Long-run Perspective Research Articles

Structural change in a small natural resource intensive economy: Switching between diversification and re-primarization, Uruguay, 1870–2017

ABSTRACT The increasing interest in economic diversification, technological sophistication, and production specialization again places structural change at the centre of the economic development theory. However, efforts to measure structural change from a long-run perspective remain scarce. We aim to fill this gap using a synthetic indicator that represents the dynamics of structural change in the long-run and allows us to identify different development patterns. We calculate this indicator including information on 13 production sectors, for a small natural-resource intensive economy (Uruguay), from 1870 to 2017. Our results adequately describe the development patterns that, according to the literature, characterize Uruguayan economic history. In the long run, economic growth causes structural change; only during the First Globalization period the opposite relation prevailed. The decline of the index – which indicates ‘backward movements’ in the production structure – is found in periods of economic crisis and downturn cycles. This dynamics reflects critical time periods associated with the (relative) primarization of the economy. In other words, near to each crisis episode, the economy reacted by going back to primary production probably due to the search for traditional comparative advantages or because in such negative phases the weakest and most exposed sectors were those other than agriculture.

Does Telecommuting Reduce Commuting Emissions?

The long-term trend toward more work from home due to digitization has found a strong new driver, the Covid-19 pandemic. The profound change in urban mobility patterns supports the often-held view that reducing the number of commuting trips can lower carbon emissions to a certain degree. We investigate this optimistic view from a long-run perspective in a monocentric urban model with household-level vehicle choice based on fuel efficiency. In the medium run, fewer trips lead to the choice of less fuel-efficient vehicles. In addition, with lower annual driving costs to the city center, households change their location in the long run toward longer commuting trips, but cheaper housing, implying an adjustment in the real-estate market. These changes in vehicle choice and the urban form largely eliminate the initial environmental benefits. Binding fuel economy standards completely prevent the medium-run drop in fuel efficiency, but slightly exacerbate the long-term increase in commuting trip length.

The force of globalization reshaping the local institutions: evidence from the Organization of Islamic Cooperation member countries

PurposeThe authors reinforce the existing literature on the effect of overall globalization on institutional quality (IQ), while incorporating the effects of economic, political and social aspects of globalization, human capital, government expenditure and population growth. To this end, the authors estimate panel data models for a sample of 36 member countries of the Organization of Islamic Cooperation (OIC) during 1984–2016.Design/methodology/approachThe authors employ the cross-sectional autoregressive distributed lags (CS-ARDL) approach.FindingsThe study’s investigation affirms the presence of an inverted U-shaped (nonlinear) relation between overall globalization and IQ indexes for the sample countries, which suggests no additional room for improvement in IQ. It also underpins the existence of an inverted-U-shaped (nonlinear) relation between political globalization and IQ. In contrast, economic and social globalizations have a U-shaped relation with IQ, implying more scope for improvement.Research limitations/implicationsThe findings have key policy implications. First, policy makers should consider a long-run approach for improving IQ and globalization over time. Second, quick reforms in the short run may not improve IQ.Practical implicationsThe results suggest that policy makers should approach the globalization process from a long-run perspective as well by designing appropriate strategies to provide a continuous but gradual increase in globalization so as to systematically monitor the threshold limits to IQ from improving globalizationOriginality/valueTo the best of the authors’ knowledge, this work is the first to empirically investigate the overall role of globalization in promoting IQ under the conditions of short-run heterogeneity and long-run homogeneity. The authors focus on the member countries of the OIC, many of which are ruled by authoritarian regimes and suffer from a poor domestic institutional setting.

Cost-effectiveness of combining drug and environmental treatments for environmentally transmitted diseases.

Control of neglected tropical diseases (NTDs) via mass drug administration (MDA) has increased considerably over the past decade, but strategies focused exclusively on human treatment show limited efficacy. This paper investigated trade-offs between drug and environmental treatments in the fight against NTDs by using schistosomiasis as a case study. We use optimal control techniques where the planner's objective is to treat the disease over a time horizon at the lowest possible total cost, where the total costs include treatment, transportation and damages (reduction in human health). We show that combining environmental treatments and drug treatments reduces the dependency on MDAs and that this reduction increases when the planners take a longer-run perspective on the fight to reduce NTDs. Our results suggest that NTDs with environmental reservoirs require moving away from a reliance solely on MDA to integrated treatment involving investment in both drug and environmental controls.

Inventor mobility and productivity: a long-run perspective

ABSTRACT The aim of this paper is to explore the influence of mobility on inventor productivity. Unlike most previous literature in this field, we separate the impact of firm mobility from geographical mobility. Our paper is also novel because of the long period of investigation. We report how the different forms of mobility, and their impacts, have changed over the period 1836–1975 using US patent data. Mobility is identified for serial inventors who change assignee and/or location over time. Firm mobility and geographical mobility increase throughout the period examined, with only temporary reversals around the Great Depression and Second World War. Comparisons across matched samples of mobile and immobile inventors reveal that firm mobility and spatial mobility raise the patent productivity of inventors, the former having the largest impact. Inventor productivity increases for up to 15 years following a mobility event, suggesting a process of adjustment after a move.

In search of a US grand strategy: considering resurgent Russia

The American political, military and economic dominance established after the dissolution of the USSR is showing a tendency to decline. This demands an adaptation of an American grand strategy toward the changing of reality, and particularly an adaptation of the strategy toward Revisionist Russia while significant American resources are redirected toward East Asia in order to balance the PRC. We assume that neither primacy nor offshore balancing nor restraint provides a satisfactory solution for the balancing of Russia. We believe that primacy may cause an overstretching to US capabilities and at the same time this GS is excessive for the balancing of Russia, especially considering that, in the long-run perspective, Russia’s capability to project power outside its borders will decline due to Russian structural weakness. Similarly, the strategies of restraint and offshore balancing tend to underestimate the power which Russia still possesses and the threat which it may pose to American interests and allies around the world, as has been demonstrated by Russian policy toward Ukraine. We suppose that deep engagement in its modest form is the most cost-effective GS enabling to fulfill American security main interests, while balancing the major competitors, including Russia, and simultaneously avoiding an overstretch.

Guiding the future energy transition to net-zero emissions: Lessons from exploring the differences between France and Sweden

Despite similarities in their current energy mixes, France and Sweden's pathways have been very different since the 1970s, when both systems were highly dependent on fossil fuels. After the oil crisis, both countries chose to reduce their oil consumption by developing nuclear power. However, Sweden pursued a more diversified energy policy that has subsequently allowed it to reduce its CO2 emissions. Today, both countries have committed to a carbon neutrality goal: by 2045 for Sweden and 2050 for France. In order to understand the key factors that can drive energy transition toward a carbon neutrality goal, we propose to compare the past energy transitions in France and Sweden, two countries that have significantly reduced their CO2 emissions and fossil fuel dependency. To assess the impacts of the current energy system and its regulations on the feasibility of meeting carbon neutrality, we use TIMES bottom-up energy system optimization models. The results show that France faces more challenges in transforming its energy system than Sweden i.e. an increase in power production, a decrease in gas consumption, the replacement of heating systems in buildings, and the electrification of industry, thus confirming that its energy policy has to be driven with a long-run perspective.

Measuring the shadow economy and its drivers: the case of peripheral EMU countries

We adopt a long-run perspective to investigate the size of the shadow economy and explore the trends in this area. The analysis is based on a panel of peripheral EMU countries over the period 1965-2015. Our empirical approach relies on a multiple indicators and multiple causes (MIMIC) framework. This approach is a variant of structural equation modelling (SEM). We used two sets of variables, (i.e. potential determinants and indicator variables) to estimate an underlying (unobserved) index that measures the evolution of the shadow economy. Ascertaining the relative importance of the shadow economy enabled analysis of its relationship with other institutional and social issues (e.g. corruption, productivity and economic growth), and helped identify the channels through which the shadow economy might negatively influence the performance of different economies. In the sampled countries, shadow activity increased over the study period. It also seemed to be affected by the economic cycle.

The Value of Saving Oil in Saudi Arabia

Saudi Arabia has one of the highest levels of per capita oil consumption in the world, but attempts are now being made by Saudi policymakers to significantly reduce this. Thus, a relevant policy question is what is the value of saving a barrel of oil in Saudi Arabia? The instinctive answer is that the value saved is the difference between the international market price and the domestic price. However, for Saudi Arabia, this answer is insufficient for several reasons. First, the current administered domestic price of oil is set below international market levels, which leaves room for improved economic efficiency. Second, Saudi Arabia is not a marginal producer of oil but a critical player in the international oil market; a shift in Saudi exports affects international oil prices and consequently the country's revenue from oil exports. Third, there are different ways to reduce the domestic consumption of oil. This paper explores policies that reduce the domestic consumption of oil in Saudi Arabia, increasing the amount of oil that would ultimately be exported and assesses the impact on welfare and carbon emissions (however, given the long-run perspective adopted here, it does not address the optimal timing to export the oil that is saved). Among the various methodologies to do this, we opt for a general equilibrium model. Our results suggest that oil-saving policies would lead to positive welfare gains and a reduction in domestic carbon emissions. The most relevant insight for policymakers is that a barrel of oil saved in the Saudi economy leads to an increase in welfare ranging between $6 to $56 for an international oil price of $52.9 per barrel, depending on the policy, and a decrease in domestic CO2 emissions from 150 kg to 368 kg.

A comparative study on the costs and returns of organic vs. inorganic farming practices at selected areas near Dhaka, Bangladesh

Inorganic farming is the norm in most areas of Bangladesh today, especially at croplands near Bangladesh’s capital - Dhaka. However, several recent studies have shown that such practices cause soil degradation overtime, consequently leading to long-term harm to the environment and economic profits. This long-term cost is often avoided by most farmers as inorganic farming is believed to fetch increased productivity/monetary gains, than its environmentally friendly, organic counterpart: the primary aim of this research was to find out the validity of this belief. The research used literature review and analysis of primary data collected about input costs, returns, crop yields, environmental effects, etc., from sixty respondents (mostly farmers and consumers involved in both types of farming), using one-on-one structured interviews, and three focus group discussions at the selected areas of Savar, Sreenagar and Rupganj, focusing primarily on two popular crops – tomato and corn; graphical and tabular analyses were conducted using MS Excel to propose interpretations and record findings. Keeping all other things constant and internalizing environmental externalities, while organic farming was found to produce around 50% and 33% less tomatoes and corns in net terms, respectively, than inorganic farming, the input costs and returns from one cycle of production were found to be lower (50%) and higher (around 200USD), respectively. Hence, from a long-run perspective, organic farming was concluded as the more cost-effective choice both in economic and environmental terms, given that the Dhaka market for organic products are managed better by the producers, consumers and government, alike.
 Res. Agric., Livest. Fish.6(2): 289-299, August 2019

The inversion of the ‘really big trade-off’: homeownership and pensions in long-run perspective

The hypothesis of a trade-off between homeownership and welfare state provision, first proposed by Jim Kemeny around 1980, is a foundational claim in the political economy of housing. However, the evidence for this hypothesis is unclear at both macro and micro levels. This paper examines the link between welfare and homeownership at the macro level using new long-run data and a multilevel modelling approach. It shows that the negative cross-sectional correlation between homeownership and public welfare provision observed in the earliest available data disappears and becomes neutral by the 1980s and possibly positive subsequently. Within-country trajectories vary, but are significantly positive in more countries than significantly negative, suggesting that in some contexts welfare and homeownership are complements rather than competitors. The paper posits a dual ratchet effect mechanism in both pension benefits and homeownership capable of producing this inversion, and further suggests that rising public indebtedness and the debt-stabilising effects of welfare states may account for the emergence of complementarity in the pension‒homeownership relationship. The latter supports the hypothesis that some countries have avoided the trade-off by ‘buying time’ on credit markets.

The long-term evolution of economic history: evidence from the top five field journals (1927–2017)

The growing appeal of the long-run perspective among economists and the fiftieth anniversary of the publication of the Conrad and Meyer article (1958), which marked the official beginning of the Cliometric Revolution, have attracted a lot of interest on economic history. This paper explores the long-term development of economic history by analysing all the 6516 articles published in the top five international journals (Economic History Review, Journal of Economic History, Explorations in Economic History, European Review of Economic History and Cliometrica). Our main results are that the Cliometric Revolution took quite a long time to fully display its effects. We show that the conventional wisdom on the current state of the discipline seems a bit too optimistic. Economic history does not seem to be neither more comparative nor more focussed on peripheral countries. The historical periods studied do not change considerably, and the relevance of different topics did not change univocally. Most articles use some econometrics but only a minority feature advanced techniques. Economic history is indeed becoming more democratic, but its boundaries remain limited to the most advanced countries. Articles by authors from Continental Europe increased substantially, while that of North American declined. This change may be the harbinger of a new divergence between the two shores of the Atlantic, possibly related to the rise of a new paradigm, but it is too early to tell.

Government Expenditures and Revenues in Italy in a Long-run Perspective

The aim of this study is to investigate the sustainability of Italian public accounts using in a long-run perspective, using empirical tests on sustainability and solvency of the country’s fiscal policies. The results of unit root and stationarity tests show that government expenditures and revenues series are first-differences stationary. The empirical analysis considered both the entire period and two sub-periods (1862–1913, 1947–2013). Furthermore, we conduct tests on cointegration, which evidence that a clear long-run relationship between public expenditure and revenues emerges only for the years 1862–1913. In essence, the paper’s results reveal that Italy have sustainability problems in the republican age.

The Effects of Electrification on School Enrollment in Bangladesh: Short- and Long-Run Perspectives

This paper aims to show the impact of access to electricity on school enrollment in Bangladesh. It offers an empirical investigation of the relationship between access to electricity and school enrollment statuses, such as grade progression, repetition, and non-attendance. The data were taken from Bangladesh’s Multiple Indicator Cluster Survey (MICS) database 2012–2013 provided by the Bangladesh Bureau of Statistics (BBS) and UNICEF; the data include two years of grading information for children of ages ranging from 5–15. We applied the propensity score matching (PSM) and the Markov schooling transition model using matched sample data. The results show that access to electricity has a significant positive effect on grade progression and a significant negative effect on non-attendance in the short run as well as in the long run. The simulation result shows that the non-attendance rate is lower and the school enrollment rate for children grades 9-11 is higher in the electrified areas compared to unelectrified areas. This result suggests that access to electricity is an important strategic indicator for increasing school enrollment in both primary and secondary schools.

The Redistributive Effects of Monetary Policy: Evidence from a Century of Modern Economic History

This paper examines the distributional implications of monetary policy from a long-run perspective, with data spanning 100 years of modern economic history in 12 advanced economies. We employ a two-step approach, by estimating a Panel VAR and a single-equation model with local projections, to obtain the dynamic responses of the top 1% income share to a monetary policy shock. We exploit the implications of the macroeconomic policy trilemma, in order to identify exogenous variations in monetary conditions. This offers a genuine orthogonal perspective to capture fluctuations in short term interest rates unrelated to home economic conditions. The obtained results indicate that expansionary monetary policy strongly increases income inequality and vice-versa. These results have important implications for monetary policy coordination and the design of economic policies that aim to reduce income inequality.

Stabilization Policies and Technological Shocks: Towards a Sustainable Economic Growth Path

The purpose of this paper is to explore the extent to which traditional economic policies can be oriented by sound practices. It is becoming widely accepted that sustainable economic growth (and not only economic growth) is the final target of economic policies, but some economic policies are applied just looking to the short-run without taking in account the long-run perspective. Our aim is to show how a sustainable economic policy-making would be possible, making compatible the stabilization of the economy in the short-run with a sustainable economic growth in the long-run. We confront the design of economic policies with the 17 goals of the 2030 Agenda. We argue that all sustainable development goals can be attained by the design and implementation of sustainable economic policies. Finally, to illustrate this point, we will conduct a simulation exercise to show under which combinations of demand policies technological shocks would promote a path of sustainable growth. Our results will provide a reference framework for a sustainable economic policy-making.

Monetary Policy and the Top One Percent: Evidence from a Century of Modern Economic History

This paper examines the distributional implications of monetary pol-icy from a long-run perspective with data spanning a century of modern economic history in 12 advanced economies between 1920 and 2015. We employ two complementary empirical methodologies for estimating the dynamic responses of the top 1% income share to a monetary policy shock: vector auto-regressions and local projections. We notably exploit the implications of the macroeconomic policy trilemma to identify exogenous variations in monetary conditions. The obtained results indicate that ex-pansionary monetary policy strongly increases the share of national income held by the top one percent. Our findings also suggest that this effect is arguably driven by higher asset prices, and holds irrespective of the state of the economy.

Health Capital, Primary Health Care and Economic Growth

Investments in healthcare are important in terms of formation of the health capital. The research aims to find out the role of the health capital in economic growth of Georgia (country). This study is based on the secondary sources of data. The study data were obtained from Human Development Report, Ministry of Labor, Health and Social Protection of Georgia. As a proxy indicator for measuring the health capital we used the life expectancy, the morbidity prevalence and Incidence rate, maternal and children‟s mortality rate, outpatient referral rate, the state expenses on healthcare. The average life expectancy has increased in recent 25 years. The maternal and children‟s mortality rate has decreased, healthcare expenses have become higher and outpatient referral rate has also become more constant character. All these have a positive influence on the people‟s health and country‟s economic growth. However, the state expenses on health and primary healthcare referral rate is far below the European level. Patients are less motivated to go to a primary healthcare for prevention and decide to receive medical service only when they are in critical condition. All this shows that the primary healthcare system cannot fulfill the role of the so-called „gatekeeper‟. In general, the primary healthcare system has not developed in Georgia. As the health capital fulfills significant role in terms of the country‟s economic growth in a long-run perspective, it is advisable to promote the development of the primary healthcare system and taking WHO recommendations concerning state healthcare expenses into account.

Social Policy or Crowding-Out? Tenant Protection in Comparative Long-Run Perspective

In the shadow of homeownership and public housing, social policy through the regulation of private rental markets is a neglected and underestimated field of social policy. This paper, therefore, presents unique new data on the development of private tenancy legislation through the binary coding of rent control, the protection of tenants from eviction, and rental housing rationing laws across more than 25 countries and 100 years. This long-run perspective reveals the dynamic effects of rent control on the rise of homeownership as the dominant tenure during the 20th century. We find that both rent regulation and rationing legislation effectively increased homeownership, but only up to a certain threshold. We suggest that the short-term lure of an inexpensive social policy for tenants has led to the long-term marginalization of rental markets in many countries.

Man and the Arctic Environment: Parameters of Reciprocal Influence

The paper deals with the analysis of specific parameters of reciprocal influence between man and the Arctic environment, the formulation of the theoretic provisions, as well as the development of the scientific conclusions regarding the definition of the perspectives and peculiarities of the Arctic Region environmental development under conditions of globalization and the world environmental crisis. As the results of the conducted research, the authors revealed and generalized the scientific approaches towards the definition of the legal status of the Arctic; stated the legal contents and the meaning of the basic environmental standards and programs of the international legislation regarding the Arctic Region; considered the spheres of influence of the states on the Arctic territory and on the environmental situation of this region in general; characterized the environmental conditions for living of the Arctic population; and defined the nature of the adverse anthropogenic effect on the environment of the investigated region. The analysis of the literature helped to formulate the theoretical conclusions, to develop the practical recommendations and to forecast the long-run perspectives and peculiarities of the Arctic environmental development. It is substantiated that the reciprocal influence between man and the environment in the territory of the Arctic Region moves towards a qualitatively new stage, which forces the states to adopt the strategical decisions in the sphere of the reclamation of the Arctic Region only considering the preservation of the ecosystem, provision of the proper living quality of the Arctic population, as well as the environmentalization of all the kinds of economic activities in the region. The paper contains the scientific substantiation and proposes the development of the Concept of Sustainable Development and Preservation of the Ecosystem for the Arctic Region, which will also include the monitoring system for the condition of the Arctic.