On October 13th, 2023, the Stockholm Institute of Transition Economics (SITE) and the Forum for Research on Media and Democracy in Eastern Europe (FROMDEE) hosted an academic conference on “Democratic Backsliding and Electoral Autocracies”. This brief provides a short summary of the keynote lecture and research presentations featured at the conference.
The most recent report by the V-Dem Institute concludes that “72 percent of the world’s population […] live in autocracies by 2022” and “the level of democracy enjoyed by the average global citizen in 2022 is down to 1986 levels” (V-Dem Institute, 2023). In Europe, these declines have manifested in the previous Polish government undermining judicial independence, in tightened political repression in Belarus, and most prominently in Putin’s invasion of Ukraine. But the rise of electoral autocracies and democratic backsliding are not confined to Europe – their strategies of propaganda, corruption, electoral manipulation, as well as attacks on judicial and media independence are a global phenomenon. The October 13th FROMDEE Conference gathered researchers from economics, law and political science to bring insight into why and where reversals are taking place, and what measures are needed to reverse the negative trend. This policy brief provides an overview of the research shared at the conference.
Populism and Autocracy – the Case of Russia
In the keynote lecture, Arturas Rozenas (New York University) focused on the roots of populism, challenging the common view of illiberal democracies as a mix between democracies and dictatorships. Rather, dictatorships evolve into populist dictatorships that then take one of two paths: either the path to democracy, or the path towards electoral autocracy, illiberal democracy, or totalitarianism. In this framework, populist dictatorships have historically made use of populist elements we recognize from modern times, i.e., democratic-seeming institutions misused for the ruler’s purposes.
In a populist dictatorship, Rozenas continued, there is a monopoly of power. Institutions such as elections and parliamentary representation, serve not to allocate power but to legitimise it. The transition from passive to active dictatorships coincided with a move away from the common notion of a king or similar leader deriving rightful power from God to rule the masses, to a reality built on the idea that the ruler’s legitimacy stems from the masses. This historic transformation should however not be interpreted as a transition to democracy. In fact, Rozenas showed that for most of recent history, the majority of elections and expansions of suffrage took place in dictatorships rather than in democracies. These seemingly populist institutions serve not only to legitimise governments, but also to coopt the population in a public display of the ruler’s strength. Rozenas argued, that in an active populist dictatorship, the ruler creates a setting which suppresses dissent and expectations of dissent, through institutionalised expressions of support (in the form of political participation, elections, large rallies etc.).
Turning to the Russian setting, the first thing to notice is the deep tradition of autocracy – from tsarism to Stalinism. In Russia, the words “society” and “the people” briefly blossomed during past revolutions or uprisings but have largely been absent in the Russian language and are once again on the decline under the rule of Putin. Further, the Russian population has time and again been exploited by its rulers during succession crises for displays of power and dominance. Examples of this are the mandatory elections held under Stalin two weeks after the invasion of the Baltic States in 1939 and more recently under Putin in the occupied territories of Luhansk and Donetsk in Ukraine in 2021. Such populist autocratic strategies are nothing new in Russia, concluded Rozenas – rather they derive from the internal logic of dictatorship that has played out throughout Russian history.
Continuing the notion of the “absent” Russian society, Olha Zadorozhna (Kozminski University) began her presentation by explaining that protests are infrequent in Russia and have surprisingly few attendees given the country’s large population. While there were mass protests in the run-up to the collapse of communism in the 1980’s and protests took place against corruption in 2017-2018, and in relation to the arrest of Alexey Navalny in 2021, protests in Russia are typically not motivated by an overarching ideology or broader political questions. Rallies in favor of authoritarianism and ethno-nationalism are a more common occurrence. Moreover, there are few indications that the invasion of Ukraine, sanctions and subsequent economic downturn have negatively affected the Russian population’s support for the regime. Still, literature has shown that war-related deaths can mobilize opposition against war participation (e.g., the U.S. participation in the Vietnam War). Considering this, Zadorozhna evaluates whether the deaths of Russian soldiers provoke a reaction among the Russian population. By combining social media data on fallen soldiers with protest activity for the first four months of the Russian invasion in 2022, the study find that casualties lead to an increase in protest activity, indicating that deaths can in fact mobilize public opposition in Russia.
Other populist strategies to ensure support for Putin in Russia relate to political participation and the judiciary. Nicholas James (University of Oxford) analysed electoral rule changes in the Russian Duma – from mixed member majoritarianism to proportional representation (PR) – by measuring their effect on floor participation. Applying a difference-in-differences framework, James found that deputies experiencing a change from PR included less words in their speeches following the switch (about 15-20 percent of an average speech). This effect should be understood in the political context of the ruling party’s (United Russia) increased influence during this time period (2010s). In fact, James concluded, the results point in the direction of the regime tampering with the Duma in an impromptu and reactionary manner with the overall goal of obtaining closer control and the appearance of support for the regime.
Yulia Khalikova’s (University of Hamburg) presentation gave further insight into how ostensibly democratic institutions can be exploited to make an authoritarian regime appear legitimate. In her work, Khalikova considers judicial references to international law that may be employed strategically, without necessarily adhering to the spirit or content of the law. Looking specifically at international law citations in 601 judgements made in the Russian Constitutional Court (RCC) between 2000 and 2021, Khalikova find evidence that the RCC has increasingly cited international courts when making judgements on topics related to politics and physical rights, indicating that state policy influences citation patterns. The change in citation patterns also points to the RCC currently using international law to support the regime and uphold its legitimacy, meaning that international law – adopted with the ambition of enhancing democratic values and ensuring human rights – is misused for undemocratic and repressive purposes.
Censorship and Propaganda
Information control is an important feature of autocratic regimes. Philine Widmer (ETH Zurich) considers the Chinese setting – where the regime controls the amount of foreign information available on the internet via a countrywide firewall. Research has shown that autocracies make use of censorship strategies to control their citizens, but these are associated with high reputational costs and can be overcome by tech-savvy citizens. Using a machine learning algorithm, Widmer first predicts a newspaper article’s alignment with the Chinese regime before comparing the placement of more/less aligned articles on news websites. Her results show that front-page news stories in Chinese newspapers are more aligned with the regime’s stance than other content. Front-page placement in turn matters for information uptake. Widmer ended the presentation by comparing the additional cost of finding less aligned articles to the technological costs required to access outside media (e.g. VPNs). For an autocracy to achieve its information control objectives, independent news may just need to be relatively harder to access. It does not need to make it impossible to access for all citizens.
Censorship is typically accompanied by, and complementary with, propaganda. Restricting other narratives allows autocratic regimes to spread their own. While propaganda is a common feature within autocracies, Jaakko Meriläinen’s (Stockholm School of Economics) presentation evaluated the effect of autocratic propaganda in a democratic setting.
Meriläinen’s study focuses on a rogue experiment in which some Finnish children in the 1970’s were taught history and social sciences using material from the Soviet Union – material which was in essence Soviet propaganda. By exploiting geographical and cohort variation, Meriläinen use a difference-in-differences approach to compare the 213 exposed children to children taught the regular Finnish curriculum. The long-term outcomes show that exposed children had lower incomes in adulthood, worked fewer months per year and were engaged in more left-leaning and publicly beneficial occupations (such as, nurses and firefighters).
Information and Accountability
The use of technological innovations to access otherwise restricted information was central to Arieda Muço’s (Central European University) presentation. She studies the spread of the Xerox photocopying machine in communist Hungary in the 1980’s – a setting characterised by limited freedom of speech and restrictions on the media. She reported that areas with early placement of Xerox machines are found to exhibit higher shares of pro-democratic voting. Muço ascribes these outcomes to the fact that the machines allowed for the spread of information and eased coordination of the opposition, suggesting that new technologies and information can act as key facilitators in the fall of autocratic regimes.
Providing citizens with information was also a key feature in Enrique Seira Bejarano’s (Michigan State University) presentation. He began by discussing two potentially related trends: in Latin America recent years have seen (i) increased levels of corruption and (ii) increased dissatisfaction with democracy among citizens. The number of corruption-related news articles have increased threefold in Spanish and doubled in English and the share of people perceiving corruption to be the greatest challenge to their country has doubled in the last decade. The study uses two empirical strategies to identify the effect of corruption on democratic values. Firstly, Seira Bejarano described an observational study, in which data on major corruption scandals were combined with Latinobarometer data on support for democracy. The authors find that corruption scandals increase corruption perceptions while decreasing stated support for democracy. Secondly, Seira Bejarano reported the results of a randomized controlled trial in which some respondents were shown videos of a politician accepting bribes. This had a negative effect on preferences for democracy and on trust more broadly. Both studies show that revelations of corruptions decrease the support for democracy, suggesting a potential tradeoff between the public’s belief in democratic institutions and increased transparency which is important for accountability but can also expose corruption.
Yet another threat to democracy is the rise of right-wing populism – currently a reality in many well-established democracies across Europe. In Germany, the far-right party Alternative für Deutschland (AfD) enjoys around 21 percent of voters’ support according to recent polls. To understand their rise in popularity, Navid Sabet (Goethe University Frankfurt) builds on previous literature on cultural conflict as a driver for right-wing party support. The paper he presented examines the role of violent conflict in the form of terrorist acts. It evaluates whether acts of terror can alter the political landscape and shift support to the far-right. To avoid selection problems, the authors compare successful terror attacks to attacks that failed. Sabet reported that successful small-scale attacks (predominantly targeting migrants) increase AfD’s vote share by about 6 percentage points in state elections (in the time period 2013-2021). The acts of terror were found to increase voter turnout, by mobilizing otherwise idle voters, but also by gaining votes at the cost of other parties. Exploring the mechanisms behind these results, the authors study the language used by political parties and the way successful attacks were covered in the media. Relative to coverage of unsuccessful attacks, media coverage used a more negative tone, more words related to Islam and terror and fewer words related to right-wing populism. This suggests that media plays an important role in shaping the public’s response to acts of terror and that far right parties are able to exploit this dynamic.
The 2023 FROMDEE Conference brought together academics from different fields to shed light on some of the main challenges to democracy today. In part, the research presented supported the prevailing narrative that democracies are backsliding in many parts of the world. However, by analysing how autocracies and populist leaders operate, the presenters also highlighted the vulnerability of dictatorships.
Arturas Rozenas cited the example of a rally in Bucharest in 1989, which was organised to display support for Ceauşescu’s regime and descended into an anti-government protest. Dictatorships can benefit by coopting the populist elements of democracy but, in doing so, they risk creating a vehicle for genuine democratic expression.
The audience learned about autocracies’ efforts to control the flow of information but also about citizens’ ability to circumvent restrictions whether in 1980s Hungary or present-day China. Several presentations focused on the extent of autocratic control in Russia but even in this setting, the death of soldiers in Ukraine motivates citizens to participate in protests.
Recent trends suggest that democratic institutions should not be taken for granted in any country. Societies can become more resilient to the threat of democratic backsliding, in part by better understanding how both democracies and autocracies operate and what makes them vulnerable. Researchers around the world are using innovative methods to expand our knowledge in this area, as reflected in the presentations at the 2023 FROMDEE Conference.
- V-Dem Institute. (2023). Defiance in the Face of Autocratization. Democracy Report 2023. University of Gothenburg. Varieties of Democracy Institute (V-Dem Institute). https://www.v-dem.net/publications/democracy-reports/
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.
Over the last two years, the world has experienced a global energy crisis, with surging oil, coal, and natural gas prices. For European households, this translates into higher gasoline and diesel prices at the pump as well as increased electricity and heating costs. The increase in energy related costs began in 2021, as the world economy struggled with supply chain disruptions caused by the Covid-19 pandemic, and intensified as Russia launched a full-scale invasion of Ukraine in late February 2022. In response, European governments have implemented a variety of energy tax cuts (Sgaravatti et al., 2023), with a particular focus on reducing the consumer cost of transport fuel. This policy paper aims to contextualize current transport fuel prices in Europe by addressing two related questions: Are households today paying more for gasoline and diesel than in the past? And should policymakers respond by changing transport fuel tax rates? The analysis will focus on case studies from Sweden, Georgia, and Latvia, countries that vary in economic development, energy independence, reliance on Russian oil, transport infrastructure, and transport fuel tax rates. Through this study, we aim to paint a nuanced picture of the implications of rising fuel prices on household budgets and provide policy guidance.
Record High Gasoline Prices, Historically Cheap to Drive
Sweden has a long history of using excise taxes on transport fuel as a means to raise revenue for the government and to correct for environmental externalities. As early as in 1924, Sweden introduced an energy tax on gasoline. Later, in 1991, this tax was complemented by a carbon tax levied on the carbon content of transport fuels. On top of this, Sweden extended the coverage of its value-added tax (VAT) to include transport fuels in 1990. The VAT rate of 25 percent is applied to all components of the consumer price of gasoline: the production cost, producer margin, and excise taxes (energy and carbon taxes).
In May 2022, the Swedish government reduced the tax rate on transport fuels by 1.80 SEK per liter (0.16 EUR). This reduction was unprecedented. Since 1960, there have only been three instances of nominal tax rate reductions on gasoline in Sweden, each by marginal amounts in the range of 0.04 to 0.22 SEK per liter. Prior to the tax cut, the combined rate of the energy and carbon tax was 6.82 SEK per liter of gasoline. Adding the VAT that is applied on these taxes, amounting to 1.71 SEK, yields a total excise tax component of 8.53 SEK. This amount is fixed in the short run and does not vary with oil price changes.
Figure 1. Gasoline Pump Price, 2000-2023.
Source: Drivkraft Sverige (2023).
Figure 1 shows the monthly average real price of gasoline in Sweden from January 2000 to October 2023. The price has slowly increased over the last 20 years and has been historically high in the last year and a half. Going back even further, the price is higher today than at any point since 1960. Swedish households have thus lately been paying more for one liter of gasoline than ever before.
However, a narrow focus on the price at the pump does not take into consideration other factors that affect the cost of personal transportation for households.
First, the average fuel efficiency of the vehicle fleet has improved over time. New vehicles sold in Sweden today can drive 50 percent further on one liter of gasoline compared to new vehicles sold in 2000. Arguably, what consumers care about the most is not the cost of gasoline per se but the cost of driving a certain distance, as the utility one derives from a car is the distance one can travel. Accounting for vehicles’ fuel efficiency improvement over time, we find that even though it is still comparatively expensive to drive today, the current price level no longer constitutes a historical peak. In fact, the cost of driving 100 km was as high, or higher, in the 2000-2008 period (see Figure 2).
Figure 2. Gasoline Expenditure per 100 km.
Source: Trafikverket (2023) and Drivkraft Sverige (2023).
Second, any discussion of the cost of personal transportation for households should also factor in changes in household income over time. The Swedish average real hourly wage has increased by more than thirty percent between 2000-2023. As such, the cost of driving 100 km, measured as a share of household income, has steadily declined over time. Further, this pattern is consistent across the income distribution; for instance, the cost trajectory for the bottom decile is similar to that of all wage earners (as illustrated in Figure 3). In 1991, when the carbon tax was implemented, the average household had to spend around two thirds of an hour’s wage to drive 100 km. By 2020, that same household only had to spend one third of an hour’s wage to drive the same distance. There has been an increase in the cost of driving over the last two years, but in relation to income, it is still cheaper today to drive a certain distance compared to any year before 2013.
Figure 3. Cost of Driving as a Share of Income, 1991-2023.
Source: Statistics Sweden (2023).
Taken all together, we see that on the expenditure side, vehicles use fuel more efficiently over time and on the income side, households earn higher wages. Based on this, we can conclude that the cost of travelling a certain distance by car is not historically high today.
Response From Policymakers
It is, however, of little comfort for households to know that it was more expensive to drive their car – as a share of income – 10 or 20 years ago. We argue that what ultimately matters for households is the short run change in cost, and the speed of this change. If the cost rises too fast, households cannot adjust their expenditure pattern quickly enough and thus feel that the price increase is unaffordable. In fact, the change in the gasoline price at the pump has been unusually rapid over the last two years. Since the beginning of 2021, until the peak in June 2022, the (nominal) pump price rose by around 60 percent.
So, should policymakers respond to the rapid price increase by lowering gasoline taxes? The perhaps surprising answer is that lowering existing gasoline tax rates would be counter-productive in the medium and long run. Since excise taxes are fixed and do not vary with the oil price, they reduce the volatility of the pump price by cushioning fluctuations in the market price of crude oil. The total excise tax component including VAT constitutes more than half of the pump price in Sweden, a level that is similar across most European countries. This stands in stark contrast with the US, where excise taxes make up around 15 percent of the consumer price of gasoline. As a consequence, a doubling of the price of crude oil only increases the consumer price of gasoline in Sweden by around 35 percent, while it increases by about 80 percent in the US. Households across Sweden, Europe, and the US have adapted to the different levels of gasoline tax rates by purchasing vehicles with different levels of fuel efficiency. New light-duty vehicles sold in Europe are on average 45 percent more fuel-efficient compared to the same vehicle category sold in the US (IEA 2021). As such, US households do not necessarily benefit from lower gasoline taxation in terms of household expenditure on transport fuel. They are also more vulnerable to rapid increases in the price of crude oil. Having high gasoline tax rates thus reduces – rather than increases – the short run welfare impact on households. Hence, policymakers should resist the temptation to lower gasoline tax rates during the current energy crisis. With imposed tax cuts, households will, in the medium and long run, buy vehicles with higher fuel consumption and thus become more exposed to price surges in the future – again compelling policymakers to adjust tax rates, creating a downward spiral. Instead, alternative measures should be considered to alleviate the effects of the heavy price pressure on low-income households – for instance, revenue recycling of the carbon tax revenue and increased subsidies of public transport.
To reach environmental and climate goals, Sweden urgently needs to phase out the use of fossil fuels in the transport sector – Sweden’s largest source of carbon dioxide emissions. This is exactly what a gradual increase of the tax rate on gasoline and diesel would achieve. At the same time, it would benefit consumers by shielding them from the adverse effects of future oil price volatility.
The most common response from policymakers regarding fuel tax rates however goes in the opposite direction. In Sweden, the excise tax on gasoline and diesel was reduced by 1.80 SEK per liter in 2022 and the current government plans to further reduce the price by easing the biofuel mandate. Similar tax cuts have been implemented in a range of European countries. Therefore, the distinguishing factor in the current situation lies in the exceptional responses from policymakers, rather than in the gasoline costs that households are encountering.
Gasoline Price Swings and Their Consequences for Georgian Consumers
The energy crisis that begun in 2021 has also made its mark on Georgia, where the operational expenses of personal vehicles, encompassing not only gasoline costs but also maintenance expenses, account for more than 8 percent of the consumer price index. The rise in gasoline prices sparked public protest and certain opposition parties proposed an excise tax cut to mitigate the gasoline price surge. In Georgia, gasoline taxes include excise taxes and VAT. Until January 1, 2017, the excise tax was 250 GEL per ton (9 cents/liter), it has since increased to 500 GEL (18 cents/liter). Despite protests and the suggested excise tax reduction, the Georgian government chose not to implement any tax cuts. Instead, it initiated consultations with major oil importers to explore potential avenues for reducing the overall prices. Following this, the Georgian National Competition Agency (GNCA) launched an inquiry into the fuel market for motor vehicles, concluding a manipulation of retail prices for gasoline existed (Georgian National Competition Agency, 2023).
The objective of this part of the policy paper is to address two interconnected questions. Firstly, are Georgian households affected by gasoline price increases? And secondly, if they are, is there a need for government intervention to mitigate the negative impact on household budgets caused by the rise in gasoline prices?
The Gasoline Market in Georgia
Georgia’s heavy reliance on gasoline imports is a notable aspect of the country’s energy landscape. The country satisfies 100 percent of its gasoline needs with imports and 99 percent of the fuel imported is earmarked for the road vehicle transport sector. Although Georgia sources its gasoline from a diverse group of countries, with nearly twenty nations contributing to its annual gasoline imports, the supply predominantly originates from a select few markets: Bulgaria, Romania, and Russia. In the last decade, these markets have almost yearly accounted for over 80 percent of Georgia’s total gasoline imports. Furthermore, Russia’s share has substantially increased in recent years, amounting to almost 75 percent of all gasoline imports in 2023. The primary reason behind Russia’s increased dominance in Georgia’s gasoline imports is the competitive pricing of Russian gasoline, which between January and August in 2023 was almost 50 percent cheaper than Bulgarian gasoline and 35 percent cheaper than Romanian gasoline (National Statistics Office of Georgia, 2023). Given the dominance of Russian gasoline in Georgia, the end-user (retail) prices of gasoline in Georgia, are closer to gasoline prices in Russia than EU gasoline prices (see Figure 1).
Figure 1. End-user Gasoline Prices in Georgia, Russia and the EU, 2013-2022.
Source: International Energy Agency, 2023.
However, while the gasoline prices increased steadily in 2020-2022 in Russia, gasoline prices in Georgia increased sharply in the same period. This more closely replicated the EU price dynamics rather than the Russian one. The sharp price increase in gasoline raised concerns from the Georgian National Competition Agency (GNCA). According to the GNCA one possible reason behind the sharp increase in gasoline prices in Georgia could be anti-competitive behaviour among the five major companies within the gasoline market. Accordingly, the GNCA investigated the behaviour of major market players during the first eight months of 2022, finding violations of the Competition Law of Georgia. Although the companies had imported and were offering consumers different and significantly cheaper transport fuels compared to fuels of European origin, their retail pricing policies were identical and the differences in product costs were not properly reflected in the retail price level. GNCA claims the market players coordinated their actions, which could have led to increased gasoline prices in Georgia (National Competition Agency of Georgia. (2023).
Given that increased gasoline prices might lead to increased household expenditures for fuel, it is important to assess the potential impact of recent price developments on household’s budgets.
Exploring Gasoline Price Impacts
Using data from the Georgian Households Incomes and Expenditures Survey (National Statistics Office of Georgia, 2023), weekly household expenditures on gasoline and corresponding weekly incomes were computed. To evaluate the potential impact of rising gasoline prices on households, the ratio of household expenditures on gasoline to household income was used. The ratios were calculated for all households, grouped in three income groups (the bottom 10 percent, the top 10 percent and those in between), over the past decade (see Figure 2).
Figure 2. Expenditure on Gasoline as Share of Income for Different Income Groups in Georgia, 2013-2022.
Source: National Statistics Office of Georgia, 2023.
Figure 2 shows that between 2013 and 2022, average households allocated 9-14 percent of their weekly income to gasoline purchases. There is no discernible increase in the ratio following the energy crisis in 2021-2022.
Considering the different income groups, the upper 10 percent income group experienced a slightly greater impact from the recent rise in gasoline prices (the ratio increased), compared to the overall population. For the lower income group, which experienced a rise in the proportion of fuel costs relative to total income from 2016 to 2021, the rate declined between 2021 and 2022. Despite the decline in the ratio for the lower-level income group, it is noteworthy that the share of gasoline expenditure in the household budget has consistently been high throughout the decade, compared to the overall population and the higher-level income group.
The slightly greater impact from the rise in gasoline prices for the upper 10 percent income group is driven by a 4 percent increase in nominal disposable income, paired with an 8 percent decline in the quantity of gasoline (Figure 3) in response to the 22 percent gasoline price increase. Clearly, for this income group, the increase in disposable income was not enough to offset the increase in the price of gasoline, increasing the ratio as indicated above.
For the lower 10 percent income group, there was a 23 percent increase in nominal disposable income, paired with a 9 percent decline in the quantity of purchased gasoline (Figure 3) in response to the 22 percent gasoline price increase . Thus, for this group, the increase in disposable income weakened the potential negative impact of increased prices, eventually lowering the ratio.
Figure 3. Average Gasoline Quantities Purchased, by Household Groups, per Week (In Liters) 2013-2022.
Source: National Statistics Office of Georgia, 2023.
The Georgian energy market is currently fully dependent on imports, predominantly from Russia. While sharp increases in petrol prices have been observed during the last 2-3 years, they do not seem to have significantly impacted Georgian households’ demand for gasoline. Noteworthy, the lack of impact from gasoline price increases on Georgian households’ budgets, as seen in the calculated ratio (depicted in Figure 2), can be explained by the significant rise in Georgia’s imports from the cheap Russian market during the energy crisis years. Additionally, according to the Household Incomes and Expenditures survey, there was in 2022 an annual increase in disposable income for households that purchased gasoline. However, the data also show that low-income households spend a high proportion of their income on gasoline.
Although increased prices did not significantly affect Georgian households, the extremely high import dependency and the lack of import markets diversification poses a threat to Georgia’s energy security and general economic stability. Economic dependency on Russia is dangerous as Russia traditionally uses economic relations as a lever for putting political pressure on independent economies. Therefore, expanding trade and deepening economic ties with Russia should be seen as risky. Additionally, the Russian economy has, due to war and sanctions, already contracted by 2.1 percent in 2022 and further declines are expected (Commersant, 2023).
Prioritizing actions such as diversifying the import market to find relatively cheap suppliers (other than Russia), closely monitoring the domestic market to ensure that competition law is not violated and market players do not abuse their power, and embracing green, energy-efficient technologies can positively affect Georgia’s energy security and positively impact sustainable development more broadly.
Fueling Concerns: The True Cost of Transportation in Latvia
In May 2020, as the Latvian Covid-19 crisis began, Latvia’s gasoline price was 0.99 EUR per liter. By June 2022, amid the economic effects from Russia’s war on Ukraine, the price had soared to a record high 2.09 EUR per liter, sparking public and political debate on the fairness of fuel prices and potential policy actions.
While gas station prices are salient, there are several other more hidden factors that affect the real cost of transportation in Latvia. This part of the policy paper sheds light on such costs by looking at some of its key indicators. First, we consider the historical price of transport fuel in Latvia. Second, we consider the cost of fuel in relationship to average wages and the fuel type composition of the vehicle fleet in Latvia.
The Price of Fuel in Latvia
Latvia’s nominal retail prices for gasoline (green line) and diesel (orange line) largely mirror each other, though gasoline prices are slightly higher, in part due to a higher excise duty (see Figure 1). These local fuel prices closely follow the international oil market prices, as illustrated by the grey line representing nominal Brent oil prices per barrel.
The excise duty rate has been relatively stable in the past, demonstrating that it has not been a major factor in fuel price swings. A potential reduction to the EU required minimum excise duty level will likely have a limited effect on retail prices. Back of the envelope calculations show that lowering the diesel excise duty from the current 0.414 EUR per liter to EU’s minimum requirement of 0.33 EUR per liter could result in approximately a 5 percent drop in retail prices (currently, 1.71 EUR per liter). This at the cost of a budget income reduction of 0.6 percent, arguably a costly policy choice.
In response to recent years’ price increase, the Latvian government opted to temporarily relax environmental restrictions, making the addition of a bio component to diesel and gasoline (0.065 and 0.095 liters per 1 liter respectively) non-mandatory for fuel retailers between 1st of June 2022 until the end of 2023. The expectation was that this measure would lead to a reduction in retail prices by approximately 10 eurocents. To this date, we are unaware of any publicly available statistical analysis that verifies whether the relaxed restriction have had the anticipated effect.
Figure 1. Nominal Retail Fuel Prices and Excise Duties for Gasoline and Diesel in Latvia (in EUR/Liter), and Nominal Brent Crude Oil Prices (in EUR/Barrel), January 2005 to August 2023.
The True Cost of Transportation
Comparing fuel retail prices to average net monthly earnings gives insight about the true cost of transportation in terms of purchasing power. Figure 2 displays the nominal net monthly average wage in Latvia from January 2005 to June 2023 (grey line). During this time period the average worker saw a five-fold nominal wage increase, from 228 EUR to 1128 EUR monthly. The real growth was two-fold, i.e., the inflation adjusted June 2023 wage, in 2005 prices, was 525 EUR.
Considering fuel’s share of the wages; one liter of gasoline amounted to 0.3 percent of an average monthly wage in 2005, as compared to 0.12 percent in 2023, with diesel displaying a similar pattern. Thus, despite recent years’ fuel price increase, the two-fold increase in purchasing power during the same time period implies that current fuel prices may not be as alarming for Latvian households as they initially appeared to be.
Figure 2. Average Nominal Monthly Net Wages in Latvia and Nominal Prices of One Liter of Gasoline and Diesel as Shares of Such Wages (in EUR), January 2005 to June 2023.
Another factor to consider is the impact of technological advancements on fuel efficiency over time. The idea is simple: due to technological improvements to combustion engines, the amount of fuel required to drive 100 kilometers has decreased over time, which translates to a lower cost for traveling additional kilometers today. An EU average indicator shows that the fuel efficiency of newly sold cars improved from 7 liters to 6 liters per 100 km, respectively, in 2005 and 2019. While we lack precise data on the average fuel efficiency of all private vehicles in Latvia, we can make an informed argument in relation to the technological advancement claim by examining proxy indicators such as the type of fuel used and the average age of vehicles.
Figure 3 shows a notable change in the fuel type composition of the vehicle fleet in Latvia. Note that the decrease in the number of cars in 2011 is mainly due to a statistical correction for unused cars. At the start of the 21st century, 92 percent of Latvian vehicles were gasoline-powered and 8 percent were diesel-powered. By 2023, these proportions had shifted to 28 percent for gasoline and 68 percent for diesel. Diesel engines are more fuel efficient, usually consuming 20-35 percent less fuel than gasoline engines when travelling the same distance. Although diesel engines are generally pricier than their gasoline counterparts, they offer a cost advantage for every kilometer driven, easing the impact of rising fuel prices. A notable drawback of diesel engines however, is their lower environmental efficiency – highlighted following the 2015 emission scandal. In part due to the scandal, the diesel vehicles growth rate have dropped over the past five years in Latvia.
Figure 3. Number of Private Vehicles by Fuel Type and the Average Age of Private Vehicles in Latvia, 2001 to 2023.
Figure 3 also shows that Latvia’s average vehicle age increased from 14 years in 2011 to 15.1 years in 2023. This is similar to the overall EU trend, although EU cars are around 12 years old, on average. This means that, in Latvia, the average car in 2011 and 2023 were manufactured in 1997 and 2008, respectively. One would expect that engines from 2008 have better technical characteristics compared to those from 1997. Recent economic research show that prior to 2005, improvements in fuel efficiency for new cars sold in the EU was largely counterbalanced by increased engine power, enhanced consumer amenities and improved acceleration performance (Hu and Chen, 2016). I.e., cars became heavier, larger, and more powerful, leading to higher fuel consumption. However, after 2005, cars’ net fuel efficiency started to improve. As sold cars in Latvia are typically 10-12 year old vehicles from Western European countries, Latvia will gradually absorb a more fuel-efficient vehicle fleet.
The increase of purchasing power, a shift to more efficient fuel types and improvements in engine efficiency have all contributed to a reduction of the overall real cost of transportation over time in Latvia. The recent rise in fuel prices to historically high levels is thus less concerning than it initially appears. Moreover, a growing share of cars will not be directly affected by fuel price fluctuations in the future. Modern electric vehicles constitute only 0.5 percent of all cars in Latvia today, however, they so far account for 10 percent of all newly registered cars in 2023, with an upward sloping trend.
Still, politicians are often concerned about the unequal effects of fuel price fluctuations on individuals. Different car owners experience varied effects, especially when considering factors like income and location, influencing transportation supply and demand.
First, Latvia ranks as one of the EU’s least motorized countries, only ahead of Romania, with 404 cars per 1000 inhabitants in 2021. This lower rate of vehicle ownership is likely influenced by the country’s relatively low GDP per capita (73 percent of the EU average in 2022) and a high population concentration in its capital city, Riga (32 of the population lives in Riga city and 46 percent in the Riga metropolitcan area). In Riga, a developed public transport system reduces the necessity for personal vehicles. Conversely, areas with limited public transport options, such as rural and smaller urban areas, exhibit a higher demand for personal transportation as there are no substitution options and the average distance travelled is higher than in urban areas. Thus, car owners in these areas tend to be more susceptible to the impact of fuel price volatility.
Second, Latvia has a high Gini coefficient compared to other EU countries, indicating significant income inequality (note that the Gini coefficient measures income inequality within a population, with 0 representing perfect equality and 1 indicating maximum inequality. In 2022, the EU average was 29.6 while Latvia’s Gini coefficient was 34.3, the third highest in the EU). With disparities in purchasing power, price hikes tend to disproportionately burden those with lower incomes, making fuel more costly relative to their monthly wages.
These income and location factors suggest that inhabitants in rural areas are likely the most affected by recent price hikes. Distributional effects across geography (rural vs urban) are often neglected in public discourse, as the income dimension is more visible. But both geography and income factors should be accounted for in a prioritized state support, should such be deemed necessary.
- Commersant. (2023). Economic dependence on Russia is growing rapidly – reasons and risks. Commersant.
- Drivkraft Sverige. (2023). Drivkraft Sverige: Data Set. drivkraftsverige.se/statistik/priser/bensin/
- Hu, K. and Chen, Y. (2016). Technological growth of fuel efficiency in European automobile market 1975–2015. Energy Policy, 98, pp.142-148.
- IEA. (2021). Fuel Consumption of Cars and Vans. Tracking Report. International Energy Agency.
- International Energy Agency. (2023). End-Use Prices Data Explorer. https://www.iea.org/data-and-statistics/data-tools/end-use-prices-data-explorer?tab=Overview
- National Competition Agency of Georgia. (2023). Regarding the investigation carried out in accordance with the order of the Chairman of the National Competition Agency of Georgia dated August 16, 2022 N04/165.
- National Statistics Office of Georgia. (2023). External Trade Portal. Retrieved from https://ex-trade.geostat.ge/en
- National Statistics Office of Georgia. (2023). Households Incomes and Expenditures Survey. https://www.geostat.ge/en/modules/categories/128/databases-of-2009-2016-integrated-household-survey-and-2017-households-income-and-expenditure-survey
- Sgaravatti, G., Tagliapietra, S., & Zachmann, G. (2022). National policies to shield consumers from rising energy prices. Bruegel Datasets.
- Statistics Sweden. (2023). Average hourly wage statistics. http://www.statistikdatabasen.scb.se
- Trafikverket. (2023). Vägtrafikens utsläpp 2022. Technical report. Swedish Transport Administration.
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 Covid-19 pandemic created one of the most substantial negative exogenous shocks in decades, forcing firms to rapidly adapt. This brief examines an adjustment mechanism that played a significant role in Latvia, and potentially in other countries in Eastern and Central Europe. Specifically, we focus on the role of envelope wages as a buffer for absorbing the shock. Our analysis demonstrates that this form of tax evasion indeed acted as a cushion during the Covid-19 pandemic. Our results indicate that, in the short run, tax-evading firms experienced smaller employment losses in response to the Covid-19 shock compared to compliant firms.
The Covid-19 pandemic generated one of the largest negative, exogenous shocks in decades. To absorb this shock, firms had to swiftly adapt. Prior literature has demonstrated that firms responded by reducing employment and investment (Lastauskas, 2022; Fernández-Cerezo et al., 2023; Buchheim et al., 2020). In this brief, we discuss another margin of adjustment – potentially important for many countries in the region. We focus on the role of envelope wages as a buffer for negative shock absorption.
Envelope wages is a widespread form tax evasion, in which, for employees that are formally registered, a portion of their salary (often at the minimum wage level) is reported to tax authorities, while the remaining ‘envelope’ portion is paid unofficially. The prevalence of this phenomenon has been extensively documented in Eastern and Central Europe (see Kukk and Staehr (2014) and Paulus (2015) for Estonia, Gorodnichenko et al. (2009) for Russia, Putniņš and Sauka (2015) for the Baltic States, Tonin (2011) and Bíró et al. (2022) for Hungary).
In addition to the evident objective of reducing tax obligations, a primary incentive for firms to employ this evasion scheme is the extra flexibility it provides. The unreported portion of wages operates outside of the legal framework, offering firms a means of adaptation in the face of production restrictions, supply chain disruptions, and overall substantial uncertainty caused by the Covid-19 pandemic. In this brief, we argue that firms utilizing envelope wages reduced their employment less than compliant firms during the pandemic in Latvia.
Identifying Firms That Pay Envelope Wages
We identify firms that paid (at least partly) their employees in cash before the pandemic using a rich combination of Latvian administrative and survey data and the methodology proposed by Gavoille and Zasova (2021).
The idea is as follows: We use a subsample of firms for which we can assume that we know whether they pay envelope wages and, using this subsample, train an algorithm that is capable of distinguishing compliant and evading firms based on their observed characteristics and reported financials.
Following Gavoille and Zasova (2021), we use firms owned by Nordic investors as a subsample of tax-compliant firms. To obtain a subsample of non-compliant firms, we combine data on administrative (i.e., reported) wages with several rounds of Labor Force Survey data in order to spot employees who are paid suspiciously little given their personal characteristics (education, experience, etc). Firms employing these employees form the subsample of evading firms. Using these samples of compliant and evading firms, we train a Random Forest algorithm to classify firms according to their type. We then use the algorithm to classify the universe of firms used in this study. Table 1 shows the classification results.
Table 1. Classification results: share of tax-evading firms and employees.
We find that almost 40 percent of firms (employing about 20 percent of employees) underreport at least some of their workers’ wages. The cross-sectoral heterogeneity is consistent with survey evidence: the construction and transport sectors are the sectors with the highest prevalence of envelope payments. Comparing the share of tax-evading firms with the share of workers working within these firms also indicates that on average, tax-evading firms are smaller than tax-compliant ones. This is yet again in accordance with survey evidence.
Employment Response During Covid-19
Figure 1. Average firm-level change in employment during the Covid-19 pandemic.
The Covid-19 crisis had a severe impact on Latvia. The government declared a state of emergency as early as March 13, 2020, which entailed significant restrictions on gatherings and on-site work, leading to a six-fold increase in the proportion of remote workers within a matter of months.
During the second wave, in Autumn 2021, Latvia had the highest ranking in the world in terms of new daily positive cases per capita. A substantial number of firms were directly affected by the pandemic (see Figure 1).
We study firm-level employment response at a monthly frequency in compliant and tax-evading firms, from January 2020 to December 2021. Our empirical approach is in the spirit of Machin et al. (2003) and Harasztosi and Lindner (2019), who study the effect of minimum wage shocks. In essence, this approach consists of a series of cross-section regressions, where the dependent variable is the percentage change in employment in a firm between a reference period (set to January 2020) and any subsequent month until December 2021. Our key interest is the difference in cumulative employment response between tax-compliant and evading firms, controlling for a set of (pre-pandemic) firm characteristics, such as the firm’s age, average profitability, average export share, and average labor share over the 2017-2019 period.
The Aggregate Effect
Figure 2 shows the estimated coefficients that measure the difference between employment effects in compliant and tax-evading firms, aggregate for all sectors. Period 0 denotes our reference period, i.e., January 2020, while the estimated coefficients in other periods show the cumulated difference between tax compliant and tax-evading firms in the respective period relative to January 2020 (e.g., the estimated coefficient in period 10 shows the cumulated differential employment response in October 2020 vis-à-vis January 2020).
We document a noticeable difference in the employment response between the two types of firms starting in April 2020. The positive coefficient associated with evading firms indicates that the change in employment growth was not as negative in evading firms as in compliant firms (see Figure 2). Labor tax-evading firms exhibit, on average, a less sensitive employment response than tax-compliant firms. In March 2021, the point estimates are about 0.025, implying that compared to March 2020, tax-evading firms contracted, on average, 2.5 percentage points less than compliant ones. This difference however fades over time and turns insignificant (at the 95 percent level) about halfway through 2021.
Figure 2. Evasion and total employment.
Differences by Sector
Figure 3 displays the estimated difference in employment response, disaggregating the sample by sector. We show the results for two sectors: trade and transportation. These two sectors exhibited the most significant differences in employment response between evading and non-evading firms.
For trade, evading firms have been able to maintain employment losses at approximately 5 percentage points less than compliant firms (see Figure 3(a)). This is consistent with the envelope wage margin mechanism. Contrary to the aggregate results, the difference in employment response does not fade over time. This suggests that this margin is not a shock absorber only in the very short run.
The decrease of the evader effect at the aggregate level is caused by negative point estimates of the evasion indicator in the transportation sector, starting in the first quarter of 2021 (see Figure 3(b)). In this sector, evading firms have on average experienced a larger employment decline in 2021 than compliant firms.
Figure 3. Employment effect – by sector.
The outcome in the transportation sector is likely influenced by the taxi market. There were two major changes in 2021 that particularly affected taxi drivers receiving a portion of their remuneration through envelopes. Firstly, amendments to State Revenues Service’s (SRS) regulations made it more difficult to underreport the number of taxi trips, as each ride was now automatically recorded in the SRS system through taxi apps. Secondly, commencing in July, legal amendments mandated a minimum social security tax, which had to be paid based on at least the minimum wage. Given that many taxi drivers work part-time, and that those associated with evading firms tend to underreport their rides, this new requirement was more binding for evading firms. Additionally, there was a significant shift of taxi drivers to the food delivery sector, where demand for driver services surged during the pandemic.
Our results indicate that employment losses in response to the Covid-19 shock were smaller in tax-evading firms than in compliant firms in the short run. We also demonstrate that by the end of 2021, the discrepancy between the two types of firms had disappeared. This can be explained by significant heterogeneity in employment responses across sectors.
These findings contribute to our understanding of the pandemic’s impact on the size of the informal sector. Despite tax-evading firms generally having more restricted access to finance, the added flexibility provided by unreported wages may have increased their resilience to the negative shock.
This brief is based on a forthcoming working paper COVID-19 Crisis, Employment, and the Envelope Wage Margin. The authors gratefully acknowledge funding from EEA and Norway, grant project “Micro-level responses to socio-economic challenges in face of global uncertainties” (Grant No. S-BMT-21-8 (LT08-2-LMT-K-01-073)).
- Bíró, A., Prinz, D. and Sándor, L. (2022). The minimum wage, informal pay, and tax enforcement. Journal of Public Economics, 215, 104728.
- Buchheim, L., Dovern, J., Krolage, C. and Link, S. (2020). Firm-level Expectations and Behavior in Response to the COVID-19 Crisis. CESifo Working Paper No. 8304
- Fernández-Cerezo, A., González, B., Izquierdo Peinado, M. and Moral-Benito, E. (2023). Firm-level heterogeneity in the impact of the COVID-19 pandemic. Applied Economics 55(42), 4946-4974.
- Gavoille, N. and Zasova, A. (2021). What we pay in the shadows: Labor tax evasion, minimum wage hike and employment. SSE Riga/BICEPS Research paper No.6.
- Gorodnichenko, Y., Martinez-Vazquez, J. and Sabirianova Peter, K. (2009). Myth and reality of flat tax reform: Micro estimates of tax evasion response and welfare effects in Russia. Journal of Political Economy 117 (3), 504-554.
- Harasztosi, P. and Lindner, A. (2019). Who pays for the minimum wage? American Economic Review, 109, 2693–2727.
- Kukk, M. and Staehr, K. (2014). Income underreporting by households with business income: evidence from Estonia. Post-Communist Economies, 26(2), 257-276.
- Lastauskas, P. (2022). Lockdown, employment adjustment, and financial frictions. Small Business Economics 58(2), 919-942.
- Machin, S., Manning, A. and Rahman, L. (2003). Where the minimum wage bites hard: Introduction of minimum wages to a low wage sector. Journal of the European Economic Association, 1, 154–180.
- Paulus, A. (2015). Tax Evasion and Measurement Error: an Econometric Analysis of Survey Data Linked with Tax Records. ISER Working Paper Series 2015-10.
- Putniņš, T. and Sauka, A. (2015). Measuring the shadow economy using company managers. Journal of Comparative Economics, 43(2), 471-490.
- Tonin, M. (2011). Minimum wage and tax evasion: Theory and evidence. Journal of Public Economics, 95(11-12), 1635-1651.
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.
Over decades much attention has been devoted to the relationship between foreign aid and economic growth, while few studies have focused on the effects of foreign aid on female empowerment. This despite the fact that empowerment of girls and women is a key driver of development, and often an explicit objective of foreign aid. Using geo-coded data on aid project placement and household-level survey responses, Perrotta Berlin, Bonnier and Olofsgård (2023), show that foreign aid has a modest but robust effect on several dimensions of female empowerment. This is the case for both aid in general and gender-targeted aid, highlighting the potential of foreign aid to reduce gender inequalities. It is also found, though, that the impact is contingent on the context, and that there can even be a backlash in male attitudes towards female empowerment in more traditional communities.
The donor community has long been invested in the empowerment of women and girls, and the 2030 Agenda for Sustainable Development also includes gender equality as an explicit goal. Yet surprisingly little quantitative research has tried to make a broader assessment of the effect of foreign aid on gender equality measures.
This policy brief summarises a study by Perrotta Berlin, Bonnier and Olofsgård (2023) which addresses this question by matching the location of aid projects with geo-coded household surveys in Malawi between 2004 and 2010. Analysing the community-level impact on five different female empowerment indices, the study finds foreign aid to affect positively women’s empowerment across several dimensions. Furthermore, the authors find that gender-targeted aid has an additional impact on an index measuring women’s control over sexuality and fertility-related decisions and an index focusing on violence against women.
When considering areas with patrilineal land inheritance traditions, the results however partly shift, especially in relation to men’s attitudes. This implies that the success of foreign aid and gender-targeted aid in reducing gender inequalities may be conditional on the community context.
Gender Equality and Foreign Aid in Malawi
Malawi is highly dependent on foreign aid. Net official development assistance (ODA) has exceeded 10 percent of gross national income yearly since 1975, reaching as high as 23.5 percent in 2016 (World Bank, WDI database).
In recent years, reforms have been undertaken by the Malawian government to improve gender equality. The minimum legal age of marriage was raised from 15 to 18 through the 2015 Marriage, Divorce and Family Relations Bill, and the 2013 Gender Equality Act strengthened the legislation concerning gender-based violence and included a universal condemnation of all types of gender-based discrimination. Yet, in 2020, Malawi was ranked 116 out of 153 in the World Economic Forum Gender Gap Report and 172 out of 189 in UNDP’s Gender Inequality Index. An area of concern regards the high rates of child marriage, with 9 percent of girls already married at age 15 and 42 percent by the age of 18. Alongside these numbers, 31 percent of women report to have given birth by the age 18.
Another aspect potentially influencing gender equality is the prevalence of matrilinear land tenure systems, particularly in the southern and central parts of the country (as depicted in Figure 1). While previous research has shown that land ownership empowers women and suggested that property rights affect decision power over key decisions, fertility preferences, age of marriage etc., less research has been devoted to analysing the effects on women’s empowerment outcomes in a matrilinear kinship setting. Some recent literature however suggests women in matrilinear societies have greater say in household decisions – including financial ones – and are less accepting of, as well as exposed to, domestic violence (Lowes, 2021; Djurfeldt et al., 2018).
Figure 1. Intensity of matrilineal tenure in Malawi.
Methodology and Data
For the analysis, the authors make use of geo-coded data on aid projects from the Government of Malawi’s Aid Management Platform (AMP) and match it to household-level data from the Malawi Demographic and Health Survey (DHS). The country of Malawi and the period 2004-2010 were chosen in order to maximize data coverage on aid disbursement. Malawi’s AMP covers 80 percent of all aid entering the country during those years, which gives a much more complete picture compared to only focusing on one specific donor.
To identify causal impact, the authors apply a difference-in-differences specification on survey clusters in proximity to aid projects implemented between 2004 and 2010. Proximity was identified as within a 10-kilometer radius from an aid project. Among those, households interviewed in 2004, i.e., prior to the implementation date of any aid project, were considered the control group, and households interviewed in 2010 formed the treatment group. The underlying assumption of parallel pre-treatment trends was confirmed with the use of earlier DHS surveys. The model specification includes individual-level controls (age, ethnicity, household size, a Muslim dummy, years of education and literacy) and also a geographic fixed-effect based on a grid of coordinates.
The analysis distinguishes between the impact of aid in general, and the additional impact of gender-targeted aid. Gender-targeted projects are defined as projects that have any of the words woman, girl, bride, maternal, gender, genital or child, in the title, description or activity list. When estimating the effect of gender-targeted aid the authors control for overall aid intensity in the household’s vicinity. The estimated effect should therefore be interpreted as the additional effect from being exposed to a gender-targeted aid project while keeping the general number of aid projects in the area constant.
Figure 2. Map of aid projects and household clusters from 2004 and 2010 survey waves in Malawi.
To capture female empowerment, the authors make use of thousands of responses to DHS survey waves from 2004 and 2010. From these responses, the authors construct four different indices. Two of these are modelled on indices used in different contexts by Haushofer and Shapiro (2016) and Jayachandran et al. (2023). The former captures experiences of violence together with men’s and women’s attitudes towards violence, and some measures of decision making and control over household resources. The more recent index by Jayachandran et al. (2023) focuses on female agency and includes questions on women’s participation in decisions on large household purchases and daily expenditures, decisions on family visits, and decisions concerning their own healthcare.
To also capture questions related to sexual and fertility preferences, often regarded as measures of female empowerment, the authors construct two additional indices. The women’s attitudes index is based on responses to questions about whether the respondent is able to refuse sexual intercourse with her husband and ask him to use a condom, age at first marriage, and age at first childbirth, among others. The men’s attitudes index is based on questions about whether the respondent thinks it is justified to use violence to force intercourse, if a woman is justified to refuse intercourse, as well as fertility and child spacing preferences. In addition, all four indices are weighted and combined into an aggregated general index.
Considering all aid projects, the authors find that being exposed to an aid project in the 2004 to 2010 window has a significant positive impact on the agency index, the female attitude index and the combined general index (12, 11 and 31 percent of their respective means). When considering gender-targeted aid, the authors found the exposure to at least one such project to increase the women’s attitude index by 7 percent and the general index by 17 percent of their respective means. The impact is present for both a narrower and a wider exposure area, and quite persistent over time.
When breaking down the analysis for areas with matrilineal versus patrilineal land tenure systems the results diverge. In communities where the share of matrilineal ethnic groups exceeds the mean of 73 percent, the results are largely in line with those in the full sample. In patrilineal communities (< 73 percent matrilineal households), the results are however vastly different. Aid projects in general, and gender-targeted aid in particular, affect negatively the men’s attitudes index. In addition, gender-targeted aid seems to have no additional impact on the other indices.
In the paper underlying this brief, the authors study the effect of foreign aid on female empowerment, a frequent but understudied objective often set by donors. Looking at geo-coded aid projects in Malawi, the authors estimated such projects to positively impact girl’s and women’s empowerment across several indices. This is true for aid in general, and for some indices even more so when considering gender-targeted aid. Some of the positive results disappear or even change sign, though, in patrilineal communities, displaying the significance of pre-existing community norms for the effectiveness of development investments. Aid even generates a backlash when it comes to men’s attitudes towards women’s sexual and fertility preferences in these communities.
The takeaway from the study lies in foreign aid’s potential to empower women in targeted communities. This however hinges on pre-existing norms in recipient communities – something that aid donors should be aware of.
The authors emphasize the need for more research to better understand the role of pre-existing norms in the uptake of aid, to distinguish direct effects from aid from potential spillovers, and to understand what type of aid projects deliver the best outcomes in terms of female empowerment.
- Djurfeldt, A. A., E. Hillbom, W. O. Mulwafu, P. Mvula, and G. Djurfeldt. (2018). “The family farms together, the decisions, however are made by the man” -Matrilineal land tenure systems, welfare and decision making in rural Malawi. Land use policy 70, 601-610.
- Haushofer, J. and J. Shapiro. (2016). The short-term impact of unconditional cash transfers to the poor: experimental evidence from Kenya. The Quarterly Journal of Economics, 131(4), 1973-2042.
- Jayachandran, S., M. Biradavolu, and J. Cooper. (2023). Using machine learning and qualitative interviews to design a five-question survey module for women’s agency. World Development 161, 106076.
- Lowes, S. (2021). Kinship structure, stress, and the gender gap in competition. Journal of Economic Behavior & Organization 192, 36-57.
- Perrotta Berlin, M., Bonnier, E., and A. Olofsgård. (2023). Foreign Aid and Female Empowerment. SITE Working Paper Series, No. 62.
The 2023 FREE Network Retreat, an annual face-to-face event for members of the FREE Network, gathered its representatives to share and exchange research ideas and to discuss its institutes’ respective work and joint efforts within the Network. An academic session highlighted multiple overarching areas of interest and opportunities for research collaboration and included a plenary session on topics ranging from theoretical underpinning of Vladimir Putin’s regime to climate change beliefs and to consumer behaviour in credit markets. A session addressing the respective institute’s work during the last year also demonstrated the importance and relevance of the FREE Network’s joint initiatives on gender, democracy and media, and climate change and environment: FROGEE, FROMDEE and FREECE. This brief gives a short outline of the plenary session and an overview of some further topics covered during the conference.
The Academic Day
The Academic Day consisted partly of a plenary session and partly of an academic session. The academic session was outlined to demonstrate the wide spectrum of research interests within the network and to promote and highlight the opportunities for research collaboration. Designed as a series of poster sessions, each organized around a common research theme, it allowed for an exchange of ideas between presenting researchers and the audience while displaying the overlap of the various research interests across the institutes. At the same time, the poster session combined the broad range of topics within 10 overarching subjects (trade, gender, migration and education, public economics, energy, labor, political economy and development, macro, conflict, and theory and auctions).
The plenary session further illustrated the wide variety of topics the FREE Network researchers’ work on. During the plenary session, three distinguished presentations were held, summarized in what follows.
“Why Did Putin Invade Ukraine? – A Theory of Degenerate Autocracy”
Firstly, Konstantin Sonin, Professor at the University of Chicago Harris School of Public Policy, gave a presentation of his working paper (with Georgy Egorov, Northwestern University) in which the Russian full-scale invasion of Ukraine is explained through a theoretical framework on dictators’ decision-making in degenerate autocracies.
Sonin outlined how the beliefs about Ukraine in Kremlin, prior to the invasion, were factually wrong. For example, Kremlin believed that Ukraine, despite plenty of facts pointing in the opposite direction, lacked a stable government and had an incapable army. Further, it was believed that the US and Europe wouldn’t care about Ukraine and that Russian troops would be welcomed as liberators – the latter exemplified by the fact that Russia sent police and not the army during the first phase of the invasion. He also stressed that the decision to invade Ukraine is likely to have disastrous consequences for Vladimir Putin, his regime, and for Russia as a whole. This is, however, not the first example of a disastrous decision made by a leader of an autocratic regime, leading up to the question: What explains such choices that should not rationally have been made? And how can leaders make them in highly institutionalized environments where they are surrounded by councils and advisors who are supposed to possess the best expertise?
The model presented by Sonin assumes a leader in such highly institutionalized environment that wishes to stay in power and whose decisions are based on input from subordinates. The subordinates differ in level of their expertise and the leader thus chooses the quality of advice that he receives through his choice of subordinates. In turn, while giving advice to the leader, the subordinate considers two factors: the vulnerability of the leader and their own prospects should the leader fall. In equilibrium there is a tradeoff as competent subordinates are also less loyal (since a more competent person might know when to switch alliances and have better prospects if the regime changes).
The leader also has access to repression as an instrument. Repression decreases his changes to be overthrown but raises the stakes for a potential future power struggle, as a leader with a history of repression is more likely to be repressed by his successor.
This interaction creates a feedback loop. If a dictator chooses repression, he feels more endangered, and he then chooses a more loyal subordinate who is less likely to deceive him for personal gain under a potential new regime. However, this leads to the appointment of less competent subordinates whereafter the information that flows to the leader becomes less and less reliable – as illustrated by Kremlin’s beliefs about Ukraine prior to the war.
There are three types of paths in equilibrium, Sonin explained; 1. “stable autocracy”, with leaders altering in power and choosing peaceful paths without repressions 2. “degenerate autocracy” – where the incumbent and opponent first replace each other peacefully and then slide into the repression-based change of power (until one of them dies and the story repeats), and 3. “consecutive degenerate autocracy” – where each power struggle is followed by repression.
Concluding his presentation, Sonin highlighted that in a degenerate autocracy such as Russia, individual decisions by the leader are rarely crucial due to the high level of institutionalization. However, as shown by the model, the leader is inevitably faced with a situation where he is surrounded by incompetent loyalists feeding him bad intel and setting him up to make disastrous decisions – most recently displayed in Vladimir Putin’s decision to invade Ukraine.
“Facing the Hard Truth: Evidence from Climate Change Ignorance”
Pamela Campa, Associate Professor at Stockholm Institute of Transition Economics, gave the conference’s second presentation, which detailed her work (with Ferenc Szucz, Stockholm University) on climate change skepticism.
Campa opened her talk with the current paradox regarding climate change, where, in the scientific community there is a strong consensus about the existence of climate change, but in society at large, skepticism is largely prevalent. This can be exemplified by one quarter of the US population not believing in global warming in 2023, and Europeans not believing in the fact that humans are the main driver of climate change.
According to Campa, the key question to answer is therefore “Why does ignorance about climate change persist among the public – in spite of the overwhelming evidence?”. One possible explanation may be a deficit in comprehension; people simply don’t understand the complexity of climate change and thus follow biased media and/ or politicians more or less sponsored by lobbyists. However, research have shown scientifical literacy to be quite uncorrelated with climate change denial, contradicting the above explanation. The second hypothesis, and of focus in the study, instead revolve around the concept of information avoidance. To test the hypothesis that people actively avoid climate change information, the authors key in on coal mining communities in the US having been exposed to negative shocks in the form of layoffs. These communities are of interest given their strong sense of identity and the fact that they are directly affected by the green transition. Arguably, a layoff shock would negatively affect not only their economy, but also pose a threat to their perceived identity. Given the context, it can thus be assumed that these communities to a larger extent would avoid information on climate change and information post-shock to restore the threatened identity.
The authors consider US counties experiencing mass layoff (more than 30 percent of mining jobs lost between 2014 and 2017) as treated counties, finding that in these counties, learning about climate change is 30 to 40 percent lower than in counties having experienced no mass layoffs. To account for the fact that the layoff itself may cause changes in learning, the authors also consider an instrument variable analysis in which gas prices are exploited as instrument for the layoffs – once again displaying the fact that people in affected communities believe climate change to be caused by humans to a lesser extent, when compared to counties in which no mass layoffs had occurred.
Interestingly, when controlling with other industries with somewhat similar characteristics (such as metal mining), the drop in climate change learning disappears, feeding in the notion of “identity-based information avoidance”.
The lack of support for and consensus among the public of the ongoing climate change and its drivers might pose a threat for the green transition as well as reduce personal effort to reduce the carbon footprint, Campa concluded.
“Consumer Credit with Over-Optimistic Borrowers”
In the plenary session’s last presentation, Igor Livshits, Economic Advisor and Economist at the Federal Reserve Bank of Philadelphia, presented his working paper (with Florian Exler, University of Vienna, James MacGee, Bank of Canada and Michèle Tertilt, Mannheimer University) on consumer credit and borrower’s behaviour.
There has been much debate on whether and how to regulate consumer credit products to limit misuse of credit. In 2009/2010 several initiatives and regulations (such as the 2009 Credit Card Accountability Responsibility and Disclosure Act) were introduced with the aim of protecting consumers and borrowers from arguments that sellers of credit products exploit lack of information and cognitive capacity of borrowers. There is however a lack of evaluation of such arguments and subsequent regulations, which Livshits explained to be the motivation behind the paper.
The paper differentiates between over-optimistic borrowers (behaviour borrowers) and rational borrowers (rationalists). While both types face the same risks, behaviour borrowers are more prone to shocks and are at the same time unaware of these worse risks (i.e., they believe they are rationalists). Focusing on these types of borrowers, the paper introduces a model in which the lenders endogenously price credit based on beliefs about the borrower type. Households decide whether to spend or save and if to file for bankruptcy in an environment in which they are faced with earning shocks and expense shocks.
In this structural model of unsecured lending and default, Livshits finds that behavioral borrowers’ “risky” behaviour negatively affects rationalists since both types are pooled together and, thus rationalists are overpaying to cover for the behaviour borrowers. A calibration of the model also suggests that behavioral borrowers borrow too much and file for bankruptcy too little and too late.
Livshits argued that the model does not provide evidence of the notion that borrowers need protection from lenders, but rather that borrowers need to be protected from themselves. In fact, had behaviour borrowers been made aware of the fact that they are overly optimistic about the actual state of their future incomes, they would borrow 15 percent less.
To address the increased risks behaviour borrowers take at the cost of rationalists, policies such as default made easier, taxation on borrowing, financial literacy efforts and score-dependent borrowing limits could all be considered. Such policies may lower debt and reduce bankruptcy filings but as they may also reduce welfare and exhibit scaling difficulties.
Updates from the Institutes
During the Retreat, the respective institutes shared the previous year’s work, and updates within the FREE Network’s three joint projects were also presented. These go under the acronyms of FROMDEE (Forum for Research on Media and Democracy in Eastern Europe), FREECE (Forum for Research on Eastern Europe; Climate and the Environment) and FROGEE (Forum for Research on Gender Economics in Eastern Europe), and address areas of great relevance in Eastern Europe and the Caucasus. Researchers from all FREE Network institutes work on these topics, with the most recent policy paper written in coordination by SITE, KSE and CenEA (with expert Maja Bosnic, Niras International Consulting). The policy paper focuses on the gender dimension of the reconstruction of Ukraine – putting emphasis on the necessity of gender budgeting principles throughout the various parts of reconstruction. An upcoming joint research paper will consider the effects of gasoline price increase on household income across the Network’s countries, written under the FREECE umbrella.
The three themes of gender, media and democracy, and environment and climate are not only purely research topics within the institutes. They also reflect developments and challenges that the institutes to a various extent face in the respective contexts in which they operate. The work focusing on the reconstruction of Ukraine is an excellent example of an area that encompasses all three.
Another example of the relevance of the three themes features prominently in one of the institutes’ most tangible contribution to their respective societies: their education programs. Nataliia Shapoval, Vice President for Policy Research at Kyiv School of Economics (KSE), emphasized how KSE has – amid Russia’s war on Ukraine – managed to greatly expand. Over the past year, KSE has launched 8 new bachelor’s and master’s programs, some of which are directly targeted at ensuring postwar reconstruction competence. On a similar note, Lev Lvovskiy, Academic Director at the Belarusian Research and Outreach Center (BEROC) mentioned the likelihood of next year being able to offer students a bachelor’s program in economics and several business courses in Vilnius – BEROC’S new location. BEROC’s effort in providing quality education in economics to Belarus’ exile youth is considered a fundamental investment in the future of the country – providing a competent leading class capable of installing democracy and fair elections in Belarus once the current regime is gone. The emphasis on education was further highlighted by Salome Gelashvili, Practice Head, Agriculture & rural policy at the International School of Economics Policy Institute (ISET-PI) who not only mentioned the opening of a master’s program in Finance at ISET but also the fact that an increasing number of students who’ve recently graduated from PhD’s abroad are now returning to Georgia. Such investments into education are necessary to counter Russian propaganda in the region all three agreed, emphasizing the need to continually stem Russia’s negative influence in the region. This investment into education is also important to hinder countries from sliding away from democratic values – realized in Belarus and threatening in Georgia.
To further delve into the issues of democratic backsliding, a tendency that has been recently observed not only in the region but also more widely across the globe, FROMDEE will organize an academic conference in Stockholm on October 13th, 2023.
The 2023 FREE Network Retreat provided a great opportunity for the Networks’ participants to jointly take part of new research and to share experiences, opportunities, and knowledge amongst each other. The Retreat also served as reminder of the importance of continuously supporting economic and democratic development, through research, policy work, and networking, in Eastern Europe and the Caucasus.
List of Presenters
- Konstantin Sonin, University of Chicago Harris School of Public Policy
- Pamela Campa, Stockholm Institute of Transition Economics
- Igor Livshits, Federal Reserve Bank of Philadelphia
Despite an increase in women’s representation since the beginning of the 20th century, women remain underrepresented in academia and other high-skilled professions. Academia has been prone to gender disparities both within and across fields as well as across academic ranks. In an endeavour to examine and address the underrepresentation of women in the academic profession, the Centre of Economic Analysis (CenEA), together with the Stockholm Institute of Transition Economics (SITE) and other partners of the Forum for Research on Gender Economics (FROGEE) at the FREE Network, organized the two-day conference “The playing field in academia: Why are women still underrepresented?”, in Warsaw June 21-22, 2023. This brief offers insights from the presentations and panel discussions held at the conference.
To date, there are few, if any, high-skilled professions exhibiting gender balance, and academia is no exception. Consequently, this imbalance has been subject to increased multidisciplinary research attention, exploring its origins and potential remedies. However, attaining a comprehensive understanding of gender disparities remains a challenge. For instance, much remains to be learnt about their long-run dynamics, a subject addressed by Carlo Schwarz, in one of the conference’s keynote lectures.
A Century of Progress
Carlo Schwarz (in joint work with Alessandro Iaria and Fabian Waldinger, 2022) trace the evolution of gender gaps in academia across a variety of domains at the global level throughout the 20th Century. Facilitated by an unprecedentedly large database of nearly 500,000 academics, spanning 130 countries and supplemented by publication and citation data, the authors specifically examine gender imbalances in recruitment, publishing, citation patterns, and promotions.
They find that in 1900 women constituted roughly 1 percent of all hires in academia (226 women, with only 113 hired as full professors). By 1969 the share of female academics had risen to about 6.6 percent, and by the year 2000 it had grown to approximately 17 percent. These rates varied across disciplines, institutions, and countries. For instance, teaching-centric disciplines such as pedagogy and linguistics, exhibited higher representation relative to research-oriented ones.
The research subsequently reveals a hump-shaped evolution of the gender gap in academic output – starting small before peaking at 45 percentage points fewer publications by women in 1969, thereafter declining to 20 percentage points. These publication disparities were also found to share a U-shaped relationship with the share of women in academia, indicating the interconnectedness of gender gaps.
The authors also address gender gaps in citations, identified by the use of a novel machine learning approach, forecasting a paper’s citations had it been written by a man. The results indicate a progressive reduction in the citation gap during the 20th century, decreasing from 27 percentage points (pre-WW1) to 14 percentage points (interwar) and eventually to 8 percentage points (post-WW2) fewer citations of papers by female relative to male academics. These gender gaps in academic output reiterated current evidence from Mexico, presented at the conference by Diana Terrazas-Santamaria, showing that women are associated with lower citation rates. Terrazas-Santamaria attribute the low rates to gender differences in both the number of publications and duration of academic careers.
The work by Iaria, Schwarz and Waldinger (2022) further showcase the gender disparities in career advancement in academia, which similarly decreased over the years. At the point of the greatest gender disparity, women required an approximately 6 percentage points better publication record to have the same promotion probabilities as their male counterparts.
The Leaky, Dry Pipeline
In the conference’s second keynote, Sarah Smith highlighted how academia, much like other professional occupations, exhibits a leaky pipeline. This is a phenomenon characterized by a declining representation of women as they ascend through the academic hierarchy. When examining specific fields, Smith’s results indicate that the gender disparities in economics much more closely align with those observed in STEM fields (science, technology, engineering, and mathematics) than other social science disciplines. Furthermore, the economics’ field illustrate a significant lack of diversity among its new entrants. This phenomenon, referred to as the dry pipeline, generates future cohort implications, as they result in less demographically representative cohorts from which future professors can be recruited (see Stewart et al., 2009).
The cross-disciplinary comparison of the dry pipeline addressed in the keynote, contest the mathematical rigor of economics as a barrier to entry, as mathematics itself demonstrated higher women representation at A-level and undergraduate levels. In a following discussion panel, which focused on ensuring a fair start in academia (comprised of Yaroslava Babych, Alessandra Casarico, Federica Braccioli and Marta Gmurek, and moderated by Maria Perrotta Berlin), the panellists acknowledged that deeply engrained social expectations, gender trained behaviours and a lack of awareness constitute some of the persistent hindrances to the (early) involvement of women in specific fields, and the academic profession in general.
Additional factors influencing the gender balance in recruitment and promotion are gendered references, and the presence or absence of shared research interests between candidates and recruitment panels. These themes were extensively investigated in the work presented by Alessandra Casarico on the conference’s opening day. Specifically, results from collaborative work with Audinga Baltrunaite and Lucia Rizzica, highlight that grindstone words (e.g., “determined”, “hardworking”, etc.) are frequently used in recommendation letters to describe female candidates, while standout words (e.g., “excellent”, “strongest” etc.) typify male candidates’ references. Compared to their male counterparts, women are also shown to be more inclined to accentuate personality traits when serving as referees. This added to a broader literature demonstrating that female candidates’ recommendation letters frequently exhibit brevity, raise doubts, carry a weak tone, and emphasize candidates’ interpersonal skills and personality traits rather than their ability. Moreover, separate results from Casarico’s work (with Piera Bello and Debora Nozza) illustrate that research similarity between the recruiting committee and the candidate predict the likelihood of recruitment. The authors argue that the relationship is indicative of a bias against women if – as shown by the authors – women are less likely to be the candidates with the highest similarity.
In her presentation, Anne Sophie Lassen offered a different factor that may contribute to the attrition in the pipeline: the influence of parenthood on academic careers. Results from her work (with Ria Ivandić) indicate that while parenthood does not significantly influence graduation rates, it extends doctoral studies by an average of 7 months for women. Moreover, Lassen highlighted a declining trend of remaining in academia after becoming a parent, particularly pronounced among women.
More Areas of Imbalance
The remaining conference presentations and panel discussions explored additional domains of gender imbalances within academia. Iga Magda showcased evidence from her joint work with Jacek Bieliński, Marzena Feldy and Anna Knapińska of gender differences in remuneration during the early stages of an academic career, substantiating a gap within a year of graduation. These disparities endure throughout respondents’ careers and are contingent on the field of study – largest among engineering and technology graduates and lowest among those from the humanities and arts fields. Furthermore, it was observed that productivity plays a negligible role in the identified pay gaps, as its impact is similar for both genders.
The panel composed of Eleni Chatzichritou, Marta Łazarowicz-Kowalik, Jesper Roine and Joanna Wolszczak-Derlacz, and moderated by Michał Myck, deliberated on exposed disparities in the application for, and the success rates in attaining research funding in Poland and Europe – as seen in the National Science Centre (NCN) and the European Research Council research grants, respectively. The discussion highlighted how quantitative measures used in the allocation of research funding are riddled with subjective criteria that often benefit male academics. They also recognized how quests to allocate funds to the most successful candidate inadvertently penalize women with career breaks.
Another panel including Lev Lvovskiy, Carlo Schwarz, Sarah Smith, Marieke Bos and Joanna Tyrowicz, and moderated by Pamela Campa, lauded the growing objective data shedding light on gender inequalities in academia. The panellists discussed current challenges in identifying and quantifying aspects of gender disparities. For instance, currently used proxies do not allow to capture more subtle disparities, like microaggressions faced by female academics from students – emphasizing the need for more individual level survey data.
The panels were further enriched by personal anecdotes and filled with retrospective advice shared by both early career and established academics. To contextualize the above, a few cases from the FREE Network countries follow.
Evidence From Within the FREE Network
Yaroslava Babych shared insights concerning women in higher education in Georgia and other countries of the South Caucasus. Preliminary findings of her study confirm the presence of gender inequality in academia, evident in disparities in access to higher education as well as gender segregation across both fields and countries. Notably, women comprise a majority of the graduates in bachelor’s and master’s of art programs, whereas higher research-level programs such as doctors of science, and top echelons of the academic hierarchy remain predominantly male. Moreover, female academic output is found to be lower than that of male counterparts.
Lev Lvovskiy discussed the case of Belarus, highlighting the influence of the Soviet legacy. A significant factor linked to this legacy is exploiting university enrolment to circumvent compulsory conscription of men, allowing male university admissions to serve a secondary purpose beyond acquiring knowledge. This increases the perceived opportunity cost of enrolling a woman. Lvovskiy further documented the academic trajectories of Belarusians, revealing a majority of women at college and doctoral levels, but being underrepresented among doctoral graduates. The results further indicate significant cross-disciplinary gender disparities, with humanities having close to 80 percent women representation and engineering and information and technology (IT) fields having less than 30 percent women representation.
Monika Oczkowska provided evidence of gender disparities in Poland. Findings from the country reveal an overrepresentation of women graduates from bachelor through doctoral levels, and relative parity at post-doctoral level, but lower proportions at habilitation, associate professor, and professor levels. These general results confirm the higher detail findings presented by Karolina Goraus-Tanska on the first day of the conference. Results from Goraus-Tanska’s work (with Jacek Lewkowicz and Krzysztof Szczygielski) suggest that the drop-off among female academics from habilitation levels is not attributed to higher output expectations for women, but rather stems from the impact of parenthood.
Oczkowska further demonstrated that female academics in Poland are characterized by fewer international collaborations and lower levels of international output. Polish female academics were also showcased to engage in more international mobility during their doctoral studies relative to men, with the converse holding true after obtaining a doctoral degree. A potential explanation for this mobility decline among female academics, could be the increased burden of familial responsibilities at the post-doctoral and higher levels. Moreover, fewer women were reported to have applied for NCN grants and were underrepresented among the beneficiaries of these calls. Lastly, female academics in Poland record significantly lower total project costs relative to their male counterparts.
‘Plugging’ the Leak
In light of the aforementioned, what measures can be taken to address the gender imbalances in academia? As summarized by Sarah Smith, early initiatives have involved tracking women representation (e.g., in admissions, progression, hiring, etc.) within departments and/or institutions to identify where in the pipeline their progress is impeded. Attempted initiatives include formulation of seminar guidelines to overcome unfair experiences, as well as using gender-blind recruiting and objective hiring criteria to equalize hiring opportunities. Some other efforts, such as diverse recruitment panels have been unsuccessfully adopted, as they seem to embolden hostile male recruiters and load female panellists with unrewarded administration tasks. Conversely, mentoring has helped women build networks, publish more, and advance professionally. Awareness raising campaigns have reduced disparities in teaching evaluations and remain vital in addressing the dry pipeline and both transparent workload allocation and rewarding of administrative tasks have been shown to reduce promotion gaps in academia. In addition to the above, initiatives such as fostering gender-neutral networking opportunities, collaborations and a more diverse faculty were also deliberated during the conference.
The conference advanced dialogue on societal and structural constraints to gender equality in academia and provided a platform to exchange ideas on how the shared objective of a more inclusive and equitable academic environment can be achieved. While the challenges remain abundant, and the costs associated not always negligible, it remains crucial to assess achievements, such as those resulting from mentoring and awareness intervention initiatives and recognize that further opportunities to enhance equity within the profession exist.
Climate change can increase the vulnerability of women to various risks, including natural disasters, food insecurity, water scarcity, and health problems. Women may also face unique challenges in accessing resources and services, which can limit their ability to adapt to a changing climate. Developing countries, with their more traditional gender roles, are even more likely to experience disproportionate impacts of climate change on women, and Georgia is no exception. Thus, the country needs to address this problem through a comprehensive approach which accounts for the social, economic, and environmental factors that contribute to gender inequality.
According to Georgia’s fourth national communication report to the United Nation’s Framework Convention on Climate Change, the negative impacts of climate change on ecosystems and the economy can hinder Georgia’s path toward sustainable development. Therefore, a key focus for the country should be to develop climate-resilient practices and reduce the vulnerability of communities exposed to these impacts.
The climate scenarios in the communication report present a worrying picture of warming trends in the country, mainly due to increased temperatures in the last summer and autumn seasons, as depicted in Figure 1 (MEPA, 2021). Such alterations in weather patterns often lead to glacier retreat, water scarcity, coastal erosion, and biodiversity loss in different regions of Georgia (ibid).
Figure 1. Average summer and winter temperatures in Georgia, 1900-2021.
An increasing body of international research has demonstrated that climate change can have adverse effects on agricultural production, food security, water management, and public health. Furthermore, research has revealed that these effects are not gender-neutral, with women and children being among the most affected groups (World Bank Group, 2021).
Climate Change Impacts on Women – A Georgian Perspective
Women in developing countries like Georgia experience various impacts of climate change, which affect them differently than men. The effects might vary according to region or community, but some common signs can be identified. The main channels through which women are disproportionally affected by climate change are discussed in the following sub-sections.
Climate change has a significant effect on human health, with women being more vulnerable due to various cultural, social, and economic factors (Sbiroli et al., 2022). In particular, women appear to be more susceptible to infectious diseases and undernutrition, especially in middle and low-income countries (ibid).
Springmann et al. (2016) found that, by 2050, Georgia could experience about 32.36 climate-related deaths per million due to malnutrition caused by a lack of fruits and vegetables in people’s diets and due to increased health complications associated with undernutrition. In Georgia, malnutrition is a significant gender equality concern. According to the Global Nutrition Report, women in Georgia disproportionally experience exposure to undernutrition translated into underweight. Similarly, women represent the majority of Georgians with obesity (26.8 percent, compared to 22.2 percent among men). Both these issues may be further exacerbated by climate change in the future.
Furthermore, in Georgia, women are more likely to care for sick family members. According to Geostat, 31 percent of women who have sick or dependent family members are involved in providing them care, compared to only 15 percent of the men. This puts women at greater risk of exposure to climate change-induced infectious diseases, given that research has demonstrated an increased risk of such diseases worldwide, including in areas in Europe that have climate profiles similar to Georgia (Mora et al., 2022; Gray et al., 2009).
Figure 2. Prevalence of underweight among adults (>18) in Georgia, 2000-2016.
Water and Food Scarcity
Climate change is also known to affect food and water supply through changes in agricultural conditions, droughts, and floods. In developing countries as women are often responsible for food and water supply, they are disproportionally affected by water shortages resulting from climate change (Figueiredo & Perkins, 2013). Women in poor rural households in Georgia are likely to face similar challenges.
Women in Georgia also play a crucial role in agriculture (according to Geostat, 47 percent of workers in agricultural holdings were women in 2021). Fluctuations in temperature and precipitation patterns can reduce crop yields, leading to lower income and food insecurity. This may disproportionately affect female farmers, as access to agricultural technologies, land ownership and lack of necessary knowledge and skills are some of the significant barriers for women involved in agriculture in Georgia (Gamisonia, 2015).
Economic Impacts and Access to Resources
One of the main reasons to why women are disproportionally affected by climate change is that their underlying economic conditions are less favourable than men’s (Yadav & Lal, 2018). In 2021, the majority of people outside the labor force were women (65 percent), while men constituted 35 percent (Geostat). It is important to mention that in the same year, only 33 percent of women were employed in Georgia, compared to 49 percent of men. Additionally, the average salary for women was 1056 GEL (813 GEL in the agricultural sector), while men earned an average of 1538 GEL (1006 GEL in the agricultural sector). Finally, although poverty rates among women in Georgia are slightly lower than among men, 17.1 vs. 17.9 percent respectively (absolute poverty rates in 2021), the poverty data does not account for the gender-biased distribution of household resources. Women face larger barriers in obtaining financial resources (collaterals, loans, etc.) than men because they own less property. For different types of property, only 44 percent are owned by at least one woman, according to the National Agency of Public Registry of Georgia. The corresponding number for men is 56 percent. Geostat data further indicates that households headed by men make up 63 percent of the total number of households, whereas households headed by women account for only 37 percent. These unfavorable conditions hinder women’s access to vital information and resources required for climate change adaptation and mitigation.
The discussed impacts may be especially prominent for women in poor rural households. Climate change-induced natural disasters are typically more detrimental for households dependent on agriculture (Dagdeviren et al., 2021), especially subsistence farmers and poor agricultural workers (in particular those without access to technology or resources). In Georgia, women are in majority in both these categories.
Natural Disasters and Displacement
Climate-driven disasters are over 14 times more likely to cause fatalities among women and children than men, according to UNHCR (2022). Additionally, women in agrarian societies impacted by climate change are less likely to use adaptive measures, putting them at higher risk of displacement (Palacios, Sexsmith, Matheu & Gonzalez, 2023). Such risks are also likely to pertain to the rural areas of Georgia.
Georgia’s International Obligations and Policies
In previous decades Georgia has made significant progress when it comes to incorporating gender equality and climate change into the policy agenda. In particular, Georgia follows numerous international legislative initiatives regarding sustainable development, gender equality, and climate change.
Georgia is a party to the Paris Agreement and the Beijing platform (a comprehensive roadmap for women’s rights and empowerment, which lists the problems associated with gender inequality and different strategies to overcome them, signed by Georgia in 1995). It is also a signatory of the Gender Action Plan (GAP), adopted a year after the Paris Agreement to integrate gender into targets and increase effectiveness, fairness, and sustainability.
The updated Nationally Determined Contribution (NDC) of Georgia includes a dedicated section on gender and climate change. This section aims to promote gender mainstreaming, encourage equal participation, empower women, build capacity, and develop climate policies that are responsive to gender considerations. Furthermore, the Long-term Low-emission Development Strategies for Paris Agreement parties (including Georgia) has a communication and awareness-raising strategy that seeks to address gender, youth, and people with disabilities in its outreach efforts (United Nations, 2022).
Despite these commitments, Georgia is lagging when it comes to tackling the issues of climate change and gender in coordination. For example, even though Georgia has adopted a Gender Equality Law and Action Plan, it does not address climate change issues. Therefore, municipalities are not required to consider gender aspects of climate change impacts.
Identified Gaps and Policy Recommendations
Despite the number of policies and measures undertaken, unsolved problems hinder the country’s ambition to adhere to gender-mainstreamed climate change-addressed policymaking.
For example, there is a lack of gender-disaggregated data on the impacts of climate change in Georgia, which prevents policymakers from developing targeted strategies to address women’s needs. Therefore, collecting and analyzing disaggregated data with gender-specific impacts in mind is recommended. Additionally, involving women in decision-making and ensuring their participation in climate change efforts is crucial as their unique experiences and perspectives can inform more effective and equitable responses to climate change impacts.
As previously mentioned, climate change in Georgia is expected to exacerbate water and food scarcity, which can disproportionately affect women. Therefore, implementing climate-resilient water management strategies and increasing access to climate-resilient agricultural practices, such as crop diversification and improved irrigation systems, can help increase farm productivity and reduce the adverse impacts of climate change on women.
Furthermore, there is a need to provide women with access to financial resources and services and to address gender-based inequalities that may limit women’s ability to access information and resources necessary for climate change adaptation and mitigation.
Finally, addressing the impacts of climate change on women in Georgia will require a coordinated and sustained effort from a range of stakeholders, including governments, civil society organizations, and local communities, so that women are not left behind in the global effort to address the impacts of climate change.
To effectively address the impacts of climate change on women in Georgia, it is essential to recognize that various social, economic, and cultural factors shape women’s experiences. For example, women in rural areas may face different challenges than women in urban areas; women with few economic means may be disproportionately affected by climate change. Therefore, policies should not only integrate gender-mainstreaming, but also account for these heterogeneities, to ensure that different parties of the society are adequately addressed within the climate change policy agenda.
- Dagdeviren, H., Elangovan, A., & Parimalavalli, R. (2021). Climate change, monsoon failures and inequality of impacts in South India. Journal of Environmental Management.
- Figueiredo, P., & Perkins, P. E. (2013). Women and water management in times of climate change: participatory and inclusive processes. Journal of Cleaner Production, 188-194.
- Gamisonia, N. (2015). Climate Change and Women. Heinrich Böll Stiftung.
- Global Nutrition Report. (2023). Global Nutrition Report. https://globalnutritionreport.org/resources/nutrition-profiles/asia/western-asia/georgia/
- Geostat. https://www.geostat.ge/en
- Gray, J. S., Dautel, H., Estrada-Peña, A., Kahl, O., & Lindgren, E. (2009). Effects of Climate Change on Ticks and Tick-Borne Diseases in Europe. National Library of Medicine.
- MEPA. (2021). Fourth National Communication of Georgia to the UNFCCC. Tbilisi: UNDP.
- Mora, C., McKenzie, T., Gaw, I. M., Dean, J. M., Hammerstein, H. v., Knudson, T. A., Franklin, E. C. (2022). Over half of known human pathogenic diseases can be aggravated by climate change. Nature Climate Change.
- National Agency of Public Registry of Georgia. https://www.napr.gov.ge/
- Palacios, H. V., Sexsmith, K., Matheu, M., & Gonzalez, A. R. (2023). Gendered adaptations to climate change in the Honduran coffee sector. Women’s Studies International Forum.
- Sbiroli, E., Geynisman-Tan, J., Sood, N., Maines, B. A., Junn, J. H.-J., & Sorensen, C. (2022). Climate change and women’s health in the United States: Impacts and opportunities. The Journal of Climate Change and Health.
- Springmann, M., Mason-D’Croz, D., Robinson, S., Garnett, T., Godfray, H. C., Gollin, D., Scarborough, P. (2016). Global and regional health effects of future food production under climate change: a modelling study. National Library of Medicine.
- UNHCR. (2022). Gender, Displacement and Climate Change. Potsdam Institute for Climate Impact Research.
- United Nations. (2022). Long-term Low-emission Development Strategies. United Nations.
- World Bank Group. (2021). Climate Risk Country Profile: Georgia. World Bank Group.
- World Bank. (2021). Climate Change Knowledge Portal. https://climateknowledgeportal.worldbank.org/country/georgia
- Yadav, S. S., & Lal, R. (2018). Vulnerability of women to climate change in arid and semi-arid regions: The case of India and South Asia. Journal of Arid Environments, 4-17.
On 2 June 2023 CenEA will host an academic seminar day as part of a training workshop on “Data Sources and Methods for Research and Policy Analysis” organised in Szczecin.
The speakers include:
- Daniel Hamermesh (University of Texas at Austin and IZA Bonn)
- Arieda Muço (Central European University)
- Michał Myck (Centre for Economic Analysis, CenEA)
- Maria Perrotta Berlin (Stockholm Institute of Transition Economics)
The detailed programme of the Seminar day can be found here.
The seminar day is open to the public (the number of places is limited). If you would like to join please register by sending an e-mail to: Artur Król at: akról@cenea.org.pl.
If you would like to join via Zoom please register via Zoom registration page: (click here)
The subjects of political discourse are important but hard to quantify. This brief uses data from 30 years of party manifestos to study how the dominant topics in politics have evolved across Europe. Transition countries have seen the most significant shift in the content of political discourse. In the early 1990s, party manifestos in Eastern Europe focused on a distinct set of topics related to transition; by recent elections they had converged to those in Western Europe, with a heavy emphasis on the welfare state, education, infrastructure and technology. Political discourse can change rapidly in times of crisis as shown by the example of Ukraine.
“It’s the economy, stupid!”
James Carville, Bill Clinton’s strategist for the 1992 election.
The dominant topics in politics are not always as apparent as when Bill Clinton was elected US president in the midst of a recession. While it is easy to track winners across election cycles, it is much harder to know what got them elected and what they will do (or at least, promise to do) once in power. The key issues and topics that political parties and candidates talk about form as important a part in our democracies as vote shares.
In this brief, we use data collected by the Manifesto Project (Lehmann et al., 2022) to describe the development of political discourse across Europe, with a particular focus on the differences and similarities between western European countries and transition economies in Eastern Europe.
Political Manifestos as Data
In most countries, voters mainly participate in the democratic process by voting for candidates put forward by political parties. Political parties advertise themselves to voters and distinguish themselves from each other by issuing party programmes or party manifestos where they lay down their ideological and policy positions.
The Manifesto Project provides a publicly available dataset on parties’ policy platforms. The data are based on the manifestos of parties that have won at least one (Western Europe) or two seats (transition countries) in a national election. Coders manually analyse the content of the manifestos and provide the percentage of each party’s manifesto that falls into one of 56 content categories. These content categories summarise a party’s policy position on given issues, for instance, whether they favour environmental protection or an expansion of the welfare state or oppose protectionism or multiculturalism.
The Manifesto Project is an example of “text as data“. Quantitative analysis based on text is becoming increasingly important across the social sciences (Gentzkow et al., 2019) but it is particularly useful in political economy and political science given that “language is the medium of politics“ and objective numerical data are often limited (Grimmer and Stewart, 2013). Unlike many recent approaches which process data using automated text analysis tools, the Manifesto Project relies on the judgement of coders from over 50 countries who read the original text. The resultant dataset has limitations: the subjective choices made by individual coders, the to-some-extent arbitrary determination of content categories to summarise the most relevant issues across different contexts and time periods and the difficulty of imposing consistent classifications for texts written in over 40 languages. Despite these caveats, it is a unique resource for analysing the evolution of countries’ political discourse over time and across countries.
Key Issues in Political Discourse
Figure 1 summarises, through content categories, the policy positions of parliaments in Western Europe and transition countries at two points in time: the early 1990s (around the time of the first democratic elections in most transition countries) and after the latest election. We measure the importance of a policy position in a country’s parliament by weighting the importance of the relevant content category in each party’s manifesto by that party’s vote share. Over time, our measure of a policy position’s importance in political discourse may increase or decline for two reasons. First, parties may change the extent to which they emphasise a given position in their manifestos. For example, parties across the political spectrum are likely to have increased references to healthcare in their manifestos during election campaigns held during the Covid-19 pandemic. Second, as voters’ preferences shift, parties that gain support will see their issues receive greater weight in the aggregate measure relative to parties that lose vote shares. For example, if the pandemic shifted voters’ preferences towards a more comprehensive welfare system, voters could respond by voting for parties which discuss the expansion of the welfare state in their manifestos.
Figure 1. Policy positions of parties in parliament.
Some striking patterns emerge. While the policy priorities of Western European parliaments remain relatively stable over the past 30 years, those of transition countries have changed markedly. During the transition period, many parties focused on the political and economic aspects of transition. Support for democracy, freedom and human rights, as well as the free market economy, featured heavily in the manifestos of parties that formed the first democratic parliaments. Over time, policy priorities in transition countries have become more similar to those of their western neighbours, and issues such as the expansion of the welfare state, the provision of education, and the importance of technology and infrastructure, have come to the fore in all countries.
Nevertheless, some differences still remain. For instance, environmental protection is one of the most important topics in western European parliaments, though its importance has declined over time. In transition countries, the environment is slowly becoming more important, but even in the latest elections it ranked at only number 16 out of 56 issues. In contrast, support for the “national way of life” was and continues to be a prominent part of the political discourse in transition economies and it is also becoming more mainstream in the Western European countries.
Political corruption and governmental and administrative efficiency have become relatively more important issues in the parliaments of transition countries, both over time and relative to their western neighbours. Meanwhile, parties in Western Europe are devoting more of their manifesto to calls for equality and social justice.
A Closer Look at Ukraine
A country’s parliament’s policy platform can change suddenly in response to shocks. Figure 2 shows the big topic groups in the manifestos of political parties in the Ukrainian parliament from 1998 to 2019. The parliamentary election in October 2014 closely followed the Euromaidan Revolution, the annexation of Crimea by Russia and the start of the Donbas war. Compared to the previous elections, external relations became a major issue in the Ukrainian parliament, driven in particular by increased mentions of the military and the relationship with the EU. Party manifestos heavily featured appeals to Ukrainian nationhood, national solidarity, and unity (as evidenced by the increasing importance of the content category “Fabric of Society”). The trend of increasing attention to freedom and democracy also continued in this election cycle. In contrast, the previously most important issues in elections (welfare and quality of life) received much less attention in parliament at times of political upheaval and military conflict.
Figure 2. Topics in Ukrainian elections.
Distribution of Political Ideology
While the previous section discussed the main policy issues in parliament, we now turn our focus to the ideology of individual political parties that make up a country’s parliament. A commonly used summary measure of political ideology is a left-right scale (RILE), where left positions favour peace, state intervention in the economy and the expansion of the welfare state and right positions support security, traditional values and the free market economy. The Manifesto Project provides a RILE value for each party at each election (based on Laver and Budge, 1992), which is calculated by subtracting the share of a party’s manifesto devoted to left-leaning policy issues, for instance support for the welfare state, from right-leaning content, such as support for the free market economy. Condensing the complexity of party programmes into a one-dimensional measure based on fixed definitions has advantages and drawbacks. The RILE makes it possible to compare diverse political parties that campaign on different issues (for instance ecological parties compared to nationalist parties) and measure how the same party’s policy stance may have shifted over time. As the definition of left- and right-leaning issues were based on influential political theories around the 1900s, some scholars argue that this measure has become less appropriate to empirically differentiate between modern political parties, particularly in transition countries (see, e.g., Mölder, 2016). In particular, Tavits and Letki (2009) show that during the transition process many leftist parties in Eastern Europe pursued economically right-wing policies and Vachudova (2008) argues that right-wing parties in the region often appealed to a nationalist discourse.
With these caveats in mind, Figure 3 shows the distribution of all parties in parliament in the Manifesto Project database on the RILE scale, weighted by their respective vote shares. In Western Europe in the 1990s, the chart shows the prominence of both centre-left and centre-right parties, as well as smaller parties both on the more extreme left and right. In contrast, the parties in parliament in transition economies at the time were more concentrated in the centre (and slightly towards the right). Fast forward 30 years and the distribution of political ideology has changed in both the east and the west. In Western Europe, the majority of parliamentarians are now situated slightly right of centre with little mass in the more extreme tails. In contrast, in the former transition countries, there is evidence of political polarisation with party representation moving both to the left and the right on the ideological spectrum and relatively few parliamentarians occupying the centre.
Figure 3. Left-right position of parties in parliament.
What are the main topics of political discourse? Are they different across countries? Do they change over time? While there is no perfect way to quantify and track political discourse over time, this brief uses data from parties’ manifestos provided by the Manifesto Project to illustrate some broad trends across Europe over the past 30 years.
We document two kinds of changes in the subject matter of party manifestos. First, there are gradual shifts in content that reflect underlying developments in society. As democracies have matured in Eastern Europe, the content of their parties’ manifestos has evolved away from the immediate concerns of economic and political transition and converged to those of Western European parties. Second, more abrupt shifts can arise when countries experience crises or institutional upheaval. Over the past decade Ukrainians have lived through a revolution, the Donbas war, and the ongoing Russian invasion. Most of the parties that represent them in parliament are new, and the issues that feature prominently in their manifestos are now markedly different from those before the Euromaidan revolution.
Manifestos are not just about substance but also about ideology. Using the Manifesto Project’s classification of parties on a left-right scale, we show how the distribution of parties has evolved in Western Europe and transition countries. By this measure, political polarisation has been increasing in transition countries where centrist positions are less well represented than in Western European parliaments.
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- Mölder, M. (2016). The validity of the RILE left–right index as a measure of party policy. Party Politics, 22(1), 37–48. https://doi.org/10.1177/1354068813509525
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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 flows. Making 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.
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.
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.
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.
- Brooks, A. and Heaslip, V. (2019). Sex trafficking and sex tourism in a globalised world. Tourism Review, 74(5): 1104-1115. https://doi.org/10.1108/TR-02-2017-0017
- Card, D. and Krueger, A. (1994). Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania. American Economic Review, 84(4): 772–793, September https://ideas.repec.org/a/aea/aecrev/v84y1994i4p772-93.html
- Ciacci, R. (2018). Banning the purchase of prostitution increases rape: evidence from Sweden. https://ideas.repec.org/p/pra/mprapa/100393.html
- Herold, E. S. and Van Kerkwijk, C. (1992). Aids and sex tourism. AIDS society, 4(1):1/8.
- Kotsadam, A. and Jakobsson, N. (2011). Do laws affect attitudes? an assessment of the norwegian prostitution law using longitudinal data. International Review of Law and Economics, 31(2):103–115. https://www.sciencedirect.com/science/article/pii/S0144818811000196
- Newman, W., Holt, B., Rabun, J., Phillips, G. and Scott, C. (2011). Child sex tourism: Extending the borders of sexual offender legislation. International journal of law and psychiatry, 34:116–21. doi: 10.1016/j.ijlp.2011.02.005
- Perrotta Berlin, M. and Spagnolo, G. (2019). The Nordic Model of Prostitution Legislation: Health, Violence and Spillover Effects. FREE Policy Brief. https://freepolicybriefs.org/2019/04/21/the-nordic-model-of-prostitution-legislation-health-violence-and-spillover-effects
- Perrotta Berlin, M. and Latour, C. (2023). Cross-Country Impacts of Prostitution Legislation: Evidence from Reforms in five Countries. Unpublished manuscript.