EconPol Policy Briefs

NATO Defense Spending in 2023: Implications One Year After Russia’s Invasion of Ukraine

Florian Dorn, Niklas Potrafke, Marcel Schlepper

War is raging close to NATO's Eastern border. Russia has attacked Ukraine and threatens those states that in the past had been part of Moscow's sphere of influence. Many of them are now member states of NATO. As a collective defense alliance, this poses a threat to all NATO members. Since the ability to defend against an aggressor does not come for free, defense spending will be on the agenda at the NATO Summit in Vilnius in July 2023. NATO Secretary General Jens Stoltenberg has already expressed his expectation that all member states no longer see the 2% target as a mere ambition, but as the floor for their future defense spending. This paper presents first results for the expected defense spending of the 30 NATO members and the candidate country Sweden in 2023.

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Has the Time Come for Excess Profit Taxes?

Shafik Hebous

Excess profit taxes (EPTs) emerge as an option to contribute to the extra needed revenues, avoiding a general increase in corporate tax rates, while having the prospect to serve as a gateway to converge toward a permanent efficient rent tax instaed of the corporate income tax. General unilateral (temporary or permanent) EPTs would face the same international pressures from profit shifting and tax competition as the existing corporate income tax, calling for international coordination. A coordinated EPT on multinational enterprises can take the form of a formulary apportionment approach that allocates the EPT base using sales by destination.

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Complex Europe: Quantifying the Cost of Disintegration

Gabriel Felbermayr, Jasmin Gröschl and Inga Heiland

On 1 January 2023, Croatia became the newest member of the Schengen Agreement of the European Union (EU) and also joined the Eurozone. This will not only mean a new currency and the elimination of border controls. It will also mean reductions in barriers to trade between Croatia and other EU member states. The Schengen Agreement and the Eurozone are part of the engine of European integration, namely the reduction of trading costs between the member countries in various dimensions as well as in trade with third countries. This includes the European Customs Union, the European Single Market, the Eurozone, the removal of customs barriers in the Schengen area and the EU’s free trade agreements with third countries.

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The Interplay of Interest Rates and Debt-Financed Government Spending

Bev Dahlby and Ergete Ferede

Persistently low interest rates on government debt over past decades have prompted some economists to question the wisdom of fiscal policies that restrict the use of deficits to finance government spending. In the new EconPol Policy Brief Bev Dahlby and Ergete Ferede argue that the widely held view that there is no, or only a low, fiscal cost from debt-financed increases in program spending can be misleading.

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Intentions to Stay and Employment Prospects of Refugees from Ukraine

Tetyana Panchenko, Panu Poutvaara

In the new Policy Brief the authors present the results of two waves of quantitative online surveys of Ukrainian refugees in Germany. They were asked whether they plan to stay in Germany and whether they are already employed or plan to search for employment, as well as the factors that determine these. The second wave of the survey clarified the socio-demographic characteristics of refugees from Ukraine, the circumstances of their arrival and adaptation in Germany, and demonstrates the dynamics of changes in their plans and intentions.

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