This week from CEPR: May 28

Thursday, May 28, 2020

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 GENDER DIVISION OF CHILDCARE DURING THE COVID-19 PANDEMIC AND LONG-TERM EMPLOYMENT IMPLICATIONS FOR YOUNG PARENTS   

    BABY STEPS: The gender division of childcare during the COVID19 pandemic
    Almudena Sevilla, Sarah Smith                   
    CEPR DP No. 14804  | May 2020 

    UK families with young children have been doing the equivalent of a working week in childcare during lockdown, with women doing the greater share. But the allocation of childcare duties has become more equal in households where men are working from home and where they have been furloughed or lost their job. There are also likely to be significant, long-term negative employment effects for parents of young children – and particularly for women.

    These are among the findings of a new CEPR study by Almudena Sevilla and Sarah Smith, who study real-time data on daily lives in the UK to document the gender childcare gap. Among the findings: 

    • For families with young children, lockdown has meant providing many additional hours of childcare – equivalent to a full-time, working week.
    • In many cases, these hours have had to be provided in addition to working at work or from home.
    • Women have done more of this childcare than men (roughly ten hours a week more).
    • Irrespective of their employment status, women working from home have done more childcare than men on furlough or who have lost their job.
    • The burden of additional childcare may have damaging long-term consequences for the career prospects of parents with young children – and particularly for women.
    • Overall, the gender childcare gap (the difference between the share of childcare done by women and the share done by men) for the additional, post-Covid-19 hours is smaller than that for the allocation of pre-Covid-19 childcare. 
    • But the amount of additional childcare provided by men is very sensitive to their employment – the allocation has become more equal in households where men are working from home and where they have been furloughed or lost their job. 

    There are likely to be long-term implications from these changes – potentially negative for the careers of parents of young children; but also, more positively for some families, for sharing the burden of childcare more equally in the future.


    • THE GILETS JAUNES: Offline and online    

    THE GILETS JAUNES: Offline and online
    Pierre Boyer, Thomas Delemotte, Germain Gauthier, Vincent Rollet, Benoit Schmutz           
    CEPR DP No. 14780 | May 2020

    A new CEPR study by Pierre Boyer and colleagues sheds new light on the ‘gilets jaunes’ movement by documenting the dynamics and interactions between its offline and o¬nline manifestations, and by assessing its impact on electoral results. Among the findings:  

    • Blockades were planned online and later reinforced online activism. 
    • Facebook gradually became the main place of mobilisation for the gilets jaunes. 
    • Discussions radicalised as the movement subsided in the streets. 
    • Online discussions evolved from local concerns to widespread critique. 
    • There is evidence of a backlash impact on electoral results: blockades boosted the performance of the government party in the 2019 European Parliament election, especially in more government-friendly constituencies.
    • But this effect was largely mitigated, if not reversed, in places where blockades contributed to further nurturing of online dissent. 

    • SOCIOECONOMIC DETERMINANTS OF COVID-19 INFECTIONS AND MORTALITY: Evidence from England and Wales   

    SOCIOECONOMIC DETERMINANTS OF COVID-19 INFECTIONS AND MORTALITY: Evidence from England and Wales
    Filipa Sá          
    CEPR DP No. 14781 | May 2020

    Areas in the UK that have larger households, worse levels of self-reported health and a larger fraction of people using public transport have more Covid-19 infections per 100,000 people. For mortality, household size and use of public transport are less important, but areas with an older population, a larger share of black or Asian population and worse levels of self-reported health have more Covid-19 deaths per 100,000 people. 

    These are the findings of a new CEPR study by Filipa Sá, who examines how the number of confirmed Covid-19 cases and the number of deaths with Covid-19 per 100,000 people is related with the socioeconomic characteristics of local areas in England and Wales. The study finds a clear relationship with age, ethnicity and self-reported health.

    To prevent the spread of infection and reduce mortality, policy-makers should introduce measures to improve housing conditions and improve the health of the population. As many countries now begin to relax lockdown measures, they should also pay particular attention to reducing the risk of infection in public transport.




    EUROPE IN THE TIME OF COVID-19: A new crash test and a new opportunity

    Agnès Bénassy-Quéré, Beatrice Weder di Mauro                
    26 May 2020

    After a period of hesitation, governments in Europe have reacted forcefully to the Covid-19 pandemic with various strategies combining social distancing, testing/quarantining, and lockdowns. During a pandemic, however, coordination is key and repairing corporate balance sheets and the single market, as well as economic recovery, constitute common goods. 

    This column takes stock of the progress on addressing the crisis on the three axes of European-level support – monetary, banking and fiscal policy. The EU recovery plan that is taking shape looks promising and could represent a significant sign of European solidarity and unity. 


    IN MEMORY OF ALBERTO ALESINA

    Francesco Giavazzi, Guido Tabellini, Beatrice Weder di Mauro              
    26 May 2020

    Alberto Alesina was one of the foundational pillars of political economics over many decades, and one of the most creative economists of his time. In this column, three friends of Alberto pay tribute to a man who was driven by a relentless curiosity and was a mentor and source of inspiration for innumerable students and colleagues.


    THE COVID-19 CONTAINMENT SEEN THROUGH FRENCH CONSUMER TRANSACTION DATA: Expenditures, mobility and online substitution

    David Bounie, Youssouf Camara, John W. Galbraith              
    26 May 2020

    Consumers' use of online shopping has mitigated the overall impact of the Covid-19 shock, according to a new study by David Bounie and colleagues using billions of anonymised French bank card transactions from before and during the Covid-19 epidemic. 

    The authors examine changes in consumer mobility, anticipatory behaviour in response to announced restrictions, and the contrasts between the responses of online and traditional point-of-sale consumption expenditures to the shock. The results show that for categories in which online purchase and physical delivery is possible, online expenditures have often increased, in some cases very substantially, suggesting substitution in the direction of online purchases.


    TRADE AND TRAVEL IN THE TIME OF EPIDEMICS 

    Hans-Joachim Voth                
    26 May 2020

    In light of the Covid crisis, how much mobility can, and should a globalised world have? A study by Hans-Joachim Voth, taken from a recent VoxEU eBook, breaks the question down into two elements: Is a massive restriction of mobility desirable? And is it feasible at all? 

    The study finds that the free exchange of goods and capital does not have to be restricted; only very few diseases are transmitted by contaminated goods. On the other hand, while the free movement of people also contributes to the advantages of globalisation, it is far less important for production. Severe restrictions may well be desirable and justifiable, bringing to an end a half-century of ever-increasing individual mobility.

    Download the eBook ‘Economics in the Time of COVID-19’, edited by Richard Baldwin and Beatrice Weder di Mauro, here. 


    MILLIONS OF EUROPEANS COULD NOT ENDURE A TWO-MONTH INCOME SHOCK WITHOUT GENEROUS, TARGETED, GOVERNMENT POLICIES

    Catarina Midões                 
    25 May 2020

    How many Europeans can afford basic necessities for two months without a privately earned income? A new study by Catarina Midões finds that nearly 100 million people in 21 EU countries do not have enough savings for two months of food, utilities, and rent or mortgage payments. Those born outside of the EU are especially vulnerable. Targeted government support is essential; rent and mortgage suspension can be effective tools. Without targeted policies, these pockets of vulnerability will remain.

     


    THE ROLE OF GLOBAL SUPPLY CHAINS IN THE COVID-19 PANDEMIC AND BEYOND

    Barthélémy Bonadio, Zhen Huo, Andrei Levchenko, Nitya Pandalai-Nayar                
    25 May 2020

    Global supply chains clearly transmit the economic effects of the lockdowns across borders. The transmission of foreign lockdowns accounted for one-third of the total Covid-19-related GDP contractions. But renationalisation of global supply chains is unlikely to help to insulate economies from future pandemic-driven lockdowns. The reason is that eliminating reliance on foreign inputs would increase the reliance on domestic inputs. Since a pandemic-related lockdown would also affect domestic input suppliers, there is generally no resilience benefit from renationalising international supply chains.

    These are the conclusions of a new study by Andrei Levchenko and colleagues, who quantify the impacts of lockdown disruptions to manufacturing and shipping, across countries through global supply chains.


    COVID-19 AND FOOD PROTECTIONISM: An impending food crisis? 

    Alvaro Espitia, Nadia Rocha, Michele Ruta           
    24 May 2020

    Although initial conditions in global food markets in the face of Covid-19 pandemic are good, disruptions across countries most affected could reduce global supplies of key staples. 

    Writing at Vox, World Bank economists show that escalating export restrictions would multiply the initial shock by a factor of three, with world food prices rising by up to 18% on average. Import food dependent countries, which are in large majority developing and least developed countries, would be most affected. Uncooperative trade policies could risk turning a health crisis into a food crisis.


    CORONAVIRUS CRISIS BAILOUTS: Why they probably won’t work politically

    Jeffrey Chwieroth, Andrew Walter                
    23 May 2020

    Although necessary, many of the economic policy responses to the Covid-19 crisis may end up damaging political incumbents in the medium and long term. 

    Writing at Vox, Jeffrey Chwieroth and Andrew Walter present evidence suggesting that as the pandemic exacerbates existing divisions within societies, the political costs predicted implies that only a minority of the most skilled political leaders are likely to survive this crisis. Voters expect great things from their leaders in deep crises, yet the potential for great disappointment arises from the inevitable perceived inequities that will follow from the coronavirus crisis bailouts


    CORPORATE SECTOR VULNERABILITIES DURING THE COVID-19 OUTBREAK: Assessment and policy responses

    Lilas Demmou, Guido Franco, Sara Calligaris, Dennis Dlugosch              
    23 May 2020

    Without policy actions, around 30% of European firms would face liquidity shortages after two months of confinement measures. A decisive public intervention, and especially the support for wage payments, is crucial to avoid the temporary shock implied by the Covid-19 crisis permanently scarring the corporate landscape.

    These are the central conclusions of a new study by OECD economists, which examines the financial vulnerability of firms associated with confinement measures, and discusses the immediate steps that governments can take to reduce the risks of such crisis. 


    THE LAST THROW? An analysis of the ‘hot hand’ in basketball field goal and free throw shooting

    Robert Lantis, Erik Nesson          
    23 May 2020

    The idea that basketball players can find themselves with a ‘hot hand’ – a streak in which they seem magically to make shot after shot – resonates with sports reporters and spectators alike. Writing at Vox, Robert Lantis and Erik Nesson investigate whether the idea of the ‘hot hand’ holds any basis in fact. Analysing 12 seasons of data from the National Basketball Association, including over 500,0000 free throws and two million field goals, the authors conclude that the basketball ‘hot hand’ is largely illusory.


    TRADE CONFLICT IN THE AGE OF COVID-19: Policies that seek to hinder supply chain trade could prove costly

    Richard Baldwin, Rebecca Freeman   
    22 May 2020

    International trade has helped many nations get vital medical supplies during this pandemic, yet a number of new, protectionist initiatives have been taken or discussed that could disrupt global value chains. A study by Richard Baldwin and Rebecca Freeman shows that national manufacturing sectors all across the globe are highly interdependent, that these connections have risen since the 2008/09 crisis, and that China is pivotal in the network of dependencies. Given this, policies that seek to hinder supply chain trade could prove costly. 


    THE EURO AREA IN THE AGE OF COVID-19

    Stephen Cecchetti, Kim Schoenholtz                
    22 May 2020


     

    Writing at Vox, Stephen Cecchetti and Kim Schoenholtz review the progress towards the completion of the European monetary union and highlight the remaining gaps. They argue that the euro area remains behind the United States in terms of risk sharing, banking and capital markets union, and labour mobility. In addition, there is no common fiscal policy to provide support in response to regional shocks. The Covid-19 crisis is a severe test for the euro area, which should be met with renewed calls for solidarity and integration.


    THE VANISHING INTEREST INCOME OF CHINESE BANKS AS AN INDICATOR OF LOAN QUALITY PROBLEMS

    Karlo Kauko              
    22 May 2020

    Many observers have had a sceptical attitude towards Chinese banks’ official disclosures of non-performing loans (NPLs). A loan should be classified non-performing if the customer stops servicing the loan. Therefore, hidden problems in the loan portfolio would manifest themselves as a suspiciously low interest revenue. 

    Using this simple idea, research by Karlo Kauko sheds light on the likely distribution of hidden non-performing loans in Chinese banks. The study finds that loan quality problems became more commonplace in 2016. Surprisingly, hidden NPLs seem more common in strongly capitalised banks and large banks, but also in banks that rely on interbank funding.


    STRATEGIES FOR COVID-19: The option value of waiting

    Luís Santos-Pinto, José Mata            
    22 May 2020

    Writing at Vox, Luís Santos-Pinto and José Mata discuss key uncertainties associated with Covid-19, and argue that there are substantial benefits in keeping the lockdown in place in order first to learn more about Covid-19 and then decide on the best strategy. This logic is based on option theory, which shows that when a strategy has irreversible consequences and there are important uncertainties, there is substantial value in waiting.


    GENDER DISCRIMINATION IN POLITICS: Evidence from a natural experiment in French local elections

    Jean Benoit Eymeoud, Paul Vertier             
    22 May 2020

    A new study by Jean Benoit Eymeoud and Paul Vertier examines the voting outcomes of French departmental elections in 2015, which required candidates to run in mixed-gender pairs, and isolates discriminatory behaviour of right-wing voters. Right-wing parties lost votes when the woman’s name appeared first on the ballot. But the discriminatory effect disappears where information about the candidates is available on the ballot.

    While decades of research have investigated the reasons behind the underrepresentation of women in politics, uncovering discriminatory behaviours of voters remains a difficult task. 


    REAL-TIME ECONOMIC ANALYSIS OF THE COVID-19 CRISIS: Lessons from Finland

    Helsinki Graduate School of Economics Situation Room              
    21 May 2020

    Effective management of the Covid-19 crisis requires real data in real time, often drawn from multiple sources. This column describes how researchers in Finland have created a remote-access ‘Situation Room’ that allows real-time analysis of the Finnish economy, both for the government and for the wider public. The results from the study provide useful insights for policy-makers in Finland and beyond.


    COVID-19’S REALITY SHOCK FOR EMERGING ECONOMIES: Solutions to deal with dependence on external funding

    Alicia García-Herrero, Elina Ribakova                
    21 May 2020

    Covid-19 is by far the biggest challenge that policy-makers in emerging economies have had to deal with in recent history, bringing into focus the dependence of emerging market economies on external financing. 

    Writing at Vox, Alicia García-Herrero and Elina Ribakova analyse the factors that put emerging economies at an increased risk of a sudden reduction in dollar liquidity as a consequence of the Covid-19 outbreak. Based on this analysis, they review the key tools at the disposal of emerging economies, the Fed, and the IMF to address this problem. It concludes by offering some policy recommendations on the pecking order that could be followed potentially to shield the emerging economies from the dollar shortage problems related to Covid-19


    DISCRIMINATION IN WORK CONDITIONS: The case of sexual harassment

    Johanna Rickne, Olle Folke                
    21 May 2020

    The #MeToo movement put a spotlight on a severe and highly prevalent workplace problem: sexual harassment. Using data from Sweden, Johanna Rickne and Olle Folke argue that economists should treat sexual harassment as gender discrimination in work conditions. Both men and women are subject to this discrimination when they are part of gender minorities in occupations or workplaces. These minorities suffer a substantial ‘disutility’ for which they are not compensated by employers. 

    The systematic mistreatment of gender minorities will shape their trade-offs as they chose where to work. Women face added costs from working in male-dominated contexts, which usually offer higher wages. Men face costs when they chose women-dominated occupations and workplaces, and where they help to break the sex segregation of the labour market.


    FAKE NEWS! Fact-checking reduces the propagation of false news in social networks

    Emeric Henry, Ekaterina Zhuravskaya, Sergei Guriev                 
    21 May 2020

    The most recent manifestations of populism owe a portion of their rise to social media and the unfettered spread of false and misleading narratives or, as they are sometimes called, ‘alternative facts’. This column makes use of an online experiment conducted among Facebook users in France during the 2019 European Parliament elections to show that fact-checking can staunch the flow of false information, as can the imposition of small costs such as requiring an additional click to confirm a user’s willingness to share news. 

    ACCOUNTING FOR GLOBAL COVID-19 DIFFUSION PATTERNS FOR JANUARY TO APRIL 2020

    Yothin Jinjarak, Rashad Ahmed, Sameer Nair-Desai, Weining Xin, Joshua Aizenman
    14 May 2020

    More stringent lockdown policies were associated with significantly lower mortality growth rates, which took longer to peak in countries considered more democratically free and those further from the equator. But ‘better or worse performance’ of a country in the first phase of the pandemic does not guarantee similar future outcomes.

    Flattening the mortality and infection curves may shift mortality and painful adjustment forwards. Premature opening of the economy without proper testing, contact-tracing and selective quarantines of vulnerable or affected segments of the population may induce future acceleration of the pandemic.

    These are the central findings of a new study by Yothin Jinjarak and colleagues, which examines the factors engendering the empirical shape of mortality curves from the onset of the pandemic to local peaks, with a focus on how policy intensity interacted with structural variables. 


    CORONAVIRUS EXPECTED TO REDUCE UK FIRMS’ SALES BY OVER 40% IN Q2

    Nicholas Bloom, Philip Bunn, Scarlet Chen, Paul Mizen, Gregory Thwaites, Pawel Smietanka                  
    20 May 2020

    Writing at Vox, Nicholas Bloom and colleagues present results from a survey of chief financial officers conducted in mid-April 2020, which shows that businesses in the UK expected the spread of Covid-19 to reduce sales by just over 40%, relative to what would have otherwise happened. Large impacts on employment and investment were also expected. The impacts were expected to be concentrated in low productivity, low wage sectors. Failures in supply chains are likely to be a factor holding back output too. There was a further large increase in uncertainty in April.


    POST-COVID: Dealing with the emerging market debt overhang

    Kevin Daly, Tadas Gedminas, Clemens Grafe                  
    20 May 2020

    Emerging market economies will face painful fiscal adjustments in the aftermath of the Covid-19 crisis if they are to place government debt onto a more sustainable path. Developed economies also face this prospect but are more likely to be afforded the time to make these adjustments, and to do so while maintaining low borrowing costs. By comparison, emerging market economies are more likely to struggle to fund their increased borrowing needs at low rates, especially in a world where all governments are attempting to borrow much larger sums.

    These are the central conclusions of a new study by Goldman Sachs economists, who measure the impact of the crisis on government deficits and debt levels in emerging markets, and the fiscal adjustments that are likely to be required in the aftermath of the crisis. The findings suggest that median government debt will rise by around ten percentage points of GDP and that most emerging economies will face painful post-crisis adjustments. The results also imply a strikingly wide range of outcomes across emerging economies around the world.


    RE-EVALUATING THE BENEFITS OF NON-PHARMACEUTICAL INTERVENTIONS DURING THE 1918 PANDEMIC

    Guillaume Chapelle                  
    20 May 2020

    Non-pharmaceutical interventions such as school closures and social distancing were implemented in the United States to counter the spread of the 1918 influenza pandemic. Writing at Vox, Guillaume Chapelle explores the effect of these interventions on economic activity and death rates in US cities during and after 1918. 

    The policies lowered the fatality rate during the peak of the pandemic but are associated with a significant rise in the death rate in subsequent years, possibly through reducing herd immunity. Their impact, positive or negative, on the growth of the manufacturing sector in US cities remains an open question.


    COVID-19 AND THE FUTURE OF DEMOCRACY

    Carl Benedikt Frey, Giorgio Presidente, Chinchih Chen                  
    20 May 2020

    A new study by Carl Benedikt Frey and colleagues analyses the stringency and effectiveness of various countries’ policy responses to Covid-19. The results show that while autocratic regimes tend to take more stringent policy measures, such measures tend to be less effective in reducing mobility in autocratic countries compared to democracies. Comparing countries with a collectivist versus an individualist culture shows that the former have been more successful in taking measures to reduce mobility.



    COVID-19: A two-phase solution

    Lee Buchheit        

    There are two phases needed in the response to help developing countries during the Covid-9 pandemic, the first is the need to get money into the hands of these countries, the second is the need for a more durable debt restructuring. Although China has joined with the other G20 countries in calling for a debt standstill, whether it will participate as a member of a coordinated form of that restructuring is an as-yet unresolved issue.

    Lee Buchheit (University of Edinburgh Law School) speaking at CEPR/LSE IGA/SPP webinar on: Born Out of Necessity: A Debt Standstill for COVID-19, 7 May 2020.


    COVID-19: Debt relief omelette

    Patrick Bolton          

    Getting a debt relief organised without credit ratings downgrades is like making an omelette without breaking any eggs, says Patrick Bolton (Columbia Business School & CEPR). Even without a debt standstill, rating downgrades are to be expected, so they should not be a deciding factor in negotiations.

    Recorded during a CEPR / LSE IGA / SPP webinar on: Born Out of Necessity: A Debt Standstill for COVID-19, 7 May 2020



    TECH INDUSTRY MERGERS

    Luís Cabral interviewed by Tim Phillips, 22 May 2020

    Should competition authorities intervene more often in tech mergers? Be careful, Luis Cabral tells Tim Phillips: they risk stifling innovation if they do.