Niels Thygesen, Roel Beetsma, Massimo Bordignon, Xavier Debrun, Mateusz Szczurek, Martin Larch, Matthias Busse, Mateja Gabrijelcic, Laszlo Jankovics, Stefano Santacroce, 08 March 2021

National governments and EU institutions enacted unprecedented budgetary measures to mitigate the economic and social impact of the Covid pandemic, a truly exogenous shock. While everyone agrees that a forceful response was needed, the pandemic magnified a number of pre-existing challenges and vulnerabilities in public finances, which need to be addressed in the coming years. This column discusses this year’s conference of the European Fiscal Board on 26 February, at which a prominent line-up of speakers had an open and inspiring exchange on the future of the EU fiscal framework. 

Stefan Pichler, Katherine Wen, Nicolas Robert Ziebarth, 05 March 2021

By now, it should be clear that presenteeism (going into work when sick) contributes significantly to the transmission of diseases. This column summarises current evidence on sick-pay mandates in the US and the spread of flu-like illnesses and COVID-19. Over the last ten years, states that introduced sick-pay mandates saw a decrease in seasonal flu activity by up to 30% in the first years compared to states that didn’t introduce such mandates. Introducing sick-pay mandates did not result in significant employment or wages decreases. Mandating COVID-19-related emergency sick leave also significantly reduced COVID-19 infection rates in states previously without sick-pay mandates, especially affecting low-income and service-sector employees.

Mathieu Cros, Anne Epaulard, Philippe Martin, 04 March 2021

Concerns have emerged that public support to firms in the COVID-19 crisis has been too generous, reducing exit of unproductive firms and preventing Schumpeterian destructive creation. Using data on French firm failures in 2020, this column suggests that these concerns are, at this stage, unwarranted. Although the number of firms filing for bankruptcy was well below its normal level, the same factors that predicted firm failures in 2019 – primarily low productivity and debt – were at work in a similar way in 2020. Overall, the findings point to hibernation rather than zombification.

Dan Goldhaber, Scott A. Imberman, Katharine O. Strunk, Bryant Hopkins, Nate Brown, Erica Harbatkin, Tara Kilbride, 04 March 2021

Following the Covid-19 outbreak, in-person instruction in US schools was dramatically reduced in favour of hybrid and online teaching modes. School reopening is now a contentious issue, with the desire to limit community spread of the virus having to be weighed against the benefits to children of in-person teaching. This column uses regional data from Michigan and Washington to study the effects of different instructional modes on Covid-19 case rates. It shows that in-person teaching correlates with higher case growth in the community only when the pre-existing Covid-19 case rates are moderate or high.

Benedict Guttman-Kenney, 03 March 2021

The UK's recovery is heavily weighted towards the “home counties” around outer London and the South. Utilising Fable Data: a real-time source of consumption data that is a highly correlated, leading indicator of Bank of England and Office for National Statistics data, Ben Guttman-Kenney and colleagues observe a stark contrast between strong online spending growth while offline spending contracts with patterns of regional difference in spending matching lockdown tier levels. To prevent such COVID-19-driven regional inequalities from becoming persistent they propose governments introduce temporary, regionally-targeted interventions in 2021.

You can read the full paper behind this research here: A Levelling Down and the COVID-19 Lockdowns: Uneven Regional Recovery in UK Consumer Spending John Gathergood, Fabian Gunzinger, Benedict Guttman-Kenney, Edika Quispe-Torreblanca, and Neil Stewart https://cepr.online/CE67

Simeon Djankov, Eva (Yiwen) Zhang, 03 March 2021

Steep falls in entrepreneurial activity were recorded in early 2020 across G7 economies. In the US, however, the creation of US startups shot up by 24% relative to the previous year. This column uses data on new company applications in the US since 2004 to show that firm birth generally accelerates in the aftermath of economic crises and that this pattern was particularly pronounced in 2020, fuelled by the government assistance provided to small businesses. It also shows that US firm births are estimated to have surpassed firm deaths in 2020, unlike in the aftermath of the previous financial crisis.

Christina Boll, Till Nikolka, 02 March 2021

The role of intergenerational contact in the spread of Covid-19 has been the subject of debate since the onset of the pandemic. This column uses survey and administrative data to explore the link between grandparental childcare and Covid-19 infection rates in Germany. The findings cast doubt on simplistic narratives that suggest a link between intergenerational contact and infection rates. The statistical significance of the positive relationship between the frequency of regular grandparental childcare and Covid infection rates breaks down as soon as potentially confounding factors, in particular the local Catholic population share, are controlled for.

Florin Bilbiie, Gauti Eggertsson, Giorgio Primiceri, 01 March 2021

How the US economy will emerge from the COVID-19 pandemic hinges in part on what will happen to the large amount of ‘excess savings’ that US households have accumulated since last March. This column argues that, in fact, these savings are not that excessive when considered against the backdrop of the unprecedented government interventions adopted over the past year in support of households, and that they are unlikely to generate a surge in demand post-pandemic.  

Manoj Pradhan, Charles Goodhart, 26 February 2021

Milton Friedman and Bill Phillips most likely assumed that their separate methods for predicting inflation would lead to much the same outcomes. Recently, however, monetary aggregates and the Phillips curve have provided extremely disparate signals. This column discusses recent economic developments leading to these disparate signals, concluding that inflation will most likely end up somewhere between the predictions of the two models – which is almost certainly higher than what central banks and the IMF are expecting.

Gee Hee Hong, Yukiko Saito, 25 February 2021

Firm exits have been at the centre of policy discussions since the start of the Covid-19 pandemic. This column explores Japanese firm exit patterns during severe crises as well as during normal times. Using a dataset that distinguishes firm exit types, the authors find that Japanese firms mainly exit voluntarily, while bankruptcy rates are extremely low. Further, Japanese firms respond to economic shocks mainly through adjustments to output instead of exits – as was seen during the Covid-19 crisis. The ‘cleansing effects’ of firm exits vary by exit type, but appear stable during the current crisis.

Michele Battisti, 25 February 2021

Are schools triggering diffusion of Covid19? Michele Battisti talks to Tim Phillips about research that uses geolocalised microdata from Sicily to show schools contribute to a significant & positive increase in area cases. You can find the full paper, Schools opening and Covid-19 diffusion: evidence from geolocalized microdata by Emanuele Amodio, Michele Battisti, Andros Kourtellos, Giuseppe Maggio and Carmelo Massimo Maida, in this free issue of CEPR's Covid Economics Papers: cepr.online/CE65

Rabah Arezki, Simeon Djankov, Ugo Panizza, 23 February 2021

While most African countries have been largely spared so far from the direct health effect of the Covid-19 pandemic, the continent’s economy has been significantly hurt by the economic consequences. This is particularly concerning given Africa’s high prevalence of extreme poverty.  A new eBook from CEPR Press focuses on business and household responses to the Covid-19 crisis in Africa, as well as access to international finance, patterns in international borrowing, and country-specific experiences during the pandemic. 

George Alogoskoufis, 23 February 2021

Greece experienced a deep recession in 2020, and pandemic relief measures have led to further increases in its exorbitantly high public debt. This column outlines three potential methods for dealing with increasing debt after the crisis: (1) increases in taxation/reductions of government spending, (2) debt restructuring and (partial) debt write-offs, or (3) a policy of ‘gradual adjustment’ in which economic growth helps the debt burden shrink relative to GDP over time. The precise policy mix will involve significant coordination among euro area countries, but Greece must also implement domestic reforms to facilitate a dynamic and sustainable recovery. 

Mark Schankerman, 19 February 2021

Diffusion of new drugs is painfully slow in low-income countries. Mark Schankerman tells Tim Phillips about how patent pools accelerate the process, and how we could still do a better job of licensing life-saving medicines.

Leticia Abad, Noel Maurer, 19 February 2021

While the COVID-19 pandemic seemed to have affected the 2020 US presidential elections, it had remarkably little effect on the electoral returns. This column compares the situation to the 1918 influenza pandemic and examines whether the flu pandemic affected US congressional, gubernatorial, and presidential elections during 1918–1920. Flu deaths did have a small effect on elections – voters did indeed blame incumbent parties for bad health outcomes. However, it appears they cared about other things much more.

Vincent Aussilloux, Adam Baïz, Matthieu Garrigue, Philippe Martin, Dimitris Mavridis, 19 February 2021

The Covid-19 crisis has presented policymakers across the euro area with an unprecedented challenge, not least of all because the shock has come to both the supply side and the demand side of the economy. This column presents a preliminary analysis of different nations’ responses so far, focusing on which measures have been deployed to address each side of the economic shock and where a ‘mixed approach’ has been taken to work in tandem. At a time where coordinated action may be needed, there is a concerning level of inconsistency in strategy. 

Michael Kende, 16 February 2021

Michael Kende (Graduate Institute) talks to Tim Phillips about the lack of digital trust in contact tracing apps which could help control the pandemic, save lives, and normalise our societies and how this is a major wake-up call.

Maarten Verwey, Milan Vyskrabka, Philipp Pfeiffer, 15 February 2021

The breakthroughs in vaccine development in the autumn of 2020 and the start of mass vaccination campaigns in 2021 brightened the near-term outlook for the EU economy. However, hopes of a quick recovery have, to some extent, been overshadowed by the recent resurgence of the pandemic. In order to highlight the extent of prevailing uncertainty and the importance of vaccinations for EU’s economic trajectory, this column describes the optimistic and pessimistic model-based scenarios for the EU economy forecast by the European Commission. It finds that effective vaccines and their quick roll-out could add about three percentage points to annual growth of EU this year. 

Cem Çakmaklı, Selva Demiralp, Sebnem Kalemli-Ozcan, Sevcan Yesiltas, Muhammed A. Yıldırım, 15 February 2021

Countries around the world are beginning to vaccinate their populations against Covid-19. This column calculates the global economic costs from the absence of an equitable distribution of vaccines, with a focus on international trade and production linkages. Under the scenario where advanced economies are vaccinated universally within four months in 2021 but only 50% of the population is vaccinated in emerging markets and developing economies by early 2022, it finds that the global economic costs might be as high as $3.8 trillion. Up to 49% of these costs are borne by advanced economies.

Kristian Behrens, Sergey Kichko, Jacques-François Thisse, 13 February 2021

Containing Covid-19 has required more people to work from home, accelerating the trend towards telecommuting. This column uses a general equilibrium model to analyse the long-term effects of this trend, and finds that it may prove to be a mixed blessing. Working from home saves time that would be spent commuting but deprives firms of the benefits from information and knowledge spillovers. Firms use less office space, but workers require more space at home. Overall, GDP will likely be maximised when working from home occurs one or two days per week.

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