Scott Viallet-Thévenin, Cédric Chambru, Attaining autonomy in the empire: French governors between 1860 and 1960, In: Working paper series / Department of Economics, No. 366, 2020. (Working Paper)
This article builds on the concept of linked ecologies to present a study of the occupational careers of French colonial governors between 1830 and 1960. We consider empires as the by-product of social entities structuring themselves. Specifically, we analyse the process of empowerment of this emerging group with respect to other professional groups within the imperial space and the French metropolitan space. Using data on the career of 637 colonial governors between 1830 and 1960, we examine how variations in the recruitment of these high civil servants actually reflect the empowerment of this social entity. We rely on optimal matching technique to distinguish typical sequence models and identify ten common career trajectories that can be grouped in four main clusters. We further compare the share of each clusters in the population of governors over time and show that the rise of the colonial cluster during the Interwar period corresponded to the peak of the administrative autonomy in the colonial space. We argue that this process is consistent with the empowerment of the governors’ corps, which is embodied by a common career within the colonial administration and a collective identity as a group. |
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Florian H Schneider, Signaling ideology through consumption, In: Working paper series / Department of Economics, No. 367, 2022. (Working Paper)
Firms often discourage certain categories of individuals from buying their products, seemingly at odds with typical assumptions about profit maximization. This paper provides a potential rationale for such firm behavior: Consumers seek to signal that they have “desirable” ideological values to themselves and others by avoiding products popular among people with “undesirable” values. In laboratory experiments and surveys, I provide causal evidence that consumption can be diagnostic of consumers’ ideologies and that demand for a product is lower if its customer base consists of individuals whose ideological values are widely considered undesirable. These effects occur for both observable and unobservable consumption and for products that do not possess any inherent ideological or undesirable qualities. |
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Domenico Ferraro, Nir Jaimovich, Francesca Molinari, Cristobal Young, The Safety Net as a Springboard? A General Equilibrium Based Policy Evaluation, In: CEPR Discussion Papers, No. 14786, 2020. (Working Paper)
We develop a search-and-matching model where the magnitude of unemployment insurance benefits affects the likelihood that unemployed actually engage in active job search. To quan- titively discipline this relation we use administrative data of unemployed search audits. We use the model to quantify the effects of unemployment reforms. For small benefits' increases, the policymaker faces a trade-off between an uptick in the measure of unemployed actually searching and a fall in the unemployment exit-rate conditional on searching. For larger bene- fits' increases, an active search margin magnifies the benefits' disincentives, leading to a bigger drop in the employment rate than previously thought. |
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Giovanni Maggi, Ralph Ossa, Are trade agreements good for you?, In: NBER Working Paper Series, No. 27252, 2020. (Working Paper)
We examine how deep agreements on domestic regulations affect welfare in a world where such agreements are influenced by producer lobbies. The answer to this question depends in a critical way on whether the agreement focuses on product standards or on production regulations. International cooperation on product standards can decrease welfare, and this is more likely to happen when producer lobbies are stronger. On the other hand, international cooperation on production regulations tends to enhance welfare when lobbying pressures are strong. A key determinant of the welfare impact of deep agreements is whether the interests of producer lobbies in different countries are aligned or in conflict: the former situation tends to occur in the case of product standards, while the latter situation tends to occur in the case of production regulations. |
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Antoine Dechezleprêtre, David Hémous, Morten Olsen, Carlo Zanella, Automating labor: evidence from firm-level patent data, In: CEP Discussion Papers, No. CEPDP1725, 2020. (Working Paper)
Do higher wages lead to more automation innovation? To answer this question, we first introduce a new measure of automation by using the frequency of certain keywords in patent text to identify automation innovations in machinery. We validate our measure by showing that it is correlated with a reduction in routine tasks in a cross-sectoral analysis in the US. Then we build a firm-level panel dataset on automation patents. We combine macroeconomic data from 41 countries and information on geographical patent history to build firm-specific measures of lowskill and high-skill wages. We find that an increase in low-skill wages leads to more automation innovation with an elasticity between 2 and 4. An increase in highskill wages tends to reduce automation innovation. Placebo regressions show that the effect is specific to automation innovations. Finally, we use the Hartz labor market reforms in Germany for an event study and find that they are associated with a relative reduction in automation innovations. |
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Finkelfarb Lichand Guilherme Lichand, Julien Christen, Behavioral nudges prevent student dropouts in the pandemic, In: Working paper series / Department of Economics, No. 363, 2021. (Working Paper)
Background: Student dropouts are a major concern in developing countries; even before the pandemic, one out of three Brazilian students dropped out before graduating high school. School closures in the context of COVID-19 have been shown to magnify that problem, with at least seven million additional dropouts worldwide in 2020. Despite efforts from governments around the world to mitigate learning gaps by the time in-person classes return, interventions to motivate students to remain in school until then have been overlooked. In particular, behavioral nudges sent to parents’ cell phones through text messages had shown promise in preventing student dropouts in developing countries before the pandemic. Having said that, such nudges typically work by leading parents to show up in school to a greater extent and monitor teachers more closely – a mechanism that might not be meaningful in the absence of in-person classes.
Methods: We conducted a cluster-randomized control trial with 18,256 high-school students in the State of Goiás, Brazil, randomizing 2/3 of them to receive behavioral nudges through text messages, between June and December 2020. The control group did not receive any messages. Within the treatment group, we additionally randomized students to variations in nudges’ content, to study whether behavioral insights linked to framing and social pressure would lead to higher impacts. We estimate the impacts of nudges on dropout risk over the course of the school year, using administrative data from the State Secretariat of Education on whether students took math and Portuguese exams each school quarter. We also estimate heterogeneous impacts of nudges by risk levels (higher for boys, sophomore and junior students, and those below-median first-quarter Portuguese GPA), by whether messages were sent to parents’ phones or directly to students, and by whether schools already offered online academic activities prior to the pandemic.
Findings: Nudges decreased dropout risk by around 26% over the course of the school year. Effects increased with exposure, and were concentrated in students at the highest risk of dropouts. Nudges only worked when sent directly to students’ phones, and in schools that already offered online academic activities prior to the pandemic. Framing content in terms of the upside of graduating high school led to higher impacts than framing it in terms of the downside of dropping out. Alluding to peer motivation to return to in-person classes to leverage social pressure had no additional effects on dropout risk.
Interpretation: Results show that behavioral nudges can partially mitigate the dramatic increase in student dropouts during school closures by keeping adolescents motivated to stay in school. The patterns of heterogeneous treatment effects are consistent with complementarities between motivation and academic instruction. All in all, our results showcase that insights from the science of adolescent psychology can be leveraged to shift developmental trajectories at a critical juncture, but also raise caution against indiscriminately applying behavioral insights derived from evaluations of similar interventions in contexts of in-person classes or static decision-making. |
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Finkelfarb Lichand Guilherme Lichand, Juliette Thibaud, Parent-bias, In: Working paper series / Department of Economics, No. 369, 2022. (Working Paper)
How do parents plan to and effectively share resources with their children over time? In a lab-in-the-field experiment in Malawi, we show that, for many parents, plans become more generous the further in the future consumption is. These parents are, however, way more likely to reverse past plans, reallocating away from children’s consumption as it gets closer, even when consumption is still in the future. Reallocating from children’s future consumption towards one’s own - what we call parent-bias - cannot be explained by present-bias. Commitment devices designed for present-bias do not mitigate parent-bias. Our findings provide a new explanation for underinvestment in children and inform the design of new interventions to address it. |
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Alessandro Ferrari, Carmen Garcia Galindo, Matic Petricek, Andreas Winkler, Bank funding and risk taking, In: ADEMU Working Papers Series, No. 2018/123, 2018. (Working Paper)
In this paper we use a novel approach to address issues of endogeneity in estimating a causal effect of leverage on risk taking by banks. Using data on local bank office deposits and local unemployment we construct an instrument to use in a regression of leverage on a measure of risk taking constructed from new issuance of loans. The results (i.) confirm that due to limited liability banks increase their risk taking after an exogenous increase in leverage, and (ii.) that an increase in deposit supply has a direct positive effect on risk taking by banks. |
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Alessandro Ferrari, Anna Rogantini Picco, International risk sharing in the European Monetary Union, In: ADEMU Working Papers Series, No. 2017/055, 2017. (Working Paper)
This paper aims at empirically assessing the effect of the adoption of the euro on the ability of euro area member states to smooth consumption and share risk. With the objective of evaluating the economic performance of euro area countries in the scenario where the euro had not been adopted, we construct a counterfactual dataset of macroeconomic variables via the Synthetic Control Method. In order to get some preliminary measures of risk sharing, we compute correlations between consumption and GDP within a country, bilateral consumption correlations, and Brandt-Cochrane-Santa Clara indices across euro area member states. We then decompose risk sharing in different channels by means of the Asdrubali, Sorensen and Yosha (1996) output variance decomposition. Our difference in difference estimates show that the euro has not affected the level of international risk sharing across euro area countries, but has partially reduced the ability of member states to smooth consumption. We attribute this change to the higher GDP growth generated by the adoption of the euro, which has been accompanied by a greater output volatility. We also report differential effects for euro area core and periphery countries, showing that the former have not suffered any negative effect from the adoption of the euro in terms of risk sharing whereas the latter are now less able to smooth consumption. |
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Carlos Alos-Ferrer, Johannes Buckenmaier, Michele Garagnani, Stochastic choice and preference reversals, In: Working paper series / Department of Economics, No. 370, 2021. (Working Paper)
Preferences over risky alternatives can be elicited by different methods, including direct pairwise choices and willingness-to-accept valuations. The results are frequently at odds, casting doubts on the foundations of economics. We develop a stochastic choice model predicting when inconsistencies across elicitation methods should occur, the type of anomalies to be expected, what determines their magnitude, and whether they uncover a bias or not. While some anomalies can be traced back to individual biases, other apparent anomalies can occur in the absence of any actual behavioral bias, as a consequence of regularities in stochastic choice, risk attitudes, and experimental design. The model delivers new predictions that are confirmed in five experiments on the classical preference reversal phenomenon. Our novel empirical approach relies on utilities estimated out of sample, which allow us to test the model and also show that the bias in willingness-to-accept valuations is limited to long shots. |
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Shuo Liu, Nick Netzer, Happy times: measuring happiness using response times, In: Working paper series / Department of Economics, No. 371, 2023. (Working Paper)
Surveys that measure subjective states like happiness or preferences often generate discrete ordinal data. Ordered response models, which are commonly used to analyze such data, suffer from a fundamental identification problem. Their conclusions depend on unjustified assumptions about the distribution of a latent variable. In this paper, we propose using survey response times to solve that problem. Response times contain information about the distribution of the latent variable even among subjects who give the same survey response, through a chronometric effect. Using an online survey, we test and verify the existence of the chronometric effect. We then provide theoretical conditions under which group differences in happiness or other variables are detectable based on response time data without making distributional assumptions. In our survey, we find evidence supporting the assumptions of traditional ordered response models for some common survey questions but not for others. |
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Giovanni Maggi, Ralph Ossa, The political economy of deep integration, In: NBER Working Paper Series, No. 28190, 2020. (Working Paper)
Modern trade agreements no longer emphasize basic trade liberalization but instead focus on international policy coordination in a much broader sense. In this paper we introduce the emerging literature on the political economy of such deep integration agreements. We organize our discussion around three main points. First, the political conflict surrounding trade agreements is moving beyond the classic antagonism of exporter interests who gain from trade and import-competing interests who lose from trade. Second, there is a more intense popular backlash against deep integration agreements than there was against shallow integration agreements. And third, the welfare economics of trade agreements have become more complex, in the sense that the insight that "free trade is good" is no longer sufficient as a guide to evaluating the efficiency of international agreements. |
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Marek Pycia, M Utku Ünver, Arrovian efficiency and auditability in the allocation of discrete resources, In: Discussion Paper Series, No. DP15377, 2020. (Working Paper)
In environments where heterogeneous indivisible resources are being allocated without monetary transfers and each agent has a unit demand, we show that an allocation mechanism is individually strategy-proof and Arrovian efficient, i.e., it always selects the best outcome with respect to some Arrovian social welfare function if, and only if, the mechanism is group strategy-proof and Pareto efficient. Re-interpreting Arrow's Independence of Irrelevant Alternatives in terms of auditability of the mechanism, we further show that these are precisely the mechanisms that are strategy-proof, Pareto efficient, and auditable. |
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Antonio Miralles, Marek Pycia, Foundations of pseudomarkets : walrasian equilibria for discrete resources, In: Discussion Paper Series, No. DP15161, 2020. (Working Paper)
We study the assignment of objects in environments without transfers allowing for single-unit and general multi-unit demands, and any linear constraints, thus covering a wide range of applied environments, from school choice to course allocation. We establish the Second Welfare Theorem for these environments despite them failing the local non-satiation condition that previous studies of the Second Welfare Theorem relied on. We also prove a strong version of the First Welfare Theorem. We thus show that the link between efficiency and decentralization through prices is valid in environments without transfers, and hence provide a foundation for pseudomarket- based market design by showing that the restriction to such mechanisms is without loss of generality. |
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Jeffrey Ely, Andrea Galeotti, Jakub Steiner, Rotation as contagion mitigation, In: Discussion Paper Series, No. DP14953, 2020. (Working Paper)
We study rotation schemes that govern individuals' activities within an organization during an epidemic. We optimize the frequency of rotation and degree of cross-mixing of the rotating subpopulations. Frequency affects risk over the length of diffusion within the infected subpopulation until the organization detects and/or reacts to the infection. If the reaction time is short, then such risk is undesirable since the growth of the prevalence is initially convex in time. Frequent rotation, which acts as insurance against exposure time risk, is then optimal. Infrequent rotation becomes optimal if the organization reacts slowly. Mixing of the rotating subpopulations is detrimental because it increases the share of interactions between sick and healthy individuals. However, the effect of mixing is small if the terminal prevalence is low in the absence of mixing. |
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Flurin Cathomas, Federica Klaus, Karoline Guetter, Hui-Kuan Chung, Anjali Raja, Tobias R Spiller, Rebecca Schlegel, Erich Seifritz, Matthias N Hartmann-Riemer, Philippe Tobler, Stefan Kaiser, Increased random exploration in schizophrenia is associated with inflammation, In: bioRxiv, No. 989483, 2020. (Working Paper)
One aspect of goal-directed behavior, which is known to be impaired in patients with schizophrenia (SZ), is balancing between exploiting a familiar choice with known reward value and exploring a lesser known but potentially more rewarding option. Despite its relevance to several symptom domains of SZ, this has received little attention in SZ research. In addition, while there is increasing evidence that SZ is associated with chronic low-grade inflammation, few studies have investigated how this relates to specific behaviors, such as balancing exploration and exploitation. We therefore assessed behaviors underlying the exploration-exploitation trade-off using a three-armed bandit task in 45 patients with SZ and 19 healthy controls (HC). This task allowed us to dissociate goal-unrelated (random) from goal-related (directed) exploration and correlate them with psychopathological symptoms. Moreover, we assessed a broad range of inflammatory proteins in the blood and related them to bandit task behavior. We found that, compared to HC, patients with SZ showed reduced task performance. This impairment was due to a shift from exploitation to random exploration, which was associated with symptoms of disorganization. Relative to HC, patients with SZ showed a pro-inflammatory blood profile. Furthermore, high sensitivity C-reactive protein (CRP) positively correlated with random exploration, but not with directed exploration or exploitation. In conclusion, we show that low-grade inflammation in patients with SZ is associated with random exploration, which can be considered a behavioral marker for disorganization. CRP may constitute a marker for severity of, and a potential treatment target for maladaptive exploratory behaviors. |
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David Carl, Christian Ewerhart, Ethereum gas price statistics, In: Working paper series / Department of Economics, No. 373, 2020. (Working Paper)
For users of the Ethereum network, the gas price is a crucial parameter that determines how swiftly the decentralized consensus protocol confirms a transaction. This paper studies the statistics of the Ethereum gas price. We start with some conceptual discussion of the gas price notion in view of the actual transaction-selection strategies used by Ethereum miners. Subsequently, we provide the descriptive statistics of what we call the threshold gas price. Finally, we identify and estimate a seasonal ARIMA (SARIMA) model for predicting the hourly median of the threshold gas price. |
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Florian Scheuer, Joel Slemrod, Taxing our wealth, In: Working Paper Series, No. 28150, 2020. (Working Paper)
This paper evaluates proposals for an annual wealth tax. While a dozen OECD countries levied wealth taxes in the recent past, now only three retain them, with only Switzerland raising a comparable fraction of revenue as recent proposals for a US wealth tax. Studies of these taxes sometimes, but not always, find a substantial behavioral response, including of saving, portfolio change, avoidance, and evasion, and the impact depends crucially on design features, especially the broadness of the base and enforcement provisions. Because the US proposals are very different from any previous wealth tax, experience in other countries offers only broad lessons, but we can gain insights from closely related taxes, such as the property and the estate tax, and from optimal tax analysis of the role of wealth taxation. |
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Florian Scheuer, Taxing the superrich: challenges of a fair tax system, In: UBS Center Public Paper Series, No. 9, 2020. (Working Paper)
Over the past decades, many developed countries have experienced considerable increases in income and wealth inequality, led by an extraordinary concentration among the very richest swath of households. This has focused policy attention on the superrich. Various political and economic arguments for at least partially offsetting this rise in inequality have been put forward. In particular, politicians have called for increasing the tax burden on rich households, both in the form of higher top rates for existing income taxes as well as new tax levies targeting the superrich. Most prominently, the idea of introducing an annual wealth tax has recently gained attention in the United States.
This Public Paper provides an overview of the tax situation the superrich currently face and evaluates various reform proposals. We emphasize that the incomes of the superrich are qualitatively different from others. Some are “superstars,” for whom small differences in talent are magnified into much larger earnings differences, while others work in winner-take-all markets, meaning that their effort to climb the ladder of success reduces the returns to others. Moreover, the discussion about tax rates must be accompanied by attention to the tax base, with a special focus on capital gains, which comprise a large fraction of the taxable income of the superrich. We also review the pros and cons of wealth taxes versus alternative policies that achieve similar objectives. While a dozen OECD countries levied wealth taxes in the recent past, only three retain them at present. Only Switzerland raises a similar fraction of revenue with its wealth tax as the recent U.S. proposals, therefore serving as a useful example. |
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Björn Bartling, Ernst Fehr, David Huffman, Nick Netzer, The complementarity between trust and contract enforcement, In: Working paper series / Department of Economics, No. 377, 2022. (Working Paper)
We show experimentally and theoretically that trust and contract enforcement can be complements, and identify the key mechanisms that drive this complementarity. In our experiments, the effect of improvements in contract enforcement is trust-dependent, and the effect of increases in trust is shaped by the strength of contract enforcement. We identify three key mechanisms underlying this complementarity: (1) heterogeneity in trustworthiness; (2) strength of contract enforcement affecting the ability to elicit reciprocal behavior from trustworthy types, and screen out untrustworthy types; (3) trust beliefs determining willingness to try such strategies. |
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