Working Papers and Work in Progress
Working Papers and Work in Progress
Narrative Entanglement (with Luis Garicano).
Link: ungated version.
Summary: Politicians rarely acknowledge trade-offs between a policy's economic and non-economic effects. In our theory, we show that incentives to suppress such trade-offs also generate narrative entanglement: a shock to one policy dimension leads politicians to update their whole narrative bundle, even on unrelated dimensions, shaping equilibrium policy. We test our theory by analyzing all speeches from the 9th European Parliament (2019-2024) with LLMs. We find entangled narratives across different policy domains, and show that following Russia's invasion of Ukraine politicians adjusted narratives on both the economic and environmental effects of climate policy, in line with our theory.
A Dynamic Model of Political Narratives and the Rise of Neoliberalism (with Tim Besley).
Link: CEPR working paper, ungated version.
Summary: We develop a dynamic model where two parties compete for office by offering policies supported by narratives that describe policy effects. Voters demand narratives that suit their interests based on motivated reasoning and parties supply narratives to win elections. Over time, the set of narratives can expand endogenously. We characterize equilibrium paths and show how polarizing narratives can benefit a party through enabling policy differentiation. We then develop a specific application to “neoliberalism”, a policy narrative that gained currency in the late 1970s. Our analysis clarifies why the 1970s oil shocks incentivized parties on the right to supply neoliberal narratives and why that prompted parties on the left to respond with the “Third Way” narrative that became a new consensus. These narrative dynamics were precipitated by a temporary shock but permanently altered the policy equilibrium, preventing a return to the old post-war consensus.
Deliberative Democracy in Political Equilibrium (with Tim Besley). R&R at American Political Science Review.
Link: ungated version.
Summary: This paper introduces deliberation into a model of policy making. A government decides whether to implement a policy which requires citizen compliance. The government cannot credibly inform citizens about policy effectiveness, since it internalizes externalities that the citizens do not. However, it can introduce a deliberative process in which citizens can influence each other. We contrast deliberation driven by informative exchange with that affected by motivated reasoning and show that either type can improve welfare, even when beliefs polarize. Making the outcomes of deliberation binding can reduce welfare by disincentivizing the government from holding deliberations and from implementing policy.
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.
Narratives of Blame. Thesis chapter.
Summary: A left and a right party compete for the support of voters who face different economic and cultural experiences. These experiences are interpreted by voters through narratives that spell out their underlying causes. Narratives of blame explain bad experiences through factors outside of voters' control. Voters who face negative experiences—grievances—demand narratives of blame from parties. The salience of economic and cultural grievances, and their correlation, determines which (if any) party can successfully leverage narratives of blame, and hence influences the implemented economic policy.
Economic Policy Narratives: A Taxonomy and Application (with Tim Besley and Jake Fazzio). LSE Public Policy Review, 4(1) , p. 4. 2026.
Summary: This article discusses how economic policy narratives can be framed as part of the study of policy formation based on insights from an emerging literature. We offer a taxonomy that distinguishes between causal and moral policy narratives. We analyse how the political success of policy narratives depends on alignment with the interests of voters and is influenced by motivated reasoning. We then show how large language models can be used to study policy narratives through an application to narratives on the size of government voiced in the UK House of Commons over 1950–2023.
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.
A new UK overlapping generations model (with Arno Hantzsche and James Watson). OBR Working paper No. 22. 2025.
This paper presents a new overlapping generations model of the UK economy, UK OLG. Built jointly by the Office for Budget Responsibility and HM Treasury, UK OLG analyses the long-term impact of shocks, trends and policies on the UK macroeconomy and public finances. The paper outlines the background to this model, before setting out UK OLG’s structure. The model’s general equilibrium framework captures interactions between households, the production sector and government. By explicitly modelling forward-looking behaviour in households both within and across generations, UK OLG creates robust simulations for the impact of shocks. The model also covers a simple treatment of bequests and inheritance. The paper then sets out how UK OLG has been calibrated to match recent UK economic data and reflect key features of the UK tax, spending and welfare systems. A detailed treatment of the age structure of the UK population allows the model to show the effects of shocks that affect age groups differently. Unanticipated shocks to earnings generate income and wealth inequality within generations, helping produce a realistic saving profile, including life-cycle and precautionary savings, and consumption smoothing. Finally, the paper demonstrates the model’s properties with a series of sensitivity analyses to shocks.