Browse by year
To request a free hard copy of a paper, please contact Margaret Nash quoting the paper number.
1321 - Who does and doesn’t pay taxes?Arun Advani
We use administrative tax data from audits of self-assessment tax returns to understand what types individuals are most likely to be non-compliant. Non-compliance is common, with one-third of taxpayers underpaying by some amount, although half of aggregate under-reporting is done by just 2% of taxpayers. Third party reporting reduces non-compliance, while working in a cash-prevalent industry increases it. However, compliance also varies significantly with individual characteristics: non-compliance is higher for men and younger people. These results matter for measuring inequality, for understanding taxpayer behaviour, and for targeting audit resources.
1320 - Did railways affect literacy? Evidence from IndiaLatika Chaudhary & James Fenske
We study the effect of railroads, the single largest public investment in colonial India, on human capital. Using district-level data on literacy, we find railroads had positive effects on literacy, in particular on male and English literacy. We employ two identification strategies. First, we exploit synthetic panel variation contained in cohort-specific literacy rates due to differences in the timing of railroad exposure of different cohorts within the same district and census year. We find a one standard deviation increase in railroad exposure raises literacy by 0.29 standard deviations. Second, we use distance from an early railway plan as an instrument for district railway exposure in the cross section and find results of similar magnitude. We show that railroads increased literacy by raising secondary, rather than primary, schooling. Our mediation analysis suggests that non-agricultural income and opportunities for skilled employment are important mechanisms, while agricultural income is not.
1319 - The Columbian Exchange and conflict in AsiaMark Dincecco, James Fenske & Anil Menon
Difference in difference and event study analyses in a panel of Asian grid cells over nine centuries demonstrate that greater agricultural potential due to New World crops increased violent conflict after 1500. Rising caloric potential in a typical grid cell increased conflict by roughly its mean. The result holds across several New World crops and conflict types. It is largely driven by South Asia, a densely populated, diverse region with several competing historical states. The evidence supports a rapacity effect – increases in the gains from appropriation to Asian and non-Asian belligerents – as a mechanism. Population density, urbanization, and British imperialism significantly mediate the impact of the Columbian Exchange.
1318 - Interregional contact and national identityManuel Bagues & Christopher Roth
We study the long-run effects of contact with individuals from other regions on beliefs, preferences and national identity. We combine a natural experiment, the random assignment of male conscripts to different locations throughout Spain, with tailored survey data. Being randomly assigned to complete military service outside of one’s region of residence fosters contact with conscripts from other regions, and increases sympathy towards people from the region of service, measured several decades later. We also observe an increase in identification with Spain for individuals originating from regions with peripheral nationalism. Our evidence suggests that intergroup exposure in early adulthood can have long-lasting effects on individual preferences and national identity.
1317 - Tradition and mortality: Evidence from twin infanticide in AfricaJames Fenske & Shizhuo Wang
Mortality of twins relative to singletons is no greater today among African ethnicities that once practiced twin infanticide. We introduce data on historic twin infanticide and merge it with birth records from 23 African countries. We use the full sample, a border sample of adjacent societies with and without past twin infanticide, and a sample of twins. All three samples provide no evidence that past twin infanticide predicts greater differential twin mortality today. Twin infanticide and negative attitudes towards twins were suppressed by Africans, missionaries, and colonial governments. Where these channels were weak, we find evidence of greater twin mortality today.
1316 - Rewarding Allegiance: Political Alignment and Fiscal Outcomes in Local GovernmentChrista N. Brunnschweiler and Samuel Kwabena Obeng
We examine how local governments' political alignment with central government affects subnational fiscal outcomes. In theory, alignment could be rewarded with more intergovernmental transfers, or swing voters in unaligned constituencies could be targeted instead. We analyze data from Ghana, which has a complex decentralized system that seeks to preclude political alignment effects. District Chief Executives (DCEs) are centrally-appointed local administrators loyal to the ruling party, while district Members of Parliament (MPs) may belong to another party. A formula for central transfer distribution aims to limit the influence of party politics. Using a new dataset for 1994-2014 and a regression discontinuity design we find that despite this system, districts with aligned MP and DCE receive more transfers, have higher district expenditure, and more internally generated funds. Results are strongest for a subsample of constant districts over the period, suggesting that repeated municipal fragmentation has weakened political alignment effects. We also show strong electoral cycle effects, and find a crowd-in effect for Ghanaian districts.
1315 - Age-Based Policy in the Context of the Covid-19 Pandemic : How Common are Multi Generational Households?Thijs Van Rens & Andrew J. Oswald
Are general lockdowns an appropriate response to the threat of Covid-19? Recent cost-benefit studies do not favour the case for them. Instead, since the virus practises a form of age discrimination (approximately 90% of coronavirus deaths are older than 65), some analysts have suggested an alternative. It is that younger citizens -- the generation worst affected by lockdowns and the one that will predominantly pay the eventual tax bill for furlough -- should be allowed to return to work to sustain the economy. Lockdown advocates argue that this would be dangerous, because older people would get infected by young workers living in the same home. We explore that claim. We find that 96% of UK workers under age 40 do not live with anyone over 65. In fact, 92% of all UK workers live in a household without anyone over 65 years old – and that holds true for white and BAME workers. Releasing young workers would thus expose only a small fraction of older citizens to intra-household transmission, although we recognize that the absolute number of people infected might eventually become considerable, and some vulnerable citizens could potentially be at risk if they live in large households. In general this paper’s results illustrate the potential value of fine-tuning the lifting of restrictions. Our findings buttress the cost-benefit case for age-based policies.
1314 - Does Contact Tracing Work? Quasi-Experimental Evidence from an Excel Error in EnglandThiemo Fetzer & Thomas Graeber
Contact tracing has been a central pillar of the public health response to the COVID-19 pandemic. Yet, contact tracing measures face substantive challenges in practice and well-identified evidence about their effectiveness remains scarce. This paper exploits quasi-random variation in COVID-19 contact tracing. Between September 25 and October 2, 2020, a total of 15,841 COVID-19 cases in England (around 15 to 20% of all cases) were not immediately referred to the contact tracing system due to a data processing error. Case information was truncated from an Excel spreadsheet after the row limit had been reached, which was discovered on October 3. There is substantial variation in the degree to which different parts of England areas were exposed – by chance – to delayed referrals of COVID-19 cases to to the contact tracing system. We show that more affected areas subsequently experienced a drastic rise in new COVID-19 infections and deaths alongside an increase in the positivity rate and the number of test performed, as well as a decline in the performance of the contact tracing system. Conservative estimates suggest that the failure of timely contact tracing due to the data glitch is associated with more than 125,000 additional infections and over 1,500 additional COVID-19 related deaths. Our findings provide strong quasi-experimental evidence for the effectiveness of contact tracing.
1311 - Pay Transparency and Cracks in the Glass CeilingEmma Duchini, Stefania Simion & Arthur Turrell
This paper studies firms’ and employees’ responses to pay transparency requirements. Each year since 2018, more than 10,000 UK firms have been required to disclose publicly their gender pay gap and gender composition along the wage distribution. Theoretically, pay transparency is meant to act as an information shock that alters the bargaining power of male and female employees vis- a-vis the firm in opposite ways. Coupled with the potential negative effects of unequal pay on firms’ reputation, this shock could improve women’s relative occupational and pay outcomes. We test these theoretical predictions using a difference-in-differences strategy that exploits variations in the UK mandate across firm size and time. This analysis delivers four main findings. First, pay transparency increases women’s probability of working in above-median-wage occupations by 5 percent compared to the pre-policy mean. Second, while this effect has not yet translated into a significant rise in women’s pay, the policy leads to a 2.8 percent decrease in men’s real hourly pay, reducing the pre-policy gender pay gap by 15 percent. Third, combining the difference-in-differences strategy with a text analysis of job listings, we find suggestive evidence that treated firms adopt female-friendly hiring practices in ads for high-gender-pay-gap occupations. Fourth, a reputation motive seems to drive employers’ reactions, as firms publishing worse gender equality indicators score lower in YouGov Women’s Rankings. Moreover, publicly listed firms experience a 35-basis-point average fall in cumulative abnormal returns in the days following their publication of gender equality data.
1310 - Subsidizing the spread of COVID19 : Evidence from the UK’s Eat-Out to-Help-Out schemeThiemo Fetzer
This paper documents that a large-scale government subsidy aimed at encouraging people to eat out in restaurants in the wake of the first 2020 COVID19 wave in the United Kingdom has had a large causal impact in accelerating the subsequent second COVID19 wave. The scheme subsidized 50% off the cost of food and non-alcoholic drinks for an unlimited number of visits in participating restaurants on Mondays-Wednesdays from August 3 to August 31, 2020. Areas with higher take-up saw both, a notable increase in new COVID19 infection clusters within a week of the scheme starting, and again, a deceleration in infections within two weeks of the program ending. Areas that exhibit notable rainfall during the prime lunch and dinner hours on days the scheme was active record lower infection incidence – a pattern that is also measurable in mobility data – and non-detectable on days during which the discount was not available or for rainfall outside the core lunch and dinner hours. A back of the envelope calculation suggests that the program is accountable for between 8 to 17 percent of all new local infection clusters during that time period.
1309 - Decoding India’s low Covid-19 case fatality rateMinu Philip , Debraj Ray & S. Subramanian
India’s case fatality rate (CFR) under covid-19 is strikingly low, with a current level of around 1.7%. The world average rate is far higher. Several observers have noted that this difference is at least partly due to India’s younger age distribution. We use age-specific fatality rates from 17 comparison countries, coupled with India’s distribution of covid-19 cases, to “predict" India’s CFR. In most cases, those predictions yield even lower numbers, suggesting that India’s CFR is, if anything, too high rather than too low. We supplement the analysis with a decomposition exercise, and we additionally account for time lags between case incidence and death for a more relevant perspective under a growing pandemic. Our exercise underscores the importance of careful measurement and interpretation of the data, and emphasizes the dangers of a misplaced complacency that could arise from an exclusive concern with aggregate statistics such as the CFR.
1308 - Roberts' Weak Welfarism Theorem: A Minor CorrectionPeter J Hammond
Roberts' "weak neutrality" or "weak welfarism" theorem concerns Sen social welfare functionals which are de ned on an unrestricted domain of utility function pro les and satisfy independence of irrelevant alternatives, the Pareto condition, and a form of weak continuity. Roberts (1980) claimed that the induced welfare ordering on social states has a one-way representation by a continuous, monotonic real-valued welfare function defined on the Euclidean space of interpersonal utility vectors | that is, an increase in this welfare function is sufficient, but may not be necessary, for social strict preference. A counter-example shows that weak continuity is insufficient; a minor strengthening to pairwise continuity is proposed instead and its sufficiency demonstrated.
1307 - The Effect of Self-Awareness on DishonestyCeren Bengu Cibik & Daniel Sgroi
We investigate the relationship between self-awareness and dishonesty in a preregistered experiment with 1,260 subjects. In a first experiment, we vary the level of awareness of subjects' own past dishonesty and explore the impact on behaviour in tasks that include the scope to lie. We find that in single-person non-interactive tasks, self-awareness of dishonesty helps to lower dishonesty in the future. However, in tasks that are competitive in nature becoming more aware of past dishonesty raises the likelihood of dishonesty. We argue that this behaviour is consistent with cognitive dissonance. In a second experiment we vary the degree of competitiveness in one of our core tasks to further explore the interactions between self-awareness, (dis)honesty and competition. Our results show when and why pointing out those who have been (dis)honest in the past can be an effective way to induce honesty in the future and when it might back- re badly, and perhaps also shed some light on perceived increases in dishonesty in politics, the media and everyday life
1306 - Network Comparative StaticsAndrew Harkins
This paper develops a framework for analyzing the effect of arbitrary changes to network structure in linear-quadratic games on networks. Changes to network structure which increase total activity and total utility are studied for the case of strategic complements and strategic substitutes. Changes which are welfare increasing are found to depend on a new measure of centrality which counts the total length of walks from a node. Two optimal network design problems are then considered. Total activity is found to be a convex function of the edge weights of the network, which allows for convex optimization techniques to be applied to minimize total activity as in the traditional ‘key player’ problem. Welfare maximizing network structures are also studied and previous results which associate optimal networks with nested split graphs are generalized.
1305 - Importing inequality:Immigration and the Top 1 percentArun Advani, Felix Koenig, Lorenzo Pessina & Andy Summers
In this paper we study the contribution of migrants to the rise in UK top incomes. Using administrative data on the universe of UK taxpayers we show migrants are over-represented at the top of the income distribution, with migrants twice as prevalent in the top 0.1% as anywhere in the bottom 97%. These high incomes are predominantly from labour, rather than capital, and migrants are concentrated in only a handful of industries, predominantly finance. Almost all (85%) of the growth in the UK top 1% income share over the past 20 years can be attributed to migration.
1304 - Sieve BLP: A Semi-Nonparametric Model of Demand for Differentiated ProductsAo Wang
We develop a semi-nonparametric approach to identify and estimate the demand for differentiated products. The proposed method adopts a random coefficients discrete choice logit model (i.e., mixed logit model) in which the distribution of random coefficients is nonparametrically specified. Our method minimizes misspecification error in this distribution to which routinely used parametric approach is subject. In addition, it overcomes the practical challenge of dimensionality in the number of products that remains the main hurdle in the nonparametric estimation of demand functions. We propose a sieve estimation procedure (referred to as sieve BLP) that remains simple to implement. Extensive Monte Carlo simulations show its robust finite-sample performance under various data generating processes. We use our method to investigate the welfare implications of a sugar tax in the ready-to-eat cereal industry in the US. This illustrative application underscores the advantages of sieve BLP in predicting the distributional effects of a policy change such as introducing a sugar tax.
1303 - Do Europeans Care about Climate Change? An Illustration of the Importance of Data on Human FeelingsAdam Nowakowski & Andrew J Oswald
Economists have proposed a variety of sophisticated climate-change interventions. But do our citizens care enough about climate change to enact such policies? This paper provides evidence that suggests they do not. Two kinds of findings are presented. Using data on 40,000 Europeans from the 2016 European Social Survey, the paper shows that only 5% of people say they are extremely worried about climate change. The cooler European countries express particularly low levels of worry. Using data on 30,000 citizens from the 2019 Eurobarometer Surveys, the paper demonstrates that climate change is viewed as a less important problem than parochial issues such as (i) health and social security, (ii) inflation, (iii) unemployment, and (iv) the economic situation. Other results, from regression equations, are provided. This paper’s conclusions seem to have exceptionally serious implications for our unborn great grandchildren -- and imply that economic policy should now focus on how to alter feelings rather than upon the design of complicated theoretical interventions. An analogy with successful anti-tobacco policy is discussed.
1302 - The Price and Allocation Effects of Targeted Mandates: Evidence from Lead HazardsLudovica Gazze
Several states require owners to mitigate lead hazards in old houses with children present. I estimate the mandates’ effects on housing markets. My empirical strategy exploits differences by state, year, and housing vintage. The mandates decrease the prices of old houses by 7.1 percent, acting as a large tax on owners. Moreover, families with children become 11.3 percent less likely to live in old houses. Increases in rents for family-friendly houses suggest that the mandates have important distributional consequences. These findings are relevant for evaluating similar mandates such as healthy homes standards.
1301 - Hassles and Environmental Health Screenings: Evidence from Lead Tests in IllinoisLudovica Gazze
I study the determinants of childhood lead screening using all Illinois birth records (2001-2014), matched to lead testing records and geocoded housing age data. Housing age measures lead risk, as older houses disproportionally have lead paint. Changes in providers’ availability, inferred from testing data, provide variation in non-monetary costs of testing. Travel costs reduce screening among low- and high-risk households alike. Thus, self-selection based on travel costs does not appear to improve targeting, even though high-risk households are willing to pay $29-389 more than low-risk households for screening. Screening incentives would be cost-effective for reasonable values of lead poisoning externalities.
1300 - Rules of Origin and Market PowerWanyu Chung & Carlo Perroni
We study how domestic content requirements in Free Trade Areas (FTAs) affect market power and market structure in concentrated intermediate goods markets. We show that content requirements increase oligopolistic markups beyond the level that would obtain under an equivalent import tariff, and we document patterns in Canadian export data and US producer price data that align with the model’s predictions: producers of intermediate goods charge comparatively higher prices when the associated final goods producers are more constrained by FTA origin requirements and by Most Favoured Nation (MFN) tariffs for both intermediate and final non-FTA goods.
1299 - Narratives and the Economics of the FamilyRobert Akerlof & Luis Rayo
We augment Becker’s classic model of the family by assuming that, in addition to caring about consumption, the family wishes to further a subjective story, or narrative, that captures its deeply held values. Our focus is on two stories that in many ways are polar opposites. The first one—the protector narrative—gives rise to a type of traditional family where gender roles are distinct, men and women are pushed towards “separate spheres,” and men are expected to be tough and authoritarian. The second one—the fulfillment narrative—gives rise to a type of modern family where roles are less distinct, family members have greater latitude in their decisions, and marriages are based to a greater extent on romantic love. We derive a rich bundle of behaviors associated with each story, and using survey data, we show that our findings are consistent with a variety of empirical patterns.
1298 - The Race between Population and Technology: Real Wages in the First Industrial RevolutionNicholas Crafts & Terence C. Mills
We investigate a structural model of demographic-economic interactions for England during 1570 to 1850. We estimate that the annual rate of population growth consistent with constant real wages was 0.4 per cent before 1760 but 1.5 per cent thereafter. We find that exogenous shocks increased population growth dramatically in the early decades of the Industrial Revolution. Simulations of our model show that if these demographic shocks had occurred before the Industrial Revolution the impact on real wages would have been catastrophic and that these shocks were largely responsible for very slow growth of real wages during the Industrial Revolution.
1297 - The Human Side of Structural TransformationTommaso Porzio , Federico Rossi & Gabriella Santangelo
We show that the global human capital increase during the 20th century contributed to structural transformation. We document that almost half of the decline in aggregate agricultural employment was driven by new birth cohorts entering the labor market. We use data on educational attainment and compile a comprehensive list of policy reforms to interpret the diﬀerences in agricultural employment across cohorts. We find that the increase in schooling led to a sharp reduction in the agricultural labor supply by equipping younger cohorts with skills more valued out of agriculture. Interpreted through a model of frictional labor reallocation, these facts imply that human capital growth accounts for about 20% of the global decline in agricultural employment.
1296 - Cooperation in a State of AnarchyAbhinay Muthoo
We lay down a simple (game-theoretic) model of a state-of-anarchy involving three players. We focus attention on the following question: Which subset of players (if any) will agree to cooperate amongst each other? Will all three players agree to do so, or only two of the three players (and if so, which two players)? Or will no player agree to cooperate with any other player? We show that the socially optimal outcome is for all three players to agree to cooperate with each other. We also show that due to the presence of positive externalities, in equilibrium, cooperation may only be established between two of the three players (which is sub-optimal).
1295 - British Relative Economic Decline in the Aftermath of German UnificationNicholas Crafts
From 1871 to 1913, German economic growth was faster than that of the UK. This represented a successful catch-up of the leading European economy but there was still a significant productivity gap at the end of the period. Slower UK growth should be seen as largely unavoidable but there was a serious weakness in the national innovation system. On the whole, the greater openness of the British economy was advantageous and a move to protectionist policies would have been damaging. The expansion of German industrial production and exports only had a small negative impact on UK national income.
1294 - Who Watches the Watchmen? Local News and Police Behavior in the United StatesNicola Mastrorocco & Arianna Ornaghi
Does media content inﬂuence local institutions? We study this question by looking at how a negative shock to local crime-related news, induced by the acquisition of local TV stations by the Sinclair Broadcast Group, affects U.S. municipal police departments. In particular, we implement a triple differences-in-differences design that exploits the staggered timing of acquisitions 2010-2017, together with cross-sectional variation in whether municipalities are covered by local news at baseline, a proxy for exposure to the shock. First, using a newly collected dataset of 300,000 transcripts of local newscasts, we document that once acquired by Sinclair, TV stations decrease news coverage of local crime. Second, we ﬁnd that after Sinclair enters a media market, municipalities that were likely to be in the news at baseline experience 8% lower violent crime clearance rates with respect to municipalities that were very rarely in the news in the ﬁrst place. The main mechanism we propose is that the change in content induces police ofﬁcers to decrease the effort allocated to clearing violent crimes, due to a decline in the salience of crime as an issue in the public opinion.
1293 - Layoffs and productivity at a Bangladeshi sweater factoryRobert Akerlof, Anik Ashraf, Rocco Macchiavello and Atonu Rabbani
Conﬂicts between management and workers are common and can have signiﬁcant impacts on productivity. We study how workers in a large Bangladeshi sweater factory responded to management’s decision to lay oﬀ about a quarter of the workers following a period of labor unrest. Our main ﬁnding is that the mass layoﬀ resulted in a large and persistent reduction in the productivity of surviving workers. Moreover, it is speciﬁcally the ﬁring of peers with whom workers had social connections – friends – that matters. We also provide suggestive evidence of deliberate shading of performance by workers in order to punish the factory’s management, and a corresponding deliberate attempt by the factory to win the angry workers back by selectively giving them tasks that are more rewarding. By combining ethnographic and survey data on the socialization process with the factory’s internal records, the paper provides a rare glimpse into the aftermath of an episode of labor unrest. A portrait of the ﬁrm emerges as a web of interconnected relational agreements supported by social connections.
1292 - Surplus Bounds in Cournot Monopoly and CompetitionDaniele Condorelli and Balazs Szentes
We characterize equilibria of oligopolistic markets where identical firms with constant marginal cost compete a’ la Cournot. For given maximal willingness to pay and maximal total demand, we first identify all combinations of equilibrium consumer and producer surplus that can arise from arbitrary demand functions. Then, as a further restriction, we fix the average willingness to pay above marginal cost (i.e., first best surplus) and identify all possible triples of consumer surplus, producer surplus and deadweight loss.
1291 - Priests and Postmen: Historical Origins of National IdentityClaudia Rei
The rise of the modern state in Western Europe, saw the emergence of national identities in the nineteenth century. This paper evaluates the association between historical religious and state capacity in Portugal proxied by priests and postmen in 1875, and current measures of national identity proxied by voter turnout in democratic elections from 1975 to 2017. I ﬁnd that places with a stronger historical presence of postmen vote more in any election, but they vote less in local elections relative to national elections. This result suggests a persistent association of historical state presence with national identity. Historical religious presence is also positively associated with voter turnout but in smaller magnitude. There is however no negative association with local elections: in contrast with historical state capacity, historical religious capacity is connected with the local rather than the national unit.
1290 - Identification of preferences, demand and equilibrium with finite dataF. Kubler R. Malhotra & H. Polemarchakis
We give conditions under which an individual's preferences can be identified with finite data. First, we derive conditions that guarantee that a finite number of observations of an individual's binary choices identify preferences over an arbitrarily large subset of the choice space and allow one to predict how the individual shall decide when faced with choices not previously encountered. Second, we extend the argument to observations of individual demand. Finally, we show that finitely many observations of Walrasian equilibrium prices and profiles of individual endowments suffice to identify individual preferences and, as a consequence, equilibrium comparative statics.
1289 - Liberal parentalismA. Heifetz, E. Minelli & H. Polemarchakis
What normative constraints should bind parents (or policy makers) if they intervene in the choices of children (or constituencies) whose preferences evolve over time? For a sophisticated child who anticipates correctly his preference change, we prove that generically there exist parental interventions that are Pareto improving over the backward induction path that the child will follow on his own. If, in contrast, the child misperceives his future preferences, Pareto improving interventions might not exist, and even nudges might be painfully sobering. The parent may then choose to minimize the maximal disappointment along time that her benevolent intervention would cause.
1288 - Pay cycles and fuel price: a quasi experimental approachAngela S. Bergantino, Mario Intini & Jordi Perdiguero
This paper studies the daily price fixing behaviour of the Spanish fuel stations. Using a difference-in-differences approach, we show that low-cost and independent operators take advantage of needier consumers. Their prices increase on the day the unemployed workers receive their subsidy from the government, whereas, on the same day, branded companies decrease their prices. Retailers, aware of this, raise the price when they know demand increases. This phenomenon emphasises the effect of pay cycles on consumer choices and their related economic impact. Findings are also relevant for Antitrust authorities which generally focus on the activities of major brands’ stations.
1287 - Spatial competition and efficiency: an investigation in the airport sectorAngela Stefania Bergantino, Mario Intini & Nicola Volta
This paper analyses the potential impact of airport competition on technical efficiency by applying the spatial stochastic frontier approach (SSFA) rather than traditional model (SFA). The SSFA allows to isolate the cross-sectional spatial dependence and to evaluate the role of intangible factors in influencing the airport economic performance, through the inclusion of the distance matrix and the shared destinations matrix, calibrated for different distances. By analysing statistical differences between the traditional and the spatial model, it is possible to identify the competition effects. This study includes 206 airports at worldwide level. First, the results show the existence of the spatial component, that could not be otherwise captured by the traditional SFA. Moreover, airport competition is found to affect the efficiency level with either a positive or a negative effect, depending on the distance considered in the spatial model.
1286 - Demographic shocks and women’s labor market participation: evidence from the 1918 influenza pandemic in indiaJames Fenske, Bishnupriya Gupta & Song Yuan
How did the 1918 influenza pandemic affect female labor force participation in India over the short run and the medium run? We use an event-study approach at the district level and four waves of decadal census data in order to answer this question. We find that districts most adversely affeffected by influenza mortality saw a temporary increase in female labor force participation in 1921, an increase that was concentrated in the service sector. By 1931, this increase had been reversed. We find suggestive evidence that distress labor supply by widows and rising wages help account for these results.
1285 - Do People Value More Informative News?Felix Chopra, Ingar Haaland & Christopher Roth
Drawing on representative samples of the U.S. population with more than 15,000 respondents in total, we measure and experimentally vary people’s beliefs about the informativeness of news. Inconsistent with the desire for more information being the dominant motive for people’s news consumption, treated respondents who think that a newspaper is less likely to suppress information reduce their demand for news from this newspaper. Furthermore, treated respondents who think that a news outlet is more likely to make false claims do not reduce their demand for this outlet. These findings strongly suggest that people have other motives to read news that sometimes conflict with their desire for more information. We discuss the implications of our findings for the regulation of media markets.
1284 - The Eﬀects of Social Capital on Government Performance and Turnover: Theory and Evidence from Italian MunicipalitiesBen Lockwood, Francesco Porcelli, Michela Redoano, Emanuele Bracco, Federica Liberini & Daniel Sgroi
This paper makes three contributions. First, it presents a theoretical analysis of how social capital, formalized as trust in politicians, impacts on government performance and turnover, employing a political agency model with both moral hazard and adverse selection. Second, it presents novel measures of both local government performance and on social capital at the Italian municipality level, using administrative data and an online survey respectively. Third, empirical results are consistent with the main predictions of the theory; higher social capital improves both the discipline and selection effects of elections (performance both in the first and final terms in office), but also increases turnover of incumbent mayors.
1283 - Cultural Identity and Social Capital in ItalyDaniel Sgroi, Michela Redoano, Federica Liberini, Ben Lockwood, Emanuele Bracco and Francesco Porcelli
Italy became one nation only relatively recently and as such there remains signiﬁcant regional variation in trust in government and society (so-called “social capital”) as well as in language and diet. In an experiment conducted across three Italian cities we exploit variation in family background generated through internal migration and make use of novel measures of social capital, language and diet to develop a new index of cultural heritage. Our new index predicts social capital, while self-reported identity does not. The missing link between the past and current identity seems to come through grandparents (especially maternal grandmothers) who have a strong role in developing the cultural identity of their grandchildren.
1282 - Incentives, Globalization, and RedistributionAndreas Haufler & Carlo Perroni
We offer a new explanation for why taxes have become less progressive in many countries in parallel with an increase in income inequality. When performance based compensation differentials are needed to incentivize effort, redistribution through progressive income taxes becomes less precisely targeted. Taxation reduces after-tax income inequality but undermines incentive contracts, lowering effort and raising pre-tax income differentials. Market integration can widen the spread of project returns and make contract choices more responsive to changes in the level of taxation, resulting in a lower optimum income tax rate even when individuals are not inter-jurisdictionally mobile.
1281 - Strategic Interdependence in Political Movements and Counter movementsAnselm Hager, Lukas Hensel, Johannes Hermle & Christopher Roth
Collective action is the result of the efforts of groups consisting of many individuals. This gives rise to strategic interactions: the decision of an individual to participate in collective action may depend on the efforts of both like-minded and opposing activists. This paper causally studies such strategic interactions in the context of left- and right-wing protests in Germany. In an experiment, we investigated whether randomly varied information on turnout of both like-minded and opposing movements impacts activists’ willingness to protest. In response to information about high turnout of their own group, left-wing activists increased their willingness to protest, consistent with theories of conditional cooperation. In contrast, right-wing activists decreased their willingness to protest, consistent with instrumental accounts and free-riding motives. For both groups, there was no significant reaction to information about turnout of the opposing movement. The results highlight substantial heterogeneity in strategic interactions and motives across the political spectrum.
1280 - Measuring the Regional Economic Cost of Brexit: Evidence up to 2019Thiemo Fetzer & Shizhuo Wang
The United Kingdom (UK) reported record employment levels following its vote to Leave the European Union (EU), leading to many pundits discarding the dire pre-Brexit vote impact assessments as part of “project fear.” This paper studies the cost of the Brexit-vote to date across UK regions finding significant evidence suggesting that the economic costs of the Brexit-vote are both sizeable and far from evenly distributed. Among 382 districts, at least 168 districts appear to be Brexit-vote losers, having lost, on average 8.54 percentage points of output in 2018 compared to their respective synthetic controls. The Brexit-vote costs are increasing in a districts: a) support for Leave in 2016; b) the size of its manufacturing sector; c) the share of low skilled. The Brexit vote induced economic divergence across regions is already exacerbating the regional economic inequalities that the 2016 EU referendum vote made apparent. Indirect evidence further suggests that firms may, amidst the significant (trade) policy uncertainty, have shifted away from capital to labor in the short term given that Brexit has, to date, not led to changes in market access. The resulting short-term employment- and payroll growth post-2016 is not supported by productivity increases in most parts of the UK. This sets up the possibility for significant labor market adjustments once Brexit becomes a defacto reality. Further, there is some evidence suggesting that COVID19 may exacerbate the regional economic impact of the Brexit-vote to date.
1279 - A Semiparametric Network Formation Model with Unobserved Linear HeterogeneityLuis E. Candelaria
This paper analyzes a semiparametric model of network formation in the presence of unobserved agent-speciﬁc heterogeneity. The objective is to identify and estimate the preference parameters associated with homophily on observed attributes when the distributions of the unobserved factors are not parametrically speciﬁed. This paper oﬀers two main contributions to the literature on network formation. First, it establishes a new point identiﬁcation result for the vector of parameters that relies on the existence of a special regressor. The identiﬁcation proof is constructive and characterizes a closed-form for the parameter of interest. Second, it introduces a simple two-step semiparametric estimator for the vector of parameters with a ﬁrst-step kernel estimator. The estimator is computationally tractable and can be applied to both dense and sparse networks. Moreover, I show that the estimator is consistent and has a limiting normal distribution as the number of individuals in the network increases. Monte Carlo experiments demonstrate that the estimator performs well in ﬁnite samples and in networks with diﬀerent levels of sparsity.
1278 - Does Party Competition Affect Political Activism?Anselm Hager, Lukas Hensel, Johannes Hermle & Christopher Roth
Does party competition aﬀect political activism? This paper studies the decision of party supporters to join political campaigns. We present a framework that incorporates supporters’ instrumental and expressive motives and illustrates that party competition can either increase or decrease party activism. To distinguish between these competing predictions, we implemented a ﬁeld experiment with a European party during a national election. In a seemingly unrelated party survey, we randomly assigned 1,417 party supporters to true information that the canvassing activity of the main competitor party was exceptionally high. Using unobtrusive, real-time data on party supporters’ canvassing behavior, we ﬁnd that treated respondents are 30 percent less likely to go canvassing. To investigate the causal mechanism, we leverage additional survey evidence collected two months after the campaign. Consistent with aﬀective accounts of political activism, we show that increased competition lowered party supporters’ political self-eﬃcacy, which plausibly led them to remain inactive.
1277 - Informality, Consumption Taxes and RedistributionPierre Bachas, Lucie Gadenne & Anders Jensen
Can consumption taxes reduce inequality in developing countries? We combine household expenditure data from 31 countries with theory to shed new light on the redistributive potential and optimal design of consumption taxes. We use the type of store in which purchases occur to proxy for informal (untaxed) consumption. This enables us to characterize the informality Engel curve: we ﬁnd that the budget share spent in the informal sector steeply declines with income, in all countries. The informal sector thus makes consumption taxes progressive: households in the richest quintile face an effective tax rate that is twice that of the poorest quintile. We extend the standard optimal commodity tax model to allow for informal consumption and calibrate it to the data to study the effects of different tax policies on inequality. Contrary to consensus, we show that consumption taxes are redistributive, lowering inequality by as much as personal income taxes. Once informality is taken into account, commonly used redistributive policies, such as reduced tax rates on necessities, have a limited impact on inequality. In particular, subsidizing food cannot be justiﬁed on equity or efﬁciency grounds in several poor countries.
1276 - Synchronized Elections, Voter Behavior and Governance Outcomes : Evidence from IndiaVimal Balasubramaniam, Apurav Yash Bhatiya & Sabyasachi Das
We examine whether holding national and state elections simultaneously or sequentially affects voter decisions and consequently, electoral and economic outcomes in India. Synchronized elections increase the likelihood of the same political party winning constituencies in both tiers by 21%. It reduces split-ticket voting, increases the salience of party among voters and shifts voters’ priority to state issues, without signiﬁcantly affecting turnout and winning margin. A model of behaviorally constrained voters with costly information acquisition best explains our results. Finally, synchronization results in insigniﬁcant economic gains. Our ﬁndings have implications for the design of elections to multiple tiers of government.
1275 - Designing Information Provision ExperimentsIngar Haaland, Christopher Roth & Johannes Wohlfart
We review methodological questions relevant for the design of information provision experiments. We first provide a literature review of major areas in which information provision experiments are applied. We then outline key measurement challenges and design recommendations that may be of help for practitioners planning to conduct an information experiment. We discuss the measurement of subjective beliefs, including the role of incentives and ways to reduce measurement error. We also discuss the design of the information intervention, as well as the measurement of belief updating. Moreover, we describe ways to mitigate potential experimenter demand effects and numerical anchoring arising from the information treatment. Finally, we discuss typical effect sizes in information experiments.
1274 - Misinformation during a PandemicLeonardo Bursztyn, Akaash Rao, Christopher Roth & David Yanagizawa-Drott
We study the effects of COVID-19 coverage early in the pandemic by the two most popular cable news shows in the US, both on Fox News, on health outcomes. We document large differences in content between the shows and in cautious behavior among viewers. Through both a selection-on-observables strategy and a novel instrumental variable approach, we find that areas with greater exposure to the show downplaying the threat of COVID-19 experienced a greater number of cases and deaths. We assess magnitudes through an epidemiological model highlighting the role of externalities and provide evidence that misinformation is a key underlying mechanism
1273 - Religion in Economic History: A SurveySascha O. Becker, Jared Rubin & Ludger Woessmann
This chapter surveys the recent social science literature on religion in economic history, covering both socioeconomic causes and consequences of religion. Following the rapidly growing literature, it focuses on the three main monotheisms—Judaism, Christianity, and Islam—and on the period up to WWII. Works on Judaism address Jewish occupational specialization, human capital, emancipation, and the causes and consequences of Jewish persecution. One set of papers on Christianity studies the role of the Catholic Church in European economic history since the medieval period. Taking advantage of newly digitized data and advanced econometric techniques, the voluminous literature on the Protestant Reformation studies its socioeconomic causes as well as its consequences for human capital, secularization, political change, technology diffusion, and social outcomes. Works on missionaries show that early access to Christian missions still has political, educational, and economic consequences in present-day Africa, Asia, and Latin America. Much of the economics of Islam focuses on the role that Islam and Islamic institutions played in political-economy outcomes and in the “long divergence” between the Middle East and Western Europe. Finally, cross-country analyses seek to understand the broader determinants of religious practice and its various effects across the world. We highlight three general insights that emerge from this literature. First, the monotheistic character of the Abrahamic religions facilitated a close historical interconnection of religion with political power and conflict. Second, human capital often played a leading role in the interconnection between religion and economic history. Third, many socioeconomic factors matter in the historical development of religions.
1272 - Pre-Colonial Warfare and Long-Run Development in IndiaMark Dincecco, James Fenske, Anil Menon & Shivaji Mukherjee
We analyze the relationship between pre-colonial warfare and long-run development patterns in India. We construct a new geocoded database of historical interstate conflicts on the Indian subcontinent, from which we compute measures of local exposure to pre-colonial warfare. We document a positive and significant relationship between pre-colonial conflict exposure and local economic development across India today. This result is robust to numerous checks, including controls for geographic endowments, initial state capacity, colonial-era institutions, ethnic and religious fractionalization, and colonial and post-colonial conflict, and an instrumental variables strategy that exploits variation in pre-colonial conflict exposure driven by cost distance to the Khyber Pass. Drawing on rich archival and secondary data, we show that districts that were more exposed to pre-colonial conflict experienced greater local pre-colonial and colonial-era state-making, and less political violence and higher infrastructure investments in the long term. We argue that reductions in local levels of violence and greater investments in physical capital were at least in part a function of more powerful local government institutions.
1271 - The Vanishing Procyclicality of Labour ProductivityJordi GalÌ & Thijs van Rens
We document two changes in postwar US macroeconomic dynamics: the procyclicality of labour productivity vanished, and the relative volatility of employment rose. We propose an explanation for these changes that is based on reduced hiring frictions due to improvements in information about the quality of job matches and the resulting decline in turnover. We develop a simple model with hiring frictions and variable effort to illustrate the mechanisms underlying our explanation. We show that our model qualitatively and quantitatively matches the observed changes in business cycle dynamics.
1270 - India’s Lockdown: An Interim ReportDebraj Ray and S. Subramanian
Our goal is to provide an interim report on the Indian lock down provoked by the covid19 pandemic. While our main themes — ranging from the philosophy of lock down to the provision of relief measures — transcend the Indian case, our context is deeply India-speciﬁc in several senses that we hope will become clear through the article. A fundamental theme that recurs throughout our writing is the enormous visibility of covid19 deaths worldwide,now that sensitivities and anxieties regarding the pandemic have been honed to an extreme sharpness. Governments everywhere are propelled to respect this visibility, developing countries perhaps even more so than their developed counterparts. In advanced economies, the cost of achieving this reduction in visible deaths is“merely”a dramatic reduction in overall economic activity,coupled with a far reaching relief package to partly compensate those who bear such losses. But for India, adevelopingcountrywithgreatsectoralandoccupationalvulnerabilities,this dramatic reduction is more than economics: it means lives lost. These lost lives,through violence, starvation, indebtedness and extreme stress, both psychological and physiological, are invisible, in the sense that they are—and will continue to be—diﬀuse in space, time, cause and category. They will blend into the surrounding landscape; they are not news, though the intrepid statistician or economist will pick them up as the months go by. It is this conjunction of visibility and invisibility that drives the Indian response. The lock down meets all international standards so far; the relief package none.
1269 - Evaluating the Sunk Cost EﬀectDavid Ronayne, Daniel Sgroi and Anthony Tuckwell
We provide experimental evidence of behavior consistent with the sunk cost eﬀect. Subjects who earned a lottery via a real-eﬀort task were given an opportunity to switch to a dominant lottery; yet 23% chose to stick with their dominated lottery. The endowment eﬀect accounts for roughly only one third of the eﬀect. Subjects’ capacity for cognitive reﬂection is a signiﬁcant determinant of sunk cost behavior. We also ﬁnd stocks of knowledge or experience (crystallized intelligence) predict sunk cost behavior, rather than algorithmic thinking (ﬂuid intelligence) or the personality trait of openness. We construct and validate a scale, the “SCE-8”, which encompasses many resources individuals can spend, and oﬀers researchers an efﬁcient way to measure susceptibility to the sunk cost eﬀect.
1268 - Slow Real Wage Growth during the Industrial Revolution: Productivity Paradox or Pro-Rich Growth?Nicholas Crafts
I examine the implications of technological change for productivity, real wages and factor shares during the industrial revolution using recently available data. This shows that real GDP per worker grew faster than real consumption earnings but labour’s share of national income changed little as real product wages grew at a similar rate to labour productivity in the medium term. The period saw modest TFP growth which limited the growth both of real wages and of labour productivity. Economists looking for an historical example of rapid labour-saving technological progress having a seriously adverse impact on labour’s share must look elsewhere.
1267 - Job Search during the COVID-19 CrisisLena Hensvik, Thomas Le Barbanchon & Roland Rathelot
This paper measures the job-search responses to the COVID-19 pandemic using realtime data on vacancy postings and ad views on Sweden’s largest online job board. First, the labour demand shock in Sweden is as large as in the US, and affects industries and occupations heterogeneously. Second, the scope and direction of search change. Job seekers respond to the shock by searching less intensively and by redirecting their search towards less severely hit occupations, beyond what changes in labour demand would predict. The redirection of job search changes relative hiring costs, and has the potential to amplify labour demand shifts. Keywords: coronavirus, search intensity, search direction, labour demand shock, job vacancies, online job board
1266 - Global Behaviors and Perceptions at the Onset of the COVID-19 PandemicThiemo Fetzer, Marc Witte, Lukas Hensel, Jon M. Jachimowicz, Johannes Haushofer, Andriy Ivchenko, Stefano Caria, Elena Reutskaja, Christopher Roth, Stefano Fiorin, Margarita Gomez, Gordon Kraft-Todd, Friedrich M. Goetz, Erez Yoeli
We conducted a large-scale survey covering 58 countries and over 100,000 respondents between late March and early April 2020 to study beliefs and attitudes towards citizens’ and governments’ responses to the COVID-19 pandemic. Most respondents reacted strongly to the crisis: they report engaging in social distancing and hygiene behaviors, and believe that strong policy measures, such as shop closures and curfews, are necessary. They also believe that their government and their country’s citizens are not doing enough and underestimate the degree to which others in their country support strong behavioral and policy responses to the pandemic. The perception of a weak government and public response is associated with higher levels of worries and depression. Using both cross-country panel data and an event-study, we additionally show that strong government reactions correct misperceptions, and reduce worries and depression. Our findings highlight that policy-makers not only need to consider how their decisions affect the spread of COVID-19, but also how such choices influence the mental health of their population.
1265 - Migration Costs and Observational Returns to Migration in the Developing WorldDavid Lagakos, Samuel Marshall, Ahmed Mushfiq Mobarak, Corey Vernot & Michael E. Waugh
Recent studies find that observational returns to rural-urban migration are near zero in three developing countries. We revisit this result using panel tracking surveys from six countries, finding higher returns on average. We then interpret these returns in a multi-region Roy model with heterogeneity in migration costs. In the model, the observational return to migration confounds the urban premium and the individual benefits of migrants, and is not directly informative about the welfare gain from lowering migration costs. Patterns of regional heterogeneity in returns, and a comparison of experimental to observational returns, are consistent with the model’s predictions.
1264 - Prussia Disaggregated : The Demography of its Universe of Localities in 1871Sascha O. Becker & Francesco Cinnirella
We provide, for the first time, a detailed and comprehensive overview of the demography of more than 50,000 towns, villages, and manors in 1871 Prussia. We study religion, literacy, fertility, and group segregation by location type (town, village, and manor). We find that Jews live predominantly in towns. Villages and manors are substantially segregated by denomination, whereas towns are less segregated. Yet, we find relatively lower levels of segregation by literacy. Regression analyses with county-fixed effects show that a larger share of Protestants is associated with higher literacy rates across all location types. A larger share of Jews relative to Catholics is not significantly associated with higher literacy in towns, but it is in villages and manors. Finally, a larger share of Jews is associated with lower fertility in towns, which is not explained by differences in literacy.
1263 - Economic Warfare in Twentieth Century History and strategyMark Harrison
In two world wars, both sides committed substantial resources to economic warfare. Before the event, influential thinkers believed that the threat of blockade (and later of bombing) would deter aggression. When war broke out, they hoped that economic action might bring the war to a close without the need for a conclusive military struggle. Why were they disappointed, and what was the true relationship between economic warfare and combat between military forces? The answer to this question depends on the effects of economic warfare, which can be understood only after considering the adversary’s adaptation. When the full range of adaptations is considered, it becomes clear that economic warfare and combat were usually strategic complements; they acted together and did not substitute for each other. The paper examines this question both in breadth and more narrowly, focusing on the Allied air campaign against Germany in World War II. There are implications for history and policy.
1262 - Climate Change and Pandemics : On the Timing of Interventions to Preserve a Global CommonMonica Giovanniello and Carlo Perroni
We characterize timing choices in investments towards the conservation of a global common and derive implications for interventions to contain the spread of a contagious disease.
1261 - Which jobs are done from home? Evidence from the American Time Use Survey?Lena Hensvik, Thomas Le Barbanchon and Roland Rathelot
Which jobs are more likely to be affected by mobility restrictions due to the Covid-19 pandemic? This paper uses American Time Use Survey data to measure the share of the work hours that are spent at home for different job categories. We compute and provide home-working shares by occupation (US census classification, SOC and international ISCO classification), and by industry (US census classification, NAICS and international ISIC classification).
1260 - Capital Gains and UK InequalityArun Advani & Andy Summers
Aggregate taxable capital gains in UK have tripled in past decade. Using conﬁdential administrative data on the universe of UK taxpayers, we show that including gains changes the picture of UK inequality over the past two decades. These taxable gains are largely repackaged income, so their exclusion biases the picture of inequality. Including them changes who is at the top of the distribution, adding more business owners and older people. The share of income plus gains (both pre- and post-tax) going to the top 1% is 3pp higher than for income only, and this gap has been steadily rising.
1259 - Attitude towards Immigrants: Evidence from U.S. Congressional SpeechesNeha Bose
Immigration and attitudes towards immigration have been key features in economic development and political debate for decades. It can be hard to disentangle true beliefs about immigrants even where we have seemingly strong evidence such as the voting records of politicians. This paper builds an \immigration corpus" consisting of 24,351 U.S. congressional speeches relevant to immigration issues between 1990-2015. The corpus is used to form two distinct measures of attitude towards immigrants - one based on sentiment (or valence) and one based on the concreteness of language. The lexical measures, particularly sentiment, show systematic variation over time and across states in a manner consistent with the history and experiences of immigrants in the USA. The paper also computes a speaker specific measure of sentiment towards immigrants which is found to be a significant positive predictor of voting behaviour with respect to immigration related bills. Applying a Latent Dirichlet Allocation (LDA) topic modelling algorithm provides further insight into how different topics (such as border security or national security) have risen and fallen in importance over time in the face of key events such as 9/11.
1258 - Identification and Inference of Network Formation Games with Misclassified LinksLuis E. Candelaria & Takuya Ura
This paper considers a network formation model when links are potentially measured with error. We focus on a game-theoretical model of strategic network formation with incomplete information, in which the linking decisions depend on agents’ exogenous attributes and endogenous network characteristics. In the presence of link misclassification, we derive moment conditions that characterize the identified set for the preference parameters associated with homophily and network externalities. Based on the moment equality conditions, we provide an inference method that is asymptotically valid when a single network of many agents is observed. Finally, we apply our proposed method to study trust networks in rural villages in southern India.
1257 - The Global Transmission of U.S. Monetary PolicyRiccardo Degasperi, Seokki Simon Hong & Giovanni Ricco
This paper studies the transmission of US monetary shocks across the globe by employing a high-frequency identiﬁcation of policy shocks and large VAR techniques, in conjunction with a large macro-ﬁnancial dataset of global and national indicators covering both advanced and emerging economies. Our identiﬁcation controls for the information eﬀects of monetary policy and allows for the separate analysis of tightenings and loosenings of the policy stance. First, we document that US policy shocks have large real and nominal spillover eﬀects that aﬀect both advanced economies and emerging markets. Policy actions cannot fully isolate national economies, even in the case of advanced economies with ﬂexible exchange rates. Second, we investigate the channels of transmission and ﬁnd that both trade and ﬁnancial channels are activated and that there is an independent role for oil and commodity prices. Third, we show that eﬀects are asymmetric and larger in the case of contractionary US monetary policy shocks. Finally, we contrast the transmission mechanisms of countries with diﬀerent exchange rates, exposure to the dollar, and capital control regimes.
1256 - Gender Attitudes in the Judiciary: Evidence from U.S. Circuit CourtsElliott Ash, Daniel L. Chen and Arianna Ornaghi
Stereotypes are thought to be an important determinant of decision making, but they are hard to systematically measure, especially for individuals in policy-making roles. In this paper, we propose and implement a novel language-based measure of gender stereotypes for the high-stakes context of U.S. Appellate Courts. We construct a judge-speciﬁc measure of gender stereotyped language use – gender slant – by looking at the linguistic association of words identifying gender (male versus female) and words identifying gender stereotypes (career versus family) in the judge’s authored opinions. Exploiting quasi-random assignment of judges to cases and conditioning on detailed biographical characteristics of judges, we study how gender stereotypes inﬂuence judicial behaviour. We ﬁnd that judges with higher slant vote more conservatively on women’s rights’ issues (e.g. reproductive rights, sexual harassment, and gender discrimination). These more slanted judges also inﬂuence workplace outcomes for female colleagues: they are less likely to assign opinions to female judges, they are more likely to reverse lower-court decisions if the lower-court judge is a woman, and they cite fewer female authored opinions.
1255 - The Separation and Reunification of Germany: Rethinking a Natural Experiment Interpretation of the Enduring Effects of CommunismSascha O. Becker, Lukas Mergele, and Ludger Woessmann
German separation in 1949 into a communist East and a capitalist West and their reunification in 1990 are commonly described as a natural experiment to study the enduring effects of communism. We show in three steps that the populations in East and West Germany were far from being randomly selected treatment and control groups. First, the later border is already visible in many socio-economic characteristics in pre-World War II data. Second, World War II and the subsequent occupying forces affected East and West differently. Third, a selective fifth of the population fled from East to West Germany before the building of the Wall in 1961. In light of our findings, we propose a more cautious interpretation of the extensive literature on the enduring effects of communist systems on economic outcomes, political preferences, cultural traits, and gender roles.
1254 - Migrants and Firms: Evidence from ChinaClement Imbert, Marlon Seror, Yanos Zylberberg and Yifan Zhang
How does rural-urban migration shape urban production in developing countries? We use longitudinal data on Chinese manufacturing ﬁrms between 2001 and 2006, and exploit exogenous variation in rural-urban migration induced by agricultural price shocks for identiﬁcation. We ﬁnd that, when immigration increases, manufacturing production becomes more labor-intensive in the short run. In the longer run, ﬁrms innovate less, move away from capital-intensive technologies, and adopt ﬁnal products that use low-skilled labor more intensively. We develop a model with endogenous technological choice, which rationalizes these ﬁndings, and we estimate the eﬀect of migration on factor productivity and factor allocation across ﬁrms.
1253 - Costs and Benefits of Rural-Urban Migration : Evidence from IndiaClément Imbert and John Papp
This paper provides new evidence on rural-urban migration decisions in developing countries. Using original survey data from rural India, we show that seasonal migrants prefer to earn 35 percent less on local public works rather than incur the cost of migrating. Structural estimates suggest that the fixed cost of migration is small, and can be entirely explained by travel costs and income risk. In contrast, the flow cost of migration is very high. We argue that higher living costs in the city explain only a small part of the flow cost of migration, and that most of it is non-monetary.
1252 - How to Improve Tax Compliance? Evidence from Population-wide Experiments in BelgiumJan-Emmanuel De Neve, Clement Imbert, Johannes Spinnewijn, Teodora Tsankova and Maarten Luts
We study the impact of simpliﬁcation, deterrence and tax morale on tax compliance. We ran ﬁve natural ﬁeld experiments varying the communication of the tax administration with the universe of income taxpayers in Belgium throughout the tax process. A consistent picture emerges across experiments: (i) simplifying communication substantially increases compliance, (ii) deterrence messages have an additional positive eﬀect, (iii) invoking tax morale is not eﬀective, and often backﬁres. A discontinuity in enforcement intensity, combined with the experimental variation, allows us to compare simpliﬁcation with standard enforcement measures. We ﬁnd that simpliﬁcation is far more cost-eﬀective, allowing for substantial savings on enforcement costs
1251 - Lords and Vassals : Power, Patronage, and the Emergence of InequalityRobert Akerlof, Hongyi Li, and Jonathan Yeo
This paper uses a laboratory experiment to study competitions for power — and the role of patronage in such competitions. We construct and analyze a new game — the “chicken-and-egg game” — in which chickens correspond to positions of power and eggs are the game’s currency. We ﬁnd that power tends to accumulate ,through a “power begets power” dynamic, in the hands of “lords.” Other subjects behave like their vassals in the sense that they take lords’ handouts rather than compete against them. We observe substantial wealth inequality as well as power inequality. There are also striking gender differences in outcomes — particularly in rates of lordship. In a second treatment, where we eliminate patronage by knocking out the ability to transfer eggs, inequality is vastly reduced and the “power begets power” dynamic disappears.
1250 - Manipulative DisclosureClaudio Mezzetti
This paper studies disclosure of veriﬁable information by a privately informed expert. It shows that if the direction of the expert’s bias is uncertain, then a positive measure of expert types manipulate the decision maker fully, inducing her to choose their ideal outcome. Most other types manipulate partially. The decision maker obtains her ﬁrst best outcome only if the expert is unbiased or the state of the world is a boundary point of the state space and the expert prefers a more extreme outcome. Experts beneﬁt from being poker faced and the decision maker’s lack of familiarity with the problem.
1249 - A Dominant Strategy, Double Clock Auction with Estimation-Based TatonnementSimon Loertscher & Claudio Mezzetti
The price mechanism is fundamental to economics but diﬃcult to reconcile with incentive compatibility and individual rationality. We introduce a double clock auction for a homogeneous good market with multi-dimensional private information and multi-unit traders that is deﬁcit-free, ex post individually rational, constrained eﬃcient, and makes sincere bidding a dominant strategy equilibrium. Under a weak dependence and an identiﬁability condition, our double clock auction is also asymptotically eﬃcient. Asymptotic eﬃciency is achieved by estimating demand and supply using information from the bids of traders that have dropped out and following a tatonnement process that adjusts the clock prices based on the estimates.
1248 - Mediation DesignPiero Gottardi & Claudio Mezzetti
We propose a mechanism design approach to study the role of a mediator in dispute resolution and bargaining. The mediator provides a buyer and a seller with “reality checks” by controlling the information each party has about her own value for a transaction, and proposes a price at which trade can occur if parties agree. We ﬁrst consider the class of static information disclosure and trading mechanisms, in which the mediator simultaneously selects the information disclosed to the parties and posts the price at which they can trade. We characterize the mechanism that maximizes the ex-ante gains from trade. We show it is optimal to restrict agents’ information, as this allows to increase the volume of trade and complete some of the most valuable trades that are lost in the welfare maximizing mechanism under full information. We then study the value of the mediator engaging in “shuttle diplomacy” by considering a class of dynamic information disclosure and trading mechanisms, and show that it is possible to design a dynamic mechanism that achieves ex-post eﬃciency. Shuttle diplomacy facilitates trade by allowing the mediator to condition information releases and prices posted on the history of feedbacks she receives from the parties during her meetings with them.
1247 - Estimation of Discrete Games with Weak Assumptions on InformationLorenzo Magnolﬁ and Camilla Roncoroni
We propose a method to estimate static discrete games with weak assumptions on the information available to players. We do not fully specify the information structure of the game, but allow instead for all information structures consistent with players knowing their own payoﬀs and the distribution of opponents’ payoﬀs. To make this approach tractable we adopt a weaker solution concept: Bayes Correlated Equilibrium (BCE), developed by Bergemann and Morris (2016). We characterize the sharp identiﬁed set under the assumption of BCE and no assumptions on equilibrium selection, and ﬁnd that in simple games with modest variation in observable covariates identiﬁed sets are narrow enough to be informative. In an application, we estimate a model of entry in the Italian supermarket industry and quantify the eﬀect of large malls on local grocery stores. Parameter estimates and counterfactual predictions diﬀer from those obtained under the restrictive assumption of complete information.
1246 - Human Capital and Macro-Economic Development: A Review of the EvidenceFederico Rossi
The role of human capital in facilitating macro-economic development is at the center of both academic and policy debates. Through the lens of a simple aggregate production function, human capital might increase output per capita by directly entering in the production process, incentivising the accumulation of complementary inputs and facilitating the adoption of new technologies. This paper discusses the advantages and limitations of three approaches that have been used to evaluate the empirical importance of these channels: cross-country regressions, development accounting and quantitative models. The key ﬁndings in the literature are reviewed, and some of them are replicated using updated data. The bulk of the evidence suggests that human capital is an important determinant of cross-country income gaps,especially when its measurement is broadened to go beyond simple proxies of educational attainment. The paper concludes by highlighting policy implications and promising avenues for future work.
1245 - Delayed Adjustment and Persistence in Macroeconomic ModelsThijs van Rens & Marija Vukotic
Estimated impulse responses of investment and hiring typically peak well after the impact of a shock. Standard models with adjustment costs in capital and labour do not exhibit such delayed adjustment, but we argue that it arises naturally when we relax the assumption that the production technology is separable over time. This result holds for both non-convex and convex cost functions, and for reasonable parameter values the effect is strong enough to match the persistence observed in the data. We discuss some evidence for our explanation and ways to test the model.
1244 - Reshaping Infrastructure: Evidence from the division of GermanyMarta Santamaria
This paper quantiﬁes the gains from infrastructure investments and shows that reshaping the highway network after a large economic shock, the division of Germany, had positive welfare and income eﬀects. To address the endogeneity between infrastructure and economic outcomes, I develop a multi-region quantitative trade model where infrastructure is chosen by the government to maximise welfare. I calibrate the model to the pre war German economy and estimate the key structural parameter of the model using the pre war Highway Plan. I exploit the division of Germany, a large-scale exogenous shock to economic fundamentals, to show that the model can predict changes in highway construction after the division. Using newly collected data, I document that half of the new highway investments deviated from the pre war Highway Plan. I ﬁnd that the reallocation of these investments (one-third of the network) increased real income by 0.69% to 2% each year, compared to the construction of the original pre war Plan. Finally, I ﬁnd a large cost of path-dependence: the ability to reshape the full network in anticipation of the division could have increased real income by an additional 1.85%.
1243 - Identification and Estimation of Group-Level Partial EffectsKenichi Nagasawa
This paper presents identification and estimation results for causal effects of group-level variables when agents select into groups. I specify a triangular system of equations to model outcome determination and group selection, accommodating general non separable models. Using conditional independence and completeness assumptions, I show that the group-level distribution of individual characteristics is a valid control function, conditional on which group-level variables of interest become exogenous. Building on this result, I identify average effects under a common support condition. The key identifying requirements are more plausible in settings where a rich array of individual characteristics are observed. For the identified parameter, I construct a kernel-based estimator and prove its consistency. Although the identification argument uses completeness, the estimation procedure does not involve solving for an ill-posed integral equation.
1242 - Do British wind generators behave strategically in response to the Western Link interconnector?Mario Intini and Michael Waterson
In Britain, the key source of renewable generation is wind, most abundant on the west coast of Scotland, where there is relatively little demand. For this reason, an interconnector, the Western Link, was built to take electricity closer to demand. When the Link is operating, payments by National Grid to constrain wind farms not to produce will be lower, we may predict, since fewer or less restrictive constraints need be imposed. But the Link has not been working consistently. We empirically estimate the link’s value. Focusing on the three most recent episodes of outage, starting on 4th May 2018 up to 25th September 2019, our essential approach is to treat these outages as a natural experiment using hourly data. Our results reveal that the Link had an important role in costs saved and price constrained and MWh curtailed reductions. We estimate a cost-saving of almost £30m. However, the saving appears to drop over time, so we investigate wind farms’ behaviour. We find that wind farms behave strategically since the accuracy of wind forecasting depends on the relevant prices impacting their earnings
1241 - Subsidies and the Dynamics of Selection: Experimental Evidence from Indonesia's National Health InsuranceAbhijit Banerjee, Amy Finkelstein, Rema Hanna, Benjamin Olken & Arianna Ornaghi
To assess ways to achieve widespread health insurance coverage with financial solvency in developing countries, we designed a randomized experiment involving almost 6,000 households in Indonesia who are subject to a nationally mandated government health insurance program. We assessed several interventions that simple theory and prior evidence suggest could increase coverage and reduce adverse selection: substantial temporary price subsidies (which had to be activated within a limited time window and lasted for only a year), assisted registration, and information. Both temporary subsidies and assisted registration increased initial enrolment. Temporary subsidies attracted lower cost enrolees, in part by eliminating the practice observed in the no subsidy group of strategically timing coverage for a few months during health emergencies. As a result, while subsidies were in effect, they increased coverage more than eightfold, at no higher unit cost; even after the subsidies ended, coverage remained twice as high, again at no higher unit cost. However, the most intensive (and effective) intervention – assisted registration and a full one-year subsidy – resulted in only a 30 percent initial enrollment rate, underscoring the challenges to achieving widespread coverage.
1240 - Secession with Natural ResourcesAmrita Dhillon, Pramila Krishnan, Manasa Patnam and Carlo Perroni
We look at the formation of new Indian states in 2001 to uncover the effects of political secession on the comparative economic performance of natural resource rich and natural resource poor areas. Resource rich constituencies fared comparatively worse within new states that inherited are relatively larger proportion of natural resources. We argue that these patterns reﬂect how political reorganisation affected the quality of state governance of natural resources. We describe a model of collusion between state politicians and resource rent recipients that can account for the relationships we see in the data between natural resource abundance and post-break up local outcomes.
1239 - Attribution Bias by Gender: Evidence from a Laboratory ExperimentJames Fenske, Alessandro Castagnetti and Karmini Sharma
In many settings, economic outcomes depend on the competence and eﬀort of the agents involved, and also on luck. When principals assess agents’ performance they can suﬀer from attribution bias by gender: male agents may be assessed more favorably than female agents because males will be rewarded for good luck, while women are punished for bad luck. We conduct a laboratory experiment to test whether principals judge agents’ outcomes diﬀerently by gender. Agents perform tasks for the principals and the realized outcomes depend on both the agents’ performance and luck. Principals then assess agents’ performance and decide what to pay the agents. Our experimental results do not show evidence consistent with attribution bias by gender. While principals’ payments and beliefs about agent performance are heavily inﬂuenced by realized outcomes, they do not depend on the gender of the agent. We ﬁnd suggestive evidence that the interaction between the gender of the principal and the agent plays a role. In particular, principals are more generous to agents of the opposite gender.