Will the Paris Accord Accelerate Climate Change?

The 2015 Paris climate accord (Paris Agreement) is meant to control our planet’s rising temperature to limit climate change. But it may be doing the opposite in permitting a slow phase-in of CO2 emission mitigation. The accord asks its 195 national signatories to specify their emission reductions and to raise those contributions over time. However, there is no mechanism to enforce these pledges. This said, the accord puts dirty energy producers on notice that their days are numbered. Unfortunately, this “use it or lose it” message may accelerate the extraction and sale of fossil fuels and, thereby, permanently worsen climate change. Our paper uses a simple OLG model to illustrate this long-noted, highly troubling Green Paradox. Its framework properly treats climate damage as a negative externality imposed by today’s generations on tomorrow’s—an externality that is, in part, irreversible and, if large enough, can tip the climate to a permanently bad state. Our paper shows that delaying abatement can be worse than doing nothing. Indeed, it can make all generations worse off. In contrast, immediate policy action can make all generations better off. Finally, we question the standard use of infinitely lived, single-agent models to determine optimal abatement policy. Intergenerational altruism underlies such models. But its assumption lacks empirical support. Moreover, were such altruism widespread, effective limits on CO 2 emissions would, presumably, already be in place. Unfortunately, optimal abatement prescriptions derived from such models can differ, potentially dramatically, from those actually needed to correct the negative climate externality that today’s generations are imposing on tomorrow’s.

Export Product Scope of Russian Firms and Proximity to Local Comparative Advantages

This paper explores the relationship between the structure of regional comparative advantages and the dynamics of the export product scope of Russian manufacturing enterprises. For this purpose, indices of revealed technological proximity of industries are calculated on the basis of data on types of economic activities and the export product scope of Russian enterprises. The methodology for calculating these indicators is based on the assumption that technologically closer types of activities are, to a certain degree, more often co-produced and co-exported within the boundaries of individual enterprises. This measure of technological proximity has several advantages over the traditionally used indicators. Estimates show that the constructed indices reflect different aspects of technological proximity of industries and can be considered as composite indicators. Technological proximity measures are used to calculate the index of product proximity to the structure of export comparative advantages of Russian regions. This index is statistically related to the probability of a product being included in the export product scope of a Russian exporter, to the probability of the product being excluded from the export product scope and, as a result, to the value and dynamics of exports of this product by the regional enterprises. These findings indicate that there is a relationship between the current structure of the regional comparative advantage and the direction in which the range of exports of Russian enterprises located in this region evolves. The results of the study can be used for designing economic policy measures aimed at diversification of production and export of the Russian regions, in particular on the basis of existing producers and exporters, as well as applied by the firms themselves to detect the most promising directions of activity expansion taking into account the production structure of the region which the given firm is located at.

Beyond the Community: On the Book "Good Economics for Hard Times" by Abhijit Banerjee and Esther Duflo

The review is devoted to the book by 2019 Nobel laureates in Economics Esther Duflo and Abhijit Banerjee, published in Russian by the Gaidar Institute Publishing House in 2021. Building upon the crisis of confidence in economists, the authors in the microeconomic plane reflect upon a set of effective tools for combating poverty in economic science. The book focuses on the following topics: trust, migration, trade, economic growth, technological progress, the role of the state in the economy, and basic income. Duflo and Banerjee consider real situations within the framework of these topics, using the method of natural experiments, in order to show the inconsistency and lack of fundamental basis in numerous stereotypes of economic policy. Technological progress is useful for high-tech industries in terms of creating jobs and saving public funds, but for the rest of the labor market it may destroy jobs and lead to increasing social insecurity of citizens with low incomes. It is the consideration of the program theses of economic science on trust, migration, trade, technological progress and welfare from the perspective of socially vulnerable population segments that determines the uniqueness of the study. Since the work touches on disparate areas, it also has a number of drawbacks, which are mentioned in the review. In particular, the idea of a natural experiment is not followed by a political economy generalization, which is a disadvantage of the work.

Multilateral Convention: Potential Issues of Legal Uncertainty

On October 1, 2019, the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting entered into force with respect to the Russian Federation. The main purpose of the MLI is to establish minimum standards for combating international tax avoidance. The MLI will extend the key approaches of the BEPS plan at once to a large number of bilateral double tax treaties. The application of the MLI is expected from January 1, 2021 in relation to a number of tax treaties concluded by the Russian Federation. At the same time, certain provisions of the MLI leave some questions about their application and may cause new problems for the taxpayers and tax authorities. In the short term, the application of a number of MLI provisions may be expected to increase uncertainty in international tax planning and lead to an increase in the number of disputes over tax treaties. The main purpose of this article is to analyze the key provisions of the MLI and identify possible problems of their enforcement for the subsequent analysis of potential ways to overcome the legal uncertainty of the application of the MLI. To this end, the tasks were set to study the goal of adopting the MLI, and analyze the content and procedure for the application of the MLI, as well as the content of the key standard of the MLI—the principal purpose test. Identifying the problems of law enforcement before the start of active use of the MLI is important, since it would allow one to pay attention to possible problems at an earlier stage and quickly move to their resolution, which would contribute to the formation of a higher level of legal certainty in the field of international tax planning and further development of foreign economic cooperation.

Strategies for Sustainable Urban Mobility: Analysis of Best Practices

The article is dedicated to the analysis of the approved strategies for sustainable mobility (sustainable transport) in the world’s leading cities. It is shown that most strategic documents contain similar principles and goals that determine the transformation vectors for cities. The fundamental principles include hierarchy of priorities (not only financial, but also in terms of equitable distribution of urban space, starting from pedestrian and bicycle mobility and public transport and ending with parking); increasing ecomobility, involving the “80:20” principle (fixing the goal of bringing the share of sustainable modes of mobility to 80% and decreasing the share of cars to 20% by 2030); “healthy streets, healthy people” and “complete streets” (reformatting car-oriented streets into bicycle and pedestrian spaces, administrative restrictions for cars, internalization of externalities); development of environmentally friendly high-speed rail public transport and the creation of preferential access rights for public transport; Vision Zero (zero tolerance for road accidents); compactness, polycentricity, and transit-oriented development; smart transport and multimodality; consideration of the transport system as one of the integral parts of the city’s stability (holistic view), etc. It is determined that the analyzed mobility strategies organically integrate into the general trajectory of sustainable long-term development and promotion of real human wellbeing. Most strategies focus on personal experience of their beneficiaries, which lies at the heart of any reform (people-centered approach). An additional benefit resulting from the implementation of sustainable mobility strategies is lower density and safer distancing within cities, which is highly relevant in the context of the COVID-19 pandemic, as well as reduced freight prices and development of a more just and secure city environment.

The Outcomes of Introducing the Effective Contract with Medical Staff

The paper presents the results of a study of changes in the salary schemes and working conditions of medical staff, their labor motivation and the compliance of these changes with the objectives of the so-called “effective”, performance-based, contract being introduced. The data from a set of surveys of employees at public medical facilities in 2009–2018 served as the empirical base of the study. It is shown that the introduction of the effective contract had changed the role of factors determining the salary of medical workers. Whereas earlier qualification had been the leading factor, afterwards it was the volume and quality of the work performed as well as the outcomes of a given medical institution or unit. Most doctors had increased the amount of work they do, and the secondary employment of medical staff had slightly been reduced. Survey data indicate quite a stable hierarchy of labor motives among medical workers, the leading ones being earning money, professional interest in work, and altruism. In 2018, the role of the guaranteed employment motive was elevated. Among the positive changes are an increase in the satisfaction of medical workers with the salary, conditions for advanced training, and rules of remuneration. The identified outcomes are generally consistent with the objectives of introducing the effective contract, and they allow one to argue that the new salary scheme has had a positive impact on the labor motivation of medical staff. However, the conclusion of an effective contract was noted by only half of respondents. For the rest, it all boiled down to an increase in salary. These results indicate serious failures in the administration of this reform.

Analysis of Bank Default Factors in 2013–2019

This paper studies bank defaults in the Russian Federation in recent years. Firstly, the Central Bank of Russia tightened prudential regulation in 2013. Secondly, a decrease in oil prices and economic sanctions resulted in a crisis in 2014–2015 with a huge depreciation of the national currency, which influenced the Russian banking sector substantially. Almost half of banks in Russia have been closed in the last 6 years. Through binary logistic models of bank defaults based on data for Q3 2013 through Q1 2019, the paper reveals the key factors which had an influence on the sustainability of Russian banks. The main result is that involvement in classical banking exposes banks to default risks. Excessive reserves appeared to be an important indicator of default as well. A special measure of liquidity creation was constructed. We found that high levels of liquidity creation increased the probability of bank failure. It is also worth mentioning that excessive liquidity creation put higher risks on a given bank in the crisis period. We can conclude that regulatory authorities should pay attention to high liquidity creators, especially in the group of small and medium-sized banks. We also found some evidence of an improvement in prudential regulation by the Bank of Russia. Separate models were estimated for the sample of 150 larger banks, which is more homogeneous and is of primary interest for the regulator. A number of variables, including the level of liquidity creation, turned out to be insignificant; however, high reserve values for possible losses still increase the probability of default to a large extent. Logistic panel regressions were also considered as an alternative specification.

Cryptocurrency Market: Overreaction to News and Herd Instincts

We studied the specific properties of the cryptocurrency market. Guided by the concept of implied volatility, we investigated the asymmetric reaction of the market to news. Based on the concept of realized volatility, we verified the hypothesis of herding behavior in the market. To test the properties of the market, we used a combination of methods, starting from the analysis of statistics of search queries, interpreted as proxies of information demand from professional market participants and the “wide crowd”, and ending with advanced Markov-Switching GARCH models and heterogeneous autoregressive models of realized volatility (HAR-RV-J-models). As a result, we found various types of asymmetric reactions of the cryptocurrency market to news related to both the general direction of its dynamics (growth or decrease) and the amplitude of return fluctuations (high or low volatility). During the upward price rally and overheating of the market, investors deliberately avoided the bad news; thereby the asymmetry in the cryptocurrency market was inverse (to the adopted leverage effect). On the contrary, during the downward price rally, market participants exhibited an overreaction to bad news. In addition, the asymmetric reaction to the news observed during the period of low market volatility actually disappeared when the amplitude of cryptocurrency return volatility increased. The behavior of short-term investors was also varied in the study period. While during the growth of the market, small speculators were more likely to follow their own trading strategies, during the hype they borrowed the trading practices of the largest players. We also revealed the effect of training among small investors: over time, they became less prone to provocations from large players, which did not allow the 2019 rally to surpass its counterpart in 2017 in terms of both return oscillations and duration.

Determinants of Private Investors’ Behavior on Russian Stock Market

The article explores behavior features of different group of private investors on the Moscow and Saint Petersburg stock exchanges. It was found that the change in the size of the biggest group of registered broker clients on Moscow Exchange depended heavily on growth of real income and key characteristics of passive forms of income, such as deposit rates, government bond returns and stock dividend yield. Active broker clients on the Moscow stock exchange mainly focused on more speculative factors, such as equity premium, equity volatility, foreign stocks’ returns and exchange rate. The growth of individual investment accounts depended on factors of both active and speculative forms of income. The quantity of broker clients on Saint-Petersburg Exchange relied on an even wider set of factors, which included not only risk and returns on national markets, but also characteristics of foreign assets and exchange rates. The two Russian exchanges are interrelated. The bond and equity premium growth makes the national market more attractive than foreign assets. The expansion of private investors on the stock market in Russia, which began in 2018, is explained not only by a search for other investment instruments apart from deposits, especially under the ongoing decline in interest rates, but also by a growing interest in individual investment accounts. The latter represent a positive example of state influence on people’s savings through tax policy. Another factor of the raise of private investments was the implementation of modern investment platforms and active promotion of broker services by major banks. The financial crisis which begun in March 2020 can become a serious challenge for millions of private investors who had opened accounts in the previous two years.