This week from CEPR: 24 March

Thursday, March 24, 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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    • New Discussion Papers


    • MAJOR GLOBAL HEALTH INTERVENTION TO COMBAT HIV SIGNIFICANTLY REDUCED SOCIAL VIOLENCE ACROSS AFRICA

    MEDICATION AGAINST CONFLICT
    Andrea Berlanda, Matteo Cervellati, Elena Esposito, Dominic Rohner, Uwe Sunde
    CEPR DP No. 17125 | 21 March 2022

    While large scale health interventions are known to yield substantial health improvements, reductions in mortality, and a recovery of labour productivity, new research suggests that they also play a significant role in reducing social violence. 

    These are the main findings of a new CEPR study by Andrea Berlanda, Matteo Cervellati, Elena Esposito, Dominic Rohner and Uwe Sunde, which investigates the consequences of the successful expansion of anti-retroviral therapy (ART) to combat the early 2000s HIV/AIDS pandemic on social violence and conflict in Africa. Among the findings:

    • The ART expansion significantly reduced the number of violent events in African countries and sub-national regions. 
    • This reduction pertains, in particular, to riots and demonstrations related to economic and human rights motives, but not to large scale armed conflict.
    • The effect works partly through a reduction in economic grievances, but does not merely reflect an improvement in overall economic well-being.
    • The effect is related instead to health improvements, greater approval of government policy, and increased trust in political institutions. 

    These findings, one of the first systematic evaluations of the effects of major health interventions on social conflict, imply that ill health may be a potent driver of social unrest and violence, and that besides improving health and economic conditions, public health interventions can also help curb social violence.

    Figure: HIV Prevalence and Social Violence in Africa: SCAD

    Note: Panel (a): HIV prevalence in 2001 and location of violent events (SCAD) aggregated at the country level. Panel (b): HIV prevalence and location of violent events (SCAD) at the level of sub-national regions as contained in the sample. 


    • HOW COVID-19 CHANGED OUR RELATIONSHIP WITH BICYCLES: Evidence from bike-sharing systems in Toulouse, Lyon, and Montreal  

    COVID-19 IMPACT ON BIKE-SHARING SYSTEMS: An analysis for Toulouse, Lyon, and Montreal
    Marc Ivaldi, Walter Núñez
    CEPR DP No. 17114 | 16 March 2022

    As the Covid pandemic spread across countries and cities, many people were motivated to change their transport habits to minimise the contagion likelihood. Bicycles became a flexible and environmentally friendly alternative to other forms of transport, and above all were compatible with the health crisis.

    Using data from bike-sharing systems (BSS) in Toulouse, Lyon, and Montreal, a new CEPR study by Marc Ivaldi and Walter Núñez examines how their use changed during the Covid-19 pandemic, and looks at the similarities and contrasts between the cities. Among the findings:

    • In each of the three cities, there was a clear increase in distance travelled by users after the Covid-19 outbreak, attributed to an uptake in use by people who decided to use the BSS to go to work or similar activities (such as going to university).
    • Users were also more willing to use the BSS in adverse weather conditions (such as rain and wind). 
    • The evidence suggests that the increase in BSS trips was mainly motivated by work transport purposes, rather than for leisure trips. 
    • Interestingly, after the first lockdown in France, fewer BSS trips were made from those areas where more women live. The authors suggest this could be because women were more likely to stay home due to greater risk aversiveness, and childcare and labour market influences. 
    • As things returned to normality, people continued to use BSS in the French cities, especially in Lyon where an increase in trips is seen.  
    • For the case of Montreal, however, there was a decrease in the number of trips using BSS during 2020 compared to 2019. 

    The authors suggest that these changes could likely represent permanent changes in user' habits, being an excellent opportunity to make specific investments in this system and thus strongly promote the bicycle use and its permanence.



    IMMEDIATE MEASURES ARE NEEDED TO STOP FINANCING RUSSIAN AGGRESSION AGAINST UKRAINE: Three proposals for EU members 

    Eric Chaney, Christian Gollier, Thomas Philippon, Richard Portes
    22 March 2022

    Despite being subject to financial sanctions, the Russian government remains supplied with foreign currency by sales of fossil fuels. In particular, EU imports bring about €650 million every day to Russia. Writing at Vox, Eric Chaney, Christian Gollier, Thomas Philippon and Richard Portes propose, in addition to the ten measures put forward by the International Energy Agency, three measures to be enforced immediately by EU members, in order to cut off financing: 

    1. Complete ban on Russian oil imports
    It is possible to do without it because there are significant capacity margins outside Russia. In some European countries, the embargo could cause difficulties that will have to be managed by European solidarity.
    2. A tax on Russian gas imports, proceeds allocated to Ukrainians
    A total embargo on Russian gas imports is unrealistic in the short term, given the level of dependence of some countries. A temporary tax on Russian gas imports would reduce demand and the rents paid to Russian suppliers.
    3. Cushion the shock on low income households
    The effects of the increase in oil, gas, and therefore electricity prices are proportionally greater for low-income households. To maintain the price signal and the reduction in demand it entails without increasing social inequalities requires temporary fiscal transfers to low-income households.

     

    ANALYSIS OF RUSSIAN SANCTIONS

    Richard Berner, Stephen Cecchetti, Kim Schoenholtz
    21 March 2022

      Writing at Vox, Richard Berner, Stephen Cecchetti and Kim Schoenholtz answer a series of questions raised by the sanction regime on Russia, covering issues such as secondary sanctions, Russia’s supposed ‘war chest’ of currency reserves, the roles of SWIFT and crypto, Russia’s options for retaliation, and the potential for systemic risk arising from the sanctions and any retaliation. 
       

    MULTILATERALISM AFTER THE UKRAINE INVASION: A New World Order?

    Dennis Snower
    21 March 2022

    Russia’s invasion of Ukraine appears to have laid the old world order to rest. Writing at Vox, Dennis Snower argues that we now stand at a crossroads. Recent events have been shaped by deglobalisation, a collapse of global collective action, retreat into nationalisms, environmental collapse, and the rising danger of large wars. The author stresses the need to ensure that future narratives underlying policy actions are constructive, rather than destructive.  

    IMPLICATIONS OF RUSSIA’S WAR FOR FINANCIAL STABILITY AND THE CLIMATE

    John Muellbauer, Janine Aron                   
    24 March 2022

    A key common feature of the global climate crisis and the Global Financial Crisis (GFC) lies in destabilising feedback loops. Writing at Vox, John Muellbauer and Janine Aron identify and compare these highly non-linear processes, and frame lessons for policymakers in the context of Russia’s war in Ukraine. 

    The research shows that Russia’s war creates immediate separate crises for the financial and global climate systems. By delaying approaches to net zero, their linkages increase future financial stability risks.
     



    MAJOR FUTURE GLOBAL ECONOMIC CHALLENGES ACCORDING TO 24 LEADING ECONOMISTS

    Olivier Blanchard, Jean Tirole
    21 March 2022

    A report generated by a commission of 24 leading economists focuses on three structural challenges for the global economy. Writing at Vox, Olivier Blanchard and Jean Tirole set out some of the conclusions. While the challenges of climate change, inequality and demographic change are significant, solutions – though sometimes expensive or unpalatable – exist.

     

    HOW TO JUDGE A COMPANY'S PERFORMANCE BEYOND PROFITS ALONE

    Hans‐Helmut Kotz, Michael Birshan, Kevin Russell
    18 March 2022

    To what extent should company performance be judged by matters beyond the narrow focus of the returns on their operations? Writing at Vox, Hans‐Helmut Kotz, Michael Birshan and Kevin Russell devise a way of accounting for who benefits from a company's value creation and why.

    The authors identify eight pathways through which economic value from corporations flows to households and the economy, and how these have evolved over the past 25 years. The analysis also suggests a growing disparity between types of companies in terms of their impacts on the eight pathways.
     


    HIGH LEVELS OF CORPORATE DEBT MAY DISTORT THE TRANSMISSION OF MONETARY POLICY

    Charles Goodhart, Udara Peiris, Dimitri Tsomocos, Xuan Wang 
    18 March 2022

    Writing at Vox, Charles Goodhart, Udara Peiris, Dimitri Tsomocos and Xuan Wang show that high levels of corporate debt may distort the transmission of monetary policy and make contractionary monetary policy less effective in controlling inflation. Consequently, the trade-off between inflation stabilisation and output stabilisation becomes more problematic when there is a large volume of corporate debt in the economy.

    The COVID-19 pandemic has seen public sector debt levels rise to historic levels, these findings contribute to our understanding of the implications of this both for public finance and inflation.
     


    ARE THE LESS EDUCATED BEING DRIVEN OUT OF EXPENSIVE US CITIES?

    Rebecca Diamond, Enrico Moretti
    17 March 2022

    Over the last three decades there has been increased polarisation in income among US communities, but how the standard of living varies across communities is not clear. A new study by Rebecca Diamond and Enrico Moretti uses transaction data for three million households to examine standards of living – in terms of consumption – in cities across the US by income and education, and how they relate to the local cost of living. The research shows that: 

    • For college-educated households, expensive cities offer incomes high enough to offset the higher cost of living and taxes. 
    • For less-educated households, expensive cities offer a standard of living that is systematically below that in affordable cities.

    KEY GLOBAL AND DOMESTIC MACROECONOMIC DRIVERS OF THE RISE IN ON-CHAIN CRYPTO-ASSET ACTIVITY

    Erik Feyen, Yusaku Kawashima, Raunak Mittal
    19 March 2022

    Crypto-asset holdings and transaction volumes have grown rapidly around the world, and crypto assets are increasingly regarded as an emerging asset class. Writing at VoxEU, Erik Feyen, Yusaku Kawashima and Raunak Mittal show that transaction volumes across countries appear to be driven by globally relevant factors such as US longer-term inflation expectations, US real Treasury yields, and gold and crypto-asset prices, rather than recent country-level macroeconomic developments. Volumes also tend to be higher in countries with higher information and communications technology penetration and greater reliance on remittances.


    DISMISSAL OF NONRESPONSE BIAS IN SURVEYS CAN HAVE IMPORTANT CONSEQUENCES: Evidence from the Norway in Corona Times survey

    Deniz Dutz, Ingrid Huitfeldt, Santiago Lacouture, Magne Mogstad, Alexander Torgovitsky, Winnie van Dijk  
    21 March 2022


     

    When COVID-19 swept the world in early 2020, researchers and policymakers scrambled to determine the economic impact of the virus. The problem was that there was little to no real-time data, so economists filled the data gap by conducting all manner of surveys about household and business activity.

    Yet, little is known about the extent to which different biases affect conclusions drawn from such data, and what we can do about them. Using survey data linked to administrative data, a study by Deniz Dutz et al. shows that a particular type of bias – nonresponse bias – can be large. The authors develop methods to detect and correct for nonresponse bias, which rely on simple changes to widely used survey designs.


    IT IS CRUCIAL TO UNDERSTAND THE MARKET ENVIRONMENT OF THE INTERNATIONAL TRANSPORT SECTOR WHEN DESIGNING CARBON PRICING

    Keisaku Higashida, Jota Ishikawa, Nori Tarui
    20 March 2022

    While most research on the impact of carbon pricing on carbon emissions typically ignores the role played by international transportation, a new study by Keisaku Higashida, Jota Ishikawa and Nori Tarui provides a framework to assess the importance of this sector for carbon leakage across borders and across sectors. 

    The authors identify the importance of asymmetric trade volumes on shipping routes, and the interplay between transportation costs and foreign direct investment choices, in determining the amount of carbon leakage. This shows the need to understand the market environment when designing carbon pricing policies. 


    ARE PEOPLE MORE PRODUCTIVE WORKING FROM HOME? Evidence from Japan suggests not

    Masayuki Morikawa
    22 March 2022

    A study by Masayuki Morikawa explores the changes in prevalence, frequency, and productivity of working from home in Japan over a year of the pandemic. The research shows that fewer workers were working from home in 2021 compared to 2020. While the productivity of working from home has improved, it is still lower than the productivity of working at the office.


    THE HIDDEN COSTS OF INCENTIVISING LATER RETIREMENT: Evidence from Sweden

    Jonas Kolsrud, Camille Landais, Daniel Reck, Johannes Spinnewijn
    22 March 2022

    Using new data from Sweden, a study by Jonas Kolsrud, Camille Landais, Daniel Reck and Johannes Spinnewijn uncovers significant redistributive costs of pension reforms that incentivise later retirement, especially when it comes to incentivising later retirement at very early and late retirement ages. The research shows that it is not only the benefits but also the reallocation costs that should be considered for policymaking.



    WAR IN UKRAINE, IMPACT IN AFRICA: The effect of soaring energy and food prices

    Rabah Arezki interviewed by Tim Phillips, 17 March 2022

    Wheat and oil prices were already rising before the Russian invasion, so what might be the effect for people in low-income countries of a war far away, that may have a secondary impact much closer to home?




    DO SCHOOLS CHANGE OUR RELIGIOUS ATTITUDES?

    Benjamin W. Arold, Ludger Woessmann, Larissa Zierow interviewed by Tim Phillips, 18 March 2022

    Does compulsory religious education make us more likely to believe as adults, and does it make us more ethical? Ludger Woessmann, Larissa Zierow, and Benjamin Arold explain to Tim Phillips what educational reform in Germany can tell us.