This week from CEPR: January 31

Friday, January 31, 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’.

**** You can sign up to our journalist mailing list here

**** Journalists can also apply for access to CEPR's Discussion Paper series via email


     

    BIG TECH MERGERS
    Massimo Motta, Martin Peitz  
    CEPR DP No. 14353  26 January 2020 

    Big tech mergers are frequently occurring events, yet largely go unregulated. A new CEPR study by Massimo Motta and Martin Peitz assesses the competitive effects of these mergers and finds that merger control, while imperfect, could enable necessary restraint to avoid problems that are likely to arise from big tech firms expanding their growing sphere of control. Among the findings:  

    • Big tech mergers may well have adverse competitive effects, hence require the scrutiny of antitrust authorities.
    • The risk that a merger removes a potential competitor often deserves careful consideration.
    • Most acquisitions by large digital platforms have not been investigated simply because they did not meet the turnover thresholds that in most jurisdictions would trigger notification – in digital industries, firms often start monetising only when they have reached a considerable customer base. 
    • Big tech companies have developed strong and entrenched positions in several markets. Their eco-systems absorb a large part of consumer attention and accumulate personal data from many different activities. Consumers could become dependent on these eco-systems and those who run them. 
    • Big tech firms can dominate their eco-systems becoming a private regulator, setting rules of conduct and excluding participants who allegedly misbehaved. This raises a number of issues for society, which go beyond standard market power issues.

    The authors find that vigilant merger control can sometimes help to avoid problems. They argue that antitrust authorities should have the means to stop those mergers that are deemed anti-competitive and to assess whether possible pro-competitive effects outweigh the competition concerns. 


    • LARGE DECLINES IN MATERNAL MORTALITY CAN BE ACHIEVED BY RAISING WOMEN'S POLITICAL PARTICIPATION 

    MATERNAL MORTALITY AND WOMEN'S POLITICAL PARTICIPATION
    Sonia Bhalotra, Damian Clarke, Joseph Flavian Gomes, Atheendar Venkataramani  
    CEPR DP No. 14339  22 January 2020

    Maternal mortality, defined as the death of women within 42 days of childbirth, remains a looming global health problem well into the 21st century, particularly in developing countries. A new CEPR study by Sonia Bhalotra and colleagues finds that increasing the share of women in parliament in low-income countries leads to more rapid declines in maternal mortality. 

    The authors estimate that the recent wave of quotas for women in parliament in low-income countries has resulted in a 9 to 12% decline in maternal mortality. Gender quotas lead to an 8 to 10% increase in skilled birth attendance, a 6 to 12% increase in prenatal care use  and a 4 to 11% decrease in birth rates.

    The study demonstrates that gender quotas could be a powerful at-scale means of modifying public health priorities in favour of maternal health. Women's involvement in policy-making can effect rapid maternal mortality decline and at low cost.

    Figure 1: Women in parliament and 1n(maternal mortality ratio)

      

    Note: Raw trends in number of countries with parliamentary gender quotas, the percentage of women in parliamentary seats and the log of the maternal mortality ratio. The sample is a global sample of 174 countries for which we have annual data through 1990-2015.  


    • CENTRAL BANK DIGITAL CURRENCY: Central banking for all? 

    CENTRAL BANK DIGITAL CURRENCY: Central banking for all?
    Jesús Fernández-Villaverde, Daniel Sanches, Linda Marlene Schilling, Harald Uhlig i 
    CEPR DP No. 14337 21 January 2020

    A new CEPR study by Jesús Fernández-Villaverde and colleagues investigates the implications of the introduction of an account-based central bank digital currency (CBDC). 

    The study finds that the introduction of a CBDC allows the central bank to engage in large-scale intermediation by competing with private financial intermediaries for deposits. Yet, since a central bank is not an investment expert, it cannot invest in long-term projects itself, but relies on investment banks to do so. The authors show that absent a banking panic, the set of allocations achieved with private financial intermediation will also be achieved with a CBDC. 

    During a panic, however, the rigidity of the central bank's contract with the investment banks has the capacity to deter runs. Thus, the central bank is more stable than the commercial banking sector. Depositors internalise this feature ex-ante, and the central bank arises as a deposit monopolist, attracting all deposits away from the commercial banking sector. This monopoly might endanger maturity transformation. 



    LONG-RUN GROWTH IN THE EURO AREA: The role of real, financial, monetary and institutional factors

    Mariarosaria Comunale, Francesco Paolo Mongelli  
    27 January 2020

    There is a significant positive role for institutional integration in supporting long-run growth in the euro area, particularly for periphery countries. Competitiveness and monetary policy also matter for sustained growth in the long run, while higher sovereign stress, equity pricy cycles, loans to non-financial corporations and debt over GDP have either mixed or negative effects in core and periphery countries.

    These are the core findings of a study by Mariarosaria Comunale and Francesco Paolo Mongelli, which looks at possible factors behind fluctuations and differences in growth rates among euro area countries since 1990. 


     

    CONTRACEPTION: The impact on premarital sex and unplanned pregnancies in the United States 

    Jeremy Greenwood, Nezih Guner, Karen Kopecky  
    22 January 2020

    Increased access to birth control does not seem to have decreased the number of unplanned pregnancies in the United States. Instead, as contraceptive technology improved over the course of the 19th and 20th centuries, the percentage of non-marital births increased.

    These are among the findings of a study by Jeremy Greenwood and colleagues, who conclude that advancements in contraception led to more premarital sex, an increase in out-of-wedlock births and a decline in the fraction of the married population.


     

    BIG TRANSFORMATIONS IN THE US LABOUR MARKET: New evidence of the impact of new technologies

    Enghin Atalay, Phai Phongthiengtham, Sebastian Sotelo, Daniel Tannenbaum 
    23 January 2020

    The tasks that workers in the United States perform on the job have changed radically, most notably in the decline of routine and manual tasks, and the increase in non-routine and analytic tasks. The majority of changes have occurred within rather than between occupations. New technologies are linked to increased intensity of non-routine analytic job tasks.

    These are the central findings of a new study by Enghin Atalay and colleagues using evidence from 8.7 million job ads published in newspapers between 1940 and 2000. 


     

    DURING ECONOMIC DOWNTURNS, SOCIAL NORMS OF MASCULINITY CAN BECOME A FERTILE GROUND FOR POPULISM: Evidence from the rise of Brazil’s Jair Bolsonaro 

    Laura Barros, Manuel Santos Silva  
    24 January 2020

    Brazil plunged into economic crisis between 2014 and 2018, the year when far-right populist Jair Bolsonaro won the presidential election. Laura Barros and Manuel Santos Silva, writing at Vox, argue that Bolsonaro’s surprising victory is partially explained by the way the economic crisis interacted with prevailing gender norms.

    In regions where men have experienced larger employment losses, there was an increase in the share of votes for Bolsonaro. In contrast, in regions where women experienced larger losses, his vote share was relatively lower. This may be explained by men feeling more compelled to vote for a figure that embodies masculine stereotypes as a way of compensating for a decline in economic and social status.

    This column is a lead commentary in the VoxEU debate on ‘Populism'


     

    ASSESSING THE RECRUITMENT PRACTICES OF ELITE UNIVERSITIES: The case of Harvard and African Americans

    Peter Arcidiacono, Josh Kinsler, Tyler Ransom  
    22 January 2020

    Harvard recruits many applicants, particularly African Americans, who essentially have no chance of being admitted; such practices reduce the credibility of information from colleges in a market already information-starved among low-income students.

    These are the central conclusions of a new study by Peter Arcidiacono and colleagues, who investigate the flawed recruiting practices of elite universities in the United States. 


     

    SECONDARY MARKET YIELDS AROUND NEW DEBT AUCTIONS AND ESCB PURCHASES

    Roel Beetsma, Josha van Spronsen  
    24 January 2020


     

    For the last decade, euro area countries have undertaken substantial debt issuances in order to maintain or bolster international capital market access. 

    Writing at Vox, Roel Beetsma and Josha van Spronsen show that the European Central Bank's unconventional monetary policy dampens yield cycles in secondary markets for euro area sovereign debt around new debt auctions. This dampening effect tends to be larger when market volatility is higher. This can be used to minimise any instability generated, for example, by different countries’ issuances occurring close together or the spillover effects of one country’s auctions on another. 


     

    EXCHANGE RATE RECONNECT: New evidence on the nature of financial crises and risk

    Andrew Lilley, Matteo Maggiori, Brent Neiman, Jesse Schreger  
    24 January 2020

    In the wake of the Global Crisis, a surprising pattern of co-movement emerged between the US dollar and global risk premia – a possible ‘reconnect’ of the exchange rate puzzle. Though short-lived, this relationship between these factors could shed new light on the nature of financial crises and risk.


     

    MARKET PARTICIPANTS DO NOT BELIEVE THE FED IS FULLY INDEPENDENT: Evidence from Trump’s tweets 

    Francesco Bianchi, Thilo Kind, Howard Kung 
    25 January 2020

    President Trump has frequently attacked the Federal Reserve, but if the markets believe that the Fed is immune to political pressure, these tweets should not affect expectations about future monetary policy. Francesco Bianchi and colleagues argue that this is not the case. Tick-by-tick fed funds futures data around the time of Trump tweets criticising the conduct of monetary policy suggest that market participants do not believe the Fed is fully independent.


     

    HOUSING SPECULATION AND ITS SUBSTANTIAL ECONOMIC CONSEQUENCES

    Zhenyu Gao, Michael Sockin, Wei Xiong  
    26 January 2020

    Housing speculation increased prices and fuelled local economic expansions in the United States during the 2000s boom; it depressed employment in construction and reduced local household demand in the recession. 

    These are among the findings of a study by Wei Xiong and colleagues, who argue that speculation led not only to greater price appreciation, economic expansions, and housing construction during the boom in 2004-2006, but also to more severe economic downturns during the subsequent bust in 2007-2009. 


     

    NURTURE AND NATURE: New data on an old debate

    Per Engzell, Felix Tropf  
    26 January 2020

    Linking trends in intergenerational mobility to data from nearly 50,000 twins, Per Engzell and Felix Tropf contribute to the age-old debate on ‘nature versus nurture’ and find that in countries with lower rates of social mobility, family environment (‘nurture’) plays a more significant role than it does in countries where institutions that promote mobility enjoy wide support.

    With improved opportunities, the influence of family environment fades and leaves a greater proportion of variation attributable to genetic factors. Thus, while genes and environment both influence education, variation in intergenerational mobility is linked to social inheritance, not genes. Where there is less mobility, better-off parents can help their children by other means. 


    LEARNING ABOUT FISCAL MULTIPLIERS DURING THE EUROPEAN SOVEREIGN DEBT CRISIS

    Lucyna Gornicka, Christophe Kamps, Gerrit Koester, Nadine Leiner-Killinger   
    23 January 2020

    Recent studies have highlighted that the fiscal multipliers used by institutional forecasters were gradually adjusted upwards as the European sovereign debt crisis developed. 

    Writing at Vox, European Central Bank and IMF economists confirm this finding, using a new dataset compiled from European Commission forecasts under the Excessive Deficit Procedure of the Stability and Growth Pact. In contrast to previous claims that the fiscal multiplier rose well above one at the height of the crisis, however, the authors argue that the ‘true’ ex-post multiplier remained below one.

    Forecasters significantly underestimated the impact of fiscal consolidation on economic growth at the height of Europe’s sovereign debt crisis; later forecasts reflected higher implicit fiscal multipliers.


    HOW THE ROYAL AIR FORCE PREPARED FOR WAR: British aviation after WWI

    Matthew Powell   
    27 January 2020

    The British aircraft industry ended the First World War in a healthy position, but the relatively small market meant the industry was still organised on cottage lines, with skilled artisans assembling airframes and engines one at a time by hand in small workshops. Matthew Powell describes the unsuccessful attempts of government and aircraft firms to expand the industry in the 1920s, and the vital lessons that helped them to guide rearmament when it began in earnest in 1936.

    This column is a lead commentary in the VoxEU Debate ‘The Economics of the Second World War: Eighty Years On


    THE IMPACT OF THE FIRST PROFESSIONAL POLICE FORCES ON CRIME: Effective when sufficiently large

    Anna Bindler, Randi Hjalmarsson  
    27 January 2020

    A study by Anna Bindler and Randi Hjalmarsson exploits two natural experiments in history – the introduction of the London Metropolitan Police in 1829 and the subsequent rollout of county police forces throughout England and Wales to show that when police forces were sufficiently large and well-regulated, they had a crime-reducing effect that, while not immediate, did persist over time. 

    The study begins to shed light on the implications of a reduction in the size and budget of modern police forces.


    A SILVER LINING OF FORCED MIGRATION: Investment in education

    Sascha O. Becker, Irena Grosfeld, Pauline Grosjean, Nico Voigtländer, Ekaterina Zhuravskaya   
    28 January 2020

    A new study by Sascha Becker and colleagues suggests that the experience of being uprooted by force encourages people to invest in portable assets such as education. The researchers show that Polish people with a family history of forced migration as a result of the Second World War are significantly more educated today than any comparison group. 

    These results imply that the benefits of providing schooling for forced migrants and their children may be even greater – and more persistent – than previously thought. The mechanism behind the educational advantage of forced migrants also has important policy implications in the face of the large refugee flows seen in many parts of the world today. 


    WHY FIRMS CHOOSE IN-HOUSE 

    Stephen Lin, Catherine Thomas, Arturs Kalnins   
    22 January 2020

    Why do so many transactions take place within firms rather than between independent agents via markets? Stephen Lin and colleagues shed new light on this question by analysing hotel chains’ decisions about whether to outsource management to independent franchisees. 

    The authors find that properties with the lowest and the highest occupancy rates tend to be managed by franchisees, at arm's length from the hotel chain. This variation in organisational form is consistent with the authors’ model in which the incentives embodied in management contracts vary with property-level productivity. 



     

    BETTING ON THE LORD

    Emmanuelle Auriol interviewed by Tim Phillips, 24 January 2019

    An experiment in Haiti shows that people take more risks in the presence of religious images, even if there is less chance they will win. Emmanuelle Auriol tells Tim Phillips about the challenges that belief in a higher power presents for economic development.



     

    ARE CREDIT CARD COMPANIES TARGETING THE LESS FINANCIALLY LITERATE?  

    Antoinette Schoar  

    Tech developments have made many things more efficient, convenient and cheaper — but there’s also a downside.

    Looking at the US credit card market, Antoinette Schoar finds that firms may deliberately target less sophisticated consumers and treat them differently from those that are more financially literate.