This week from CEPR: April 08

Thursday, April 8, 2021

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


    • BLACK AMERICAN WOMEN WERE DISPROPORTIONATELY AFFECTED BY COVID-19, DUE TO SOCIOECONOMIC AND RACIAL SEGREGATION FACTORS: Evidence from Cook County

    COVID-19, Race, and Gender
    Graziella Bertocchi, Arcangelo Dimico 
    CEPR Discussion Paper No. 16000 | April 2021

    Black Americans died at exceptionally high rates during the early stages of Covid-19 compared to the population share, which discloses an extraordinary degree of racial segregation. This was driven by a Black female bias in mortality that appears to be at odds with the well-established evidence. This is largely the result of poverty and occupational concentration in the health care and transportation sectors and by commuting on public transport. Living arrangements and lack of health insurance are instead found uninfluential. The bias is concentrated in neighbourhoods that were subject to historical redlining.

    These are among the findings of a new CEPR study by Graziella Bertocchi and Arcangelo Dimico, which uses an extraordinarily detailed source of information on daily deaths from COVID-19 collected by Chicago’s Cook County Medical Examiner, to investigate the racial and gendered impact of COVID-19, its timing, and its determinants. It uncovers several notable, and thus far unreported findings: 

    • During the  first wave of the COVID-19 epidemic Black individuals have died at a rate approximately 1.2 times higher than their population share. By April 9 this was as high as 2.2, which implies that Black individuals were the  first to be hit by the virus.
    • Thus, not only are Black Americans disproportionately affected by COVID-19, but they also started to succumb to it earlier than other groups, which explains the consequent decline in the share of cumulative black deaths as the epidemic followed its course.
    • The data uncovers a Black female bias in mortality that appears to be at odds with the well-established evidence that rather points to a male bias. The probability of dying from COVID-19 has been particularly high for Black women, while Black men were not significantly more likely to die from the disease than White men.
    • Black women, who tend to be as vulnerable as Black men are unlike White and Latino women, who are more shielded than White and Latino men, respectively.
    • The higher vulnerability of Black women being explained not by physical and demographic factors, such as comorbidities and ageing, but rather by socioeconomic status. The impact of the latter on mortality is channelled by their overrepresentation in low-pay, high-risk, essential jobs in the health care and transportation/warehouses sectors, that they access through commute by public transport, often from the historically redlined neighbourhoods where they tend to be residing.
    • There is no evidence for a role of other potential channels that can affect contagion through the household or prevent access to health care.

    What the epidemiological curve discloses is an extraordinary degree of racial segregation, with different groups displaying distinct patterns even in the timing of their exposure to the Epidemic provide evidence on how race affects COVID-19 outcomes.


    • COVID-19 VACCINE'S GENDER PARADOX: Why are women more vaccine hesitant, despite being more concerned about Covid-19?   

    COVID-19 VACCINE'S GENDER PARADOX
    Martial Foucault, Vincenzo Galasso, Vincent Pons, Paola Profeta     
    CEPR Discussion Paper No. 15996 | April 2021

    New data reveals there is a COVID-19 Vaccine gender paradox: Women are less likely to be vaccinated than men and less likely to want compulsory vaccinations, despite being more concerned about its health consequences and more compliant with the public health rules imposed during the pandemic. Women’s vaccine hesitancy is partly due skepticism, since women are less likely to believe that vaccination is the only solution to COVID-19 and more likely to believe that COVID-19 was created by large corporations.eu3=uy7k8-

    These are the findings of a new CEPR study by Martial Foucault, Vincenzo Galasso, Vincent Pons and Paola Profeta, which uses survey data from ten countries (Australia, Austria, France, Germany, Italy, New Zealand, Poland, Sweden, the UK, and the United States) to investigate gender differences in attitudes and expected behaviours regarding COVID-19 vaccination.

    Being more concerned about COVID-19 and more likely to believe to be infected and consequently to become seriously ill, women could be expected to be more supportive of vaccination than men. Instead, the findings show that women agree less than men to be vaccinated and to make vaccination compulsory. The results show that information provision on the role of vaccination to become immune to COVID-19 is effective in reducing vaccine hesitance.


    • THE CAPABILITY OF SLOW VACCINATION PROGRAMS TO CONTROL AGGRESSIVE NEW COVID-19 STRAINS ARE NOT JUST DELAYED, BUT STRONGLY REDUCED   

    How fast must vaccination campaigns proceed in order to beat rising Covid-19 infection numbers?
    Alexandra Fotiou, Andresa Lagerborg
    Issue 75 Covid Economics | 07 April 2021

    A new study by Claudius Gros and Daniel Gros in CEPR’s Covid Economics derive an analytic expression describing how health costs and death counts of the Covid-19 pandemic change over time as vaccination proceeds. The key factors are that the mortality risk from a Covid-19 infection increases exponentially with age and that the sizes of age cohorts decrease linearly at the top of the population pyramid. Taking these factors into account, the authors derive an expression for a critical threshold, which determines the minimal speed a vaccination campaign needs to have in order to be able to keep fatalities from rising: 

    • Younger countries with fast vaccination campaigns find it substantially easier to reach this threshold than countries with aged population and slower vaccination. 
    • For EU countries it will take some time to reach this threshold, given that the new, now dominant, mutations, have a significantly higher infection rate. 
    • The urgency of accelerating vaccination is increased by early evidence that the new strains also have a higher mortality risk. 
    • Protecting the over 60 years old, which constitute one quarter of the EU population, would reduce the loss of live by 95 percent.

    Meanwhile, the disease may continue to spread exponentially unless checked by Non-Pharmacological Interventions (NPI).



    PANEL OF EXPERTS REVIEW RISH SUNAK’S ‘SPEND NOW, TAX LATER’ BUDGET

    Ethan Ilzetzki, Jason 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. Referred to as the “spend now, tax later” budget, 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. 

     

    EXPELLING THE EXPERTS: Populism has negative impact on bureaucratic expertise and government performance

    Luca Bellodi, Massimo Morelli, Matia Vannoni                       
    07 April 2021

    How does Populism impact the quality of government? Using Italian municipal-level data, a study by Luca Bellodi, Massimo Morelli and Matia Vannoni shows that populism has a negative impact on bureaucratic expertise and government performance, ultimately to the detriment of society and the economy.

    The findings show that government bodies controlled by populist mayors pass more resolutions and planning instruments, as a cheap signal of effort to their constituents. When the bureaucracy does not work properly and when it is devoid of expertise, the politicians will use excessive legislation to maximise their short-term electoral benefits, with negative consequences for the economy. 


    WILL EUROPE EXPERIENCE ANOTHER ‘ROARING TWENTIES’? 

    Alessio Terzi                   
    02 April 2021

    Writing at Vox, Alessio Terzi reviews the evidence for and against the ‘Roaring Twenties’ hypothesis, that GDP growth and productivity might boom in the aftermath of the Covid-19 pandemic, and concludes that although a replication of the Roaring Twenties looks far from granted for Europe as a whole, what cannot be excluded is that an economic boom might materialise for selected countries within the EU.

    The ambition and quality of the public policy response to the crisis, including the degree to which Recovery and Resilience Fund is well spent, and coupled with wide-reaching structural reforms, is ultimately what will define economic prospects in the ‘twenties’ of the 21st century. 


    THE HIDDEN COSTS OF CORPORATE SOCIAL RESPONSIBILITY: When firms invest in CSR, workers lose a substantial part of their salaries

    Guglielmo Briscese, Nick Feltovich, Robert Slonim                    
    03 April 2021

    Companies often engage in activities of corporate social responsibility, such as donating a share of profits to charity, which previous research suggests can help attract and motivate workers, even at the cost of giving up part of their compensation.

    A new study by Guglielmo Briscese, Nick Feltovich and Robert Slonim 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. 


    THE RESOLUTION OF PARTISAN DISAGREEMENTS WILL HAVE SIGNIFICANT CONSEQUENCES FOR THE OVERALL IMPACT OF THE AMERICAN RESCUE PLAN (ARP) ON THE AGGREGATE ECONOMY

    Gerald Carlino, Thorsten Drautzburg, Robert Inman, Nicholas Zarra                        
    07 April 2021

    Recently, President Biden proposed, and Congress approved, a $1.9 trillion debt-financed increase in national spending known as the American Rescue Plan (ARP). However, the allocation of this assistance has proven to be a point of significant partisan conflict between the Democratic administration and Republican governors. The administration wants states to stimulate the economy via outlays or transfers while Republican governors want to give tax cuts.

    New research by Gerald Carlino, Thorsten Drautzburg, Robert Inman and Nicholas Zarra, first motivated by partisan conflicts in the passage and implementation of the American Recovery and Reinvestment Act (ARRA), suggests that the resolution of these disagreements will have significant consequences for the overall impact of the ARP on the aggregate economy.


    THE LOCK-IN EFFECTS OF PART-TIME UNEMPLOYMENT BENEFITS: Evidence from France

    Hélène Benghalem, Pierre Cahuc, Pierre 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.

    A new study by Hélène Benghalem, Pierre Cahuc and Pierre Villedieu finds 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.


    QUANTITATIVE EASING IN EMERGING MARKET ECONOMIES: Benefits, risks, and limitations

    Yasin Mimir, Enes 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.

    Writing at Vox, Yasin Mimir and Enes Sunel argue 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.


    CAPITAL AND ECONOMIC GROWTH IN BRITAIN, 1270–1870: Preliminary findings

    Stephen Broadberry, Alexandra de Pleijt                       
    04 April 2021

    Little is known about the role of capital in economic growth before the late 19th century. Writing at Vox, Stephen Broadberry and Alexandra de Pleijt provide the first estimates of investment and the capital stock in Britain as far back as 1270.

    The authors find that 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.


    HOW TO GET HIGHLY QUALIFIED TEACHERS TO MOVE TO DISADVANTAGED SCHOOLS: Evidence from Peru

    Nicolas Ajzenman, Eleonora Bertoni, Gregory Elacqua, Luana Marotta, Carolina Méndez                        
    03 April 2021

    The lack of high-quality teachers in more vulnerable schools has serious implications for inequities in education worldwide. Writing at Vox, Nicolas Ajzenman and colleagues present 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. The programme was designed based on two behavioural insights. Firstly by appealing to prosocial behaviour - the intent to benefit others. And secondly by employing extrinsic, monetary incentives.

    The potential policy implications of these results are substantial, and show that low-cost, easy to scale behavioural strategies can help to improve the equity and efficiency of the system by mitigating teacher shortages in disadvantaged schools and increasing the flow of qualified teachers to low-performing institutions. 


    PREPARING FOR A WAVE OF NON-PERFORMING LOANS: Empirical insights and important lessons

    Johannes Kasinger, Jan Pieter Krahnen, Steven Ongena, Loriana Pelizzon, Maik Schmeling, Mark 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. Writing at Vox, Johannes Kasinger and colleagues highlight 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.


    THE PERSISTENT ELECTORAL BENEFITS OF REDISTRIBUTION: Evidence from Italy 1946-92

    Bruno Caprettini, Lorenzo Casaburi, Miriam 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. Writing at Vox, Bruno Caprettini, Lorenzo Casaburi and Miriam Venturini show how the episode offers insights into the persistence of the electoral benefits of redistribution. 


    EFFICIENT CARBON PRICING UNDER UNCERTAINTY

    Christian Gollier                  
    06 April 2021

    Uncertainties around economic growth and carbon abatement technologies suggest an efficient growth rate of expected carbon prices of 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 finds a new study by Christian Gollier.



    INEQUALITY BEYOND GDP

    Leandro de la Escosura interviewed by Tim Phillips, 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.