This week from CEPR: September 02

Thursday, September 2, 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


    • HELPING FAMILIES OVERCOME BEHAVIORAL BARRIERS CAN PROMOTE SOCIOECONOMIC EQUALITY IN EARLY CHILD CARE ENROLMENT: Evidence from Germany   

    BEHAVIOURAL BARRIERS AND THE SOCIOECONOMIC GAP IN CHILD CARE ENROLMENT
    Henning Hermes, Philipp Lergetporer, Frauke Peter, Simon Wiederhold 
    CEPR Discussion Paper No. 16501 | August 2021 

    Early childhood programmes can promote child development and other important life outcomes, especially for disadvantaged children. However, in many countries, child care enrolment rates tend to be lower for disadvantaged children. In particular, individuals with lower socioeconomic status (SES) may lack important information about the costs and benefits of different educational programs, the application process, or their own suitability and eligibility for such programmes, especially when application processes are complex and competitive. They are also more susceptible to behavioural patterns such as present bias and overreliance on routines or defaults. 

    A new CEPR study by Henning Hermes, Philipp Lergetporer, Frauke Peter and Simon Wiederhold examines whether reducing behavioural barriers in the application process increases enrolment in child care for lower socioeconomic status (SES) children. The authors implemented an RCT with more than 600 families in two large cities in western Germany. Treated families receive application information and personal assistance for applications. Among the findings: 

    • The results show large, equity-enhancing effects of our treatment on child care application and enrolment.
    • For lower-SES families, the treatment increases child care application rates by 21 pp and enrolment rates by 16 pp. 
    • Higher-SES families are not affected by the treatment. 
    • Thus, alleviating behavioural barriers closes half of the SES gap in early child care enrolment.
    • Treatment effects on enrolment tend to be stronger for those lower-SES families who are likely to benefit more from alleviating behavioural barriers (e.g., families with low initial knowledge about the child care application process).
    • Treatment increases not only application rates, but also the probability of visiting a child care centre on-site during the application process — an important factor for securing a child care slot.

    However, behavioural barriers in the application process are only one of several explanations for the large observed SES gap in child care usage.


    • US MONETARY POLICY IS NOT THE ONLY ONE WITH A GLOBAL REACH 

    A TALE OF TWO GLOBAL MONETARY POLICIES
    Silvia Miranda-Agrippino, Tsvetelina Nenova
    CEPR Discussion Paper No. 16485 | August 2021

    A new CEPR study by Silvia Miranda-Agrippino and Tsvetelina Nenova compares the international financial spillovers of the unconventional monetary policies of the Fed and the European Central Bank (ECB). Among the findings: 

    • Monetary policy tightenings in both areas are followed by a global retrenchment in capital flows, a fall in global stock markets, and a rise in global risk measures. 
    • Thus, ECB and Fed monetary policies propagate internationally through equivalent transmission channels. 
    • ECB monetary policy shocks also affect significantly the US business and financial cycles. 
    • There is tentative evidence that links the strength of the ECB international spillovers to the € exposure for both trade invoicing and the pricing of financial transactions.

    This paper consolidates the findings of a growing body of literature on the powerful spillovers from Fed monetary policy to financial conditions and economic activity in the rest of the world. Importantly, however, the study documents that ECB policies have very similar effects on global aggregates and on the variables that characterise the Global Financial Cycle. 



    RACIAL BIAS IN NEWSPAPER RATINGS OF PROFESSIONAL FOOTBALL PLAYERS

    Francesco Principe, Jan van Ours       
    22 August 2021

    The mass media is the main source of information for fans of professional football, and racial bias in the way the media reports on sport activities would be a cause for concern. 

    A new study by Francesco Principe and Jan van Ours analyses data on over 400 players and shows that there is racial bias in the way Italian newspapers rate professional football players. Conditional on objective performance indicators, Black players receive a lower rating than non-Black players. The authors find no evidence of a racial bias in the wages Italian football clubs pay their players.

     

    IMMIGRANTS SERVED AS A PROTECTIVE SHIELD AGAINST EXPOSURE TO COVID-RELATED RISKS FOR EU NATIONALS 

    Laurent Bossavie, Daniel Garrote Sanchez, Mattia Makovec, Çağlar Özden       
    01 September 2021

    A new study by World Bank economists Laurent Bossavie, Daniel Garrote Sanchez, Mattia Makovec and Çağlar Özden finds that not only were immigrant workers more vulnerable to the economic and health shocks of the Covid-19 pandemic; they also served as a protective shield for native workers. 

    Studying 15 countries across Western Europe, the authors show that by undertaking higher-risk occupations, immigrants enabled native workers to move into work with fewer face-to-face interactions or jobs that could be carried out from the safety of home. 


    MASK MANDATES SAVE LIVES

    Niels-Jakob Hansen, Rui C. Mano                               
    02 September 2021

    The emergence of new Covid-19 variants and a highly uneven vaccine rollout have put mask mandates back on the policy agenda. Writing at Vox, Niels-Jakob Hansen and Rui C. Mano present new evidence that state-level mask mandates reduced new weekly COVID-19 cases, hospital admissions, and deaths significantly in the United States. 

    The results imply that 87,000 lives were saved up until 19 December 2020, while an additional 58,000 lives could have been saved if all states had put in place a mandate starting in April 2020. Mask mandates had a greater effect in counties more positively inclined towards mask wearing.


    THE ECB STRATEGY: The 2021 review and its future

    Lucrezia Reichlin, Klaus Adam, Warwick J. McKibbin, Michael McMahon, Ricardo Reis, Giovanni Ricco, Beatrice Weder di Mauro                               
    01 September 2021

    The ECB signalled an historic shift in its 2020 strategy review. This column introduces a new CEPR report which argues that the review has moved the ECB in the right direction but leaves some key issues unaddressed. 

    The report focuses on the definition of the ECB’s inflation target, its operational framework, fiscal and monetary policy interactions, and the implications for monetary policy of climate change and related mitigation initiatives. The authors identify topics to be addressed in future strategic reviews and provide a framework as a basis for this ongoing analysis.


    GLOBAL WEATHER DISRUPTIONS, FOOD COMMODITY PRICES, AND ECONOMIC ACTIVITY: A global warning for advanced countries

    Jasmien De Winne, Gert Peersman                                 
    29 August 2021

    Writing at Vox, Jasmien De Winne and Gert Peersman show how global food price increases that are caused by global harvest and extreme weather disruptions could cause a decline in economic activity that will be substantial and greater in advanced than in low-income countries. 

    The findings suggest that the consequences of climate change for advanced countries may be greater than previously thought, and in contrast to the common perception that low-income countries will suffer most. Furthermore, the strong rise in food prices since the outbreak of COVID-19 could seriously impede the recovery.


    WHAT IS DRIVING US POLITICAL POLARISATION? 

    Levi Boxell                           
    25 August 2021


     

    Writing at Vox, Levi Boxell presents key trends in US political polarisation and discusses their implications. It shows that polarisation:

    1. has been increasing since the 1980s, 
    2. has grown at similar rates across different age groups, and 
    3. has increased more in the US relative to many other developed countries. 

    Potential determinants for these trends in US political polarisation include racial divisions, elite polarisation, and cable TV news consumption.


    IMMIGRATION SHOCKS CAN HAVE A NEGATIVE IMPACT ON R&D INVESTMENTS: Evidence from Norway

    Torje Hegna, Karen Helene Ulltveit-Moe                        
    31 August 2021

    A study by Torje Hegna and Karen Helene Ulltveit-Moe investigates the impact that a large immigration shock – in this case, the sudden influx of migrants to Norway following the 2004 enlargement of the EU – had on research and development (R&D) investments. 

    The results suggest that immigration shocks can have a negative impact on a receiving country’s R&D investments, with potentially long-term consequences for productivity growth. Any negative shock to R&D would consequently also have a negative impact on firms’ productivity. 


    ARE IMF LOANS DIVERTED TO OFFSHORE BANK ACCOUNTS?

    Shekhar Aiyar, Manasa Patnam                                  
    24 August 2021

    Recent research suggests that World Bank aid disbursements are associated with outflows from recipient countries to offshore financial centres, indicating elite capture of aid. Writing at Vox, IMF economists Shekhar Aiyar and Manasa Patnam use 25 years of data to examine whether the same is true for IMF lending. 

    The authors find no evidence that IMF loans are diverted to offshore bank accounts. This could be because IMF lending differs in structural respects – such as conditionality, concessionality, and continuity – from World Bank aid.


    THE IMPACT OF THE COVID-19 SHOCK ACROSS FIRMS AND THE ROLE OF VACCINE DEVELOPMENTS IN RECOVERY EXPECTATIONS: Evidence from Spain

    Alejandro Fernández-Cerezo, Beatriz González, Mario Izquierdo, Enrique Moral-Benito      26 August 2021

    Based on a new firm-level survey matched with balance-sheet information, a study by Alejandro Fernández-Cerezo, Beatriz González, Mario Izquierdo and Enrique Moral-Benito presents new evidence from Spain on the asymmetric impact of the pandemic shock. 

    The results show that the impact of the Covid-19 shock was larger in the case of small and less productive firms within each sector and region. However, the unexpected announcement of the effectiveness of the Pfizer vaccine significantly improved the prospects of faster recovery under different sets of measures.


    COVID-19 GOVERNMENT SUPPORT MAY HAVE NOT BEEN AS UNPRODUCTIVELY DISTRIBUTED AS FEARED 

    Tommaso Bighelli, Tibor Lalinsky, Filippo di Mauro                                
    19 August 2021

    A new study by Tommaso Bighelli, Tibor Lalinsky and Filippo di Mauro uses data from four EU countries (Croatia, Finland, Slovakia, Slovenia) to show that Covid-19 support was distributed more efficiently than often thought. 

    The results show that government subsidies were distributed towards medium productive firms, and only marginally towards the undeserving ‘zombies’. However, the negative impact of the pandemic on productivity growth was large and resource reallocation sluggish, which calls for a removal of the blanket as soon as the situation allows. 


    THE LONG-RUN EFFECTS OF R&D PLACE-BASED POLICIES: Evidence from Russian science cities

    Helena Schweiger, Alexander Stepanov, Paolo Zacchia                                 
    26 August 2021

    Localised innovation policies, such as local R&D clusters, are very popular, yet the evidence about their effectiveness is scarce in the short run, let alone the long run. A new study by EBRD economists Helena Schweiger, Alexander Stepanov and Paolo Zacch fills the gap by studying the long-run effects of a historic localised place-based innovation policy in the form of Russian science cities. 

    The results show that in present-day Russia, science cities remain more innovative and productive, host more highly skilled workers, and pay them higher salaries. 


    BANKS’ IT ADOPTION AND LENDING DURING THE PANDEMIC

    Nicola Branzoli, Edoardo Rainone, Ilaria Supino                                  
    23 August 2021

    The Covid-19 pandemic increased the pace of change in clients’ relationships with the banking sector, with mobility restrictions forcing banks to make better use of information technology to accommodate the increasing demand for digital financial services. 

    A study by Nicola Branzoli, Edoardo Rainone and Ilaria Supino analyses the role of IT adoption in bank lending since the outbreak of the pandemic. It finds that intermediaries with a higher degree of digital readiness provided more credit to non-financial corporations. It also shows that proximity to a physical bank branch increased the positive impact of IT on the amount of credit granted.



    SUSTAINABLE FINANCE: Is there a trade-off between growing value for investors and for society?

    Alex Edmans, 24 August 2021

    Alex Edmans of the London Business School and CEPR, author of Grow the Pie, argues there doesn't have to be a trade-off between growing value for investors and for society. But what does this mean in practice, and how strong is the evidence?



    PROPAGANDA, PERSUASION, AND THE NAZIS

    Hans-Joachim Voth interviewed by Tim Phillips, 20 August 2021

    In 1932, Hitler and his followers believed that marching through the streets in uniform would convince the German public to vote them into power. But did the flags, songs and stomping boots actually persuade people? Hans-Joachim Voth tells Tim Phillips how polling data (and the spread of a pandemic) reveal whether this type of propaganda actually worked.

    Read more about the research behind this Vox Talk: Caesmann, M, Caprettini, B, Voth, H and Yanagizawa-Drott, D. 2021. 'Going Viral: Propaganda, Persuasion and Polarization in 1932 Hamburg'. CEPR


    DOES MALNUTRITION CAUSE DISEASE?

    Eric Schneider interviewed by Tim Phillips, 27 August 2021

    The records of London's Foundling Hospital provide centuries of information on children's health. Eric Schneider tells Tim Phillips how he used this data to discover surprising information about the link between nutrition and common childhood illnesses.

    Read more about the research behind this Vox Talk: Schneider, E. 2021. 'The Effect of Nutritional Status on Historical Infectious Disease Morbidity: Evidence from the London Foundling Hospital, 1892-1919'. CEPR