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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.

This paper studies the prevalence of vertical market foreclosure using a novel dataset on U.S. and international buyer-seller relationships, and across a large range of industries. We find that relationships are more likely to break when suppliers vertically integrate with one of the buyers’ competitors than when they vertically integrate with an unrelated firm. This relationship holds also, among other things, when conditioning on mergers that follow exogenous downward pressure on the supplier’s stock prices, suggesting that reverse causality is unlikely to explain the result. In contrast, the relationship vanishes when using rumored or announced but not completed integration events. Firms experience a substantial drop in sales when one of their suppliers integrates with one of their competitors. This sales drop is mitigated if the firm has alternative suppliers in place.

The strength of contract enforcement determines how firms source inputs and organize production. Using microdata on Indian manufacturing plants, we show that production and sourcing decisions appear systematically distorted in states with weaker enforcement. Specifically, we document that in industries that tend to rely more heavily on relationship-specific intermediate inputs, plants in states with more congested courts shift their expenditures away from intermediate inputs and appear to be more vertically integrated. To quantify the impact of these distortions on aggregate productivity, we construct a model in which plants have several ways of producing, each with different bundles of inputs. Weak enforcement exacerbates a holdup problem that arises when using inputs that require customization, distorting both the intensive and extensive margins of input use. The equilibrium organization of production and the network structure of input-output linkages arise endogenously from the producers’ simultaneous cost minimization decisions. We identify the structural parameters that govern enforcement frictions from cross-state variation in the first moments of producers’ cost shares. A set of counterfactuals show that enforcement frictions lower aggregate productivity to an extent that is relevant on the macro scale.

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 2011-11
GODEFROY Raphael
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Though a large literature on the determinants of turnout has ourished, there is scant evidence on the causal impact of turnout on policies implemented in practice. Using data on French municipalities and instrumental variables for turnout based on temperature and inuenza variations, we show that a one percent increase in turnout decreases on average the municipalities' yearly budget by 1.5 percent. This is mostly due to a decrease in spending on equipment or personnel. We show that this could be the result of a negative effect of turnout on the strength of the incumbent's majority combined with the fact that the incumbent promises higher budgets. We argue, in the context of a theoretical model, that these different facts could be natural consequences of the well documented incumbency advantage.

in Cultural Integration of Immigrants in Europe Sous la direction de ALGAN Yann Publication date 2013-01
LANDAIS Camilla
SENIK Claudia
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The French Republican model appears as a polar case among the different cultural integration models. Dating back to the French Revolution and the Third Republic, France has a long secular tradition imposing restrictive attitudes on the expression of religious and cultural identity in the public sphere. There are, however, growing concerns that this model, despite its claimed egalitarianism and universalism, fails to integrate the new immigrant minorities. The most illustrative example is the 2004 ruling against the display of conspicuous religious symbols in school, mainly targeted at Muslim schoolgirls who wished to wear the hijab. The main consequence of this refusal to acknowledge any minorities has been an inability to know whether the reality of equality matches the rhetoric of perfect cultural integration. While views on national identity and the integration model are very strongly held in France, the evidence base is rather weak. The goal of this chapter is to fill this gap.

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.

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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.

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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 Annals of Statistics Publication date 2016
BONHOMME Stéphane
JOCHMANS Koen
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A constructive proof of identification of multilinear decompositions of multiway arrays is presented. It can be applied to show identification in a variety of multivariate latent structures. Examples are finite-mixture models and hidden Markov models. The key step to show identification is the joint diagonalization of a set of matrices in the same non-orthogonal basis. An estimator of the latent-structure model may then be based on a sample version of this joint-diagonalization problem. Algorithms are available for computation and we derive distribution theory. We further develop asymptotic theory for orthogonal-series estimators of component densities in mixture models and emission densities in hidden Markov models.

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We consider collective decision problems given by a profile of single-peakedpreferences defined over the real line and a set of pure public facilities to be located on the line. In this context, Bochet and Gordon (2012) provide a large class of priority rules based on efficiency, object-population monotonicity and sovereignty. Each such rule is described by a fixed priority ordering among interest groups. We show that any priority rule which treats agents symmetrically - anonymity - , respects some form of coherence across collective decision problems - reinforcement - and only depends on peak information - peak-only -, is a weighted majoritarian rule. Each such rule defines priorities based on the relative size of the interest groups and specific weights attached to locations. We give an explicit account of the richness of this class of rules.

Thesis Advisor MARTIN Philippe Publication date 2013-12
GRJEBINE Thomas
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Cette thèse comprend quatre essais en macroéconomie internationale et théorie monétaire. Elle est constituée de deux parties. Les deux premiers chapitres, coécrits avec François Geerolf, étudient les conséquences macroéconomiques des cycles immobiliers sur les comptes courants (chapitre 1) et sur les dynamiques de l'emploi (chapitre 2). La seconde partie de cette thèse s'intéresse aux conséquences des récentes transformations intervenues dans les systèmes bancaires sur les mécanismes de la création monétaire. Ces transformations semblent en effet conduire à une privatisation de la monnaie. Le chapitre 3 étudie empiriquement la réalité d'une telle privatisation. Je développe dans le chapitre 4 un modèle pour analyser les conséquences de ces transformations sur la création monétaire et sur les mécanismes de propagation du risque.

Publication date 2013-05
BUREAU Dominique
FONTAGNÉ Lionel
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Dans un contexte de renchérissement prévisible de l’énergie au cours des vingt prochaines années, orienter l’effort d’innovation industrielle et l’offre de biens et services vers des technologies économes en énergie est une nécessité. Toutefois, une hausse des prix de l’énergie plus marquée en France que chez nos concurrents pénaliserait la compétitivité à court terme de l’industrie française. Cette Note expose les termes de l’arbitrage que doit affronter la France entre la préservation d’un élément significatif de sa compétitivité à court terme (le coût relativement faible de son énergie en particulier électrique) et la nécessaire transformation de ses avantages comparatifs à moyen-long terme (sous l’effet d’une vérité des prix énergétiques). À partir d’un travail économétrique original portant sur les exportations des entreprises françaises, nous estimons qu’une hausse de 10 % des prix de l’électricité en France réduirait la valeur des exportations en moyenne de 1,9 % et qu’une même augmentation du prix du gaz les réduirait de 1,1 %. La perte de compétitivité est sensiblement plus marquée pour les plus gros exportateurs, parti- culièrement dans les secteurs fortement dépendants de l’énergie. Cet effet négatif de court terme est à mettre en regard de l’effet de signal d’une hausse des prix de l’énergie sur les spécialisations à moyen-long terme, afin que la France ne reste pas en arrière dans la course à l’innovation « verte ». Nous tirons de cette analyse plusieurs enseignements. Tout d’abord, il convient d’annoncer la hausse des prix de l’énergie, de manière crédible, afin que les agents économiques l’intègrent dans leurs calculs et réorientent leurs choix de consommation et de production. Afin de limiter les effets négatifs d’un renchérissement de l’énergie sur la compétitivité à court terme, nous recommandons que la taxation supplémentaire de l’énergie soit utilisée pour réduire le coût du travail, une grande prudence quant au rythme de déclassement des équipements nucléaires historiques, dont le coût au kWh est particulièrement performant, une imputation différenciée de la charge de service public en fonction de l’intensité énergétique (comme en Allemagne) et une convergence des approches au niveau européen pour ce qui concerne les coûts de réseau.

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Tout le monde ne peut pas avoir une monnaie faible au même moment : si une monnaie s’affaiblit, c’est qu’une autre au moins se renchérit. De cette vérité arithmétique est né le concept de « guerre des monnaies » : une course à la dépréciation monétaire qui ne peut que mal finir. La réalité est toutefois plus complexe car les principales banques centrales des pays développés poursuivent des objectifs internes. Ainsi, la Banque centrale européenne (BCE) a pour mission la stabilité des prix dans la zone euro, tandis que la Réserve fédérale américaine poursuit un double objectif de stabilité des prix et de plein-emploi. Leurs taux de change fluctuent librement sur le marché, en fonction de l’offre et de la demande. Ce ne sont pas des objectifs de politique économique, mais des canaux de transmission de la politique monétaire. En fait de « guerre des monnaies », on assiste à une confrontation de politiques monétaires dont les objectifs, les stratégies et les contraintes varient d’un pays à l’autre. Depuis l’automne 2012, la BCE s’est distinguée de ses consœurs en menant une politique monétaire bien moins expansionniste. Dans un contexte économique marqué par la désinflation, la faiblesse de la reprise et la fragmentation du marché du crédit, la Note fait différentes propositions en faveur d’un assouplissement monétaire dans la zone euro. Un tel activisme de la BCE devrait s’accompagner d’un affaiblissement temporaire de l’euro. À travers une étude économétrique originale, les auteurs estiment qu’une dépréciation de l’euro de 10 % élèverait la valeur des exportations hors zone euro de l’ordre de 7-8 %. Cependant, elle renchérirait les importations manufacturières d’environ 3,5 %, sans baisse à court terme des volumes importés. Les prix relatifs ayant un impact aussi important que celui du taux de change sur les exportations, les auteurs soulignent l’importance de renforcer la vigilance sur les effets des politiques publiques (prélèvements obligatoires, coût de l’énergie, etc.) sur les coûts et les prix français. Selon eux, une dépréciation temporaire de l’euro, qui accompagnerait une politique monétaire plus expansionniste, aiderait la zone euro à se sortir d’une situation conjoncturelle difficile. Mais il ne faut pas s’attendre à un affaiblissement durable de la monnaie européenne qui n’est vraisemblablement pas très éloignée de sa valeur d’équilibre de long terme. Pour limiter les risques liés au cycle mondial du crédit, les auteurs proposent de transférer au niveau de la zone euro les principaux outils de régulation macro-prudentielle, même lorsque ceux-ci supposent une différenciation selon les pays. Ils sont sceptiques sur l’utilité des déclarations des responsables politiques sur le niveau du taux de change comme sur la faisabilité d’une véritable coordination internationale des politiques monétaires. Ils suggèrent néanmoins de réexaminer, au niveau multilatéral, le concept de « manipulation » de change, actuellement peu opérationnel.

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We analyze the interaction of economic and political determinants of free trade agreements (FTA). In addition to standard trade gains, FTAs can promote peaceful relations by offering a political forum and by increasing the opportunity cost of conflicts that disrupt trade. If policy makers believe in such pacifying effects of FTAs, country-pairs with large trade gains from FTAs and high probability of conflict are more likely to sign a FTA. Using data on the 1950-2000 period, we show that this complementarity between economic and political gains is at work in the geography of FTAs. Country pairs characterized by a high frequency of old wars - which we use as a proxy of the probability of conflict - are shown to be more likely to sign FTAs, the more so the higher the trade gains from a FTA. These trade gains are estimated by a theory-driven empirical strategy to disentangle them from the political factors. We also show that, contrary to old wars, recent wars make it more difficult to negotiate a FTA. This suggests the existence of windows of opportunity to lock-in FTAs and peace. Finally multilateral trade openness, because it reduces the opportunity cost of a bilateral conflict, increases the political incentive to sign FTAs.

in NBER International Seminar on Macroeconomics 2012 Publication date 2013-08
BERMAN Nicolas
DE SOUSA José
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This dissertation examines the links between international trade and economic development through the lens of export growth at the extensive margin. By extensive margin growth is meant either trade in previously untraded products, or trade in existing products between new country pairs. The three chapters of this dissertation represent some of the first contributions to the literature in this area with an approach anchored in development policy concerns. They contribute to a clearer understanding of the links between firm heterogeneity, extensive margin growth, and development. In addition, they provide new insights into the importance of domestic regulations and institutions in terms of developing country trade performance. Chapter one shows that similar factors also affect diversification in the geographical dimension. Chapter three takes the opposite approach, showing that product standards in importing countries can affect export diversification overseas. All three chapters use trade models incorporating heterogeneous firms to motivate the empirical work undertaken.

in Trade, Payments, and Adjustments in Central and Eastern Europe : Proceedings of an EBRD Conference, 26-27 March 1992 Publication date 1992
AGHION Philippe
BURGESS Robin
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Now the Doha Round is in its tenth year, it is still far from clear whether a deal will be concluded this year. Neither is clear what are the reasons of the current deadlock. Deep division also remain on how to conclude a possible Doha deal. Apart from this negotiation stalemate, what do trade experts think about Doha? This policy brief analyses these questions using mainly data from the CUTS forum debate on the Doha Round among trade experts and academics. The results show that also among experts huge divisions remain on these issues.

in Trade, payments, and adjustments in Central and Eastern Europe : proceedings of an EBRD conference, 26-27 March 1992 Publication date 1992
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in Foundations of an open economy : trade laws and institutions for Eastern Europe Publication date 1995
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Negotiators in Geneva are still struggling to conclude the Doha Round of multilateral trade talks at the World Trade Organization (WTO). However, after seven years of negotiations, many people - and especially many industrialists in Europe and the United States - are not convinced that the negotiations are worth the efforts being put into them. These doubts have been fueled by the modesty of recent estimates of the gains on the table in the negotiations on Non-Agricultural Market Access (NAMA). This policy brief argues that a completed Doha Round has more to offer to the U.S. and European private sector than cuts to already low applied industrial tariffs. The real gold mine in the Doha negotiations is the increased certainty that would flow from large cuts to bound tariff rates.

in Revue d'économie financière Publication date 1994
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