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2271. Comparative Advantages in the Digital Era – A Heckscher-Ohlin-Vanek Approach

Author:
Dario Guarascio and Roman Stöllinger
Publication Date:
07-2022
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
This paper revisits the Heckscher-Ohlin-Vanek (HOV) theorem and investigates its fit for digital tasks and ICT capital, which both represent endowment factors that are expected to shape the digital transformation. We use a theory-consistent methodology for calculating the measured net factor content of trade (Trefler and Zhu, 2010) and apply it to a unique dataset on digital and non-digital tasks performed in detailed occupations, as well as recent data on ICT capital stocks. Equipped with these data we provide new evidence on the factor-based trade patterns for 25 EU countries and use it to test the HOV theorem. Overall, the performance of the sign test and the rank test is good if not impressive. In 83% of the cases countries are net exporters of those factors with which they are abundantly endowed, with a higher score achieved for digital tasks than for ICT capital. We conclude that the fit of the HOV theorem for highly relevant endowments of the digital era is as good as that of traditional endowment factors.
Topic:
European Union, Business, Trade, and Digital Transition
Political Geography:
Europe

2272. The Impact of ICT and Intangible Capital Accumulation on Labour Demand Growth and Functional Income Shares

Author:
Robert Stehrer
Publication Date:
07-2022
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
This paper investigates whether the diffusion of tangible IT and CT capital and intangible capital asset types has an impact on labour demand growth and the share of labour income in total income at the industry and country level. The econometric analysis is derived from a Cobb-Douglas production function taking empirical stylized facts into account. The effects of technical progress embodied in the various forms of capital impact along inter-industry and intercountry production linkages, which are considered by using global value chain indicators. The analysis is broken down to examine the influence on different types of labour, including the dimensions of gender, age, and educational attainment. Accumulation of ICT assets have generally insignificant and in some cases small positive effects on labour demand and income shares, though patterns differ across types of labour. Intangible assets show a positive relation with respect to labour demand growth.
Topic:
Labor Issues, European Union, Capital, Income, and Capital Accumulation
Political Geography:
Europe

2273. Salmonella Program in the European Union and the Trade Dispute with Brazil at the World Trade Organisation: A Partial Equilibrium Framework

Author:
Mahdi Ghodsi
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
This contribution provides a cost-benefit analysis in a partial equilibrium framework to investigate the welfare consequences of a prohibitive regulatory non-tariff measure (NTM) in the form of a sanitary and phytosanitary (SPS) measure aimed at a foreign product with perceived negative characteristics. Two groups of consumers are distinguished: one that is indifferent to the foreign product’s negative attributes, and another that is concerned about them. Different scenarios concerning the welfare gains from the introduction of an NTM are explored. The results depend on consumer awareness and information policies pursued by the government of the importing country or group of countries. The theoretical model is illustrated with data on the production and importation of prepared poultry in the EU. This paper focusses on the recent Dispute Settlement (DS) case 607 at the World Trade Organization (WTO) that was initiated by Brazil in November 2021 to consult with the EU on restrictive measures imposed on the importation of prepared and preserved poultry. These restrictions are in line with the comprehensive and restrictive programme legislated by the EU to combat salmonella spp. The findings suggest that the consumer surplus may be reduced after the imposition of prohibitive SPS measures because the market structure changes from a duopoly to a monopoly. However, when the perceived harm of the bad product increases and the portion of the concerned population in society regarding the bad product increases, the change in the consumer surplus also increases.
Topic:
World Trade Organization, European Union, Welfare, Trade Policy, and Disputes
Political Geography:
Europe, Brazil, and South America

2274. The Cyclical Behaviour of Fiscal Policy During the Covid-19 Crisis

Author:
Philipp Heimberger
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
This paper analyses the cyclicality of fiscal policy (discretionary versus automatic) for 28 advanced economies over 1995-2021 by paying special attention to the Covid-19 crisis. We find evidence that discretionary fiscal policy during the Covid-19 crisis (2020-2021) was significantly more countercyclical than before – in particular in the Eurozone. We do not find comparable evidence for more counter-cyclicality during the financial crisis or Euro crisis, which lends support to the argument that discretionary fiscal policy responded especially forceful to stabilise the economy during the Covid-19 crisis. Furthermore, automatic fiscal stabilisers contributed significantly to counter-cyclical stabilisation, although their performance over 2020-2021 was more in line with the past than for discretionary fiscal policy. Overall, fiscal policy in non-Eurozone advanced countries is more countercyclical than in the Eurozone. However, the cyclicality varies markedly across countries. Our findings shed light on how the cyclical behaviour of fiscal policy varies across countries and time.
Topic:
Financial Crisis, European Union, Fiscal Policy, and COVID-19
Political Geography:
Europe

2275. NATO’s Tunnel Vision

Author:
George Beebe
Publication Date:
08-2022
Content Type:
Policy Brief
Institution:
Quincy Institute for Responsible Statecraft
Abstract:
Despite Russia’s violent rejection of a NATO-centric Europe, the United States should still pursue its vision of a continent that will one day be “peaceful, whole, and free.” The alternative is a blood-soaked division of the continent, constantly prone to escalation into a direct conflict with Russia. The United States needs to adopt a different approach to achieving its vision, as follows: • The path to peace must begin with settling the conflict in Ukraine, and the key to a settlement is securing Ukraine’s independence as a neutral state outside NATO. • If Europe is to be whole, NATO cannot serve as its overarching security arm. NATO should focus on defense of its existing members, not expanding its ranks or operating out of area, including against China. • Over time, our goal should be evolution toward a U.N. Security Council-type arrangement in Europe that includes both NATO and non-NATO members. The price of admission for Russia must be good faith compliance with the terms of a settlement in Ukraine. • If Europe is to be free, we must recognize that a stable security environment in Europe is a prerequisite for the ex-Soviet states gradually becoming more liberal. The best means of ensuring that Europe is free is by revitalizing democracy within the West itself.
Topic:
Security, NATO, European Union, and Russia-Ukraine War
Political Geography:
Russia and Europe

2276. German Economy Summer 2022: Slowly progressing recovery

Author:
Jens Boysen-Hogrefe, Nils Jannsen, Saskia Meuchelbock, Dominik Groll, Stefan Kooths, and Nils Sonnenberg
Publication Date:
06-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
The German economy navigates troubled waters. The catch-up process in the contact-intensive service industries is continuing at a fast pace and companies in the manufacturing sector are sitting on well-filled order books. However, high inflation is reducing the purchasing power of disposable incomes and thus dampening the recovery in consumption. In addition, supply bottlenecks have recently worsened again due to the war in Ukraine. As a result, the recovery will regain strength only in the second half of the year, when prices will no longer rise as rapidly and supply bottlenecks will begin to ease. Overall, we expect GDP to increase by 2.1 percent this year, as in our spring forecast. In 2023, GDP will grow by 3.3 percent (spring forecast: 3.5 percent). At 7.4 percent, inflation in the current year will be higher than ever before in reunified Germany. Next year, inflation will probably remain high with 4.2 percent. The recovery in employment continues. Effective earnings will rise strongly, also because labor shortages have reached an all-time high. In the current year, however, the increase of about 5 percent will lag behind the rate of inflation. Public budget deficits will decline as revenues increase strongly and pandemic-related expenditures are reduced. In 2023, public debt in relation to GDP is expected to be slightly above 60 percent.
Topic:
Economics, GDP, Inflation, and Russia-Ukraine War
Political Geography:
Europe and Germany

2277. German Economy Spring 2022: Recovery at risk – Soaring Inflation

Author:
Jens Boysen-Hogrefe, Nils Jannsen, Saskia Meuchelbock, Jan Reents, Dominik Groll, Stefan Kooths, Martin Ademmer, and Nils Sonnenberg
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
The German economy is once again facing strong headwinds. The war in Ukraine is leading to rising commodity prices, new supply bottlenecks and dwindling sales opportunities. These factors will affect the German economy in different ways. Higher commodity prices reduce the purchasing power of disposable incomes and thus dampen private consumption. Moreover, new supply bottlenecks will dampen industrial production in the coming months. Finally, sales opportunities will deteriorate at least temporarily due to the sanctions and the increased uncertainty caused by the war. All this is hitting the economy in a phase in which the dampening effects of the pandemic are fading out and a strong recovery has begun to emerge. The dampening factors are cushioned because private households have accumulated large amounts of extra savings since the beginning of the pandemic, so that high inflation does not fully impact private consumption. In addition, industrial firms have an unusually high stock of orders, which will cushion the temporarily lower sales opportunities. As a result, the recovery is likely to continue this year, albeit at a noticeably slower pace than expected in winter. Overall, we now expect GDP to rise by 2.1 percent in this year (winter forecast: 4 percent) and by 3.5 percent in 2023 (winter forecast: 3.3 percent). With 5.8 percent inflation is likely to be higher this year than ever before in reunified Germany. Even if commodity prices stop rising and supply bottlenecks gradually ease, inflation is still likely to be unusually high at 3.4 percent next year, also because recent producer price increases are only gradually being passed through to consumers. The labor market is expected to remain robust. Public spending will rise in response to the war and its economic consequences, so that budget deficits will remain at elevated levels for a longer period.
Topic:
Economics, GDP, Inflation, and Purchasing Power
Political Geography:
Europe and Germany

2278. Russia-Ukraine: Dangerous Stalemate

Author:
European Institute of Peace
Publication Date:
02-2022
Content Type:
Working Paper
Institution:
European Institute of Peace (EIP)
Abstract:
Seven years have passed this month since the Package of Measures for implementation of the Minsk agreements called for an “immediate and comprehensive ceasefire in certain areas of the Donetsk and Luhansk regions of Ukraine and its strict implementation…”. Despite endorsement by the UN Security Council Resolution 2202 (February 2015), little or no progress was made in implementing the Minsk agreements, with continued conflict and violations of the ceasefire reported by the OSCE Special Monitoring Mission to Ukraine (SMM) on an almost daily basis. Almost 14.000 Ukrainians lost their lives, thousands more were injured, and millions displaced. With no effective ceasefire in place, this is not a “frozen conflict,” and violent escalation may happen by intent, misunderstanding or miscalculation. Today an even more dangerous stalemate has emerged. Deep international concerns have been raised about the reported Russian military build-up along the country’s borders with Ukraine. Further raising the stakes, broader security issues have re-surfaced with Moscow demanding inter alia guarantees from the US and NATO to refrain from any further enlargement of the alliance, including the accession of Ukraine and other states. Despite intensive and on-going international consultations at all levels, there are no signs yet of de-escalation of the crisis. This report has been prepared in consultation with a group of Ukrainian and Russian experts who have been conducting quiet discussions during the past two years on the Minsk peace process and, more broadly, relations between the Russian Federation and Ukraine. These talks are held under the auspices of the European Institute of Peace.[1] Out of deep concern with present developments, it was decided to share more widely the broad consensus among the participants about the urgent need for a sustainable and durable ceasefire as a prerequisite for implementing the Minsk agreements. In a recent encouraging development, the advisers to the Normandy Four (N4) heads of state and government have supported in a joint statement after their meeting in Paris “unconditional observance of the ceasefire of 22 July 2020 regardless of differences on other issues of the implementation of the Minsk agreements.”[2] Reportedly, a follow-up meeting in Berlin on 10 February 2022 yielded no tangible results yet. Even if the Minsk peace process has come to a ground halt at present, it should be realized that the same political and security issues will have to be addressed in any renewed peace efforts in whatever format to restore peace in east Ukraine. This report highlights that any attempt to overcome the current political stalemate needs to be supported by concrete steps to establish a sustainable ceasefire at the ground-level of the conflict. The report analyses the major reasons for why a sustainable ceasefire was not implemented thus far, and offers a ceasefire management tool referred to as a “Coordination and Verification Mechanism” (CVM).
Topic:
Military Strategy, Violence, Peace, and Russia-Ukraine War
Political Geography:
Russia, Europe, and Ukraine

2279. Local Self-0Government in a Crisis Caused by the COVID-19 Pandemic: The Case of Serbia

Author:
Samed Karovic, Sinisa Domazet, and Jelena Jesic
Publication Date:
02-2022
Content Type:
Journal Article
Journal:
Journal of Liberty and International Affairs
Institution:
Institute for Research and European Studies (IRES)
Abstract:
This research examined whether there is an elaborate system of protocols, protection, and prevention in place at the local self-government level in the event of a crisis caused by an epidemic or pandemic. The core idea of this paper was to evaluate the protocol's effectiveness at the local self-government. Analysis was conducted using responses of 16 local self-government authorities. During a crisis caused by an epidemic/a pandemic of infectious illnesses, surveys were done as a cross-section documenting and detecting the current state of local self-government functioning. Methods used in the study are defining the objectives of the research, conceptualization, analysis of legal regulations, economic analysis, and decomposition of the problem. Key results and arguments of this paper expanded existing research thus there are only certain empirical data from areas that have been affected by the infectious disease caused by the epidemic/pandemic. Data was collected, processed, and systematized to serve in model formulation. As a brief conclusion, this study suggested protocol effectiveness at the local self-government level representing the idea that emergency and crisis management should be organized to preserve the health and livelihood of the population in the area affected by the pandemic of infectious diseases and thus enable the functioning of economic activities and society as a whole.
Topic:
Government, Leadership, Local, Pandemic, and COVID-19
Political Geography:
Europe and Serbia

2280. The Impact of Corporate Governance And Its Consequences On Protecting The Bank's Assets: Empirical Evidence From Kosovo Banks

Author:
Esat A. Durguti and Emine Q. Gashi
Publication Date:
02-2022
Content Type:
Journal Article
Journal:
Journal of Liberty and International Affairs
Institution:
Institute for Research and European Studies (IRES)
Abstract:
This study aims to analyze the relationships between corporate governance instruments on the wealth of financial intermediaries in wide-ranging. The data employed in this study are secondary data from nine (9) commercial banks and covered the years 2013-2020. The approach used in data processing is a 2SLS estimation and multilevel mixed-effects for the dependent variable natural logarithm of total assets. The results provided by the econometric analysis show that board size, sovereign committees, Net Interest Margin (NIM), Non-Performing Loans (NPL’s), and equity to liabilities have an important impact on the protection of the assets of financial institutions. While surprising results have been generated in the composition of the board structure in terms of gender diversity, they have turned out to be insignificant. The originality and value of this study lie in the approach of including the characteristics of the board, as well as the combination of some financial indicators different from previous studies, which makes more comprehensive the study of the impact of board composition on increasing the wealth of banks.
Topic:
Governance, Finance, Banks, and Corporate Governance
Political Geography:
Europe, Kosovo, and Serbia