Economic Consequences of the Conflict in Ukraine

Richard Baldwin, Dmitry Grozoubinski, 03 June 2022

Climate change, the pandemic, and persistent economic and social inequalities threaten untold millions of lives. While trade alone cannot solve these threats, this column argues that viable solutions require more trade, and stronger multilateral trade governance. This means that world leaders must reimagine the WTO as critical to saving lives, not just livelihoods – a vital tool in the struggle against humanity’s existential threats.

Martin Larch, Janis Malzubris, 03 June 2022

The notion that fiscal rules are necessary to safeguard fiscal responsibility is a widely accepted tenet of fiscal policy. However, experience with the implementation of EU fiscal rules has been mixed, driving a wedge between initial ambitions and outcomes. This column uses the latest update of the European Commission’s compliance tracker to shed some light on the debate. In particular, it points out that if consistently followed over time, all numerical rules are equally demanding.

Jonas Kasteng, Ari Kokko, Nils Norell, Patrik Tingvall, 02 June 2022

Free trade agreements bring questions about how long it takes for firms to acquire the knowledge needed to utilise tariff preferences, and what determines learning outcomes. This column uses Swedish import transaction-level and firm-level data for the EU–South Korea free trade agreement from 2008 to 2018 to answer these questions. The authors find that firms learn about preference utilisation mainly by carrying out repeated import transactions; the number of years as an importer does not seem to matter.

Anders Anderson, Harrison Hong, 02 June 2022

Electric bikes are a viable alternative to cars in urban areas, but how effective they are at reducing carbon emissions is unclear. This column finds that a 2018 Swedish e-bike subsidy programme was successful in persuading people to buy an e-bike, and there was considerable substitution of biking for driving. However, for the programme to be cost-effective, the social cost of carbon much higher than the $50 to $100 estimates frequently discussed. Other social benefits, such as stimulating adoption, promoting health or reducing congestion, are needed to motivate these interventions. 

Tobias Adrian, Patrick Bolton, Alissa Kleinnijenhuis, 01 June 2022

Attempts to phase out coal have faltered amid fears that the transition to renewable energy would be too costly. By comparing the present value of avoided emissions with the present costs of replacing coal with renewable energy, this column estimates that the world can realise a net gain of $77.89 trillion by shifting to renewable energy. The benefits from ending coal are so large that carbon pricing and the other financing policies discussed here merit sustained attention.

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