This week from CEPR: September 10

Thursday, September 10, 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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    The Persistence of Socio-Emotional Skills Life Cycle and Intergenerational Evidence
    Áureo De Paula, Orazio Attanasio, Alessandro Toppeta        
    CEPR DP No. 15254 | September 2020

    New CEPR research investigates the evolution of socio-emotional skills over the life cycle and across generations, analysing data from the 1970 British Cohort Study (BCS70) which is tracking a representative sample of the UK population now aged 50 and their households. 

    The study starts by characterising the evolution of these skills in the first part of the life cycle. The authors then examine whether parents’ socio-emotional skills in early childhood rather than in adolescence are more predictive of their children’s socio-emotional skills. They focus on two dimensions of socio-emotional skills: internalising and externalising skills, linked respectively to the abilities to focus attention and to engage in interpersonal activities.

    Examining the link between parents’ socio-emotional skills at ages 5, 10 and 16 and their children’s socio-emotional skills between the ages 3 and 16, the findings indicate that parents’ and children’s socio-emotional skills during early childhood are comparable. But the magnitudes of intergenerational persistence estimates are smaller than the magnitude of intergenerational persistence estimates for occupation and income. Grandmothers’ internalising skills correlate with their grandchildren’s socio-emotional skills even after controlling for parental skills.

    • GOLFING WITH TRUMP: His electoral success was founded on long-term economic and population decline in areas with strong social capital    

    DP15259 Golfing with Trump. Social capital, decline, inequality, and the rise of populism in the US
    Andrés Rodríguez-Pose, Neil Lee, Cornelius Lipp   
    CEPR DP No. 15259 | September 2020

    In 2000, Robert Putnam forecast that US democracy was at risk from the twin challenges of declining civic engagement (‘bowling alone’) and rising interpersonal inequality. Sixteen years later, his predictions were vindicated by the election of Donald Trump as president.

    New CEPR research analyses the extent to which the election of Donald Trump was related to levels of social capital and interpersonal inequalities, and posits a third alternative: that the rise in vote for Trump in 2016 was the result of long-term economic and population decline in areas with strong social capital. This hypothesis is confirmed by the econometric analysis conducted for counties across the country. 

    Long-term declines in employment and population – rather than in earnings, salaries or wages – in places with relatively strong social capital propelled Donald Trump to the presidency. By contrast, low social capital and high interpersonal inequality were not connected to a surge in support for Trump. The analysis also shows that the discontent at the base of the Trump margin is not just a consequence of the 2008 crisis but had been brewing for a long time. Places that remained cohesive but witnessed an enduring decline are no longer bowling alone, they are golfing with Trump.


    Gender Diversity Goals, Supply Constraints, and the Market for Seasoned Female Directors: The U.S. Evidence
    Patricia Boyallian, Sudipto Dasgupta, Swarnodeep Homroy
    CEPR DP No. 15257 | September 2020

    New CEPR research shows that supply constraints – a limited pool of women candidates on the radar for corporate director appointments – are affecting how American companies are responding to the pressures to achieve gender balance on their boards.

    The study shows that over the last decade, growing public pressure for board gender diversity and awareness of gender equality issues in the United States have manifested themselves in ‘seasoned’ women board members accumulating multiple board appointments at a rate faster than seasoned male directors. The larger firms have been the most active in attracting seasoned women directors, at the expense of the smaller firms. This is likely to have contributed to the smaller firms lagging behind the larger firms in the pursuit of more gender balance.

    The evidence in the new study is highly consistent with ‘supply constraints’, as reflected in high costs of recruiting first-time women directors, which the larger firms manage to avoid and the smaller firms find too costly to incur. Gender quota mandates are likely to expose the smaller firms even more to these costs, but the absence of mandates may also not be optimal. Given growing public pressure, it may be necessary to mandate that larger firms maintain the ratio of first-time to seasoned women appointments above some level.

    Working from home: The polarising workplace

    Abigail Adams-Prassl, Teodora Boneva, Marta Golin, Christopher Rauh, 
    02 September 2020

    Workers in the UK and the United States who were already able to carry out a large share of tasks remotely have become able to do even more from home, according to research by Abigail Adams-Prassl, Teodora Boneva, Marta Golin and Christopher Rauh.

    Working from home during the pandemic has provided shelter from both the health risks and the economic shock brought about by Covid-19. The new study uses survey data from the United States and the UK to demonstrate systematic variation in individuals’ ability to work from home both across and within occupations and industries.

    The results confirm that men and workers with a college degree can do a substantially higher share of their tasks from home, while workers on low incomes report being able to do a smaller share. This polarisation has increased over the course of the pandemic, as workers who were already able to carry out a large share of tasks remotely have become able to do even more from home.


    Giulia Lotti 
    05 September 2020

    Young offenders in England and Wales who are sent to rehabilitative facilities are less likely to reoffend, while those exposed to harsher facilities are 27% more likely to re-offend and also more likely to commit future violent offences. These are the central findings of research by Giulia Lotti.

    More than half of all young offenders in the United States are rearrested within the first year of their release from prison, yet the relationship between crime and punishment remains understudied. The new study examines three quasi-experiments and the criminal records of 6,444 offenders in England and Wales to compare the effects of harsh versus rehabilitative incarceration practices.


    Nicholas W. Papageorge, Matthew Zahn, Michèle Belot, Eline van den Broek-Altenburg, Syngjoo Choi, Julian C. Jamison, Egon Tripodi
    05 September 2020

    People with lower income and less flexible work arrangements are less likely to behave in ways that limit the spread of infectious disease, according to research by Nicholas Papageorge, Matthew Zahn, Michèle Belot, Eline van den Broek-Altenburg, Syngjoo Choi, Julian Jamison and Egon Tripodi.

    Their study examines factors that predict individual behaviour during the Covid-19 pandemic in the United States using novel survey data. They find that the burden of measures to stem the pandemic is unevenly distributed across socio-demographic groups in ways that affect behaviour and potentially the spread of illness. Policies that assume otherwise are unlikely to be effective or sustainable.

    BEYOND IMPORTS: The supply chain effects of trade protection on export growth

    Kyle Handley, Fariha Kamal, Ryan Monarch
    01 September 2020

    Tariffs on imports hurt export growth performance in a world of global supply chains, according to analysis of confidential firm-trade linked transaction data on US firms facing new import tariffs in the period 2018-19.

    Researchers Kyle Handley, Fariha Kamal and Ryan Monarch note that the rise of global supply chains means that many firms that import are also exporters. Their study shows that product exports with higher firm-level exposure to new import tariffs had weaker export growth after 2018 than less exposed products. This impact on export growth is equivalent to an ad valorem tariff on US exports of 2-4% for the average product.


    Richard Button, Marek Rojicek, Matt Waldron, Danny Walker 
    07 September 2020

    Covid-19 and the measures taken to contain it have led to a sharp fall in economic activity, which could lead to a cash-flow deficit in the UK corporate sector of at least £135 billion over the next year. That is the conclusion of analysis by Bank of England economists Richard Button, Marek Rojicek, Matt Waldron and Daniel Walker.

    Supported by public policy, UK companies have already raised a large amount of external finance, providing them with liquidity to help bridge some of the disruption. But additional liquidity will be required and equity finance will likely be important during the recovery phase.

    UNDOING EUROPE: Quantifying the cost of disintegration

    Gabriel Felbermayr, Jasmin Gröschl, Inga Heiland 
    06 September 2020


    Rising anti-European sentiments over the past decade have prompted economists to assess the economic consequences of ‘undoing’ Europe. Focusing on trade, research by Gabriel Felbermayr, Jasmin Gröschl and Inga Heiland uses a state-of-the-art sector-level gravity model to estimate the cost savings achieved through each individual step of integration – and then simulate the economic consequences of reversing those steps. 

    The results suggest that if all steps were to be reversed, EU manufacturing exports would drop by 26% and services exports by 12%. A complete breakdown of the EU would also generate significant real consumption losses for all EU members, with small open economies and younger and poorer EU members from central and eastern Europe having the most to lose.


    Olivier Coibion, Yuriy Gorodnichenko, Michael Weber 
    08 September 2020

    A major component of the 27 March CARES Act in the United States was a one-time transfer to all qualifying adults of up to $1200, with $500 per additional child. Using a large-scale survey of US consumers, research by Olivier Coibion, Yuriy Gorodnichenko and Michael Weber studies how these large transfers affected individuals' consumption, saving and labour supply decisions.

    Most respondents report that they primarily saved or paid down debts with their transfers, with only about 15% reporting that they mostly spent it. On average, individuals report having spent or planning to spend only around 40% of the total transfer. The payments appear to have had no meaningful effect on labour supply decisions from these transfer payments, except for 20% of the unemployed who report that the stimulus payment made them search harder for a job.


    Christopher Adam, Mark Henstridge, Stevan Lee 
    08 September 2020

    The small open economies of sub-Saharan Africa are substantially constrained in their ability to respond to the Covid-19 shock through fiscal adjustment. The scale of contraction in external demand, combined with limited fiscal space, means that without substantial external support, feasible policy packages in many of these countries translate to austerity programmes. 

    Research by Christopher Adam, Mark Henstridge and Stevan Lee uses a dynamic general equilibrium model calibrated to data from Uganda to characterise the macroeconomics of the pandemic and its aftermath in sub-Saharan Africa. It finds that the recovery depends significantly on how the public finances are restored to sustainability – and it may be accelerated with external support.


    Michele Valsecchi, Ruben Durante 
    02 September 2020

    Italian provinces more exposed to return migration from areas hit by the pandemic earlier on experienced considerably more Covid-19 deaths in the ensuing months, according to a study by Michele Valsecchi and Ruben Durante.
    The researchers note that many internal migrants returned to their place of origin after the initial outbreaks of Covid-19 and before national lockdowns were in place. Investigating whether this behaviour contributed to the further spread of the pandemic and to its heavy death toll, they look at the case of Italy, using data on the place of origin and destination of internal migrants.


    Dennis Essers, Francesco Grigoli, Evgenia Pugacheva 
    04 September 2020

    Incentives to connect researchers and spur collaborations are likely to result in more dynamic knowledge generation, in turn promoting economic growth, according to analysis of the role of the co-authorship network structure in International Monetary Fund (IMF) working papers.

    Knowledge and ideas – spread, among other channels, through the publication of research papers – are considered key contributing factors to economic growth. In recent years, research papers have increasingly been produced through collaborations among researchers.

    The new study by Dennis Essers, Francesco Grigoli and Evgenia Pugacheva presents evidence on the importance of network effects for starting and maintaining research collaborations. Based on the IMF working papers co-authorship network, it finds that researchers closer to each other are significantly more likely to collaborate.

    THREE CHANNELS BY WHICH EXCHANGE RATE DEPRECIATIONS STILL BENEFIT EXPORTERS: Silvana Tenreyro on open economies, global currencies and trading networks

    Silvana Tenreyro 
    04 September 2020

    Understanding the nature of the global economy remains an important topic of discussion for both policy-makers and researchers. Writing at VoxEU, Silvana Tenreyro presents a summary of two recent evaluations of aspects of the open economy. She summarises work concerning global currencies and trading networks, offering insights into how the research agenda on each area may evolve over the coming years.


    Eric Lonergan, Megan Greene 
    03 September 2020

    By employing dual interest rates, central banks can go beyond targeting short-term interest rates and providing emergency liquidity to provide a stimulus across the economy, according to Eric Lonergan and Megan Greene writing at VoxEU.

    The low interest rate environment since the global financial crisis has led economists and analysts to suggest that major central banks have run out of monetary policy tools with which to face major downturns, including the Covid-19 crisis. These authors argue that a dual interest rate approach could help to eliminate the effective lower bound and give central banks infinite firepower. They conclude that as political support for fiscal stimulus in the face of the Covid-19 crisis wanes, central banks can and should step in with overwhelming force.



    Aakriti Mathur, Rajeswari Sengupta 
    03 September 2020

    Since India's central bank adopted inflation targeting in 2016, the length of monetary policy statements has dramatically declined, linguistic complexity has improved and content is more focused, according to research by Aakriti Mathur and Rajeswari Sengupta.

    Since the 2008 global crisis, significant attention has been paid to central bank communication, especially for countries with an inflation targeting mandate. The new study analyses the monetary policy statements of the Reserve Bank of India, finding a strong relationship between the length of statements and stock market volatility, highlighting the real impacts of effective communication.


    Sarah Allen, Srđan Čapkun, Ittay Eyal, Giulia Fanti, Bryan Ford, James Grimmelmann, Ari Juels, Kari Kostiainen, Sarah Meiklejohn, Andrew Miller, Eswar Prasad, Karl Wüst, Fan Zhang
    04 September 2020

    While central banks already provide wholesale digital currency to financial institutions, a retail central bank digital currency would expand access to more users and provide opportunities for innovative central banking. Writing at Vox, Sarah Allen, Srđan Čapkun, Ittay Eyal, Giulia Fanti, Bryan Ford, James Grimmelmann, Ari Juels, Kari Kostiainen, Sarah Meiklejohn, Andrew Miller, Eswar Prasad, Karl Wüst and Fan Zhang examine the benefits, risks and design considerations.

    Many central banks are considering, and some are even piloting, central bank digital currency. The authors provide an overview of important considerations for central bank digital currency design. The design must balance the benefits of expanding access to more users and providing opportunities for innovative central banking with the potential risks created by retail central bank digital currency deployment.

    RESOLVING LAND TENURE CONFLICTS ON NATIVE AMERICAN RESERVATIONS: Evidence on the burden of non-transferable property rights

    Christian Dippel, Dustin Frye, Bryan Leonard 
    03 September 2020

    Analysis of the impact of non-transferable property rights on the cultivation of land – which mean that it can’t be sold, collateralised or developed – suggests either converting allotted-trust lands to private property or reverting the land to tribal control. 

    The researchers – Christian Dippel, Dustin Frye and Bryan Leonard – note that in 1887, the US government began allotting millions of acres of previously tribe-owned land to individual Native American households. The Indian Reorganization Act ended that policy in 1934, placing all allotted-trust land into trusteeship and creating a patchwork of land tenures that characterise reservations to this day. The new study suggests ways to improve a system that severely impedes economic development.


    Runjing Lu interviewed by Tim Phillips, 4 September 2020

    Many Americans blame China for Covid-19. Runjing Lu tells Tim Phillips that the way politicians have exploited the pandemic has led to an increase in prejudice against the US Asian community.

    Race and Covid-19: The long-run impact of discrimination

    Graziella Bertocchi, 9 September 2020         

    Graziella Bertocchi (University of Modena & EIEF) uses a detailed individual-level dataset from Cook County, Illinois, to explore the relationship between COVID-19 mortality and race. Not only are Black Americans disproportionally affected by COVID-19, but they also started to succumb to it earlier than other groups. Such asymmetric effects can be traced back to racial segregation introduced by discriminatory lending practices in the 1930s