Current Working Papers and Work in Progress
Current Working Papers and Work in Progress
Narratives of Blame. Thesis chapter.
Summary: This paper formulates a new theory of political competition in narratives applicable to the study of populism. Parties act as narrators, offering voters explanations for observable outcomes that differ in the degree of blame attributed to external scapegoats. Populist narratives of blame appeal to voters who face unfavourable outcomes. The model sheds light on the factors that lead to left-wing versus right-wing populism. In particular, economic cleavages in society favour left-wing populism, whereas sociocultural cleavages favour right-wing populism. The relative rise of right-wing populism and an emerging sociocultural split in the electorate can jointly be interpreted as driven by an increasing salience of sociocultural issues. The theory also examines the role of “left-behind” voters in the success of populists, and explores the incentives for right-wing populists to adopt more redistributive economic policies in order to satisfy such voters.
The Political Economy of Neoliberal Narratives (with Tim Besley).
Link: CEPR working paper.
Summary: This paper develops a dynamic theory of political competition in narratives as subjective causal models of how policies affect outcomes. Politicians supply narratives to win elections, and voters demand narratives that suit their interests, based on motivated reasoning. We apply this framework to study the rise of neoliberal narratives that emphasize the trickle-down benefits of deregulation. We provide insights into why neoliberalism gained traction following the 1970s oil shocks, and how it evolved into a new consensus narrative, sometimes called the Third Way. Our framework shows how temporary economic shocks can lead to a narrative dynamic that permanently alters policy choices.
Narrative Entanglement in Climate Policy (with Luis Garicano).
Link: ungated version.
Summary: Political narratives on climate policy have turned more skeptical despite mounting evidence on climate urgency. We explain this shift with a theory of narrative entanglement, in which politicians intertwine economic and environmental narratives to appealto voters rather than treating these policy dimensions separately. As a result, politicians’ environmental narratives can respond to economic shocks unrelated to climate change. We test our theory in the context of Russia’s invasion of Ukraine, which affected the economic costs of the European Green Deal without changing its impact on emissions. We use large language models to identify climate narratives across all speeches in the 9th European Parliament (2019-2024). Exploiting only variation within each parliamentarian, we find that after the invasion climate policy narratives become more negative in their assessment of both economic costs and environmental necessity. This effect is driven by right-wing politicians voicing more climate-skeptic narratives and left-wing politicians speaking less often about climate policy.
An Economic Model of Deliberative Democracy (with Tim Besley).
Link: ungated version.
Summary: This paper studies the role of deliberative processes in policy making. We suppose that a government is deciding whether to implement a policy whose net benefit is uncertain and whose effectiveness requires citizens to comply with it. Since the government internalizes externalities which its citizens do not, it cannot credibly inform citizens about the policy's effectiveness. However, it can introduce a deliberative process in which citizens communicate with each other about policy effectiveness and thereby change their beliefs. In modeling this process, we contrast forms of deliberation driven by informative exchange with those driven motivated reasoning. We model how deliberation influences the government's incentive to implement the policy and give conditions under which deliberation increases welfare. Deliberation that polarizes beliefs and/or involves motivated reasoning may help or hinder welfare-improvements from deliberation. Deliberative processes where a benevolent government retains policy discretion are generally welfare superior to those that are accompanied by binding referenda or result in political pressure. This should make governments more cautious in using deliberative processes when they risk losing control of the policy agenda.
Monetary Capacity (with Roberto Bonfatti, Kivanc Karaman and Nuno Palma). R&R at International Economic Review.
Link: CEPR working paper; ungated version.
Summary: Monetary capacity refers to the maximum level of monetization attainable by a state. We show that increases in monetary capacity led to a significant expansion in the fiscal capacity of early modern states, preceding modern economic growth by several decades. In a theoretical part of the paper, we argue that sufficient monetary capacity is a necessary condition for the rise of modern fiscal states; without it, there exist neither the means nor the incentives for the advancement of fiscal capacity. In an empirical part, we exploit a natural experiment to estimate the causal effect of monetary capacity on fiscal capacity: the exploitation of silver and gold mines in Spanish colonies in the Americas. This exogenous expansion in precious metals increased the monetary capacity and, in a second stage, the fiscal capacity of early modern European countries. We complement our causal estimates with a historical analysis of Europe and China from antiquity to the early modern period highlighting the mutual dependence of monetary and fiscal capacity in the long run.
The vagaries of the sea: evidence on the real effects of money from maritime disasters in the Spanish Empire (with Yao Chen, Nuno Palma and Felix Ward). Review of Economics and Statistics, 106(5), 1220–1235 . 2024.
Summary: Maritime disasters in the Spanish Empire (1531-1810) resulted in the loss of substantial amounts of silver money. We exploit this recurring natural experiment to estimate the effect that an exogenous change in the money supply has on the real economy. We find that a negative shock to Spain’s money supply caused Spanish real output to decline. A transmission channel analysis highlights nominal rigidities and credit frictions as important transmission channels through which money supply changes affected the real economy. Especially large output declines occurred in textile manufacturing against the backdrop of a credit crunch that impaired merchants’ ability to supply their manufacturers with input goods.
Vox-EU article: https://voxeu.org/article/real-effects-money-supply-shocks
Understanding Money Using Historical Evidence (with Nuno Palma and François R. Velde ). Annual Review of Economics, 16, p. 571-595. 2024.
Summary: Debates about the nature and economic role of money are mostly informed by evidence from the twentieth century, but money has existed for millennia. We argue that there are many lessons to be learned from monetary history that are relevant for current topics of policy relevance. The past is a source of evidence on how money works across different situations, helping to tease out features of money that do not depend on one time and place. A close reading of history also offers testing grounds for models of economic behavior and can thereby guide theories on how money is transmitted to the real economy.
The Economist article: https://www.economist.com/finance-and-economics/2024/09/19/what-the-history-of-money-tells-you-about-cryptos-future
Science skepticism reduced compliance with COVID-19 shelter-in-place policies in the United States (with Valentin Kecht, David Van Dijcke and Austin Wright). Nature Human Behavior. 2021.
Summary: Physical distancing reduces transmission risks and slows the spread of COVID-19. Local and regional governments in the United States have issued shelter-in-place policies to mandate physical distancing. Yet compliance with these policies is uneven and may be influenced by beliefs about science and topics of scientific consensus. Using county-day measures of physical distancing derived from cellphone location data, we demonstrate that the proportion of people who stay at home after lockdown policies go into effect is significantly lower in counties with a high concentration of climate change skeptics. These results are consistent when we study how belief in science influences physical distancing across as well as within Democratic and Republican counties. Our findings suggest public health interventions and messaging about risks associated with COVID-19 that take into account local attitudes towards science may be more effective.
The COVID-19 Pandemic: Government vs. Community Action Across the United States (with Guido Deiana, Valentin Kecht and David Van Dijcke ). Covid Economics: Vetted and Real-Time Papers, Issue 7. 2020
Summary: Are lockdown policies effective at inducing physical distancing to counter the spread of COVID-19? Can less restrictive measures that rely on voluntary community action achieve a similar effect? Using data from 40 million mobile devices, we find that a lockdown increases the percentage of people who stay at home by 8% across US counties. Grouping states with similar outbreak trajectories together and using an instrumental variables approach, we show that time spent at home can increase by as much as 39%. Moreover, we show that individuals engage in limited physical distancing even in the absence of such policies, once the virus takes hold in their area. Our analysis suggests that the targeted promotion of distancing among less responsive groups may be as effective as across-the-board lockdowns, while also being less damaging to the economy.
Vox-EU article: https://voxeu.org/article/voluntary-social-distancing-and-lockdowns-us
INET Working Paper: https://www.inet.ox.ac.uk/files/BrzezinskiKechtDeianaVanDijcke_18042020_CEPR_2.pdf
Synergies in Labour Market Institutions: The Nonlinear Effect of Minimum Wages on Youth Employment. Atlantic Economic Journal, 45(2), 251–263. 2017.
This paper is based on work done as part of the Bachelor thesis in Warwick and was published in the Atlantic Economic Journal after winning the Best Undergraduate Paper Competition, hosted by the International Atlantic Economics Society.