Endogenous Policy Research Articles

Embedded hegemony and the evolution of the United States’ structural power

Whilst the United States’ (US) economic hegemony has existed continuously since the end of World War II, it has not been realised in the same way. In the early post-war period, the US’s hegemony rested on its dominance over gross world product and manufacturing output and exports. However, by the 1970s it began to transition to high-technology industries, services and foreign investment. Using a structural power analysis, this article argues that this transition in the economic foundations of US hegemony was not a reaction to an exogenous shift in the international division of labour, but was rather the result of the endogenous policies, decisions and priorities of the US. Moreover, the article illustrates how the interaction between the four aspects of structural power (security, production, finance and information) determined how these new hegemonic interests were embedded in international institutions and norms to better project US power globally. Through a historical analysis, the article demonstrates that the four aspects of structural power went from mutually reinforcing each other in the early post-war period to detracting from each other from the mid-1960s. This spurred a managed transition by the US from one embedded hegemonic order to another. The result was the construction of contemporary US embedded hegemonic order based on dollar hegemony (financial structural power) and the internationalisation of US corporate dominance (productive structural power), supported by the private ownership of knowledge by US corporations (informational structural power). The article also considers the implications of this analysis for current challenges to the contemporary hegemonic order.

Do parties matter for policy accumulation? An analysis of social policy portfolios in 22 countries

AbstractThis article analyses the role of political parties in policy accumulation. We study this relationship in the area of social policy. Our analysis builds on a large data set covering the size of policy portfolios (policy targets and instruments) in three subfields of social policy for 22 OECD countries over 30 years. We find that the probability of social policy accumulation is not affected by the government's ideological position. Left governments do not produce more extensive social policy portfolios than right ones. Yet, this striking result does not contradict governments’ political ideologies, as left and right parties accumulate for different reasons. While left parties address new social policy targets to broaden the scope of the welfare state, right parties adopt new policy instruments to condition social benefits. These findings hold regardless of how we measure governments’ ideological position and despite strong endogenous policy growth dynamics, that is, countries with greater policy portfolios also display higher levels of policy accumulation. Our findings indicate that party political considerations can explain the reasons for but not the level of policy accumulation. Changes in government are thus unlikely to stall or slow down the constant accumulation of public policies.

A Segmented Market Model Incorporating Endogenous Policy Risk

This paper develops a segmented market model to incorporate policy risk. Credit risks and information inertia are considered within the model’s framework. The model shows that a high level of policy uncertainty has a negative impact on the capital market’s participation rate, which in turn, determines the effectiveness of monetary policy. This suggests that policy risk is an endogenous factor, and that the authority should control policy uncertainties.

Resilience, endogenous policy responses to COVID-19, and their impacts on farm performance

Policy measures aimed at containing the spread of the COVID-19 pandemic had unintended consequences on economic activities globally. In this study, we isolate and investigate the short-term partial impacts of six such measures on the farm and nonfarm incomes of agricultural households and examine the related resilience factors. Using Nigeria as a case study, we find that the COVID containment measures had mixed effects on farm and non-farm incomes in the short run. These varying effects are due to households’ resilience and vulnerability factors, including land size, wealth, income diversification, involvement in processing activities, and reliance on hired labor. Our findings highlight the need for more targeted health crisis containment measures which consider the uniqueness, diversity, and regional heterogeneity of agriculture, especially the potential implications for farm viability.

Modelling pandemic risks for policy analysis and forecasting.

What were the economic effects of vaccination campaign, agents' adaptation to containment measures, and fiscal and monetary measures during the COVID-19 pandemic? To quantify these effects, we augment the ECB's macro-econometric model with an endogenous epidemiological block, providing one of the first institutional policy models with epidemiological elements. The model tracks closely actual pandemic developments by relying on detailed epidemiological data and by nesting a wide range of features, including vaccination campaigns, emergence of new variants and learning effects. Importantly, it includes an endogenous policy reaction function for containment measures, allowing counterfactual simulations. Our simulation results show that: (i) agents' adaptation to containment measures over time was key in reducing negative macroeconomic consequences of lockdowns, (ii) the vaccination campaign slowed down infection rates and hospitalizations, enabling a relaxation of containment measures and avoiding a sharp double dip in economic activity and (iii) complementary fiscal and monetary policy interventions provided support to the economy.

Шляхи вдосконалення податкового контролю в Україні

The article reveals the theoretical, methodological and practical aspects of ensuring the economic security of the enterprise, which affects the dynamics of the national economy in general. The purpose of the study is a scientific and practical assessment of the theoretical foundations of economic security of the enterprise. The methodological basis is general scientific methods, namely: logical generalization, dialectical, tabular, graphic, synthesis, induction, deduction. The information base was, in particular, scientific professional articles, materials of dissertation studies, Internet sources, etc. The approaches of modern economists, as well as the author's approach to this phenomenon, are presented. Factors affecting the economic security of the enterprise are shown. It is proposed to expand the principles of its provision by adding people-centeredness at the enterprise and greening of production. Adherence to these principles will make it possible to more clearly understand the process of sustainable development of the enterprise. They can be supplemented taking into account changes in the exogenous and endogenous policies of the enterprise, changing conditions, industry specifics and state policy. Practical examples of the necessity of greening the enterprise's production activity and people-centeredness are demonstrated. A structural and logical scheme for ensuring the economic security of the enterprise has been formed.

Людиноцентризм та екологізація виробництва як основні елементи забезпечення економічної безпеки підприємства

The article reveals the theoretical, methodological and practical aspects of ensuring the economic security of the enterprise, which affects the dynamics of the national economy in general. The purpose of the study is a scientific and practical assessment of the theoretical foundations of economic security of the enterprise. The methodological basis is general scientific methods, namely: logical generalization, dialectical, tabular, graphic, synthesis, induction, deduction. The information base was, in particular, scientific professional articles, materials of dissertation studies, Internet sources, etc. The approaches of modern economists, as well as the author's approach to this phenomenon, are presented. Factors affecting the economic security of the enterprise are shown. It is proposed to expand the principles of its provision by adding people-centeredness at the enterprise and greening of production. Adherence to these principles will make it possible to more clearly understand the process of sustainable development of the enterprise. They can be supplemented taking into account changes in the exogenous and endogenous policies of the enterprise, changing conditions, industry specifics and state policy. Practical examples of the necessity of greening the enterprise's production activity and people-centeredness are demonstrated. A structural and logical scheme for ensuring the economic security of the enterprise has been formed.

Uncertain policy regimes and government spending effects

Money financing returns to policy debate as governments around the world adopted massive fiscal measures during the pandemic. Using a fully nonlinear New Keynesian model with endogenous policy regime switching, we show that a moderate inflation-driven switching probability to a debt-financing regime reduces money-financed spending multipliers. When interacted with high government debt, money-financed spending multipliers fall below one, similar to the size of debt-financed spending multipliers. This result holds at the zero lower bound, with long-term government debt, and under a wide range of key parameter values. Policy regime uncertainty, on the other hand, has little effect on debt-financed spending multipliers.

Strategic compromise, policy bundling and interest group power: Theory and evidence on education policy

Policy reforms are often multifaceted. In the rent-seeking literature policies are usually taken as one-dimensional. This paper models policy formation using a political contest with endogenous policy proposals containing two dimensions, e.g. access and quality of education. The two dimensions provide an opportunity to trade off one policy over another to make the lobbying opposition less aggressive. In a first stage, the government proposes a reform over the two policies, and in a second stage engages in a contest with an interest group over the enactment of the proposed reform. As a result, the government makes a compromise, under-proposing in the policy the interest group opposes and over-proposing in the policy the interest group desires. Effectively, there will be strategic bundling of desired policies with undesired ones in an attempt to increase enactment probability and overall utility. We study this prediction empirically using a newly complied dataset on education legislation in the states of California, Illinois and Texas. Results suggest that stronger opposition is associated with less quality reforms. Moreover, as predicted by the model, when bundling access reforms together with quality, the negative effect is counteracted.

The Influence of Indirect Democracy and Leadership Choice on Cooperation

The paper examines whether an institution has a differing impact on cooperation if it is introduced by a representative of the affected subjects rather than exogenously imposed. The experimental design controls for selection effects arising from the endogenous policy choice. The treatment varies whether the decision-maker is elected or randomly appointed. There is evidence of a large democracy premium in the sense that endogenously chosen institutions lead to more cooperation than identical exogenous institutions, but only if the group leader is democratically chosen. Especially the subjects who initially did not prefer the policy are more likely to cooperate if it was brought about by an elected representative. There is no democracy premium for randomly appointed group leaders.

Endogenous viral mutations, evolutionary selection, and containment policy design

How will the novel coronavirus evolve? I study a simple epidemiological model, in which mutations may change the properties of the virus and its associated disease stochastically and antigenic drifts allow new variants to partially evade immunity. I show analytically that variants with higher infectiousness, longer disease duration, and shorter latent period prove to be fitter. “Smart” containment policies targeting symptomatic individuals may redirect the evolution of the virus, as they give an edge to variants with a longer incubation period and a higher share of asymptomatic infections. Reduced mortality, on the other hand, does not per se prove to be an evolutionary advantage. I then implement this model as an agent-based simulation model in order to explore its aggregate dynamics. Monte Carlo simulations show that a) containment policy design has an impact on both speed and direction of viral evolution, b) the virus may circulate in the population indefinitely, provided that containment efforts are too relaxed and the propensity of the virus to escape immunity is high enough, and crucially c) that it may not be possible to distinguish between a slowly and a rapidly evolving virus by looking only at short-term epidemiological outcomes. Thus, what looks like a successful mitigation strategy in the short run, may prove to have devastating long-run effects. These results suggest that optimal containment policy must take the propensity of the virus to mutate and escape immunity into account, strengthening the case for genetic and antigenic surveillance even in the early stages of an epidemic.

A Deadly Triple Threat: Three Layers of U.S. Racial Inequity in COVID Infections and Deaths

ABSTRACT COVID-19 infections and deaths in the United States have affected racial groups differentially. Until now, there has been no analysis of the role that structural racism plays in those health outcomes. We use three models of ascending complexity to quantify the state-level impact of reporting bias, socioeconomic difference, and endogenous policy choices in a treatment model. Even after controlling for confounding factors like Black Lives Matter and other public demonstrations, multivariate regressions conclude that all three explain the phenomenon. We estimate massive avoidable costs of over 870,000 infections and 39,000 deaths due to unequal health outcomes by race.

Straddling multiple streams: focusing events, policy entrepreneurs and problem brokers in the governance of English fire and rescue services

ABSTRACT Empirical studies that use the multiple streams approach often examine cases of reactive policymaking in response to “focusing events”, rather than proactive policymakers who seek to broker or construct problems that their preferred solution might address. Drawing on publicly-available debates about reforms to fire and rescue services in seven areas of England, we show how individuals within small policy subsystems may construct problems to try and convince others to support their preferred policy solution. By straddling all three streams and acting as endogenous policy entrepreneurs, policymakers and problem brokers simultaneously, we highlight how these actors can exert substantial influence over policymaking processes – although consensus within the political stream about the existence of a genuine problem is still a key factor in facilitating change. These insights allow us to introduce a more obvious power dimension and greater predictive capacity into the multiple streams approach.

Endogenous Growth, Skill Obsolescence and Optimal Monetary Policy

Endogenous Growth, Skill Obsolescence and Optimal Monetary Policy

A Deadly Triple Threat: Three Layers of U.S. Racial Inequity in COVID Infections and Deaths (updated)

COVID infections and deaths in the United States have affected racial groups differentially. Until now, there has been no analysis of the role that structural racism plays in those health outcomes. We use three models of ascending complexity to quantify the state-level impacts of reporting bias, socioeconomic difference, and endogenous policy choices in a treatment model. Even after controlling for confounding factors like Black Lives Matter and other public demonstrations, multivariate regressions conclude that all three explain the phenomenon. We estimate massive avoidable costs of over 870,000 infections and 39,000 deaths due to unequal health outcomes by race.

Coordination Effects and Optimal Policy Choices of Macroprudential Policy and Monetary Policy

Considering three monetary policy rules, together with two endogenous macroprudential policies that are credit constraints (loan to value, LTV) for households and counter-cyclical capital (capital requirement ratio, CRR) for bankers, this paper establishes a dynamic stochastic general equilibrium (DSGE) model. Based on the welfare analysis of different combinations of macroprudential rules and monetary policy rules, this paper identifies the optimal policy combinations and analyzes the coordination effects between macroprudential policies and monetary policies. The results show that no matter what kind of monetary policy rules is implemented, the introduction of macroprudential rules has improved the level of total social welfare. In the optimal “two pillars” framework of monetary policies and macroprudential rules, the main objective of monetary policy is to stabilize price inflation, and the macroprudential policy to be implemented is the CRR macroprudential policy. This combination can effectively promote the stability of the real estate market, financial market, and macroeconomy, while maximizing the improvement of total social welfare.

Do party positions affect the public's policy preferences? Experimental evidence on support for family policies

Abstract The standard assumption of exogenous policy preferences implies that parties set their positions according to their voters’ preferences. Focusing on family policies, we investigate the reverse effect: Are the electorates’ policy preferences responsive to party positions? In a representative German survey, we inform randomized treatment groups about the positions of political parties on two disputed family policies, child care subsidy and universal student aid. In both experiments, the information treatment aligns policy preferences of specific partisan groups with their preferred party's position, implying endogenous policy preferences. The treatment also affects non-partisan swing voters, suggesting that party positioning can affect the public's preferences beyond their partisans.

Endogenous vertical structure and trade policy in an import‐competing market

We examine the endogenous determination of a vertical market in an import‐competing market with import tariff. We show that if firms commit to vertical organization before the government's commitment to trade policy, the home and foreign firms choose vertical separation and vertical integration, respectively, at equilibrium under Bertrand competition. Under Cournot competition, the subgame perfect Nash equilibrium entails both firms separating their retailers. Comparing profits between Bertrand competition to Cournot competition, we find that upstream manufacturer's profit can be higher under Bertrand competition with integration than under Cournot competition with separation when comparing foreign upstream manufacturer's profit.

The suggested structure of final demand shock for sectoral labour digital skills

ABSTRACT International data seem to confirm that countries with a relative abundancy of highly-skilled labour with digital competences grow faster than others. For this reason, digital competences and skills in general are progressively assuming a central role in labour market policies. In this article, we show the potential of the disaggregated multisectoral analysis with the macro multipliers approach as a tool of economic policy. Such analyses allow identifying a set of endogenous policies in which specific objectives do not clash with growth objectives. The identification and the quantification of the macro multipliers is based on an extended multi-industry, multi-factor and multi-sector model, which accounts for the representation of the income circular flow as in the social accounting matrix (SAM). The SAM constructed for this exercise allows for a proper disaggregation of the labour factor by formal educational attainment, digital competences and gender for the case of Italy.

A Deadly Triple Threat: Three Layers of U.S. Racial Inequity in COVID Infections and Deaths

COVID infections and deaths in the United States have affected racial groups differentially. Until now, there has been no analysis of the role that structural racism plays in those health outcomes. We use three models of ascending complexity to quantify the state-level impacts of reporting bias, socioeconomic difference, and endogenous policy choices in a treatment model. Even after controlling for confounding factors like Black Lives Matter events, multivariate regressions conclude that all three explain the phenomenon. We estimate massive avoidable costs of over 870,000 infections and 39,000 deaths due to unequal health outcomes by race.