Abstract: This study examines the impact of debt (un)sustainability on climate efforts, focusing on the duration and consequences of sovereign default. In practice, we investigate the temporal influence of default on greenhouse gas emissions. Using a recent difference-in-difference estimator, we analyzed private debt-default data from 1970 to 2019 across 195 countries, linking it with CO2 emissions in 42 sectors. The main result indicates a temporary 18% reduction in emissions over the decade following a default, particularly driven by the energy sector. Notably, countries with robust institutional quality do not exhibit this trend. The research method employs a comprehensive analysis that combines economic and environmental data. The findings are substantive and reveal a significant, albeit temporary, impact on emissions post-default.

Abstract: This paper introduces a two-phase model formalizing the concept of alignment to a climate scenario within an economy of publicly traded companies and investors. During the first phase, companies must make a choice between announcing their commitment to low-carbon target, which compels them to abate their emissions, or refusing to make any announcement. Their decision is based on a required minimum level of abatement and on their ability to abate their greenhouse gas emissions. In the second phase, investors make heir portfolio allocation decisions based on the companies’ announcements, which provide signals on the long-term climate risk exposure of stocks. We show that companies with the highest abilities always have profit opportunities to commit to low-carbon targets. We also identify a cost to announcing a low-carbon target. Finally, we show that the investors’ climate preferences are essentiel to maximizing the number of companies committing to low-carbon targets.

Abstract: Urban areas are main economic centers that gather most of the world’s population but they are exposed to diverse and complex disaster risks. Indeed, potential damages from extreme events grow with urban development. On the other hand, the recurrence of catastrophic events is likely to increase with climate change, which challenges public authorities to build resilient urban development. Risks prevention plans (PPR) are a type of land use regulation that intend to tackle externalities deriving from inhabitants choosing to locate in hazardous areas by controlling constructions and land use. It is a two-step policy that first provides objective information to inhabitants about existing risks to correct for imperfect information. It then converts the risk assessment into effective land use restrictions that limit possible uses and new buildings. Does the PPR implementation limit number of stakes and their vulnerability in at-risk areas? This paper relies on high-quality geolocalized administrative data to disentangle the effect of a uniform risk-information provision from land-use regulation restrictions at the national level. To the best of my knowledge, it is the first data set on hazard-based land use regulations that study the effect of new zoning over a large and detailed period with granular geospatial data. I identify the causal impacts of each implementation phase (first information, second land use regulation) on local housing markets in a difference-in-difference with a staggered adoption framework. Very preliminary results indicate no significant impact of plan adoptions on either new construction or changes in land use, which follow the same urban development trend as before. Consistently with previous work on information shocks (Kocornik-Mina et al. 2020) and on environmental land use regulations (Sims and Schuetz 2009), it suggests a limited integration of risks by housing markets even with better information.

Abstract: While climate change is projected to deeply modify melting processes of solid water, the links between seasonal snow, mountain glaciers melt and downstream economic activities is still unclear. In an econometric analysis of melt water shocks and overall economic activity at sub-national levels, I deepen the understanding of whether and through which channel hydrological conditions affect economic development. I construct a new data set of monthly melt water shocks based on snow cover and glaciers data and combine them with nighttime light intensity at the 0.1◦ grid cell level over the entire region of Himalayan-fed hydraulic sub-basins. The data set covers all months from 2000 to 2013. I estimate the change in month specific annual economic development in a hydraulic sub-basin as a function of current and past melt water shocks in the chain of upstream sub-basins. This paper provides further evidence that upstream hydrological conditions have causal effects on downstream economic development. The key findings are that (i) economic development are significantly dependent on seasonal melt water quantities, (ii) shocks in discharged melt water have causal impacts on downstream economic activities and (iii) agriculture is the main channel through which the impacts propagate through the economy.

Abstract: Personality traits, preferences, and behaviors matter for labor market outcomes. Evidence shows that these non-cognitive skills are malleable and that the formation of these depends on the social environment. While previous research has established that specific curriculum interventions can affect non-cognitive skills, it remains unclear whether education per se affects these skills. Therefore, we exploit five educational reforms which increased mandatory years of education in four low- and middle-income countries to study their effect on non-cognitive skills. We use cross-sectional data collected by the World Bank in 2012/2013 as the first-ever initiative to measure skills in low- and middle-income countries. Using within-country variation in mandatory years of education, we find that raising mandatory years of education decreased individuals’ emotional stability, grit, hostile attribution bias, patience, and risk willingness and increased individuals’ openness to experience. Openness to experience and risk willingness are positively related to wages in our sample, while hostile attribution bias is negatively associated with wages.

Abstract: The integration of electricity markets through increased interconnection capacity is a key driver of their economic performance. However, its impact on the environmental and market values of renewable energies, which are simultaneously being heavily deployed, must be measured. I empirically estimate this impact for the case of the connection between France and Spain, which was doubled in 2015. I find that this doubling has reduced the domestic marginal CO2 abatement effect of Spanish wind power but has increased the reduction in emissions in France due to it. However, this increase does not fully offset the domestic decrease. Regarding the price effect, I find that Spanish wind power has a downward impact on French electricity prices, and this effect is even more pronounced after the increase in interconnection capacity. Spanish wind power also reduces the wholesale price of Spanish electricity, once again validating the existence of the merit order effect. Back-of-the-envelope calculations reveal a net gain for Spanish consumers, as the price decrease outweighs the cost of wind energy subsidies. This holds true both before and after the expansion of the interconnection. Conversely, this expansion has allowed French consumers to benefit from both the price effect and the reduction in emissions free of charge. After the expansion, I estimate the annual amount of CO2 avoided in France due to Spanish wind power to be 2 megatonnes per year, each ton costing the Spanish consumer 128 euros. This study underscores the relationship between market integration, renewable energy deployment, and environmental outcomes. It highlights the need for systematic assessments of the environmental and economic benefits associated with the integration of European price zones, especially in the context of countries with varying degrees of polluting generation. The implications extend beyond the France-Spain case, offering insights into the ongoing transformation of European electricity markets.

Abstract: We use newly available microdata from country-by-country reporting (CbCR) to study the profit-shifting behavior of large French multinational firms. We provide a robust methodology to correct CbCR from double counting of intra-group dividends, which we show inflates observed pre-tax profits by about 13%. Using corrected data, we show that about 23% of foreign profits cannot be explained by real activity. We also find that 18% of profits are shifted for tax reasons, with two-third going to four tax havens. We also provide evidence on the concentration of profit shifting in the hands of a few large firms: 6% of MNEs account for two-third of the total profit shifting.

Abstract: The economic costs incurred by extreme weather events are substantial and increasing. In this study, we demonstrate how community banks – a type of financial institution with strong local ties and customer relationships – mitigate these costs. We use an event study model to demonstrate that US counties with higher community bank market shares experience fewer employment losses through extreme weather events. We then use bank-level analyses to demonstrate the mechanism – the small business credit supply. Community banks maintain their lending following extreme weather events, while other banks reduce it. These findings provide novel evidence on how local financial institutions strengthen economic resilience through extreme weather events. As policymakers develop strategies to mitigate the effects of extreme weather events, local finance may be a solution. For the financial system as a whole, this suggests a possible trade-off between efficiency and resilience.

Abstract: Outdoor air pollution can reduce the productivity of indoor workers. In this paper, I estimate the causal impact of air pollution over the performance of professional basketball players from the National Basketball Association (NBA). I measure productivity using players' ability to score a free throw shot, a repetitive and relatively easy manual task. I link performance data with daily measures of air quality and I use variations in wind direction to instrument pollution at NBA arenas. Over the period 2006-2016, I observe over 500,000 shots and I find that a 10μg/m3 increase in PM2.5 reduces the probability of making a free throw by 0.5% at sample mean. I use highly detailed play-by-play basketball data and I find that air pollution reduces productivity independently to additional stressful factors faced by workers.

Abstract: Energy crises can alter the incentives of utilities to temporally promote energy-saving behavior. This paper takes advantage of a natural gas saving reward program, implemented by a major German utility during the heating season of the European energy crisis of 2022/23, to provide evidence for the effectiveness of financial incentives for energy conservation on a large scale. Using billing records from the universe of residential customers of the utility, we find that program participants reduce their gas consumption by 5.4 percent compared to a matched control group. Rich tracking data on the pre-intervention engagement of customers with information on their energy consumption allows us to address selection bias. We find that more active and already motivated customers are more likely to select into treatment. Failure to account for self-selection would lead to an overestimation of the treatment effect by about 80 percent. The implementation of the double/debiased machine learning estimator validates these results and allows us to move beyond average treatment effects by combining it with precise geo-location and socio-economic characteristics. A mechanism analysis further distinguishes between the direct effect of the financial treatment and the indirect effect induced by the program. We find that the improved access to energy consumption information and marginal cost through the company's app partially accounts for the program's success, although the transaction costs associated with acquiring this information likely lowered participation rates. Lastly, work in progress in the form of a welfare analysis seeks to find conditions under which such conditional lump-sum payments are more effective than marginal price increases in promoting energy conservation behavior during crises.

Abstract: What is the impact of diversity on economic development? This paper offers micro-level evidence in the case of China’s "Administrative Village System" (AVS), a program of forced integration in rural communities from the 1950s to the early 1980s. Aiming to foster inter-group cooperation and increase economic efficiency, the AVS program brought together farmers with diverse identities to live and work together for agricultural production and public goods construction. Using a regression discontinuity design, this paper demonstrates that the effects of diversity depend on institutional contexts. During the AVS program when personal freedom of decision-making was denied, diversity had little effect on economic development and even led to negative consequences, such as increased mortality during the Great Leap Famine and conflicts during the Cultural Revolution. However, after the program ended and China transitioned to a market economy, the impact of diversity reversed. In regions that experienced stronger forced integration, better inter-group interaction emerged as people tended to trust strangers more and interact more frequently with those of different identities in labor and land markets. Consequently, increased diversity led to better economic development. This paper highlights the importance of institutions in shaping the developmental consequences of diversity.

Abstract: Subject to exoduses, internal rebellions and diseases, states have historically developed only under very particular agro-ecological circumstances. This paper advances and empirically validates a new perspective on state formation, helping to understand their paucity and uneven development across the globe throughout the pre-industrial era. I posit that spatially asynchronous agricultural calendars mandated for a scattered productive system that could not be easily taxed and harnessed by centralised governments. Using data from the Ethnographic Atlas, I provide evidence that the heterogeneity of agricultural growing seasons was a crucial barrier to state centralisation. This holds true when controlling for a wide range of alternative determinants of state-building. The use of potential, rather than observed, agro-ecological data, as well as various robustness tests, give credit to an interpretation of the results beyond the mere correlation. Additional evidence on 19th century taxation and military mobilisation in China, India and Russia sheds light on the precise mechanisms whereby crop cycle heterogeneity hindered political centralisation.

Abstract: This paper explores how news coverage of violence against women (VAW) affects the reporting and judicial treatment of sexual and domestic violence. I combine high-frequency data on French TV news content with rich novel administrative data on all cases handled by the criminal justice system in France. I document a relatively low level of prosecution of perpetrators of VAW, as well as limited coverage of such violence on TV news, but significant changes have occurred over the last decade. Exploiting the quasi-random timing of news in the short run, I next estimate the effect of TV news coverage of VAW on each stage of the legal process -- namely reporting, prosecution and sentencing decisions. First, news on VAW crimes have a relatively small impact on the propensity to report sexual or domestic violence. Second, prosecutors are less likely to dismiss a case after news coverage of VAW crimes. The effect amounts to a 2% increase in prosecutions of perpetrators of VAW in the week following the news coverage, mainly for domestic violence and cases that were on the verge of being dismissed. Third, sentencing decisions made by judges are not affected by news coverage of VAW. The results suggest that the media can influence prosecutors’ decisions, which corresponds to a critical stage in the judicial process as around 80% of complaints are dismissed at this stage. These findings imply that documenting and talking about VAW is important to raise prosecution and effectively combat this violence.

Abstract: Certain occupations exhibit a disproportionate representation among elected officials compared to the broader population. In order to shed light on the crucial role of occupation in both the decision to enter politics and voters’ preferences, I introduce a simple theoretical model. Following this, I develop a novel index to quantify the proximity between occupations and public expenditures. I empirically test the predictions of the model of the effect of an increase of the prosecution cost on the occupation of elected in Italian Municipalities over the period 2008-2017. Using the approval of the Severino Law as a source of exogenous variation—a legislative measure aimed at mitigating corruption in public institutions—I observe a significant reduction in the number of candidates from proximate occupations and at the same time an increase in voters’ preference for them. These results are consistent with an increase of corruption among politicians and a backlash of the law.

Abstract: This paper introduces a two-phase model formalizing the concept of alignment to a climate scenario within an economy of publicly traded companies and investors. During the first phase, companies must make a choice between announcing their commitment to low-carbon target, which compels them to abate their emissions, or refusing to make any announcement. Their decision is based on a required minimum level of abatement and on their ability to abate their greenhouse gas emissions. In the second phase, investors make heir portfolio allocation decisions based on the companies’ announcements, which provide signals on the long-term climate risk exposure of stocks. We show that companies with the highest abilities always have profit opportunities to commit to low-carbon targets. We also identify a cost to announcing a low-carbon target. Finally, we show that the investors’ climate preferences are essentiel to maximizing the number of companies committing to low-carbon targets.

Abstract: This study examines the impact of debt (un)sustainability on climate efforts, focusing on the duration and consequences of sovereign default. In practice, we investigate the temporal influence of default on greenhouse gas emissions. Using a recent difference-in-difference estimator, we analyzed private debt-default data from 1970 to 2019 across 195 countries, linking it with CO2 emissions in 42 sectors. The main result indicates a temporary 18% reduction in emissions over the decade following a default, particularly driven by the energy sector. Notably, countries with robust institutional quality do not exhibit this trend. The research method employs a comprehensive analysis that combines economic and environmental data. The findings are substantive and reveal a significant, albeit temporary, impact on emissions post-default.

Abstract: Urban areas are main economic centers that gather most of the world’s population but they are exposed to diverse and complex disaster risks. Indeed, potential damages from extreme events grow with urban development. On the other hand, the recurrence of catastrophic events is likely to increase with climate change, which challenges public authorities to build resilient urban development. Risks prevention plans (PPR) are a type of land use regulation that intend to tackle externalities deriving from inhabitants choosing to locate in hazardous areas by controlling constructions and land use. It is a two-step policy that first provides objective information to inhabitants about existing risks to correct for imperfect information. It then converts the risk assessment into effective land use restrictions that limit possible uses and new buildings. Does the PPR implementation limit number of stakes and their vulnerability in at-risk areas? This paper relies on high-quality geolocalized administrative data to disentangle the effect of a uniform risk-information provision from land-use regulation restrictions at the national level. To the best of my knowledge, it is the first data set on hazard-based land use regulations that study the effect of new zoning over a large and detailed period with granular geospatial data. I identify the causal impacts of each implementation phase (first information, second land use regulation) on local housing markets in a difference-in-difference with a staggered adoption framework. Very preliminary results indicate no significant impact of plan adoptions on either new construction or changes in land use, which follow the same urban development trend as before. Consistently with previous work on information shocks (Kocornik-Mina et al. 2020) and on environmental land use regulations (Sims and Schuetz 2009), it suggests a limited integration of risks by housing markets even with better information.

Abstract: While climate change is projected to deeply modify melting processes of solid water, the links between seasonal snow, mountain glaciers melt and downstream economic activities is still unclear. In an econometric analysis of melt water shocks and overall economic activity at sub-national levels, I deepen the understanding of whether and through which channel hydrological conditions affect economic development. I construct a new data set of monthly melt water shocks based on snow cover and glaciers data and combine them with nighttime light intensity at the 0.1◦ grid cell level over the entire region of Himalayan-fed hydraulic sub-basins. The data set covers all months from 2000 to 2013. I estimate the change in month specific annual economic development in a hydraulic sub-basin as a function of current and past melt water shocks in the chain of upstream sub-basins. This paper provides further evidence that upstream hydrological conditions have causal effects on downstream economic development. The key findings are that (i) economic development are significantly dependent on seasonal melt water quantities, (ii) shocks in discharged melt water have causal impacts on downstream economic activities and (iii) agriculture is the main channel through which the impacts propagate through the economy.

Abstract: Personality traits, preferences, and behaviors matter for labor market outcomes. Evidence shows that these non-cognitive skills are malleable and that the formation of these depends on the social environment. While previous research has established that specific curriculum interventions can affect non-cognitive skills, it remains unclear whether education per se affects these skills. Therefore, we exploit five educational reforms which increased mandatory years of education in four low- and middle-income countries to study their effect on non-cognitive skills. We use cross-sectional data collected by the World Bank in 2012/2013 as the first-ever initiative to measure skills in low- and middle-income countries. Using within-country variation in mandatory years of education, we find that raising mandatory years of education decreased individuals’ emotional stability, grit, hostile attribution bias, patience, and risk willingness and increased individuals’ openness to experience. Openness to experience and risk willingness are positively related to wages in our sample, while hostile attribution bias is negatively associated with wages.

Abstract: The integration of electricity markets through increased interconnection capacity is a key driver of their economic performance. However, its impact on the environmental and market values of renewable energies, which are simultaneously being heavily deployed, must be measured. I empirically estimate this impact for the case of the connection between France and Spain, which was doubled in 2015. I find that this doubling has reduced the domestic marginal CO2 abatement effect of Spanish wind power but has increased the reduction in emissions in France due to it. However, this increase does not fully offset the domestic decrease. Regarding the price effect, I find that Spanish wind power has a downward impact on French electricity prices, and this effect is even more pronounced after the increase in interconnection capacity. Spanish wind power also reduces the wholesale price of Spanish electricity, once again validating the existence of the merit order effect. Back-of-the-envelope calculations reveal a net gain for Spanish consumers, as the price decrease outweighs the cost of wind energy subsidies. This holds true both before and after the expansion of the interconnection. Conversely, this expansion has allowed French consumers to benefit from both the price effect and the reduction in emissions free of charge. After the expansion, I estimate the annual amount of CO2 avoided in France due to Spanish wind power to be 2 megatonnes per year, each ton costing the Spanish consumer 128 euros. This study underscores the relationship between market integration, renewable energy deployment, and environmental outcomes. It highlights the need for systematic assessments of the environmental and economic benefits associated with the integration of European price zones, especially in the context of countries with varying degrees of polluting generation. The implications extend beyond the France-Spain case, offering insights into the ongoing transformation of European electricity markets.

Abstract: We use newly available microdata from country-by-country reporting (CbCR) to study the profit-shifting behavior of large French multinational firms. We provide a robust methodology to correct CbCR from double counting of intra-group dividends, which we show inflates observed pre-tax profits by about 13%. Using corrected data, we show that about 23% of foreign profits cannot be explained by real activity. We also find that 18% of profits are shifted for tax reasons, with two-third going to four tax havens. We also provide evidence on the concentration of profit shifting in the hands of a few large firms: 6% of MNEs account for two-third of the total profit shifting.

Abstract: Women remain underrepresented in math-intensive fields, which has long-run implications for not just economic, but also scientific outcomes. We show that a gender quota system in competitive higher education institutions could be an efficient solution to address this problem. We use original hand-collected historical data from the entrance exam for one of the most competitive elite graduate schools in France to evaluate the effect of a change in admission policy that removed a hard gender-based quota system. We document that the end of the quota led to a sharp decline in the percentage of admitted female candidates, but only in math-intensive fields. We then focus on the mathematics entrance exam to delve into the mechanisms. We show that roughly half of this fall can be mechanically explained by a gender performance gap. However, we also uncover an endogenous response by female candidates: there are fewer female candidates at the entrance exam once it became mixed-gender, and this shying-away mechanism is mostly driven by potentially high-achieving female candidates. This detrimental endogenous response of women in a real-life context is important. As this elite institution leads to high-level academic careers in France, we show that the removal of the gender quota increased the gender gap in professorial and research careers for affected students.

Abstract: More than two decades of sustained economic growth across most of South Asia brought significant poverty reduction, yet inclusive social progress has remained elusive. Based on newly constructed dataset with 12 million observations, we quantify the portion of inequality in consumption and education which can be unambiguously attributed to predetermined circumstances in the South Asia Region (Afghanistan, Bangladesh, Bhutan, India, Nepal, Pakistan, Sri Lanka) across birth cohorts. The analysis uncovers a puzzling divergence: the increase in formal human capital accumulation that, with different degrees and intensities, has characterized the region in the recent decades, has not been followed by similar improvements in inequality of economic opportunities. Hence, improvement in the educational systems did not translate in the labor market success potential due to skill and knowledge mismatch or limited quality of the attained education. Providing a growth incidence assessment, we document improvements in education attainment to be strongly progressive in most countries and economic growth in terms of consumption to be less progressive. Moreover, we investigate the role played by the different circumstances in determining the extent of inequality of opportunity (IOp) in the different countries. Given the common data restriction of absent direct parental background data, we examine the potential contribution of coresident data in IOp estimation.

Abstract: In low- and middle-income countries, family norms significantly contribute to gender disparities, often leading to long-term disadvantages for females. Little is known about the gender-specific effect of family norms on child labor. To analyze the effects of such norms on gender-related child labor and schooling decisions, we exploit a Ghanaian inheritance reform that largely changed the inheritance system of matrilineal ethnic groups and weakened the core of matrilineal family norms. Using cross-sectional survey data in a difference-in-differences framework, our findings indicate that the inheritance reform significantly impacts child labor, leading to a 47 percent reduction in weekly work hours for girls and a 25 percent increase for teenage boys. Additionally, the reform is associated with a decrease in school attendance that is substantially larger for boys (13 percentage points) than for girls (7.6 percentage points). These findings imply that matrilineal family norms induce parents to protect their sons from child labor and invest in their schooling. However, this comes at the expense of their daughters, who have to work additional hours. We conclude that implementing reforms like those related to inheritance rights represents an initial, constructive move towards transforming family norms and subsequently improving the situation of girls by reducing their child labor.

Abstract: The economic literature explores the role of industrial relationships in technological progress and growth by incorporating production networks into endogenous growth models. The paper uses those models to understand the mutual evolution of production networks and firms’ technology choices. Our model addresses the complexity of firms’ technological behaviors and the evolving structure of the production network over time. We propose a production network formation model grounded in general equilibrium theory with time-varying categorization of firms that enables us to define the essential and potential inputs for the firms. Thus, we restrict the search of potential input combinations, shaping firms’ technology levels to a reasonable size of choice set. The main finding is that the correlation between technological homogeneity and firm productivity varies concerning the innovative environment of economies. This varying correlation affects the evolution of overall economic outcomes.

Abstract: We study a simple model of algorithmic collusion in which Q-learning algorithms repeatedly play a prisoner's dilemma and allow players to choose different exploration policies. We characterize behavior of such algorithms with asymmetric policies for extreme values and prove that any Nash equilibrium features some cooperative behavior. We further investigate the dynamics for general profiles of exploration policy by running extensive numerical simulations. Results indicate agents over-explore in equilibrium and uncover a trade-off between the incentive to unilaterally explore and the fragility of cooperative outcomes to exploration. 

Abstract: This paper provides a novel empirical analysis of the intracity effect of Working From Home (WFH) on business districts. Using a unique dataset on commercial real estate in the Paris metropolitan area up to 2022, I take advantage of the Covid-19 crisis as a natural experiment to implement a difference-in-differences strategy. Findings reveal a significant rise in office vacancy due to WFH, with effectsmore pronounced (i) further from the city center, (ii) in areas with longer commuting distances and (iii) with respect to firm size. This suggests that aggregate demand for office space is shrinking, while firms maintain a preference for central locations and labor market access, which exacerbates spatial disparities between central and suburban business districts. Furthermore, I provide evidence that WFH exposure yields a notable decrease in local retail sector employment and business numbers, underscoring the broad economic implications of teleworking.

Abstract: How much should we fight climate change? A faster reduction of greenhouse gas emissions would preserve our environment and the welfare of future generations, but at a higher cost to the present. How to strike the right balance between investing for the future and without ignoring the needs of current generations?

To compare the cost and benefits of long run policies, economic models typically use a discount factor: a sequence of decreasing weights that are applied to consumption at each time period. The speed at which the discount factor decreases is called the discount rate. The classical formula for determining the discount rate is called the Ramsey rule, and comes from the seminal article of Ramsey (1928).

Discounting is omnipresent in cost-benefit analysis for long term policies. In particular, it is a major topic of controversy among climate economists. Following Ramsey (1928), Stern (2007) believes that generations should be treated impartially. In opposition with Stern, Nordhaus (2007) claims that the social discount rate should be consistent with the ones observed on financial markets — even if it implies that the happiness of our children matters much less than ours.

The problem with this controversy is that it is a question of ethics. No empirical evidence can convince Nordhaus that generations should be considered impartially. In our paper, we propose a way to move past this normative disagreement, by treating it as uncertainty.

Our contribution is twofold. First, we provide a very general result on the long-run discount rate under normative uncertainty. Then, under more specific assumptions, we provide a new extension of the Ramsey rule.

Abstract: Roma constitute not only the largest minority group in Europe but also the most deprived and socially excluded. According to Karoly (2015), since their very first arrival in Europe, a general feeling of mistrust and suspect was present in the hosting countries, leading Roma to be kept far away from cities, and in multiple occasions, to be persecuted, ostracized and killed, notably under the Nazi regime. Roma’s reaction to the continuous violence suffered over the centuries has been to alienate from the mainstream society, to strengthen the importance of the community of which they are part of and developing a community belief system that clearly distinguish them from the rest of the population (Stark and Berlinschi, 2020; Leeson, 2013). Ciaian and Kancs (2018), when analyzing the relationship between Roma and the mainstream society, highlight the fundamental importance of addressing social mobility constraints, both in terms of entry and exit costs. The first term refers to the difficulty faced by Roma to integrate into the mainstream society, which is highly discriminatory towards them. A general anti-Roma attitude in the mainstream society, indeed, increases the magnitude of the segregation and marginalisation of Roma, translated into a higher cost of education, of formal employment, healthcare and nutrition. In terms of exit costs, also Roma can be reluctant to assimilate their behaviors with those of the mainstream society, being their norms own-enforcing and creating an organizational structure in every community (Matras, 2015). This latter aspect has been greatly neglected when Roma are analyzed, and the lack of effectiveness of European policies aimed at their integration is also the result of a scarce attention to the peculiar dynamics that have been established over the centuries within the different communities. Given the urgent need to consider and combine these aspects into a single analysis, I develop a model that shows how barriers to social mobility affect the intensity of the identity of minority members and prevent individuals from implementing behaviors that improve their well-being. Indeed, starting from the work of Akerlof and Kranton (2000), there has been a significant effort in modeling the role of identity in affecting various economic outcomes. This literature relies on the core principle under which the identification of an agent with a certain social category (e.g. based on ethnicity, religion, ethical principles) is associated to a prescribed behavior that she should follow. An important contribution to the state of the art is represented by Bisin et al. (2011), from which my model takes the structure, including the intensity of identity of the agents and the parental choice of vertical socialization of children.

Abstract: While many romantic relationships begin at work, relationships between managers and subordinates have increasingly come under scrutiny. Yet we know little about the economic implications of "dating the boss". We use administrative data covering the universe of cohabiting couples in Finland from 1988-2016 to explore the career implications of dating and breaking up with one’s manager and spillovers on the wider workforce. Using a difference-in-difference across-couples research design we find that those in relationships with their managers experience a 9% bump in their earnings compared to those in relationships with managers in different firms. Relationships between managers and subordinates last longer and both manager and subordinate are more likely to remain in the same firm. However, when a manager and subordinate break up, the subordinate is 4.2 percentage points more likely to drop out of employment. Last, we examine the spillovers of these relationships on the broader workforce and document a 4 percentage point decrease in retention of other workers from these relationships. This result is consistent with these relationships imposing substantial costs on colleagues, including but not limited to exit from the firm.

Abstract: This study investigates the relationship between electricity access and employment outcomes in South Africa. Using data from the National Income Dynamics Study (NIDS), we employ two-way fixed effects and staggered difference in differences estimations to analyze the effects. Our findings reveal a significant positive association between electricity access and employment, labour force participation, and job search likelihood. Notably, rural areas exhibit a pronounced 50% increase in job search probability with electricity access, underscoring its pivotal role in facilitating job prospects. Furthermore, the study explores the impact on formal and informal employment, shedding light on potential economic implications.

Abstract: Webpages are full of marketing cues, these salient visual elements that steer consumers toward specific choices. The literature has written extensively about the algorithms that determine which choices are promoted, but little about the cues themselves. In this paper, I show that one can regulate what cues look like to improve consumer welfare based on a simple lab experiment, without prior knowledge about the algorithm or consumer preferences. The reason is that some cues are intrinsically safer than others: they are not blindly followed, hence help when attributed to the preferred choices but do not harm otherwise. In a lab experiment, I compare consumer performance in a choice task, varying the cue and the algorithm. I find that brown circles are safer than green circles and explain this using a model of rational attention. I also illustrate how the choice of a cue shapes supply-side incentives regarding the algorithm. Finally, I discuss how to use this approach in practice to regulate online choice environments.

Abstract: Recent work in psychology finds that creating the illusion of owning a body of the opposite sex (using virtual reality) makes (wo)men perceive themselves as (more) less competitive. But does this extend to the actual choices men and women would make when selecting into competitive environments in an incentivized setting? I answer this question by randomly assigning participants to be embodied in a virtual body (VB) of the same sex, a VB of the opposite sex, or a placebo condition (with no VB) and eliciting their post-intervention willingness to compete. While the virtual gender swap increases women’s overconfidence and decreases men’s, this does not translate into a detectable effect on willingness to compete.

Abstract: In most real-life interactions players are free to act and react at whim: actions may incite others to react (which may then incite further reactions and so forth), and inaction leaves the floor for others to act. I propose a solution concept where players correctly predict the long-term consequences that their actions or inaction might bring, but know nothing about the process determining who acts when.

Abstract: Recovery packages from COVID-19 are committing nearly one trillion dollars of public spending to green investments globally, with strong expectations of economic growth and job creation. Yet, we crucially lack ex-post validations of the multiplier effects widely used to forecast new green jobs. This is especially the case for energy retrofits in buildings, which are likely to have among the highest potentials for climate action and job creation at the same time. We provide the first ex-post analysis of a large-scale retrofit program on both fixed-term and permanent job creations by exploiting a large discontinuity in the provision of subsidies through the French Energy Efficiency Obligation scheme. Using a novel synthetic control method to exploit employment variations at the regional level, we estimate that the policy sustains 1.4 jobs per million euros invested annually.

Abstract: This paper studies the use of domestic outsourcing to circumvent labor regulations and its consequences for firms and workers. Drawing on longitudinal plant data and employer-employee data from Mexico, we first provide novel evidence on a phenomenon wherein many firms were outsourcing their entire workforce. These entities operated as empty establishments, with positive production and costs but no legally hired workers. We provide evidence that a central motive for this practice was to avoid mandatory profit-sharing with employees. We then leverage a reform that significantly restricted the use of outsourcing to understand the implications for both firms and workers when this practice is constrained. Using a difference in differences design, we find that the reform caused firms to insource their workers and newly incur profit-sharing payments. We find no effect on total employment (composed of outsourced workers + in-house workers). Moreover, we find that treated firms offset the increase in profit sharing by a small decrease in wage growth relative to the control group. This decrease did not fully compensate for increases in profit sharing and total worker compensation for treated workers, i.e., wages + profit sharing, increased by around 3%. We provide a theoretical model to show that our results are consistent with a labor market where (i) firms offer workers a compensation bundle of wages and profit sharing (ii) outsourcing all workers allows firms to avoid mandatory profit sharing (iii) workers respond more to differences in wages than to differences in profit sharing when deciding where to work.

Abstract: This paper assesses the impact of the German minimum wage policy on firms’ financial leverage. The analysis demonstrates that the introduction of the minimum wage significantly escalates firms’ operating risks by increasing their labor share. Subsequently, firms opt to mitigate these risks by reducing financial leverage. Heterogeneous effects show that firms choose to adjust riskier debts; firms with greater labor flexibility exhibit a lesser inclination towards deleveraging, but firms with financial constraint react less to the minimum wage. Overall, the minimum wage benefits employees by shifting more earnings towards labor but introduces larger operating risks and prompts conservative behavior among firms.

Abstract: Most contributions in the algorithmic collusion literature only consider symmetric algorithms interacting with each other. We study a simple model of algorithmic collusion in which Q-learning algorithms repeatedly play a prisoner’s dilemma and allow players to choose different exploration policies. We characterize behavior of such algorithms with asymmetric policies for extreme values and prove that any Nash equilibrium features some cooperative behavior. We further investigate the dynamics for general profiles of exploration policy by running extensive numerical simulations which indicate symmetry of equilibria, and give insight for their distribution.

Abstract: How much should we fight climate change? A faster reduction of greenhouse gas emissions would preserve our environment and the welfare of future generations, but at a higher cost to the present. How to strike the right balance between investing for the future and without ignoring the needs of current generations?

To compare the cost and benefits of long run policies, economic models typically use a discount factor: a sequence of decreasing weights that are applied to consumption at each time period. The speed at which the discount factor decreases is called the discount rate. The classical formula for determining the discount rate is called the Ramsey rule, and comes from the seminal article of Ramsey (1928).

Discounting is omnipresent in cost-benefit analysis for long term policies. In particular, it is a major topic of controversy among climate economists. Following Ramsey (1928), Stern (2007) believes that generations should be treated impartially. In opposition with Stern, Nordhaus (2007) claims that the social discount rate should be consistent with the ones observed on financial markets — even if it implies that the happiness of our children matters much less than ours.

The problem with this controversy is that it is a question of ethics. No empirical evidence can convince Nordhaus that generations should be considered impartially. In our paper, we propose a way to move past this normative disagreement, by treating it as uncertainty.

Our contribution is twofold. First, we provide a very general result on the long-run discount rate under normative uncertainty. Then, under more specific assumptions, we provide a new extension of the Ramsey rule.

Abstract: Roma constitute not only the largest minority group in Europe but also the most deprived and socially excluded. According to Karoly (2015), since their very first arrival in Europe, a general feeling of mistrust and suspect was present in the hosting countries, leading Roma to be kept far away from cities, and in multiple occasions, to be persecuted, ostracized and killed, notably under the Nazi regime. Roma’s reaction to the continuous violence suffered over the centuries has been to alienate from the mainstream society, to strengthen the importance of the community of which they are part of and developing a community belief system that clearly distinguish them from the rest of the population (Stark and Berlinschi, 2020; Leeson, 2013). Ciaian and Kancs (2018), when analyzing the relationship between Roma and the mainstream society, highlight the fundamental importance of addressing social mobility constraints, both in terms of entry and exit costs. The first term refers to the difficulty faced by Roma to integrate into the mainstream society, which is highly discriminatory towards them. A general anti-Roma attitude in the mainstream society, indeed, increases the magnitude of the segregation and marginalisation of Roma, translated into a higher cost of education, of formal employment, healthcare and nutrition. In terms of exit costs, also Roma can be reluctant to assimilate their behaviors with those of the mainstream society, being their norms own-enforcing and creating an organizational structure in every community (Matras, 2015). This latter aspect has been greatly neglected when Roma are analyzed, and the lack of effectiveness of European policies aimed at their integration is also the result of a scarce attention to the peculiar dynamics that have been established over the centuries within the different communities. Given the urgent need to consider and combine these aspects into a single analysis, I develop a model that shows how barriers to social mobility affect the intensity of the identity of minority members and prevent individuals from implementing behaviors that improve their well-being. Indeed, starting from the work of Akerlof and Kranton (2000), there has been a significant effort in modeling the role of identity in affecting various economic outcomes. This literature relies on the core principle under which the identification of an agent with a certain social category (e.g. based on ethnicity, religion, ethical principles) is associated to a prescribed behavior that she should follow. An important contribution to the state of the art is represented by Bisin et al. (2011), from which my model takes the structure, including the intensity of identity of the agents and the parental choice of vertical socialization of children.

Abstract: While many romantic relationships begin at work, relationships between managers and subordinates have increasingly come under scrutiny. Yet we know little about the economic implications of "dating the boss". We use administrative data covering the universe of cohabiting couples in Finland from 1988-2016 to explore the career implications of dating and breaking up with one’s manager and spillovers on the wider workforce. Using a difference-in-difference across-couples research design we find that those in relationships with their managers experience a 9% bump in their earnings compared to those in relationships with managers in different firms. Relationships between managers and subordinates last longer and both manager and subordinate are more likely to remain in the same firm. However, when a manager and subordinate break up, the subordinate is 4.2 percentage points more likely to drop out of employment. Last, we examine the spillovers of these relationships on the broader workforce and document a 4 percentage point decrease in retention of other workers from these relationships. This result is consistent with these relationships imposing substantial costs on colleagues, including but not limited to exit from the firm.

Abstract: This study investigates the relationship between electricity access and employment outcomes in South Africa. Using data from the National Income Dynamics Study (NIDS), we employ two-way fixed effects and staggered difference in differences estimations to analyze the effects. Our findings reveal a significant positive association between electricity access and employment, labour force participation, and job search likelihood. Notably, rural areas exhibit a pronounced 50% increase in job search probability with electricity access, underscoring its pivotal role in facilitating job prospects. Furthermore, the study explores the impact on formal and informal employment, shedding light on potential economic implications.

Abstract: This paper proposes an optimal short-time work policy for recessions such as the Great Recession or the COVID-19 recession. I model an economy in which firms and workers are unable to modify the labor contract during recessions and investigate how a short-time work policy can improve the situation. I include a firm’s financial constraint, a distortionary labor tax, a firm-specific skill accumulation mechanism, and a government budget constraint. I find that the classical policy of reducing the cost of short-time work for firms to 0 and facilitating access to the short-time work program is not optimal. First, short-time work programs need to be coupled with an hours subsidy and access to loans. Second, the cost of short-time work should be higher than 0 and continuously adjusted according to the severity of the recession. Third, short-time work programs should be an experience rating program to ensure their sustainability.

Abstract: We study the impact of working with same-race coworkers on individuals’ retention at firms. Using administrative employer-employee data from Brazil, we exploit unexpected deaths of workers from different race groups as exogenous shocks to the peer group composition. We find that a decrease in the non-white share of coworkers leads to lower levels of retention among non-white workers but does not affect the retention of white workers. The effects are driven by quits rather than layoffs, are highly heterogeneous across occupation characteristics, and interact with the gender composition of the peer group. Our findings highlight how peer dynamics contribute to differences in the careers of non-white and white employees.

Abstract: Enhancing the access of smallholder farmers to profitable value chains can improve their incomes and overall well-being. This requires farmers to adopt new practices and technologies that raise productivity and improve product quality. We focus on the role of the intermediating sector, particularly on the role of traders’ expectations regarding the quality of produce supplied by farmers, and analyze incentives for farmers to produce high-quality output. Our theoretical model demonstrates how quality expectations can be a self-fulfilling prophecy—perpetuating either bad equilibria (low quality, low prices) or opening up good ones (high quality, high prices)—and how an institutional innovation such as the introduction and promotion of certification services can set in motion a development trajectory from the bad to the good steady state. We conduct a lab-in-the-field experiment among wheat traders in Ethiopia to study how “demand” for high quality crops is mediated by expectations and certification. Our experimental results provide mixed support for theoretical predictions. While trader expectations regarding farmer supply matter for trader investments, we also find that traders fail to optimally respond to new opportunities created by certification.

Abstract: This paper studies the systematic relationship between causal estimates of program impact and subsequent spending on the evaluated programs. I construct a novel data set of 126 evaluations of Conditional Cash Transfers in Latin America linked to government expenditures on the same programs from 2000-2015. I find no systematic relationship between causal estimates of program impact and subsequent spending on the same program. This result holds regardless of: study methodology, timing of the study publication, author characteristics, and demand for the program evaluation. I show that this finding is robust to more sophisticated models of information aggregation. Using a Bayesian hierarchical model, I aggregate study findings on the impact of CCTs for each country’s program evaluations, up to 2015. I find no systematic relationship between the posterior mean of study findings in each country, and spending in 2015. Moreover, I find that more surprising findings, relative to the existing stock of findings, do not correspond with larger changes in spending. These findings hold across different assumptions on policymaker views of the external validity of program evaluations of other countries’ cash transfer programs. 

Abstract: What are the effects of Central Bank balance sheet expansion, and can Quantitative Easing stimulate an economy stuck at the zero lower bound? We use a Heterogeneous Agent New Keynesian model in which the central bank creates money to purchase assets when the lower bound is binding, and derive both theoretical insights and quantitative results regarding the efficiency of a balance sheet expansion. First, the size of the central bank balance sheet is not neutral at the steady state, as it modifies its revenue and then the distortionary taxation. Second, when the ZLB is binding, agents anticipate that the new steady state will be better, which stimulates the economy and mitigates the loss in welfare and output. Third, the results depend on how the Central Bank covers its losses at the end of the ZLB.

Abstract: The breakeven rate (BE), the yield spread between nominal and inflation-linked Treasury bonds, is commonly used to extract real-time inflation expectations. However, a large liquidity premium in TIPS biases BE towards zero. I exploit an institutional feature of the US Treasury issuance policy, to construct an instrumental variable that identifies the effect of institutional demand on price. I estimate a TIPS liquidity premium of 0.5%/year, close to extant estimates, and not subsumed by other liquidity proxies. My adjusted BE makes important progress towards solving two puzzles: the large apparent mispricing between TIPS and Treasuries, and the poor R2 of inflation forecasts based on BE.