This week from CEPR: June 17

Wednesday, June 16, 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


     

    The impact of University reopenings on COVID-19 cases in Scotland
    Hector Rufrancos, Mirko Moro and Eva Moore  
    Issue 80 Covid Economics | 9 June 2021

    A new paper by Hector Rufrancos, Mirko Moro and Eva Moore, in Issue 80 of CEPR’s Covid Economics, estimates the impact of University reopenings in Scotland in Autumn 2020 on COVID-19 cases in Scottish neighbourhoods. The results show that: 

    • There was a substantial and persistent increase in cases in areas containing halls and evidence of persistent spillovers; i.e., transmissions to the wider community in areas near to halls.
    • These effects are linked to the group of Universities that started on 14th September, which include large Universities located in the major urban areas. 
    • The cases began to rise on 21st September, with 100 extra cases per 100,000 per day, and peaked a week later with 400 additional cases per 100,000 per day, after which they started declining. 
    • However, the number of cases remained stubbornly higher relative to their contiguous areas until the end of November, recording an additional 100 cases per 100,000 per day.
    • These estimates represent a lower bound as they are compared to contiguous areas that also experienced a persistent increase in cases relative to their neighbours following University reopenings. For these neighbourhoods, daily cases went up by an additional 20-80 cases per 100,000 until the end of November.

    The analysis suggests that student in migration into halls represented a risk for areas hosting the halls their surroundings, despite the pre-existing national restrictions on household mixing and indoor gathering, and Universities mitigation with class-size limits, physical distancing rules in common areas, and enhanced hygiene measures. Noting that in the vast majority of cases there was no in person teaching over Autumn 2020. The findings broadly invite a re-think of how close proximity activity in Universities can be resumed, as the pre-existing mitigations barring severe curtailment of trading activity were not successful in keeping the spread in check.

    Figure 1: Intermediate Zones with student halls, and those within 5km of a student hall

    Note: Figures show neighbourhoods which have student halls, marked as red dots. Student neighbourhoods
    are shaded dark, whilst those who serve as comparison groups are shaded light. Subfigures b-f denote the
    neighbourhoods for each of the major Scottish cities. Note that the comparison areas are selected as having
    the centroid of the neighbourhood within 5km of student halls.


    • SIGNIFICANT REDUCTION OF AIR POLLUTION AFTER COVID: Evidence from 31 European countries   

    COVID-19 AND ENVIRONMENT: An investigation of the COVID-19 pandemic effects of the air quality in Europe
    Myrto Kasioumi and Thanasis Stengos     
    Issue 80 Covid Economics | 9 June 2021

    A new study by Myrto Kasioumi and Thanasis Stengos, in Issue 80 of CEPR’s Covid Economics, investigates the effects of COVID-19 on European air quality. The study focuses on 31 European countries and three air pollutants (PM10, PM2.5, and NO2), and start with a comparison of the air pollution levels before and after the pandemic, focusing on the years 2018-2019 on one side and 2020-2021 on the other. Among the findings: 

    • The level of each pollutant dropped significantly for most countries after the beginning of the virus. 
    • The measures taken to control the spread of the COVID-19 virus did not only have negative impacts (as in the economy, tourism and other aspects) but they also had some positive effects mainly on the environment by reducing air pollution emissions due to restrictive government policies pursued to contain the spread of the virus. 
    • However, it is also clear that previous air pollution levels have acted as an important factor in explaining the COVID-19 spread due to their negative effects on health.

    The authors also present individual country analysis on how new monthly COVID-19 cases affect each pollutant for the years 2020 to 2021 and present a fixed effects panel data analysis for the same years for the whole of Europe. We also consider how air pollution in earlier periods may have affected the spread of COVID-19 through its negative health effects. 


    • THE ECONOMIC CONSEQUENCES OF THE OPIUM WAR 

    THE ECONOMIC CONSEQUENCES OF THE OPIUM WAR
    Wolfgang Keller, Carol H Shiue     
    CEPR Discussion Paper No. 16242 | June 2021

    A new CEPR paper by Wolfgang Keller and Carol H Shiue studies the economic consequences of the West's foray into China after the Opium War (1840-42), when Western colonial institutions were introduced in dozens of so-called treaty ports. Among these institutions was the Maritime Customs Service, organising trade and tariff collection, as well as consular courts that projected Western legal traditions into China. The study also assesses individual elements of extra-territoriality in China such as the scope of jurisdiction, appeal process, court proceedings, and sentencing. Among the findings: 

    • Western countries had a positive impact on China's economy over the 19th century. 
    • Regions with Western influence exhibited a higher rate of growth of modern firms and more investment into advanced machinery.
    • Western influence brought down local interest rates by almost a quarter, with much of this due to Western institutions providing enhanced security and lower risk as opposed to additional capital. 
    • Both legal and trade institutions contributed to the lowering of risk; firm growth, investment, and technology adoption were closely affected by trade institutions while legal institutions played a stronger role for capital market performance. 
    • The geographic scope of influence went far beyond the immediate vicinity of treaty ports, customs houses, and consulates. 
    • Western institutions affected Chinese areas up to 400 kilometres away, influencing a large part, perhaps even the majority, of China during this period.


    Low-performing boys are particularly affected by family environment

    David Autor, David Figlio, Krzysztof Karbownik, Jeffrey Roth, Melanie Wasserman          
    11 June 2021

    Modest gender gaps emerge in primary school, with girls tending to perform better than boys in reading tests, for example, and less likely to experience disciplinary incidents that result in suspension.

    This column uses data from the US state of Florida to examine why these modest gaps translate into large gender differences in later educational attainment, such as completing secondary education and enrolling in and graduating from tertiary education.

    It finds that early childhood family environment has differential effects on boys, and particularly those at the lower tails of the academic test score and attendance distributions.

     

    CRISES AND ECONOMIC CONCERNS ALONE CANNOT BUILD SOCIAL COHESION 

    Cevat Giray Aksoy, Antonio Cabrales, Mathias Dolls, Ruben Durante, Lisa Windsteiger      13 June 2021

    How are trust, reciprocity, and altruism affected by economic interests, shared values, and a major health crisis? Writing at Vox, Cevat Giray Aksoy, Antonio Cabrales, Mathias Dolls, Ruben Durante and Lisa Windsteiger present novel evidence from a large-scale survey conducted in August 2020 across nine European countries to show that while altruism is enhanced by shared identities or crises, interpersonal trust is not. Common economic interests have little impact on altruism or reciprocity, suggesting that economic concerns alone cannot build social cohesion.


    INCREASED PARENTAL AGE HAS SIGNIFICANT ADVERSE EFFECTS ON OFFSPRING OUTCOMES

    Hans Hvide, Julian Vedeler Johnsen, Kjell G. Salvanes                        
    12 June 2021

    Existing literature has gravely underestimated the negative effects on offspring outcomes of parental ageing. A new study by Hans Hvide, Julian Vedeler Johnsen and Kjell Salvanes argues that when using a more appropriate methodology, comparing children within families – i.e. between siblings – there are strong and negative effects of parental ageing on offspring outcomes, with implications for public policy.


    RETURNING TO THE OFFICE WILL BE HARD: Hybrid working will be the solution

    Nicholas Bloom, Paul Mizen, Shivani Taneja                         
    15 June 2021

    Writing at Vox, Nicholas Bloom, Paul Mizen and Shivani Taneja argue that although the shift to working from home during the Covid pandemic was surprisingly easy, returning to the office will be hard. The authors present new evidence from a survey of 2,500 employees in the UK shows a preference in favour of home working 2-3 days a week, with lingering concerns of overcrowded transport and offices. But allowing workers to choose when to work from home will leave empty offices Monday and Friday, and many tasks such as large group meetings are more effective in person than online. Hybrid working will be the solution.


    CENTRALISED BANK SUPERVISION AND THE COMPOSITION OF FIRM INVESTMENT

    Miguel Ampudia, Thorsten Beck, Alexander Popov                             
    11 June 2021

    The trade-off between stability and growth has long been a subject of policy debate and informs views on the extent to which the supervision of banks should be centralised. Writing at Vox, Miguel Ampudia, Thorsten Beck and Alexander Popov present analysis of the ECB’s Single Supervisory Mechanism, using the announcement of the mechanism and its implementation as a quasi-natural experiment. It finds that centralised bank supervision is associated with a decline in lending to firms, which is accompanied by a shift away from intangible investment and towards more cash holdings and higher investment in easily collateralisable physical assets.


    LARGE TRADE SHOCKS AND ECONOMIC CRISES: The case of the Finnish-Soviet trade collapse

    Adam Gulan, Markus Haavio, Juha Kilponen                       
    10 June 2021


     

    WIn December 1990, the Soviet Union withdrew from its bilateral trade agreement with Finland. This was followed by a dramatic collapse in Finnish-Soviet trade and a deep economic crisis in Finland. A study by Adam Gulan, Markus Haavio and Juha Kilponen re-assesses the role of the trade collapse in causing the Finnish Great Depression in the early 1990s.

    The authors find that the trade shock had a strong negative effect on the Finnish economy but explains less than one-third of the cumulative GDP loss. Domestic factors, including a financial boom and bust, exerted a much larger negative effect. 


    BANKING ON EXPERIENCE

    Hans Degryse, Sotirios Kokas, Raoul Minetti                      
    14 June 2021

    Writing at Vox, Hans Degryse, Sotirios Kokas and Raoul Minetti explore how banks’ credit market experiences affect their decisions and moral hazards in lending.

    The authors find that Banks' prior experience with borrowing firms and co-lenders reinforces their monitoring incentives allowing for a smaller lead share in the lending syndicate. Banks' sectoral experience, in contrast, appears to dilute monitoring incentives, calling for a larger lead share in the lending syndicate. 


    TRADE IMBALANCES AND PREFERENTIAL TRADE AGREEMENTS: An empirical investigation

    Giovanni Facchini, Peri da Silva, Gerald Willmann                            
    14 June 2021

    The creation of new preferential trade agreements remains a key driver in trade liberalisation, at least bilaterally. Writing at Vox, Giovanni Facchini, Peri da Silva and Gerald Willmann examine the creation of new agreements, highlighting the effects of pre-agreement bilateral imbalance and within-country income inequality on the likelihood of a preferential trade agreement being formed.

    The authors suggest that while the creation of preferential trade agreements continues to be an important avenue to liberalise trade, there are significant political constraints to be considered.



    TURNING COMPETITION RESEARCH INTO COMPETITION POLICY

    Gregory Crawford, Cristina Caffarra  interviewed by Tim Phillips, 08 June 2021

    The CEPR's Research Policy Network on competition policy launches this week. In the first of two special podcasts on the topic, Greg Crawford and Cristina Caffarra tell Tim Phillips why it is so important to have this debate now, and how academics can use the RPN to connect their research to real-world policy.

    You can find out more about and register for the event on June 17th 2021 here: Privacy & Antitrust: "Integration", not just "Intersection"

    CAPITALISM AFTER COVID

    Luis Garicano interviewed by Tim Phillips, 16 June 2021

    What's the future of capitalism? Luis Garicano asked this question to 21 of his fellow economists, and this week the interviews are published as a CEPR ebook. He tells Tim Phillips that Covid-19 may inspire us "to rethink everything we are doing".

    You can download the new eBook 'Capitalism after Covid: Conversations with 21 economists' here.