April 2021

Bown, 30 April 2021

If you had trouble in the last four years keeping up with what was happening in the trade war, you're not alone. Chad Bown tell Tim Phillips about his new paper that explains what happened, when, what it meant - and what happens next.

Mavroidis, Sapir, 30 April 2021

The ability of the WTO to shape the way China conducts its trade policy has been severely limited, and most attempts to leverage multilateral pressure have so far failed. This third in a series of three columns explores how the relationship could be reformed and improved going forward. The authors highlight the need for clearer guidelines on state-owned enterprises, as well as new rules surrounding the transfer of technology between signatories.

Andreoni, Nikiforakis, Siegenthaler, 30 April 2021

Some social norms – the informal rules governing which actions should be rewarded or sanctioned in a particular society – exist for so long that they seem permanent. And yet, historical data document significant instances of sudden social change, such as widespread support for gay rights. This column presents evidence from a large-scale lab experiment designed to predict the tipping point at which such change occurs. The model suggests that effective policy interventions can raise the likelihood of reaching the tipping threshold, thereby promoting a beneficial change in social norms.

Bluedorn, Caselli, Hansen, Shibata, M. Tavares, 30 April 2021

Early evidence from the COVID-19 recession suggested that women’s employment rates were falling disproportionately, portending a possible ‘she-cession’. Drawing on quarterly data from 38 advanced and emerging market economies, this column documents the extent and persistence of pandemic-induced she-cessions and uncovers significant heterogeneity across countries. In two-thirds of the countries studied, women’s employment rates declined more than men’s, but the differences were short-lived – lasting only a quarter or two on average – and strongly correlated to specific sectors of the economy.

Borino, Carlson, Rollo, Solleder, 30 April 2021

The global spread of Covid-19 forced governments to impose strict containment measures, generating international supply and demand shocks. As a result, nationalistic views advocating for increased localisation of production were amplified. Using a novel dataset comprising 4,433 enterprises across 133 countries, this column shows that, despite being more strongly affected by the Covid-19 crisis, firms engaged in international trade have taken more resilient actions than firms that only operate domestically. These results underscore the importance of global connectedness and international trade for promoting resilience to economic shocks.

Mavroidis, Sapir, 29 April 2021

Having joined the WTO, many Western countries expected China to soon liberalise and become an open market economy. This second in a series of three columns describes how China has been able to shrug off pressures to change its economic structure and trading strategy, particularly regarding how its state-owned enterprises operate within the multilateral system.

Andreolli, Surico, 29 April 2021

What is the consumption response to unexpected transitory income gains of different size and what are the aggregate demand implications of stimulus packages that target different segments of the population? This column explores these questions using responses to hypothetical questions in the Italian Survey of Household Income and Wealth. Families with low cash-at-hand display a higher marginal propensity to consume out of small gains, while affluent households exhibit a higher marginal propensity to consume out of large gains. For a given level of public spending, a fiscal transfer of a smaller size paid to a larger group of low-income households stimulates aggregate consumption more than a larger transfer paid to a smaller group.

Honkapohja, McClung, 29 April 2021

Recent challenges have generated interest in new monetary policy frameworks, including average inflation targeting. The Federal Reserve adopted this policy in 2020, but they have not communicated many details about the policy itself. This column argues that an opaque average inflation targeting policy can de-anchor inflation expectations from the target equilibrium – even if expectations are initially well-anchored. Policymakers should be cautious when implementing average inflation targeting.

Acharya, Vij, 29 April 2021

Emerging market economies increasingly rely on foreign currency debt, leaving borrowing firms exposed to sudden stops and currency depreciations. This column examines the dynamics of corporate foreign currency borrowing in India using new firm-level data. It finds that interest rate differentials are a strong predictor of foreign currency debt issuance, particularly after the Global Crisis. After the ‘taper tantrum’ of 2013, the Reserve Bank of India introduced new macroprudential policies that were effective at mitigating the riskiest borrowing and reducing the vulnerability of Indian firms. 

Beckert, Smith, Takahashi, 28 April 2021

Many antitrust investigations, particularly for intermediate goods, involve markets where the buyer negotiates with competing sellers and gets an individualised price. This column explores the conceptual differences between individualised pricing and standard uniform pricing, and reports some recent evidence that provides empirical support for the view that these differences can have a major impact on market power and merger effects, which should be accounted for in competition policy.

Mavroidis, Sapir, 28 April 2021

China’s ascension to the WTO followed years of negotiations with the incumbent members and was hailed at the time as a victory for the liberal paradigm – part of the ‘end of history’. But today frictions remain. This first in a series of three columns presents the build-up to China joining the multilateral trade agreement, arguing that expectations for its subsequent behaviour were misguided from the off.

Cuntz, Sahli, 28 April 2021

Appropriation artists incorporate borrowed images from different sources to produce new compositions. These artists not only risk infringing copyright, but also leave intermediaries such as auction houses at risk of litigation. This column considers changes to the secondary market for appropriation art in the aftermath of a 2013 decision by the US Court of Appeals. Providing quantitative evidence of how the ‘fair use’ defence has affected the secondary arts market, the column questions whether the existing framework promotes or hampers innovation in the art world.

Klenert, Fleurbaey, 28 April 2021

The social cost of carbon is a monetary metric for the damage caused by the emission of an additional tonne of CO2. Previous literature has shown that accounting for inequality between countries significantly influences the social cost of carbon, but mostly omits heterogeneity below the national level. Using a model that features heterogeneity both between and within countries, this column demonstrates that climate and distributional policy can generally not be separated. In particular, it shows that a higher social cost of carbon may be called for globally under realistic expectations of existing inequality.

Narita, Aihara, Matsutani, Saito, 28 April 2021

Machine learning algorithms are increasingly being used in decision making. Web companies, car-sharing services, and courts rely on algorithms to supply content, set prices, and estimate recidivism rates. This column introduces a method for predicting counterfactual performance of new algorithms using data from older algorithms as a natural experiment. When applied to a fashion e-commerce service, the method increases the click through rate and improved the recommendations algorithm.  

Borchert, Winters, 28 April 2021

An increasing amount of trade is digital, but trade negotiations are bogged down by arguments over how to regulate it. A new CEPR eBook investigates what gets in the way of digital trade, and editors Ingo Borchert and Alan Winters tell Tim Phillips what we can do to make it work better.

You can download the eBook, free of charge, here

Borchert, Winters, 27 April 2021

In a world in which the Covid-19 pandemic has severely affected conventional trade and economic activity, digital trade and digitally enabled services can be a source of future growth and prosperity.  Yet, these new opportunities come with unique challenges for trade policymaking, not least because digital trade is inseparable from a data governance framework.  In March 2021 the UK Department for Digital, Culture, Media and Sport and the UK Trade Policy Observatory organised a conference, hosted by CEPR, to discuss new directions for digital trade policy.  A new eBook presents the conference proceedings, which identify current and future impediments and discuss policy options to tackle them.

Bénassy-Quéré, Hadjibeyli, Roulleau, 27 April 2021

The question of how to deal with the legacy of the COVID-19 crisis in the corporate sector is moving to the centre of policymaking. This column presents results from a microsimulation which suggest that the crisis almost doubled the share of newly insolvent French firms from March to December 2020 from 3.6% to 6.6%. However, without public support this number may have reached 11.9%. The findings also indicate that the cleansing effect of firm exit is still there, but it is less effective than in normal times. 

Adams-Prassl, Boneva, Golin, Rauh, 27 April 2021

Women, the young, and the less educated have borne the brunt of the economic damage caused by the Covid-19 pandemic and lockdowns in terms of job and earnings losses. As this column reports, women have also suffered far more from social distancing measures than men in terms of their mental health. Evidence from the Spring 2020 ‘stay-at-home’ orders in US states indicates that this widening gender gap in mental health cannot be explained by respondents earning less than usual, working less than usual, losing their job, struggling to pay their bills, or changing their work patterns or number of hours spent on childcare. 

Lodefalk, Hatzigeorgiou, Alm, 27 April 2021

The COVID-19 pandemic has led to a dramatic rise in protectionism and restrictions around the world. This column sheds light on the role migration can play in restoring globalisation in the wake of COVID-19. It draws upon evidence from macro-, sub-national, and micro-level research to demonstrate that migration has the potential to promote economic recovery through facilitating foreign trade, investment, and offshoring. The findings carry implications not only for physical migration, but also for whether or not recent technological advances may enable foreign-based online workers to promote globalisation.

Eberhardt, Presbitero, 26 April 2021

Commodity prices are one of the most important drivers of output fluctuations in developing countries. This column shows that a major channel through which commodity price movements can affect the real economy is their effect on financial stability. Commodity price volatility is likely to trigger financial instability and banking crises through a reduction in government revenues and a shortening of sovereign debt maturity, which in turn are likely to weaken banks’ balance sheets.

Henn, Robinson, 26 April 2021

Social science research has painted a dismal picture of Africa’s potential for sustained economic growth. But growth, such as that which happened in China after 1978, can be surprising and can tap into ‘latent assets’ in a society that might have not been previously evident. This column identifies three latent assets in Africa which the authors argue are highly propitious for its long run trajectory.

Soares, Bonnet, Berg, 25 April 2021

At the onset of the COVID-19 crisis, scholars around the world estimated the potential of working from home, given its efficacy as a measure to mitigate the spread of the contagion while allowing productive activities to continue. This column uses household survey data for 31 countries to update previous estimates of working from home during the pandemic. The new data suggest that that during the second quarter of 2020, 557 million workers worked from home, accounting for 17.4% of the world’s employment.  This estimate is remarkably close to the previous estimate from May 2020, based on an expert assessment of teleworkability adjusted for occupational distributions.

Gorodnichenko, Pham, Talavera, 25 April 2021

While the effectiveness of central bank’s verbal communication is well documented, little is known about the effectiveness of communication via non-verbal channels. This column discusses vocal features of Federal Open Market Committee communication and examines the impacts on financial markets. The results suggest that tone of voice can contain distinct information not captured in the texts of press conferences. A positive voice tone can lead to higher share prices and decreases in volatility, highlighting the importance of voice control for central bank communication. 

Acciari, Alvaredo, Morelli, 24 April 2021

Growing wealth disparities can have corrosive effects on equality of opportunity when they crystallise over time and turn into persistent disparities across generations. This column uses newly assembled data from Italian inheritance tax records to show that the wealth share of the top 1% (half a million individuals) increased from 16% in 1995 to 22% in 2016, and the share accruing to the top 0.01% (the richest 5,000 adults) almost tripled from 1.8% to 5%.  In contrast, the poorest 50% saw an 80% drop in their average net wealth over the same period. The data also reveal the growing role of inheritance and gifts inter vivos as a share of national income, as well as their increasing concentration at the top.

Chatterjee, Czajka, Gethin, 24 April 2021

Many studies have investigated the dynamics of poverty and consumption in developing countries, but still little is known about the distribution of household net worth. This column documents the persistence of extreme wealth inequalities in South Africa since the end of the apartheid regime. Today, the top 10% own about 85% of total wealth and the top 0.1% own close to one third. A progressive wealth tax targeted at the richest 1% could collect the equivalent of between 1.5% and 3.5% of South Africa’s GDP, both tackling this legacy of extreme inequality and bringing additional government revenue in the wake of the COVID-19 crisis.

Papaconstantinou, 23 April 2021

Europe has struggled through two crises in the last decade, but this time its response has been much more decisive and ambitious. George Papaconstantinou tells Tim Phillips why Covid-19 may be the catalyst for deeper EU integration.

You can download CEPR Policy Insight 109: Reshaping economic policy in the EU in the post-Covid world, by Marco Buti and George Papaconstantinou, here

Razin, 23 April 2021

Concerns associated with the Covid-19 pandemic have led to new rationales of protectionism, with renewed emphasis on domestic production and sourcing. This column compares the current economic crisis brought on by the pandemic to previous major economic crises and examines what this could mean for the future of various aspects of globalisation.

Anwar, Bayer, Hjalmarsson, 23 April 2021

In the justice system, the jury is meant to be representative of the community. Yet, juries across the US are often highly unrepresentative, especially for racial minority populations. Using data from Harris County, Texas, this column examines how unequal representation impacts verdicts and sentences. Many zip codes with the highest proportion of white residents are overrepresented on juries. If the jury pool were more reflective of the county, the average sentence would fall by almost 15 years for Black defendants and the likelihood of a life sentence by more than 50%. Policy responses could include expanding the jury source list and oversampling residents from underrepresented neighbourhoods in calls for jury duty.

Buti, Papaconstantinou, 23 April 2021

Most of the discussion on the economic policy response to the pandemic in Europe has centred on its ambition, tools, and institutional characteristics. Less discussion has taken place on the factors shaping EU integration and economic policy priorities after the pandemic. In a new CEPR Policy Insight, the authors argue that four sets of issues will be important in shaping the legacy of the pandemic for European integration: redefining the new boundaries between state and market; revisiting the nature of subsidiarity; reconnecting the EU domestic with the global agenda; and learning to respond to longer term structural shifts.

Bertocchi, Dimico, 23 April 2021

It has been widely reported that among COVID-19 fatalities in the US, minorities are overrepresented while women are underrepresented. This column uses detailed individual-level data and georeferenced data on daily deaths in Cook County, Illinois, to reveal a Black female bias in fatalities. This bias is driven by Black women employed in high-exposure, frontline jobs in the healthcare and transportation sectors, that they reach by public transport from the historically poor neighbourhoods where they reside, having been disproportionately hit by the pandemic.

Lin, McDermott, Michaels, 22 April 2021

Despite the higher susceptibility to floods and a growing climate crisis, more than 10% of the world’s population live in low-elevation coastal zones, and that percentage is growing. This column uses a new dataset on the location of housing and flood risk across thousands of kilometres of the US Atlantic and Gulf coasts to present a detailed picture of housing in low-elevation coastal zones, and its relationship to the vulnerability of different locations to flooding and sea level rise. It also explores how sea level rise may reshape cities, and considers implications in terms of rising costs of flooding and taxpayer subsidies, the economic decline of some neighborhoods, and lengthening commutes.

Krahnen, Pisani-Ferry, Martin, Reichlin, Weder di Mauro, 22 April 2021

The financial crisis of 2007-2012 was the first wake up call to the inadequacy of the euro area architecture when facing a large systemic crisis. This column explains why the Covid crisis will leave a deeper impact on the European policy system, and re-introduces the Vox debate on Europe’s economic architecture in the context of the transformations that we have witnessed over the past year. Contributions to the debate are welcome.

Blanchard, Leandro, Zettelmeyer, 22 April 2021

The EU’s fiscal rules are currently suspended. If reinstated, they will need to be modified to account for the higher levels of debt. This column, part of the Vox debate on euro area reform, argues that simple fiscal rules provide a crude and unsatisfactory assessment of debt sustainability and proposes that they be replaced with fiscal standards. In particular, it calls for qualitative prescriptions that leave room for judgement together with a process to decide whether the standards are met. This proposal envisages a larger surveillance role for independent fiscal councils and/or the European Commission, as well as a judicial body for adjudication over disputes. 

Christiaensen, De Weerdt, Ingelaere, Kanbur, 21 April 2021

Despite potentially greater income gains in big cities, migrants from rural areas in developing countries often move to small towns. This column uses survey data from Tanzania to show that distance drives destination in migration decisions, particularly for the poor and for those with no education. This finding explains the seeming paradox of greater migration to small towns than to big cities, and provides a strong argument for a more balanced orientation of development investment between the two. 

Arezki, Bolton, 21 April 2021

Ensuring that developing countries remain able to access credit markets is vital for promoting growth and recovery post-pandemic. This column argues that urgent efforts by major economies to support regional development banks and preserve their financial standing will help limit the cost of rebuilding after the crisis, in turn helping preserve international capital markets in the short and medium run.  

Broadberry, 20 April 2021

As a result of recent work on historical national accounting, it is now possible to establish more firmly the timing of the Great Divergence of living standards between Europe and Asia in the 18th century. This column shows that there was a European Little Divergence as Britain and the Netherlands overtook Italy and Spain, and an Asian Little Divergence as Japan overtook China and India. The Great Divergence occurred because Japan grew more slowly than Britain and the Netherlands starting from a lower level, and because of a strong negative growth trend in Qing dynasty China.

Muringani, Fitjar, Rodríguez-Pose, 20 April 2021

Social capital matters for economic growth and development, but different types of social capital matter in very different ways. This column examines how differences in social capital across Europe shape regional economic growth. While ‘bridging’ social capital is linked to higher regional economic growth, ‘bonding’ social capital leads to lower growth. This is particularly the case in less-developed regions and in regions with a lower endowment of human capital. As the level of education increases, the need for bridging social capital declines, implying that bridging social capital and human capital are, to a certain extent, substitutes.

Andersen, Johannesen, Jørgensen, Peydró, 19 April 2021

Who gains – and by how much ­– when central banks soften their monetary policy regime is a key policy question. This column discusses new evidence on the distributional effects of monetary policy based on detailed administrative household-level data. The authors show that the gains from lower policy rates exhibit a steep income gradient, with the increases in income, wealth, and consumption modest at the bottom of the income distribution and highest at the top. 

Chiplunkar, Goldberg, 19 April 2021

Promoting gender equality in firm ownership is not only beneficial for women, but for the entire economy. This column describes a framework for quantifying the macroeconomic implications of gender-based distortions that affect female entrepreneurship. Applying the model to India suggests that eliminating the barriers to entry, operation, and expansion for female-owned firms could produce significant productivity and welfare gains.

Jacks, Stuermer, 18 April 2021

As the recent past has shown, maritime transport costs are subject to wide swings. This column analyses a large new dataset on dry bulk freight rates from 1850 to 2020, when maritime transport costs fell 79%. Turning to the drivers of booms and busts in the dry bulk shipping industry, it finds that shipping demand shocks dominate both fuel price and shipping supply shocks. Shipping demand shocks have increased in importance over time while shipping supply shocks have become less relevant.

Davis, Ghent, Gregory, 18 April 2021

The COVID-19 pandemic has prompted a radical shift in how much people work from home. This column argues that, through learning and technology adoption effects, this enforced shift has boosted the productivity of working from home, which will lead to higher lifetime incomes for the working population. While these productivity gains would likely have happened eventually, the pandemic accelerated this process.

Filauro, Fischer, 17 April 2021

Inequality in the EU has traditionally been analysed either at the individual country level or in terms of the average of country trends, but attention is now shifting to the analysis of inequality between all citizens across individual member states. Using income survey data, this column shows that that inequality among EU citizens is significantly lower than among US citizens, but slightly higher than in countries with established welfare models such as Australia and Japan. This and other findings may be useful in identifying the most effective policy path to address inequality at the EU level.

Kapteyn, Stancanelli, 17 April 2021

The COVID-19 pandemic has meant that more people are working from home and women are disproportionately losing paid work. This column uses daily activity diaries from the American Time Use Survey to look back at the impact of the unemployment benefit extensions that were triggered by the Great Recession on hours worked from home. The overall picture is one of increased gender inequality in the labour market, with women but not men increasing work hours and effort in response to the Great Recession and the consequent changes in the duration of unemployment benefits. 

Laouénan, Nekoei, Wasmer, 16 April 2021

Can we create a database of everyone in history using the sources we have today? Tim Phillips talk to the authors of two projects which set out to do just that through combining sources such as Wikipedia and Wikidata with machine learning. What do these databases tell us about who we consider to be important?
The two papers discussed are:

Bhargava, J, Eyméoud, J-P, Gergaud, O, Laouenan, M, Plique, G and Wasmer, E. 2021. 'A Cross-verified Database of Notable People, 3500BC-2018AD'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15852

Nekoei, A and Sinn, F. 2021. 'Human Biographical Record (HBR)'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15825

 

Jondeau, Mojon, Monnet, 16 April 2021

The momentum towards greening the economy implies transition risks that represent new threats to financial stability. The risk of a run on brown assets, similar to that seen during the subprime crisis, can have widespread destabilising effects. This column proposes a liquidity backstop with an access fee proportional to carbon emissions, and a borrowing rate independent of emissions. It argues that such a facility will help green the economy, re-establish production efficiency, and avoid highly inefficient runs. An orderly reallocation of capital to a greener economy can lift long-term growth and facilitate the post-Covid recovery.

Dewatripont, Reichlin, Sapir, 16 April 2021

The existing European resolution framework, an essential part of the European banking union, is still largely deficient. National resolution authorities often bypass the European framework, with the result that, since its creation in 2015, the Single Resolution Board has adopted only one resolution decision. This column argues that two aspects of the European resolution framework are particularly in need of reform – the bail-in regime and the resolution mechanism for cross-border banks – and proposes a reform of both.

Asaria, Costa-Font, Cowell, 15 April 2021

COVID-19 has not only impacted inequality, it has also affected preferences for inequality. This column examines inequality aversion in Italy, Germany, and the UK. Surveys taken during the early stages of the pandemic higher aversion to income inequality than to health inequality in all three countries, consistent with the findings of other studies conducted before COVID-19. Focusing on the UK, it also finds that people have become more averse to inequality since the onset of the pandemic, especially when it comes to health. This effect is stronger among those not directly affected by the COVID-19 pandemic. 

Daly, Chankova, 15 April 2021

The economic consequences of Covid-19 are often compared to a war, prompting fears of rising inflation and high bond yields. However, historically, pandemics and wars have had diverging effects. This column uses data extending to the 1300s to compare inflation and government bond yield behaviour in the aftermath of the world’s 12 largest wars and pandemics. It shows that both inflation and bond yields typically rise in wartime but remain relatively stable during pandemics. Although every such event is unique, history suggests high inflation and bond yields are not a natural consequence of pandemics. 

Felbermayr, Yotov, 14 April 2021

Whether or not large bilateral trade imbalances are a signal of non-reciprocal (or ‘unfair’) trade costs has been the subject of debate for some time, and was brought to the fore during President Trump’s time in office. This column argues that if the trading partners’ average trade costs with the whole of the world are taken into account, then the ‘unfair trade’ argument does not hold up. Using standard gravity modeling, the authors find that up to 88% of the variance in bilateral balances can be explained without making any reference to asymmetries in bilateral trade costs.

Fernandes, Forero, Maemir, Mattoo, 14 April 2021

Under the African Growth and Opportunity Act in 2001, the US allowed duty-free entry of apparel products from eligible African countries. However, the end of the Multi-Fiber Arrangement in 2005 re-exposed African countries to significant international competition from Asia. This column finds that countries in Southern Africa and firms in Kenya that boomed during the period of high initial trade preferences went bust when the Multi-Fiber Arrangement expired. Subsequent growth was driven by new countries, notably Ethiopia, and by new firms in Kenya. These results are consistent with the complementary role of domestic reforms rather than the ‘infant industry’ benefits of trade preferences alone.

Cavallo, Powell, 13 April 2021

Latin America and the Caribbean suffered from several regional preconditions in advance of the Covid-19 crisis, including weak health infrastructure, low growth, and inefficient taxation. Now the pandemic threatens to leave the region with even higher poverty levels, greater inequality, and debts across virtually all countries. This column recognises the severity of these challenges but also provides reason to hope. If Covid-19 produces the political will to move the region towards better policy frameworks and execution, something positive could come of the crisis.

Gilhooly, Martinez, Watt, 13 April 2021

Emerging markets will be shaped by the US and Chinese policy stances in 2021. This column considers how the latest US fiscal package will interact with China’s policy normalisation and concludes that while President Biden’s American Rescue Plan should dominate a less expansionary stance in China, the boost to the global economy will be much more modest than one would typically expect. Specifically, the normalisation of goods consumption in developed markets and less import-intensive Chinese growth will curtail global goods trade, a key determinant of emerging market growth.

Dahl, Knepper, 13 April 2021

Around the globe, countries are experiencing a surge in the size and proportion of older individuals in their populations, leading to a ‘greying’ of the workforce. These older workers often encounter discrimination in the workplace. This column uses two unique data sources and two novel statistical approaches to show that economic downturns increase the incidence of illegal age discrimination. Whatever power disparities exist between workers and employers appear to grow during recessions, allowing employers to engage in higher levels of discrimination.

Krugman, 12 April 2021

Nobel Laureate Robert Mundell passed away on 4 April 2021. In this column, Paul Krugman describes the evolution of Mundell’s contribution to economic thought and policy, from his early pathbreaking models that remain the foundation of modern international macroeconomics to his later views that were more controversial and less influential in the profession. He also offers an explanation of how the man who brought Keynesian analysis to the open economy and highlighted the difficult tradeoffs in creating a currency area could come to be seen as the father of both supply-side economics and the euro.

Armand, Kim Taveras, 11 April 2021

When discussing the socioeconomic effects of climate change, little attention has been given to the role of the ocean. This column presents new evidence of the effect of ocean acidification on early-childhood mortality in low- and middle-income countries. Small increases in exposure to water acidity while in utero have significant effects on neonatal mortality. A closer look at possible mechanisms highlight the role of the ocean for nutrition and how overfishing represents an additional threat.

Costa-Font, Jiménez-Martín, Viola, 11 April 2021

The COVID-19 pandemic has had a disproportionate impact on older Europeans living in nursing homes. This column finds evidence consistent with a 'fatal underfunding hypothesis', suggesting that the regional variation in nursing home fatalities during the first wave of the pandemic in Spain is associated with indicators of underfunding such as understaffing, larger nursing homes, and occupancy rates. Coordination failures both between healthcare and long-term care and between central and regional governments also contributed.

Andersen, Parise, Peijnenburg, 10 April 2021

The demographics of criminality are changing, with the share of crimes committed by older adults rising in developed countries. This column uses administrative data from Denmark to better understand late-in-life determinants of crime – specifically, severe health shocks. It finds that a cancer diagnosis can incite criminal activity, and argues that social support should be made widely available to vulnerable segments of the population in the wake of the Covid health crisis, when even people with previously clean records could find themselves drawn into illegal behaviour.

Gollier, 09 April 2021

The slow development of the vaccination campaign in continental Europe raises critical questions around who should be prioritised in the roll-out, the welfare costs of a delay, and the impact of ‘anti-vaxxers’ and vaccine nationalism. This column uses an age-structured SIR model to addresses these issues with a focus on France. A doubling of the speed of vaccination France achieved in March could reduce deaths in 2021 by a third, while the presence of senior anti-vaxxers may imply around 5,000 additional deaths among the senior pro-vaxxer population (based on 30% of the population refusing the vaccine). Vaccine nationalism is estimated to increase the global death toll by 20%.  

Angrist, Djankov, Goldberg, Patrinos, 09 April 2021

Human capital is a critical component of economic development. But the links between growth and human capital – when measured by years of schooling – are weak. This column introduces a better measurement, using a database that directly measures learning and represents 98% of the global population. The authors find that the link between economic development and human capital is strong when measured in this way. They also show that global progress in learning has been limited over the past two decades, even as enrolment in primary and secondary education has increased.

Khanna, Liang, Mobarak, Song, 08 April 2021

Why do workers remain in low-productivity areas when they could experience wage gains elsewhere? While the literature has proposed a few explanations, including the high cost and risky nature of migration, this column uses the case of China to examine instead the role that pollution plays. It finds that severe pollution can induce workers to relocate from productive to unproductive regions, suggesting that pollution control, coupled with policies facilitating migration, has the potential to bring about extra economic gains in developing countries.

Hayakawa, Koster, Tabuchi, Thisse, 08 April 2021

The economic and social consequences of investments in transport infrastructure generate heated academic and policy debates because they typically involve costly investments that are supposed to yield high payoffs. Particularly telling examples of large transport infrastructure investments are investments in high-speed rail. This column shows that the Shinkansen has had a substantial effect on Japan’s spatial distribution of employment. The relative position of municipalities within the network and their underlying location fundamentals are essential in understanding why the effects of an extensive infrastructure are positive or negative at the local level.  

Breuer, Leuz, Vanhaverbeke, 08 April 2021

Firms often argue that disclosure and reporting regulations such as the EU Accounting Directive require them to reveal proprietary information, which discourages innovation. This column explores the effects of disclosure requirements on corporate innovation in the EU, and finds that forcing firms to publicly disclose their financial statements does indeed discourage innovative activities. At the industry level, positive information spillovers to competitors, suppliers, and customers appear insufficient to compensate for the negative direct effect on innovation. Indeed, the spillovers seem to concentrate innovation within a few large firms in a given industry.

Edwards, Cabezas, 08 April 2021

The nominal exchange rate plays a dual role in macroeconomic adjustments – it is part of the transmission mechanism of monetary policy, and it also helps accommodate external and domestic shocks through its effect on the real exchange rate. This column uses disaggregated price index data from Iceland to test how exchange rate pass-through varies with the international tradability of goods and with the monetary policy framework. It shows that pass-through is significantly higher for tradables relative to nontradables. In addition, it finds that improvements in the credibility of the central bank are associated with declines in the exchange rate pass-through. 

Aizenman, Ito, Pasricha, 08 April 2021

Facing acute strains in the offshore dollar funding markets during Covid-19, the Federal Reserve implemented measures to provide US dollar liquidity. This column examines how the Fed reinforced swap arrangements and established a ‘financial institutions and monetary authorities’ repo facility in response to the crisis. Closer pre-existing ties with the US helped economies access the liquidity arrangements. Further, the announcements of the liquidity expansion facilities led to appreciation of partner currencies against the dollar, as did US dollar auctions by foreign central banks. 

Bellodi, Morelli, Vannoni, 07 April 2021

Populism is once more becoming a dominant feature of the political landscape in many countries, but little is known about its consequences for the quality of government. Using Italian municipal-level data, this column shows that populism has a negative impact on bureaucratic expertise and government performance, ultimately to the detriment of society and the economy. 

Carlino, Drautzburg, Inman, Zarra, 07 April 2021

The allocation of COVID-19 assistance under the American Rescue Plan has proven to be a point of significant partisan conflict between the Democratic administration and Republican governors. Motivated by partisan conflicts in the passage and implementation of the American Recovery and Reinvestment Act, this column suggests that the resolution of these disagreements will have significant consequences for the overall impact of the American Rescue Plan on the aggregate economy.

Gollier, 06 April 2021

Any global temperature target must be translated into an intertemporal carbon budget and an associated cost-efficient carbon price schedule. This column uses an intertemporal asset-pricing approach to examine the impact of uncertainties surrounding economic growth and abatement technologies on the dynamics of efficient carbon prices. It finds evidence of a positive carbon risk premium and suggests an efficient growth rate of expected carbon prices of around 4% plus inflation. This is lower than the growth rates found in many public reports and integrated assessment models, and justifies a higher carbon price today in order to satisfy the carbon budget.

Mimir, Sunel, 05 April 2021

Central banks in emerging economies deployed asset purchases for the first time to respond to the Covid-19 shock. Initial studies have found quantitative easing reduced long-term bond yields in these economies without creating bouts of currency depreciation. This column argues that asset purchases ease financial conditions in emerging economies by curbing capital outflows enabled by stronger bank balance sheets upon the asset intermediation by the central bank. If asset purchases cause a de-anchoring in inflation expectations, their effectiveness diminishes. Counterfactual policy experiments reveal that bond yield reductions from asset purchases during the pandemic could have persisted only under large-sized programmes that are representative of advanced economies.

Benghalem, Cahuc, Villedieu, 05 April 2021

The rise of alternative work arrangements – from temporary and part-time work to self-employment and online gig-economy jobs – has increased the take-up of part-time unemployment benefits in several countries. This column presents the results of a large experiment among recipients of unemployment-benefits insurance in France. It shows that increasing part-time unemployment benefits raises the propensity to work in non-regular jobs, but also extends the duration of compensated unemployment and unemployment insurance expenditure, suggesting that the lock-in effects of compensated unemployment associated with part-time benefits require precise evaluation.

Broadberry, de Pleijt, 04 April 2021

Little is known about the role of capital in economic growth before the late 19th century. This column provides the first estimates of investment and the capital stock in Britain as far back as 1270. Although important changes did occur in the role of capital, such as the growing importance of fixed capital relative to working capital and a substantial increase in the investment share of GDP, growth accounting analysis shows that productivity growth was more important than capital deepening in explaining the growth of output per head.

Ajzenman, Bertoni, Elacqua, Marotta, Méndez, 03 April 2021

Low-income students are more likely to attend schools with less-qualified teachers, expanding the very achievement gaps that public education should help reduce. Although the problem of teacher sorting is well-documented, policy responses have tended to focus on increasing compensation at hard-to-staff schools, which can be both expensive and ineffective. This column presents the results of a novel and low-cost strategy implemented nationwide by the government of Peru that successfully encouraged highly qualified teachers to apply for job openings in disadvantaged schools.

Briscese, Feltovich, Slonim, 03 April 2021

Companies often engage in activities of corporate social responsibility such as donating a share of profits to charity. Previous research suggests these initiatives can help attract and motivate workers, even at the cost of giving up part of their compensation. This column presents experimental evidence that shows, however, that when workers can choose who they want to work for, they prefer firms that offer a higher wage, and are attracted by a firm’s corporate social responsibility only when they consider their wage offer as ‘fair’. Further, if companies compensate donations to charity by reducing workers’ wages, this could ultimately harm workers’ wellbeing, depending on the worker’s views on the donations. 

de la Escosura, 02 April 2021

We measure inequality using income as a proxy for welfare. But are we mixing up "doing well" with "being well"? Leandro Prados de la Escosura thinks so, and his research contradicts much of what we think we know about the long-run trends in inequality.

Terzi, 02 April 2021

Inspired by conspicuous historical parallels, some scholars and journalists have argued that GDP growth and productivity might boom in the aftermath of the Covid-19 pandemic. This column reviews the evidence for and against the ‘Roaring Twenties’ hypothesis, concluding that some countries might well experience a forceful economic expansion. But policymakers should avoid complacency and make the most of the Recovery and Resilience Facility funds, combining them with wide-reaching structural reforms to improve economic prospects for the decade to come.

Ilzetzki, Jia, 02 April 2021

In his Spring Budget, UK Chancellor Rishi Sunak announced a super-deduction that allows companies to deduct 130% of expenses on capital on most investments on plant and equipment. This column reveals that the majority of the CfM panel of experts on the UK economy think this super-deduction will moderately aid the UK’s recovery from the Covid recession, but that the announced corporate tax increases also announced in the Budget will do moderate harm. Most panellists believe that the government is moving too fast on deficit reduction. 

Caprettini, Casaburi, Venturini, 01 April 2021

In the aftermath of World War II, the 1950 Italian land reform expropriated wealthy landowners and redistributed their land among rural workers, with substantial and long-lasting electoral rewards for the initiating Christian Democratic Party. The electoral effects of the reform were visible even 40 years later, arguably because the reform strengthened local Christian Democratic grassroots organisations and because Christian Democratic governments continued to invest in reform towns. The episode offers insights into the persistence of the electoral benefits of redistribution.

Kasinger, Krahnen, Ongena, Pelizzon, Schmeling, Wahrenburg, 01 April 2021

Once moratoria and other Covid-19 support measures are unwound, European banks will likely be confronted by a wave of non-performing loans. This column provides empirical insights on the current levels of such loans in Europe and draws lessons from previous financial crises for their effective treatment. It highlights the importance of early and realistic assessment of loan losses to avoid adverse incentives for banks. Secondary loan markets would help in this process and further facilitate bank resolution as laid down in the Bank Recovery and Resolution Directive, which should be upheld even in extreme scenarios.

Persaud, 01 April 2021

The servicing and rolling over of the public and private debt of middle-income countries is a major point of COVID-19-induced stress in the global economy. The G20’s Debt Service Suspension Initiative is a worthy initiative, but it does not address this issue. This column outlines three related steps that may help avoid a crisis. The centre-piece is recycling new and unused Special Drawing Rights for debt reduction through the repayment or repurchase of debt. Moral hazard can be addressed by reducing only those debts held by official creditors and up to an amount equal to fiscal expenditures relating to natural disasters – COVID-19 and climate change, principal amongst them.  

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