The pandemic crisis: The mechanisms of development and solutions for economic policy

The new coronavirus pandemic has created new challenges for experts in economic analysis and substantiation of economic policy. The difference between a pandemic crisis and the mechanisms of a traditional business cycle crisis requires a description of the key mechanisms of its development. The relatively more favorable macroeconomic results of the Russian economy in 2020 were determined both by its structural features and by the parameters of economic policy. At the same time, the crisis led to significant social losses, which resulted in an increase in excess mortality and a decrease in real incomes of the population, and unemployment rising. The crisis has shown the impossibility of targeted support for all the affected segments of the population. In this regard, a rapid recovery of economic activity on the basis of state support can be the most effective way to restore the level and quality of life of the population.

Economic policies in a pandemic

What economic policy space does a country have to respond to a crisis provoked by the Covid-19 pandemic? To assess this space, the article calculates the nominal policy space index as a sum of each country’s fiscal space, monetary space, and reserve space. This nominal policy space is then adjusted for institutional features of individual countries to derive the effective policy space index. By way of illustration, the article applies the index to the Covid-19 crisis. It finds that at least 95 countries (about 11 percent of global GDP and 23 percent of population) have no or very limited policy space and may require emergency assistance.

Endogenous Stackelberg leadership within a team. The coalition effect

The article engages in a theoretical investigation of the possibility of implementing the Stackelberg strategy within a team. It is assumed that the team gene-rates aggregate income that increases as the efforts invested by each agent intensify, subject to the law of diminishing returns. The goal of each agent in a team is to maximize his own individual gain. In order to achieve an outcome that is Paretopreferable over Nash equilibrium, two approaches may be used: identifying a leader or forming a smaller group (coalition) within the team whose members, in pursuance of increased individual gains, choose the route that maximizes coalition gains. It is shown that the advent of a coalition in a team results in Pareto-improvement in a simultaneous game. We analyse the possibility of endogenous leadership forming according to the Stackelberg model when using the mechanism of timing decisions. It is established that under autonomy of all team members, leadership formation can only be confidently predicted in specific individual cases. In a significantly more general case, all of the prerequisites for the formation of leadership are created by the presence of a single coalition interested in implementing the Stackelberg strategy.

Digital poverty: How online economy captures property inequality

The article discusses the problem of digital poverty, arising when communication through digital platforms reduces the cost of the process of obtaining and exchanging information and replaces traditional economic processes. Using the example of the consumption of digital and online services, the author shows how digital communications can act as a marker for differentiating the behavior of the poor and the rich. Using cluster analysis and assessment of multicollinearity, the author interprets the data of a sociological study of five groups of respondents, indicating the factors of manifestation of digital poverty in the behavior of economic agents. The problem of the digital trace formed as a result of the automated data collection from users of online services is also considered. The author notes that consumers of digital services, in exchange for discounts, transfer their personal data to digital platforms that use the information received to stimulate further online consumption through new discounts and loyalty programs, which has a negative impact on offline consumption. The study also raises the issue of the accompanying digital poverty of economic externalities, identifies markers of property inequality in the digital economy, possible options for the development of the online economy against the background of the classical communication and social relations become luxurious. It also indicates the main scenarios for leveling the effects of digital poverty.

Culture in the context of COVID-19: Impact assessment and support measures

The article is devoted to the analysis of foreign experience in supporting the cultural sector in the context of the COVID-19, which is characterized by: a complex system and a variety of public aid mechanisms; a priority in supporting freelancers; support of cultural organizations, regardless of the form of ownership and the nature of the activity (non-commercial or commercial); transparency of the conditions for receiving aid for potential recipients and society as a whole. The paper also analyzes the measures of the Russian government to support the domestic cultural sector. The consequences of the pandemic in Russia are not so destructive due to the institutional features associated with the prevalence of the public sector and the existence of contractual relations between employees and cultural organizations. However, there are certain types of occupations where the costs of pandemic are very high (professional musicians, artists, writers, etc.).

Incentive based regulation of water supply under tariffs limitation

The article browses methods of natural monopolies tariff regulation, applied in Russian Federation and foreign countries for the case of water supply. Three principles for natural monopolies tariff regulation are identified: compromise, compensatory, and Incentive based regulation. One of the Incentive based regulation methods — Yardstick Cost Method — has an advantage of regulated entities labor saving within the tariff protection. The other benefit of the method is the feasibility to grade providers from most to least economic performance and to regulate the economic performance improvement for ineffective providers specifically. Benchmarking of publicly available water supply costs data turned up that the costs of physical resources, amortization and rentals depend on specific conditions of enterprise. Therefore, the water supply costs exclusive of resource cost, amortization and rentals seems to be good as an outcome variable for Yardstick Cost Method. We calculated a formula of approximate functional relationship among three contributors and water supply costs exclusive of resource cost and amortization. The yardstick water supply costs were determined by target performance method applying the formula. Although the formula needs an upgrade, our calculations demonstrate a feasibility of Yardstick Cost Method practice for tariff regulation of Russian water suppliers.

Assessment of trade intensity of the Russian Far East: Structural approach

Based on complied statistical data, the scale of trade of the Russia’s Far Eastern regions with the local, macro-regional, domestic and foreign markets is determined. The assessment of the trade intensity in the Russia’s Far Eastern regions was carried out by comparing the results obtained within the framework of log-linear and multiplicative forms of gravity model. The estimation shows a deviation in the trade intensity of the Russia’s Far Eastern regions in favor of the national market as compared to the foreign one. Comparisons of the obtained values showed that the loglinear form, relative to the multiplicative one, significantly overestimated the impact of transportation costs on trade and the contiguity; while at the same time underestimating the values of intensity for trade interaction of Russian Far East with the domestic and foreign markets. The estimates obtained using multiplicative form, suggest a suppression of the comparative intensity of trade of the Russia’s Far Eastern regions with the macro-regional, domestic and foreign markets in dynamics, which can be explained not only by the costs of such interactions but also, by the concentration of trade relations within the Russia’s Far Eastern regions as a result of trade deviation in favor of the local markets.

Social policy development based on a combination of agent-oriented and inter-industrial approaches

The article proposes methodological approach for assessing the consequences of state social policy based on an extended agent-based spatial model with a detailed representation of the reaction of agents to changes in social transfers and taxation as the instruments of government policy. Optimization of territorial social policy is ensured by maximizing the iso-elastic function of social welfare (FSW), based on the individual utility functions of households and taking into account the degree of rejection of social inequality. Structural changes resulting from public policy are analyzed by aggregating the decisions of microeconomic agents and calculating the inputoutput balance table, including through a visual representation in the fourth quadrant of redistribution processes when transfers and taxes change. The results of experimental calculations show that at each level of the coefficient of rejection of inequality for both transfers and taxes, local maxima arise that correspond to the optimal levels of transfers and taxes and form monotonically decreasing iso-optimal curves depending on an increase in either the share of transfers or the level of taxation. The proposed approach to the formalization of ideas about the ratio of efficiency and fairness in the construction of FSW provides an opportunity to choose optimal solutions to justify an agent-based social policy.

Transmission of monetary policy shocks in small open emerging market economies

In this paper, we compare the transmission of monetary policy shocks using quarterly data for 13 emerging market economies (EMEs) with that in a benchmark advanced open economy, the United Kingdom, in the periods of inflation targeting (from 1990s onward). To estimate the transmission within a given country, we specify a monetary VAR-model and we extend it with a variable reflecting commodities terms of trade. We identify monetary policy shocks using a sign restriction scheme: a restrictive shock is determined as an unexpected rise of policy rate and reduction of inflation (CPI) and money demand (M2). We apply the Bayesian approach to estimating VARs to address the curse of dimensionality. Our results indicate that monetary policy in EMEs is not less efficient comparable to the U.K.: restrictive monetary shocks decrease inflation but also lead to a slowdown of GDP and stock market outflows. Overall, our findings add to the debate on the real effects of monetary policy surprises with a special attention to a large set of EMEs.

Why do voters vote? Theoretical concepts and experimental results

The article examines the evolution of the analysis of voters’ behavior when searching for an answer to the question: Why does the a voter vote? It is shown how the approach to the voter as a rational egoistic investor gave rise to what is commonly called the “voter’s paradox” in political and economic theory. Further search was aimed at explaining this paradox. On the one hand, the concept of an expressive voter appears, who expresses himself through participation in elections, on the other hand, we are talking about an altruistic voter who overcomes egoism. The latest theoretical finding was the explanation of participation in voting by attracting “relational goods” that differ in their qualities from both public and private goods. With this approach, the “voter’s paradox” finds the most consistent solution. And it is in this approach the shift from methodological individualism to institutional individualism is most clearly manifested. The authors of the article highlight this shift as a new trend in explaining the reasons for voting. At the same time, it is argued that the considered conceptual diversity is a reflection of the multidimensional features of human nature, and it is this fact that gives rise to the ambiguity and contradiction of experimental results.