Informing to Divert Attention - Margarita KIRNEVA (CREST – École Polytechnique) 

Abstract: We study a multidimensional Sender-Receiver game in which Receiver can acquire limited information after observing the Sender’s signal. Depending on the parameters describing the conflict of interest between Sender and Receiver, we characterize optimal information disclosure and the information acquired by Receiver as a response. We show that in case of partial conflict of interests (aligned on some dimensions and misaligned on others) Sender uses multidimensionality of the environment to divert Receiver’s attention away from the dimensions of misalignment of interests. Moreover, there is negative value of information in the sense that Receiver would be better off if she could commit not to extract private information or to have access to information of lower quality. We present applications to informational lobbying and optimal bonus policies.

Procurement with Costly Inspection - Amirreza AHMADZADEH (Toulouse School of Economics)

Abstract: We study procurement with costly inspection. A regulator hires an agent to produce a quantity of a good. The agent’s marginal cost of production is his private information. The regulator has two instruments at her disposal: transfers and inspection. Inspection is costly, but reveals the agent’s marginal cost. In contrast to prior work, we allow for stochastic inspection. Preliminary results suggest that an (epsilon-)optimal contract has the following structure: low cost types are inspected with a constant but positive probability and produce the first-best quantity when not inspected; intermediate cost types are inspected with intermediate probability and produce a quantity lower than first-best; high cost types are inspected with probability 1. Moreover, each type produces the first-best quantity when inspected, and the agent’s payoff is strictly above his outside option only if the agent was inspected and found to have reported her true type.

How Can I Know How Much I Like You? Valuation and V-stability for matching markets with incomplete information - Laure GOURSAT (Paris School of Economics)

Abstract: On a (no transfer) matching market with unknown preferences (agents only observe the current matching and realized match utilities), two main questions arise: (1) How do agents form beliefs on their preferences? (valuation) (2) How does that reshuffle the matching outcome? (v-stability). (1) We assume an agent builds an estimate of a counterfactual match utility by extrapolating from two realized utilities: his own utility and the utility of the target’s partner. Under this heuristic, agents base their blocking decisions on cardinal comparisons of current utilities across the same side of the market (jealousy). (2) V-stability requires that any two partners hold the same rank according to realized match utilities (happiness sorting). The predictions under specific preference structures are thus straightforward. The alignment of interests across the market governs the size of the v-stable set from empty to maximal. The correlation of preferences by agent or target makes the positive assortative matching the unique stable matching. For a generic market, though, we get neither the existence of a v-stable matching nor the convergence of a dynamic blocking pair process (predicting persistent moves on the market). We introduce some learning and mixture in the dynamic to address these issues.

Production Fragmentation, Trade and Pollution Emissions - Riccardo NORBIATO (CREST)

Abstract: Between 1990 and 2008, emissions embodied in the production and transportation of traded  goods increased and many developed countries became net importers of pollution emissions. At the  same time, these countries experienced a decrease in domestic emissions despite a substantial increase  in output. Technological changes leading to lower pollution intensity (e.g., the amount of domestic  emissions per unit of output) are usually reported to be the main cause of this emissions reduction.  However, the standard decomposition analysis lacks considering the possible role played by production  fragmentation and imported intermediates: while not altering the composition of final goods produced,  offshoring intermediates may lead to a decrease in domestic emissions per unit of output. Thus, I develop a model linking trade with the environment to better understand the economic forces driving  these changes. In particular, the model includes heterogeneous firms sourcing intermediates and it  accommodates decreasing pollution intensities as a result of both endogenous abatement investment  and offshoring decisions. By doing so, the aim is to analyze the effects of trade and environmental  regulation on domestic and global pollution emissions. In future work, I plan to estimate the model and  quantitatively evaluate a range of counterfactuals in order to explain the evolution of pollution  emissions.

The Spatial and Distributive Implications of Working-from-home: A General Equilibrium Model - Morgane RICHARD (University College London)

Abstract: Covid19 radically changed how and where we work by triggering the widespread adoption of working-from-home. This shift extended far beyond the period of the pandemic and can be interpreted as a structural change in the way we organise labour. This paper analyses the impact of remote work on consumption inequality through a novel real estate channel. The rise in work-from-home changed what households look for in a house by increasing the demand for space and reducing commuting costs. Consequently, it shifted the relative house prices and rents between suburbs and city centres. Who are the winners and the losers from such a real estate value reshuffling? What is the impact on consumption inequality? This study starts by presenting new empirical evidence on the impact of working-from-home on housing markets within UK metropolitan areas, highlighting a British "Donut Effect". Using granular property level transaction and rental data, I set up a hedonic pricing model to highlight that households’ taste for space increased while the cost of commuting shrunk since the boom in remote work. I then incorporate this shift in housing demand into a rich general equilibrium, heterogeneous agents model of remote work and housing tenure augmented with city geography. Such a framework draws the direct link between the real estate assets that are subject to valuation changes and the households who own these assets. The first results suggest that the impact of remote work on consumption is ambiguous. Inequality grew at the bottom and shrunk at the top of the wealth distribution, implying polarizing consequences of working-from-home. 

The Inequality of Climate Change - Thomas BOURANY (University of Chicago)

Abstract: Climate change disproportionately affects developing economies while hurting relatively less the higher-income countries responsible for a large share of greenhouse gas emissions. In this context, what is the optimal policy design for energy taxation when there is inequality in impacts and levels of development? Through the lens of an Integrated Assessment Model with heterogeneous countries, I characterize the Social Cost of Carbon (SCC) and the second-best Ramsey policy when lump-sum transfers across countries are not allowed. In contrast to the standard representative country model, both the level and the distribution of optimal carbon taxes change. In particular, the carbon tax is higher for low-marginal utility, and thus higher-income countries. This qualitative finding is general and does not depend on the market structure or the energy market’s characteristics. I also propose a new numerical method relying on the sequential formulation to simulate the model globally, solve for optimal policy and potentially handle aggregate uncertainty in this heterogeneous agents model. 

Human Capital, Self Insurance and Marriage Uncertainty: Racial Difference in the Child Penalty - Jiaqi Li (University of Warwick)

Abstract: This paper documents that Black women experience only half the child penalties as white women. The racial gap is driven by married Black women with high wages in the South returning to the labor market almost immediately after childbirth. The racial gap remains after controlling for the racial difference in the distribution of the covariates, such as her characteristics, husband covariates, and informal help. Finally, I build a life cycle model of female labor supply, consumption, and savings with uncertainty in divorce shock. Only using the racial difference in marriage and divorce rates, the model is able to generate the same racial gap in child penalties as empirical estimates. The structural model illustrates that Black women stay in the labor market to prevent human capital from depreciation to self-insure against future divorce shocks. 

Gender Discrimination through Limited and Biased Memory: Evidence from Teachers - Francesca MISEROCCHI (Harvard University)

Abstract:  This paper studies whether women are penalized in male-dominated fields because  decision-makers have limited and biased memory of their performance and skills. To do so, I use administrative data and two experiments. First, in years when teachers need to evaluate a larger number of students – amplifying memory constraints – girls are less likely to be recommended for top-tier scientific high school tracks than boys of similar math ability. Second, in an experiment with teachers, they have to recall the characteristics of a series of hypothetical students’ profiles and  assign track recommendations. Discrimination starts at the recall stage: conditional on observing the same objective information, teachers disproportionately recall stereotype-consistent signals (e.g.  that the student performed poorly in math if she is a girl). Biases in recall predict biases in  recommendations. Reducing memory constraints drastically decreases discrimination in decisions:  compared to identical boys, girls are 37% less likely to be assigned to the scientific tracks when their teachers freely recall information about them than when they can reference the information  (proxying a perfect memory benchmark). These findings are generalized with a large-scale online  experiment in which participants freely recall the identical performance of a male or female  candidate in sports and pop culture. The results shed light on a new source of gender discrimination in male-typed fields, opening up the scope for policy interventions in the form of structured  reminders.

Municipal-Level Gender Norms: Measurement and Effects on Women in Politics - Lorenzo DE MASI (Universidad Carlos III de Madrid)

Abstract: In this paper, we exploit the massive amount of information from Facebook to build a measure of gender attitudes in Italy at a previously impossible resolution—the municipal level. We construct our index via a machine learning method to replicate a benchmark region-level measure. Interestingly, we find that most of the variation in our Gender Norms Index (GNI) is across towns within narrowly defined geographical areas, rather than across regions or provinces. In a second step, we show how this local variation in norms can be leveraged for identification purposes. In particular, we use our index to investigate whether these differences in norms carry over to the policy activity of politicians elected in the Italian Parliament. We document that females are more likely to sit in parliamentary committees focused on gender-sensitive matters, but not if they come from a relatively conservative town. These effects are robust to conditioning on fixed effects for the legislative term interacted with the politician’s district of election or political party. This suggests the importance of social norms in shaping legislators’ policy activity, beyond party and constituency effects. 

The Take-up of In-work Benefits: Evidence from a French Program - Claire LEROY (CREST – École Polytechnique)

Abstract: Welfare programs are key policy instruments for governments to perform redistribution and fight poverty. Yet in many cases, evidence shows that a significant share of eligi ble families do not benefit from such programs. Because of data limitations, measuring and understanding imperfect take-up has proven empirically challenging. In this paper, I propose a method to study variation in take-up that solely relies on enrollment records. Exploiting exhaustive social administrative data about a major in-work benefit in France (“prime d’activité”), I investigate the question of who does not take up and why. By using two recent reforms of the program as quasi-experimental variations, I uncover the relative role of (i) financial incentives, (ii) imperfect information and (iii) complexity in driving claiming behaviors. Building on the empirical results about the mechanisms and targeting properties of imperfect take-up, I develop a theoretical framework to derive insights about the welfare implications of different types of reforms that wish to raise take-up. 

From the Penitentiary to the Picket Line: Convict Labor and the Birth of American Labor Unions - Hazal SEZER (Tilburg University)

Abstract: What role did the use of convict labor play in the establishment of early labor unions? Using  an instrumental variable approach, we demonstrate that the presence of convict labor at the  turn of the 20th century led to a notable increase in labor unions, strikes, and union  membership. Strikingly, this impact has endured over time, with areas heavily relying on  convict labor still exhibiting higher union membership rates today. Our findings provide the  first clear evidence of the persistent legacy of convict labor on the workers’ movements of  today.

Rebuilding the Future: The Economic Origins of Renaissance Rome - Alyssa RUSONIK (HEC Paris)

Abstract: The Avignon Papacy – a period of nearly seventy years (1309-1377) during which the papacy sojourned in the south of France – brought the Roman economy to a halt. Surprisingly, investment in private real estate only began to recover over a century later. I argue that this change cannot be attributed to the repatriation of the papal court, or indeed to other conventional explanations (e.g., the end of the Western Schism, post-Plague growth, etc.), and is instead caused by a reform of inheritance laws in 1480. Using novel, hand-collected data spanning over 300 years, and exploiting a quasi-natural experiment, I show that the papal bull in question had a significant and persistent effect on investment in private real estate; I also provide suggestive evidence of a signalling-of-credibility channel as the plausible mechanism behind the policy’s success. 

Versioning with Observational Learning - Yating YUAN (University of Warwick)

Abstract: Observational learning is a widespread phenomenon in various on line marketplaces, e.g. Kickstarter, where sellers often launch a new product with different versions. Yet few papers explain the seller’s versioning incentive from a learning perspective. This paper explores how observational learning alone in centivizes monopolists to sell different versions. The dynamic learning process sheds new light on the multi-version policy beyond traditional explanations. Fur thermore, the quality of consumers’ private information is crucial in shaping two distinct selling strategies. In a market with noisy private signals, the seller provides a single cheap premium version; with precise signals, the seller prefers multiple versions.

Privatization with Political Connections - Matteo BROSO (Collegio Carlo Alberto)

Abstract: A partially privatized, politically connected public firm competes with a private one in a game of endogenous product differentiation. The public firm maximizes a combination of its profits and the median voter's utility. I show that: (i) privatization has a pro-competitive effect as it encourages entry of the private firm; (ii) the public firm's profits may exceed those of its private competitor; and that (iii) the socially optimal degree of privatization is interior.

Procurement with Supplier Rationing Rule for Market Clearing - Manpreet SINGH  (Paris School of Economics)

Abstract: Large-scale procurement auctions with capacity constrained bidders, have multiple winners with a split award. The split percentage is usually pre-specified. However, there are auctions, like renewable energy capacity creation auctions in India and Brazil, where the auctioneer doesn’t specify the split, but asks the bidders to report their capacity before the auction. Thereafter, in an English auction, bidders compete on price, and the lowest price loser is given a residual quantity to clear the market, thereby splitting the award ex-post. The non-trivial BNE of the English auction under IPV assumption, for given quantity bids, is characterized by lesser competitiveness and a strictly positive probability of bidding the reserve by the bidder with the highest quantity. Such a BNE is unique with 2 players, but may not always exist with more players. The data from renewable energy auctions in India further provides some preliminary empirical evidence of bunching. 

The Power of Reserve Tiering: Financial Institution Heterogeneity and Monetary Policy Pass-through - Wentong CHEN (Cornell University)

Abstract: This paper studies how reserve tiering, which involves remunerating di↵erent reserve tiers at di↵erent rates, can promote monetary policy pass-through to the loan market. The data shows a sharp increase in low-interest-rate loans and a decline in medium-interest-rate loans in Japan following the reserve tiering policy. Using a heterogeneous agent model to connect interbank and loan markets, I show that financial institutions’ heterogeneous interest rate exposures to the tiered system is the key driver. Higher-risk banks borrow more under higher tiering rates from non-depository institutions (NDIs) and get additional cheaper funding through interbank trading to cut loan rates. At the same time, banks’ profit function shifts, and the optimal loan rate for banks decreases. Further, I show that reserve tiering brings risks to the financial system since banks with higher risk exposure cut loan rates more. Additionally, big banks with more foreign currency holdings have domestic currency depreciation expectations and want to lend out more in foreign currencies by cutting loan rates to avoid low interest rate balances. The paper suggests that to cool down the overheating economy, the central bank can implement reserve tiering with ascending interest rates by remunerating the reserve above a threshold at a higher interest rate instead. Reserve tiering with ascending interest rates is more effective, less costly, and can stabilize the financial system’s health compared with alternative monetary policies. 

The Carbon Premium and Policy Risk Exposure: A Text-Based Approach - Sarah DUFFY (University of Oxford)

Abstract: Risk Factor discussions from firms’ 10-K reports constitute a novel data source through which we can understand climate-related risk exposure. I use Natural Language Processing methods to develop a measure of firm-level exposure to climate policy risk, exploiting this data and return volatility on climate policy jump days. This measure improves on existing methods of proxying for transition risk exposure with incomplete firm-level emissions data. I use this measure to 1) examine the channels through which transition risk is operating, and 2) test whether financial markets are pricing in climate policy risks. Preliminary results indicate that markets, until recently, have not been pricing in risks associated with climate policy.

Original Sin & Partial Redemption: Foreign Currency Debt and Hedging Strategies in Non-Financial Firms - Juan Camilo MEDELLÍN (Paris School of Economics)

Abstract: This paper aims at understanding the lack of complete Foreign Currency (FC) hedging of  non-financial firms in emerging market economies. By developing a theoretical model, using a rich firm-level panel dataset (2005-2013) for Colombia, and proposing a novel instrumental variable coupled with Tobit estimations, we provide evidence and two plausible explanations for the persistence of inefficient exposure to exchange rate risk. i)  The market of covered FC debt presents market imperfections embodied in financial frictions. In particular, the lack of relative liquidity of this market limits entry and the extent of firms' optimal hedges. ii) Policy induced distortions. Firms with FC debt use the FC  derivatives to protect themselves against exchange rate fluctuations, but their optimal allocations are distorted by the sterilized Foreign Exchange Interventions(FXI) of the Central  Bank in the spot market. Firms reduce their use of covered FC debt given that they feel implicitly protected by the monetary authority. Furthermore, this distortion is heterogenous and non-linear in firm type and size of intervention: The threshold of FXI for which firms with trade credit switch from a reduction to an increase in their long positions is six times larger than the threshold for firms with financial FC debt. This non-linear heterogeneity might be explained by the economies of scale required to enter the covered  FC debt market, and/or the effectiveness in the short vs long run of the FXI. We also find that, consistent with the Dominant Currency Paradigm, export-oriented firms used  intensively the FC derivatives market when they expected an exchange rate depreciation.