This week from CEPR: January 16
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’.
**** You can sign up to our journalist mailing list here
**** Journalists can also apply for access to CEPR's Discussion Paper series via email
TERROR AND TOURISM: The economic consequences of media coverage
TERROR AND TOURISM: The Economic Consequences of Media Coverage
Timothy J. Besley, Thiemo Fetzer, Hannes Felix Mueller
CEPR DP No. 14275 6 January 2020
Violent events in a destination are followed by sharp spikes in negative media reporting and subsequent reductions in tourist activity. Media coverage of violence has a large independent effect on tourist spending beyond what can be accounted for by controlling for the incidence of violence.
These are the central findings of a new CEPR study Timothy Besley, Thiemo Fetzer and Hannes Mueller, which examines the economic effects of news coverage of violent events. They analyse credit card data on tourism spending from 114 origin countries and five tourist destinations – Turkey, Egypt, Tunisia, Israel and Morocco – with a large corpus of more than 446,000 newspaper articles covering news on the five destination countries from a subset of 57 tourist origin countries. Among the findings:
- There is robust relationship between the intensity of reporting on violence and subsequent drops in tourism activity.
- If media-reporting switches from reporting on topics unrelated to violence to covering only stories about tourists being targeted, then tourism spending drops by about 56% a month later.
- This effect is persistent, lasting for about nine months following the coverage.
- Tourists with more information react less to inflammatory media reporting because they have a broader informational base, and this can be an important factor in the overall effect of violence on economic ties.
- The effect of violence and news coverage varies markedly across both destination and origin countries.
- Many individuals may lack the capacity or desire to collect and use all available information and simply take news coverage in their home country at face value. This can produce biased beliefs about the actual safety of danger of a destination since the same event is reported with different degrees of intensity in different countries.
- About a third of the weight in terms of updating beliefs comes from country-specific news reporting but there is significant heterogeneity across countries and events.
The study shows that the economic impact of violent events on tourism activity is significantly driven by the underlying news reporting, indicating that the media is indeed powerful in affecting international flows of tourists.
Figure 1. Overall aggregated spending patterns of British- and German-issued cards in Tunisia in the wake of the Sousse attack
Note: The drop in tourism spending is markedly lareger for British-issued cards.
HOW GLOBALISATION AND ROBOTICS ARE CHANGING THE FACE OF DEVELOPMENT: New analysis of what happens when manufacturing is jobless and services are tradable
GLOBOTICS AND DEVELOPMENT: When manufacturing is jobless and services are tradable
Richard Baldwin, Rikard Forslid
CEPR DP No. 14293 8 January 2020
What does development look like when digital technologies have rendered manufacturing jobless and many services freely traded? A new CEPR report by Richard Baldwin and Rikard Forslid examines how globalisation and robotics (‘globotics’) are transforming the world economy at an explosive pace, and analyses the impending impact on developing countries and development strategies.
The paper argues that the globotics transformation is likely to disable the traditional manufacturing-led development journey of the kind that China is taking, while enabling the service-led development journey of the kind that India is following. Since success in the service sector is based on quite different factors to success in manufacturing, development strategies and mindsets may have to change.
This is a fundamentally optimistic conclusion, the authors argue, since it suggests that developing nations can directly export the source of their comparative advantage – low-cost labour – without having first to make goods with that labour. The resulting expansion in service trade is likely to be an overall net export gain for emerging markets and an overall net import gain for developed economies.
Figure 6. Evolution of net trade positions, India and China
Source: Elaboration by authors based on World Bank Data.
HOW DIRECT AND EASILY AVAILABLE RESEARCH CAN INFLUENCE POLICY CHANGE IN DEVELOPING COUNTRIES: Evidence from 2,150 Brazilian municipalities
HOW RESEARCH AFFECTS POLICY: Experimental Evidence from 2,150 Brazilian Municipalities
Jonas Hjort, Diana Moreira, Gautam Rao and Juan Francisco Santini
CEPR DP No. 14280 6 January 2020
Do research findings change political leaders' beliefs and cause policy change? Despite the money and effort devoted to evaluating policy impact, we have little understanding of whether the conditions necessary for the public ultimately to benefit hold.
A new CEPR study Jonas Hjort and colleagues examines the role that research can play in spurring the spread of effective policies and the abandonment of ineffective ones. By collaborating with 2,150 Brazilian municipalities and the mayoral administrations that control their policies, the study measures mayors' demand for research information and their response to learning about research findings. Among the findings:
- Larger-sample studies are valued more, while not distinguishing on average between studies conducted in rich and poor countries.
- Informing mayors about research on a simple and effective policy (reminder letters for taxpayers) increases the probability that their municipality implements the policy by 10 percentage points.
- Mayors and other municipal officials are willing to pay to learn about the results of impact evaluations, and update their beliefs when informed of the findings.
The results provide direct evidence that effectively supplying research information to political leaders can lead to policy change. Information frictions may thus help explain failures to adopt effective policies. The reach of thinktanks and other organisations that institutionalise and scale up transmission of research findings to political leaders still appears limited in developing countries.
POLITICAL INFORMATION IN THE AGE OF THE INTERNET: The digital revolution has amplified extremist voices, distracting from non-controversial general interest policies
Filip Matějka, Guido Tabellini
|Digital technologies provide a vast and accessible supply of information for voters. And yet research by Filip Matějka and Guido Tabellini suggests that the American electorate is no better informed than it was in the late 1980s. They argue that the digital revolution has changed the distribution of news and data, increasing informational asymmetries across issues, amplifying the influence of extremist voters, and diverting attention away from important but non-controversial policies.|
Increasing productivity for the Japanese economy under the current population decline is a top priority challenge, and a proposed minimum wage hike to achieve that objective is attracting growing interest.
Keisuke Kondo, writing at Vox, suggests that firms may respond to a minimum wage hike by carrying out reforms to increase productivity in response to the hike, while other less productive firms may exit the market. Thus, the overall effect on productivity will vary across countries and firms, since the relative strength of these two effects depends on a country’s firms’ characteristics and market structure.
In December 2019, Marco Buti left the position of Director General for Economic and Financial Affairs at the European Commission at the end of a rough journey through the crisis and its aftermath. Writing at Vox, he draws the main lessons out of five key moments in the crisis for the completion of the Economic and Monetary Union (EMU) and the appropriate policy mix in the euro area.
You can also find his recent CEPR Policy Insight on the subject, available for free download, here>>>
PROTECTIONIST TARIFFS HURT THE DOMESTIC FIRMS OF THE COUNTRY THAT IMPLEMENTS THEM – Even more so in the United States than in China
Peter Egger, Jiaqing Zhu
|A new study by Peter Egger and Jiaqing Zhu scrutinises global stock market responses to assess the effects of the trade war and finds that, on average, the US and Chinese tariffs have directly hurt targeted firms/sectors abroad as intended, but they have also hurt firms at home. The results also reveal unintended effects on third parties, mediated by global value chain interdependencies.|
Sofoklis Goulas, Rigissa Megalokonomou
|The number of days between exams, the number of days since the first exam and the exam order all have an influence on school students' academic performance. These are the findings of a new study by Sofoklis Goulas and Rigissa Megalokonomou, who use evidence from Greek public high schools to show that exam scheduling may contribute to performance gaps between subjects, between boys and girls, and between students with differing performance histories.|
Piritta Sorsa, Jens Arnold, Paula Garda
Low productivity in Latin America results from weak competition and a large informal economy. Progress is needed on simplifying regulations, easing administrative burdens, encouraging market entry and reducing trade barriers.
These are among the findings of a study by OECD economists, which analyses the various factors that have caused these conditions to exist in several Latin American countries, and how policies to counteract them have fared.
Steven Ongena, Raphael Auer
|Targeted macroprudential policies may spill across sectors, but this does not mean that they are ineffective, argue Stephen Ongena and Raphael Auer writing at Vox. Their analysis shows how the effects of a countercyclical capital buffer designed to curb house price growth in Switzerland spilled over into commercial lending, increasing the overall resilience of banks.|
Marvin Suesse, Nikolaus Wolf
There was a rapid spread of credit cooperatives in rural 19th-century Germany providing small-scale savings and loan services to previously unbanked people. These cooperatives helped shift farm investment from grains to potentially profitable but more capital-intensive products, such as the production of meat and dairy.
These are the findings of a new study by Marvin Suesse and Nikolaus Wolf. They argue that in cases like this, changes in the sector of economic activity are a better metric for the impact of microfinance than comparing income pre- and post-credit.
ECONOMIC RESEARCH PAPERS WRITTEN BY WOMEN FACE A HIGHER BAR IN GETTING PUBLISHED: Evidence from top journals
David Card, Stefano DellaVigna, Patricia Funk, Nagore Iriberri
Women economists are under-represented across the discipline, from university departments to academic conferences and publishing houses. A new study by David Card and colleagues examines the editorial process and asks whether the referees and editors of four leading economics journals made gender-neutral publishing decisions between 2003 and 2013.
The findings suggest that the gender of the referee does not affect the valuation of a paper and that editors are gender-neutral in valuing advice from referees. But papers written by women appear to face a higher bar in the quest to be published.
Gregori Galofré Vilà
|Writing at Vox, Gregori Galofré Vilà uses network analysis to review the development of ‘Economic History’ as a discipline over the last 40 years. He illustrates how economic historians are interconnected through their research, identifies which scholars are the most cited by their peers, and reveals the central debates enlivening the discipline. He also shows that the rapid increase in the number of economic history publications since 2000 has been driven more by research at universities in continental European than by those in the UK or the United States.|
Iain Begg, David Miles interviewed by Tim Phillips, 10 January 2019
In 2020, the UK and the European Union will try to strike a post-Brexit deal in financial services. At the SEURF conference in Amsterdam, David Miles and Iain Begg explain to Tim Phillips what's at stake in the negotiations, and who would suffer most if there's no deal.
‘It’s not too far of a stretch to think that there’s a correlation between style and performance.’
Antoinette Schoar's recent research looks at how the market responds to CEO-level management styles. ‘We look at CEOs that were having their first job in a recession versus in a boom time. You see that those managers have different styles, and the stock market reacts differently to them. So it’s not too far of a stretch to think that there’s a correlation between style and performance.’