Democracy in Cuba, 1900-2010

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The V-Dem dataset is a huge dataset that compiles many indicators to measure political institutions, dating back to 1900. With the death of Fidel Castro, I tried to see what the indicators said about the evolution of democracy in Cuba. It shows a tremendous decline after 1950. Interestingly this started before Fidel Castro, during the dictatorship of Fulgencio Batista. When Castro took power, the democratic index stayed low, essentially continuing the type of autocratic rule pursued by Batista with a different ideological bent.

Donald Trump’s victory in historical perspective

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Donald Trump is on course to be the US presidential candidate to win the Presidency with the largest negative popular vote margin, with nearly 2 million votes less than Hillary Clinton. At the same time, Hillary Clinton is set to become the presidential candidate with the third largest number of votes in US history.

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The Fiscal Impact of Immigrants: Perceptions vs. Reality

 

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The graph above charts popular perceptions about how much immigrants pay into the welfare state (vertical axis) against what they actually pay (horizontal axis, in euros per household). The data comes from a paper by Huber et al. for the horizontal axis (based on EU SILC data) and the the vertical axis comes from the Eurobarometer 2009, which asked people if they thought that immigrants in their country pay more in taxes than they receive in welfare. A few interesting facts:

First, in all countries but Spain and Portugal, a majority of people think that immigrants receive more than what they pay. However, in reality this is far from being the case in all countries: a number of them receive more from immigrants than what they give them. This is for instance the case in the Netherlands, the UK, Sweden and Italy. In this latter country, 3 billion euros a year in pension benefits remain unclaimed by migrants who returned home.

Second, in spite of people in many countries having a wrong idea about the fiscal contribution of immigrants, there is nevertheless a positive relationship between these two measures: the more immigrants contribute, the more people are likely to think that this is the case.

Third, these are absolute measures; they do not measure the difference between native and migrant households. In some countries, both natives and immigrants have a negative fiscal balance, if the state has deficit. However, in other the balance is strikingly different. In the United Kingdom, the fiscal balance is negative for natives and positive for migrants, which means that natives are “bailed out” by migrants. In Germany, it is the opposite.

Comparing EU member states and US states

Economists often compare the European Union and the United States, notably in the context of macro-economic management. For instance, the United States has a fiscal union that allows automatic transfers from richer states to poorer states, a system that the European Union does not have. The United States also has a more integrated labour market, and people move more easily between states, for instance from high-unemployment to low unemployment states. In the graphs below, I have pooled together data on GDP per capita and GDP growth rate in the European Union and the United States. The differences are quite striking: US states are much more similar both in terms of GDP per capita and growth rates than European Union member states. This means that growth is more correlated across US states than across EU member states. Both have their outliers: Washington DC in the US and Luxembourg in the European Union. Greece stands out as a (negative) outlier in terms of GDP growth in the EU, while Texas and North Dakota have had much higher growth rates than the rest of the country.

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Portuguese Labour Market Reforms in the Aftermath of the Eurozone Crisis: The Problems Behind the Recovery

This is a extended repost of a blog written with Jasper Simons for Critcom, the blog of the Council of European Studies.

If one were to believe the assessments of European institutions, Portugal is on the path to recover from the severe economic crisis it suffered from 2010 onwards, and the drastic reforms implemented in employment protection, unemployment benefits and collective bargaining are starting to yield results. Portugal swiftly implemented most of the measures contained in the Memorandum of Understanding (MoU) agreed with the Troika. Since then, exports have gone up, debt accumulation slowed down and unemployment decreased as well.

However labour market restructuring came with a high price tag, and the apparently promising numbers hide somewhat less encouraging developments for the long-term recovery of the country. The imposed changes to its political economy have not only led to a considerable deterioration of social protection, but they also coincided with high levels of emigration. The labour force has shrunk, and an impending demographic problem will be very difficult to reverse.

Portugal’s pre-crisis performance within the euro area, in contrast to Greece and Spain, was rather sluggish. In the aftermath of the financial crisis, José Sócrates’ socialist government (2005-June 2011) responded with a stimulus programme to push consumption and increase investment in the real economy. Active labour market and welfare policies improving access and levels of unemployment benefits were adopted in order to maintain demand and contain rising poverty. The coverage of unemployment insurance (the share of unemployed people actually receiving benefits) had steadily improved since 2000 (Figure 1

Figure1.pngSource: Pordata

With Portugal’s fiscal position worsening, the government quickly turned to spending cuts and deregulation reforms geared towards reassuring markets. These programmes could not prevent bankruptcy, however, and Portugal was forced to request a 79 billion euro bailout with even more severe austerity and flexibilisation policies attached. The MoU included, inter alia, the revision of the labour code and severe reductions in severance and overtime payments, measures increasing the scope for the individualisation of contracts and dismissals and lowering and restricting access to unemployment benefits, which the centre-right Passos Coelho government (June 2011-November 2015) implemented.

Firstly, employment protection and severance payments (of fixed-term contract workers) have been severely affected. Although Portugal still has relatively high protection levels in the European context (and had one of the highest levels in the run-up to the crisis), no other European country has witnessed such a strong liberalisation trajectory since the crisis (see Figure 2). Alongside the flexibilisation of dismissals, minimum severance payment requirements for employers were lowered. For instance, severance pay in case of a redundancy dismissal for a worker with five years of tenure dropped from 21.7 to 14.3 weeks between 2010 and 2013. The minimum wage was frozen at 485 euros/month from 2011 onwards (565 with Christmas bonuses), until the new left-wing coalition that came to power in 2016 increased it again.

Figure 2.jpegSource: OECD

Secondly, unemployment benefits were cut and eligibility requirements tightened reducing overall benefit. If unemployment did not decrease until recently, the share of people receiving benefits did decrease right when the government needed to cut expenditure. Coverage for both social and the ordinary unemployment benefits decreased: if high unemployment levels in Southern Europe often make the headlines, it is seldom mentioned that the actual number of unemployed people who receive benefits is much lower, and Southern Europe has had a rather poor record in this respect. Interestingly, if unemployment levels have decreased, this may have as much to do with the shrinking of the labour force as with the creation of jobs: between 2008 and 2014, the labour force (people in employment or seeking work) has shrunk by 303.000 people. If the number of jobs remains stable but the labor force decreases, unemployment goes down. This partly results from discouragement of workers, but also to a large extent from emigration. In fact, emigration may have had a greater impact because, as the government admitted, the number might be twice as high as official figures display. The Portuguese population has been shrinking since the crisis, and emigration added to an impending demographic problem, with the lowest fertility rates in the EU (1.23 children per woman) (Figure 3).

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Source: Pordata

Thirdly, collective bargaining has been decentralised in favour of firm level and individual agreements. Reforms of, erga omnes, extension have led to sweepingly decreasing coverage levels for ordinary workers (see figure 6). Remarkably, both the socialist and centre-right governments largely implemented these policies with the support, albeit lukewarm, of the social partners. Although the larger communist CGTP-IN remained absent, the socialist UGT worked together with employer organisations and both governments on many of the reforms including most of the MoU. This came, however, at the cost of internal division, loss of membership and various general strikes of both the CGTP-IN and the UGT.       Figure4.png            Source: UGT

Alexandre Afonso is an Assistant Professor at the University of Leiden, Netherlands. Jasper Simons is a political economy graduate and former European Economic and Social Committee trainee.

 

 

The Network Structure of the Panama Papers

I have made the graph below with the data from the Panama papers made available two days ago. The original dataset was composed of entities, officers and intermediaries, and the links “subsidiary of”, etc. In order to make the network manageable (there were about 600’000 nodes), I have merged the nodes (entities, officers and intermediaries) by country. The nodes are sized by weighted degree, that is, the number of connections they possess throughout the network. The first network shows the nodes sized by in-degree, that is, how many connexions they receive. The countries that stand out are the usual suspects: Hong Kong, Samoa, the Cook Islands, the Cayman Islands, the Bahamas, with Malaysia appearing as well. The second graph shows countries sized by out-degree (how many connections they send), which makes more countries stand out, potentially countries whose citizens are clients of the entities in the tax havens. Because of the heterogeneity of of the links (some countries are both senders and receivers) it is difficult to make a clear-cut judgement about what is represented.

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Is there a trade-off between equality and immigration?

Branko Milanovic has a piece in the FT (gated) where he advocates a form of differentiated citizenship as a way to make immigration more acceptable in rich countries. Milanovic argues that immigration is one of the most powerful mechanisms to reduce global income inequalities (by allowing inhabitants of poor countries to increase their income by moving to rich countries) but it is susceptible to create tensions within inhabitants of rich countries. Hence, we should find ways to make it more acceptable within rich countries, and this should be done by essentially restricting the rights of migrants so that citizens do not need to share the “premiums” reserved to them.

Chris Bertram has a very critical response to the piece, claiming that Milanovic advocates a form of apartheid, and that there are a number of inalienable rights that cannot be violated even for purposes of economic outcomes. Moreover, the differentiation in rights proposed by Milanovic has already been in place in a number of countries. Germany for instance has a huge population of “denizens”, people of the 2nd or 3rd generation (children of guest workers that came in the 1960s and 1970s) that do not enjoy citizenship.

My take on this is that Milanovic is is wrong to think that differentiating rights will eliminate tensions and reduce opposition to immigration, but many advocates of equal rights for migrants also fail to see that equality would mean less immigration (and less global inequality reduction) in the first place. What I’m arguing here is based on a conference paper that I just presented in Philadelphia. It seeks to explain why some countries (Switzerland, Germany) massively resorted to foreign labour to fill in labour needs, while others (Sweden, but most of Scandinavia as well) did not.

First, differentiating rights makes migrant workers much cheaper than native workers, and is therefore likely to exacerbate tensions rather than dampen them. Germany and Switzerland had guest-worker programs where immigrants not only had no limited or no right to family reunification, but were also not allowed to change employer because their immigration status was tied to a specific job. If you cannot leave your job to get a better one, your bargaining position is weaker than other (native workers), and you will be more attractive for employers than natives. Hence, differentiating rights is likely to create a form of unfair competition that may actually exacerbate xenophobic tensions. You can hear this regularly in the United Kingdom, where UKIP-leaning working class natives complain about immigrants accepting lower wages. Differentiating rights exacerbates this.

Second, one has to accept that conferring equal rights to migrants would probably mean lower immigration levels in rich countries, and therefore less international income redistribution. Milanovic gives the example of the Gulf States, that give very few rights to migrants while having a huge proportion of them. There is clearly a connection between these two factors: migrants are so attractive as a source of labour because they have lower reservation wages and can be dismissed easily during economic downturns. Hence, the social cost of their employment doesn’t need to be assumed by the host country. It is fairly easy to imagine that the Gulf States would import much less foreign labour from the Philippines, Pakistan or elsewhere if they had to pay for healthcare for their children, and fund a system of unemployment benefits in case their jobs disappeared. Because labour would be more expensive, they would probably seek to mechanize more, use fewer workers and less income would be sent to poor countries in the form of remittances.