Paper Abstracts
1a: Behaviour/Theory
Cooperation between Spouses: Do Kinder People Select into Love Matched Marriages in Pakistan? Uzma Afzal, University of Nottingham
Impacts of Urbanization on Trust: Evidence from an Experiment in the Field Elvis Cheng Xu, University of Nottingham
Agenda-Manipulation in Ranking Gregorio Curello, University of Bonn
A committee ranks a set of alternatives by sequentially voting on pairs, in an order chosen by the committee’s chair. Although the chair has no knowledge of voters’ preferences, we show that she can do as well as if she had perfect information. We characterise strategies with this ‘regret-freeness’ property in two ways: (1) they are efficient, and (2) they avoid two intuitive errors. One regret-free strategy is a sorting algorithm called insertion sort. We show that it is characterised by a lexicographic property, and is outcome-equivalent to a recursive variant of the much-studied amendment procedure.
1b: Macro (Chair in bold)
Does financial integration generate potential benefits? An Empirical Evidence from India Rakesh Padhan, Indian Institute of Technology
The study empirically investigates the potential benefits of financial integration (FI) in the Indian context from 1996Q2-2018Q4. Using Structural Break Unit Root Test, Autoregressive Distributed Lag Model, and Dynamic Ordinary Least Square Method, we find: (1) FI promotes international consumption risk sharing, (2) FI positively affects economic growth in the long run, and short run, (3) FI reduces output volatility, (4) important role of indirect channels in achieving these benefits. These findings provide evidence of the presence of benefits of FI and crucial practical implications on generating pre-requisites before full capital account convertibility.
Quo Vadis, Britain? – Implications of the Brexit Process on the UK’s Real Economy Kaan Celebi, Schumpeter School of Business and Economics
Transmission Mechanisms of Conventional and Unconventional Monetary Policies in Open Economies Ivan Hajdukovic, Universtitat de Barcelona School of Economics
1c: Labour/Health (Chair in bold)
Structural Transformation in India: The Role of the Service Sector Rafael Serrano-Quintero, Universidad de Alicante
Errors in financial expectations and unhealthy behaviours- evidence from Russia Wei Jin, University of Birmingham
Using the Russia Longitudinal Monitoring Survey, which includes over 120,000 observations spanning 16 years, I investigate the relationship between errors in financial expectations and unhealthy behaviours. I employ a wide range of estimation methods and I find that extreme optimism (i.e. overestimating future household finances) is associated with higher probabilities of smoking and drinking, and higher cigarette and alcohol consumption. I also find that errors in financial expectations tend to affect drinking for males, and smoking for females, which indicates Russian males and females have different coping strategies in response to stress. The results are robust to using both static and dynamic models.
Migrant health and healthcare utilisation Gretta Mohan, ESRI
1d: Development Economics (Chair in bold)
Standard Essential Patents: Forming a Policy Framework for SEPs in India – Lessons from a comparative study of International Regulatory Regimes Keerti Pendyal, Indian Institute of Management Calcutta
In this paper, we look at the guidelines issued by regulatory authorities across the world to enable judiciaries to deal with several key issues that are raised in cases involving Standard Essential Patents. Standard Essential Patents present a unique challenge to judiciaries wherein they have to balance principles of intellectual property law with competition policy. We have examined at length the different guidelines issued by the United States, Japan, the European Union, Canada and Republic of Korea. We analyze four key challenges that have been raised in disputes involving Standard Essential Patents – jurisdiction, the appropriate approach to determining royalties, identification of unwilling licensor/licensee, and repeated invocation of exclusionary rights by the owners of these patents. Through the examination of the guidelines and an analysis of the key challenges, we arrive at the best practices that can be drawn from these varying guidelines so that they may be used as guideposts for policymakers and regulators in India to adjudicate the increasing number of disputes involving Standard Essential Patents in India. Finally, we also identify some key challenges that remain and systemic issues that are yet to be addressed, issues that are at the center of some of the biggest disputes involving Standard Essential Patents today.
The long-run gains from the early adoptions of electricity Björn Brey, University of Nottingham
This paper explores the effect of the early adoption of technology on local economic development. While timing and intensity of technology adoption are key drivers of economic divergence across countries, the initial impact of new technologies within advanced countries has been elusive. Resolving this puzzle, this paper documents that the early adoption of electricity across Switzerland was conducive to local economic development not just in the short-run, but also in the long-run. Exploiting exogenous variation in the potential to produce electricity from waterpower, this paper finds that electricity adoption at the end of the 19th century led to structural transformation. Industrialization and incomes continue to be higher up to today. The main mechanism through which differences in economic development persist is increased human capital accumulation and innovation, rather than persistent differences in the way electricity is used.
Quantifying externalities: evidence from Ugandan farmers Benedetta Lerva, Stockholm University
2a: Development Economics (Chair in bold)
Two Sides of the Same Coin: Co-Evolution of Kin Ties and Institutions Gian Luca Tedeschi, University of Nottingham
This paper studies the joint evolution of kin ties and state institutions across the world and over time. First, I study the geographical forces that have historically driven the evolution of both kin ties and state institutions, based on the assumption that historical societies featured an equilibrium between kin ties and formal institutions reflecting the scope of prevailing economic relations. I exploit historical ethnographic data and combine it with measures of climate intertemporal volatility and spatial variability to establish that the need to protect from weather shocks historically led to weaker kin ties and more developed state institutions. Second, I explore the long-run persistence of historical differences in kin ties and state institutions. Employing country-level institutional quality measures from the 19th century to the present and linking modern countries’ populations with the characteristics of their historical ancestors, I determine that countries whose populations’ ancestors were characterised by more developed state institutions and weaker kin ties are associated with modern institutions of significantly higher quality.
Assessing the (a)symmetric effect of global climate anomalies on food prices: Evidence from local prices Lotanna Ernest Emediegwu, University of Manchester
Multi-product firms, networks and quality-upgrading: Evidence from China in India Alexander Copestake, University of Oxford
This paper exploits China’s accession to the WTO to investigate the propagation of a supply shock across the Indian production network. Consistent with a model of multi-product manufacturers gaining access to higher-quality components, a fall in input tariffs raises revenue, quality and prices whilst lowering quality-adjusted prices and the probability of product exit. Upgrading persists for at least ten years; at the peak in 2010, products with a 10% higher pre-accession input tariff, and hence a larger post-accession fall in tariffs, have 5.3% higher quality. Broader input-output linkages then amplify this effect by up to 75%, with the first two links down the supply chain most significant. In contrast to existing literature focused on negative demand effects of the ‘China shock’, these results highlight a potential beneficial impact in developing countries, namely supply-driven quality upgrading.
2b: Political Economy (Chair in bold)
The One and Only: Single Bidding in Public Procurement Vitezslav Titl, KU Leuven
About 23% of public procurement contracts in the European Union are awarded to the only firm that submitted a bid. The market of public procurement contracts is worth about one seventh of GDP in developed countries, which makes any inefficiencies on this market a first-order problem. In this paper, I exploit a reform from the Czech Republic that made it impossible to award contracts with only one bid. Using a difference-in-differences strategy, I first show that for the majority of these contracts, the reform pushed prices down by 10% relatively to the estimated costs. Second, I provide evidence that procuring authorities started to provide significantly longer description of procurement contracts and also a longer time span for firms to prepare their bids. Last, I show that the prices of procurement contracts supplied by politically connected and anonymously owned firms did not decline after the reform.
Rewarding Allegiance: Political Alignment and Fiscal Outcomes in Local Government Samuel Obeng, University of East Anglia
We examine how local governments' political alignment with central government affects subnational fiscal outcomes. In theory, alignment could be rewarded with more intergovernmental transfers, or swing voters in unaligned constituencies could be targeted instead. We analyze data from Ghana, which has a complex decentralized system: District Chief Executives (DCEs) are centrally-appointed local administrators loyal to the ruling party, while district MPs may belong to another party. A formula for transfer distribution aims to limit the influence of party politics. Using a new dataset for 1994-2014 and a regression discontinuity design, we find that despite this system, districts with aligned MP and DCE receive more transfers, have higher district expenditure, and more internally generated funds. Results are strongest for a subsample of constant districts over the period, suggesting that municipal fragmentation has weakened political alignment effects. We also show strong electoral cycle effects, and find a crowd-in effect for Ghanaian districts.
The moral hazard of devolution: Applying fiscal federalism to the evolution of Northern Ireland’s public finances, 1920-1972 David Jordan, Queen's University Belfast
Northern Ireland is the first example of UK devolution, yet despite this apparent benefit, its economic performance continued to lag the rest of the UK between 1920 and 1972. By constructing an analytic narrative, which combines theory from fiscal federalism with new archival material and data, it demonstrates institutional structure affected the economic efficiency of fiscal decentralisation. Westminster was primarily concerned with limiting the moral hazard posed by Stormont, leading to conditions being imposed on fiscal transfers, which restricted the growth of public expenditure. This affected the level and composition of subnational public goods and services, with significant implications for Northern Ireland’s long-run economic performance.
2c: Labour Economics (Chair in bold)
Estimating Labor-Supply Elasticities when Commitment between Spouses is Limited Jan Gravert, University of Wuppertal
Marriage and income risk in the United Kingdom Johanna Tiedemann, The University of Glasgow
Knockin’ on the Bank’s Door: Why is Self-Employment Going Down? Alina Malkova, University of North Carolina
2d: Finance (Chair in bold)
Stock Price Wealth Effects and Monetary Policy: An Imperfect Knowledge Approach Adrian Ifrim, UAB & Barcelona GSE
This paper argues that a central bank can increase macroeconomic stability by reacting explicitly to stock prices and therefore rationalizes the observed empirical evidence of the "FED put". Waves of optimism/pessimism, unrelated to fundamental developments in the economy affect stock prices and the real economy through wealth effects which appear due to imperfect knowledge of the economy. Monetary policy can dampen these effects by influencing agents' expectations about stock prices and therefore eliminate the non-fundamental effects of stock price booms and busts. In an estimated version of the model, able to capture realistically the dynamics of the stock market and survey expectations, reacting explicitly to stock prices increases welfare by 0.2% on average per period.
Global Spillovers of Fed Information Effect Andrzej Szczepaniak, Ghent University
Firm Heterogeneity in Production-Based Asset Pricing: The Role of Habit Sensitivity and Lumpy Investment Zhiting Wu, The University of St Andrews
3a: Finance (Chair in bold)
Optimal Factor Investing in FX Markets: Model Sparsity in a Data-Rich Environment Ruirui Liu, King’s College London
Optimal Financial Regulation Hormoz Ramian, University of Glasgow
Corporate-Sovereign Debt Nexus and Externalities Jun Hee Kwak, University of Maryland
I show that corporate debt accumulation during booms can explain increases in sovereign risk during stress periods. Using idiosyncratic shocks to large firms as instruments for aggregate corporate leverage, I show that rising corporate leverage during the period 2002-2007 causally increases sovereign spreads in six Eurozone countries during the debt crisis period of 2008-2012. To explain these findings, I build a dynamic quantitative model in which both firms and the government can default. Rising corporate debt increases sovereign default risk, as tax revenues are expected to decrease. Externalities arise because it can be privately optimal but socially suboptimal for firms to default given their limited liability. The fact that firms do not take into account the effect of their debt accumulation on aggregate sovereign spreads is an important externality, rationalizing macroprudential interventions in corporate debt markets. I propose a set of such optimal debt policies that reduce the number of defaulting firms, increase fiscal space, and boost household consumption during financial crises. Both constant and countercyclical debt tax schedules can correct overborrowing externalities. Contrary to conventional wisdom, countercyclical debt policy is less effective than constant debt policy, as the countercyclical policy induces more firm defaults.
Risk-Taking, Competition and Uncertainty: Do CoCo Bonds Increase the Risk Appetite of Banks? Ioana Neamtu, University of Amsterdam
3b: Applied Economics (Chair in bold)
Preferences for Cash vs. Card Payments: An Analysis using German Household Scanner Data Calogero Brancatelli, Goethe University Frankfurt
Price Discrimination and Market Competition: Evidence from the laundry detergent market Thiago Cacicedo, University of Alicante
I analyse the relationship between price discrimination, with respect to the package size of the product, and market concentration in the liquid laundry detergent market. Specifically, I study how quantity discounts change with market concentration. I estimate a fixed effects model and find that this relationship is non-monotonic and I provide evidence that it is U-shaped. These results suggest that firms offer more quantity discounts in less and more concentrated markets, whilst they offer less quantity discounts in moderately concentrated markets.
Severance Savings Accounts and life-cycle savings R.R. Azevedo, Insper
3c: Macro (Chair in bold)
Towards HANK: Investigating Credit and Labour market interactions in a New Keynesian Economy Matthew McKernan, University of Oxford
How does the presence of heterogeneity in the ability of households to smooth consumption affect
labour market dynamics in response to macroeconomic shocks? This paper attempts to address this
question by extending the standard TANK model of Bilbiie (2008) to incorporate a frictional labour market.
We show that heterogeneity in discount rates has macroeconomic consequences which operate through
the labour market, due to the fact that firms have higher discount rates and so place a higher continuation value
on a match than the average worker. We show under a standard calibration that this channel is important for the
dynamic responses of the model to standard shocks. Finally, we illustrate that the degree of household risk
aversion and the fraction of constrained households are key parameters which influence
the strength of this channel.
Resolving Indeterminacy with Neural Network Learning: sinks become sources Julian Ashwin, University of Oxford
Inequality, Taxation, and Sovereign Default Risk Minjie Deng, University of Rochester
Income inequality and worker migration significantly affect sovereign default risk. Governments often impose progressive taxes to reduce inequality, which redistribute income but discourage labor supply and induce emigration. Reduced labor supply and a smaller high-income workforce erode the current and future tax base, reducing the government's ability to repay debt. I develop a sovereign default model with endogenous non-linear taxation and heterogeneous labor to quantify this effect. In the model, the government chooses the optimal combination of taxation and debt, considering its impact on workers' labor and migration decisions. With the estimated model, I find that income inequality and its interactions with migration explain one-third of the average U.S. state government spread.
Monetary Policy, Sticky Wages, and Household Heterogeneity: TANK vs HANK Ghislain Afavi, University of Montreal
3d: Micro (Chair in bold)
The sorting effect of high-powered incentives in the mission-oriented sector Monika Pompeo, University of Nottingham
This paper examines the effect of incentives on sorting across the mission-oriented and profit-oriented sectors and, more generally, studies the role played by individual characteristics in self-selection across sectors and incentive schemes. I employ an experimental design divided into an online stage and a lab experiment. In the online stage, I elicit subjects' risk aversion, discounting, trust, altruism, positive reciprocity, negative reciprocity, and self-control with the use of validated questionnaire measures. Participants are then invited to the lab, where they are given the option to choose between working in the profit-oriented or the mission-oriented sector for different types of incentives. The incentive scheme associated with the profit sector is always high-powered (that is performance-based), whereas in the mission-oriented context, in one treatment it is low-powered (that is fixed), in another subjects choose between a high- and a low-powered incentive, and in the third it is high-powered. I find that as long as high-powered incentives are used alongside low-powered ones, they are able to screen for more productive and altruistic individuals. However, when they are the only incentive type offered within the mission sector, they do increase average productivity compared to the baseline setting but dilute prosocial motivation, weakening the link between altruism and the choice of the mission sector.
Agglomerative Hierarchical Clustering for Selecting Valid Instrumental Variables Xiaoran Liang, University of Bristol
Cyclical Attention to Saving Alistair Macaulay, University of Oxford
This paper explores the business cycle implications of limited household attention to choosing between different savings products. In a model with heterogeneous banks, savers pay more attention to their bank choice when the marginal utility of income is high. This implies that attention rises in contractions. I find evidence for such countercyclical attention using a novel combination of data on retail savings markets in the UK. In the data, banks offer heterogeneous interest rates on very similar products, and savers more reliably choose products closer to the top of the rate distribution during contractions. Countercyclical attention amplifies shocks to consumption: after a contractionary shock, attention rises, so savers experience higher interest rates, which causes a further fall in consumption. In a quantitative New Keynesian model, this amplification is estimated to be large. Countercyclical attention increases the variance of consumption by 17%, and amplifies some key shocks by more than 25%. Policies that reduce the costs of comparing between financial products have substantial stabilization effects.
Over-austerity in a model of electoral competition with heterogeneous beliefs Anastasia Papadopoulou, University of Leicester
This paper discusses the consequences of heterogeneous beliefs on voting behaviour and the welfare implications driven by them. We assume an asymmetric change in voters' beliefs about the ability of an incumbent and a challenger politician to govern after an implicit negative economic shock. Voters lose faith in the incumbent and trust an outsider challenger without prior office experience. In a model of electoral competition, we show that the incumbent loses his power irrespective of the platform he proposes. Moreover, we show that electoral competition may under-provide public goods compared to the utilitarian social optimum, depending on voters’ belief distribution.