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71. From Carrots to Sticks, to Carrots Again? The EU’s Changing Sustainable Trade Agenda

Author:
Victor De Decker
Publication Date:
02-2024
Content Type:
Policy Brief
Institution:
EGMONT - The Royal Institute for International Relations
Abstract:
Although sustainability criteria include references to human, social and labour rights as well as broader environmental concerns, this policy brief will focus on measures related to carbon emission reduction in relation to the Paris Agreement. This policy brief consists of three parts. First, there will be an overview of how Trade and Sustainable Development (TSD) chapters have gained prominence in European Free Trade Agreements. The second part will be dedicated to the autonomous, unilateral EU initiatives the Carbon Border Adjustment Mechanism (CBAM) and the Corporate Due Diligence Directive (CSDDD). To conclude, there will be a brief analysis of how the EU is working within a multilateral setting on the issue of climate change. In 2015, the United Nations adopted the 2030 Agenda for Sustainable Development, a landmark framework renowned for its far-reaching vision encompassing 17 Sustainable Development Goals (SDGs) and 169 targets. These goals collectively constitute the “universal policy agenda,” aiming to address global challenges and foster inclusive economic growth. Notable among these goals is the promotion of sustainable international trade, identified as a pivotal policy instrument contributing to overarching SDGs. The 2030 Agenda positions international trade as “an engine for inclusive economic growth and poverty reduction” while actively contributing to the broader pursuit of sustainable development.
Topic:
Climate Change, Economics, European Union, Trade, Sustainability, and Energy
Political Geography:
Europe

72. EU Elections: National Democracy at Its Cornerstone?

Author:
Ward Den Dooven
Publication Date:
06-2024
Content Type:
Policy Brief
Institution:
EGMONT - The Royal Institute for International Relations
Abstract:
On the eve of the European elections, those who keep a keen eye already know that a big turnaround of the European hemicycle is to be expected, with more than 50% being newly elected. In a recent article, the secondary place occupied by the European elections was highlighted; in Belgium they can even be said to only rank as tertiary due to its collision with national and regional elections on the same day. Although up to 8 member states will see both national and European elections in 2024, this very much gives a unique context to the EU elections in Belgium. Its conclusions however were not new: although the federal government presented itself as radically pro-European, currently holding the Council of the EU’s rotating Presidency, in Belgium as well as abroad, the European election is inherently still very much national in nature: the limited space that is left for it between the other campaigns becomes confused through both themes and politicians being presented at other levels than they (currently) sit.
Topic:
Economics, Elections, European Union, Democracy, and Regional Politics
Political Geography:
Europe

73. Uganda’s Chess Game in Eastern DRC: With or Without M23?

Author:
Kristof Titeca
Publication Date:
06-2024
Content Type:
Policy Brief
Institution:
EGMONT - The Royal Institute for International Relations
Abstract:
Uganda has various economic, political and security interests in Eastern DRC. The latter is for example a vital export market for Ugandan products, and an important source of gold, Uganda’s most important export product. In this situation, a careful tactical game is played, in which Kampala seeks to protect these interests in Eastern DRC – for example from Kigali. This does not only involve a clear engagement with Kinshasa, but to a lesser extent also with M23. This is particularly the case because M23 is expanding (and keeping) its territory; creating an incentive for regional actors to engage with them.
Topic:
Security, Foreign Policy, Economics, and Politics
Political Geography:
Uganda, Africa, and Democratic Republic of the Congo

74. Labor Market Volatility and Worker Financial Wellbeing: An Occupational and Gender Perspective

Author:
Julie Yixia Cai
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
One emerging but underexplored factor that is likely to contribute to group racial earnings disparity is unstable work schedules. This is often detrimental for hourly workers when volatility is frequent, involuntary, or unanticipated. Using data from 2005-2022 monthly Current Population Survey and its panel design, this study follows a group of hourly workers across a four-month period to assess whether labor market volatility relates to their financial well-being, focusing on low-wage care and service occupations as well as female workers and workers of color. The findings are threefold: In general, during economic expansion periods, nonwhite workers often benefit more in terms of wage growth compared to their white counterparts. Second, net of other characteristics, on average, greater volatility is associated with lower earnings, and this is mostly driven by those holding jobs in low-wage service sectors and healthcare support roles. Last, the earnings consequences of volatility vary significantly by the type of low-wage jobs a worker holds and their gender and race, but this is only true when volatility happens in a job. Specifically, when working within the same employment spell, female workers, particularly those of color and those working in low-wage service and care jobs, earn significantly less when facing greater volatility than their male counterparts or those working in non-service, non-care occupations.
Topic:
Economics, Inequality, Finance, Labor Market, and Gender
Political Geography:
Global Focus and United States of America

75. Monetary Policy and Illiquidity

Author:
Jan Toporowski
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
The discussion of financial stability, and the role of monetary policy, is incoherent because there is very little agreement on what constitutes financial stability (and, by implication, instability) - exchange rate stability, asset price stability, absence of debt default. By implication, there is a gap between the claims of various authors to the general applicability of their respective analyses, and the actual applicability of their conclusions, let alone the usefulness of some of their policy recommendations. The paper argues that the key issue is the regulation of the liquidity of all financial markets, and not just that of the banking system, through the markets for government securities. The paper examines the sources of this liquidity in the financial portfolios of the private sector, and how that liquidity may be managed through the open market operations of central banks and the debt management operations of governments. An implication of this approach is yield curve control and the use of (government) debt management to control the liquidity of the markets. These elements of monetary policy have been neglected in theory and policy since the 1950s.
Topic:
Debt, Economics, Monetary Policy, Banking, and Liquidity
Political Geography:
Global Focus

76. Considering Returns on Federal Investment in the Negotiated “Maximum Fair Price” of Drugs Under the Inflation Reduction Act: an Analysis

Author:
Edward W. Zhou, Paula G. da Silva, Debbie Quijada, and Fred D. Ledley
Publication Date:
03-2024
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
The Inflation Reduction Act (IRA) of 2022 contained landmark provisions authorizing government to negotiate a “maximum fair price” for selected Medicare Part D drugs considering the manufacturer’s research and development costs, federal support for discovery and development, the extent to which the drugs address unmet medical needs, and other factors. This working paper describes federal investment in the discovery and development of the ten drugs selected for price negotiation in the first year of the IRA as well as the health value created through Medicare Part D spending on these drugs. We identified $11.7 billion in NIH funding for basic or applied research leading to approval of these drugs with median investment costs of $895.4 million/drug. This early public investment provided a median cost savings to industry of $1,485 million/drug, comparable to reported levels of investment by industry. From 2017-2021, Medicare Part D spent $126.4 billion (median $10.7 billion) for these products before rebates. Excluding two products for diabetes, Medicare Part D spending was $97.4 billion and the total health value created was 650,940 QALYs or $67.7 billion (WTP/QALY=$104K) representing a negative residual health value of -$29.7 billion (before rebates). We argue that a negotiated fair price should provide returns on both private and public investments in these products commensurate with the scale and risk of these investments, with the principal return on public sector investments being the residual health value (net price) accruing to those using the product. These empirical data provide a cost basis for negotiating a fair price that rewards early government investments in innovation and provides social value for the public.
Topic:
Economics, Health, Public Health, Pharmaceuticals, and Public Investment
Political Geography:
North America and United States of America

77. Tilting at Windmills: Bernanke and Blanchard’s Obsession with the Wage-Price Spiral

Author:
Servaas Storm
Publication Date:
04-2024
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
Bernanke and Blanchard (2023) use a simple dynamic New Keynesian model of wage-price determination to explain the sharp acceleration in U.S. inflation during 2021-2023. They claim their model closely tracks the pandemic-era inflation and they confidently conclude that “… we don’t think that the recent experience justifies throwing out existing models of wage-price dynamics.” This paper argues that this confidence is misplaced. The Bernanke and Blanchard is another failed attempt to salvage establishment macroeconomics after the massive onslaught of adverse inflationary circumstances with which it could evidently not contend. It misrepresents American economic reality, hides distributional issues from view, de-politicizes (monetary and fiscal) policy-making, and sets monetary policymakers up to deliver significantly more monetary tightening than can be justified on the basis of more realistic model analyses.
Topic:
Economics, Monetary Policy, Inflation, Macroeconomics, and Wages
Political Geography:
North America and United States of America

78. The Diffusion of New Technologies

Author:
Aakash Kalyani, Nicholas Bloom, Marcela Carvalho, Tarek A. Hassan, Josh Lerner, and Ahmed Tahoun
Publication Date:
07-2024
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
We identify phrases associated with novel technologies using textual analysis of patents, job postings, and earnings calls, enabling us to identify four stylized facts on the diffusion of jobs relating to new technologies. First, the development of economically impactful new technologies is geographically highly concentrated, more so even than overall patenting: 56% of the most economically impactful technologies come from just two U.S. locations, Silicon Valley and the Northeast Corridor. Second, as the technologies mature and the number of related jobs grows, hiring spreads geographically. But this process is very slow, taking around 50 years to disperse fully. Third, while initial hiring in new technologies is highly skill-biased, over time the mean skill level in new positions declines, drawing in an increasing number of lower-skilled workers. Finally, the geographic spread of hiring is slowest for higher-skilled positions, with the locations where new technologies were pioneered remaining the focus for the technology’s high-skill jobs for decades.
Topic:
Development, Economics, Science and Technology, Innovation, and Labor Market
Political Geography:
North America and United States of America

79. Implications of the Inflation Reduction Act for the Biotechnology Industry

Author:
Cody Hyman, Henry Dao, Gregory Vaughan, and Fred D. Ledley
Publication Date:
07-2024
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
The Inflation Reduction Act of 2022 contains landmark provisions authorizing the government to negotiate the price of selected drugs covered by Medicare Part D. The biopharmaceutical industry has criticized these provisions as a threat to innovation arguing that reducing future revenues could disincentivize equity investment in biotechnology. This research examines the sensitivity of private and public equity investment in the biotechnology industry to drug price indices and market conditions from 2000-2022. The analysis shows that equity financing and valuation in the biotechnology industry were strongly associated with equity market conditions but not indices of either producer or consumer drug prices. These results do not support claims of an association between changing drug prices and the availability of equity capital to emerging biotechnology companies, which currently sponsor the majority of all clinical trials. These results add to evidence that the IRA may not have a negative impact on pharmaceutical innovation.
Topic:
Economics, Health, Inflation, Innovation, Biotechnology, Public Investment, and Inflation Reduction Act
Political Geography:
North America and United States of America

80. Scale and Scope in Early American Business History: The “Fortune 500” of 1812

Author:
Richard Sylla and Robert E. Wright
Publication Date:
08-2024
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
Fortune magazine began publishing annual rankings of U.S. corporations by revenue in 1955. Ever since, scholars and forecasters have analyzed changes in the Fortune 500 to help inform their judgments about industry concentration and the relative importance of different sectors of the economy. Unfortunately, earlier data are scarce, especially before the Civil War. Through extensive research we have created a sort of historical “Fortune 500” going back to 1812, ranked by corporate capitalization, which we share here. Numerous insights can be drawn from this dataset, including the historical dominance of the banking and finance sectors and the early importance of manufacturing. Perhaps the larger significance of being able to come up with a Fortune 500 for 1812, though, is the fact that even with a population of only about 7.5 million, U.S. already had more business corporations than any other country, and possibly more than all other countries put together, securing its role as the world’s first “corporation nation.” The ease of incorporating businesses released a lot of entrepreneurial energy that helped to build an ever-expanding economy and by the end of the 19th century, the U.S. would be the world’s largest national economy with tens of thousands of corporations.
Topic:
Economics, History, Business, and Industry
Political Geography:
North America and United States of America