Project: FREE policy brief

New Insights Concerning the 1970 Nobel Prize in Literature to Aleksandr Solzhenitsyn

Posted on November 15, 2021 | Policy Brief

Image with Aleksandr Solzhenitsyn representing his work and Nobel Prize

The recently declassified proceedings of the Swedish Academy shed new light on why it awarded Aleksandr Solzhenitsyn the literature prize in 1970. His novels reflected unique experiences of many prisoners. The Academy characterized his work as a renewal of the great Russian literary tradition. On the other hand, Soviet authorities prohibited publication of his novels, however, they were widely circulated underground or published abroad. We now know that his novel In the First Circle as it was published in 1968 was only a shortened version that Solzhenitsyn had hoped would pass the censorship. The complete version, published recently in many languages, gives an even better inside picture of the Soviet state, its leaders and ordinary citizens, and thus strengthen the Academy’s motivations for the award.

The decisions by the Nobel prize committees are declassified after fifty years. Therefore, we recently got a better insight on the motivations by the Academy for giving the 1970 prize in literature to Aleksandr Solzhenitsyn. The proceedings of the Academy add to what was known at the time, from leakages to the press and rumours by initiated persons. Remarkable Western journalists and scholars could describe the main events in the Soviet cultural life surrounding Solzhenitsyn and the Nobel prize. (Saraskina 2008; Scammell 1984). What has now been revealed from the Academy archives are the opinions of the Academy members and in particular the motivations in the propositions submitted in 1969–70 from entitled personalities.

The decision to award Aleksandr Solzhenitsyn the 1970 Nobel Prize in literature was preceded by his own struggle in the USSR to make his novels available to a wider public. In the last year of the Second World War, he was sentenced for allegedly subversive correspondence with another officer in the Red Army. Solzhenitsyn was sentenced to a long term in the camps. However, much of this time he spent in a special design bureau operated by MGB, the secret services’ so-called “sharashki”. After his release, Solzhenitsyn worked as teacher in a distant province. Here, he managed to write novels and short stories, based on what he had himself experienced or heard from other prisoners. He must, of course, keep his writings secret.

With the “thaw” under Nikita Khrushchev in the early 1960s, an opening was found for Solzhenitsyn to get his short story “A Day in the life of Ivan Denisovich” published in the renowned journal Novyi Mir. It seemed that he would then get his novels published; a contract was given for the novel The Cancer Ward (Rakovyi korpus). However, the literature climate changed as Khrushchev was ousted in 1964. The authorities stopped all plans to publish Solzhenitsyn’s works. In those days, there circulated many transcripts of unpublished works, in the so-called samizdat. It is even today an open question, for researchers, just how many hundreds or even thousands of readers throughout the Soviet Union were in those days familiar with literature that the censorship authorities would not allow to be printed.

These hardened attitudes of the Communist authorities only spurred Solzhenitsyn to have his works published abroad. He managed to organize a solid network for smuggling his manuscripts abroad, and to have responsible publishers contracted. In the late 1960s, The Cancer Ward – based on his observations during treatment in a Soviet hospital – and In the First Circle (V kruge pervom) – describing a design bureau where sentenced scientists were to develop high-technological equipment – were published in the USA and many countries in Europe.

His books were not only best-sellers, but highly esteemed by literary critics. Already in 1969, the Swedish Academy received applications from their authorized contributors, that the Nobel prize in literature be awarded to Solzhenitsyn. The Academy member and author Lars Gyllensten formulated a detailed analysis of Solzhenitsyn’s books. He emphasized Solzhenitsyn’s talent for psychologically pertinent portraits of a plethora of individuals in the most extreme conditions. However, in 1969, the Swedish Academy decided to award its literature prize to Samuel Beckett, as a dramatist with a much longer career. The next year, Francois Mauriac (Nobel laureate in 1952) jointly with a group of influential French authors formulated a proposition concerning Solzhenitsyn to the Academy. It had also received an anonymous Prize proposition written by a dozen members of the Soviet Union of Authors who emphasized the pathbreaking character of Solzhenitsyn’s novels. After deliberations within the Swedish academy, with only one dissenting member, it was announced that the 1970 prize in literature was awarded to Solzhenitsyn.

The Soviet authorities had a dilemma. In 1965, the appraised Soviet novelist Mikhail Sholokhov had received the prize in Stockholm and lectured here on his renowned novel And Quiet flows the Don (Tikhii Don). On the other hand, in 1958, the equally famous Boris Pasternak was nominated for his novel Doctor Zhivago. However, Pasternak was forced, under humiliating circumstances, to renounce the prize. The situation in 1970 for Solzhenitsyn thus presented several dilemmas. He rightly feared, as the nowadays available documents also confirm, that if he would go to the Nobel prize ceremony in Sweden, the Communist party leaders would most probably withdraw his citizenship and thus force him into exile. Consequently, he informed the Academy that he was honored and would accept the prize, but that he was not prepared to travel to Stockholm. Discussions with Swedish diplomats in Moscow concerned the alternative to arrange a ceremony at our embassy. Finally, this option was cancelled in 1971 when the chairman of the Swedish academy Karl Ragnar Gierow was denied a visa to the USSR.

Solzhenitsyn’s Later Path-breaking Contributions

In the meantime, Solzhenitsyn would continue his writing of the multi-volume historical novel The Red Wheel (Krasnoe Koleso) on the last period of Imperial Russia and his interpretation of the 1917 February revolution. He was also more engaged than before in publishing manifestoes and letters to the authorities, in a struggle against the oppressive regime. Much changed as more dissident voices in the Soviet Union manifested themselves in the early 1970s. A new landmark in Soviet literature would come in early 1974, with the publication of the first parts of The GULAG Archipelago. Although concerned Western readers had a vague notion of the Soviet camp system, Solzhenitsyn had managed to assemble hundreds of eye-witness stories from former prisoners that really shocked the public. In France and several other countries, the intellectual climate changed dramatically as The GULAG Archipelago made its imprint. In the 1980s, it was not yet possible to undertake serious historical research on the Soviet penitential, prison and camp system. Only with glasnost and Gorbachev’s perestroika was the seal on the secret archives opened and many of Solzhenitsyn’s originally earth-shaking revelations could be put into a solid factual framework. We now know who the more than two hundred personalities were who had sent Solzhenitsyn their stories in the early 1960s, as they had read his “Ivan Denisovich” short story. Solzhenitsyn’s guesswork, in the absence of statistics, concerning the economic significance of the GULAG camp system can instead be analyzed by the solid documentary collections from the archives (Jesipov 2018). A major contribution was made by the French historian Nicolas Werth and his colleagues, who jointly with archivists in Russia, assembled and wrote commentaries to the exhaustive, seven volumes Istoriia stalinskogo GULAGa. Solzhenitsyn’s original work undertaken under the direst possible circumstances stand out as pioneering. He could not even dream of having his manuscript fact-checked by experts, let alone read in wider circles. It deserves emphasis therefore that President Putin took the initiative to have an abridged version of The GULAG Archipelago edited for the Russian school. Solzhenitsyn’s widow, Natalia Dmitrovna accomplished this careful selection and added commentaries as necessary for young readers.

The 1970 Nobel Literature Prize Reconsidered in Hindsight

Finally, a reflection on how Swedish opinions on Solzhenitsyn has changed over time – from the enthusiastic reception in the 1960s of his novels to the skeptical attitude in the 1990s and early 2000s to Solzhenitsyn’s allegedly nationalistic worldview. It cannot enough be emphasized under how horrible circumstances he wrote classical contributions to world literature. To take only one example. If the Swedish Academy – hypothetically – had known the original version of The First Circle, and not only the abridged version published in the late 1960s, with its far less political implications, they could with even greater emphasis have nominated him for the Literature Prize. It demands a lot from contemporary readers to imagine how one man like Aleksandr Solzhenitsyn, who even in his early age in the late 1930s dreamt of writing novels on the Russian revolution, after much suffering in the camps managed to vividly describe, in the novels here presented, the many-faceted Soviet system from inside its prisons, camps and deportation cities.

References

  • Carlisle, Olga, Solzhenitsyn and the Secret Circle, London: Routledge & Kegan Paul 1978.
  • Jesipov, Valerii, Kniga, obmanuvshaya mir: Ob “Arkhipelage GULAG” A. Solzhenitsyna nachistotu, Moscow: Letnii Sad, 2018; Swedish abbridged translation Boken som lurade världen: Om Aleksandr Solzjenitsyns GULAG-arkipelagen, Stockholm 2020.
  • Ostrovskii, Aleksandr, Solzhenitsyn – Proshchanie s mifom, (Farewell to the Myth) Moscow: Jauza 2004.
  • Samuelson, Lennart, ”Nya ingångar i Solzjenitsyns Nobelpris när sekretessen hävs”, Respons, 3/2021, http://tidskriftenrespons.se/artikel/nya-ingangar-i-solzjenitsyns-nobelpris-nar-sekretessen-havs/.
  • Saraskina,:Liudmila, Aleksandr Solzhenitsyn, Moscow: Molodaya Gvardija 2008;
  • Saraskina, Liudmila (ed.), Aleksandr Solzhenitsyn: Vzgliad iz XXI veka: materialy Mezhdunarodnoi nauchnoi konferentsii, posviashchennoi 100-letiiu so dnia rochdeniia, Moscow, Russkii Put, 2019.

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.

Russian Exporters in the Face of the COVID-19 Pandemic Crisis

Posted on November 8, 2021 | Policy Brief

20211108 Russian Exporters in the Face of the COVID-19 Image 01

This brief summarizes the results of recent work on the effects of the COVID-19 pandemic on Russian exporting companies (Volchkova, 2021).  We use data from the CEFIR NES survey of exporters conducted in 2020. 72% of respondents reported that they were affected by the crisis. We scrutinize this impact. Contrary to popular wisdom, we observe little difference in delays of inputs by domestic and foreign suppliers. On the other hand, exporters experienced more disruptions in their sales in foreign destinations than in the domestic market. Possible reasons for this may be due to restrictions on international travel.

Introduction

According to experts at the Gaidar Institute (Knobel, Firanchuk, 2021), in 2020, Russia’s non-resource non-energy exports, decreased by 4.3%, while export prices fell by 4.1 % on average. The export of high-tech goods decreased by 14% due to a reduction in the physical volume of export. These changes in export intensity are mainly associated with the COVID-19 pandemic crisis. But are exporting firms more affected by the crisis than firms only active in the domestic market? What are the main channels through which the crisis influenced exporters?  And how do exporters adjust to the COVID-19 related shocks?

The analysis in this brief is based on forthcoming publication in the Journal of New Economic Association (Volchkova, 2021). We use data from a survey of Russian non-resource exporters conducted in 2020. We show that involvement in international trade did not affect the company’s vulnerability to the crisis on the production side: supply delays were equally likely to occur from domestic and foreign suppliers. These findings are consistent with Bonadio et al. (2021) who consider a numerical multi-sectoral model for 64 countries around the world linked by supply chains. They show that, in the face of the employment shocks associated with quarantine measures and switching to a remote work format, the contribution of global chains to the decline of real GDP is about one quarter. Importantly, the authors show that the “re-nationalization” of supply chains does not make countries more resilient to shocks associated with quarantine measures on the labor market because these shocks are also bad for domestic industries.

At the same time, our results indicate that exporting companies are exposed to additional risks associated with the need to adjust to shocks in the sales markets. According to the data, exporters find it more difficult to adjust their sales in foreign markets than in the domestic one. This is consistent with the fact that, during the pandemic, all countries introduced a strict ban on international travel, reducing the possibility of establishing new business ties through personal contacts. Similarly, Benzi et al. (2020) show a significant negative effect of international travel restrictions on the export of services.

Survey of Non-resource Exporters

The survey of exporters was carried out in June – November 2020 by CEFIR NES. The primary purpose of the survey was to identify and estimate barriers to the export of non-primary non-energy products. In the context of the developing economic crisis caused by the COVID-19 pandemic, we have added several questions to identify how the crisis influenced companies’ operations and how the respondent firms adjusted to the new conditions.

The survey was conducted using a representative sample of Russian exporting firms. As a control group, we interviewed non-exporting firms with (observable) characteristics (region, industry, labor productivity) similar to those of the surveyed exporters. Altogether, 928 exporting companies and 344 non-exporting companies were interviewed during the field stage of the study.

Most exporting companies that took part in the survey produce food products, chemicals, machinery and equipment, electrical equipment, metal products, and timber. On average, a surveyed exporter had 827 full-time employees; 25% of the firms had fewer than 26 employees. More than half of the surveyed exporting firms (53%) are also importers: 81% import raw materials and other inputs, 66% import equipment, and 22% import technology. Most interviewed exporters sell their products both abroad and on the domestic market. On average, an enterprise supplies 67% of its output to the domestic market and 32% abroad.

Impact of the COVID-19 Crisis on Firms’ Performance

Among exporters that participated in the survey, 25% reported that their business was not affected by the COVID-19 crisis, while 72% of respondents stated that the crisis did have an impact. Like any crisis, the COVID-19 pandemic created problems for some enterprises and provided new beneficial opportunities for others. According to the data, exporting businesses were significantly more likely to be negatively affected by the crisis than their non-exporting counterparts, and the impact of the crisis was not correlated with the size of the enterprise. Figure 1 presents the exporters’ answers to the question of how their sales in the domestic and foreign markets have changed with the COVID-19 pandemic.

The distribution of changes in sales volume in domestic and foreign markets significantly differ from each other. Estimates of the mean values of changes in sales volumes also differ significantly: the average drop in sales in the domestic market was 5%, while for the external market, it reached 17%. Hence, in times of the COVID-19 crisis, opportunities for growth were less prominent in foreign markets than in the domestic one, while significant market losses were more frequent.

Figure 1. Change in sales of export companies associated with the COVID-19 pandemic

Source: Survey of non-resource exporters, CEFIR NES, 2020.

Adjustment to the Crisis

The most frequently used crisis adjustment measure was employees transition to remote work – it was reported by 70% of the surveyed companies. 25% of exporters were forced to suspend their work during the crisis, while 72% were not. 14% of respondents stated they had to cut their payroll expenditures and other non-monetary benefits for employees (food, insurance, etc.), 12% of companies sent workers on unpaid leave. Only 6.5% of export firms had to lay off workers, while 91% handled the crisis without layoffs.

Comparing exporters’ answers with those of non-exporters while controlling for enterprise size, we conclude that exporting firms were more rigid in their adjustment  to the crisis. They were significantly more likely to suspend enterprise activities, dismiss of employees, send workers on unpaid leave, and reduce of wages. Also, these events were more likely to occur for smaller companies than for larger ones.

At the same time, flexible adjustment measures such as remote work were equally likely to be used by exporters and non-exporters, as well as by firms of different sizes. In general, Russian exporters of non-primary goods maintained their efficiency mainly by adjusting the labor relations to the new epidemiological conditions rather than by reducing employee-related expenses.

Dealing with Counterparties

Delays in the supply of components and raw materials were reported by 36% of the surveyed companies, and such delays were equally likely for shipments from abroad and domestic shipments. There is a perception that international supply chains in the context of the pandemic crisis are an additional risk factor. Our results indicate that domestic and international supply chains were equally challenged in 2020. Nevertheless, non-exporting companies faced the problem of delayed deliveries significantly less often than exporters did, and about 60% of companies experienced no problems at all on the input supply side.

27% of surveyed exporters stated that they delayed payments to counterparties. Non-exporting companies reported these reactions much less frequently regardless of firm size.

On the sales side, half of the surveyed exporters experienced delays in payments from their customers during the pandemic crisis. Non-exporting enterprises encountered the problems with the same frequency, and companies of all sizes were affected by this obstacle equally.

The cases of planned purchases cancellation on behalf of buyers were reported by 34% of exporting companies. Exporters experienced these problems significantly more often than non-exporters, and smaller companies experienced them much more often than larger ones.

Crossing international borders presented a certain problem for Russian exporters when it concerns product delivery. Just over half of the respondents indicated that they had to delay deliveries due to difficulties with border crossing. However, about the same share of companies (48%) reported that they delayed products delivery due to the introduction of lockdowns. Thus, during the COVID-19 pandemic, exporters’ operations were complicated to the same extent by problems related to border crossings as by those associated with lockdown regimes.

Conclusion

It is widely believed that international exposure of companies in the context of the COVID-19 pandemic crisis creates additional risks. Our study shows that, regarding existing inputs supply, international relations pose problems for Russian companies just as often as relations with domestic partners. As far as sales are concerned, adjustment to the crisis was better on the domestic market than on foreign markets. A possible explanation of this phenomenon is that, in addition to the shocks associated with quarantine measures in the labor market, access to foreign markets was hampered by restrictions on international travel, which is essential for readjusting contractual relations to explore new opportunities brought by crises (Cristea, 2011). Without personal interaction, new contracts were more difficult to launch. Thus firms’ opportunities to adjust foreign sales were more restricted than the ones in the domestic market.

References

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

Media mentions: Key takeaways from this policy brief have been published by one of the most influential media outlets in Russia Kommersant – Коммерсант: «Ковид сильнее ударил по экспортерам». Исследование ЦЭФИР РЭШ. 

Assessing a Model for the Implementation of an Equal Pay Review and Reporting (EPRR) Methodology in Georgia

Posted on November 3, 2021 | Policy Brief

20211102 Assessing a Model of Equal Pay

Georgia’s gender pay gap has started to attract the attention of the population and policymakers alike. The gap persists despite working women generally reporting better labor-market skills and personal characteristics. It has been argued that this could be the result of systematic gender-based workplace wage discrimination, resulting in unequal pay for equal work. The discussion that ensued highlights how the fight to guarantee equal pay for equal work could benefit from establishing an Equal Pay Review and Reporting Mechanism. In response, the ISET-PI team – after reviewing the best international practices – devised and tested an excel based tool that could help companies and governmental agencies identify, monitor, and fight gender discrimination in Georgia. The main quantitative result of the exercise identified that, should reporting be made mandatory, extending the obligation to companies that employ up to 50 people would make the administrative costs for companies and public administration up to twenty times higher; thus, the usefulness of the tool was found to be substantially limited when applied to smaller companies. Finally, the exercise emphasized the reluctance of companies to provide the data required, leading to the conclusion that the successful implementation of such an initiative would require the enforcing agency to have the legal authority to sanction failures to provide the necessary data.

Introduction

One of the key gender inequality indicators is the gender pay gap – or gender wage gap – calculated as the average difference between the remuneration for men and women in the labor market. Its evolution is monitored worldwide, and closing this gap is considered a key step towards more inclusive and prosperous economies and societies. According to the World Economic Forum, as of 2020, no country (including the top-ranked ones) had yet achieved gender parity in wages.

In Georgia, the unadjusted hourly gender pay gap amounts to 17.7 percent of the average male hourly wage (UN Women, 2020). Moreover, when controlling for personal characteristics of men and women, the adjusted hourly gender pay gap in Georgia is estimated to be 24.8 percent (UN Women, 2020). This implies that women, on average, have better observable labor-market characteristics but are still paid less than men.

These findings prompted a core discussion within the Georgian society on the presence of unequal pay for equal work in Georgia as one of the possible reasons for the gap and how to tackle the problem. The idea of equal pay for equal work entails that individuals in the same workplace are given equal pay if they perform the same type of work. Consequently, this potential source of the pay gap can only be verified at the individual employer level. This is accomplished by calculating the unexplained gender pay gap at the organizational/employer level and validating whether, and why, these differences exist.

Given the attention the topic holds in the national discourse, ISET Policy Institute created and tested an excel tool, built in line with the international best practices and adapted to the Georgian context, to help employers and government offices identify and measure the differences in wages between men and women performing equal work. During this process, the team learned several noteworthy lessons, as summarized in this policy brief.

International Experience

There is growing consensus that transparency is critical when dealing with pay inequality and, therefore, gender pay reporting should become the norm. Since 2010, several (mostly developed) countries have introduced reporting schemes to monitor gender pay gaps, promote awareness about gender equality issues throughout society (particularly among employees), and increase organizations’ accountability to address gender inequalities (Equileap, 2021).

However, the gender pay gap is a key issue for which the disclosure of information remains particularly low. Equileap’s 2021 report revealed that 85 percent of organizations worldwide did not publish information on remuneration differences between female and male workers in 2020.

Three countries, according to Equileap, lead the way in gender pay gap reporting: Spain, the UK, and Italy (Figure 1). In each of these top three countries, reporting is mandatory.

Figure 1. Percentage of organizations publishing gender pay information, per country

Source: Equileap, 2021. The figure only includes countries for which more than 49 surveyed organizations were included in the Equileap dataset.

However, even in these countries, and, more generally, in all countries scrutinized by Equileap but Iceland, firms with 50 or fewer employees are not required to report on gender pay gaps.

The Case of Georgia

Georgian legislation clearly establishes the principle of equal pay for equal work for all employees. The requirement applies to both public and private organizations. Nevertheless, enforcement of the law remains a significant challenge.

At present, Georgia has no reporting requirements regarding employee salaries for private organizations. It has not yet designed a reporting scheme for equal pay for equal work, nor has it assigned the task of collecting this information to any governmental body.

Moreover, Labour Inspectorate representatives state that few wage discrimination cases are currently being filed in the country. The main reason behind this is that norms regarding equal pay for equal work have never been properly specified. In addition, there are no explicit criteria defining the concept of ‘equal work’. Thus, employers and employees alike do not seem to fully understand the phrase – equal pay for equal work.

The Excel Tool

After a careful review of the three tools presently utilized to calculate gender pay inequality (the Swiss Logib, the German Logib-D, and the Diagnosis of Equal Remuneration (DER) tool developed by UN Women), ISET-PI built a Georgian model as a modified version of the DER tool that is adapted to the Georgian context and includes some variables from the Swiss tool.

The tool itself is an excel file with several worksheets. The two main facets are the inputted data sheet and the results sheet. Companies may input information on their employees in the data sheet, and the findings will then be demonstrated in the results sheet. The tool first identifies people performing the same work, and classifies jobs based on their official titles, alongside managerial responsibilities and skill requirements. After individuals are grouped by job, the tool calculates the average salary within each group separately for men and women. Thereafter, the pay gap is calculated based on the average salary for the two gender groups.

With the support of the Employers’ Association, several companies of all sizes were approached to test the tool. Unfortunately, only a few agreed to participate, and just two completed the trial: one small-sized enterprise (with 50 or fewer employees) and a large-sized enterprise (with 250 or more employees).

While low participation rates have significantly limited our analysis, we still obtained several important insights which are discussed in the next subsection.

Findings

Firstly, it is important to note that companies’ willingness to share anonymized salary data was very low, even among the companies that completed the test.

Secondly, the usefulness of the tool for obtaining a comprehensive view of equal pay for equal work in small companies (with 50 or fewer employees) appeared fairly limited as few people within the same firm perform the same job.

Thirdly, we performed a simple cost assessment exercise to evaluate the compliance costs – to both companies and the government – of collecting and reporting the gender pay gap. We found that extending the data collection requirement to small companies would increase the compliance costs by up to 20 times (high-cost scenario) compared to an example where small companies are exempt. This is because there are many more small companies in Georgia (146,802), than those classified as medium or large ones (2,752 and 609, respectively).

In addition, during the implementation of the exercise, we became aware of the following:

  • Under the existing legal provisions, it would be extremely difficult to introduce the EPRR in a mandatory format – no governmental agency could sanction companies for failing to comply.
  • Opting for the mandatory option and sanctioning the emergence of unequal pay in certain job categories could incentivize companies to manipulate the data input. In this case, therefore, it would be ill-advised to provide the full tool to companies, as they could more easily adjust data inputting to obtain more favorable indicators through successive iterations.

Conclusion

Setting up an EPRR system is one way to contribute to the implementation of the equal pay for equal work principle.

Designing the Georgian Model for the Implementation of an Equal Pay Review and Reporting Methodology generated several useful insights that might prove valuable for policymakers in Georgia and other developing countries:

1) The EPRR instrument can be utilized for the analysis of gender pay gaps within companies with more than 50 employees. Within smaller companies, evaluating the gender pay gap significantly increases the costs to society, while providing rather limited additional information.

2) The decisions about whether to provide the analytical part of the tool to companies, and whether reporting should be voluntary or mandatory should be taken jointly. If the goal is to provide an instrument to the agency enforcing the equal pay for equal work principle and to facilitate appeals from workers, the tool should be made mandatory. However, in this case, companies should only provide the input data, without having access to the part of the tool that assesses pay gaps at the job level. On the other hand, if the goal of the reform is to support willing companies in their efforts to eliminate unequal pay for equal work conditions, a non-mandatory form may be preferable. In this instance, companies should have access to the full version of the tool. This would allow them to better understand the dynamics that lead to unequal pay and thus put in place internal remedial actions.

3) If the goal is to provide a tool to the agency enforcing the equal pay for equal work principle, it is crucial that any gaps in the associated legislation are closed. As such, the enforcing agency should be capable of sanctioning failures to provide the required data, and prosecuting violations of the equal pay for equal work principle.

Finally, it is important to note that testing the application of the equal pay for equal work principle at the company level through an EPRR system, while useful for identifying potential causes of the gender pay gap and the existence of gender disparities within companies, is just a first step in a longer and more complex process. Once disparities are identified, both companies and enforcing agencies should follow up with additional research and analysis to determine whether these disparities are linked to discriminatory practices, and what type of remedial options could be adopted.

References

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

Land Market and a Pre-emptive Right in Farmland Sales

Posted on October 25, 2021 | Policy Brief

20211025 Land Market Image 01

After more than 20 years of a land sales ban, Ukraine finally opened its farmland market on July 1st, 2021. A design of the land market contains a pre-emptive right to buy the land for the farmland tenants. In this study, we model the effect of this pre-emptive right. Following the approach of Walker (1999), we use a theoretical model with three players – landowner, potential buyer, and the tenant – to model outcomes of the land transactions with and without the pre-emptive right. To empirically estimate the effect of the pre-emptive right, we use farm-level data to derive farmers’ maximum willingness to pay and the minimum price that landowners are willing to accept. The introduction of the pre-emptive right decreases the land price and increases the tenant’s chances of winning as well as his surplus, at the cost of a potential buyer and the landowner. The introduction of the pre-emptive right also leads to inefficient distribution and deadweight losses to the economy.

Introduction

After more than 20 years of a land sales ban, Ukraine finally opened its farmland market on July 1st, 2021. The moratorium on the sales of agricultural land in Ukraine covered of 96% of the country’s farmland market (or 66% of its entire territory).

The critical element of the newly opened Ukrainian farmland market design is the pre-emption right (right of the first refusal, RoFR) that is granted to the current tenant of land plots. By applying their pre-emptive right, tenants can purchase the land at the highest price the landowner could get on the market. On top of that, this right is transferable, meaning that the tenant could sell the right to the interested party. In this brief, we model the consequences of the pre-emptive right introduction in Ukraine.

Farmland Market in Ukraine

The moratorium on farmland sales that was in place for the last 20 years created a substantial distortion on the farmland market. It led to the situation where large companies predominantly cultivate the rented land, with the average share of leased land in the land bank for corporate farms in Ukraine approaching 99% (Graubner et al., 2021). Another noticeable trait of the farmland market in Ukraine is significant inequality in Ukrainian farms’ land banks. Based on the statistical forms 50AG, 29AG, and 2farm, our calculations show that the GINI index for the allocation of cultivated land across farms in Ukraine is 86%, indicating an extreme degree of inequality. As we can see from Table 1 – the top 10% of farms operate on 75% of all cultivated farmland in Ukraine.  On the other side of the spectrum, 49% of the smallest farms in Ukraine operate on only 2% of the cultivated farmland and rent only 0,3% of all rented farmland.

Table 1. Ukrainian farmland market structure 

Source – own calculations based on the statistical forms 50AG, 29AG, 2farm for the year 2016.

Therefore, in our analysis, we break a sample of Ukrainian farms into five categories with respect to their size.

Framework

To model the effect of the pre-emptive right, we will use the approach proposed by Walker (1999) using farm-level data. Thus, this study compares two scenarios – with the pre-emptive right (right of the first refusal, RoFR) and without the pre-emptive right in place. We assume that there are only three sides to each transaction – the seller (landowner), the prospective buyer, and the tenant, to whom the pre-emptive right is granted. Throughout this brief, we assume that there are no transaction costs involved.

Scenario 1. No Pre-emptive Right

In the no-RoFR scenario, the prospective buyer offers the landowner a price that the seller is willing to accept. The seller now has two options: either accept and get the offered price or reach the tenant and propose to outbid this offer. The option of reaching a tenant is more attractive since, in a worst-case scenario, if the tenant’s valuation – i.e., the maximum price the tenant is willing to pay for the land plot – is lower than the offered price, the tenant would simply not respond to this offer, and the landlord still gets the offered price.

On the other hand, if the tenant’s valuation is higher than the offered price, he has a strong incentive to make the counteroffer and start a bidding process. Both the tenant and the prospective buyer are incentivized to make a counteroffer up until the point where the offer’s value reaches their respective valuation. Thus, the smallest valuation between those of the tenant and prospective buyer would be the final transaction price.

Scenario 2. A Tenant Has the Pre-emptive Right

In this scenario, the tenant does not need to increase the price in his counteroffer if the third-party buyer’s offer is lower than the tenant’s valuation. The tenant could execute his pre-emptive right and buy the plot at the third-party buyer’s proposed price. Therefore, the outside buyer will change his approach to the initial offer. If the offer he makes is “too low”, he loses the chance of buying this plot since the tenant would exercise his pre-emptive right. If the offer is “too high,” he misses the profit he would make by making a lower offer.

In such circumstances, the transaction price will be given by the third-party buyer’s offer that maximizes his expected profit. The latter, in turn, depends on the probability of the tenant exercising his preemptive right, the third-party buyer’s own valuation, and the price he offers to the landlord. The probability of the tenant exercising the offer is the probability that the tenant’s valuation exceeds the offered price. It depends on the tenant’s farm size category and on the offer itself and can be calculated based on the distribution of valuations.

Empirical Approach

Our empirical analysis considers a (hypothetical) situation of a third-party buyer coming to the landowner, whose land is rented to another farmer, with the offer to buy a one-hectare plot. We assume that the offer exceeds the landowner’s minimum price that a landowner is willing to accept (WTA). The landowner’s WTA is proxied by the current rental price the landlord gets multiplied by the capitalization rate, set to 20 for all three sides of the transaction. The farmers’ valuations are estimated based on their net profit per hectare. We use the farm-level data to compute the average net profit per hectare needed for valuations estimation and the average rental price per hectare for the WTA estimation. This data was collected by the State Statistics Service of Ukraine through statistical questionnaires called 50AG, 29AG, and 2farm for the year 2016 and covers 39,297 farms. The descriptive statistics of the data are presented in table 2.

Table 2. Descriptive statistics

Source: own calculations based on the statistical forms 50AG, 29AG, 2farm for the year 2016.

We construct a set of potential buyers for each farm that operates on rented land based on the 10-km threshold distance between the tenant and third-party buyer. We end up with a sample of 764760 pairs of tenants and potential third-party buyers. We drop all pairs where third-party buyers cannot make an offer landlord is willing to accept. Therefore, only a sample of 291506 observations of tenant – prospective buyer pairs is used for the analysis. Importantly, for large and ultra-large farms, the share of observations that would attempt a transaction is 70% and 69% correspondingly. On the lower side of the size spectrum, this share is noticeably lower. For the group of small third-party buyers, the buyer would attempt the transaction only in 42% of cases. The most excluded from the farmland sales market category are ultra-small farms as they would only attempt the transaction in 25% of all cases.

Results

Our findings suggest that the effect of the pre-emptive right on the land price is twofold. On the one hand, in 55% of cases – the RoFR price is higher than the (modelled auction) price in the absence of a preemptive right. However, the median price differences in these cases are just 0,7% of the auction price. At the same time, for the cases where the auction price is higher than the price with the RoFR, it exceeds the RoFR price, on average, by 83%, with a median value of 66%. As a result, if we compare the expected prices, the expected prices under the RoFR are significantly lower than the auction prices. There are also differences between different farm size categories of the third-party buyer – the larger the buyer is, the higher the transaction price would be regardless of the RoFR. In the scenario without the RoFR, the average transaction price for ultra-small farms would be $1259 per hectare. While for the ultra-large farm as the third-party buyer, the transaction price would be $1647. With the pre-emptive right granted to the tenant, the transaction prices would be $977 and $1313 correspondingly.

The pre-emptive right also increases the probability of the tenant acquiring the land. The most noticeable effect is for ultra-small and small farms – if an outside buyer attempts the transaction, their chances of purchasing the land increase from 12% to 28% and from 23% to 45%, respectively. The probability increase for the larger tenants persists, but percentage-wise it is smaller – their probability of purchasing the land due to the granted pre-emptive right increases from 42-45% to 65-66%.

The pre-emptive right also redistributes the surplus from the transaction. Measuring the surplus as the difference between the valuation and the buyer’s actual purchase price, we can conclude that the third party’s surplus decreased due to the RoFR introduction. The tenant’s surplus, on the other hand, increases. In the case of RoFR introduction, the percentage increase in the tenant’s surplus is larger for the ultra-small and small farmers, from 5% to 13% and from 10% to 23% of the tenant’s valuation, respectively. For larger farms, albeit the surplus’ increase is larger in absolute terms, percentage-wise, it is smaller than for their smaller counterparts. Their average surplus increased from 18-20% to 37-38% of the tenant’s valuation. For the third-party buyers, the percentage-wise decrease is more or less the same, regardless of their farm size. Their surpluses, on average, shrink by 23-27% depending on the size of the farm.

We also estimated the effect of the pre-emptive right on the joint surplus of the landlord and the tenant. The effect of the pre-emptive right on their joint surplus is positive regardless of the size category of the tenant. The largest increase of the joint surplus, percentage-wise, is observed for the small-sized farms as a tenant. In this case, the average joint surplus increased by 5%, translating into an $87 increase in the joint surplus. In absolute terms, the highest increase is for medium-sized farms as a tenant – $108 increase in the surplus or 4.5% of their original joint surplus.

The pre-emptive right also leads to inefficient allocations when the land is acquired by a lower valuation party, resulting in deadweight losses. Inefficient allocation is observed in 19% of all observations. The deadweight losses generated by the introduction of the ROFR are statistically significant (with the t-value equal to 195) and average 233 USD per hectare.

Conclusions

In this brief, we suggest a theoretical and analytical approach to calculate the impact of the pre-emptive right in farmland sales. Our analysis offers a range of important findings. First, small and medium-sized farms are almost entirely excluded from the farmland market. While more than two-thirds of the medium, large or ultra-large farms can afford to buy a nearby parcel, based on their profitability – for ultra-small farms, which have a land bank of under 50 hectares – this share is equal to just 25%. The introduction of the pre-emptive right granted to the current tenant may exaggerate this problem. The reason is that most of the rented land is already controlled by large and ultra-large companies. At the same time, the pre-emptive right increases the tenant’s probability of winning and its surplus at the expense of the landowner and outside buyer.

On the other hand, the pre-emptive right increases the joint surplus of the tenant and the landowner. Therefore, if the pre-emptive right would be a voluntaristic clause in the contract, rather than a right granted to all tenants by the government, it creates an incentive to include the pre-emptive right in the rental agreement with the price of this right negotiated between the landlord and the tenant.

Summing up, the pre-emptive right, as a policy instrument, has its costs. It leads to inefficient distribution and deadweight losses. In view of this, as much as the recent farm market reform in Ukraine is a clear step towards a market economy, the design of the land market should be taken with a grain of salt.

References

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

Green Banking and Its Development in Belarus

Posted on October 12, 2021 | Policy Brief

20211012 Green Banking and Its Development in Belarus Image 01

Climate change and environmental protection are challenging both policymakers and society. People are getting increasingly concerned about the careful consumption of water and energy, use of biodegradable products, and biodiversity. In these conditions, more and more companies and industries adopt “green” and “sustainable” standards in their work. The financial sector is also involved in this process. For banks and other financial institutions, green activities require adopting new approaches, strategies, and instruments. This brief discusses green banking with a special focus on the development and challenges of this industry in Belarus. It concludes by providing policy recommendations for green banking development in the country.

Introduction

Sustainable development is one of the main global challenges, and an important role in facilitating and funding it belongs to green financing. The UN Environment Program defines green financing as “to increase the level of financial flows (from banking, micro-credit, insurance, and investment) from the public, private and non-profit sectors to sustainable development priorities”. Such financing can be provided by banks, financial institutions, nonfinancial private companies, governments, and individuals. The instruments of green financing range from climate, blue, and sustainability bonds to green credits and mortgages. One of the leading roles in the field is played by banks, which will be the focus of the current brief. This brief first offers a general overview of green banking. Then it and a discusses the existing green banking practices and challenges in Belarus. It concludes by providing policy recommendations for the development of the Belarussian green banking sector.

Green Banking: An Overview

The Indian Bank’s Association defines a green bank as “a normal bank which considers all the social and environmental/ecological factors, with an aim to protect the environment and conserve natural resources”. Moreover, the Finance Initiative of the UN Environment Program states that all green banks’ operations and activities should be consistent with sustainable development goals (Tara, K., Singh S., Kumar, R., 2015).

Considering the importance of green and sustainable development, it is natural to expect increasingly more financial companies and banks to implement eco-friendly instruments and policies. However, there is still much work to be done to ensure that market players consider green aspects in their deals. For example, while the European “green” financial market is growing rapidly, the Green Assets Ratio (GAR, the share of green loans, bonds to total bank’s assets) was only at 7,9% for the EU banking sector in March 2021 (Huw Jones, May 21, 2021).

A necessary component to speed up banks’ uptake of green practices is an appropriate regulatory and supervisory framework. Indeed, as green aspects become part of the traditional banking activities – e.g., international financing, work in foreign markets, participation in financial programs and projects -, there  is a need to develop common rules of work, principles, and standards in the green financing sphere. Today, several international initiatives and platforms provide such rules. For example, the Energy efficient Mortgages Initiative supports green mortgage development in Europe (Energy Efficient Mortgages Initiative, n.d.). The International Capital Markets Association acts as a (self-) regulatory organization that forms, implements, and manages principles and standards of green social, or sustainable bonds. One of the famous standards in green finance is the Equator Principles, a set of guidelines for project financing evaluation that incorporates social and environmental risks management (Equator Principles, n.d.). The Climate Bonds Initiative supports the mobilization of the bond market to meet the challenges of climate change (Climate Bonds Initiative, n.d.).

At the same time, most national monetary regulators work on legislation and rules of green banking development. The financial sector in general and the banking sector in particular are highly regulated. Financial institutions distribute owned and borrowed funds by providing short- and long-term credits and investing in numerous financial instruments with different levels of risk in national and foreign currencies. Monetary regulators need to control the their activity in order to minimize banks’ risks (credit, liquidity, and currency risk, etc.). For this reason, it is essential to have clear guidelines for dealing with new instruments (climate, social, blue, sustainability bonds, green mortgages, etc.), as their characteristics are likely to differ from the traditional ones. For instance, green bonds may have distinct characteristics of issuing and circulation. Green mortgages can be considered less risky than traditional credits due to more liquid collateral (energy-efficient buildings). There are specific measures that could make green instruments more attractive for banks, for instance by introducing green capital requirements or regulation against greenwashing.

Apart from guidelines, recommendations, and rules, central banks can create additional incentives for developing the green financial market. For example, the Bank of Bangladesh established a preferential lending Fund for projects in spheres such as renewable energy, energy efficiency, alternative energy, and green industry (Ulrich Volz, March 2018). Also, the Central Bank of Hungary introduced preferential capital requirements for energy-efficient housing loans (Liam Jones July 13, 2021).

Another important aspect of regulation and incentives created by monetary regulators is environmental and climate change risks management. Climate change and the green transition increase the environment-associated financial risks for banks. Banks’ financial losses can result from not only storms floods, tsunamis, and temperature increases, but also financial problems of borrowers due to stricter environmental legislation and changes in social and environmental norms and standards.  According to the ECB survey, many banks develop sustainable development strategies, but very few include environment-associated financial risks in their risk management. Therefore, the ECB works on creating incentives and regulations for banks in green risks-management. It is expected that bank stress-testing will start in 2022 (Harrison C., Muething L., 2021). At the same time, the Bank of Bangladesh, with IFC support, has developed guidelines on social and environmental risk management for the banking sector (Ulrich Volz, 2018).

Based on the above mentioned, there is still much to be done to ensure that market players consider green aspects in their deals. Green banking is still a new thing, but its implementation takes place in many countries, and green finance is an essential element of sustainable economic development.

Green Banking in Belarus

In this section, we overview the current state and perspectives of green banking development in Belarus. The country takes its first steps in green finance market development. Socio-economic development program of the Republic of Belarus for 2016-2020 has incorporated green projects in spheres such as transport and agriculture, recycling, eco-labelling and eco-certification development, as well as a study of the implementation of green bonds and green investment bank creation (Ukaz № 466, December 15 2016). In 2016, the National Plan of Activities on Green Economy Development in the Republic of Belarus till 2020 was adopted. The plan included the development of areas such as organic agriculture, eco-tourism, energy-efficient construction, and smart cities (CMRB Decree, № 1061, December 21, 2016). However, none of these projects were introduced with links to green financing and green banking. The National Plan of the Activities of Green Economy Development in the Republic of Belarus till 2025 pays more attention to green finance. In this plan, there is a description of implemented projects in recent years and a list of instruments (green bonds, credits, insurance products), tools (indexes, ratings, databases, etc.), entities and elements of the green finance ecosystem (MNREPRB, 2021). Still, there is no plan or detailed strategy of special regulation, rules, or framework of green banking development.

In the absence of precise plans from the government, green banking in Belarus began to emerge at the micro-level. Banks started to provide green products for their clients, participate in sustainable initiatives, and implement green management in their work. One of the main incentives to transition towards more sustainable banking practices comes from the investors’ side. In the case of joint investment and lending programs implementation, many foreign partners require that the bank applies modern green standards.

Another incentive to this transition builds on reputational risks and competition. Today, there is a public demand for eco-products, energy-efficient construction, and environmental protection. Banks that consider these issues have a competitive advantage and gain a positive reputation among their clients. Moreover, some commercial banks with foreign capital have to introduce green standards and green management at the request of their parent companies.

A few green initiatives by Belarusian banks are worth mentioning here. The Belinvestbank can be distinguished as one of the brightest examples of green banking in Belarus. The financial institution started transforming into EcoBank – it began to hold green financing transactions in the framework of the Global Trade Financial program (a program by the International Finance Corporation), adopted a new ecological and social strategy, issued a charity-bonus payment card made from recycled plastic, and held activities in ecological spheres (Belinvestbank, 2020). The bank plans to issue green bonds, establish green projects accelerator, continue green financing, and build new communications approaches with its clients (Belinvestbank, 2019a). Green financing is one of the main lending spheres of the EBRD, which planned to purchase a share of Belinvestbank.

Priorbank is another case of a green banking initiative in Belarus. The bank presented a new type of lending that allows consumers to buy only energy-, water- and heat-efficient products (Priorbank, 2021).

The Development Bank of Belarus launched a program of ecological projects financing for small and medium businesses and individual entrepreneurs for preferential interest rates (DBRB, n.d.).

As part of the Belarus Sustainable Energy Finance Program (BelSEFF) framework, funding was provided by banks such as MTBank, BelVeb Bank, BPS-Sberbank, and Belgazprombank with EBRD support (Tarasevich. V., 2014). Agreement about energy-efficient projects financing between MTBank and Nordic Environment Finance Corporation can be highlighted as one more example of a green initiative (Aleinikov & Partners, n.d.). The last but not least example of green activities is the joint project of BNB-Bank and North Ecological Financial Corporation in which they offered loans to private individuals and legal entities for the purchase of hybrid and e-vehicles, as well as for building infrastructure for e-vehicles. (BNB-Bank, n.d.).

Some Belarusian banks implement standards of environmental management into practice. For example, the Sustainable Development Report of Raiffeisen Bank International mentions that the Raiffeisen Group plans by 2025 to reduce carbon dioxide emissions by 35% (Raiffeisen Bank International, 2019). They also present plans on water savings, reduction of paper document flow and energy consumption. Priorbank is involved in this process as part of the Raiffeisen Group. Similar goals can be found in the Sustainable Development Report of Bank BelVeb. The environmental priories of the bank are to reduce pollution, restore biodiversity, and increase the efficiency of water,  energy, and other resources consumption (BelVeb, 2019). In the Social Report of Belarusbank it is mentioned that the bank tries to consider negative environmental effects and ecological factors in their lending-decisions (Belarusbank, 2020).

Based on the information above, the conclusion is that Belarusian financial institutions gradually introduce principles of green banking. Most green projects in Belarus are implemented with the support of international financial organizations, parent institutions, or by request from foreign bank partners. Today, Belarusian banks carry out two types of green banking activities. First, they incorporate an environmental perspective in their everyday activities, not directly related to green finance: for example, by reducing water and electricity consumption and waste, switching to electronic document management, providing green incentives to their employees, etc.. Second, banks integrate an environmental perspective into their financial activities using green instruments, for instance by providing loans to the population and corporate sector based on  sustainable finance principles.

At the same time, Belarusian banks do not work with climate-related and environmental risks management. This is not surprising, as, normally, regulators would initiate and incentivize this process, but in Belarus, neither the National Bank nor any other regulator deals with environmental risk management rules for banks. Another challenge is that Belarusian banks do not take part in international green financing initiatives, such as the Equator Principals or the Climate Bond Initiative. Finally, the narrowness of the Belarusian financial market and absence of clear rules and definitions restrict green bond markets and green mortgage development.

Recommendations

Investment in green projects imposes positive externalities on society that are not necessarily internalized by the market. As reflected in the international practices discussed earlier, support from the government and financial authorities might be necessary both in monetary and regulatory terms. Even if developing countries like Belarus may not have a green transformation on top of their agenda, they will soon be faced with the necessity to adapt to the European Green Deal, at least with respect to their trade with the EU. Hence, they will also need policies that promote and support green finance development.

Based on international experience and national issues of green banking, the following recommendations can be highlighted (Luzgina A., 2021):

  1. The adoption of supportive regulation/rules of work with green instruments, including green, sustainable and/or sustainability-linked bonds, green mortgages, and green project financing. This regulation can include criteria for identifying green projects and construction, principles of green projects evaluation, rules of green bonds issuing, tax benefits, and/or preferential credit eligibilities. The ResponsAbility Investments Survey confirms the necessity to implement special rules on green lending development in emerging economies. According to the survey, 40% of respondents believe that an affordable regulatory environment is a key element of green loan market development (ResponsAbility Investments AG, 2017).
  2. The implementation of economic and social incentives for green banking activity popularization. Such incentives can include lower interest rates on green loans, providing tax exemptions for companies and people involved in green projects realization, subsidizing the process of green bonds verification, and holding study activities on green economy and finance. According to ResponsAbility Investments Survey, 60% of respondents agree that special green credit lines of public financial institutions have played an important role in green finance development. At the same time, governments subsidize the process of bonds verification issued by SMEs in Russia (at the stage of adoption), Singapore, and Japan (Vinogradov E. April 2, 2020).
  3. The creation of an additional section in the Belarusian currency and stock exchange for green corporate and state bonds circulation. Green or sustainable bonds have special characteristics in terms of issuing purposes and listing features that require highlighting them in a separate section.
  4. Guiding the development of climate-related and environmental risks management as well as green management rules implementation for all banks. Based on the international experience, this area of green banking requires incentives from the Government and Central Bank, as it is poorly studied and associated with additional costs for banks. Financial institutions are not sufficiently motivated to implement green risks management principles on their own.
  5. Extending the international collaboration in the field of green finance. This activity may include participating in not only international programs on green financing or foreign investments attraction but also international initiatives such as Principles for Responsible Banking, Climate bonds Initiative, Equator Principles, etc..
  6. The development of a green banking methodology and (or) strategy/ concept by responsible bodies. The introduction of green banking requires the development of new approaches, definitions, and rules that are within the competence of not only the Central Bank but also the Ministry of Economy (in terms of SMEs support), Ministry of Finance (in terms of funding), Ministry of Agriculture (in terms of the development of bioproducts standards), Ministry of Architecture and Construction (in terms of energy-efficient building definition and indicators), Ministry of Natural Resources and Environmental Protection, etc. An institutional body could coordinate this work by developing a methodology of green banking in discussion with the National Bank, ministries, and other interested parties (NGOs, banks). The association of Belarusian Banks can perform this function as it knows the specifics of banking legislation, can identify the existing obstacles of green banking and other challenges in the field, and is interested in developing the Belarusian banking system in line with current trends.

Conclusion

Green finance as a whole and green banking in particular will continue to develop. Monetary regulators are working on green rules and risk management implementation for banks. Financial institutions from different countries are participating in international green initiatives and developing sustainable strategies.

Green banking development is an international process which Belarus cannot ignore. Today, the majority of green activities at the national level are based on the initiative of banks. Contracts with international financial institutions and requirements of parent companies and investors motivate Belarusian banks to implement green instruments and approaches. Traditionally, the banking system works under restricted and highly regulated conditions. Therefore, it is necessary to introduce clear rules of green banking by the government as well as to increase the attractiveness of green financing, including economic and social incentives development.

Otherwise, the existing policy gap in green banking will widen and the opportunities for collaboration between Belarusian banks and foreign financial institutions will diminish. Finally, the absence of green regulation will deteriorate the quality of risk management in the Belarusian banking system compared to the world level.

References

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

Dimensions of Well-being

Posted on September 20, 2021 | Policy Brief

20210920 Dimensions of Well-being Image 01

This brief summarizes the insights shared in the online workshop “Dimensions of Well-being“, where participants presented and discussed their latest research relating to the dimensions of well-being. The two-day workshop was organized by the Stockholm Institute of Transition Economics (SITE) as part of the Forum for Research on Gender Economics (FROGEE) and took place on 28-29 June, 2021.

Introduction

It has been roughly 18 months since the first cases of Covid-19 were reported in Europe. So far the total number of deaths worldwide has passed 4.4 million (John Hopkins University, 2021), unemployment is trending upward in most countries (ILOSTAT, 2021), roughly half of the world’s students have been affected by school closures (UNESCO, 2021), and an alarming increase in domestic violence has been reported across the globe (UN Women, 2020).

It is safe to say that this pandemic crisis has had a multifaceted impact on our lives. Identifying what factors contribute to overall well-being and understanding how they interact with one another is central in designing and implementing solid and effective recovery policies.

Stockholm Institute of Transition Economics invited international experts to an online workshop where they discussed and presented their recent research relating to the dimensions of well-being. The workshop was organized as part of the Forum for Research on Gender Economics (FROGEE).

Well-being in a Pandemic

The government response policies intended to contain the spread of Covid-19 have undoubtedly had a major impact on society. However, estimating the overall effect of these policies on individuals’ well-being is not necessarily straightforward. Economic support policies likely have a positive effect on income and decrease poverty. But at the same time, other responses such as lockdowns and mobility restrictions may not only have an opposite effect on these outcomes but also influence other known determinants of well-being such as social life or education.

Anthony Lepinteur, researcher at the University of Luxembourg, presented his recent work on the well-being consequences of the pandemic policy responses in Germany, France, Spain, Italy, and Sweden. Lepinteur and co-authors link survey data on subjective well-being measures to data on government economic policy and stringency indices. The former index records financial policies such as income support, furlough schemes, and debt relief while the latter measures the strictness of Covid-19 containment and closure policies. The results show that more stringent policies reduce life satisfaction, and this negative effect is stronger for women, the unemployed, and those with relatively high incomes. Economic support policies are found to have no significant impact on reported life satisfaction.

As many countries have experienced major disruptions in many sectors of their economy, concerns have been raised about deteriorating labor markets and the effect this might have on living conditions and, ultimately, the well-being of individuals. Knar Khachatryan, associate professor at the American University of Armenia, shared research studying the impact of Covid-19 on multidimensional deprivation from labor market opportunities in Armenia. Knachatryan and co-authors base their analysis on two surveys from 2018 and 2020. To measure labor market opportunities, they adopt the “Alkire-Foster method” to develop a multidimensional index of labor market deprivation – a basket of indicators explaining an individual’s degree of labor market opportunities (e.g. education, employment status, income, type of work contract, and union membership). With respect to this index, they find that education is the most important determinant of multidimensional labor market deprivation – those having less than a bachelor’s degree are very likely to be deprived in terms of labor market opportunities. The results also show that the pandemic has widened the gender gap in labor opportunities. The number of people classified as deprived has increased more for women than men during the pandemic. This is primarily because women experienced stronger income reductions and more frequent job losses.

Thesia Garner, researcher at the U.S. Bureau of Labor Statistics, discussed how ex-ante levels of well-being have affected the outcomes of economic support policies during the pandemic. More specifically, her study investigates the role of individual’s well-being in determining their reported use of economic impact payments (EIP) in the U.S. Garner and co-author assess well-being using both objective measures (e.g. income sources, employment status) and subjective ones (e.g. depression, financial difficulty, expectations about job-loss or eviction). The findings show that those who report lower levels of subjective well-being are more likely to use the EIP to pay off debt, and this likelihood increases as the well-being measures worsen. Respondents who report having experiences of financial difficulty and negative expectations about the economy are more likely to spend the stimulus on nondurables and tend to allocate it to a wider range of spending categories.

In contrast to the U.S. and most other countries in the world, Belarus’ government offered very little support to its citizens during the pandemic. Lev Lvovskiy, researcher at BEROC, presented findings on how different sectors of the Belarusian economy and society were affected by the pandemic. Using the BEROC/Satio survey data, Lvovskiy and co-authors examine that the country still had sharp drops in mobility and economic shocks mainly caused by lockdowns of major trade partners. The pandemic significantly increased the probability of income reductions and they show that financial distress associates with the incidence of depression of Belarusians.

Gender and Wellbeing

Another central topic discussed at the workshop concerned the gender aspects of well-being and other related topics from gender economics.

An essential channel through which gender differences in well-being can arise is unequal representation in politics. Sonia Bhalotra, professor at the University of Warwick, presented a study on the relationship between maternal mortality and women’s political power in 174 countries. Maternal mortality is the leading cause of death and disability for women aged 15-44, and significantly higher in low-income countries – at levels similar to what high-income countries had in the early 1900s. Bhalotra and co-authors document that the costs of providing access to prenatal health services, antibiotics, and skilled birth attendance are relatively low. They therefore argue that there are likely other barriers to adopting these solutions. Male policymakers might have a weaker preference for preventing maternal mortality or less information on its prevalence and treatment. To gain insight, the authors use a staggered event-study approach and study the effect of gender quota implementations on the maternal mortality ratio (MMR, maternal mortality per birth). They find that, in countries that adopted quotas, the MMR declined by 10% following implementation, and this effect is stronger for larger quotas. Focusing on the mechanisms, the results show that gender quotas lead to a 5-8 percentage point (p.p.) increase in skilled birth attendance, a 4-8 p.p. increase in prenatal care utilization, 6-7 % decline in birth rates, and an increase in girl’s education by 0.5 years.

Elizaveta Pronkina, researcher at Université Paris-Dauphine, also shared findings relating to gender and politics but from a historical perspective.  Her research studies historic institutional differences across communist regimes and women’s work experiences. The paper focuses on Lithuania and Poland, two countries that experienced different gender policies under a communist regime. After the second world war, Lithuania was controlled by the central government of the Soviet Union while Poland’s government was able to preserve its independence although being part of the Soviet bloc. Based on anecdotal evidence, the two countries had the same religious and political policies but different enforcement – Lithuania faced a hard and Poland a soft form of communism. To isolate the impact of the Soviet policies on women’s life decisions and account for differences in the countries’ pre-communist era, the authors only include regions that were part of the Russian empire until the end of the first world war. The findings show that women living under the Soviet regime were more likely to educate themselves and have on average two additional years of work experience (by 50 years of age).

A productive environment and reliable social interactions at work are also likely to be formative elements of people’s well-being, and gender might factor in here. Yuki Takahashi,  PhD candidate in economics at the University of Bologna, presented his paper on how being corrected by others affects one’s willingness to collaborate with them in future work, as well as gender differences in these responses. Takahashi conducts a quasi-experimental design in which roughly 3000 participants individually and collectively solve a puzzle. The setting allows the researcher to observe individual ability, number of corrections, as well as whether the corrections were good (i.e., a mistake was corrected), or bad (i.e., a good move was corrected). The study analyzes how the different factors affect an individual’s likelihood of being selected as a collaborator in a last puzzle-solving stage where both participants win cash earnings based on joint performance. The results show that both genders respond negatively to a correction, but women more so than men. Men are less likely to collaborate with a person who has corrected their mistake, particularly men with high ability. The gender of the corrector is found not to matter.

Domestic violence (DV) is another gender aspect of well-being that has become particularly concerning during the pandemic. For many victims, lockdowns and curfews have meant more exposure to their perpetrator. Mobility restrictions have also implied more social isolation from family members and friends as well as increased economic distress, two other factors known to exacerbate DV. In a preliminary study presented by Damian Clarke, associate professor at the University of Chile, he and co-authors address the relationship between DV and quarantines in Chile. They use longitudinal data on police DV hotline calls and use of women’s shelters to measure DV incidence, criminal complaints of DV to police to measure reporting, and mobile phone data to measure mobility. Exploiting municipal variation in the timing of lockdown entry and exit, the study shows that lockdowns lead to more DV incidence and less reporting. DV shelter use increased on average by 11% with entry and reversed with exit. DV calls to the police hotline increased by 86% and persists after lockdown exit. DV crime reports decrease by 5% and increases by 10% with exit. Moreover, the authors document that lockdowns activate both DV mechanisms – increased economic distress and decreased mobility. In municipalities where lockdowns had a stronger impact on unemployment and mobility, they also find larger changes in DV.

Expectations About the Future and Parenthood

Two other studies presented at the workshop discussed the relationship between future expectations and well-being. Claudius Garten, researcher at the Technical University of Dortmund, presented findings on the role of homeownership. Garten and co-authors utilize individual-level survey data from 2007 covering 14 European countries. It contains information on homeownership status and wellbeing measures expressed as respondents’ expectations about future living standards five years from today. They find that expectations about future living standards are higher among homeowners relative to renters and strongly associated with the value of housing assets, suggesting that material security through housing ownership works as a channel for future wellbeing. Garten further argued that since most countries included in the sample have experienced rising house property prices and increased rents since 2007, the divergence between renters and owners is likely to be even more significant today, especially in urban areas.

The second presentation that discussed expectations about well-being in later life was by Alina Schmitz, researcher at the Technical University of Dortmund. Unlike housing, which is seen as a form of material security, Schmitz’s study focuses on the role of health infrastructure quality. Availability of care services may be seen as a safety net in case of illness and care dependency and should thus have a positive effect on wellbeing. The study performs a multilevel analysis on the individual, regional and, country level using micro-survey data on individuals’ life satisfaction and macro-data on the availability of long-term care beds, covering 96 regions from six European countries in 2015. The results show that the quality of care infrastructure is significantly related to the wellbeing of those aged above 50. Moreover, care infrastructure is particularly important for the wellbeing of those with health limitations (i.e. those who require that infrastructure either now or in the future).

Parenthood is another factor that is commonly thought of as a source of happiness. Contrary to this idea, European populations are aging rapidly and the young today have fewer children than the generations before them. The reason why people choose to have few children could be several – e.g. high opportunity costs and/or low benefits of having a large family. Is the fertility rate we see in the developed world today a result of the well-being-maximizing decisions of individuals? This is the main question asked in the paper presented by Barbara Pertold-Gebicka, assistant professor at the Institute of Economic Studies at Charles University. Her study utilizes European survey data to investigate the effect of having an additional unplanned child in five developed countries. To measure the effect of an additional unplanned child and deal with the fact that happy individuals tend to have more children, Pertold-Gebicka and co-author compare people who had twin births in their second pregnancy with parents of two children. Apart from life satisfaction, the most common wellbeing measure, the authors construct a second measure of wellbeing denoted as the happiness index – normalized value summarizing five questions about feelings over the last 5 months, interpreted as the relative frequency of positive feelings. They find no significant effect of having a third child on the well-being of parents. However, when separately looking at groups divided by age of children, they find that the effect of having an additional child on well-being is negative for fathers of younger children and positive for those of teenagers. For the parents of younger children, they show that the negative effect of having a third child is likely driven by increased feelings of nervousness and problems relating to accommodation.

Measuring Inequality and Social Deprivation

Some aspects of wellbeing such as feelings of unfairness or social connections can be quite ambiguous to study as they depend on context and are hard to quantify.

Nicolai Suppa, researcher at the Centre for Demographic Studies at the UAB, presented his research aimed to improve the measurement of deprivation in social participation (DSP) and complementing previous work with an additional outcome variable measuring a different dimension of deprivation. The study uses German survey data to measure how often common social activities are performed and then uses an intersectional approach (similar to the “Alkire-Foster method”) to assign individuals as deprived based on if and how often they practice these activities. The findings show that while the DSP measure correlates positively both with income poverty and material deprivation measures, it identifies a different sample of individuals. Being deprived in terms of social participation is associated with a significant loss of life satisfaction, a magnitude comparable to the loss of being unemployed.

Ingrid Bleynat, researcher at Kings College London, also discussed how to improve measurement but presented a study focusing on a different dimension of well-being, inequality. While quantitative approaches may give little account of the detailed mechanisms of inequality and its multidimensionality, qualitative studies often focus on a subset of the population which make results difficult to generalize. Bleynat and co-authors suggest a mixed approach, combining quantitative and qualitative assessments of inequality. They utilize neighborhood-level data on average household income in Mexico City to randomly select five households in each decile of the income distribution and conduct semi-structured interviews in these households to better understand the nuances of inequality. Based on these interviews they construct two qualitative measures. The first is called inequality of lived experiences and measures qualitative experiences in work, education, and health services across the income distribution. The second is called lived experiences of inequality, and measures feelings of stigma, discrimination, and social hierarchy across gender, ethnicity and location. The quantitative data confirms that Mexico City is highly unequal across the income distribution in terms of not only income but also social factors such as housing, health and food security. The results concerning the qualitative measures, such as inequalities in lived experiences or lived experiences of inequality confirm the existing understanding – e.g., that households belonging to the lower deciles are more likely to be mistreated in the public health sector, have a hostile school environment, and worse working conditions, or that women across the income distribution bear most of the childcare responsibilities, – but provide nuanced details on the interaction between material inequality and the reported experiences.

Conclusion

There is no doubt that the impact of Covid-19 on our well-being has been many-sided, and the presentations of the workshop have clearly demonstrated the broad spectrum of related problems and concerns, as well as their variation across institutional, social, political, economic, and cultural contexts.

Although we are well underway, further research and comprehensive data collection on how people have coped with and responded to the pandemic is needed to design sensible recovery policies and incentivize governments to implement them.

On behalf of the Stockholm Institute of Transition Economics, we would like to thank the experts who shared their insightful research and participated in “Dimensions of Well-being“.

List of Participants

Part 1 | Online Workshop on Dimensions of Well-being

Part 2 | Online Workshop on Dimensions of Well-being

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.

IMF’s New SDR Allocation—Why Belarus Is “Getting Money From the Fund”

Posted on September 9, 2021 | Policy Brief

20210909 IMF New SDR Allocation Image 01

Why is the IMF sending $1bn to Belarus as the country is falling deeper into repression and authoritarianism? The short answer is that Belarus, together with 189 other countries, is a member of the IMF and the institution has decided to make a $650bn allocation of SDRs to its members in proportion to their quotas in the IMF. Belarus has a quota of 0.14 and will thus receive an injection of around $1bn to its reserves. In other words, this is not a decision to support the Belarus government as such but a general decision by the IMF members to support a global recovery after the Covid-19 pandemic. That said, it still means that the leaders of Belarus are given an asset worth $1bn that can be used without conditions, but the underlying reason to support the recovery in low- and middle-income countries still makes this palatable.

Introduction

On August 2, 2021, the board of the IMF approved the largest-ever SDR allocation to its 190 member countries. Belarus is one of the members that, by this decision, will get a boost of reserve assets of almost $1 billion. This has raised the question in some circles of “why is the IMF giving money to Belarus”. This brief provides a short background on IMF SDR allocations; how this may be used by the autocratic regime of Belarus; and why the general SDR allocation still makes sense.

SDR Allocations

For most people, an IMF “SDR allocation” is just another mysterious acronym that means very little. Therefore, a short introduction to the concept is warranted. SDR is short for Special Drawing Rights and is the IMF’s own reserve asset and unit of account, with a value that was first linked to gold but is now based on a basket of other currencies (IMF 2021). More specifically, the value of the SDR is based on a basket that consists of the U.S. dollar, euro, yen, pound sterling, and Chinese renminbi (since 2016). Table 1 shows the amounts of each currency and the value of the SDR based on exchange rates for August 26, 2021. In short, on that date, 1 SDR was worth approximately 1.42 U.S. dollars. Since the cross-exchange rates in the basket vary over time, so does the value of the SDR (see Figure 1).

Table 1. The SDR basket

Source: IMF (https://www.imf.org/external/np/fin/data/rms_sdrv.aspx)

Figure 1. SDR valuation

Source: IMF’s IFS database

The next issue is how SDRs are allocated among the IMF members. This is determined by the IMF’s Articles of Agreement and is done to provide reserve assets to its member countries. A new SDR allocation requires an 85 percent majority in the board to pass, and SDRs are then allocated to members based on their quotas. IMF quotas, in turn, are basically the stake the different member countries have in the Fund and are roughly based on the size of the economy of the country relative to other members.  Since several countries joined the IMF after the general SDR allocations in 1981, a special allocation was done in 2009 to allow new member countries to join the SDR Department on more equal terms. There was also a large general allocation in 2009 during the global financial crisis and in 2021 in response to the COVID-19 pandemic (Figure 2). The latter one is by far the largest and given the exchange rate in Table 1, the SDR456.5 billion is equivalent to around $650 billion.

 Figure 2. SDR allocations

The final issue to address in this section is why the SDR allocations matter at all. The answer is that SDRs can be exchanged for other currencies that, in turn, can be used to buy goods and services in international markets, including vaccines, other medical equipment, services, or food. When countries use the SDRs in this way, there is a cost in terms of the interest rate countries pay on SDRs. However, this interest rate is very low compared to other types of borrowing, so it is a cheap way of getting more foreign currency to spend (see Figure 3). In other words, for countries lacking access to foreign exchange at reasonable costs, the SDR allocation is a very welcome addition to their spending power.

Figure 3. Interest rate on SDR

Source: IMF’s Finance Department

Belarus and the IMF

Belarus became a member of the IMF in July 1992, shortly after the dissolution of the Soviet Union. Its quota in the IMF is SDR 681.5 million (or a share of 0.14 percent of total).

Belarus has had two IMF programs so far, the first in the early 1990s and the second in the wake of the global financial crisis in 2009. In the latter program, the IMF board approved a $2.5 billion loan “in support of the country’s efforts to adjust to external shocks” on January 12, 2009 (IMF, 2009a). The loan was then increased to a total of $3.5 billion in June 2009 (IMF, 2009b).

Despite the need for reforms and external funding, Belarus could not reach an agreement with the IMF on continued funding and instead repaid the loans to the Fund between 2012 and 2015. At the heart of this was the fact that for a country to get financial support in a regular Fund program, conditions will apply and will not always be stated explicitly, including on how to deal with human rights issues that are outside the Fund’s mandate. Therefore, the previous money from the Fund to Belarus was fundamentally different from the general SDR allocation described here, which is money without strings attached.

As the Covid-19 pandemic hit economies across the globe, Belarus approached the Fund in March 2020 to seek financial assistance. According to various reports, Belarus could not reach an agreement with the IMF due to conditions on how the pandemic was to be handled (IMF, 2020).

The new SDR allocation is however NOT subject to any conditionality but distributed to IMF members in proportion to their quotas. For Belarus, this means a new SDR allocation of 0.14 percent of the total SDR 456.5 billion, equivalent to around $900 million. As explained above, the SDR allocation can be exchanged for dollars, euros, or other currencies that can then be used to buy whatever the regime in Belarus likes. It could be vaccines, food, and medical equipment, but it could also be guns, ammunition, or tear gas to the security forces. In other words, this is money that can be spent in any way the government decides and the only price for this is a very small interest charge (see Figure 3) that comes with not keeping the SDRs as a reserve asset.

Concluding Remarks

The IMF is a member institution with 190 countries that is governed by its Articles of Agreement. This dictates that a new general SDR allocation should be distributed to its members according to their quotas. New SDR allocations are rare but have been used before to handle global economic crises. The current SDR allocation is designed to help low- and middle-income countries to deal with the economic side of the Covid-19 by making more foreign exchange available at a low cost. Helping countries with limited reserves to deal with the crisis and ensure that they can secure imports of vital goods and services makes perfect sense. The fact that this general support in certain instances will go to regimes like the one in Belarus that we currently think do not warrant the support of the global community is unfortunate. In a perfect world, the IMF would be able to impose conditions on human rights and democracy for any type of financial support, but this is not the world we live in. Therefore, the conclusion is not to stop helping a global recovery but to do more to support the alternatives to autocratic regimes across the world with other instruments.

References

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

Vaccination Progress and the Opening Up of Economies

Posted on July 5, 2021 | Policy Brief

20210622 Reopening Soon Webinar Image 01

In this brief, we report on the FREE network webinar on the state of vaccinations and the challenges ahead for opening up economies while containing the pandemic, held on June 22, 2021. The current state of the pandemic in each respective country was presented, suggesting that infection rates have gone down quite substantially recently in all countries of the network, except in Russia which is currently facing a surge in infections driven by the delta-version of the virus. Vaccination progress is very uneven, limited by lacking access to vaccines (primarily Ukraine and Georgia) and vaccine scepticism among the population (primarily in Russia and Belarus but for certain groups also in Latvia, Poland and to some extent Sweden). This also creates challenges for governments eager to open their societies to benefit their economies and ease the social consequences of the restrictions on mobility and social gatherings. Finally, the medium to long term consequences for labour markets reveal challenges but also potential opportunities through wider availability of work–from-home policies. 

Background

In many countries in Europe, citizens and governments are starting to see an end to the most intense impact of the Covid-19 pandemic on their societies. Infection and death rates are coming down and governments are starting to put in place policies for a gradual opening up of societies, as reflected in the Covid-19 stringency index developed by Oxford University. These developments are partially seasonal, but also largely a function of the progress of vaccination programs reaching an increasing share of the adult population. These developments, though, are taking place to different degrees and at different pace across countries.  This is very evident at a global level, but also within Europe and among the countries represented in the FREE network. This has implications for the development within Europe as a whole, but also for the persistent inequalities we see across countries.   

Short overview of the current situation

The current epidemiological situation in Latvia, Sweden, Ukraine, and Georgia looks pretty similar in terms of Covid-19 cases and deaths but when it comes to the vaccination status there is substantial variation.

Latvia experienced a somewhat weaker third wave in the spring of 2021 after being hit badly in the second wave during the fall and winter of 2020 (see Figure 1). The Latvian government started vaccinating at the beginning of 2021, and by early June, 26% of the Latvian population had been fully vaccinated.

Sweden, that chose a somewhat controversial strategy to the pandemic built on individual responsibility, had reached almost 15 thousand Covid-19 deaths by the end of June of 2021, the second highest among the FREE network member countries relative to population size. The spread of the pandemic has slowed down substantially, though, during the early summer, and the percentage of fully vaccinated is about to reach 30% of the population.

Figure 1. Cumulative Covid-19 deaths 

Source: Aggregated data sources from the COVID-19 Data Repository by the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University, compiled by Our World in Data.

Following a severe second wave, the number of infected in Ukraine started to go down in the winter of 2020, with the total deaths settling at about 27 thousand in the month of February. Then the third wave hit in the spring, but the number of new daily cases has decreased again and is currently three times lower than at the beginning of the lastwave. However, a large part of the reduction is likely not thanks to successful epidemiological policies but rather due to low detection rates and seasonal variation. 

In June 2021, Georgia faces a similar situation as Ukraine and Latvia, with the number of cumulative Covid-19 deaths per million inhabitants reaching around 1300 (in total 2500 people) following a rather detrimental spring 2021 wave. At the moment, both Georgia and Ukraine have very low vaccination coverage relative to other countries in the region(see Figure 5).

In contrast to the above countries, Russia started vaccinating early. Unfortunately, the country is now experiencing an increase in the number of cases (as can be seen in Figure 2), contrary to most other countries in the region. This negative development is likely due to the fact that the new Covid-19 delta variant is spreading in the country, particularly in Moscow and St. Petersburg. Despite the early start to vaccinations, though, the total number of vaccinated people remains low, only reaching 10.5% of the population.

Figure 2. New Covid-19 cases

Source: Aggregated data sources from the COVID-19 Data Repository by the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University, compiled by Our World in Data.

In some ways similar to Sweden, the government of Belarus did not impose any formal restrictions on individuals’ mobility. According to the official statistics, in the month of June, the rise in the cumulative number of covid-19 deaths and new daily infections has declined rapidly and reached about 400 deceased and 800 infections per one million inhabitants, respectively. Vaccination goes slowly, and by now, around 8% of the population has gotten the first dose and 5% have received the second.

There were two major waves in Poland during the autumn 2020 and spring 2021. In the latter period, the country experienced a vast number of deaths.  As can be seen in Figure 3, the excess mortality P-score – the percentage difference between the weekly number of deaths in 2020-2021 and the average number of deaths over the years 2015-2019 – peaked in November 2020, reaching approximately 115%. The excess deaths numbers in Poland were also the highest among the FREE Network countries in the Spring of 2021, culminating at about 70% higher compared to the baseline. By mid-June, the number of deaths and cases have steeply declined and 36% of the country’s population is fully vaccinated.

Figure 3. Excess deaths

Turning to the economy, after a devastating year, almost all countries are expected to bounce back by the end of 2021 according to the IMF (see Figure 4). Much of these predictions build on the expectations that governments across the region will lift Covid-19 restrictions. These forecasts may not be unrealistic for the countries where vaccinations have come relatively far and restrictions have started to ease. However, for countries where vaccination rates remain low and new variations of the virus is spreading, the downside risk is still very present, and forecasts contain much uncertainty.

 Figure 4. GDP-growth

Vaccination challenges

Since immunization plays such a central role in re-opening the economy and society going back to normal, issues related to vaccinations were an important and recurring topic at the event. The variation in progress and speed is substantial across the countries, though.

Ukraine and Georgia are still facing big challenges with vaccine availability and have fully vaccinated only 1.3% and 2.3% of the population by the end of June, respectively. Vaccination rates have in the recent month started to pick up, but both countries face an uphill battle before reaching levels close to the more successful countries.

Figure 5. Percent fully vaccinated

Other countries a bit further ahead in the vaccine race are still facing difficulties in increasing the vaccination coverage, though not so much due to lack of availability but instead because of vaccine skepticism. In Belarus, a country that initially had bottleneck issues similar to Ukraine and Georgia, all citizens have the opportunity to get vaccinated. However, Lev Lvovskiy, Senior Research Fellow at BEROC in Belarus, argued that vaccination rates are still low largely because many Belarusians feel reluctant towards the vaccine at offer (Sputnik V).

This vaccination scepticism turns out to be a common theme in many countries. According to different survey results presented by the participants at the webinar, the percentage of people willing or planning to get vaccinated is 30% in Belarus and 44% in Russia. In Latvia, this number also varies significantly across different groups as vaccination rates are significantly lower among older age cohorts and in regions with a higher share of Russian-speaking residents, according to Sergejs Gubins, Research Fellow at BICEPS in Latvia.

Webinar participants discussed potential solutions to these issues. First, there seemed to be consensus that offering people the opportunity to choose which vaccine they get will likely be effective in increasing the uptake rate. Second, governments need to improve their communication regarding the benefits of vaccinations to the public. Several countries in the region, such as Poland and Belarus, have had statements made by officials that deviate from one another, potentially harming the government’s credibility with regards to vaccine recommendations. In Belarus, there have even been government sponsored disinformation campaigns against particular vaccines. In Latvia, the main problem is rather the need to reach and convince groups who are generally more reluctant to get vaccinated. Iurii Ganychenko, Senior Researcher at KSE in Ukraine, exemplified how Ukraine has attempted to overcome this problem by launching campaigns specifically designed to persuade certain age cohorts to get vaccinated. Natalya Volchkova, Director of CEFIR at NES in Russia, argued that new, more modern channels of information, such as professional influencers, need to be explored and that the current model of information delivery is not working.

Giorgi Papava, Lead Economist at ISET PI in Georgia, suggested that researchers can contribute to solving vaccine uptake issues by studying incentive mechanisms such as monetary rewards for those taking the vaccine, for instance in the form of lottery tickets. 

Labour markets looking forward

Participants at the webinar also discussed how the pandemic has affected labour markets and whether its consequences will bring about any long-term changes.

Regarding unemployment statistics, Michal Myck, the Director of CenEA in Poland, made the important point that some of the relatively low unemployment numbers that we have seen in the region during this pandemic are misleading. This is because the traditional definition of being unemployed implies that an individual is actively searching for work, and lockdowns and other mobility restrictions have limited this possibility. Official data on unemployment thus underestimates the drop in employment that has happened, as those losing their jobs in many cases have left the labour market altogether. We thus need to see how labor markets will develop in the next couple of months as economies open up to give a more precise verdict.

Jesper Roine, Professor at SITE in Sweden, stressed that unemployment will be the biggest challenge for Sweden since its economy depends on high labor force participation and high employment rates. He explained that the pandemic and economic crisis has disproportionately affected the labor market status of certain groups. Foreign-born and young people, two groups with relatively high unemployment rates already prior to the pandemic, have become unemployed to an even greater extent. Many are worried that these groups will face issues with re-entering the labour market as in particular long-term unemployment has increased. At the same time, there have been more positive discussions about structural changes to the labour market following the pandemic. Particularly how more employers will allow for distance work, a step already confirmed by several large Swedish firms for instance.

In Russia, a country with a labour market that allowed for very little distance work before the pandemic, similar discussions are now taking place. Natalya Volchkova reported that, in Russia, the number of vacancies which assumed distance-work increased by 10% each month starting from last year, according to one of Russia’s leading job-search platforms HeadHunter. These developments could be particularly beneficial for the regional development in Russia, as firms in more remote regions can hire workers living in other parts of the country.

Concluding Remarks

It has been over a year since the Covid-19 virus was declared a pandemic by the World Health Organization. This webinar highlighted that, though vaccination campaigns in principle have been rolled out across the region, their reach varies greatly, and countries are facing different challenges of re-opening and recovering from the pandemic recession. Ukraine and Georgia have gotten a very slow start to their vaccination effort due to a combination of lack of access to vaccines and vaccine skepticism. Countries like Belarus and Latvia have had better access to vaccines but are suffering from widespread vaccine skepticism, in particular in some segments of the population and to certain vaccines. Russia, which is also dealing with a broad reluctance towards vaccines, is on top of that dealing with a surge in infections caused by the delta-version of the virus.

IMF Economic Outlook suggests that most economies in the region are expected to bounce back in their GDP growth in 2021. While this positive prognosis is encouraging, the webinar reminded us that there is a great deal of uncertainty remaining not only from an epidemiological perspective but also in terms of the medium to long-term economic consequences of the pandemic.

Participants

  • Iurii Ganychenko, Senior Researcher at Kyiv School of Economics (KSE/Ukraine)
  • Sergejs Gubins, Research Fellow at the Baltic International Centre for Economic Policy Studies (BICEPS/ Latvia)
  • Natalya Volchkova, Director of the Centre for Economic and Financial Research at New Economic School (CEFIR at NES/ Russia)
  • Giorgi Papava, Lead Economist at the ISET Policy Institute (ISET PI/ Georgia)
  • Lev Lvovskiy, Senior Research Fellow at the Belarusian Economic Research and Outreach Center (BEROC/ Belarus)
  • Jesper Roine, Professor at the Stockholm Institute of Transition Economics (SITE / Sweden)
  • Michal Myck, Director of the Centre for Economic Analysis (CenEA / Poland)
  • Anders Olofsgård, Deputy Director of SITE and Associate Professor at the Stockholm School of Economics (SITE / Sweden)

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

Creative Industries: Impact on the Development of Ukraine’s Economy

Posted on June 21, 2021 | Policy Brief

Image of coloured umbrellas representing impact of creative industries

This brief is based on research investigating the effects of creative industries on the development of the Ukrainian economy. The results indicate that capital investment in creative industries has a significantly greater effect on economic growth than a simple increase in the consumption of the respective industry’s products. Thus, we conclude that to achieve a more substantial economic effect of spending in creative industries, it is necessary not only to increase the expenditures in these industries and boost consumption of their products but also to support these industries in developing production capacity. The underlying study “Creative Industries: Impact on the Development of Ukraine’s Economy” was prepared by the Kyiv School of Economics in cooperation with the Ministry of Culture and Information Policy of Ukraine. The first results from the study were presented at the international forum “Creative Ukraine” in 2020.

Background

In 2019, the United Nations (UN) General Assembly declared 2021 as the International Year of Creative Economy for Sustainable Development. This nomination was a recognition of the growing role of creative industries in the economic development of both developed and developing countries. The program of events taking place under the theme of the International Year of the Creative Economy for Sustainable Development includes forums, conferences, and intergovernmental meetings, which intend to draw attention to the problems that hinder the development of creative industries (CI) and the opportunities that these areas create.

The importance of CIs, which lie at the crossroads of art, business, and technology, is constantly growing both at the national level and in terms of international competition between countries. CIs have become a strategic direction for increasing competitiveness, productivity, employment, and sustainable economic growth (UNCTAD 2019) [1]. Exceptional rates of growth in turnover, creation of new jobs, and resilience to the economic crisis make creative industries an attractive area for investment at both the private and governmental levels. (UNCTAD 2004) [2]. On the other hand, the scope of knowledge about the economic role of CIs and their impact on the development of other sectors of the economy is quite limited.

This brief describes the economic effect of spending in CIs. Particularly, using input-output and computable general equilibrium models, we outline CI multiplier effects on the development of other industries and discuss implications for government support of CI.

Creative Industries in Ukraine

Although the term creative industry is becoming more common, countries have different approaches to the definition. There have been attempts to introduce an international standard, but the goal has not yet been achieved [3].

Ukrainian law define CIs as “types of economic activity aimed at creating added value and jobs through cultural (artistic) and/or creative expression”.

Currently, the Cabinet Ministers of Ukraine list 34 basic economic activities belonging to CIs, including visual arts, performing arts, publishing, design, fashion, IT, audiovisual arts, architecture, advertising, libraries, archives and museums, folk arts and crafts.

The gross value added (GVA) of CIs in Ukraine is growing rapidly. In 2013, the GVA of creative industries amounted to UAH 31 billion (3% of total value added), and in 2019 it amounted to UAH 117.2 billion (3.9% of total value added) (Figure 1). The number of companies and employees in the field of CI is also growing rapidly. In 2019, there were 205.5 thousand business entities and more than 350 thousand employees. 

Figure 1. Gross value added of CI in Ukraine

Source: State Statistics Service of Ukraine

Most GVA of CIs is generated by information technology (IT) activities. In 2019, the IT sector generated UAH 63.7 billion of GVA or 54.3% of the national CI GVA (Figure 2). In second place, there is Advertising, ¢Marketing and PR – UAH 20.2 billion of GVA or 17% of national GVA. In third place with a small gap there is Audiovisual Art – UAH 19.4 billion of GVA or 17% of national GVA.

Figure 2. Structure of Gross Value Added CI in Ukraine, 2019.

Source: State Statistics Service of Ukraine

Methodology and Data

To assess the economic effect of creative industries, we employ a computable general equilibrium (CGE) approach. CGE estimates a general equilibrium model of an economy using real-life economic data. It models interactions of individual markets – such as manufactured goods, services, and factors of production – encompassing the entire economic system. In doing so, the model takes into account reactions of economic agents – economic sectors, households, government, external sectors – and assumes that markets are perfectly competitive. The resulting set of simultaneous equations then employs real data from the economy in question to estimate the equilibrium in these markets by balancing supply and demand in all markets via the appropriate choice of prices.

In this way, the CGE model is a good reflection of a studied economy. In particular, in application to our research question, it allows us to distinguish the economic impact of additional consumption and capital investments in creative industries, and therefore to form reasonably precise recommendations for policy measures. This feature makes the CGE approach much more relevant than the alternative methods, such as the input-output approach.

Limitations of the CGE approach include increased analytical difficulty and computational demands, calibration and the use of estimated parameters, etc.

Data utilized by the CGE model are given by the Social Accounting Matrix (SAM). The SAM structure is related to the input-output table. Each row and column reflects the income and expenses of a particular economic agent. The main principle of SAM is balance, i.e., income from the sale of goods and services equals expenditures.

As a result, the availability of input-output table data is a crucial factor for our analysis. The State Statistics Service of Ukraine publishes an input-output table for 42 industries, which is not sufficient to distinguish creative industries from other sectors of the economy. To compensate for these deficiencies, we use the following sources:

  • input-output table for Ukraine for 2018.
  • input-output table for Poland for 2015 (latest available) to approximate the intermediate consumption of creative industries, not available from Ukrainian input-output tables.
  • annual report on state budget expenditures of Ukraine for 2018.
  • balance of payments of Ukraine for 2018.
  • structural business statistics of Ukrainian enterprises in part of gross value added and sales volume for 2018.

Results

The results of the CGE model suggest a strong effect of investment in CIs.  The sizes of the multipliers across the most creative industries are similar. The exception is the programming industry, for which for a one hryvnia investment leads to a total GDP growth of 3.2 hryvnias. This value is the highest among all sectors of the economy, not only among the CIs. For the rest of the CIs, the multiplier ranges from 1.9-2.2, which is comparable to the multipliers of the construction and finance and insurance sector (Figure 3). Accordingly, the increase in GDP for one hryvnia of investment by the industry is:

  • UAH 2.2 for libraries, museums, archives.
  • UAH 2.1 for publishing.
  • UAH 2.1 for architecture.
  • UAH 2.0 for performing and other arts.
  • UAH 2.0 for production of jewellery, costume jewellery, musical instruments.
  • UAH 2.0 for public relations, marketing, advertising.
  • UAH 2.0 for design, photography, translation.
  • UAH 1.9 for audiovisual and audio art.

Figure 3. GDP change per one hryvnia of capital expenditures*

* Estimated assuming 5% increase in capital Source: Our calculations are based on data from State Statistics Service of Ukraine and Poland, as described in the data section.

While the above results are obtained by estimating GDP response to a 5% increase in capital, the results are quite similar for different sizes of investments.

Conclusion

Our estimations show that investment in creative industries has a considerable impact on GDP. Investment in the IT sector has the highest multiplier, even compared to “non-creative” sectors of the economy. Other CIs’ multipliers can be compared to the construction and finance and insurance sector. Therefore, the results suggest that creative industries offer a highly valuable investment opportunity.

We also find that increase in capital investment in a creative industry has a stronger positive impact on GDP than an increase in the consumption of the respective industry’s products. An immediate policy implication of this finding is that, to achieve a more significant economic effect of government spending in creative industries, it is necessary not only to increase the expenditures on these industries or boost consumption of their products but also to support them in expanding production capacity.

References

  • Nikolaeva, O., Onoprienko, A., Taran, S., Sholomitskyi, Y. and Iavorskyi, P., 2020. Creative Industries: Impact on the Development of Ukraine’s Economy. Ministry of Culture and Information Policy of Ukraine.
  • UNCTAD, 2019. How can the creative economy help power development? https://unctad.org/news/how-creative-economy-can-help-power-development
  • UNCTAD, 2004. Creative Industries and Development. https://unctad.org/system/files/official-document/tdxibpd13_en.pdf

 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.

Did the Government Help Belarusian SMEs to Survive in 2020?

Posted on June 14, 2021 | Policy Brief

Enterprises During Pandemic representing Belarus

Capitalizing on the dataset obtained from five waves of the Covideconomy Project business survey, we explore how pandemic-related shocks and state economic policy responses influenced the performance of Belarusian small and medium enterprises (SMEs) in 2020. We find that Belarusian SMEs were left on their own with the COVID-related economic challenges, and only a small portion of enterprises could benefit from state support measures. Only two sectors (Manufacturing and Construction) derived advantages from soft loans provided to state-owned enterprises. The implementation of new, pandemic-adjusted business models did not result in an increase of revenues of Belarusian SMEs, at least not in the short run.

Small and Medium Enterprises During the Pandemic

According to OECD estimates (2020), the small and medium-sized enterprise (SME) sector has been more affected by the COVID-19 pandemic compared to large enterprises. Besides being highly concentrated in the most affected sectors, the main reasons for SMEs experiencing stronger COVID-related shocks are a lower level of cash cushion and limited access to external funds (Goodhart et al., 2021). Next, the stock of supplies and materials, as well as the range of suppliers, are usually lower for SMEs (WTO, 2020). This makes any price changes or abruptions more detrimental for them in comparison to large companies. Lastly, the availability of digital technologies and skills needed to implement new business formats appeared as an additional constraint for the SME sector during the pandemic. Indeed, per the World Bank’s business surveys, the most frequently mentioned effects of COVID-19 on SMEs in Central and Eastern European countries were a drop in sales, liquidity problems, limited access to finance, and breakdowns in supply. In this context, only 35% of SMEs in the region were able to adapt quickly to new conditions by introducing new business models such as online sales, delivery services, and remote work. At the same time, many SMEs in the region laid off employees, reduced wages, or initiated furloughs as alternatives to closing the business altogether.

In this regard, the SME support measures became an extremely important task for national governments to conduce to faster economic recovery and job creation. As a result, a wide range of monetary and non-monetary measures was implemented in various countries to support SMEs.

Internationally, direct support was provided in the form of wage subsidies, cash grants and transfers, tax holidays, reductions, or deferrals that could prevent unemployment growth. In addition, liquidity problems of SMEs were addressed by introducing rental fee deferral or reduction, repayment holidays as well as providing micro and short-term loans.

In many countries, specific measures were aimed to support the digitalization of SMEs (e.g., in China, France, Latvia, Italy, Slovenia, South Korea) by offering subsidies, financial support, training, and consulting services, developing e-commerce sales channels to respond to pandemic-related challenges (OECD, 2020).

Figure 1 demonstrates shares of SMEs in Central and Eastern European countries that benefitted from state support measures and SMEs’ perceived importance of these measures. Wage subsidies (65.1%) and direct cash transfers and grants (47.1%) appeared as the most commonly used measures, while fiscal exemption and reductions were regarded as the most important and relevant ones.

Concurrently, at the macro level, some governments eased requirements on banks’ emergency funds and reduced base rates to provide more and cheaper financial resources as loans for the enterprise sector.

Figure 1: Scope and importance of SME support measures

Source: World Bank data on Belarus, Russia, Poland, Estonia, Latvia, Lithuania, Georgia, Moldova, Slovakia, Czech Republic, Bulgaria, Romania, Hungary.

In general, the scope and target groups of the support programs depended on financial resources at the disposal of governments, access to capital markets, macroeconomic conditions (public debt, exchange rates, unemployment rates), as well as the structure of the economy.

In this brief, we discuss how the macroeconomic environment and the Belarusian government’s policy reaction to the pandemic affected revenues of Belarusian SMEs in 2020.

The Belarusian Economy in 2020

The official statistics reported outstanding results of the Belarusian economy, despite it being expected to be hit harder than other countries in the region. The COVID-19 pandemic-related shocks were aggravated in Belarus by endemic ones: the early-2020 oil-supply dispute with Russia, the sociopolitical crisis that broke out after the presidential elections in August (Bornukova et al., 2021), and the concomitant sharp devaluation of the Belarusian ruble (22.59% to US dollar in 2020) in March and August. Against this backdrop, the 0.9% decrease in GDP, 4.6% increase in real disposable incomes, and stable unemployment rate (at 4.0%) together look like an economic miracle. Some of the rationales behind these figures include the absence of lockdowns and substantial mobility restrictions throughout the year, as well as easy access to bank loans for state-owned enterprises (SOEs) that faced an export shock. At the same time, ad-hoc sampled population and business surveys documented income reductions of Belarusians and a substantial decrease in business revenues in many sectors (Covideconomy project, 2021). Figure 2 displays the shares of SMEs in different sectors whose revenues dropped by more than 20% in the month before being surveyed.

Figure 2. Share of SMEs with loss of revenue >20%  

Source: Own elaboration based on five ways of business surveys

The Belarusian government was substantially restricted in terms of financial resources as well as fiscal and external loan opportunities to extensively support businesses suffering from the COVID-related economic crisis. According to experts’ estimations, Belarus lags behind other Eurasian Economic Union members (Russia, Armenia, Kazakhstan, Kyrgyzstan) in terms of the estimated share of GDP spent on crisis response measures – 1.5% (Russian Academy of Foreign Trade & Research Institute of VEB, 2020). While the most suffering sectors (trade, transportation, hotels, restaurants, tourism, education, leisure, sport, etc.) could benefit from the deferral of profit, real estate and land taxes, as well as rental fees till the end of 2020, obtaining any type of support appeared bureaucratically challenging and imposed exigent obligations for the future. Overall, the support was perceived as negligible and far below expectations both in terms of financial resources saved by businesses and coverage. Thus, in May-October 2020, about 50 thousand businesses (incl. sole proprietors) received cumulative support for a total amount of $26 Million or $536 per business (National Center of Legal Information of the Republic of Belarus, 2020). According to the Covideconomy project, in May-July, less than 5% of SMEs reported getting support from the state.

What Affected Belarusian SMEs?

Motivated by the specific reaction of the Belarusian government and its very limited support to SMEs, we explore what enterprise- and country-level factors affected SME revenues across industries during the pandemic. In pursuit of this objective, we use data obtained from five waves of the business survey conducted within the Covideconomy project (2020) on 359 SMEs amounting to 947 observations, and perform a regression analysis with a set of ordered logistic models. Particularly, we test whether the (i) self-isolation of population, (ii) currency devaluation, (iii) volume of loans provided to SOEs, and (iv) new business models implemented by Belarusian SMEs impacted their revenues.

These hypotheses are based on the following arguments:

  1. In the absence of restrictive measures and lockdowns, entrepreneurs and citizens made conscious decisions about self-isolation and remote work. To minimize personal contact, many people reduced the number of visits to public places as well as various group activities. Such responsible behavior could hurt business income, primarily in the areas of catering, hotels, entertainment, transport, and consumer services, in which SMEs are widely represented.
  2. The sharp devaluation of the Belarusian ruble is, and has traditionally been, a significant problem for Belarusian businesses. The rise in prices of imported goods and services, inflation, and the fall in household incomes in dollar terms harm domestic demand, leading to a drop in sales in many sectors. The exceptions could be export-oriented enterprises, which mostly use materials and supplies produced in Belarus, as well as enterprises that are suppliers and contractors of exporters.
  3. To minimize the impact of the pandemic-related shocks, the Belarusian government continued its habitual practice of providing soft loans for SOEs to maintain their production volumes and pay wages. Arguably, this could bolster demand for SMEs’ goods and services from the side of SOEs’ employees and prevent a deeper recession. In addition, SMEs that were suppliers and contractors of SOEs could also benefit from this policy measure.
  4. The pandemic significantly accelerated SMEs’ processes of finding and realizing opportunities to develop. This became key in the survival of many businesses. We thus expect that the implementation of new business models could have had a positive impact on revenues of SMEs.

In our models, we use the size of SMEs, location in the capital city, and whether a firm belongs to one of the most suffering sectors (HoReCa, Transportation, Leisure & Sport) as control variables. To capture the effect of factors across different sectors, we use interaction terms between the aforementioned factors and dummies indicating different sectors.

The results of the regression analysis (summarized in a stylized way in Table 1) demonstrate that the impact of the selected factors is not consistent across sectors and that none of the factors appear significant when considering the entire sample of SMEs.

Table 1. Impact on SMEs’ revenues

Source: Own estimates based on 947 observations from 359 SMEs.

Not surprisingly, self-isolation behavior negatively affects only the HoReCa and Leisure & Sports sectors. Currency devaluation does not significantly influence the revenues of SMEs. Only the ICT sector, which is export-oriented and does not depend on imported materials, easily adapted to remote work and increased demand for IT-related services and experienced a positive shock. The state policy that provided soft loans to SOEs helped SMEs in the manufacturing and construction sectors that are, supposedly, contractors and suppliers of SOEs. The implementation of new business models did not result in an increase in the revenues of Belarusian SMEs, at least not in the short run. A possible explanation for this finding could be that firms responded by adopting new business models only if they experienced a very steep fall in revenues.

As for the control variables, we find that larger enterprises better adapted to the crisis and their decrease in sales appear smaller. Interestingly, SMEs located in the capital city –  Minsk – suffered more from the crisis in 2020, likely, due to a higher concentration of SMEs in the most affected sectors and a quicker reaction of citizens to economic and political shocks.

Conclusion

Based on our analysis, we can deduce that Belarusian SMEs were left on their own with the COVID-related economic challenges. Only a small share of enterprises could benefit from the state support measures and only two sectors (Manufacturing and Construction) derived advantages from soft loans provided to SOEs.

At the same time, the absence of lockdowns and other restrictions – the laissez-faire approach (Bornukova et al., 2021) – propped up most of the sectors except those that suffered from voluntary self-isolation of customers (HoReCa, Leisure, Sport, Beauty).

The ongoing crisis substantially changes the economic landscape, management practices, and business models of SMEs. The most flexible, competitive, and proactive businesses have been capable of identifying and exploiting the emerged opportunities. From this point of view, Belarusian businesses and entrepreneurs have outstanding experience in surviving and developing during recurrent crises (Marozau et al., 2020). This must be an important pre-condition for the future economic recovery of Belarus.

References

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