This week from CEPR: September 09

Thursday, September 9, 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

    • WHO IS BUYING BITCOIN? The socioeconomic drivers of cryptocurrency investments   

    DISTRUST OR SPECULATION? The socioeconomic drivers of U.S. cryptocurrency investments
    Raphael Auer, David Tercero Lucas
    CEPR Discussion Paper No. 16518 | September 2021 

    Are cryptocurrency investors motivated by distrust in fiat currencies or regulated finance? A new CEPR study by Raphael Auer and David Tercero Lucas uses data from the US Survey of Consumer Payment Choice to show that this is not the case. 

    The research shows that compared with the general population, investors show no differences in their level of security concerns with either cash or commercial banking services. Cryptocurrency investors tend to be educated, young and digital natives. In recent years, a gap in ownership of cryptocurrencies across genders has emerged. The study examines how investor characteristics vary across cryptocurrencies and show that owners of cryptocurrencies increasingly tend to hold their investment for longer periods. Among the findings: 

    • Cryptocurrency investors do not present differences in their level of security concerns with mainstream payment options, i.e., trust in cash or the banking deposits.
    • Compared with the general population, cryptocurrency investors show no differences in their level of security concerns with either cash or commercial banking services.
    • However, those who are concerned with the security of cash or bank accounts tend to acquire information about cryptocurrencies.
    • Higher educational attainment is associated with more knowledge about and likelihood of owning a cryptocurrency.
    • Male gender is associated with a 2 to 2.2 percentage points higher likelihood of owning at least one cryptocurrency. The  probability of knowing at least one cryptocurrency is higher for men and for those individuals with higher levels of both income and an education.
    • Although age has no effect on knowledge about cryptocurrencies, it does have a strong effect on investment decisions.
    • Owners of ether and xrp are the most educated in our sample, followed by bitcoin cash and bitcoin users. Conversely, those owning litecoin are the least educated.
    • Owning a cryptocurrency in one year increases the probability, on average, of owning a cryptocurrency in the following year by 50%.


    COUNTERING MISINFORMATION WITH TARGETED MESSAGES: Experimental evidence using mobile phones
    Alex Armand, Britta Augsburg, Antonella Bancalari, Kalyan Kumar Kameshwara
    CEPR Discussion Paper No. 16492 | September 2021

    Widespread misconceptions can be critical, especially in times of crisis. In the context of the COVID-19 pandemic, misinformation has become so widespread to have been deemed a major concern for public health, labelling its diffusion as an infodemic. 

    A new CEPR study by Alex Armand, Britta Augsburg, Antonella Bancalari and Kalyan Kumar Kameshwara examines how targeted messages, i.e. messages delivered and tailored to an individual citizen, can correct misconceptions. The authors implement a field experiment among slum residents – a hard-to-reach population – of the two largest cities of Uttar Pradesh (UP), India, amid the COVID-19 pandemic. Misinformation is a particularly pressing issue in India, which has seen dramatic increases in access to platforms that are widely used to spread misleading information.

    The experiment randomly allocated participants to receive voice and video messages introduced by a local citizen, the messenger, and in which medical practitioners debunk misconceptions. To understand the role of targeting, the study randomly vary the signalled religious identity of the messenger into either Muslim or Hindu, guaranteeing exogenous variation in religion concordance between messenger and recipient. 

    The results show that messages from doctors are effective at increasing knowledge of, and compliance with, COVID-19 policy guidelines. Changes in misconceptions are observed only when there is religion concordance and mainly for religious-salient misconceptions. Correcting misconceptions with information requires targeting messages to specific populations and tailoring them to individual characteristics.


    Daron Acemoglu 
    CEPR Discussion Paper No. 16524 | September 2021

    A new CEPR study by Daron Acemoglu discusses several potential economic, political and social costs of the current path of AI technologies. He argues that if AI continues to be deployed along its current trajectory and remains unregulated, it may produce various social, economic and political harms. These include: 

    • Damaging competition, consumer privacy and consumer choice 
    • Excessively automating work, fuelling inequality, inefficiently pushing down wages, and failing to improve worker productivity 
    • Damaging political discourse, democracy's most fundamental lifeblood 

    Although these costs are theoretical, it is crucial to understand them before they are fully realised and become harder or even impossible to reverse, precisely because of AI's promising and wide-reaching potential. 

    Additionally, these costs are not inherent to the nature of AI technologies, but are related to how they are being used and developed at the moment - to empower corporations and governments against workers and citizens. As a result, efforts to limit and reverse these costs may need to rely on regulation and policies to redirect AI research. Attempts to contain them just by promoting competition may be insufficient.


    Francesco Principe, Jan van Ours       
    22 August 2021

    Environmental legislation requires political support to be viable, rational governments will continue to hesitate as long as political damage is palpable. New research from Davide Furceri, Michael Ganslmeier and Jonathan Ostry identifies key lessons to overcome this political dilemma and use the current crisis as an opportunity to advance low-carbon and climate-resilient economic growth. 

    1. First, adopting stricter environmental policies in times of low oil prices can help to underpin popular support for mitigation. 
    2. Second, providing social insurance for those adversely affected by climate mitigation can help to give those who are vulnerable to the transition to a greener economy the wherewithal to bounce back, and thus give governments the political backing to advance a greener policy agenda. 
    3. Finally, adopting non-market-based measures such as emission limits or feebates can be a politically viable alternative to market-based emissions pricing, provided that they come with a transparent analysis of the costs and benefits.

    THE DOWNTON ABBEY EFFECT: How the late 19th century decline in British agricultural prices led to a significant proportion of male aristocrats marrying American heiresses with rich dowries

    Mark Taylor        
    05 September 2021

    The late 19th-century decline in British agricultural prices shrank the incomes of aristocrats and of land-owning ‘commoners’ as well. To carry on the tradition of raising money through auspicious marriages, British aristocrats looked across the Atlantic – to US heiresses with large dowries but no pedigrees, even by the standards of their own country. 

    A study by Mark Taylor examines the social and economic forces that steered the daughters of US business magnates into marriages with British aristocrats. 


    Hyunbae Chun, Kyoji Fukao, Hyeog Ug Kwon, Jungsoo Park                                
    06 September 2021

    In many developed countries, real wage growth has lagged behind labour productivity growth in recent decades. A study by Hyunbae Chun, Kyoji Fukao, Hyeog Ug Kwon and Jungsoo Park uses evidence from Japan and Korea to show that the main reason for the real wage-labour productivity growth gap is a large decline in labour’s terms of trade. 

    Raising real wages in the future will require policies to support the business environment and develop new high value-added sectors with sustained relative prices so that labour’s terms of trade do not deteriorate, rather than artificially raising the minimum wage to target the labour income share. 


    Jenny Guardado                                
    04 September 2021

    A study by Jenny Guardado shows how parts of Peru where colonial rule was more ruthless in the 18th century (as measured by expected returns to office, the tax burden and the intensity of anti-colonial rebellions) exhibited higher support for Pedro Castillo in the 2021 presidential election. Interestingly, this support is not visible for other leftist and Marxist parties in the elections of 1980 and 1985.

    WHAT’S WORTH KNOWING IN ECONOMICS? A global survey among economists

    Peter Andre, Armin Falk                                  
    07 September 2021

    Research shapes policy. But what we choose to study is subjective. A new study by Peter Andre and Armin Falk uses a global survey of almost 10,000 academic economists to find their opinions on what economic research should look like. Many economists think that economic research should become more policy-relevant, multidisciplinary, and disruptive, and should pursue more diverse research topics. 

    The research also shows that economists are largely unified in their dissatisfaction, and reveal a systematic dissatisfaction with the current state of economics. Economists also tend to value their own fields most.

    WHAT’S WRONG WITH ECONOMICS? Efficiency and equity in a socially embedded economy

    Marc Fleurbaey, Ravi Kanbur, Dennis Snower                            
    03 September 2021


    There has been a spate of critiques of mainstream, neoclassical economics in the last few years. Writing at Vox, Marc Fleurbaey, Ravi Kanbur and Dennis Snower argue that this is partly the result of a core general model that is too narrow. Instead, the authors propose a base model that includes not just the economy but also the socioeconomic system. 

    The model encompasses many specific themes in the literature such as the interplay between economic inequality and efficiency, but it also takes us well beyond the conventional economic resource allocation-based perspective on inequality. 


    Roberta Cardani, Olga Croitorov, Fabio Di Dio, Lorenzo Frattarolo, Massimo Giovannini, Stefan Hohberger, Philipp Pfeiffer, Marco Ratto, Lukas Vogel                         
    08 September 2021

    The COVID-19 recession differs strongly from past crises in recent history. Writing at Vox, economists from the European Commission summarise the integration of key economic features of the pandemic into the European Commission’s estimated DSGE model. 

    Shock decompositions highlight the dominant role of ‘lockdown shocks’ (‘forced savings’, labour hoarding) for explaining the quarterly pattern of real GDP growth in 2020, complemented by negative contributions from foreign and investment demand notably in 2020q2 and a negative impact of persistently higher (precautionary) savings. The inflation response has been modest given the severity of the recession.


    Benoît Cœuré                                   
    08 September 2021

    In March 2020, the French parliament tasked an independent committee with monitoring the financial support available to companies during the Covid-19 crisis. A rich firm-level database – matching receipt of government money with balance-sheet records, tracing payroll and turnover trajectories for the first two waves of the pandemic – was the result. 

    A study by Benoît Cœuré mines that database to evaluate the incentives for accepting government aid; the impact of support measures; and heterogeneity across industries, firms, and locations. The authors judge French fiscal support during the crisis a tentative success.

    FINTECH AND DIGITAL CURRENCIES RPN: The soul of the financial system

    Dirk Niepelt, 07 September 2021

    The research policy network on Fintech and Digital Currencies has an ever-expanding list of issues for its researchers. Dirk Niepelt of the University of Bern, RPN director, explains what's top of the agenda for central banks and policymakers, and how the RPN can influence their decisions.


    Mehdi Benatiya Andaloussi interviewed by Tim Phillips, 02 September 2021

    How many lives could be saved if rich countries shared their vaccines? Less than 2% of people in low-income countries have received even one dose. Mehdi Benatiya Andaloussi tells Tim Phillips about his calculation of how many lives would be saved by the end of 2021 if vaccines were shared more fairly - and how many have been lost because this hasn't happened so far.

    Read more about the research discussed and download the free discussion paper:
    Benatiya Andaloussi, M and Spilimbergo, A. 2021. 'How many lives could be saved through the early sharing of vaccines globally?' CEPR