This week from CEPR: July 15

Thursday, July 15, 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’.

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

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


     

    • New Discussion Papers


    • HHOW ECONOMIC SHOCKS AND UNEMPLOYMENT AFFECTS DOMESTIC VIOLENCE: Evidence from Brazil 

    JOB DISPLACEMENT, UNEMPLOYMENT BENEFITS AND DOMESTIC VIOLENCE
    Sonia Bhalotra, Diogo G.C. Britto, Paolo Pinotti, Breno Sampaio 
    CEPR Discussion Paper No. 16350 | July 2021

    As many as one in three women report having ever experienced domestic violence at some stage in their lives. It is both a marker and a cause of gender inequality in the economic domain and, yet, it has attracted far less attention from economists than other dimensions of gender discrimination such as the gender pay gap. One reason for relatively limited causal research, is that large-scale systematic data on Domestic Violence are scarce.

    A new CEPR study by Sonia Bhalotra, Diogo G.C. Britto, Paolo Pinotti and Breno Sampaio estimates the impact of male job loss, female job loss, and male unemployment benefits on domestic violence in Brazil. The authors use data on Domestic Violence cases brought to Brazilian courts in 2009-2018 (a total of about 2.4 million cases), use of public shelters by victims and mandatory notifications of domestic violence by health providers. They link these data to longitudinal employer-employee registers containing a total of 100 million workers and 60 million yearly employment spells. Among the Findings: 

    • The negative income shock brought by job loss may trigger stress and re-negotiation of a shrunken household budget, opening the door for conflict.
    • Job loss constitutes a positive time shock, increasing women's exposure to Domestic Violence risk as displaced workers spend more time at home, which is particularly relevant during the stressful period following job loss.
    • Both male and female job loss, independently, lead to large and pervasive increases in domestic violence. 
    • In particular, male job loss leads to a 32% increase in the risk of perpetration, and female job loss to a 56% increase in the risk of victimisation.
    • These effects are pervasive along the distribution of perpetrator age, education and baseline income, and also across area-level characteristics including baseline Domestic Violence rates, the gender pay gap, population size, GDP per capita, and the labour informality rate. They are evident among  first-time as well as repeat perpetrators (and victims).
    • Eligible men are not less likely to commit domestic violence while benefits are being paid, and more likely to commit it once benefits expire. 

    These findings are consistent with job loss increasing domestic violence on account of a negative income shock and an increase in exposure of victims to perpetrators, with unemployment benefits partially offsetting the income shock while reinforcing the exposure shock.


    • HOW CHINA LENDS: A Rare Look into 100 Debt Contracts with Foreign Governments   

    HOW CHINA LENDS: A Rare Look into 100 Debt Contracts with Foreign Governments
    Anna Gelpern, Sebastian Horn, Scott Morris, Brad Parks, Christoph Trebesch
    CEPR Discussion Paper No. 16331 | July 2021

    China is the world's largest official creditor, but we lack basic facts about the terms and conditions of its lending. Very few contracts between Chinese lenders and their government borrowers have ever been published or studied. A new CEPR study by Anna Gelpern, Sebastian Horn, Scott Morris, Brad Parks and Christoph Trebesch provides the first systematic analysis of the legal terms of China's foreign lending. 

    The authors collect and analyse 100 contracts between Chinese state-owned entities and government borrowers in 24 developing countries in Africa, Asia, Eastern Europe, Latin America, and Oceania, and compare them with those of other bilateral, multilateral, and commercial creditors. Three main insights emerge: 

    1. The Chinese contracts contain unusual confidentiality clauses that bar borrowers from revealing the terms or even the existence of the debt. 
    2. Chinese lenders seek advantage over other creditors, using collateral arrangements such as lender-controlled revenue accounts and promises to keep the debt out of collective restructuring ("no Paris Club" clauses). 
    3. Cancellation, acceleration, and stabilization clauses in Chinese contracts potentially allow the lenders to influence debtors' domestic and foreign policies. Even if these terms were unenforceable in court, the mix of confidentiality, seniority, and policy influence could limit the sovereign debtor's crisis management options and complicate debt renegotiation. 

    Overall, the contracts use creative design to manage credit risks and overcome enforcement hurdles, presenting China as a muscular and commercially-savvy lender to the developing world. 

    Figure 2: Map of countries with Chinese debt contracts in authors’ dataset 


    • HOW COVID-19 MEDICAL SUPPLY SHORTAGES LED TO EXTRAORDINARY TRADE AND INDUSTRIAL POLICY

    When Bonuses Backfire: Evidence from the Workplace
    Chad P. Bown     
    CEPR Discussion Paper No. 16359 | July 2021

    Early in the COVID-19 pandemic, a global shortage of hospital gowns, gloves, surgical masks, and respirators caused policymakers around the world to panic. A new CEPR study by Chad P. Brown examines international trade in this personal protective equipment (PPE) during the crisis, with a focus on China, the European Union, and the United States. Among the findings: 

    • As the pandemic first hit, China increased imports and decreased exports of PPE, removing considerable quantities of supplies from global markets. 
    • For the European Union and United States, the decrease in their imports from China was not immediately replaced by increased trade from other foreign suppliers. 
    • Early shortages led to EU and US export controls on their own, domestically produced PPE and other extraordinary policy actions, including a US effort to reserve for itself supplies manufactured in China by a US-headquartered multinational. 
    • By April 2020 China's exports had mostly resumed, and over the rest of 2020 its export volumes of some products surged, more than doubling compared to pre-pandemic levels. 
    • But China's export prices also skyrocketed and remained elevated through 2020, reflecting severe and continued shortages. 

    This study documents these facts in details. It also explores these and other government actions, such as US trade war tariffs and the emergence of over $1 billion of US industrial policy to build out its domestic PPE supply chain, as well as potential lessons for future pandemic preparedness and international policy cooperation.

    Figure 4: The trade war put the US at a pandemic preparedness disadvantage 

    Note: PPE products included in US section 301 List 4A and subject to new 15% tariff in September 2019.

    Source: PIIE, US Census.  



    POPULISM IS ALIVE AND WELL IN TIMES OF COVID-19

    Antonio Spilimbergo           
    13 July 2021

    Many analysts expected Covid-19 to expose the contradictions of ‘populist’ politicians and cited various reasons for this, including short-sightedness, the lack of trust often associated with populist sentiments, unhelpful populist narratives, and a resistance to international cooperation. 

    Writing at Vox, Antonio Spilimbergo argues that there is no clear evidence that its handling of the pandemic has ‘killed’ populism. In fact, the pandemic crisis has spawned new political issues which, if left unaddressed by traditional parties, may rekindle the growth of the populist ideology once again.

     

    SUPPLY-SIDE INNOVATIONS IN THE LEGAL AND ILLEGAL DRUG MARKETS HAVE FUELLED THE US OPIOID EPIDEMIC

    David M. Cutler, Edward Glaeser

    12 July 2021

    Over 90,000 Americans died from opioids in the year ending November 2020, bringing the death total since 1999 to over 850,000. Writing at Vox, David M. Cutler and Edward Glaeser argue that rather than rising demand for opioids for relief from pain or despair, it is supply-side innovations in the legal and illegal drug markets that have been the main driver of the opioid epidemic. 

    The opioid cycle is a cautionary tale about how technological innovation can go terribly awry, and calls for more collective scepticism about innovations that allegedly cleanse pleasure-inducing drugs of their addictive properties as well as stronger penalties for companies that mislead the public about the risks of their products.


    THE TALIBAN’S STRATEGIC USE OF VIOLENCE: Evidence from NATO’s disengagement in Afghanistan

    Thiemo Fetzer, Pedro Souza, Oliver Vanden Eynde, Austin L. Wright                         
    11 July 2021

    A study by Thiemo Fetzer, Pedro Souza, Oliver Vanden Eynde and Austin L. Wright demonstrates that the Taliban is highly strategic in its use of violence, choosing to conserve their fighting capacity during the security transfer from international troops to local forces, and ramping up the violence once the foreign troops physically withdraw from the country and the cost of local reintervention is sufficiently high.

    The authors use declassified data on conflict outcomes and perceptions of local security to show how strategic miscalculation during Afghanistan’s first security transition may have contributed to its current resurgence of violence.


    THE RACE BETWEEN VACCINE ROLLOUT AND NEW COVID VARIANTS

    David Turner, Balázs Égert, Yvan Guillemette, Jarmila Botev                         
    11 July 2021

    A new study by OECD economists David Turner, Balázs Égert, Yvan Guillemette and Jarmila Botev a rapid rollout of vaccinations is needed to compensate for the pressure from more infectious variants and avoid a cycle of stop-and-go mitigation policies. However, for those countries now going into summer, it is also important that policymakers are not lulled into a false sense of security by the temporary decline in reproduction numbers due to seasonal factors, as in the summer of 2020. Failure to vaccinate a sufficient share of the population could then lead to a resurgence of the virus in the winter as seasonal factors reverse.


    ANYWHERE JOBS AND THE FUTURE OF WORK

    Jeegar Kakkad, Christina Palmou, David Britto, James Browne                             
    10 July 2021

    The Covid pandemic has helped to loosen the binds that previously tied a job to a specific geography and created a new class of work in the UK. ‘Anywhere jobs’ are non-routine service sector jobs that can be done from anywhere in the world, potentially for cheaper. 

    A study by Jeegar Kakkad, Christina Palmou, David Britto and James Browne shows that one in five workers in the UK are in an anywhere job and, in contrast to the past when the pressure was on semi-skilled workers, it is relatively highly skilled workers in non-routine roles that are now vulnerable to the pressures of technology and globalisation.


    EPIDEMIC EXPOSURE, FINTECH ADOPTION, AND THE DIGITAL DIVIDE

    Orkun Saka, Barry Eichengreen, Cevat Giray Aksoy                       
    09 July 2021


     

    Although epidemics are frequently cited as inducing changes in economic behaviour and accelerating technological and behavioural trends, there may be important differences across socioeconomic groups in ability to utilise such new technologies. 

    Writing at Vox, Orkun Saka, Barry Eichengreen and Cevat Giray Aksoy studies these issues in the context of fintech adoption and finds strong evidence of epidemic-induced changes in economic and financial behaviour, of differences in the extent of such shifts by more and less economically advantaged individuals, and of a role for IT infrastructure in spreading or limiting the benefits of technological alternatives. The results highlight both the behavioural response to epidemics and the digital divide.


    BEYOND THE PANDEMIC: From life support to structural change

    Maarten Verwey, Mirko Licchetta, Alexandru Zeana                       
    08 July 2021

    COVID-19 caused a ‘recession like no other’, which triggered an unprecedented economic policy response in the EU. As the European Commission’s Summer 2021 Economic Forecast points to a quick return to the pre-pandemic output levels, attention shifts to the post-pandemic years. Will the recovery be short-lived, or will the COVID-19 crisis prove to be a transformative event for the EU? 

    Much will depend on the course of economic policy in the years ahead, argue Maarten Verwey, Mirko Licchetta and Alexandru Zeana. NextGenerationEU, with its centrepiece the Recovery and Resilience Facility, provides a unique possibility to turn the challenges of the crisis into opportunities. The first set of National Recovery and Resilience Plans give reason for optimism, but much will depend on their implementation by the member states.


    CLIMATE CHANGE WILL UNEVENLY IMPACT THE EUROPEAN FINANCIAL SYSTEM

    Paul Hiebert                            
    13 July 2021

    Climate change will impact those parts of the financial system most exposed to its disruptive effects. A study by Paul Hiebert analyses a new financial stability risk mapping for the EU financial system, linking financial exposures of thousands of banks, insurance companies, and investment funds to millions of firms subject to climate risk. 

    Paul highlights a high level of risk concentration, both in European regions subject to climate hazards as well as economic sectors with diverse carbon emission intensities. Long-term scenario analyses suggest that the risks will be best addressed through proactive policies that directly contain global temperature rises. 


    WHY DO MIGRANTS MOVE FROM POOR ECONOMIES TO RICH ONES?

    Eran Yashiv                            
    14 July 2021

    A study by Eran Yashiv examines this question using the case of Palestinian workers who could decide to either work in the (poorer) local economy or commute to work in (richer) Israel. It finds productivity gains experienced by the migrants are largely offset by the low returns for the job tasks offered to these migrants in the richer economy.



    A BRIGHT FUTURE FOR POLITICAL ECONOMY

    Helios Herrera, Ronny Razin interviewed by Tim Phillips, 09 July 2021

    CEPR is creating a new programme area in political economy. Helios Herrera of the University of Warwick and Ronny Razin of LSE tell Tim Phillips how they plan to attract a wide range of economists and social scientists to the discipline, and how we can do a better job of translating polecon research into policy.



    WHAT MAKES CHILDREN LIE?

    Johannes Abeler interviewed by Tim Phillips, 09 July 2021

    If some kids lie a little, and some lie a lot, is that just the way they are, or can we increase a child’s honesty in day-to-day life? Johannes Abeler tells Tim Phillips about how mentors can create lasting behaviour change.
    The paper discussed is:
    Abeler, J, Falk, A and Kosse, F. 2021. 'Malleability of preferences for honesty'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=16164
    .