Industry Interconnectedness and Regional Economic Growth in Germany

Urban systems, and regions more generally, are the epicenters of many of today’s social issues. Yet they are also the global drivers of technological innovation, and thus it is critical that we understand their vulnerabilities and what makes them resilient to different types of shocks. We take regions to be systems composed of internal networks of interdependent components. As the connectedness of those networks increases, it allows information and resources to move more rapidly within a region. Yet, it also increases the speed and efficiency at which the effects of shocks cascade through the system. Here we analyzed regional networks of interdependent industries and how their structures relate to a region’s vulnerability to shocks. Methodologically, we utilized a metric of economic connectedness called tightness which quantifies a region’s internal connectedness relative to other regions. We calculated tightness for German regions during the Great Recession, comparing it to each region’s economic performance during the shock (2007–2009) and during recovery (2009–2011). We find that tightness is negatively correlated with changes in economic performance during the shock but positively during recovery. This suggests that regional economic planners face a tradeoff between being more productive or being more vulnerable to the next economic shock.

Has previous loan rejection scarred firms from applying for loans during Covid-19?

The concept of the ‘discouraged’ borrower is well documented. In this paper, we consider whether smaller firms in the UK who have been previously rejected for bank loans have been scarred by the experience so badly that even in the presence of two exceptionally generous Covid-19 loan guarantee schemes, they still refuse to make an application. Furthermore, we also consider what happens when they do. As banks have either zero or minimal loss exposure, do they still maintain their normal strict lending protocols or do they relax their standards to fulfil the governments’ objective of supporting struggling businesses through the crisis? Our findings show that 72% of previously rejected borrowers are reluctant to request loans. We find some evidence that previously scarred firms faced such severe liquidity problems that they relaxed their distrust of banks during the Covid-19 crisis. However, their share of the government-guaranteed loan portfolio was slightly lower suggesting that banks were treating each new loan application on its merits. Plain English Summary The Covid-19 crisis hit smaller businesses so hard that even previously rejected borrowers were forced to apply for loans to keep them afloat. Previous loan rejections have not discouraged small businesses in the UK in applying for Covid-19 government-guaranteed loans. Banks have used the loan guarantee schemes to continue to supply loans to small business during the pandemic. Our paper analyses the important phenomenon of borrower scarring and discouragement, when potential debtors are self-excluded from the lending market because they have previous rejections or expect a negative bank response. We consider around 45,000 UK small businesses from 2018 to 2020. On the demand side, we find that the economic shock for small businesses during the pandemic dissipates the scarring effect. Specifically, we find that micro and small businesses had the highest loan demand in the first two quarters of the pandemic (from March 2020). On the supply side, we show that scarred borrowers were not routed onto Covid-19 government-guaranteed loan schemes. These findings show the importance of government-backed lending schemes for small businesses during crisis period.

Adult life-course trajectories of psychological distress and economic outcomes in midlife during the COVID-19 pandemic

This study used two British birth cohorts to examine whether pre-pandemic trajectories of psychological distress were associated with a greater risk of changes in financial and employment situation during the pandemic, as well as increased need for government support and use of other methods to mitigate their economic situation. We identified 5 differential life-course trajectories of psychological distress from adolescence to midlife and explored their relation to changes in financial and employment circumstances at different stages during the pandemic from May 2020 to March 2021, applying multinomial logistic regression and controlling for numerous early life covariates. In addition, we ran modified Poisson models with robust standard errors to identify whether different trajectories were more likely to have been supported by the benefit system, payment holidays, borrowing and other methods of mitigating the economic shock. We found that despite the UK governments economic response package economic inequalities for pre-pandemic psychological distress trajectories with differential onset, severity and chronicity across the life-course were exacerbated by the COVID-19 economic shock. Furthermore, the subsequent cut in government support, alongside increases in the cost of living may widen economic inequalities for differential pre-pandemic psychological distress trajectories, which in turn may also worsen mental health. This work highlights, different pre-pandemic trajectories of psychological distress were more vulnerable to economic shock.

Negative Economic Shocks and the Compliance to Social Norms

This paper is about why suffering a Negative Economic Shock, i.e. a large loss, may trigger a change in behavior. We conjecture that people trade off a concern for money with a conditional preference to follow social norms, and that suffering a shock makes the first motivation more salient, leading to more norm violation. We study this question experimentally: After administering losses on the earnings from a Real Effort Task, we elicit decisions in set of pro-social and anti-social settings. To derive our predictions, we elicit social norms separately from behavior. We find that a shock increases deviations from norms in antisocial settings — more subjects cheat, steal, and avoid retaliation, with changes that are economically large. This is in line with our prediction. The effect on trust and cooperation is instead more ambiguous. Finally, we conducted an additional experiment to study the difference between an intentional shock and a random shock in a trust game. We found that the two induce partially different effects and that victims of intentional losses are more sensible to the in-group belief. This may explain why part of the literature studying shocks in natural settings found an increase in pro-social behavior, contrary to our prediction.

Covid-19: Prospering Industries & Oversize Management

With COVID-19, many businesses have failed, while other industries and corporations have seen profits increase, and are likely to continue to do so post-pandemic, in line with the trend of the oversize economy. Coronavirus 2019 has caused a major economic shock, in addition to its tremendous impact on global health, pushing the biggest corporations towards an outburst of the new, basic drivers of global capitalism (Health; Energy; Food; Communication). That is, the pillars of global competition that start from an oversize management in order to fix the competitive landscapes of large corporations.

Hybrid Model of MSMEs for Livestock Hype Product Facing Consumer Sudden Shift on Pandemics

Pandemic covid-19 breakout has a massive impact on the MSMEs sector. The majority of producers could not survive due to unpreparedness to face the economic shock due to declining purchasing power. So that, the research was designed to create a resilient strategy for business through a hybrid model with an analysis of planned behavior theory. The research focuses on livestock products that currently excites the community, intended for role models of agricultural food products as perishable food and susceptible to an unbalanced market. So that, the decline in purchasing power of the consumers is imbalanced with availability and vice versa. The selected products are mozzarella cheese and honey. The research used an interview survey method with producers and consumers. Data analysis used game theory to design a model that conforms to the condition of the business. Results of the research showed that hybrid model of MSMEs for mozzarella and honey (livestock products which are hype during a pandemic) has the optimization of strategy to bring more adaptive business into reality by improvising strategy of popularity for mozzarella product of brand X and improvisation from an advocacy perspective for a honey product of MSMEs brand X. MSMEs products have opportunity to acquire market and compete with big companies in each product because it has superiority that would be able to meet the consumer needs and conform to the purchasing power.

Adaptation Trajectories of Dismissed Workers: A Critical Case Study of the Lithuanian Radio-Electronics Sector

This article explores why some dismissed workers adapt successfully to the changing structure of an economy, while others remain trapped in low-quality jobs and experience deskilling. The associated case study relies on in-depth, semi-structured interviews with 50 former employees of four bankrupt radio-electronics factories in Lithuania. It is found that workers with ‘inherited’ skills that are deep and technical are able to enter high-quality jobs when new firms emerge, recombining the physical, financial and human assets of destitute factories for new productive uses. However, if such economic opportunities are scarce, workers with inherited broad skill sets are relatively more successful in transitioning to services from manufacturing. Further, in line with the literature of the sociology of work, women and older workers are found to face more acute challenges in adapting to the economic shock associated with dismissal.