Research
Working papers
with Cem Karayalcin
Developing countries are facing mounting pressures to incorporate environmental concerns into their policy reform agendas. This paper finds that common environmental policies, such as levying taxes to reduce the excessive exploitation of natural assets, can be self-defeating when (i) institutions are weak and (ii) the general equilibrium effects of such policy actions are overlooked. This seemingly paradoxical result is driven by fundamental mechanisms in structural transformation frameworks, without the need for strong assumptions. It also carries a clear policy implication: environmental policies should be considered within a country’s broader development context, rather than in isolation.
with Cem Karayalcin
Climate change will impose large and differentiated tolls across countries. This paper suggests that economic fragility and resilience against climate change-driven natural shocks are shaped by: (i) the elasticity of input substitution in resource-intensive sectors, (ii) the trade regime, and (iii) the property rights regime in nature-based assets. Using a structural transformation model, the paper shows, inter alia, that openness increases resilience against natural shocks, regardless of the property right regime. Additionally, openness reduces fragility when a social planner internalizes the social cost of natural resource degradation. However, it increases fragility in a decentralized economy with incomplete property rights in nature-based assets.
with Erhan Artuc and Nicolas Gomez-Parra
Measuring the economic impact of a war is a daunting task. Common indicators like casualties, infrastructure damages, and gross domestic product effects provide useful benchmarks, but they fail to capture the complex welfare effects of wars. This paper proposes a new method to estimate the welfare impact of conflicts and remedy common data constraints in conflict-affected environments. The method first estimates how agents regard spatial welfare differentials by voting with their feet, using pre-conflict data. Then, it infers a lower-bound estimate for the conflict-driven welfare shock from partially observed post-conflict migration patterns. A case study of the conflict in Eastern Ukraine between 2014 and 2019 shows a large lower-bound welfare loss for Donetsk residents equivalent to between 7.28 and 24.79 percent of life-time income depending on agents’ time preferences
with Gregory Ponthiere and Pierre Pestieau
This paper uses an equivalent income approach to quantify the domestic welfare loss due to the Syrian Civil War. Focusing on the (income, life expectancy) space, we show that the equivalent income has fallen by about 60 % in comparison to the pre-conflict level. We also find that the differential between the equivalent income and the standard income for 2016 lies between $75 and $144. Although this low willingness to pay for coming back to pre-conflict survival conditions can be explained by extreme poverty due to the War, the small gap between standard and equivalent incomes tends to question the extra value brought by the latter for the measurement of standards of living in situations of severe poverty. We examine some solutions to that puzzle, including a more general specification of the utility function, the shift from an ex ante approach (valuing changes in life expectancy) to an ex post approach (valuing changes in distributions of realized longevities), as well as considering population ethical aspects. None of those solutions is fully successful in solving the puzzle.
with Richard Chisik and Dhimitri Qirjo
This study considers the role of demand-driven changes arising from population aging and howthey affect the pattern of international trade as well as trade and immigration policy. An aging society can see a welfare-reducing reduction in its share of manufacturing output and this reduction is magnified by a decrease in trade costs (an increase in globalization). Immigration can ameliorate this outcome if it is directed toward younger immigrants. A unilateral tariff increase can also reduce firm delocation from an aging country, however, a reciprocated tariff increase will unambiguously harm the country with the older average population.
This paper analyzes the structure of cooperation between two large countries under one-sided incomplete information. Foreign government privately observes its likelihood of experiencing a political economy shock in each period. Home government’s prior belief about this likelihood is updated in a Bayesian fashion as the relationship continues. We show that the home government employs its privilege to design a contract so as to start with a few-goods-agreement, and increase the extent of cooperation gradually as its belief is favorably updated through periods. We also provide the conditions under which the home government makes the partner reveal its type in the beginning, or enables it to stay in a cooperative relationship without a complete revelation. As opposed to conventional approaches that relate gradualism with cost of liberalization, we show that asymmetric information provides a sufficient reason for gradualism to emerge.
Peer-reviewed articles
Journal of Development Economics, with Lori Beaman and Stefanie Onder (2022)
This paper provides an empirical analysis of refugee returns to Syria. Since 2011, about 5.6 million Syrians – more than a quarter of the country’s pre-conflict population – have been registered as refugees. By mid-2018, only about 1.8 percent of them had returned to Syria voluntarily. This paper compiles a novel data set with administrative data for 2 million refugees, existing and new household surveys, a new conflict-events database, and nightlights data for Syria to analyze the correlates of these returns. A reduction in conflict intensity and an increase in luminosity in Syria increase the likelihood of spontaneous return. Moreover, the patterns of who returns and when differ between high and low conflict areas of Syria. Finally, we show there is a positive association between better conditions faced by refugees in exile and the likelihood of return to Syria.
European Journal of Political Economy, with Tito Cordella (2020)
This paper investigates how the devolution of oil windfalls affects the likelihood of political violence. It shows that transferring large shares of oil wealth can prevent conflict, while transferring small shares can trigger it. Among the different transfer schemes, fiscal transfers (to subnational governments) yield the highest levels of consumption, but direct transfers (to people) are the most effective in preventing conflict. By averting conflict, transfers can improve ex ante welfare; however, only a subset of the ex ante welfare optimal transfers is optimal ex post and thus self-enforcing. Among them, those that avert conflict by reinforcing repressive regimes are of particular policy interest.
German Economic Review, with Justina Klimaviciute and Pierre Pestieau (2019)
The role of inherited wealth in modern economies has increasingly come under scrutiny. This study presents one of the first attempts to shed light on how demographic aging could shape this role. It shows that, in the absence of retirement annuities, or for a given level of annuitization, both increasing longevity and decreasing fertility should reduce the inherited share of total wealth in a given economy. Thus, aging is not likely to explain a recent surge in this share in some advanced economies. Shrinking retirement annuities, however, could offset and potentially reverse these effects. The paper also shows that individual bequests will be more unequally distributed if aging is driven by a drop in fertility. In comparison, the effect of increasing longevity on their distribution is non‐monotonic.
Economics & Politics, with Cem Karayalcin (2018)
This paper compares different fiscal integration schemes on the basis of their ability to finance public investments and resilience to debt distress and contagion. Complete integration schemes, where a central authority chooses the level of public investments with productivity-enhancing externalities across different jurisdictions, are shown to be superior to incomplete integration schemes, where member governments choose public investments unilaterally. As a result, equilibrium income is greater for citizens of member states under a complete integration scheme. Moreover, complete integration schemes are shown to be more resilient to idiosyncratic shocks and more effective in limiting contagion of debt distress. This is mainly because the central authority can credibly borrow more without risking default than member states taken together can and it can "transfer resilience" across them if needed. These findings inform discussions on structural aspects of secular stagnation in Europe by emphasizing a potential challenge in the institutional design of fiscal responsibilities.
Journal of Development Economics, with J.Alix-Garcia, A. Bartlett, S.Walker, and A. Sanghi (2018)
We combine nighttime lights data, official statistics, and new household survey data from northern Kenya in order to assess the impact of long-term refugee camps on host populations. The nighttime lights estimates show that refugee inflows increase economic activity in areas very close to Kakuma refugee camp: the elasticity of the luminosity index to refugee population is 0.36 within a 10 km distance from the camp center. In addition, household consumption within the same proximity to the camp is 25% higher than in areas farther away. Price, household survey, and official statistics suggest that the mechanisms driving this positive effect are increased availability of new employment and price changes in agricultural and livestock markets that are favorable to local producers.
Journal of International Economics, with N.Behzadan, R.Chisik, and W. Battaile (2017)
In this paper we show that the Dutch disease can arise solely from inequality in the distribution of natural resource rents. Given two otherwise identical countries that differ only in the ownership shares of the natural resource rents, the country with the less equal distribution will have less production of manufacturing goods and less development of learning-by-doing in this sector. As opposed to conventional models, where income distribution has no effect on economic outcomes, an unequal distribution of the resource wealth can generate the Dutch disease dynamics even in countries with an initial comparative advantage in manufacturing. We also provide a range of empirical tests of our model, including both difference and system GMM estimators in a dynamic panel. To disentangle the effects of inequality and institutional quality we purge our inequality measure of any linear or higher order correlations with institutional quality and repeat our system and difference GMM estimations. Our empirical analysis supports the hypothesis that inequality indeed plays a significant role in whether being resource-rich is a blessing or a curse for a country. The more unequal is the distribution of natural resource rents, the stronger is the disease.
Journal of the Economics of Ageing, with A.Dedry and P.Pestieau (2017)
This paper analyzes the impact of demographic aging on capital accumulation and welfare in economies with unfunded pensions. By using a two-period overlapping generations model with potentially endogenous retirement decisions, it shows that both the type of aging, i.e. declining fertility or increasing longevity, and the type of pension system, i.e. defined contributions or defined benefits, are important in understanding this impact. Results show that when aging is driven by an increasing longevity, unregulated retirement age systems lead to greater improvements in welfare. In contrast, with a decreasing fertility, mandatory retirement systems with defined contributions fare better.
Economic Inquiry, with R.Chisik (2017)
This paper analyzes two prominent institutional rules in the international trading system: a limited cross-retaliation rule characterized by the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) Article 22.3 and a limited punishment rule characterized by the General Agreement on Tariffs and Trade (GATT) Article XXVIII. In general, both rules are designed to limit the countermeasures upon a violation; however, the former rule specifies the limits of composition in retaliation, whereas the latter one designates the limits of retaliation magnitude. We show that, albeit seemingly unrelated, the limited cross-retaliation rule complements the limited punishment rule in permitting greater trade liberalization. Specifically, we show how the limited cross-retaliation rule also helps limit the incentives to violate the trade agreement when the limited punishment rule prevails.