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101. Artificial Intelligence and the Clustering of Human Capital: The Risks for Europe

Author:
Erik van der Marel
Publication Date:
12-2023
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Europe trails the global frontier of productivity growth and the region’s trend is sluggish. Much prospective economic growth for Europe is likely to come from AI and its adoption by European firms which is projected to shoot up the productivity trend. For such AI-generated growth to work, high levels of human capital need to be available for firms, in particular Science, Technology, Engineering, and Mathematics (STEM) graduates. However, much of this human capital for AI is leaving Europe and the region experiences a net outflow when it comes to the skills required to make AI work. Moreover, the spread of both human capital and AI is very uneven within Europe, with some in the West spearheading whilst others in the East are trailing. This paper shows that those regions in Europe that successfully have invested in human capital in the past explain more than one-third of AI adoption by their firms a decade later. Furthermore, this persistent trend is driven by the most human capital-intense firms as they explain more than 50 percent of the observed adoption of AI across Europe. The clustering of human capital is very persistent over time and those that lag in human capital now will weigh down Europe’s ability in generating AI-related growth in the future. This will likely have long-lasting effects for Europe as a whole, defining its capacity to catch up to the global frontier or amplifying the region’s slow-moving growth and productivity trend. Policy makers who are serious about creating growth in the future on the back of AI should therefore invest in human capital now, or else Europe will further fall behind.
Topic:
European Union, Economic Growth, Human Capital, and Artificial Intelligence
Political Geography:
Europe

102. To what extent can urbanisation mitigate the negative impact of population ageing in China?

Author:
Alicia Garcia-Herrero and Jianwei Xu
Publication Date:
10-2023
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
China is experiencing population ageing caused by a rapidly declining fertility rate and increased life expectancy. This demographic transition poses economic challenges, yet the intensity of these challenges depends on a number of factors, with the move of people from rural to urban areas being of central importance. To gain a clearer understanding of how urbanisation interacts with population ageing, we investigate changes in the Chinese labour force in both rural and urban areas. Our findings suggest a modest shrinking of the overall labour force up until 2035. However, until 2035, the labour force is projected to contract only in rural areas, while the urban labour force will continue to grow. As urban employment is more productive than rural employment, the combined effect of demographic change and urbanisation on growth will remain moderately positive (0.4 percent per year). Beyond 2035, fertility rate decline will begin to affect the working-age population in both rural and urban areas, especially since the urbanisation process is expected to level off by then. In such circumstances, China’s shrinking population will shave off 1.4 percent from GDP growth annually. These results, however, do not take into account the impact of population aging on labour productivity. China’s fast move towards robotisation and artificial intelligence might help mitigate any negative impacts by increasing productivity, but there is no sign yet that this is the case.
Topic:
Demographics, Urbanization, Economic Growth, and Aging
Political Geography:
China and Asia

103. Corking Russian Gas: Global Economic and Political Ramifications

Author:
Scott Semet
Publication Date:
08-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Awarm winter in 2022–2023, a purposive decline in consumption that caused the economy to cool, and frantic efforts to attract supplies of liquefied natural gas (LNG) obscured Europe’s enduring reliance on cheap Russian gas for economic growth. European winters will not always be warm, and there is not enough LNG to replace Russian gas in the short term. Efforts to wean Europe from Russian gas permanently defy economic logic. Should policymakers choose to do so, it would carry costs not only for Europe but also for the United States and the rest of the world.
Topic:
Gas, Economic Growth, Imports, Energy, and Regional Politics
Political Geography:
Russia, Europe, and United States of America

104. What Growth Strategies Do Citizens Want? Evidence from a New Survey

Author:
Lucio Baccaro, Bjorn Bremer, and Erik Neimanns
Publication Date:
04-2023
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
While research on the economic characteristics of growth models across countries is now extensive, research on the politics of growth models is still in its infancy, even though governments routinely pursue different strategies to generate growth. In particular, we lack evidence on (1) whether citizens have coherent preferences towards growth strategies, (2) what growth strategies citizens prefer, and (3) what shapes their preferences. We address these questions through a new survey of public opinion in Germany, Italy, Sweden, and the United Kingdom, which exemplify different models. We find that preferences for growth strategies are consistent with other policy preferences and are meaningfully structured by class and retirement status, and to a lesser extent by sector of employment. At the same time, differences across class and sector are small, and a large majority of respondents across countries favor wage-led growth. This suggests there is a “representation gap,” since this particular growth strategy is in crisis everywhere.
Topic:
Public Opinion, Capitalism, Economic Growth, Representation, and Macroeconomics
Political Geography:
Europe and Germany

105. Growth Stories: the 'Knowledge Economy' and alternative economic narratives for a future government

Author:
Nick O'Donovan and Vicky Pryce
Publication Date:
03-2023
Content Type:
Video
Institution:
Mile End Institute, Queen Mary University of London
Abstract:
Since the early 1990s, successive UK governments have emphasised social investment in education and research, coupled with pro-market reforms, to foster high-productivity 'knowledge work' in industries such as computing and life sciences. At this seminar at the Mile End Institute, held on Tuesday 23 March 2023, Dr Nick O'Donovan (Head of the Future Economies Centre at Manchester Metropolitan University) explored how the 'Knowledge Economy' became received wisdom in economic policy circles. After presenting his recent book, Pursuing the Knowledge Economy, Nick discussed how it endured multiple crises and a decade-long slump with Vicky Pryce (former Head of the Government Economic Service) and Lord Wood of Anfield (Special Adviser to Gordon Brown). They concluded by discussing whether today's political leaders are willing to break free of the Knowledge Economy narrative and what alternative 'growth stories' they might tell in its place after the next general election.
Topic:
Government, Reform, Economic Growth, and Knowledge Economy
Political Geography:
United Kingdom and North America

106. Inclusive Growth and Decent Jobs by Gender: The Case of Urban Areas in Bolivia

Author:
Beatriz Muriel Hernández and Sergio Mansilla
Publication Date:
10-2023
Content Type:
Working Paper
Institution:
Institute for Advanced Development Studies (INESAD)
Abstract:
This paper presents an empirical study of how inclusive was the extraordinary growth experienced by Bolivia between 2006 and 2019, in terms of decent job generation in urban areas and by gender. For this, we use the Ali and Son (2007) concentration curve of opportunities and approach the jobs with five rates proposed by Muriel (2014, 2019, 2020a, 2020b): i.e. job stability, Christmas wage bonus tenure, social protection access, sufficient labour income and membership of a labour association. The results show that growth was inclusive between 2006 and 2011; but it was not in further periods. Even, the percentage of workers with Christmas wage bonus, sufficient labor income and with affiliation to some labor association were lower in 2019 compared to 2006. In terms of gender gaps, the one associated with sufficient labor income stands out, but the main problems lie in the inequities of access to opportunities within the same female population.
Topic:
Economic Growth, Urban, Gender, Economic Inclusion, and Jobs
Political Geography:
South America and Bolivia

107. Estimating Tax Revenues on Economic Growth for Southeast European Countries

Author:
Luljeta Gllogjani and Esat A. Durguti
Publication Date:
12-2023
Content Type:
Journal Article
Journal:
Journal of Liberty and International Affairs
Institution:
Institute for Research and European Studies (IRES)
Abstract:
The study aims to identify and empirically analyze the impact of direct tax and indirect tax revenues on economic growth in the transition countries of Southeast Europe, based on panel data for the period 2005-2019. Factors that are included in the study as independent variables are direct tax and indirect tax revenues. In contrast, the dependent variable is defined as the annual GDP growth in percentage, an indicator of economic growth. The econometric approach is OLS regression analysis, random effects regression, and fixed effects regression. The model’s reliability has been tested by applying diagnostic tests, such as autocorrelation, normal distribution, and heteroscedasticity. Moreover, the result of the Breusch and Pagan Lagrangian multiplier and Hausman test suggests that the adequate model is a regression with fixed effects. Therefore, the findings with a regression with fixed effects confirm that the revenues from indirect taxes resulted in a positive and statistically significant effect. In contrast, direct tax revenues did not significantly affect economic growth but resulted in a positive sign. The analysis through the econometric model enabled the achievement of the aims set in this paper and the achievement of the final goal, providing observed evidence that the role of tax policy is crucial to encouraging economic growth.
Topic:
Economic Growth, Tax Systems, and Revenue
Political Geography:
Europe and Southeast Europe

108. Privilege, Economy and State in Old Regime France: An Interview with Lewis Wade

Author:
Tehreem Husain and Lewis Wade
Publication Date:
12-2023
Content Type:
Commentary and Analysis
Institution:
The Toynbee Prize Foundation
Abstract:
Dr. Lewis Wade’s new book Privilege, Economy and State in Old Regime France: Marine Insurance, War and the Atlantic Empire under Louis XIV (Boydell and Brewer, 2023) closely analyses the rise and fall of Louis XIV's marine insurance institutions in Paris, which were central to the French monarchy's efforts to stimulate commerce, colonial enterprise and economic growth. The book discusses two leading ministers, Jean-Baptiste Colbert and his son, the Marquis de Seignelay who both recognised that marine insurance was crucial for protecting commercial investment in French maritime endeavours. While Colbert looked to private enterprise to lure capital away from passive investments in state debt towards the marine insurance industry. Seignelay, by contrast, leveraged the tools of privilege on which the French economy was built by creating the first chartered company in the history of marine insurance. The book discusses in detail the overarching system of risk management that lay at the heart of absolutism itself. I was delighted to interview Dr. Wade to dig deeper into his book.
Topic:
History, Economy, Economic Growth, State, Interview, and Capital
Political Geography:
Europe and France

109. Energy Efficiency for Sustainable Development in Africa: Challenges and Opportunities

Author:
Larissa Ntoubia
Publication Date:
10-2023
Content Type:
Working Paper
Institution:
The Nkafu Policy Institute
Abstract:
Globally, about 940 million people lack access to electricity, accounting for about 13% of the world’s population. Most of these people reside in rural and deplorable areas where this lack of electricity negatively affects their standard of living, the environment and sustainable development (Ahmad, Ali & Basit, 2022). In Africa, at least 645 million people do not have access to electricity. The continent’s electricity access rate stood at 40% in 2017, the lowest in the world. Power shortages and load shedding are on the rise. Even with the implementation of several power pool zones across the continent, Africans still experience a series of blackouts and power rationing that costs an estimated 2-4% of GDP per year. Electricity is necessary for agriculture, communications, healthcare, business and education, which are key drivers of sustainable development. In Tanzania and Ghana, businesses have lost around 15% of the value of their overall turnover due to recurrent power outages (AfDB, 2018). Similarly, in South Africa, economic growth has slowed in recent years due to severe power outages. There is also a decline in human capital as computers and other laboratory equipment cannot be used in schools because of the power cuts. Lives are at risk in hospitals, and life-saving equipment and services cannot be used because of the lack of electricity. An inadequate energy supply hampers economic development, hence the need for affordable, reliable, sustainable and clean energy with lower carbon dioxide emissions (UN SDG 7). This paper aims to examine the challenges faced by the energy sector in Africa and present opportunities for improving the sector to achieve sustainable development. The paper shows how energy providers, policymakers and other stakeholders can ensure an efficient and reliable energy supply and how this can be done to achieve sustainable development in Africa. The paper is structured in two sections; the first presents challenges facing the energy sector in Africa, while the second identifies opportunities for the sector.
Topic:
Economic Growth, Energy Efficiency, and Sustainable Development
Political Geography:
Africa

110. Chinese Economy: Present Trends - A Dialogue with Huang Zhangkai

Author:
Huang Zhangkai
Publication Date:
02-2023
Content Type:
Special Report
Institution:
Brazilian Center for International Relations (CEBRI)
Abstract:
On the occasion of the XXI China Analysis Group meeting, Huang Zhangkai, associate professor at Tsinghua University, shared his outlook on the current state of the Chinese economy, the main factors impacting growth, and the perspectives and challenges he anticipates in the short- and medium-terms.
Topic:
Economy, Economic Growth, and Dialogue
Political Geography:
China and Asia