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The neoclassical growth model predicts large capital flows towards fast-growing emerging countries. We show that incorporating fertility and longevity into a lifecycle model of savings changes the standard predictions when countries differ in their ability to borrow inter-temporally and across generations through social security. In this environment, global aging triggers capital flows from emerging to developed countries, and countries’ current account positions respond to growth adjusted by current and expected demographic composition. Data on international capital flows are broadly supportive of the theory. The fact that fast-growing emerging countries are also aging faster, while having less developed credit markets and pension systems, explains why they are more likely to export capital. Our quantitative multi-country overlapping generations model explains a significant fraction of the patterns of capital flows, across time and across developed and emerging countries.

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In this paper I study the relation between self-employment and the tax rates on wages and on self-employment income. Using variation in the statutory tax rates across countries, industries, and occupations, I find that while the share of self-employed is strongly positively correlated with the tax rate on wage income, it is weakly negatively correlated with the tax rate on self-employed income. The asymmetry between the effects of the tax rates suggests that those who choose self-employment partly do so in order to evade taxes. This extensive margin of adjustment – between employment and self-employment – should be taken into account when considering the effects of tax rates on labor income, on taxable income and on welfare.

in American Economic Journal: Macroeconomics Publication date 2018-01
SIEGEL Christian
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We document that job polarization—contrary to the consensus—has started as early as the 1950s in the United States: middle-wage workers have been losing both in terms of employment and average wage growth compared to low- and high-wage workers. Given that polarization is a long-run phenomenon and closely linked to the shift from manufacturing to services, we propose a structural change driven explanation, where we explicitly model the sectoral choice of workers. Our simple model does remarkably well not only in matching the evolution of sectoral employment, but also of relative wages over the past 50 years.

Publication date 2015-12
HALKET Jonathan
NESHEIM Lars
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Using the English Housing Survey, we estimate a supply side selection model of the allocation of properties to the owner-occupied and rental sectors. We find that location, structure and unobserved quality are important for understanding housing prices, rents and selection. Structural characteristics and unobserved quality are important for selection. Location is not. Accounting for selection is important for estimates of rent-to-price ratios and can explain some puzzling correlations between rent-to-price ratios and homeownership rates. We interpret this as strong evidence in favor of contracting frictions in the rental market likely related to housing maintenance.

Governments often take unpopular measures. To minimize the political cost of such measures policy makers may strategically time them to coincide with other newsworthy events, which distract the media and the public. We test this hypothesis using data on the recurrent Israeli-Palestinian conflict. Combining daily data on attacks on both sides of the conflict with data on the content of evening news for top U.S. TV networks, we show that Israeli attacks are more likely to be carried out when the U.S. news are expected to be dominated by important (non-Israel-related) events on the following day. In contrast, we find no evidence of strategic timing for Palestinian attacks. The timing of Israeli attacks minimizes the next-day news coverage which, as confirmed by comprehensive video content analysis, is especially charged with negative emotional content. We also find that: i) strategic timing is applied to retaliation only in periods of less intense fighting, when the urgency of retaliation is lower; ii) strategic timing is present only for the Israeli attacks that bear risk of civilians being affected; and iii) Israeli attacks are timed to newsworthy events that are predictable.

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We investigate the causal impact of broadband Internet on political participation using data from Italy. We show that this impact varies across different forms of political engagement and over time. Initially, broadband had a negative effect on turnout in national elections, driven by increased abstention of ideologically extreme voters. Meanwhile, however, broadband fostered other forms of online and offline participation. Over time, the negative effect was reverted due to the emergence of new political entrepreneurs who used the Internet to convert the initial “exit” back into “voice”. Overall, these nuanced effects underscore the general equilibrium dynamic induced by the Internet.

in The Economic Journal Publication date 2015-08
BUONANNO Paolo
PRAROLO Giovanni
VANIN Paolo
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With weak law-enforcement institutions, a positive shock to the value of natural resources may increase demand for private protection and opportunities for rent appropriation through extortion, favouring the emergence of mafia-type organisations. We test this hypothesis by investigating the emergence of the mafia in twentieth century Sicily, where a severe lack of state property-rights enforcement coincided with a steep rise in international demand for sulphur, Sicily's most valuable export commodity. Using historical data on the early incidence of mafia activity and on the distribution of sulphur reserves, we document that the mafia was more present in municipalities with greater sulphur availability.

Publication date 2019-01
KOESSLER Frédéric
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This paper proposes an equilibrium concept, Language-Based Expectation Equilibrium, which accounts for partial language understanding in sender-receiver cheap talk games. Each player is endowed with a privately known language competence which represents all the messages that he understands. For the messages he does not understand, he has correct but only coarse expectations about the equilibrium strategies of the other player. In general, a language-based expectation equilibrium outcome differs from Nash and communication equilibrium outcomes, but is always a Bayesian solution. Partial language competence of the sender rationalizes information transmission and lies in pure persuasion problems, and facilitates information transmission from a moderately biased sender.

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This note gives a new proof of Blackwell’s celebrated result. The result is a bit stronger than the classical version since the action set and the prior are fixed, and only the utility of the decision maker varies. I show directly that a decision maker has access to a larger set of joint distributions over actions and states of the world if and only if her information improves in the garbling order.

Publication date 2018-05
SKRETA Vasiliki
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We characterize a receiver-optimal test when manipulations are possible in the form of type falsification. Optimal design exploits the following manipulator trade-off: while falsification may lead to better grades, it devalues their meaning. We show that optimal tests can be derived among falsification-proof ones. Our optimal test has a single ‘failing’ grade, and a continuum of ‘passing’ grades. It makes the manipulator indifferent across all moderate levels of falsification. Good types never fail, but bad types may pass. An optimal test delivers at least half of the full-information value to the receiver. A three-grade optimal test also performs well.

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This paper analyzes the determination of global equity portfolios and stock returns in the context of imperfectly integrated stock markets. We consider a continuous-time, two-country endowment economy, where the level of financial integration is captured by a proportional tax on foreign dividends. Despite the investor heterogeneity induced by this tax, we obtain approximate closed-form expressions for asset prices, and characterize equity holdings and the joint process followed by country-level stock returns in equilibrium. Our model is consistent with a broad range of empirical findings on international financial integration. When the (endogenous) cross-country return correlation is high, small frictions in equity markets can generate a substantial home bias in portfolios. In the baseline version of our model, the cross-country return correlation is driven by the fundamental correlation and portfolio rebalancing. In a two-good extension of the model, the adjustment of relative good prices can generate a high stock return correlation even for a low level of fundamental correlation, magnifying the impact of the financial friction on portfolios. We assess the quantitative performance of the model in a calibration exercise using data from G7 countries.

in Journal of International Money and Finance Publication date 2011-03
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Using aggregate data on bilateral cross-border equity holdings, we investigate whether investors correctly hedge their over-exposure to domestic risk (the well-known equity home bias) by investing in foreign stock markets that have low correlation with their home stock market. To deal with the endogeneity of stock return correlations, we instrument current correlations with past correlations. Controlling for many determinants of international portfolios, we find that, all else equal, investors do tilt their foreign holdings towards countries, which offer better diversification opportunities. The diversification motive that we uncover is stronger for source countries exhibiting a higher level of home bias.

in Journal of Comparative Economics Publication date 2015-08
VAKULENKO Elena
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We study barriers to labor mobility using panel data on gross region-to-region migration flows in Russia in 1996–2010. Using both parametric and semiparametric methods and controlling for region-to-region pairwise fixed effects, we find a non-monotonic relationship between income and migration. In richer regions, higher incomes result in lower migration outflows. However, in the poorest regions, an increase in incomes results in higher emigration. This is consistent with the presence of geographical poverty traps: potential migrants want to leave the poor regions but cannot afford to move. We also show that economic growth and financial development have allowed most Russian regions to grow out of poverty traps bringing down interregional differentials of wages, incomes and unemployment rates.

We develop an informational theory of dictatorship. Dictators survive not because of their use of force or ideology but because they convince the public--rightly or wrongly--that they are competent. Citizens do not observe the dictator's type but infer it from signals inherent in their living standards, state propaganda, and messages sent by an informed elite via independent media. If citizens conclude the dictator is incompetent, they overthrow him in a revolution. The dictator can invest in making convincing state propaganda, censoring independent media, co-opting the elite, or equipping police to repress attempted uprisings -- but he must finance such spending with taxes that depress the public's living standards. We show that incompetent dictators can survive as long as economic shocks are not too large. Moreover, their reputations for competence may grow over time. Censorship and co-optation of the elite are substitutes, but both are complements of propaganda. Repression of protests is a substitute for all the other techniques. In some equilibria the ruler uses propaganda and co-opts the elite; in others, propaganda is combined with censorship. The multiplicity of equilibria emerges due to coordination failure among members of the elite. We show that repression is used against ordinary citizens only as a last resort when the opportunities to survive through co-optation, censorship, and propaganda are exhausted. In the equilibrium with censorship, difficult economic times prompt higher relative spending on censorship and propaganda. The results illuminate tradeoffs faced by various recent dictatorships.

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This paper draws on a natural experiment to identify the relationship between income and trust. We use a unique panel dataset on Russia where GDP experienced an 8 percent drop in 2009. The effect of the crisis had been very uneven among Russian regions because of their differences in industrial structure inherited from the Soviet times. We find that the regions that specialize in producing capital goods, as well as those depending on oil and gas, had a more substantial income decline during the crisis. The variation in the industrial structure allows creating an instrument for the change in income. After instrumenting average regional income, we find that the effect of income on generalized social trust (the share of respondents saying that most people can be trusted) is statistically and economically significant. Controlling for conventional determinants of trust, we show that 10 percent decrease in income is associated with 5 percentage point decrease in trust. Given that the average level of trust in Russia is 25%, this magnitude is substantial. We also find that post-crisis economic recovery did not restore pre-crisis trust level. Trust recovered only in those regions where the 2009 decline in trust was small. In the regions with the large decline in trust during the crisis, trust in 2014 was still 10 percentage points below its pre-crisis level.

in Putin's Russia Sous la direction de ARON Leon Publication date 2015-05
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In this paper Sergei Guriev focuses on the postcrisis slowdown, which mushroomed into the current crisis. The goal is to explain the origins of the slowdown, understand its political implications, and analyze its interaction with the 2014 crisis in Crimea and eastern Ukraine.

in The Global Macro Economy and Finance Sous la direction de ALLEN Franklin, AOKI Masahiko, KIYOTAKI Nobuhiro, GORDON Roger, STIGLITZ Joseph Publication date 2012-10
STIGLITZ Joseph
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In February 2008, the President of the French Republic, Nicholas Sarkozy, unsatisfied with the present state of statistical information about the economy and the society, asked, Joseph Stiglitz (President of the Commission), Amartya Sen (Advisor) and Jean Paul Fitoussi (Coordinator) to create a Commission, subsequently called “The Commission on the Measurement of Economic Performance and Social Progress” (CMEPSP). The Commission’s aim has been to identify the limits of GDP as an indicator of economic performance and social progress, including the problems with its measurement, to consider what additional information might be required for the production of more relevant indicators of social progress, to assess the feasibility of alternative measurement tools, and to discuss how to present the statistical information in an appropriate way (...).

Publication date 2010
MCCORMICK Roger
DE LUCA Valerio
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La profonde crisi morale ed economica ha evidenziato l'esigenza di un investimento più deciso e coraggioso nel campo del sapere e della prassi, quale via per rispondere alle numerose sfide aperte e per preparare le giovani generazioni a costruire un futuro migliore. Occorre allora lanciare una sfida educativa per formare le nuove classi dirigenti. Questo libro rappresenta una riflessione sui valori, le regole e le pratiche di business al fine di raggiungere un consenso etico di fondo su cui orientare un nuovo modello di sviluppo economico e sociale al servizio dell'uomo, attento all esigenze di giustizia e solidarietà, rispettoso della dignità umana e promotore di una libertà integrale, creativa e responsabile.

in Journal of Money, Credit and Banking Publication date 2009-02
AUER Raphaël
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This paper extends the Mussa and Rosen (1978) model of quality pricing under perfect competition. Exporters sell goods of different qualities to consumers who have heterogeneous preferences for quality. Production is subject to decreasing returns to scale and, therefore, supply and the toughness of competition react to cost changes brought about by exchange rate fluctuations. First, we predict that exchange rate shocks are imperfectly passed through into prices. Second, prices of low-quality goods are more sensitive to exchange rate shocks than prices of high-quality goods. Third, in response to an exchange rate appreciation, the composition of exports shifts toward higher quality and more expensive goods. We test these predictions using highly disaggregated price and quantity U.S. import data and find only weak empirical evidence in support of our theory.

in COGITO, la lettre de la recherche à Sciences Po Publication date 2018-11
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Il existe en économie une régularité empirique étonnante exprimée par ce que l’on appelle l’équation de gravité : dans une année donnée, et ce depuis au moins un siècle pour lequel il existe des données précises, la valeur des échanges commerciaux entre deux pays est approximativement proportionnelle à leurs tailles, et inversement proportionnelle à la distance géographique qui les sépare. En d’autres termes, deux pays éloignés de 500 km échangent deux fois plus que deux pays éloignés de 1.000km, toutes choses égales par ailleurs.

in Journal of Political Economy Publication date 2017
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The gravity equation in international trade states bilateral exports are proportional to economic size, and inversely proportional to geographic distance. While the role of size is well understood, that of distance remains mysterious. I offer an explanation for the role of distance: If (i) the distribution of firm sizes is Pareto, (ii) the average squared distance of a firm’s exports is an increasing power function of its size, and (iii) a parameter restriction holds, then the distance elasticity of trade is constant for long distances. When the firm size distribution follows Zipf’s law, trade is inversely proportional to distance.

Publication date 2018-08
CARBONNIER Clément
MALGOUYRES Clément
PY Loriane
FOFFANO Charlotte
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Le crédit d’impôt pour la compétitivité et l’emploi (CICE) a été institué avec l’objectif d’améliorer la compétitivité des entreprises. Pour étudier ses différents effets potentiels sur l’emploi et les salaires, l’évaluation présentée ici s’appuie d’une part sur une analyse économique, et d’autre part sur une étude sociologique, dont les résultats qualitatifs avaient été détaillés lors du rapport remis le 29 septembre 2016 par le LIEPP de Sciences Po à France Stratégie. L’analyse micro-économique basée sur les données fiscales et sociales des entreprises fait tout d’abord apparaître que, au niveau de l’emploi, les décisions des nouvelles embauches des entreprises n’ont pas été affectées par la présence de la nette discontinuité du CICE. De plus, comparativement aux entreprises moins intensément ciblées par la mesure, les entreprises les plus intensément ciblées par le CICE n’ont pas connu de hausse de l’emploi entre 2013 et 2015, et cela quelle que soit la catégorie socio-professionnelle. Concernant l’effet sur les salaires, notre analyse montre que la mesure n’a pas eu d’impact détectable sur la distribution des hausses de salaires mais il apparaît toutefois qu’au niveau de l’entreprise, les sommes allouées dans le cadre du CICE ont été en partie reversées aux salariés, sous forme de hausses de salaires, en particulier aux cadres, professions intellectuelles supérieures et professions intermédiaires. Il faut garder à l’esprit que les conclusions de cette évaluation ne portent que sur les trois premières années de mise en place du CICE, les données de 2016 et 2017 n’étant pas encore disponibles au moment de l’évaluation. Il convient enfin de préciser la difficulté de toute étude portant sur le CICE : celui-ci n’a pas été conçu de manière à être évalué par un dispositif expérimental.

in American Economic Review Publication date 2014-06
BAGGER Jesper
FONTAINE François
POSTEL-VINAY Fabien
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We develop and estimate an equilibrium job search model of worker careers, allowing for human capital accumulation, employer heterogeneity and individual-level shocks. Wage growth is decomposed into contributions of human capital and job search, within and between jobs. Human capital accumulation is largest for highly educated workers. The contribution from job search to wage growth, both within- and between-job, declines over the first ten years of a career – the ‘job-shopping’ phase of a working life – after which workers settle into high-quality jobs using outside offers to generate gradual wage increases, thus reaping the benefits from competition between employers.

Publication date 2011-08
BAGGER Jesper
FONTAINE François
POSTEL-VINAY Fabien
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We develop and estimate an equilibrium job search model of worker careers, allowing for human capital accumulation, employer heterogeneity and individual-level shocks. Monthly wage growth is decomposed into the contributions of human capital and job search, within and between jobs. Human capital accumulation is found to be the most important source of wage growth in early phases of workers’ careers, but is soon surpassed by search-induced wage growth. Conventional measures of the returns to tenure hide substantial heterogeneity between different workers in the same firm and between similar workers in different firms.

in American Economic Review Publication date 2014-05
HEAD Keith
THOENIG Mathias
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Quantifications of gains from trade in heterogeneous firm models assume that productivity is Pareto distributed. Replacing this assumption with log-normal heterogeneity retains some useful Pareto features, while providing a substantially better fit to sales distributions-especially in the left tail. The cost of log-normal is that gains from trade depend on the method of calibrating the fixed cost and productivity distribution parameters. When set to match the size distribution of firm sales in a given market, the log-normal assumption delivers gains from trade in a symmetric two-country model that can be twice as large as under the Pareto assumption.

Publication date 2014-02
HEAD Keith
THOENIG Mathias
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This paper investigates the consequences of replacing the assumption of Pareto heterogeneity with log-normal heterogeneity. This case is interesting because it (a) maintains some desirable analytic features of Pareto, (b) ts the complete distribution of rm sales rather than just approximating the right tail, and (c) can be generated under equally plausible processes (see online appendix). The log-normal is reasonably tractable but its use sacrices some \scale-free" properties conveyed by the Pareto distribution. Aspects of the the calibration that do not matter under Pareto lead to important dierences in the gains from trade under log-normal.

in American Economic Review Publication date 2014-02
MELITZ Marc J.
OTTAVIANO Gianmarco
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We build a theoretical model of multi-product firms that highlights how competition across market destinations affects both a firm's exported product range and product mix. We show how tougher competition in an export market induces a firm to skew its export sales toward its best performing products. We find very strong confirmation of this competitive effect for French exporters across export market destinations. Theoretically, this within-firm change in product mix driven by the trading environment has important repercussions on firm productivity. A calibrated fit to our theoretical model reveals that these productivity effects are potentially quite large.

in American Economic Review Publication date 2017-04
LISE Jeremy
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We develop an equilibrium model of on-the-job search with ex ante heterogeneous workers and firms, aggregate uncertainty, and vacancy creation. The model produces rich dynamics in which the distributions of unemployed workers, vacancies, and worker-firm matches evolve stochastically over time. We prove that the surplus function, which fully characterizes the match value and the mobility decision of workers, does not depend on these distributions. This result means the model is tractable and can be estimated. We illustrate the quantitative implications of the model by fitting to US aggregate labor market data from 1951-2012. The model has rich implications for the cyclical dynamics of the distribution of skills of the unemployed, the distribution of types of vacancies posted, and sorting between heterogeneous workers and firms.

in COGITO, la lettre de la recherche à Sciences Po Publication date 2018-04
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Y a t-il plus de chômeurs qualifiés lorsque l’économie est en récession ? Les chômeurs sont-ils alors plus souvent contraints d’accepter des emplois de moindre qualité ? À l’inverse, les employés trouvent-ils plus facilement de meilleurs emplois lorsque l’économie rebondit ? Pour répondre à ces questions, Jean-Marc Robin, chercheur au Département d’économie de Sciences Po, et Jeremy Lise, Associate Professor à l’Université du Minnesota, ont élaboré un modèle macroéconomique très riche qu’ils ont calibré sur données américaines. Ils en ont fait l’exposé dans la très prestigieuse The American Economic Review : The Macro-dynamics of Sorting between Workers and Firms. Aperçu.

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