The persistence of consumption habits
Lorenz Kueng, Evgeny Yakovlev 10 September 2014
Understanding consumer behaviour is crucial for many economic questions. This column looks at the persistence of consumer habits towards alcohol among Russian males. Beer sales expanded rapidly after the collapse of the Soviet Union both in levels and relative to vodka sales, driven mainly by the beer consumption of cohorts born in the 1980s and 1990s. The authors estimate that this trend will reduce the male mortality rate in Russia by one quarter in the next 20 years.
Understanding consumption behaviour of individuals and households is crucial for many economic questions, particularly for those with policy implications. For instance, given that consumption is the largest component of aggregate demand in most economies, it is important for policymakers to understand how consumers respond to changes in their economic environment – so called ‘shocks’ – including those caused by new policies.
Health economics Microeconomic regulation
consumption habits, Alcohol consumption, substitution, Russia
Yuriy Gorodnichenko, Gérard Roland 04 September 2014
With the crisis in Ukraine escalating further, the question on everyone’s mind is when and how peace can be restored. This column describes three different scenarios where Ukraine continues fighting with or without economic and military help from the West. The authors suggest that though Russia’s chances of winning are small, the policy response of the West could be essential in resolving the conflict quickly.
There is plenty of evidence that Russian troops are fighting the Ukrainian army on Ukrainian soil. This Russian invasion is a further escalation of the war between Ukraine and Russian-sponsored separatists and terrorists in the east of Ukraine. As soon as the Ukrainian forces were about to take over cities in eastern Ukraine, Mr Putin raised the stakes and sent Russian military to rescue the separatists from certain defeat. Both sides have experienced heavy losses, but the Russian government denies any involvement. The excuses sound increasingly surreal (e.g.
Europe's nations and regions
Russia, Ukraine crisis
Europe’s Russian connections
Aasim M. Husain, Anna Ilyina, Li Zeng 29 August 2014
The conflict in Ukraine and the sanctions against Russia have already affected the Russian financial markets. This column discusses the repercussions for the rest of Europe of possible disruptions in the trade and financial flows with Russia. Eastern European countries could be seriously affected by a slowdown in the Russian economy due to their close links with Russia. Western countries – despite having looser links with it – could also experience significant effects.
The conflict in Ukraine and the imposition of new sanctions against Russia by the US and the EU (second half of July) followed by Russia's counter-sanctions (August 7) signal an escalation of geopolitical tensions that has been strongly felt in Russian financial markets (see Chart 1). A deterioration in the conflict, as well as further escalation of sanctions and counter-sanctions, could have a substantial adverse impact on the Russian economy through direct and indirect (confidence) channels (IMF 2014a).
Europe's nations and regions Politics and economics
Russia, sanctions, Eastern Europe
A way out of the Ukrainian quagmire
Thorvaldur Gylfason, Inmaculada Martínez-Zarzoso, Per Magnus Wijkman 14 June 2014
The Ukraine saw EU soft power met by Russian hard power. This column argues that the EU should counter this hard power using trade policy, among other policies. EU members should agree a common policy and seek support from others to execute this policy. To date, the EU’s response has been too little, too late.
At the Vilnius Summit in November 2013, President Yanukovich chose not to sign the Deep and Comprehensive Free Trade Agreement (DCFTA) with the EU that Ukraine had spent five years negotiating.1 His decision was dictated both by Ukraine’s failure to fulfil the political conditions for signature set by the EU and by strong pressure by Russia on Ukraine to join the Eurasian Customs Union instead.2 His refusal to sign unleashed events in Ukraine that within six months led to the President’s flight to Russia, the installation of a new pr
EU policies Europe's nations and regions International trade
Russia, EU, civil war, free trade agreements, Ukraine, diplomacy
Russia’s tit for tat
Peter A.G. van Bergeijk 25 April 2014
In reaction to the Crimean crisis, the EU imposed certain sanctions on Russia. Russia responded by blacklisting EU and US officials. This column discusses the comparative vulnerability of the EU and Russia amid this tit for tat pattern. In purely economic terms, the EU is in a much better position than Russia. However, political regimes also matter. The autocracy score for Russia dampens the impact that the economic sanctions would have politically. The democratic nature of the European governments would translate the sanctions imposed by Russia into great political pressure for the EU. This makes the Russian tit for tat threat realistic.
Since 16 March 2014, the EU (in concerted action with the US) has frozen assets and imposed travel bans on 33 persons and an individual bank. On 20 March, Russia counteracted with the reciprocal blacklisting of EU and US officials. This pattern of tit for tat raises the question of the comparative vulnerability of the EU and Russia. In assessing this vulnerability, is not just the ability to inflict economic damage that matters, however, but also the way economic damage translates into political change. This means that one needs to consider the political system.
Politics and economics
Russia, EU, sanctions, Crimean crisis
Russian volatility: Obstacle to firm survival and diversification
Alvaro González, Leonardo Iacovone, Hari Subhash 12 February 2014
Growth in Russia comes from few natural-resource-linked sectors and to a few firms; the economy is currently less diversified than it was during the Soviet times. This column presents evidence that the emergence of new firms is not the binding constraint on diversification: it is the poor survival odds of new firms, created by long, deep Russian economic slumps. More competition would help to drive out less efficient, older firms, and create space for young and efficient ones to survive and thrive.
Limited economic diversification – where production is concentrated in sectors characterised by low technology spillovers – can limit productivity growth and expose an economy to the macroeconomic instability of a fate dictated by external events. Moreover, development and diversification appear to be related. Imbs and Wacziarg (2003) show that higher per capita incomes are associated with greater diversification and then with increasing specialisation at higher per capita incomes.
Development Industrial organisation
Russia, economic diversification
Meeting Russia’s challenge to EU’s Eastern Partnership
Thorvaldur Gylfason, Per Magnus Wijkman 25 January 2014
The EU’s Eastern Partnership is currently in turmoil. Armenia and Ukraine – two of the four partner countries (which also include Moldova and Georgia) did not initial association agreements. This column discusses the role of Russia in discouraging such negotiations. The soft power of the EU was apparently no match for the hard power of Russia in the cases of Armenia and Ukraine. A successful partnership would require peaceful international relations between the four partners, and solving their conflicts with Russia.
EU’s Eastern Partnership is in turmoil after its Summit in Vilnius on 29 November 2013. Only Georgia and Moldova of the four partner countries that had successfully negotiated Association agreements with the EU, including Deep and Comprehensive Free Trade Agreements (DCFTAs), initialed them at the Summit.1 In September, President Sargsyan, motivated by the threatened loss of Russia’s security guarantee vis-à-vis Azerbaijan, had informed the EU that Armenia would not initial its Association agreement but instead join Russia’s proposed Eurasian Customs Union.
Politics and economics
Russia, EU, Ukraine, Eastern Partnership
Was Stalin necessary for Russia’s economic development?
Anton Cheremukhin, Mikhail Golosov, Sergei Guriev, Aleh Tsyvinski 10 October 2013
Soviet Russia’s industrialisation was a pivotal episode in the 20th century, and economic historians have spent decades debating the role of Stalin’s policies in bringing it about. This column argues that Stalin’s industrialisation was disastrous even in purely economic terms. The brutal policy of collectivisation devastated productivity, both in manufacturing and in agriculture. The massive welfare losses in the years 1928-40 outweighed any hypothetical gains from Stalin’s policies after 1940, and Russia would have been better off under a continuation of the ‘New Economic Policy’.
In 1962, a prominent British economic historian, Alec Nove, asked whether Russia would have been able to industrialise in the late 1920s and 1930s in the absence of Stalin’s economic policies (Nove 1962). This question is still important for several reasons.
- The transformation of Soviet Russia from an agrarian to an industrial economy is a key episode in economic and political history.
The industrialised Soviet Union played a key role in the victory over Nazi Germany during WWII and, as one of the two superpowers during the Cold War, reshaped the postwar world.
Development Economic history
Russia, Stalin, Soviet Union, industrialisation, collectivisation
The BRICs party is over
Anders Åslund 04 September 2013
Emerging markets are under pressure. This column argues that this is not a mere headwind but that the BRICs’ party is over. Their ability to get going again rests on their ability to carry through reforms in grim times for which they lacked the courage in a boom.
After a decade of infatuation, investors have suddenly turned their backs on emerging markets. In the BRIC countries – Brazil, Russia, India and China – growth rates have quickly fallen and current-account balances have deteriorated.1 The surprise is not that the romance is over but that it could have lasted for so long.
From 2000 to 2008 the world went through one of the greatest commodity and credit booms of all times. Goldman Sachs preached that the BRICs were unstoppable (e.g. Wilson and Purushothaman 2003).
Development International trade
Russia, China, India, commodities, protectionism, BRICs, Brazil, BRIC
The past in the Polish present
Irena Grosfeld, Ekaterina Zhuravskaya 23 March 2013
History influences the politics of every nation. But how exactly can we measure it? This column presents new research that assesses the influence of empires on Poland’s current political makeup. In particular, the centuries-old partition of Poland continues to influence politics through its long-lasting effects on infrastructure and religion.
History is vividly present in today’s political debates in Poland. There is a near-consensus among politicians and political commentators that the spatial pattern in voting is determined, to a large extent, by the Partitions of Poland (1772-1918) and the change of boundaries in 1945 that triggered mass migration of the population.
Economic history Frontiers of economic research
Russia, Poland, Prussia, Habsburg, Catholic