This week from CEPR: July 02

Friday, July 2, 2021

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


    • HOW UNEMPLOYMENT RATES CONTRIBUTE TO TERRORIST RECRUITMENT: Evidence from Daesh Personnel Records

    TRANSNATIONAL TERRORIST RECRUITMENT: Evidence from Daesh Personnel Records
    Mohamed Abdel-Jelil, Kartika Bhatia, Anne Brockmeyer, Quy-Toan Do, Clément Joubert 
    CEPR Discussion Paper No. 16292 | June 2021

    Over 25,000 foreign fighters, from over 100 countries, travelled to Iraq and Syria between 2011-2016 to fight for Daesh or for the Al-Nusra Front. New evidence suggests economic opportunities and migration costs in the home countries of potential recruits have a substantial effect on the likelihood of joining a terrorist organisation. 

    A new CEPR study by Mohamed Abdel-Jelil, Kartika Bhatia, Anne Brockmeyer, Quy-Toan Do, and Clément Joubert exploits a unique data set of personnel records from the Islamic State, to study how economic opportunities and migration costs shape the spatial pattern of foreign participation in transnational terrorist organisations. Among the findings: 

    • There is a strong conditional correlation of higher unemployment rates with recruitment into the terror group.
    • Poor labour market opportunities generally push more individuals to join terrorist organisations, but at the same time limit their ability to do so when longer travel distances imply higher migration costs.
    • Travel costs to Syria and Iraq matter due to their interaction with unemployment. This is because limited labour market opportunities simultaneously generate a substitution effect by lowering the opportunity costs of joining the terror group and an income effect, which exacerbates liquidity constraints for candidates who need to travel long distances to join. This generates spatially heterogeneous associations of economic conditions with recruitment.

    Figure 1: Number of Recruits per Country 

    Note: Panel A displays the number of recruits by population for each country of residence, for countries represented in the Daesh
    personnel records. 


    • SCOTLAND’S STRICTER DRINK DRIVING LAWS FAILED TO REDUCE ROAD ACCIDENTS AND SAVE LIVES   

    None for the Road? Stricter Drink Driving Laws and Road Accidents?
    Marco Francesconi, Jonathan James
    CEPR Discussion Paper No. 16287 | June 2021

    A new CEPR study by Marco Francesconi and Jonathan James evaluates the impact on road accidents of a 2014  reform in Scotland that reduced the drink drive limit (DDL) from 0.08 to 0.05 blood alcohol concentration (BAC), while in the rest of Britain the limit stayed at 0.08 BAC. Among the findings: 

    • The reform had no effect on accident rates, the main target of the Scottish lawmaker.
      • This is the case for all types of accidents, from fatal crashes to collisions with only slight injuries, and regardless of whether drivers were drunk or sober.
    • Estimates suggests that the reform did not have much ex-ante scope for sizeable effects.
    • The pre-existing maximum legal level was already sufficiently low that further abatements in motor vehicle crashes could not have been easily reachable, unless the reform were accompanied by changes in other factors, such as stricter enforcement of the new DDL or hot-spot policing.
    • The unavailability of cheaper alternative means of transportation, such as Taxis and Buses, and weak law enforcement (measured broadly in terms of police numbers, breath tests carried out at the roadside, and drink drive arrests and convictions unrelated to motor vehicle crashes), seem to have been the main channels behind the lack of an impact.
    • Accompanied by a heavyweight media campaign, the reform ramped up anti-drink drive attitudes close to unanimity, but this was not enough for Scots to reduce alcohol consumption.

    The study highlights the importance of accompanying measures, such as alternative means of transportation and policing, to increase the effectiveness of policies which reduce the drink drive limit. 


    • WHEN BONUSES BACKFIRE: Monetary bonuses can shift the perception of absenteeism as acceptable behaviour

    When Bonuses Backfire: Evidence from the Workplace
    Jakob Alfitian, Dirk Sliwka, Timo Vogelsang     
    CEPR Discussion Paper No. 16282 | June 2021

    Monetary incentives are widely used to align employees' actions with the objectives of employers. A new study finds that monetary incentives may sometimes fail to fulfil their intended purpose, and may even achieve the exact opposite of the intended effect. 

    A new CEPR study by Jakob Alfitian, Dirk Sliwka, and Timo Vogelsang evaluates whether an attendance bonus reduces employee absenteeism, using evidence from a field experiment in the retail sector. The experiment assigned 346 apprentices for one year to either a monetary attendance bonus, a time-off bonus or a control group. 

    The authors find that neither form of the bonus reduced absenteeism, but the monetary bonus increased absence by around 45%. This backfiring effect is persistent and driven by the most recently hired apprentices. Survey results reveal that the bonus shifted the perception of absenteeism as acceptable behaviour.

    Over time, as newly hired employees enter an organisation successively, the norms of behaviour of the entire workforce may thus erode. In other words, our results show that incentive schemes can persistently shape the norms of behaviour in organizations. Managers are therefore well advised to carefully examine prevailing norms within the organization before adopting monetary incentives for certain forms of behaviour.



    DOMESTIC TRAVEL BANS MAY HAVE INCREASED COVID-19 SPREAD IN DEVELOPING ECONOMIES: Evidence from India

    Fiona Burlig, Anant Sudarshan, Garrison Schlauch           
    27 June 2021

    A study by Fiona Burlig, Anant Sudarshan, and Garrison Schlauch uses evidence from India, where the government implemented one of the most stringent lockdowns, to show that domestic travel bans may actually have increased Covid-19 cases in developing countries with large urban-rural migrant populations. 

    While a travel ban is in place, the spread of the disease in migrants’ rural home districts is indeed temporarily stopped. But when travel is finally permitted, migrants return home possibly carrying many more infections than if they had been allowed to leave early.

     

    IMMIGRATION AND THE UK ECONOMY AFTER BREXIT

    Jonathan Portes

    25 June 2021

    Since the Brexit referendum,  public sentiment towards immigration in the UK – and economists’ views on Brexit’s economic impact – has changed. Immigration has become a much less salient political issue, and public attitudes towards immigration have become more positive. However, its economic significance has become more apparent, first as migration flows from the EU fell sharply and then, in the past year, as the Covid-19 pandemic has led to very large net outflows.

    Writing at Vox, Jonathan Portes discusses the UK’s post-Brexit migration system introduced in January 2021. He argues that the new system, while ending free movement with the EU and hence being far more restrictive for EU citizens moving to the UK for work, is considerably less restrictive.


    POLICIES THAT FOSTER TRUST IN PUBLIC INSTITUTIONS WILL PROMOTE COVID-19 VACCINATION ACCEPTANCE: Evidence from Germany

    Katrin Schmelz, Samuel Bowles                         
    01 July 2021

    Policies that foster trust in public institutions will promote vaccine acceptance, but a vaccine mandate can also crowd out initial willingness, according to a new study by Katrin Schmelz and Samuel Bowles. The authors use evidence from Germany to show how interventions may affect beliefs and preferences in counterproductive ways.


    HOW HAS THE COVID-19 SHOCK AFFECTED FIRMS’ PRICING CHOICES AND INFLATION EXPECTATIONS? Evidence from Italy

    Marco Bottone, Cristina Conflitti, Marianna Riggi, Alex Tagliabracci                         
    30 June 2021

    Writing at Vox, Marco Bottone, Cristina Conflitti, Marianna Riggi and Alex Tagliabracci show that Italian firms' planned price changes and inflation expectations during Covid-19 pandemic were driven by the expected duration of the downturn and by the strength of competitive pressures. The authors finds no effects of liquidity and financial conditions, which were major drivers of corporate pricing policies during the Great Recession and the sovereign debt crisis, on pricing strategies during the pandemic.


    HOW MISINFORMATION SPREADS ON SOCIAL MEDIA

    Daron Acemoğlu, Asuman Ozdaglar, James Siderius                             
    30 June 2021

    What makes misinformation spread virally on social media? What role do the algorithms of social media platforms play in this process? A new study by Daron Acemoğlu, Asuman Ozdaglar, and James Siderius shows that a social media platform that wishes to maximise content engagement will propagate extreme articles amongst its most extremist users. ‘Filter bubbles’ prevent the content from spreading beyond its extremist demographic, creating ‘echo chambers’ in which misinformation circulates. The threat of censorship and a corresponding loss in engagement could pressure platforms to fact-check themselves, while regulating their algorithms could mitigate the consequences of filter bubbles.


    EXPLORING INCENTIVES FOR VACCINE UPTAKE

    Joan Costa-Font                       
    29 June 2021


     

    Vaccine availability does not necessarily entail widespread vaccination demand, as a share of the population may be unwilling to be vaccinated. Writing at Vox, Joan Costa-Font argues that creating a narrative of social esteem around being vaccinated may be the most effective way to ensure widespread uptake, and traditional incentives (such as subsidies) are unlikely to work.


    GLOBALISATION: A WOMAN'S BEST FRIEND? Not for all

    Alessandra Bonfiglioli, Federica De Pace                       
    25 June 2021

    The rise in income inequality and, more prominently, in the wage gap between men and women has been one of the major concerns among policymakers and the public in recent years. 

    Writing at Vox, Alessandra Bonfiglioli and Federica De Pace present new evidence from Germany on the impact of exports on the gender wage gap, which shows that an increase in a plant’s exports significantly reduces the wage gap between male and female co-workers in white-collar occupations, but widens it for employees in blue-collar occupations. 

    The findings suggest that designing policies that support women taking part in trade, especially in positions in which they would benefit from their comparative advantage, is crucial to maximise the potential benefits from globalisation.


    HOW COVID-19 IS CHANGING OUR SAVING HABITS: Evidence from Italy

    Valerio Ercolani, Elisa Guglielminetti, Concetta Rondinelli                            
    21 June 2021

    The Covid-19 pandemic has seen a surge in household savings across the world. Using data from Italy, a new study by Valerio Ercolani, Elisa Guglielminetti and Concetta Rondinelli finds there has been an increase in precautionary savings associated with factors such as higher job uncertainty and fears of a protracted pandemic. Additionally, it suggests that a lasting precautionary attitude could slow the decumulation of piled up savings, even as the pandemic slows down. 


    SHAPING A GENERATION OF ITALIAN ECONOMISTS

    Enrico Nano, Ugo Panizza, Martina Viarengo                            
    25 June 2021

    Over the last 40 years, Italy has produced a large number of influential economists. This is somewhat surprising because economics is more likely to require technical training than other social sciences and, until the 1980s, Italy did not have any formal doctoral programme. 

    Writing at Vox, Enrico Nano, Ugo Panizza, and Martina Viarengo show how a large scholarship programme contributed to the formation of a generation of Italian economists with a focus on gender and socioeconomic status, and on their interaction with social mobility.



    WHY HAS POLITICAL ECONOMY BEEN NEGLECTED?

    Helios Herrera, Ronny Razin interviewed by Tim Phillips, 29 June 2021

    Two years ago, CEPR launched its Political Economy research group, led by Helios Herrera and Ronny Razin. As the group expands to become a programme area, they tell Tim Phillips how a lack of recognition for political economics in recent years has damaged both research and teaching — and how to repair the damage.



    WHATEVER HAPPENED TO THE 15-HOUR WORK WEEK?

    Nicholas Crafts interviewed by Tim Phillips, 25 June 2021

    John Maynard Keynes famously predicted that no one would need to work for more than three hours a day by 2030. How did he get it so wrong? Nick Crafts tells Tim Phillips that, in one way, Keynes has underestimated the change in our work-life balance.