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IZA – Institute of Labor Economics

Costs and benefits of postponing elections during the pandemic

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During the COVID-19 pandemic, politicians are faced with the enormously difficult task of balancing individual liberties and public health when it comes to human interactions of various sorts. Especially mass gathering events may lead to an exponential spread of infections when social distancing cannot be maintained.

A particular tough policy dilemma is the case of holding elections or referenda at a time of high infection rates. Such official voting events are mass gatherings of vital importance for the functioning of democratic countries, and their postponement or cancellation can undermine the citizens’ trust in the political institutions of a country.

However, during the first 18 months of the pandemic alone, about 80 countries decided to postpone national or regional elections due to public health concerns. Since there has been little scientific evidence on the effects of such events on the spread of COVID-19, the choice whether to hold or postpone forthcoming elections was mostly at the discretion of politicians and their public health advisors.

Voter turnout matters

A new IZA discussion paper by Marco Mello and Giuseppe Moscelli aims to fill this gap. First, the authors evaluate whether holding national-level polls during an epidemic increases the number of new infections in municipalities with a higher turnout. Second, they evaluate the opportunity cost of holding the ballots in terms of the hospital costs and lives saved when a general election to be scheduled during a high infection rate period is postponed.

The paper exploits the polls held in Italy in September 2020 serve as a source of exogenous variation to identify the causal effect of voters’ turnout on COVID-19 infections, and the government crisis of early 2021 (during which new elections were barely avoided) as a real case scenario to build the cost-benefit analysis.

The exogenous and significant increase in the turnout rate, provided by the peculiar setting of the September 2020 election day, allows the researchers to overcome one of the main issues related to the first research question, namely the fact that the choice of voters to cast a ballot depends on the severity of the epidemic stage.

Thousands of lives saved

According to the study, a one-percentage-point increase in the turnout rate leads to an average 1.1% increase in new weekly coronavirus infections. The cost-benefit analysis shows that the choice to avoid a general election during a period of high contagion might have spared Italy around €362 million in hospital care costs and about 23,000 lives saved from COVID-19.

The authors argue that focusing on the turnout impact is relevant for policymakers because the spread of new infections is a function of the ‘mass gathering intensity’ provided by the voters’ turnout, not just by holding in-person elections. Focusing on the turnout intensity also allows policy-makers to elaborate cost-benefit analyses based on realistic scenarios of expected turnout to polls, helping them in the decision whether to keep or postpone the polls.

Air pollution reduces electoral support for government parties

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Poor air quality has well-documented adverse impacts on health and the environment, but also causes important psychological, economic and social effects. A high level of air pollution can impair cognitive functioning and trigger negative emotions such as anxiety and anger. Recent findings suggests that these psychological impacts have knock-on effects on people’s decision making. In a new IZA paper, Luna Bellani, Stefano Ceolotto, Benjamin Elsner and Nico Pestel study the effect of air pollution on a high-stakes decision made by millions of people at a time, namely voting in parliamentary elections. In elections, people decide on the same issue on the same day but in different locations, which means that they are exposed to different levels of air pollution when making their decision.

Incumbent parties lose support on days with dirty air

The study uses county-level data on 64 federal and state parliament elections in Germany between 2000 and 2018, combined with daily measures of air pollution and weather conditions. The measure of local air pollution is the daily average concentration of particulate matter (PM10), one of the most frequently used indicators for suspended particles in the air. The outcome of interest is the vote share of the parties forming the incumbent government coalition on the day of the election. Voting for incumbent parties can be seen as an expression of support for the status quo. Relative to voting for opposition parties, voting for the current government also represents the less risky option.

The paper’s main finding is a negative effect of air pollution on the vote share of the incumbent parties and a corresponding increase in the vote share of established opposition parties. An increase in the ambient concentration of PM10 by ten micrograms per cubic meter – an increase that would commonly occur in many German cities – reduces the vote share of the incumbent parties by two percentage points and increases the vote share of established opposition parties by 2.8 percentage points. These are large effects, given that the typical drop in support for the incumbent government is around five percentage points.

Effect of air pollution driven by voters’ unhappiness with current government

The authors document similar effects in two large-scale representative surveys from Germany. One is a well-known monthly opinion poll carried out on behalf of German public television (Politbarometer). The results show that on days with higher pollution in a respondent’s region, respondents report a lower intention to vote for the incumbent federal government and a greater intention to vote for the opposition. At the same time, the results indicate a lower approval of the current government’s policies, while approval of the opposition is unaffected.

A second piece of evidence comes from the German Socio-Economic Panel Study (SOEP). Again, on interview days with higher air pollution, respondents show weaker identification with the current federal government and stronger identification with the opposition.

Emotions as a plausible mechanism affecting decision making

Using the SOEP survey data, the authors provide evidence that emotions are an important explanation why voters respond to poor air quality. On days with elevated levels of air pollution, respondents are more likely to be worried, feel angry and sad, and are less likely to feel happy. In contrast, there is no evidence that air pollution affects people’s perceptions of the current state of the economy or their own economic situation.

The authors view their findings as evidence of a behavioral bias. At the levels measured in Germany, the concentration of PM10 is not directly noticeable. People may notice a higher concentration through symptoms such as irritation of the airways or coughing. But since the same symptoms could also be caused by factors other than particulate matter, it is unlikely that people deliberately choose to change their voting behavior because they are exposed to high air pollution. A more likely explanation is that air pollution has an unconscious effect on voting, for example by affecting a person’s emotions or health, which in turn affects how they process information and make decisions.

What happens to workers at firms that adopt new technologies?

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Recent technological developments such as artificial intelligence (AI), augmented reality (AR), or 3D printing have given rise to a new generation of technologies suspected of having profound impacts on the labor market. Some speak of the second machine age, others call it the Fourth Industrial Revolution. Fears range from major employment losses to the loss of high-skill jobs. Despite such claims, there is little empirical evidence on the implications of these new technologies for firms and workers, partly due to a lack of data at the firm level.

New data on the diffusion of cutting-edge digital technologies

A new study by IZA researcher Terry Gregory, together with colleagues from Utrecht University and IAB, provides fresh insights into the individual-level adjustments of workers in response to technology investments for the case of Germany. The authors collected novel data that links representative survey information on firms’ technology adoption to administrative social security records. This allows the research team to distinguish between firms that invested in older non-digital technologies (referred to as non-adopters), digital technologies (3.0-adopters), and more recent digital and connected technologies (4.0-adopters).

According to the study, the most recent 4.0 technologies (e.g., AI, AR, or 3D printing) still play a relatively minor role across firms in the German economy: only about every fifth firm has adopted technologies associated with the Fourth Industrial Revolution. However, although 4.0-adopters constitute a relatively small group of firms, they are moving forward relatively fast at the technological frontier, as suggested by their heavy investments in the recent five-year period between 2011 and 2016. This suggests that modern technologies will continue to penetrate all sectors of the economy in the coming years.

Improved employment stability, wage growth and earnings

Besides describing the degree of technology adoption in Germany, the authors track workers’ employment biographies in the aftermath of firms’ technology investments. Overall, they find evidence for improved employment stability, higher wage growth, and increased cumulative earnings in response to digital technology adoption. However, the beneficial labor market adjustments split differently across digital technologies: older digital 3.0-technologies relate to a significant increase in workers’ employment stability and translate into higher cumulative labor earnings. In comparison, more recent digital and connected 4.0-technologies are associated predominantly with significantly pronounced wage growth without corresponding pronounced adjustments in employment days and earnings.

On the one hand, this could indicate that cutting-edge 4.0 technologies are less “brilliant” than expected, similar to “so-so” technologies. On the other hand, it could reflect that firms adopting 4.0 technology are currently still in an investment and transition phase, such that their productivity gains and business expansions from these technologies have not yet been entirely generated and realized, a hypothesis put forward in The Second Machine Age.

Do service providers create better jobs in the digital era?

More detailed breakdowns of the results suggest that the beneficial adjustments seem to be driven by technologies used by service providers rather than manufacturers. This aligns with the results of other research in the field, for example on the adjustment of labor markets to robots. One idea put forward by the new study is that manufacturing-related technologies (e.g., industrial robots) tend to be more labor-saving compared to technologies predominantly used among service providers (e.g., personal computers and AI). One implication arising from this finding is that focusing on specific manufacturing-related technologies, as done by many studies on robot adoption, might miss substantial parts of the beneficial adjustments from technology adoption more generally.

IT-related expert jobs benefit, but not necessarily academics

A further result of the study is that the adjustments do not occur equally across worker groups: IT-related expert jobs with non-routine analytic tasks benefit most from technological upgrading, coinciding with highly complex job requirements. To the authors’ surprise, this does not necessarily coincide with a higher demand for academics. In contrast, the jobs that benefit are primarily held by workers with vocational training (e.g., occupations in business organization and strategy or technical production planning controllers). The authors suggest this might reflect the strength of the German vocational training system or point towards supply shortages in the labor market such that firms currently do not find enough workers with academic skills.

Mergers and acquisitions change the hierarchical structure of the firm

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How do firms restructure their operations after mergers and acquisitions (M&As)? Although a large literature documents that M&As create financial wealth by analyzing stock returns and other financial data, little is known about the creation of these synergies. A recent IZA discussion paper by Britta Gehrke, Ernst Maug, Stefan Obernberger and Christoph Schneider argues that much can be learned from analyzing employee flows and changes in the composition and size of the workforce of the merged firm.

The study investigates a large sample of acquisitions in Germany between 1997 and 2014 and tracks the worker flows after the acquisition. In particular, the worker flows are compared relative to those of control firms with similar characteristics that have not been affected by M&A activity.

Overall restructuring activity is very large

On average, targets lose 55.4% of their workforce by the end of the second calendar year after the acquisition, and the combined workforce of the merged firm declines by 7.2%. This employment decline is concentrated in those targets that are closed completely, whereas employment in surviving targets is stagnant. More than 40% of the employees who leave the merged firm become either unemployed or accept lower-paid jobs. Larger acquirers grow more after acquiring a target of a given size, which is surprising, since larger firms typically grow less. The authors interpret this finding such that larger acquirers have more managerial capacities in place, but lack the growth options to deploy them. These growth options are then acquired externally in M&As.

There is a significant increase in employee turnover, so that net employment changes alone do not reveal the full extent of restructuring. Two years after the acquisition, merged firms have lost 13.4% more employees than comparable control pairs of acquirer and target, about half of whom are replaced by new hires. Turnover shifts jobs from the target to the acquirer, since increased hiring occurs at acquirers, whereas job losses are concentrated at the target.

The study shows that firms replace departing workers with similarly qualified and slightly better educated new hires, but who are on average much younger (about four years or 10% of the average pre-acquisition age of the work force) and less expensive than the departing employees (about 11% reduction in daily compensation). Hence, firms save costs when they replace workers by hiring less-experienced workers, not by hiring workers with lower education or qualification.

Firms trade off the costs of the skills and knowledge of a better-trained workforce against the costs of a more hierarchical structure with more specialized managers, who solve production problems that cannot be solved in the lower tiers of the organization. After M&As firms transfer more problem-solving to the higher layers of the organization, and economize on the costs of employees in the middle and lower layers.

Mergers create internal labor markets

Flows between establishments of the merged firm increase by 3.5% of the merged firm’s total employment. These are mostly flows from the target to the acquirer, with a much smaller flow in the opposite direction. Interestingly, there are also abnormal flows of about 1% of the merged firm’s employment within acquirers or within targets, which would have been feasible before the acquisition and indicate that mergers set in motion a chain of new job assignments within the merged firm.

However, while activity in the newly created internal labor market of the merged firm is significant, it accounts for only about one-quarter of abnormal employee flows. The other three quarters of the restructuring after acquisitions occurs through external hiring and releases of employees to the external labor market, either to other firms or to unemployment. The main driver of a stronger use of internal labor markets is the degree of hierarchization of the acquirer: Operating an internal labor market seems to demand higher managerial capacities.

Targets and acquirers contribute complementary assets

The study emphasizes the complementarity of two intangible assets to create synergies with M&As: (1) growth options and (2) organizational skills and management practices. M&As allow firms to economize on the costs of the labor force in three ways: First, by streamlining production and reducing the size of the workforce; second, by increasing turnover, which shifts jobs from the target’s establishments to those of the acquirer, and leads to the displacement of existing employees by younger, less expensive, and better-educated employees; third, by increasing job rotations in internal labor markets. Building hierarchical structure and managerial capacities appears critical for this process.

Hotter temperatures increased workplace injuries in California

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Hotter temperatures in California significantly increase the risk that workers will be injured on the job, according to a new IZA discussion paper by Jisung Park, Nora Pankratz and Patrick Behrer. The study finds these incidents are vastly undercounted in official records.

The researchers gathered information on about 18 years’ worth of claims from California’s workers’ compensation system — the largest in the country — and compared it to daily temperature data. They found that workplace injuries and accidents increased by as much as 9% on days when temperatures were in the 90s and rose by as much as 15% on days in the 100s.

Though much of the research and media attention has been on how heat affects people who work outdoors in agriculture and construction, the study found that high temperatures increased accidents for indoor workers, too, endangering people employed in manufacturing, warehousing and wholesale.

The types of injuries were not isolated to heat sickness or exhaustion. Workers were more likely to fall, be hit by a moving vehicle or mishandle dangerous machinery — accidents that researchers suggested could be the result of heat’s ability to impair decision-making.

Judging by official records alone, one would think that heat-related workplace injuries are rare. In California, only about 850 injuries per year are classified as being caused by extreme heat. But by looking at whether injuries increased on hot days, the researchers discovered the true tally is likely much greater.

In total, rising temperatures caused about 20,000 additional workplace injuries per year, imposing an estimated cost of $1 billion on workers, employers and the state as a whole, according to the study.

The authors also found that when temperatures rise, the burden is not shared equally. Men and younger workers are at much greater risk of injury on a hot day, even in indoor settings.

Low-wage workers fare the worst, in part because they tend to work in more dangerous jobs, and they often live and work in the hottest parts of the state. The study found that someone in the bottom 20% of earners was five times more likely to be injured on a hot day than someone in the top 20%. Because workers’ compensation and health insurance cover only a fraction of these employees’ lost wages and medical bills, the research suggests that rising temperatures could also fuel income inequality.

Contrary to the researchers’ expectations, these trends did not worsen over time as climate change makes heat waves in California more frequent and more severe. The data showed that heat began to have less of an effect around 2005, at roughly the same time California adopted a heat illness prevention regulation that required outdoor workers to be given shade, water and training on ways to avoid heat exhaustion.

While there is no clear indication whether the state’s outdoor heat regulation was truly effective, the findings suggest there are things employers can do on hot days to prevent workers from getting hurt.

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Adapted from the Los Angeles Times – read the full article here.

UK sugar levy effectively reduced calorie intake from soft drinks

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Concerns about the health burden of obesity have prompted governments across the world to introduce sugar taxes. In March 2016, the UK Government announced a national Soft Drinks Industry Levy (SDIL) which was enacted in April 2018. The levy was particularly steep, requiring the manufacturers of sugar sweetened beverages (SSBs) to typically pay £0.24 per litre of beverage.

The goal was to substantially raise prices and thus trigger a demand response by prompting consumers to reduce their purchases of fizzy beverages. At the same time, the SDIL contained a provision to trigger a supply response: Brands that reduced their sugar content below 5g/100ml would not be levied. In a recent IZA paper, Alex Dickson, Markus Gehrsitz, Jonathan Kemp went to the data to assess the effectiveness of the levy in reducing calorie intake.

All but a few brands cut their sugar content

Their empirical results suggest that the levy led to massive reductions in the calorie intake and that, remarkably, most of these reductions were realized before the levy even went into effect. That is because many manufacturers used the two-year gap between levy announcement and enactment to change the recipes of their beverages. By substituting artificial sweetener for sugar, they cut their sugar content below the 5g/100ml threshold, thus avoiding the levy.

Among the 100 main brands and brand variants, which account for 73% of consumer spending in UK mainstream retailers, product reformulation was responsible for a reduction in calorie intake of about 5 billion per week. Consumers seem to barely have noticed the product reformulations as prices and volume sales held steady both before and after the enactment of the levy.

Figure 1: Aggregate weekly consumption for main UK soft drinks brands by volume (in millions of litres) and calories (in billions)

Brands that passed on the levy to the consumer paid a price for it

But not everyone changed their recipe. In particular, in the cola and energy drink segments of the market, full-sugar variants continued to feature prominently at the time the levy was implemented in April 2018. As the levy was passed on to consumers, prices shot up. In particular for colas, the price paid by consumers increased by more than the nominal tax and was over-shifted.

Figure 2: Pricing of levied and non-levied soft drinks

The consumer response followed quickly and took the form of about an 18% reduction in volume sales of levied brands. The sales response was most pronounced for large “take-home” containers of colas whereas, “on-the-go” purchases of energy drinks barely budged. At the same time sales of zero sugar diet versions increased, letting total soft drinks volumes continue its growth path. In total, levy-induced price increases and the subsequent substitution behavior took another 1 billion calories per week out of UK consumers’ diet.

Supply-side response trumps demand-side response

The authors conclude that the UK SDIL holds important lessons for policy makers. While the demand-response to higher prices is non-negligible, it is dwarfed by calorie reductions by way of manufacturers’ decision to cut the sugar content in their beverages. More than 80 percent of overall levy-induced calorie reductions were due to reformulation. As such, a tiered sugar levy that allows sufficient time between announcement and implementation, and sets a feasible target sugar level below which it can be entirely avoided through reformulation, will act as a massive accelerator.

Sugar intake from SSBs had been falling even before the levy was announced, mainly because changing consumer sentiment. Primarily because of reformulation incentives, the authors estimate that the levy sped up this process and ultimately led to an additional reduction of 6,500 calories from soft drinks per year per UK resident.

How social norms affect people’s willingness to fight climate change

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Many people contribute little to climate protection because they underestimate the willingness of others to fight global warming, according to a new IZA discussion paper by Peter Andre, Teodora Boneva, Felix Chopra and Armin Falk. In a survey experiment, the authors asked 8,000 adults, representative of the U.S. population, to allocate 450 dollars between themselves and a charitable organization that fights climate change.

While 6% indicated they would keep all the money for themselves, 12% were willing to donate the entire sum – enough to offset the annual CO2 emissions of a typical U.S. citizen. On average, participants were willing to contribute half of the total amount.

Economic preferences and moral values matter

The study also documents that patience, altruism, positive reciprocity, and moral universalism are among the fundamental human traits that are strongly correlated with individual willingness to fight climate change.

On average, women in the experiment donate $17 more to climate protection than men do. Democrats contribute $45 more than Republicans. Donations increase with household income, but decline with higher educational attainment, mainly for Republicans.

“Fighting global warming is a matter of cooperation. But people tend to cooperate conditionally: I’ll do it if you do it. That’s why it’s so important to uncover and correct misperceptions of prevalent climate norms,” says Armin Falk. The authors suggest that large-scale information campaigns could trigger a positive feedback loop where learning about the existing support for action against climate change could encourage others to follow suit.

The impact of climate change on labor markets

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Climate change is increasing the frequency of extreme weather events such as heatwaves, floods, and hurricanes for the global population. In addition to causing damages to the environment and human health, global warming poses challenges for the functioning of labor markets. The First IZA Workshop on Climate Change and Labor Markets, organized by Andrew Oswald, Olivier Deschenes and Nico Pestel, brought together researchers working on the implications of global warming and climate change adaptation for labor markets.

In his welcome address, Oswald emphasized the urgency of the problem for the modern world, drawing attention to what had just been witnessed in the unprecedented temperatures recently in British Columbia in Canada. He also pointed to a comparative lack of research articles in the major general journals of Economics and stressed IZA’s commitment to help foster research in this important area.

“Changing Climate, Changing Economics”

The workshop was opened by a keynote address delivered by Lord Nicholas Stern from the London School of Economics on “Changing Climate, Changing Economics”. According to Stern, the central problem with respect to climate change is to stabilize the global average temperature by achieving net zero emissions of greenhouse gases by the mid of the 21st century. A global warming by two degrees Celsius would already provide large risks for humanity and a warming by three degrees or even more would be absolutely disastrous and make whole areas of the world uninhabitable, said Stern.

He pointed out that preventing such a climate disaster requires rapid change and tremendous investments particularly in energy systems. The contribution of economics and economic policy-making should mainly focus on overcoming market failures and should not stop at suggesting and implementing a global carbon price given that more systemic change is required.

Rainfall affects employment mainly in agriculture

The first session of the workshop focused on direct impacts of weather anomalies on labor market outcomes. A paper co-authored by Camilo Bohorquez-Penuela studies effects of municipality-level precipitation shocks on formal rural employment in Colombia. The results indicate that episodes of excessive rainfall have a negative impact on formal employment in rural areas for both the agricultural and non-agricultural sector, while episodes of lack of rainfall affect the formal rural labor market in the opposite direction. These findings are explained by substitution effects between water and labor inputs in agricultural production.

Droughts impact on migration decisions

Beyond direct labor market effects, climate change may have an impact on location decisions of workers and firms. The study presented by Fernanda Martínez Flores investigates the extent to which soil moisture anomalies have an impact on international migration from West Africa directed to Europe. The results show that drier soil conditions decrease rather than increase the probability to migrate. This effect is concentrated during the crop-growing season, suggesting that the decrease in migration is mainly driven by financial constraints, also because the effect is only seen for areas in the middle of the income distribution, with no impact on the poorest or richest areas who can never or always afford migration.

Adjustment to climate change is costly

Climate change will cause precipitation volatility to increase around the world, leading to economic damages in the face of adjustment costs. Jeffrey G. Shrader presented his co-authored work on estimating these damages for U.S. construction, an economically important, climate exposed industry. He showed that employment falls in response to predicted rainfall and more so as the forecast horizon increases. Firms anticipate and adapt to rainfall events through costly adjustment of their labor force. Higher adjustment costs reduce this adaptation, leading to greater damage from bad weather realizations. These results imply that firms value forecasts and would be willing to pay to learn about rainfall sooner.

See the online program of the workshop for more downloadable papers.

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For more research on environmental regulation and the labor market, see also the IZA World of Labor topic page.

Rapid tests effectively contain COVID-19

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According to a recent IZA discussion paper by Janos Gabler, Tobias Raabe, Klara Röhrl and Hans-Martin von Gaudecker, rapid tests effectively broke COVID-19 infection chains in spring 2021. Using an agent-based simulation model focused on physical contacts between people, the research team found that rapid tests reduced the number of infections in Germany by more than 40 percent in May alone, while the sharply rising vaccination rates played a minor role, being responsible for only 16 percent of the decline.

The authors advocate further use of rapid testing as an important an relatively inexpensive tool to contain the pandemic as long as vaccination rates are still too low. They attribute its effectiveness to the fact that rapid tests reduced contacts in case of a positive result—in contrast to vaccinations. The seasonality of the virus, i.e. external conditions such as temperature and humidity and, consequently, the extent to which people meet outdoors rather than indoors—had a similar impact as testing.

Previous research from the IZA network

Several other IZA discussion papers have looked at the effects of antigen testing and provided encouraging results as well.

  • A study from Slovakia, where nearly the entire population was tested once, and only certain districts were re-tested later, found that repeated mass antigen testing reduced infections by about 25-30% and decreased R0 by 0.3 two weeks after the re-testing.
  • A case study for the German city of Tübingen, which set up a rapid testing scheme while relaxing lockdown measures, concluded that this “opening under safety” policy did not lead to a substantial increase in case rates. The authors also point out that more testing helps identify asymptomatic cases, which may otherwise have led to more infections.
  • When testing is voluntary, it is important for policymakers to understand what determines people’s willingness to get tested. A study from the South Tyrol region in Italy found that convenience—more test centers available in the community—was a key factor. Age, socioeconomic status and religiosity were also both positively related to greater testing. The authors suggest that similar patterns may hold for vaccination uptake.

How environmental pollution affects educational and labor market outcomes

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Climate change and environmental pollution are the central challenges of our time. The COVID-19 pandemic has also moved population health a top policy priority. To present and discuss new research on these issues, the 8th IZA Workshop on “Environment, Health and Labor Markets”, organized by Olivier Deschenes and Nico Pestel, brought together researchers analyzing the interaction between environmental factors, health policies, labor markets and education.

Central questions evolved around the impacts of environmental pollution on educational and labor market outcomes, the effects of environmental policies on employment, as well as health benefits of public policies.

Lead exposure spills over to classmates

It is well established that children exposed to lead are more disruptive and have lower achievement. In her paper, Ludovica Gazze studies how lead-exposed children affect the long-run outcomes of their peers by using new data on preschool blood lead levels matched to education data for all students in North Carolina public schools. Having more lead-exposed peers is associated with lower high-school graduation and SAT-taking rates and increased suspensions and absences.

School building quality important for student performance

Governments devote a large share of public budgets to constructing, repairing and modernizing school facilities. Juan Palacios presented evidence on the implications for student performance of poor environmental conditions inside classrooms by continuously monitoring the environmental conditions (i.e. CO2, fine particles, temperature, humidity) in the classrooms of 3,000 children over two school years, and linking them to their scores in standardized tests. The findings show that exposure to poor indoor air quality during the school term preceding the test is associated with significant performance drops. Changes in teaching time could be a potential mechanism.

Low-emission zones improve child health

Hannah Klauber examines the impact of early-life exposure to air pollution on children’s health from their in-utero period to school enrollment by using public health insurance records covering one-third of the population of children in Germany. The results indicate that children born just before and just after a Low Emission Zone, banning high-emission vehicles, was implemented in the county of birth exhibit persistent differences in medication usage for at least five years.

Management quality crucial for climate change mitigation

Cap-and-trade programs for CO2 emissions are being considered by governments worldwide to address the climate change challenge. The success of such a market-based climate policy at minimizing overall abatement cost and fostering low-carbon investment and innovation depends on participants fully understanding the system. Ulrich Wagner provides evidence on how management quality moderates responses to carbon pricing, by analyzing firms that participated in two of China’s regional pilot emissions trading schemes (ETS). The findings show that the launch of the pilot ETS has reduced consumption of coal and electricity, but only for well-managed firms.

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More papers are downloadable from the workshop homepage.