How Does Wealth Beget Wealth? Evidence from Sweden

By , and ·August 4, 2020
Columbia University, University College, Dublin and Lund University

How Does Wealth Beget Wealth? Evidence from Sweden

The Issue:

Wealthy parents tend to raise children who grow up to be wealthy, just as children whose parents have few assets are likely to possess little wealth in adulthood. However, little is known about the extent to which this relationship is determined genetically, by environmental factors, or by some combination of both.


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The Politics of Pandemics

By and ·July 24, 2020
Harvard University and Fletcher School, Tufts University

Beyond the obvious effects on health and the economy, COVID-19 has also had an effect on politics; and, in turn, politics has affected the spread of the disease and its economic consequences. In this episode of EconoFact Chats, Michael Klein and Jeffry Frieden at Harvard discuss the links between politics and economics in the COVID-19 era.

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The Unequal Impact of COVID-19 on Children’s Economic Vulnerability

By , , , , and ·July 14, 2020
University of Minnesota and Cornell University

The Issue:

Our original research finds that 21 percent of children in the United States experienced the job loss of an adult in their household between February and April of 2020 and 8 percent experienced the job loss of all adult earners in their household. We also find striking disparities by race, ethnicity, and income, with higher shares of Latinx, Black, and lower-income children losing all adult earners in their households.

The Facts:

  • The share of children living in households in which no one earned an income doubled from 7 percent in February to 15 percent in April. But there were disparities across racial, ethnic and income groups: The shares of children whose households lost all adult earners was 5.8 percent for White children, 12.4 percent for Black children and 11.9 percent for Latinx children; These shares were 12.1 percent of children in below-median income households, 4.9 percent for children in households that made between $75,000 and $150,000 and 2.5 percent for those in households with incomes over $150,000.
  • Latinx children were more likely to be in households that experienced any job loss, but they were relatively protected from job losses among all adult earners because they more often lived in households with multiple adults. Twenty percent of Latinx children lived in two-parent households with other adults – the comparable statistics were 10.4 percent for White children and 8 percent for Black children.
  • There were mixed findings when following the same group of children into May 2020. There were fewer children in households with no earners among all groups. But this appears to be especially true among children in higher-income households while other children, particularly Black and Latinx children, seem to be lagging behind.

What this Means:

The number of children who lived in households that experienced job loss in the first months of the pandemic was staggering, which is consistent with the precipitous rise in unemployment during this period. The job losses followed longstanding patterns of unequal vulnerability and exacerbated inequalities by race and ethnicity, income, and family structure. Furthermore, issues of child well-being extend beyond economic security to broader indicators of development, including stress-related health outcomes, cognitive development, and social development. Children—particularly those at greatest risk of economic vulnerability—need support at this unprecedented time.

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Using Mobile Money to Help the Poor in Developing Countries

By ·July 6, 2020
The Fletcher School, Tufts University

The Issue:

With Latin America becoming a new epicenter of the COVID-19 pandemic and the growth of new cases accelerating in Africa, developing countries are facing growing impacts from the coronavirus crisis. The spreading virus and lockdown policies can disproportionately harm poor workers who work in the informal sector. Governments worldwide have implemented social safety net programs to offset this. Yet how will government transfers be distributed, especially to those who don’t have bank accounts and live in remote areas?

The Facts:

  • Recognizing the impact of COVID restrictions, over 150 countries have implemented over 700 social protection measures, more than 200 of which involve some form of cash transfers to the poor. While some of these are extensions of ongoing programs, 59% are new programs, implying a significant increase in coverage. 
  • The key issue, though, is distribution: globally, 1.7 billion adults remain unbanked, without an account at a financial institution or through a mobile money provider. 
  • While 30% of the global population does not have a bank account, 2/3 of unbanked adults have a mobile phone. The simple mobile phone can improve access to financial services via mobile money, a set of applications that facilitate a variety of financial transactions via mobile phone. 
  • Research in Niger, Kenya and Afghanistan shows that using mobile money for public and private transfers are less costly than in-person or other traditional transfer mechanisms, and can have positive impacts on individuals’ well-being, suggesting a “win-win” for governments, the private sector and individuals alike.  
  • Many developing countries have made use of mobile money technology to help their citizens during the COVID-19 crisis. 
  • Despite its potential, mobile money adoption is still low in certain regions and countries, in part due to limited physical  (electricity and mobile phone networks) and human (agent) infrastructure.

What this Means:

Mobile money offers significant opportunities to distribute cash transfer programs at scale during the current crisis and beyond, especially among the poor, who tend to be less likely to have a bank account. Nevertheless, it requires significant increases in the density of mobile money agents, as well as increases in mobile money adoption among the unbanked.

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The Paradox of Medical Costs During the Pandemic

By and ·June 30, 2020
Harvard T.H. Chan School Of Public Health and Harvard Medical School and Willis Towers Watson

The Issue:

As COVID-19 began to rapidly spread in the United States, many experts suggested that medical costs would rise substantially due to the pandemic. Paradoxically, however, medical costs seem to have gone down — at least in the short term. Such a drop in medical expenditures is extremely rare: total U.S. health expenditures per capita have increased every year since at least 1970, including during the recession of 2008-9.

The Facts:

  • Demand for non-emergency medical services has fallen dramatically during the pandemic. Preliminary first quarter Gross Domestic Product reports show that almost half of the total decrease in GDP is due to reduced health care spending. Most hospitals stopped doing elective surgeries, dentists closed, and people were deterred from going to their doctors because of fear of contracting COVID-19. The decrement in non-COVID care is dramatically larger than modelers initially expected, and it has been bigger than the COVID-19 related expenditures.
  • Much of the deferred care driving the drop in U.S. health expenditures may never be delivered at all. Forgone care means that for the most part, health care spending will decline, but it also likely means worse health outcomes because people are not receiving the care they need. 
  • Healthcare expenditures could increase in some areas following COVID-19, such as long-term complications for COVID-19 survivors and higher rates of mental illness in the general population. 
  • The pandemic introduces huge uncertainties for the future. A subsequent wave of infection could lead to a new spike in costs in the future, and these could be higher if the rate of infection increases. We do not know the future cost of drug therapy, which might be effective for coronavirus treatment or prevention, nor do we know the timing, cost or financing of a vaccine. 
  • COVID-19 may be bringing about long-lasting changes in the provision of health services, such as widespread adoption of telemedicine, which could affect medical expenditures in the long term.

What this Means:

Paradoxically, the COVID-19 pandemic has led to a dramatic reduction in the consumption of medical care and is also having profound impacts on the provider community. The healthcare sector lost 42,000 jobs in March. Many provider organizations face insolvency due to decreased volume, and we will likely see provider consolidation, which could raise prices. Hospitals shutting down will also raise accessibility issues for consumers. Looking forward, it is unclear exactly when or to what extent health expenditures will rebound. This period of a historic decline in medical expenditures may reshape the industry, including having possible enduring effects on how medical care is delivered, what types of payment models are used, and how accessible healthcare is across different populations.

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