This week from CEPR: 21 April

Thursday, April 21, 2022

Highlights from some of the latest research reports published in the Centre for Economic Policy Research (CEPR) network’s long-running series of discussion papers, as well as some other recent CEPR publications.

Also, links to some of the latest columns on Vox, the Centre’s policy portal, which provides ‘research-based policy analysis and commentary from leading economists’.

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    Michael J. Callen
    CEPR DP No. 17226 | 17 April 2022

    A new CEPR study by Michael Callen shows that three features of Afghan institutions ensured that a broad-based and inclusive government capable of providing stability, safety, liberty, and economic opportunity to Afghans would not emerge, even with unprecedented levels of international assistance. 

    1. First, the Afghan government initiated at the Bonn conference in 2001 explicitly excluded the Taliban. This is widely argued to be the ‘original sin’ that stymied subsequent political development. This exclusionary decision gave the Taliban and their supporters no choice other than to sustain violent conflict, deepen ties to Pakistan, and seek more favourable terms or an outright victory. 
    2. Second, the government adopted an electoral system that combined large multi-member districts with a single non-transferable vote (SNTV). This obscure system is used almost nowhere in the world precisely because it is known to be politically divisive and to undermine the development of political parties. This, in turn, limited the potential for groups focused on shared political agendas to emerge. 
    3. Third, the highly centralised presidential system created by the 2004 constitution -- which copied many elements of Zahir Shah's 1964 constitution -- did not accommodate Afghanistan's rich diversity and the reality that de facto power is decentralised. 

    These exclusionary, divisive, and centralised political institutions were fundamentally out of sync with Afghanistan's political realities and encumbered the development of an effective state.


    • THE WOMEN WHO PAVED THE WAY IN EUROPEAN ACADEMIA 

    WOMEN IN EUROPEAN ACADEMIA BEFORE 1800 - Religion, Marriage, and Human Capital
    David de la Croix, Mara Vitale
    CEPR DP No. 17229 | 17 April 2022

    Few women had the opportunity to teach at universities and participate in the intellectual activities of academies across Europe from the founding of the first universities until 1800, and even then, their very existence is often called into question. 

    A new CEPR study by David de la Croix and Mara Vitale examines the participation of these early pioneers of European academia to document a set of new findings:

    • 108 women taught at universities or were members of academies of arts and sciences across Europe during this period. 
    • Most of them were active in Catholic southern Europe - an unexpected result. This may have been largely determined by the holistic personalities of the time, historical events, and the social position of women.
    • In northern countries, women accessed universities and academies very late. The authors suggest that Protestantism left less room for women at the top of the distribution of human capital to exercise their talent – it had a closed attitude (in that it did not tolerate exceptions) towards the possible participation of women in higher education.
    • The percentage of ever-married female scholars is 79%, but a large fraction of them remained childless. 
    • By measuring the quality of women in academia through their publications, and comparing them to 52,000 male scholars, the research finds that they were on average better, suggesting some form of discrimination.

    Figure: Female Academics in Europe

    Note: Paler dots indicate women for whom the link with the institution is weak.



    MACROECONOMIC EFFECTS OF SANCTIONS ON RUSSIA

    Anna Pestova, Mikhail Mamonov, Steven Ongena
    15 April 2022

    Writing at VoxEU, Anna Pestova, Mikhail Mamonov and Steven Ongena estimate the macroeconomic effects of the new sanctions on Russia, to show that: 

    • Industrial production, consumption, and investment will all decline, and that Russian GDP will contract by -12.5% to -16.5% in 2022. 
    • Nevertheless, the Russian economy will continue to rely on its existing export model, which may be difficult to undermine, even with potential oil and gas embargoes. 
    • The sanctions will likely produce one of the deepest economic crises in the last three decades, comparable to the transformation crisis that followed the Soviet Union’s collapse. 
    • The population will struggle with the ‘new poor’ who will be appealing to the mechanisms of household adaptation to deep crises that had been widely employed in the 1990s. 
    • As a negative unintended spillover effect, this will touch on not only the Russian population but, more broadly, a wide range of households in many developing countries across the globe.
     

    THE NEGATIVE EFFECT OF CONFLICT ON ACADEMIC ACHIEVEMENT: Lessons for Ukraine from the West Bank

    Tilman Brück, Michele Di Maio, Sami Miaari
    19 April 2022

     

    Focusing on the Second Intifada in the West Bank, a study by Tilman Brück, Michele Di Maio and Sami Miaari documents how conflict reduces Palestinian high-school students’ probability of passing their final exam, the total test score at the exam, and thus the probability of being admitted to university. The research shows that for conflict-affected counties like Ukraine, the negative effect of conflict on academic achievement is likely to have long-lasting consequences.


    COUNTRIES SUFFER LARGE ECONOMIC PROXIMITY PENALTY FROM WAR IN UKRAINE

    Jonathan Federle, André Meier, Gernot Müller, Victor Sehn
    18 April 2022

    Financial markets responded quickly to the Russian invasion of Ukraine by pricing in a proximity penalty, according to new research by Jonathan Federle, André Meier, Gernot Müller and Victor Sehn. The authors compare the cumulative equity returns in 66 countries during a four-week window centred around 24 February 2022, and find the existence of ‘proximity penalty’ worth about 2.6 percentage points for every 1,000 kilometres a country is closer to Ukraine. Trade-related spillovers account for about two-thirds of this penalty.

     

    RUSSIA’S INVASION OF UKRAINE HAS LED TO HIGHER INFLATION EXPECTATIONS OF INDIVIDUALS IN GERMANY

    Geghetsik Afunts, Misina Cato, Susanne Helmschrott, Tobias Schmidt
    20 April 2022

    A study by Geghetsik Afunts, Misina Cato, Susanne Helmschrott and Tobias Schmidt shows  that both short-term and long-term inflation expectations increased as an immediate result of the Russian invasion. One major contributing factor to higher inflation expectations in Germany has been strong anticipation of further increases in energy prices because of the war.


    WAR IN UKRAINE IS RAISING ECONOMIC UNCERTAINTY IN THE UK

    Lena Anayi, Nicholas Bloom, Philip Bunn, Paul Mizen, Gregory Thwaites, Ivan Yotzov 
    16 April 2022

    Writing at VoxEU, Lena Anayi et al. present early evidence on the impact of the conflict in Ukraine on economic uncertainty, using a number of forward-looking measures of uncertainty that are available in close to real time:

    • Daily measures of uncertainty have increased, but by much less than during the Covid-19 pandemic. 
    • 48% of businesses considered the conflict a ‘top-three’ source of uncertainty in March, although that level is still below the peak uncertainty seen due to Covid-19 and Brexit in the past.
    • Measures of subjective uncertainty derived from firm surveys have also increased, particularly those relating to future inflation. 
    • Almost half of UK firms saw the war as an important source of uncertainty for their business in March 2022. 
    • Factors such as energy use, demand, trade, and ownership are important determinants of business uncertainty regarding the conflict.

    WILL THE UKRAINE WAR ACCELERATE OR RETARD THE TRANSITION TO A LOW-CARBON ECONOMY?

    Ming Deng, Markus Leippold, Alexander Wagner, Qian Wang
    21 April 2022

    Writing at VoxEU, Ming Deng, Markus Leippold, Alexander Wagner and Qian Wang examine stock prices reactions to the Russia-Ukraine war, to show that the speed of transition to a low-carbon economy appears to be diverging between the US and Europe. In the US, investors generally expect the transition to slow down. In Europe, investors expect stronger policy responses supporting renewable energy sources, which, given the continent’s relatively pronounced dependency on Russian oil and gas, is arguably the only way for the Europe to enhance its energy security.



    EXPOSURE TO FOX NEWS REDUCES COVID-19 VACCINATION RATES

    Matteo Pinna, Léo Picard, Christoph Goessmann
    15 April 2022

    A study by Matteo Pinna, Léo Picard and Christoph Goessmann finds that exposure to Fox News reduces COVID-19 vaccination rates, while exposure to CNN or MSNBC does not. Cable media appears to shape beliefs about the effectiveness of COVID-19 vaccines. The results support the interpretation that Fox News Channel promulgated a uniquely sceptical narrative about vaccines and that this narrative caught on and reduced uptake.

     

    FIGURING OUT EFFICIENT UNEMPLOYMENT

    Pascal Michaillat, Emmanuel Saez
    19 April 2022

    Empirically, the unemployment rate is inversely related to the vacancy rate. Furthermore, servicing a job opening costs about as much as one job in terms of resources. Writing at VoxEU, Pascal Michaillat and Emmanuel Saez show that the labour market minimises waste when the unemployment rate equals the vacancy rate. It is too slack when the unemployment rate is higher and too tight when it is lower. Consequently, the efficient unemployment rate is simply given by the geometric average of the current unemployment and vacancy rates. At the beginning of 2022, the US labour market is excessively tight, and tighter than at any point since 1951.


    COLLECTIVE MORAL HAZARD AND THE INTERBANK MARKET

    Levent Altinoglu, Joseph Stiglitz
    18 April 2022

    The interconnected structure of the financial system has been a focal point of debate among policymakers in the wake of recent financial crises. Writing at VoxEU, Levent Altinoglu and Joseph Stiglitz offer a theory to help explain the structure of the financial system and its consequences for risk-taking and systemic risk. 

    The authors find that interconnectedness and excessive risk-taking reinforce one another and the anticipation of ex-post government intervention may exacerbate the systemic risk. The theory, in turn, has important implications for the design of macroprudential regulation.



    THE GREAT EQUALISER SHUTS DOWN: The triple impact of Covid school closures

    Matthias Doepke and Fabrizio Zilibotti interviewed by Tim Phillips, 19 April 2022

    Have Covid school closures widened the gap between the haves and have nots and, if so, can policy close it again?




    HOW FOX NEWS INSPIRED VACCINE HESITANCY

    Matteo Pinna interviewed by Tim Phillips, 15 April 2022

    At the height of the Covid-19 pandemic, some cable news hosts cast doubt on the effectiveness of vaccines. Matteo Pinna tells Tim Phillips about his research on the impact of Fox News on vaccination rates.