RESEARCH NEWSLETTER COVID-19: Development Impacts and Policy Responses | February 2021 COVID-19 has proven devastating to lives and livelihoods. This month’s newsletter rounds up research on the pandemic—both documenting its costs and the policies that have attempted to shield populations from its worst impacts. Decerf et al. (2020)calculate that by June 2020, the pandemic had already caused an estimated 4.3 million years of lost life and 68.2 million additional years of extreme poverty. Nor have businesses escaped the impact: Bachas, Brockmeyer, and Semelet (2020) find declining payrolls, higher exit rates, and lower tax payments in many low- and middle-income countries. Furthermore, the costs of the pandemic are highly unequally distributed, as Sanchez et al. (2020) demonstrate when looking at who can and who cannot work from home. Research has also highlighted policies that have helped counteract the worst of the pandemic. Abay et al. (2020) find that Ethiopia’s social protection program offset most of the negative impact of the pandemic on food security for beneficiary households, while Demirgüç-Kunt, Pedraza, and Ruiz-Ortega (2020) show that measures to support the financial sector have in many cases helped banks to support businesses through a countercyclical lending role. While vaccines promise to bring an eventual end to the pandemic, policies such as these can help limit the damage from the crisis both now and over the long run. RESEARCH HIGHLIGHTS W O R K I N G PA P E R S ✓Do Immigrants Push Natives towards Safer Jobs? Exposure to COVID-19 in the European Union Laurent Bossavie, Daniel Garrote Sanchez, Mattia Makovec, Çağlar Özden, World Bank Policy Research Working Paper 9500, December 2020 | Blog The broad labor market analysis in this study shows that immigration enables native-born workers to shift toward occupations more amenable to work from home with less economic and health exposure to COVID-19. Overall, a 1 percent increase in the share of immigrants in the labor force in a region leads to an almost 0.5 percentage point increase in the share of health-safe jobs and slightly over 0.6 percentage points in teleworkable jobs among native-born workers. ✓COVID-19 and Food Security in Ethiopia: Do Social Protection Programs Protect? Kibrom A. Abay, Guush Berhane, John Hoddinott, Kibrom Tafere, World Bank Policy Research Working Paper 9475, November 2020 | Blog In the wake of COVID-19, households in Ethiopia’s Productive Safety Net Program were 9.3 percentage points less likely to be food insecure than non-beneficiary households—offsetting nearly all of the adverse impact of the pandemic. The program had greater impact among poorer households and those living in remote areas. The beneficiaries of the program were also less likely to cut spending on health, education, and agricultural inputs. ✓The Interplay of Policy, Institutions, and Culture in the Time of Covid-19 Sheng Fang, L. Colin Xu, Yuanyuan Yi, World Bank Policy Research Working Paper 9470, November 2020 This paper documents vast differences across countries in the pandemic’s spread and mortality using data on preexisting health vulnerabilities, mobility restrictions, institutions (democracy), and culture (individualistic culture and trust). Cross-country regressions suggest that differences in pandemic outcomes are often not due so much to one specific factor but rather combinations of several factors. ✓The Impact of COVID-19 on Formal Firms: Micro Tax Data Simulations across Countries Pierre Bachas, Anne Brockmeyer, Camille Semelet, World Bank Policy Research Working Paper 9437, October 2020 | Blog Administrative corporate tax records were used to model the likely economic fallout of the crisis and the size of government support needed to keep firms afloat. Simulations using firm-level tax records for 10 low- and middle-income countries predicted less than half of firms would remain profitable by the end of 2020, about 5-10 percent of the formal aggregate annual payroll would be lost, firm exit rates would double, and tax revenue remitted by the corporate sector would fall by at least 1.5 percent of baseline gross domestic product. ✓Modeling and Predicting the Spread of Covid-19: Comparative Results for the United States, the Philippines, and South Africa Susmita Dasgupta and David Wheeler, World Bank Policy Research Working Paper 9419, October 2020 This model of COVID-19 transmission can be used in any country where spatially disaggregated COVID-19 infection data are available. It uses only free public access data, scales from individual regions to countries of continental size, and forecasts future hotspots with enough accuracy to provide useful alerts. ✓Banking Sector Performance During the COVID-19 Crisis Asli Demirgüç-Kunt, Alvaro Pedraza, Claudia Ruiz-Ortega, World Bank Policy Research Working Paper 9363, August 2020 | Blog The impact of the COVID-19 pandemic on bank stock prices suggests that the countercyclical lending role banks around the world are expected to play has put the sector under significant pressure. Although policy measures such as liquidity support, borrower assistance, and monetary easing moderated this adverse impact for some banks, this was not true for all banks or in all circumstances. ✓Who on Earth Can Work from Home? Daniel Garrote Sanchez, Nicolas Gomez Parra, Çağlar Özden, Bob Rijkers, Mariana Viollaz, Hernan Winkler, World Bank Policy Research Working Paper 9347, July 2020 | Story | COVID-19 Webinar Video In low-income countries, only one of every 26 jobs can be done from home, whereas the ratio is 1-in-3 in high-income countries. Across the globe, young, poorly educated workers and those on temporary contracts are least likely to be able to work from home and are more vulnerable to labor market shocks from COVID-19. These gaps are due to the nature of jobs as well as the inequality of digital infrastructure. ✓Lives and Livelihoods: Estimates of the Global Mortality and Poverty Effects of the Covid-19 Pandemic Benoit Decerf, Francisco H. G. Ferreira, Daniel G. Mahler, Olivier Sterck, Policy Research Working Paper 9277, June 2020 | Blog Measuring the health and economic costs of the pandemic in a common unit is important for quantifying the pandemic’s total welfare cost and helping judge the trade-offs entailed by various policy responses. This paper estimates the welfare costs of the pandemic (along with observed policy responses) for 150 countries, using life years as a common unit. As of early June, COVID- 19 had caused an estimated 4.3 million lost years of life and 68.2 million additional years of extreme poverty. While “no- intervention” would be a bad policy choice in almost all settings, the paper’s results suggest that the optimal design of containment interventions in rich and poor countries is unlikely to be the same. ✓Winners and Losers from COVID-19: Global Evidence from Google Search Kibrom A. Abay, Kibrom Tafere, Andinet Woldemichael, World Bank Policy Research Working Paper 9268, June 2020 Estimating the economic consequences of COVID-19 requires new sources of information and fresh empirical approaches. This investigation tracks consumer demand using historical and near real-time Google search data, which has the advantage of global reach and instant results. It confirms that demand for services requiring face-to-face interaction decreased while demand for services that can be performed remotely or with reduced personal interactions increased. For more Policy Research Working Papers from the Development Research Group: Web | Email Notifications ADDITIONAL COVID-19 RESOURCES Working Papers: World Bank Policy Research Working Papers related to COVID-19 Publications: World Bank publications related to COVID-19 Events: Development Policy and COVID-19 Seminar Series Newsletter: May 2020: Development Policy and COVID-19 UPCOMING EVENTS March 23, 2021: Policy Research Talk: Trade, Robots, and Industrial Development April 12, 2021: Policy Research Talk: Overuse and Underuse of Acute Healthcare: Evidence from Mali Fall 2021 or Spring 2022: 21st Annual Conference on Land and Poverty: Institutions for Equity and Resilience See more events | Sign up for event email notifications. SOCIAL MEDIA What do you need to do to make a matching estimator convincing? Rhetorical vs statistical checks David McKenzie | Development Impact | February 16, 2021 Many economists are really skeptical about the credibility of matching estimators for identifying treatment impacts. For example, in a 2019 blogpost titled “why so much hate against propensity score matching?”, Paul Hünermund wrote “Apparently, in the year 2019 it’s not possible anymore to convince people in an econ seminar with a propensity score matching (or any other matching on observables, for that matter).” Jennifer Doleac writes “This is your regular reminder that propensity score matching is typically not a good way to measure causal effects. Yes, there are exceptions. Whatever you want to do probably isn’t it.” In his recent textbook, Scott Cunningham (p. 208) writes “Economists are oftentimes skeptical that CIA (the conditional independence assumption) can be achieved in any data set – almost as an article of faith”. It’s been said that “friends don’t let friends do IV” – should we be saying the same about matching? Or when will matching be more plausible, and what do you need to do to argue for this plausibility? Read the blog Managing coastal out-migration in Bangladesh Susmita Dasgupta, David Wheeler, Mainul Huq, Utpal Roy | End Poverty In South Asia | February 11, 2021 The changing climate has forced working-age adults to move out to seek opportunities elsewhere, often leaving behind children and elderly caregivers. The critical zone for outmigration lies in low-lying areas within 4 km of the coast, where inundation and destruction from cyclone strikes are recurrent and progressive salinization of water and soil is most pronounced. Read the blog | Report Children on the move: The tale of a surprising spillover in humanitarian cash transfers to refugees Berk Özler | Development Impact | February 8, 2021 In a recent working paper, co-authored with Çiğdem Çelik, Scott Cunningham, P. Facundo Cuevas, and Luca Parisotto (author order random), evaluating the impact of the Emergency Social Safety Net (ESSN) in Turkey, the largest cash transfer program for international refugees in the world, we tell the story of how program benefits were spread out throughout the refugee population— beneficiary or not. It happened via substantial changes in household size and composition, with a net movement of primarily school-aged children from larger non-beneficiary households to smaller beneficiary ones. Read the blog | Working Paper Poverty and productivity, mobile money explained, who wants to migrate, and more… David McKenzie | Development Impact | February 5, 2021 The second VoxDevLit is out, this one is on mobile money, edited by Tavneet Suri and with a great group of co-editors — a great summary of what we have learned so far, and a call for more research “By the end of 2019, a total of 290 mobile money services were being offered in 95 countries; there were more than 1 billion mobile money accounts globally, including 372 million actively used for a transaction in the previous 90 days” “its use remains mostly limited to very specific P2P transactions: those that take place over long distances and those that are in places where holding cash is risky. Outside these applications, there has been less success” “Given that mobile money and, more broadly, a digital payments system has been so widely adopted in the developing world, and seeing that there are so few value-added services layered over it, there is a lot left to do and learn.” Read the blog Two hundred years of public loans under the microscope Le Monde | February 4, 2021 Three economists have examined the loans between states, central banks and international institutions from 1790 to 2015. The explosion in the amount of public loans—whether from states, central banks or international financial institutions—to come to the aid of economies stricken by the pandemic is alarming and worrying economists. Yet the history of the past two centuries shows that international flows of public capital have very often been higher than those of private capital, especially during periods of crisis—wars, natural disasters and economic crises—when private credit dries up. Simply put, while the latter have been extensively studied by generations of economists, the former have most often remained in the shadows, with the exception of recent episodes such as the Marshall Plan or the interventions of the International Monetary Fund and the World Bank. Article (in French) | Working Paper by Sebastian Horn, Carmen Reinhart, and Christoph Trebesch Learning-by-doing: Navigating financial technologies among Bangladeshi factory workersrs Leora Klapper, VoxDev | February 2, 2021 Leora Klapper talks about the global landscape of financial inclusion, policies to improve the take-up and use of mobile money, and her recent work with Emily Breza and Martin Kanz on the effects of payroll accounts for Bangladeshi factory workers. Audio Interview | Working Paper Book review of Cunningham’s Causal Inference: The Mixtape David McKenzie | Development Impact | February 3, 2021 The release of Scott Cunningham’s new book Causal Inference: the Mixtape was accompanied by the unusual sight of multiple economists proudly posting photos (e.g. 1, 2, 3) on twitter of the arrival of the book at their houses like they had just scored tickets to a sold-out concert. This book has two fantastic features for readers interested in impact evaluation. First, Scott has provided a free online version of the book, as a compliment to the paper copy. Second, the book provides Stata and R code throughout, which both shortens the distance from theory to practice, and can serve as a great way of helping learn one language if you know the other. Read the blog COVID-19 and food security in Ethiopia: Do social protection programs protect? Kibrom A. Abay, Guush Berhane, John Hoddinott, Kibrom Tafere | Let’s Talk Development, February 1, 2021 Our paper adds to the small but growing literature on the impact of the pandemic on household food security in sub-Saharan Africa, specifically rural Ethiopia. We assess the effectiveness of a social protection intervention—Ethiopia’s flagship social protection program, the Productive Safety Net Program (PSNP)—in mitigating these malign impacts at both the household and intra-household levels. Read the blog | Working Paper World Bank Chief Economist Reinhart on Global Economic Recovery Bloomberg, January 28, 2021 Carmen Reinhart, Vice President & Chief Economist, World Bank Group speaks with Bloomberg Senior Executive Editor for Economics Stephanie Flanders at The Year Ahead virtual summit about what it will take to get the global economy back on track, where she sees the World Bank doing the most good in the year ahead, and how optimistic she is about a recovery. Video | Also see: “Shaping the Rebirth of the Global Economy” with Carmen Reinhart Creating jobs by helping small and medium firms understand labor law David McKenzie | Development Impact | January 25, 2021 An experiment in South Africa taught firms that labor law is not as bad as they think it is, leading to an impressive increase in employment over the next 6 months. Read the blog To read more of our blogs, see: Let’s Talk Development | Development Impact | All About Finance To read previous editions of the newsletter, see: Research Newsletter Archive This newsletter is produced by the Development Research Group, part of the Development Economics Vice Presidency of the World Bank Group. To learn more about us, click here. Follow us on