This week from CEPR: October 07

Thursday, October 7, 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


    • TRUST IN SCIENTISTS IS THE KEY DRIVER OF SUPPORT FOR AND COMPLIANCE WITH NON-PHARMACEUTICAL INTERVENTIONS DURING COVID: Panel Evidence from 12 Countries   

    TRUST IN SCIENTISTS IN TIMES OF PANDEMIC: Panel Evidence from 12 Countries
    Yann Algan, Daniel Cohen, Eva Davoine, Martial Foucault, Stefanie Stantcheva
    CEPR Discussion Paper No. 16600 | October 2021 

    Trust in scientists played a specific and critical role for both the support for and compliance with non-pharmaceutical interventions (NPIs) during the COVID-19 pandemic, according to rich new survey evidence from twelve countries (Australia, Austria, Brazil, Canada, France, Germany, Italy, New Zealand, Poland, Sweden, the UK, and the USA). 

    This is the main finding of a new CEPR study by Yann Algan, Daniel Cohen, Eva Davoine, Martial Foucault and Stefanie Stantcheva, which explores the specific impacts of the levels and the changes in different types of trust on attitudes towards NPIs, on the willingness to be vaccinated, and on compliant behavior over time, across individuals and countries during the pandemic. Among the findings: 

    • Trust in scientists is the key driving force behind individual support for and compliance with NPIs, and for favourable attitudes towards vaccination. 
    • The effect of trust in government is more ambiguous and tends to diminish support for and compliance with NPIs in countries where the recommendations from scientists and the government were not aligned. 
      • In countries where the governments spoke out against social distancing and restrictions, such as the USA and Brazil, trust in government has negative effects on support for or compliance with NPIs.
    • Trust in others also has seemingly paradoxical effects: in countries where social trust is high, the support for NPIs is low due to higher expectations that others will voluntary social distance. 
    • Trust levels, and in particular trust in scientists, have changed dramatically for individuals and within countries, with important subsequent effects on compliant behaviour and support for NPIs. 

    These findings point to the challenging but critical need to maintain trust in scientists during a lasting pandemic that strains citizens and governments.

    Figure: Trust in scientists across countries and over time (March to December 2020).

     


    • WOMEN LEGISLATORS SIGNIFICANTLY INCREASE ECONOMIC PERFORMANCE: Evidence from India    

    WOMEN LEGISLATORS AND ECONOMIC PERFORMANCE
    Thushyanthan Baskaran, Sonia Bhalotra, Yogesh Uppal
    CEPR Discussion Paper No. 16605 | October 2021

    Evidence from India shows that there is significantly higher growth in economic activity in constituencies that elect women. Women legislators are also more efficacious, more likely to complete infrastructure projects, are less corrupt and less vulnerable to political opportunism.

    There has been a phenomenal global increase in the proportion of women in politics in the last two decades, but there is no evidence of how this influences economic performance. A new CEPR study by Thushyanthan Baskaran, Sonia Bhalotra and Yogesh Uppal investigates using data on competitive elections to India's 4265 state assemblies, leveraging close elections to isolate causal effects. Among the findings:  

    • There is significantly higher growth in economic activity in constituencies that elect women and no evidence of negative spillovers to neighbouring male-led constituencies, consistent with net growth. 
    • Women legislators in India raise economic performance in their constituencies by 2.3 percentage points per year more than male legislators. 
    • The share of non-farm employment is higher under women than under male legislators by 0.84% points per year.
    • Probing mechanisms, the research also shows that women legislators are more efficacious, more likely to achieve completion of road infrastructure projects, less corrupt and less vulnerable to political opportunism.

    These results suggest that, as economic development progresses, the growth advantage from electing women may narrow but is unlikely to be eliminated.

    Figure: Constituencies in which a female candidate won an assembly constituency seat in state elections between 1992 and 2008.

     


    • FRACTIONAL DOSES OF COVID-19 VACCINES COULD BE THE ANSWER TO GLOBAL SUPPLY SHORTAGES, SUBSTANTIALLY REDUCING INFECTIONS AND DEATHS     

    TESTING FRACTIONAL DOSES OF COVID-19 VACCINES
    Witold Więcek, Amrita Ahuja, Esha Chaudhuri, Michael Kremer, Alexandre Simoes Gomes Junior, Christopher Snyder, Alex Tabarrok, Brandon Tan 
    CEPR Discussion Paper No. 16599 | October 2021

    CEPR Study by Witold Więcek, Amrita Ahuja, Esha Chaudhuri, Michael Kremer, Alexandre Simoes Gomes Junior, Christopher Snyder, Alex Tabarrok and Brandon Tan argues that lowering the dosage of some COVID-19 vaccines could provide significant benefits by expanding supply. 

    Using fractional doses of vaccines has been employed successfully for multiple diseases, including in 2016-2018 when several countries used 1/5-doses of yellow fever vaccine to combat epidemics based on advice from the WHO. The research shows that even if fractional doses are less effective than standard doses, vaccinating more people faster could substantially reduce total infections and deaths. Given the large potential benefits, investing in generating evidence on the efficacy of fractional doses and validating processes for delivery at scale has a high expected return.

    Clinical data on the immunogenicity of lower doses combined with evidence of a high correlation between neutralising antibody response and vaccine efficacy suggests that half- or even quarter-doses of some vaccines could generate high levels of protection, particularly against severe disease and death, while potentially expanding supply by 450 million to 1.55 billion doses per month, based on supply projections for 2021. 

    The costs of further testing alternative doses are much lower than the expected public health and economic benefits. However, commercial incentives to generate evidence on fractional dosing are weak, suggesting that testing may not occur without public investment. Governments could support either experimental or observational evaluations of fractional dosing, for either primary or booster shots. Discussions with researchers and government officials in multiple countries where vaccines are scarce suggest strong interest in these approaches.

    Figure: Efficacy associated with mean neutralization levels for fractional doses



    EUROPEAN PENSION SYSTEMS ARE NEITHER SUSTAINABLE NOR EQUITABLE 

    Armand Fouejieu, Alvar Kangur, Samuel Romero Martinez, Mauricio Soto          
    02 October 2021

    A study by Armand Fouejieu, Alvar Kangur, Samuel Romero Martinez and Mauricio Soto assesses the sustainability, fairness, and intergenerational equity of pension systems in Europe by comparing the pension contributions and benefits over the lifetime of different cohorts. The research shows that: 

    • The average pension system deficit in Europe stands around 2.5% of GDP today and is projected to increase to 4% of GDP in the next three decades.
    • Financing sustained high levels of pension spending in some countries might be difficult without triggering some stress in light of already high public debt levels or eroding potential growth.
    • Reforms legislated in the decade from the onset of the Global Crisis reduced the lifetime benefit-contribution ratio by nearly 25% for younger generations. 
    • However, subsequent policy reversals have partly eroded these gains, suggesting additional reforms are needed.
     

    TRUST IN THE ECB DURING THE PANDEMIC: Evidence from survey data

    Carin van der Cruijsen, Anna Samarina            
    03 October 2021

    A study by Carin van der Cruijsen and Anna Samarina uses a rich new survey dataset to show that trust in the ECB during the Covid-19 pandemic depends on consumers’ financial knowledge and on how severely they are affected by the pandemic, and that this trust and financial knowledge both contribute to better anchoring of consumers’ inflation expectations around the ECB’s inflation target. 

    The research suggests several routes to improve the public’s trust in the ECB, including activities that enhance financial knowledge, tailoring central bank communication in terms of content and targeting it at people with low trust. 


    INTRODUCTION OF THE MINIMUM WAGE IN GERMANY BOOSTED PAY FOR LOW-WAGE WORKERS WITHOUT LOWERING THEIR EMPLOYMENT PROSPECTS 

    Christian Dustmann, Attila Lindner, Uta Schӧnberg, Matthias Umkehrer, Philipp vom Berge                                  
    07 October 2021

    In January 2015, Germany introduced a uniform minimum wage of €8.50. Many economists and media outlets predicted that this would have dire consequences for the German economy and result in substantial job losses. 

    A study by Christian Dustmann, Attila Lindner, Uta Schӧnberg, Matthias Umkehrer and Philipp vom Berge shows that, in fact, the introduction of the minimum wage boosted pay for low-wage workers without lowering their employment prospects. It also prompted a reallocation of staff towards more productive firms. Overall, the minimum wage helped reduce wage inequality while improving the quality of firms operating in the economy.


    SCAPEGOATING OF ETHNIC MINORITIES: Experimental evidence from the discrimination of Roma in Eastern Slovakia

    Michal Bauer, Jana Cahlíková, Julie Chytilová, Gérard Roland, Tomáš Želinský                   27 September 2021

    A study by Michal Bauer, Jana Cahlíková, Julie Chytilová, Gérard Roland and Tomáš Želinský measures how an injustice that affects a member of one’s own group shapes the punishment of an unconnected bystander (or scapegoat). 

    The authors use experimental evidence from Eastern Slovakia, where a large Roma minority regularly suffers from discrimination, to show that members of a majority group will systematically shift punishment onto innocent members of an ethnic minority.


    WORK REQUIREMENTS DO MORE TO REMOVE PEOPLE FROM BENEFITS THAN TO BOLSTER EMPLOYMENT: Evidence from the US Supplemental Nutrition Assistance Program

    Colin Gray, Adam Leive, Elena Prager, Kelsey Pukelis, Mary Zaki                                     
    04 October 2021

    A study by Colin Gray, Adam Leive, Elena Prager, Kelsey Pukelis and Mary Zaki shows that post-recession reinstatement of work requirements for the US Supplemental Nutrition Assistance Program do not appear to have improved economic self-sufficiency, while substantially reducing benefits paid to recipients of this safety net.

    Debates are likely to continue regarding the shape and scope of safety nets. In designing off-ramps from the Covid-19 expansions, policymakers should consider the evidence: work requirements do more to remove people from benefits than to bolster employment.


    RECYCLING REVENUE TO IMPROVE POLITICAL FEASIBILITY OF CARBON PRICING IN THE UK

    Maria Chiara Paoli, Rick van der Ploeg                                
    04 October 2021


     

    Despite climate justice advocates continuing to highlight climate inequities along racial, gender and class dimensions and policymakers’ vague statements in support of a ‘just transition’, there are few concrete plans. 

    A study by Maria Chiara Paoli and Rick van der Ploeg uses microsimulations of household behaviour from UK data to investigate the efficiency and equity impacts of different ways of recycling carbon tax revenue, focusing on both horizontal and vertical equity dimensions, and their implications for political feasibility. 

    The authors find that rebating carbon tax revenues through social security payments renders the policy progressive and benefits the highest share of households in their sample.


    THE CURRENT BAIL-IN DESIGN DOES NOT RESOLVE THE TOO-BIG-TO-FAIL PROBLEM

    J. Doyne Farmer, Charles Goodhart, Alissa Kleinnijenhuis                            
    01 October 2021 

    Since the Great Financial Crisis, bail-in has been introduced as an approach to address too-big-to-fail and contagion risk problems. Writing at Vox, J. Doyne Farmer, Charles Goodhart and Alissa Kleinnijenhuis show that the design parameters that are now generally in use are ‘poor’ and could well add to the extent of contagious losses in the case of major systemic crises or, in some cases, after idiosyncratic, but systemically important bank, failures.

    The research shows that early implementation of a bail-in and stronger bank recapitalisation lead to lower contagion losses. However, current bail-in design seems to be in the region of instability and the political economy of incentives makes reforms unlikely in the near future. 


    DISTRUST VERSUS SPECULATION: The drivers of cryptocurrency investments

    Raphael Auer, David Tercero-Lucas  
    06 October 2021 

    Are cryptocurrency investors motivated by distrust in fiat currencies or regulated finance? A new study by Raphael Auer and David Tercero-Lucas finds that investors show no differences from the general population in their level of security concerns about either cash or commercial banking services. The research also shows that crypto investors tend to be educated and young and to be digital natives. In recent years, a gap in ownership of cryptocurrencies across genders has emerged.



    SUSTAINABLE FINANCE RPN: Pricing carbon risk to get to net zero

    Patrick Bolton interviewed by Tim Phillips 05 October

    Do financial markets penalise firms that emit a lot of carbon, and is this an incentive for them to reduce emissions? Patrick Bolton of Columbia Business School has analysed the financial returns to estimate how carbon risk is priced.



    USING AI TO TARGET AID IN TOGO

    Joshua Blumenstock interviewed by Tim Phillips, 01 October 2021

    There is often an urgent need for humanitarian assistance in low-income countries. But how can it be targeted efficiently and quickly? Joshua Blumenstock tells Tim Phillips how, in Togo, a combination of machine learning and mobile phone data dramatically increased the effectiveness of Covid assistance.

    Read more about the research discussed and download the free discussion paper:
    Aiken, E, Bellue, S, Blumenstock, J, Karlan, D and Udry, C. 2021. 'Machine Learning and Mobile Phone Data Can Improve the Targeting of Humanitarian Assistance'. CEPR