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2013 Working Papers

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Title/Author(s) Abstract Number

Globalized Market for Talents and Inequality: What Can Be Learnt from European Football?

Chrysovalantis Vasilakis

Complex interactions between high-skilled migration and aggregate performance govern the dynamics of growth and inequality across nations. Due to lack of data, these interdependencies have not been extensively studied in the economics literature. [read more] 1034

Rationality and Dynamic Consistency under Risk and Uncertainty

Peter J. Hammond and Horst Zank

For choice with deterministic consequences, the standard rationality hypothesis is ordinality — i.e., maximization of a weak preference ordering. For choice under risk (resp. uncertainty), preferences are assumed to be represented by the objectively (resp. subjectively) expected value of a von Neumann–Morgenstern utility function. [read more] 1033

The Value of Relationships: Evidence from a Supply Shock to Kenyan Rose Exports

Rocco Macchiavello and Ameet Morjaria

This paper provides evidence on the importance of reputation, intended as beliefs buyers hold about seller’s reliability, in the context of the Kenyan rose export sector. [read more] 1032

Too Good to Be True: Asset Pricing Implications of Pessimism

Pablo F. Beker and Emilio Espino

We evaluate whether the introduction of pessimistic homogeneous beliefs in the frictionless Lucas-Mehra-Prescott model and the Kehoe-Levine-Alvarez-Jermann model with endogenous borrowing constraints, helps explain the equity premium, the risk-free rate and the equity volatility puzzles as well as the short-term momentum and long-term reversal of excess returns. [read more] 1031

Do Research Joint Ventures Serve a Collusive Function?

Michelle Sovinsky and Eric Helland

Every year thousands of firms are engaged in research joint ventures (RJV), where all knowledge gained through R&D is shared among members. Most of the empirical literature assumes members are non-cooperative in the product market. But many RJV members are rivals leaving open the possibility that firms may form RJVs to facilitate collusion. [read more] 1030

Reviews, Prices and Endogenous Information Transmission

Luciana A Nicollier

Empirical evidence suggests that online reviews are an important source of consumers information and a relevant determinant of the rms revenues. Little is known, however, about how prices and reviews a ect each other. [read more] 1029

On the Origin of the Family

Marco Francesconi, Christian Ghiglino and Motty Perry

We present a game theoretic model to explain why people form life long monogamous families. Three components are essential in our framework, paternal investment, fatherhood uncertainty, and, perhaps the most distinctive feature of all, the overlap of children of different ages. [read more] 1028

Productivity and the Welfare of Nations

Susanto Basu, Luigi Pascali and Fabio Schiantarelli

We show that the welfare of a country’s infinitely-lived representative consumer is summarized, to a firrst order, by total factor productivity (TFP) and by the capital stock per capita. These variables suffice to calculate welfare changes within a country, as well as welfare di¤erences across countries. [read more] 1027

Banks and Development: Jewish Communities in the Italian Renaissance and Current Economic Performance

Luigi Pascali

Are differences in local banking development long-lasting? Do they affect long-term economic performance? I answer these questions by relying on an historical development that occurred in Italian cities during the 15th century. [read more] 1026

Financing Experimentation

Rocco Macchiavello

Entrepreneurs must experiment to learn how good they are at a new activity. What happens when the experimentation is financed by a lender? [read more] 1025

Implementing the "Wisdom of the Crowd"

Ilan Kremer, Yishay Mansour and Motty Perry

We study a novel mechanism design model in which agents each arrive sequentially and choose one action from a set of actions with unknown rewards. The information revealed by the principal affects the incentives of the agents to explore and generate new information. [read more]

This has been published: Journal of Political Economy


Parliamentary Questions and the Probability of Re-election in the UK House of Commons

Luc Tucker

Members of worldwide parliaments partake in debates, where they have the opportunity to hold governments to account by asking pre-submitted questions. The UK House of Commons uses a ballot system to determine which members are selected to ask a question from those who expressed an interest in doing so. [read more] 1023

Why Blame?

Mehmet Gurdal, Joshua B. Miller & Aldo Rustichini

We provide experimental evidence that subjects blame others based on events they are not responsible for. In our experiment an agent chooses between a lottery and a safe asset; payment from the chosen option goes to a principal who then decides how much to allocate between the agent and a third party. [read more] 1022

A Political Economy of the Separation of Electoral Origin

Peter Buisseret

Political constitutions frequently separate the roles of proposer and veto player in policy-making processes. A fundamental distinction lies in whether both offices are subject to direct and separate election, or whether the voter instead may directly elect the holder of only one office. [read more] 1021

Defying the LATE? Identification of local treatment effects when the instrument violates monotonicity

Clement de Chaisemartin

The instrumental variable method relies on strong "no-defiers" condition, which requires that the instrument affect every subject's treatment decision in the same direction. [read more] 1020

Discrimination or Social Networks? Industrial Investment in Colonial India

Bishnupriya Gupta

Industrial investment in Colonial India was segregated by the export oriented industries, such as tea and jute that relied on British firms and the import substituting cotton textile industry that was dominated by Indian firms. [read more] 1019

Rearmament to the Rescue? New Estimates of the Impact of ‘Keynesian’ Policies in 1930s’ Britain

Nicholas Crafts and Terence Mills

We report estimates of the fiscal multiplier for interwar Britain based on quarterly data, time-series econometrics, and ‘defense news’. We find that the government expenditure multiplier was in the range 0.3 to 0.8, much lower than previous estimates. [read more] 1018

Bidding Markets with Financial Constraints

Pablo Beker and Angel Hernando-Veciana

We develop a model of bidding markets with financial constraints a la Che and Gale (1998b) in which two firms optimally choose their budgets. First, we provide an alternative explanation for the dispersion of markups and “money left on the table” across procurement auctions. [read more]

This has been published: Journal of Economic Theory


How Beneficial Was the Great Moderation After All?

Roberto Pancrazi

In this paper I compute the welfare effect of the Great Moderation, using a consumption based asset pricing model. The Great Moderation is modelled according to the data properties of consumption and dividend growth, which display a reduction of their innovation-volatility and increased persistence. [read more]


Accounting for Secrets

Mark Harrison

The Soviet dictatorship used secrecy to shield its processes from external scrutiny. A system of accounting for classified documentation assured the protection of secrets. The associated procedures resemble a turnover tax applied to government transactions. [read more] 1015

Fiscal Rules and Discretion under Persistent Shocks

Marina Halac and Pierre Yared

This paper studies the optimal level of discretion in policymaking. We consider a fiscal policy model where the government has time-inconsistent preferences with a present-bias towards public spending. [read more] 1014

Technology Persistence and Monetary Policy

Roberto Pancrazi and Marija Vukotic

In this paper, by using several statistical tools, we provide evidence of increased persistence of the U.S. total factor productivity. In a forward-looking model, agents’ optimal behavior depends on the autocorrelation structure of the exogenous shocks. [read more] 1013

Asymmetric Parametric Division Rules

John Stovall

We describe and characterize the family of asymmetric parametric division rules for the adjudication of con icting claims on a divisible homogeneous good. read more] 1012

Constructing Social Division to Support Cooperation: Theory and Evidence from Nepal

James Choy

Many societies are divided into multiple smaller groups. The defining feature of these groups is that certain kinds of interaction are more likely to take place within a group than across groups. [read more] 1011

Optimal Resource Allocation in General Cournot-competitive Equilibrium

Inger Sommerfelt Ervik and Christian Soegaard

Conventional economic theory stipulates that output in Cournot competition is too low relative to that which is attained in perfect competition. We revisit this result in a General Cournot-competitive Equilibrium model with two industries that differ only in terms of productivity. [read more] 1010

Pay Growth, Fairness and Job Satisfaction: Implications for Nominal and Real Wage Rigidity

Jennifer C Smith

Theories of wage rigidity often rely on a positive relationship between pay changes and utility, arising from concern for fairness or gift exchange. Supportive evidence has emerged from laboratory experiments, but the link has not yet been established with field data. [read more] 1009

Extending the Original Position: Revisiting the Pattanaik Critique of Vickrey/Harsanyi Utilitarianism

Peter J. Hammond

Harsanyi’s original position treats personal identity, upon which each individual’s utility depends, as risky. Pattanaik’s critique is related to the problem of scaling “state-dependent” von Neumann–Morgenstern utility when determining subjective probabilities. [read more]

This has been published Published: Economic Theory


An Oligopolistic Theory of Regional Trade Agreements

Christian Soegaard

Why are trade agreements regional? I address this question in a model of oligopoly featuring product variety. Tariffs have the effect of manipulating a country's terms of trade and shifting profits towards the domestic market at the expense of foreign trade partners. [read more] 1007

Efficient Upgrading in Network Goods : Is Commitment Always Good?

Thanos Athanasopoulos

The frequency of upgrades in technology markets is not socially optimal when the quality improvement is negligible and smaller than the adoption cost of the new product. In monopolies, the literature has identified a sufficient factor for efficient upgrading: the firm’s power to commit to whether it will upgrade or not in the future. [read more] 1006

An example of Strategic Market Game with Infinitely Many Commodities

Simone Tonin

This short paper shows in an example of strategic market game that the Cournot- Nash equilibrium converges to the Walras equilibrium, even in the case of an exchange economy with infinitely many commodities. [read more] 1005

Cable Regulation in the Internet Era

Gregory S. Crawford

The market for multi-channel video programming has undergone considerable change in the last 15 years. Direct-Broadcast Satellite service, spurred by 1999 legislation that leveled the playing field with cable television systems, has grown from 3% to 33% of the U.S. MVPD (cable, satellite, and telco video) market. [read more] 1004

Not the Opium of the People : Income and Secularization in a Panel of Prussian Counties

Sascha O. Becker and Ludger Woessmann

The interplay between religion and the economy has occupied social scientists for long. We construct a unique panel of income and Protestant church attendance for six waves of up to 175 Prussian counties spanning 1886-1911. [read more] 1003

Do entrepreneurs matter?

Sascha O. Becker and Hans K.Hvide

In the large literature on firm performance, economists have given little attention to entrepreneurs. We use deaths of more than 500 entrepreneurs as a source of exogenous variation, and ask whether this variation can explain shifts in firm performance. [read more] 1002