This week from CEPR: March 25

Thursday, March 25, 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


    • WOMEN ARE STILL DOING THE LION’S SHARE OF HOUSEHOLD CHORES DURING LOCKDOWN – AND IT’S FUELLING TENSIONS AMONG COUPLES: Evidence from France

    Couples in lockdown, "La vie en rose"? Evidence from France
    Hugues Champeaux and Francesca Marchetta
    Issue 73 Covid Economics | 23 March 2021

    During the Covid-19 lockdown, couples in relationships were harshly challenged by a novel situation which could notably redistribute roles and/or could also lead to intrahousehold conflicts. However, this period did not structurally affect gender roles and stereotypes at home, with men only notably increasing ‘quasi-leisure’ activities such as shopping and playing with children. The unbalanced division of the increased household chores is directly linked to increased intrahousehold conflicts.

    These are among the main findings of a new study by Hugues Champeaux and Francesca Marchetta, in Issue 73 of CEPR’s Covid Economics, which uses survey data from France to investigate the lockdown’s effects on the household chores allocation and tensions among couples. Among the findings: 

    • The lockdown did not offer an opportunity to strongly renegotiate the housework and childcare division between the partners, as women still did the lion’s share during this period. 
    • The time spent by French women doing housework increased by about 30%, while time spent helping children with their homework also increased substantially.
    • Men changed their participation in household chores that are quasi-leisure, such as shopping and playing with children. 
    • There was an unbalanced division of the increased household chores during the lockdown, in particular on cleaning and childcare, is directly linked to an increase of the intrahousehold conflicts. 
    • The disruption of social life and forced cohabitation also contributed to increase the likelihood of the occurrence of conflicts and tensions between partners.

    Typical roles in the allocation of the household chores between couples have thus persisted in France. The confinement did not changed this situation as the gender gap remained positive for all activities surveyed, ultimately contributing to increased tensions between couples during lockdown.


    • ECONOMIC INEQUALITY IS STRONGLY ASSOCIATED WITH COVID-19 DEATH RATES: A Cross-Country Analysis    

    Economic Inequality and Covid-19 Death Rates in the First Wave, a Cross-Country Analysis
    James B. Davies     
    Issue 73 Covid Economics | 23 March 2021

    Disadvantaged minorities and some low-income groups have been hit hard by Covid-19 infection and deaths, new research suggests that its severity within countries were strongly related to their pre-existing differences in income inequality and poverty in the first global wave of the pandemic. Moreover, the effects are not in the same direction: income inequality is associated with a higher death rate while poverty is associated with a lower rate.

    These are among the findings of a new study by James B. Davies in Issue 73 of CEPR’s Covid Economics, which examines the cross-country relationship between Covid-19 crude mortality rates and previously measured income inequality and poverty in the pandemic’s first wave, across 141 countries. Among the findings: 

    • First-wave Covid-19 crude death rates by country were consistently and positively related to the Gini coefficient for income. Absolute poverty was found to have a significant negative effect in this setting.  
    • Poverty as measured by the $1.90 per day standard has a small negative association with death rates.
    • An older population, fewer hospital beds, lack of universal BCG (tuberculosis) vaccination, and greater urbanization are also associated with higher mortality.  
    • The elasticity of Covid-19 deaths with respect to the Gini coefficient, evaluated at sample means, is 0.9.  Assuming the observed empirical relationships unchanged, if the Gini coefficient in all countries where it is above the OECD median was instead at that median, 67,900 fewer deaths would have been expected after 150 days of the pandemic - a reduction of 11%. Shrinking higher Gini’s down to the G7 median reduces predicted deaths by 89,900, or 14%. 

    • RESTRICTIONS AFFECTED MOBILITY IN ADVANCED OECD ECONOMIES MUCH MORE THAN FEARS OF COVID INFECTION   

    Fears of COVID and non‑pharmaceutical interventions: An analysis of their economic impact among 29 advanced OECD countries 
    Laurence Boone and Colombe Ladreit
    Issue 73 Covid Economics | 23 March 2021

    A study by Laurence Boone and Colombe Ladreit in Issue 73 of CEPR’s Covid Economics analyses the economic effects of the COVID sanitary situation and non-pharmaceutical interventions (NPIs) on 29 advanced OECD countries, and compare the first wave of COVID to the second one.

    Overall, the results show that restrictions affected mobility in advanced OECD economies much more than fears of COVID infection. This effect is more visible during the first wave than during the second as the influence of the sanitary situation gained weight during the second wave. This is probably due to (i) a second wave stronger than the first in many countries, (ii) while NPIs were, on average, less stringent during the second wave, leaving more room for voluntary social distancing. Among the findings: 

    • During the first wave the effect of NPIs on mobility was stronger in France, Spain, and the United Kingdom than in the average of advanced OECD countries. This is probably due to the magnitude of the shock in these countries. 
    • Interestingly, Italy stands out as the only country in which mobility decreased both as a consequence of government restrictions and the sanitary situation. The fall in activity in the first half of 2020 was more marked in these four countries. 
    • Reactions across countries were less homogeneous during the second wave. The explanatory weight of NPI in the mobility decline is higher in France, Germany, and Italy, which is explained by the implementation of restrictive measures, and in particular second lockdowns in these countries. 
    • Conversely, countries where the restrictions have been less strict, in part because decisions were adopted at the regional level, see the sanitary situation as the main explanatory factor. 
    • It is interesting to note that in France, the daily COVID deaths toll had zero weight on the decline in mobility during the second wave, which could suggest either a lower anxiety-inducing perception of the virus, for example, due to less negative communication, or greater confidence in the respect of individual protective measures, such as mask-wearing and handwashing.


    ‘DASH FOR CASH’ VERSUS ‘DASH FOR COLLATERAL’: Market liquidity of European sovereign bonds during the Covid-19 crisis

    Emanuel Moench, Loriana Pelizzon, Michael Schneider            
    23 March 2021

    Writing at Vox, Emanuel Moench, Loriana Pelizzon and Michael Schneider investigate how euro area sovereign bond markets fared during the March 2020 ‘dash for cash’, which affected the liquidity of the US Treasury bonds market as well as numerous other financial markets around the globe.

    The findings show that while deteriorations in sovereign debt market liquidity are evident, these appear to be driven by a ‘dash for collateral’ in euro-denominated safe assets. This suggests some differences from the US experience, as well as variations across European countries. 

     

    HOW ARREARS COULD UNLEASH A BANKING CRISIS IN SUB-SAHARAN AFRICA

    Erica Bosio, Rita Ramalho, Carmen Reinhart                      
    22 March 2021

    A study by Erica Bosio, Rita Ramalho and Carmen Reinhart estimates that the size of government arrears in sub-Saharan Africa was 4.26% of GDP in 2019, and likely increased by an average of 1.92 percentage points of GDP across the region in 2020. Financing the COVID relief and recovery programmes by delaying payments is negatively affecting suppliers and contractors at a time when liquidity is crucial for firm survival, which in turn burdens the banking sector and increases the likelihood of a banking crisis.


    CLIMATE CHANGE AND CENTRAL BANKS: Introducing the expectations channel

    Alexander Dietrich, Gernot Müller, Raphael Schoenle                  
    22 March 2021

    Climate change has emerged as a major challenge for central banks, although its extent and the immediate consequences are highly uncertain. A study by Alexander Dietrich, Gernot Müller and Raphael Schoenle uses a survey of over 10,000 US consumers to show that irrespective of when and how climate change actually plays out, what matters for monetary policy is how people expect it to play out. Central bankers ignore the expectations channel of climate change at their peril.  


    LESS THAN 10% OF URBAN JOBS IN DEVELOPING COUNTRIES CAN BE CARRIED OUT REMOTELY 

    Charles Gottlieb, Jan Grobovšek, Markus Poschke, Fernando Saltiel                   
    18 March 2021

    Writing at Vox, Charles Gottlieb, Jan Grobovšek, Markus Poschke and Fernando Saltiel estimate the ability to work from home in low- and middle-income countries. The results indicate that fewer than 10% of urban jobs in developing countries can be done remotely, and in particular workers in low-wage occupations and the self-employed have fewer opportunities to work from home. Importantly, these results indicate that the low WFH ability in developing countries is driven not only by occupational composition, but also by the nature of tasks within occupations.


    LONG-RUN CONTACT WITH IMMIGRANT GROUPS MAKES PEOPLE LESS PREJUDICED AND POLITICALLY HOSTILE: Evidence from the United States

    Leonardo Bursztyn, Thomas Chaney, Tarek Hassan, Aakaash Rao                      
    21 March 2021

    Can greater intergroup contact mitigate prejudice and increase altruism? Using a case study of Arab-Muslims in the United States, Leonardo Bursztyn, Thomas Chaney, Tarek Hassan and Aakaash Rao find that long-term contact makes a majority group less prejudiced, less politically hostile, more altruistic toward minority communities, and even influences the political preferences of voters.  


    WHEN AGRICULTURE DRIVES DEVELOPMENT: Lessons from the Green Revolution

    Douglas Gollin, Casper Worm Hansen, Asger Mose Wingender                
    20 March 2021


     

    Poor countries have large and relatively unproductive agricultural sectors, yet investments in the development and diffusion of agricultural technology have substantially improved material living standards in the poorest places on our planet over the past half century.

    Writing at Vox, Douglas Gollin, Casper Worm Hansen and Asger Mose Wingender describe how the ‘Green Revolution’ (modern crop-breeding techniques and high-yielding crop varieties) instigated positive but unevenly distributed effects of agricultural productivity on food crop yields, GDP per capita, schooling, and life expectancy across different countries.

    In the face of climate change, further investments in agricultural science targeting the developing world may have the potential to sustain these gains in the decades ahead. 


    LANGUAGE TRAINING SIGNIFICANTLY INCREASES REFUGEES’ SUCCESS: Evidence from Denmark

    Mette Foged, Linea Hasager, Giovanni Peri                
    20 March 2021

    Using data from Danish refugees assigned to language training, a study by Mette Foged, Linea Hasager and Giovanni Peri shows that language acquisition significantly increases the lifetime earnings of refugees.

    Refugees with language training are more likely to work in communication-intensive jobs and obtained additional education. The positive effects are transmitted to the next generation in terms of improved schooling outcomes for male children of refugees.


    LENDING RELATIONSHIPS HAVE A SIGNIFICANT POSITIVE EFFECT ON CORPORATE LOAN RENEGOTIATION, MITIGATING THE COST OF DISTRESS FOR FIRMS

    Melina Papoutsi                     
    22 March 2021

    How important are relationships with bank loan officers for corporate borrowers? A study by Melina Papoutsi shows how continuous lending relationships between bank loan officers and corporate borrowers improve the outcomes of loan renegotiations.

    Data from Greece in the mid-2010s reveals that firms experiencing an interruption in their loan officer relationship were less likely to renegotiate a loan, receive tougher loan terms, and raise more equity, reduce their overall borrowing, and partially substitute borrowing from other banks. Following the COVID-19 outbreak, managing lending relationships will become even more important for bank governance, risk, and credit supply.


    HOW INFLATION EXPECTATIONS AFFECT HOUSEHOLDS’ SPENDING DECISIONS

    Olivier Coibion, Yuriy Gorodnichenko, Michael Weber                      
    19 March 2021

    Households in advanced economies are quite uninformed about inflation. Does this mean that they ignore inflation in their economic decision making?

    Writing at Vox, Olivier Coibion, Yuriy Gorodnichenko and Michael Weber use a randomised control trial, a large-scale survey, and spending data to show that the answer is ‘no’. When households change their inflation expectations, this causally alters their spending decisions. This suggests communication strategies that meaningfully impact household expectations can also be expected to affect their decisions. 


    TECHNOLOGICAL PROGRESS REDUCES THE EFFECTIVENESS OF MONETARY POLICY

    Robin Döttling, Lev Ratnovski             
    19 March 2021

    Technological progress increases the importance of corporate intangible assets such as research and development knowledge, organisational structure, and brand equity. Using US data covering 1990 to 2017, a study by Robin Döttling and Lev Ratnovski shows that the stock prices and investment of firms with more intangible assets respond less to monetary policy shocks.

    Similarly, intangible investment responds less to monetary policy compared to tangible investment. The key channel explaining these effects is a weaker credit channel of monetary policy, as firms with intangible assets use less debt.


    BARRIERS TO NET-ZERO: Organisational constraints are holding back the green transition in less-developed economies

    Ralph De Haas, Ralf Martin, Mirabelle Muûls, Helena Schweiger                
    19 March 2021

    Many countries are striving for net-zero carbon emissions by 2050, requiring massive investments over the next decades. But many companies, especially smaller ones, will not be able or willing to invest in cleaner technologies. Writing at Vox, Ralph De Haas, Ralf Martin, Mirabelle Muûls and Helena Schweiger explore how organisational constraints, such as credit constraints and weak green management, can hold back the green transition of firms in less-developed economies.

    The findings also reveal how financial crises can slow down the decarbonisation of economic production and caution against excessive optimism about the potential green benefits of the current economic slowdown, which – like any recession – has led to temporary reductions in emissions.


    ECONOMIC PREPARATION FOR THE NEXT PANDEMIC

    Peter A.G. van Bergeijk                    
    18 March 2021

    The COVID-19 pandemic is the first time in history that closing entire economies has been used as a medical tool, simultaneously and worldwide. Writing at Vox, Peter van Bergeijk argues that such ‘pandonomics’ cannot be repeated during future pandemics that are sure to come – the costs are too heavy.

    The study shows that since lockdowns are very costly, future economic non-pharmaceutical interventions need to be designed more intelligently, helping the economy to restructure and support the transition from a basically ignorant and domestically oriented society into a pandemic-aware one.


    INEQUALITY BENCHMARK INCOMES: A neglected tool for analysing income distributions

    Laurence Roope                   
    18 March 2021

    Nearly all income inequality measures are associated with a benchmark income or position, above which income gains increase inequality, and below which income gains decrease inequality. Looking at ten contrasting countries, a study by Laurence Roope finds that the benchmark incomes associated with the Gini coefficient ranged from the 62nd percentile to the 85th percentile.

    Knowledge of benchmark incomes could be used to predict the impact on inequality of subsidies to incomes in particular parts of the distribution, or to identify the richest person for whom it might be deemed fair to subsidise income financed by taxation and the poorest person for whom it is just and fair not to subsidise income.


    GLOBAL PRICING OF CARBON-TRANSITION RISK

    Patrick Bolton, Marcin Kacperczyk                    
    24 March 2021

    Do companies with different carbon emissions have different stock returns? A study by Patrick Bolton and Marcin Kacperczyk shows that the total level of a company’s CO2 emissions and the year-by-year growth in emissions significantly affect its stock returns in most geographic areas of the world. The increasing cost of equity for companies with higher emissions can be a form of carbon pricing by investors seeking compensation for carbon-transition risk.


    WHY ARE PUBLIC CONTRACTS SO OFTEN RENEGOTIATED?

    Jean Beuve, Marian W. Moszoro, Pablo T. Spiller                    
    23 March 2021

    The frequent renegotiation of public contracts is variously attributed to collusion between officials and bidders, the desire to circumvent budgetary rules, and other factors. Writing at Vox, Jean Beuve, Marian Moszoro and Pablo Spiller challenges the industrial organisation view of public contract renegotiation, showing that frequent renegotiations can be understood as a consequence of the non-remediable, rigid nature of contracts rather than an inherent consequence of opportunistic behaviour.



    THE EXTERNAL EFFECTS OF LOCAL LOCKDOWNS: Evidence from the United States

    Gabriele Guaitoli and Todor Tochev interviewed by Tim Phillips, 23 March 2021

    The business restrictions introduced during the Covid-19 pandemic greatly affected the labour market. However, quantifying their costs is not trivial as local policies affect neighbouring areas through spillovers. Gabriele Guaitoli and Todor Tochev of Warwick University tell Tim Phillips about their work which exploits the U.S. local variation in restrictions and commuting, to estimate the causal direct and spillover impacts of lockdowns. Spillovers alone account for 10-15% of U.S. job losses.



    DO LOOKS MATTER IN ECONOMICS?

    Galina Hale interviewed by Tim Phillips, 19 March 2021

    Academic scholars' success may depend somewhat on their looks, new research shows. More attractive individuals are found to be more likely to get jobs at more prestigious institutions as many as 15 years after their graduation. While good looking economists also tend to have a higher research output. In this Vox Podcast, Galina Hale tells Tim Phillips about surprising new research that challenges our assumptions about how departments rate and recruit candidates.

    CEPR Discussion Paper, DP15893 Do Looks Matter for an Academic Career in Economics? by Galina B Hale, Tali Regev, Yona Rubinstein, can be read here.