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Projektai

Micro-level responses to socio-economic challenges in face of global uncertainties

Project promoter: Vilnius University
Project title: Micro-level responses to socio-economic challenges in face of global uncertainties
Project code: LT08-1-ŠMSM-K01-010 (Project contract No S-BMT-21-8 (LT08-2-LMT-K-01-073))
Project eligible expenditure: EUR 843309,61 (EUR 716813,17 grant from the EEA Financial Mechanism and EUR 126496,44 budget co-financing) 
Project signature date: 20 January 2021
Project implementation period: 1 January 2021 - 31 December 202
 
Project summary:
Events such as an increased concentration on domestic matters and engagement in trade wars by the US, the British decision to le
ave the European Union and an increase in global political and economic power by China, as well as current pandemic and global lockdowns, call for a deeper understanding of how societies adjust their behavior within such an uncertain and evolving environment.
 
We plan to tackle these broad socio-economic challenges by analyzing in detail, firstly, how firms adjust to trade shocks in terms of their labor allocations, human capital and technological investments; secondly, concentrating on how the two major adjustments of firms’ production functions – labor and technology – interact in response to increasing global uncertainty, especially in the face of deglobalization and the fragmentation of global trade links; finally, combining the empirical insights from the first and the second blocks, and building a theoretical framework on the labour market adjustments, paying special attention to the complementarity/substitutability of new types of labor and capital as well as labor and technology (automation). The three blocks will take three different approaches – empirical analysis based on administrative data, empirical analysis based on the new big data methods, theoretical and structural analysis – and dovetail in our plan to understand the firm- and individual-level adjustments.
 
The expected project results include not less than 12 theoretical and empirical publications  in high level academic journals, a number of working papers and policy notes to foster economic policy debate among economic agents and equip the  policy makers with relevant economic policy tools, the creation of new databases available to economic researchers in the future, the organization of one large international conference and an enhanced research network that would serve as a platform for future collaborations (we plan at least one follow-up research grant).

Summary from the annual report 2021

When initiating the project we referenced trade wars by the US, the British decision to leave the European Union and an increase in global political and economic power by China that highlight an increased concentration on domestic matters. At the beginning of 2022, 1 year into the project, these questions and matters became even more important, relevant and pressing. The need to understand the reaction of firms that also have to deal with the consequences of global phenomena like the current pandemic and the associated lockdown in the short run, but also anticipate possible future shocks on supply chains in the medium run is still pressing. These political and natural events call for a deeper understanding of how societies adjust their behavior within such an uncertain and evolving environment. Border closure, tendencies to blame globalization, increased barriers for international commerce and factor movements, unclear prospects of the “new normal”, uncoordinated policy interventions produce many uncertainties and a need to adapt and adjust behavior. By focusing on individual-level decisions as well as the major constraints and frictions, we attempt to deepen our understanding and draw useful policy implications to adjust faster and more efficiently in the inherently frictional, quickly changing and uncertain world. The understanding of such trade shocks are especially important for small open economies such as the Nordic and Baltic countries that are highly integrated in global value chains.

The main tasks of the project, addressed in the first year are:

  • Build datasets at various levels of granularity;
  • Make dataset available to other researchers;
  • Conduct empirical analysis (work out stylized facts, test hypothesis);
  • Prepare draft papers for presentations in conferences and social networks.


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