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Micael Castanheira

Professor of economics at FNRS and ULB

(ECARES and SBS-EM - Solvay Brussels School of Economics and Management)

Welcome to my homepage

I am an economist, research director ("Directeur de Recherche") with the Fonds National de la Recherche Scientifique, and associate editor for the European Economic Review. Submit your paper here!

I work at ECARES: the European Centre for Advanced Research in Economics and Statistics, a research center of the Solvay Brussels School of Economics and Management, which is part of the Université Libre de Bruxelles (I know: this is a bit complicated, welcome to Belgium!).

I obtained my Ph.D. in economics from the Université Libre de Bruxelles, and spent two years as a post-doctoral fellow at IGIER (Bocconi University, Milan), and two years visiting NYU (September 2014 - January 2017). I am also a CEPR research affiliate.

My main research topics include the political economics of collective decisions, and of reforms. I also work on conflict and organization theory. My scientific works have been published in leading academic journals, such as Econometrica, American Journal of Political Science, Journal of the European Economic Association, Economic Journal, Journal of Public Economics, Games and Economic Behavior, International Economic Review, International Tax and Public Finance, and in several books.

I am also a member of the scientific board of the Price Observatory of the Belgian government and of the National Bank of Belgium, and I acted as an external expert a.o. for a multinational enterprise, the Bertelsmann Foundation, and the World Bank.

Recent activity

February 2024

Accepted: A Theory of Small Campaign Contributions, joint with Laurent Bouton and Allan Drazen , Economic Journal.

Popular and academic discussions have mostly concentrated on large donors, even though small donors are a major source of financing for political campaigns. We propose a theory of small donors with a key novelty: it centers on the interactions between small donors and the parties' fund-raising strategy. In equilibrium, parties microtarget donors with a higher contribution potential (i.e., richer and with more intense preferences) and increase their total fundraising effort in close races. The parties' strategic fundraising amplifies the effect of income on contributions, and leads to closeness, underdog and bandwagon effects. We then study the welfare effects of a number of common campaign finance laws. We find that, due to equilibrium effects, those tools may produce outcomes opposite to intended objectives. Finally, we identify a tax-and-subsidy scheme that mutes the effect of income while still allowing donors to voice the intensity of their support.

December 2023

New version: Pack-Crack-Pack: Gerrymandering with Differential Turnout, with L. Bouton, G. Genicot, and A. Stashko
NBER Working Paper 31442 and CEPR Discussion Paper 18280
This paper studies the manipulation of electoral maps by political parties, known as \textit{gerrymandering}. At the core of our analysis is the recognition that districts must have the same population size but only voters matter for electoral outcomes. We propose a model of gerrymandering that allows for heterogeneity in turnout rates across individuals. We show how this modifies the gerrymandering strategies: the novel pattern is to pack-crack-pack along the turnout dimension. That is, parties benefit from packing their supporters when they have too low turnout rate as well as their opponents when they have too high turnout rate. In between, they create cracked districts that mix moderate-to-high-turnout supporters with lower-turnout opponents.
This produces testable empirical implications about the link between partisan support, turnout rates, and electoral maps. Using a novel empirical strategy that relies on the comparison of maps proposed by Democrats and Republicans during the 2020 redistricting cycle in the US, we bring such empirical implications to the data and find support for them.

May 2023

Accepted for publication: How Trump Triumphed: Multi-Candidate Primaries with Buffoons, joint with Steffen Huck, Johannes Leutgeb, and Andrew Schotter, European Economic Review

While people on all sides of the political spectrum were amazed that Donald Trump won the Republican nomination this paper demonstrates that Trump’s victory was not a crazy event but rather the equilibrium outcome of a multi-candidate race where one candidate, the buffoon, is viewed as likely to self-destruct and hence unworthy of attack. We model such primaries as a truel (a three-way duel), solve for its equilibrium, and test its implications in the lab. We find that people recognize a buffoon when they see one and aim their attacks elsewhere with the unfortunate consequence that the buffoon has an enhanced probability of winning. This result is strongest amongst those subjects who demonstrate an ability to best respond suggesting that our results would only be stronger when this game is played by experts and for higher stakes. Policy brief: Stimulating Orphan Disease Research: from low-cost repurposing to pricey nichebusting , joint with Georges Siotis, i3h policy brief
Orphan (or “Rare”) Diseases are both vastly different from more “normal” diseases and a bellwether for medicine at large: in the future, many medicinal products may be tailored to each patient, making the target diseases “rare” by standard definitions. About 6% of the European population suffers from at least one rare disease (roughly 36 million individuals in the EU). We document that the market for rare diseases suffers from a number of significant market imperfections. Some diseases have become so profitable that a re-calibration of current policy is warranted. However, the overwhelming majority of rare diseases are instead left under- or un-researched. Current regulations prove insufficient for these, and additional – quite different – interventions should come to complement existing ones.

February 2023

Published: Evolving Market Boundaries and Competition Policy Enforcement in the Pharmaceutical Industry, European Journal of Law and Economics, joint with Georges Siotis and Carmine Ornaghi. [DOI Link]
Competition investigations start with market definition, which establishes the perimeter of the competitive analysis. In this paper, we focus on the definition of economic markets in the pharmaceutical industry, where the entry of generics in different therapeutic areas provides a sequence of quasi-natural experiments involving a significant competitive shock for the originator producer. We show how generic entry modifies price and non-price competitive constraints over time, generating market-wide effects. Paradoxically, generic entry may soften the competitive pressure for brands other than the originator. We obtain these results by econometrically estimating time-varying price elasticities. We then apply the logic of the Hypothetical Monopolist Test to gauge the strength of competitive constraints under different market structures. Our results provide strong empirical support for an approach that defines relevant markets contingent on the theory of harm. We discuss the relevance of these findings in the context of ongoing cases.
Associated VoxEU column: "Antitrust markets in the pharmaceutical industry: A logical definition"