Politics and economics

Christos Makridis, Jonathan Rothwell, 10 July 2020

There is significant dispersion in beliefs about the pandemic and its economic implications. This column uses new high-frequency and nationally representative data to document the overwhelming importance of political affiliation as a determinant of these beliefs and the adverse effects of partisanship on local economic activity. In the US, Republicans are significantly less worried about COVID-19 and less likely to expect a long-term disruption due to the virus. These results suggest that the macroeconomic effects of the pandemic on consumption may depend on behavioural factors, like political affiliation.

Thorsten Beck, Orkun Saka, Paolo Volpin, 10 July 2020

A rapidly expanding literature has shown the importance of political economy factors for legislative and regulatory actions in the financial sector and ultimately financial sector stability and efficiency. This column reports on recent research in this field, presented at the first London Political Finance, including work on financial fragility leading to the rise of right-wing extremist parties, private interests in financial regulation, financial gains from political connections, political beliefs and financial decisions and the role of media in financial decisions.  It lays out some of the important takeaways and suggests directions for further research that can shed light on the remaining issues.

Ulrich J. Eberle, Vernon Henderson, Dominic Rohner, Kurt Schmidheiny, 09 July 2020

Urbanisation is a major driver of economic development. Agglomeration forces that make cities productive and dispersion forces that limit their growth have been extensively studied, but the effect of ethnolinguistic diversity has been largely overlooked. This column shows that more diverse regions tend to experience more social tensions and conflict, less urbanisation, less urban concentration, and hence potentially less economic growth. This effect is however more confined to intermediate political regimes like fragile democracies, whereas a mature degree of democracy helps to defuse the negative impact of diversity on urbanisation.

Giovanni Facchini, Brian Knight, Cecilia Testa, 07 July 2020

The disproportionate arrest rates of black Americans is well established, but the relationship between racist police practices and political accountability is not. This column examines whether black voter turnout – which soared following the Voting Rights Act of 1965 – affected police departments in the southern US. It finds that an historically oppressed minority’s enfranchisement can lead to their improved treatment by police, but only when the chief law enforcement officers in a district are elected rather than appointed. While historical in nature, the findings have significant policy implications given ongoing debates about policing, race, and voting.

Jean-Pierre Dube, Andrey Simonov, Szymon Sacher, Shirsho Biswas, 06 July 2020

US televised news networks offer strikingly different coverage of the COVID-19 pandemic, the exposure risks, and the benefits of social distancing measures recommended by health experts. This column devises an empirical strategy to test for a causal effect of news viewership on compliance with social distancing. It finds a large effect of local Fox News viewership on local compliance, with a persuasion rate of up to 26%. These findings reinforce concerns about the media’s role in sowing distrust in scientific evidence in the determination of public policies.  

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