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Contributions in Merlin
|Hans-Joachim Voth, Sebastian Klaus Dörr, Stefan Gissler, José Luis Peydró, From finance to fascism: the real effect of Germany's 1931 banking crisis, In: CEPR Discussion Papers, No. 12806, 2019. (Working Paper)
Do financial crises radicalize voters? We analyze a canonical case - Germany during the Great Depression. After a severe banking crisis in 1931, caused by foreign shocks and political inaction, radical voting increased sharply in the following year. Democracy collapsed six months later. We collect new data on pre-crisis bank-firm connections and show that banking distress led to markedly more radical voting, both through economic and non-economic channels. Firms linked to two large banks that failed experienced a bank-driven fall in lending, which caused reductions in their wage bill and a fall in city-level incomes. This in turn increased Nazi Party support between 1930 and 1932/33, especially in cities with a history of anti-Semitism. While both failing banks had a large negative economic impact, only exposure to the bank led by a Jewish chairman strongly predicts Nazi voting. Local exposure to the banking crisis simultaneously led to a decline in Jewish-gentile marriages and is associated with more deportations and attacks on synagogues after 1933.
|Hans-Joachim Voth, Guo Xu, Patronage for productivity: selection and performance in the age of sail, In: CEPR Discussion Papers, No. 13963, 2019. (Working Paper)
Patronage is a byword for poor performance, yet it remains pervasive. We study the selection effects of patronage in the world's most successful navy - the British Royal Navy between 1690 and 1849. Using newly collected data on the battle performance of more than 5,800 naval officers promoted - with and without family ties - to the top of the navy hierarchy, we find that connected promotees outperformed unconnected ones. There was substantial heterogeneity among the admirals in charge of promotions. Discretion over appointments thus created scope for "good" and "bad" patronage. Because most admirals promoted on the basis of merit and did not favor their kin, the overall selection effect of patronage was positive.
|Jim Malley, Ulrich Woitek, Estimated human capital externalities in an endogenous growth framework, In: CESifo Working Papers, No. 7603, 2019. (Working Paper)
To better understand the quantitative implications of human capital externalities at the aggregate level, we estimate a two-sector endogenous growth model with knowledge spill-overs. To achieve this, we account for trend growth in a model consistent fashion and employ a Markov-chain Monte-Carlo (MCMC) algorithm to estimate the model's posterior parameter distributions. Using U.S. quarterly data from 1964-2017, we find significant positive externalities to aggregate human capital. Our analysis further shows that eliminating this market failure leads to sizeable increases in education-time, endogenous growth and aggregate welfare.
|Nir Jaimovich, Itay Saporta-Eksten, Henry Siu, Yaniv Yedid-Levi, The macroeconomics of automation: data, theory, and policy analysis, In: Working paper series / Department of Economics, No. 340, 2020. (Working Paper)
The U.S. economy has experienced a significant drop in the fraction of the population employed in middle wage, “routine task-intensive” occupations. Applying machine learning techniques, we identify characteristics of those who used to be employed in such occupations and show they are now less likely to work in routine occupations. Instead, they are either non-participants in the labor force or working at occupations that tend to occupy the bottom of the wage distribution. We then develop a quantitative, heterogeneous agent, general equilibrium model of labor force participation, occupational choice, and capital investment. This allows us to quantify the role of advancement in automation technology in accounting for these labor market changes. We then use this framework as a laboratory to evaluate various public policies aimed at addressing the disappearance of routine employment and its consequent impacts on inequality.
|Marek Pycia, Peter Troyan, A theory of simplicity in games and mechanism design, In: Discussion Paper Series, No. DP14043, 2019. (Working Paper)
We introduce a general class of simplicity standards that vary the foresight abilities required of agents in extensive-form games. Rather than planning for the entire future of a game, agents are presumed to be able to plan only for those histories they view as simple from their current perspective. Agents may update their so-called strategic plan as the game progresses, and, at any point, for the called-for action to be simply dominant, it must lead to unambiguously better outcomes, no matter what occurs at non-simple histories. We use our approach to simplicity to provide characterizations of simple mechanisms in general social choice environments both with and without transfers, including canonical mechanisms such as ascending auctions, posted prices, and serial dictatorship-style mechanisms. As a final application, we explain the widespread popularity of the well-known Random Priority mechanism by characterizing it as the unique mechanism that is efficient, fair, and simple to play.
|Christian Ruff, Henryk Bukowski, Martin Tik, Giorgia Silani, Christian Windischberger, Claus Lamm, When differences matter: rTMS/fMRI reveals how differences in dispositional empathy translate to distinct neural underpinnings of self-other distinction in empathy, In: PsyArXiv Preprints, No. 9ndac, 2019. (Working Paper)
Self-other distinction is crucial for empathy, since it prevents the confusion of self-experienced emotions with those of others. We aimed to extend our understanding of the neurocognitive mechanisms of self-other distinction. Thirty-one female participants underwent continuous theta burst transcranial magnetic stimulation (cTBS) targeting the supramarginal gyrus (rSMG), a sub-region of the temporoparietal junction previously shown to be involved in self-other distinction, and the vertex, a cortical control site. Right after stimulation they completed a visuo-tactile empathy task in an MRI scanner. Self-other distinction performance was assessed by differences in emotion judgments and brain activity between conditions differing in the requirement for self-other distinction. Effects of rSMG-cTBS (compared to vertex cTBS) on self-other distinction depended on dispositional empathic understanding: they decreased self-other distinction in participants with lower dispositional empathic understanding, but increased it in participants with higher empathic understanding. On the neural level, this inverse relationship between disposition and self-other distinction performance translated into a reduction or an increase of cTBS-induced rSMG activity, in persons with lower and higher dispositional empathy, respectively. Moreover, the differences in rSMG activity were associated with two anatomically and functionally distinct networks. These findings open up novel perspectives on the causal role of rSMG in self-other distinction and empathy. They also suggest that considering individual differences may yield novel insights into how brain stimulation affects higher-level affect and cognition, and its neural correlates.
|Todd Anthony Hare, G Aydogan, R Daviet, R Karlsson Linnér, J W Kable, H R Kranzler, R R Wetherill, C C Ruff, P D Koellinger, G Nave, Genetic underpinnings of risky behavior relate to altered neuroanatomy, In: bioRxiv, No. 862417, 2019. (Working Paper)
Previous research points to the heritability of risk-taking behavior. However, evidence on how genetic dispositions are translated into risky behavior is scarce. Here, we report a genetically-informed neuroimaging study of real-world risky behavior in a large European sample (N=12,675). We found negative associations between risky behavior and grey matter volume (GMV) in distinct brain regions, including amygdala, ventral striatum, hypothalamus and dorsolateral prefrontal cortex (dlPFC). Polygenic risk scores for risky behaviors, derived from a genome-wide association study in an independent sample (N=297,025), were inversely associated with GMV in dlPFC, putamen, and hypothalamus. This relation mediated ∼2.2% of the association between genes and behavior. Our results highlight distinct heritable neuroanatomical features as manifestations of the genetic propensity for risk taking. One Sentence Summary Risky behavior and its genetic associations are linked to lower grey matter volume in distinct brain regions.
|Todd Anthony Hare, Carolina Feher da Silva, Humans are primarily model-based and not model-free learners in the two-stage task, In: bioRxiv, No. 682922, 2019. (Working Paper)
Distinct model-free and model-based learning processes are thought to drive both typical and dysfunctional behaviors. Data from two-stage decision tasks have seemingly shown that human behavior is driven by both processes operating in parallel. However, in this study, we show that more detailed task instructions lead participants to make primarily model-based choices that show little, if any, model-free influence. We also demonstrate that behavior in the two-stage task may falsely appear to be driven by a combination of model-based/model-free learning if purely model-based agents form inaccurate models of the task because of misunderstandings. Furthermore, we found evidence that many participants do misunderstand the task in important ways. Overall, we argue that humans formulate a wide variety of learning models. Consequently, the simple dichotomy of model-free versus model-based learning is inadequate to explain behavior in the two-stage task and connections between reward learning, habit formation, and compulsivity.
|Todd Anthony Hare, Silvia Maier, Greater BOLD signal during successful emotional stimulus reappraisal is associated with better dietary self-control, In: bioRxiv, No. 542712, 2019. (Working Paper)
We combined established emotion regulation and dietary choice tasks with fMRI to investigate behavioral and neural associations in self-regulation across the two domains in human participants. We found that increased BOLD activity during the successful reappraisal of positive and negative emotional stimuli was associated with better dietary self-control. This cross-task correlation was present in medial and lateral prefrontal cortex as well as the striatum. These results suggest that neural processes related to the reappraisal of emotional stimuli may also facilitate dietary self-control. However, within the dietary self-control task itself, we did not find that prefrontal cortex (PFC) activity significantly increased with self-control success during our food choice task, in contrast to previous reports. This prompted us to conduct exploratory analyses, which revealed that BOLD activity in PFC tracks the amount of taste and healthiness at stake on each self-control challenge trial regardless of the chosen outcome. This exploratory finding also replicated in an independent dataset. We discuss the implications of this evidence that individuals track the self-control stakes in light of theories about effortful self-regulation. In addition, we discuss features of this version of the food choice task that may have reduced the need to recruit PFC to achieve self-control. In summary, our findings indicate that the neural systems supporting emotion reappraisal can generalize to other behavioral contexts that require reevaluation to conform to the current goal. Significance statement Reappraisal is a prominent strategy for self-regulation. Yet data to compare processes underlying the reappraisal of emotions and dietary self-control within the same individual is lacking. Here, we use two established emotion regulation and dietary choice tasks to compare both on the neural level. We found that increased BOLD activity in several brain regions including medial and lateral prefrontal cortex and striatum during the successful reappraisal of positive and negative emotional stimuli was linked to better dietary self-control. These results suggest that neural processes underlying the reappraisal of emotional stimuli may also facilitate dietary self-control.
|Ingo E Isphording, Ulf Zölitz, The value of a peer, In: Working paper series / Department of Economics, No. 342, 2020. (Working Paper)
This paper introduces peer value-added, a new approach to quantify the total contribution of an individual peer to student performance. Peer value-added captures social spillovers irrespective of whether they are generated by observable or unobservable peer characteristics. Using data with repeated random assignment to university sections, we find that students significantly differ in their peer value-added. Peer value-added is a good out-of-sample predictor of performance spillovers in newly assigned student-peer pairs. Yet, students’ own past performance and other observable characteristics are poor predictors of peer value-added. Peer value-added increases after exposure to better peers, and valuable peers are substitutes for low-quality teachers.
|Giuseppe Sorrenti, Ulf Zölitz, Denis Ribeaud, Manuel Eisner, The causal impact of socio-emotional skills training on educational success, In: Working paper series / Department of Economics, No. 343, 2020. (Working Paper)
We study the long-term effects of a randomized intervention targeting children’s socio-emotional skills. The classroom-based intervention for primary school children has positive impacts that persist for over a decade. Treated children become more likely to complete academic high school and enroll in university. Two mechanisms drive these results. Treated children show fewer ADHD symptoms: they are less impulsive and less disruptive. They also attain higher grades, but they do not score higher on standardized tests. The long-term effects on educational attainment thus appear to be driven by changes in socio-emotional skills rather than cognitive skills.
|Simon A Broda, Marc Paolella, Archmodels.Jl: Estimating Arch Models in Julia, In: Econometrics: Computer Programs & Software SSRN eJournal, No. 3551503, 2020. (Working Paper)
This paper introduces ARCHModels.jl, a package for the Julia programming language that implements a number of univariate and multivariate ARCH-type models. This model class is the workhorse tool for modelling the conditional volatility of financial assets. Their distinguishing feature is that they model the latent volatility as a (deterministic) function of past returns and volatilities. This recursive structure results in loop-heavy code which, due to its just-in-time compiler, Julia is well-equipped to handle. As such, the entire package is written in Julia, without any binary dependencies. We benchmark the performance of ARCHModels.jl against popular implementations in MATLAB, R, and Python, and illustrate its use in a detailed case study.
|Christian Ewerhart, Sheng Li, Imposing choice under ambiguity: the case of dynamic currency conversion, In: Working paper series / Department of Economics, No. 345, 2020. (Working Paper)
It is a common experience for present-day consumers making an international payment via credit or debit card to be invited to choose the currency in which they wish to have the transaction executed. While this choice, made feasible by a technology known as dynamic currency conversion (DCC), seems to foster competition, we show that the opposite is the case. In fact, the unique pure-strategy Nash equilibrium in a natural fee-setting game turns out to be highly asymmetric, entailing fees for the service provider that always exceed the monopoly level. Although losses in welfare may be substantial, a regulatory solution is unlikely to come about due to a global free-rider problem.
|Andreas Hefti, Shuo Liu, Armin Schmutzler, Preferences, confusion and competition, In: Working paper series / Department of Economics, No. 344, 2020. (Working Paper)
Do firms seek to make the market transparent,or do they confuse the consumers in their product perceptions? We show that the answer to this question depends decisively on preference heterogeneity. Contrary to the well-studied case of homogeneous goods, confusion is not necessarily an equilibrium in markets with differentiated goods. In particular, if the taste distribution is polarized, so that indifferent consumers are relatively rare, firms strive to fully educate consumers. By contrast, if the taste distribution features a concentration of indecisive consumers, confusion becomes part of the equilibrium strategies. The adverse welfare consequences of confusion can be more severe than with homogeneous goods, as consumers may not only pay higher prices, but also choose a dominated option, or inefficiently refrain from buying. Qualitatively similar insights obtain for political contests, in which candidates compete for voters with heterogeneous preferences.
|Nir Jaimovich, Disappearing middle class: job polarization and policy approaches, In: UBS Center Public Paper Series, No. 8, 2020. (Working Paper)
The creeping hollowing out of the middle class and the simultaneous rise of automation have become hotly debated topics in the popular media and among policymakers, and there is certainly no shortage of dire predictions about the ascent of robots and subsequent obsolescence of workers. But – doomsday prophecies aside – what are the facts? What is happening to workers, specifically middle-class ones? And, from a policy perspective, what can (or should) be done to address this fundamental shift in who – or what – does which jobs? This Public Paper tackles these questions head-on. We first identify the types of individuals who are likely to work in middle-class occupations and track how they act on the labor market outcomes. Then we evaluate policies proposed in recent years that have been aimed at combating the labor market malaise middle-class workers have experienced.
|Pol Campos-Mercade, Armando N Meier, Florian H Schneider, Erik Wengström, Prosociality predicts health behaviors during the COVID-19 pandemic, In: Working paper series / Department of Economics, No. 346, 2020. (Working Paper)
Socially responsible behavior is crucial for slowing the spread of infectious diseases. However, economic and epidemiological models of disease transmission abstract from prosocial motivations as a driver of behaviors that impact the health of others. In an incentivized study, we show that a large majority of people are very reluctant to put others at risk for their personal benefit. Moreover, this experimental measure of prosociality predicts health behaviors during the COVID-19 pandemic, measured in a separate and ostensibly unrelated study with the same people. Prosocial individuals are more likely to follow physical distancing guidelines, stay home when sick, and buy face masks. We also find that prosociality measured two years before the pandemic predicts health behaviors during the pandemic. Our findings indicate that prosociality is a stable, long-term predictor of policy-relevant behaviors, suggesting that the impact of policies on a population may depend on the degree of prosociality.