Showing papers by "Institute for the Study of Labor published in 2020"

The Cost of the COVID-19 Crisis: Lockdowns, Macroeconomic Expectations, and Consumer Spending

Abstract: We study how the differential timing of local lockdowns due to COVID-19 causally affects households’ spending and macroeconomic expectations at the local level using several waves of a customized survey with more than 10,000 respondents. About 50% of survey participants report income and wealth losses due to the corona virus, with the average losses being $5,293 and $33,482 respectively. Aggregate consumer spending dropped by 31 log percentage points with the largest drops in travel and clothing. We find that households living in counties that went into lockdown earlier expect the unemployment rate over the next twelve months to be 13 percentage points higher and continue to expect higher unemployment at horizons of three to five years. They also expect lower future inflation, report higher uncertainty, expect lower mortgage rates for up to 10 years, and have moved out of foreign stocks into liquid forms of savings. The imposition of lockdowns can account for much of the decline in employment in recent months as well as declines in consumer spending. While lockdowns have pronounced effects on local economic conditions and households’ expectations, they have little impact on approval ratings of Congress, the Fed, or the Treasury but lead to declines in the approval of the President.

How the Covid-19 Lockdown Affected Gender Inequality in Paid and Unpaid Work in Spain

Abstract: The covid-19 pandemic led many countries to close schools and declare lockdowns during the Spring of 2020, with important impacts on the labor market. We document the effects of the covid-19 lockdown in Spain, which was hit early and hard by the pandemic and suffered one of the strictest lockdowns in Europe. We collected rich household survey data in early May of 2020. We document large employment losses during the lockdown, especially in "quarantined" sectors and non-essential sectors that do not allow for remote work. Employment losses were mostly temporary, and hit lower-educated workers particularly hard.Women were slightly more likely to lose their job than men, and those who remained employed were more likely to work from home. The lockdown led to a large increase in childcare and housework, given the closing of schools and the inability to outsource. We find that men increased their participation in housework and childcare slightly, but most of the burden fell on women, who were already doing most of the housework before the lockdown. Overall, we find that the covid-19 crisis appears to have increased gender inequalities in both paid and unpaid work in the short-term.

Artificial Intelligence Against Covid-19: An Early Review

Abstract: Artificial Intelligence (AI) is a potentially powerful tool in the fight against the COVID- 19 pandemic. Since the outbreak of the pandemic, there has been a scramble to use AI. This article provides an early, and necessarily selective review, discussing the contribution of AI to the fight against COVID-19, as well as the current constraints on these contributions. Six areas where AI can contribute to the fight against COVID-19 are discussed, namely i) early warnings and alerts, ii) tracking and prediction, iii) data dashboards, iv) diagnosis and prognosis, v) treatments and cures, and vi) social control. It is concluded that AI has not yet been impactful against COVID-19. Its use is hampered by a lack of data, and by too much data. Overcoming these constraints will require a careful balance between data privacy and public health, and rigorous human-AI interaction. It is unlikely that these will be addressed in time to be of much help during the present pandemic. In the meantime, extensive gathering of diagnostic data on who is infectious will be essential to save lives, train AI, and limit economic damages.

Expectations, reference points, and compliance with COVID-19 social distancing measures

Abstract: We surveyed representative samples of Italian residents at three critical points in the COVID-19 pandemic, to test whether and how intentions to comply with social-isolation restrictions respond to the duration of their possible extension. Individuals reported being more likely to reduce, and less likely to increase, their self-isolation effort if negatively surprised by a given hypothetical extension (i.e., if the extension is longer than what they expected), whereas positive surprises had no impact. These results are consistent with reference-dependent preferences, with individual expectations serving as a reference point, and loss aversion. Our findings indicate that public authorities should carefully manage expectations about policy measures and account for behavioral reactions to deviations from previous announcements.

Non est Disputandum de Generalizability? A Glimpse into The External Validity Trial

Abstract: While empirical economics has made important strides over the past half century, there is a recent attack that threatens the foundations of the empirical approach in economics: external validity. Certain dogmatic arguments are not new, yet in some circles the generalizability question is beyond dispute, rendering empirical work as a passive enterprise based on frivolity. Such arguments serve to caution even the staunchest empirical advocates from even starting an empirical inquiry in a novel setting. In its simplest form, questions of external validity revolve around whether the results of the received study can be generalized to different people, situations, stimuli, and time periods. This study clarifies and places the external validity crisis into perspective by taking a unique glimpse into the grandest of trials: The External Validity Trial. A key outcome of the proceedings is an Author Onus Probandi, which outlines four key areas that every study should report to address external validity. Such an evaluative approach properly rewards empirical advances and justly recognizes inherent empirical limitations. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

The Short-Term Economic Consequences of COVID-19: Exposure to Disease, Remote Work and Government Response

Abstract: In this ongoing project, we examine the short-term consequences of COVID-19 on employment and wages in the United States. Guided by a pre-analysis plan, we document the impact of COVID-19 at the national-level using a simple difference and test whether states with relatively more confirmed cases/deaths were more affected. Our findings suggest that COVID-19 increased the unemployment rate, decreased hours of work and labor force participation and had no significant impacts on wages. The negative impacts on labor market outcomes are larger for men, younger workers, Hispanics and less-educated workers. This suggest that COVID-19 increases labor market inequalities. We also investigate whether the economic consequences of this pandemic were larger for certain occupations. We built three indexes using ACS and O*NET data: workers relatively more exposed to disease, workers that work with proximity to coworkers and workers who can easily work remotely. Our estimates suggest that individuals in occupations working in proximity to others are more affected while occupations able to work remotely are less affected. We also find that occupations classifed as more exposed to disease are less affected, possibly due to the large number of essential workers in these occupations.

When to Release the Lockdown? A Wellbeing Framework for Analysing Costs and Benefits

Abstract: In choosing when to end the lockdown, policy-makers have to balance the impact of the decision upon incomes, unemployment, mental health, public confidence and many other factors, as well as (of course) upon the number of deaths from COVID-19. To facilitate the decision it is helpful to forecast each factor using a single metric. We use as our metric the number of Wellbeing-Years resulting from each date of ending the lockdown. This new metric makes it possible to compare the impact of each factor in a way that is relevant to all public policy decisions.

Labour Supply in the Early Stages of the COVID-19 Pandemic: Empirical Evidence on Hours, Home Office, and Expectations

Abstract: Using a survey module administered in late March 2020, we analyze how working hours change under the social distancing regulations enacted to fight the COViD-19 pandemic. We study the Netherlands, which are a prototypical Western European country, both in terms of its welfare system and its response to the pandemic. We show that total hours decline and more so for the self-employed and those with lower educational degrees. The education gradient appears because workers with atertiary degree work a much higher number of hours from home. The strength of this effect is dampened by the government defining some workers to be essential for the working of the economy. Across sectors, we show that there are two clusters: One dominated by office-type occupations with high shares of academics, home-office hours, and low fractions of essential workers; and one where manual tasks and social interactions are prevalent with low shares of academics, home office hours, and often high shares of essential workers. Short-term expectations show that workers expect current patterns to prevail and that they expect a lot from government support schemes. In particular, many workers expect to keep their jobs in early June due to government support and the expected unemployment response is far lower than in the U.S. or the U.K..

The impact of high ambient temperatures on delivery timing and gestational lengths

Abstract: Evidence suggests that heat exposure increases delivery risk for pregnant women. Acceleration of childbirth leads to shorter gestation, which has been linked to later health and cognitive outcomes. However, estimates of the aggregate gestational losses resulting from hot weather are lacking in the literature. Here, we use estimated shifts in daily county birth rates to quantify the gestational losses associated with heat in the United States from 1969 to 1988. We find that extreme heat causes an increase in deliveries on the day of exposure and on the following day and show that the additional births were accelerated by up to two weeks. We estimate that an average of 25,000 infants per year were born earlier as a result of heat exposure, with a total loss of more than 150,000 gestational days annually. Absent adaptation, climate projections suggest additional losses of 250,000 days of gestation per year by the end of the century. Hot weather can cause early childbirth, meaning shorter gestation. Daily US birth-rate data from 1969 to 1988 show that deliveries increased on hot days and that those births occurred up to two weeks early. Around 25,000 infants were born early each year, representing over 150,000 gestational days lost annually.

How Do Travel Costs Shape Collaboration

Abstract: We develop a simple theoretical framework for thinking about how geographic frictions, and in particular travel costs, shape scientists’ collaboration decisions and the types of projects that are d

Air Pollution Exposure and COVID-19

Abstract: In light of the existing preliminary evidence of a link between Covid-19 and poor air quality, which is largely based upon correlations, we estimate the relationship between long term air pollution exposure and Covid-19 in 355 municipalities in the Netherlands. Using detailed secondary and administrative data we find compelling evidence of a positive relationship between air pollution, and particularly PM2.5 concentrations, and Covid-19 cases, hospital admissions and deaths. This relationship persists after controlling for a wide range of explanatory variables. Our results indicate that a 1 μ/m3 increase in PM2.5 concentrations is associated with 9.4 more Covid-19 cases, 3.0 more hospital admissions, and 2.3 more deaths. The relationship between Covid-19 and air pollution withstands a number of sensitivity and robustness exercises including instrumenting pollution to mitigate potential endogeneity and modelling spatial spillovers using spatial econometric techniques.

A Literature Review of the Economics of Covid-19

Abstract: The goal of this piece is to survey the emerging and rapidly growing literature on the economic consequences of COVID-19 and government response, and to synthetize the insights emerging from a very large number of studies. This survey (i) provides an overview of the data sets used to measure social distancing and COVID-19 cases and deaths; (ii) reviews the literature on the determinants of compliance and effectiveness of social distancing; (iii) summarizes the literature on the socio-economic consequences of COVID-19 and government interventions, focusing on labor, health, gender, discrimination and environmental aspects; and (iv) discusses policy proposals.

Internal Capital Markets in Times of Crisis: The Benefit of Group Affiliation

Abstract: Firms affiliated with business groups survive the stress of the global financial and euro crises better than unaffiliated firms. Using granular data from Italy, we show that better performance stems partly from access to an internal capital market, as the survival value of group-affiliated firms increases with group-wide cash flow. Internal cash transfers increase when banks’ health deteriorates, with funds moving from cash-rich to cash-poor firms and, some evidence suggests, to firms with favorable investment opportunities. Internal capital markets’ role thus increases when external markets (banks) are distressed.

Observability, Social Proximity, and the Erosion of Norm Compliance

Abstract: We study how individuals' compliance with norms of pro-social behavior is influenced by other actors' compliance in a novel, dynamic, and non-strategic experimental setting. We are particularly interested in the role that social proximity among peers plays in eroding or upholding norm compliance. Our results suggest that social proximity is crucial. In settings without known proximity, norm compliance erodes swiftly because participants only conform to observed norm violations of their peers while ignoring norm compliance. With known social proximity, participants conform to both types of observed behaviors, thus halting the erosion of norm compliance. Our findings stress the importance of the broader social context for norm compliance and show that, even in the absence of social sanctions, compliance can be sustained in repeated interactions, provided there is group identification, as is the case in many social encounters in natural and online environments.

EU Jobs at Highest Risk of Covid-19 Social Distancing: Will the Pandemic Exacerbate Labour Market Divide?

Abstract: This paper employs a skills-based approach to identify individual and jofactors most likely to be impacted by social distancing measures and practices due to

Pandemic Meets Pollution: Poor Air Quality Increases Deaths by COVID-19

Abstract: We study the impact of short-term exposure to ambient air pollution on the spread and severity of COVID-19 in Germany We combine data on county-by-day level on confirmed cases and deaths with information on local air quality and weather conditions and exploit short-term variation in the concentration of particulate matter (PM10) and ozone (O3) We apply fixed effects regressions controlling for global time-varying confounding factors and regional time-invariant confounding factors on the county level, as well as potentially confounding weather conditions and the regional stage of the pandemic We find significant positive effects of PM10 concentration after the onset of the illness on COVID-19 deaths specifically for elderly patients (80+ years): higher levels of air pollution by one standard deviation 3 to 12 days after developing symptoms increase deaths by 30 percent (males) and 35 percent (females) of the mean In addition, air pollution raises the number of confirmed cases of COVID-19 The timing of results supports mechanisms of air pollution affecting the severity of already realized infections Air pollution appears not to affect the probability of infection itself

Estimation of a Roy/Search/Compensating Differential Model of the Labor Market

Abstract: The four most important models of post-schooling wage determination in economics are almost certainly human capital, the Roy model, the compensating differentials model, and the search model. All four lead to wage heterogeneity. While separating human capital accumulation from the others is quite common, we know remarkably little about the relative importance of the other three sources of inequality. The key aspect of the Roy model is comparative advantage in which some workers earn more than others as a result of different skill levels at labor market entry. Workers choose the job for which they achieve the highest level of earnings. By contrast, in a compensating wage differentials model a worker is willing to be paid less in order to work on a job that they enjoy more. Thus, workers with identical talent can earn different salaries. Finally, workers may have had poor luck in finding their ideal job. This type of search friction can also lead to heterogeneity in earnings as some workers may work for higher wage firms. In short, one worker may earn more than another a) because he has more talent at labor market entry (Roy Model), b) because he has accu- mulated more human capital while working (human capital), c) because he has chosen more unpleasant job (compensating differentials), or d) because he has had better luck in finding a good job (search frictions). The goal of this work is to uncover the contribution of these different components to overall earnings inequality.

The Pied Piper: Prizes, Incentives, and Motivation Crowding-in

Abstract: In mainstream business and economics, prizes such as the Presidential Medal of Freedom are understood as special types of incentives, with the peculiar features of being awarded in public, and of having largely symbolic value. Informed by both historical considerations and philosophical instances, our study defines fundamental theoretical differences between incentives and prizes. The conceptual factors highlighted by our analytical framework are then tested through a laboratory experiment. The experimental exercise aims to analyze how prizes and incentives impact actual individuals’ behavior differently. Our results show that both incentives (monetary and contingent) and prizes (non-monetary and discretional rewards) boost motivation to perform if awarded publicly, but only prizes crowd in motivation promoting virtuous attitude.

Covid-19, Stay-at-Home Orders and Employment: Evidence from CPS Data

Abstract: In this paper, we examine the short-term consequences of COVID-19 and evaluate the impacts of stay-at-home orders on employment and wages in the United States. Guided by a pre-analysis plan, we document that COVID-19 increased the unemployment rate, decreased hours of work and labor force participation, especially for younger workers, non-white, not married and less-educated workers. We built four indexes (exposure to disease, proximity to coworkers, work remotely and critical workers) to study the impact of COVID-19. We find that workers that can work remotely are significantly less likely to have their labor market outcomes affected, while workers working in proximity to coworkers are more affected.The unemployment effects are significantly larger for states that implemented stay-at-home orders. Our estimates suggest that, as of early May, these policies increased unemployment by nearly 4 percentage points, but reduced COVID-19 cases by 186,600– 311,000, and deaths by 17,851–23,325. We apply our estimates to compute lost income ($18.6–$21.4 billion), reduced government income tax revenues ($3.4–$5.5 billion), increased unemployment insurance benefit payments ($5–$5.8 billion) and reduced hospital costs ($0.7–$1.2 billion). Despite the jobs lost, age adjusted value of statistical life suggests that stay-at-home orders are cost effective.

The Political Scar of Epidemics

Abstract: What political legacy is bequeathed by national health crises such as epidemics? We show that epidemic exposure in an individual’s “impressionable years” (ages 18 to 25) has a persistent negative effect on confidence in political institutions and leaders. The effect is specific to the impressionable ages, observed only for political institutions and leaders, and does not carry over to other institutions and individuals with one key exception. That exception is strong negative effects on confidence in public health systems, suggesting that the loss of confidence in political institutions and leaders is associated with the (in)effectiveness of a government’s healthcare-related responses to past epidemics. We document this mechanism, showing that weak governments took longer to introduce policy interventions in response to the COVID-19 outbreak, and demonstrating that the loss of political trust is larger for individuals who experienced epidemics under weak governments. Finally, we report evidence suggesting that the epidemic-induced loss of political trust may discourage electoral participation in the long term.

Hitting Where it Hurts Most: Covid-19 and Low-Income Urban College Students

Abstract: Using administrative data merged with a rich student survey collected during the summer of 2020, we document the immediate and short-term educational, financial, and personal burdens of New York city's low-income public university students during the COVID-19 pandemic, the closing of college campuses, and the city's shutdown. Low-income students are identified by whether they ever received the federal Pell Grant. We find that low-income college students were 8% more likely than general students at the same college to experience challenges while attending online classes during spring 2020 mostly due to higher childcare responsibilities, greater lack of internet, or greater probability of being sick or stressed. They were also 11% more likely to consider dropping a course because of concerns that their grade would jeopardize their financial assistance. Despite being 21% more likely to receive financial support from emergency relief grants and stimulus payments and unemployment benefits from the CARES Act, low-income college students have or are currently more at risk of experiencing financial distress including securing basic food needs (46% higher) and shelter (62% higher), facing job loss (15% higher), or losing their financial aid (12% higher). We identify potential mechanisms driving these results and correct for multiple hypothesis testing. Our findings underscore the need to target a variety of services and assistance towards low-income college students to secure their wellbeing and college continuity.

The Impact of Sickness Absenteeism on Firm Productivity: New Evidence from Belgian Matched Employer–Employee Panel Data

Abstract: Using rich longitudinal matched employer–employee data for Belgium, we provide a first investigation of the impact of sickness absenteeism on firms’ productivity. To do so, we estimate a production function augmented with a firm‐level measure of sickness absenteeism that we constructed from worker‐level information on nonworked hours due to illness or injury. We deal with the endogeneity of inputs and sickness absenteeism by applying a modified version of the semiparametric control function method developed by Ackerberg, Caves, and Fraser (2015), which explicitly takes firm fixed unobserved heterogeneity into account. Our main finding is that, in general, sickness absenteeism substantially dampens firms’ productivity. However, further analyses show that the impact varies according to several workforce and firm characteristics. Sickness absenteeism is more detrimental to firm productivity when absent workers are high tenure or blue collar. Moreover, it is especially harmful to industrial, capital‐intensive, and small enterprises. These findings are consistent with the idea that sickness absenteeism is more problematic when absent workers have in‐depth firm‐/task‐specific knowledge, when the employees’ work is highly interconnected (e.g., along the assembly line), and when firms face more organizational limitations in substituting absent workers.

Inferring Cognitive Heterogeneity From Aggregate Choices

Abstract: Manzini and Mariotti thank the ESRC for the financial support provided under grant ES/J012513/1.

Robots and the Gender Pay Gap in Europe

Abstract: Could robotization make the gender pay gap worse? We provide the first large-scale evidence on the impact of industrial robots on the gender pay gap using data from 20 European countries. We show that robot adoption increases both male and female earnings but also increases the gender pay gap. Using an instrumental variable strategy, we find that a ten percent increase in robotization leads to a 1.8 percent increase in the gender pay gap. These results are mainly driven by countries with high levels of gender inequality and outsourcing destination countries. We then explore the mechanisms behind this effect and find that our results can be explained by the fact that men at medium- and high-skill occupations disproportionately benefit from robotization (through a productivity effect). We rule out the possibility that our results are driven by mechanical changes in the gender composition of the workforce nor by inflows or outflows from the manufacturing sector.

Does Policy Communication During COVID work

Abstract: Using a large-scale survey of U S households during the Covid-19 pandemic, we study how new information about fiscal and monetary policy responses to the crisi

Worker overconfidence: Field evidence and implications for employee turnover and firm profits

Abstract: Combining weekly productivity data with weekly productivity beliefs for a large sample of truckers over 2 years, we show that workers tend to systematically and persistently overpredict their productivity. If workers are overconfident about their own productivity at the current firm relative to their outside option, they should be less likely to quit. Empirically, all else equal, having higher productivity beliefs is associated with an employee being less likely to quit. To study the implications of overconfidence for worker welfare and firm profits, we estimate a structural learning model with biased beliefs that accounts for many key features of the data. While worker overconfidence moderately decreases worker welfare, it also substantially increases firm profits. Overconfidence biased learning turnover D03 J24 J41 M53

Early Evidence on the Impact of COVID-19 and the Recession on Older Workers

Abstract: We summarize some of the early effects and discuss possible future effects of the COVID-19 pandemic and recession on the employment outcomes of older workers in the United States We start by discussing what we know about how older workers faired in prior recessions in the United States and how COVID-19 and this recession may differ We then estimate some early effects of the COVID-19 pandemic and recession on employment and unemployment rates by age group and sex using Current Population Survey data We calculate employment and unemployment rates multiple ways to account for the complicated employment situation and possible errors in survey enumeration We find that while previous recessions, in some ways, did not affect employment outcomes for older workers as much, this recession disproportionately affected older workers of ages 65 and older For example, we find that unemployment rates in April 2020 increased to 1543% for those ages 65 and older, compared to 1299% for those ages 25-44 We also find that COVID-19 and the recession disproportionately affected women, where women have reached higher unemployment rates than men, which was consistent for all age groups and unemployment rate measures we used

Perceived Fairness and Consequences of Affirmative Action Policies

Abstract: Debates about affirmative action often revolve around fairness. Accordingly, we document substantial heterogeneity in the fairness perception of various affirmative action policies. But do these differences translate into different consequences? In a laboratory experiment, we study three different quota rules that favor individuals whose performance is low, either due to bad luck (discrimination), low productivity, or choice of a short working time. Higher fairness perceptions coincide with a higher willingness to compete and less retaliation against winners. No policy harms overall efficiency or post-competition teamwork. Furthermore, individuals seem to internalize the normbehind the policies that are perceived as fairest.

Stay-at-Home Orders, Social Distancing and Trust

Abstract: Better understanding whether and how communities respond to government decisions is crucial for policy makers and health officials in response to the COVID-19 pandemic. In this study, we document the socioeconomic determinants of COVID-19 stay-at-home orders' compliance in the U.S. Using cell phone data measuring changes in average distance traveled and non-essential visitation, we find that: stay-at-home orders reduce mobility by about 8­–10 percentage points; high-trust counties decrease their mobility significantly more than low-trust counties post-lockdown; and counties with relatively more self-declared democrats decrease significantly more their mobility. We also provide evidence that the estimated eeffct on compliance post-lockdown is especially large for trust in the press, and relatively smaller for trust in science, medicine or government.

The Easterlin Paradox

Abstract: The Easterlin Paradox states that at a point in time happiness varies directly with income, both among and within nations, but over time the long-term growth rates of happiness and income are not significantly related. The principal reason for the contradiction is social comparison. At a point in time those with higher income are happier because they are comparing their income to that of others who are less fortunate, and conversely for those with lower income. Over time, however, as incomes rise throughout the population, the incomes of one's comparison group rise along with one's own income and vitiates the otherwise positive effect of own-income growth on happiness. Critics of the Paradox mistakenly present the positive relation of happiness to income in cross-section data or in short-term time fluctuations as contradicting the nil relation of long-term trends.