Economics Seminar of Paris—Saclay
Séminaire d'Economie de Paris—Saclay

This paper presents the representation of an asset pricing model rule assuming the absence of arbitrage, the existence of market frictions, and the Put-Call Parity. This model constitutes a special case of the Choquet Pricing Rule, where the non-additive probability measure (or capacity) is decomposed into an additive probability and an increasing weighting function. The necessary conditions for a Choquet Pricing Rule to be a Rank-Dependent Pricing Rule are given in the finite and the infinite cases. We test the empirical validity of the Put-Call and Call-Put Parities assumptions on Bid and Ask call option prices from the S&P500. The Rank-Dependent Pricing Rule is calibrated on the same data, utilizing two new families of distortion functions tailored for flexibility and two other functions referred to as (Generalized) Neo-Additive Capacity. We investigate the impact of time to expiration (time value) and moneyness (intrinsic value) on the shape of the distortion function. The resulting models always exhibit a greater accuracy than the benchmark (linear model). Furthermore, the calibrated distortion functions display a remarkably similar shape. The results from the calibration procedure allow us, through the inverted S-shape distortion function, to conclude the risk-seeking behaviour of the market in evaluating call options prices. Finally, we verify the robustness of the calibration on another dataset.

This paper analyses the long-run distributional effects of the increase of compulsory schooling implemented in Sweden after WWII. To assess the extent of inequality of opportunity, we focus on the distribution of labor market earnings, conditional on father's education. According to equality of opportunity theories, any gap in the distribution of earnings attributable to differences in family background should be interpreted as inequality of opportunity. The reform is said to equalize opportunities if it reduces the gaps in the conditional income distribution, across different levels of parental education. We assess the effect of the reform using estimates of the quantile treatment effects of the reform conditional on family background. Our identification exploits the quasi-experimental implementation of the reform. Our results first indicate significant inequality of opportunity for earnings acquisition among post-WWII Swedish cohorts. Second, while the educational expansion policy had virtually no effect on the average level of earnings of treated individuals, it allowed to significantly equalize opportunities by closing the gap in the opportunity profile of children of low vs. high education parents.

This article shows that the wage gap between native and immigrant workers depends on the export activity of the employing firm and the skill level of the worker. Using French employer-employee data from the manufacturing sector covering the period 2005 to 2015, we show that the conventional wage gap between natives and immigrants closes, and even reverses, for white-collar workers employed in exporting firms. The same is not found for blue-collar workers. We build a model incorporating heterogeneous firms and workers, to show that our findings can be rationalised in a setting where white-collar immigrants capture an informational rent within exporting firms. We provide further suggestive evidence consistent with this mechanism. 

The recent digital revolution has significantly broadened the scope of IT-related tasks across various occupations within the labor market. In this paper we document these changes, we propose a novel conceptual framework for thinking about the effect of technological change, and we investigate its impact on worker mobility across occupations using a gravity equation approach. Our results reveal that the evolution of skill distance between jobs significantly affected mobility patterns, disproportionately favoring workers with pre-existing knowledge of digital tools. Finally, we micro-found our gravity equation through a matching model to evaluate mobility in counterfactual scenarios without technological change. 

This paper establishes a connection between cognitive noise (Enke and Graeber, 2023) and the level of contribution in the public goods game. Our experimental results demonstrate that a cooperative advice can assist individual in either gaining a better understanding of their true social preference, or translating their true social preferences into contribution actions that maximize their utility as the game repeats. Further, we argue that cognitive noise complements, rather than replaces, taste-based social preference to explain the contribution decision. Our correlational data supports the notion that cognitive uncertainty is positively correlated with contribution in the public goods game at the aggregate level, or cognitive uncertainty lead people to behave as if they are more cooperative. However, there is heterogeneity, where cognitive noise is negatively correlated with the contribution level of some participants at an economically significant extent. These findings suggest the significance of only considering contribution decisions that exceed a certain cognitive certainty threshold in a public goods game if they are to be taken at face value. We also find that advice from the Generative Pre-trained Transformer (hereafter referred to as “GPT”) reduces cognitive uncertainty for all participants, though the impact of the advice does not seem to depend on whether or not the participants are informed the advice was made by GPT.

Fighting the climate crisis requires changing many aspects of our consumption habits. Previous studies show that a first pro-environmental action can lead to another. But does this spillover effect persist when nudges foster the initial action? We model the mechanisms leading nudges to alter such behavioural spillovers. In an online experiment (n=2775), we test if encouraging vegetarianism with a social norm nudge alters environmental donations. The nudge is effective in increasing intentions to choose vegetarian food. Using machine learning, we find that a subgroup drives this effect. We also see a positive spillover effect: choosing vegetarian food increases donations. However, the nudge crowds out this spillover effect for the subgroup identified with machine learning. Our results suggest no free lunch: when the nudge works in increasing vegetarian choices, this is at the cost of crowding out people's willingness to do more.

This study investigates the welfare effects of a trade shock resulting from a complete shutdown of trade in intermediate inputs. We derive novel insights into the implications of this shock on consumption possibilities. The analysis is conducted within the framework of a model that incorporates endogenous quality and substitution between intermediate inputs and final goods. We first demonstrate that a shutdown of trade in intermediate inputs does not affect countries’ revenues or nominal wages conditionally on the constancy of the share of value added in production. Building upon this insight, we quantify the welfare gains from trade following the shutdown, considering special cases where technology and quality are alternatively endogenous and exogenous, and demonstrate how they relate to welfare formulas already derived in the literature. Our main result shows that the loss of access to foreign intermediate inputs by a country’s local producers would increase the price of final goods, but this increase would be partially offset by an increase in imports of final goods that utilize previously imported inputs. Thus, our study emphasizes the significance of considering the substitution between intermediate and final goods when evaluating the consequences of a shutdown of international fragmentation. This research contributes to a deeper understanding of the welfare effects of trade shocks and provides valuable insights for policymakers and stakeholders in assessing the potential consequences of disruptions in global supply chains.

Abstract: Is current monetary policy making the distribution of credit more unequal? Using French household-level data, we document credit volumes along the income distribution. Our analysis centers on assessing the impact of surprises in monetary policy on credit volumes at different income levels. Expansionary monetary policy surprises lead to a surge in mortgage credit exclusively for households within the top 20% income bracket. Monetary policy then does not impact mortgage credit volume for 80% of households, whereas its effect on consumer credit exists and remains consistent across the income distribution. This result is notably associated with the engagement of this particular income group in rental investments. Controlling for bank decision factors and city dynamics, we attribute these results to individual demand factors. Mechanisms related to intertemporal substitution and affordability drive the impact of monetary policy surprises. They manifest through the policy's influence on collaterals and a larger down payment.

 Complementarities between infrastructure projects have been understudied. This paper examines interactions in the impacts of large-scale road construction, electrification, and mobile phone coverage programs in rural India. We find strong evidence of complementary impacts between roads and electricity on agricultural production: dry season cropping increases significantly when villages receive both, but not when they receive one without the other. These complementarities are associated with a shift of cropping patterns towards market crops and with improved economic conditions. In contrast, we find no consistent evidence of complementarities for the mobile coverage program.

We develop a theory of monotone comparative statics for models with adjustment costs. We show that comparative-statics conclusions may be drawn under the usual ordinal complementarity assumptions on the objective function, assuming very little about costs: only a mild monotonicity condition is required.  We use this insight to prove a general le Chatelier principle: under the ordinal complementarity assumptions, if short-run adjustment is subject to a monotone cost, then the long-run response to a shock is greater than the short-run response. We extend these results to a fully dynamic model of adjustment over time: the le Chatelier principle remains valid, and under slightly stronger assumptions, optimal adjustment follows a monotone path. We apply our results to models of capital investment and of sticky prices. 

We explore the role of central bank balance sheets in taming the effect of the global financial cycle since the late 19th century based on newly collected monthly data of 22 central banks from both developed and emerging market economies. Preliminary results show that the macroeconomic trilemma prevailed until the early 1970s. Floating exchange rates and/or capital controls worked as genuine shock absorbers, while central bank balance sheets partially mitigated the constraints of fixed exchange rates and capital account openness. Yet a more challenging situation has emerged with the 2nd financial globalization of the past 40 years, closer to a dilemma. Today, floating exchange rates are no longer sufficient to isolate the domestic money and asset markets from international shocks. Consequently, the shock absorbing role of central bank balance sheets has made a come-back since the 1990s and is now employed by fixing and floating countries alike. Central bank strategies have gone full circle.

 Since Barro (2006), the macro-finance literature has shown that accounting for rare macroeconomic disasters helps explain various long-lasting empirical puzzles in financial asset markets through the critical role of disaster risk perceptions. However, the latter have not been documented at the microeconomic level. To fill this gap and investigate whether communication on macroeconomic disaster risk can affect individual perceptions and financial investment decisions, we ran an online experiment on 345 French finance and macroeconomics professionals. We randomly assigned participants to three distinct informational treatments about the past frequency of macroeconomic disasters in a given historical sample. We asked participants to estimate this frequency prior and posterior to the treatment and to allocate a sum of money between a risk-free asset and a risky asset whose returns depend on the possibility of a macroeconomic disaster. Our preliminary results reveal that disaster perceptions are heterogeneous and that, on average, participants significantly overestimate the past frequency of macroeconomic disasters before information provision. At the intensive margin, participants decrease their frequency estimate and uncertainty and increase investment in the risky asset following the treatments. More than half of the participants behave as Bayesian updaters. At the extensive margin, the high-precision treatment increases the probability of updating the prior relative to the two other treatments.

We study the Colombian energy market, where diversified energy producers strategically substitute thermal generation for hydropower before droughts. This within-firm substitution, due to thermal generators internalizing the drop in hydropower supply during droughts, mitigates the surge in market prices. We show theoretically and empirically that these virtuous spillovers exist only when thermal generators have market power and are severed when their residual demands are vertical or horizontal, receding any business stealing incentives. Therefore, industry consolidation through diversified firms can decrease prices more than the entry of new atomistic generators, reducing the cost of intermittencies and keeping the green transition affordable.  

This paper studies technology adoption and factory location in England during the

Industrial Revolution. First, we document a negative relationship between industri-

alization in the 19th century and pre-industrial economic activities. Second, we show

that while city-level self-governing institutions promoted early economic growth, these

cities failed to adopt the new industrial technologies during the 19th century. We

argue that because local self-governance led to the development of representative in-

stitutions, these facilitated collective action and enabled workers threatened by labor

mechanization to resist technology adoption. Higher resistance to technology adoption,

in turn, resulted in the relocation of economic activities away from traditional centers

of production.

 This paper examines the role of social networks and diversity on migrants' economic performance in an agricultural setting. We rely on a historical episode (i.e., the resettlement of the Pontine Marshes in Italy, 1932-41) that led to a quasi-random allocation of thousands of families to farming plots. Using detailed information on the universe of settlers, we create measures of networks (families from the same origin) and diversity (fractionalization and linguistic similarity) in a narrow vicinity. We find that a larger network has a positive effect on productivity while diversity has a non-linear effect and depends on the economic potential of the plot. We further explore the mechanisms behind these results trying to shed light on the role of social bonds, cooperation, and learning. 

In this paper, we study the strategies of firms when they cause joint damage where it is difficult or impossible to determine the responsibility of each of them.  In this case, to internalize the damage, courts must apportion the total damage among all involved tortfeasors. Based on  a Stackelberg oligopoly and a Cournot oligopoly, and knowing that the liability of each firm depends on the applicable liability rule, we study the effectiveness of three mechanisms of apportionment: the first is based on market shares and the second is an equal apportionment of damages and the third is a mixed of both. In addition, we are interested in how each mechanism would motivate firms to collude, when dealing with repeated game and grim trigger strategies.

We study a model of interlocking vertical relationships between manufacturers and retailers where the latter select which product(s) to distribute on the market. We highlight that the degree of substitution among retailers as well as their bargaining power vis-à-vis manufacturers play a critical role on retail assortments. When both are sufficiently weak, we show that at least one retailer has an incentive to restrict its assortment which decreases product variety and leads to higher prices for consumers. We also analyze the effect of downstream consolidation through buying groups and retail merger and derive policy implications.  

How does firms’ bargaining power impact outcomes in labor markets? How does bargaining power evolve driven by market forces? The goal of this paper is to understand the factors determining the distribution of bargaining power in an economy and to seek explanation for the observed empirical facts. To answer the first question, we identify conditions on the firms’ technology under which profits are non-monotonic in bargaining power and thus, the firms obtaining maximal profits will not be those with a bargaining power of one. In as far as the optimal bargaining power is technology-dependent, this might explain the observed variability of bargaining power across industries. We also examine the dependence of the optimal bargaining power on market conditions, specifically, on the price of the output good. To address the second question, we propose a dynamic model of an industry with endogenous entry and exit, heterogeneity with respect to bargaining power and demand subject to exogenous shocks. The Markov equilibrium characterizes the long-run distribution of bargaining power. The model allows for heterogeneity in bargaining power within a given period. Furthermore, the distribution of bargaining power can vary in time with the state of the economy. These features allow us to explain observed variability of bargaining power across firms and relate the labor wedge to the state of the economy. 

The paper assesses the financial cost of federal farm programs in mitigating income losses due to drier conditions expected from climate change. Our study encompasses agricultural-producing counties within the conterminous United States during the census years from 2002 to 2017. We quantify historical drought patterns and their projected trends for the near (2020-2049) and more distant (2030-2059) future, using climate reanalysis data and 20 downscaled global circulation model products from the Coupled Model Intercomparison Project 5. We estimate the relationship between agricultural payments and climate change by analyzing how farm income losses due to drier conditions affect the magnitude and distribution of income support payments under the RCP 8.5 scenario. We predict that, under unmitigated climate change, income support payments should significantly increase, with a greater likelihood of much larger financial costs when accounting for statistical and climate uncertainties.

I tackle an old question, which has received a revived interest with massification of usage of social media: what drives opinion polarisation? There is no consensus in both the empirical and the theoretical literature about how to model, measure and investigate Opinion heterogeneity. In particular, one drawback in the literature is that models rarely produce or explain the broad range of opinion distributions (consensus, weak consensus, dissensus, clustering, polarisation, strong polarisation) that one might observe in real life. In this research paper, I introduce essential elements into a theoretical framework which are directly inspired from the observation of online social networks today. First, I introduce the inequality of attention that individuals receive online, e.g. when public figures express themselves online they receive attention from thousands or millions of followers and can have an impact on a given discourse, as opposed to normal individuals with at most few hundred followers. Second, since only a happy few receive attention within the digital public sphere, I focus in my model on the interactions between Elite individuals (based on their centrality as a measure of influence) who can hold concordant or discordant opinions. It is documented in the literature that ideologically opposed individuals tend to interact together and push each other towards even more extreme opinions. I run simulations with several families of network structures and show that depending on the fraction of Elite individuals and the level of agreement that is tolerated in discussions, opinions within society can move from consensus to polarisation.

This paper studies gender differences in educational attainment and labor market compensation. Across a group of OECD countries, college attainment rates and college premia are higher for women than men, despite a gender wage gap in favour of college educated men. The gap in the college premium is positively correlated with the gender difference in college attainment rates. This paper explores potential explanations for these patterns. The approach is to estimate the parameters of a dynamic model of education choice and labor market outcomes that allows for information frictions, and then decompose the observed gender gaps through a series of counterfactual exercises. These gaps are driven mainly by gender differences in the average compensation at non-college jobs. For Germany and Italy, where the college premium is higher for men, the gaps are largely explained through taste shocks capturing the influence of family and peers.

We explore the role of central bank balance sheets in taming the effect of the global financial cycle since the late 19th century based on newly collected monthly data of 22 central banks from both developed and emerging market economies. Preliminary results show that the macroeconomic trilemma prevailed until the early 1970s. Floating exchange rates and/or capital controls worked as genuine shock absorbers, while central bank balance sheets partially mitigated the constraints of fixed exchange rates and capital account openness. Yet a more challenging situation has emerged with the 2nd financial globalization of the past 40 years, closer to a dilemma. Today, floating exchange rates are no longer sufficient to isolate the domestic money and asset markets from international shocks. Consequently, the shock absorbing role of central bank balance sheets has made a come-back since the 1990s and is now employed by fixing and floating countries alike. Central bank strategies have gone full circle. 

With a global security framework that mitigates interstate conflicts, nation-states establish a reputation of resolve by supporting foreign rebellions. Our theoretical predictions suggest that states with more targets are more likely to support foreign uprisings, and such groups experience higher political inclusion. Employing a dataset of over 280,000 ethnic group × sponsor state × target state × year observations, our analysis supports reputation-building using co-ethnicity narratives as a determinant of sponsor state activism and reveals that this mechanism results in political concessions within target states, benefiting groups connected to reputed potential sponsors. 

The emergence of high frequency trading has resulted in `bursts' of orders arriving at an exchange (nearly) simultaneously, yet most electronic financial exchanges implement the continuous limit order book which requires processing of orders serially. Contrary to an assumption that appears throughout the economics literature, the technology that performs serialization provides only constrained random serial dictatorship (RSD) in the sense that not all priority orderings of agents are possible. We provide necessary and sufficient conditions for fairness under different market conditions on orders for constrained RSD mechanisms. Our results show that exchanges relying on the current serialization technology cannot ensure fairness, including exchanges using `speed bumps.' We find that specific forms of constrained RSD ensure fairness under certain assumptions about the content of those orders but that the general case nevertheless requires unconstrained RSD. Our results have implications for the design of trading exchanges. 

We study the role of expectations of naive agents in a general equilibrium version of the Ramsey model with quasi-hyperbolic discounting. When agents recognize others' naivete, as strongly suggested by empirical evidence, they revise consumption paths, correctly anticipating prices in a resulting sliding equilibrium (perfect foresight). When agents are unaware of others' naivete, as is typically assumed in the literature, they revise both consumption paths and price expectations (quasi-perfect foresight). We prove the existence of sliding equilibrium under perfect foresight for the class of isoelastic utility functions. We show that generically quasi-hyperbolic discounting matters for saving behavior: sliding equilibrium under perfect foresight is observationally equivalent to some optimal path in the standard Ramsey model if and only if utility is logarithmic. We compare sliding equilibria under different types of foresight and show that perfect foresight implies a higher saving rate, long-run capital stock, and consumption level than quasi-perfect foresight.  

To investigate general patterns in news information in the US, we combine a protocol for identifying major political news stories, 11 monthly surveys, three different samples, and a model of news discernment. When confronted with a true and a fake news story, 47% of subjects confidently choose the true story, 3% confidently choose the fake story, and the remaining half are uncertain. Socioeconomic differences are associated with large variations in the probability of selecting the true news story. Partisan congruence between an individual and a news story matters too, but has an impact that is up to an order of magnitude smaller.

We study a reform of the French wealth tax that dramatically reduced the amount of information that taxpayers must self-report below a certain level of wealth. Combining administrative micro-data with dynamic bunching and difference-in-differences approaches, we find large behavioral responses to this switch to a low-information regime. The reform caused a 0.5 percentage points average decrease in the annual growth rate of wealth reported by treated taxpayers each year following the switch to the low-information regime. This reduction is driven by a 4 percentage points decrease for taxpayers bunching at the information discontinuity threshold. Consistent with opacity leading to lower compliance, treated households do not experience a real change in their (third-party) reported labor and capital income. The wealth tax base becomes much more elastic in the low-information regime, illustrating the first-order role of information policy choices for tax base elasticities. 

With commodities becoming international financial securities, commodity prices are a ffected by the international financial cycle. With this evidence in mind, this paper reconsiders the macroeconomic adjustment of developing commodity-exporting countries to changes in world interest rates. We proceed by building a model of a small open economy that produces a non-tradable good and a storable tradable commodity. The di erence with standard models of small open economies lies in the endogenous response of commodity prices which -due to commodity storage- adjust to variations in international interest rates. We find that the endogenous response of commodity prices amplies the reaction of commodity exporting countries to international monetary shocks. This suggests that commodity exporting countries are more vulnerable to unfavourable international monetary disturbances than other small open economies. In particular, through the commodity price channel, even those small open commodity-exporting economies that are disconnected from international financial markets can be aff ected by the international financial cycle. 

Measuring behaviors and preferences in times of conflict is of great interest for understanding conflict dynamics and designing conflict-resolution interventions. Yet, data users often cast doubts on the reliability of sensitive self-reported measures, especially in fragile contexts. This is the first paper to study sensitive experiences and preferences related to insecurity in a fragile State - Mali - by explicitly addressing potential response biases with a List Experiment (LE) method. We survey 1,500 individuals across the entire country and randomly assign respondents to answer sensitive questions through the LE or DQ (direct question) techniques, so as to measure response biases. We focus on three experience-related items (physical assault victimization, firearms' possession, willingness to engage in violence) and two preference-related items (support for the military regime and trust in the foreign armed forces in Mali). We find significant biases affecting responses about preference-related items. Our results confirm that popular support for the military regime and mistrust in the foreign armed forces is large, but response biases yield a substantial over-estimation of these prevalence rates. Misreporting is not uniformly distributed across the population, but varies depending on gender, education and conflict exposure. Further results suggest that such heterogeneity in response bias can yield fake significant correlations between individual characteristics and sensitive item's prevalence rates depending on the technique used.  

We analyze the equilibrium in the credit market when a bank and a lending platform compete to offer credit to borrowers. The platform does not manage deposit accounts, but acts as an intermediary between the borrower and the investor, offering a risky contract such that the investor is only reimbursed if the borrower is successful. We first characterize the optimal prices proposed by the platform, depending on the two-sided structure of the market. Then, we study the impact of bank-platform competition on the investor's incentives to fund platform loans and on borrower repayments. We show that the platform business model of financial intermediation may generate unexpected effects in the credit market. The investor participation in the platform may be reduced when the platform attracts borrowers of better quality. In addition, when the bank lowers borrower repayments, the platform may react by increasing them. The welfare effects of platform entry are not trivial, because it may reduce the average expected surplus of borrowers.

This paper presents a novel approach to analyze human decision making and decision quality in a setting in which fully rational decisions are ruled out due to cognitive constraints: chess. The identification approach contrasts human behavior with a computational benchmark of cognitively bounded rationality based on the algorithms contained in modern chess engines. The results document that behavioral deviations are not necessarily associated with worse performance. Additional evidence shows that behavior is related to asymmetric evaluation, time pressure, fatigue, and complexity. Faster decisions are associated with more frequent deviations, but also with better performance, suggesting that intuition and expertise might be important behavioral factors. 

This paper studies a Bayesian persuasion problem in a connected world. A sender wants to induce receivers to take some action by committing to a signal structure about a payoff-relevant state. I wonder how information provision is affected by a random network when signals are shared among neighbors. Receivers differ in their prior beliefs; the sender wants to persuade some receivers without dissuading the others. I present and characterize novel strategies through which the network is exploited. These strategies can prove useful if the network is sufficiently segregated. In such a case, connectivity can be beneficial to the sender. When some receivers are especially hard to persuade, exploiting the network becomes more attractive. A less informative signal structure which does not exploit the network is however preferred when the other receivers are especially hard to dissuade. Therefore, polarization has ambiguous effect on the informativeness of the optimal signal structure.

We estimate structural vector autoregressions (SVAR) models for four small open-economies (Australia, Canada, Norway and Sweden) to measure the effects of US and domestic monetary policy shocks on the bilateral (against the US dollar) real exchange rate. Our identification strategy combines block exogeneity (a classic feature of SOE SVARs) with sign-restrictions imposed directly on the coefficients of the domestic and US monetary policy rules. Our approach allows for simultaneous interactions between the exchange rate and the domestic and foreign policy rates. Our empirical results are consistent with Dornbusch’s overshooting hypothesis and UIP. In response to a contractionary domestic (foreign) monetary policy shock, the exchange rate appreciates (depreciates) strongly on impact, reaching its peak response immediately or shortly after the shock. The contribution of domestic and US monetary policy shocks to exchange rate fluctuations are roughly similar.

Auctions with endogenous rationing have been introduced to ensure proportionality of public support for renewables. Such (reverse) auctions reduce the auctioned volume below the volume put out to tender (or reduce the reserve price) when competition is low. However, we show that with costly participation, endogenous rationing strongly reduces participation, and this effect is independent of how much the volume is reduced. In a lab experiment, endogenous rationing reduces participation, the allotted volume, welfare, and support payments but there is no evidence of an increase in auctioneer’s surplus. We thus explore other options to achieve different auctioneer’s objectives. Optimal auction designs to maximize surplus or welfare, or to achieve volume goals reimburse all or all losing bidders for their participation costs but there is the usual trade-off between the objectives in choosing the optimal reserve price. In contrast, reducing participation costs contributes to all three objectives and helps ensure proportionality.

This paper investigates the inuence of corporate tax avoidance (CTA) on rm-level sales, and its aggregate implications. CTA gives a competitive advantage to avoiding rms, which aects the distribution of sales in the economy. Using three identication strategies, we nd a causal impact of CTA on sales in US rm-level data. In the US, CTA increased more among the largest rms, which has reinforced their dominant position. In key industries, trends in CTA rms explain 10%-30% of the increase in concentration from 1994 to 2017. Further analysis shows the impact of CTA-induced distortions on industrial output is relevant at a macroeconomic scale 

I show that the maritime shipping industry - handling above 80\% of global trade flows - has evolved over the past decades to systematically evade "corporate responsibilities,'' i.e., compliance with regulatory standards and potential tort liabilities. Shipping firms increasingly dissociated legal and ultimate ownership, fragmented assets in one-ship subsidiaries, used flags of convenience, and evaded end-of-life responsibilities with "last-voyage flags.'' Microeconomic tests confirm that responsibility evasion, amidst global competition, is a dominant motive behind these patterns. These findings have implications for our understanding of corporate social responsibility, of extended forms of liability, and of the "dark side'' of globalization.

We document that more than one third of employment and two-fifths of the wage bill in French manufacturing firms is in jobs performing service functions—i.e., neither production nor management— and that these functions gained importance over the period 1999-2015. We underline the role of the non-routine functions that are more prevalent in larger firms. Conditioning on firm size, their higher shares in employment are correlated with innovation, intangible capital, product complexity, higher total factor productivity and profitability. This suggests that firms use non-routine services to gen- erate within-firm knowledge and create firm capabilities. Consistently with empirical regularities, we model firms as organizations where production of higher-value added, complex goods requires within-firm knowledge workers to develop capabilities. 

Labor markets reward the most talented workers through high wages and beneficial transitions, and the opposite occurs for the most unproductive ones. These casual observations relating worker flows and ability or match quality find empirical support: the unemployment rate and wage inequality have highly significant, positive and concave relation over time and across states in the US. Job finding rates and Job-to-job transitions also share this common pattern. We rationalize these facts through employer hiring selectivity in a non-sequential search model with on-the-job search. Most qualified applicants, either unemployed or employed, have higher chances to be hired, especially when unemployment is high. Employer selectivity also generates a general equilibrium composition effect affecting inequality. We estimate our model using CPS worker flows and wages data via Generalized Method of Moments. We also analyze the social planner problem, and we show that a regressive taxation should be implemented to increase efficiency in this setting, since highly productive matches spur vacancies and create a positive externality to the whole market. 

An understanding of (gender) differences in non-monetary work conditions is fundamental for a complete characterization of individuals’ well-being at work, that is, to fully characterize gender inequalities in the labor market. We examine one such condition—meaningful work—using nationally representative survey data linked with worker and employer administrative data. We document a large and expanding gender gap in meaningful work, wherein women experience their jobs as more meaningful than men do. We find little support for explanations based in labor market decisions related to first parenthood or to women’s under-representation in leadership jobs. Instead, the gap appears to be largely driven by sorting of more women into jobs with a high level of beneficence—the sense of having a prosocial impact. While both women and men experience such jobs as more meaningful, women do so by a larger margin, that may result from an alignment between beneficence and the stereotypical female role. Turning to implications, we explore how much a female advantage in meaningful work compensates for the female wage disadvantage. While the gender gap in meaningful work compensates for about one-third of the gender wage gap in the lower half of the wage distribution, it is insignificant in the upper half, where the gender wage gap is most pronounced. We also uncover suggestive evidence linking men’s lower experience of meaning at work to the political trend of grievance-based mobilization for the populist radical right, pointing to political implications of gender differences in meaningful work. 

TBA

Does the complexity of multinational enterprises’ (MNEs) ownership structure serve tax avoidance? We use cross-country firm-level data to show that affiliates belonging to more complex MNEs are more likely to bunch around zero profit, consistent with complexity enabling tax avoidance by multinational firms. Our results show that only more complex MNEs shift profits away from their high-tax affiliates, while MNEs with flat ownership structures do not display such pattern. Our analysis also shows that affiliates directly held through tax havens are more likely to report zero profit than other affiliates in more complex MNEs.

We consider a buyer who conducts a procurement auction to award a contract to one or more suppliers that specifies a price at which she can buy from these suppliers. Suppliers might fail to deliver. If contract suppliers fail to deliver, the buyer tries to source from non-contract suppliers but has little bargaining power due to time pressure.

The mitigation of supply risks plays an important role in procurement practice but attracted little attention in the academic analysis of procurement auctions. Academic research on multi-sourcing procurement auction typically analyzes these auctions as stand-alone events. In contrast, we consider the influence of the auction design on the post-auction market structure.

First, we show increasing the number of contracts does not only reduce the supply risk but also induces more aggressive bidding. The increase makes the post-auction market more competitive such that being a non-contract supplier becomes less attractive.

Second, if suppliers are heterogeneous regarding their disruption probabilities, less reliable suppliers bid more aggressively than their more reliable competitors causing an adverse selection problem. We show that attracting an additional supplier might lower the buyer's expected profit. However, we also show how the buyer can adjust the auction design to benefit from an entrant.

What is the long-term impact of forced labor migration in colonial times on fertility preferences and behaviors in Africa? We study the case of Burkina Faso, the largest labor reservoir in French West Africa according to colonizers, who sent hundreds of thousands of young men to work in neighboring colonies for one to two years. Circular labor migration persisted after forced labor was replaced with voluntary wage employment: Burkina Faso is still characterized by large temporary migration flows to Cote d'Ivoire. We exploit the historical, temporary partition of colonial Burkina Faso (and, more specifically, the historical land of the Mossi ethnic group) into three zones with different needs for labor as a spatial regression discontinuity design. We find that, on the side of the border where Mossi villages were more exposed to forced labor, there is more male migration, lower realized and desired fertility, and less polygamy today. As these villages are not richer, these long-term effects cannot be explained by an income effect. Rather, they are consistent with the view that paid work opportunities outside the village disrupted traditional societies. Specifically, wage employment opportunities for adult men outside the sphere controlled by village elders reduced inequalities between men and the needs for child labor. These findings contribute to the debate on the origins of family institutions and preferences, often mentioned to explain West Africa's exceptional fertility trends, showing that social norms on family formation can change if modes of production change. 

Art is often presented as an investment of last resort or a potential safe haven in times of political or financial distress. Yet, as no study has focused on the performance of art markets in times of crisis, this paper fills this gap by means of unclosing historical auction archives. We trace the longterm performance of the UK art market, which we relate to periods of crisis such as the World Wars, economic recessions, inflationary periods, and changes in monetary policy. By constructing an art price index from 1908 to 2016, we show that the value of British art expanded more than seven-fold over this century. We classify crises into economic & financial crises, systemic ones, and war periods. The results show that art outperformed equities and other financial assets in war times, which implies that it could serve as a hedge against political uncertainties. However, in times of economic and financial crises the art market underperformed the equity market. We also detail changes in art preferences for specific paintings’ sizes, art schools, art objects’ liquidity, art (price) segments, and art(ist)’s nationality across crises.

Using thirty years of municipal elections in France, we show that election results affect the share of immigrants across municipalities. In municipalities where a left- instead of right-wing mayor has been elected, the share of non-European immigrants in the population grows faster by 1.5 p.p. within six years after the elections, and by 3 p.p. within twelve years. To a large extent, these effects reflect partisan differences in public housing constructions and changes in composition of the population within existing public housing units. We find no evidence that the adoption of partisan public housing policies bears an electoral cost. In contrast, they appear to be associated with greater incumbency advantage in the longer run, in line with a model of electoral reshaping.

Post-disaster aid aims to relieve affected communities, but excessive bailouts may deter economic activity from adapting by moving away from exposed areas. We provide new empirical and theoretical evidence on post-disaster policies' spatial consequences related to political motives. Using the exogenous variation in the timing of hurricanes relative to Election Day in the US, we show that hurricanes close to Election Day lead to oversized post-disaster grants and, consequently, lead to larger populations in the impacted areas. To quantify and comprehend the implications of this new sorting pattern for the aggregate economy, we introduce the relationship between political cycles and post-disaster policies as a new feature in a dynamic spatial general equilibrium model.

Combining French firm-level administrative, customs and patent data over 1995-2012, and using a difference-in-differences identification strategy with a staggered treatment design, we show that entry by a French firm into a new export market increases its patents' citations received from that destination. The citations generated by the entry are also of higher quality. These citations, linked to the new export relationship, happen both inside and outside of global value chains. Moreover those technological spillovers are stronger for French firms with higher quality patents and in destination countries technologically close to the firm. 

We investigate the real effects of mandatory climate-related disclosure by financial institutions on the funding of carbon-intensive industries. Our impact metric is the amount invested into securities, bonds and stocks, issued by fossil fuel companies. A French law, which came into force in January 2016 in the aftermath of the Paris Agreement on climate change, provides us with a quasi-natural experiment.  The new regulation, unique in Europe at that time, requires institutional investors (i.e., insurers, pension funds and asset management firms), but not banks, to report annually on both their climate-related exposure and climate change mitigation policy. Using a unique dataset of security-level portfolio holdings by each institutional sector in each euro area country, we compare the portfolio choices of French institutional investors with those of French banks and all financial institutions located in other EA countries. We find that investors subject to the new disclosure requirements curtailed their financing of fossil energy companies compared to investors in the control group.

We use French firm-level data to study the role of multinational enterprises' (MNEs) presence tax havens in determining the dynamics of the aggregate labor share and therefore, income inequalities between workers and capitalists. Given these firms’ weight in the economy, we find that tax haven presence of MNEs accounts for a 5% of the observed increase in the aggregate share of labor in France between 1997-2014. Implementing a difference-in-differences we analyze the effect of firm entry in a tax haven on firms' labor share of value added and each of its components. We find that average firm labor share in France experiences an increase by 2.2% over the immediate years following the establishment in a tax haven. We argue that the labor share of MNEs with presence in tax havens is overestimated given that tax  optimization partly consists in artificially shifting profits to low tax jurisdictions, thus underestimating domestic value added, which experiences an average drop by 11.1%. Indeed, the labor share increases even if its numerator, total wage bill, decreases on average by 8.8% when MNEs enter a tax haven. Additionally, the total wage bill drop is explained by a strong decline in employment (-8.6%) rather than a decline on average firm wages, on which there is no statistically significant effect. This means that the effect of firms' usage of tax havens on workers goes beyond the underestimation of their share of income. Finally, we implement a panel event study design to show that our estimates capture the tax entry effect and not differential trends between treated and control units. 

 This paper studies the effects of a desegregation policy consisting in closing down a middle school located in a deprived neighborhood and reallocating its students to other middle schools in the city. I analyze the direct effects on students from deprived neighborhoods (the “movers”), as well as the indirect peer effects on incumbent students in receiving schools (the “receivers”). In both cases, I make use of the staggered closure of middle schools in cities all over France as well as of the availability of control cities, and I compare cohorts of students before and after closure. Exhaustive administrative panel data at the student level allow me to account for potential selection of the movers into receiving middle schools as well as for a potential “rich flight” of the receivers by using the predicted middle school students should attend instead of the actual one. This also allows me to study how the direct and indirect effects of the policy vary with the proportion of new comers in the receiving schools. I find that a school closure leads to a decrease in the probability of dropping out of school after middle school for the movers that is driven by boys and students from low socioeconomic status (SES). Crucially, the probability of dropping out also decreases for the receivers for the same groups of students. The effects on the movers are observed despite a small increase in class size and while no effect on class size is found for the receivers. The effects on low-SES receivers are consistent with ranking effects being stronger than disruption effects. On the contrary, for high-SES receivers, I find a decrease in the probability of attending an academic high school that does not vary with the proportion of new comers. For them the data show evidence of a “rich flight” to the private system that can explain the previous effect while changes in classmates characteristics are unlikely to explain it.

This paper studies a game of attack and interception in a network, where a single attacker chooses a target and a path, and each node chooses a level of protection. We show that the Nash equilibrium of the game exists and is unique. It involves a mixed strategy of the attacker except when one target has a very high value relative to others. We characterize equilibrium attack paths and attack distributions as a function of the underlying network and target values. We also show that adding a link or increasing the value of a target may harm the attacker — a comparative statics effect which is reminiscent of Braess’s paradox in transportation economics. Finally, we contrast the Nash equilibrium with the equilibria of two variations of the model: one where nodes make sequential protection decisions upon observing the arrival of a suspicious object, and one where all nodes cooperate in defense.

Increasing attention has been given to the fact that some multinational enterprises shift income to tax haven countries, an activity that generates inequality in corporate taxation. Here, we examine how profit shifting relates to wage inequality.  Using rich matched employer-employee data from Norway, we find that profit-shifting firms pay higher  wages,  particularly  among  service  firms  where  the  wage  premium  is  approximately 2%. Furthermore, this average effect masks significant within-firm heterogeneity with high-skill occupations – and managers in particular – earning higher shifting wage premiums. CEOs particularly gain, with their wages rising nearly 10%. These results thus suggest that profit shifting by multinationals meaningfully contributes to wage inequality, both between and within firms. Finally, our back-of-the-envelope calculations suggest these higher wages would generate additional income tax revenues which would offset around 3% of the fall in Norway’s corporate tax revenues due to profit shifting.

This paper investigates the role of sectoral reallocations in the divergence of productivity in Europe, based on a database for 33 sectors and 14 countries between 1995 and 2015.Using the contribution of sectoral productivity growth to Total Factor Productivity (TFP) dynamics at the country level, we highlight that variations in the relative size of sectors –less productive sectors growing relatively to more productive ones have been at the origin of variable productivity losses in main European countries. Parallel to this divergence, European countries experienced heterogeneous real estate price dynamics, which took the form, in some economies, of massive boom bust cycles. We investigate real estate shocks as a potential source of sectoral reallocations through a collateral mechanism. These shocks turn out to be a strong driver of productivity divergence between European countries.

How do estimates of firm-level markups that rely on production function estimations depend on common data limitations? With a tractable analytical framework, simulation from a quantitative model, and firm-level administrative production and pricing data, we study biases due to the use of revenue instead of quantity, and due to production function misspecification. Estimates from revenue mismeasure the level of markups, but do contain useful information about true markups. Conversely, misspecified production functions have little effect on the estimated average markup but reduce their information content. Finally, revenue and quantity markups display similar correlations with variables such as profitability and market share in our data.

As a complement to the federal EITC, some states offer their own EITC, typically calculated as a percentage of the federal EITC. In this paper, we analyze the effect of state EITC on education using policy discontinuities at U.S. state borders. Our estimates reveal that an increase in state EITC leads to a statistically significant drop in high school completion. We then use a life-cycle matching model with directed search and endogenous educational choices, search intensities, hirings, hours worked, and separations to investigate the effects of EITC on the labor market in the long run and along the transitional dynamics. We show that a tax credit targeted at low-wage (and low-skilled) workers reduces the relative return to schooling, thereby generating a powerful disincentive to pursue long-term studies. In the long run, this results in an increase in the proportion of low-skilled workers in the economy, which may have important implications in terms of employment, productivity, and income inequalities.

Immigrant supply shocks are typically expected to reduce the wage of comparable workers. Natives may respond to the lower wage by moving to markets that were not directly targeted by immigrants and where presumably the wage did not drop. This paper argues that the wage change observed in the targeted market depends not only on the size of the native response, but also on which natives choose to respond. A non-random response alters the composition of the sample of native workers, mechanically changing the average native wage in affected markets and biasing the estimated wage impact of immigration. We document the importance of this selection bias in the French labor market, where women accounted for a rapidly increasing share of the foreign-born workforce since 1976. The raw correlations suggest that the immigrant supply shock did not change the wage of French women, but led to a sizable decline in their employment rate. In contrast, immigration had little impact on the employment rate of men, but led to a sizable drop in the male wage. We show that the near-zero correlation between immigration and female wages arises partly because the native women who left the labor force had relatively low wages. Adjusting for the selection bias results in a similar wage elasticity for both French men and women (between -0.8 and -1.0).

Good peers may help you learn, but they may also steal the spotlight. We use the panel of chess players participating in the French club championship to provide evidence on this trade-off. With an instrumental variable strategy based on club closures, we show that good clubmates help players improve, but only when they do not monopolize the (good) opportunities to play. Therefore, positive externalities are masked by competition for players at the bottom of the club distribution. This mechanism seems particularly relevant for juniors, who enjoy a steep learning curve but suffer from peer competition in the short-run and are only able to reap benefits from better peers in the long run.

Measuring substitution patterns across differentiated products is at the heart of many empirical studies. Most of the approaches used in applied work, including the leading approach pioneered by Berry, Levinsohn, and Pakes (1995) (BLP), impose distributional and functional form assumptions that may restrict substitution patterns in the space of product characteristics. In this paper, I propose a flexible approach that avoids making arbitrary assumptions on the way substitution patterns depend on product characteristics. I show that my approach yields substitution patterns that BLP cannot recover, including complementarity in demand. I further show that the inverse demand model I rely on is consistent with utility maximization by heterogeneous consumers. My approach can be applied to topics in various fields of economics, such as digital economics, industrial organization, and international trade, to address policy-relevant questions such as the effects of mergers or regulatory changes in taxes and trade policy.

Despite long-standing theoretical interest, empirical attempts at investigating the appropriate level of decentralization remain scarce. This paper develops a simple and flexible framework to test for the presence of public good spillovers between fiscally autonomous jurisdictions and to investigate potential welfare gains from marginal fiscal integration. We build a quantitative spatial equilibrium model with many local jurisdictions, mobile households and endogenous local public goods causing spillovers across jurisdictional boundaries. We show how one can exploit migration and housing price responses to shocks in local public goods at different geographic scales to reveal the intensity of spillovers. Applying our framework to the particularly fragmented French institutional setting, we structurally estimate the model using a unique combination of municipal administrative panel datasets. Estimation relies on plausibly exogenous variations in government subsidies to instrument changes in the supply of public goods. We find that public goods in a municipality account for 4--11% of the local public good bundle enjoyed by its residents, and that public goods in each neighbor municipality account for an average 3.2--3.5% of this bundle. Finally, we simulate the effect of a reform increasing fiscal integration and find substantial welfare gains. 

How does import protection affect export performance? In trade models with scale economies, import liberalization can reduce an industry’s exports by cutting domestic production. We find this export destruction mechanism reduced US export growth following the normalization of trade relations with China (PNTR). But there was also an offsetting boost to exports from lower input costs. We use our empirical results to calibrate the strength of scale economies in a quantitative trade model. Counterfactual analysis implies that while PNTR increased aggregate US exports relative to GDP, exports declined in the most exposed industries because of the export destruction effect. On aggregate, the US and China both gain from PNTR, but the gains are larger for China. 

I study how competition affects the role of reputation in encouraging sellers to exert effort. First, I model the reputation-building process in a frictional marketplace. Here, the relative number of buyers and sellers affects how the two sides of the market share the surplus from a match. With more competitors, sellers exert less effort since their share of transactions’ surplus is lower. Then, I test this prediction by exploiting the introduction of a rental regulation on Airbnb. More competition significantly depresses ratings about effort. To address rating inflation and selection of guests, I provide an estimation of hosts’ effort exploiting the relationship between different categories of ratings reported by the same guests. The negative impact of a 10 percent increase in the number of competitors is equivalent to the variation from the 80th to the 20th percentile of the estimated effort distribution. 

Recent evidence demonstrates that the perceived, not the actual, level of income inequality influences the redistribution policy. The perception of inequality, as conceptualized in this paper, is closely related to both objective inequality and prospect equality. An axiomatic system of individual preferences is suggested and demonstrated to characterize an index of perceived inequality. Prospect equality reflects the individual ideal level of equality, and it serves as a reference point for perception. I adopt the proposed notion to study voting on redistribution. I theoretically identify the conditions under which a more equal society will demand redistribution while a less equal society blocks redistribution. These insights help explain the redistribution puzzle observed across nations.

The Mexico City Policy (MCP) prohibits different agencies of the United States (including USAID) from providing aid to international non-governmental organizations that provide abortion-related services. Since 1984 the MCP has been active during Republican Administrations. It induces large decreases and changes in US funding to family planning programs. This paper examines how other donors adjust their own allocation for family planning aid in reaction to the MCP. To do so, I develop an instrumental strategy based on the timing of the MCP and on heterogeneity across recipient countries. If any things, despite international announcements, donors do not fill the decency gap. On the contrary, they tend to reinforce the effect of the MCP, leading to a large decrease in family planning supply that should affect reproductive and maternal health.

We show, using instrumental variable estimations on French administrative data from 1995 to 2018, that labor market concentration deepens inequality between jobs: in a local labor market having a high concentration equal to the average level in manufacturing, the gini coefficient and the 90/10 ratio would be higher by 13%, compared to a market with a lower concentration equal to the average level in services. Two hypotheses could explain those results. The first is that with increased concentration, larger employers can impose a more demanding selection process, improving sorting and generating "efficient" inequality. A second hypothesis is that an increased concentration is relatively less detrimental for better paid jobs which depend more on individual factors such as competence scarcity, therefore resulting in "inefficient" inequality. Whereas the effect on within-firm inequality (dispersion of wages of jobs in a given firm) supports the bargaining power hypothesis, the effect on between-firm inequality (dispersion of firms' average wage) is consistent with the two hypotheses. We find that labor market concentration increases both types of inequality. However, we then show that, except for the top 1%, all percentiles of jobs along the wage distribution suffer from a negative effect of concentration, which is not consistent with the sorting hypothesis. Overall, our results point to labor market concentration generating inefficient inequality by undercutting relatively more the bargaining power of the lowest earners, allowing employers to extract a higher rent from the lowest paid jobs. 

The optimality of deductible contracts is a fundamental and robust result of insurance theory (Arrow (1963, 1971), Raviv (1979)). By generalizing the model of Ehrlich and Becker (1972) - which combines insurance and self-insurance opportunities - to a context involving n states of the world instead of two states, we show that the optimality of franchise contracts generalizes.

However, if the insurer cannot observe the policyholder's behavior of self-insurance, the optimal insurance design is no longer a straight deductible contract.

If the insurer overestimates the policyholder's self-insurance effort, the second-best insurance contract requires an increasing deductible. Symmetrically, a decreasing deductible is required when the insurer underestimates the policyholder's self-insurance investment. These results justify the presence of self-insurance clauses in insurance contracts.

In this work we introduce a general equilibrium model with landlords, indebted owner-occupiers and renters to study housing markets’ dynamics. We estimate it by using standard Bayesian methods and match the US data of the last decades.  This framework is particularly suited to explain current trends on housing markets. We highlight the crucial relationship between interest rates, house prices and rents, and argue that it helps understanding the main driving forces. Our analysis suggests that current developments on housing markets can play a role for a recovery from the Covid pandemic as they have an expansionary effect on aggregate output. Moreover, we account for the heterogeneous impact of crisis-induced policies depending on agents’ status on the housing market. We show how, despite an increase in housing prices, the welfare of landlords has been negatively hit. This is associated to the joint decrease in returns on housing and financial assets that reduces their financial incomes.

Current account regressions show that when top income shares are added to the comprehensive set of conventional explanatory variables used by the IMF, they predict significantly larger current account deficits in a cross-section of advanced economies, but with important outliers among countries that have pursued export-led rather than  finance-led growth strategies. To study this mechanism, we develop a DSGE model where the income share of top earners increases at the expense of bottom earners. Due to preferences for wealth, top earners have a much higher marginal propensity to save than bottom earners, as they do in the data. We find that, when the redistributive shock has a large positive effect on asset values, and if domestic financial markets are large, the result will be a sizeable current account deficit. On the other hand, when the redistributive shock mostly affects relative labor incomes, and if domestic financial markets are small, the result will be a current account surplus.

In this paper, we propose to take advantage of the implicit cognitive exercise available in standard Labor Force Surveys in order to reconsider the relation between poverty (aka financing constraints arising from low wages in our setting) and cognitive burden that is debated in Carvalho et al. (2016) or Mani et al. (2020) (among others). To be precise, survey respondants are requested to report the monthly equivalent of their wage, which allows measuring the amount of "mental bandwidth" that is allocated to retaining this information. In our dataset, self-reported amounts can be compared with their fiscal counterparts, thus allowing for measures of accuracy, bias, and information coarsening that are based on a flexible structural mixture model, estimated by standard ML/EM techniques. We obtain that workers tend to perceive their own wages with a volatility premium of around 11% whatever the baseline volatility of their wage, which suggests that workers facing higher baseline volatility tend to exert more effort to gather information such that their volatility premium is not larger. Through the lens of a simple rational signal extraction model (Gabaix, 2018), this amounts to estimates of workers' attention ranging between 20% and 70% depending on education, skills or gender. Last and most importantly, we show that the attention of the 20% lowest-wage workers is cyclical and increases (by 20 percentage points) in the ten days preceding payday, before dropping instantaneously at that date. This pattern is suggestive of the cognitive cost induced by tight "end-of-month" financing constraints.

We revisit the problem of optimal insurance contract design under risk and ambiguity in an optimal control framework where the indemnity function and the premium are to be solved for simultaneously. Our approach generalizes the analyses carried out so far in the context of the smooth ambiguity model. We  prove the existence of an optimal insurance policy under the standard assumption of a risk-averse policyholder and a risk-neutral insurer, both of whom can  be averse or neutral to ambiguity. We characterize not only the risk-sharing but also the ambiguity-sharing rule between an insurer and a policyholder. Under one-sided ambiguity aversion, we show that a straight deductible policy cannot be optimal. Revisiting the model of Raviv (1979) as a special case, we complete his analysis by showing directly that an upper limit coverage cannot constitute a Pareto optimum in the presence of a risk-neutral insurer and positive indemnity provision cost.

This paper explores a mechanism by which illicit trade, trade of products conflicting with regulations and norms, takes part to licit global value chains in the extractive industry. Secretive territories, defined as « legal havens », provide opacity services that disconnect products from their illicit origin and enable illicit minerals to be used as components in various downstream industries. I define and measure this new concept of legal havens using data on jurisdictions legal framework. Using the Dodd-Frank Act as a natural experiment, I show that following a decrease in opacity, legal havens become less attractive destinations for countries exporting conflict minerals. This targeted transparency regulation causes 16.8 percentage points decrease of export shares to legal havens from Africa’s Great Lakes region.

This paper studies the interplay between a poor and a rich country when they compete sequentially over corporate taxes and environmental regulations to attract imperfectly mobile firms. The countries also have different levels of environmental awareness. We show that in general, the poor country undercuts the rich country in terms of corporate taxes. The poor country chooses to be both a tax and pollution haven when it is less concerned about the environment than the rich country is and capital integration is low. The rich country never has the incentive to be both a tax haven and a pollution haven. Interestingly, at equilibrium, the poor country rarely does better in terms of welfare than the rich country. Finally we find that higher capital mobility narrows the tax gap between the rich and the poor country but does not affect the optimal environmental policy: tax competition immunizes countries against the detrimental effect of globalization on environmental standards.

Based on French firm-level data over 15 years we evaluate the contribution of the microlevel profit shifting –- through tax haven foreign direct investments (FDI), may it be in or outward -- to the aggregate productivity slowdown in France and the role that intangible investments play in this relation. We show that firm productivity in France experiences a decline over the immediate years following the establishment in a tax haven, with an average estimated drop by 3.5% in labor productivity. We argue that this productivity decline, following a presence in a tax haven, is most likely explained by MNEs’ fiscal optimization, where domestic productivity is underestimated as profits are not recorded anymore in the home country. The fall in productivity is especially strong for firms that are intensive in intangible capital and is equivalent to 4.1% (versus 2.7% for low intangible intensive firms), reflecting the fact that these type of assets are more easily transferred across countries and facilitate fiscal optimization. Our results additionally suggest that the mismeasurement has strong dynamic effects, as the decline becomes more important the longer the firm remains in a tax haven. Due to possible attenuation biases, we argue that our estimates provide a lower bound of the productivity mismeasurement. Finally, given these firms’ weight in the economy, our results imply an 8% loss at the aggregate in terms of the level of the labor productivity throughout the whole sample period, which is equivalent to an annual loss of 9.7% in terms of the aggregate annual labor productivity growth.

This paper investigates the interplay between labour mobility and education in Europe. We observe that economic cycles and education both matter in the understanding of labour mobility in Europe. In that light, we use a two-country overlapping generation model comprising labour mobility, heterogeneous agents investing in education and fluctuations to reassess the value of labour mobility as an adjustment mechanism in a currency area. We show that, if agents are mobile, short-term asymmetric shocks lead to a population-wide upgrade in skills. Indeed, in a depressed economy the possibility to migrate provides an outside option for agents willing to pay a migration cost. It reinforces incentives to educate and be more skilled in order to pay for such option if needed. A skill-biased migration pattern is also the result of this mechanism. Using the OECD migration database we provide empirical evidence confirming some of the theoretical assumptions and results. Finally, using a simulation of the model, we illustrate the trade-off between the skill-upgrade effect and the size of migration flows, the persistence of shocks and the effects on inequality.

We study the interplay between intragenerational and intergenerational equity in an economy with two countries producing and consuming from national capital stocks. We characterize the sustainable development path that a social planner would implement to achieve intertemporal egalitarianism. If intergenerational equity is defined with respect to the global consumption of each generation, regardless of its distribution between countries, consumption in the poor country should be set as low as possible to maximize investment and hasten convergence, resulting in important intragenerational inequalities. When social welfare accounts for intragenerational equity, the larger the intragenerational inequality aversion (IIA), the smaller the sacrifice asked of the poor country, but the lower the sustained level of generational welfare. Along the intertemporal welfare-egalitarian path with IIA, consumption in the poor country increases, while it decreases in the rich country, resulting in a global degrowth.

We study optimal lockdown decisions taken by a policymaker facing a pandemic affecting its society which is modelled according to the standard SIR deterministic model of a pandemic. The policymaker wants to trade-off between the economic costs of lockdown and the mortality record of the pandemic which depends on the extent of lockdown. The policy instrument is the degre of strictness of lockdown which affects the dynamics of the pandemic through the control of social distancing and interactions. We study the SIR model in four configurations: no intervention, an active lockdown policy, a variant including hospital capacity constraints and a variant including the finding and administration of a vaccine at a future date. We highlight the impact of the timing of action, depending on cross-derivatives in the infection dynamic equation between the lockdown decision, the date of decision and the date of termination of the pandemic. We show that in the presence of hospital capacity constraint, there is a large intermediate range of "values of life" for which the optimal lockdown policy consists in exactly saturating the hospital capacity constraint.

How and why does a country become a tax haven? In my paper, I develop a new quantitative analysis to explain the onset of tax havens. Using specialized sources written by tax experts, I develop a new dataset that traces back the offshore legal history of tax havens until the mid-19th century. For each country recognized as a tax haven, I collect the year and purpose of each legal reform that aims at making it a tax haven, or aims at reinforcing it. I first propose new facts on the emergence of tax havens in the 20th century. I rationalize these trends into a theoretical framework where the rise of tax havens is seen as the result of the emergence of a worldwide market for tax havens. In particular, the introduction of modern taxes fueled the demand for tax havens’ operations. My empirical analysis confirms the role of demand and explores the determinants that, associated with increasing demand, participated to the emergence of the offshore world.

We explore jointly the implications of financial constraints and firm-level heterogeneity in shaping the impact of financial shocks on investment, both at the micro and aggregate levels. We investigate the heterogeneous response of investment to local real-estate prices in the universe of French firms over 2000-2015. We instrument local real estate prices and control for various firm-, industry-level, and local determinants to find that investment by bigger/more productive firms react 2 to 3 times less to a relaxation of financial constraints. In a second step, we combine these results with CompNet data for several EU countries to infer a firm-level distribution of elasticities of investment to real-estate shocks across countries. This exercise provides a micro-founded exploration of the heterogeneity of the financial accelerator across the considered countries, directly related to the differences in firms’ size/performance distribution. The policy implications are important, especially for Euro Area members.

We experimentally investigate the effect of learning on ambiguity attitudes, using decision situations where subjects have the opportunity to sample from an unknown distribution before betting on it. Varying the number of draws prior to choice, while explicitly controlling for beliefs, allows us to “scan” ambiguity attitudes in the presence of differing amounts of information. Our main finding is that as sample size decreases, people exhibit more pronounced ambiguity attitudes: they are more ambiguity averse for likely events, and more ambiguity seeking for unlikely events. This finding emerges under various decision- theoretic models – including prospect theory and the smooth ambiguity model – and whether beliefs are separately elicited from choice or assumed to result from Bayesian updating. Our investigations also suggest that, though ambiguity attitude becomes more neutral as sample size increases, it does not vanish at very large sample sizes.

This paper analyzes the implications for the banking sector and the real economy of introducing a central-bank digital currency. We consider a central-bank digital currency that is potentially interest bearing and competes with bank deposits; i.e., agents can use both currency and bank deposits to conduct transactions in the goods market. Banks are endowed with an investment technology and a monitoring technology. Banks’ monitoring choices determine the level of riskiness of their investment. Because monitoring is costly for banks, the level of monitoring is inefficiently low from a social point of view. We show that the introduction of an interest-bearing central bank digital currency can force banks to increase their monitoring level, hence reducing their risk taking and resulting in increased output. The introduction of a central-bank digital currency is generally welfare improving.

Many decisions taken by households involve some risk. Risk situations for households are both characterised by the risk to the household but also by individual risk. We study for the case of spouses, how individual versus household risk preferences interact in an experimental paradigm. 202 co-habiting spouses (101 couples) participated in a controlled experimental risk taking task. We focus on a household risk task, in which spouses face the choice between an option in which risk is correlated (high household risk, low inequality among spouses) and an option allowing for hedging (low household risk, high inequality among spouses). We show that spouses are mainly influenced by household risk and do not react to inequality as long as payoffs are symmetric. However when payoffs become asymmetric, because one of the spouses risk is reduced, we observe a change in preferences. Specifically our results suggest that households put a higher weight on men’s individual risks. We further observe that married couples put a higher weight on expected utilities from joint household payoffs.

Domestic outsourcing has grown substantially in developed countries over the past two decades. While some studies document its implications for earnings inequality, very little is known regarding the drivers of this phenomenon. This paper addresses this question by studying the impact of the staggered diffusion of broadband internet on job outsourcing by French firms. We adopt an event study design and rely on employer-employee data. Our results confirm that broadband technology is skill-biased, since it increases firm productivity and the relative demand for high-skill workers. Further, we show that broadband internet led firms to outsource some non-core occupations to service contractors, both in the low and high skill segment. In both cases, we find that employment related to these occupations became increasingly concentrated in firms specializing inthese activities, and less likely to be performed in-house within firms specialized in other activities. Moreover, establishments become increasingly homogeneous in their occupational composition after the arrival of broadband internet, signaling that this technology fostered skill segregation. Finally, we provide suggestive evidence that high-skill workers experience salary gains from being outsourced, while low-skill workers lose.

This paper shows that the macroeconomic consequences of international migration are positive for OECD countries, and suggests that international migration produces a demographic dividend by increasing the share of the workforce within the population. The estimation of a structural vector autoregressive model on a panel of 19 OECD countries over the period 1980–2015 reveals that a migration shock increases GDP per capita through a positive effect on both the ratio of working-age to total population and the employment rate. International migration also improves the fiscal balance by reducing the per capita transfers paid by the government and per capita old-age public spending.

We present an alternative form of technical change within the traditional two-input framework. The aggregate production function is the convex hull of an increasing, finite number of Leontief production functions. At each date, each of these local production functions mutates into two Leontief production functions: one featuring exogenously increased labor-augmenting productivity, the other featuring exogenously increased capital-augmenting productivity. We embed this model of technical change into an otherwise standard, discrete-time Solow model. We do not specify technical change as purely labor-augmenting; still, it comes out that this modified Solow model has a globally stable balanced growth path. Along this path, technical change jointly determines the growth rate, capital-output ratio, and marginal productivity of capital and the competitive factor shares. 

This paper studies the evolution of language in the process of nation-building. We provide the first empirical evaluation of the determinants of the homogenization of language in nation-building. The emergence of nation-states in the nineteenth century has been associated with a process of homogenization in order to spur national identity, trade, and the diffusion of ideas. In France, at the time of the French Revolution, less than fifteen percent of the population spoke standard French-a dialect of langue d’oil and only one of nine different languages and more than forty-five dialects spoken historically. Today, only French is spoken. In order to study this, we digitize a novel, detailed town-level dataset on spoken languages in France in 1900. We explore the role of state-sponsored education in a regression discontinuity framework exploiting quasi-experimental variation in school building and show that schools played a substantial role in the adoption of standard French language. Finally, we shed light on mechanisms and suggest that local elites and secular public education were important vectors of homogenization.