4th Doctorissimes

10:00-10:45: Keynote speaker:

Philippe ASKENAZY (CNRS)

"Competitiveness: France versus Germany"


11:00-12:30: Consumption, savings and wages (Discussion: Christophe Starzec, CES, Paris 1)

In this paper we determine the feasibility of using data from the Egyptian and Jordanian Labor Market Panel Surveys (ELMPS2006, ELMPS2012 & JLMPS2010) to estimate the Burdett-Mortensen job search model. The data contain sufficient information on wages, labor force states, durations, and transitions to generate estimates of the model’s structural transition parameters which eventually enable us to explain the persistent high unemployment rates in the region. Results indicate that arrival rates of offers for workers are generally higher when unemployed than when employed. When a worker is already employed, the arrival rates of offers for highly educated workers tend to be higher than their uneducated peers. We therefore find that they consequently move faster up the job ladder. When comparing the two MENA countries, Egypt’s labor market tend to be much more rigid than its Jordanian peer, where extremely higher search frictions force labor market entrants and on-search workers to accept what they are offered. We therefore observe a peculiar high monopolistic power exerted by the employers. Although, we were able to calculate a firm-specific productivity distribution, we choose to rather focus on the supply side of the equilibrium job search model. We therefore study labor market differentials across the different educational groups in Egypt and Jordan, showing that the wide Variation in frictional transition parameters across these groups helps to explain persistent unemployment and wage differentials especially among the very high educated youth. Formal Tests and policy implications are performed based on the obtained results. The paper is a preliminary endeavor to explore the dynamics of the MENA region labor markets (particularly Egypt and Jordan) and test for their extent of rigidity.

Do risk-lovers tend to choose partners who share their love of risk? And what about the other dimensions of individual preference? In other words, do couples share the same values? This is the question, as yet somewhat neglected, that we address in this paper. The social sciences have mainly concentrated on comparing the socioeconomic characteristics of spouses, but rarely their preferences to risk and time. On this subject, two well-established conclusions have been highlighted by the economic literature. Firstly, homogamy increases wealth inequalities between households and also affects intergenerational mobility. Secondly, preferences for saving explain a significant part of the differences in household wealth. The first aim of this article is to reconcile these two strands of literature by examining the effect on wealth inequalities of homogamy in terms of risk and time preferences. But this work also provides a useful contribution to the analysis of the formation of preferences and their transmission between generations. In this paper, we use conventional measurements (lotteries and self-evaluated scales) and an original method (scoring). We find that spouses are very similar in their savings preferences, even when we control for the individual characteristics. More specifically, we observe a similarity between partners in their attitude to risk, whatever the indicators used. Homogamy is also present in terms of life- cycle motives, with similar results for the correlations. Econometric analysis shows that this homogamy in psychological profiles remains valid even when we take the other individual characteristics of spouses into account, such as age, social background and position, religious beliefs, etc. The choice of spouse according to time or risk preferences turns out to be primarily a matter of taste. The other important contribution of this article is that it points up the consequences of these results in terms of wealth inequalities. Preferences with regard to time and risk have a direct effect on wealth accumulation: people who are more precautionary, farsighted and altruistic accumulate more wealth. The mutual attraction between people with similar savings profiles then reinforces “vicious” or “virtuous” circles. For example, individuals with a strong preference for the present (and who therefore save little) are unlikely to marry more provident spouses. Ceteris paribus, we observe substantial differences in wealth. Thus, “myopic” couples are half as wealthy as farsighted couples; couples with contrasting attitudes to risk possess 60% less wealth than those who share the same attitude to risk; the gap is 20% for couples with divergent attitudes to altruism. Homogamy in terms of savings preferences does indeed tend to divide the population and to widen the wealth gap between households.

We propose in this article a new method to estimate price effects on micro cross-sectional data using full prices derived from a matching of Household Budget and Time Use surveys. This method is applied to a matching of Ecuadorian surveys containing both monetary and time expenditures, then to a Guatemalan survey containing both monetary and time expenditures. The estimated price elasticities perform well compared to other methods, and they can be computed for different sub-populations, which is an important question for policy design and micro-simulation methods. Additionally, a microsimulation is performed in order to measure the impact of the pro-poor policies implemented in those countries.


13:30-15:00: Financial crisis and policy response (Discussion: Sylvie Diatkine, PHARE, Paris 12)

This research studies the factors determining what John Richard Hicks called at the end of the Thirties "the logic of the interest system". We would like to shed new light on the debate between Hawtrey, Keynes and Hicks in the analysis of the term structure of interest rates. All agreed that the short term interest rate is a monetary phenomenon but disagreed on the determinants of the long term interest rate. Hawtrey (1919) was considering this last as a real phenomenon while Keynes and Hicks, more than a decade later, explained it by expected monetary factors, as to say by expectations on future short term interest rates. They obtained this result first of all by introducing equilibrium without arbitrage opportunity; then by introducing a risk of a liquidity loss related at once to a lender’s “disappointment risk” (Keynes), to a borrower’s risk of a rise in spot [short term] rates of interest (Hicks) and to the “professional investors” ’s liquidity risk. At last, both of these authors took into account the liquidity risk of the banking system. Throughout these developments, Keynes and Hicks founded the risk-premium theory.

The U.S. Federal Reserve responded to liquidity shortage through compulsory loan guarantee scheme and bank recapitalisations mainly under Capital Purchase Program (CPP) for commercial banks. The bailout packages provided under CPP seem to be efficient in responding to the liquidity crisis subject to large banks that contributed the most to systemic risk. However, smaller banks that were actually exposed to the mortgage market and non-performing loans were denied the financial aid or received CPP funds of a relatively smaller size. Such CPP funds allocation was efficient from the point of view of taxpayer as the probability of bailout non-repayments was minimised. However, it did not support consumers' loan recapitalisations that could become a reason of large welfare loses for the homeowners.

The reactions of policy-makers in the aftermath of financial crises differ widely across countries and time, even though the desired responses and reforms, from an economical perspective, can often be clearly identified. We suspect that the political, institutional and social environment affect government responses and shape the reform process. In order to respond to these questions, we have built a framework for analysing the relationship between politics and economic policy response to financial crises. Political constraints, however, are not fixed but can vary depending on financial crisis occurrence, the type of financial crisis, and the degree of a financial turmoil. For instance, enhanced political instability may postpone or dilute the measures put into place for economic recovery. As a pilot, we initially focus on financial liberalization reforms and fiscal policies. We consider three sets of political constraints: the governability of a country, the degree of democracy, and the frequency of social unrests. In the first step of the research, we consider a wide dataset of panel data, consisting out of several existing datasets in order to take into account the largest number of crises episodes possible. Financial crises are identified following Leuven and Valencia (2008), who distinguish between banking, currency and debt crises. The variables for political constraints are drawn from the following databases: Political Constraint Index, the KOF Economic Globalization Index, the Quality of Governments Database, the database of Political Institutions 2010 (World Bank), the Polity IV Database, The Major Episodes of Political Violence database and the Cross-National Time Series Database. The set of policy responses are extracted from the IMF new database on financial liberalization and structural reforms, and from the Government Financial Statistics (1990-2012), as well as the Historical Government Financial Statistics (1972-1989) databases for fiscal variables. First descriptive statistics are presented below. In the second step, we are constructing a more systematic quarterly database comprising policies implemented in response to crises including the monetary, fiscal and regulatory measures. We are using a narrative approach using qualitative data analysis software and face to face interviews in order to extract information from official documents and staff (OECD Economic Surveys, Government reports, IMF Staff reports World Bank documents, and national authorities).


15:15-16:45: Economic Growth and Political Economy (Discussion: Katheline Schubert, CES, Paris 1 & Bertrand Wigniolle, CES, Paris 1):

What type of technical progress is able to increase income per capita, instead of merely translating into higher fertility? To investigate this question, this paper first sets up an OLG growth model with capital, land and endogenous fertility. At each date, children compete with physical capital as a means of saving for the young. This framework is then put into motion by continuous neutral and investment-specific technical change. Neutral technical change leads to well-known Malthusian dynamics and cannot make the wage rate grow asymptotically. On the contrary, investment technology alters the relative price of capital and children and so also affects the households’ accumulation/fertility decisions. If capital and labor are strict substitutes in the production function, continuous investment-specific technical change results in long-term growth of per capita income. When the direction of technical change is made endogenous, the agents most often tend to undertake R&D that increases neutral productivity, leading to stagnation of per capita income. The theory is used to interpret some evidence on the first steps of the Industrial Revolution.

In this paper we investigate the effect of inequality on steady state tax rate, aggregate capital and public service in an economy characterized by endogenous growth. In this model, tax rate is determined endogenously. We distinguish between two determinants of inequality, i.e. relative population of poor agents to rich agents (inequality extension) and endowment ratio between the poor and the rich (inequality intention). We focus on the situation when population of the poor is higher than the rich and so tax rate will be decided by median voter who belongs to poor category. We will show that in this case, inequality extension will decline the tax rate and improve growth while inequality intension brings about higher tax and lower accumulation of capital in steady state.

This paper discusses how the economic structure and asset ownership shape political and institutional outcomes. Using a simple structural model of the productive sector, I provide a theoretical framework in which a commodity price shock, substitutability between productive assets, and inequalities increase the stakes of political competition, and therefore the intensity of the conflict over political power. These results provide a theoretical explanation for the frequent conflicts associated with abundant mineral resources. They are valid in a democratic setting, where this competition is electoral, but also in any other setting, where competition may be of a more violent nature. I then extend this analysis to show that a commodity price shock and substitutability between productive assets negatively influence the willingness of elite groups to invest in property rights institutions, thus providing an economic explanation for why some countries have endogenously developed a context more favorable to business than others.

Organizers: Bertand Achou, Thibault Darcillon, Anthony Edo, Gaëtan Fournier, Léontine Goldzahl, Alexandre Reichart, Matthieu Renault