Academic Research

Hausmann, R., et al., 2022. Cutting Putin’s Energy Rent: ‘Smart Sanctioning’ Russian Oil and Gas.Abstract

Following the Russian aggression against Ukraine, major sanctions have been imposed by Western countries, most notably with the aim of limiting Russia’s access to hard international currency. However, Russia remains the world’s first exporter of oil and gas, and at current energy prices this provides large hard currency revenues. As the war continues, European governments are under increased pressure to scale-up their energy sanctions, following measures taken by the United States, the United Kingdom, Canada and Australia. This piece argues that given the inelasticity of Russia’s oil and gas supply, for Europe the most efficient way to sanction Russian energy would not be an embargo, but the introduction of an import tariff that can be used flexibly to control the degree of economic pressure on Russia.

E-Letter in Science: How to weaken Russian oil and gas strength

Neffke, F., Hartog, M. & Li, Y., 2022. The Economic Geography of the War in Ukraine. Complexity Science Hub Vienna.Abstract

The war in Ukraine has been waging for a month now, not only causing human suffering on a massive scale, but also sending economic tremors that are felt far beyond the country’s borders. Since the collapse of the Soviet Union, Ukraine’s economy has been pulled between its strong historical ties with the Russian economy and the opportunities in forging new ties with the European Union (EU). With the help of Metroverse, an online tool for analyzing the local economies of over a thousand cities worldwide, and of the data that power this tool, we analyze the evolving economic relations between Ukraine, Russia and the West and weigh the consequences of their disruption.

Explore: The Economic Geography of the War in Ukraine 

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Media Release
Bloomberg Opinion: Markets Need to Lose the ‘Peace in Our Time’ Reflex

2022 Mar 28

Research Seminar: Organizational Frictions to Automation, and Its Effects on Firms, Workers, and Labor Markets

10:15am to 11:30am

Location: 

Zoom (registration information below)

Speaker: Daniel P. Gross, Assistant Professor, Duke's Fuqua School of Business

Abstract: AT&T was the largest U.S. firm for most of the 20th century. Telephone operators once comprised over 50% of its workforce, but in the late 1910s it initiated a decades-long process of automating telephone operation with mechanical call switching---a technology first invented in the 1880s. This talk will cover results from two papers. In one, we study what drove AT&T to do so, and why it took one firm nearly a century to automate this one...

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Horrible trade-offs in a pandemic: Poverty, fiscal space, policy, and welfare
Hausmann, R. & Schetter, U., 2022. Horrible trade-offs in a pandemic: Poverty, fiscal space, policy, and welfare. World Development , 153. Publisher's VersionAbstract
We analyze how poverty and a country’s fiscal space impact policy and welfare in times of a pandemic. We introduce a subsistence level of consumption into a tractable heterogeneous agent framework, and use this framework to characterize optimal joint policies of a lockdown and transfer payments. In our model, a more stringent lockdown helps fighting the pandemic, but it also deepens the recession, which implies that poorer parts of society find it harder to subsist. This reduces their compliance with the lockdown, and may cause deprivation of the very poor, giving rise to an excruciating trade-off between saving lives from the pandemic and from deprivation. Transfer payments help mitigate this trade-off. We show that, ceteris paribus, the optimal lockdown is stricter in richer countries and the aggregate death burden and welfare losses smaller. We then consider a government borrowing constraint and show that limited fiscal space lowers the optimal lockdown and welfare, and increases the aggregate death burden during the pandemic. This is particularly true in societies where a larger fraction of the population is in poverty. We discuss evidence from the literature and provide reduced-form regressions that support the relevance of our main mechanisms. We finally discuss distributional consequences and the political economy of fighting a pandemic.
2022 Feb 14

Research Seminar: How Immigration Grease is Affected by Economic, Institutional, and Policy Contexts: Evidence from EU Labor Markets

10:15am to 11:30am

Location: 

Zoom (registration information below)

Speaker: Martin Kahanec, Professor and Head of the Department of Public Policy at the Central European University (CEU) in Vienna.

Abstract: (Paper)
Theoretical arguments and previous country-level evidence indicate that immigrants are more fluid than...

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2022 Feb 07

Research Seminar: Colombia’s Structural Challenges for the Creation of New, Better and More Inclusive Jobs

10:15am to 11:30am

Location: 

Zoom (registration information below)

Please register in advance and contact Chuck McKenney with any questions. 

Speakers: Laura Pabón, Eliana Carranza, and Andreas Eberhard-Ruiz

Abstract:
In mid-2020, the Government of Colombia launched a labor reform consultation process (Misión de Empleo) in response to a deterioration in pre-Covid19...

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How production networks amplify economic growth
McNerney, J., et al., 2022. How production networks amplify economic growth. Proceedings of the National Academy of Sciences of the United States of America (PNAS) , 119 (1). Publisher's VersionAbstract

Technological improvement is the most important cause of long-term economic growth. In standard growth models, technology is treated in the aggregate, but an economy can also be viewed as a network in which producers buy goods, convert them to new goods, and sell the production to households or other producers. We develop predictions for how this network amplifies the effects of technological improvements as they propagate along chains of production, showing that longer production chains for an industry bias it toward faster price reduction and that longer production chains for a country bias it toward faster growth. These predictions are in good agreement with data from the World Input Output Database and improve with the passage of time. The results show that production chains play a major role in shaping the long-term evolution of prices, output growth, and structural change.

Media release: New study finds economic progress is aided by longer supply chains and deeper networks

The new paradigm of economic complexity
Balland, P.-A., et al., 2022. The new paradigm of economic complexity. Research Policy , 51 (3). Publisher's VersionAbstract
Economic complexity offers a potentially powerful paradigm to understand key societal issues and challenges of our time. The underlying idea is that growth, development, technological change, income inequality, spatial disparities, and resilience are the visible outcomes of hidden systemic interactions. The study of economic complexity seeks to understand the structure of these interactions and how they shape various socioeconomic processes. This emerging field relies heavily on big data and machine learning techniques. This brief introduction to economic complexity has three aims. The first is to summarize key theoretical foundations and principles of economic complexity. The second is to briefly review the tools and metrics developed in the economic complexity literature that exploit information encoded in the structure of the economy to find new empirical patterns. The final aim is to highlight the insights from economic complexity to improve prediction and political decision-making. Institutions including the World Bank, the European Commission, the World Economic Forum, the OECD, and a range of national and regional organizations have begun to embrace the principles of economic complexity and its analytical framework. We discuss policy implications of this field, in particular the usefulness of building recommendation systems for major public investment decisions in a complex world.
McNerney, J., et al., 2021. Bridging the short-term and long-term dynamics of economic structural change.Abstract
In the short-term, economies shift preferentially into new activities that are related to ones they currently do. Such a tendency should have implications for the nature of an economy’s long-term development as well. We explore these implications using a dynamical network model of an economy’s movement into new activities. First, we theoretically derive a pair of coordinates that summarize long-term structural change. One coordinate captures overall ability across activities, the other captures an economy’s composition. Second, we show empirically how these two measures intuitively summarize a variety of facts of long-term economic development. Third, we observe that our measures resemble complexity metrics, though our route to these metrics differs significantly from previous ones. In total, our framework represents a dynamical approach that bridges short-and long-term descriptions of structural change, and suggests how different branches of economic complexity analysis could potentially fit together in one framework.
2021 Dec 20

Research Seminar: The Cushioning Effect of Immigrant Mobility

10:15am to 11:30am

Location: 

Zoom (registration information below)

Speaker: Cem Özgüzel, Economist, Organization for Economic Co-operation and Development (OECD)

Abstract: During the Great Recession, immigrants reacted to the drop in labour demand in Spain through internal migration or leaving the country. Consequently, provinces lost 13.5% of their immigrants or -3% of the total labour supply, on average. Using municipal registers and longitudinal administrative data, I find that immigrant outflows slowed the decline in employment and wage of natives. I use a modified shift-share instrument based on...

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2021 Dec 13

Research Seminar - Apollo’s Arrow: The Profound and Enduring Impact of Coronavirus on the Way We Live

10:15am to 11:30am

Location: 

Zoom (registration information below)

Apollo's Arrow offers a broad account of the impact of the coronavirus pandemic as it swept through American society in 2020 and of how the pandemic will unfold, and ultimately end, in the coming years. Using up-to-the-moment information, and drawing on epidemiology, sociology, medicine, public health, history, virology, and other fields, it explores what it means to live in a time of plague — an experience...

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