State capacity for economic sustainability in the external shocks framework Автор

The aim of the study is to compare the COVID-19 consequences in countries with different state capacity indexes. The hypothesis is that the global crises are inversely related to state capacity. This article is based on the authors’ approach to assessing state capacity. The main idea is to evaluate the complex index for four domains – “Trust”, “Life Satisfaction”, “Competitive Order”, “Democracy”. Each domain consists of indicators that characterize the effectiveness of the governing in one of the key areas – ideology, social sphere, national economy, politics. Indicators for COVID-19 were retrieved from World Bank–2020: GDP per capita growth, industrial production growth, service growth, exports, imports, inflation and unemployment dynamics. Average and low state capacity countries show decreases in most of the indicators: GDP per capita growth rate, production growth rate, the growth rate of exports and imports. There are some country-specific features that influence the final result, but, in general, a high state capacity increases the chances of smoothing the recession. The North European countries – Denmark, Norway, Finland, Sweden – are the most resilient to negative shocks. The dynamics of unemployment in COVID-19 turned out to be practically insensitive to state capacity, which may be due to the support tools in the labor market and the short-term effects (most lockdowns did not exceed a few months). Nevertheless, in most countries, there is a general trend of increase in unemployment, regardless of the total state capacity index. Inflation turned out to be relatively more pronounced in countries with a low level of state capacity (from 0.5% to 1.5%), while, in countries with an average and high indicator, inflation mainly decreased during the COVID-19 restrictions. In general, the results of the study confirm the idea about a non-linear relation between state capacity and economic performance. The biggest GDP per capita decline (more than 10%) is typical for average state capacity countries (45–55 points), while countries with a high state capacity (from 70 points and more) demonstrate more significant success in overcoming the negative consequences of the pandemic, comparable with the results of countries with a low level of this indicator (less than 40 points). The results of the study confirms the scientific and practical potential of the authors’ approach to assessing state capacity for predicting the socio-economic consequences of global crises and analyzing the effectiveness of resilience governing.