Medium-run Effects Research Articles

Medium-run effects of COVID-19 induced distant learning on students’ academic performance

Administrative data on bachelor students for 2014/15 to 2022/23 academic years are used to analyze their performance before, during, and – what is new in the literature – after the COVID-19 pandemic. The analysis reveals that both low- and high-ability students of all affected cohorts received better grades during the semesters when teaching and examinations were delivered online, with the effect on low-ability students continuing through the first after-COVID academic year. However, improved grades contrast with lower graduation rates, especially among high-ability students. Detailed analysis of graduation patterns coupled with ECTS credits take-up analysis suggests that high-ability students were often discouraged from studying during the pandemic. For low-ability students, the negative influence of COVID-19 was compensated by the lenient grading policy that allowed them to pass the compulsory exams and continue studying.

Transition towards the sustainable development: unraveling the effects of mineral markets, Belt & Road Initiative, and the Paris Agreement on green economic growth

The Agenda 2030 strongly emphasizes implementing effective and equitable measures to address the urgent challenge of global warming, primarily driven by unsustainable fossil-fuel combustion, and one of its core focuses is Sustainable Development Goal (SDG) – 8, among others. In light of this, the recent article aims to explore the dynamic nexus between minerals (MNR), the Belt and Road Initiative (BRI), the Paris Agreement (PA), green technologies (GT), and green growth, with a specific focus on developing a policy framework for advancing SDG – 8. The study utilizes daily data and advanced econometric tools such as QVAR, Cross-quantileogram, and wavelet-quantile correlation to examine the diverse effects of these factors on green growth across various time horizons. The short-run analysis reveals that MNR, BRI, and GT discourage green growth under most market conditions, except for a few quantiles that exhibit positive or insignificant relationships. In the medium run, impacts are mixed, with both positive and negative effects observed. However, in the long run, MNR, BRI, and GT consistently demonstrate favorable effects on green growth. For PA, short and medium-run effects are mixed, but medium-run results indicate a predominantly positive impact on green growth. In the long run, PA significantly benefits green growth across the majority of market conditions. Overall, the diversified results suggest that minerals, BRI, the Paris Agreement, and green technologies play a crucial role in stimulating green growth to achieve SDG - 8 in the long term.

Credit market developments and sectoral business cycles worldwide

Abstract This paper investigates the relationship between credits and sector-level output dynamics in a sample of 41 advanced and developing countries. The existing literature shows that household credits are associated with boom-bust cycles in aggregate output, whereas business loans do not cause such output dynamics. The present paper expands these findings in terms of advanced versus developing countries and manufacturing versus services sectors. The new findings indicate that the resulting boom-bust cycles in the aggregate output in response to household credits are generally observed in the sample of developing countries, with no similar dynamics in the advanced countries. Another significant conclusion is that the boom-bust cycles are generated mostly in the services sector. No equivalent boom-bust dynamics are observed in the manufacturing sector, but the negative medium-run effects of household credits are larger in this sector. These findings indicate that credit mechanisms and consequences can significantly vary across countries and sectors.

Medium-run determinants of real wages in Australia

We assess the medium-run effects of changes in the labour force, the capital stock and the terms of trade on real wages in Australia between 1978 and 2018. For this purpose, we estimate a simple two-sector specific-factors model. A rise of one percent in the labour force lowers wages by 1.4 percent, a rise of one percent in the capital stock lifts wages by 0.47 percent and a rise of one percent in the terms of trade lifts wages by 0.15 percent. Rapid growth in the labour force accounts for some of the stagnation of wages between 1984 and 1989, and slow growth in the capital stock accompanied the stagnation between 2013 and 2018. Declines in the terms of trade preceded both episodes.

Weather shocks and economic growth in India

ABSTRACT This study examines the effects of weather shocks on the economic growth in the Indian context. By using state and district level data on weather variables (viz., temperature and rainfall) and growth rate of per-capita real GDP, the study evaluates the short-run as well as medium-run effects of changing weather on the growth. We use a fixed-effects model on state- and district-panel data sets spanning across several decades. The results based on the state-level analysis are suggestive of negative effects of the increasing temperature on the growth during 1980–2019. These aggregate results are further reinforced by the results from the district-level analysis. We find that higher temperatures have a significant negative impact on poorer districts, with a 1°C increase in temperature leading to a nearly 4.7% fall in the growth rate of district per-capita income. Moreover, higher temperatures not only have level effects but also have growth effects, especially for richer districts. Further, to propound tangible climate adaptation policy discussion, we use some developmental characteristics like credit access, electrification, urbanisation, and improved roads and market network in our analysis. The results suggest that such developmental characteristics may play a significant role in mitigating the negative impacts of climate change.

Food systems during the COVID-19 pandemic: vulnerabilities, adaptations, and resilience

AbstractThis paper reviews the emerging literature on food systems and food supply chains during the COVID-19 pandemic. Four themes are explored: consumer demand and retail market effects; supply-side shocks; food system and supply chain resilience; and developing countries and food insecurity. The effect of demand-side shocks is explored, including the sudden shift in expenditures from food service to food retail. Longer-run structural changes in the food retailing landscape include the expansion of online food delivery. The effect of supply-side shocks is examined extensively in the literature, including short-run adaptations as supply chains pivoted from the food service sector to food retail, along with supply-side disruptions due to labour force outbreaks of COVID-19. Resilience is a common theme in the literature, at both food system and food supply chain levels. While a variety of perspectives are offered, most assessments point to a surprising degree of resilience and adaptability, while identifying the points of vulnerability. The pandemic increased food insecurity through the effect on household incomes from reduced labour mobility, lockdowns, and a contraction in economic activity. These effects were particularly prominent among vulnerable populations in developing countries. Significant attention has been paid to the short- and medium-run effects of the pandemic on food systems, with further research needed to understand any longer-term structural changes that may arise. The COVID-19 pandemic offers lessons for the robustness of food systems and the importance of timely, well-informed policy responses in preparation for future global shocks.

The effects of a daycare reform on health in childhood – Evidence from Sweden

This paper studies the impact of a daycare reform on children’s mental and physical health development in Sweden. The reform effectively reduced daycare fees by a significant amount and went along with an expansion of supply. We draw on a unique set of comprehensive individual-level healthcare register data over the period 1999–2008. By exploiting variation in reform exposure by birth cohort, we estimate short and medium-run effects on child health at different ages. We find a significant reduction in mental disorders in the medium-run for children affected by the reform. The reform leads to strong and immediate increases in probabilities of diagnosis with physical health conditions that fade out as children get older. Sub-sample analyses indicate that the reform effects are strongly associated with children from disadvantaged backgrounds. An analysis of healthcare utilization shows that affected children have more overall medical visits at younger ages but fewer sickness-related visits in primary school than non-affected children.

Hysteresis from employer subsidies

This paper uses administrative data to analyze a large and 8-year long employer payroll tax rate cut in Sweden for young workers aged 26 or less. We replicate previous results documenting that during the earlier years of the reform, it raised youth employment among the treated workers, driven by labor demand (as workers’ take-home wages did not respond). First, drawing on additional years of data, this paper then documents that the longer-run effects during the reform are twice as large as the medium-run effects. Second, we document novel labor-demand-driven “hysteresis” from this policy – i.e. persistent employment effects even after the subsidy no longer applies – along two dimensions. Over the lifecycle, employment effects persist even after workers age out of eligibility. Three years after the repeal, employment remains elevated at the maximal reform level in the formerly subsidized ages. These hysteresis effects more than double the direct employment effects of the reform. Discrimination against young workers in job posting fell during the reform and does not bounce back after repeal, potentially explaining our results.

Small business under the COVID-19 crisis: Expected short- and medium-run effects of anti-contagion and economic policies

This study makes a causal inference on the effects of anti-contagion and economic policies on small business by conducting a survey on Japanese small business managers’ expectations about the pandemic, policies, and firm performance. We first find the business suspension request decreased targeted firms’ sales by 10 percentage points on top of the baseline 9 percentage points decline due to COVID-19, even though the Japanese anti-contagion policy was in a form of the government’s request that is not legally enforceable. Second, using a discontinuity in the eligibility criteria, we find lump-sum and prompt subsidies improved firms’ prospects of survival by 19 percentage points. Third, the medium-run recovery of firms’ performance is expected to depend crucially on when infections would end, indicating that the anti-contagion policies could complement longer-run economic goals.

Skill matching and mismatching: labour market trajectories of redundant manufacturing workers

ABSTRACT While re-employment opportunities for redundant workers have been a much-debated topic in economic geography, the characteristics of these new employments and the medium-run effect of major lay-offs constitute a less explored field. The present paper investigates skill matching between the pre-redundancy job and the employment workers have five years after redundancy by studying the distance and direction of their labour market trajectories. By following 670 manufacturing workers made redundant in major layoffs in 2003, the present paper connects patterns of career mobility and underemployment to possible frictions connected to spatial and industrial mobility. The results indicate that moving some distance from the initial point of departure is correlated with upward mobility. This especially concerns moving to a related industry in the same region or moving to a new region, but within the same industry. Moving too great a distance, however, increases the risk of downward mobility. Moving to unrelated industries in general, but also to related industries in new regions, is associated with a higher risk of facing underemployment in the medium run. In conclusion, the longer-run labour market trajectories, in relation to both distance and direction, need to be addressed if we are to assess the outcome of redundancies.

The Heterogeneous Effects of Large and Small Minimum Wage Changes: Evidence Over the Short and Medium Run Using a Pre-Analysis Plan

This paper advances the use of pre-analysis plans in non-experimental research settings. In a study of recent minimum wage changes, we demonstrate how analyses of medium- and long-run impacts of policy interventions can be pre-specified as extensions to short-run analyses. Further, our pre-analysis plan includes comparisons of the effects of large vs. small minimum wage increases, which is a theoretically motivated dimension of heterogeneity. We discuss how these use cases harness the strengths of pre-analysis plans while mitigating their weaknesses. This project’s initial analyses explored CPS and ACS data from 2011 through 2015. Alongside these analyses, we pre-committed to analyses incorporating CPS and ACS data extending through 2019. Averaging across the specifications in our pre-analysis plan, we estimate that relatively large minimum wage increases reduced employment rates among low-skilled individuals by just over 2.5 percentage points. Our estimates of the effects of relatively small minimum wage increases vary across data sets and specifications but are, on average, both economically and statistically indistinguishable from zero. We estimate that medium-run effects exceed short-run effects and that the elasticity of employment with respect to the minimum wage is substantially more negative for large minimum wage increases than for small increases.

Small Business under the COVID-19 Crisis: Expected Short- and Medium-Run Effects of Anti-Contagion and Economic Policies

This study makes a causal inference on the effects of anti-contagion and economic policies on small business by conducting a survey on Japanese small business managers' expectations about the pandemic, policies, and firm performance. We first find the business suspension request decreased targeted firms' sales by 10 percentage points on top of the baseline 9 percentage points decline due to COVID-19, even though the Japanese anti-contagion policy was in a form of the government's request that is not legally enforceable. Second, using a discontinuity in the eligibility criteria, we find lump-sum and prompt subsidies improved firms' prospects of survival by 19 percentage points. Third, the medium-run recovery of firms' performance is expected to depend crucially on when infections would end, indicating that the anti-contagion policies could complement longer-run economic goals.

Human activity, daylight saving time and wildfire occurrence

Wildfires shape landscapes and ecosystems, affecting health and infrastructure. Understanding the complex interactions between social organization, human activity and the natural environment that drive wildfire occurrence is becoming increasingly important as changing global environmental conditions combined with the expanding human-wildland interface, are expected to increase wildfire frequency and severity. This paper examines the anthropogenic drivers of wildfire, and the relationship between the organization of human activity in time and wildfire occurrence focusing on the effects of transitions into and out of Daylight Saving Time (DST). DST transitions shift activity in relation to natural wildfire risk within a solar day, induce changes in the time allocated to wildfire-causing activities and disrupt sleep patterns. The paper estimates short and medium run effects of DST-induced changes in the temporal organization of human activity through a Regression Discontinuity Design with time as the running variable and Fixed Effects models, using data from over 1.88 million non-prescribed ignitions recorded in the contiguous US over 23 years. Estimates suggest that DST has a quantitatively and statistically significant immediate and medium-run effect on wildfire occurrence. Wildfire occurrence jumps by around 30% in the immediate aftermath of transitions into DST, adding about 98 human-caused wildfires across the contiguous US per year, while the transition's effect is detectable for 3 weeks. Transitions induce within-day temporal displacement of wildfires in a pattern compatible with the shifting of human activity mechanism, while the result cannot be attributed exclusively on disruptions in sleep patterns. Naturally arising lightning-strike wildfires do not respond to changes in civil time, while the results are robust to changes in assumptions. Results suggest that wildfire policy should account for the temporal organization of human activity.

Electoral Democracy at Work

We evaluate the short- to medium-run effects on unionization and employers' and workers' trust in unions, of an important reform of French employment relations in 2008. This reform made the conditions for union recognition more liberal and democratic after 2008 in private firms with 11 employees or more. The law gave equal chances to all unions to be recognized for bargaining, putting an end to the quasi-monopoly given to five historical unions until then. The law also introduced votes and minimal electoral requirements to obtain union recognition. These new regulations only became fully effective at the first firms' work councils elections happening after January 1st, 2009. Those elections occur within each firm according to a pre-defined frequency - usually every four years -, so that election dates only depend on former election dates, and can be considered as quasi-random with respect to the application date of the new law, at least in firms that are old enough. The identification thus relies on a regression discontinuity design in which the running variable is the firms' work councils election date: we compare in early 2011 firms that had those elections just before or just after January 1st, 2009. We find that the democratic rules introduced in 2008 quickly improved employers' satisfaction and trust towards unions by around 45% of a standard deviation. Union coverage and membership at the establishment level also increased strongly due to the reform and work stoppages became more likely. Together, these results suggest that the introduction of electoral democracy in French firms managed to improve workers' participation in unions and their ability to voice concerns while also improving employers' opinions of unions.

Hysteresis from Employer Subsidies

This paper uses administrative data to analyze a large and 8-year long employer payroll tax rate cut in Sweden for young workers aged 26 or less. First, we document that while active, the reform raised youth employment among the treated workers. The long-run effects are twice as large as the medium-run effects and likely driven by labor demand (as workers' take-home wages did not respond). Second, we document novel labor-demand-driven from this policy – i.e. persistent employment effects even after the subsidy no longer applies – along two dimensions. Over the lifecycle, employment effects persist even after workers age out of eligibility. Two years after the repeal, employment remains elevated at the maximal reform level in the formerly subsidized ages. These hysteresis effects triple the direct employment effects of the reform. Discrimination against young workers in job posting fell during the reform and does not bounce back after repeal, potentially explaining our results. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Medium-Run Effects of Student Loans on Debt Holdings

Both student loans and household debt are at their peaks. This paper investigates how student loans causally impact debt holdings of individuals in the medium-run using data from the National Longitudinal Survey of Youth 1997. To identify the causal effect of student loans on future debt holdings, I instrument the amount of student loan debt with eligibility for merit grants, using a triple differences estimation in the first stage. I find that student loans mechanically increase debt holdings at age 25 but decrease debt holdings at age 30 by reducing credit card debt. I explore potential explanations for this decrease. I find that student loans positively impact the educational outcomes of students, but do not increase their risk aversion or impact their mental well-being. Furthermore, the effects are driven by individuals from poorer families. These results suggest that individuals with larger student loans reduce their borrowing because of education and credit constraint channels, but not because they become more averse to debt.

Improving the quality of early childhood care at scale: The effects of “From Zero to Forever”

The focus in developing countries is shifting from increasing access to early childhood care services to improving its quality. In light of the inclusion of early childhood development in the UN Sustainable Development Goals, there has emerged a global call for early childhood programs that integrate nutrition, health and development components. However, large-scale studies of integrated early childhood interventions are scarce in developing countries, and thus, little is known about its effectiveness and sustainability. In this paper we study the immediate and medium-run effects of a large-scale expansion of an integrated package of services including care, education, health and nutrition on child growth and development, by analyzing the expansion of the Colombian national early childhood strategy known as “From Zero to Forever” between 2011 and 2013. The results indicate that the increased access to integrated center-based care had a large immediate effect on vocabulary that persists five years into the intervention, and less robust effects on nutritional status.

Persistent commodity shocks and transitory crime effects

This paper studies the dynamic response of crime to a positive income shock. We estimate the short- and medium-run effects that an increase in copper price had on the local economy and on criminal activity in Chile, which is the world’s leading copper producer. After a decade of high prices, mining municipalities did not exhibit lower crime rates compared to non-mining municipalities. To explain this counterintuitive result, we investigated heterogeneous dynamic effects and observed that property crimes decreased only at the beginning of the boom. As the dynamics of unskilled employment are consistent with the crime cycle, we argue that crime evolves due to temporary labor market adjustments.

On the Macroeconomic Consequences of Over-Optimism

Is over-optimism about a country's future growth perspective good for an economy, or does over-optimism also come with costs? In this paper we provide evidence that recessions, fiscal problems, as well as Balance of Payment-difficulties are more likely to arise in countries where past growth expectations have been overly optimistic. To examine this question, we look at the medium-run effects of instances of over-optimism or caution in IMF forecasts. To isolate the causal effect of over-optimism we take an instrumental variables approach, where we exploit variation provided by the allocation of IMF Mission Chiefs across countries. As a necessary first step, we document that IMF Mission Chiefs tend to systematically differ in their individual degrees of forecast-optimism or caution. The mechanism that transforms over-optimism into a later recession seems to run through higher debt accumulation, both public and private. Our findings illustrate the potency of unjustified optimism and underline the importance of basing economic forecasts upon realistic medium-term prospects.

Public Investment Subsidies and Firm Performance – Evidence from Germany

AbstractThis paper assesses firm-level effects of the single largest investment subsidy programme in Germany. The analysis considers grants allocated to firms in East German regions over the period 2007 to 2013 under the regional policy scheme Joint Task ‘Improving Regional Economic Structures’ (GRW). We apply a coarsened exact matching (CEM) in combination with a fixed effects difference-in-differences (FEDiD) estimator to identify the effects of programme participation on the treated firms. For the assessment, we use administrative data from the Federal Statistical Office and the Offices of the Länder to demonstrate that this administrative database offers a huge potential for evidence-based policy advice. The results suggest that investment subsidies have a positive impact on different dimensions of firm development, but do not affect overall firm competitiveness. We find positive short- and medium-run effects on firm employment. The effects on firm turnover remain significant and positive only in the medium-run. Gross fixed capital formation responses positively to GRW funding only during the mean implementation period of the projects but becomes insignificant afterwards. Finally, the effect of GRW-funding on labour productivity remains insignificant throughout the whole period of analysis.