This week from CEPR: June 03

Thursday, June 3, 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

    • THE GLOBAL COVID-19 STUDENT SURVEY: The consequences of the pandemic for university students across seven countries and 29 institutions

    The Global COVID-19 Student Survey: First Wave Result
    David A. Jaeger, Jaime Arellano-Bover, Krzysztof Karbownik, Marta Martínez-Matute, John M. Nunley, R. Alan Seals, et al.  
    Issue 79 Covid Economics | 27 May 2021

    COVID-19 has affected educational experiences of university students in most countries, harmed their employment status as well as that of their family members, and created concerns about physical and mental health. College students’ situations and perspectives have been transformed as a result of both the health crisis and the economic impact on the labour market and household conditions.

    A study by David Jaeger et al., in Issue 79 of CEPR’s Covid Economics, presents results from the first wave of the Global COVID-19 Student Survey, which was administered at 28 universities in the United States, Spain, Australia, Sweden, Austria, Italy, and Mexico between April and October 2020. The survey addresses outcomes and future expectations regarding three fundamental aspects of students’ lives in the pandemic: the labour market, education, and health. And documents differences across country of residence, parental income, gender, and ethnicity. Among the findings:

    • College students’ and their parents experienced high rates of job loss during the pandemic, particularly in the United States, Spain and Australia and for students from lower-income households.
    • Many graduating seniors had accepted job offers only to have them rescinded. The cancellation of job offers was particularly extensive in Spain (58%), for students from lower-income households (56%), and for Hispanics in the United States (36%).
    • Many students had internships planned for the summer, and a large share were cancelled due to the pandemic.
    • The pandemic triggered changes in career considerations as well as expectations about future earnings. Over half of college students across all countries, household income groups, genders, and ethnicities (in the US) consider job security, paid sick leave, and flexible work arrangements to be more important given the pandemic.
    • Around 70% of students with household incomes above the 80th percentile expect to earn more than the average at both 30 and 45 years old. Less than half of students with parental incomes below the 20th percentile expect to be earning less than the average at both ages.
    • Over 60% of men expect to be earning above average incomes at 30 and 45 years old, but only 53% of women expect to be earning above average income at age 30 and 46% expect to earn above average incomes at age 45.
    • The pandemic induced changes in how students allocate their time. The share of students who reported not working before the pandemic compared with during the pandemic increased dramatically across countries, parental income groups, genders, and ethnicities.
    • For those who worked before, the vast majority of them report working less after the onset of the pandemic. Students who tended to study more before, however, reduced time allocated to studying.
    • The percentage of students who are uncertain about returning to school is highest for students with parental incomes at or below the 40th percentile.
    • Uncertainty associated with returning to school is also higher among members of minority groups in the US (Black, Asian, Hispanic).
    • Loss of financial resources or job losses either for the student or their parents also impacts the uncertainty of returning to school.
    • The main challenge students faced was lack of contact with other students and faculty, but having a noisy place to study and greater family responsibilities are noteworthy challenges in some countries (e.g., Mexico, Spain, and the US), for students from households with lower parental incomes, for women, and for Hispanic students in the US.
    • The percentage of students who have an acquaintance or family member that died from COVID-19 is highest in Spain (45%) and Mexico (42%), but the percentage does not vary sizeably across parental income.
    • In the US, the percentage of Black students who know someone who died from COVID-19 is 42% versus much lower rates for White (28%), Asian (28%), and Hispanic (32%) students.
    • A large share of students across all countries, parental income groups, genders, and ethnicities (in the US) report being worried about their own health or the health of family members. Male students tend to be more nervous and stressed about the pandemic than women, while a larger share of women than men report being calm and relaxed.

    The study finds patterns that will likely deepen the inequalities that existed prior to the pandemic with lower-SES students, females, and minorities bearing the disproportionate burden.

    Figure 1: Labour, educational, and health consequences of COVID-19 pandemic

    • EVALUATING EMERGENCY CHILDCARE POLICIES DURING THE FIRST COVID-19 LOCKDOWN IN GERMANY: Increase in negative and potentially harmful parenting behaviour directly caused by school and daycare closures.  

    Simone Schüller and Hannah S. Steinberg     
    Issue 27 Covid Economics | 27 May 2021

    While emergency care policies during the Covid-19 pandemic did not considerably affect parents’ life satisfaction, partnership satisfaction or mental health, they have been effective in diminishing harsh parenting behaviour, according to new research from Germany. Decreasing parental well-being is likely a general effect of the pandemic, whereas increases in negative and potentially harmful parenting behaviour is largely directly caused by school and daycare facility closures.

    These are among the findings of a new study by Simone Schüller and Hannah Steinberg in Issue 79 of CEPR’s Covid Economics evaluates the effect of emergency childcare policies on parental well-being and parenting behaviour during the Covid-19 pandemic, using unique data from Germany. Among the findings:

    • Emergency childcare was not able to permanently shelter families from a considerable reduction in parental well-being.
    • However, the provision of emergency childcare was effective in diminishing increases in harsh parenting in terms of ‘becoming angry’ among the EC-eligible parents.
    • This effect of emergency childcare is evident several months post-lockdown, more pronounced in families with children of preschool-age or younger, and completely cancels out increases in harsh parenting among compliers.
    • Furthermore, for fathers only, we find that emergency childcare prevented decreases in positive parenting behaviour (child-centred communication), and increases in harsh parenting in terms of ‘punishing harder than merited’.


    HUMANS AGAINST VIRUS OR HUMANS AGAINST HUMANS: A Game Theory Approach to the COVID-19 Pandemic
    Santiago Forero-Alvarado, Nicolás Moreno-Arias and Juan J. Ospina-Tejeiro     
    Issue 79 Covid Economics | 27 May 2021

    Externalities and private information are key characteristics of an epidemic like the Covid-19 pandemic. A new study by Santiago Forero-Alvarado, Nicolás Moreno-Arias and Juan Ospina-Tejeiro in Issue 79 of CEPR’s Covid Economics analyses the welfare costs stemming from the incomplete information environment that these characteristics foster.

    The authors estimate the costs of keeping health information private to be between $5.9 to $6.7 trillion dollars. The study finds that an optimal policy of disclosure and divulgation that, combined with testing and containment measures, can improve welfare. Since it is private information about individuals' health what produces the greatest welfare losses, finding ways to make such information known as precisely as possible, would result in significantly fewer deaths and significantly higher economic activity.


    Geraldine Blanchard-Rohner, Bruno Caprettini, Dominic Rohner, Hans-Joachim Voth        
    01 June 2021

    Vaccination hesitancy is emerging as a key challenge in the fight against COVID-19. Geraldine Blanchard-Rohner, Bruno Caprettini, Dominic Rohner and Hans-Joachim Voth explore the relationship between pre-pandemic intensive care unit capacity and attitudes towards the COVID-19 vaccine in the UK.

    The authors find that despite widespread pre-pandemic scepticism about vaccines in general, willingness to become vaccinated against COVID-19 overall was strikingly high, even amongst those who rejected vaccines before the pandemic. The results point to a surprising synergy: where the emergency care systems of public healthcare providers were less strained during the early days of the COVID-19 epidemic, vaccination hesitancy is systematically less today.


    FDI IS IN BIG TROUBLE: Insights from the 27th Global Trade Alert report

    Simon Evenett, Johannes Fritz                            
    03 June 2021

    Writing at Vox, Simon Evenett and Johannes Fritz introduce the 27th Global Trade Alert report, which looks back over the past quarter of a century to put current FDI dynamics in perspective, assesses the degree to which governments continue to favour FDI, and points the spotlight on the limited contribution of FDI to advancing sustainable development in emerging markets. Once a hallmark of globalisation, FDI has been in trouble for some time – a fact compounded by the ongoing pandemic:

    • Even before last year’s 42% drop, sensibly benchmarked annual inflows of FDI have been in decline since the Global Financial Crisis.
    • The economic fallout from COVID-19 has witnessed new FDI flows retreating to levels not seen for 25 years.
    • New greenfield investments into developing countries have been particularly hit last year, falling 57% year-on-year in the fourth quarter of 2020.
    • Outside of the Middle East, since 2015 US multinationals have earned at most meagre additional returns from FDI in developing countries when compared to investments in less risky European Union economies.
    • Returns on US FDI in educational services are so low it would take 40 years to recoup their outlays. Worse, the payback period for investments in health and telecoms is over 90 years. Fortunately, returns from investing in manufacturing are healthier.


    Julia Estefania Flores, Davide Furceri, Siddharth Kothari, Jonathan D. Ostry                      
    28 May 2021

    Public debt ratios have increased significantly in 2020 from already elevated levels. Current projections envisage a quick stabilisation and subsequent decline in debt ratios. However, writing at Vox, IMF economists Julia Estefania Flores, Davide Furceri, Siddharth Kothari and Jonathan Ostry show that forecasts have systematically understated the actual evolution of debt. If the past is a guide to the future, rather than declining, debt ratios could be some 7% of GDP higher five years from now than they are today in emerging and developing countries.


    Davide Furceri, Prakash Loungani, Jonathan D. Ostry, Pietro Pizzuto                         
    03 June 2021

    In the aftermath of past pandemics, fiscal policy played an important role in reducing or amplifying income inequality. A study by Davide Furceri, Prakash Loungani, Jonathan D. Ostry and Pietro Pizzuto predict the likely distributional effects of Covid-19 by analysing evidence from five previous outbreaks (SARS, H1N1, MERS, Ebola, and Zika).

    It finds that severe austerity measures were associated with inequality increases three times greater than expansive fiscal policy following a pandemic. Premature austerity is self-defeating from both a macro and an equity standpoint.


    Arash Nekoei, Fabian Sinn                            
    27 May 2021

    When and where did international differences in women’s status first emerge? A study by Arash Nekoei and Fabian Sinn uses data from the Human Biological Record to explore women's status over the last 5,000 years. Among the findings:

    • The records show no long-run trend in women's share in recorded history.
    • Historically, women's power has been a side-effect of nepotism: the more important family connections, the higher the women's share.
    • But self-made women began to rise among the writers in the 17th century before a broader take-off in the 19th century.


    Philipp Hartmann, Stefano Borgioli, Alina Kempf, Philippe Molitor, Francesco Paolo Mongelli                      
    28 May 2021


    The coronavirus health crisis also had a strong impact on financial systems. Writing at Vox, Philipp Hartmann, Stefano Borgioli, Alina Kempf, Philippe Molitor and Francesco Paolo Mongelli discuss the effects of the coronavirus health crisis on euro area financial integration and financial structure.

    • It illustrates how decisive monetary, fiscal and prudential policy responses first contained and then reversed the initial sharp fragmentation in asset prices across member countries.
    • Overall cross-border asset holdings, however, still have to recover.
    • The emerging alignment between common monetary and fiscal measures through the adoption of the three European safety nets and the Next Generation EU recovery programme seem to have been a game-changer in this regard.
    • The resilience of financial re-integration to potential future shocks to the Economic and Monetary Union, however, should be monitored going forward.
    • The different phases of the pandemic also went along with sizeable shifts between different corporate financing tools and different financial intermediaries.


    Yuqing Xing                    
    27 May 2021

    Factoryless goods producers are a fruitful consequence of the evolution of global value chains. A study by Yuqing Xing shows that the trade value of their output may be largely underestimated.

    The true export value to producers like Apple and Nike to countries like China – where many of these companies’ products are assembled – is far higher than the value of the tangible good itself, when embedded intangible assets and IP are taken into account. Yet this is not reflected in the measurement of bilateral trade flows. If it were, it would paint a very different picture of US exports and the trade deficit.


    Benjamin Artz, David Blanchflower, Alex Bryson                           
    28 May 2021

    The US labour market is producing too few jobs and those it is producing are often low paid and of poor quality. This is exacerbated by the fact that workers do not have the means to fix their problems at work because of a precipitous decline in union membership over the last half century, particularly in the private sector.

    Using panel data from the National Longitudinal Survey of Youth 1979 and 1997 cohorts and from the Bureau of Labor Statistics, a study by Benjamin Artz, David Blanchflower and Alex Bryson shows that Union density is now on the rise and that union workers are now more satisfied than non-union workers. Unions’ ability to help workers avoid underemployment suggests that what seems to have changed is the value attached to the insurance component of the union good.


    Ian Goldin, Pantelis Koutroumpis, François Lafond, Julian Winkler                              
    31 May 2021

    Writing at Vox, Ian Goldin, Pantelis Koutroumpis, François Lafond and Julian Winkler evaluate the various reasons as to why labour productivity has stagnated, if not declined, in many countries around the world. The authors show that the slowdown is primarily attributable to a combination of mismeasurement, slowdowns in capital deepening (for cyclical and structural reasons), spillovers from intangibles, trade integration, and the contribution of allocative efficiency.


    Päivi Leino-Sandberg, Vesa Vihriälä                  
    25 May 2021

    The EU’s response to the COVID-19-induced economic crisis has been aggressive, but not without criticism. Writing at Vox, as part of the Vox debate on euro area reform, Päivi Leino-Sandberg and Vesa Vihriälä summarise some of the shortcomings of the way in which the EU’s Next Generation programme may play out, and suggest short- and longer-term considerations that need to be made in order to ensure that the programme strengthens the Union in the long run.


    Mario Crucini, Oscar O’Flaherty                    
    29 May 2021

    Throughout much of 2020, the Trump administration deferred decision making regarding stay-at-home orders to the state and local level. Using data-driven analysis, a study by Mario Crucini and Oscar O’Flaherty suggests that a national stay-at-home order at the onset of the pandemic, when the virus was spreading primarily in a small group of cities, may have imposed earlier and deeper economic costs on states with relatively low case numbers without any corresponding reduction in infection rates in such states.

    But as the virus spread more uniformly across the country in the last several months of 2020, a nationwide order seemed more appropriate. The findings demonstrate the value of public policy discretion at the state and local level when it comes to implementing stay-at-home orders with the simultaneous and competing goals of minimising community spread and business dislocation.

    Lower for longer – macroprudential policy issues arising from the low interest rate environment

    John Fell, Tuomas Peltonen, Richard Portes                  
    02 June 2021

    At the end of 2019 the European Systemic Risk Board General Board mandated a Task Force on Low Interest Rates to revisit the ESRB’s 2016 report on “Macroprudential policy issues arising from low interest rates and structural changes in the EU financial system”, assess subsequent developments, compare these to the risks identified in the report, and assess whether new sources of systemic risk have emerged. Furthermore, the Task Force was mandated to review progress in relation to the policy proposals in the earlier report, as well as propose possible new policy actions aimed at mitigating potential systemic risks. As this column discusses, the new report finds that the low interest rate environment continues to pose risks for financial stability. For instance, since 2016, search-for-yield behaviour has intensified in the banking and investment fund sectors, and some business models are proving unsustainable. To address these sources of risk and vulnerabilities, the report puts forward a wide range of policy options.

    TWITTER CHANGES HOW THE MEDIA REPORTS CONFLICT: Evidence from the Israel Palestine Conflict

    Ekaterina Zhuravskaya interviewed by Tim Phillips, 28 May 2021

    Every day we can see harrowing mobile phone footage from conflict zones, shot by civilians, on the TV news. Ekaterina Zhuravskaya tells Tim Phillips that data from the Israel-Palestine conflict suggests social media has changed the tone of what traditional media reports.

    MISFORTUNES NEVER COME ALONE: The impact of the financial crisis on Covid-19 deaths

    Steven Ongena interviewed by Tim Phillips, 01 June 2021

    Is there a connection between the 2007-2009 financial crisis and the COVID-19 pandemic? Steven Ongena talks to Tim Phillips about the relation between both macroeconomic and financial losses derived from the financial crisis and the health outcomes associated with the first wave of the pandemic.