and U.S. inequality trends.
Topic:: Inequality, Economy, Redistribution, and Income
Political Geography:: North America and United States of America

8560. The Functionality of Uganda’s Single Spine Agricultural Extension System

Author:: Elijah Dickens Mushemeza
Publication Date:: 01-2023
Content Type:: Research Paper
Institution:: Advocates Coalition for Development and Environment (ACODE)
Abstract:: This report presents the findings and discussions on the functionality of the single-spine agricultural extension system in Uganda. The recommendations from the research process will potentially inform the implementation of the new national agricultural extension strategy aligned to the NDP III, the Parish Model and the national agenda of socio-economic transformation. The single spine extension system was conceptualized as a well-coordinated, harmonized, public sectorled pluralistic extension system. The aim was to eliminate the parallel institutional arrangements that emerged during the NAADS program implementation. It aims at enhancing agricultural production and productivity, value addition, food security, household income and export. In addition, it focuses on building the capacity of individual farmers and farmer institutions to have greater access to and control over structures and processes that transform their resources and assets into the outcomes that they desire to achieve their goals. The study sought to address four objectives: (i) assessing the effectiveness of coordination among key actors (including clarity of mandates) in the delivery of agricultural extension; (ii) assessing the functionality of transparency and accountability mechanisms in the single spine agricultural extension system; (iii) assessing the performance of the system in the attainment of key agricultural extension outcomes; and (iii) assessing the effects of COVID-19 on the delivery of agricultural extension services. The report gives a background to the reform and an overview of the strategy that has been used to implement it. The report gives the methodology utilised in the research process, the limitations of the study and how methodological challenges were addressed. The report brings out the findings in relation to the objectives set and in particular; on coordination dilemmas, transparency and accountability mechanisms, and performance of the system and the effects of COVID-19 on the delivery of agricultural extension service.
Topic:: Agriculture, Governance, Reform, and Policy Implementation
Political Geography:: Uganda and Africa

8561. Compliance Assessment of the FY 2023/24 Budget to Climate Change Interventions in the Third National Development Plan (NDPIII)

Author:: Advocates Coalition for Development and Environment (ACODE)
Publication Date:: 01-2023
Content Type:: Research Paper
Institution:: Advocates Coalition for Development and Environment (ACODE)
Abstract:: The Intergovernmental Panel on Climate Change (IPCC) affirms that climate change is occurring in the world today. Climate change is a global development challenge with adverse effects manifested in different ways at national and local levels especially in the vulnerable least prepared countries like Uganda. It is associated with negative severe effects on human well-being and ecosystems which equally hinders the achievement of sustainable development and social equity goals hence becoming one of the drivers of exclusion. This makes it an urgent problem that requires global, regional and national efforts towards effective mitigation and adaptation responses. Swift effective response to climate change could significantly contribute to the attainment of the 17 Sustainable Development Goals (SDGs) while delayed action is predicted to have severe and irreversible consequences for natural and human systems. Uganda’s frameworks to sustainable development (Uganda’s Vision 2040, the NDP III, sectoral policies and plans) highlight climate change as an outstanding development challenge. This implies that the attainment of the country’s long-term development goals and the building of resilient communities that will mitigate and adapt to climate change largely depends on the significant allocation of financial resources to climate change interventions specified in the development frameworks. The NDPIII 2020/21-2024/25) not only integrates climate change across all its twenty (20) programmes but also provides for their strategic interventions and targets. This integration trickles down to the NDPIII Results Framework and Programme Implementation Action Plans (PEAPs) and is also supposed to fully cascade down to the national budget. This report presents the compliance assessment of the FY 2023/24 budget to climate change interventions in the third National Development Plan (NDPIII) based on ten (10) priority programmes selected due to their real or potential contribution to climate change and their strategic importance to the development process. Overall, the analysis revealed that the FY2023/24 Annual Budget (AB) to climate change interventions in NDP III is unsatisfactory at 55.35 percent which is slightly lower than last year’s compliance level of 64.7 percent. However, there were variations in the compliance levels of the different programmes. The programmes on Sustainable Development of Petroleum Resources programme (83.3%), and Sustainable Minerals Development programme (80%) had a satisfactory level of compliance. On the other hand, the programmes of Human Capital Development (62.5%), Integrated transport infrastructure and services (61.1%), and Tourism development (66.7%) had a moderately satisfactory level of compliance. Lastly, the programmes of Sustainable Urbanisation and housing (56.7%), Natural Resources, Environment, Climate Change, Water and Land Management (56.3%), Agro-industrialization programme (28%), Digital transformation (40%), Private Sector Development (0%) had a far below an unsatisfactory level of compliance (below 60%).
Topic:: Climate Change, Budget, and Sustainable Development Goals
Political Geography:: Uganda and Africa

8562. Emergent Agency in a Time of COVID-19: Research report

Author:: Flippo Artuso, Katrina Barnes, Duncan Green, and Irene Guijt
Publication Date:: 02-2023
Content Type:: Working Paper
Institution:: Oxfam Publishing
Abstract:: The outbreak of the COVID-19 pandemic was an unprecedented event in the modern era. Earlier studies demonstrated how ‘critical junctures’, which comprise major historical events and emergencies, often play an essential role in social change. This paper seeks to explore whether the COVID-19 pandemic would prove to be a similar pivotal moment, and what lessons and insights we could gather for positive social change. The research set out to find key insights on how individuals, communities, and organizations in civil society were responding to the pandemic in low-income populations at the intersection of multiple inequalities. These lessons could inform how donors, governments and NGOs might reshape their efforts to reduce emerging or deepening inequalities, and how civil society organisations and community-based organisations could amplify their positive impacts. Over 18 months, from September 2020 to March 2022, the ‘Emergent Agency’ research convened a global conversation between activists, development practitioners, researchers, and academics to better understand the phenomena that were taking place in response to the pandemic. The research collected more than 200 case studies and held a series of webinars and conversations in thematic clusters to uncover what these responses could teach us. The research project was enabled with funding from The Atlantic Fellows for Social and Economic Equity programme (AFSEE) of the London School of Economics.
Topic:: Civil Society, Governance, Pandemic, and COVID-19
Political Geography:: Global Focus

8563. 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

8564. Assessing Community Sensitivity to Cross-Border Security in Ghana

Author:: Mawusi Yaw Dumenu, Newton Yaw Norviewu, Balaarah Abdulai, and Nana Kwabena Aborampah Mensah
Publication Date:: 03-2023
Content Type:: Research Paper
Institution:: Ghana Center for Democratic Development
Abstract:: Strengthening the integrity of Ghana’s borders is essential for the welfare of the nation and its people. National efforts to prevent illegal cross-border activities, including illicit goods, persons and activities require full involvement of all Ghanaians, especially those living in border areas. This has become even more important considering the regional insecurity posed by terrorist groups and violent extremists. It is therefore imperative that residents be sensitized to potential threats associated with irregular cross-border activities that have a potential to facilitate activities of criminal gangs such as terrorists and violent extremist groups. Furthermore, as violent extremism and terrorist activities have become more prevalent in the West African sub-region it is crucial that these threats are considered when examining the functionality of Ghana’s border security. In an effort to improve awareness among border communities, the Center initiated the project entitled “Enhancing citizen participation in border security”. As part of the project strategies, a baseline survey was conducted within selected border communities to assess the level of awareness regarding border-related threats and gather information on the relationship between border residents and security agencies. The baseline survey was intended to inform the direction and interventions of the broader project. Both border residents and staff of some security agencies were interviewed in each of the 10 regions within where Ghana’s land borders are located. The findings of this survey are contained in this report.
Topic:: Security, Development, Terrorism, Borders, Smuggling, and Survey
Political Geography:: Africa and Ghana

8565. Proposals for Reducing the Size and Cost of Running Government

Author:: Kojo Asante and David Asante Darko
Publication Date:: 01-2023
Content Type:: Policy Brief
Institution:: Ghana Center for Democratic Development
Abstract:: Every other sector of the economy has had to incur substantive inconvenience or financial loss in efforts to return the sovereign debts to sustainable levels. Every other sector of the economy, except government itself. Against this backdrop, this paper reiterates some of the measures that have been proposed to reduce government spending and examines them in more detail. We delve into how the ministerial team might be reduced in size and thereby optimized to cut down government expenditure.
Topic:: Government, Budget, Finance, and Economy
Political Geography:: Africa and Ghana

8566. Reflections on Nigeria’s Elections: Threats, potential outcomes and relevance to democracy in West Africa

Author:: Paul Osei-Kuffour
Publication Date:: 02-2023
Content Type:: Policy Brief
Institution:: Ghana Center for Democratic Development
Abstract:: The upcoming presidential election in Nigeria has generated huge interest and enthusiasm within the sub-region. The election has been described as the most competitive since returning to multi-party democracy in 1999. This paper reflects on the prevailing context barely one month into the election. It discusses the relevance of the election to the sub-region, major reforms around the election and why it is receiving enormous attention in Nigeria and the whole of West Africa. It concludes with an analysis of the factors shaping the potential outcome of the election.
Topic:: Reform, Elections, Democracy, and Domestic Politics
Political Geography:: Africa, West Africa, and Nigeria

8567. The Democratic Quality of Primaries in Ghana: A Look at the 2020 NPP Internal Party Elections

Author:: Gildfred Boateng Asiamah, Francisca Sarpong Owusu, and Alfred Torsu
Publication Date:: 04-2023
Content Type:: Policy Brief
Institution:: Ghana Center for Democratic Development
Abstract:: In Ghana, political party primaries are not only a democratic imperative but also a constitutional requirement. However, no laws regulate the conduct of political party primaries in Ghana. Even the involvement of the national election management body, the Electoral Commission (EC), is limited to the counting and declaration of votes. This paper shares insights on the extent to which the parliamentary primaries conform to fundamental principles of democratic elections and identifies the mechanisms that party executives and leadership use to circumvent the democratic processes.
Topic:: Elections, Democracy, Political Parties, and Parliament
Political Geography:: Africa and Ghana

8568. Why Democracies Implement Better Climate Actions: Case Study of India, the Philippines, and Japan

Author:: Niranjan Sahoo and Jisoo Park
Publication Date:: 07-2023
Content Type:: Policy Brief
Institution:: East Asia Institute (EAI)
Abstract:: Asia is the most populous and one of the most climate-vulnerable regions in the world. Long coastline, vast low lying areas comprising many small island nations make it highly susceptible to climate change such as rising sea level and extreme weather events like floods, landslides. For many critics, democracies' response to climate change is much impeded due to their slow decision-making process and short-termism governed by electoral compulsions. Some analysts go as far as to claim that authoritarianism is needed to tackle the crisis more effectively. However, close examination of different governance structure's climate actions strongly supports that democracies are inherently better at handling climate crisis compared to authoritarian regimes. This article explores the multifaceted impact of climate change to democracy and delves into the case studies of India, the Philippines, and Japan to identify strengths as well as areas of improvement that democracies should consider to establish meaningful climate actions.
Topic:: Climate Change, Authoritarianism, Democracy, and Accountability
Political Geography:: Japan, India, Asia, and Philippines

8569. Australia’s Role Supporting Democracies as a Middle Power

Author:: Michael J. Green and Victoria Cooper
Publication Date:: 07-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: Michael J. Green (Professor and CEO of the United States Study Centre (USSC) in Sydney) and Victoria Cooper (Research Editor at the USSC) analyze Australia’s strengths as a middle power in the face of Beijing’s pressure campaign, and offer areas of regional cooperation that like-minded countries, including Australia, can build upon in order to defend democracy against authoritarian regimes. While acknowledging the limited capacity of Australia to independently counter Beijing’s illiberal behavior, the authors argue that through the expansion of development initiatives, promotion of women’s empowerment, and anti-corruption drives, Canberra can play a key role in leading multilateral efforts to promote democratic resilience in the region.
Topic:: Diplomacy, Statecraft, Middle Power, and Regional Politics
Political Geography:: China, Asia, and Australia

8570. Shifting Paradigms: The Rise of the Move Forward Party and the Changing Face of Thai Democracy

Author:: Napon Jatusripitak
Publication Date:: 06-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: In light of the 2023 general election in Thailand that delivered a surprise victory for the progressive Move Forward Party (MFP), Napon Jatusripitak, a visiting research fellow at the ISEAS ? Yusof Ishak Institute, analyzes the shifting political dynamics in the country and explains the key to MFP’s success. With the election outcome reflecting public’s heightened awareness and desire for political participation and citizen engagement, Thai politics seems prepared for transition from the conservative status quo. Nevertheless, Jatusripitak emphasizes that a sustainable change in domestic governance depends on the MFP’s capacity to carry out the drive for democracy and the conservative establishment’s willingness to accept and adjust.
Topic:: Elections, Democracy, Social Media, Political Parties, and Civic Engagement
Political Geography:: Thailand and Southeast Asia

8571. The Demise of ‘Hybrid’ Democracy in Pakistan: Case of Ex-Prime Minister Imran Khan’s Arrest

Author:: Haider Kaleem
Publication Date:: 06-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: Following the arrest of Pakistan`s former Prime Minister Imran Khan, social unrest and civil-military tension continue to grip the country. Haider Kaleem, a development researcher and journalist in Pakistan, attributes the current democratic crisis to the longstanding practice of military intervention in the country`s political affairs. Pointing out that the general mass is not adequately represented in the political discussions, Kaleem argues that Pakistan`s democracy will remain impaired until the power to form or dismantle regimes is transferred from the military to the hands of the people.
Topic:: Democracy, Domestic Politics, Civil-Military Relations, Civil Unrest, and Imran Khan
Political Geography:: Pakistan and South Asia

8572. Recent Defamation Case and Mounting State Onslaughts Against Political Opposition in India

Author:: Niranjan Sahoo
Publication Date:: 05-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: Niranjan Sahoo, a Senior Fellow at the Observer Research Foundation (ORF), assesses the current state of political opposition in India. Highlighting the recent defamation case against the key opposition leader Rahul Gandhi, Sahoo points out that the current Bharatiya Janata Party government has consistently deployed state agencies and has taken advantage of its brute majority in the lower house of Parliament to weaken and silence the opposition voice. Questioning the sustainability of this rare occasion of unity among the opposition parties over Mr. Gandhi`s disqualification, Sahoo paints a grim outlook for India’s democracy should the marginalization of opposition voices continue.
Topic:: Democracy, Domestic Politics, Narendra Modi, Opposition, and Defamation
Political Geography:: South Asia and India

8573. Japan’s Gradual Move to Address Technological Challenges to Democracy

Author:: Maiko Ichihara
Publication Date:: 04-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: Maiko Ichihara, a professor at Hitotsubashi University Graduate School of Law, explores the challenges that technological advancements pose to democracy and analyzes Japan’s recent efforts to regulate disinformation and protect private data. Despite the absence of global regulations on digital technology, Ichihara highlights Japan’s domestic fact-checking efforts as well as its multilateral initiatives with G7 to create action plans promoting international cooperation against disinformation and data privacy abuse. In order to bolster democracy in the digital realm, she advocates for a proactive development of counter-narratives to fake news on social media.
Topic:: Science and Technology, Democracy, Regulation, Privacy, Social Media, G7, Disinformation, Data Collection, and Digital Space
Political Geography:: Japan and Asia

8574. Upcoming Elections and Political Turmoil in Pakistan

Author:: Ahmed Bilal Mehboob
Publication Date:: 03-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: As the Election Commission of Pakistan (ECP) delayed a key provincial election due to financial and security-related issues, a potential constitutional crisis looms over the country. In light of the deepening political turmoil in Pakistan, Ahmed Bilal Mehboob explores how this crisis has developed and offers a grim outlook of holding a free and fair election this year. Mehboob argues that the former Prime Minister Imran Khan’s audacious move to seek fresh elections to both the National and Provincial Assemblies have exacerbated party polarization, and Supreme Court decisions for the court cases are unlikely to be fully enforced due to such divide. Mehboob warns that prolonged political crisis may induce military intervention to restore order so that the elections could be pushed ahead.
Topic:: Elections, Democracy, Constitution, Domestic Politics, Supreme Court, and Imran Khan
Political Geography:: Pakistan and South Asia

8575. Indonesia’s ASEAN Chairmanship: Challenges for Strengthening Democracy Agenda in ASEAN

Author:: Lidya C. Sinaga
Publication Date:: 03-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: Lidya Christin Sinaga analyzes the internal and external challenges that Indonesia, as the Chair of ASEAN, faces in promoting the principles of democracy in the organization`s agenda. Sinaga claims that the recent cases of Indonesia`s democratic regression have damaged the credibility of its sincerity in spreading democracy in Southeast Asia. On the other end, the ASEAN member states’ growing emphasis on economic performance as their source of legitimacy complicates the regional organization`s commitment to democratic values. Given that the ASEAN has limited influence on its member states’ respective political 시스템s, whether Indonesia can successfully implement democratic agenda this year depends on the extent of the members’ willingness to engage in meaningful political communication. Finally, Sinaga argues that bolstering commitment to democracy within the ASEAN can only be successful when every member states recognize that democratic principles are critical for regional prosperity.
Topic:: Democracy, Economy, ASEAN, and Regional Politics
Political Geography:: Indonesia and Southeast Asia

8576. Institutionalizing Downward Accountability: The Bangladesh Experience

Author:: Shaheen Anam
Publication Date:: 02-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: In this issue briefing, Shaheen Anam, Executive Director at Manusher Jonno Foundation, explores the challenges of institutionalizing downward accountability and assesses how such difficulties are projected in development projects of various sizes. Anam argues that effective bottom-up planning requires expertise of stakeholders, strong political will from above, and most importantly, active participation of the local community. Through a Bangladesh case study, Anam offers a successful example of the civil society taking advantage of social accountability tools to channel its voice and improve the transparency of the authorities.
Topic:: Civil Society, Development, Government, Accountability, Institutions, and Transparency
Political Geography:: Bangladesh and South Asia

8577. Restoring Democracy in Myanmar: A Call for Bolstered Anti-Junta Resistance Forces

Author:: Lin Htet Myat
Publication Date:: 02-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: February 2023 marks the second anniversary of the military coup in Myanmar that ousted its civilian government and cracked down on democratic protests. Lin Htet Myat, a political analyst from Myanmar, assesses the grim situation in the country and offers new approaches that both the international community and the Burmese anti-junta forces should take to facilitate the restoration of democracy. The author argues that the international community must not engage the junta to seek for a peaceful resolution, and instead strengthen material support and communication with anti-junta forces within Myanmar. Meanwhile, Burmese democratic resistance forces should bolster military cooperation among like-minded groups and build trust in preparation for a federal democratic Myanmar.
Topic:: Democracy, Coup, Humanitarian Crisis, and ASEAN
Political Geography:: Asia and Myanmar

8578. Taiwan’s Civic Space Threatened by Chinese Misinformation and the Government’s Worrisome Legislative Responses

Author:: Chin-en Wu
Publication Date:: 02-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: Civic space in Taiwan is consistently threatened by misinformation campaigns and operations run by external forces, particularly mainland China. Chin-en Wu, an associate research fellow at the Institute of Political Science at Academia Sinica, assesses that China disseminates fake news to portray positive image of itself while creating internal polarization and competition in Taiwan. The Taiwanese government has attempted to take various measures, such as amending the Social Order Maintenance Act and introducing social media regulation bill, to counter the rampant Chinese misinformation activities. Although Wu acknowledges that the Taiwanese government should collaborate with the civil society to safeguard the island from misinformation, Wu warns that the government must be conscious of the potential damage that the restrictive measures against fake news could inflict on Taiwan’s liberal democracy.
Topic:: Democracy, Social Media, Misinformation, and Civic Engagement
Political Geography:: Taiwan and Asia

8579. Expanding International Cooperation against Corruption in the Indo-Pacific

Author:: Sook-Jong Lee
Publication Date:: 01-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: In light of the Indo-Pacific regional meeting of the 2nd Summit for Democracy (S4D2) (hosted by South Korea) choosing to discuss matters on corruption, Dr. Sook Jong Lee, a Professor at Sungkyunkwan University and a Senior Fellow at EAI, evaluates the state of corruption within the region. Despite persistent and wide-spread efforts to tackle the malignant effects of corruption, Dr. Lee points out that progress has been slow, especially due to the dominance of grand corruption and preserving independence for anti-corruption institutions. Lee concludes by suggesting that, with the Summit as a launch pad, leaders should look into the creation of a network of anti-corruption bodies to boost international cooperation, capacity building, and promoting independence.
Topic:: Corruption, International Cooperation, United Nations, and Democracy
Political Geography:: Indo-Pacific

8580. One Thing It Lacks: South Korea’s North Korea Policy in 2023 National Security Strategy

Author:: Yang Gyu Kim
Publication Date:: 06-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: Yang Gyu Kim, Principal Researcher at the East Asia Institute, conducts a critical analysis of the new National Security Strategy published on June 7, 2023 and offers policy recommendations for the ROK government’s DPRK policy outlined in the document. While Kim identifies with the National Security Office’s emphasis on strengthening deterrence measures against growing DPRK nuclear and missile threats, he highlights that South Korean countermeasures create a feedback loop that affects North Korea’s threat perception. The author, therefore, points out the limits of the current 3D (Deterrence, Dissuasion, Dialogue) approach and recommends including a “Development” strategy to encourage Pyongyang to envision an alternative future path of prosperity and voluntarily take the denuclearization path.
Topic:: Development, National Security, Deterrence, Dialogue, and Threat Perception
Political Geography:: Asia, South Korea, and North Korea

8581. Tasks for North Korea Policy After the Washington Declaration

Author:: Yu-hwan Koh
Publication Date:: 06-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: Yu-hwan Koh, the President of the Korea Institute for National Unification, acknowledges the progress made in maintaining the Nuclear Non-proliferation Treaty regime and bolstering extended deterrence capabilities against North Korean nuclear threats through the Washington Declaration. Nevertheless, he underscores the lack of a fundamental solution to halt further advancements in Pyongyang's nuclear capabilities. Dr. Koh emphasizes the importance of establishing normalized relations between the United States and North Korea, particularly considering that North Korea now possesses nuclear weapons and is unlikely to return to denuclearization talks. In response, he reiterates the significance of the ROK-US alliance in strengthening the Three-Axis system and developing new weapon systems that can effectively counter North Korea's nuclear capabilities.
Topic:: International Relations, Nuclear Weapons, Deterrence, and Denuclearization
Political Geography:: Asia, North Korea, and United States of America

8582. North Korea’s Space Development: The Gap Between Ideal and Reality

Author:: Cheol-wun Jang
Publication Date:: 05-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: Cheol-wun Jang, a research fellow at the Korea Institute for National Unification, emphasizes that while North Korea has made significant strides in long-range ballistic missiles, it has not been successful in the area of artificial satellites. Up until now, Pyongyang has had limited engagement in exchanges with major advanced countries involved in space development. Dr. Jang predicts that North Korea is expected to continue its independent pursuit of space development, which will hinder the country’s progress in the satellite sector in the near future.
Topic:: Development, Nuclear Weapons, Space, Kim Jong-un, and Militarization
Political Geography:: Asia and North Korea

8583. The South Korea-U.S. Summit and Measures to Enhance Bilateral Cooperation on North Korea

Author:: Jechun Kim
Publication Date:: 05-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: Jechun Kim, a professor at Sogang University, points out that the Biden administration appears to prioritize competition with China, the Taiwan issue, and the Ukraine War, despite the growing threat posed by North Korea’s nuclear and missile capabilities. In response, Kim underlines the importance of issuing a “2023 US-ROK Joint Statement on North Korea” after President Yoon’s visit to the White House. Given the fading interest and support for the reunification of the Korean Peninsula, Professor Kim emphasizes the significance of addressing the rapid advancement in DPRK’s nuclear capabilities. He then suggests that South Korea needs to create a conducive environment for peaceful reunification through strong support from the U.S. for the “Audacious Initiative.”
Topic:: Diplomacy, International Cooperation, Nuclear Weapons, Bilateral Relations, and Denuclearization
Political Geography:: Asia, South Korea, North Korea, North America, and United States of America

8584. Pyongyang in Search of a New Cold War Strategy

Author:: Jihwan Hwang
Publication Date:: 04-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: Jihwan Hwang, a professor at the University of Seoul, predicts that the strengthening alliance between North Korea, China, and Russia could enable North Korea to overcome its international isolation, weakening the influence of the US-South Korea alliance and increasing China’s leverage over the Korean Peninsula. Dr. Hwang points out that even without the establishment of a new Cold War order, the strengthened cooperation among the authoritarian regimes will pose a significant strategic challenge to South Korea. As Seoul’s approach to Pyongyang has been based on a unipolar system led by Washington, Dr. Hwang highlights the need for South Korea to explore new approaches to address the changing security environment.
Topic:: Security, Foreign Policy, Bilateral Relations, Alliance, and Russia-Ukraine War
Political Geography:: Russia, China, Ukraine, Asia, South Korea, and North Korea

8585. Japan’s Stance on North Korea’s “New Cold War” Narrative: Strengthening Japan’s Defense and Global Normative Power

Author:: Seunghee Oh
Publication Date:: 03-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: Seunghee Oh, a research professor at Seoul National University Institute of Japanese Studies, suggests that Pyongyang perceives the current global order as a “new Cold War” and views strengthening trilateral cooperation among Seoul, Washington, and Tokyo as hostile to its national interest. In response to North Korea’s moves, Japan prioritizes multilateral initiatives to strengthen its security ties with other partners in the region and the globe. Dr. Oh further claims that as Tokyo assumes the presidency of the G7 Hiroshima Summit this year and has been elected as a non-permanent member of the 2023-24 UN Security Council, Japan is well-positioned to criticize North Korea as an international norm violator and proactively address the North Korean problem and utilize it to enhance its global leadership.
Topic:: Defense Policy, Cold War, International Cooperation, Multilateralism, and Kim Jong-un
Political Geography:: Japan, Asia, and North Korea

8586. Russia’s Stance on the North Korean Narrative of a New Cold War

Author:: Seho Jang
Publication Date:: 03-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: Seho Jang, a research fellow in the Institute for National Security Strategy, states that North Korea is promoting strategic solidarity with China and Russia to achieve its goal of dismantling US hegemony. While Russia also shares the perception that the US-centered unipolar order is not conducive to attaining its national interests, it rarely uses the term “new Cold War” in official foreign policy discourse, reflecting its apprehension about the concept and its potential implications. He evaluates that this caution possibly originated from Russia’s historical trauma as a loser of the Cold War, making it highly likely to be opposed to the emergence of the new Cold War order led by Washington and Beijing. Dr. Chang suggests that this subtle difference could become an important inflection point as Washington’s clout in international politics decreases in the future.
Topic:: International Relations, Foreign Policy, Multipolarity, International Order, and Russia-Ukraine War
Political Geography:: Russia, Ukraine, North Korea, and United States of America

8587. U.S. Stance on North Korea’s “New Cold War” Narrative

Author:: Hyun-wook Kim
Publication Date:: 03-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: Hyun-wook Kim, Professor at Korean National Diplomatic Academy, assesses that North Korea is advocating a new Cold War discourse to strengthen its strategic solidarity with China. However, the intensified Cold War dynamic would lead the United States to prioritize its strategic competition with China, and the Biden administration should turn to a more passive approach toward North Korea. In this context, Dr. Kim anticipates that Washington would not offer incentives to Pyongyang for engaging in dialogue, which would lead Pyongyang to continue its military provocations to influence the direction of Washington’s policy course and gain recognition as a nuclear power. Given the volatility of the situation, Dr. Kim emphasizes the importance of reaffirming the ROK-US military alliance to counter the escalating crisis on the Korean Peninsula.
Topic:: Cold War, International Cooperation, Deterrence, Strategic Competition, and Russia-Ukraine War
Political Geography:: China, Asia, North Korea, North America, and United States of America

8588. North Korea’s Outlook on the New Cold War

Author:: Won Gon Park
Publication Date:: 03-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: Won Gon Park, Chair of the EAI Center for North Korean Studies (Professor at Ewha Womans University), argues that North Korea utilizes its “new Cold War” rhetoric for two objectives: 1) to criticize US military buildup and its DPRK policy, and 2) to enhance the legitimacy of its possession of nuclear weapons by exploiting the geopolitical competition. Further, he claims that North Korea characterizes the Cold War as a clash between liberalism and authoritarianism in an effort to appeal to and garner support from China and Russia. However, Dr. Park assesses that while North Korea, Russia, and China may temporarily cooperate against the US as their common enemy, the nature of their “political marriage of convenience” complicates the likelihood of a sustained alliance. Finally, Dr. Park predicts that the new Cold War system that Pyongyang envisions is unlikely to come to fruition.
Topic:: International Relations, Alliance, Kim Jong-un, and Multipolarity
Political Geography:: Asia, South Korea, and North Korea

8589. Will Spring Ever Come? Security Landscape of Northeast Asia in 2023

Author:: Kyung-joo Jeon
Publication Date:: 03-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: Kyung-Joo Jeon, a research fellow at the Korea Institute for Defense Analyses, predicts that the Korean peninsula might repeat the days of fire and fury in 2017 this year. North Korea will likely turn to its military provocation tactics ahead of the ROK-US Freedom Shield Exercises in mid-March, DPRK’s 70th Anniversary of The Day of Victory in the Great Fatherland Liberation War in July, and another ROK-US joint military drill in August. Dr. Jeon suggests that Seoul should increase its strategic value as an essential global player while Washington seeks a stronger alliance network in the Indo-Pacific region if South Korea wants to live up to its policy goal of the “Global Pivotal State.”
Topic:: Security, Defense Policy, Deterrence, and Denuclearization
Political Geography:: Russia, China, and Asia

8590. China’s Stance on North Korea’s “New Cold War” Narrative

Author:: Dong Ryul Lee
Publication Date:: 02-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: Dong Ryul Lee, Chair of the China Research Center at EAI (Professor at Dongduk Women’s University), highlights that although China and North Korea might seem to have a close relationship, Beijing maintains a reserved stance regarding the North’s perspective on its strategic value amid the US-China competition. Professor Lee explains that Xi Jinping prioritizes political stability by boosting the economy and tries to avoid a full-scale confrontation with the US. Accordingly, China seeks to manage the risk spurred on by Pyongyang’s military provocations, given that they legitimize stronger US-Japan-ROK trilateral security cooperation.
Topic:: International Relations, Security, Cold War, Xi Jinping, and Strategic Competition
Political Geography:: China, Asia, South Korea, and North Korea

8591. Re-Declared “Frontal Breakthrough”: North Korea’s Nuclear First Line in 2023 and Its Limitations

Author:: Walter G. Park
Publication Date:: 02-2023
Content Type:: Commentary and Analysis
Institution:: East Asia Institute (EAI)
Abstract:: Won Gon Park, Chair of the EAI Center for North Korean Studies (Professor at Ewha Womans University) stresses that North Korea's persistence to pursue its nuclear-first line will lead Pyongyang to a severe crisis as the line would cripple its economy while boosting the U.S. efforts to establish enhanced alliance security cooperation based on the concept of "integrated deterrence." Dr. Park suggests that the South Korean government establishes measures to assist North Korea's transition to an "economy first" state and to prepare an innovative measure that could guarantee the survival of the regime while not jeopardizing the national security of South Korea.
Topic:: International Relations, Security, Nuclear Weapons, and Denuclearization
Political Geography:: Asia, South Korea, and North Korea

8592. East Vs. West: A New Cold War?

Author:: Richard Sakwa
Publication Date:: 03-2023
Content Type:: Journal Article
Journal:: Turkish Policy Quarterly (TPQ)
Institution:: Transatlantic Policy Quarterly (TPQ)
Abstract:: Cold War has returned to dominate international politics. Expectations that the end of the Cold War in 1989 would lead to a more inclusive and comprehensive peace seems to be practically failed, and instead, by 2014, the centenary of the start of the First World War, Europe was once again wracked by conflict. On the one side, the U.S.-led Political West shaped by the Cold War remained the main protagonist. In contrast, on the other hand, a much-weakened Russia took the place of the former Soviet Union, now accompanied by a China intent on restoring its status as a great power. The article examines why a new cold war emerges again, and analyses how such a ‘Cold War II’ differs from the original.
Topic:: Cold War, Hegemony, Conflict, and Rivalry
Political Geography:: Russia, China, Europe, Asia, North America, and United States of America

8593. IMperial or Colonial: The War is Fought Over The Soviet Past an A Broken Relationship

Author:: Li Bennich-Bjorkman
Publication Date:: 03-2023
Content Type:: Journal Article
Journal:: Turkish Policy Quarterly (TPQ)
Institution:: Transatlantic Policy Quarterly (TPQ)
Abstract:: Russia is trying, through its bombs, attacks, and brutality, to erase what Ukraine was. Therefore, it is a war effort to keep remembering how Ukraine in peace looked like, how it smelled, tasted, and felt. And to never forget that this is a war against Ukraine, in its own right. Not as a representative of the West, and not as a representative of democracy. But because Ukraine is of such importance to Russia, that a break between the two is unthinkable for Putin. That was what Leonid Kravchuk, the Ukrainian president, realized already in 1991. He, and Ukrainian leaders after him, tried to protect their territory while at the same time reassuring Russia that relations could still be friendly. But Russia has never changed in a similar way
Topic:: Imperialism, Military Strategy, Colonialism, Conflict, and Russia-Ukraine War
Political Geography:: Russia, Europe, and Ukraine

8594. The West Versus The Rest: The Russian Invasion Of Ukraine And The Crisis Of The "Post-Western" Order

Author:: Ziya Önis
Publication Date:: 03-2023
Content Type:: Journal Article
Journal:: Turkish Policy Quarterly (TPQ)
Institution:: Transatlantic Policy Quarterly (TPQ)
Abstract:: The Russian invasion of Ukraine intensified the defining conflict of the new age, the conflict between democratic and authoritarian capitalism. The unified Western response to the war highlighted the revitalization of the democratic club of Western states and their allies (G7 plus). Another critical implication of the War has been that a clear divide has emerged between “the West” and “the Rest” in their reactions to the War. The Russian War on Ukraine signals the beginnings of a new phase of the post-Western world, where territorial conquests could be considered the new normal, paving the way for further military confrontations in a conflict-ridden World.
Topic:: Capitalism, Liberal Order, Conflict, International Order, and World System
Political Geography:: Russia and Europe

8595. Russia, Ukraine, and Lasting Peace in Europe

Author:: Nicolai N. Petro
Publication Date:: 03-2023
Content Type:: Journal Article
Journal:: Turkish Policy Quarterly (TPQ)
Institution:: Transatlantic Policy Quarterly (TPQ)
Abstract:: Among the many competing narratives that drive the war in Ukraine, the healing of the Ukrainian people themselves is often overlooked. That is because current Western policy overlooks the Other Ukraine, whose disagreement with the policies of the Ukrainian government since 2014 led up to this conflict. The Western response to Russia’s invasion has been tailored to punishing Russia, but not necessarily to healing the domestic tension within Ukraine. This article suggests that only a reconciliation within Ukrainecan bring lasting social harmony to Ukraine and peace to Europe as a whole.
Topic:: Security, Conflict, Peace, and Russia-Ukraine War
Political Geography:: Russia, Europe, and Ukraine

8596. East-West Relations: A New Cold War?

Author:: Ilter Turan
Publication Date:: 03-2023
Content Type:: Journal Article
Journal:: Turkish Policy Quarterly (TPQ)
Institution:: Transatlantic Policy Quarterly (TPQ)
Abstract:: The Cold War bipolar order was characterized by two camps isolated from each other, competing along four dimensions: global governance, security, economics, and ideology. The end of the Cold War, with the Soviet Bloc collapsing, did not produce a U.S.-dominated unipolar but a multi-centered world. The Americans, losing power and influence and the Russians to restore their superpower status have been trying to reconstruct bipolarity. If reconstructed China, not Russia, would likely constitute the other pole, an outcome Russia does not want. Economic relations and Chinese disinterest currently prevent a bipolar world like the one we have left behind. We may be moving toward a multi-centered world with many unpredictable aspects, including armed conflicts such an order may entail.
Topic:: Cold War, Hegemony, Conflict, and Rivalry
Political Geography:: Europe

8597. Small States and the War in Ukraine

Author:: Anders Wivel
Publication Date:: 03-2023
Content Type:: Journal Article
Journal:: Turkish Policy Quarterly (TPQ)
Institution:: Transatlantic Policy Quarterly (TPQ)
Abstract:: The War in Ukraine signals a return to the sphere of influence politics and great powers’ use of military instruments against their weaker neighbors. The consequences for small states are negative. Although some small states will find new opportunities for hedging and brinkmanship, most small states will see their chances of shaping international agendas reduced as they increasingly focus on defensive aims. To meet these challenges small states must work together to promote their shared interests: 1) A modus vivendi between the great power, which minimizes the risk of great power war as well as the annexation and invasion of smaller states, 2) a rule-based international order; 3) a relaunch the United Nations as the central arena for debates on international society among sovereign states.
Topic:: Military Strategy, Conflict, Russia-Ukraine War, and Superpower
Political Geography:: Global Focus

8598. U.S. Foreign Policy an the War in Ukraine

Author:: James A. Russell
Publication Date:: 03-2023
Content Type:: Journal Article
Journal:: Turkish Policy Quarterly (TPQ)
Institution:: Transatlantic Policy Quarterly (TPQ)
Abstract:: This essay assesses the impact of the war in Ukraine on American foreign policy. The thesis provided here is that the war in Ukraine must be viewed as a painful but maybe necessary shock therapy that has helped to relieve the residual hangover from America’s two-decade-long, ill-advised war on terror and the lost wars in Iraq and Afghanistan. In parallel, the war has served as a vehicle for the reinvigoration of national grand strategy and the foreign policy that provides the vital connective tissue between ends, ways, and means. In this trinity, the foreign policy represents an instrumental tool to connect the assumptions that undergird grand strategy to the practical, real-world of international politics.
Topic:: Foreign Policy, Military Strategy, Hegemony, Strategic Interests, and Russia-Ukraine War
Political Geography:: North America and United States of America

8599. The Role of Democracy Discourse in the Emerging "New Cold War"

Author:: Emre Demir and Sirma Altun
Publication Date:: 03-2023
Content Type:: Journal Article
Journal:: Turkish Policy Quarterly (TPQ)
Institution:: Transatlantic Policy Quarterly (TPQ)
Abstract:: In the first three decades after China initiated reform and opening-up policies in 1978, its relations with the United States (U.S.) improved steadily. However, in the post-2007/2008 global financial crisis period, both countries’ attitudes toward each other began to change. Particularly since the Trump administration, as the U.S. started to define China as its main competitor, their bilateral relations deteriorated further. As a result, scholars, diplomats, and politicians worldwide began to talk about the emergence of a new Cold War between China and the U.S., encompassing economic, ideological, military, and political aspects. The ideological aspect of this emerging “new Cold War” revolves around the discourse of democracy.
Topic:: Cold War, Hegemony, Democracy, and Rivalry
Political Geography:: China, Asia, North America, and United States of America

8600. West Vs. Non-West: A New Cold War?

Author:: Greg Simons
Publication Date:: 03-2023
Content Type:: Journal Article
Journal:: Turkish Policy Quarterly (TPQ)
Institution:: Transatlantic Policy Quarterly (TPQ)
Abstract:: There is a noticeable and growing evolution of the global geopolitical balance of power and influence in the 21st century’s system of international relations. The current hegemon, the unipolar United States, and the political system of Western liberalism that supports it, is under great strain and is in a state of relative decline. The challenger is a non-Western-centric multipolar order, which consists of a wide variety of countries spanning the globe, including what is referred to as the Global South. This ‘crisis’ of the Western order has prompted a tangible and informational response from the U.S. and its system, to defend their privileged hegemony and to deter the rise of alternative systems of power and influence in international relations.
Topic:: International Relations, Cold War, Hegemony, Geopolitics, and Rivalry
Political Geography:: Global Focus

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COLUMBIA UNIVERSITY PRESS