This week from CEPR: October 31

Thursday, October 31, 2019

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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    Graziella Bertocchi and Monica Bozzano  
    CEPR DP No. 14082 | 25 October

    A new CEPR study by Graziella Bertocchi and Monica Bozzano reviews the growing body of economic research on the education gender gap and its evolution, over time and across countries. 

    The study first focuses on gender differentials in the historical period from 1850 to the Second World War, documenting the deep determinants of the early phase of female education expansion, including pre-industrial conditions, religion, and family and kinship patterns. The authors then describe the stylised facts of contemporary gender gaps in education, from the 1950s to the present day. 

    • For the majority of human history, women have been undereducated relative to men. Traditionally education was reserved for female nobility and, even then, it was focused mainly on specific ‘women’s subjects’, such as needlework and household duties.
    • The rise of modern economic growth over the last two centuries witnessed the widespread expansion of mass schooling. Yet the initial extension of education opportunities benefited mostly boys. 
    • Only since the 19th century has there been progress in women’s formal education, and a convergence with men from the beginning of the 20th century, as modernisation and economic development proceeded.
    • For the non-western world, between 1820 and 1900 schooling still remained largely neglected. Differences between women and men were much wider in developing countries.
    • A retarding force to female education has been religion – and not only in the past. Catholicism, Hinduism, Confucianism and Islam have all made the education of males over females a high priority. Protestantism, on the other hand, played an important role in enhancing female education historically.
    • In most patriarchal societies parents underinvest in the education of their daughters, who then acquire very limited access to education, while their employment opportunities are further constrained by the indirect effect of early marriage.

    Post-war period 

    • Despite the fact that gender-based inequalities have tended to close in recent years, sharp differences still exist across levels of education and across countries. A majority of regions have reached gender parity in primary education, but disparities persist at higher levels.
    • At the tertiary level, OECD data show that the fraction of women attaining a degree has surpassed that of men, to reach 34% and 30%, respectively, by 2012. 
    • In 2017, among individuals aged 25 to 34 who attained a master’s degree, women represented the majority in 33 countries, while this was true only in 11 countries at the doctoral level. 
    • Yet in the face of generalised improvement, in severely disadvantaged populations, girls remain the last to enrol and the first to drop out. 
    • Some gender norms that originated in response to specific historical circumstances, but were then transmitted across generations and tend to persist even after the originating historical conditions and incentives have changed. Hence, the same drivers of the pre-war gender gaps may still be at play in the post-war period.
    • Technological innovation, in its various forms, has freed women from household work, raising their value in the labour market and their incentive to become more educated. 
    • Although women have outpaced men in educational attainment, on average – even in OECD countries – gender gaps in employment, entrepreneurship and politics persist.
    • Visible discriminatory gaps against women persist, in secondary and especially tertiary education, in the choice of the fields of study, with lifelong consequences for their occupational careers and earning profiles. 
    • In particular, at the college level, women are underrepresented in the STEM fields, which typically lead to higher employability and wages. Only 30% of the female student population in higher education is in STEM fields.

    Although much progress has been done in identifying and understanding the determinants and implications of gender gaps in education, some puzzles still remain unresolved. Despite the closing, or even the reversal, of gender gaps worldwide, in the developing world there are still large discrepancies in access to schooling for girls and in basic literacy among adult women. 

    Even in rich countries, girls are still at disadvantage given their apparent self-selection out of the more lucrative fields of study in STEM and economics. Lastly, it is not yet entirely understood why girls’ remarkable progress in education has not so far fully propagated to other realms where women are still discriminated against – from their performance in the labour markets to their position within the household and their accomplishment in the political arena.


    • CURRENT ECONOMIC THEORY IS ILL-EQUIPPED TO PREDICT TRADE WARS 

    TRADE WARS: Nobody Expects the Spanish Inquisition 
    Eddy Bekkers, Joseph Francois, Doug R Nelson, Hugo Rojas-Romagosa    
    CEPR DP No. 14079 | 24 October

    Contemporary economic theory developed during a uniquely peaceful and liberal period in world history, affecting how economists have thought about times of conflict. But since the causes of trade wars are almost completely political and their consequences are to a significant degree also political, the economics profession is left unprepared to provide serious analysis or advice.

    These are the conclusions of a new CEPR study by Eddy Bekkers, Joseph Francois, Doug Nelson and Hugo Rojas-Romagosa. They argue that the utility of economic theory of rational trade wars to predict such events or to prescribe courses of action to control their consequences is highly debatable. 

    Nevertheless, the tools – theoretical, computational and econometric – with which economists evaluate the effects of trade policy on national income, the distribution of national income, growth, etc. remain useful. 


    • BETTER MANAGEMENT PRACTICES IN SCHOOLS IMPROVE STUDENTS’ LEARNING   

    MEASURING AND EXPLAINING MANAGEMENT IN SCHOOLS: New approaches using public data
    Clare Leaver, Renata Lemos, Daniela Scur   
    CEPR DP No. 14069 | 21 October

    A CEPR study by Clare Leaver, Renata Lemos and Daniela Scur explores the effect of school management on student learning. The authors introduce a new approach to measurement using existing public data, and apply it to build a management index covering 15,000 schools across 65 countries, as well as another index covering nearly all public schools in Brazil. Both indices show a strong, positive relationship between school management and student learning outcomes. 

    The authors then formalise their intuition that strong management practices might be driving learning gains via incentive and selection effects among teachers, students and parents. Among the findings: 

    • Strong people management practices may be improving student learning through a combination of teacher selection and incentive effects. 
    • Schools could be encouraged to adopt practices that reward good performers, develop good performers, and create a good employee value proposition. 
    • Strong operations practices may be improving student learning through a combination of teacher selection and household incentives. 
    • Schools could be encouraged to adopt practices promoting quality of delivery in the classroom and adopt processes to review school performance and drive change.
    • Improvements to management practices present an untapped opportunity for potentially large improvements in educational outcomes, particularly in cash-strapped regions of the world.


    POPULISM: A new Vox debate

    Sergei Guriev     
    29 October 2019

    The rise of populism is one of the most important political, social, and economic phenomena in recent years. Sergei Guriev introduces a new Vox debate focusing on four broad questions: What is populism and how can we quantify its rise? What are the drivers of the recent rise of populism? What are the implications for economic growth, for other socio-economic outcomes, and for political institutions? And if the recent rise of populism is a problem, what should be done about it?

    Join the debate here


    THE RISE OF POPULISM 

    Guido Tabellini     
    29 October 2019

    Despite an increase in economic inequality and a decline in social mobility, today those who are 'left behind' seem to care more about immigration and civil rights than they do about redistribution – and they sometimes support policies that run counter to their economic interests. 

    Contributing to the Vox debate on Populism, Guido Tabellini offers a potential explanation for this: a shift from the traditional class-based distinction and divide between left and right to a distinction based on cultural attitudes and education. He argues that this change is having profound effects on the political systems of advanced democracies organised along the traditional left versus right divide.

    This column is a lead commentary in the Vox debate on ‘Populism'.


    THE TWO FACES OF POPULISM 

    Barry Eichengreen     
    29 October 2019

    Explanations for variants of populism are typically framed as a contest between culture and economics. Contributing to the Vox debate on populism, Barry Eichengreen looks at the arguments for both and uses data from the British Election Study to show that populism – and Brexit in particular – is as much about economics as it is about culture and identity. 

    Eichengreen argues that populism rooted in economics can be addressed with policies that enhance socio-economic mobility, reduce income disparities, increase economic security and help left-behind places. Yet, it is less clear how to address authoritarian, xenophobic populism rooted in cultural identity concerns.

    This column is a lead commentary in the Vox debate on ‘Populism'.


    MANY FORMS OF POPULISM

    Dani Rodrik     
    29 October 2019

    There are essentially two schools of thought on the roots of populism, one that focuses on culture and another that focuses on economics. Dani Rodrik, contributing to the Vox debate on populism, examines the drivers behind each of these perspectives. He also argues that there are times when economic populism may be the only way to forestall its much more dangerous cousin, political populism.

    This column is a lead commentary in the Vox debate on 'Populism'.


    THE PHILLIPS CURVE: Dead or alive?

    Peter Hooper, Frederic S. Mishkin, Amir Sufi      
    23 October 2019

    The apparent flattening of the Phillips curve, which shows the relationship between inflation and economic slack, has led some to claim that it is dead. Writing at Vox, Peter Hooper, Frederic Mishkin and Amir Sufi argue that the responsiveness of wage and price inflation to tight labour markets and significant non-linearities in regional data from the United States suggest that the Phillips curve is very much alive, but hibernating.

    The authors note that we have been here before – in the 1960s, similar low and stable inflation expectations led to the great inflation of the 1970s. 


    WHAT RANDOMISATION CAN AND CANNOT DO: The 2019 Nobel Prize

    Kevin Bryan      
    29 October 2019


     

    The 2019 Nobel Prize in Economic Sciences has been awarded jointly to Abhijit Banerjee, Esther Duflo, and Michael Kremer ‘for their experimental approach to alleviating global poverty’. 

    Writing at Vox, Kevin Bryan outlines their impact on development economics research and practical action to reduce poverty. He also considers some of the critiques of randomised controlled trials as an approach to development.


    MIDDLE MANAGERS: How firms mitigate negative effects on their performance of geographical frictions between corporate headquarters and far away establishments 

    Anna Gumpert, Henrike Steimer, Manfred Antoni    
    24 October 2019

    A new study by Anna Gumpert, Henrike Steimer and Manfred Antoni shows that hiring middle managers helps firms mitigate the negative impact of geographic frictions between establishments and headquarters, by improving the efficiency of management resources. Do too do faster travel times as a result of improved transport infrastructure.

    The results show that economic conditions and other factors affecting the efficiency of a local establishment have knock-on effects for the whole firm, regardless of distance.


    TANGIBLE ENVIRONMENTAL COMMITMENTS: How local social norms encourage climate-friendly behaviour

    Stefano Carattini, Simon A. Levin, Alessandro Tavoni     
    23 October 2019

    Evidence ranging from hybrid cars to carbon offsets suggests that for people deciding whether to adopt climate-friendly behaviours, local social norms matter, despite the global nature of the problem. That is the conclusion of a new study by Stefano Carattini, Simon Levin and Alessandro Tavoni. They argue that interventions can play a key role in facilitating behavioural change by increasing the visibility of otherwise invisible behaviours, such as green energy adoption. 


    OBJECTIVES FOR THE NEXT GOVERNOR OF THE BANK OF ENGLAND 

    Jagjit Chadha    
    25 October 2019

    Writing at Vox, Jagjit Chadha argues that impending appointment of the next Governor of the Bank of England provides an opportunity for an open and deep debate about the fundamental objectives of the central bank and the limits of independence. Chadha warns that the genuine progress that has been made in the science of monetary policy may be threatened by a new era of economic populism.

    The key question for the next Governor is not so much whether to reform the monetary framework, but at what speed and in what manner should reform occur?


    AGNAR SANDMO: A distinguished economist

    Hans-Werner Sinn     
    25 October

    According to the public finance economist Agnar Sandmo, who passed away in August 2019, the ideal economist should be an ‘applied theorist’ who is always ‘concerned with the application of theory to specific issues of economic policy’. 

    Hans-Werner Sinn, his friend and colleague of long standing, writes that Sandmo himself satisfied these criteria to the highest possible extent. He combined extraordinary theoretical skills with a profound sense of political relevance and the ability to communicate his knowledge in a way accessible to all.


    WHY BETTER MEASUREMENT IS NEEDED TO DELIVER FINANCIAL STABILITY

    Anil Kashyap , Benjamin King     
    28 October 2019

    There are still remarkable gaps in the data available on the overall structure of the financial systems of major economies. Writing at Vox, Anil Kashyap and Benjamin King present rough estimates for the UK and the United States that suggest some surprising structural differences between the two systems and which point to areas where better measurement is needed. The authors note that there is a strong case for policy-makers to think about the system as an interconnected whole, rather than as a set of distinct sectors to be regulated in isolation. 


    3D PRINTING CAN STIMULATE TRADE BY REDUCING PRODUCTION COSTS: Evidence from the production of hearing aids

    Caroline Freund, Alen Mulabdic, Michele Ruta      
    28 October 2019

    3D printing looks likely to stimulate rather than hamper trade growth,  according to e new study by World Bank economists Caroline Freud, Alen Mulabdic and Michele Ruta. Their examination of the trade effects of the shift to 3D printing in the production of hearing aids shows that adopting the new technology increased trade by 60% as costs came down

    Analysis of 35 other products that are increasingly produced using 3D printing also finds positive effects, but suggests that product characteristics such as bulkiness can affect the relationship between 3D printing and trade.

    FAMILY FIRMS MAKE REPUTATION A PRIORITY AT THE COST OF THEIR COMPETITIVENESS

    Mario Daniele Amore, Riccardo Marzano      
    27 October 2019

    Family-owned firms are less likely than non-family firms to commit antitrust violations, but they also tend to curb equity financing and invest less aggressively after antitrust investigations. These are the findings of a new study by Mario Daniele Amore and Riccardo Marzano. Their analysis suggests that family control wards off reputational damages but at the same time it weakens firms’ ability to keep up with fiercer competition following the dismantlement of an anti-competitive practice.

    MAFIA INFILTRATIONS OF FIRMS IN ITALY’S LEGAL ECONOMY HURTS LOCAL ECONOMIC GROWTH

    Litterio Mirenda, Sauro Mocetti, Lucia Rizzica  
    26 October 2019

    Mafia-infiltrated firms in Italy's legal economy are disproportionately in the utilities and financial services sectors. The infiltration has a strong negative effect on local long-term employment growth.
    These are the central findings of  new study by Litterio Miernda, Sauro Mocetti and Lucia Rizzica, which estimates the impact of Mafia penetration, looking both at the micro-level effects on firms infiltrated by members of the criminal organisation the 'ndrangheta, and at the more aggregate long-run effects on local economic growth.

    DISRUPTIVE EFFECTS OF NEW TECHNOLOGY ON SOCIETY: Evidence from electrification in early 20th century Sweden 

    Jakob Molinder, Tobias Karlsson, Kerstin Enflo   
    23 October 2019

    New technology can disrupt societies, and current developments in automation have raised anxious speculation on what might happen if stable middle-class jobs are taken over by machines. 

    A new study by Jakob Molinder, Tobias Karlsson and Kerstin Enflo analyses the historical impact of technological change on labour markets and social protests after the adoption of electricity in early 20th century Sweden. 

    The results show that electrification did increase the incidence of local strikes, but that disputes were associated with workers demanding higher wages and better working conditions rather than attempting to block innovation.



    THE COST OF DYING

    Eric French interviewed by Tim Phillips, 25 October 2019

    How much is spent on end-of-life care, and who foots the bill? Eric French of UCL tells Tim Phillips about the total cost of the last year of our lives, and how different countries have very different ideas of who should pay it.

    Read about the research here, and download the Vox book about the economics of ageing here: Live Long and Prosper? The Economics of Ageing Populations.



    THE DEMOCRATISATION OF CREDIT 

    Michèle Tertilt , 29 October 2019

    Michèle Tertilt discusses the US 'Fresh Start' system, under which it is possible to declare bankruptcy and then start with a clean slate the next day.

    The introduction of credit scoring made it cheaper for banks to target loans better and within 20 years, the number of US Americans with a credit card rose from 40% to 70%. This also led to the rise of bankruptcies in the 1980s: ‘If new types of people, riskier people borrow, then they will also default at higher rates’.

    In this context, Tertilt and her colleagues have looked at the US 'Fresh Start' system where it is possible to declare bankruptcy and then start with a clean slate the next day. In countries such as the US, where there is less welfare state provision, this can act as an important safety net. On the downside it also leads to higher interest rates, which reduces the length of time over which people are able to spread their debt.