From:                                         Sophie Roughton <>

Sent:                                           Montag, 16. November 2020 11:15

To:                                               IHS Library

Subject:                                     CEPR Discussion Paper Week Ending 15/11/2020


Summary of CEPR Discussion Papers for the week ending 15/11/2020

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CEPR Discussion Papers for the week ending 15 November 2020




Summary of Discussion Papers uploaded to our website week ending 15/11/2020 (for details see below).
This email lists all the CEPR Discussion Papers uploaded to in the last week. Clicking on the Discussion Paper number in the list below will take you to the abstract page for that paper and clicking on the PDF link will take you directly to the paper itself if you are a Corporate Member of CEPR, a CEPR Research Fellow or Affiliate or a subscriber to CEPR Discussion Papers.
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DP15454 Vernacularization and Linguistic Democratization

Author(s): Christine Binzel, Andreas Link, Rajesh Ramachandran

Date of Publication: November 2020

Programme Area(s): MG

Keyword(s): Inclusive institutions, Language, economic development, Protestant Reformation

Abstract: The use of a language in written and formal contexts that is distinct from the varieties used in everyday communication - such as Latin in early modern Europe and Standard Arabic in the Arabic-speaking world - comes with benefits, but also with costs. Drawing on city-level data on all books and pamphlets published in Europe between 1451 and 1600, we document that the Protestant Reformation led to a sharp rise in vernacular printing, such that by the end of the 16th century, the majority of works were printed in spoken tongues rather than in Latin. This transformation allowed broader segments of society to access knowledge. It was also associated, as we show, with a significant diversification in the composition of authors and book content. Finally, we provide evidence that an increase in vernacular printing at the city level is strongly correlated with higher population growth - a proxy for economic development - and in the birth of notable innovators and creative individuals. In this way, we argue that the vernacularization of printing was an important driver of European dynamism in the early modern period.


DP15453 From Dual to Unified Employment Protection: Transition and Steady State

Author(s): Juan J. Dolado, Etienne Lale, Nawid Siassi

Date of Publication: November 2020

Programme Area(s): LE


Abstract: Three features of real-life reforms of dual employment protection legislation (EPL) systemsnare particularly hard to study through the lens of standard labour-market search models: (i) the excess job turnover implied by dual EPL, (ii) the non-retroactive nature of EPL reforms, and (iii) the transition dynamics from dual to a unified EPL system. In this paper we develop a computationally tractable model addressing these issues. Our main finding is that the welfare gains of reforming a dual EPL system are sizeable and achieved mostly through a decrease in turnover at short job tenures. This conclusion continues to hold in more general settings featuring wage rigidities, heterogeneity in productivity upon matching, and human capital accumulation. We also find substantial cross-sectional heterogeneity in welfare effects along the transition to a unified EPL scheme. Given that the model is calibrated to data from Spain, often considered as the epitome of a labour market with dual EPL, our results should provide guidance for a wide range of reforms of dual EPL systems.


DP15452 The Spanish Labour Market at the Crossroads: Covid19 meets the Megatrends

Author(s): Juan J. Dolado, Florentino Felgueroso, Juan Jimeno

Date of Publication: November 2020

Programme Area(s): LE


Abstract: This paper reviews the experience so far of the Spanish labour market during the Covid19 crisis in the light of current institutions, past performance during recessions, and the policy measures adopted during the pandemic. Emphasis is placed on the role of worldwide trends in labour markets (automation and AI) in shaping a potential recovery from this (hopefully) transitory shock through a big reallocation process of employment and economic activity.


DP15451 Daily Tracker of Global Economic Activity. A Close-Up of the Covid-19 Pandemic

Author(s): Gabriel Pérez-Quirós, Elena Diaz

Date of Publication: November 2020

Programme Area(s): MEF

Keyword(s): Global Economic Activity, commodity prices, factor models, Genetic Algorithm

Abstract: This paper develops a novel indicator of global economic activity, the GEA Tracker, which is based on commodity prices selected recursively through a genetic algorithm. The GEA Tracker allows for daily real-time knowledge of international business conditions using a minimum amount of information. We find that the GEA Tracker outperforms its competitors in forecasting stock returns, especially in emerging markets, and in predicting standard indicators of international business conditions. We show that an investor would have inexorably profited from using the forecasts provided by the GEA Tracker to weight his/her portfolio. Finally, the GEA Tracker allows us to present the daily evolution of global economic activity during the COVID-19 pandemic.


DP15450 The Sources of Fiscal Fluctuations

Author(s): Antoine Levy, Luca Antonio Ricci, Alejandro Werner

Date of Publication: November 2020

Programme Area(s): IMF, PE

Keyword(s): Fiscal, deficit, debt, Fluctuations, Insurance, Sovereign debt

Abstract: This paper assesses the dynamic impact of global macroeconomic conditions, commodity price movements, shifts in portfolio preferences, and domestic shocks on fiscal outcomes – notably the budget deficit, its main components, and debt – across a wide range of countries. Heterogeneity is investigated across the level of development and other structural characteristics. Dynamics are explored via panel local projections, while robustness is assessed via dynamic panel and system GMM regressions. World growth, financial risk appetite, political events, and commodity export prices are key determinants of fiscal outcomes in EM, while domestic growth, commodity import prices, and banking crises appear to matter more in AE. Our estimates help quantify the amount of fiscal risk generated by various factors, and thus provide inputs for the design of potential insurance mechanisms or state-contingent debt instruments that could assist in smoothing fiscal fluctuations.


DP15449 Fifty Shades of QE: Conflicts of Interest in Economic Research

Author(s): Brian Fabo, Martina Jancokova, Elisabeth Kempf, Luboš Pástor

Date of Publication: November 2020

Programme Area(s): FE, MEF

Keyword(s): Conflict Of Interest, central bank, Quantitative easing, QE, career concerns

Abstract: Central banks sometimes evaluate their own policies. To assess the inherent conflict of interest, we compare the research findings of central bank researchers and academic economists regarding the macroeconomic effects of quantitative easing (QE). We find that central bank papers report larger effects of QE on output and inflation. Central bankers are also more likely to report significant effects of QE on output and to use more positive language in the abstract. Central bankers who report larger QE effects on output experience more favorable career outcomes. A survey of central banks reveals substantial involvement of bank management in research production.


DP15448 Search, Showrooming, and Retailer Variety

Author(s): Heski Bar-Isaac, Sandro Shelegia

Date of Publication: November 2020

Programme Area(s): IO

Keyword(s): consumer search, Pricing, Retailer Variety, Showrooming

Abstract: In a model of consumer search, we trace through effects of changes in retail variety. Some consumers visit stores that offer many products that are imperfect substitutes, learn which product they like most, and then buy it elsewhere. These showroomers put upward pressure on prices elsewhere because they populate the market with consumers who know their preferences, in the style of the Diamond paradox (Diamond (1971)). Changes in retail variety affect search behaviour and all market outcomes. One change that we examine is the introduction of a shopping venue where prices are readily available but product information is not.


DP15447 Revenge of the Experts: Will COVID-19 Renew or Diminish Public Trust in Science?

Author(s): Barry Eichengreen, Cevat Aksoy, Orkun Saka

Date of Publication: November 2020

Programme Area(s): MG


Abstract: It is sometimes said that an effect of the COVID-19 pandemic will be heightened appreciation of the importance of scientific research and expertise. We test this hypothesis by examining how exposure to previous epidemics affected trust in science and scientists. Building on the “impressionable years hypothesis” that attitudes are durably formed during the ages 18 to 25, we focus on individuals exposed to epidemics in their country of residence at this particular stage of the life course. Combining data from a 2018 Wellcome Trust survey of more than 75,000 individuals in 138 countries with data on global epidemics since 1970, we show that such exposure has no impact on views of science as an endeavor but that it significantly reduces trust in scientists and in the benefits of their work. We also illustrate that the decline in trust is driven by the individuals with little previous training in science subjects. Finally, our evidence suggests that epidemic-induced distrust translates into lower compliance with health-related policies in the form of negative views towards vaccines and lower rates of child vaccination.


DP15446 A hitchhiker guide to empirical macro models

Author(s): Fabio Canova, Filippo Ferroni

Date of Publication: November 2020

Programme Area(s): MEF

Keyword(s): VARs, local projections, Bayesian inference, identification, Forecasts, Missing values, Filters and Cycles, Matlab

Abstract: This paper describes a package which uses MATLAB functions and routines to estimate VARs, local projections and other models with classical or Bayesian methods. The toolbox allows a researcher to conduct inference under various prior assumptions on the parameters, to produce point and density forecasts, and to trace out the causal effect of shocks using a number of identification schemes. The toolbox is equipped to handle missing observations, mixed frequencies and time series with large cross-section information (e.g. panels of VAR and FAVAR). It also contains a number of routines to extract cyclical information and to date business cycles. We describe the methodology employed and implementation of the functions with a number of practical examples.


DP15445 Screening and Loan Origination Time: Lending Standards, Loan Defaults and Bank Failures

Author(s): José Luis Peydró, Gabriel Jiménez, Mikel Bedayo, Raquel Vegas

Date of Publication: November 2020

Programme Area(s): FE, MEF

Keyword(s): loan origination time, Lending standards, Credit cycles, Defaults, bank failures, screening

Abstract: We show that loan origination time is key for bank lending standards, cycles, defaults and failures. We exploit the credit register from Spain, with the time of a loan application and its granting. When VIX is lower (booms), banks shorten loan origination time, especially to riskier firms. Bank incentives (capital and competition), capacity constraints, and borrower-lender information asymmetries are key mechanisms driving results. Moreover, shorter (loan-level) origination time is associated with higher ex-post defaults, also using variation from holidays. Finally, shorter precrisis origination time –more than other lending conditions – is associated with more bank-level failures in crises, consistent with lower screening.


DP15444 Storing Power: Market Structure Matters

Author(s): Natalia Fabra, David Andrés-Cerezo

Date of Publication: November 2020

Programme Area(s): IO

Keyword(s): Storage, electricity, market structure, investment, Vertical Relations

Abstract: We asses how firms' incentives to operate and invest in energy storage depend on the market structure. For this purpose, we characterize equilibrium market outcomes allowing for market power in storage and/or production, as well as for vertical integration between storage and production. Market power reduces overall efficiency through two channels: it induces an inefficient use of the storage facilities, and it distorts investment incentives. The worst outcome for consumers and total welfare occurs under vertical integration. We illustrate our theoretical results by simulating the Spanish wholesale electricity market for different levels of storage capacity. The results are key to understand how to regulate energy storage, an issue which is critical for the deployment of renewables.


DP15443 Institutions and the uneven geography of the first wave of the COVID-19 pandemic

Author(s): Andrés Rodríguez-Pose, Chiara Burlina

Date of Publication: November 2020

Programme Area(s): IT

Keyword(s): COVID-19, Pandemic, institutions, regions, Europe

Abstract: This paper examines the uneven geography of COVID-19-related excess mortality during the first wave of the pandemic in Europe, before assessing the factors behind the geographical differences in impact. The analysis of 206 regions across 23 European countries reveals a distinct COVID-19 geography. Excess deaths were concentrated in a limited number of regions – expected deaths exceeded 20% in just 16 regions – with more than 40% of the regions considered experiencing no excess mortality during the first six months of 2020. Highly connected regions, in colder and dryer climates, with high air pollution levels, and relatively poorly endowed health systems witnessed the highest incidence of excess mortality. Institutional factors also played an important role. The first wave hit regions with a combination of weak and declining formal institutional quality and fragile informal institutions hardest. Low and declining national government effectiveness, together with a limited capacity to reach out across societal divides, and a frequent tendency to meet with friends and family were powerful drivers of regional excess mortality.


DP15442 How ‘smart’ are Smart Specialisation strategies?

Author(s): Marco Di Cataldo, Vassilis Monastiriotis, Andrés Rodríguez-Pose

Date of Publication: November 2020

Programme Area(s): IT

Keyword(s): Smart specialisation, EU policy, regions, Europe

Abstract: The introduction of Smart Specialisation (S3) as a fundamental pillar of the 2014 reform of the European Union (EU) Cohesion Policy has represented a significant strategic shift in European development intervention. S3 strategies are aimed at mobilising the economic potential of each country and region of the EU, by allowing a more place-based and bottom-up approach to development. However, despite the salience that S3 has acquired in a short period of time, there has been no European-wide evaluation of the extent to which S3 strategies truly reflect the economic characteristics and potential of the territories where they are being implemented. This paper examines the characteristics of S3 strategies across Europe – by focusing on their development axes, economic/scientific domains, and policy priorities – to assess whether this is the case. The results show that S3 strategies display a proliferation of objectives, a problem which particularly affects those areas with weaker government quality. Moreover, strategies are generally loosely connected with the intrinsic conditions of each region and mostly mimic what neighbouring areas are doing. The lack of more concise and focused S3 strategies is likely to undermine the effectiveness of what is, otherwise, a very interesting and worthwhile policy experiment.


DP15441 Did U.S. Politicians Expect the China Shock?

Author(s): Matilde Bombardini, Bingjing Li, Francesco Trebbi

Date of Publication: November 2020

Programme Area(s): IT, PE


Abstract: In the two decades straddling China's WTO accession, the China Shock, i.e. the rapid trade integration of China in the early 2000's, has had a profound economic impact across U.S. regions. It is now both an internationally litigated issue and the casus belli for a global trade war. Were its consequences unexpected? Did U.S. politicians have imperfect information about the extent of China Shock's repercussions in their district at the time when they voted on China's Normal Trade Relations status? Or did they have accurate expectations, yet placed a relatively low weight on the subconstituencies that ended up being adversely affected? Information sets, expectations, and preferences of politicians are fundamental, but unobserved determinants of their policy choices. We apply a moment inequality approach designed to deliver unbiased estimates under weak informational assumptions on the information sets of members of Congress. This methodology offers a robust way to test hypotheses about the expectations of politicians at the time of their vote. Employing repeated roll call votes in the U.S. House of Representatives on China's Normal Trade Relations status, we formally test what information politicians had at the time of their decision and consistently estimate the weights that constituent interests, ideology, and other factors had in congressional votes. We show how assuming perfect foresight of the shocks biases the role of constituent interests and how standard proxies to modeling politician's expectations bias the estimation. We cannot reject that politicians could predict the initial China Shock in the early 1990's, but not around 2000, when China started entering new sectors, and find a moderate role of constituent interests, compared to ideology. Overall, U.S. legislators appear to have had accurate information on the China Shock, but did not place substantial weight on its adverse consequences.


DP15440 Foreign Currency Borrowing of Corporations as Carry Trades: Evidence from India

Author(s): Viral V Acharya, Siddharth Vij

Date of Publication: November 2020

Programme Area(s): FE

Keyword(s): emerging markets, foreign currency debt, Foreign exchange risk, taper tantrum

Abstract: We establish that macroprudential policies limiting capital flows can curb risks arising from corporate foreign currency borrowing in emerging markets. Using detailed firm- level data from India, we show that propensity to issue foreign currency debt for the same firm is higher when the difference in short-term interest rates between India and the US is higher, i.e., when the dollar ‘carry trade’ is more profitable; this behavior is driven by the period after the global financial crisis. The positive relationship between issuance and the ‘carry trade’ breaks down once regulators institute more stringent interest-rate caps on foreign currency borrowing. Riskier borrowers such as importers and those with higher interest costs cut issuance most. Firm equity exposure to foreign exchange risk rose after issuance in favorable funding conditions and emerged as a source of external sector vulnerability during the ‘taper tantrum’ of 2013. Macroprudential policy action limiting capital flows is able to nullify this effect, such as during the market stress due to the COVID-19 pandemic.


DP15439 Static and Dynamic Inefficiencies in an Optimizing Model of Epidemics

Author(s): Pietro Garibaldi, Christopher Pissarides, Espen R Moen

Date of Publication: November 2020

Programme Area(s): LE, PE

Keyword(s): SIR models, matching model, COVID-19, Social distancing, rat race, herd immunity

Abstract: In an optimizing model of epidemics several externalities arise when agents shield to avoid infection. Optimizing behaviour delays herd immunity but also reduces overall infections to approximately the minimum consistent with herd immunity. For reasonable parameter values, and with no vaccine, we find that agents delay too much because of a rat race to shield: they shield too much in the hope that others catch the disease and reach herd immunity. This and other externalities drive large wedges between private and social outcomes. The expectation of a vaccine reverses the effects, and agents shield too little.


DP15438 What a drag it is getting old? Mental health and loneliness beyond age 50

Author(s): Jan C. van Ours

Date of Publication: November 2020

Programme Area(s): LE

Keyword(s): mental health, loneliness, age, old people

Abstract: This paper studies mental health and loneliness in the Netherlands for individuals beyond age 50. The analysis is based on panel data over the period 2008 to 2018 and focuses on the effects of life events and aging. It appears that mental health gets worse and loneliness increases if individuals lose their partner or become unemployed. On average, mental health of males and high educated females improves at retirement. With respect to aging, the main conclusions are that mental health improves while loneliness goes down at least up to the high 70s. From the perspective of mental health and loneliness it does not seem to be a drag getting old.


DP15437 Do Family Policies Reduce Gender Inequality? Evidence from 60 Years of Policy Experimentation

Author(s): Henrik Kleven, Camille Landais, Johanna Posch, Andreas Steinhauer, Josef Zweimüller

Date of Publication: November 2020

Programme Area(s): LE, PE


Abstract: Do family policies reduce gender inequality in the labor market? We contribute to this debate by investigating the joint impact of parental leave and child care, using administrative data covering the labor market and birth histories of Austrian workers over more than half a century. We start by quasi-experimentally identifying the causal effects of all family policy reforms since the 1950s on the full dynamics of male and female earnings. We then map these causal estimates into a decomposition framework a la Kleven, Landais and Søgaard (2019) to compute counterfactual gender gaps. Our results show that the enormous expansions of parental leave and child care subsidies have had virtually no impact on gender convergence.



Sophie Roughton
0207 183 8812






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