This week from CEPR: May 06

Thursday, May 6, 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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    Who doesn’t want to be vaccinated? Determinants of vaccine hesitancy during COVID-19
    Era Dabla-Norris, Hibah Khan, Frederico Lima, and Alexandre Sollaci  
    Issue 77 Covid Economics | 30 April 2021

    While there has been steady progress towards resolving global vaccine supply constraints in recent months, vaccine hesitancy still poses serious challenges to achieving herd immunity. A new study by Era Dabla-Norris, Hibah Khan, Frederico Lima, and Alexandre Sollaci in CEPR’s Covid Economics Journal uses survey data for 17 countries between November 2020 and April 2021 to assess the drivers and implications of COVID-19 vaccine demand, and what aspects should be prioritised when designing policies to tackle hesitancy. Among the findings: 

    • Across the entire sample of over 114,000 observations, only 61% of respondents agree or strongly agree that they would take the COVID-19 vaccine if available to them.
    • Reasons for low vaccine uptake are typically centred on concerns about their safety, potential side effects, and efficacy, frequently fuelled by misinformation or lack of trust in government and health systems.
    • Vaccination can also be a victim of its own success, as the benefits of widespread vaccination become less salient when disease incidence has been dramatically reduced.
    • Hesitancy can increase COVID-19 infections and deaths significantly if it slows down vaccine rollouts, but has a much smaller impact if all willing adults can be immunised rapidly.
    • Older people, who have the largest morbidity and mortality risks linked to COVID-19, report a much higher willingness to be vaccinated than younger cohorts.
    • Women, especially working-age, are less likely to want to be vaccinated than men.
    • Vaccine demand is linked to how information is shared with peers, such as friends and family.

    These results suggest that even if certain countries or regions achieve herd immunity through vaccination, neighbouring countries or regions may not, which could prolong the pandemic. Public health policies and communication targeted at informing the public about vaccine safety and effectiveness are key to containing vaccine hesitancy. 

    • FAILING YOUNG AND TEMPORARY WORKERS: The impact of Covid-19 on the Portuguese labour market  

    FAILING YOUNG AND TEMPORARY WORKERS: The impact of Covid-19 on a dual labour market
    Carolina Nunes, Bruno P. Carvalho, João Pereira dos Santos, Susana Peralta and José Tavares     
    Issue 77 Covid Economics | 30 April 2021

    A new paper by Carolina Nunes, Bruno P. Carvalho, João Pereira dos Santos, Susana Peralta and José Tavares in CEPR’s Covid Economics analyses the impact of the pandemic crisis in a dual labour market, using monthly data covering the universe of individuals registered as unemployed in 278 Portuguese municipalities, between March and August 2020. Among the findings: 

    • There was a large causal impact of the pandemic of up to 40 percentage points increases in year-on-year growth rates of the monthly stock of unemployed.  
    • Younger workers, below the age of 35, are between 20% and 25% more likely to be unemployed than those older than 55. 
    • Middle educated individuals are at least 15% more likely to be unemployed when compared to the highly educated ones. 
    • There are no differences across genders for transitions into unemployment, but women have lower job placements than men. 
    • The transitions into unemployment were driven by dismissals and termination of temporary contracts.
    • The findings document a strong decrease in transitions from inactivity into unemployment, meaning that inactive individuals were discouraged from seeking a job. 
    • The impact of Covid-19 on total unemployment is higher in municipalities with a higher share of temporary workers.
    • The effects are exacerbated by the duality of the labour market: an increase of one standard deviation in the municipal share of temporary contracts causes a rise of 11.6% in the number of unemployment registries and magnifies the socio-demographic asymmetries. 

    These results suggest that furlough schemes do not insure some segments of the labour market against the negative shock of the pandemic crisis.

    • Learning loss during COVID-19: An early systematic review  

    Learning loss during COVID-19: An early systematic review
    Robin Donnelly and Harry Anthony Patrinos     
    Issue 77 Covid Economics | 30 April 2021

    The COVID-19 pandemic has caused significant disruption to education systems around the world. At its peak, UNESCO (2020) reported that nearly 1.6 billion learners in more than 190 countries, or 94% of the world’s student population, were impacted. New research shows the impact that this has had on student learning progress and, in particular, if learning loss has been experienced.

    A new paper by Robin Donnelly and Harry Anthony Patrinos in CEPR’s Covid Economics conduct a thorough analysis of recorded learning loss evidence documented between March 2020 and March 2021. The study conducts a systematic review, which consolidates available data and documents what has currently been reported in the literature. Among the findings: 

    • Seven (out of eight studies identified) found evidence of student learning loss amongst at least some of the participants, 
    • One of the seven also found instances of learning gains in a particular subgroup. 
    • The remaining study found increased learning gains in their participants. 
    • Four of the studies observed increases in inequality where certain demographics of students experienced learning losses more significant than others.


    Michele Andreolli, Paolo Surico                
    29 April 2021

    A study by Michele Andreolli and Paolo Surico uses survey evidence from Italy to show that economic stimulus payments of smaller size and targeted to a larger share of disadvantaged families would provide a stronger boost to aggregate consumption than a larger transfer paid to a smaller share of poorer households.

    The research finds that while debt-financed interventions are associated with the largest aggregate impact, a fiscal policy that redistributes resources from the top to the bottom of the income distribution would deliver an economically significant stimulus to the aggregate economy at no additional cost for public finances.  



    John Bluedorn, Francesca Caselli, Niels-Jakob Hansen, Ippei Shibata, Mariana Tavares                          
    30 April 2021

    A study by IMF economists shows that in two-thirds of 38 advanced and emerging market countries, women’s employment rates declined more than men’s. The results show that the differences were short-lived (a quarter or two) – and strongly correlated to specific sectors of the economy.


    Floriana Borino, Eric Carlson, Valentina Rollo, Olga Solleder                      
    30 April 2021

    Using a novel dataset comprising 4,433 enterprises across 133 countries, a study by Floriana Borino, Eric Carlson, Valentina Rollo and Olga Solleder shows that, despite being more strongly affected by the Covid-19 crisis, firms engaged in international trade have taken more resilient actions than firms that only operate domestically. These results underscore the importance of global connectedness and international trade for promoting resilience to economic shocks – turning inwards is unlikely to remove the risk of shocks from suppliers and buyers.  


    Sreevidya Ayyar, Uta Bolt, Eric French, Jamie Hentall MacCuish, Cormac O’Dea                       
    05 May 2021

    The children of rich families tend to go to better quality schools, have higher cognitive skills, and complete more years of schooling. A study by Eric French and colleagues exploits unique data from the National Child Development study to determine these early childhood factors go on to have long-run impacts on an individual’s lifetime earnings, perpetuating a cycle of wealth. These results suggest that policies that equalise investments, such as improving school quality, could promote income mobility.

    CHINA AND THE WTO: How can they work together better?

    Petros C. Mavroidis, André Sapir                          
    30 April 2021

    The ability of the WTO to shape the way China conducts its trade policy has been severely limited, and most attempts to leverage multilateral pressure have so far failed. Writing at Vox, Petros Mavroidis and André Sapir explain how the relationship could be reformed and improved going forward. The authors highlight the need for:

    • Clearer guidelines on state-owned enterprises. 
    • New rules surrounding the transfer of technology between signatories.

    This is the final column in a three-part series on China and the WTO. Read the first two columns here and here.


    Pierre Chaigneau, Alex Edmans, Daniel Gottlieb                    
    04 May 2021


    Executive pay is increasingly based on performance measures other than stock price – from financial metrics such as earnings and sales, to sustainability metrics such as emissions and safety. The use of performance-based vesting may seem like common sense, but it is often introduced in an ad hoc manner that does not allow for rigorous analysis or accountability.

    Writing at Vox, Pierre Chaigneau, Alex Edmans and Daniel Gottlie question whether and under what conditions performance-based vesting is appropriate, and provides a framework for understanding how to incorporate performance conditions into CEO contracts. 


    Megha Patnaik, Andrea Lamorgese, Andrea Linarello, Fabiano Schivardi                    
    01 May 2021

    In response to COVID-19, firms had to adapt to nationwide lockdowns and social distancing measures with little to no prior experience. A study by Megha Patnaik, Andrea Lamorgese, Andrea Linarello and Fabiano Schivardi uses evidence from Italy to demonstrate the importance of the role of management in firms’ responses to the pandemic in Italy.

    The findings reveal that firms with structured management practices experienced lower declines in performance during the post-lockdown period. These firms were more likely to adopt labour-related strategies in response to the lockdown, including transitions to remote work.  


    Antonio Fatás                         
    03 May 2021

    There is growing interest by central banks on the launch of digital currencies accessible to everyone. The main goal is to produce a more resilient, efficient and inclusive payment system.

    Writing at Vox, Antonio Fatás argues that central bank digital currency (CBDC) alone will not achieve those goals unless central banks are willing to engage in all the steps of the payment system or complement their digital currency with a broad set of regulatory changes to ensure competition and interoperability of payments.


    Hans‐Helmut Kotz, Jan Mischke, Sven Smit                            
    03 May 2021

    The weak productivity growth that followed the global financial crisis can be averted if private and public sectors act together to strengthen demand and diffuse supply-side restructuring to all firms, finds new research by Hans‐Helmut Kotz, Jan Mischke and Sven Smit. The authors use evidence from eight economic sectors to lay out the key conditions for sustained recovery from the Covid-19 crisis.


    Söhnke Bartram, Kewei Hou, Sehoon Kim                
    03 May 2021

    How effective are climate change policies, and what are the important considerations to ensure they are effective? A study by Söhnke Bartram, Kewei Hou and Sehoon Kim shows that firms respond to climate change policies with regulatory arbitrage so that localised policies aimed at mitigating climate risk can have unintended consequences.

    Studying the impact of the California cap-and-trade programme, it shows that firms without financial constraints do not reduce their emissions in response to the policy. In contrast, financially constrained firms shift emissions and output from California to other states. In fact, contrary to the policy objective, these firms increase their total emissions after the cap-and-trade rule.

    THE REVERSAL INTEREST RATE: A new motive for countercyclical macroprudential policy

    Matthieu Darracq Pariès, Christoffer Kok, Matthias Rottner                   
    02 May 2021

    The prolonged period of negative interest rates in advanced economies has raised concerns that further monetary policy accommodation could produce contractionary effects. Using a non-linear macroeconomic model fitted to the euro area economy, a study by Matthieu Darracq Pariès, Christoffer Kok and Matthias Rottner demonstrates that the risk of hitting the ‘reversal interest rate’ depends on the capitalisation of the banking sector.

    Consequently, the possibility of the reversal rate creates a novel motive for macroprudential policy, such as a countercyclical capital buffer. The new motive emphasises the strategic complementarities between monetary and macroprudential policy.

    BANK RUNS AND CENTRAL BANK DIGITAL CURRENCY: Evidence from the French Great Depression of 1930-1931

    Eric Monnet, Angelo Riva, Stefano Ungaro                     
    01 May 2021

    One of the concerns in the debate on central bank digital currency is whether the ability for depositors to hold an account at the central bank could trigger a run on the banking system. Writing at Vox, Eric Monnet, Angelo Riva and Stefano Ungaro look back to the French Great Depression of 1930-1931, when savers had a safe alternative to banks in the form of government-backed savings institutions, and shows that the existence of safe deposits other than banks can play a substantial role in triggering bank runs. The study also provides insights into two elements of the current discussion: ceilings on safe deposits and interest rates.

    CURRENCY ARRANGEMENTS: Jeffrey Frankel on the ideas of a generation of great international economists who recently passed away

    Jeffrey Frankel                   
    02 May 2021

    Richard Cooper, Robert Mundell, and John Williamson made important contributions on a variety of topics in international economics throughout their careers, particularly in terms of how we think about currency arrangements. Writing at Vox, Jeffrey Frankel reviews the work of all three, tracing their ideas and drawing lessons for policymakers today.


    John O'Hagan                      
    04 May 2021

    A study by John O'Hagan finds that young economists who have been awarded prestigious prizes come predominantly from a small number of universities – in particular, a few based in the greater Boston area, London and Paris. The presence of prize-winning young economists among faculty can be seen as a marker of a university’s status in the field of economics, particularly when awards are given on the basis of researchers being published in ‘top’ journals. 


    Chad Bown interviewed by Tim Phillips, 30 April 2021

    If you had trouble in the last four years keeping up with what was happening in the trade war, you're not alone. Chad Bown tell Tim Phillips about his new paper that explains what happened, when, what it meant - and what happens next.

    IN VACCINES WE TRUST? The impact of the CIA vaccine ruse in Pakistan

    Monica Martinez-Bravo interviewed by Tim Phillips, 04 May 2021

    Mass vaccination programmes, and the problems of trust surrounding them, have been brought sharply into focus by COVID-19. In July 2011, the Pakistani public learnt that the CIA had used a vaccination campaign as cover to capture Osama Bin Laden.

    The Taliban leveraged on this information and launched an anti-vaccine propaganda campaign to discredit vaccines and vaccination workers. Monica Martinez-Bravo tells Tim Phillips about her research into the long-term effects of this episode on vaccination behaviour in Pakistan.