Author: Cecilia Smitt Meyer

Closing the Gender Data Gap

Posted on March 7, 2024 | FROGEE PROJECT, Policy Brief

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High-quality data plays a crucial role in enhancing our comprehension of evolving social phenomena, and in designing effective policies to address existing and future challenges. This particularly applies to the gender dimension of data, given the profound impact of the pervasive so-called “gender data gap”. In recent decades, data recovered from archives, high quality surveys, and census and administrative data, combined with innovative approaches to data analysis and identification, has become pivotal for the progress of documenting structural gender differences. Nonetheless, before we can close the gender gaps on the labour market, within households, in politics, academia and other areas, researchers and policy-makers must first ensure a closure of the gender data gap.

Policy Brief | EN langauge version

Policy Brief | GE language version

Introduction

Any progress in our understanding of social phenomena hinges on the availability of data, and there is no doubt that recent advances in economics and other social sciences would not have been possible without countless high quality data sources. As we argue in this policy brief, this applies also, and perhaps particularly, to the documentation of different dimensions of gender inequalities and the analysis to identify their causes. Over the last few decades innovative ways to document historical developments, combined with improvements in the access to existing data, as well as new approaches to data collection, have become cornerstones in the progress made in our understanding of the various expressions of gender inequality. In the economic sphere this has covered themes such as labor market status,  earning and income levels, wealth accumulation over the life course, education investments, pensions, as well as consumption patterns and time allocation – in particular caregiving and household work. Researchers have also been able to empirically study gender inequalities in politics, culture, crime, the justice system and in academia itself.

Groundbreaking studies in gender economics, including those by Claudia Goldin, the recent Nobel Prize laureate, would not have been possible without high quality data and innovative ways aimed at closing the “gender data gap”, a term coined by Caroline Criado Perez, in her bestseller “Invisible women” (Criado Perez, 2020). In the introduction to the book she notes that “(…) the chronicles of the past have left little space for women’s role in the evolution of humanity, whether cultural or biological. Instead, the lives of men have been taken to represent those of humans overall.” (p. XI). The gender data gap is the result of deficits of informative data sources on women, which has been augmented by frequent lack of differentiation of information by sex/gender in available sources. Closing the gender gaps along the dimensions already identified in existing studies will require a continuous monitoring of evidence, thus closing the gender data gap in the first place. New studies focused on greater equality and on the effectiveness of various implemented policies will continue to rely on good data. Thankfully, few new datasets currently ignore the gender of the respondents. However  as our understanding of the biological and cultural aspects of sex and gender grows, the way data is collected will need to be modified.

As we prepare for the new challenges ahead of those designing data collection efforts and examining the data, we believe it is important to give credit to the authors of some of the groundbreaking studies that paved the way to the current pool of evidence on gender inequality. Around the time of the International Women’s Day, we recall several empirical studies in gender economics that, in our opinion, merit special attention due to either their innovative approaches to data collection, their unique access to original data sources, or their methodological novelty. These studies bring valuable insights into specific dimensions of gender inequality. This short list is naturally a subjective choice, but we believe that all of these studies deserve credit not only among researchers within gender economics, but also among those more broadly interested in the recent progress in the understanding of different aspects of gender inequality.

From Data to Policy Recommendations

Over the last few decades substantial efforts have been made to provide empirical evidence concerning historical trends in inequalities between men and women on the labor market. Seminal work in this field was conducted by Claudia Goldin in the 1970s and 80s, culminating in the publication of the path-breaking book Understanding the Gender Gap: An Economic History of American Women (Goldin, 1990). The book fundamentally changed the view of women’s role in the labor market. Empirically Goldin shows that female labor force participation has been significantly higher in historical times than previously believed. Before Goldin, researchers mainly studied twentieth century data. Based on this it looked as if women’s participation in the labour market is positively correlated with economic growth. Goldin’s work showed instead that women were more likely to participate in the labour force prior to industrialization, and that early expansion of factories made it more difficult to combine work and family. Seen over the full 200 year period, from before industrialization to today, the pattern of women’s labour market participation is in fact U-shaped, pointing to the importance of various societal changes that alter incentives and possibilities for women’s work. Goldin’s contribution is however not just about getting the empirical picture right. At least equally important is the recognition of women as individual economic agents, who make forward looking decisions under various institutional constraints and limitations related to social norms about identity and family, as well as education opportunities and labor market options. While some decision can be modeled as taken by “the economic man”, others by households, it may seem surprising that studying women’s decisions was for so long neglected.

Institutional, cultural and economic factors behind historical trends have become the focus of much of the literature trying to identify the forces driving gender disparities. Some of the most original work considers the role that “chance” plays in determining individual decisions related to gender – how having a first-born son (e.g. Dahl and Moretti, 2008) or having twins (Angrist and Evans, 1998), both of which can be considered random, – affect choices related to partnership, future fertility and the labor market. Others examin the influence of gender imbalances caused by major historical events. Brainerd (2017) investigates the consequences of extremely unbalanced sex ratios in cohorts particularly affected by the massive loss of lives during World War II in the Soviet Union. By exploiting a unique historical data source derived from the first postwar census, combined with statistics registry records from archives, Brainerd provides evidence that the war-induced scarcity of men profoundly affected women’s outcomes on the marriage market. Women were more likely to never get married, give birth out of wedlock and get divorced. On top of that, unbalanced sex ratios affected married women’s intrahousehold bargaining power and resulted in lower fertility rates and a higher rate of marriages with a large age gap between spouses. The post-war institutional setup increased the cost of divorce and withdrew legal obligations to support children fathered out of wedlock, which exacerbated the consequences from the shortage of men by further reducing the rates of registered marriages and increasing marital instability.

The examples above highlight how conditions beyond individuals’ control can contribute to social gender imbalances, or shed light on existing gender biases. How these ‘exogenous’ circumstances translate into economic inequalities and what additional factors drive disparities has been the focus of much academic work on gender inequalities. One of the most challenging questions has been that of demonstrating that discrimination of women, rather than women’s characteristics or choices, are behind the growing body of evidence on economic gender inequality. In this respect Black and Strahan (2001) provide important convincing conclusions by using significant changes in the level of regulation in the US banking sector. Increasing competition between banks lowered banks’ profits, and led to a reduced ability of managers to ‘divide the spoils’, and thus to discriminate between different types of employees. The authors used information on wages within specific industries (including banking) from one of the oldest ongoing surveys in the world – the US Current Population Survey (CPS). By exploiting detailed individual data covering a period of several decades the authors show that higher levels of banking sector regulations (prior to deregulation) facilitated greater premia paid out to male compared to female employees. Thus, increased competition in the banking sector brought favorable changes to women’s pay conditions as well as their position in banks’ management.

While long running surveys such as the CPS continue to serve as invaluable sources of information on the relative conditions of men and women, the growing availability of administrative data has opened new opportunities for documentation of inequalities and identification of the reasons behind these. For instance, the ability to track individuals throughout their work history before and after the arrival of their first child has allowed researchers to compare the trajectories of women’s and men’s earnings, wages and working hours. This comparison has revealed the existence of the so-called “child penalty”, with women experiencing a drop in their labor market position relative to their male partners after the birth of their first child, and with the gap persisting for many years. Strikingly, this penalty has been estimated in some of the most gender-equal countries in the world, such as Sweden (Angelov et al., 2016) and Denmark (Kleven et al., 2019), two countries which have spearheaded collecting and making rich administrative data available to researchers.

Another area where individual register data has proven invaluable is in the study of the so-called “glass ceiling”, i.e., the sharply increasing differences between men and women when it comes to pay as well as representation in the very top of the income distribution. In a seminal study by Albrecht et al. (2003), individual earnings for men and women were compared and differences were found to be markedly higher (with men earning much more) when comparing men in the top of the male income distribution with women in the top of the female income distribution. Also making use of Swedish registry data, Boschini et al. (2020) study a related question, namely the evolution of the share of women in the top of the income distribution. In line with other glass-ceiling results, they demonstrate that the share of women in the top is small, and that it gets smaller the higher one looks, , although it has increased over time. Decomposing incomes into labor earnings and capital income they also show that while women seem to be catching up in the labor income distribution, they clearly lag in the capital income distribution. Also, the income profile of the partners of high-income men and high-income women are strikingly different. Most high-income women have high-income partners, while the opposite is not true for high-income men.

Differences in the economic position of men and women reflected in the above examples can have their origin much before the time individuals enter the labor market. They can be driven by differences in schooling opportunities, as well as other forms of early life investments, to the extent that even much of what is perceived as choices or preferences later in life are in fact results of these subtle early life disadvantages for women. While these have largely diminished in the global North, there is a growing number of studies documenting these differences in the global South. Jayachandran and Pande (2017) examine the impact of son preference, a widespread cultural practice for example in India, on child health and development. The study leverages a simple, standardized, and broadly available indicator – the height of children – which is measured at routine health checks and included in many population surveys, such as the Demographic and Health Surveys (DHS). Additionally, their use of a natural experiment, based on the birth order of children, helps to establish a causal relationship between eldest son preference and nutritional disparities that have long-term developmental consequences among subsequent children, not only for girls but for Indian children on average. Findings like these underscore the importance of gender equality not only as a fundamental value but also as a crucial factor in promoting growth and development at the societal level.

The social costs of gender inequality have also motivated the growing research interest in gender-based violence and crime. Given the specific challenges associated with these topics – such as the clandestine and underreported nature of these acts but also the consideration for victims’ confidentiality and safety – studies in this area has required researchers to develop and apply innovative tools and data collection methods. In this framework list experiments have emerged as a methodology allowing respondents to disclose sensitive or socially undesirable attitudes indirectly, reducing the likelihood of the so-called social desirability bias in survey reporting. In a list experiment, respondents are presented with a set of statements or behaviors and asked to indicate their agreement or engagement with these. Among listed items, one is considered “sensitive” and is included only for a randomly selected subset of respondents. By comparing the average number of items agreed with by the entire sample to a control group that did not get the sensitive item, researchers can estimate the proportion of respondents who agreed with or engaged in the sensitive behavior or opinion. Kuklinski et al. (1997) is one of the pioneering contributions in this area, estimating the proportion of voters who harbored racial prejudices but who may have been unwilling to admit it in a direct survey question. List experiments have since become a widely used tool in political science and economics and have helped in the advancement of our understanding of gender-based violence (Peterman et al., 2018). Given the strong assumptions underlying the analysis the method has not become the ”statistical truth serum” it was at some point considered to be. However, list experiments have broadened the analytical opportunities in an area plagued by significant informational and data challenges.

While worldwide gender gaps in economic opportunities and especially in education and health have rapidly declined (and sometimes reversed) in the last decades, larger differences remain in political empowerment (see e.g., WEF Gender Gap Report 2023). Another Nobel Prize laureate in economics, Esther Duflo, in her joint work with Raghabendra Chattopahyay (2004), have pioneered a highly prolific area of research on the impacts of women as policymakers. In their study, they leverage a unique policy experiment in India  that randomized the gender of the leader of Village Councils, and a detailed dataset based on extensive surveys administered to both Village Council leaders and villagers. The surveys allowed for estimation of the investments in different public goods in 265 Village Councils, as well as the preferences over each of these public goods among female and male villagers. Combining the randomization and this rich dataset, the authors establish that political leaders prioritize public goods that are more relevant to the needs of their own gender, suggesting that women’s under-representation in politics might result in women’s and men’s preferences being unequally represented in policy decisions.

Conclusions and Recommendations

The narrowing gender gap in political representation across various levels of government, the growing influence of women in other areas such as public institutions, administration etc., and the heightened awareness of the crucial role gender equality plays in socio-economic progress all bode well for improvements in access to high-quality gender-differentiated data sources. Before we can recognize and close gender gaps identified from high-quality data, the gender data gap needs to firstly be closed. Governments and public institutions should make their  increasing amounts of digitized information available for research purposes. Funding should be available to collect data through surveys, and these could in turn be combined with details available in administrative sources to take advantage of the breadth of survey data and the precision of official statistics. Information needs to be collected on a frequent and regular basis to make sure that the consequences of various major developments, such as legal changes, conflicts or natural disasters, can be identified. Innovative data sources, for instance information from mobile apps or social media, can provide additional useful insights into socio-economic trends, old and new dimensions of inequalities and regular timely updates on different aspects of gender disparities. These new data sources can become the basis for future innovative studies on gender inequalities, contributing to a better understanding of the mechanisms behind these inequalities, and providing evidence for policies and other efforts to effectively close the remaining gaps. Already now there is enough evidence to conclude that closing these gaps is not only just but that it also constitutes a fundamental basis for continued inclusive economic development.

Post Scriptum

Contributing to the existing pool of data sources we are happy to share a regional dataset with information on gender norms and gender-based violence: the FROGEE Survey 2021. The data was collected using the CATI method (phone interviews) in autumn 2021 in Belarus, Georgia, Latvia, Poland, Russia, Sweden and Ukraine. In each country interviews were conducted with between 925 and 1000 adults. The survey covered areas such as: basic demographics, material conditions, labor market status, gender norms, attitudes towards harassment and violence, awareness of violence against women and awareness of legal protection for gender violence victims.

The data collection was funded by the Swedish International Development Cooperation Agency (SIDA) as part of the FREE Network’s FROGEE project. The dataset and supporting materials are freely available for research purposes. For more information see: FROGEE Survey on Gender Equality.

References

  • Angrist, D. J., and Evans, N. W. (1998). Children and their parents’ labor supply: Evidence from exogenous variation in family size. American Economic Review, 88(2), 450-477.
  • Albrecht, J., Björklund, A., and Vroman, S. (2003). Is there a glass ceiling in Sweden? Journal of Labor Economics, 21(1), 145-177.
  • Angelov, N., Johansson, P., and Lindahl, E. (2016). Parenthood and the gender gap in pay. Journal of Labor Economics, 34(3), 545-579.
  • Black, S. E., and Strahan, P. E. (2001). The division of spoils: Rent-sharing and discrimination in a regulated industry. American Economic Review, 91(4), 814-831.
  • Boschini, A., Gunnarsson, K., and Roine, J. (2020). Women in top incomes: Evidence from Sweden 1971–2017. Journal of Public Economics, 181, 104-115.
  • Brainerd, E. (2017). The lasting effect of sex ratio imbalance on marriage and family: Evidence from World War II in Russia. The Review of Economics and Statistics, 99(2), 229-242.
  • Chattopadhyay, R., and Duflo, E. (2004). Women as policymakers: Evidence from a randomized policy experiment in India. Econometrica, 72(5), 1409-1443.
  • Criado Perez, C. (2020). Invisible women. Vintage, London.
  • Dahl, G. B., and Moretti, E. (2008). The demand for sons. Review of Economic Studies, 75(4), 1085-1120.
  • Goldin, C. (1990). Understanding the Gender Gap: An Economic History of American Women. Oxford University Press.
  • Kleven, H., Landais, C., and Søgaard, J. E. (2019). Children and gender inequality: Evidence from Denmark. American Economic Journal: Applied Economics, 11(4), 181-209.
  • Kuklinski, J. H., Sniderman, P. M., Knight, K., Piazza, T., Tetlock, P. E., Lawrence, G. R., & Mellers, B. (1997). Racial prejudice and attitudes toward affirmative action. American Journal of Political Science, 402-419.
  • Jayachandran, S., and Pande, R. (2017). Why are Indian children so short? The role of birth order and son preference. American Economic Review, 107(9), 2600-2629.
  • Peterman, A., Palermo, T. M., Handa, S., Seidenfeld, D., and Zambia Child Grant Program Evaluation Team (2018). List randomization for soliciting experience of intimate partner violence: Application to the evaluation of Zambia’s unconditional child grant program. Health Economics, 27(3), 622-628.

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Alcohol-Related Costs and Potential Gains from Prevention Measures in Latvia

Posted on February 26, 2024 | Policy Brief

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Latvia has the highest per capita registered alcohol consumption rate among EU and OECD countries (OECD, 2024). In this brief, we show that the total budgetary (direct) and non-budgetary (indirect) costs associated with alcohol consumption in Latvia in 2021 amounted to 1.3–1.8 percent of the GDP. Non-financial costs from alcohol abuse amounted to a loss of nearly 90 thousand years spent in good health and with a good quality of life. We assess the potential effects of five alcohol misuse prevention measures, all recognized by the World Health Organization (WHO) as effective in reducing harmful alcohol consumption – especially when implemented together. Our analysis focuses on the individual effects of each measure and shows that raising the minimum legal age for alcohol purchases and enforcing restrictions on alcohol advertising and marketing are likely to yield the largest reductions in alcohol-related costs, although these effects will take time to fully materialize.

Introduction

Alcohol consumption is an important risk factor for morbidity and premature death worldwide. It is associated with over 200 diagnoses recorded in the International Statistical Classification of Diseases and Related Health Problems (CDC, 2021), including liver diseases, injuries, malignancies, and diseases of the heart and circulatory system (WHO, 2018). Alcohol consumption at any level is considered unsafe (Burton & Sheron, 2018).

Globally, an average of 3 million people die each year due to alcohol-related harm, accounting for 5.3 percent of all deaths (Shield et al., 2020). In 2019, alcohol consumption was the main risk factor for disease burden in people between 25 and 49 years of age and the second most important risk factor in people aged 10-24 years (GDB, 2019).

Alcohol use is associated not only with health problems but also with social issues, posing risks to people’s safety and well-being. It causes harm not only to the individual but also to family members and society at large (Rehm & Hingson, 2013). Various sectors, including health, justice, home affairs, and social care agencies, are involved in preventing the consequences of alcohol misuse and reducing the harm this causes. This demonstrates the multiple negative impacts of alcohol use on public health and well-being (Flynn & Wells, 2013).

Latvia has the highest per capita registered alcohol consumption rate among the EU and OECD countries (OECD, 2024), and no clear trend of declining levels has been observed in recent years. Moreover, the consumption of spirits, which can potentially cause more harm than other alcoholic beverages (Mäkelä et al., 2011), is steadily increasing. According to WHO data (WHO, 2024), the high per capita consumption of registered absolute alcohol in Latvia, compared to other countries, is largely due to the consumption of spirits. In Latvia, the share of spirits in total consumption is around 40 percent. By comparison, in the Czech Republic and Austria, where total per capita alcohol consumption is similar to Latvian levels, spirits account for only 25 and 16 percent of total consumption, respectively, while the proportions of beer and wine are higher.

This policy brief reports the estimated costs related to alcohol use in Latvia in 2021, based on the study Alcohol Use, its Consequences, and the Economic Benefits of Prevention Measures (Pļuta et al., 2023). It also provides an overview of the expected benefits from implementing preventive measures, such as raising the minimum legal age for buying alcohol and restricting alcohol advertisements.

Costs of Alcohol Use in Latvia

We estimate three types of costs associated with alcohol consumption:

  • Direct costs: These include budgetary costs related to alcohol consumption, such as healthcare, law enforcement and social assistance costs, as well as expenses for public education.
  • Indirect costs: These costs represent unproduced output in the economy and arise from the premature deaths of alcohol users, as well as their reduced employment or lower productivity.
  • Non-financial welfare costs: This type of cost arises from the compromised quality of life of alcohol users, their families, and friends.

We estimate direct costs by utilizing detailed disaggregated data on alcohol-related budget costs in the healthcare sector, law enforcement institutions (including police, courts, and prisons), costs of public education (e.g., educating schoolchildren about the consequences of alcohol consumption), costs of awareness-raising campaigns, and social assistance costs. For cost categories that are only partially attributable to alcohol consumption, we classify only a fraction of these costs as attributable to alcohol use (e.g., liver cirrhosis is attributable to alcohol usage in 69.8 percent of the cases, so only this fraction of the budget costs on compensated medicaments is attributable to alcohol use). To estimate social assistance costs, including public expenditure on social services, sobering-up facilities, social care centres, orphanages, and specialized care facilities for children and out-of-family care, we conduct a survey among social assistance providers.

To estimate non-budgetary costs, we construct a counterfactual scenario where alcohol is not being overly consumed, ensuring higher productivity, a lower rate of unemployment, and lower mortality within the labour force. Finally, non-financial welfare costs are estimated by measuring the reduction in quality of life or QALYs lost (quality-adjusted-life-years) (for details, see the methodology section in Pļuta et al. (2023)).

The total direct and indirect costs of alcohol abuse in 2021 amounted to 1.3–1.8 percent of Latvia’s GDP. In comparison, revenues from the excise tax on alcoholic beverages in 2021 accounted for 0.7 percent of the GDP.

Direct costs, which entail expenses directly covered by the state budget, comprised 0.45 percent of the GDP. Among these costs, healthcare expenses were the largest component, constituting 37.8 percent  of total direct costs and 2.7 percent of general government spending on healthcare. Nearly half of these healthcare costs were attributed to the provision of inpatient hospital treatment for patients diagnosed with alcohol-related conditions. Another significant component of budgetary costs is associated with addressing alcohol abuse and combating illicit trade through law enforcement, accounting for 31.9 percent of total direct costs and 6.5 percent of general government spending on public order and safety.

Alcohol-related indirect costs amount to 0.9-1.3 percent of Latvia’s GDP. Despite not being directly covered by the state budget, they represent unproduced output and thus entail economic losses. The primary components of these indirect costs are linked to decreased output resulting from higher unemployment and reduced economic activity (0.6-0.8 percent of the GDP), as well as decreased output due to premature death among heavy drinkers (0.2-0.4 percent of the GDP). Notably, indirect costs attributed to alcohol misuse by males constitute almost two-thirds of the total indirect costs.

Finally, the non-financial costs from alcohol abuse in 2021 are estimated to reach 88 620 years spent in good health and with a good quality of life. These losses primarily stem from the distress experienced by household members from alcohol users, the decline in the quality of life among alcohol users themselves, and the premature mortality of such individuals.

The Effects of Preventive Measures

We consider five alcohol misuse preventive measures, all of which are included in the list of WHO “best buys” policies that effectively reduce alcohol consumption (WHO, 2017):

  • Reducing the availability of retail alcohol by tightening restrictions on on-site retail hours
  • Raising the minimum legal age for alcohol purchase from 18 to 20 years
  • Increasing excise tax on alcohol
  • Lowering the maximum allowed blood alcohol concentration limit for all drivers from 0.5 to 0.2 per mille (currently 0.2 for new drivers and 0.5 for all other drivers)
  • Restricting alcohol advertising and marketing

Our estimates of the expected reduction in alcohol-related costs resulting from these measures are based on two main components:

  • (1) our own estimates of alcohol-related costs in Latvia, as described above, and
  • (2) external estimates of the impact of the five misuse preventative measures on alcohol consumption derived from existing literature on other countries.

We then apply these external estimates to the calculated alcohol-related costs and Latvian data on alcohol consumption to determine the estimated impact for Latvia (for further details, see the methodology outlined in Pluta et al. (2023)).

Our findings indicate that the most substantial reduction in direct costs attributed to alcohol misuse is anticipated through raising the minimum alcohol purchase age to 20 years (yielding an 11.4-15.8 percent estimated cost reduction). Previous literature has shown that early initiation of alcohol use significantly increases the likelihood of risky drinking, and that risky drinking during adolescence significantly increases the risk of heavy drinking in adulthood (Betts et al., 2018; McCarty, 2004). Hence, raising the minimum legal age for alcohol purchase represents an effective tool to reduce alcohol consumption also among the adult population.

Another highly effective measure to reduce alcohol consumption is imposing restrictions on advertising, which results in a 5.0-8.0 percent estimated reduction of direct costs. There is a large body of literature indicating that alcohol advertising increases alcohol consumption among young people, as well as significantly increases the likelihood of alcohol initiation among adolescents and young adults (Noel, 2019; Jernigan et al., 2017). Also, among the adult population, alcohol consumption decreases with stricter advertising restrictions (see Casswell, 2022; Rossow, 2021).

However, it is important to emphasize that the full impact of both above discussed preventative measures will only manifest in the long run.

The Effect of Illicit Markets

It is often argued that illicit alcohol markets, which provide access to cheaper alternative alcohol than registered commercial markets, can limit the effectiveness of preventive measures on overall alcohol consumption (Rehm et al., 2022).

To explore the interplay between illicit alcohol circulation and alcoholism prevention measures we conduct semi-structured interviews with experts regarding the prevalence of illicit alcohol circulation in Latvia and strategies to mitigate it.

While our main findings emphasize the inherent challenge of precisely quantifying the size of the illicit alcohol market, our analysis suggests that the share of illicit alcohol in total alcohol consumption in Latvia is relatively low. We also conclude that the size of the illicit alcohol market has been diminishing in recent years, and that public interest in engaging with illicit alcohol is declining. Given these findings, the current scope of the illicit market is unlikely to substantially undermine the efficacy of alcohol control measures. This is especially true as the consumers of illicit alcohol represent a specific group minimally affected by legal alcohol control measures in the country.

Conclusion

Our findings underscore the substantial costs associated with the large alcohol consumption in Latvia. In 2021, budgetary (direct) and non-budgetary (indirect) costs reached 1.3–1.8 percent of Latvia’s GDP. Furthermore, non-financial costs from alcohol abuse represent a loss of nearly 90 thousand years spent in good health and with a good quality of life.

Furthermore, non-financial costs from alcohol abuse represent a loss of nearly 90 thousand years spent in good health and with a good quality of life. This stems primarily from the distress experienced by alcohol users’ household members, and the decline in life quality and premature mortality among users themselves.

Latvia stands out as a country with exceptionally high levels of absolute alcohol consumption per capita compared to other countries. Policy makers should implement effective preventive measures against alcohol consumption to maintain the sustainability of a healthy and productive society in Latvia.

Acknowledgement

This brief is based on a study Alcohol Use, its Consequences, and the Economic Benefits of Prevention Measures completed by BICEPS researchers in 2023, commissioned by the Health Ministry of Latvia (Pļuta et al., 2023).

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Trending? Social Media Attention on Russia’s War in Ukraine

Posted on February 19, 2024 | Policy Brief

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Russia’s invasion of Ukraine is one of the most important geopolitical events of the 21st century. For almost two years, international news outlets have been covering the war, often providing daily or even hourly updates. But what is the level of public interest and public engagement in countries around the world? When does the war capture an international audience’s attention and what are the events that supplant it? This brief uses data on X (formerly Twitter) trends in 62 countries to address these questions.

The competition for attention is a defining feature of our information landscape. From the relentless stream of social media updates to the myriad of news articles vying for our clicks, individuals are constantly bombarded with information, each competing for a slice of their limited attention. Amidst this cacophony of voices, certain topics rise to the forefront, capturing the collective consciousness and dominating public discourse.

Russia’s war in Ukraine has, for obvious reasons, commanded significant media coverage over the past two years. It has been described as a hybrid war, where conventional military tactics are increasingly combined with non-traditional methods. This includes an information war, fought with narratives to manipulate people’s perceptions, spread falsehoods, or enlist support. To a large extent, this information war has taken place on social media. On the one hand, social media platforms have been used to spread disinformation and propaganda. For example, we’ve seen the spread of false narratives about the causes of the war, the actions of the different parties involved, and the suffering of the Ukrainian people. But on the other hand, social media has also been used to counter this disinformation, with fact-checking initiatives and grassroots efforts to promote accurate information.

This policy brief analyses the prominence of the war in social media discourse. While the content on traditional media outlets provides a snapshot of the supply of information, platforms like X/Twitter offer a unique window into the broader population’s demand for that information and how they evolve over time. Whether or not hashtags related to Russia’s war in Ukraine are trending in a given country, depends not just on the public’s interest in the war relative to other events in the news, but also on the level of interest relative to sport, music, television, and cats. By tracking the prevalence of trending hashtags, we can gain insights into the public’s engagement with Russia’s war in Ukraine, going beyond traditional media narratives and high-level governmental discussions to uncover the conversations and sentiments that shape broader public opinion.

The X/Twitter data suggest that in most countries, social media attention in the Russian war on Ukraine has been short-lived and sporadic. On February 24, 2022, Ukraine-related hashtags were trending in 100 percent of the countries in our dataset. Two weeks later, on March 9, 2022, they were trending in only 3 percent of the countries. We find that geographical proximity to the conflict is a strong predictor of social media interest. Related hashtags trend most frequently in Eastern, Central and Northern Europe. We also document spikes in interest around events that link a country to the war in Ukraine: announcements of military assistance or visits by Ukraine’s President Volodymyr Zelenskyj. Finally, we compare the hashtags trending in NATO countries to those trending in countries that either sided with Russia or abstained from voting in a critical UN resolution and show significant differences between the two groups.

Data and Methodology

The source for our dataset is archive.twitter-trending.com – a website that records trending hashtags on X/Twitter across countries and over time. We scrape this website to collect (i) the five highest volume topics in each country on each day and (ii) the five longest-trending topics in each country on each day (these two categories can overlap). Our sample consists of the 62 countries available on the website and covers the timeframe July 2021 to December 2023. From this, we construct a country-by-day panel dataset with 55,862 observations.

We identify 11 topic categories that collectively account for the overwhelming majority of trending topics related to Russia’s war in Ukraine. These topics and their relative frequency are shown in Figure 1. The three dominant categories are “Ukraine”, “Russia” and ”Putin”. We use Google’s translation software to translate non-English tweets which account for a significant fraction of the dataset.

Figure 1. Frequency of hashtags in 11 category topics.

Note: This chart shows the number of times topics assigned to our 11 war-related categories were among the top five longest trending topics (in orange) or the top five highest volume topics (in blue) in any country on any day in our dataset. The source are data scraped from archive.twitter-trending.com

Figure 1 shows that it is more common for war-related topics to be among the highest volume topics on a given day than among the longest trending topics. This suggests that these topics attract a lot of interest in a narrow timeframe (e.g. when news breaks) but are relatively less likely to remain prominent over a whole day. Despite this difference, we find that the distinction between highest-volume and longest-trending does not affect any of the patterns we observe when comparing across countries or time. For simplicity, the results shown below all use the highest-volume measure.

It is important to acknowledge the limitations of the X/Twitter data. Firstly, the population actively using X/Twitter is not representative of the overall population. Secondly, the composition of users may differ across countries which complicates cross-country comparisons. Trending hashtags provide an indicator of public interest that is informative only because we do not have high frequency, nationally representative surveys that are comparable across countries. Finally, we are only able to observe the top-five hashtags in a country on any given day. In principle, a war-related topic could increase in absolute volume from one day to the next, while still being crowded out of the top five.

Geographic Variation in Attention

Social media attention to the war in Ukraine varies greatly across countries. The map in Figure 2 shows the proportion of days when any hashtag from the considered categories was among the top-five most tweeted, for each country in the database since the start of the war. Interest has, on average, been higher in Europe as well as in Anglo-Saxon countries. In contrast, other regions of the world exhibited less sustained interest, as indicated by the lower frequency of related hashtags among the top-five most tweeted topics.

Figure 2. Prevalence of war-related hashtags.

Note: The map shows the share of days on which war-related hashtags (in our 11 categories) were among the top five highest volume topics on X/Twitter between 24/02/2022 and 18/12/2023. Countries in white are not among the 62 countries in the dataset. The source are data scraped from archive.twitter-trending.com

To some extent, this heterogeneity is explained by distance. Figure 3 plots the frequency of war-related trends against geographical proximity to the conflict zone (represented by the distance from each country’s capital to the city of Kharkiv in eastern Ukraine, a major point of focus during the ongoing war). The relationship is clearly negative, suggesting that physical distance from the crisis reduces the intensity of online discourse and public interest. Unsurprisingly, the number of related trends is highest in countries directly or indirectly involved in the conflict – Ukraine, Russia, and Belarus – as well as in Latvia which borders both Russia and Belarus.

Figure 3. Frequency of war-related hashtags and distance from Kharkiv.

Note: The chart shows the log of the distance from each country’s capital city to the city of Kharkiv in km on the x-axis and the logged frequency of war-related topics among the top five highest volume topics in that country between 24/02/2022 and 18/12/2023 on the y-axis. The source are data scraped from archive.twitter-trending.com

Variation in Attention Over Time

Over the past two years, the war has sustained a relatively high intensity. By contrast, global attention on X/Twitter has been more sporadic, spiking around specific events. This is shown in Figure 4, which plots the day-to-day variation in the number of battle events as recorded by the Armed Conflict Location & Event Data Project (ACLED) (in blue) as well as the share of countries where war-related tweets are trending (in orange). Attention was highest at the time of the invasion in February 2022 and the days of the Wagner Group rebellion in June 2023. Overall, the correlation between twitter trends and conflict intensity is positive but relatively weak.

Figure 4. Frequency of war-related hashtags and intensity of conflict.

Note: The chart shows the number of daily battle events in Ukraine as classified by ACLED on the left axis (in blue) and the share of countries where war-related topics were trending on the respective day on the right axis (in orange). The sources are ACLED’s Ukraine conflict monitor and data scraped from archive.twitter-trending.com

Attention also reacts to other major global events. Figure 5 compares the number of top-five trending hashtags related to the categories of interest in each country on two specific dates: February 24, 2022, the day of Russia’s full-scale invasion of Ukraine, and October 7, 2023, the day of a Hamas terror attack on Israel. On the day of the Russian invasion, the majority of countries in our sample exhibited the highest value. In contrast, on the day of the Hamas attack, related hashtags were trending almost nowhere outside Ukraine and Russia, indicating that global attention and engagement with this new ongoing crisis significantly overshadowed the focus on the situation in Ukraine. This shift in attention demonstrates how breaking news can capture the public’s interest and divert focus from ongoing crises, affecting the level of engagement on social media and potentially influencing the global response and discourse surrounding these events.

Figure 5. Map of prevalence of war-related hashtags on two different dates.

Note: The maps show the share of the top five highest volume topics on twitter related to Russia’s war on Ukraine. The map on the left shows 24/02/2022 – the day of Russia’s invasion. The map on the right shows 07/10/2023 – the day of a Hamas terror attack on Israel. Countries in white are not among the 62 countries in the dataset. The source are data scraped from archive.twitter-trending.com

While some events impact attention globally, others affect the salience of the conflict for a specific country. Figure 6 shows that people pay more attention to the war when there is a tangible connection to their own country. The panel on the left shows that war-related topics were more likely to trend in a country around the days where the country announced an aid package for Ukraine (military, financial or humanitarian). It shows an increasing trend in the preceding days and a peak on the day of the announcement. The panel on the right shows that war-related topics were more likely to trend in a country around the days of a visit from President Zelenskyj. This effect is large in magnitude but only lasts for around three days.

Figure 6. Likelihood of hashtags trending in relation to country-specific event.

Note: The charts show variation in the share of countries where at least one war-related topic was among the top five highest volume topics on days relative to a specific event. In the left chart, day 0 represents the day on which a country’s government announces an aid package for Ukraine. In the right chart, day 0 represents the day on which President Zelenskyj arrived in a country for an official visit. The source for these charts are: (i) the Kiel Institute’s Ukraine Support Tracker (Trebesch et al., 2023), (ii) Wikipedia’s list of official visits by President Zelenskyj and (iii) data scraped from archive.twitter-trending.com

While the events above act as drivers of attention, it is also interesting to consider what causes war-related topics to drop out of the top five trending topics. We distinguish between two reasons why war-related hashtags could stop trending: (i) a loss of interest that results in a reduction in the absolute number of related tweets (ii) the rise of other topics that displace war-related tweets from the top five. Figure 7 focuses on days where war-related topics dropped out and compares the volume of tweets on the last day where they were in the top five, to the threshold they would have had to surpass in order to make the top five on the subsequent day. In cases where the threshold is lower than the previously observed volume of tweets (a ratio of less than 1), the topic would have kept trending had it sustained its volumes, and one can conclude there was an absolute loss of interest. In cases where the ratio is greater than one, it is possible that the topic sustained its previous volume of tweets but was crowded-out by the rise of a new trending topic. Figure 7plots the histogram of this ratio. 73 percent of the cases are in the first category (loss of attention) and 27 percent are in the possible crowding out category. This provides further evidence to suggest that attention to the war on social media is typically fleeting.

Figure 7. Loss of attention vs crowding out.

Note: The sample are country-days where war-related topics were among the top five highest-volume topics but then dropped out of the top five the next day. The chart provides a histogram of the ratio of the threshold for making the top five on the subsequent day to the highest volume of tweets of a war-related topic. Values below 1 (in blue) indicate that the volume was above the next day’s threshold and the topic declined in absolute terms. Values above 1 (in orange) indicate that the volume was below the next day’s threshold. The source are data scraped from archive.twitter-trending.com

We also examine the content of discussions on the first day after war-related hashtags drop out of the top five. The word cloud in Figure 8 suggests that on such days, people primarily discuss entertainment topics like music and football.

Figure 8. Word cloud of hashtags trending on days war-related categories drop out.

Note: The figure provides a word cloud of trending topics on country-days where no war-related topic was among the top five highest volume topics, but at least one war-related topic had been in the top five on the previous day. The source are data scraped from archive.twitter-trending.com

Content and Context of War-Related Discourse

In addition to providing insight into the level of engagement, hashtag analysis can also reveal the content and context of popular discourse surrounding the war. By examining words trending on the same days as those from our 11 categories, we can gain a better understanding of the topics people are discussing and how the conversation varies across different regions. Figure 9 illustrates this through word clouds, showing the language used in NATO countries on the left and in countries that abstained or voted against the United Nations General Assembly Resolution ES-11/1 on the right. This resolution, dated March 2, 2022, condemned the brutal invasion of Ukraine and demanded that Russia immediately withdraw its forces and comply with international law.

This exercise allows us to compare the dominant themes and narratives in these two groups of countries and observe any differences in public perception and discourse regarding the conflict. The prevalence of cryptocurrency and NFT (non-fungible tokens) references in the word cloud on the right is suggestive of how economic interests and alternative financial systems could be relevant for the positions of countries that abstained or voted against the resolution, and how this might affect their involvement or response to the conflict. On the left, words like “NATO”, ”Biden”,  and ”Trump” clearly stand out, suggesting that these topics are central to the discourse on the war in NATO countries. This could indicate a focus on geopolitical alliances, international cooperation, and the role of key political figures in shaping the response to the conflict. Interestingly, “Putin” is very prominent in the left word cloud while “Russia” and “Russian” are more prominent on the right. This could indicate that Putin is seen and discussed as the primary antagonist in NATO countries.

Figure 9. Word cloud of hashtags in NATO countries vs Russia-friendly countries.

Note: These word clouds represent topics that trend on days where at least one war-related topic is trending in the respective country. The cloud on the left shows NATO countries. The cloud on the right shows countries that either abstained or voted against United Nations General Assembly Resolution ES-11/1. The source are data scraped from archive.twitter-trending.com

Conclusion

This brief uses X/Twitter trends as a barometer of public interest in Russia’s war in Ukraine. We show how attention fluctuates over time in response to developments in the conflict, to other breaking news, and to local events that make the conflict salient for a domestic audience. We also provide descriptive evidence on the variation across geographical regions and among different groups of countries. Additionally, we analyse the instance where Ukraine-related topics stop trending and find suggestive evidence that this is typically due to a gradual loss of interest rather than crowding out by new distracting trends.

Public attention and engagement drive policy in democratic countries, and the sustained support of its democratic allies is vital for Ukraine during this critical time. Understanding the patterns and influences of public attention is crucial for developing effective strategies to sustain engagement and support. This can be achieved for example by regularly highlighting the ongoing significance and bearing of Russia’s war against Ukraine, even as other events dominate the headlines. Emphasizing the impact of the conflict on individuals and communities, as well as its broader implications for international relations and global security, can help sustain public interest and engagement.

References

  • ACLED. Ukraine Conflict Monitor. https://acleddata.com/ukraine-conflict-monitor/
  • Trebesch, C., Antezza, A., Bushnell, K., Bomprezzi, P., Dyussimbinov, Y., Frank, A., Frank, P., Franz, L., Kharitonov, I., Kumar, B., Rebinskaya, E., Schade, C., Schramm, S., and Weiser, L. (2023). The Ukraine Support Tracker: Which countries help Ukraine and how? Kiel Working Paper, 2218, 1-75.
  • Twitter Trending Archive. Scraped on ##/12/2023. https://archive.twitter-trending.com/

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Monetary Policy in Belarus Since Mid-2020: From Rules to Discretion

Posted on February 12, 2024 | Policy Brief

20240211 Monetary Policy in Belarus Image 00

The most important “safeguard” against negative consequences from government’s economic policy mistakes is an independent monetary policy aimed at maintaining inflation near a pre-announced target and smoothing out short-term fluctuations. In Belarus, various monetary policy regimes have been employed and, for most of history, the ability of the National Bank of Belarus to set goals and deploy monetary policy instruments without government intervention has been limited. As a result, monetary policy in Belarus tend to exacerbate negative shocks to the Belarusian economy rather than play a stabilizing role. Since mid-2020, the National Bank has de facto lost operational and institutional independence, and monetary policy has become discretionary – focused on stimulating economic activity. As of 2024 this discretionary and expansionary monetary policy has increasingly come into conflict with the need to ensure macroeconomic stability.

Monetary Policy Design in Belarus: Developments in the Last Decade

Since 2015, the National Bank of Belarus (henceforth the National Bank) has declared its monetary policy regime to be monetary targeting. The primary goal of such policy is price stability, while the intermediate target is broad money supply growth. However, research results show that monetary targeting was employed only until mid-2016. From mid-2016 to mid-2020, the National Bank implicitly employed flexible inflation targeting (Kharitonchik, 2023b).

In mid-2020 the National Bank de facto lost its operational independence as the bank was no longer in control of the rules concerning monetary policy (Kharitonchik, 2023a). In 2022-2024, among other things, targets were set for inflation, the growth of the ruble monetary base, broad money supply, the banks’ claims on the economy, and the refinancing rate level. Thus, the National Bank seeks to simultaneously control both the volume of money in the economy and the prices. This is, in practice, expressed in the implementation of discretionary and situational monetary policy.

Under pressure from the government, the National Bank’s monetary policy has since mid-2020 focused on stimulating economic activity, with a high degree of tolerance to inflationary risks. After the US, EU, UK, and several other countries imposed strict sanctions on Belarus in the beginning of 2022, the government’s pressure on the National bank to support economic activity increased even further.

Since October 2022, the only inflation regulator has been strict price controls, exercised by the government in the form of a system of price regulations for approximately 85 percent of the items in the consumer basket. According to the system, manufacturers are obliged to coordinate wholesale prices with government authorities and retailers were in Q4 2022 forced to adjust prices. The system has been modified several times, but as of 2024, it continues to operate in an extremely rigorous version.

Besides the erosion of operational independence, the recent years have been characterized by a marked decline in the institutional framework for executing monetary policy. Aspirations to enhance transparency and accountability of the National Bank to the public seem to be history, at least for the time being. The frequency of the bank’s communication has decreased significantly and its content, as well as the bank’s published data and analytical materials have deteriorated. There are no longer any National Bank briefings on the outcomes of its board meetings, nor are there clear explanations of the decisions made or meetings with the expert community.

The National Bank also introduces uncertainty and undermines confidence in its policies with its strange approach to setting and announcing inflation targets. The increased inflation target, from the previous 5, to 7-8 percent for 2023 is unexplained, the explicit inflation target for 2024 was not presented until the end of August 2023, and the medium-term inflation target is nonexistent. Under such conditions, investment planning and forecasting becomes challenging, necessitating substantial efforts to rebuild trust in monetary authorities for the future.

Figure 1. Inflation and inflation targets in Belarus, 2015–2023.

Source: Author’s estimates based on data from Belstat and the National Bank of Belarus.

Between 2020 and 2023, the National Bank was unable to effectively implement monetary policy in a coordinated manner, falling short in achieving de jure primary and intermediate targets. Thus, inflation in 2020–2022 was significantly higher than targeted levels, while the money supply growth was close to the lower bound of its target range (see Figure 1 and 2).

Figure 2. Broad money growth and its target in Belarus, 2015–2023.

Source: Author’s estimates based on data from the National Bank of Belarus.

In 2023, the inflation was below its target due to total price controls, while money supply growth was twice its target (see Figure 2). Such targeted monetary policy dynamics indicate the instability of the economy’s demand for money and the money multiplier, the instability and poor predictability of money velocity in the face of shocks to the Belarusian economy, as well as the lack (or inability) of a strict commitment by the National Bank to achieve the primary goal of monetary policy.

Monetary Conditions Between 2020 and 2023

Monetary conditions are calculated as a weighted combination of deviations of real interest rates on assets in Belarusian rubles and the real effective exchange rate of the Belarusian ruble from their equilibrium levels. As detailed in Figure 3, the monetary conditions for 2020–2023 are considered stimulative for economic activity and pro-inflationary.

Figure 3. Monetary conditions in Belarus,2015–2023.

Source: Author’s estimates based on QPM BEROC (Kharitonchik, 2023b).
Note: Monetary conditions are estimated as a combination of deviations of real interest rates on the Belarusian ruble assets and of the real effective Belarusian ruble exchange rate from their equilibrium (or inflation-neutral) levels (assessed within the model). Positive monetary condition values indicate their restraining-economic-activity and disinflationary stance, and negative monetary condition values indicate their stimulating and pro-inflationary stance.

In 2020, the soft monetary conditions (the combined effect of interest rates and the exchange rate on the economy) were determined by the behavior of the exchange rate. The Belarusian ruble weakened significantly and became undervalued in 2020 due to a sharp increase in demand for foreign currency at the onset of the Covid-19 pandemic in Belarus and following the presidential elections in August 2020.

As a result of the National Bank’s discretionary monetary policy, interest rates’ volatility significantly increased. A deterioration of the liquidity situation in the banking system and increased risks to the economy during the acute phase of the socio-political crisis in 2020 resulted in interest rates restraining economic activity in September-December 2020.

In 2021, there was a notable improvement in the economic situation in Belarus compared to the crisis experienced in 2020. External demand for Belarusian goods and services rose, and export prices increased significantly which contributed to an increase in foreign currency earnings. As a result, the undervaluation of the Belarusian ruble neutralized during 2021, the banking system moved to a liquidity surplus, and interest rates decreased noticeably, creating soft monetary conditions (see Figure 3).

In 2022–2023, monetary conditions became even softer against the backdrop of increasing priority for the National Bank to support economic activity over inflation containment. The Belarusian ruble again became undervalued which increased foreign trade and allowed for the banking system’s liquidity surplus to expand significantly (see Figure 4).

The realization of a substantial liquidity surplus in 2022 resulted from the National Bank’s active emission policy, likely associated with considerable government pressure. The National Bank injected at least 1.7 billion Belarusian rubles (0.9 percent of GDP) into the financial system through lending to non-deposit financial organizations in 2022, and more than 1.9 billion Belarusian rubles (1 percent of GDP) in 2022 and 1.1 billion Belarusian rubles (0.5 percent of GDP) in 2023, through the purchase of government bonds on the secondary market.

Figure 4. Banking system liquidity in Belarus, 2017–2023.

Source: Author’s estimates based on data from Belstat and the National Bank of Belarus.

Under a colossal and stable liquidity surplus – not withdrawn by the National Bank – interest rates in the money and credit-deposit markets, in 2022-2023, repeatedly reached historically low levels in nominal terms, and in real terms remained  significantly below their equilibrium levels (see Figure 3).

The Monetary Conditions’ Impact on Economic Activity and Inflation in Belarus, 2022–2024

Under loose monetary conditions there was a significant strengthening of the credit impulse (share of new loans in GDP) from Q3 2022 and onwards (BEROC, 2023). In this environment of increased credit activity, the money supply grew at a rapid pace in the second half of 2022–2023 (see Figure 2). The money supply growth significantly exceeded an inflation-neutral pace and by the end of 2023, the volume of real money supply exceeded the inflation-neutral level by almost 10 percent.

Expansionary monetary policy was one of the drivers of the rapid economic recovery in the second half of 2022–2023. The negative output gap, which widened in Q2 2022, following increased sanctions against Belarus, was offset in Q1 2023. Moreover, in Q2–Q4 2023, GDP surpassed its equilibrium level (see Figure 5).

Figure 5. Output gap decomposition in Belarus, 2015–2023.

Source: Author’s estimates based on QPM BEROC (Kharitonchik, 2023b).
Note: The output gap is the deviation of real GDP from its potential (or equilibrium) level, where potential is understood as such a volume of GDP that does not exert any additional pro-inflationary or disinflationary pressure.

By 2024, the Belarusian economy reached a state of moderate overheating (see Figure 5). Currently, loose monetary policy fuels demand but the ability to adjust supply to increased demand levels is limited under sanctions and labor shortages. This mismatch between supply and demand would normally lead to a significant acceleration of inflation. However, due to the strict price controls, this is yet to realize. In fact, inflation reached a historically low value of 2.0 percent Year over Year (YoY), in September 2023. Nonetheless, inflation in Belarus began to accelerate in Q4 in 2023 and amounted to 5.8 percent YoY at the end of the year. In an environment of excess demand and a shortage of workers, firms’ costs rise and translate into higher selling prices, albeit on a limited scale and with a time lag due to the price controls (see Figure 6).

Figure 6. CPI inflation in Belarus, 2015–2023.

Source: Author’s estimates based on data from Belstat. Calculations based on QPM BEROC (Kharitonchik, 2023b).

A prolonged combination of total price controls and loose monetary policy leads to an inflationary overhang – the potential for delayed accelerated price growth. Inflation overhang is a highly undesirable phenomenon since it increases the risk of a price surge in the future and the need for a sharp and aggressive tightening of monetary policy. The inflationary overhang in Belarus is estimated at 5–9 percent (for the end of 2023).  This means that there is a risk of a sharp increase in prices by 5-9 percent if price controls are removed or significantly relaxed.

Conclusion

Since mid-2020, the National Bank has de facto lost its operational independence, and monetary policy has become discretionary, focused on stimulating economic activity. By the beginning of 2024, this discretionary and overly loose monetary policy has increasing come into conflict with the task of ensuring macroeconomic stability.

The Belarusian economy enters 2024 in a state of low economic growth potential (about 1 percent per year) and an imbalance of supply and demand, which creates threats of intensified inflation and a decline in foreign trade.

Attempts by the authorities to artificially maintain high rates of GDP growth and low inflation through excessively stimulating economic policies and archaic price controls may lead to an economic overheating by the end of 2024 similar to the situations leading up to the currency crises in 2009, 2011 and 2015. Under such developments, the fragility of the economy and the likelihood of an economic crisis in Belarus will increase.

To prevent such negative development, it is critical to gradually normalize the monetary policy design in coordination with fiscal policy. Key recommendations from experts for a strengthening of the stabilizing role of monetary policy include ensuring the National Bank’s independence, eliminating discretionary and subjective policymaking, and outlining a clear hierarchy of monetary policy goals (Kruk, 2023).

Simulation results indicate that the use of flexible inflation targeting is the most preferable monetary policy strategy for Belarus under existing sanctions and internal and external capital control measures (as discussed in Kharitonchik, 2023a).

Lastly, as monetary policy is about managing expectations for which trust (i.e. credibility) plays a key role, restoring the public’s trust in the National Bank is essential. To achieve this, the National Bank needs to reestablish communication with the public and resume the publication of analytical and statistical reports, at a minimum matching the extent seen in early 2021.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

What Is the Evidence on the Swedish “Paternity Leave” Policy?

Posted on February 5, 2024 | Policy Brief

20240204 Swedish Paternity Leave image representing fathers parental leave policy

Since 1995, Sweden has earmarked an increasing number of parental leave days to each parent, creating a strong incentive for fathers to increase their (traditionally low) parental leave uptake. The literature on the causal impacts of these policies establishes several important findings. First, the incentive seems to work, as fathers tend to increase their uptake of paternity leave. However, who responds to the incentive, the timing of the leave and how mothers adjust to it is heterogenous, depending on the policy design and the underlying couple characteristics. Second, there is no strong support in the data for the argument, popular in public opinion and among policy-makers, that paternity leave should improve the balance of childcare duties within a couple and ultimately enhance women’s labor market position. However, in order to estimate causal effects, the studies reviewed in this policy brief focus on the first cohort of families affected by earmarked parental policies, whereas impacts on mothers’ labor market outcomes are more likely to manifest in the long run. Further, paternity leave policies in the broader sense have benefitted mothers’ health post childbirth and they may also have broken the social stigma on fathers taking time off to care for their children. Finally, recent evidence suggests that earmarking has improved gender attitudes in the next generation, making men less likely to hold stereotypical views about gender roles in society.

Parental Leave in Sweden

All parents in Sweden have been entitled to paid parental leave benefits since 1974, with no difference between birthing and non-birthing parents (for simplicity referred to as mothers and fathers henceforth). Despite this, fathers’ parental leave take-up has historically been very low (see Figure 1).

To change this pattern, the legislator has introduced a few reforms over the years. In 1995, 30 of the wage-replaced days (i.e. parental leave days compensated at almost the rate of the daily wage) were earmarked to each parent, creating the so called ”mum/dad month”. When a parent failed to take up these 30 days these would be “lost”, as earmarked days could not be transferred to the other parent. Through two subsequent reforms, effective from 2002 and 2016 respectively, the number of earmarked wage-replaced days increased, first to sixty days and then to ninety days.

Today, the total allowance is 480 benefit days, of which 390 are wage-replaced (paid at about 80 percent of the parent’s wage), and the remaining 90 are compensated at a low flat rate (approximately 15 euros per day). 90 of the wage-replaced days are earmarked to each parent. The parental leave days can be utilized until the day the child turns 12 or until the child finishes 5th grade, but 80 percent of these days must be used by the time the child turns 4.

As shown in Figure 1, father’s share of the total parental leave steadily grew over the years when the earmarking reforms occurred but has since 2018 stalled at a rate of 69/31 (i.e., mothers and fathers take 69 and 31 percent respectively of the total number of leave days claimed in Sweden during one year).

Figure 1. Men’s share of parental leave days in Sweden, 1974-2021, in percent.

Source: Author’s compilation based on data from Statistics Sweden.

One could speculate, based on these trends, that earmarking might have successfully increased father’s take-up of parental leave. However, without rigorous statistical analysis, it is virtually impossible to distinguish between the role of the earmarking polices and secular trends in preferences over parental leave. Thankfully, a few papers have studied the Swedish parental leave reforms, using state-of-the art techniques to understand their respective causal impacts. What is the research-based evidence on the Swedish parental leave earmarking reforms? Did they successfully incentivize fathers to increase their take-up? Did they succeed in their broader goal of balancing child responsibilities within couples, ultimately helping women improve their position in the labor-market? How were children affected by them? What lessons from the Swedish experience can be useful for fine-tuning of the Swedish policy or for similar designs in other countries?

This policy brief delves into the academic literature on the impacts of the Swedish earmarking reforms. The review is by no means representative of the large amount of academic work produced on the Swedish parental leave reforms. Rather, it is a small selection of studies where results can be more easily interpreted as causal impacts, as they are based on comparing families with children born just before versus just after the relevant date for the policy implementation, and account for so called month-of-birth effects (see e.g. Larsen et al., 2017) when needed. Causal estimates can be more directly used to inform policy-making, which is what motivates the focus of this review.

Earmarking and Take-up of Paternity Leave

As explained above, the Swedish earmarking system creates strong incentives for fathers to increase their take-up of leave days, as these would otherwise be “lost”, leaving couples with the need to resort to potentially more costly arrangements for childcare.

It is thus not surprising that the 1995 reform increased fathers’ take-up of wage-replaced leave by an average of 15 days, 50 percent of the pre-reform take-up (Ekberg et al., 2013). This change seems to mostly stem from the 54 percent of fathers who were taking 0 days of leave before the reform and were induced to take between 20 and 40 days after, so that the percentage of fathers not taking any leave declined to 18 precent.

In a recent working paper, Avdic et al. (2023) complement this evidence, considering all leave days together. They show that the reform induced fathers to increase their take-up of total parental leave by 21 days, whereby mothers decreased it by the same amount. Therefore, on average, the total amount of leave taken by Swedish parents remained unchanged, but the mother’s share decreased by about 5.4 percentage points. The paper also compares changes in parents’ take-up month-by-month, finding that some mothers took some unpaid leave within the child’s first year to compensate for the loss of wage-replaced days. It is not clear why these mothers would not resort to the low flat rate leave, as other mothers seem to have done (see Ekberg at al., 2013). In general, the data points to fathers having mostly, although not exclusively, substituted for mothers’ time with the child during the child’s second year of life.

Avdic and Karimi (2018) extend the policy-evaluation to the 2002 reform, which earmarked one additional month to each parent, but also made one more month of wage-replaced leave available. They find that this reform also caused an increase in take-up of paternity leave, but for a different group of fathers. While in 1995 fathers that otherwise would have taken no leave were induced to take approximately one month, the 2002 shift occurred mostly among fathers who, instead of taking between 30 and 40 days of leave, started taking more than 50 days.

These findings are consistent with those in Alden et al. (2023), who study the characteristics of fathers who do not take any leave. They find that while the 1995 reform changed the composition of this group of fathers, the same thing did not happen with the 2002 and 2016 reforms. Over-time, one group of men consistently stands out for not taking any parental leave regardless of the incentives created by the legislator, namely fathers with worse labor-market positions, and whose earnings are lower than that of the mothers.

Paternity Leave and Gender Gaps

The main motivation for policies that seek to increase the take-up of parental leave among fathers is that this increase can help women, especially high-skilled ones, improve their labor-market position (Ekberg et al., 2013). The economics literature has long established a systematic loss in earnings and employment for women following the birth of their first child (the so-called child penalty; see e.g. Kleven et al., 2019). There are two main mechanisms through which earmarking policies could improve women’s labor market outcomes. First, if firms discriminate against women because of the (perceived) cost of maternity leave, the discrimination should decline once employers expect also men to take parental leave. Ginja et al. (2020) show evidence (although not causal) consistent with long maternity leaves reducing child-bearing aged women’s “attractiveness” among Swedish employers.  Second, by creating a stronger bond between fathers and children, and by reducing mothers’ specialization in childcare, paternity leave should increase the time fathers allocate to childcare as the child grows up, thus re-balancing the division of non-market (and possibly market) work within the couple.

As pointed out in Cools et al. (2015), the first type of effect, more likely to be relevant in the long run, is hard to estimate with data from only one country, as virtually all employers in the country should be somewhat affected by the change in perceptions.

Instead, Ekberg et al. (2013) study the effect on intra-household division of childcare responsibilities, by estimating the impact of the 1995 reform on the amount of time that fathers and mothers claim off work when their child is sick. They find no evidence that the 1995 reform increased the share of time off taken by fathers to care for sick children. Consistently, the study also fails to find evidence of large and robust changes in mothers’ earnings for thirteen years post childbirth. Similarly, Avdic et al. (2023) show that mothers affected by the 1995 reform did not increase, on average, their labor supply, except during the first year of the child’s life.

While these analyses are extremely valuable for our understanding of the reforms’ effects on the first cohort of families affected, they fall short of capturing long-term dynamics. For instance, it is important to acknowledge that the decision on who takes time off when the child is sick depends on many factors, including the availability of flexible arrangements at work. Women are known for selecting into occupations and jobs that allow a more flexible schedule (Goldin, 2014). This pattern might change if the increase in take-up of paternity leave leads to updated expectations among women on partners’ willingness to share daycare responsibility. This is most likely a long-term development, which the design used in the above outlined studies does not capture.

Another effect of the Swedish parental leave system, not directly linked to earmarking but nevertheless indicative of the importance of fathers’ time off work during the child’s first year of life, is that on mothers’ health. Persson and Rossin-Slater (2019) show that a Swedish 2012 reform that in practice allowed fathers to take 30 days of parental leave in concomitance with the mother during the child’s first year of life reduced the likelihood of mothers experiencing health issues due to post-partum complications.

An important aspect that the literature has so far not emphasized is also that earmarking reforms might affect another gender gap, namely the “freedom” to take the leave. Given the traditional division of roles across genders, there might be a stigma at a societal level against men taking parental leave. By creating strong economic incentives for taking paternity leave, the earmarking policies may downplay the stigma in the short-term and break it in the long-term. There is some suggestive, although not definitive, evidence that norms around paternity leave might have changed. Avdic and Karimi (2018) show that between 1995 and 2002 the share of fathers who were taking more than one month of leave had already started increasing before the second month was earmarked. More research would be needed, however, to assess the role of policies in changing societal perceptions around paternity leave.

Paternity Leave and Children’s Outcomes

An obvious question to ask is how children are affected by earmarking of parental leave days. Avdic et al. (2023) study this question in the context of the 1995 reform. By looking separately at different groups of children by sex and parents’ education, they find that the 1995 reform caused a decline in GPA for sons of non-college-educated fathers and mothers. The most likely channel for this relationship, according to the authors, is boys’ diminished access to fathers’ time, due to the 1995 reform increasing the likelihood of couple dissolution within the child’s first three years of life (for households with low-earning mothers). At that time children tended to live predominantly with the mother in case of parental separation. However, a potential additional channel could be the worsened economic situation caused by the paternity leave. In households with low-earning mothers, mothers’ and family earnings declined post-reform due to mothers compensating for “lost” leave days by taking unpaid leave. Very conflictual separations could also be behind the effect on children’s GPA.

These findings highlight the importance of considering potential unintended consequences of the parental leave policies, and the diverse effects they might have on different demographic groups. Such considerations could improve the design of future policies. For instance, Avdic and Karimi (2018) find that the 2002 reform, which earmarked one more month and added one month of wage-replaced parental leave, did not cause couple dissolution. Thus, the authors conclude that not imposing strong constraints on households, while creating incentives for fathers to take paternity leave, is highly desirable.

Finally, in a very recent working paper, Fontenay and Gonzalez (2024) consider the effect of earmarking policies on children’s gender attitudes as adults, leveraging data from online surveys of 3,000 respondents across six European countries, including Sweden. They study changes in attitudes as measured by an Implict Association Test, which is meant to capture subconscious associations between women and family and men and career.  In five of the countries studied they find that male respondents born soon after an earmarking reform have less stereotypical gender attitudes than those born before. No differences are detected for women. The effect in Sweden is one of the largest: in a sample of 237 male respondents, the father being eligible for the “dad-month” makes the child hold more egalitarian gender-attitudes as an adult by 0.3 standard deviations. The authors suggest that a role model effect might be at play, whereby boys who observe their fathers being more involved in childcare are nurtured to hold more egalitarian beliefs about gender roles.

Conclusion

Since 1995, Sweden has earmarked an increasing number of parental leave days to each parent, creating strong incentives for fathers to increase their previously very low parental leave uptake. This policy brief has reviewed the literature that studies the causal impacts of these earmarking reforms, highlighting a number of important conclusions as well as gaps in the knowledge on the effects of these policies.

First, the incentives created by the earmarking policies seem to work, as fathers tend to increase their uptake of paternity leave, while mothers tend to increase their labor supply during their child’s first year of life. However, such effects are heterogeneous, depending on the policy design and the underlying couple characteristics. Designs that impose strong constraints on household choices seem to have adverse effects on low-income or low-education households, reducing mothers’ earnings, triggering couple dissolution, and negatively affecting children’s GPA. Future increases in earmarking or similar policies in other countries should consider these design details carefully.

Second, there is no strong support in the data for the argument, popular in the public opinion and among policy makers, that paternity leave improves the balance of childcare duties within a couple and that it ultimately enhances women’s labor market position. However, to estimate causal effects, the studies analyzed in this policy brief focus on the first cohort of families affected by the earmarked reforms, whereas impacts on mothers’ labor market outcomes are more likely to be seen in the long run. After all, Sweden is one of the countries with the lowest documented child penalty in employment and earnings (see the child penalty atlas), and it is unlikely that policy played no role in narrowing gender gaps among parents. Consistently, recent evidence suggests that earmarking has improved gender attitudes in the next generation, making men less likely to hold stereotypical views about gender roles in society.

Further, it is important to mention that paternity leave policies in general have benefitted mothers’ post-childbirth health and that they may have broken a societal stigma around fathers taking time off to care for their children.

References

  • Aldén, L., Boschini, A. and Tallås Ahlzen, M. (2023). Fathers but not Caregivers. http://dx.doi.org/10.2139/ssrn.4405212
  • Avdic, D. and Karimi, A., (2018). Modern family? Paternity leave and marital stability. American Economic Journal: Applied Economics, 10(4), pp. 283-307.
  • Avdic, D., Karimi, A., Sundberg, E. and Sjögren, A. (2023). Paternity leave and child outcomes. IFAU, Working Paper 25.
  • Ekberg, J., Eriksson, R., and Friebel, G. (2013). Parental leave—A policy evaluation of the Swedish “Daddy-Month” reform. Journal of Public Economics, 97, pp. 131-143.
  • Ginja, R., Karimi, A. and Pengpeng Xiao. (2023). Employer responses to family leave programs. American Economic Journal: Applied Economics, 15(1), pp. 107-135.
  • Goldin, C., (2014). A grand gender convergence: Its last chapter. American Economic Review, 104(4), pp. 1091-1119.
  • Gonzalez, L. and Fontenay, S. (2024). Can Public Policies Break the Gender Mold? Evidence from Paternity Leave Reforms in Six Countries. BSE, Working Paper 1422.
  • Kleven, H., Landais, C., Posch, J., Steinhauer, A. and Zweimüller, J. (2019). Child penalties across countries: Evidence and explanation”. AEA Papers and Proceedings, 109, pp. 122-126.
  • Larsen, E. R. and Solli, I. F. (2017). Born to run behind? Persisting birth month effects on earnings. Labour Economics, 46, pp. 200-210.
  • Persson, P., and Rossin-Slater, M. (2019). When dad can stay home: fathers’ workplace flexibility and maternal health. National Bureau of Economic Research, Working Paper 25902.

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Ukrainian Refugees: Who Returns and Why?

Posted on January, 2024 | Policy Brief

Image depicting Ukrainian refugees, including a child holding a teddy bear, eagerly awaiting their return to Ukraine

Of the 17 million Ukrainians who have fled the country since the full-scale Russian invasion in spring 2022, over 60 percent have returned to the country. Based on survey data of Ukrainians who were previously abroad but have returned and those who have remained abroad, we look at the factors that impact their respective decisions to return or to stay. We find that having family in Ukraine is an important factor, but so is missing one’s home, a wish for children to study in Ukraine and a desire to participate in the reconstruction of Ukraine. People who emigrated with their spouse, and those who had planned to emigrate prior to the full-scale war, are more likely to stay abroad. We also find that those staying in a host country are highly involved in Ukrainian affairs and argue that the Ukrainian government should consider them a resource rather than lost human capital.

One of the major consequences of the Russian war on Ukraine has been the mass exodus of Ukrainians fleeing the war. As of February 2022, the Ukrainian statistical agency has ceased publishing population data for both technical and security reasons, so the exact number of Ukrainians that have left the country is unknown. However, on the basis of  mirror statistics from other countries, data from international organizations or surveys, it can be estimated that about 17 million people have fled the country since February 2022. Out of those, over 60 percent have returned to Ukraine, while 6 million Ukrainians have remained abroad.

As people are key in the future reconstruction and development of Ukraine, it is of great importance to understand what factors drive people to return (or not to return) to Ukraine. A recent paper (Sologoub, 2024) aims at addressing this question using a representative survey implemented by the Factum Group in July-August 2023. The survey includes 1400 people who, since early 2022, have fled Ukraine.  Half of the respondents had returned to Ukraine at the time of the survey while the other half remained abroad. The first group is from here on referred to as returnees and the latter as refugees.

To look at the factors that determine individual’s decisions to return or stay abroad, the paper specifically considers the factors that impact three probabilities:

  • the probability that a person stays abroad;
  • the probability that a person who stays abroad plans to return (64 percent of the refugees);
  • and the probability that a person who returned plans to stay in Ukraine (56 percent of the returnees).

This policy brief briefly describes the survey data, summarizes the key findings and concludes with policy implications and recommendations.

Main Characteristics of the Survey Respondents

The survey data shows that out of the entire sample of people who have returned to Ukraine and who have remained abroad, over 80 percent are women, and out of these 44 percent emigrated from Ukraine with children. About a quarter of our respondents stay or have stayed in Poland or Germany, 7 percent in the Czech Republic, while other countries have accommodated up to 4 percent of the Ukrainian migrants in our sample. The main reason for emigration is safety – almost half of the respondents reported it being the main reason for leaving Ukraine (see Figure 1).

Figure 1. Stated reasons for migration choices.

Source: Factum Group survey, own calculations. Note: Blue bars are for returnees, orange bars are for refugees (i.e. individuals who have stayed in host country). A dark color denotes the main reason, and a light color denotes other reasons.

Half of the respondents who had a job in Ukraine prior to the war lost their jobs at onset of the full-scale invasion, 18 percent quit their jobs and 30 percent continued to work remotely. 53 percent of the refugees had a job at the time of the survey, and 9 percent of those who remained abroad worked online for a Ukrainian organization. Of those who worked abroad at the time of the survey, 61 percent remained on the same qualification level, while 37 percent changed their qualification level – the majority of those changed to a lower qualification level.

39 percent of all respondents had school-aged children. A quarter of them reported that their children studied only online in Ukrainian schools in 2022/23. Over 60 percent stated that their children studied in a host country, but most of these children took additional classes within the Ukrainian school program – in an online or offline environment, with tutors or on their own.

When asked to compare different aspects of their life abroad and in Ukraine, approximately equal shares of the respondents reported an improvement or a worsening of these aspects. Worsening aspects was mainly reported to concern relations with friends, psychological state, and healthcare. The respondents also stated reasons for their return to Ukraine (or willingness to return), which allowed for estimation of the significance of these reasons. Generally, we found that pull factors (factors attracting people to return to Ukraine) are much more powerful than push factors (factors that force people out of host countries).

Main Results from the Probability Models

Demographic factors (age, education, family status, or income group) are non-significant across all models with the exception of marital status. People who are single are more likely to return to Ukraine, while those who migrated together with their spouse and those who do not have children are more likely to stay abroad.

Significantly positive for the probability that a person had returned at the time of the survey were pull factors such as missing family or home, the wish for children to study in Ukraine, better job opportunities in Ukraine, having property in Ukraine, and returning friends. Some significant push factors were loneliness or integration hardship, as well as feeling humiliated for living on subsidies/state support.

Among respondents who lived abroad at the time of the survey, 64 percent planned to return to Ukraine someday, 13 percent did not plan to return to Ukraine and the rest were undecided. One should however keep in mind that peoples’ intentions can change rather quickly – in the qualitative part of the survey, some respondents explained that their decision to return was spontaneous.

The probability that a person plans to return was lower for people who had planned to emigrate prior to 2022, for people who hadn’t been to Ukraine since they fled, and for people with refugee status (in some countries, people may lose refugee protection status if they exit the host country and travel to Ukraine).

Safety improvements and better job prospects increase the probability that a refugee plans to return, as well as a wish for children to study in Ukraine and a desire to participate in Ukraine’s reconstruction. Over 70 percent of the respondents believe that their experiences from abroad will be useful for the reconstruction and over 50 percent state that the new skills they’ve gained abroad can be applied during the reconstruction of Ukraine.

Significant push factors are lacking integration into the local community and an inferior social life abroad compared to life in Ukraine. Higher levels of general well-being and life satisfaction abroad expectedly reduce the probability that a person plans to return.

Lastly, those who had returned to Ukraine at the time of the survey were asked whether or not they planned to stay in Ukraine. 56 percent said yes, 7 percent plan to emigrate again, while the rest will consider the circumstances. The main factors that keep a person in Ukraine are family, the wish for one’s children to study in Ukraine and a willingness to participate in the reconstruction of the country. Improved safety is also a significant factor – which might explain why people who are originally from the Western part of Ukraine are more likely to stay (the regional factor is significant only in this third probability model). Finally, people who planned to emigrate prior to 2022, or those whose life in Ukraine is considerably inferior to that abroad, are less likely to stay.

Ukrainians’ Liaison with Their Country

60 percent of the refugees read Ukrainian news daily, and over 90 percent read them at least several times a week. The majority of the readers spread these news in their local communities and/or in their social networks. Generally, Ukrainian refugees are quite active, over 40 percent attend rallies in support of Ukraine, almost 40 percent participate in volunteer projects, over 70 percent donate to Ukrainian organizations (and the same share help their relatives in Ukraine) and 15 percent work at a non-governmental organization.

Not surprisingly, the opinion among Ukrainian refugees on reforms in Ukraine is very similar to the opinion among returnees: anti-corruption and judicial reform have the highest priority. In line with this, the fear of corruption derailing the reconstruction of Ukraine is greater than the fear that Russia will continue with their missile attacks on Ukraine. Therefore, the determination of the Ukrainian government to fight corruption will likely not only improve life for people in Ukraine but also increase the probability that refugees return to Ukraine.

Conclusion

Most of the Ukrainians who initially fled the war have already returned to Ukraine, with the majority planning on staying in the country. For those who are still abroad, the majority wish to return when safety improves. When analysing the factors behind such wishes, it is evident that among the pull factors lie not only personal drivers, such as missing one’s home or family, but also civic factors such as a willingness to participate in the reconstruction of Ukraine or a wish for one’s children to study in Ukraine, thus contributing to preserving their identity. Moreover, Ukrainians who are living abroad are highly involved in Ukrainian affairs.

Therefore, we suggest that the Ukrainian government consider refugees as a valuable resource rather than as a loss. For example, government representatives could ask refugees to donate to Ukraine, and engage in individual or collective actions (e.g. inform their local friends about the situation in Ukraine, join rallies or flashmobs in support of Ukraine etc.). Such “people’s diplomacy” is important to ensure continued support for Ukraine.

We also recommend that the governments of host countries make it easier for refugees to stay connected with Ukraine. Specifically, refugees should be allowed to travel to Ukraine without losing their protection status.

Lastly, the strongest precondition for refugees’ return to Ukraine is supplying the country with weapons and other crucial support to win the war. A Ukrainian victory will not only bring about reconstruction and development of Ukraine but also promote and enforce global democracy.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Gender Equality and Women’s Economic Empowerment in Times of Crisis

Posted on January 22, 2024 | FROGEE PROJECT, Policy Brief

20240122 Gender Equality Image 01

On October 19-20, 2023, the International School of Economics at Tbilisi State University Policy Institute (ISET Policy Institute), in partnership with the Forum for Research on Gender Economics (FROGEE), organized the conference “Gender Equality and Women’s Economic Empowerment in Times of Crisis”. The conference addressed critical issues surrounding gender equality and women’s economic empowerment. By bringing together academics and practitioners from various sectors it served as a dynamic platform for knowledge sharing and collaboration on actionable solutions and commitments to address multifaceted challenges faced by women globally. This policy brief outlines the keynote, academic and other presentations and discussions featured at the conference.

Introduction

Gender equality and women’s economic empowerment are vital issues that have gained increasing global attention in recent years. Their significance is even more pronounced in times of crisis, such as during economic downturns or global health emergencies. Such challenging circumstances often exacerbate existing gender disparities and vulnerabilities, making it crucial to address the specific challenges women face in accessing economic opportunities and resources. Discussions on these matters delve into the complex intersection of gender equality and economic empowerment and how empowering women economically can contribute to more resilient and equitable societies.

The October 19-20 conference was aimed at examining and addressing the various aspects of gender equality and female empowerment. The conference begun with opening introductions by Tamar Sulukhia, Eva Atterlöv and Kaori Ishikawa (see the participant list at the end for all associations). Following the opening remarks were two distinctive keynote presentations, a policy panel discussion, and academic presentations. This policy brief summarizes the key takeaways from the conference.

Keynote Addresses

The conference’s first keynote speaker, Elizabeth Brainerd, deliberated on the impact of World War II on marriage and fertility among Russian women. Brainerd show that the war affected these women’s lives for decades, leading to lower rates of marriage and fertility and higher out-of-wedlock births and divorce rates in urban areas than would have been the case in absence of the war. These effects were likely exacerbated by a war and post-war institutional environment that encouraged nonmarital births (in part by expanding the child benefit program) and increased the cost of binding commitments through marriage, particularly for men (absolving fathers of any financial or legal responsibility for children fathered outside marriage). As shown by Brainerd the shock to sex ratios in the Soviet Union due to World War II was among the largest experienced by any country in the twentieth century. In this sense, the effect on Russian women and men was unique and arguably not directly relevant to other countries or time periods. Yet, highly unbalanced sex ratios characterize many populations – whether due to war, immigration and emigration, or preferences for sons etc., – and the analysis can therefore shed light on the effects of sex ratio imbalance also in other contexts. Brainerd’s work supports the conclusion that sex ratios matter for marital and fertility outcomes, both on the marriage market itself and within marriage. The insights from the Soviet Union also highlights that the institutional context matters for determining both the size and direction of the sex ratio’s impact on marriage markets and family formations.

In the conferences second keynote presentation, Maria Floro discussed the findings from a time-allocation survey in Georgia. Evident from the results, women’s work differs from men’s in the sense that women more often perform unpaid household tasks, and since they are primarily responsible for household and caregiving duties, including childcare and elderly care. Such combined responsibilities, coupled with working in typically low-paid jobs can negatively affect women’s physical and mental wellbeing. As the data shows, 66 percent of Georgia’s population engage in unpaid domestic work, with women (88.3 percent) and men (39.6 percent) participating at starkly different rates. Rural women’s participation is the highest, at 90,3 percent. On average, the Georgian population spends 2.1 hours per day on unpaid domestic services for household and family members – with a large gender disparity. In general, the time spent per day by men is 0.7 hours while, in contrast, the time spent by women on these activities is 5 times higher in rural areas (3.6 hours) and 4.7 times higher in urban areas (3.2 hours). Women working full time spend 2.7 hours per day on unpaid domestic services, five times higher than the 0.5 hours spent by men working full time. For all areas of residence, the time spent on unpaid domestic services by women increases with age up until 64 years of age when the numbers drop. Further, women’s time spent on unpaid caregiving work (0.9 hours per day) is 4.5 times higher than the time spent by men. Even for full time working women, the daily time spent on unpaid caregiving work (0.6 hours) is three times higher than that of their male counterparts (0.2 hours). Women who have completed a higher level of education spend higher time on unpaid caregiving services (0.9-1.1 hours per day) than those with a lower level of education (0.4-0.7 hours per day). The difference in women’s and men’s time spent on unpaid caregiving work is greatest for Georgians aged 25-44. Such unequal sharing of household and caregiving responsibilities limits women’s job prospects and is a major reason behind their low participation rate in the labor force, as well as the gender pay gap.

The South Caucasus Gender Equality Index

Following the keynote presentations, Davit Keshelava, presented the ISET Policy Institute’s most recent work on the South Caucasus Gender Equality Index (SCGEI). The index, developed by ISET Policy Institute in close collaboration with Swiss Cooperation Office in Georgia and updated on an annual basis, draws inspiration from the European Institute for Gender Equality’s Gender Equality Index. It comprises of six domains: work, money, knowledge, time, power, and health, alongside eleven subdomains and nineteen indicators.

The index is calculated for three South Caucasus countries, Georgia, Armenia, and Azerbaijan, and nine benchmark countries: Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, and Slovenia. The 2023 edition, mainly based on data from 2021-2022, reveals that within the South Caucasus Armenia is ahead concerning gender equality in the work domain, while Georgia trails behind its regional counterparts. Gender equality in the work domain is lower in the South Caucasus (64.0) than in the baseline countries (67.3).

Georgia stands out as the South Caucasus leader in gender equality within the money domain but significantly trails the baseline countries (South Caucasus – 51.1 vs. baseline countries – 80.5). This discrepancy is the most prominent across all six domains. Azerbaijan leads in the knowledge domain (with Armenia displaying the greatest inequality), yet the South Caucasus slightly outpaces baseline countries in this domain (South Caucasus – 59 and baseline countries – 58.8). This is however the sole equality domain where the South Caucasus surpasses the benchmark countries.

Georgia and Armenia exhibit higher equality in the power domain than Azerbaijan while, in the time domain, Georgia takes the lead in the South Caucasus. In the health domain, Armenia leads in equality, although the difference in index values is marginal.

In the overall index, Georgia emerges as the regional leader in gender equality (60.4), followed by Armenia (57.5) and Azerbaijan (53.0). However, South Caucasus countries as a whole have a lower index (55.4) than the baseline countries (64.1).

Panel Discussion: Topics and Takeaways

The SCGEI presentation was followed by a policy panel discussion, moderated by Tamar Sulukhia and including the panelists Nino Okribelashvili, Nino Chelidze, Nani Bendeliani and Nino Lortkipanidze. The panelists discussed gender inequalities in different areas such as within academia and the tech industry as well as the role of women during crises and the progress made in Georgia towards ensuring gender equality.

Nino Okribelashvili deliberated on the role of women in academia emphasizing that gender inequalities in higher education attainment become obvious when looking at the representation of women across different fields of science. The share of women in subjects such as social work, education and nursing is more than 80 percent, while it is 20 percent in subjects such as computer science, electrical engineering and mechanical engineering. Science, technology, engineering, and mathematics (STEM) oriented institutions are still generally perceived as male dominated. The second glaring gap concerns the representativeness of women in higher rank and leadership positions in academia, where women remain underrepresented in academic and professorial positions across all subjects.

While Nino Okribelashvili discussed the role of women in academia in general, Nino Lortkipanidze focused specifically on the tech industry. She discussed the industry’s potential to create job opportunities for women through various strategies and initiatives such as STEM education and training, diverse hiring practices, leadership development and flexible work policies – including remote work possibilities. Lortkipanidze emphasized that with the right support and opportunities, the rapidly growing tech industry could allow working mothers to thrive in their careers while also enjoying the advantages of a family-friendly work environment.

Shifting the focus to women in times of crisis, Nino Chelidze emphasized the aggravated impact of war on women using the example of the Nagorno-Karabakh conflict. Chelidze highlighted the need for urgent, coordinated action from the donor community to address the challenges of internally displaced persons, most of whom are women and children.

The panel discussion wrapped up with Nani Bendeliani highlighting Georgia’s advancements in gender equality and female empowerment over the past three decades. Bendeliani mentioned different institutional mechanisms adopted in the country for the advancement of women alongside legislative initiatives implemented in different areas concerning for instance maternity and paternity leave, changes to the labor code and the election code. According to Bendeliani, the progress towards gender equality is visible but slow, with available data and multiple assessments showing there is still much to be done.

Academic Presentations

The remainder of the conference was comprised of several academic sessions all contributing to the overall theme of multifaceted gender-related issues. The topics, as detailed below, were: gender disparities in the labor market, violence against women, gender dynamics during the Covid-19 pandemic, the gender divide in education, women in academia and female empowerment and access to services.

Gender Disparities on the Labor Market

The presenters focused on gender disparities on the labor market, exploring aspects such as the implications of labor protection regulations on both men and women, biases and discrimination in employment and wage negotiation, and the impact of female labor force participation on the advancement of women’s rights.

In his presentation, Michal Myck outlined the consequences of labor protection policies in Poland for employees within four years of retirement (regulation that protects them against layoffs, a lowering of their wages or adjustment of their responsibilities). Preliminary results indicate no economically or statistically significant adverse impacts on the employment of men and women approaching labor protection eligibility. These findings suggest that either the anticipated negative effects are absent, or that any concerns employers may have harbored regarding prospective employment protection were counteracted by robust labor demand during the reform period. The general conclusion is that extending protection to specific groups of workers, both men and women, does not necessarily lead to the adverse outcomes often highlighted in standard economic theory.

While Michal Myck focused on labor protection regulations, Francisco Lagos addressed the topic of weight-related employment discrimination and its impact on hiring outcomes. In an experiment, job applications accompanied either by a facial photo of a normal-weight person or by a photo of the same person manipulated to look overweight were sent out to real job opening across 12 occupations in Spain. The results reveal a significant disparity in callback rates for weight-manipulated male applicants, who received fewer callbacks compared to their normal-weight counterparts, with a more pronounced effect in female-dominated occupations. Conversely, weight-manipulated female applicants experienced a slight increase in callbacks, particularly in female-dominated fields. For men, the weight manipulation effect is attributed to the overweight making them appear less attractive, which translates into an attractiveness wage premium. On the contrary the findings for women suggest evidence of an attractiveness penalty, which is also combined with a weight penalty.

The topics of discrimination and biases were also central to Ramon Cobo Reyes Cano’s presentation, which outlined the results of a field experiment on anticipated discrimination and wage negotiation. The findings show that female applicants ask for a lower salary than male applicants in the baseline treatment group – when the full name of the applicant is visible. In the main treatment group, when the gender of the applicant was no longer visible to the employer, the wage requested by female applicants increased by 86 percent, whereas male applicants’ wage requests were 18 percent lower. Evidently, the gender gap in requested wages completely disappears (and even slightly reverses) when the applicants know that their sex is not visible for the potential employer.

The presentations on gender inequalities in the labor market were concluded by Nisar Ahmad, who empirically investigate the impact of women’s labor force participation on women’s rights.  In general, female labor force participation has a positive effect on women’s rights in countries with at least some legal economic rights for women. In countries where women’s rights are extremely limited or non-existent, female labor force participation has a negative or negligible impact on women’s rights.

Violence Against Women

In the academic session devoted to violence against women, the presenters elaborated on the primary factors influencing such violence in various countries at different time periods, including during the Covid-19 pandemic.

Monika Oczkowska explores how social norms, values, and stereotypes determine beliefs about abuse, including recognition of abuse, what is considered as abuse, whether abuse is ever justified, and societal consent towards gender-based discrimination. In countries where gender inequality is rampant, reported rates of abuse in standard surveys are sensitive to the socio-economic status and beliefs about gender norms of the participants, highlighting a high scale of variation in the perception of gender-based discrimination in Central and Eastern Europe.

These findings are in line with the results presented by Salome Gelashvili, who consider potential determinants of gender-based violence (GBV) in South Caucasus. According to the research, key factors contributing to GBV in Armenia, Azerbaijan and Georgia include alcohol abuse, social stigma, being a member of a marginalized groups, a pervasive patriarchal culture, adherence to traditional gender roles, a high level of bureaucracy when reporting GBV to the police, generally weak legal support, limited awareness about various forms of GBV, and economic factors such as financial dependence on an abusive partner.

Similar outcomes, but with more emphasis put on norms and the patriarchal system, were found by Reina Shehi, who assesses gender-based violence in Albania. The results show that the patriarchal system and gender-based norms are the two main factors contributing to gender-based violence. However, there is a growing awareness of the importance of patriarchal institutions and gender norms when addressing GBV in Albania.

Violence against women increase in times of crisis, as shown by Velan Nirmala, who studies women’s empowerment and intimate partner violence (IPV) in India. The findings reveal that, regardless of socio-economic factors, the main types of IPV during the Covid-19 lockdown were physical and emotional violence. The results also highlight that a large majority of victims, regardless of education, wealth, region, household structure, religion, and caste, do not disclose the abuse due to societal taboos.

Gender Dynamics During the Covid-19 Pandemic

The unequal effect from the Covid-19 pandemic was further examined in an academic session in which the presenters keyed in on repercussions of the pandemic on women in terms of employment outcomes, decisions related to time allocation, and the division of unpaid household labor.

Nabamita Dutta presented work on gender inequality in employment during Covid-19 related lockdowns in India. The results show that during the pandemic, women were, in general, 8 percent less likely to be employed than men. While return migrants generally suffered less in terms of finding alternative jobs, being a female return migrant, increased the probability of joblessness to about 17 percent. For female return migrants belonging to marginalized castes, the probability of joblessness was about 10 percent, an interesting result considering that women belonging to marginalized castes (but not being return migrants) experience a higher likelihood of being unemployed then women that are not part of marginalized castes.

Anne Devlin further elaborated on this topic, assessing the economic impact of the Covid-19 pandemic on people living in disadvantaged areas in Ireland. The results indicate that Pandemic Unemployment Payment (PUP) rates were higher in more deprived areas during lockdown periods and that woman, on average, receive PUP for a slightly longer duration than men. Further, female unemployment has a negative and statistically significant relationship with the length of PUP claims. The findings show that average PUP durations tend to be shorter in areas with a higher share of individuals with lower education levels, and in areas with historically higher levels of female unemployment.

Jacklyn Makaaru Arinaitwe presented work on how gender, culture, norms, and practices contributed to the unequal distribution of unpaid care work during Covid-19 in Uganda. The findings reveal that there are policy gaps in addressing the issue, as current policies don’t acknowledge the value of unpaid care work at a personal and national level. This lack of recognition and failure to come up with new ways to reduce or share women’s disproportionate burden of unpaid care work creates obstacles to girls’ education and hinder women’s economic empowerment in Uganda.

Also, on the topic of the Covid-19 pandemic impacts on women, Alessandro Toppeta presented work on the impacts of the pandemic on the role of parental beliefs in England. The results show that parents believe that the time they spend with their children is more valuable and less risky than the time children spend in formal childcare or with friends and that parents’ beliefs can predict the choices they make in investing time with their children. Further, the findings align with previous indications of the increased burden on women’s time experienced during the pandemic being a consequence of limited availability of alternative childcare options.

The Gender Divide in Education

Within the topic of gender in education, the presenters delved into the connection between education and gender roles and the importance of parental education for children’s education.

Sumit S. Deole presented work on the causal impact of education on gender role attitudes based on evidence from European datasets. The results suggest that an additional year of education prompts egalitarian gender role attitudes. Furthermore, the impact of increases in education is particularly prominent among women and, to some extent, in urban areas.

Fethiye Burcu Türkmen-Ceylan focus specifically on the importance of maternal education for children’s education in Turkey. Preliminary results indicate that maternal education has a distinctive positive impact on households’ budget allocation for children’s education among Turkish households.

Saumya Kumar also presented work on the importance of maternal education, considering the impacts of paternal education as well. The presented research finds that both maternal and paternal education reduce the gender gap in educational enrollment. However, having an educated mother is more important when it comes to increasing girls’ enrollment as compared to boys’ enrollment. The research also indicates that as mothers’ education levels rise, there is a greater increase in spendings on education for both boys and girls.

Further on the gender divide within education, Lubna Naz deliberated on how drought affects school attendance in rural Pakistan. The income decline caused by drought leads to a four-month decrease in schooling for all children, and a six-month decrease for boys. Asset ownership also has a negative impact on school attendance, suggesting a possible reverse causality or Simpson’s paradox. The combined effect of asset ownership and drought, however, has a positive impact on school attendance, Naz concluded.

Women in Academia

Gender inequalities are apparent also in the academic sphere. Liis Roosaar’s research looks into the impact of having children on women’s careers within academia. Roosaar find that becoming a mother doesn’t impact earnings per hour, but that mother’s do work fewer hours. More than four years after having a child, women in academia have lost the equivalent of two years of full-time work. Interestingly, men don’t face the same reduction in work hours after becoming fathers. The study also reveals that the career setback for women in academia after having a child is shorter compared to the general population. However, female academics experience a decline in citations as a consequence of the reduced working hours.

Barbara Będowska-Sójka’s research on women in academia focus on female representation on editorial boards of finance journals.  According to Będowska-Sójka women account for 20 percent of all editors on average, with considerable variance between countries. When it comes to editor’s affiliations they are strongly concentrated in the United States, and to a lesser extent in the United Kingdom. Additionally, a small number of extremely well-connected editors sit on many boards. The gender ratio is consistent in substructures for editors that are better connected (have so-called a high degree of centrality in terms of network analysis) or editors who serve on a large number of boards, yet men outnumber women.

Female Empowerment and Access to Services

Although their research focuses on distinct topics, Fazle Rabbi and Ulrich Wohak both presented research on the overarching theme of women’s empowerment and enhanced access to goods and services.

In his paper, Fazle Rabbi and his co-authors consider a new way to support marginalized individuals, most of whom are women, through the introduction of a new donation model where development agencies provide goats to project beneficiaries. Goat ownership might help beneficiaries generate income and devote more time to education. The research results show that the proposed donation model significantly enhances the economic empowerment of participants, providing them a steady income, better access to education, and more access to the financial system – with the results being more pronounced for women.

Ulrich Wohak evaluated tampon tax reforms (efforts to reduce the taxation of menstrual hygiene products, including tampons, pads, and menstrual cups) as a means to address gender-based tax discrimination. Using transaction-level scanner data, the study finds that when countries lower their standard VAT rates, the extent to which these reductions are passed on to consumers ranges from 57 percent to 119 percent.

Concluding Remarks

The ISET conference “Gender Equality and Women’s Economic Empowerment in Time of Crisis” brought together diverse voices, perspectives, and expertise from various sectors to engage in discussions and knowledge sharing on how to advance gender equality in times of normality and in times of crises. The conference also served as a platform to inspire actionable solutions and commitments to address the multifaceted challenges women face worldwide.

List of Participants

  • Alessandro Toppeta – Assistant Professor at SOFI, Stockholm University, Sweden. “Parental Beliefs, Perceived Health Risks, and Time Investment in Children: Evidence from COVID-19” (in collaboration with Gabriella Conti and Michele Giannola).
  • Anne Devlin – Research Fellow, Economic and Social Research Institute, Ireland. “The Impact of COVID-19 on Women’s Employment in Ireland” (in collaboration with Adele Whelan, Seamus McGuinnes, Paul Redmond).
  • Aswathi Rebecca Asok – PhD Fellow, University of Portsmouth, United Kingdom. “Unveiling Gendered Dimensions of “Volunteerism”: The COVID-19 Story of Kerala, India”.
  • Barbara Będowska-Sójka – Head of Department, Poznań University of Economics and Business, Poland. “Editorial boards of finance journals: the gender gap and social networks” (in collaboration with Claudia Tarantola, C., Mare, C., Ozturkkal, B., Paccagnini, A., Perri, R., Pisoni, G., Shala, A., Skaftad´ottir, H., K.).
  • Davit Keshelava – Lead Economist, ISET Policy Institute.
  • Elizabeth Brainerd – Susan and Barton Winokur Professor of Economics and Women’s, Gender and Sexuality Studies, Brandeis University.
  • Eva Atterlöv – Deputy Head of Development Cooperation, Embassy of Sweden.
  • Fazle Rabbi – Deputy Head of School of Business, Crown Institute of Higher Education, Australia. “From Goats to Education: An Innovative Approach to Community Empowerment” (in collaboration with Laurel Jackson and Zahid Hasan).
  • Fethiye Burcu Türkmen-Ceylan – Research Fellow, Ahi Evran University, Turkey. “Educate a Woman, And You Educate a Generation: How Does Maternal Education Affect Intro Household Resource Allocation for Education among the Children?” (in collaboration with Ulucan, H., Çakmak, S.).
  • Francisco Lagos – Professor of Economics, Georgetown University, USA. “Weight, Attractiveness, and Gender when Hiring: a Field Experiment in Spain” (in collaboration with Catarina Goulão, Juan Antonio Lacomba, and Dan-Olof Rooth).
  • Jacklyn Makaaru Arinaitwe – Director, Ace Policy Research Institute, Uganda. “Gender, culture, norms, and practices that promote gender gaps in the allocation of time to unpaid domestic work in the context of COVID-19 in Uganda” (in collaboration with Twinomugisha David).
  • Kaori Ishikawa – UN Women Country Representative to Georgia.
  • Liis Roosaar – Lecturer at the Chair of Economic Modelling, University of Tartu, Estonia. “Child penalty in academia: Event study estimate” (in collaboration with Jaan Masso, Jaanika Meriküll, Kärt Rõigas, and Tiiu Paas).
  • Lubna Naz – Associate Professor, Institute of Business Administration. Pakistan. “Left High and Dry: Gendered impacts of Drought on school attainment in Rural Pakistan”.
  • Maria Floro – Professor Emerita Economics, American University in Washington, DC.
  • Michal Myck – Director, Centre for Economic Analysis (CenEA), Poland. “Pre-retirement employment protection: no harm when times are good” (in collaboration with Paweł Chrostek, and Krzysztof Karbownik).
  • Monika Oczkowska – Senior Research Economist, CenEA, Poland. “Patterns of harassment and violence against women in Central and Eastern Europe. The role of the socio-economic context and gender norms in international comparisons” (in collaboration with Kajetan Trzcinski and Michal Myck).
  • Nabamita Dutta – Professor of Economics, University of Wisconsin-La Crosse, USA. “Lockdown and Rural Joblessness in India: Gender Inequality in Employment?” (in collaboration with Kar, S.).
  • Nani Bendeliani – Project Analyst, UN Women Georgia.
  • Nino Chelidze – Program Director of Women’s Initiative for Security and Equity at Mercy Corps.
  • Nino Lortkipanidze – Women in Tech Ambassador for Georgia and Chief Innovation Officer at The Crossroads.
  • Nino Okribelashvili – Vice Rector for Research at Ivane Javakhishvili Tbilisi State University.
  • Ramon Cobo Reyes Cano – Professor of Economics, Georgetown University, USA. “Anticipated Discrimination and Wage Negotiation: A Field Experiment” (in collaboration with Gary Charness and Simone Meraglia).
  • Reina Shehi – Primary Appointment Lecturer, Epoka University, Albania. “Patterns of Geographic Gender-Based Violence in Albania” (in collaboration with Endi Tirana and Ajsela Toci).
  • Salome Gelashvili – Lead Economist, ISET Policy Institute, Georgia. “Gender-based violence in the South Caucasus” (in collaboration with Lobjanidze, G., Seturidze, E., Shubitidze I.).
  • Saumya Kumar – Assistant Professor (Economics), University of Delhi, India. “Gender Differential in Parental Investment in Education: A Study of the Factors Determining Children’s and Adolescents’ Educational Investment in India” (in collaboration with Jawaharlal Nehru).
  • Sumit S. Deole – Scientific Assistant, Trier University, Germany. “The Causal Impact of Education on Gender Role Attitudes: Evidence from European Datasets” (in collaboration with Zeydanli, T.).
  • Tamar Sulukhia – Director ISET and ISET Policy Institute.
  • Ulrich Wohak – Teaching and Research Associate, Vienna University of Economics and Business, Austria. Free the Period? Evaluating Tampon Tax Reforms using Transaction-Level Scanner Data (in collaboration with Kinnl, K.).
  • Velan Nirmala – Professor of Economics, Pondicherry University, India. “Women Empowerment and Intimate Partner Violence in India” (in collaboration with Lusome, R).

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

How to Undermine Russia’s War Capacity: Insights from Development Day 2023

Posted on January 15, 2024 | Policy Brief

Image from SITE Development Day conference

As Russia’s full-scale invasion of Ukraine continues, the future of the country is challenged by wavering Western financial and military support and weak implementation of the sanction’s regime. At the same time, Russia fights an information war, affecting sentiments for Western powers and values across the world. With these challenges in mind, the Stockholm Institute for Transition Economics (SITE) invited researchers and stakeholders to the 2023 Development Day Conference to discuss how to undermine Russia’s capacity to wage war. This policy brief shortly summarizes the featured presentations and discussions.

Holes in the Net of Sanctions

In one of the conference’s initial presentations Aage Borchgrevink (see list at the end of the brief for all presenters’ titles and affiliations) painted a rather dark picture of the current sanctions’ situation. According to Borchgrevink, Europe continuously exports war-critical goods to Russia either via neighboring countries (through re-rerouting), or by tampering with goods’ declaration forms. This claim was supported by Benjamin Hilgenstock who not only showed that technology from multinational companies is found in Russian military equipment but also illustrated (Figure 1) the challenges to export control that come from lengthy production and logistics chains and the various jurisdictions this entails.

Figure 1. Trade flows of war-critical goods, Q1-Q3, 2023.

Source: Benjamin Hilgenstock, Kyiv School of Economics Institute.

Offering a central Asian perspective, Eric Livny highlighted how several of the region’s economies have been booming since the enforcement of sanctions against Russia. According to Livny, European exports to Central Asian countries have in many cases skyrocketed (German exports to the Kyrgyzs Republic have for instance increased by 1000 percent since the invasion), just like exports from Central Asian countries to Russia. Further, most of the export increase from central Asian countries to Russia consists of manufactured goods (such as telephones and computers), machinery and transport equipment – some of which are critical for Russia’s war efforts. Russia has evidently made a major pivot towards Asia, Livny concluded.

This narrative was seconded by Michael Koch, Director at the Swedish National Board of Trade, who pointed to data indicating that several European countries have increased their trade with Russia’s neighboring countries in the wake of the decreased direct exports to Russia. It should be noted, though, that data presented by Borchgrevink showed that the increase in trade from neighboring countries to Russia was substantially smaller than the drop in direct trade with Russia from Europe. This suggests that sanctions still have a substantial impact, albeit smaller than its potential.

According to Koch, a key question is how to make companies more responsible for their business? This was a key theme in the discussion that followed. Offering a Swedish government perspective, Håkan Jevrell emphasized the upcoming adoption of a twelfth sanctions package in the EU, and the importance of previous adopted sanctions’ packages. Jevrell also continued by highlighting the urgency of deferring sanctions circumvention – including analyzing the effect of current sanctions. In the subsequent panel Jevrell, alongside Adrian Sadikovic, Anders Leissner, and Nataliia Shapoval keyed in on sanctions circumvention. The panel discussion brought up the challenges associated with typically complicated sanctions legislation and company ownership structures, urging for more streamlined regulation. Another aspect discussed related to the importance of enforcement of sanctions regulation and the fact that we are yet to see any rulings in relation to sanctions jurisdiction. The panelists agreed that the latter is crucial to deter sanctions violations and to legitimize sanctions and reduce Russian government revenues. Although sanctions have not yet worked as well as hoped for, they still have a bite, (for instance, oil sanctions have decreased Russian oil revenues by 30 percent).

Reducing Russia’s Government Revenues

As was emphasized throughout the conference, fossil fuel export revenues form the backbone of the Russian economy, ultimately allowing for the continuation of the war. Accounting for 40 percent of the federal budget, Russian fossil fuels are currently mainly exported to China and India. However, as presented by Petras Katinas, the EU has since the invasion on the 24th of February, paid 182 billion EUR to Russia for oil and gas imports despite the sanctions. In his presentation, Katinas also highlighted the fact that Liquified Natural Gas (LNG) imports for EU have in fact increased since the invasion – due to sanctions not being in place. The EU/G7 imposed price cap on Russian oil at $60 per barrel was initially effective in reducing Russian export revenues, but its effectiveness has over time being eroded through the emergence of a Russia controlled shadow fleet of tankers and sales documentation fraud. In order to further reduce the Russian government’s income from fossil fuels, Katinas concluded that the whitewashing of Russian oil (i.e., third countries import crude oil, refine it and sell it to sanctioning countries) must be halted, and the price cap on Russian oil needs to be lowered from the current $60 to $30 per barrel.

In his research presentation, Daniel Spiro also focused on oil sanctions targeted towards Russia – what he referred to as the “Energy-economic warfare”. According to Spiro, the sanctions regime should aim at minimizing Russia’s revenues, while at the same time minimizing sanctioning countries’ own costs, keeping in mind that the enemy (i.e. Russia) will act in the exact same way. The sanctions on Russian oil pushes Russia to sell oil to China and India and the effects from this are two-fold: firstly, selling to China and India rather than to the EU implies longer shipping routes and secondly, China and India both get a stronger bargaining position for the price they pay for the Russian oil. As such, the profit margins for Russia have decreased due to the price cap and the longer routes, while India and China are winners – buying at low prices. Considering the potential countermoves, Spiro – much like Katinas – emphasized the need to take control of the tanker market, including insurance, sales and repairs. While the oil price cap has proven potential to be an effective sanction, it has to be coupled with an embargo on LNG and preferrable halted access for Russian ships into European ports – potentially shutting down the Danish strait – Spiro concluded.

Chloé Le Coq presented work on Russian nuclear energy, another energy market where Russia is a dominant player. Russia is currently supplying 12 percent of the United States’ uranium, and accounting for as much as 70 percent on the European market. On top of this, several European countries have Russian-built reactors. While the nuclear-related revenues for Russia today are quite small, the associated political and economic influence is much more prominent. The Russian nuclear energy agency, Rosatom, is building reactors in several countries, locking in technology and offering loans (e.g., Bangladesh has a 20-year commitment in which Rosatom lends 70 percent of the production cost). In this way Russia exerts political influence on the rest of the world. Le Coq argued that energy sanctions should not only be about reducing today’s revenues but also about reducing Russian political and economic influence in the long run.

The notion of choke points for Russian vessels, for instance in the Danish strait, was discussed also in the following panel comprising of Yuliia Pavytska, Iikka Korhonen, Aage Borchgrevink, and Lars Schmidt. The panelists largely agreed that while choke points are potentially a good idea, the focus should be on ensuring that existing sanctions are enforced – noting that sanctions don’t work overnight and the need to avoid sanctions fatigue. Further, the panel discussed the fact that although fossil fuels account for a large chunk of federal revenues, a substantial part of the Russian budget come from profit taxes as well as windfall taxes on select companies, and that Russian state-owned companies should in some form be targeted by sanctions in the future. In line with the previous discussion, the panelists also emphasized the importance of getting banks and companies to cooperate when it comes to sanctions and stay out of the Russian market. Aage Borchgrevink highlighted that for companies to adhere to sanctions legislation they could potentially be criminally charged if they are found violating the sanctions, as it can accrue to human rights violations. For instance, if companies’ parts are used for war crimes, these companies may also be part of such war crimes. As such, sanctions can be regarded as a human rights instrument and companies committing sanctions violations can be prosecuted under criminal law.

Frozen Assets and Disinformation

The topic of Russian influence was discussed also in the conference’s last panel, composed of Anders Ahnlid, Kata Fredheim, Torbjörn Becker, Martin Kragh, and Andrii Plakhotniuk. The panelists discussed Russia’s strong presence on social media platforms and how Russia is posting propaganda at a speed unmet by legislators and left unchecked by tech companies. The strategic narrative televised by Russia claims that Ukraine is not a democracy, and that corruption is rampant – despite the major anti-corruption reforms undertaken since 2014. If the facts are not set straight, the propaganda risks undermining popular support for Ukraine, playing into the hands of Russia. Further, the panelists also discussed the aspect of frozen assets and how the these can be used for rebuilding Ukraine. Thinking long-term, the aim is to modify international law, allowing for confiscation, as there are currently about 200 billion EUR in Russian state-owned assets and about 20 billion EUR worth of private-owned assets, currently frozen.

The panel discussion resonated also in the presentation by Vladyslav Vlasiuk who gave an account of the Ukrainian government’s perspective of the situation. Vlasiuk, much like other speakers, pointed out sanctions as one of the main avenues to stop Russia’s continued war, while also emphasizing the need for research to ensure the implications from sanctions are analyzed and subsequently presented to the public and policy makers alike. Understanding the effects of the sanctions on both Russia’s and the sanctioning countries’ economies is crucial to ensure sustained support for the sanction’s regime, Vlasiuk emphasized.

Joining on video-link from Kyiv, Tymofiy Mylovanov, rounded off the conference by again emphasizing the need for continued pressure on Russia in forms of sanctions and sanctions compliance. According to Mylovanov, the Russian narrative off Ukraine struggling must be countered as the truth is rather that Ukraine is holding up with well-trained troops and high morale. However, Mylovanov continued, future funding of Ukraine’s efforts against Russia must be ensured – reminding the audience how Russia poses a threat not only to Ukraine, but to Europe and the world.

Concluding Remarks

The Russian attack on Ukraine is military and deadly, but the wider attack on the liberal world order, through cyber-attacks, migration flows, propaganda, and disinformation, must also be combatted. As discussed throughout the conference, sanctions have the potential for success, but it hinges on the beliefs and the compliance of citizens, companies, and governments around the world. To have sanctions deliver on their long-term potential it is key to include not only more countries but also the banking sector, and to instill a principled behavior among companies – having them refrain from trading with Russia. Varying degrees of enforcement undermine sanctions compliant countries and companies, ultimately making sanctions less effective. Thus, prosecuting those who breach or purposedly evade sanctions should be a top priority, as well as imposing control over the global tanker market, to regain the initial bite of the oil price cap. Lastly, it is crucial that the global community does not forget about Ukraine in the presence of other conflicts and competing agendas. And to ensure success for Ukraine we need to restrain the Russian war effort through stronger enforcement of sanctions, and by winning the information war.

List of Participants

Anders Ahnlid, Director General at the National Board of Trade
Aage Borchgrevink, Senior Advisor at The Norwegian Helsinki Committee
Torbjörn Becker, Director at the Stockholm Institute of Transition Economics
Chloé Le Coq, Professor of Economics, University of Paris-Panthéon-Assas, Economics and Law Research Center (CRED)
Benjamin Hilgenstock, Senior Economist at Kyiv School of Economics Institute
Håkan Jevrell, State Secretary to the Minister for International Development Cooperation and Foreign Trade
Michael Koch, Director at Swedish National Board of Trade
Iikka Korhonen, Head of the Bank of Finland Institute for Emerging Economies (BOFIT)
Martin Kragh, Deputy Centre Director at Stockholm Centre for Eastern European Studies (SCEEUS)
Eric Livny, Lead Regional Economist for Central Asia at European Bank for Reconstruction and Development (EBRD)
Anders Leissner, Lawyer and Expert on sanctions at Advokatfirman Vinge
Tymofiy Mylovanov, President of the Kyiv School of Economics
Vladyslav Vlasiuk, Sanctions Advisor to the Office of the President of Ukraine
Nataliia Shapoval, Chairman of the Kyiv School of Economics Institute
Yuliia Pavytska, Manager of the Sanctions Programme at KSE Institute
Andrii Plakhotniuk, Ambassador Extraordinary and Plenipotentiary of Ukraine to the Kingdom of Sweden
Daniel Spiro, Associate Professor, Uppsala University
Adrian Sadikovic, Journalist at Dagens Nyheter
Kata Fredheim, Executive Vice President of Partnership and Strategy and Associate Professor at SSE Riga
Lars Schmidt, Director and Sanctions Coordinator at the Ministry for Foreign Affairs, Sweden

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Cognitive Dissonance on Belarus: Recovery and Adaptation or Stalemate?

Posted on January 8, 2024 | Policy Brief

20240107 Cognitive Dissonance on Belarus Image 02

A closer look at the Belarusian economy over the recent year, produces two initially competing narratives. The first one emphasizes that tough sanctions have led to a deadlock for the Belarusian economy. The second one stresses that output losses have turned out to be much lower than expected, and that the economy has displayed a rather high degree of adaptability – securing an early and rapid recovery. This policy brief shows that these narratives are not mutually exclusive but rather elements of the same bigger picture. A short-term focus gives the impression that the current stance is ‘more good than bad’. This reflects the fact that output has recovered and almost reached historically high levels, made possible due to a combination of exports protection mechanisms and compensatory effects on output. However, this does not eliminate the disappointing medium- and long-term prospects for the country. On the flip side of the immediate survival of the Belarusian economy is the country’s economic and political stalemate. This includes the lack of opportunities for future sustainable growth and Belarus’ enormous and continuously growing dependence on Russia. Within this stalemate, stagnation is the best plausible scenario. At the same time, much worse scenarios, both economically and politically, are also highly likely. Ultimately, breaking the deadlock is the only way to a better future for Belarus.

The Belarusian Economy and the Changing Narratives

About 1.5 years ago, Western countries introduced tough sanctions against Belarus, punishing the Lukashenka regime for its role in Russia’s invasion of Ukraine. This gave rise to a huge uncertainty regarding Belarus’ economic prospects. A FREE policy brief published about a year ago (Kruk & Lvovskiy, 2022) presented a model-based estimate of a potential rock-bottom for the Belarusian economy in the new environment, which amounted to 20 percent of output losses. The authors however argued that actual output losses might be significantly lower given Russia’s support and policy responses, which were unaccounted for in the model. At the same time, downside risks and a lack of output consistency seem to have become permanent traits of the Belarusian economy.

Expectations of a large and prolonged recession in Belarus prevailed into mid-2023. International institutions (IMF, World Bank) and rating agencies (S&P, Fitch Ratings) mainly expected a recession in Belarus up to 10 percent 2022-2023.  The reality has however turned out to be quite different with the recession being relatively contained and short-lived. The output losses between the peak (Q2-2021) trough Q3-2022 amounted to 6.8 percent. In Q4-2022 a recovery began, and in Q3-2023 the economy had almost fully recovered, reaching nearly the same levels as in Q2-2021 (see Figure 1). Further, in terms of average real wages and household consumption, the situation appears to be even more positive. The real average wage reached its pre-war level in Q1-2023 and has since displayed record high levels, and household consumption follow a similar trend (see Figure 1).

These dynamics have given rise to a new narrative. As of lately, the Belarusian economic situation is at times treated as ‘more good than bad’. Further, most international financial institutions currently forecast a continued weak recovery growth in the coming years (EBRD, 2023; IMF, 2023; Izvorski et al., 2023).

Figure 1. Real GDP, Average Real Wages, and Real Household Consumption (index, seasonally adjusted, 2018=100).

Source: Author’s estimations based on Belstat data.

Factors Behind the Recent Recovery Growth

The underlying reasons for the recovery growth can be divided into two groups: (i) export protection mechanisms under sanctions and (ii) positive shocks and compensatory effects on output.

Export protection mechanisms under sanctions are twofold. Firstly, the Belarusian regime turned out to be somewhat successful in adjusting to the new sanctions-environment. This partly due to a somewhat geographical U-turn of Belarusian exports, underpinned by new logistics and payment schemes. The best example of this turn is the re-orientation of oil product exports from the EU and Ukraine to Russia (Kharitonchik, 2023). Moreover, some exports to traditional markets, which were challenged by logistics and payment barriers rather than sanctions, were secured by crossing these barriers. The best such example is the recovery of potash fertilizer exports to China, Brazil and India. Since early 2023 these displayed a rapid recovery due to Belarus finding logistic solutions through Russian sea ports instead of EU ports, and by using railway transportation.

Secondly, the practices of sanctions evasion may also have played a significant role. The scope of sanctions evasion is however difficult to assess due to its secretive nature. Moreover, the difference between avoiding and evading sanctions is not always clear.

Export protection mechanisms allowed Belarus to cushion actual export losses, making them transitory (see Figure 2). Actual losses in exports were close to the rock-bottom scenario estimates for only a couple of months. Instead of an expected level shift in exports by roughly 40 percent (from the pre-war level), exports displayed a recovery trajectory. Hence, what was modelled as a permanent shock in Kruk & Lvovskiy (2022), turned out to be transitory.

Figure 2. Physical Volume of Exports (index, seasonally adjusted, 2018=100).

Source: Author’s estimations based on Belstat data.

One important aspect to mention is that part of this recovery is due to oil-product exports taking place already in 2022 (Kharitonchik, 2023). In Kruk & Panasevich (2023) the authors show that the oil-refinery industry is of extreme importance for the entire Belarusian economy. Due to inter-industrial linkages, the oil-refinery industry indirectly accounts for about 11 percent of Belarus’ output, despite its modest direct contribution to the GDP (slightly more than 1 percent). Hence, due to protecting these exports (and the corresponding production of oil products), a large amount of output losses was avoided. A similar situation unfolded also for potash fertilizer exports and the chemical industry producing them (although inter-industrial linkages and effects on output are much weaker for that industry).

Besides export protection mechanisms, the recovery of exports and output stem largely from various positive and compensatory effects on output Some of them arose from Belarus’ and Russia’s respective regimes responses to sanctions, and from Russia’s readiness to support Belarus. Others are classical external positive shocks (to no degree related to sanctions) while some are a combination of both. They include: (i) increasing energy (gas) subsidies from Russia, (ii) a prolonged period of extra-high price competitiveness, especially in the Russian market, (iii) expanded access to the Russian market, (iv) other forms of Russian support (debt restructuring, budget transfers, new loans), (v) favorable trade conditions and export prices (apart from on the Russian market), (vi) a (macro)economic environment that allow for more  room for domestic economic policy interventions.

Taken together, these positive output drivers largely contributed to curbing the recession in 2022 and to the output recovery in 2023. A straightforward decomposition of the actual output growth path is unfeasible (due to the close interconnection of export protection mechanisms and output drivers, and the lack of available statistics). However, approximating the actual path in a model environment results in the following: between Q2-2021 and Q3-2022, about 12 percent of losses due to sanctions (taking into account the export protection mechanisms) and a deprivation of the Ukrainian market, and 5.2 percent of gains due to output shocks, resulted in actual output losses of 6.8 percent. Later in 2023, due to increasing effects from the export protection mechanisms, the sanctions-related output losses shrank to about 6.6 percent, while output shocks expanded output by roughly the same level. This allowed output losses to be zeroed out, i.e. the level of output in Q3-2023 was almost identical to Q3-2021.

An Economic Stalemate

Is the ‘more good than bad’ economic situation sustainable? Does the recent recovery mean that Belarus has overcome the major challenges to the economy? The short answer is no. Even with short-term thinking, there are still numerous downside risks. Sanctions still form a permanently challenging environment for the Belarusian economy, putting exports and output in jeopardy. The export protection mechanisms are not persistent, and they largely depend on Russia’s political will to support them. Moreover, the updated logistics and payment chains may also be vulnerable and sensitive to changes in the sanctions’ environment, and short-term trends in external prices. The aforementioned positive output effects are short-term by their nature and there are indications of them starting to fade already in 2023 (BEROC, 2023). Hence, even short-term projections for 2024 are challenging: the output growth is expected to weaken significantly or even fade away, while inflation spikes and financial destabilization risks are high (BEROC, 2023). Therefore, a return to a stagnant economic environment appears to be the most plausible short-term outlook.

The medium-term outlook seems even worse. According to Kruk (2023), the Belarusian macroeconomic balance (a) is very fragile, (b) is subject to numerous and huge downside risks, and (c) cannot be secured by macroeconomic policies because of the structural weaknesses in their design and the lack of room for maneuver. This means that even the existing weak long-term growth potential cannot be realized in the medium term, while the likelihood of recessions, inflation spikes and financial destabilization is high.

Re-shifting focus to a long-term and international perspective makes the viewpoint ‘more good than bad’ appear inconsistent. First, the long-term growth potential for Belarus, which was very weak even before the sanctions, keeps on worsening. This as adverse supply shocks and a deterioration of the productivity determinants continue eroding it (Kruk & Lvovskiy, 2022). Estimations of the growth potential (that rely on historical time series) are mainly within the range of 0-1 percent per annum. However, even such disappointing estimates might be optimistic bearing in mind the current political and sanctions-related risks and uncertainty (absent in the historical data). This makes stagnation the best possible long-term outlook, although it cannot be guaranteed.

Second, despite the milder recession and rapid recovery, the well-being gap between Belarus and its EU neighbors keeps on expanding (see Figure 3).

Figure 3. Well-being in Belarus vs the average among its EU neighbors (Latvia, Lithuania, Poland), 1990-2022, in percent.

Note: The GDP per capita PPP in 2017 constant international dollars is considered as well-being. The average well-being for EU Neighbors is the simple average in GDP in Latvia, Lithuania, and Poland.
Source: Author’s estimations based on World Bank data.

The average well-being in Belarus (measured in GDP per capita in constant international dollars) vs. that among its EU neighbors reached an (almost) historically low level in 2022. After attaining a level of well-being of roughly 75 percent of the average in Latvia, Lithuania, and Poland in the early 2010s, the well-being in Belarus has fall to about 52.5 percent, almost as low as in the mid-1990s. Given the economic stagnation as the most likely outlook, this means that the country will, in relative terms, keep on getting poorer in comparison to its EU neighbors.

A Political Stalemate

The hypothetical way out of the economic stalemate is more or less obvious. For instance, there is somewhat of a consensus among Belarusian economists about strengthening the long-term growth and securing macroeconomic stability (see Daneyko & Kruk, 2021; Kruk, 2023, for an overview of a collective view from a group of Belarusian economists). This vision, however, clashes with the views of the Lukashenka regime, which has inhibited its implementation throughout decades. Hence, democratic transition, or at least deprival of power of the Lukashenka regime has long appeared to be a highly likely precondition for moving away from the stalemate.

This, however, has changed in the last couple of years. The Belarusian economy’s dependence on Russia has moved from large to absolute. Prior to 2022, Russia was an important market for Belarusian exports (about 40 percent), the single energy supplier, and de facto the lender of last resort. To date, Russia’s role has expanded dramatically. The share of exports to Russia has increased up to about 65 percent. Moreover, the majority of the remaining 35 percent is exported with the assistance of or through Russia, using Russian infrastructure. Therefore, it would be fair to argue that Russia in some form “controls” roughly 90 percent of Belarusian exports. Further, being Belarus’ sole energy supplier, Russia has increased its significance for Belarus through expanded energy subsidies. The size of the energy subsidies reached a historical high in 2022, and the mechanism of the energy subsidies has become a cornerstone for macroeconomic stability in Belarus. Furthermore, Russia has turned out to be the only effective creditor for Belarus. Overall, Russia has accumulated a significant number of tools to undermine Belarus at any given moment.

A democratic transition or at least deprival of power of the Lukashenka regime might therefore not be sufficient preconditions for breaking the economic deadlock. Even if domestic political will to do so should emerge, the risk that Russia will successfully suppress it using the above outlined economic tools is very high. Hence, apart from a democratic transition, the way out of the economic stalemate requires a way out of the political stalemate. This seems to only be possible through either a politically weakened Russia, and/or an external political force, allied to the Belarusian democratic forces, and strong enough to suppress Russia.

Conclusions

Recently, the narrative on the Belarusian economy has changed. The prevailing expectations of a large and prolonged recession has been substituted by expectations of a gradual recovery. The narrative ‘the jig is up’ has somehow been crowded out by the ‘more good than bad’ viewpoint on the Belarusian economy. However, these narratives are not mutually exclusive. Behind the current ‘more good than bad’ viewpoint on the Belarusian economy, a severe economic and political deadlock prevails. Moreover, future economic and political deadlocks are the actual price being paid for the recent survival and recovery of the Belarusian economy.

From a positive perspective, the economic and political deadlock means that the country is likely to, at least, be bogged down in stagnation. Belarus’ total dependency on Russia makes the country hostage to Russia’s political preferences and country-specific risks. Should Russia decide to exert further economic and/or political influence over Belarus, it is likely to succeed. Consequently, any economic downturn faced by Russia would automatically impact Belarus.

From a normative perspective, breaking the economic and political deadlock might be the only solution, and for this, the order might matter. Prior to 2020 there was a widespread opinion that breaking the economic deadlock must be prioritized, and that it could – in turn – break the political deadlock. As of now, the tables have turned. The current order postulates the political deadlock comes first, as it seems to be the only way of breaking the economic stalemate. However, breaking the political deadlock appears to require external political will.

With these conclusions in mind, the recent Belarusian democratic forces’ manifest regarding Belarus’ EU membership aspiration, deserves attention (BDF, 2023). At first, such aspiration might appear schizophrenic given the actual political situation inside of the country. However, taking a Belarusian EU membership serious (within the EU and among Belarusians) might be the answer to Belarus’ political and economic deadlock. From this perspective, the task for the Belarusian society is thus to convince EU counterparts that this is not madness, but rather a feasible solution. It is rather evident why this solution is both desirable and feasible for the Belarusian society. The main question to be answered is therefore whether, and why it would be desirable and feasible for the EU.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Democratic Backsliding and Electoral Autocracies: Research Shared at the 2023 FROMDEE Conference

Posted on December 4, 2023 | Policy Brief

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On October 13th, 2023, the Stockholm Institute of Transition Economics (SITE) and the Forum for Research on Media and Democracy in Eastern Europe (FROMDEE) hosted an academic conference on “Democratic Backsliding and Electoral Autocracies”. This brief provides a short summary of the keynote lecture and research presentations featured at the conference.

The most recent report by the V-Dem Institute concludes that “72 percent of the world’s population […] live in autocracies by 2022” and “the level of democracy enjoyed by the average global citizen in 2022 is down to 1986 levels” (V-Dem Institute, 2023). In Europe, these declines have manifested in the previous Polish government undermining judicial independence, in tightened political repression in Belarus, and most prominently in Putin’s invasion of Ukraine. But the rise of electoral autocracies and democratic backsliding are not confined to Europe – their strategies of propaganda, corruption, electoral manipulation, as well as attacks on judicial and media independence are a global phenomenon. The October 13th FROMDEE Conference gathered researchers from economics, law and political science to bring insight into why and where reversals are taking place, and what measures are needed to reverse the negative trend. This policy brief provides an overview of the research shared at the conference.

Populism and Autocracy – the Case of Russia

In the keynote lecture, Arturas Rozenas (New York University) focused on the roots of populism, challenging the common view of illiberal democracies as a mix between democracies and dictatorships. Rather, dictatorships evolve into populist dictatorships that then take one of two paths: either the path to democracy, or the path towards electoral autocracy, illiberal democracy, or totalitarianism. In this framework, populist dictatorships have historically made use of populist elements we recognize from modern times, i.e., democratic-seeming institutions misused for the ruler’s purposes.

In a populist dictatorship, Rozenas continued, there is a monopoly of power. Institutions such as elections and parliamentary representation, serve not to allocate power but to legitimise it. The transition from passive to active dictatorships coincided with a move away from the common notion of a king or similar leader deriving rightful power from God to rule the masses, to a reality built on the idea that the ruler’s legitimacy stems from the masses. This historic transformation should however not be interpreted as a transition to democracy. In fact, Rozenas showed that for most of recent history, the majority of elections and expansions of suffrage took place in dictatorships rather than in democracies. These seemingly populist institutions serve not only to legitimise governments, but also to coopt the population in a public display of the ruler’s strength. Rozenas argued, that in an active populist dictatorship, the ruler creates a setting which suppresses dissent and expectations of dissent, through institutionalised expressions of support (in the form of political participation, elections, large rallies etc.).

Turning to the Russian setting, the first thing to notice is the deep tradition of autocracy – from tsarism to Stalinism. In Russia, the words “society” and “the people” briefly blossomed during past revolutions or uprisings but have largely been absent in the Russian language and are once again on the decline under the rule of Putin. Further, the Russian population has time and again been exploited by its rulers during succession crises for displays of power and dominance. Examples of this are the mandatory elections held under Stalin two weeks after the invasion of the Baltic States in 1939 and more recently under Putin in the occupied territories of Luhansk and Donetsk in Ukraine in 2021. Such populist autocratic strategies are nothing new in Russia, concluded Rozenas – rather they derive from the internal logic of dictatorship that has played out throughout Russian history.

Continuing the notion of the “absent” Russian society, Olha Zadorozhna (Kozminski University) began her presentation by explaining that protests are infrequent in Russia and have surprisingly few attendees given the country’s large population. While there were mass protests in the run-up to the collapse of communism in the 1980’s and protests took place against corruption in 2017-2018, and in relation to the arrest of Alexey Navalny in 2021, protests in Russia are typically not motivated by an overarching ideology or broader political questions. Rallies in favor of authoritarianism and ethno-nationalism are a more common occurrence. Moreover, there are few indications that the invasion of Ukraine, sanctions and subsequent economic downturn have negatively affected the Russian population’s support for the regime. Still, literature has shown that war-related deaths can mobilize opposition against war participation (e.g., the U.S. participation in the Vietnam War). Considering this, Zadorozhna evaluates whether the deaths of Russian soldiers provoke a reaction among the Russian population. By combining social media data on fallen soldiers with protest activity for the first four months of the Russian invasion in 2022, the study find that casualties lead to an increase in protest activity, indicating that deaths can in fact mobilize public opposition in Russia.

Other populist strategies to ensure support for Putin in Russia relate to political participation and the judiciary. Nicholas James (University of Oxford) analysed electoral rule changes in the Russian Duma – from mixed member majoritarianism to proportional representation (PR) – by measuring their effect on floor participation. Applying a difference-in-differences framework, James found that deputies experiencing a change from PR included less words in their speeches following the switch (about 15-20 percent of an average speech). This effect should be understood in the political context of the ruling party’s (United Russia) increased influence during this time period (2010s). In fact, James concluded, the results point in the direction of the regime tampering with the Duma in an impromptu and reactionary manner with the overall goal of obtaining closer control and the appearance of support for the regime.

Yulia Khalikova’s (University of Hamburg) presentation gave further insight into how ostensibly democratic institutions can be exploited to make an authoritarian regime appear legitimate. In her work, Khalikova considers judicial references to international law that may be employed strategically, without necessarily adhering to the spirit or content of the law. Looking specifically at international law citations in 601 judgements made in the Russian Constitutional Court (RCC) between 2000 and 2021, Khalikova find evidence that the RCC has increasingly cited international courts when making judgements on topics related to politics and physical rights, indicating that state policy influences citation patterns. The change in citation patterns also points to the RCC currently using international law to support the regime and uphold its legitimacy, meaning that international law – adopted with the ambition of enhancing democratic values and ensuring human rights – is misused for undemocratic and repressive purposes.

Censorship and Propaganda

Information control is an important feature of autocratic regimes. Philine Widmer (ETH Zurich) considers the Chinese setting – where the regime controls the amount of foreign information available on the internet via a countrywide firewall. Research has shown that autocracies make use of censorship strategies to control their citizens, but these are associated with high reputational costs and can be overcome by tech-savvy citizens. Using a machine learning algorithm, Widmer first predicts a newspaper article’s alignment with the Chinese regime before comparing the placement of more/less aligned articles on news websites. Her results show that front-page news stories in Chinese newspapers are more aligned with the regime’s stance than other content. Front-page placement in turn matters for information uptake. Widmer ended the presentation by comparing the additional cost of finding less aligned articles to the technological costs required to access outside media (e.g. VPNs). For an autocracy to achieve its information control objectives, independent news may just need to be relatively harder to access. It does not need to make it impossible to access for all citizens.

Censorship is typically accompanied by, and complementary with, propaganda. Restricting other narratives allows autocratic regimes to spread their own. While propaganda is a common feature within autocracies, Jaakko Meriläinen’s (Stockholm School of Economics) presentation evaluated the effect of autocratic propaganda in a democratic setting.

Meriläinen’s study focuses on a rogue experiment in which some Finnish children in the 1970’s were taught history and social sciences using material from the Soviet Union – material which was in essence Soviet propaganda. By exploiting geographical and cohort variation, Meriläinen use a difference-in-differences approach to compare the 213 exposed children to children taught the regular Finnish curriculum. The long-term outcomes show that exposed children had lower incomes in adulthood, worked fewer months per year and were engaged in more left-leaning and publicly beneficial occupations (such as, nurses and firefighters).

Information and Accountability

The use of technological innovations to access otherwise restricted information was central to Arieda Muço’s (Central European University) presentation. She studies the spread of the Xerox photocopying machine in communist Hungary in the 1980’s – a setting characterised by limited freedom of speech and restrictions on the media. She reported that areas with early placement of Xerox machines are found to exhibit higher shares of pro-democratic voting. Muço ascribes these outcomes to the fact that the machines allowed for the spread of information and eased coordination of the opposition, suggesting that new technologies and information can act as key facilitators in the fall of autocratic regimes.

Providing citizens with information was also a key feature in Enrique Seira Bejarano’s (Michigan State University) presentation. He began by discussing two potentially related trends: in Latin America recent years have seen (i) increased levels of corruption and (ii) increased dissatisfaction with democracy among citizens. The number of corruption-related news articles have increased threefold in Spanish and doubled in English and the share of people perceiving corruption to be the greatest challenge to their country has doubled in the last decade. The study uses two empirical strategies to identify the effect of corruption on democratic values. Firstly, Seira Bejarano described an observational study, in which data on major corruption scandals were combined with Latinobarometer data on support for democracy. The authors find that corruption scandals increase corruption perceptions while decreasing stated support for democracy. Secondly, Seira Bejarano reported the results of a randomized controlled trial in which some respondents were shown videos of a politician accepting bribes. This had a negative effect on preferences for democracy and on trust more broadly. Both studies show that revelations of corruptions decrease the support for democracy, suggesting a potential tradeoff between the public’s belief in democratic institutions and increased transparency which is important for accountability but can also expose corruption.

Right-wing Populism

Yet another threat to democracy is the rise of right-wing populism – currently a reality in many well-established democracies across Europe. In Germany, the far-right party Alternative für Deutschland (AfD) enjoys around 21 percent of voters’ support according to recent polls. To understand their rise in popularity, Navid Sabet (Goethe University Frankfurt) builds on previous literature on cultural conflict as a driver for right-wing party support. The paper he presented examines the role of violent conflict in the form of terrorist acts. It evaluates whether acts of terror can alter the political landscape and shift support to the far-right. To avoid selection problems, the authors compare successful terror attacks to attacks that failed. Sabet reported that successful small-scale attacks (predominantly targeting migrants) increase AfD’s vote share by about 6 percentage points in state elections (in the time period 2013-2021). The acts of terror were found to increase voter turnout, by mobilizing otherwise idle voters, but also by gaining votes at the cost of other parties. Exploring the mechanisms behind these results, the authors study the language used by political parties and the way successful attacks were covered in the media. Relative to coverage of unsuccessful attacks, media coverage used a more negative tone, more words related to Islam and terror and fewer words related to right-wing populism. This suggests that media plays an important role in shaping the public’s response to acts of terror and that far right parties are able to exploit this dynamic.

Concluding Remarks

The 2023 FROMDEE Conference brought together academics from different fields to shed light on some of the main challenges to democracy today. In part, the research presented supported the prevailing narrative that democracies are backsliding in many parts of the world. However, by analysing how autocracies and populist leaders operate, the presenters also highlighted the vulnerability of dictatorships.

Arturas Rozenas cited the example of a rally in Bucharest in 1989, which was organised to display support for Ceauşescu’s regime and descended into an anti-government protest. Dictatorships can benefit by coopting the populist elements of democracy but, in doing so, they risk creating a vehicle for genuine democratic expression.

The audience learned about autocracies’ efforts to control the flow of information but also about citizens’ ability to circumvent restrictions whether in 1980s Hungary or present-day China. Several presentations focused on the extent of autocratic control in Russia but even in this setting, the death of soldiers in Ukraine motivates citizens to participate in protests.

Recent trends suggest that democratic institutions should not be taken for granted in any country. Societies can become more resilient to the threat of democratic backsliding, in part by better understanding how both democracies and autocracies operate and what makes them vulnerable. Researchers around the world are using innovative methods to expand our knowledge in this area, as reflected in the presentations at the 2023 FROMDEE Conference.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.