Location: Germany

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

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.

Does Online Fundraising Increase Charitable Giving? A Nationwide Field Experiment on Facebook

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On 3 October, Dr. Maja Adena will be presenting her working paper entitled ‘Does online fundraising increase charitable giving? A nationwide field experiment on Facebook at SSE. Dr Maja Adena together with a co-author used a Facebook tool for a field experiment in Germany, revealing nuanced findings on donations and advertising.

About the Speaker

Dr. Maja Adena is a Vice Director of the research unit “Economics of Change” at WZB Berlin Social Science Center […] Click “Expand” below to learn more Collapse Dr. Adena received her doctoral degree in Economics from the Free University of Berlin and finished the Berlin Doctoral Program in Economics and Management Science in 2013. She is a member of the Board of Directors of the Berlin Center for Consumer Policies and was a chairperson of the WZB ethics committee. Dr. Adena’s work has been published in leading journals in Economics including the Quarterly Journal of Economics, Management Science, and the Journal of Public Economics. She is a CESifo Research Network Fellow. Dr. Adena’s academic interests are mainly in the field of Public Economics and Behavioral Economics. In particular, she is interested in charitable giving and non-profit organizations carrying out (field) experiments on the optimal design of a fundraising campaign. In the field of Political Economy, she works on persuasion, studying the question of how far the media can influence individual preferences and behavior. Her research is also concerned with poverty and deprivation and its impact on individual well-being.

About the Working Paper

Does online fundraising increase charitable giving? Using the Facebook advertising tool, we implemented a natural field experiment across Germany, randomly assigning almost 8,000 postal codes to Save the Children fundraising videos or to a pure control. We studied changes in the volume and frequency of donations to Save the Children and other charities by postal code. Our design circumvents many shortcomings inherent in studies based on click-through data, especially substitution and measurement issues. We found that (i) video fundraising increased donation frequency and value to Save the Children during the campaign and in the subsequent five weeks; (ii) the campaign was profitable for the fundraiser; and (iii) the effects were similar independent of video content and impression assignment strategy. However, we also found non-negligible crowding out of donations to other similar charities or projects. Finally, we demonstrated that click data are an inappropriate proxy for donations and recommend that managers use careful experimental designs that can plausibly evaluate the effects of advertising on relevant outcomes.

Register for the Event

Interested in attending the SITE brown bag seminar at SSE or online via Zoom? The link to the seminar will be distributed by invitation only. If you are interested in attending the seminar – please contact site@hhs.se. Follow the instructions below: Type the subject box with “Brown bag seminar *INSERT SEMINAR TITLE*” Indicate your affiliation and field of interest Please also indicate if you want to attend in person or online For registered applicants, a Zoom link will be provided prior to the event via email with further instructions.

Spillover Effects from the Nordic Model of Prostitution Legislation

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In recent years several European countries alongside Canada and Israel have adopted the so-called Nordic model of prostitution legislation to try and reduce the risk of sexual exploitation. While the reforms directly affect the regulation of the domestic sex market, their effects may also spill over to other outcomes in nearby areas and internationally – for example affecting sex tourism flowsMaking use of data on tourism flows and Google searches, a new study examines the causal effect from the implementation of the reform in four different countries on sex tourism in popular destinations. The findings indicate that domestic reforms increase sex tourism, calling for the design of policies to account also for these adverse effects.


Since 1999, when Sweden introduced the so-called Nordic model of prostitution legislation, similar legislation has been introduced in Canada, Iceland, Ireland, France, Norway, and most recently Israel. While the legislation design differs between countries (for an overview see Perrotta Berlin and Spagnolo, 2019), the common foundation is to effectively criminalize the purchase but not the selling of sexual services. The introduction of such reforms aims at battling human trafficking and reducing the risk of exploitation. While the effect from the asymmetric prostitution legislation has been found to increase rape incidence in Sweden (Ciacci, 2018), when it comes to the sex market the Nordic model is mainly thought to affect it in two contrasting ways. Firstly, it may suppress domestic supply, which could result in people travelling to destinations where prostitution is not criminalized. Secondly, it might affect the general view on prostitution (Kotsadam and Jakobsson, 2011), thus reducing domestic demand as well as international sex tourism.

Sex tourism is associated with human trafficking, child exploitation and increased spread of sexually transmitted diseases (Herold and Van Kerkwijk, 1992; Brooks and Heaslip, 2019; Newman et al. 2011). Despite this, few studies have explored the impact of prostitution laws on the practice – in part due to measurement difficulties.

This brief presents evidence from a forthcoming paper by Perrotta Berlin and Latour on sex tourism patterns following the implementation of the reform in four different countries.

Quantifying Sex Tourism

Perrotta Berlin and Latour use tourism patterns and Google searches to quantify sex tourism flows, in order to evaluate the effect from changes in prostitution legislation in Canada, France, Ireland and Norway. Specifically, they use data on the number of monthly tourist arrivals to Thailand and The Philippines, and weekly Google searches originating from the above-mentioned reform countries for popular sex-tourism and other tourism destinations, including attractions within cities. German tourism data and Google searches originating from France as well as Google searches originating in the US are used to estimate the effect on sex tourism to bordering countries (France to Germany and US to Canada, respectively). To evaluate the respective effects, they identify treated and control groups for each considered setting, and proceed to compare data between these groups before and after the reform (in line with the so-called difference-in-differences specification, as pioneered by Card and Krueger, 1994). In the following sections, each of these specifications and the subsequent results are discussed.

Evident Spillover Effects

Thailand and The Philippines

For Thailand and The Philippines, monthly data was available on tourist arrivals differentiated by country of origin from 2013 to 2020 and from 2008 to 2020, respectively. The underlying assumption is that, absent a prostitution legislation reform in the four considered countries (Canada, Ireland, France and Norway), the tourism flows from the country in question to Thailand and The Philippines would have remained the same over time. Thus, the change in the number of tourist inflow (out of which an unknown number are sex tourists) from the country in question – when compared to the number of tourists from other countries used as the control group – can be interpreted as a causal effect from the legislative reform on sex tourism.

The results show that, when compared to tourists arriving from other countries, the number of tourists arriving from one of the countries having recently implemented the Nordic model increased by 0.312 and 0.158 standard deviation points for The Philippines and Thailand respectively. Figure 1 below illustrates the results from an event study specification, in which the reform dates in the four different countries are aligned at 0, depicting how the increase is spread over the two years following the reform.

Figure 1. Number of tourists before and after the reform, The Philippines to the left and Thailand to the right.

Notes: The horizontal axis is the time variable. Time is normalized such that 0 is the month when the reform came into force. On the left panel the vertical axis is the number of tourist arrivals to The Philippines from reform countries in deviation from control countries. On the right panel the vertical axis is the number of tourist arrivals to Thailand from reform countries in deviation from control countries.

France-Germany Border

In Germany, the legislative status of prostitution is determined at the level of municipality. For the analysis, German municipalities where prostitution is to some extent legal were considered to form the treatment group and municipalities where it is illegal constituted the control group. The outcomes of interest were i) tourists travelling to German municipalities of interest, and ii) Google searches from France for the same municipalities.

The analysis shows an increase in foreign tourism to the treatment municipalities following the implementation of the Nordic model of prostitution legislation in France.  At the same time, no changes in domestic tourism was detected. The conclusion that the increase in foreign tourism is driven by an increase in French tourists, by which one could then argue the implemented reform to increase cross-border sex tourism, was validated by the analysis of French Google searches. In these data it can be seen that distant German municipalities where prostitution is legal become relatively more interesting in French Google searches after the reform compared to municipalities where prostitution is illegal.

Figure 2. Searches of German municipalities originated in France relative their distance from the French border.

Notes: The vertical axis is the weekly index of Google Trends for searches for municipalities in Germany originated in France. The horizontal axis is distance from the French border. The red line shows that the slope decreased, i.e. distance became more salient for municipalities with illegal prostitution after the reform.

Canada-US Border

Data on Google searches for Canadian municipalities from one year before to one year after the reform in Canada were considered for the analysis. Searches originate in different US states, which also differ in the extent to which purchase of sexual services is legally punishable. The length of imprisonment in each US state determines whether a state was considered treated – when the length of imprisonment equals or exceeds that in Canada following the reform – or control. Results show that after the introduction of the Canadian reform, Google searches for Canadian municipalities dropped, in particular, in US states with high punishments for purchase of sexual services – most likely those where sex tourism to Canada used to originate before the reform. The results from the event study is depicted in Figure 3 below.

Figure 3. Number of searches of Canadian cities before and after the reform, deseasoned.

Notes: The horizontal axis is the time variable. Time is normalized such that 0 is the month when the reform came into force. The vertical axis is the number of searches from US states with high punishments in deviation from control states.

Sex Tourism Destinations

Finally, Google Searches for sex tourism destinations were considered as the outcome variable with the underlying idea being that – in the absence of a legislative change in the four considered countries – the difference in number of searches for sex tourism vs tourism destinations would have been the same over time. Sex tourism destinations were defined in two alternative ways: first, a list of popular destinations was selected within countries where prostitution is legal; second, this list was augmented with information from websites that list popular destinations for sex tourism, regardless of the legal status of prostitution in that country.

The results from this analysis are less clear, varying with the definition of sex tourism destinations and with the country of origin. But by and large they showed, if anything, that the interest in sex tourism destination countries decreased after the reform. This might indicate a change in attitudes towards lower acceptance of sex trade in general in the countries where the reform was implemented.


Prostitution legislation reforms affect the domestic sex market and have potential cross-border and international spillover effects. One such impact from criminalizing the purchase of sexual services domestically is increased levels of sex tourism, which might in turn impose adverse effects on the destination countries.

Filling a research gap by studying the effect from introducing asymmetric prostitution laws on sex tourism, Perrotta Berlin and Latour find evidence suggesting that harsher domestic regulation, while potentially changing attitudes in the general population (as indicated by Google Searches) also, in specific cases, increases, the outflow of tourists to destinations with less stringent laws.

After the introduction of the Nordic model, Norway has imposed legislation prohibiting their citizens to purchase sexual services even in countries where it is legal and implemented awareness campaigns on the detrimental effects of sex tourism on local populations. Given that sex tourism is associated with human trafficking, child exploitation and increased spread of sexually transmitted diseases, the results call for other countries to follow suit with domestic prostitution legislation taking on a more global approach to achieve greater effectiveness.


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 Can We Learn from Regional Patterns of Mortality During the Covid-19 Pandemic?

Doctor outside COVID-19 isolation center representing covid-19 pandemic mortality

Given the nature of the spread of the virus, strong regional patterns in fatal consequences of the Covid-19 pandemic are to be expected. This brief summarizes a detailed examination of the spatial correlation of deaths in the first year of the pandemic in two neighboring countries – Germany and Poland. Among high income European countries, these two seem particularly different in terms of the death toll associated with the pandemic, with many more excess deaths recorded in Poland as compared to Germany. Detailed spatial analysis of deaths at the regional level shows a consistent spatial pattern in deaths officially registered as related to Covid-19 in both countries. For excess deaths, however, we find a strong spatial correlation in Germany but little such evidence in Poland. These findings point towards important failures or neglect in the areas of healthcare and public health in Poland, which resulted in a massive loss of life.


While almost all European countries currently refrain from imposing any Covid-19 related restrictions, the pandemic still takes a huge economic, health and social toll across societies worldwide. The regional variation of incidence and different consequences of the pandemic, observed over time, should be examined to draw lessons for ongoing challenges and future pandemics. This brief outlines a recently published paper by Myck et al. (2023) in which we take a closer look at two neighboring countries, Germany and Poland.  Within the pool of high-income countries, these are particularly different in terms of the death toll associated with the Covid-19 pandemic. In 2020 in Poland, the excess deaths rate (with reference to the 2016-2019 average) was as high as 194 per 100,000 inhabitants, over 3 times higher than the 62 deaths per 100,000 inhabitants in Germany (EUROSTAT, 2022a, 2022b). While, in relative terms, the death toll officially registered as resulting from Covid-19 infections in 2020 was also higher in Poland than in Germany, the difference was considerably lower (about 75 vs 61 deaths per 100,000 inhabitants, respectively) (Ministry of Health, 2022; RKI, 2021). Population-wise Germany is 2.2 times larger than Poland and, before the pandemic struck, the countries differed also in other relevant dimensions related to the socio-demographic structure of the population, healthcare and public health. The nature of Covid-19 and the high degree of regional variation between and within the two countries along some crucial dimensions thus make Germany and Poland an interesting international case for comparison of the pandemic’s consequences. We show that the differences in the spatial pattern of deaths between Germany and Poland may provide valuable insight to the reasons behind the dramatic differences in the aggregate numbers of fatalities (Myck et al., 2023).

Regional Variation in Pandemic-Related Mortality and Pre-Pandemic Characteristics

We examine three measures of mortality in the first year of the Covid-19 pandemic in 401 German and 380 Polish counties (Kreise and powiats, respectively): the officially recorded Covid-19 deaths, the total numbers of excessive deaths (measured as the difference in the number of total deaths in year 2020 and the 2015-2019 average) and the difference between the two measures. Figure 1 shows the regional distribution of these three measures calculated per 1000 county inhabitants. All examined indicators were generally much higher in Poland as compared to Germany. In Poland, deaths officially registered as caused by Covid-19 were concentrated in the central and south-eastern regions (łódzkie and lubelskie voivodeships), while in Germany they were concentrated in the east and the south (Sachsen and Bayern). Excess mortality was predominantly high in German regions with high numbers of Covid-19 deaths, but also in nearby regions. As a result, these same regions also show greater differences between excessive deaths and Covid-19 deaths. On the contrary, high excessive deaths can be noted throughout Poland, including the regions where the number of Covid-19 deaths were lower. In the case of Poland, spatial clusters are much less obvious for both excess deaths and the difference between excess and Covid-19 deaths. To further explore the degree of regional variation between and within countries with respect to the mortality outcomes, we link them to regional characteristics such as population, healthcare and economic conditions, which might be relevant for both the spread of the virus and the risk of death from Covid-19. In Figure 2 we illustrate the scope of regional disparities with examples of (a) age structure of the population, (b) the pattern of economic activity and (c) distribution of healthcare facilities in years prior to the pandemic.

Figure 1. Regional variation of death incidence in 2020: Germany and Poland.

Note: The panels share a common legend based on the quintile distribution of Covid-19 deaths, with two additional categories added at the top and bottom of the scale. County borders in white, regional borders in yellow and country border in grey. Source: Myck et al. (2023).

Figure 2. Pre-pandemic regional variation of socio-economic indicators: Germany and Poland.

Note: Two top and bottom categories in the legend cover 10% of observations each, the rest of categories cover 20% of observations each. County borders in white, regional borders in yellow and country border in grey. Source: Myck et al. (2023).

Shares of older population groups (aged 85+ years) are clearly substantially higher in Germany compared to Poland, and within both countries these shares are higher in the eastern regions. On the other hand, the proportion of labor force employed in agriculture is significantly higher in Poland and heavily concentrated in the eastern parts of the country. In Germany, this share is much lower and more evenly spread. This indicator illustrates that socio-economic conditions in 2020 were still substantially different between the two countries. The share of employed in agriculture is also important from the point of view of pandemic risks – it reflects lower levels of education, and specific working conditions that make it challenging to work remotely yet entail less personal contact and more outdoor labor. The distribution of hospital beds reflects the urban/rural divide in both countries. It is also a good proxy for detailing the differences in the overall quality of healthcare between the two countries, i.e. displaying significantly better healthcare infrastructure in German counties.

Uncovering the Spatial Nature of Excess Deaths in Germany and Poland

While spatial similarities among regions are present along many dimensions, they are particularly important when discussing such phenomena as pandemics, when infection spread affects nearby regions more than distant ones. With regard to the spatial nature of excess deaths in the first year of the pandemic, a natural hypothesis is thus that the pattern of these deaths should reflect the nature of contagion. This applies primarily to excess deaths directly caused by the pandemic (deaths resulting from infection with the virus). At the same time, some indirect consequences of Covid-19 such as limitations on the availability of hospital places and medical procedures, or lack of medical personnel to treat patients not affected by Covid-19, are also expected to be greater in regions with a higher incidence of Covid-19. On the other hand, spatial patterns are much less obvious in cases where excess deaths would result, for example, from externally or self-imposed restrictions such as access to primary health care, reduced contact with other people, diminished family support, or mental health problems due to isolation. While these should also be regarded as indirect consequences of the pandemic, as they would arguably not have realized in its absence, these consequences do not necessarily relate to the actual spread of the virus. Our in-depth analysis of the spatial distribution of the three examined mortality-related measures, therefore, allows us to make a crucial distinction in possible explanations for the dramatic differences in the observed death toll in the first year of the pandemic in Germany and Poland. We explore the degree of spatial correlation in the three mortality outcomes using multivariate spatial autoregressive models, controlling for a number of local characteristics (for more details see Myck et al., 2023).

We find that in Germany, all mortality measures show very strong spatial correlation. In Poland, we also confirm statistically significant spatial correlation of Covid-19 deaths. However, we find no evidence for such spatial pattern either in the total excess deaths or in the difference between excess deaths and Covid-19 deaths. In other words, in Poland, the deaths over and above the official Covid-19 deaths do not reflect the features to be expected during a pandemic. As the results of the spatial analysis show, these findings cannot be explained by the regional pre-pandemic characteristics but require alternative explanations. This suggests that a high proportion of deaths results from a combination of policy deficits and individual reactions to the pandemic in Poland. Firstly, during the pandemic, individuals in Poland may have principally withdrawn from various healthcare interventions as a result of fear of infection. Secondly, those with serious health conditions unrelated to the pandemic may have received insufficient care during the Covid-19 crisis in Poland, and, as a consequence, died prematurely. This may have been a result of lower effectiveness of online medical consultations, excessive limitations to hospital admissions – unjustified from the point of view of the spread of the virus, and/or worsened access to healthcare services as a result of country-wide lockdowns and mobility limitations. The deaths could also have resulted from reduced direct contact with other people (including family and friends as well as care personnel) and mental health deterioration as a consequence of (self)isolation. Our analysis does not allow us to differentiate between these hypotheses, but the aggregate excess deaths data suggests that a combination of the above reasons came at a massive cost in terms of loss of lives. The consequences reflect a very particular type of healthcare policy failure or policy neglect in the first year of the pandemic in Poland.

Our study also shows that a detailed analysis of country differences concerning the consequences of the ongoing pandemic can serve as a platform to set and test hypotheses about the effectiveness of policy responses to better tackle future global health crises.


The authors wish to acknowledge the support of the German Research Foundation (DFG, project no: BR 38.6816-1) and the Polish National Science Centre (NCN, project no: 2018/31/G/HS4/01511) in the joint international Beethoven Classic 3 funding scheme – project AGE-WELL. For the full list of acknowledgements see Myck et al. (2023).


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.

German Dependence on Russian Energy, Economic Stress and Green Transition

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The invasion of Ukraine has created a reassessment in many European governments of the risks that Russia inflicts on countries and the current world order. This has implications for both the military buildup and the reliance on trade and exchange with Russia in particular in the area of oil and gas.

Perhaps nowhere has this turnaround been more significant than in Germany. Probably the country within Europe that has maintained the closest business ties with Russia since 1991.

Anders Olofsgård, Deputy Director at the Stockholm Institute of Transition Economics, and Associate Professor at the Stockholm School of Economics discusses the turnaround of German policy towards Russia with Guido Friebel, Professor at the Goethe University in Frankfurt.

Professor Guido Friebel is also a Fellow at CEPR, IZA, a VP of SIOE, a founding member of the Organizational Economics Committee of the German Economic Association (VfS), and a member of the Scientific Advisory Board of Sciences Po, and of ConTrust at Goethe University. He also serves as a Scientific Director of CLBO. Before joining Goethe, I held positions at the Toulouse School of Economics and EHESS, and at SITE, Stockholm School of Economics.

Regional Economic Development Along the Polish-German Border: 1992-2012

Image of Europe at night from sky via NASA representing regional economic development

In this brief, we summarize the results of a recent analysis focused on the regional economic development in Poland and Germany along the Oder-Neisse border (Freier, Myck and Najsztub 2021a). Economic activity is approximated by satellite night-time light intensity, a comparable proxy available for regions on both sides of the frontier consistently between 1992 and 2012. This period covers the time of economic transformation and the first eight years of Poland’s membership in the European Union. We find that convergence in overall activity across the border has been complete: Polish municipalities that used to be economically much weaker have caught up with those on the German side of the Oder and the Neisse rivers.


The question of the harmonious development of economic activity is at the heart of the European integration project (Art. 2, Treaty of Rome, 1957), and the Maastricht Treaty (1992) made economic convergence between member states an explicit objective. In a forthcoming paper (Freier et al. 2021), we take a new approach to the question of regional European integration.

This brief derives from a recent publication in Applied Economics (Freier et al. 2021a), in which we examine the degree of regional economic convergence along the German-Polish border by taking advantage of satellite night-time illumination data covering the period between 1992 and 2012. The data allows us to study detailed regional patterns of economic development along the river-delimited part of the frontier and further inland.

The seminal work by Henderson et al. (2012) was the first to use night-time light intensity data which covers the entire globe to measure economic activity. Unlike traditional regional economic indicators, light intensity data is independent of administrative border reforms and has been collected in a consistent format over the studied two decades.

Our analysis suggests that, over the analysed period from 1992-2012, there has been essentially full convergence in economic activity between municipalities on both sides of the Polish-German border. While the average value of night-time illumination in our selected group of municipalities in 1992 was 3.7 (on a scale between 0 and 63) in Poland and 7.7 in Germany, the respective values were 9.0 and 9.7 by 2012, and the latter difference is not statistically significant. This convergence suggests a much stronger rate of growth in economic activity on the Polish side of the border. Additionally, we show that within Germany, the distance to the border has much less relevance for economic activity compared to Poland, where it reflects interesting trends. In 1992, Polish towns farther from the border showed significantly higher economic performance. Within Poland, this gap has been greatly reduced over the 20 years we analyse, with regions closer to the border growing much faster compared to those farther away.

Night Lights Along the Polish-German Border

In our dataset, we include municipalities that are located within 100 km from the river delimited part of the PL-DE border. To avoid the sensitivity of the analysis to top censoring of the night-time light intensity data, we removed regional capital cities: Berlin (with surrounding municipalities), Dresden, Gorzów Wielkopolski, and Zielona Góra. This leaves us with 488 municipalities on the German side of the border and 193 municipalities on the Polish side.

The night lights data series, provided by the National Oceanic and Atmospheric Association (NOAA), starts as early as 1992 and continues in a consistent, comparable format to 2012. The data is independent of the administrative structures of local governments, which over time have changed on both sides of the border. This allows us to aggregate the night-time lights information for municipalities using the most recent available administrative borders. This data is essentially the only source of information on economic activity that is consistently available and comparable on both sides of the border over such a long period of time.

The night-time lights data has been applied widely as a proxy of economic development on the country and regional level (Henderson et al., 2012; Bickenbach et al., 2016). Clearly, the intensity of night-time lights does not capture the entire spectrum of economic activity. It has been pointed out that the relationship between night-time light intensity and conventional measures of economic development, such as GDP, is likely to differ depending on a region’s stage of economic development (Hu and Yao, 2019). However, we focus on mostly rural and sparsely populated areas (where there is little risk of top censoring of the data), and compare dynamics between regions that are similar in terms of their stage of economic development, geography, and weather. All these factors support the use of night lights as a proxy for regional development in our application (a number of technical steps are necessary to validate and calibrate the data for use in our analysis, see: Freier et al. 2021).

Economic Convergence Along the PL-DE Border

To understand the overall development of economic activity over the period of interest, we map the changes in the night-time light intensity in Figure 1. The colour scale on the map represents differences in light emissions between 1992 and 2012, with the range going from -40 to 40. A negative value indicates a reduction, and a positive value highlights an increase in light intensity. The negative values have been coloured in a blue-green scale (-40 to 0), while positive values in a red scale (0 to +40).

Figure 1. Night lights: changes in light intensity between 1992 – 2012 along the Polish-German border

Notes: municipalities along the PL-DE river border up to 100 km to the border; municipalities marked in grey treated as outliers and excluded from analysis due to high proportion of top-coded lights pixels in 1992; municipality borders as of 2013 (DE) and 2012 (PL). Source: GeoBasis-DE / BKG 2013, PRG 2012, DMSP OLS v4, OpenStreetMap, own calculations. For details see Freier et al. (2021).

As notable in Figure 1, the red areas are predominant. This exemplifies that between 1992 and 2012, nearly all municipalities in this area witnessed positive economic development as manifested in the intensity of night-time lights. We have a few areas that reflect negative dynamics on the German side of the border. This is mainly due to the regional implications of shutting down activity in agriculture and traditional industries as they were unable to compete with West-German technology and productivity. In Poland, green-blue areas are essentially non-existent, illustrating a universally positive economic development over the studied period. This difference in the pace of changes in light intensity between the German and the Polish side reflects a process of rapid convergence of economic development between municipalities on both sides of the border. These developments are represented in Figure 2 which shows the difference between the night-time light intensity in Germany and Poland by year and provides a test for its statistical significance. The estimation is done on mean log pixel values per municipality and clearly highlights the steep path of convergence. In the early nineties, the difference in mean light intensity was around 100 percent – i.e., the mean difference was as high as the mean level of lights on the Polish side of the border.  Already ten years later it reduced to around 50 percent and disappeared by the end of the analysed period. It is notable that, after an initial steep convergence, the difference in light intensity had a period of stagnation between 2002 and 2008. Interestingly, the full convergence which followed coincides with Poland’s entry into the Schengen agreement in December 2007. As seen in Figure 2, the difference in the average night-time light intensity between Poland and Germany was statistically insignificant and essentially zero since 2009.

Figure 2. Difference in mean night-time lights between Germany and Poland over time

Notes: Difference in log of average pixel values per municipality; year fixed effects included, weighted by municipality area; 95% CI. Source: see Figure 1.

Regional Development and Distance from the Border

Thanks to its high degree of geographical precision, the night-time lights data allows us to study the detailed spatial patterns within each country and, in particular, the relationship between distance to the border and economic activity. This is done by looking across the years 1992 to 2012 and examining three-year windows at each end of the analysed period. Our results, which are reported in Table 1, confirm a strong positive relationship between economic activity and distance to the border on the Polish side of the Oder-Neisse rivers. Overall, Polish regions farther from the border show a greater degree of economic activity, but this relationship has substantially diminished over time. While in Germany, economic activity was higher in regions farther from the border and increasing at the average rate of about 0.3% per km, this rate was about three times higher in Poland, falling from about 1.2% per km in 1992-94 to 0.6% in 2010-2012.

 Table 1. Total night-time lights along the Polish-German border, 1992-2012

Notes: Notes: municipalities along the PL-DE river border up to 100 km to the border; municipality borders as of 2013 (DE) and 2012 (PL); mean municipal total lights calculated using average pixel values per municipality and weighted by municipality area. Standard errors in parentheses, statistical significance: + p < 0.10, * p < 0.05, ** p < 0.01, *** p < 0.001. Source: see Figure 1.

Table 2 reports changes in light intensity between the beginning and the end of a specific period. Here, we find some interesting and perhaps disconcerting results on the relationship between the distance to the border and changes in light intensity. While the distance-to-border coefficient in the Polish case for the full period is negative, suggesting that regions closer to the border were catching up to the more developed regions farther away, the corresponding coefficient for the final three years is positive. This means that, in the years 2010-2012, economic development was faster in municipalities farther away from the border. Although the relationship is not very strong (the change in light intensity grows by about 0.1% per kilometre of distance to the border), it still suggests a reversal in the fortunes of municipalities close to the border on the Polish side. This result points towards the fact that homogeneity of development cannot be taken for granted and that physical distance might continue to play a role in determining the regional rate of growth in the future.

Table 2. Changes in night-time lights along the Polish-German border: 1992-2012

Notes: Notes: municipalities along the PL-DE river border up to 100 km to the border; municipality borders as of 2013 (DE) and 2012 (PL); mean municipal total lights calculated using average pixel values per municipality and weighted by municipality area. Standard errors in parentheses, statistical significance: + p < 0.10, * p < 0.05, ** p < 0.01, *** p < 0.001. Source: see Figure 1.


In this brief, we report results from a forthcoming paper (Freier et al. 2021) in which we evaluate regional development in municipalities on the German and Polish side of the Oder-Neisse border between 1992 and 2012, using night lights data as a proxy for economic activity. We find that driven by rapid growth in Polish municipalities and somewhat sluggish growth in German ones, the light intensity levels across the Oder-Neisse border show no significant differences by the end of our observation period. This is despite significant initial differences just 20 years earlier and the fact that municipalities on the German side also experienced increases in economic activity. In as far as economic development can be proxied by the intensity of night-time illumination, it seems that economic convergence between regions on both sides of the border was complete by 2012.

We also show interesting patterns regarding the relationship between economic activity and distance from the border. For Germany, this relationship is weakly positive and remains stable throughout the analysed period. In Poland, distance is strongly and positively correlated with light emissions at the beginning of the period, hence indicating that municipalities farther from the border show higher average economic activity. By 2012, however, the border regions have closed most of the gap and the distance to the border is a substantially weaker predictor of economic activity, suggesting a much more homogenous pattern of activity.


This brief draws on results reported in Freier et al. (2021a). The authors gratefully acknowledge the support of the Polish National Science Centre (NCN), project number: 2016/21/B/HS4/01574. For the full list of acknowledgements and references see Freier et al. (2021a).


  • Bickenbach F, Bode E, Nunnenkamp P and Söder M (2016) Night Lights and Regional GDP. Review of World Economics 152(2): 425–47.
  • Freier, R., Myck, M., Najsztub, M (2021a) Lights along the frontier: convergence of economic activity in the proximity of the Polish-German border, 1992-2012. Applied Economics, available online: doi: 10.1080/00036846.2021.1898534.
  • Freier, R., Myck, M., Najsztub, M (2021b) Night lights along the PL-DE border 1992-2012. Dataset used in Freier et al. (2021a), Zenodo, DOI: 10.5281/zenodo.4600685.
  • Henderson JV, Storeygard A and Weil DN (2012) Measuring Economic Growth from Outer Space. American Economic Review 102(2): 994–1028.

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.

Ahead of Future Waves of Covid-19: A Regional Perspective on Health Risks and Healthcare Resources in Germany and Poland

An image with ambulance car at night representing COVID-19 Health Risks and Healthcare Resources

Drawing on the most fundamental conclusions from the early research on the Covid-19 pandemic, in this policy paper we examine the regional prevalence of a number of risk factors related to severe consequences of Covid-19. Using the examples of Germany and Poland, two neighbouring countries which have generally dealt relatively well with the outbreak in recent months, we show that there is significant regional variation both in the distribution of health status and healthcare resources. Highly differentiated demographic and epidemiological risks related to the pandemic between as well as within Germany and Poland call for a decentralised evaluation of risks and point out the need to consider an application of regionally focused policy reactions such as lockdowns and social distancing regulations. The cross-country regional perspective adds a valuable angle to the analysis of challenges raised by the Covid-19 pandemic and should urgently be considered regarding any possible consequences of future outbreaks of the virus.


In the first five months of 2020 the Covid-19 crisis has grown from a local epidemic outbreak in the Chinese city of Wuhan to a global pandemic, which by the end of May, according to official statistics, took the lives of over 370 thousand people and has been detected in nearly all countries around the world. In the initial phase of the pandemic, the healthcare systems of many countries were pushed to the brink of collapse, and in the severely hit regions even the need of “prioritizing” patients with a high chance of survival became reality. In most European countries the total number of identified cases has continued to grow throughout the month of May, but the rate of growth generally decreased, and in some countries, such as Austria or Slovenia, only a handful of cases were identified in the last two weeks of May. As a result, countries eased the social and economic lockdown, and in many parts of Europe life is beginning to portray a certain restricted semblance of pre-Covid-19 normality. At least in this part of the world, it seems that the first wave of the pandemic is behind us: the “hammer” is over, the “dance” has begun. Thus now that the spread of the virus is slowing down and we are in a phase of smaller local outbreaks, it is time to take a step back and use the information available to draw lessons before the arrival of a potential second wave, which according to many epidemiologists is likely to happen later this year.

Drawing on the most fundamental conclusions from the early research on the Covid-19 pandemic and taking a cross-country perspective, in this policy paper we examine the prevalence of a number of risk factors related to severe consequences of Covid-19 from a regional perspective. In our analysis we focus on Germany and Poland — two neighbouring countries which differ in the demographic structure of their populations as well as with respect to their healthcare infrastructure. Epidemiological research suggests that the risk of serious health complications as well as the risk of dying as a result of Covid-19 grows rapidly with age and is much higher among people with pre-existing health conditions such as cardiovascular conditions, diabetes, hypertension, chronic pulmonary disease and malignancy (Emami et al. 2020). Thus, the prevalence of these risk factors might serve as an indicator for the need of (in-hospital) health care in times of larger outbreaks. We then extend the analysis by a discussion of regional statistics on systemic features of healthcare resources reflecting the potential for addressing the pandemic. One can generally say that both in Germany and Poland the first wave of the pandemic, while placing additional heavy strain on healthcare in some regions, has not led to the collapse of healthcare provision. Yet, regions with lower level of service are at greater risk of healthcare rationing, thus further raising the likelihood of severe consequences to the local populations in the future.

We begin this policy paper with a discussion of the key demographic and epidemiological risk factors related to severe health consequences of Covid-19 (Section 1), which is followed by a presentation of the regional distribution of Covid-19 cases in Germany and Poland, as reflected in official statistics at the end of May 2020 (Section 2). We then discuss regional differences in the proportion of people aged 65+ and in the rates of the relevant comorbidities by showing regional statistics on the main causes of death (Section 3). This is complemented in Section 4 by a discussion of the regional distribution of healthcare resources as indicated by the number of hospital beds and the number of doctors. All aspects of our analysis are presented at the level of “powiat” for Poland and “Kreise” for Germany, referred to below as “counties”. There are 380 counties in Poland (including township with county status) and 401 counties in Germany, which in the international Nomenclature of Territorial Units for Statistics (NUTS) correspond to the former NUTS level 4 (former LAU 1) and NUTS level 3 respectively.

As we demonstrate, there are significant differences both across and within the two countries with respect to the relevant demographic and epidemiological risk factors. At the same time there is high heterogeneity across Germany and Poland in the resources of the respective healthcare systems. We show that the cross-country regional perspective adds an additional valuable angle to the analysis of challenges raised by the Covid-19 pandemic. Epidemiologists have modelled various scenarios of future Covid-19 waves including recurring small outbreaks, a new “monster wave” or even a persistent crisis (Moore et al. 2020). Whatever the shape of future outbreaks, the pandemic is expected to persist until “herd immunity” is reached, be it through successful vaccination or through developing immunity in response to illness. Thus, regions potentially facing more serious consequences of the pandemic need to be brought to the attention of central governments as they prepare to address the challenge of future outbreaks of the Covid-19.

1. Macro-Level Determinants of the Health-Related Consequences of Covid-19

At the initial stage of the pandemic, the WHO estimated the fatality rate of the Covid-19 disease at 3-4% (WHO 2020a). As the public health crisis developed, this general conclusion has been challenged given a high number of asymptomatic infections, low testing capacities in most countries and relatively low test accuracy for antibodies as well as PCR testing (Ghandi et al. 2020, Kandel et al. 2020, Manski & Molinari 2020). The available statistics should thus be treated more as “fatality-case” ratios, i.e. the ratios of deaths resulting from Covid-19 to the number of individuals tested positive. According to the most recent studies, this ratio differs substantially between countries, from as low as 0.04% in Qatar and 0.08% in Singapore to over 15% in Belgium or France (Oke & Heneghan 2020). Such high variation is unlikely to reflect “real” differences in the way the virus affects people in different countries, but is more likely to be a consequence of specific factors as the testing strategies, the demographic structure of the population, the characteristics of the part of the population affected (e.g. young holiday makers vs. patients of care institutions), as well as the ability of the healthcare system to deal with a sudden surge in the number of hospitalisations.

There is mounting evidence that the probability of developing severe symptoms of the infection, of hospitalisation and finally of dying, increases significantly with age. According to some early estimates the fatality-case rates grow from 1.8-3.6% among people aged 60-69, through 4.8-12.8% among those aged 70-79, up to 13-20.2% among those 80+ (Roser et al. 2020). Higher hospitalization and fatality rates are also strongly correlated with underlying health conditions, in particular with cardiac disorders, chronic lung diseases, diabetes and cancer (ECDC 2020). This further puts older individuals, among whom these health conditions are most prevalent, at much greater risk as compared to the younger population.

While the risk of severe consequences of Covid-19 substantially increases at older ages, several competing mechanisms are at play with regard to the role of the demographic structure for a potential spread of the virus. On the one hand, since levels of economic activity are generally lower among older people, their compliance with self-isolation rules is likely to be less sensitive to the intensity of economic activity at regional or country level. On the other hand, however, as social life now returns to a higher level of interaction, different forms of living arrangements of older individuals place certain groups at a particular risk. The first months of the pandemic in Europe have revealed high vulnerability of people living in long-term care facilities, many of which became Covid-19 clusters with high rates of mortality among their residents (Comas-Herrera et al. 2020; Gardner et al. 2020; McMichael et al. 2020). On the other hand, in countries characterised by low rates of institutionalization, older individuals are more likely to co-reside in households with children and younger adults (Myck et al. 2020), i.e. groups which in conditions of lifted lockdown restrictions will be exposed to the risk of infection. Studies at the early stages of the epidemic showed that intra-household transmission of the virus may be responsible for the majority of clusters (WHO 2020b). This implies that while the strategies to protect the most vulnerable groups may differ depending on the specific living arrangements, regions with a higher proportion of older people face an increased risk of severe health consequences of Covid-19 outbreaks.

Similar arguments apply to the regions where incidence of the relevant comorbidities is particularly high. Systemic constraints related to healthcare played an important role at the height of the recent Covid-19 crisis in countries such as Italy or Spain where the number of patients in need of in-hospital treatment exceeded the capacities of the healthcare systems (Pasquariello & Stranges 2020, Remuzzi & Remuzzi 2020, Verelst et al. 2020). We thus argue that regions with populations facing highest risks related to the Covid-19 pandemic ought to be particularly vigilant to the spread of the disease and ensure that their healthcare infrastructure can respond adequately to future outbreaks.

2. The Regional Spread of Covid-19 infections in Germany and Poland

The first official case of the disease in Germany was confirmed on 27 January, while the first infection in Poland dates to 4 March. Since then 183 thousand Covid-19 infections have been identified in Germany and 23 thousand in Poland by the end of May 2020. The corresponding fatality-case ratio at that point stood at the average country levels of 4.69% and 4.47% respectively. The difference in the overall number of cases relates both to the greater spread of the virus and the more extensive testing conducted in Germany as well as to a simple difference in the size of population (83 vs. 38 million inhabitants). Importantly, when we take a regional perspective on the pandemic, as we can see in Figure 1, the distribution of the infection rate is far from homogenous. In Germany, the level of infection rates is much higher in some of the southern and western regions (Bavaria, Baden-Württemberg and North Rhine Westphalia), while in Poland the region of Silesia is a clear local “hot-spot” of the pandemic.

Figure 1. COVID-19 infections per 100 thousand inhabitants by county
(as of 31 May 2020)

Source: own compilation based on data from Robert Koch Institute (RKI) and Federal Agency for Cartography and Geodesy (BKG) in case of Germany and data collected individually by Michał Rogalski (https://www.micalrg.pl/) from Voivodeship Offices, Voivodeship and Powiat Epidemiological-Sanitary Stations, media and materials sent on request and Head Office of Geodesy and Cartography (GUGiK) in case of Poland.
Note: Class 3, 4 and 5 cover 20% of the observations, the other classes 10% each.

In Germany, the first outbreaks were attributed to business travel and skiing tourism and the spread within certain communities went on via close contacts during large gatherings such as those at the time of carnival festivities and at church services, and also as a result of specific economic activities (e.g. delivery services or workers in slaughterhouses). Numerous cases have also been reported in institutionalised accommodation such as nursing and refugee homes. As Figure 1 shows, the counties with the highest rates of infections were located in Bavaria. By the end of May one of the Bavarian counties (Tirschenreuth) had an infection rate far higher than any other county – 1,568 infections per 100,000 inhabitants, when this rate was 891 and 890 in the next highest scoring counties of Straubing and Wunsiedel. At the same time the counties of Uckermark and Prignitz (in the region of Brandenburg), Friesland and Wilhelmshaven (Niedersachsen), Ostholstein (Schleswig-Holstein) and Rostock (Mecklenburg-Vorpommern) recorded infections rates of below 35 per 100,000 inhabitants.

The origins of the first reported cases in Poland were also directly related to international travel – to Germany and Italy. Further local outbreaks were reported in hospitals and social welfare homes. The virus often spread between such institutions due to a transmission via medical and care personnel working in several institutions in parallel. Initially, only Warsaw and neighbouring counties stood out with regard to the infection rate, which could be due to higher mobility and population density in the first case, and local outbreaks in social welfare homes in the latter. However, about two months after the beginning of the pandemic, a major surge in new cases was recorded in the region of Silesia where the bulk of infections concentrated among mine workers. Often asymptomatic, infections were identified as a result of extensive screening of miners and their families. By the end of May, about one third of Poland’s total infections were found in Silesia alone. Together with the cases reported in the Mazovian region (with Warsaw as capital), these two regions represented about half of the total number of infections in Poland. The highest infection rate in Poland exceeding 500 infections per 100,000 inhabitants was observed in the counties of Silesia (Bytom, Jastrzębie-Zdrój and powiat lubliniecki), Mazovia (powiat białobrzeski) and Greater Poland voivodship (powiat kępiński), while a handful of counties located throughout Poland (powiaty: bartoszycki, bieszczadzki, drawski, gołdapski, kolski, lidzbarski, międzyrzecki, sejneński, żuromiński) have not recorded any infections.

Figure 2 provides another angle on the aftermath of the epidemic in both countries – regional case fatality rates, calculated as a ratio of deaths to recorded infections and presented at a higher level of aggregation – the level of Bundesländer in Germany and Voivodship in Poland (due to the lack of comparable data on county level in Poland). Even though, as mentioned above, the country average death rates are very similar, the within-country regional differences are striking. As compared to Poland, the regional death ratios in Germany do not deviate much from the country average (4.7), with the lowest rate in the region of Mecklenburg-Vorpommern (2.6) and the highest one in the region of Saarland (6.0). On the other hand, the differences between Polish regions are substantial, with no deaths per 120 infections in the lubuskie region and the fatality rate exceeding 9.0 in the podkarpackie region. At this early stage of the pandemic such differences might reflect a number of factors and may not be systematically related to specific risks. However, as we show below, the most clearly identified risk factors are far from evenly distributed both between and within the two countries, which in cases of broader outbreaks is likely to lead to significant systematic differentiation of risks at the regional level.

Figure 2. Covid-19 death rates by region (DE: Bundesländer, PL: Voivodeships) (as of 31 May 2020)

Source: own compilation based on data from Robert Koch Institute (RKI) and Federal Agency for Cartography and Geodesy (BKG) in case of Germany and data collected individually by Michał Rogalski (https://www.micalrg.pl/) from Voivodeship Offices, Voivodeship and Powiat Epidemiological-Sanitary Stations, media and materials sent on request and Head Office of Geodesy and Cartography (GUGiK) in case of Poland.
Note: Class 3, 4 and 5 cover 20% of the observations, the other classes 10% each.

3. Demographic and Epidemiological Variation at Regional Level in Germany and Poland

There are significant differences in the age structure of the population with a substantially higher proportion of individuals in older age groups in Germany. While 17.5% of the Polish population is over 65 years old and 2.1% is aged 85+, the corresponding proportions in Germany amount to 21.4% and 2.7%. These average differences, however, conceal significant within country variation in the demographic composition, which – as we argue – is very relevant against the background of the potential consequences of the Covid-19 pandemic.

In Figure 3 we present shares of people aged 65+ in the general population by county in 2018. The counties with highest proportions of older individuals in Germany are concentrated in the east of the country. The variation in the proportion of those aged 65+ ranges between 15.7% in Frankfurt am Main (region Hessen) and Freising (region Bavaria) and 31.5% in Suhl (region Thüringen). The ‘youngest’ of German counties resemble some of the oldest ones in Poland, where we find counties with the proportion of people aged 65+ as low as 11.2% or 12.1% (powiats kartuski and gdański, region Pomerania). Only in 15 counties in Poland (less than 4% of counties), the proportion of those aged 65+ exceeds 21% – which we find in about two thirds of counties in Germany. Similar differences are found regarding the proportion of those aged 85+ (not shown here), with a distinct concentration of the “oldest-old” in the eastern parts in both countries. However, while in Poland less than half of counties have a proportion of the 85+ population higher than 2%, this is the case in all but one county in Germany.

Figure 3. Share of people aged 65+ by county, 2018

Source: own compilation based on data from Eurostat and Federal Agency for Cartography and Geodesy (BKG) in case of Germany and Central Statistical Office (GUS) and Head Office of Geodesy and Cartography (GUGiK) in case of Poland.
Note: Class 3, 4 and 5 cover 20% of the observations, the other classes 10% each.

When we compare the regional variation in the number of Covid-19 infections with the population’s age structure, it seems that the pandemic in both countries has so far affected the ‘younger’ regions. The spread of the virus has been relatively slow both in the eastern part of Germany and in the east of Poland. Thus, there is a negative correlation between the within-country spread of Covid-19 and the proportion of older age groups at the county level. This might be due to a higher level of travel and economic activity in younger regions of the two countries which – at least in the initial phase – limited further spread of the virus to the parts with higher proportions of older individuals.

Apart from older age several pre-existing medical conditions have also been identified as risk factors for severe consequences of Covid-19. Figure 4 displays the ratio of deaths due to a selected group of diseases in the total number of deaths among people aged 65+ to proxy the incidence of these health conditions among the living population. The causes of death are coded according to the diagnostic criteria of the International Statistical Classification of Diseases and Related Health Problems (ICD-10) compiled by the WHO. Deaths caused by external factors such as traffic accidents are excluded from the total of fatalities due to different reporting practise in Poland and Germany. Since no clear deviations in reporting deaths due to internal causes has been found, we assume this data is comparable between the two countries and we use deaths due to internal causes as a measure of total deaths in Figure 4. Causes that are especially relevant against the background of Covid-19 include deaths due to circulatory diseases, neoplasms and respiratory diseases (the level of data aggregation does not allow to single out deaths due to diabetes). In contrast to Figure 3, which showed much higher proportions of older people in Germany than in Poland, when it comes to health risks due to the specified conditions, the country picture is reversed. While the rate of deaths resulting from the selected conditions exceeds 90% of all deaths in the 65+ population in multiple counties across Poland (over 8% of all), it does not surpass 84% anywhere in Germany. Importantly, the regional distribution of death ratios in Germany due to the chosen conditions closely reflects the proportion of the older population and is concentrated in eastern parts of the country, in particular in the southern regions of the former East Germany. Epidemiological risks related to Covid-19 seem to be lower in the more prosperous regions in southern and western Germany, as well as in bigger cities such as Hamburg. In Poland there is no apparent relation between the selected health risks and the demographic structure of the regions. The highest proportion of deaths due to the selected conditions is found in the north-western regions and in the south-east, leaving central Poland with somewhat lower incidence rates of death due to these causes – at similar levels observed in many parts of Germany. Moreover, the within-country variation in the proportion of these deaths is much higher in Poland, where in sztumski county (Pomerania region) as many as 94.5% of deaths among 65+ can be attributed to the selected conditions, while in ełcki county (Warmia-Masuria region) this number was only 66.6%.

Figure 4. Share of deaths due to neoplasms, circulatory and respiratory diseases among people aged 65+ by county, 2016

Source: own compilation based on data from European Data Portal and Federal Agency for Cartography and Geodesy (BKG) in case of Germany and Central Statistical Office (GUS) and Head Office of Geodesy and Cartography (GUGiK) in case of Poland.
Note: Class 3, 4 and 5 cover 20% of the observations, the other classes 10% each.

4. Healthcare Resources at the Regional Level in Germany and Poland

The initial wave of the Covid-19 pandemic in several most affected countries resulted in a significant overburden of their healthcare capacities with a sudden wave of patients in need of in-hospital intensive care. While in some hospitals in Germany and Poland the first inflow of patients placed a heavy burden on the available resources, both healthcare systems have so far not been overwhelmed to the extent that was experienced in Italy, Spain, or some states of the USA. However, there are significant differences between the healthcare resources available in Germany and Poland and these differences might become apparent if the next waves of the pandemic result in much higher rates of infections. Health expenditure accounted for 11.3% of Germany’s gross domestic product (GDP) in 2017, with an expenditure of 4,459€ per inhabitant. The spending in Poland was much lower and amounted to 6.5% of the GDP and an expenditure of 731€ per inhabitant (Eurostat 2020a). The differences are not as high in the absolute values of traditional healthcare indicators such as the number of hospital beds per 1,000 people (601.5 in Germany and 485.1 in Poland; Eurostat 2020b) or the number of doctors per 100.000 inhabitants (424.9 in Germany and 237.8 in Poland; Eurostat 2020c), but they are still notable.

We show the regional distribution of hospital beds and practising doctors in Figures 5 and 6. As in the case of the demographic structure and epidemiological conditions, there are significant regional differences in the capacity of healthcare as measured by these indicators. In the latter case the data do not allow for a direct cross-country comparison as the data in Germany only covers medical doctors who provide health services to patients with social health insurance in outpatient clinics. In Poland the data is limited to the medical doctors working directly with patients conditional on their primary workplace / main employer in case of multiple assignments (excluded if private practice is reported as such). This means that the data at hand only covers a proportion of all medical doctors – in Germany it captures 37% of all those with an active medical license (according to the German Medical Association) and in Poland 60% of licensed doctors as reported by the Polish Supreme Medical Chamber. As this data is not directly comparable across countries, the proportions in Figure 6 are presented in shades of blue and green for Germany and Poland respectively. However, the key dimension of the data we present is the high within-country variation in the level of medical staff across regions.

In both countries there is an urban-rural divide of the healthcare capacities that is most pronounced in Poland and in the south-western regions of Germany. In Poland this originates partly from the task division at consecutive levels of local administration. Although county authorities are responsible for the broad network of hospitals, the major clinical hospitals are located in the biggest cities. The north-south difference that we observe in Germany is related to the fact that in northern regions many populated cities compose a county together with neighbouring municipalities, while in the southern and central parts they constitute an independent county. This brings out the contrast between cities and the localities around them, which is also noticeable in the case of Poland. For many areas this means that their inhabitants have to travel or be transported relatively long distances when in need for medical treatment, in particular in cases of specialised interventions. In 2016 there were four counties in Germany and as many as 24 counties in Poland with no hospitals.

Figure 5. Number of hospital beds per 1,000 inhabitants by county, 2016

Source: own compilation based on data from Federal Statistical Office and Statistical Offices of the Länder and Federal Agency for Cartography and Geodesy (BKG) in case of Germany and Central Statistical Office (GUS) and Head Office of Geodesy and Cartography (GUGiK) in case of Poland.
Note: Class 3, 4 and 5 cover 20% of the observations, the other classes 10% each.

The rural-urban divide is even more evident in Poland when we look at the number of medical doctors, as doctors are clustered in the biggest cities or counties with clinical hospitals (Figure 6). In 2018, three counties had 20 or less medical doctors per 100,000 inhabitants (powiat łomżyński in Podlaskie region, średzki in Lower Silesia and siedlecki in Mazovia), and in 30% of counties this number was below 100. Almost 10% of counties (all big cities and regional capitals) had at the same time 400 or more doctors per 100,000 inhabitants, two counties in South-East Poland – Lublin (Lubelskie region) and Rzeszów (Podkarpackie region) reported over 770 doctors. Thus, the striking feature of several regions in Poland is that besides a strong medical centre, there is a high number of municipalities around them with very low number of doctors. This is the case for example in Olsztyn in the north-east of Poland (region Warmia-Masuria) or Poznań in the west (Greater Poland region).

Since for Germany we only considered doctors working in outpatient clinics and excluded doctors working solely in hospitals and thus concentrated in major regional cities, the medical workforce seems spread out more equally (Figure 6) compared to the availability of hospital beds (Figure 5). However, in particular since in Germany the data covers a much lower proportion of medical doctors compared to Poland, even in the German counties with lowest statistics, the numbers of doctors are still much higher than in many rural areas throughout Poland.

Figure 6. Number of doctors per 100,000 inhabitants by county, 2018

A) in Germany: doctors working in outpatient clinics B) in Poland: doctors working directly with patients in primary workplace

Source: own compilation based on data from Federal Medical Registry (KBV) and Federal Agency for Cartography and Geodesy (BKG) in case of Germany and Central Statistical Office (GUS) and Head Office of Geodesy and Cartography (GUGiK) in case of Poland.
Note: Class 3, 4 and 5 cover 20% of the observations, the other classes 10% each.


The early evidence suggests that people over the age of 65 and those with pre-existing health conditions such as cardiovascular conditions, diabetes, hypertension, chronic pulmonary disease and cancer are at the highest risk of severe consequences of Covid-19. A well-equipped healthcare system is required to respond appropriately to increases in demand for healthcare in order to safeguard the population against the worst outcomes of the disease in potential future waves of the pandemic. This regards the issue of preventing Covid-19 related fatalities, but it also refers to the continued need to provide other general types of healthcare which are constantly required alongside the cases directly related to the pandemic.

Such a combination of health risks related to demographic, epidemiological and systemic factors results in potentially high regional variation of the scale of consequences of the spread of the Covid-19 pandemic. Using the example of Germany and Poland, two neighbouring countries which have generally dealt relatively well with the outbreak of Covid-19 in recent months, this policy paper shows that there is significant regional variation both in the distribution of health risks and healthcare resources. These regional inequalities should be considered regarding the consequences of future outbreaks of the virus. The regional analysis of the first wave of the pandemic – with data until 31 May 2020 – suggests that in both countries the virus spread mainly in ‘younger’ regions (with low proportions of people aged 65+) with lower incidence of the relevant comorbidities. At the same time the number of cases in the two countries was low enough so that both the German and the Polish healthcare systems, notwithstanding the differences between them, were not overwhelmed by the inflow of Covid-19 patients.

Such a situation is by and large not guaranteed in the case of future waves of the pandemic. The virus is likely to spread beyond the best connected and most mobile regional populations, which has been the case so far in Germany and Poland. With respect to the demographic structure of the population, the places most at risk for severe health consequences due to Covid-19 are the counties of the former East Germany and those in the east of Poland, where we observe an outstandingly large proportion of people aged 65+. Similarly – looking at the incidence of relevant comorbidities, the northern and southern counties clearly stand out in Poland, and in this respect the health of the German 65+ population presents a much lower risk compared to the health status of the Polish counterparts.

How these two critical risk factors translate into health outcomes in future waves of Covid-19 depends on the readiness of the local healthcare system to provide support to patients requiring in-hospital and intensive care. Using regional data on the number of beds and medical doctors we have shown that in both countries there is a significant variation in healthcare resources. This variation is particularly visible in Poland with a substantial urban-rural divide and high concentration of healthcare resources and staff in larger cities. A rapid spread of the disease in future months could be devastating in Polish rural areas with poor medical infrastructure and high proportions of the population at risk.

The differences between and within the countries regarding the healthcare infrastructure lead to two crucial conclusions with regard to the potential consequences of future waves of Covid-19. First of all, it is clear that the German healthcare system – with the better hospital infrastructure and higher number of doctors, is overall better prepared to face a surge in Covid-19 cases. Secondly, there is a much higher proportion of counties in Germany with high level of medical resources and few localities standing out with much lower levels of hospital capacity or doctors compared to those with the highest values. This is not the case in Poland where the majority of counties have very low capacities of both hospital beds and doctors. While such inequalities in medical resources may be of less concern in ‘normal times’ when individuals from areas with poorer infrastructure might find a place in their nearest relevant hospital, in the case of a sudden increase in demand for hospitalisations such local medical centres might rapidly become overwhelmed. Additionally, moving patients to distant hospitals would place significant additional demand on medical transportation. In cases of rapid increases in the numbers of infected people problems are also likely to occur at the level of the basic diagnosis before the patients are classified for hospitalisation.

As shown in this policy paper the variance in the demographic structure of the population as well as in the main causes of death at older ages between Germany and Poland and within each of the two countries is substantial. In many regions these underlying demographic and epidemiological factors overlap with relatively low general capacities of the healthcare system to deal with a sudden surge of hospitalisations (Kandel et al. 2020). Thus, the analysis presented in this policy paper points towards the need for a disaggregated regional level risk-management approach to future waves of the Covid-19 pandemic. Highly differentiated demographic and epidemiological risks related to the pandemic between as well as within Germany and Poland call for a decentralised evaluation of risks and point out the need to consider an application of regionally focused policy reactions such as lockdowns and social distancing regulations. If risks and the ability to respond to them vary significantly at the regional level, policies should consider and account for such variation to prepare for potential next outbreaks later this year or next year.


The authors wish to acknowledge the support of the German Science Foundation (DFG, project no: BR 38.6816-1) and the Polish National Science Centre (NCN, project no: 2018/31/G/HS4/01511) in the Beethoven Classic 3 funding scheme. We are grateful to Vera Birgel for research assistance.


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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.

The Political Economics of Long Run Development in Eastern Europe: Insights from the 2019 SITE Academic Conference

Roller coaster photographed from below symbolising Eastern Europe transition

Thirty years after the fall of communism, many assume that the economic transition of Eastern Europe and the former Soviet States towards a system of market economy is complete. But the region faces new challenges, of both economic and political kind, which renders a thorough understanding the past even more important. This policy brief is based on the scientific contributions presented at the 7th SITE Academic Conference held at the Stockholm School of Economics from December 16th to December 17th, 2019. Organized by the Stockholm Institute of Transition Economics (SITE), the conference brought together academics from all over Europe and the United States to share and discuss their research on economic and political development in Eastern Europe.

The Imperial and Soviet Periods

In the first section of the conference, papers with a focus on the long-term history of Eastern Europe and its implications for more recent events were presented. Marvin Suesse presented his research on how the Russian State Bank financed Tsarist Russia´s belated industrialization, a question that had been discussed by historians, but never thoroughly analyzed quantitatively. By geo-coding historical manufacturing censuses around the turn of the century and using distance between bank branches and factory location, the causal impact of the expansion of the State Bank is estimated, revealing large effects on firm revenues and productivity. These effects are largest in areas where alternative means of financing were least available and where human capital was more abundant.

Natalya Naumenko presented her findings on the economic consequences of the 1933 Soviet famine, which in terms of casualties was extremely devastating. She uses the meteorological conditions a year earlier as an instrumental variable and finds that the famine, which was mostly a rural phenomenon, had a persistent negative effect on the urban population while the rural population recovered relatively quickly.

Gerhard Toews discussed the long-term consequences on regional development of the displacement of an estimated 3 million “enemies of the people”, political prisoners typically belonging to the elite of the society, into the gulags in the early years of the Soviet Union. Using archival data, he has constructed a large database describing the gulag population in terms of the shares of “enemies” relative to other prisoners and taking into account their socio-economic characteristics i.e. the much higher levels of education of the former group. Exploiting variation within gulags, the results suggest that a historically higher density of “enemies” means higher economic prosperity today as measured by nightlight intensity.

Taking another angle, Christian Ochsner investigated the effects of the Red Army´s occupation on post-war Europe, using the demarcation line crossing the Austrian state of Styria as a natural experiment. His conclusion is that even the temporary occupation affected the region’s long-term development, the main channel being age-specific migration.

Finally, Andreas Stegman offered an analysis of the effects of the 1972 East German Extended Visitors Program. The program reduced travel restrictions for West German visitors traveling to certain districts of East Germany. Using a geographic regression discontinuity design comparing similar districts with and without the program, he shows that included districts indeed received much more visits from West Germany and that their citizens were more likely to protest against the Communist government and less likely to vote for the ruling party. This suggests that face-to-face interaction can influence beliefs and attitudes in non-democratic regimes, in turn influencing individual behavior and societal outcomes during transition.

Corruption, Conflict and Public Institutions

Another topic of the conference was the current role of corruption, conflict, electoral fraud and public sector effectiveness for the region. Scott Gehlbach presented his most recent research on the ownership patterns and strategies of Ukrainian oligarchs before and after the Orange revolution. By mapping oligarchs to changing political leadership, he shows how firm owners in Ukraine take actions to protect their property depending on their connections with the current government. He finds that obfuscation of ownership behind holding companies and complicated structures is a potentially valuable strategy in this environment in general but becomes particularly important when an oligarch loses direct connections to the ruling regime.

Likewise, Timothy Frye analyzed election subversion by employers in Russia, Argentina, Venezuela, Turkey and Nigeria. He finds that in Russia, public sector employers and especially state-owned firms are more likely to influence their employees’ decision to vote than private companies. Furthermore, work place mobilization by employers in Russia is clearly negatively associated with the freedom of the press. Election subversion is more likely to be successful when the degree of dependence of the employee is high and the employer’s potential threats are credible. Among Russian firm officials, the most frequently named motivations for them to practice election subversion are the desire to improve their relationship with the authority and the intention to help their party.

Michal Myck studied the impact of the transition experience on economic development around the Polish-German border. Polish communities close to the border were economically backward at the beginning of the transition but could potentially benefit from trade opportunities with an opening towards the West. Using similar methods to those of Stegman above, and nightlight intensity as a measure of economic activity as for instance Toews, Myck finds significant evidence for economic convergence both between Germany and Poland, and between Polish border regions and the rest of Poland.

Vasily Korovkin presented his research on the impact of the conflict in Eastern Ukraine on trade in non-conflict areas in Ukraine, hypothesizing that the conflict may cause a trade diversion away from Russia, particularly so in areas with many ethnic Ukrainians. Using variation in the share of the Russian speaking population at the county level as well as detailed firm level export and import data, he finds that the decrease in trade with Russia is negatively correlated with the share of the Russian speaking population. Potential mechanisms include a decline in trust at the firm level and changes in local attitudes including consumer boycotts.

Finally, Tetyana Tyshchuk analyzed the effects of a Ukrainian public sector reform on civil servants’ capacity and autonomy. The reform created public policy directorates parallel to the regular bureaucracy in 10 ministries. Members of the directorates were hired based on a different procedure and different merits relative to regular public servants and received significantly higher salaries.  Tyshchuk finds that the better paid civil servants indeed score higher on many, though not all, indicators of capacity and autonomy.

Information, Populism and Authoritarianism Today

The final important theme of the conference was the role of information and media, old and new, in today’s politics. In the event´s first keynote speech, Ruben Enikolopov analyzed the political effects of the Internet and social media whose low entry barriers and reliance on user-generated content make them decisively different from traditional media channels. On the one hand, this represents a chance for opposition leaders and whistleblowers to make their voice heard and may improve government accountability. On the other, these media may also become a platform for extremists. Enikolopov presented some of his work analyzing to what extent social media has contributed to fighting corruption in Russia. Using the timings of blog posts by the famous Russian opposition leader Alexei Navalny on corporate governance violations in state-owned companies, he shows that revelations resulted in an immediate drop in the price of the traded shares of the respective companies. He also finds evidence suggesting that Navalny´s blog posts resulted in management changes in these companies. In related papers, he exploits the spread of VKontakte (VK), the Russian version of Facebook, to better understand the influence of social networks on political activism, voting and the occurrence of hate crime. He finds that the spread of VK is indeed causally related to political protests, though not because it nurtures opposition to the government, but rather because it facilitates protest co-ordination. With respect to hate crime, he finds that social media only has an effect in areas where it falls on fertile grounds and where there already are high levels of nationalism. The tentative conclusion is that in Russia – as in Western countries – social media seems to have increased political polarization.

On a similar topic but taking a more theoretical approach, Galina Zudenkova investigated the link between information and communication technologies (ICT), regime contestation and censorship. In a game theoretical framework, where citizens use ICT both to learn about the  competency of the government and to coordinate protests, governments can use different tools to censor information to increase their chances of survival. Zudenkova finds that less competent regimes are more likely to censor coordination, whereas intermediate regimes are more likely to focus on censoring content. These theoretical predictions are then tested using country level data.

The targeted use of information has also played a key role in Putin’s Russia according to Daniel Treisman. In his keynote speech, he argued that while the 20th century dictatorships were mainly based on violence and ideology, the 21st century has been characterized by a sizeable shift towards what he calls “informational autocracy”. Constructing a dataset on the methods used by authoritarian regimes to maintain power between 1946 and 2015, he shows that the use of torture and violence peaked among those dictators who took power in the 1980s and has declined since. Furthermore, he highlights a remarkable shift from topics of violence towards topics of economic competency in dictators’ speeches. However, Treisman finds that by instrumentalizing information, dictators fool the public “but not the elite”. In democratic regimes, those with tertiary education tend to rate their political leaders higher than people without tertiary education. In the new informational authoritarian regime, the opposite seems to be the case. According to Treisman, this is because the “informed elite” has a better understanding of the political reality in places where the media is censored, Putin’s Russia being a good example. Treisman concluded that this new model of authoritarianism has become the prevalent model outside of Europe and today also has its advocates inside the European Union.

The conference ended with a final keynote speech by Sergei Guriev on the political economy of populism. Using existing definitions, he first confirmed that Europe has seen a rise in right-wing populism in the last 20 years. Secular trends, such as globalization and new communication technology, but also the recent global financial crisis, are driving factors behind the rise of populist parties. For instance, analyzing regional variation in voting patterns suggests that the Brexit vote was primarily driven by economic motives rather than by anti-immigrant sentiments. Ironically, though, most evidence suggests that populist governments have a below-average economic performance once in office, the US and Poland being notable exceptions. A key point of Guriev’s presentation was that populism seems to be a good method to obtain power, but, once in power, populists tend to be less successful in promoting citizen welfare. These findings seem to be of high importance given the increasing public support for populist parties around the world and in parts of Eastern Europe

The conference was very well received and on behalf of SITE, the authors would like to express their appreciation to all speakers and participants for sharing their knowledge and to Riksbankens Jubileumsfond for financial support. For those interested to learn more about the papers summarized very briefly above, please visit the conference website and the presenters’ websites as indicated in the text and here below.

Speakers at the Conference

Andreas Stegman, briq – Institute on Behavior and Inequality

Christian Ochsner, CERGE-EI and University of Zurich

Daniel Treisman, University of California, Los Angeles

Galina Zudenkova, TU Dortmund University

Gerhard Toews, New Economic School Moscow

Marvin Suesse, Trinity College

Michal Myck, CenEA

Natalya Naumenko, George Mason University

Ruben Enikolopov, New Economic School Moscow

Scott Gehlbach, University of Chicago

Sergei Guriev, Sciences Po Paris

Tetyana Tyshchuk, Kyiv School of Economics

Timothy Frye, Columbia University

Vasily Korovkin, CERGE-EI

How to Intensify and Diversify Ukrainian Exports? The Case of Bilateral Trade with Germany

20191021 How to Intensify and Diversify Ukrainian Exports FREE Network Policy Brief Image 00

This policy brief focuses on trade relations between Ukraine and Germany. In particular, it analyses bilateral trade in goods and examines the possibilities for increasing Ukrainian exports to Germany, in both the extensive and the intensive margins. The brief identifies prospective product groups for such increases and discusses potential obstacles to trade intensification. Finally, it provides recommendations for the further trade development.

German-Ukrainian Trade

Germany has recently become one of the most important trading partners for Ukraine. In 2018, Germany was fifth in terms of Ukrainian export destinations and third in terms of its import source countries.  While Ukraine, not surprisingly, is less important for German international trade (in 2018, Ukraine ranked 42nd in terms of Germany’s export and 45th in terms of its import), bilateral trade between Ukraine and Germany showed positive dynamics over the last five years.

Since Germany is a member of the European Union, its trade relations with Ukraine are regulated by legislation common for all EU member states. The EU’s political and economic cooperation with Ukraine is stipulated by the Association Agreement (AA). The AA is a comprehensive agreement provisioning the Deep and Comprehensive Free Trade Area (DCFTA) between Ukraine and the EU. While the provisional application of the AA began in the fall of 2014, the document fully entered into force on September 1, 2017. The abovementioned intensification of trade relations between Ukraine and Germany was to a significant extent driven by the signing of the DCFTA and a loss of a significant share of the Russian market.

The main Ukrainian exports to Germany include ignition wiring sets used in vehicles, aircraft and ships; low erucic acid, rape or colza seeds, iron ores agglomerated, maize, electrical switches etc. (see Table 1). Together, the top-15 product groups at a 6-digit level of the Harmonised System (HS) give 57% of the total exports from Ukraine to Germany.

Table 1. Top-15 Ukrainian product groups by export to Germany as of 2018

Source: UN Comtrade

This brief argues that both countries are likely to gain additional benefits from further intensifying bilateral trade relations. It summarizes the results of the research (Iavorskyi P. at al., 2019) on how to further expand and diversify Ukrainian exports to Germany, it identifies the prospective product groups and obstacles to their exports, and provides policy recommendations for trade development.

Promising Products

In order to find the most promising ways for increasing Ukrainian exports to Germany, this study employs a two-step approach. First, using a normalized revealed comparative advantage (NRCA) index (Run Yu et al, 2009) we distinguish goods, which Ukraine has world-wide comparative advantage in and Germany does not. A positive (negative) NRCA indicates that country’s actual share of a product in national exports is higher (lower) than the world average, – so that the country has a comparative advantage (disadvantage) in this commodity. According to this criterion, product groups with a negative NRCA for Germany and a positive NRCA for Ukraine were selected.

At the second stage, for the goods identified during the first step, a gravity model was estimated. A gravity model predicts bilateral trade flows based on the size of the economy and trade costs between them (such as distance, cultural differences, free trade agreements, tariffs, etc.). Being a general equilibrium model, it captures not only immediate impact of economic and political changes on trade between two countries, but also how it influences trade with other countries. A gap between current and potential export volumes predicted by the model is a potential for exports increase (which we refer to as undertrade).

The gravity model estimates the total undertrade between Ukraine and Germany at $ 500 million in 2016, or 35% of the total exports from Ukraine to Germany in the same year. Moreover, Ukraine has the potential to increase trade in both goods already exported to Germany as well as goods not yet supplied by Ukrainian companies to this market.

As for the structure of our findings, agricultural and mining commodities, as well as products of traditional Ukrainian export industries, such as metallurgy, are widely represented on the top of the undertraded commodity list. For example, more than a half of the estimated undertrade falls on primary food and primary industrial supplies, such as soybeans, barley, tomatoes, grain sorghum, iron ore, zirconium ores, etc. These categories already account for a large share of the current exports composition, and production in these sectors provides for a significant share of employment. Foreign currency inflow stipulated by exporting these products is also important for the Ukrainian economy.

At the same time, the undertrade in categories of final consumption, capital goods and transport is much lower. However, these product groups are important for exports diversification. These, for example, include liquid dielectric transformers, refrigerator cabinets, telescopes, tugs and pusher craft in capital goods, rail locomotives, railway cars, gas turbine engines in transport; automatic washing machines, electric space heaters, fans, coffeemakers, synthetic curtains, and leather apparel in consumer goods. Despite the complex regulation and relatively small amount of estimated undertrade, export diversification from primary to manufactured goods is important for overcoming export instability and long-term economic growth (Cadot at al. 2013), which is why promotion of trade in such areas is important.

Figure 1. Estimated undertrade according to broad economic categories

Source: Own calculations based on UN Comtrade data

Obstacles to Trade

Following the abolition or reduction of EU import duties between Ukraine and the EU under the DCFTA, tariffs do not significantly restrict exports of Ukrainian goods to the EU. Instead, technical regulations, sanitary and phytosanitary measures, geographical indications, licensing, etc. create significant barriers to bilateral trade. Thus, “non-tradability” can be explained, for instance, by the negative effects of various non-tariff barriers (both at European and national levels) or other factors, such as low competitiveness (in terms of price or quality) of Ukrainian goods compared to similar goods supplied by other countries, taste preferences of German consumers, peculiarities of importers’ associations, specific requirements of retailers, etc. Thus, harmonization of Ukrainian regulations with those of the European Union in accordance with the AA will help reduce customs barriers and existing divergences in regulations, and thus simplify the export of Ukrainian goods to the EU and Germany in particular.

Policy Recommendations

Based on the findings of the qualitative and quantitative research carried out, Ukrainian policy makers are advised to:

  • Timely and effectively align Ukrainian legislation, standards and practices with those of the EU, in line with the Action Plan and Commitments undertaken by Ukraine under the DCFTA within the framework of the AA with the EU, in particular in such areas as technical barriers to trade, sanitary and phytosanitary measures, customs, and protection of intellectual property rights.
  • Accelerate preparations for the signing of the ACAA (the Agreement on Conformity Assessment and Acceptance for Industrial Products) for the top three priority sectors of Ukrainian industry, which Ukrainian authorities agreed with European side, namely in the areas of low-voltage equipment, electromagnetic compatibility and machine safety, which will boost industrial technological exports to the EU and other countries.
  • Conduct government level negotiations with the EU and Germany regarding the removal of those barriers to the single market faced by the promising Ukrainian goods that will not be lifted as a result of harmonization of regulations with the European ones.
  • Take advantage of the Regional Pan-Euro-Mediterranean Preferential Rules of Origin Convention (the Pan-Euro-Med Convention), which establishes identical rules of origin for goods between its member-states under free trade agreements, and will facilitate the opening of new production facilities and involvement in regional and international value chains.
  • Provide information and consulting support to local manufacturers and exporters regarding the most promising destination markets, help them find partners on such markets, advise on the best ways to penetrate such markets by organizing trade missions, etc.

Another push to the German-Ukrainian trade promotion may arise from facilitating German FDIs to Ukraine. German entrepreneurs and investors are interested in localizing German production facilities in Ukraine and establishing joint German-Ukrainian enterprises, STIs, in particular in such areas as agriculture, light industry (including textiles), civil engineering, renewable energy, and circular economy (GTAI 2018a, 2018b, 2018c). This form of cooperation also boosts Ukrainian exports, since such enterprises often produce intermediate inputs for German production. In order to promote joint enterprises setup Ukraine should:

  • Establish effective mechanisms for protecting foreign investments, including export-oriented ones.
  • Ensure the rule of law and effective protection of property rights.
  • Create favorable macroeconomic conditions to ensure access to financing for both Ukrainian and foreign businesses.


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.

The Nordic Model of Prostitution Legislation: Health, Violence and Spillover Effects

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An emerging literature is studying, with the help of new types of data and clever identification strategies, the effects of different legislative measures regulating the market for sexual services. The primary target of such measures are arguably the participants in the market, prostitutes and their clients, and law and order concerns in their immediate vicinity. In a new research project, we mean to shift the spotlight on potential broader spillovers from these policies, both to other outcomes and other countries. In their presence, we cannot understand the full impact of a law change if we limit our analysis to the prostitution market in that country alone. We focus on a particular model of prostitution legislation, first adopted in Sweden in 1999 and known since as the Nordic model.

The Nordic model

The debate on prostitution legislation shares clear similarities with the standard arguments put forward for or against alcohol prohibition or drug liberalization. The criminalization of an activity is most likely shrinking the corresponding market, because it increases the cost of participation. It also functions as a signal of what a society deems acceptable or not, and coordinates behavior to potentially change social norms. At the same time, however, it pushes the remaining market into the darkness, where criminal activity potentially increases. In the specific case of the prostitution market, what is particularly feared is an increased risk of violence and general worsening of conditions for the potentially fewer sex workers.

When, in 1999, Sweden enacted the first asymmetric criminalization of prostitution, whereby buyers but not sellers of sexual services are punished, a third way between criminalization and legalization seemed to appear. This legislation would still give a clear signal on societal values, but at the same time protect the, in large part female and in large part exploited, sex workers. The model proved very successful in deterring street prostitution, and, under the catchy name of the “Nordic model”, has subsequently been adopted by Norway, Iceland, Canada, and France. It is currently under consideration in further countries as well.

This is where most reports and policy evaluations stop. In a new project at SITE, involving an international research cooperation, we propose to investigate the impacts of this legislation beyond the participants in the prostitution market. Specifically, we encompass other outcomes such as gender-based violence, health outcomes and online behavior, both within Sweden and other countries that implemented the reform, but also, most importantly, across their borders. The idea is that law changes in one country may also affect the demand and supply of prostitution in other countries, especially but not exclusively those bordering the country that enacts the law change. Two possible channels for such cross-border effects are sex tourism and human trafficking.

This brief summarizes the preliminary evidence we collected so far.


The focus on the role of policies is a recent but rapidly growing addition to the economic literature on prostitution. The risk of violence, both for the participants and within the neighboring geographic areas, is a natural area of concern for policy in relation to the sex market, and to criminal activities in general. To improve on cross-country comparisons and draw causal links from policies to outcomes, the most robust contributions in this area focus on natural experiments. Cunningham and Shah (2018) study an unintentional, and therefore unexpected and temporary, decriminalization of indoor prostitution in Rhode Island, and find that reported rape offences fall by 30%. Cunningham and coauthors (2019) also look at the geographic expansion of the erotic services section of Craigslist, a popular advertisements website, before online solicitation was banned in 2018. The possibility to use online platforms for their work, by allowing prostitutes to keep mostly indoors, and screen their potential clients to a larger extent, appears to have been very beneficial: the study finds lower female homicide rates by 10-17% when and where the service was available. Ciacci and Sviatschi (2018) find that the opening in a neighborhood of indoor prostitution establishments decreases sex crime by 7-13%, with no effect on other types of crime, arguing that the reduction is mostly driven by potential sex offenders resorting to the establishments, instead, to satisfy their needs. What is common to these studies is the finding that allowing the sex market to exist in some form is beneficial for outsiders, while indoor prostitution is safer for the sex workers themselves.

Preliminary findings from our project (Berlin et al., 2019 a) are consistent with this. We base our strategy on a comparison, within Sweden, between counties that are above or below average in terms of representation of women among police force and elected officials (we refer to them as treated and control counties, respectively). Both these indicators have been found in previous studies to drive greater reporting and lower incidence of crimes against women (Iyer et al., 2012; Miller and Segal, 2018). Looking at population-wide rates of violence against women in Sweden, we observe an increase in assaults committed by acquaintances indoors by about 10% and an increase in rapes indoors by more than 20% in treated as compared to control counties. Since the reform is argued to have eliminated street prostitution, and pushed the remaining sex trade indoors, violence against prostitutes will be counted in the indoor assaults statistic. However, in treated counties, where we observe the increase in violent crimes against women, we at the same time find fewer convictions for buying sex. We argue therefore that the increase in assaults we observe is not likely in the context of the sex market, but rather indicates increased violence against non-prostitutes from frustrated former customers, in other words a negative externality of deterring prostitution. In order to distinguish whether this increase is only in reported or actually committed crimes, we look at hospitalizations of women for injuries that are related to sexual interactions. If we think that seeking hospital care is less sensitive than reporting a violent man to the police, the series of hospitalizations should be closer to the true violence than the convictions. Although numbers are small and differences not significant, hospitalizations spike up in treated counties directly after the reform, as Figure 1 shows. All in all, our preliminary evidence from Sweden suggests that intimate partner violence and violence on women in general might have increased as a consequence of the “Nordic model”.

Figure 1. Hospitalizations of women

Source: Hospitalizations of women for injuries related to sex, from Berlin et al. (2019 a).

Other outcomes

Besides violence, health outcomes are also a policy relevant objective with the regulation of prostitution. Indicators such as the spread of sexually transmitted infections serve the double purpose of giving a rough indication of the changes in the size of the sexual market while at the same time enabling inference on the work environment and general living conditions for prostitutes. In a companion paper, which is underway, we examine these statistics for Sweden and Norway, in terms of within country changes but also with a mind to capture potential cross-border spillovers between the two countries.

Cross-border spillovers

In another working paper (Berlin et al., 2019 b) we study the reform enacted in France on April 13th, 2016, which removed the punishment for solicitation of prostitution (previously set to two months imprisonment plus a fine) and introduced instead a range of fines for the purchasing of sexual services, thereby, pushing the punishment to the side of the buyer. In order to study the cross-border effect of this change, we focus on the German Bundesländer bordering France: Baden-Württemberg, Saarland and Rheinland-Pfalz. The national law in Germany generally allows prostitution, but gives federal states the right to regulate it on a more detailed level. This generates variation at the level of the Gemeinde, the administrative division corresponding roughly to a municipality. The idea behind our analysis is to compare municipalities where prostitution is at least in part allowed with municipalities where it is banned (we refer to them as treated and control municipalities, respectively). Our preliminary results show that foreign tourism to cities where prostitution is at least partly legal increased after the reform more than to those completely overlapping with a Sperrbezirk, i.e. an area in which prostitution is banned. However, so does domestic tourism. This might be seen as a threat to our interpretation, since we can’t connect this increase directly to the French reform, unless we can show that there is a dynamic adjustment of the supply of sexual services, which also attracts domestic flows. We can’t isolate tourism from France in this data, so we go a step further by looking at online behavior.

Google searches

A key contribution of this project is to gather new data that haven’t been analyzed to date in the existing literature. In particular, we collected detailed data on Google searches originating in France using as keywords different German cities. The idea is to capture potential deviations of search trends over time driven by prostitute customers who after the legislative change find it more attractive to look for sexual services across the German border. Preliminary findings show that after the policy change there is a larger increase in search activity for cities closer to the French border relative to cities further away. While searches are generally downward trending over time, the trend is slowed after the French reform, and this effect is stronger the closer a city is to the border, although intermittently significant. Figure 2 reports the differential increase in searches (with 95% confidence intervals) as related to the distance from the border. The negative relationship between size of the impact and distance to the border is consistent when controlling for city and time fixed effects. However, further analysis is needed in order to validate the results and control for confounding factors.

Figure 2. Google searches for German cities before and after the French reform

Source: Google Search data on searches originating in France for cities closer to VS farther from the German border than the indicated distance (in km).

We are currently repeating the same exercise at the French borders with Belgium and Spain, with searches originating in Norway around the time of the Norwegian reform (2009), and at the US-Canada border around the time of the Canadian reform (2014).


When adopting a version of the Nordic model in 2014, the Canadian Department of Justice stated that the “overall objectives [of the reform] are to:

  • Protect those who sell their own sexual services;
  • Protect communities, and especially children, from the harms caused by prostitution; and
  • Reduce the demand for prostitution and its incidence.”

Research seems to show that restrictions on the sexual services market, rather than the sex trade itself, have substantial negative impacts on communities and sex workers. Nevertheless, it is understandable that legislators in many countries, sharing similar concerns and expectations as expressed by the Canadian DoJ, find it unattractive to legalize prostitution. What our project points to, then, is that when considering various forms of criminalization, it is crucial to understand how best to pursue each of these objectives. Taking into account side-effects, or spillovers, such as the ones we highlight above, might reveal the need for complementary policies, in order to avoid unexpected and counterproductive consequences.


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.