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1258 - 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 - Stereotypes in High-Stakes Decisions: 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 - The challenges of universal health insurance in developing countries: Evidence from a large-scale randomized experiment in IndonesiaAbhijit 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.