This week from CEPR: December 17

Thursday, December 17, 2020

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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    THE VALUE OF A COVID-19 CURE: An Asset Pricing Perspective
    Viral V. Acharya, Timothy Johnson, Suresh Sundaresa and Steven Zheng     
    Issue 61 Covid Economics | 11 December 2020

    What is the value of a Coivd-19 cure for the economy? According to new estimates, the value of the ability to end the pandemic could be worth 5-15% of total wealth. This value rises substantially when there is uncertainty about the frequency and duration of pandemics.

    These are among the findings of a new CEPR paper by Viral V. Acharya, Timothy Johnson, Suresh Sundaresa and Steven Zheng, in Issue 61 of Covid Economics, estimates of the value of a cure using the joint behaviour of stock prices and a vaccine progress indicator during the ongoing Covid-19 pandemic. Among the findings: 

    • The value of a cure is estimated to be worth 5-15% of wealth.
    • The value of the cure rises sharply when there is uncertainty about the frequency and duration of pandemics.
    • Agents place almost as much value on the ability to resolve the uncertainty as they do on the value of the cure itself. 
    • This effect is stronger – not weaker – when agents have a preference for later resolution of uncertainty. 
    • The policy implication is that understanding the fundamental biological and social determinants of future pandemics may be as important as resolving the immediate crisis.
       

    • CORPORATE CULTURE IS DRIVING THE GENDER GAP AMONG TOP BUSINESS EXECUTIVES: Evidence from the United States 

    THE GENDER GAP AMONG TOP BUSINESS EXECUTIVES
    Wolfgang Keller, Teresa Molina, Will Olney       
    CEPR DP No. 15552  | December 2020

    Women are underrepresented in the corporate business world, even more so at the executive level. For those women who do reach executive roles, despite having similar experience and education, working at similar firms, and doing similar jobs, they earn less than their male colleagues. While both corporate culture and flexibility affect the female share of employment, only corporate culture influences the gender pay gap.

    These are among the findings of a new CEPR paper by Wolfgang Keller, Teresa Molina and Will Olney, which examines gender differences among top business executives using a large executive-employer matched data set spanning the last quarter century. Among the findings: 

    • Female executives make up 6.2% of the sample and we find they exhibit more labour market churning - both higher entry and higher exit rates. 
    • The share of female executives varies across job titles (i.e. 2.7% for CEOs versus 7.9% for CFOs) and across industries (i.e. 1.0% in agriculture versus 10.1% in education and health).
    • Unconditionally, women earn 26% less than men, which decreases to 7.9% once executive characteristics, firm characteristics, and in particular job title are accounted for. 
    • Although women tend to select into firms with temporal flexibility and a female-friendly corporate culture, there is no evidence that this sorting drives the gender pay gap. 
    • Corporate culture affects pay gaps within firms: the within-firm gender pay gap disappears entirely at female-friendly firms. 
    • Overall, while both corporate culture and flexibility affect the female share of employment, only corporate culture influences the gender pay gap.

    • ARE BANKS CATCHING CORONA? Effects of the pandemic on Lending in the United States   

    ARE BANKS CATCHING CORONA? Effects of COVID on Lending in the United States 
    Thorsten Beck and Jan Keil  
    Issue 61 Covid Economics | 11 December 2020

    A CEPR study by Thorsten Beck and Jan Keil, in Issue 61 of Covid Economics, exploits geographic variation in the exposure of US banks to Covid-19 and lockdown policies to document the impact of the pandemic and consequent economic crisis on banks. Among the findings: 

    • Counties and states more exposed to Covid-19 deaths and (independently) lockdown measures experience higher increases in unemployment.
    • Both the pandemic and the public-health response also explain variation in loan performance across banks.
    • Overall lending growth increases with bank exposure in Covid-19 deaths.
    • Commercial & Industrial lending growth sees a general increase in the second and third quarter of 2020, but no variation across banks with exposure to the pandemic or lockdown measures.
    • There is strong growth in small business lending, which varies with banks’ exposure to the pandemic and lockdown policies.
    • Banks more exposed to the pandemic increase interest spreads and reduce the maturity more for syndicated loans. 

    These findings show that banks have already seen the negative impact of the pandemic and have reacted to higher lending risk with an adjustment in loan conditionality, but have also responded to higher loan demand and government support programmes.



    THE GLOBAL PANDEMIC HAS EXACERBATED THE GENDER PAY GAP FOR MANY, BUT NOT ALL, ADVANCED ECONOMIES

    Simeon Djankov, Tea Trumbic, Eva (Yiwen) Zhang           
    14 December 2020

    A study by Simeon Djankov, Tea Trumbic and Eva Zhang examines evidence from eight advanced countries to show that certain policy responses to the pandemic have better served women’s participation in the labour force than others – notably those tailored to flexible working to accommodate home and childcare responsibilities, as well as those serving industries with greater participation by women. Such policies should be taken into account, especially as historically the reintegration of women into the labour force can take time after a crisis.

     

    HOW LOCAL UNEMPLOYMENT SHAPES MIGRANT INTEGRATION: Evidence from the 2015 European refugee crisis

    Cevat Giray Aksoy, Panu Poutvaara, Felicitas Schikora           
    11 December 2020

    Around 2.4 million refugees and irregular migrants arrived in Europe from 2015 to 2016. A study by Cevat Giray Aksoy, Panu Poutvaara and Felicitas Schikora presents systematic evidence on how local unemployment and attitudes towards immigrants at refugees’ initial place of residence shape their multi-dimensional (economic, linguistic, navigational, political, psychological, and social) integration in the context of the European refugee crisis.

    The study leverages Germany’s centralised allocation policy, which exogenously assigns refugees to live in specific counties, the study finds that high initial local unemployment negatively affects refugees’ economic and social integration. Conversely, favourable attitudes towards immigrants promote the economic and social integration of refugees.


    WHY ARE SOME PEOPLE AGAINST VACCINATION? 

    Leonard Goebel, Thomas Mayrhofer, Hendrik Schmitz         
    12 December 2020

    A study by Leonard Goebel, Thomas Mayrhofer and Hendrik Schmitz, which relates risk attitudes to willingness to get vaccinated, finds that more ‘prudent’ individuals are less likely to take a Covid-19 vaccine. This effect is stronger in risk groups, such as older participants and those with pre-existing illnesses.

    The findings could help politicians convince people to get vaccinated against Covid-19, by appealing not only to risk assessments but also to social responsibility.


    DO ALCOHOL PRICE FLOORS EFFECTIVELY REDUCE HEAVY DRINKING? Evidence from Scotland 

    Rachel Griffith, Martin O'Connell, Kate Smith        
    11 December 2020

    A study by Rachel Griffith, Martin O'Connell and Kate Smith exploits the introduction of a price floor for alcohol in Scotland but not in other parts of the UK to assess the efficacy of a price floor for tackling the externalities associated with alcohol consumption. 

    The results shows that, if the external cost of an additional drink is at least moderately higher for heavy compared with lighter drinkers, then a price floor leads to larger welfare gains than a simple Pigouvian-style tax on ethanol. However, a tax system that taxes the ethanol in stronger drinks more heavily can do as well as a price floor at reducing heavy drinking while raising tax revenue.


    TWO PROPOSALS TO RESURRECT THE BANKING UNION: The Safe Portfolio Approach and SRB+

    Luis Garicano            
    17 December 2020

    Without completion of the Banking Union, Europe’s Economic and Monetary Union will continue to be fragile and exposed to a return of the doom loop. Writing at Vox Luis Garicano provides a politically and economically viable solution based on first, creating a model ‘Safe Portfolio’ and, through a reform of the regulatory treatment of sovereign exposures, incentivising banks to move towards it; and second, reforming the resolution framework to empower the Single Resolution Board while simultaneously setting up, within it, a European deposit insurance based on the emerging consensus around a ‘hybrid model’. You can read the full CEPR Policy Insight 108 here


    TAKING STOCK OF THE FINANCIAL SECTOR POLICY RESPONSE TO COVID-19 AROUND THE WORLD

    Erik Feyen, Tatiana Alonso Gispert, Tatsiana Kliatskova, Davide S. Mare        
    17 December 2020


     

    Writing at Vox, World Bank economists introduce a new global database that tracks the wide array of support measures used to mitigate the impact of the Covid-19 crisis on the financial sector. It finds that:

    • Banking sector measures constitute the majority of policies taken and that they aim to take advantage of the flexibility embedded in the international standards. 
    • However, emerging market and developing economies tend to rely more on prudential measures that go beyond this embedded flexibility compared to advanced economies which may reduce bank balance sheet transparency and increase risks to financial stability. 
    • Financial authorities in richer and more populous countries appear to have taken more actions and were more responsive.

    TRADE POLICY RESPONSES TO THE COVID-19 PANDEMIC: Evidence from a new dataset

    Simon Evenett, Matteo Fiorini, Johannes Fritz, Bernard Hoekman, Piotr Lukaszuk, Nadia Rocha, Michele Ruta, Filippo Santi, Anirudh Shingal         
    11 December 2020

    How did governments use trade policy in response to the Covid-19 pandemic? A study by Simon Evenett and colleagues documents trade policy changes targeting medical and food products since the beginning of the pandemic. Among the findings: 

    • While there was a burst in trade policy activism in February and March 2020 in tandem with the rise in Covid-19 cases, there was significant variation across governments in their resort to trade policy, the types of measures used, and the duration of interventions.
    • Measures targeting medical products and PPE dominate, accounting for two-thirds of all trade measures taken. Food is less in focus.
    • Export curbs in medical goods covered international trade worth $135 billion, whereas import reforms in the same sector covered $165 billion.


    POLITICISED RESPONSES TO COVID-19 CONTRIBUTED TO THE SPREAD OF THE VIRUS ACROSS THE UNITED STATES 

    Umut Akovali, Kamil Yilmaz            
    10 December 2020

    A study by Umut Akovali and Kamil Yilmaz finds that US states with lax government policy and community mobility response had higher case growth trajectories and generated connectedness of Covid-19 cases to other states. States with Republican governors tend to have higher connectedness of Covid-19 cases among themselves and generate net connectedness to states with Democratic governors.

    The authors conclude that unless the federal government starts implementing stringent public health policies at the national level and coordinating state-level policies, controlling both Covid-19 cases and their connectedness across states will remain challenging.


    HAS ONLINE TEACHING NEGATIVELY AFFECTED STUDENT LEARNING DURING COVID19? Evidence from higher-education institutions 

    Anna McDougall, George Orlov, Douglas McKee            
    10 December 2020

    Writing at Vox, Anna McDougall, George Orlov and Douglas McKee compare student performance on a set of standard assessments at four PhD-granting institutions in the United States before and after the switch to online classes.

    The authors find that the switch to remote teaching did take a toll on student learning, though it is difficult to say whether this cost was incurred because the classes were online or because of the stress and other factors related to the pandemic. There is also little evidence that disadvantaged groups were further disadvantaged by the pandemic in their college learning. Instructor experience with online teaching and the use of active-learning technique have a positive effect on student outcomes.


    THE PANDEMIC CRISIS RESPONSE IS A LONG-TERM MARATHON: Some key principles to drive the G20 economic policy response in 2021

    Elena Flores, Lucia Granelli       
    14 December 2020

    In April 2020, G20 Finance Ministers and Central Bank Governors endorsed the ‘G20 Action Plan Supporting the Global Economy Through the Covid-19 Pandemic’, setting out the key principles guiding the global response to the crisis and commitments to specific actions for driving forward international economic cooperation. The G20 agenda in 2021 – under the Italian Presidency – will be closely linked to the Action Plan. Writing at Vox, Elena Flores and Lucia Granelli develop a few principles to support the G20’s work in 2021.


    WHY AUTOMATION IN SPANISH FIRMS DID NOT CAUSE RESHORING

    Katherine Stapleton, Michael Webb           
    12 December 2020

    How does increased automation in high-income countries affect imports and multinational activity involving lower-income countries? Using data on Spanish manufacturing firms between 1990 and 2016, a study by Katherine Stapleton and Michael Webb shows that contrary to the typical assumption, the deployment of robots in Spanish manufacturing firms actually caused them to increase offshoring to lower-income countries. This effect was mainly caused by firms starting to newly offshore as a consequence of automation.

    Taken together, these results suggest that fears about the consequences of automation for reshoring have over-simplified what is, in fact, a complex relationship and there are reasons why automation could actually increase trade with lower-income countries. 


    THE NEXT PUBLIC HEALTH CHALLENGE: Pain and its unequal distribution

    David M. Cutler, Ellen Meara, Susan T. Stewart              
    13 December 2020

    Pain is on the rise among working age adults in the US and may be the greatest public health challenge facing the United States after Covid. Like many public health challenges, the burden of pain is unequal.

    A study by David M. Cutler, Ellen Meara and Susan Stewart explores why knee pain – the top joint problem in the United States – differs by education. It finds that physical demands on the job and obesity each explain about one-third of the education gradient in knee pain and that there is an interaction between the two, with physical requirements on the job associated with knee pain primarily in those who are obese.


    HOW TO ACHIEVE CHILD LITERACY AND NUMERACY IN THE WORLD’S POOREST AREAS: Evidence from rural Guinea Bissau

    Ila Fazzio, Alex Eble, Robin Lumsdaine, Peter Boone, Baboucarr Bouy, Pei-tseng Jenny Hsieh, Chitra Jayanty, Simon Johnson, Filipa Silva           
    16 December 2020

    Targeted education policies can have substantial positive effects on children’s schooling outcomes. Such policies could play a key role in helping people ‘escape’ the poverty trap, as the education gains from such interventions elevate local children’s attainment levels far beyond those found in neighbouring areas.

    Writing at Vox, Simon Johnson and colleagues present evidence from an intervention in rural Guinea Bissau, which suggests that such learning gains may have spillovers across families, villages, and generations and could provide a resource efficient wat of contributing towards universal basic literacy and numeracy.


    HOW THE INTERNET IS CHANGING THE DEMAND FOR HEALTHCARE

    Sofia Amaral-Garcia, Mattia Nardotto, Carol Propper, Tommaso Valletti          
    15 December 2020

    The internet is fundamentally changing the relationship between healthcare suppliers and demanders, leading to concerns that social media will increase demand for unnecessary and unsafe products and reduce demand for appropriate treatments.

    A study by Sofia Amaral-Garcia, Mattia Nardotto, Carol Propper and Tommaso Valletti looks at demand in the UK for caesarean section births, and finds that mothers with better, faster access to the internet are 2.5% more likely to have a C-section than mothers living in areas with worse internet access. This effect comes from an increase in elective C-sections, with no effect of the internet on the likelihood of having an emergency C-section.


    HOW SOCIAL POSITION SHAPES OUR VIEWS OF INEQUALITY

    Kristoffer Balle Hvidberg, Claus Thustrup Kreiner, Stefanie Stantcheva            
    16 December 2020

    How well do individuals understand their own social position? How does that understanding shape their stance on inequality more broadly? A study by Kristoffer Balle Hvidberg, Claus Thustrup Kreiner and Stefanie Stantcheva show that on average individuals are well informed about their own social positions, and those positions are important for their views on fairness and inequality. Moving up the social ladder makes people more tolerant of inequality, while moving down makes them less tolerant of inequality. By contrast, political views are more stable. Respondents perceive inequality to be most unfair among people with the same education level and working in the same sector. These are also the reference groups in which lower-income people overestimate their position the most and within which respondents in general underestimate inequality most. 


    GREEN BONDS AND CARBON EMISSIONS: Exploring the case for a rating system at the firm level

    Torsten Ehlers, Benoit Mojon, Frank Packer, Luiz A. Pereira da Silva           
    12 December 2020

    Projects financed by green bonds have not always resulted in decreased carbon emissions at the firm level. A study by Torsten Ehlers, Benoit Mojon, Frank Packer, Luiz Pereira da Silva – published on the 5th anniversary of the Paris Agreement – outlines three features of a simple rating system that could both encourage firms to reduce their carbon footprint and provide a useful signal to investors. By focusing on firms’ carbon intensity (emissions relative to revenue), this system would complement existing green bond labels while embracing the features most conducive to decisively lowering carbon emissions.


    WHEN THERE IS NO GENDER DISCRIMINATION IN PROMOTION IN SCIENCE: An econometric case study

    Jacques Mairesse, Michele Pezzoni, Fabiana Visentin            
    13 December 2020

    Few women reach the highest positions in science – are they discriminated against? A study by Jacques Mairesse, Michele Pezzoni and Fabiana Visentin use the French Institute of Physics at CNRS, one of Europe’s largest public research organisation, as a case study to examine this question.

    The authors find that differences in research productivity account entirely for the average gender gap in the promotion from junior to senior positions. This finding does not contradict the observation that other promotion factors – such as family characteristics, mentoring, professional networks, and research responsibilities – have different impacts on female and male researchers.


    POLLUTION PERMITS AND FINANCING COSTS

    Fabio Antoniou, Manthos Delis, Steven Ongena, Christos Tsoumas         
    16 December 2020

    Effective environmental policy should consider the behaviour of financiers of polluting firms. In 2013 the EU Emissions Trading System implemented a reform, which translated to higher compliance costs for producers.

    Writing at Vox, Fabio Antoniou, Manthos Delis, Steven Ongena and Christos Tsoumas discuss the reform. They find that in contrast with possible programme intentions, loan spreads fell on average by 25% starting in 2013, and this dynamic partly undermined the expected reduction in CO2 emissions. The study identifies a key role of permits storage in driving the fall in loan spreads for affected firms. 


    TRADE UNIONISM AND THE WELFARE OF RURAL-URBAN MIGRANT WORKERS IN CHINA

    Alison Booth, Xin Meng, Jilu Zhang       
    13 December 2020

    Rural-urban migrant workers in China often do not receive the same benefits at the workplace as their urban counterparts. A study by Alison Booth, Xin Meng and Jilu Zhang studies the effects of union presence on the welfare of migrant workers.

    The results show that relative to workplaces without unions or with inactive unions, union-covered non-members and union members in places with active unions earn higher incomes and receive better benefits and insurances. In addition, there is a notable premium for union members compared with union-covered non-members, particularly on wages. 


    ‘GOOD’ LOCAL GOVERNANCE MITIGATES THE NEGATIVE PRODUCTIVITY RETURNS OF CREDIT RATIONING

    Andrés Rodríguez-Pose, Roberto Ganau, Kristina Maslauskaite, Monica Brezzi      
    15 December 2020

    Does institutional quality mitigate the negative returns of credit rationing on labour productivity? Using data on a large sample of manufacturing firms in 11 European countries, a study by Andrés Rodríguez-Pose and colleagues demonstrates that this is indeed the case, especially for micro, small, and medium-sized firms. The negative effects of credit constraints on productivity are mitigated in those areas of Europe with high-quality governance. ‘Good’ regional institutions not only drive firm-level productivity but also, and in a more indirect way, reduce the negative productivity returns of credit constraints.



    COVID BABY BOOM OR BUST?

    Joshua Wilde interviewed by Tim Phillips, 11 December 2020

    Will the pandemic create more or fewer babies? Joshua Wilde tells Tim Phillips how Google search data can provide the answer.



    Achieving herd immunity: Can we persuade people to take a vaccine?

    Nicolas Duquette interviewed by Tim Phillips, 10 December 2020

    What kind of message is most effective when trying to persuade communities to support vaccination drives? Nicholas Duquette talks to Tim Phillips about the results of a survey experiment which reveal divergent responses between white non-Hispanic respondents and non-white or Hispanic respondents, depending on whether the message emphasises either the risks of the virus or the safety of vaccination, to the respondent personally or to others

    You can read the Covid Economics paper which details Nic's work,  '“Heard” immunity: Messages emphasizing the safety of others increase intended uptake of a COVID-19 vaccine in some groups', here.


    DEFORESTATION AND COVID-19: A deadly combination for Brazil's indigenous people

    Humberto Laudares interviewed by Tim Phillips, 15 December 2020

    Humberto Laudares (Graduate Institute & University of Geneva) reveals a positive & statistically significant relationship between deforestation & the transmission of COVID19 in indigenous communities in Brazil. With intensified Mining & Conflict contributing to the spread. Read the paper discussed in this video in Issue 53 of CEPR's Covid Economics Papers