Location: Sweden

Vaccination Progress and the Opening Up of Economies

Posted on July 5, 2021 | Policy Brief

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In this brief, we report on the FREE network webinar on the state of vaccinations and the challenges ahead for opening up economies while containing the pandemic, held on June 22, 2021. The current state of the pandemic in each respective country was presented, suggesting that infection rates have gone down quite substantially recently in all countries of the network, except in Russia which is currently facing a surge in infections driven by the delta-version of the virus. Vaccination progress is very uneven, limited by lacking access to vaccines (primarily Ukraine and Georgia) and vaccine scepticism among the population (primarily in Russia and Belarus but for certain groups also in Latvia, Poland and to some extent Sweden). This also creates challenges for governments eager to open their societies to benefit their economies and ease the social consequences of the restrictions on mobility and social gatherings. Finally, the medium to long term consequences for labour markets reveal challenges but also potential opportunities through wider availability of work–from-home policies. 

Background

In many countries in Europe, citizens and governments are starting to see an end to the most intense impact of the Covid-19 pandemic on their societies. Infection and death rates are coming down and governments are starting to put in place policies for a gradual opening up of societies, as reflected in the Covid-19 stringency index developed by Oxford University. These developments are partially seasonal, but also largely a function of the progress of vaccination programs reaching an increasing share of the adult population. These developments, though, are taking place to different degrees and at different pace across countries.  This is very evident at a global level, but also within Europe and among the countries represented in the FREE network. This has implications for the development within Europe as a whole, but also for the persistent inequalities we see across countries.   

Short overview of the current situation

The current epidemiological situation in Latvia, Sweden, Ukraine, and Georgia looks pretty similar in terms of Covid-19 cases and deaths but when it comes to the vaccination status there is substantial variation.

Latvia experienced a somewhat weaker third wave in the spring of 2021 after being hit badly in the second wave during the fall and winter of 2020 (see Figure 1). The Latvian government started vaccinating at the beginning of 2021, and by early June, 26% of the Latvian population had been fully vaccinated.

Sweden, that chose a somewhat controversial strategy to the pandemic built on individual responsibility, had reached almost 15 thousand Covid-19 deaths by the end of June of 2021, the second highest among the FREE network member countries relative to population size. The spread of the pandemic has slowed down substantially, though, during the early summer, and the percentage of fully vaccinated is about to reach 30% of the population.

Figure 1. Cumulative Covid-19 deaths 

Source: Aggregated data sources from the COVID-19 Data Repository by the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University, compiled by Our World in Data.

Following a severe second wave, the number of infected in Ukraine started to go down in the winter of 2020, with the total deaths settling at about 27 thousand in the month of February. Then the third wave hit in the spring, but the number of new daily cases has decreased again and is currently three times lower than at the beginning of the lastwave. However, a large part of the reduction is likely not thanks to successful epidemiological policies but rather due to low detection rates and seasonal variation. 

In June 2021, Georgia faces a similar situation as Ukraine and Latvia, with the number of cumulative Covid-19 deaths per million inhabitants reaching around 1300 (in total 2500 people) following a rather detrimental spring 2021 wave. At the moment, both Georgia and Ukraine have very low vaccination coverage relative to other countries in the region(see Figure 5).

In contrast to the above countries, Russia started vaccinating early. Unfortunately, the country is now experiencing an increase in the number of cases (as can be seen in Figure 2), contrary to most other countries in the region. This negative development is likely due to the fact that the new Covid-19 delta variant is spreading in the country, particularly in Moscow and St. Petersburg. Despite the early start to vaccinations, though, the total number of vaccinated people remains low, only reaching 10.5% of the population.

Figure 2. New Covid-19 cases

Source: Aggregated data sources from the COVID-19 Data Repository by the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University, compiled by Our World in Data.

In some ways similar to Sweden, the government of Belarus did not impose any formal restrictions on individuals’ mobility. According to the official statistics, in the month of June, the rise in the cumulative number of covid-19 deaths and new daily infections has declined rapidly and reached about 400 deceased and 800 infections per one million inhabitants, respectively. Vaccination goes slowly, and by now, around 8% of the population has gotten the first dose and 5% have received the second.

There were two major waves in Poland during the autumn 2020 and spring 2021. In the latter period, the country experienced a vast number of deaths.  As can be seen in Figure 3, the excess mortality P-score – the percentage difference between the weekly number of deaths in 2020-2021 and the average number of deaths over the years 2015-2019 – peaked in November 2020, reaching approximately 115%. The excess deaths numbers in Poland were also the highest among the FREE Network countries in the Spring of 2021, culminating at about 70% higher compared to the baseline. By mid-June, the number of deaths and cases have steeply declined and 36% of the country’s population is fully vaccinated.

Figure 3. Excess deaths

Turning to the economy, after a devastating year, almost all countries are expected to bounce back by the end of 2021 according to the IMF (see Figure 4). Much of these predictions build on the expectations that governments across the region will lift Covid-19 restrictions. These forecasts may not be unrealistic for the countries where vaccinations have come relatively far and restrictions have started to ease. However, for countries where vaccination rates remain low and new variations of the virus is spreading, the downside risk is still very present, and forecasts contain much uncertainty.

 Figure 4. GDP-growth

Vaccination challenges

Since immunization plays such a central role in re-opening the economy and society going back to normal, issues related to vaccinations were an important and recurring topic at the event. The variation in progress and speed is substantial across the countries, though.

Ukraine and Georgia are still facing big challenges with vaccine availability and have fully vaccinated only 1.3% and 2.3% of the population by the end of June, respectively. Vaccination rates have in the recent month started to pick up, but both countries face an uphill battle before reaching levels close to the more successful countries.

Figure 5. Percent fully vaccinated

Other countries a bit further ahead in the vaccine race are still facing difficulties in increasing the vaccination coverage, though not so much due to lack of availability but instead because of vaccine skepticism. In Belarus, a country that initially had bottleneck issues similar to Ukraine and Georgia, all citizens have the opportunity to get vaccinated. However, Lev Lvovskiy, Senior Research Fellow at BEROC in Belarus, argued that vaccination rates are still low largely because many Belarusians feel reluctant towards the vaccine at offer (Sputnik V).

This vaccination scepticism turns out to be a common theme in many countries. According to different survey results presented by the participants at the webinar, the percentage of people willing or planning to get vaccinated is 30% in Belarus and 44% in Russia. In Latvia, this number also varies significantly across different groups as vaccination rates are significantly lower among older age cohorts and in regions with a higher share of Russian-speaking residents, according to Sergejs Gubins, Research Fellow at BICEPS in Latvia.

Webinar participants discussed potential solutions to these issues. First, there seemed to be consensus that offering people the opportunity to choose which vaccine they get will likely be effective in increasing the uptake rate. Second, governments need to improve their communication regarding the benefits of vaccinations to the public. Several countries in the region, such as Poland and Belarus, have had statements made by officials that deviate from one another, potentially harming the government’s credibility with regards to vaccine recommendations. In Belarus, there have even been government sponsored disinformation campaigns against particular vaccines. In Latvia, the main problem is rather the need to reach and convince groups who are generally more reluctant to get vaccinated. Iurii Ganychenko, Senior Researcher at KSE in Ukraine, exemplified how Ukraine has attempted to overcome this problem by launching campaigns specifically designed to persuade certain age cohorts to get vaccinated. Natalya Volchkova, Director of CEFIR at NES in Russia, argued that new, more modern channels of information, such as professional influencers, need to be explored and that the current model of information delivery is not working.

Giorgi Papava, Lead Economist at ISET PI in Georgia, suggested that researchers can contribute to solving vaccine uptake issues by studying incentive mechanisms such as monetary rewards for those taking the vaccine, for instance in the form of lottery tickets. 

Labour markets looking forward

Participants at the webinar also discussed how the pandemic has affected labour markets and whether its consequences will bring about any long-term changes.

Regarding unemployment statistics, Michal Myck, the Director of CenEA in Poland, made the important point that some of the relatively low unemployment numbers that we have seen in the region during this pandemic are misleading. This is because the traditional definition of being unemployed implies that an individual is actively searching for work, and lockdowns and other mobility restrictions have limited this possibility. Official data on unemployment thus underestimates the drop in employment that has happened, as those losing their jobs in many cases have left the labour market altogether. We thus need to see how labor markets will develop in the next couple of months as economies open up to give a more precise verdict.

Jesper Roine, Professor at SITE in Sweden, stressed that unemployment will be the biggest challenge for Sweden since its economy depends on high labor force participation and high employment rates. He explained that the pandemic and economic crisis has disproportionately affected the labor market status of certain groups. Foreign-born and young people, two groups with relatively high unemployment rates already prior to the pandemic, have become unemployed to an even greater extent. Many are worried that these groups will face issues with re-entering the labour market as in particular long-term unemployment has increased. At the same time, there have been more positive discussions about structural changes to the labour market following the pandemic. Particularly how more employers will allow for distance work, a step already confirmed by several large Swedish firms for instance.

In Russia, a country with a labour market that allowed for very little distance work before the pandemic, similar discussions are now taking place. Natalya Volchkova reported that, in Russia, the number of vacancies which assumed distance-work increased by 10% each month starting from last year, according to one of Russia’s leading job-search platforms HeadHunter. These developments could be particularly beneficial for the regional development in Russia, as firms in more remote regions can hire workers living in other parts of the country.

Concluding Remarks

It has been over a year since the Covid-19 virus was declared a pandemic by the World Health Organization. This webinar highlighted that, though vaccination campaigns in principle have been rolled out across the region, their reach varies greatly, and countries are facing different challenges of re-opening and recovering from the pandemic recession. Ukraine and Georgia have gotten a very slow start to their vaccination effort due to a combination of lack of access to vaccines and vaccine skepticism. Countries like Belarus and Latvia have had better access to vaccines but are suffering from widespread vaccine skepticism, in particular in some segments of the population and to certain vaccines. Russia, which is also dealing with a broad reluctance towards vaccines, is on top of that dealing with a surge in infections caused by the delta-version of the virus.

IMF Economic Outlook suggests that most economies in the region are expected to bounce back in their GDP growth in 2021. While this positive prognosis is encouraging, the webinar reminded us that there is a great deal of uncertainty remaining not only from an epidemiological perspective but also in terms of the medium to long-term economic consequences of the pandemic.

Participants

  • Iurii Ganychenko, Senior Researcher at Kyiv School of Economics (KSE/Ukraine)
  • Sergejs Gubins, Research Fellow at the Baltic International Centre for Economic Policy Studies (BICEPS/ Latvia)
  • Natalya Volchkova, Director of the Centre for Economic and Financial Research at New Economic School (CEFIR at NES/ Russia)
  • Giorgi Papava, Lead Economist at the ISET Policy Institute (ISET PI/ Georgia)
  • Lev Lvovskiy, Senior Research Fellow at the Belarusian Economic Research and Outreach Center (BEROC/ Belarus)
  • Jesper Roine, Professor at the Stockholm Institute of Transition Economics (SITE / Sweden)
  • Michal Myck, Director of the Centre for Economic Analysis (CenEA / Poland)
  • Anders Olofsgård, Deputy Director of SITE and Associate Professor at the Stockholm School of Economics (SITE / Sweden)

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Carbon Tax Regressivity and Income Inequality

Posted on May 17, 2021 | Policy Brief

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A common presumption in economics is that a carbon tax is regressive – that the tax disproportionately burdens low-income households. However, this presumption originates from early research on carbon taxes that used US data, and little is known about the factors that determine the level of regressivity of carbon taxation across countries. In this policy brief, I explore how differences in income inequality may determine the distribution of carbon tax burden across households in Europe. The results indicate that carbon taxation will be regressive in high-income countries with relatively high levels of inequality, but closer to proportional in middle- and low-income countries and in countries with low levels of income inequality.

Introduction

Climate change is one of the main challenges facing us today. To reduce emissions of greenhouse gases, and thereby mitigate climate change, economists recommend the use of a carbon tax. The environmental and economic efficiency of carbon taxation is often highlighted, but the equity story is also of importance: who bears the burden of the tax?

How the burden from a carbon tax is shared across households is important since it affects the political acceptability of the tax. For instance, the “Yellow Vests” protests against the French carbon tax started due to concerns that the tax burden is disproportionately large on middle- and working-class households. Research in economics also shows that people prefer a progressive carbon tax (Brännlund and Persson, 2012).   

In this brief, I explore what we know about the distributional effects of carbon taxes and analyze the link between carbon tax regressivity and levels of income inequality in theory and in application to Sweden as well as other European countries.

Carbon Tax Burden Across Households

It is a common finding in the economics literature that carbon taxes are, or would be, regressive (Hassett et al., 2008; Grainger and Kolstad, 2010). However, most of the earlier literature is based on US data, and the US is unrepresentative of an average high-income country in terms of variables that are arguably important for carbon tax incidence. Compared to most countries in Europe, income in the US is high but unequally distributed, carbon dioxide emissions per capita are high, the gasoline tax rate is low, and the access to public transport is poor. If we want to understand the likely distributional effects of carbon taxes across Europe, we thus need to look beyond the US studies.

A recent study by Feindt et al. (2020) examines the consumer tax burden from a hypothetical EU-wide carbon tax. They find that the distributional effect at the EU-level is regressive, driven by the high carbon intensity of energy consumption in relatively low-income countries in Eastern Europe. At the national level, however, carbon taxation in Eastern European countries is slightly progressive due to car ownership and transport fuel being luxuries. Conversely, in high-income countries – where transport fuel is a necessity – carbon taxation is slightly regressive.

That the incidence of carbon and gasoline taxation varies across countries with different levels of income, has been found in numerous studies (Sterner, 2012; Sager, 2019). To understand the source of this variation, we need to identify the determinants of the incidence of carbon taxes.

The Role of Income Inequality

In a recent paper, I, together with Giles Atkinson at the London School of Economics, present a simple model where the variation in the carbon tax burden across countries and time can be determined by two parameters: the level of income inequality and the income elasticity of demand for the taxed goods (Andersson and Atkinson, 2020). The income elasticity specifies how the demand for a good, such as gasoline, responds to a change in income. If the budget share decreases as income increase, we refer to gasoline as a necessity. If the budget share increases with income, we refer to gasoline as a luxury good. Our model predicts that rising inequality increases the regressivity of a carbon tax on necessities. Similarly, we will see a more progressive incidence if inequality increases and the taxed good is a luxury.

To mitigate climate change, a carbon tax should be applied to goods responsible for the majority of greenhouse gas emissions: transport fuel, electricity, heating, and food. To estimate the distribution of carbon tax burden, we must then first establish if these goods are necessities or luxuries, respectively. Gasoline is typically found to be a luxury good in low-income countries but a necessity in high-income countries (Dahl, 2012). Food, in the aggregate, is consistently found to be a necessity. A carbon tax on food would, however, mainly increase the price of red meat – beef has a magnitude larger carbon footprint than all other food groups – and red meat is generally a luxury good, even in high-income countries (Gallet, 2010). Lastly, electricity and heating are necessities, with little variation across countries in the level of income elasticities.  A broad carbon tax would thus likely be regressive in high-income countries, but more proportional, maybe even progressive, in low-income countries. The overall effect in low-income countries depends on the relative budget shares of transport fuel and meat (luxuries) versus electricity and heating (necessities). A narrow carbon tax on transport fuel has a less ambiguous incidence: it will be regressive in high-income countries where the good is a necessity and proportional to progressive in low-income countries where the good is a luxury.  

The income elasticities of demand, however, only provide half of the picture. To understand the degree of regressivity from carbon taxation, we also need to take into account the level of income inequality in a country. Our model predicts that a carbon tax on necessities will be more regressive in countries with relatively high levels of inequality. And increases in inequality over time may turn a proportional tax incidence into a regressive one.

To test our model’s prediction, we analyze the distributional effects of the Swedish carbon tax on transport fuel and examine previous studies of gasoline tax incidence across high-income countries. 

Empirical Evidence from Sweden

The Swedish carbon tax was implemented in 1991 at $30 per ton of carbon dioxide and the rate was subsequently increased rather rapidly between 2000-2004. Today, in 2021, the rate is above $130 per ton; the world’s highest carbon tax rate imposed on households. The full tax rate is mainly applied to transport fuel, with around 90 percent of the revenue today coming from gasoline and diesel consumption.

 Figure 1. Carbon tax incidence and income inequality in Sweden

Sources: Andersson and Atkinson (2020). Gini coefficients are provided by Statistics Sweden.

Using household-level data on transport fuel expenditures and annual income between 1999-2012, we find that the Swedish carbon tax is increasingly regressive over time, which is highly correlated with an increase in income inequality. Figure 1 shows the strong linear correlation between the incidence of the tax and the level of inequality across our sample period. The progressivity of the tax is measured using the Suits index (Suits, 1977), a summary measure of tax incidence that spans from +1 to -1. Positive (negative) numbers indicate that the tax is overall progressive (regressive) and a proportional tax is given an index of zero. The level of income inequality, in turn, is summarized by the Gini coefficient (0-100), with higher numbers indicating higher levels of inequality.

In 1991, when the Swedish carbon tax was implemented, income inequality was relatively low, with a Gini of 20.8. If we extrapolate, the results presented in Figure 1 indicate that the tax incidence in 1991 was proportional to slightly progressive. Since the early 1990s, however, Sweden has experienced a rise in inequality. Today, the Gini is around 28 and the carbon tax incidence is rather regressive. This can be a potential concern if people start to perceive the distribution of the tax burden as unfair and call for reductions in the tax rate.

Empirical Evidence Across High-Income Countries

Figure 2 presents the results of our analysis of previous studies of gasoline tax incidence across high-income countries. Again, we find a strong correlation with inequality; the higher the level of inequality, the more regressive are gasoline taxes.  In the bottom-right corner, we locate the results from studies on gasoline tax incidence that have used US data. The level of inequality in the US has been persistently high, and the widespread assumption that gasoline and carbon taxation is regressive is thus based to a large part on studies of one highly unequal country. Looking across Europe we find that the tax incidence is more varied, with close to a proportional outcome in the (relatively equal) Nordic countries of Denmark and Sweden.

Figure 2. Gasoline tax incidence and income inequality in OECD countries

Sources: Andersson and Atkinson (2020). Gini coefficients are from the SWIID database (Solt, 2019).

Conclusion

A carbon tax is economists’ preferred instrument to tackle climate change, but its distributional effect may undermine the political acceptability of the tax. This brief shows that to understand the likely distributional effects of carbon taxation we need to take into account the type of goods that are taxed – necessities or luxuries – and the level and direction of income inequality. Carbon taxation will be closer to proportional in European countries with low levels of inequality, whereas in countries with relatively high levels of inequality the carbon tax incidence will be regressive on necessities and progressive for luxury goods.

This insight may explain why we first saw the introduction of carbon taxes in the Nordic countries. Finland, Sweden, Denmark, and Norway all implemented carbon taxes between 1990-1992, and income inequality was relatively, and historically, low in this region at the time. Policymakers in the Nordic countries thus didn’t need to worry about possibly regressive effects. Looking across Europe today, many of the countries that have relatively low levels of inequality have either already implemented carbon taxes or, due to the size of their economies, have a low share of global emissions. In countries that are responsible for a larger share of global emissions – such as, the UK, Germany, and France – inequality is relatively high, and they may find it to be politically more difficult to implement carbon pricing as the equity argument becomes more salient and provides opportunities for opponents to attack the tax.

To increase the political acceptability and perceived fairness of carbon pricing, policymakers in Europe should consider a policy design that offsets regressive effects by returning the revenue back to households, either by lump-sum transfers or by reducing tax rates on labor income.   

References

  • Andersson, Julius and Giles Atkinson. 2020. “The Distributional Effects of a Carbon Tax: The Role of Income Inequality.” Grantham Research Institute on Climate Change and the Environment Working Paper 349. London School of Economics.  
  • Brännlund, Runar and Lars Persson. 2012. “To tax, or not to tax: preferences for climate policy attributes.” Climate Policy 12 (6): 704-721.
  • Dahl, Carol A. 2012. “Measuring global gasoline and diesel price and income elasticities.” Energy Policy 41: 2-13.
  • Feindt, Simon, et al. 2020. “Understanding Regressivity: Challenges and Opportunities of European Carbon Pricing.” SSRN 3703833.
  • Gallet, Craig A. 2010. “The income elasticity of meat: a meta-analysis.” Australian Journal of Agricultural and Resource Economics 54(4): 477-490.
  • Grainger, Corbett A and Charles D Kolstad. 2010. “Who pays a price on carbon?” Environmental and Resource Economics 46(3): 359-376.  
  • Hassett, Kevin A, Aparna Mathur, and Gilbert E Metcalf. 2009. “The consumer burden of a carbon tax on gasoline.” American Enterprise Institute, Working Paper.
  • Sager, Lutz. 2019. “The global consumer incidence of carbon pricing: evidence from trade.” Grantham Research Institute on Climate Change and the Environment Working Paper 320. London School of Economics.  
  • Thomas, Sterner. 2012. Fuel taxes and the poor: the distributional effects of gasoline taxation and their implications for climate policy. Routledge.
  • Suits, Daniel B. 1977. “Measurement of tax progressivity.” American Economic Review 67(4): 747-752.

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Inequality in the Pandemic: Evidence from Sweden

Posted on March 22, 2021 | Policy Brief

Condominium houses near the water representing inequality during the covid19 pandemic

Most reports on the labor-market effects of the first wave of COVID-19 have pointed to women, low-skilled workers and other vulnerable groups being more affected. Research on the topic shows a more mixed picture. We contribute to this discussion. Using monthly official unemployment data in Sweden we find that across wage levels, occupations with lower salaries display higher increases in unemployment, and low-wage occupations are also more difficult to do from home. The job loss probability is also higher in sectors with a higher concentration of workers born outside of the EU and those aged below 30. But we find no evidence of a gender unequal impact in Sweden. Overall, our results point to higher effects for low-wage groups but small gender differences overall.

Introduction

The ongoing Covid-19 pandemic has affected the health of millions of people worldwide. But it has also had an enormous impact on economic and living conditions through government policies aimed at containing the spread of the infection. While, at the onset of the pandemic, government officials, mainstream media, and even celebrities labeled COVID-19 “the great equalizer” (Mein, 2020), the reality has proven quite different, with the most vulnerable groups of the population appearing to be the most harmed by both the health and the economic crises (see, for instance, The World Economic Forum, Joseph Stiglitz in this IMF article, and The World Bank). In this brief, we focus on one specific economic impact of the pandemic, namely its effect on unemployment status, and we study the extent to which this impact has been unequal across different groups of the Swedish society. Our analysis uses administrative data and segments the population by wage, gender, age, and foreign-born status.

Covid-19 and Inequality in the Labor Market

An extensive review of the emerging literature on the effect of the pandemic on different kinds of inequality is beyond the scope of this brief. However, a number of studies are especially relevant to put our analysis in context, as they are focused on the unequal labor market impacts of the crisis and study real-time data. Based on these studies, a number of patterns emerge. First, the effect of the pandemic on the increased probability of job loss appears stronger for low-skilled workers, as proxied by education level (see e.g., Adam-Prassl et al., 2020, Gaudecker et al.  2020, Casarico and Lattanzio 2020). Gaudecker et al. (2020) also observe that in the Netherlands the negative education gradient has been mitigated by the government identifying some sectors of the economy as essential since some of these sectors are characterized by a high concentration of low-educated workers. Second, the evidence of unequal gender impacts on the probability of job loss is mixed. While survey information from the UK and the US reveals that labor market outcomes for women have more severely deteriorated during the crisis (Adams-Prassl et al., 2020), there is no evidence of unequal impacts by gender in Germany (Adams-Pras et al., 2020) and Italy (Casarico and Lattanzio, 2020). Other papers confirm that the effect on labor-market outcomes by gender varies across contexts (see, e.g.,  Hupkau and Petrongolo, 2020).

Analysis of Labor Market Data From Sweden

Our analysis of the Swedish labor market provides a valuable contribution to the existing findings for a number of reasons. First, despite rising inequality over the past decades, Sweden is characterized by relatively low income inequality (e.g. OECD, 2019), high participation of women in the labor market, and high level of society inclusiveness (e.g. Gottfries, 2019, OECD 2016) among OECD countries. Second, unlike the majority of countries worldwide, throughout the pandemic, Sweden has not adopted stay-at-home orders that would have separated sectors of the economy between “essential” and “non-essential”. As a result, sectors that were typically shut down in other countries, for instance, the hospitality industry, were not ordered to close during the first wave of the pandemic and have then only faced partial limitations during the second wave. Importantly, schools below the secondary level were never closed. Third, as we will describe in more detail below, the availability of administrative information on unemployment claims on a monthly basis allows studying the “real-time” development of unemployment throughout the pandemic for the universe of employees in the Swedish labor market.

Data

We use data from the registry of unemployed individuals kept by the Swedish Public Employment Service (Arbetsförmedlingen), the government agency responsible for the functioning of the Swedish labor market. The incentives for laid-off individuals to register with the Employment Service are high since the registration is directly connected to the right to claim various (relatively generous) unemployment benefits. As such, the data arguably includes a large share of employees who lost their job over the period studied. Based on the high incentives to register as unemployed, we also assume that the probability to register does not differ the segments of the population that we consider. The data does not include some self-employed who for various reasons choose not to register, but this group is not believed to be significant. Also, furloughed workers do not count as unemployed. This group was significant, especially in the very early stages of the pandemic, but still small relative to all unemployed. As of July 2020, they represented 13% of the total pool of unemployed individuals in Sweden (Swedish Agency for Economic and Regional Growth, 2021).

The population-wide coverage is the main advantage of our data vis-à-vis the survey information used in many recent studies of the labor market throughout the pandemic (other studies using administrative data are Casarico and Lattanzi, 2020, studying the Italian labor market, and Forsythe et al., 2020, who analyze the US case).

We consider everyone registered as unemployed/seeking employment each month from January 2019 to July 2020. The data is grouped by 4-digit occupational classification (there are about 440 occupations at this level) and each occupational group is further broken down by sex, age, and foreign-born status (specifically, Sweden born, foreign EU born, and foreign non-EU born.) We then merge this data with information on the average wage by occupational group and gender in 2019, as reported by Medlingsinstitutet and publicly available at Statistics Sweden. This measure, although not being at the individual level, allows us to develop a relatively precise proxy of wages by occupation that we use to rank unemployment by wage deciles.

Evidence

With the data described above, we build the following measure of the change in job-loss probability (JLP) between February and July 2020, adjusted for seasonality:

where u is the number of workers in 4-digit occupational sector who registered as unemployed in a month over the average number of employed in the same sector in 2017 and 2018 (data available at Statistics Sweden). Put it simply, ΔJLP is a sector-level indicator of the change in job loss probability due to the pandemic; it measures the change in chances of job loss between February and July 2020, i.e. between five months after the start of the pandemic and the month before its onset, as compared to the equivalent change the year before. We thus account for seasonal factors by differencing out the job loss probability during the same months of 2019, when the pandemic was neither occurring nor anticipated. Below we use ΔJLP to show differences in the impact of the pandemic on the chances of job loss for different groups of the Swedish society.

Job loss probability by wage deciles. We leverage information on sector-level average wages and the number of employees to partition occupational sectors into (approximate) wage deciles. The purpose of such a partition is to rank sectors as being typically “low-” or “high-” wage within the Swedish context. As we document in Figure 1, the pandemic has increased the probability of job loss across all sectors of the economy; however, this increase in percentage points is higher the lower is the average sector wage, with the category of least-paid workers being the most likely to lose their job. This category includes occupations such as home-based personal care and related workers, cleaners and helpers in offices, hotels and other establishments, or restaurant and kitchen helpers. Considering that the pre-pandemic probability of becoming unemployed was already largest for this group (19.7% compared to the average 6% in 2019), the existing inequality in the labor market has been exacerbated by the Covid-19 crisis. In our regression analysis that is available by request, we also find that accounting for an index of the share of tasks that can be performed from home, defined at 2-digit occupational level, does not explain away the negative and significant relationship between wages and job loss probability. Although, we confirm previous evidence that the probability of losing jobs is lower among occupations that can be performed from home. The substantial contraction in economic activity in some sectors of the economy seems to be the driver of the unequal distribution of job losses.

 Figure 1. Change in job loss probability by wage decile between February and July

Source: Author’s own calculation, for data sources see Data Section.

Job loss probability by gender. Figure 1 also documents that, even though the change in job loss probability is higher in sectors dominated by women, the likelihood of men losing jobs has increased more in these sectors. As a result, in the regression analysis we find that there is no significant association between the share of women in a sector and the sector-level change in job loss probability.

Job loss probability by foreign status and age. We find that workers who are born outside of EU countries are significantly more likely to transition into unemployment during the pandemic (see Figure 2). The difference is striking. Based on our indicator, considering male workers the pandemic has raised the probability of job loss by roughly 7 p.p. more for non-EU citizens as compared to non-Swedish EU citizens, and by 9 p.p. more compared to Swedish citizens. These differences are only slightly smaller for women. Another group particularly affected is that of workers in the age group below 30 (result available upon request). Such patterns are due to foreign-born and younger workers being more concentrated in those low-wage sectors that also appear, based on our analysis, to be more impacted by the pandemic in terms of job loss probability

Figure 2. Change in job loss probability by foreign status between February and July 2020

Source: Author’s own calculation, for data sources see Data section

Conclusion

Our analysis of administrative monthly data on the number of workers who register as unemployed in Sweden confirms previous evidence that the Covid-19 crisis has not been “the great equalizer”. While the pandemic has increased the probability of losing jobs across all sectors, the most affected in Sweden are those workers in occupations where the lowest wages were paid before the pandemic. Considering other demographic characteristics, vulnerable groups that were most impacted by the crisis are workers born outside of the EU and workers aged below 30. However, we do not find evidence of a gender-unequal impact of the pandemic in terms of the probability of job loss. There may of course be many other aspects to the issue along gender lines. For example, on one hand, there might be gender-unequal effects that we cannot observe in our data, for instance in the number of hours worked, temporary unemployment, and level of stress due to increased childcare responsibility. On the other hand, since schools in Sweden stayed open throughout the pandemic, the concerns related to increased childcare responsibility, which have led to identifying mothers as most vulnerable in other countries, do not necessarily apply to the Swedish context.

Sweden has adopted a number of measures to shield workers from the worst effects of the pandemic. As the country plans the recovery, special attention should be devoted to the opportunities for re-employment for the most vulnerable groups. Absent such focus, the economy emerging from the crisis might be less inclusive and equal than it has been before the pandemic, with important consequences for many societal outcomes that are generally linked to labor market inclusiveness.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Addressing the COVID-19 Pandemic: Vaccination Efforts in FREE Network Countries

Posted on March 1, 2021 | Policy Brief

Preparing Covid Vaccine on Pink Surface representing COVID-19 vaccination

There are great expectations that vaccinations will enable a return to normality from Covid-19. However, there is massive variation in vaccination efforts, vaccine access, and attitudes to vaccination in the population across countries. This policy brief compares the situation in a number of countries in Eastern Europe, the Baltics, the Caucasus region, and Sweden. The brief is based on the insights shared at a recent webinar “Addressing the COVID-19 pandemic: Vaccination efforts in FREE Network countries” organized by the Stockholm Institute of Transition Economics.

Introduction

As of February 16, 2021, the total number of confirmed COVID-19 deaths across the globe has reached 2.45 million according to Our World in Data (2021).  Rapid implementation of vaccination programs that extend to major parts of the population is of paramount importance, not only from a global health perspective, but also in terms of economic, political, and social implications.

Eastern Europe is no exception. Although many countries in the region had a relatively low level of infections during the first wave of the COVID-19 pandemic in the spring of 2020, all have by now been severely affected. Vaccination plays a key role for these economies to bounce back, especially as many of them depend on tourism, trade, and other sectors that have been particularly hurt by social distancing restrictions.

 Figure 1. Cumulative confirmed COVID-19 cases (top panel) and deaths per million (bottom panel) in the FREE Network region

Source: John Hopkins University CSSE COVID-19 visualizations: Ourworldindata.org/coronavirus

Against this background, the Stockholm Institute of Transition Economics invited representatives of the FREE Network countries to discuss the current vaccination efforts happening in Eastern Europe, the Baltics, and the Caucasus (the represented countries were Belarus, Georgia, Latvia, Poland, Russia, Sweden, and Ukraine). This brief summarizes the main points raised in this event.

Vaccination Status

In Latvia, Poland, and Sweden, the second wave of infections started to pick up in November 2020 and peaked according to most COVID-19 impact measures in early 2021. As all three countries are members of the EU and take part in its coordinated efforts, they have all received vaccines from the same suppliers (i.e. Astra/Zeneca, Moderna, and Pfizer/BioNTech).

Latvia had problems early on with getting the vaccination process off the ground. The health minister was blamed for the slow start since he declined orders from Pfizer/BioNTech in the early stages, and was forced to resign. As of February 16, two doses per 100 people have been distributed primarily to medical staff, social care workers, and key-state officials.

Figure 2. Cumulative COVID-19 vaccination doses per 100 people

Source: Our world in data, last updated February 24th, 2021. This is counted as a single dose, and may not equal the total number of people vaccinated. Visualizations: Ourworldindata.org/coronavirus

With the first phase starting in late December, Sweden has by February 16th, 2021, fully vaccinated 1,05% of the population while experiencing serious problems with delivery and implementation. As planning and delivery of vaccines are centralized while the implementation is decided regionally, there have been some unclarities regarding who stands accountable for issues that emerge. Guidelines, issued by the Public Health Agency of Sweden, for how to prioritize different groups have been changed a couple of times. Currently, the (non-binding) recommendation is to prioritize vaccinating people living in elderly care homes, as well as personnel working with this group, followed by those above 65 years of age, health care workers, and other risk groups.

Looking at regional statistics there are significant differences in vaccinating people across regions with an average of 70% usage rate of delivered vaccines, and with lows at 40-60%, see figure 3. Reasons for this remain unclear.

Figure 3. Distributed relative to delivered vaccines across counties (län) in Sweden.

Source: Authors’ calculations based on data collected by the Public Health Agency of Sweden. Last updated February 14th, 2021.

Poland has so far been somewhat more efficient than Sweden in its vaccination efforts. Despite turbulent political events over the last couple of months, it has managed to distribute 5.7 doses per 100 people. The country has just finished the first phase of the national vaccination plan, which focused on vaccinating healthcare personnel, and has now entered the second phase with a shifted focus towards elderly care homes, people above 60 years of age, military, and teachers.

Among the countries that are not members of the EU, and thus, not taking part in its coordinated vaccination efforts, the vaccination statuses are more diverse.

Russia was fast in developing and approving the Sputnik V vaccine. The country started vaccinating in early December, although only people in the age of 18-60 in prioritized occupations such as health care workers, people living and working in nursing homes, teachers, and military. At the start of 2021, the program extended to people above 60 and, on January 16, all adults were given the possibility to register themselves and get vaccinated within one week. There are no precise data at the moment, but the fraction of the population vaccinated is likely to be higher than 1%.

Others in the region have faced greater challenges in signing contracts with vaccine suppliers. Georgia and Ukraine are still waiting to secure deliveries and have not yet started to vaccinate. Being outside the EU agreements and with public and political mistrust towards Sputnik V and Russia alternatives are being explored. Georgia has ordered vaccines through the COVAX platform (co-led by Gavi, the Coalition for Epidemic Preparedness Innovations (CEPI) and WHO) but there are concerns about potential delays in deliveries. In terms of prioritizing groups once vaccinations can start, both Ukraine and Georgia have set similar priorities as other countries, with extra focus on health-care and essential workers, age-related risk groups, and people with chronic illnesses.

While Belarus’ official figures on the death toll have been widely perceived as unrealistic from the beginning, the most accurate and recent data shows an excess deaths rate of about 20% in July. The country has no precise data on vaccinations, but some reports have emerged based on interviews with government officials in the Belarusian media. These suggest that around 20,000 imported doses of Sputnik V have been distributed mainly to medical professionals and an additional 120,000-140,000 doses have been promised by Russia.

Main Challenges

The discussion during the Q&A session at the webinar concerned the economic and political implications of vaccinations in the region.

Pavlo Kovtoniuk, the Head of Health Economics Center at KSE in Ukraine, stressed the importance of a coordinated vaccination effort in Europe with regards to geopolitics. There is a clear EU vs Non-EU divide in the vaccination status across European countries. The limited vaccine availability in Non-EU countries such as Ukraine, Georgia, and Belarus offers opportunities for more influential nations like Russia and China to pressure and affect domestic policy in these countries.

Also highlighting the fact that no one is safe until everybody is safe, Lev Lvovskiy, Senior Research Fellow at BEROC in Minsk, noted that vaccination efforts in Europe are important for recovery in small open economies like Belarus as many of its trade partners currently have imposed temporary import restrictions.

Similar to the political crisis happening alongside the pandemic in Belarus, the challenges we see in Poland – protests against the recent developments regarding abortion rights and attempts by the government to limit free media – have deflated the urgency to vaccinate in terms of its future economic and political implications, according to Michal Myck, director of CenEA in Szczecin.

Looking forward, another major challenge for the region is vaccine skepticism. Not only do many countries have to build proper infrastructure that can administer vaccines at the required scale and pace, but also make sure that people actually show up. In Latvia, Poland, Georgia, Russia, and Ukraine, polls show that less than 50% of the population are ready to vaccinate. Sergejs Gubin, Research Fellow at BICEPS in Riga, highlighted that there can be systematic variation in the willingness to vaccinate within countries as e.g. Russian-speaking natives in Latvia have been found to be less prone to vaccinate on average. Also, most of the skepticism in Georgia has been more directed towards the Chinese and Russian vaccine than towards those approved by the EU, according to Yaroslava Babych who is lead economist at ISET in Tbilisi.

Even though vaccine skepticism is an issue in Russia too, Natalya Volchkova, Director of CEFIR at New Economic School in Moscow, pointed to the positive impact of “bandwagon effects” in vaccination efforts. When one person gets vaccinated, that person can spread more accurate information about the vaccine to their social circle, resulting in fewer and fewer people being skeptical as the share of vaccinated grows. In such a scenario vaccine skepticism can fade away over time, even if initial estimates suggest it is high in the population.

Concluding Remarks

Almost exactly a year has passed since Covid-19 was declared a pandemic. The economic and social consequences have been enormous. Now vaccines – developed faster than expected – promise a way out of the crisis. But major challenges, of different types and magnitudes across the globe, still remain. As the seminar highlighted, there are important differences across transition countries. Some countries (such as Russia) have secured vaccines by developing them, but still face challenges in producing and distributing vaccines. Others have secured deliveries through the joint effort by the EU, but this has also had its costs in terms of a somewhat slower process (compared to some of the countries acting on their own) and sharing within the EU. For some other countries, like Belarus, Ukraine, and Georgia, the vaccination is yet to be started. All in all, the choice and availability of vaccines across the region illustrates how economic and geopolitical questions remain important. Finally, for many of the region countries vaccine skepticism and information as well as disinformation are important determinants in distributing vaccines. Summing up, the combination of these factors once again reminds us that how to best get back from the pandemic is truly a multidisciplinary question.

List of Participants

  • Iurii Ganychenko, Senior researcher at Kyiv School of Economics (KSE/Ukraine)
  • Jesper Roine, Professor at Stockholm School of Economics (SSE) and Deputy Director at the Stockholm Institute of Transition Economics (SITE/ Sweden)
  • Lev Lvovskiy, Senior Research Fellow at the Belarusian Economic Research and Outreach Center (BEROC/ Belarus)
  • Michal Myck, Director of the Centre for Economic Analysis (CenEA/ Poland)
  • Natalya Volchkova, Director of the Centre for Economic and Financial Research  ­New Economic School (CEFIR NES/ Russia)
  • Pavlo Kovtoniuk, Head of Health Economics Center at Kyiv School of Economics (KSE/Ukraine)
  • Sergej Gubin, Research Fellow at the Baltic International Centre for Economic Policy Studies (BICEPS/ Latvia)
  • Yaroslava V. Babych, Lead Economist at ISET Policy Institute (ISET PI/ Georgia)

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Video of the FREE Network webinar “Addressing the Covid-19 Pandemic: Vaccination Efforts in Free Network Countries“

Domestic Violence in the Time of Covid-19

Posted on October 12, 2020 | Policy Brief

20201012 Domestic Violence in the Time of Covid-19 Policy Brief image 01

 Since the outbreak of Covid-19 in the spring of 2020, media outlets around the world have reported increases in domestic violence. United Nations secretary-general António Guterres has even referred to it as a “shadow pandemic”. Besides news outlets, academic researchers have also taken an interest in the issue, which is crucial if we are to draw the right conclusions from the patterns we see in the statistics. Preliminary evidence shows that the incidence of intimate partner violence has also increased in Sweden, notwithstanding the absence of a strict lockdown. This is likely related to the socio-economic changes brought about by the pandemic.

A Shadow Pandemic?

In response to the Covid-19 pandemic, governments around the world introduced a variety of measures aimed to stave off the contagion, and billions of worried people adapted their behavior and lifestyle. But did the pandemic, and the changes brought by it, also lead to an increase in domestic violence?

Were we to simply look at the number of domestic violence offenses reported over time, we would not be able to answer this question. Historical trends and seasonal patterns in domestic violence would confound this observation, while the crisis might affect the reporting of crimes independently of their occurrence. More rigorous statistical analysis is needed for understanding not only the true situation with domestic violence under the pandemic, but also the reasons behind it. Investigating the driving factors is crucial for informing policy reactions already in the short run — is it a loss of income that generates violence, or could it simply be increased exposure? Do we need more unemployment benefits or shelters for victims?  ­­Moreover, the rather special conditions created by the pandemic can contribute to our general understanding of how domestic violence occurs in relation to other societal dynamics, unveil some of the causal mechanisms that are still open questions in the literature and help to fight this issue further, even after the pandemic is over.

Socio-economic Theories of Violence

Within social science research, studies that focus on the relationship between domestic violence and factors at a societal level can be divided into several different branches. A large corpus of theories interprets violence as a result of power imbalance within households. This perspective is associated with explanations such as bargaining power, exit options, and status, theoretical concepts that are often embodied and approximated by observable factors such as (relative) education, income or employment status. For example, Aizer (2010) provides results in line with the bargaining power hypothesis showing that a decrease in the gender wage gap in the US is associated with a decrease in domestic violence against women. Along the same lines, Anderberg et al. (2016) use UK data to show that an increase in unemployment among men reduces the incidence of intimate partner violence (IPV) while an increase in unemployment among women increases it. In contrast, a study from Spain documents the opposite relationship in provinces characterized by stronger traditional gender roles (Tur-Prats, 2019). It finds that a decrease in female relative to male unemployment causes an increase in violence, which is more in line with the “backlash explanation” — when a woman improves her economic position and independence, the man in the household feels that his identity as breadwinner is threatened and retaliates with violence as a result. Studies such as Iyer et al. (2012) and Miller and Segal (2018) highlight the importance of improving the position of women in society, which can be achieved, for example, through role models and female representation in critical positions. They associate the proportion of women among elected politicians and among the police, in India and the United States respectively, with a significant increase in reports of crimes against women and at the same time a significant decrease in the incidence of such crimes.

An alternative interpretation of domestic violence puts more emphasis on its emotional and irrational nature. In this case, particular events or negative emotional shocks, such as an unexpected negative result of an important football match (Card and Dahl, 2011), are believed to trigger violent reactions in the heat of the moment. The likelihood of such incidents is exacerbated by stress and emotional climate within a household, which in turn are influenced by economic conditions or financial uncertainty. For example, several studies from developing countries associate improvements in general economic conditions with a reduction in domestic violence (Hidrobo et al., 2016; Kim et al., 2007; Haushofer et al., 2019).

Finally, there is a common perception that domestic violence increases during holidays and weekends as families spend more time together and potential victims are more isolated from their social networks, in line with the so-called exposure model in criminology. So far, research on this hypothesis is limited and incomplete. However, it is precisely one of the areas where studies from the recent months may fill the knowledge gap: the fact that lockdowns and work from home  forced many families to spend more time together at home while retaining full wages, gives a unique opportunity to examine exposure in isolation from other economic factors.

The opposite of exposure is known as (self-) incapacitation theory: no aggression will occur while a (potentially violent) partner is occupied with something else, whether imposed or self-chosen. Several studies focusing on this hypothesis have documented that the incidence of violent crimes declines, on the street or in the home environment, when potential perpetrators are in school (Jacob and Lefgren, 2003), in prison (Levitt, 1996), at the cinema (Dahl and DellaVigna, 2009) and when they have access to a legal prostitution market (Cunningham and Shah, 2018; Ciacci and Sviatschi, 2018; Berlin et al., 2019). During a lockdown, the availability of such activities is restricted, both to violent people as well as potential victims.

Research on Domestic Violence During Covid-19

The list of studies analyzing data from the past few months is growing by the day. Although full consensus is yet to be reached, the results that have emerged point towards a few patterns: spikes in domestic violence can be credibly connected to strict limitations of movement, at least in some contexts (India, Ravindran and Shah, 2020; Peru, Agüero, 2020; 15 large US cities, Leslie and Wilson, 2020);  unemployment could be an important mechanism (Bhalotra et al., 2020; in Canada, Beland et al., 2020 find no impact of unemployment or work arrangements per se, but do associate spikes in violence to financial difficulties); alcohol does not seem to amplify domestic violence during the pandemic, at least in some context (Silverio-Murillo and Balmori de la Miyar do not find any effect of the prohibition to sell alcohol in parts of Mexico City); and by and large barriers to reporting might be a serious issue (Spencer et al, 2020).

A selection of studies on domestic violence during the Covid-19 crisis, many of which are as yet unpublished, were presented at the recent FROGEE Workshop “Economic Perspectives on Domestic Violence”. Two FREE Policy Briefs summarizing the event are forthcoming.

Domestic Violence in Sweden During Covid-19

Studying Sweden against this background can be particularly interesting for at least two reasons. Sweden regularly occupies the top positions in international rankings of gender equality in many dimensions and is seen as having advanced progressive norms and attitudes in this area. As pointed out by the literature on the economic determinants of domestic violence, underlying norms and attitudes can play a significant role in shaping the impact of other factors, such as unemployment (Tur-Prats, 2019). Therefore, the Swedish case can offer a valuable comparison to studies focusing on countries that have different attitudes and norms.

According to estimates by the National Council for Crime Prevention (BRÅ), at least 7% of the Swedish population is exposed yearly to domestic violence, both men and women in roughly equal parts. However, women are much more likely to report recurring violence and to end up hospitalized.

When it comes to the particular situation of the Covid-19 crisis, Sweden is also close to unique in its contagion-management strategy. Swedish policy relied much more than elsewhere on voluntary participation and individual responsibility rather than coercion. Certainly, working from home when possible was encouraged, the use of public transport discouraged, and indoor events with more than 500, and thereafter 50 participants were forbidden, which included many sports and cultural events. In fact, the Google mobility index, based on location data from Google Account users, shows patterns of clear deviation from the baseline since week 11 of 2020, when the authorities declared a very high risk of community spread.

Figure 1. Mobility patterns in Sweden during Covid-19

Source: Author’s aggregation of Google mobility index. The lines show the deviation from baseline, in percentual terms, of total user presence in different urban areas by category.

The plots in Figure 1 show that the presence of Google Account users was about 10% higher in residential areas (the pink line) and much lower in workplaces, despite some variation over the period: the initial decline was roughly half as large as the impact of summer vacation, as shown by the blue line. Also, visits to retail centers and grocery stores, recreation places (such as restaurants, cinemas, and theaters), and transit stations decreased, especially during the beginning of the period. Mobility in parks and green areas, shown separately, follow to a larger extent a seasonal pattern.

Nevertheless, the general population was never forbidden or even discouraged from leaving their homes, which clearly makes a stark difference for many of the mechanisms that, based on the literature, we think could play a role in explaining domestic violence.

According to BRÅ, during the first half of 2020, there was a 1% increase in total reported crime compared to the same period of the previous year. However, there is wide variation among the crime categories: 9% more violent assaults against women were reported, and 4% more against men, but 6% fewer rapes of women and 9% fewer rapes of men. As discussed above, it is not straightforward to draw conclusions from simple comparisons over time. Preliminary analysis utilizing the variation in mobility patterns over weeks and municipalities reveals that a 10% increase in residential mobility is associated with a (lower bound) increase in reported non-battery crimes against women committed by an intimate partner by 0.015 crimes per 10,000 individuals (a sixth of the mean). The corresponding figure for a 10% reduction in mobility in retail and recreation areas and transit mobility is around 0.0025 additional crimes (3% of the mean) (see Figure 2). Crime categories include attempted or planned homicides; sexual molestations, sexual assaults, and rapes; violations of integrity and privacy (including limitation of freedom, coercion, threats, persecutions; battery crimes are not included for the time being because of a coding mistake in the police system pertaining this particular category).

Figure 2. Mobility patterns and IPV in Sweden during Covid-19 – non-battery crimes

Source: Author’s analysis. Crime data provided by the police, mobility index provided by Google.

We consider this a lower bound because of the voluntary nature of the Swedish ”lockdown” – if people have the freedom to choose, then it is reasonable to expect that individuals more exposed to the risk of domestic violence would decide to be less at home, which would reduce the strength of the relationship observed. In the opposite direction, we might be worried that when more people are at home, more crimes are reported by a third party, such as neighbors, and thus not implying that more crimes are being committed. However, we differentially see more reported crimes with a female victim than with a male victim, which is not necessarily easy for a third party to distinguish by the sounds. Therefore, it seems likely that, based on the changes in mobility patterns, IPV against women has increased in Sweden during the Covid-19 crisis. Other consequences of the crisis that might also play an important role in shaping IPV and domestic violence, including the huge increase in unemployment and changes in alcohol sales, remain to be investigated.

Conclusion

In conclusion, research from the past months finds some limited support for hypotheses originating from previous literature on the relationship between different socio-economic factors and domestic violence. When these factors were affected by the pandemic and the associated economic crisis, domestic violence responded as well, to a varying extent depending on the context. This can be seen as an indirect and hidden cost of the pandemic.

Preliminary evidence indicates a similar case for Sweden, notwithstanding the absence of a strict lockdown. This implies that a significant part of the changes in behavior, which in turn can be expected to affect domestic violence, have occurred as a response to the pandemic itself and not necessarily as a result of policy measures.

While the shock of the pandemic will help us to better understand some of the underlying mechanisms behind the phenomenon of domestic violence, many questions are still open, and it is important to look beyond the pandemic. Domestic violence existed before Covid-19 and will, unfortunately, remain part of our societies when the pandemic is over. Investigating and understanding its determinants is important in order to formulate proper policies to combat it during and after the crisis.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Governance in the Times of Corona: Preliminary Policy Lessons from Scandinavia

Posted on June 25, 2020 | Policy Brief

Areal image of empty restaurant tables with only one table occupied by two people representing governance and Covid-19

This policy brief summarizes the key points discussed in the webinar entitled “How did we end up here? Governance lessons from the Covid-19 pandemic” which was organized by CEPR, LSE IGA, SPP and SITE on June 18, 2020. The main insights concern the relationship between science and expert authorities on the one hand and elected and democratically accountable political institutions on the other hand. The Covid-19 pandemic has illustrated the need to strike a balance between being prepared and having a plan, and at the same time being able to take in new information and learn as new challenges unfold. This requires drawing on expertise from multiple fields as well as keeping an open mind to reevaluate chosen strategies when necessary.

Introduction

Economists have long reflected upon the potential benefits from separating the short-run decision making and implementation of policies from the overarching long-run goals. Central bank independence is probably the most prominent example, but the general idea of elected politicians transferring decisions to technocrats is widespread and, in different forms and to a different extent, part of the governance structure of all countries.

In the context of the corona crisis, governance issues have also been discussed, and the pros and cons of different systems are under debate: China, with its authoritarian system, has found it easier to control its population’s movements than many hard-hit European countries. In the US, the duality between the federal government and strong states has caused a lot of tensions. In Brazil, strong mayors and state governments have partly succeeded in counterbalancing the federal policy by imposing lockdown measures at the local level. The Covid-19 crisis is special: as a global health crisis, it certainly requires more coordination and expert knowledge than most other types of crises. Hence, in all countries, epidemiologists have received particular attention, but even internationally the Swedish state epidemiologist Anders Tegnell stands out with regards to this.

In the webinar entitled “How did we end up here? Governance lessons from the Covid-19 pandemic” which was organized by CEPR, LSE IGA, SPP and SITE on June 18, economists Karolina Ekholm and Bengt Holmström discussed governance issues within the Covid-19 crisis with a special focus on the Nordic countries. Ekholm is a professor at Stockholm University, former deputy governor of the Swedish Central Bank and served as a state secretary at the Swedish Ministry of Finance until 2019. Holmström, professor at the MIT and Nobel prize laureate, has been part of the Finnish commission on corona. Finland’s approach to the Covid-19 crisis has been widely approved of: the country imposed an early lock-down which seems to have successfully contained the spread of the virus. Sweden, by contrast, has made headlines all over the world due to its relatively loose policy approach, and more recently, due to the high death toll the country has recorded so far. How have governance issues contributed to these very different outcomes and what can we learn from this for the larger picture?

A Transdisciplinary Approach for a Multidimensional Crisis

Holmström contributed with an instructive account of his experience advising the Finnish government. The initial forecast turned out to be overly pessimistic, according to him, partly because epidemiologists underestimated a driving force behind people´s behavior: fear. If people had not been so afraid of the virus, compliance with the restrictions may have been much lower. This is not to blame epidemiologists: economists have struggled for decades to understand people’s behavior better and to integrate it into their models, which is everything but an easy exercise. But what policymakers can certainly learn from the first wave of Covid-19 is that the societal appreciation of the urgency of the pandemic can make a crucial difference and will determine whether policies fail or succeed. This may be of vital importance if a second wave of the virus is to follow. Moreover, scientists need to remember to update their models. What has worked for the swine flu may not work for Covid-19. As noted by one of the webinar participants: what is needed now is a forward-looking approach to science.

The Pitfalls of Technocratic Rule

Economists tend to focus on the benefits of technocratic rule in opposition to government corruption. This may be true in certain contexts, but technocratic rule is not a panacea. A priori, health experts are better informed than politicians during a health crisis. The Swedish, as well as the Finnish and the UK governments, were following their health agencies’ advice at the beginning of the Covid-19 outbreak. Yet, the governments in Helsinki and London departed from this policy quite early. According to Ekholm, the Finnish government soon overruled expert advice because they expected that voters would punish politicians who did not prioritize saving lives. A reason which is often invoked to explain why the Swedish government has not followed the Finnish example is that the Swedish constitution does not allow ministerial rule. Yet, this is unlikely to be decisive in the comparison to Finland, which also has a tradition of autonomous government agencies. Ekholm thinks that the evaluation of the health agencies in Scandinavia made at the outset of the crisis did not differ much from each other – with the exception of the Swedish health agency being more pessimistic with regards to the possibility of suppressing the spread of the virus by going into lock-down. The Swedish health agency also still enjoys high approval and confidence both from politicians and the general public. However, why it took so long for the health agency to push for more testing capacity remains a mystery to the webinar speakers.

Holmström mentioned another reason for exercising caution: just as economists, epidemiologists tend to fall for their standard models and may not question them enough. Scientists are trained to reason along their disciplines’ main paradigms and models and this can limit their intellectual flexibility and ability to analyze new phenomena. In this sense, having a lot of experience can sometimes lead to being overly confident in solutions which have been “proven before” as for instance, the idea of “herd immunity”.

The Use of Scientific Evidence

Science is supposed to be objective and transparent, but from an epistemological point of view, things are ambiguous. Holmström named the example of face masks, which have become the symbol of the Covid-19 pandemic elsewhere, but which are still rare on the streets of Stockholm and Helsinki. The Swedish and Finnish health authorities have hesitated to endorse the use of face masks, mainly because there is little evidence of their efficiency. Yet, other countries have endorsed them, following the very argument that there is little evidence of their harmfulness. Which question you are asking – whether masks help fight the spread of the virus or whether they may cause any collateral damage – determines which conclusion you come to. While a priori this may appear mostly as a philosophical question, the stakes are high in a health crisis and the dimensions of the current pandemic may very well justify adherence to the principle of precaution, according to Holmström.

Efficiency vs. Resilience

Economists’ workhorse model by contrast tends to be that of optimization: minimizing costs and maximizing efficiency or welfare. Particularly in the context of healthcare, this approach has been subject to criticism, though. Ekholm confirmed that the health sector in Sweden has been slimmed down, partly following extensive privatizations. In Sweden, another issue has been the lack of coordination between the national, the regional (largely responsible of healthcare) and the local level (responsible of nursing homes). Ekholm believes that there are many lessons to be learned from the numerous failures in vertical and horizontal cooperation between different Swedish governance institutions. Conferring more responsibilities to the European level in the domain of health could be efficient but both speakers agree that, despite generally high approval of the European Union, the Swedish and the Finnish public are unlikely to agree to such measures.

Conclusions

All conclusions we draw at this point must necessarily be preliminary. First, the Covid-19 crisis has challenged local, regional, national and supranational governance more than any previous crisis. The reasons for this are manifold: Covid-19 has grown from a health emergency to becoming an economic, social, political and potentially financial crisis. Second, the merits and pitfalls of technocratic rule must be evaluated. No single expert authority can – or should – claim the sole power of interpretation when facing a multidimensional crisis such as the current one. Considering this, it seems advisable that scientists with different expertise be included in a transparent decision-making process that then is clearly and openly communicated to the public. Crucially, all decisions and rules must be updated constantly, as new evidence arises; there is no room for dogmatism. Finally, there is no doubt that society has to become more resilient in the future. Whether this is to be achieved via supranational integration, investments in research and healthcare, more efficient crisis management mechanisms, or a combination of all these, is to be evaluated.

List of Speakers

Karolina Ekholm, Professor, Stockholm University and Fellow, CEPR

Bengt Holmström, Paul A. Samuelson Professor of Economics, MIT

Chair and Moderator:

Erik Berglöf, Director, Institute of Global Affairs, LSE School of Public Policy and Fellow, CEPR

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

The Swedish Exceptions: Early Lessons From Sweden’s Different Approach to COVID-19 – Insights From a SITE-LSE Webinar

Posted on April 27, 2020 | Policy Brief

Image of sunrise in Stockholm street representing Sweden's different approach to COVID-19 response

Sweden’s policy in the Corona crisis has been subject to a lot of discussion in international media recently. Some point to the country portraying “the Swedish way” as a valid policy alternative to the forced lock-down of society, others criticize the Swedish government for being imprudent. Given the pace with which the virus spreads and considering the volatility of current events, it is pre-mature to draw any definite conclusions. But it is certainly time to start an informed policy discussion. The webinar “The Swedish Exceptions: Early Lessons from Sweden’s different approach to COVID-19, jointly organized by the Stockholm Institute of Transition Economics (SITE) and the London School of Economics (LSE) on April 22, 2020” brought together academics from different relevant disciplines from Scandinavia, the UK and the US . The webinar allowed to discern a few of the motivations behind the Swedish policy choices as well as a number of criteria which will serve to measure the success of governments’ responses to the Covid-19 pandemic in the future.

Understanding the Swedish Approach to Covid-19

Much has been written and said about the Swedish reluctance to impose a strict lock-down on the country: the Swedish government has so far relied mostly on expert recommendations, avoiding from more stringent policies such as the strict lock-downs imposed by for instance Sweden’s neighboring countries Norway and Denmark (more on Sweden in the Covid-19 crisis here). The majority of the speakers in the webinar agree that the Swedish policy in the Corona crisis has been an outlier, even with respect to traditional Swedish policy: Peter Baldwin, historian and professor at the University of New York and the University of California, Los Angeles, argued that Sweden has had an interventionist tradition with respect to social and health policy in the past. “Native policy traditions” therefore do not explain why Sweden has chosen this policy course in his view.

While it seems difficult to pin down historical or ideological reasons behind the Swedish policy stance with respect to Covid-19, Lars Trägårdh, professor of social history at Ersta Sköndal Bräcke University College in Stockholm, pointed out that even though the legal differences may seem stark, the difference in the policy impact may be smaller than expected, the crucial factor being the degree of compliance with a certain measure or recommendation and not its legal force. Trägårdh further argued that, since it may take many months to develop a vaccine, the sustainability of a given policy strategy is essential. According to him, a policy relying on voluntary compliance as the Swedish one rather than legal obligation, may therefore yield comparable effects in the short and medium run and could even turn out to be more successful in the long run.

Trägårdh argued that the true exceptionality of the Swedish response to the global pandemic has been the choice to not close elementary schools. This policy choice can be explained above all by the concern for children’s rights: for smaller children, digital learning simply is not a valid option. As declared by the government on several occasions, another reason is that parents working in professions such as healthcare may be induced to stay at home if schools are closed. Finally, Trägårdh cited a recent study from Iceland which suggests that the effect of closing schools on limiting the spread of the virus may be relatively small.

Later in the discussion, another potential argument in favor of the Swedish strategy emerged: Professor Sara Hagemann from the LSE School of Public Policy described the difficulty of leaving a lock-down, which Denmark is currently experiencing. The question which measures are to be lifted and which sectors of the economy are to be opened first has caused considerably more controversy than imposing the initial lock-down. In contrast, the public debate in Sweden can immediately focus on dealing with the long-term consequences of the crisis according to Trägårdh.

The significance of the concept of “herd immunity” (meaning the protection from disease arising from large percentage of the population having developed immunity) for the Swedish strategy is unclear. Baldwin pointed out that even though Swedish authorities have declared not targeting herd immunity, many measures implicitly seem to be aiming for this outcome.

Results of the Swedish Approach Until Today

Tom Britton, professor of mathematics at Stockholm University, agreed that the Swedish response to the Covid-19 crisis came late and that there has been too little testing. However, he argued that the government’s policy has been consistent, focusing on reducing the spread of the virus and protecting risk groups and especially the elderly. Whether Sweden has achieved the latter goal is still up to discussion, though. As of April 2020, reported infections and deaths in nursing homes had increased, which according to Trägårdh has been the major failure of the Swedish policy response up until today. Yet, the speakers agreed that the Swedish government’s measures have received a lot of public support within Sweden so far, which is a non-negligible factor for the long-term success of the strategy.

General Policy Conclusions

Professor Ole Petter Ottersen, president of the Karolinska Institute in Stockholm, Sweden’s largest centre of medical research, stressed the speed with which the virus has been spreading: the rapid development forces policymakers to quickly take decisions based on limited information. Given the lack of data, Ottersen called for politicians to practice humility and acknowledge the uncertainty surrounding policy choices. According to him, it will take years to evaluate whether the Swedish model or the Norwegian model of a quick and strict lock-down is better suited to fight the pandemic.

Policymakers around the globe face a dilemma: for sustainable crisis management and given countries’ interdependency, measures meant to fight the spread of Covid-19 should be aligned internationally and taken cooperatively. Yet, as Hagemann pointed out, it is clear that one policy cannot fit all: countries differ for instance with respect to their socio-economic structure, health care quality and availability, demographics, and with respect to the point in time when they were hit by the virus. This is not only the case between countries, but even within countries, which could justify a differentiated approach between rural and urban areas in some instances. In other words, all models and policy recommendations have to be adapted to the specific local setting. A strategy which allows for making local adjustments while maintaining a global perspective will be a major challenge for policymakers in the coming months and, likely, years.

Britton stressed the importance of understanding the limits of the models being used. Their predictions depend on a lot of assumptions regarding for instance how individuals behave and to what extent rules and regulations are being respected. Anti-body tests will soon provide more data on the actual spread of the virus, but even then, major questions, such as how to treat a potential trade-off between preventing deaths from Covid-19 vs. the socio-economic and health costs caused by a lock-down, will remain unanswered. This trade-off is country specific as well: Hagemann argued that Sweden and the other Nordic countries have quite successfully implemented remote working and learning options. This, however, will not be feasible in most developing countries, for instance, which necessarily affects the cost-benefit analysis of the available policy options.

Further, data collection and availability undoubtedly need to improve. As long as no better instruments of analysis are available, both scientists and politicians should be transparent about the simplifying assumptions and models they base their policy recommendations and decisions on.

Finally, despite their different academic backgrounds, all experts agreed on the need to take into account the indirect consequences of both the spread of the virus and the policy measures implemented to fight it. Covid-19 is likely to reinforce social inequities. For instance, it has been shown that in Stockholm, immigrant communities have been hit the hardest. As soon as the imminent health crisis is under control, the policy focus, therefore, has to shift towards the socio-economic consequences of the crisis.

Acknowledgements

The Stockholm Institute of Transition Economics wishes to express its appreciation to the speakers for their contributions to the policy debate, to the London School of Economics for the successful cooperation in organizing the event, and to the audience for its engaging questions and interest in the topic.

List of Speakers:

  • Peter Baldwin, New York University and University of California, Los Angeles
  • Tom Britton, Stockholm University
  • Sara Hagemann, London School of Economics
  • Ole Petter Ottersen, Karolinska Institute, Stockholm
  • Lars Trägårdh, Ersta Sköndal Bräcke University College, Stockholm
  • Erik Berglöf, London School of Economics (moderator)

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Recipient Type and the Effectiveness of Informational Campaigns: The Case of Meat

Posted on March 30, 2020 | Policy Brief

A picture of meat on the table table, indoor, sitting representing Informational campaigns that affect meat consumption

While global population growth has been accelerating during the last decades, the number of humans currently living on the planet is dwarfed by the amount of farm animals alive at any time, and even more by the quantity we slaughter for meat every year. According to the latest FAO statistics, this latter number is estimated at around 75 billion. Even ignoring animal welfare, this is severely affecting the health of the planet and our own. What should be done about this?

Externalities of Meat Consumption

Mankind has been butchering and eating animals for at least 3,4 million years (McPherron et al., 2010). Evolutionary biology theories claim that complementing our diet with meat contributed to the spectacular growth of our brain (Fonseca-Azevedo et al., 2012). Anthropological theories suggest that the necessity of hunting drove the development of tool building, language and social structures. The domestication of animals (and plants) around 10,000 years ago led to a jump in the history of civilization. In other words, eating meat is a large part of what made us human. However, during the last century, we took this to unsustainable levels. All in all, the agricultural sector accounts for 25 to 30% of global CO2 emissions, second only to the energy and transport sector, and 60% of non-CO2 emissions, in particular methane, which is much more efficient than CO2 at warming up the planet. A third to half of these emissions, depending on whether or not we include the share related to land use, comes from livestock production. Large scale factory farms, which cater to the ever-increasing global demand for cheap meat, are also responsible for other externalities, including distorted resource use (in particular of water and fertile land); local pollution of air and waterways, with consequences for neighbouring ecosystems and human health; abuse of antibiotics, which threatens their effectiveness with dramatic implications for the whole spectrum of modern medicine. The cheap and overabundant animal products with worsened nutritional properties, which result from these production methods are also behind the epidemic of “welfare diseases” such as diabetes, cardiovascular conditions and some types of cancer (Mozaffarian, 2016).

So, what should we do about this? Economics is very clear on this point. In the presence of externalities, market prices do not reflect social costs; therefore, the market mechanism fails, and decisions taken on the basis of these prices are suboptimal. If applied to meat consumption, this principle implies that, first of all, consumers and producers must pay for the emissions (and other externalities) they cause. Today’s carbon pricing systems, whether in the form of a tax like in Sweden or tradable emission permits like in EU, exempt the agricultural sector for various reasons. Moreover, as already mentioned there is more to meat than carbon emissions. Another FREE brief (Perrotta, 2011) makes the case for a meat (consumption) tax. Multiple teams of researchers (Wirsenius, Hedenus, and Mohlin, 2011; Edjabou and Smed, 2013; Gren, 2015; Andersson, 2019) have come as far as to compute the optimal level of such a tax, in different contexts and under different assumptions. There are also drawbacks to this approach, though. Climate-change curbing policy is in general an area where policy makers at all levels find it hard to converge to policies of strong incentives, such as taxes and regulation. Interventions targeting food production or dietary choices, in particular, are likely to face strong opposition from producers and consumers alike. It is therefore worth considering the alternative – or at least complementary – strategy of information and awareness campaigns.

The Power of Information

Given that a climate policy agenda of strong incentives is so fraught with obstacles, the potential for information to spark voluntary action would be very valuable. There is a catch here, however. Information about the benefits of an action often fails to encourage that action. Consider the case in point: for decades now, we have observed a persistence and increase of meat eating despite mounting evidence and widespread information on the ills of meat production and consumption. Indeed, this well-known weakness of informational interventions has contributed to the rising importance and application of alternative approaches. One example is the popularity of the so-called nudges (Thaler and Sunstein, 2009), modifications in the choice architecture that can subtly push agents towards an action without actually limiting the available alternatives. There is ample research on where and why the chain from information to action might get interrupted, and established evidence that the effectiveness of information depends on a variety of factors such as recipients’ prior beliefs, the sender’s credibility, and the non-informative content of the message, such as the emotional evocativeness of imagery (see a survey in DellaVigna and Gentzkow, 2010). Taking a step back to the stage before, namely the question whether information does reach the intended beneficiaries in the first place, at least three aspects of this have been investigated: limited attention, active avoidance, and selective retaining of information on the part of the recipients. In a new working paper (Berlin and Mandl, 2020), we investigate the role of individual type for selective information retention. We ask whether certain types of agents, in our case vegetarians, retain more of the information they are exposed to, even when exposed to a similar context and the same incentives to retain information as everyone else (so that hopefully the competing channels of limited attention and active avoidance can be neutralized). This has relevance for the possibility of tailoring the policy message, similar to the marketing theories of market segmentation. In contrast to well-developed marketing practices in the private sector, this potential has so far not been exploited in policy design. To the best of our knowledge, this mechanism has not been investigated in a real-life incentivized setting outside the lab before.

Natural Experiment in Class

We exploit a natural experiment in the context of higher education. A class of college students was assigned an essay about their plan for a Christmas dinner menu, after being exposed to a lecture and reading materials on the externalities of meat production, so that they could decide to make use of this information. The essays were to be written in randomly assigned groups of three, making the type combination, i.e. the presence of one or more vegetarian group members, a random group characteristic. We hypothesize that there is a difference in how carnivores and vegetarians deal with the provided information about the food industry. In particular, we test whether groups that include a vegetarian student recall a larger share of the information than groups made up only of carnivores. The essay was mandatory, and moreover it awarded study credits toward the final grade of the course (10/100 points). This constitutes a sizeable incentive and possibly provides a stronger motivation for information retention as compared to the average monetary rewards which lab experiments rely on. To measure the share of information retained, we preregistered a list of 30 words in both English and Swedish related to the learning outcomes of the lecture. We then used a script to measure how many of the 30 words appear in each essay. We call this number the essay’s score, separate and independent from the teacher’s assigned grade, which is of relevance for the student. The teacher-assigned grade, reflecting general comprehension of the topic rather than just the presence of keywords, is expected to be correlated with the score, but not perfectly. We also expect the grade to capture the ability of the students to a higher degree compared to the score, as the automatized word count fails to consider the context in which the words are mentioned.

Results

Figure 1. Group score by treatment status

Source: Berlin and Mandl (2020).

On average, groups including a vegetarian student scored higher (4.8) than groups with all meat-eaters (4.3), but not significantly so. The estimated Cohen’s d (0.347), a standard measure of effect size used to indicate the standardized difference between two means, is much smaller than the minimum detectable effect in our sample, which we estimated at 0.8. In other words, we do not have the statistical power to either accept or reject the null hypothesis. The reason is that the treated group displays larger variation in score outcomes, possibly due to the smaller than anticipated sample size: only 11 students out of almost 300 identified themselves as vegetarians or vegan (non meat-eaters), which is a much smaller proportion than what the latest survey of young adults in Sweden estimates (17%, Djurens Rätt, 2018).

Looking beyond the mean at the details of our data reveals an interesting pattern. As the Figure shows, the distribution of achieved scores among the vegetarian groups is bimodal: a lower-level concentration of scores is close to the mode of the control distribution, but there is an almost as large mass at a higher level. This might suggest that, quite understandably, (attention and) performance, in terms of recall, is affected by several factors beyond the type. In other words, not all the individuals with the relevant type display increased retention of information. While many vegetarians remain close to the mode for the meat-eating type, a large fraction obtains double the score, suggesting a substantial though heterogenous increase in the retention of information.

We also use regression analysis in order to control for potential omitted variables and net out some of the variation in the score data that is not related to our variable of interest (such as group size and ability). Robustness checks were performed with different specifications and alternative outcome variables, but the main conclusion remains the same: mean performance, in terms of information retention, is higher for the vegetarian type but not significantly so. However, these results should not be interpreted as a rejection of our original hypothesis about the importance of type for information retention, as our analysis is empirically underpowered due to the low number of vegetarians in the sample. More importantly, the method we propose is highly appropriate, easily replicable and cheap.

Conclusion

Information interventions are low-cost and can be effective. Understanding how they can be tweaked for best effect is an area of crucial research interest, in particular for such an area as climate-change curbing policy. We provide an easy and cheap method to investigate this further and hope that more future research will pursue this avenue.

References

  • Andersson, Julius J., 2019. “The ‘meatigation’ of Climate Change: Environmental and Distributional Effects of a Greenhouse Gas Tax on Animal Food Products.” London School of Economics
  • Berlin, Maria P. and  Benjamin Mandl , 2020. “Selective attention and the importance of types for information campaigns”, SITE Working Paper Series. 53.
  • DellaVigna, Stefano and Matthew Gentzkow, 2010. “Persuasion: empirical evidence.”, Annu. Rev. Econ. 2 (1), 643–669.
  • Djurens Rätt, 2018. “Opinionundersökning, Våren 2018.” Novus.
  • Fonseca-Azevedo, Karina and Suzana Herculano-Houzel, 2012. “Tradeoff between brain and body mass.” Proceedings of the National Academy of Sciences. 109 (45), 18571-18576
  • McPherron, Shannon P. et al., 2010. “Evidence for stone-tool-assisted consumption of animal tissues before 3.39 million years ago at Dikika, Ethiopia.” Nature 466, 857–860.
  • Mozaffarian, Dariush, 2016. “Dietary and policy priorities for cardiovascular disease, diabetes, and obesity: a comprehensive review.” Circulation. 133(2), 187–225.
  • Perrotta, Maria, 2011. “Tax Meat to Save the Baltic Sea.” FREE Policy Brief Series.
  • Säll, Sarah and Ing-Marie Gren, 2015. “Effects of an environmental tax on meat and dairy consumption in Sweden.” Food Policy. 55, 41-53.
  • Thaler, Richard H. and Cass R. Sunstein, 2009. “Nudge: Improving Decisions About Health, Wealth, and Happiness.” Penguin Group.

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Women at the Top of the Income Distribution: Are Transition Countries Different?

Posted on March 2, 2020 | Policy Brief

Shadows of women walking down the road in a sunset representing women at the top of income distribution

This policy brief reviews recent research on women at the top of the income distribution. The overall trend across a number of countries is that, while women are still a minority (and more so the closer to the top one moves), their share in top income groups has steadily increased since the 1970s. Detailed data from Sweden suggests that most of this rise is due to women increasingly earning high labor incomes (rather than capital becoming more important). It also shows that there are important differences between top income men and women, especially with respect to family circumstances. Comparing preliminary results from former Soviet and Eastern European countries indicates that there are, on average, more women at the top of the income distribution in these countries. On the other hand, the average time trend indicates that the share of women in top groups is falling. The preliminary results also indicate considerable heterogeneity across countries. These preliminary results require more detailed study, as does the question to which extent the relatively strong representation of women at the top of the income distribution reflects the “economic power” of women in the region.

The Gender Aspect of Rising Top Shares

Rising inequality has received a lot of attention in the policy debate as well as in the academic literature over the past decade. A particular feature of this discussion has been the increased concentration of both wealth and income in top groups. The summary of the World Inequality Report 2018 starts by stating that “The top 1% has captured twice as much of global income growth as the bottom 50% since 1980”. Such facts have, in turn, brought a lot of attention to the characteristics of top groups. What is driving their income growth? What is their income composition? Why have top shares increased so much in recent decades? (see, e.g., Roine and Waldenström, 2015, for an extensive overview, or Roine, 2016, for a brief summary).

However, one aspect which has received relatively little attention is that of gender. This may seem a little surprising. In a time when gender dimensions are often acknowledged as being important, one would expect that questions about the gender composition of top groups would also be of interest. If we know that top income shares are increasing, what is the gender composition of these groups? How has this changed over time?

This brief outlines some recent results on these questions and also points to some preliminary findings about a potential contrast between Western countries and (former) transition countries.

Evidence from Sweden, 1971-2017

Sweden is one of the few countries having had independent taxation of all taxpayers for a long period of time, allowing for a thorough analysis of the gender composition of top income groups. After having had joint taxation for married couples for most of the 20th century, and a short period of the option to be taxed independently even if married, Sweden switched to fully independent taxation in 1971. In a recent paper Boschini et al. (2020) study developments of men and women in top income groups in Sweden using detailed registry data on the full population for the almost 50-year period since.

The study finds a number of interesting results. First, it is evident that the share of women in top income groups has increased significantly, yet women remain clearly underrepresented, and more so the higher up in the distribution one moves. Figure 1 below shows the basic development over time for three top groups: the top 10 (P90-100), the top 1 (P99-100), and the top 0.1 group (P99.9-100) in the total income distribution and the labor income distribution respectively.

Figure 1. Share women in top groups in Sweden.

Source: Boschini et al. (2020)

Besides showing the general development comparing the two panels also reveals a subtler point: especially in the earlier decades and in the very top group (the top 0.1 group), there were substantially more women at the top of the total income distribution than at the top of the labor earnings distribution. In the 1970s and 1980s, the share of women in the top 0.1 group of the total income distribution is about two to three times as large as in the labor earnings distribution. Put differently, this means that in the past, to the extent that there were any women at the very top, they were mainly there thanks to capital incomes. Over time this changes and detailed analysis in the paper shows that the growth of the share of women in top groups is driven by an increasing share of high-income women in the labor income distribution.

While it seems that top income men and women have converged in terms of income composition and observable individual characteristics, the one area that still stands out as being markedly different is partner income. Figure 2 shows that top income women are much more likely to have partners who are also in the top of the income distribution. Even if the trend indicates convergence, large differences remain. Out of the top 1 women who are married, 70% have a partner who is at least in the top 10 (and about 30% are also in the top 1). For married top 1 men, only 30% have a partner who is in the top 10, and only a couple of percentage points are in the top 1. Part of this is, of course, a reflection of there being fewer women in top groups, but this is far from explaining all the difference (See Boschini et al., 2020 for more details).

Figure 2. Share of top income partners in Sweden.

Source: Boschini et al. (2020)

This is of course far from conclusive, but it points in the direction of family circumstances being a potential factor for explaining the relative absence of women in top income groups. Having a partner with a top (income) career is likely to be more demanding (for both parties) and such couples are much more common among top income women than men.

Several strands of research connect to this: for example, Fisman et al. (2006) find, among other things, that men are significantly “less likely to accept a woman who is more ambitious than he”. Also, work by Bertrand et al. (2015), on the impact of gender identity suggest that there is a social norm prescribing that men should earn more than women, which creates a discontinuity in the distribution of women’s contribution to total household income at 50 % (although Hederos Eriksson and Stenberg (2015) and Zinovyeva and Tverdostup (2018) find alternative explanations for this observation). Folke and Rickne (2020) find that women who are elected to high political office in Sweden face a higher probability of divorce (while this is not the case for men). Furthermore, according to the World Values Survey, close to 40% of Americans as well as Europeans agree with the statement “(i)f a woman earns more money than her husband, it’s almost certain to cause problems”. Taken together, findings like these suggest that, even in relatively progressive countries, social norms may contribute to women shying away from entering career paths leading to top incomes.

What About Other Countries?

Even though the Swedish data is unusually detailed, it is certainly not the only country where individual tax data exist. Atkinson et al. (2018) calculate the share of women in top groups for eight countries over time periods when individual tax data exist. Figure 3 puts their results next to those from Sweden. The resulting picture shows a remarkably similar development across countries and over time. The share of women in the top 10 has approximately tripled since the 1970s, from around 10% to around 30%. For the top 1 group, the level is slightly lower, but the relative increase is similarly large, from slightly above 5% to around 20%.

Figure 3. International comparison.

Source: Atkinson et al. (2018) and Boschini et al (2020).

Bobilev et al. (2019) explore the extent to which Luxemburg Income Study (LIS) data can be used to shed light on the presence of women at the top of the income distribution. Their findings point to a similar trend across a broader set of countries. Even though the main analysis has to be limited to the share of women at the top of the labor income distribution (since the possibilities to separate out individual capital incomes is limited), the picture in terms of the share of women in top groups is surprisingly similar across the 28 countries for which sufficient data exists from around 1980 until today. The overall finding is that the share of women in the top 10 group increases from about 10% around 1980 to just below 30% today.

To the extent that LIS data allows us to look at partners and family circumstances, the data shows a consistent pattern of asymmetries between top income men and women similar to that in Sweden found by Boschini et al. (2020). Having a partner and having children are positively associated with being in top income groups for men, but negatively associated for women (even though these differences have decreased over time). Also, top income men are likely to have partners who are not in the top of the income distribution, while this is not the case for top income women. Understanding patterns like these and the underlying channels is likely to contribute to our comprehension of the remaining differences in top income shares between men and women.

Are There Differences Between “East and West”?

A particularly interesting pattern in the LIS data is the difference that emerges when contrasting transition countries to Western countries.

As has often been pointed out, the Soviet Union and many of the countries in Eastern and Central Europe were, at least in some dimensions, forerunners in terms of promoting gender equality (e.g., Brainerd, 2000; Pollert, 2003; Campa and Serafinelli, 2019). This was mainly due to the high participation of women in the labor market as well as the (officially) universal access to basic health care and education.

However, some scholars have suggested that not all aspects of gender equality were as advanced in the countries in the Soviet Union and in Central and Eastern Europe (Einhorn, 1993; Wolchik and Meyer, 1985). Even though women were highly integrated in the labor market, they were still expected to take care of child rearing and housework at the same time (UNICEF, 1999). The gender pay gap and gender segregation in the labor market was also similar to levels found in OECD countries. In addition, despite the high number of women in representative positions in communist party politics, women were rarely found in positions of real power in the political sphere (Pollert, 2003).

Looking just at average values (in the labor income distributions), there are clear differences between East and West in top groups. The share of women among the top earning groups was considerably higher in some former Soviet countries during and after transition. However, the shares of women in top income groups have been converging in East and West.

Figure 4. Share of women in the top 10 / top 1 income groups, East vs. West.

Data source: Own calculations based on LIS data. West: unweighted average for Australia, Canada, Denmark, Italy, Norway, New Zealand, Spain, Great Britain. East: unweighted average for the Czech Republic, Estonia, Georgia, Hungary, Lithuania, Poland, Russia, Serbia, Slovenia and the Slovak Republic.

An analysis of the situation at the country level, provides a more complex picture. Figure 5 clearly indicates that the total representation of women in the top 10 income group has been higher in Eastern European countries than in the West (the pattern is similar for the top 1). However, while the share of women in top income groups has consistently increased in Western countries, the developments for women are much less homogenous in Eastern Europe (being below the diagonal indicates a higher share of women in the top 10 in 2005-2020 as compared to 1990-2005).

In Estonia, Slovakia and Poland, women are less likely to be part of the top income group in the period from 2005 to 2020 than they were in the years directly following transition. Considering that the most recent family policies in Poland have been shown to discourage female labor supply (Myck, Trzciński, 2019), this is maybe not so surprising.

Figure 5: Share of women in top 10 income group by country.

Data source: Own calculations based on LIS data. Eastern and Western countries defined as if Figure 4.

The share of women in the top 10 income group in Estonia declined from an astonishingly high 53% in 2000 to about 31% in 2013, which, admittedly, is still high compared to the corresponding average rate for Western countries (28%). Women in Russia, Hungary, Slovenia and the Czech Republic, by contrast, are more likely to be among the top earners in the period from 2005 to 2020 than they were between 1990 and 2005. Moreover, among all the countries in our sample, more recently, Slovenia is the country with the highest share of women in the top 10 of income earners (44% in 2007); Slovenian women seem to have gained grounds even after transition.

How come the representation of women in top income groups remains high (or even increases) in some transition countries but decreases in others? What is the role played by policy and regulation and what role can be attributed to social norms, family circumstances and institutions such as childcare? May economic growth have led to women dropping out of the labor force or never entering it to do care work, even when they had been or potentially could have been part of top income groups? What would be the impact of adding capital incomes to the picture?

Conclusion

Looking across a large number of countries, women seem to have increased their presence in top income groups since the 1970s. This has mostly been driven by women increasingly having high paying jobs. A preliminary look at LIS data indicates that former Soviet and Eastern European countries on average had higher shares of women in top groups around 1990, probably reflecting high labor market participation as well as relatively high education levels for women. But it also indicates that in some Eastern European countries, the share of women in top groups has dropped since the 1990s. As noted by Campa, Demirel, and Roine (2018) there seems to be an overall convergence in some dimensions of gender equality in transition countries, but there is also considerable variation across countries. More detailed studies of how men and women fare in terms of reaching top positions in incomes – but also in other areas like politics – are much needed and likely to be an interesting research area for years to come.

References

The Nordic Model of Prostitution Legislation: Health, Violence and Spillover Effects

Posted on April 21, 2019 | Policy Brief

20190422 The Nordic Model of Prostitution Image 01

An emerging literature is studying, with the help of new types of data and clever identification strategies, the effects of different legislative measures regulating the market for sexual services. The primary target of such measures are arguably the participants in the market, prostitutes and their clients, and law and order concerns in their immediate vicinity. In a new research project, we mean to shift the spotlight on potential broader spillovers from these policies, both to other outcomes and other countries. In their presence, we cannot understand the full impact of a law change if we limit our analysis to the prostitution market in that country alone. We focus on a particular model of prostitution legislation, first adopted in Sweden in 1999 and known since as the Nordic model.

The Nordic model

The debate on prostitution legislation shares clear similarities with the standard arguments put forward for or against alcohol prohibition or drug liberalization. The criminalization of an activity is most likely shrinking the corresponding market, because it increases the cost of participation. It also functions as a signal of what a society deems acceptable or not, and coordinates behavior to potentially change social norms. At the same time, however, it pushes the remaining market into the darkness, where criminal activity potentially increases. In the specific case of the prostitution market, what is particularly feared is an increased risk of violence and general worsening of conditions for the potentially fewer sex workers.

When, in 1999, Sweden enacted the first asymmetric criminalization of prostitution, whereby buyers but not sellers of sexual services are punished, a third way between criminalization and legalization seemed to appear. This legislation would still give a clear signal on societal values, but at the same time protect the, in large part female and in large part exploited, sex workers. The model proved very successful in deterring street prostitution, and, under the catchy name of the “Nordic model”, has subsequently been adopted by Norway, Iceland, Canada, and France. It is currently under consideration in further countries as well.

This is where most reports and policy evaluations stop. In a new project at SITE, involving an international research cooperation, we propose to investigate the impacts of this legislation beyond the participants in the prostitution market. Specifically, we encompass other outcomes such as gender-based violence, health outcomes and online behavior, both within Sweden and other countries that implemented the reform, but also, most importantly, across their borders. The idea is that law changes in one country may also affect the demand and supply of prostitution in other countries, especially but not exclusively those bordering the country that enacts the law change. Two possible channels for such cross-border effects are sex tourism and human trafficking.

This brief summarizes the preliminary evidence we collected so far.

Violence

The focus on the role of policies is a recent but rapidly growing addition to the economic literature on prostitution. The risk of violence, both for the participants and within the neighboring geographic areas, is a natural area of concern for policy in relation to the sex market, and to criminal activities in general. To improve on cross-country comparisons and draw causal links from policies to outcomes, the most robust contributions in this area focus on natural experiments. Cunningham and Shah (2018) study an unintentional, and therefore unexpected and temporary, decriminalization of indoor prostitution in Rhode Island, and find that reported rape offences fall by 30%. Cunningham and coauthors (2019) also look at the geographic expansion of the erotic services section of Craigslist, a popular advertisements website, before online solicitation was banned in 2018. The possibility to use online platforms for their work, by allowing prostitutes to keep mostly indoors, and screen their potential clients to a larger extent, appears to have been very beneficial: the study finds lower female homicide rates by 10-17% when and where the service was available. Ciacci and Sviatschi (2018) find that the opening in a neighborhood of indoor prostitution establishments decreases sex crime by 7-13%, with no effect on other types of crime, arguing that the reduction is mostly driven by potential sex offenders resorting to the establishments, instead, to satisfy their needs. What is common to these studies is the finding that allowing the sex market to exist in some form is beneficial for outsiders, while indoor prostitution is safer for the sex workers themselves.

Preliminary findings from our project (Berlin et al., 2019 a) are consistent with this. We base our strategy on a comparison, within Sweden, between counties that are above or below average in terms of representation of women among police force and elected officials (we refer to them as treated and control counties, respectively). Both these indicators have been found in previous studies to drive greater reporting and lower incidence of crimes against women (Iyer et al., 2012; Miller and Segal, 2018). Looking at population-wide rates of violence against women in Sweden, we observe an increase in assaults committed by acquaintances indoors by about 10% and an increase in rapes indoors by more than 20% in treated as compared to control counties. Since the reform is argued to have eliminated street prostitution, and pushed the remaining sex trade indoors, violence against prostitutes will be counted in the indoor assaults statistic. However, in treated counties, where we observe the increase in violent crimes against women, we at the same time find fewer convictions for buying sex. We argue therefore that the increase in assaults we observe is not likely in the context of the sex market, but rather indicates increased violence against non-prostitutes from frustrated former customers, in other words a negative externality of deterring prostitution. In order to distinguish whether this increase is only in reported or actually committed crimes, we look at hospitalizations of women for injuries that are related to sexual interactions. If we think that seeking hospital care is less sensitive than reporting a violent man to the police, the series of hospitalizations should be closer to the true violence than the convictions. Although numbers are small and differences not significant, hospitalizations spike up in treated counties directly after the reform, as Figure 1 shows. All in all, our preliminary evidence from Sweden suggests that intimate partner violence and violence on women in general might have increased as a consequence of the “Nordic model”.

Figure 1. Hospitalizations of women

Source: Hospitalizations of women for injuries related to sex, from Berlin et al. (2019 a).

Other outcomes

Besides violence, health outcomes are also a policy relevant objective with the regulation of prostitution. Indicators such as the spread of sexually transmitted infections serve the double purpose of giving a rough indication of the changes in the size of the sexual market while at the same time enabling inference on the work environment and general living conditions for prostitutes. In a companion paper, which is underway, we examine these statistics for Sweden and Norway, in terms of within country changes but also with a mind to capture potential cross-border spillovers between the two countries.

Cross-border spillovers

In another working paper (Berlin et al., 2019 b) we study the reform enacted in France on April 13th, 2016, which removed the punishment for solicitation of prostitution (previously set to two months imprisonment plus a fine) and introduced instead a range of fines for the purchasing of sexual services, thereby, pushing the punishment to the side of the buyer. In order to study the cross-border effect of this change, we focus on the German Bundesländer bordering France: Baden-Württemberg, Saarland and Rheinland-Pfalz. The national law in Germany generally allows prostitution, but gives federal states the right to regulate it on a more detailed level. This generates variation at the level of the Gemeinde, the administrative division corresponding roughly to a municipality. The idea behind our analysis is to compare municipalities where prostitution is at least in part allowed with municipalities where it is banned (we refer to them as treated and control municipalities, respectively). Our preliminary results show that foreign tourism to cities where prostitution is at least partly legal increased after the reform more than to those completely overlapping with a Sperrbezirk, i.e. an area in which prostitution is banned. However, so does domestic tourism. This might be seen as a threat to our interpretation, since we can’t connect this increase directly to the French reform, unless we can show that there is a dynamic adjustment of the supply of sexual services, which also attracts domestic flows. We can’t isolate tourism from France in this data, so we go a step further by looking at online behavior.

Google searches

A key contribution of this project is to gather new data that haven’t been analyzed to date in the existing literature. In particular, we collected detailed data on Google searches originating in France using as keywords different German cities. The idea is to capture potential deviations of search trends over time driven by prostitute customers who after the legislative change find it more attractive to look for sexual services across the German border. Preliminary findings show that after the policy change there is a larger increase in search activity for cities closer to the French border relative to cities further away. While searches are generally downward trending over time, the trend is slowed after the French reform, and this effect is stronger the closer a city is to the border, although intermittently significant. Figure 2 reports the differential increase in searches (with 95% confidence intervals) as related to the distance from the border. The negative relationship between size of the impact and distance to the border is consistent when controlling for city and time fixed effects. However, further analysis is needed in order to validate the results and control for confounding factors.

Figure 2. Google searches for German cities before and after the French reform

Source: Google Search data on searches originating in France for cities closer to VS farther from the German border than the indicated distance (in km).

We are currently repeating the same exercise at the French borders with Belgium and Spain, with searches originating in Norway around the time of the Norwegian reform (2009), and at the US-Canada border around the time of the Canadian reform (2014).

Conclusion

When adopting a version of the Nordic model in 2014, the Canadian Department of Justice stated that the “overall objectives [of the reform] are to:

  • Protect those who sell their own sexual services;
  • Protect communities, and especially children, from the harms caused by prostitution; and
  • Reduce the demand for prostitution and its incidence.”

Research seems to show that restrictions on the sexual services market, rather than the sex trade itself, have substantial negative impacts on communities and sex workers. Nevertheless, it is understandable that legislators in many countries, sharing similar concerns and expectations as expressed by the Canadian DoJ, find it unattractive to legalize prostitution. What our project points to, then, is that when considering various forms of criminalization, it is crucial to understand how best to pursue each of these objectives. Taking into account side-effects, or spillovers, such as the ones we highlight above, might reveal the need for complementary policies, in order to avoid unexpected and counterproductive consequences.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.