This week from CEPR: February 03

Wednesday, February 2, 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


    • OVERWHELMING THE NHS: The pandemic has large knock-on effects on the accessibility and quality of non-covid-19 care in England 

    Pandemic Pressures and Public Health Care: Evidence from England
    Thiemo Fetzer, Christopher Rauh
    CEPR DP No. 16955 | January 2022

    A new CEPR study by Thiemo Fetzer and Christopher Rauh shows that COVID-19 induced pressures on the NHS health care system have had significant adverse knock-on effects on the accessibility and quality of non-COVID-19 care. The authors study both the arrival of COVID-19 and the initial disruption of the first wave in the UK, along with the effect of ongoing pandemic pressures on the health system’s performance. The research shows that:

    • The care for COVID-19 patients is drawing resources and subsequently affects the quantity and quality of care for patients that require medical help for reasons unrelated to COVID-19. Lockdowns and other public-health measures that are taken to slow the spread of COVID-19 may also directly affect both the supply as well as the demand for health care services.
    • The initial wave of the pandemic caused a drastic decline in A&E attendances that was followed by a sharp increase. While before the pandemic 80% of A&E visits were attended within the NHS set  goal of 4 hours, this share has collapsed to just two thirds.
    • There were drastic impacts on the performance of elective care: since the onset of the pandemic, access to specialist care has been significantly curtailed with waiting lists for referrals increasing by 20% and waiting times shooting up. Pre-pandemic, 97% of diagnostics took place within the NHS set goal of 6 weeks. The share dropped to 56% during the first wave and has only increased to 71% since, implying notable delays in diagnosis and access to treatment. Given that the waiting list tends to be around 1 million entries long, these delays have affected millions of patients over the course of the pandemic.
    • Non-emergency consultant-led treatment declined dramatically and has only recently approached pre-pandemic levels. Missing treatments accumulated over the course of the pandemic are estimated at 5.6 million. Moreover, patients referred for treatment have been 9% less likely to receive treatment within the NHS set goal of 18 weeks.
    • The disruption caused by the various pandemic waves has had a significant negative impact on cancer care. There are estimated to be 32,189 fewer cancer patients receiving first treatment following a decision to treat, along with a notable worsening performance in terms of times to first consultation and times of first treatment for urgent cases. For example, while before the pandemic, 91% of urgent referrals of suspected cancer cases would lead to consultations with a specialist within the NHS set goal of 14 days, this share has been only 86% since the end of the first wave. Even more importantly, for cancer treatment, the share of patients receiving urgent first treatment after referral within the NHS set goal of 62 days has declined from 78% before the pandemic, to 75% during and 72% after the first wave. Alarmingly, the share has been trending downwards: in the most recent months only 66% of patients received treatment within 62 days of first referral. Amongst detected urgent cancer cases, 53,068 people had their cancer care delayed past the NHS set goal. This is likely consequential in driving excess mortality in the future as systematic reviews of clinical evidence suggest that even a four weeks delay of cancer treatment is associated with increased mortality for cancer patients. 
    • COVID-19 disruptions have had a notable impact increasing excess mortality among patients attending hospital for reasons unrelated to COVID-19. The authors estimate there to be at least one such non-COVID-19 related excess death among patients being admitted to hospital for non-COVID-19 reasons for every 30 COVID-19 deaths that is caused by the disruption to the quality of care due to COVID-19.
    • For the period from March 2020 to February 2021 alone, the research estimates that there have been at least 4,003 excess deaths of hospital patients in England that, if it were not pandemic disruptions, would not have been expected to die.
    • Frontline health care staff see notably higher staff absence rates if they are hit by a significant influx of new COVID-19 patients in need of hospital care. Further, the erratic COVID-19 induced health care demand surges may indirectly affect the quality of care provision through simple physical exhaustion and stress.

    Figure: Measuring quantity and quality of health care across NHS over time

    Notes: Figures present aggregate measures across a broad range of metrics indicative of extent as well as timeliness or accessibility of health care across NHS. The pre-pandemic mean is represented by the grey dotted line, during the first wave by red dotted line, and after the first wave by the blue dotted line.


    • THE EUROPEAN UNION EMISSIONS TRADING SCHEME REDUCES CARBON EMISSIONS WITHOUT IMPOSING SIGNIFICANT ECONOMIC LOSSES ON REGULATED FIRMS

    DOES PRICING CARBON MITIGATE CLIMATE CHANGE? Firm-Level Evidence from the European Union Emissions Trading Scheme
    Jonathan Colmer, Ralf Martin, Mirabelle Muûls, Ulrich Wagner CEPR DP No. 16982 | January 2022

    A new CEPR study by Jonathan Colmer, Ralf Martin, Mirabelle Muûls and Ulrich Wagner evaluates the environmental and economic consequences of the European Union Emissions Trading Scheme (EU ETS) – the world’s first and largest market-based climate policy, using data from the French manufacturing sector. Among the findings:  

    • Induced regulated firms to reduce carbon dioxide emissions by 8-12% compared to unregulated firms, a necessary condition for climate change mitigation. 
    • CO2 emissions fell by 4.7 million tonnes each year, accounting for approximately 26% of France’s aggregate industrial emissions reductions during this period.
    • No evidence was found of outsourcing to unregulated firms or markets, instead firms made targeted investments, reducing the emissions intensity of production. The study finds no evidence of carbon leakage, suggesting that the EU ETS helped to mitigate global climate change.
    • Investing in cleaner production processes was the prevailing abatement mechanism among regulated firms, the results indicate there was no increased substitution towards purchased electricity.
    • The maximum permit price during the time of the estimated emissions reductions suggests that marginal abatement costs could not have exceeded $53 per tonne of CO2 ($2017), which compares favourably to the marginal abatement costs of many non-market based regulatory instruments

    These findings suggest that the EU ETS induced global emissions reductions, a necessary and sufficient condition for mitigating climate change. 

    Figure: The Effect of the EU Emissions Trading Scheme on the Environmental and Economic Performance of Firms


    • EXPECTING BREXIT: The Leave vote had a sizeable negative effect on the UK economy even before the UK left the EU      

    EXPECTING BREXIT
    Swati Dhingra, Thomas Sampson
    CEPR DP16970 | January 2022

    A new CEPR study by Swati Dhingra and Thomas Sampson examines the economic consequences of the Brexit referendum before the UK’s new economic relationship with the EU came into effect. It shows that:

    • During this waiting period, which lasted until the end of 2020, Brexit can be conceptualised as a shock to expectations about future economic policy. 
    • In particular, the Leave vote raised the probability of economic disintegration, leading to a decline in the expected future openness of the UK to trade, investment and migration with the EU. 
    • In addition, it increased uncertainty over future UK and EU economic policy, creating a higher risk environment for decision makers. 
    • The fall in sterling following the referendum raised consumer prices and imported input costs leading to a decline in real wages.
    • Uncertainty and the prospect of higher future barriers to trade and migration led to lower capital investment, reduced demand and slower GDP growth. The UK dropped from having the highest growth rate in the G7 in 2015 to the lowest two years later.
    • The UK economy was around 2 to 3 percent smaller at the end of 2019 than it would have been if voters had opted to remain in the EU. 

    There is no precedent for an industrialised economy leaving an economic area like the EU’s common market. Trade agreements generally seek to strengthen economic integration and lower barriers to trade. Brexit does the reverse.

    Figure: UK inflation and real wage growth, monthly 2015-18

    Notes: This figure compares the distribution of raw (non-Bayesian aggregated) results across the three samples of the literature on confidence. 



    TRUST IN GOVERNMENT AND SCIENTISTS KEY TO HANDLING COVID-19 CRISIS

    Yann Algan, Daniel Cohen, Madeleine Péron              
    02 February 2022

    Homeownership among younger households has been decreasing in several major advanced economies. Writing at Vox, Gonzalo Paz-Pardo shows that increases in labour income inequality and uncertainty are key drivers of this trend. Confronted with high house prices and low, risky incomes, many young households cannot, or do not, want to risk making such a big, illiquid investment. As a result, they accumulate less wealth, particularly at a time of low mortgage rates.

     

    FIVE CENTURIES OF NEW GERMAN DATA ON INEQUALITY 

    Guido Alfani, Victoria Gierok, Felix Schaff                  
    28 January 2022

    In the aftermath of COP26, Jun Arima highlights key assessments and challenges: 

    • Developing countries are expected to continue pressuring industrialised ones to achieve net zero sooner and raise nationally determined contributions. 
    • The lack of space for realistic international discussions on energy security may limit the effectiveness of pushing the COP26 standards.

    WIDESPREAD INFORMALITY THREATENS TO HOLD BACK COVID-19 RECOVERY FOR EMDES

    M. Ayhan Kose, Franziska Ohnsorge, Shu Yu                 
    27 January 2022

    Informality compounded the damage of the Covid-19 pandemic in emerging market and developing economies (EDMEs), and is now threatening to hold back the recovery, according to a new study by M. Ayhan Kose, Franziska Ohnsorge and Shu Yu. The authors recommend that:

    • Policymakers need to employ innovative measures, tailored to country circumstances, to help the informal sector cope with the consequences of the pandemic. 
    • Policies to better reach informal workers, such as online platforms and databases, as well as progress in digitalisation and financial inclusion can all help support vulnerable populations during times of crisis. 

    BECOMING A PHYSICIAN INCREASES USE OF ANTIDEPRESSANTS, OPIOIDS, ANXIOLYTICS AND SEDATIVES – ESPECIALLY FOR WOMEN

    D. Mark Anderson, Ron Diris, Raymond Montizaan, Daniel I. Rees              
    28 January 2022

    A study by Francesco Agostinelli, Matthias Doepke, Giuseppe Sorrenti and Fabrizio Zilibotti shows that school closures during the pandemic exacerbated educational inequality, and that the direct impact of the switch to remote teaching is only part of the story. The research finds that:

    • During school closures, socioeconomic segregation increased as children were largely confined to their neighbourhoods.
    • Low-income parents are less likely to work from home during the pandemic, which limits their ability to support their kids’ schooling during closures.
    • Among 9th graders, children from low-income neighbourhoods in the US are predicted to suffer a learning loss equivalent to almost half a point on the four-point GPA scale, whereas children from high-income neighbourhoods remain unscathed.

    EUROPEAN PUBLIC GOODS: How we can supply more

    Marco Buti, George Papaconstantinou                  
    31 January 2022

    A study by Vu Minh Ngo and colleagues finds that pandemic pressures, economic strength, educational advancement, and political regimes are key factors which affect vaccination uptake across countries.

    The research finds that while democratic regimes initially show faster vaccination uptake, this advantage fades out as countries try to get more people vaccinated. Countries with strong economies and education systems are likely to have faster uptake of vaccination campaigns.


    CREATIVE DESTRUCTION DURING COVID: An opportunity for a cleaner energy mix?

    Pragyan Deb, Davide Furceri, Jonathan D. Ostry, Nour Tawk              
    31 January 2022


     

    A study by Erik Hornung, Guido Schwerdt and Maurizio Strazzeri finds that Muslim students achieve higher test scores following a more intensive Ramadan, with increases in math and science test scores by around 11%.

    The authors suggest that by sharing the religious experience, students can build their social capital and social identities, which in turn boosts educational performance.

    The findings cast a positive light on the relationship between Muslim religiosity and secular education (Muslim students traditonally underperform in minority environments), and implies that it may be worthwhile to promote the social aspects of religiosity.


    HOW TEACHERS INFLUENCE CREATIVITY: Evidence from music composition since 1450

    Karol Jan Borowiecki                
    29 January 2022

    A study by Kai Arvai and Katja Mann compares consumption baskets of US households to show the effect of digitalisation on consumption inequality. The research finds that: 

    • High-income households consume more digital products, and thus benefit more from price declines in these goods due to digitalisation. 
    • The price channel accounts for 22.5% of the increase in consumption inequality between 1960 and 2017.
    • This implies that digitalisation has more uneven effects than the increase in income inequality suggests.


    A CITY’S RESILIENCE TO ECONOMIC SCHOCKS ARE HEAVILY INFLUENCED BY CULTURAL AND PUBLIC SERVICES: Evidence from Canada

    Kristian Behrens, Manassé Drabo, Florian Mayneris                   
    01 February 2022

    In 2009, Portugal restricted the use of fixed-term contracts by firms with over 750 employees. A study by Pierre Cahuc, Pauline Carry, Franck Malherbet and Pedro Martins finds that while the reform was successful in reducing the number of fixed-term jobs, it did not increase the number of permanent contracts and it decreased employment in large firms. Despite positive spillovers on small firms, the reform reduced total employment and had negative effects on the welfare of employees and unemployed workers.

    Th research suggests that there is a limited degree of substitutability between fixed-term contracts and permanent contracts. Some jobs that may be created under fixed-term contracts would not necessarily have emerged if the fixed-term contract legal framework were not available, at least when the alternative of permanent contracts may be undesirable from the firm’s perspective.


    THE EFFECTS OF FISCAL MEASURES DURING COVID-19

    Pragyan Deb, Davide Furceri, Jonathan D. Ostry, Nour Tawk, Naihan Yang                    
    02 February 2022

    A study by Juan Dolado, Etienne Lalé and Hélène Turon examines the equilibrium and welfare effects of zero-hours contracts on the low-pay segment of the UK, and suggests three policy recommendations moving forward:

    • Zero-hours contracts should be restricted to job matches where workers opt for such a contract when offered a choice. 
    • Access to zero-hours contracts should be prioritised for workers employed in small rather than large firms. 
    • The way flexibility over hours is shared between workers and firms should be regulated. 


    FERTILITY AND PRESIDENTIAL ELECTIONS: A partisan issue

    Gordon Dahl interviewed by Tim Phillips, 01 February 2022

    Election results delight or disappoint us, but do they also affect the size of our families? New research examines the partisan impact of the 2016 US presidential election.
    Read more about this research and download the free DP:
    Dahl, G, Lu, R and Mullins, W. 2021. 'Partisan Fertility and Presidential Elections'. CEP