This week from CEPR: January 27

Thursday, January 27, 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


    • INHERITANCE TAXES MAY DO LITTLE TO MITIGATE THE EXTREME WEALTH INEQUALITY IN SOCIETY: Evidence from Norway

    THE (UN)IMPORTANCE OF INHERITANCE
    Sandra Black, Paul J. Devereux, Fanny Landaud, Kjell G Salvanes
    CEPR DP No. 16940 | January 2022

    Do the richest echelon of society get their money mostly from inheritances and gifts, or do their resources predominantly come from work?

    A new CEPR study by Sandra Black, Paul Devereux, Fanny Landaud and Kjell Salvanes uses 19 years of data from Norway to evaluate the importance of gifts and inheritances relative to labour income and government transfers across the lifetime for individuals throughout the income and wealth distribution. Among the findings:

    • Perhaps surprisingly, gifts and inheritances represent a small share of Total Inflows; this is true across the distribution of Total Inflows, as well as at all levels of net wealth at a point in time. 
    • Gifts and inheritances are only an important source of income flows among those who have very wealthy parents. 
    • Additionally, gifts and inheritances have very little effect on the distribution of Total Inflows when we do a counterfactual Total Inflows distribution with zero gifts and inheritances, it is not much different from the actual distribution. 

    These findings suggest that inheritance taxes may do little to mitigate the extreme wealth inequality in society.


    • IN THE NAME OF GOD! Religiosity and the Transition to Modern Growth

    IN THE NAME OF GOD! Religiosity and the Transition to Modern Growth
    Lars Harhoff Andersen, Jeanet Bentzen CEPR DP No. 16938 | January 2022

    A new CEPR study by Lars Harhoff Andersen and Jeanet Bentzen uses data from 10,000s of university students in the Holy Roman Empire and 100,000s of authors active during the past 700 years to show that the intensity of religious beliefs of our ancestors can be measured by the names they gave their children. 

    The research finds that individuals with religious names are more likely to study theology rather than medicine or law and to study church law rather than Roman law, that parents were more likely to give their children religious names in the aftermath of earthquakes, that authors who shared names with religious figures were more likely to be born in areas with more clergy swearing loyalty to the Catholic church in France, and that these authors were more likely to by priests and theologians.

    The authors find that religiously raised individuals were less likely to become doctors, engineers, scientists, and chemists, and less likely to proceed with advanced studies. Cities populated with more religious individuals are found to have grown slower, particularly after 1800, coinciding with the point in time where upper-tail knowledge production became increasingly important. Religiosity thus played an important role in the spread of intellectual production throughout Western Europe in the centuries leading up to the industrial revolution and beyond, consistent with the literature emphasising the importance of science and knowledge for the transition to modern growth. 

    While religion may come with potential benefits for the individual, such as happiness and improved ability to cope with stress, this research shows that religion may have posed substantial economic costs at societal-level. Indeed, early universities and many early inventions were often linked to monasteries, but over time religion became a stumbling block for the emergence and spread of knowledge useful for the takeoff to modern growth.


    • CAN OVER-CONFIDENCE EXPLAIN THE GENDER WAP?      

    MEN ARE FROM MARS AND WOMEN TOO: A Bayesian Meta-Analysis of Overconfidence Experiments
    Oriana Bandiera, Nidhi Parekh, Barbara Petrongolo, Michelle Rao
    CEPR DP16939 | January 2022

    Gender differences in self-confidence could explain women's under representation in high-income occupations and glass-ceiling effects, yet against typical stereotypes, both men and women are overconfident, according to a new CEPR study by Oriana Bandiera, Nidhi Parekh, Barbara Petrongolo and Michelle Rao. The authors use data from the economic literature, surveys of experts, and experimental findings over the last 20 years to show that: 

    • The literature in economics provides little support to the hypothesis that differences in self-confidence can explain differences in labour market outcomes because, against popular stereotypes, the literature reveals that both men and women are typically overconfident.
    • Moreover, the findings cannot reject the hypothesis that gender differences in self-confidence are equal to zero. 
    • This is important because if men and women do not differ on traits such as confidence, it may be that the barriers/opportunities they face are different and that is what needs to be addressed.
    • However, there is no doubt that in some settings women are less confident than men, but in many others they are not - self-confidence is context specific.
    • Survey results, however, indicate beliefs that men are overconfident and women under-confident. This is especially surprising because for other traits – especially altruism and risk attitudes – the experts’ opinions are more in line.  

    Figure: Distribution of results on self-confidence

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



    YOUNGER GENERATIONS ARE LOSING THE DREAM OF HOMEOWNERSHIP

    Gonzalo Paz-Pardo             
    14 January 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.

     

    WHAT DID COP26 ACHIEVE? Assessment and Challenges

    Jun Arima                 
    26 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.

    HEADSTRONG GIRLS AND DEPENDENT BOYS EARN LESS IN ADULT LIFE 

    Robert Kaestner, Ofer Malamud                
    21 January 2022

    A study by Robert Kaestner and Ofer Malamud shows how gender differences in adult earnings correspond to various childhood behaviours. The research finds that women (but not men) who exhibited headstrong behaviour as children incurred significant earnings penalties as adults, while men (but not women) who exhibited more dependent behaviour as children were penalised.


    PANDEMIC HAS INCREASED EDUCATIONAL INEQUALITY: Evidence from the United States

    Michael Kumhof, Nicolaus Tideman, Michael Hudson, Charles Goodhart              
    08 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.

    KEY DETERMINANTS OF COVID-19 VACCINATION UPTAKE: Pandemic pressures, economic strength, educational advancement, and political regimes

    Vu Minh Ngo, Klaus F. Zimmermann, Phuc V. Nguyen, Toan L.D. Huynh, Huan Huu Nguyen                 
    25 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.


    MUSLIM STUDENTS IN SECULAR SCHOOLS ACHIEVE HIGHER TEST RESULTS FOLLOWING A MORE INTENSIVE RAMADAN: The power of religious bonding 

    Erik Hornung, Guido Schwerdt, Maurizio Strazzeri             
    22 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.


    AS MORE PRODUCTS GO DIGITAL – CONSUMPTION INEQUALITY RISES FOR POOR HOUSEHOLDS

    Kai Arvai, Katja Mann               
    21 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.


    RESTRICTING FIXED-TERM CONTRACTS DOES NOT INCREASE NUMBER OF PERMANENT CONTRACTS AND DECREASES EMPLOYMENT IN LARGE FIRMS

    Pierre Cahuc, Pauline Carry, Franck Malherbet, Pedro S. Martins                  
    20 January 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.


    ARE ZERO-HOURS CONTRACTS BENEFICIAL OR EXPLOITATIVE? Evidence from the United Kingdom

    Juan Dolado, Etienne Lalé, Hélène Turon                   
    20 January 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. 


    THE COVID-19 TRAVEL SHOCK: Which countries suffered most?

    Gian Maria Milesi-Ferretti interviewed by Tim Phillips, 24 January 2022

    International travel and tourism collapsed during Covid-19. Gian Maria Milesi-Ferretti sets out the impact has this had on countries that depend most on tourism.
    Read more about the research behind this and download the free DP:
    Milesi-Ferretti, G. 2021. 'The Travel Shock'. CEPR