Archived Seminars

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Brown Bag Seminars

2017-18

Fall

September 27
Soo Hong Chew, National U of Singapore
"Ellsberg Meets Keynes: Missing Links Among Attitudes Toward Sources of Uncertainty"
Engineering 2, room 280


October 11
Theresa Beltramo
“Reaching Poor Refugees: Targeting Food and Multi-Sectoral Cash Transfers in Niger”
Abstract
The demand for humanitarian financing globally has steadily increased from 2012 (16.1 billion) to 2016 (27.3 billion) in pace with the growing number of forcibly displaced people globally- 65.6 million forcibly displace, 17.2 million refugees under UNHCR’s mandate. UNHCR’s funding levels and gaps resemble those at the global level for humanitarian actors, between 2010 and 2016, as contributions to UNHCR have more than doubled, increasing from US $1.8 billion to US $3.9 billion over the same time period.  While UNHCR’s financing has reached historic highs, the needs continue to grow at an even faster pace. As of July 31, 2017 the total amount pledged to UNHCR was 38% of the total global appeal or 2.55 billion pledged of 7.91 billion assessed as needed. In light of this financing gap, UNHCR and other humanitarian partners are forced to prioritize among the needs assessed. Due to this funding gap, basic assistance particularly for protracted forcibly displaced situations like the Malian refugees in Niger, has to be prioritized. Traditionally humanitarian agencies and partners have targeted assistance using categorical targeting, or criteria based on certain vulnerabilities or needs of individuals or household. In Niger, UNHCR and WFP faced the resource challenge of targeting limited food assistance and forthcoming multi-purpose cash. To identify the best tool for targeting assistance to Malian refugees in Niger, we estimate household welfare by producing a household capacity score for each of the methods implemented (Proxy Means Testing, Household Economy Approach, and Principal Components Analysis). All models show that the predictive power of the HEA models are weaker than the PMT model. The levels of R2 range between 10 to 26 percent, corresponding to approximately half of the levels reached in the PMT models. The PCA model confirms the relationship between explanatory variables for monetary poverty but PMT performs better than RCA as a larger share of variance is explained by the model.  We find for the Intikane site, the pre-existing categorical targeting used to target food assistance prior to this exercise is performing poorly as those who receive the equivalent of half of a daily food ration are poorer than those who receive 100%. 

 


October 18
Asha Shepard
"School Entry and Criminal Behavior"


November 1
Dan Friedman
"High Frequency Trading, Order Protection, and Exchange Delay"
Abstract.
Investors Exchange LLC (IEX) is a newly approved public exchange that is designed to discourage aggressive high-frequency trading. We explain how IEX differs from traditional continuous double auction markets and present summary data on IEX transactions by trader class and order type. Our primary contribution is a simple analytic model of IEX as a constrained version of the continuous double auction. The model predicts that IEX will generally improve price efficiency and lower transactions cost while increasing delay costs. A subset of the model's predictions are testable in the field or in a laboratory environment.


November 8
Jon Robinson
"Market Access, Trade Costs, and Technology Adoption: Evidence from Northern Tanzania"
Abstract:
We study how geographical remoteness affects agricultural productivity via access to input and output markets using novel, self-collected data on the supply chains for chemical fertilizer and maize in all of the 570 villages in the Kilimanjaro region of Northern Tanzania. In reduced form, we find that adoption is much lower in remote areas: adoption of fertilizer in the 3rd and 4th highest remoteness quartiles is 21-32 percentage points lower than in the lowest quartile (equivalent to 31-47% in percentage terms); villages in the highest remoteness quartiles are 21 percentage points less likely (36%) to have a maize-buying intermediary visit their village. We find evidence that reduced access to markets (either directly, or through middlemen) is an important contributing factor to this disparity. Using point-to-point travel costs for the universe of villages in Kilimanjaro, we find that the standard deviation of travel cost-adjusted fertilizer prices is 15% of the mean, and that 20% of the villages face prices that are 30% higher than the lowest-cost village. To quantify these effects, we develop a spatial model of agro-retailer pricing, farmer investment, and intermediary activity, and find that a counterfactual 50% reduction in travel costs along the supply chain accounts for about 20% of the reduced form relationship between remoteness and adoption of fertilizer. Targeted counterfactuals suggest that access to local input and output markets are equally important for this effect, while there is little effect of the costs to bring inputs to retailers from urban hubs. 


November 15
Jeremy West
"How Moral Suasion Complements Pecuniary Policy"
ABSTRACT:
Despite substantial use of prosocial persuasion to reduce negative externalities, there remains scant evidence on how moral suasion interacts with conventional pecuniary policies. We empirically examine this question in the context of water conservation. Methodologically, we use a randomized control trial that provided households with peer comparisons to their neighbors’ water consumption, coupled with a regression discontinuity design based on an arbitrary cutoff for pecuniary threats regarding irrigation violations. We find the pecuniary threat was effective only during targeted hours of the week, with evidence of significant intertemporal substitution. In contrast, the prosocial treatment yielded blanket reductions in water consumption.


November 22
Grace Gu
"New Evidence on Cyclical Variation in Labor Costs in the U.S."
Abstract:
Over the last three decades, the share of employer-provided nonwage benefit expenditures in U.S. firms' labor costs has risen to nearly one-third. In this paper, we document that a broad measure of real labor costs that includes such benefit expenditures is countercyclical over the period 1982-2014. This stands in sharp contrast to the conventional view that the price of labor is procyclical. Using BLS establishment-job data, we control for various composition effects and find that even real wages, which have been the main focus of prior literature, have become countercyclical. The same is true of benefit expenditures. We also document that nominal nonwage benefit expenditures are less rigid than nominal wages, although the rigidity of both components of labor costs has risen over time. The paper provides some suggestive evidence that these stronger nominal rigidities, in combination with the rising relative importance of aggregate demand shocks (including the financial crisis and its aftermath), may account for the countercyclical variation in firms' real labor costs.


November 29
Dario Pozzoli
"The Impact of Immigration on Firm-Level Offshoring"
Abstract:
This paper studies the relationship between immigration and offshoring by examining whether an influx of foreign workers reduces the need for firms to offshore jobs abroad. Using the Danish employer-employee matched dataset covering the universe of workers and firms over the period 1995-2011, the findings show that an exogenous influx of immigrants into a municipality reduces firm-level offshoring at both the extensive and intensive margins. The fact that immigration and offshoring are substitutes has important policy implications, since restrictions on one may encourage the other. While the aggregate relationship is negative, a subsequent bilateral analysis shows that immigrants have connections in their country of origin which can help their employers offshore to that particular foreign country


December 6
Nirvikar Singh
"The 0.0003 Percent: Sources of Extreme Wealth in America"


Winter 2018

February 7
Ajay Shenoy
"Untenable Hypothesis: Do Insecure Land Rights deter Investment?"
Abstract
We study an intervention in Zambia that cross-randomized an agroforestry extension with the distribution of customary land certificates, which grant official recognition of a household's tenure. We find that although the intervention improved perceptions of tenure security, it had no impact on investments like agroforestry, land fallowing, or the use of fertilizer. The reason seems to be that the improvements in perceived security were broad but shallow. Already secure households became fully certain of their tenure. There was little effect on feelings of deep insecurity because such feelings are generally transient. Insecure households regain confidence even without outside intervention.


February 21
Eric Aldrich
"Experiments in High-Frequency Trading: Testing the Frequent Batch Auction"
Abstract:
Using laboratory experiments, we compare two leading financial market formats in the presence of high-frequency trading (HFT):  the Continuous Double Auction (CDA), also known as continuous limit order book, which organizes trade in the majority of equities, futures and currency exchanges around the world; and the Frequent Batch Auction (FBA), which gives equal time priority to orders received within a short batching period. Our evidence suggests that, relative to the CDA, the FBA (1) reduces predatory trading behavior, (2) disincentivizes investment in low-latency messaging technology, and (3) results in lower transaction costs. Further, volatility, both in market spreads as well as in liquidity, is higher in CDA compared to the FBA. Finally, we examine transitory, off-equilibrium behavior. In the CDA, transitory changes in the environment impact market dynamics substantially more than in the FBA.


March 14
Axel Ockenfels, University of Cologne
"Norm Enforcing on eBay"


Spring 2018

April 18
Marcelo Moreira
"Invariant Tests in an IV Regression With Heteroskedastic and Autocorrelated Errors: Inference on Intertemporal Elasticity of Substitution"


April 25
Claire Brunel
"Climate Change and Internal Migration in Brazil: The Role of Road Infrastructure"
Abstract: Global warming affects productivity in climate-sensitive sectors thereby creating income shocks, especially for rural households in poor countries. Internal migration represents an important channel through which households can cope with these shocks. In this paper, we exploit exogenous variation in temperatures and precipitation rates across 25 Brazilian states and examine the response in state-to-state migration flows between 1980 and 2010. The empirical analysis incorporates a novel road dataset we constructed by digitizing historical maps of the road networks, combined with geospatial data on climate factors and bilateral migration data from decennial censuses. Our results suggest that states with warming temperatures and greater variability in rainfall experience higher emigration when combined with an improvement in the road infrastructure. Better road connectivity is thus key to households being able to adapt to the changing climate by relocating. Although road networks could provide an alternative adaptation strategy through a better connected goods market, we find strong evidence that a reduction in travel time is associated with higher levels of cross-state migration beyond climate as well.


May 2
Alonso Villacorta
"Equity Allocation and Risk-Taking in the Financial Sector"
Abstract
We present a model of the capital structure and risk-taking in the financial intermediation chain. Loan originators obtain funding from intermediaries that diversify idiosyncratic risks to create the safe assets demanded by some investors. Equity is needed by originators to reduce excessive risk-taking, and by intermediaries to absorb losses from aggregate risk. The equity allocation in the economy trades-off the diversification benefits with the cost of excessive risk-taking by originators. We find that the ratio of equity in intermediaries relative to originators is non-monotonic on aggregate risk. As the demand for safety increases or the price of risk falls, more equity is allocated to intermediaries, which increases the supply of safe assets and leads to an expansion of the financial sector, increases in leverage and lending but more risk-taking. The model predictions are consistent with the saving glut narrative of the expansion of shadow banking in the run-up to the crisis.


May 9
Massimo Anelli
"Foreign Peer Effects and STEM Major Choice"


May 16
Ajay Shenoy
"Can Democracy Control Corruption? Evidence from Village Council Elections in India"
Abstract/Description
The Chicago Model of electoral competition argues that in an ideal setting democracy should prevent elected leaders from exploiting office to enrich themselves. Though many studies have found evidence of corruption in democracies, the prior work has focused on large democracies where voters cannot monitor politicians or punish them for unkept promises. We study an ideal setting for the Chicago Model, village council elections in India, where voters should be able to directly monitor and (informally) sanction their elected leaders. These leaders play a key role in allocating the benefits of a massive make-work scheme. We test for whether the households of candidates who barely win an election receive more benefits than those who barely lose. We find that close winners receive roughly twice the level of benefits as close losers. We propose several alternative models to explain why corruption is possible and find evidence to support only one.


May 23
Shilpa Aggarwal
"The Long Road to Health: Healthcare Utilization Impacts of a Road Pavement Policy in Rural India"
Abstract: Does poor road connectivity constrain households' access to formal healthcare and better health? This paper utilizes a natural experiment that led to plausibly exogenous variation in road pavement in rural India to provide 3 pieces of evidence on healthcare access and health outcomes. Road construction (a) improved access to healthcare facilities, leading to (b) higher rates of institutional antenatal care and deliveries, which translated into (c) better medical care, and expanded vaccination coverage. Most of these gains accrue from more repeat visits, rather than from new entrants. Evidence also points to a proximity-quality tradeoff in choosing providers.


May 30
Chenyue Hu
"Spatial Risk Sharing"
Abstract/Description 
This paper examines how geographic distances influence consumption risk sharing across regions. I embed migration and trade in a DSGE framework, in order to study how the two channels influence cross-region consumption correlations. The model not only predicts that migration and trade costs hinder risk sharing, but also unveils the interaction between the two channels. Motivated by this theoretical model, I empirically develop and test a gravity model of risk sharing using the US state-level data. I find that faraway regions exhibit lower degrees of bilateral consumption risk sharing. Moreover, I estimate model-consistent migration and trade costs with interstate population and commodity flows. Estimated costs positively correlate with geographic distances, which rationalizes the gravity model. Counterfactual analysis based on this quantitative framework will evaluate the policy implications for consumption and migration patterns.


June 6
Grace Gu
"Sovereign Risk and Unemployment Crisis"


June 13
Arsenios Skaperdas, Federal Reserve Board
"Central Bank Independence at Low Interest Rates"



 

2016-17

Fall

Time & Location of Seminars:
Wednesdays 12:001:05 p.m.
499 Engineering II

October 19
Greg Laughlin, Yale University
"Leveraging the Speed of Light — The Dynamics and Economics of Ultra-Low Latency Trading"
ABSTRACT: The past decade has been characterized by a rapid evolution of the network infrastructure that supports electronic trading. Tick data is now routinely time-stamped to nanosecond precision, and inter-exchange messaging occurs at nearly the speed of light in vacuum. In this talk, I will review how high-frequency traders have adopted these technological innovations. I will argue that cross-correlation of trading activity at microsecond resolution, across physically separated venues, is a powerful tool for understanding liquidity provision, market dynamics, and price formation. I will provide quantitative estimates of the overall profitability of low-latency trading, and I will illustrate how the dissemination of major economic news releases are rapidly incorporated into consensus prices.


October 12
Jae Choi
"Capital Controls and Foreign Exchange Market Intervention"


October 19
Greg Laughlin, Yale University "Leveraging the Speed of Light — The Dynamics and Economics of Ultra-Low Latency Trading"
ABSTRACT: The past decade has been characterized by a rapid evolution of the network infrastructure that supports electronic trading. Tick data is now routinely time-stamped to nanosecond precision, and inter-exchange messaging occurs at nearly the speed of light in vacuum. In this talk, I will review how high-frequency traders have adopted these technological innovations. I will argue that cross-correlation of trading activity at microsecond resolution, across physically separated venues, is a powerful tool for understanding liquidity provision, market dynamics, and price formation. I will provide quantitative estimates of the overall profitability of low-latency trading, and I will illustrate how the dissemination of major economic news releases are rapidly incorporated into consensus prices.


October 26
Jessica Leight, Williams College
"Complementarity between non-agricultural and agricultural shocks in rural industrialization: Evidence from China"
ABSTRACT: This paper analyzes patterns of structural transformation in China between 2000 and 2010, seeking to estimate the impact of shocks to labor demand in the secondary (industrial and mining) sector on local economic outcomes, and analyze whether there is any evidence of complementarity between these shocks and agricultural productivity shocks, proxied by county-level rainfall. I employ a newly assembled panel including a nationwide sample of 2000 counties, and construct secondary labor demand shocks following Bartik (1991), using the baseline composition of county employment and national employment fluctuations by subsector. The empirical results indicate that first, there is a robust response to secondary labor demand shocks in terms of increased employment, GDP and value added in the secondary sector, and increases in total GDP. Second, there is evidence of significant complementarity between these shocks and agricultural shocks, but this pattern is restricted to counties that are less industrialized in baseline. In these counties, non-agricultural growth is observed only following positive shocks to both the non-agricultural and agricultural sectors. Further exploration suggests this pattern may be driven by capital constraints in heavily agricultural regions.


November 2
Jongchan Lee 
"Effectiveness of Precautionary Capital Controls - Generalized Propensity Score Approach"
ABSTRACT: This paper investigates the effect of ex-ante capital controls in mitigating the output cost of the Global Financial Crisis (GFC) 2008-2009. Restrictions on capital accounts are accepted as a tool for financial stability purpose among the policy community after the GFC, but empirical evidence of capital controls' usefulness is not clearly verified yet. We employ Imbens (2000)'s generalized propensity score (GPS) analysis using 88 cross-country data to handle this issue. GPS analysis is designed to find average treatment effect where the treatment is in continuous form. GPS approach combined with balancing property can remove all the biases from country characteristics related with capital controls. We found indeterminate evidence that pre-crisis inflow capital controls were successful to lessen the GDP cost of the GFC. Also, we found a partial result that pre-crisis outflow capital controls even worsened crisis severity of the GFC.


November 9
Dan Freidman, Eric Aldrich, and Kristian Lopez Vargas
"High-Frequency Trading Experiments"
ABSTRACT: High-frequency trading (HFT) firms, with latency-driven algorithms, now account for a large and increasing fraction of trades at major financial exchanges worldwide. Some experts say that HFT helps increase market liquidity and reduce transaction costs. But others argue that HFT hurts ordinary investors and provides illusory liquidity. Existing data is insufficient to resolve these controversies since it is gathered using only a single market format, the continuous double auction. Using laboratory experiments, we study the performance of existing and alternative market formats in the presence HFT. The baseline market format is the Continuous Double Auction (CDA), also known as the Continuous Limit Order Book, which organizes trade in most modern exchanges around the world. Second, we study the newly-launched IEX format, which is intended to reduce the incentives for HFT. The IEX market delays all incoming orders and allows hidden, “pegged” orders to move automatically with the National Best Bid and Offer prices. Third we study a format used by Electronic Broking Services (EBS), one of the largest currency exchanges. Within a narrow time-window, the new EBS format randomizes the sequence in which orders are processed. Finally, we study the frequent batch auction (FBA) -- also known as the multiple call market -- as proposed in Budish et al. (2015). This format gives equal priority to all orders received in the same batching period (of, say, a tenth of a second), and, in theory, reduces the incentive for investment on speed and restores primacy to competition on price. These formats are implemented in a simplified laboratory environment based on the Budish et al. (2015, BCS) model. In the experiments, human participants tune algorithms that automatically submit orders to a financial exchange on their behalf. We compare performance across formats in metrics associated with liquidity, stability and transactions costs, among others. We have already developed the basic experimental interfaces and started running pilots. In Wednesday’s Brown Bag we present a first set of results comparing CDA to HFT performance in a BCS laboratory environment. Later we plan to conduct a high-profile, public tournament using a specially developed exchange that will compare all four market formats in a realistic, yet controlled setting.


November 16
Luke Lindsay, University of Exeter
"Avoidable Costs and Market Design"
ABSTRACT: In many laboratory settings, the continuous double auction gives highly efficient outcomes. However, in markets where sellers have avoidable costs, van Boening and Wilcox (1996) observed wild price and efficiency dynamics. Subsequent studies have tested a range of other market designs in this setting; however, mechanisms that reliably deliver high efficiency in markets with avoidable costs have remained elusive. We experimentally test four market mechanisms. First, a continuous double auction where the order book is hidden. Second, a continuous double auction where the order book is visible to traders. Third, a call market where sellers submit supply schedules and buyers submit demand schedules. Fourth, a mechanism where traders submit schedules in continuous time. Provisional transactions are shown and traders may update their schedules subject to an improvement rule. The market closes when no improved schedules have been submitted for a period of time and at this point the standing provisional transactions are executed. The main result is that the mechanisms where traders submit schedules give higher efficiency than the double auctions, with the mechanism that allows for updating schedules delivering the highest efficiency overall.


November 23
Michael Hutchison, Evan Miao, and Mahir Binici
"Down But Not Out: Do Credit Rating Agencies Provide Valuable Information in Market Evaluation of Sovereign Default Risk?"
ABSTRACT: This paper assesses the information value of the three largest credit rating agencies’ (CRA) announcements of sovereign credit rating changes, “outlook” changes and “watch” changes on market pricing of country default risk as embedded in credit default swap (CDS) spreads. An event study framework is employed for 56 advanced and emerging-market countries and daily data over January 2005 through June 2014. We find marked asymmetries in market impact from watch and outlook designations; negative and positive watch/outlook designations; credit upgrades and downgrades; and across different CRA announcements. Credit rating downgrades and negative watch announcements have a large impact on CDS spreads. Credit upgrades and positive watch/outlook announcements, by contrast, have little impact on market prices. We also investigate whether rating changes and other announcements from CRAs have the same "news" impact on markets before and after the global financial crisis (GFC). We find that CRA announcements have similar qualitative effects before and after the GFC, but that the magnitude of the effects were larger prior to the global financial crisis.


November 30
Justin Marion
"Customer Discrimination and the Effects of Segregation on Business in the Jim Crow Era"


Winter

February 22
Grace Gu
"The pricing of sovereign risk under costly information"
ABSTRACT: When investors' information acquisition and the sovereign's default decision are jointly endogenous, sovereign bond spread exhibits significant time-variation in its volatility. Without considering such state-contingent investor attention allocation, model-based estimates of default risk from spread data could be negatively biased during crisis periods.


March 1
Dario Pozzoli, Copenhagen Business School
"Coordination of Hours within the Firm"
ABSTRACT: Teamwork has become increasingly important in many firms, yet little is known about how coordination of hours among heterogeneous coworkers affects pay, productivity and labor supply. In this paper we propose a framework where differently productive firms choose whether or not to coordinate hours in exchange for productivity gains. In this framework, we show that more productive firms select into coordinating hours and pay compensating wage differentials, leading to attenuated labor supply responses and spillovers from tax changes. Next, we bring the model predictions to the data using linked employer-employee registers in Denmark. We first document evidence of positive correlations between wages, productivity and the degree of hours coordination - measured as the dispersion of hours - within firms. We estimate that hours coordination can explain around 4\% of the variance of firm-level wages. We then estimate labor supply elasticities using changes to the personal income tax schedule in 2010 which affected high-wage earners differently. We find evidence of higher labor supply elasticity in firms with lower hours coordination. Furthermore, we find evidence of spillover effects on hours worked by coworkers not directly affected by the reform that are consistent with our model of firm level coordination of hours.


March 15
Ajay Shenoy
"Climate and Power: The Political Consequences of Climate Change"
ABSTRACT: Climate change is predicted to shift economic power away from vulnerable populations. We study whether there is likewise a shift in political representation. We estimate the impact of a permanent change in the weather---a shift in the probability distribution of rainfall and temperature---on the representation of disadvantaged castes in India. We show that trends in climate are endogenous, ruling out a simple reduced-form comparison across places with different trends. We propose instead to exploit exogenous variation in weather shocks. The reduced-form impact of these shocks cannot simulate the effect of a permanent change in climate. Instead we use them to estimate a structural model, which can then simulate the counterfactual world in which the weather distribution has permanently changed.


Spring

April 12
Tamon Asonuma (IMF)
"Sovereign Bond Prices, Haircuts and Maturity"
ABSTRACT: Rejecting a common assumption in the sovereign debt literature, we document that creditor losses (“haircuts”) during sovereign restructuring episodes are asymmetric across debt instruments. We code a comprehensive dataset on instrument-specific haircuts for 28 debt restructurings with private creditors in 1999–2015 and find that haircuts on shorter-term debt are larger than those on debt of longer maturity. In a standard asset pricing model, we show that increasing short-run default risk in the run-up to a restructuring episode can explain the stylized fact. The data confirms the predicted relation between perceived default risk, bond prices, and haircuts by maturity.


April 26
Jeremy West
"Competition and technology diffusion in automobiles"
ABSTRACT: Theories since Schumpeter (1942) posit how competition affects the innovation and diffusion of new technologies, but empirical identification is complicated because firms' technology and competitive positioning are endogenous. This study evaluates the importance of competitive position in automobile engineering using a regression discontinuity design based on 5-Star Safety Ratings of crash test injury risk. We assess whether vehicles discontinuously positioned less-favorably in the market are more likely to introduce new safety technologies or to speed the diffusion of technologies from other vehicle models. (Note this is very early work and we look forward to your comments.)


May 3
Kristian Lopez Vargas
"Voice Messages and Timely Vaccination in the Dominican Republic"
ABSTRACT: While immunization-related infrastructure has improved in the developing world in the last decades, demand for vaccination is still clearly suboptimal. In that context, we study an intervention aimed to boost demand for timely vaccination in the Dominican Republic. In particular, we conduct a randomized field experiment in the metropolitan area of Santo Domingo. A sample of seven thousand low-income households with 0-5 year-old children or pregnant women were assigned into one control group and two treatment groups. Treatment consisted of a cocktail of voice messages delivered by phone that contained information on the benefits of vaccination, the risks of lack of vaccination, and encouragement (social-norm and affect related) messages. Treatment group 1 received the messages recorded by a standard, radio, female voice. Treatment group 2 received the same messages except recorded the Vice president of the country (also female). A total of 24 messages over a span of six months (approximately one per week) were delivered. The outcomes of study are: the number of vaccine-related visits to health centers, the number of immunizations, timely vaccination, immunization delays. We find no evidence of impact at the intent-to-treat level, when we look at the whole intervention period plus the three months that followed. Further analysis to deal with partial compliance and potential spillovers is in progress.


May 10
Nate Higer (Brown)
"Upward Mobility and Discrimination: the Case of Asian Americans"
ABSTRACT: Asian Americans are the only non-white US racial group to experience long-term, institutional discrimination and subsequently exhibit high income. I re-examine this puzzle in California, where most Asians settled historically. Asians achieved extraordinary upward mobility relative to blacks and whites for every cohort born in California since 1920. This mobility stemmed primarily from gains in earnings conditional on education, rather than unusual educational mobility. Historical test score and prejudice data suggest low initial earnings for Asians, unlike blacks, reflected prejudice rather than skills. Post-war declines in discrimination interacting with previously uncompensated skills can account for Asians' extraordinary upward mobility.


May 17
Elira Kuka (SMU)
"Women's Enfranchisement and Children's Education: the Long-Run Impact of the U.S. Suffrage Movement"
ABSTRACT: While a growing literature has shown that empowering women leads to increased short-term investments in children, little is known about its long-term effects. Exploiting plausibly exogenous variation in U.S. state and federal suffrage laws, we show that exposure to women’s political empowerment during childhood leads to large increases in educational attainment for children from economically disadvantaged backgrounds, in particular blacks and Southern whites. We also find improvements in employment outcomes among this group. An investigation into the mechanisms behind these effects suggests that the educational gains are plausibly driven by the rise in public expenditures following suffrage.


May 24
Hikaru Saijo
"Redistribution and Fiscal Uncertainty Shock"


May 31
Chris Limnios (Providence College)
"On the empirical plausibility of financing constraints and the persistence of vacancy posting in labor search models"



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Macroeconomics & International Finance

2017-18

Spring 2018

Tuesday 1:403:00 p.m.
499 Engineering II

April 3
Heiwai Tang, Johns Hopkins
"Production Networks, Trade and Misallocation"
Host: Alan Spearot
ABSTRACT: 
This paper analyzes aggregate TFP losses in contexts in which policy distortions result in resource misallocation across heterogeneous firms within sectors and where firms are engaged in inter-sectoral intermediate input trade, both domestically and globally. In the presence of various policy distortions and industry input-output (IO) linkages due to firms’ global sourcing of inputs, we show that a closed economy’s aggregate TFP is simply a geometric mean of sectoral productivities, with weights equal to sectoral influences captured by their sales to GDP ratios. We discuss how a sectoral influence needs to be adjusted with each country’s domestic trade shares to incorporate global IO linkages. Importantly, sectoral TFP losses get amplified in the aggregate through IO linkages, more so when the economy’s foreign trade shares increase. We confirm this amplification quantitatively using manufacturing enterprise-level data from China and India over the period of 2000-2007. However, despite a significant amplification effect through IO linkages for both countries, our estimates of aggregate TFP losses from resource misallocation, obtained using a gross output approach, are similar and sometimes even smaller than those computed using the value-added approach adopted by Hsieh and Klenow (2009) and subsequent studies. The reason is that the distortions on input sourcing appear to be much less dispersed across firms within industries, compared to those of labor and capital, hence resulting in an upward bias in the estimated sectoral TFP losses from resource misallocation under the value-added approach.


April 10
Joel David, USC
"The Sources of Capital Misallocation"
Host: Ajay Shenoy
ABSTRACT: 
We develop a methodology to disentangle various sources of capital misallocation, i.e., dispersion in static marginal products. It measures the contributions of technological/informational frictions and a rich class of firm-specific factors. An application to Chinese manufacturing firms reveals that adjustment costs and uncertainty, while significant, generate only modest amounts of marginal product dispersion, which stems largely from other factors. Adjustment costs are relatively more salient for large US firms, though other firm-specific factors still account for the bulk of observed misallocation. Heterogeneity in technologies/markups explains a limited fraction of misallocation in China, but a potentially large share in the US.


April 24
Javier Cravino, U of Michigan
"Price Rigidities and the Relative PPP"
Host: Chenyue Hu
ABSTRACT: 
We measure the proportion of real exchange rate movements accounted for by cross-country movements in relative reset prices (prices that changed since the previous period) using CPI microdata for the UK, Austria, Finland, Mexico and Chile. Relative reset prices account for almost all of the real exchange rate movements in the data. This is at odds with the predictions of Sticky Price Open Economy models with complete markets, which generate volatile and persistent real exchange rates but not through movements in relative reset prices. We show that incomplete markets models featuring UIP deviations are much closer to replicating the empirical decomposition at low frequencies.


May 8
Saki Bigio, UC Los Angeles
"Optimal Debt-Maturity Management"
Host: Alonso Villacorta
ABSTRACT: 
A Government wishes to smooth financial expenses and can issue fixed-coupon bonds among a continuum of maturities. The Government takes into account its price impact. It faces income, interest-rate, and liquidity risk. It acknowledges its own temptation to default. We characterize variations of this problem, compute its risky steady state and present applications.


May 15
Pierre-Olivier Weill, UCLA
"Incentive Constrained Risk Sharing, Segmentation, and Asset Pricing"
Host: Alonso Villacorta
ABSTRACT: 
Incentive problems make assets imperfectly pledgeable. Introducing these problems in an otherwise canonical general equilibrium model yields a rich set of implications. Asset markets are endogenously segmented. There is a basis going always in the same direction, as the price of any risky asset is lower than that of the replicating portfolio of Arrow securities. Equilibrium expected returns are concave in consumption betas, in line with empirical findings. As the dispersion of consumption betas of the risky assets increases, incentive constraints are relaxed and the basis reduced. When hit by adverse shocks, relatively risk tolerant agents sell the safest assets they hold. 


May 22
Chris Tonetti, Stanford
"Nonrivalry and the Economics of Data"
Host: Ajay Shenoy
ABSTRACT: 
Data is nonrival: a person's location history, medical records, or driving data can be used by any number of firms without being depleted. Nonrivalry leads to increasing returns and implies an important role for market structure and property rights. Do markets produce the right amount of data? Who should own data? We show that individual firms, fearful of creative destruction, may choose in equilibrium to hoard data they own. Yet there may be large social gains to sharing data, even in the presence of privacy considerations. When consumers own the data and sell it to many firms, the economy operates with a higher degree of increasing returns to scale. In a simple numerical example, firms owning the data is substantially worse than consumers owning the data, which in turn is close to optimal.


Winter 2018

January 12
Brenda Samaniego de la Parra
"Formal Firms, Informal Workers, and Household Labor Supply in Mexico"
Host: Carl Walsh
ABSTRACT:
I analyze the effects of labor regulation enforcement on firms and households in Mexico. I construct a new employer-employee-household matched panel dataset, and exploit exogenous variation caused by random worksite inspections between 2005 and 2016, to examine how formal firms respond to changes in the expected probability of getting caught hiring informal employees. I analyze firms' responses along different margins including formalization rates, separation rates, and wages. I find that inspections increase the quarterly probability that a worker will transition from an informal to a formal job within the same establishment from 14% to 20%. The quarterly probability of job separation also increases from 3.1% to 4%. There is no evidence of a change in after-tax wages for informal workers that remain employed after an inspection. This suggests the cost of registration is not levied on the newly formalized workers. Instead, wage growth for formal coworkers at inspected firms is lower, indicating that inspections induce some shifting of total compensation from already-formalized workers to newly formalized ones. I then analyze how households re-optimize their labor supply after one of their members receives the government mandated benefits that accompany a formal job. I find that unemployed spouses of workers that became formal after an inspection are more likely to remain unemployed, less likely to start a formal job, and receive higher starting wages conditional on transitioning to employment. 


January 22
David Argent
"Product Life Cycle, Learning, and Nominal Shocks"
Host: Carl Walsh
ABSTRACT: 
In this paper we study the role of product entry and exit in propagating nominal shocks to the real economy. Toward that goal, we show that product turnover has an extensive role in the aggregate economy and that the frequency and size of price adjustments are negatively related to a product's age. We exploit information from product-level characteristics and the timing of products' launches to provide empirical support that these stylized facts can be rationalized by an active learning motive: firms with new products are faced with demand uncertainty and can optimally obtain valuable information by varying their prices. Building on the empirical findings, we construct a menu cost model with active learning and quantify the importance of age-dependent pricing moments for the propagation of nominal shocks. In the calibrated version of our model, the cumulative response of output to a nominal shock more than doubles compared to the standard menu cost model and this response is higher during economic booms.


January 24
Ryan Kim
"The Effect of the Credit Crunch on Output Price Dynamics: The Corporate Inventory and Liquidity Management Channel"
Host: Carl Walsh
ABSTRACT:
I study how a credit crunch affects output price dynamics. I build a unique micro-level dataset that combines scanner-level prices and quantities with producer information, including the producer's banking relationships, inventory, and cash holdings. I exploit the Lehman Brothers' failure as a quasi-experiment and find that firms facing a negative credit supply shock decrease their output prices approximately 15% relative to their unaffected counterparts. I hypothesize that such firms reduce prices to liquidate inventory and to generate additional cash flow from the product market. I find strong empirical support for this hypothesis: (i) firms facing a negative bank shock temporarily decrease their prices and inventory and increase their market share and cash holdings relative to their counterparts, and (ii) this effect is stronger for firms and sectors with high initial inventory or small initial cash holdings. To discuss the aggregate implications of these findings, I integrate this micro-level study into a business cycle model by explicitly allowing for two identical groups of producers facing different degrees of credit supply shock. The model predicts that a negative credit supply shock leads to a large temporary drop in aggregate inflationas a result of the aggressive liquidation of inventoryfollowed by an increase in inflation as producers eventually run out of inventory. This prediction for inflation and inventory dynamics is fully consistent with observations for the 2007-09 recession.


January 26
Nicholas Kozeniauskas
"What's Driving the Decline in Entrepreneurship?"
Host: Carl Walsh
ABSTRACT:
Recent research shows that entrepreneurial activity has been declining in the US in recent decades. Given the role of entrepreneurship in theories of growth, job creation and economic mobility this has generated considerable concern. This paper investigates why entrepreneurship has declined. It documents that (1) the decline in entrepreneurship has been more pronounced for higher education levels, implying that at least part of the force driving the changes is not skill-neutral, and (2) the size distribution of entrepreneur businesses has been quite stable. Together with a decline in the entrepreneurship rate the second fact implies a shift of economic activity towards non-entrepreneur firms. Guided by this evidence I evaluate explanations for the decline in entrepreneurship based on skill-biased technical change, increases in the fixed costs of businesses which could be due to technological change or increases in regulations, and changes in technology that have benefited large non-entrepreneur firms. I do this using a general equilibrium model of occupational choice calibrated with a rich set of moments on occupations, income distributions and firm size distributions. I find that an increase in fixed costs explains most of the decline in the aggregate entrepreneurship rate and that skill-biased technical change can fully account for the larger decrease in entrepreneurship for more educated people when combined with the other forces.


February 2
Cynthia Balloch
"Inflows and Spillovers: Tracing the Impact of Bond Market Liberalization"
Host: Carl Walsh
ABSTRACT: 
As bond markets grow, this affects not only the financing decisions of firms, but also the lending behavior of banks, and the resulting equilibrium allocation of credit and capital. This paper makes three contributions to understand the impact of bond market liberalization. First, using evidence from reforms in Japan that gave borrowers selective access to bond markets during the 1980s, it shows that firms that obtained access to the bond market used bond issuance to pay back bank debt. More importantly, this large, positive funding shock led banks to increase lending to small and medium enterprises and real estate firms. Second, it proposes a model of financial frictions that is consistent with the empirical findings, and uses the model to derive general conditions under which bond liberalization has this effect on banks. The model predicts that bond liberalization can significantly worsen the quality of the pool of bank borrowers, and so lower bank profitability. These results suggest that Japan's bond market liberalization contributed to both the real estate bubble in the 1980s and bank problems in the 1990s. Third, the model implies that bond markets amplify the effects of shocks to the risk-free rate and firm borrowing, in addition to attenuating the effects of financial shocks.


February 27
Pablo Guerron-Quintana, Boston College
"Recurrent Bubbles, Economic Fluctuations, and Growth"
Host: Hikaru Saijo
ABSTRACT: 
We propose a model that generates permanent effects on economic growth following a recession (super hysteresis). Recurrent bubbles are introduced to an otherwise standard infinite-horizon business-cycle model with liquidity scarcity and endogenous productivity. In our setup, bubbles promote growth because they provide liquidity to constrained investors. Bubbles are sustained only when the financial system is under-developed. If the financial development is in an intermediate stage, recurrent bubbles can be harmful in the sense that they decrease the unconditional mean and increase the unconditional volatility of the growth rate relative to the fundamental equilibrium in the same economy. Through the lens of an estimated version of our model fitted to U.S. data, we argue that 1) there is evidence of recurrent bubbles; 2) the Great Moderation results from the collapse of the monetary bubble in the late 1970s; and 3) the burst of the housing bubble is partially responsible for the post-Great Recession dismal recovery of the U.S. economy.


March 2
Jing Zhang
"Structural Change and Global Trade"
Host: Ken Kletzer
ABSTRACT: 
Services, which are less traded than goods, rose from 50 percent of world expenditure in 1970 to 80 percent in 2015. Such structural change likely held back “openness”—global trade over GDP—over this period. To quantify this impact, we build a general equilibrium trade model with non-homothetic preferences and input-output linkages. Openness would have been 70 percent in 2015, 23 percentage points higher than the data, if expenditure patterns were unchanged from 1970. Structural change is critical for estimating the dynamics of trade barriers and welfare gains from trade. Ongoing structural change implies declining openness, even without rising protectionism.


March 5
Gianluca Benigno, LSE
"Stagnation Traps"
Host: Ken Kletzer
ABSTRACT: 
We provide a Keynesian growth theory in which pessimistic expectations can lead to very persistent, or even permanent, slumps characterized by unemployment and weak growth. We refer to these episodes as stagnation traps, because they consist in the joint occurrence of a liquidity and a growth trap. In a stagnation trap, the central bank is unable to restore full employment because weak growth depresses aggregate demand and pushes the interest rate against the zero lower bound, while growth is weak because low aggregate demand results in low profits, limiting firms' investment in innovation. Policies aiming at restoring growth can successfully lead the economy out of a stagnation trap, thus rationalizing the notion of job creating growth.


March 6
Oleg Itskhoki, Princeton
"Exchange Rate Disconnect in General Equilibrium"
Host: Chenyue Hu
ABSTRACT: 
We propose a dynamic general equilibrium model of exchange rate determination, which simultaneously accounts for all major puzzles associated with nominal and real exchange rates. This includes the Meese-Rogoff disconnect puzzle, the PPP puzzle, the terms-of-trade puzzle, the Backus-Smith puzzle, and the UIP puzzle. The model has two main building blocks — the driving force (or the exogenous shock process) and the transmission mechanism — both crucial for the quantitative success of the model. The transmission mechanism — which relies on strategic complementarities in price setting, weak substitutability between domestic and foreign goods, and home bias in consumption — is tightly disciplined by the micro-level empirical estimates in the recent international macroeconomics literature. The driving force is an exogenous small but persistent shock to international asset demand, which we prove is the only type of shock that can generate the exchange rate disconnect properties. We then show that a model with this financial shock alone is quantitatively consistent with the moments describing the dynamic comovement between exchange rates and macro variables. Nominal rigidities improve on the margin the quantitative performance of the model, but are not necessary for exchange rate disconnect, as the driving force does not rely on the monetary shocks. We extend the analysis to multiple shocks and an explicit model of the financial sector to address the additional Mussa puzzle and Engel’s risk premium puzzle.


March 12
Cynthia Wu, Chicago Booth
"A Shadow Rate New Keynesian Model"
Host: Ken Kletzer
ABSTRACT: 
We propose a tractable and coherent framework that captures both conventional and unconventional monetary policies with the shadow fed funds rate. Empirically, we document the shadow rate's resemblance to an overall financial conditions index, various private interest rates, the Fed's balance sheet, and the Taylor rule. Theoretically, we demonstrate the impact of unconventional policies, such as QE and lending facilities, on the economy is identical to that of a negative shadow rate, making the latter a useful summary statistic for these policies. Our model generates the data consistent result: a negative supply shock is always contractionary. It also salvages the New Keynesian model from the zero lower bound induced structural break.


March 13
Gisle James Natvik, BI Norwegian Business
"MPC Heterogeneity and Household Balance Sheets"
Host: Carl Walsh
ABSTRACT: With Norwegian administrative panel data we use sizable lottery prizes to explore the heterogeneity in households' marginal propensity to consume (MPC). Spending spikes in the year of winning, and typically falls back to the pre-prize level after 3 to 5 years. Controlling for all items on household's balance sheets and characteristics such as education, household size and income, MPCs primarily vary with the amount won and liquid assets held. Among the winners who are in both the least liquid and the lowest prize-size quartiles, nearly all is spent within the year of winning, whereas among winners in both the most liquid and the highest prize-size quartiles, on average one quarter is spent within the year of winning. Many households are wealthy, yet illiquid, and have high MPCs, consistent with 2-asset models of consumer choice.


Fall 2017

Tuesday 1:403:00 p.m.
499 Engineering II

October 3
Zheng Liu, SF Fed
"The Slow Job Recovery in a Macro Model of Search and Recruiting Intensity"
Host: Grace Gu & Chenyue Hu
ABSTRACT:
An estimated model with labor search frictions and endogenous variations in search intensity and recruiting intensity does well in explaining the slow job recovery after the Great Recession. The model features a sunk cost of vacancy creation, under which firms rely on adjusting both the number of vacancies and recruiting intensity to respond to aggregate shocks. This stands in contrast to the textbook model with free entry, which implies constant recruiting intensity. Our estimation suggests that fluctuations in search and recruiting intensity help substantially bridge the gap between the actual and model-predicted job filling and finding rates.


October 10
Ben Hebert, Standford GSB
"Optimal Corporate Taxation Under Financial Frictions"
Host: Chenyue Hu
ABSTRACT:
We study the optimal design of corporate taxation when firms are subject to financial constraints. We find that corporate taxes should be levied on unconstrained firms, since those firms value resources inside the firm less than financially constrained firms. When the government has complete information about which firms are and are not constrained, this principle is sufficient to characterize optimal corporate tax policy. When the government (and other outsiders) do not know which firms are and are not constrained, the government can use the payout policies of firms to elicit whether or not the firm is constrained, and assess taxes accordingly. Using this insight, we discuss conditions under which a tax on dividends paid is the optimal corporate tax. We then extend this result to a dynamic setting, showing that, if the government lacks commitment, the optimal sequence of tax mechanisms can be implemented with a dividend tax. With commitment, we reach a very different conclusion– a lump sum tax on firm entry is optimal. We argue that these two models demonstrate an underlying principle, that optimal corporate taxes should avoid exacerbating financial frictions, and demonstrate that the structure of the financial frictions can drastically change the optimal policy.


October 17
Michael Weber, Chicago Booth
"Price Rigidities and the Granular Origins of Aggregate Fluctuations"
Host: Chenyue Hu


October 31
Julio Garin, Claremont McKenna
"Repatriation Taxes"
Host: Grace Gu & Carl Walsh
ABSTRACT:
We present a model of a multinational firm to quantify the effects of policy changes in repatriation taxes rates - taxes that firms pay on profits remitted from abroad. Our model captures the full dynamic response of the firm from the time they expect a policy change, through the enactment of the policy change, to the lasting effects of the policy. We find that a failure to account for the full dynamics surrounding a reduction in repatriation tax rates overstates the amount of profits repatriated from abroad and underestimates tax revenue losses. Additionally, since most multinational firms have access to external credit markets, policy changes have a relatively small impact on a firm's hiring and investment decisions, as access to credit makes these decisions relatively independent from changes in the flow of assets from abroad. 


November 7
Eric Swanson, UC Irvine
"Measuring the Effects of Federal Reserve Forward Guidance and Asset Purchases on Financial Markets"
Host: Grace Gu
ABSTRACT:
I extend the methods of G ̈urkaynak, Sack, and Swanson (2005) to separately identify the effects of Federal Reserve forward guidance and large-scale asset purchases (LSAPs) during the 2009–15 U.S. zero lower bound (ZLB) period. I find that both forward guidance and LSAPs had substantial and highly statistically significant effects on medium-term Treasury yields, stock prices, and exchange rates, comparable in magnitude to the effects of the federal funds rate before the ZLB. Forward guidance was more effective than LSAPs at moving short-term Treasury yields, while LSAPs were more effective than forward guidance and the federal funds rate at moving longer-term Treasury yields, corporate bond yields, and interest rate uncertainty. However, the effects of forward guidance were not very persistent, with a half-life of 1–4 months. The effects of LSAPs seem to be more persistent. I conclude that, overall in terms of these criteria, LSAPs were a more effective policy tool than forward guidance during the ZLB period.


November 14
Michael Magill, USC
"Unconventional Monetary Policy and the Safety of the Banking System"
Host: Carl Walsh & Hikaru Saijo
ABSTRACT:
This paper presents a simple general equilibrium model which simultaneously incorporates the banking sector and the monetary and macro-prudential policy of the Central Bank. Banks are viewed  as intermediaries which channel  funds from  cash pools and depositors who insist on the complete safety of their funds, and investors who accept risks, to borrowers who invest in risky projects. Bank debt is  rendered safe by the explicit or implicit guarantee of the government. The presence of cash pools  which can either buy (short-term) government bills or lend to banks implies that the choice of an interest rate by the Central Bank determines the cost of funds for the banks. The government insurance of debt gives it an advantage over equity which implies that capital requirements are needed to limit bank leverage. The paper studies the possible monetary and prudential policies of the Central Bank and their effect on the banking equilibrium, for economies with a high demand for a safe asset---a notion precisely defined in the paper. We show that the conventional monetary and prudential tools, the interest rate and the capital requirements of banks, are not independent instruments, and that there is no choice of policy which can lead to a Pareto optimum. However enlarging the monetary policy toolkit by adding the payment of interest on bank reserves and QE policies can, in conjunction with appropriate capital requirements, restore the Pareto optimality of the banking equilibrium.


November 28
Toan Phan, UNC
"Self-enforcing Debt Limits and Costly Default in General Equilibrium"
Host: Grace Gu
ABSTRACT:
We establish a novel determination of self-enforcing debt limits at the present value of default cost in a general competitive equilibrium. Agents can trade state-contingent debt but cannot commit to repay. If an agent defaults, she loses a fraction of her current and future endowments. Moreover, she is excluded from borrowing but is still allowed to save, as in Bulow and Rogoff (1989). Competition implies that debt limits are not-too-tight, as in Alvarez Jermann (2000). Under a mild condition that the endowment loss from default is bounded away from zero, we show that the equilibrium interest rates must be sufficiently high that the present value of aggregate endowments is finite. Not-too-tight debt limits are exactly equal to the present value of endowment loss due to default. The determination of competitive debt limits based on endowment loss is isomorphic to the determination of public debt sustainable by tax revenues. We also show that competitive equilibria with self-enforcingdebt and costly default are equivalent to Arrow-Debreu equilibria with limitedpledgeability, as defined by Gottardi and Kubler (2015).


December 5 - CANCELLED!
Saki Bigio, UCLA
"Optimal Debt-Maturity Management"
Host: Alonso Villacorta
ABSTRACT:
We solve the problem of a government that wants to smooth financial expenses by choosing over a continuum of bonds of different maturity. The planner takes into account that adjusting debt too fast can affect prices. At the same time, it wants to insure against several sources of risk: (a) income risk, (b) interest rate (price) risk, (c) liquidity risk (prices can become more sensitive to issuance’s), and (d) the risks in the cost of default. We characterize this infinite dimensional control problem to aid the design of the debt-maturity profile in response to these forms of risk.



2016-17

Fall

Note different day/time: Thursday September 15, 2:00 - 3:30 pm
James Costain, Economist, Bank of Spain
"Fiscal Delegation in a Monetary Union: Instrument Assignment and Stabilization Properties"
ABSTRACT: Motivated by the failure of fiscal rules to eliminate deficit bias in Europe, this paper analyzes an alternative policy regime in which each member state government delegates at least one fiscal instrument to an independent authority with a mandate to avoid excessive debt. Other fiscal decisions remain in the hands of member governments, including the allocation of spending across different public goods, and the composition of taxation.
We compare long run debt accumulation and the response to public spending shocks in dynamic games representing several different institutional configurations, including a status quo monetary union scenario with many local governments, a monetary union with a single federal government, and various fiscal delegation scenarios, as well as a social planner's solution.
In our numerical simulations, delegation of budget balance responsibilities to a national or union-wide fiscal authority implies large long-run welfare gains due to much lower steady-state debt. The presence of the fiscal authority also reduces the welfare cost of fluctuations in the demand for public spending, in spite of the fact that the authority imposes considerable "austerity" when it responds to fiscal shocks.


October 11
Adrien Auclert, Stanford University
"Inequality and Aggregate Demand"
Host: Carl Walsh
ABSTRACT: We explore the effects of transitory and persistent increases in income inequality on the level of economic activity in the context of a Bewley-Huggett-Aiyagari model in its Keynesian regime of constant real interest rates. A temporary rise in inequality lowers output modestly because the covariance between changes in income and marginal propensities to consume is negative but small in the model and the data. A permanent rise in inequality leads to a permanent Keynesian recession whose magnitude depends on the elasticity of aggregate savings to idiosyncratic uncertainty—a potentially much larger effect. Economic slumps create endogenous redistribution and give rise to an inequality multiplier. By reducing the marginal product of capital, they also lead to declines in investment that further amplify the recession. Government spending and public debt issuances are expansionary and crowd capital in. Our methodology separates sufficient statistics from general equilibrium multipliers and is applicable to the study of all macroeconomic models of aggregate demand.


October 18
Oscar Jorda, UC Davis / SF Fed
"Large and State-Dependent Effects of Quasi-Random Monetary Experiments"
Host: Ken Kletzer


October 25
Jennifer La'O, Columbia University
"Optimal Fiscal and Monetary Policy with Informational Frictions"
Host: Ajay Shenoy


November 8
Raul Tadle, UC Santa Cruz
"FOMC Sentiment Extraction and its Transmission to Financial Markets"
Host: Carl Walsh
ABSTRACT: Since 2005, the Federal Open Market Committee (FOMC) has regularly released its minutes three weeks after its meetings. Previous research has found that the volatility of different financial market returns react to these releases, and the nature of the reaction may depend on the information the minutes contain. In this paper, I use Automated Content Analysis adopted from computational linguistics and political science to derive sentiments acquired from these FOMC meeting documents. I assign an index to the minutes in order to determine if the sentiments obtained from the information therein can be classified as hawkish (analogous to improving economic conditions and inflationary concerns) or dovish (related to deteriorating economic outlook and subdued price changes). I compare the sentiments of the discussions in the minutes to the sentiments of information in corresponding FOMC statements released immediately after the meetings and calculate the surprise component of the relative sentiments. I then evaluate how this news shock in the minutes impacts broad equity and real estate investment trust indices as well as the exchange rate valuation of different world currencies against the U.S. Dollar. My findings indicate that financial assets respond to the minutes based on the type of news shock they contain and that financial markets react more significantly during the FOMC's implementation of date-based Forward Guidance.


November 15
Zach Bethune, University of Virginia
"Asset Supply and Private Information in Over-the Counter Markets"
Host: Carl Walsh
ABSTRACT: This paper studies asset issuance and trading dynamics in a decentralized market with incomplete information. New assets are issued in a primary market through efficient auctions and then trade amongst investors who have heterogeneous valuations in an over-the-counter (OTC) secondary market. The innovation regarding the OTC market literature is that, in all trades, investors’ valuations for the asset are private information. The innovation regarding the literature on trade under private information is that the distribution of investors’ valuations is endogenous—it depends on trading dynamics in the OTC secondary market. We calibrate the model to match features of the U.S. municipal bond market between 2005-2014 and examine the effects of private information on key financial market indicators such as trade volume, asset issuance, secondary market liquidity, and welfare.


November 29 *NOTE different time: 9:00AM*
Dirk Niepelt, University of Bern
"Domestic and External Debt and Default"
Host Carl Walsh
ABSTRACT: We develop a general equilibrium model with defaultable domestic and external debt. Overlapping generations work, consume, accumulate capital and public debt. Successive, democratically elected governments choose taxes, public goods spending, domestic and external debt issuance and repayment. In politico-economic equilibrium, inter generational conflict strengthens debt capacity and lowers the fundamental conflict between creditor groups. Default decisions may or may not be correlated across debt tranches. Minimum debt returns raise the cost of public funds ex post and render default on other tranches more likely; ex ante, they crowd out capital. Under standard functional form assumptions the model is solved in closed form. Demographic ageing increases domestic debt capacity but has only modest effects on external debt capacity. Equilibrium default offers risk sharing possibilities, but only for select types of shocks.


Winter

Time & Location of Seminars:
Tuesday 1:30-3:00 PM
499 Engineering II

January 18 (Note different day)
Nelson Lind, UC San DIego
"Credit Regimes and the Seeds of Crisis"
Host: Hikaru Saijo
ABSTRACT: This paper presents a theory of mortgage credit that explains (1) the rise of non-prime lending during the early 2000’s, (2) the simultaneous housing boom, and (3) the subsequent crisis. The theory is built on rational and competitive behavior by lenders in response to asymmetric information about borrower income risk. Two possible credit regimes may arise. In the “screening” regime, lenders ration credit through documentation requirements (screening contracts) and down-payment requirements (separating contracts). In the alternative “pooling” regime, risky borrowers gain access to low-doc low-down mortgages (pooling contracts). Joint housing and mortgage market equilibrium implies a tipping point phenomenon — a fall in income risk can trigger the pooling regime, lead to a sudden fall in documentation requirements, and, due to an indifference condition switching effect, generate a rapid appreciation in home prices. A housing crisis follows this credit-fueled boom once fundamentals revert and the screening regime returns. The theory matches microeconomic evidence on the allocation of credit during the mid-2000’s, explains why mortgage rates fell relative to treasury yields during 2003, and provides a framework to assess policies intended to rule out future housing crises.


January 23 (Note different day)
Sanjay Singh, Brown University
"Output Hysteresis and Optimal Monetary Policy"
Host: Carl Walsh
ABSTRACT: We analyze the implications for monetary policy when deficient aggregate demand can cause a permanent loss in potential output, a phenomenon termed as output hysteresis. We incorporate Schumpeterian endogenous growth into a business cycle model with nominal rigidities. In the model, incomplete stabilization of a temporary shortfall in demand reduces the return to innovation, thus reducing R&D and producing a permanent loss in output. Output hysteresis arises under a standard Taylor rule, but not under a strict inflation targeting rule when the nominal interest rate is away from the zero lower bound (ZLB). In a calibrated medium-scale DSGE model, we find that a ZLB episode lasting six quarters permanently reduces output by 2.70% relative to the deterministic trend. At the ZLB, a central bank unable to commit to future policy actions suffers from hysteresis bias: it does not offset past losses in potential output. A new policy rule that targets zero output hysteresis approximates the optimal policy by keeping output at the first-best level. However, it is optimal to deviate from the deterministic trend when the economy is hit by both TFP and demand shocks.


January 31
Caio, Machado
"Financial Crises, Coordination Failures and Disasters"
Host: Carl Walsh


February 1 (Note different day)
Leland Farmer
"The Discretization Filter: A Simple Way to Estimate Nonlinear State Space Models"
Host: Hikaru Saijo


February 28 (Note different time and location - 3:30 - 5:00 pm, E2, room 180)
John C. Williams, Federal Reserve Bank of San Francisco
"Measuring the Natural Rate of Interest: International Trends and Determinants"
Host: Carl Walsh
ABSTRACT: U.S. estimates of the natural rate of interest – the real short-term interest rate that would prevail absent transitory disturbances – have declined dramatically since the start of the global financial crisis. For example, estimates using the Laubach-Williams (2003) model indicate the natural rate in the United States fell to close to zero during the crisis and has remained there into 2016. Explanations for this decline include shifts in demographics, a slowdown in trend productivity growth, and global factors affecting real interest rates. This paper applies the Laubach-Williams methodology to the United States and three other advanced economies –Canada, the Euro Area, and the United Kingdom. We find that large declines in trend GDP growth and natural rates of interest have occurred over the past 25 years in all four economies. These country-by-country estimates are found to display a substantial amount of comovement over time, suggesting an important role for global factors in shaping trend growth and natural rates of interest.


March 7
Gregor Jarosch, Stanford University
"Intermediation as Rent Extraction"
Host: Carl Walsh
ABSTRACT: This paper develops a theory of asset intermediation as a pure rent extraction activity. Agents meet bilaterally in a random fashion. Agents differ with respect to their valuation of the asset's dividends and with respect to their ability to commit to take-it-or-leave-it offers. In equilibrium, agents with commitment behave as intermediaries, while agents without commitment behave as end users. Agents with commitment intermediate the asset market only because they can extract more of the gains from trade when reselling or repurchasing the asset. We study the extent of intermediation as a rent extraction activity by examining the agents' decision to invest in a technology that gives them commitment. We find that multiple equilibria may emerge, with different levels of intermediation and with lower welfare in equilibria with more intermediation. We find that a decline in trading frictions leads to more intermediation and typically lower welfare, and so does a decline in the opportunity cost of acquiring commitment. A transaction tax can restore efficiency.


Spring

Time & Location of Seminars:
Tuesday 1:40-3:00 p.m.
499 Engineering II

April 11
Betty Daniel, University of Albany-SUNY
"Why Don’t Rich Countries Default? Explaining Debt/GDP and Sovereign Debt Crises"
Host: Carl Walsh
ABSTRACT: Incentives for default are different for a rich sovereign than for a poor one. Rich countries have well-developed financial systems with government debt as a central anchor. Strategic default would destroy the assets and trust upon which the financial system is based, inflicting a massive punishment. We introduce a debt contract, which explicitly incorporates the different incentives faced by a rich sovereign. The implicit contract contains the threat of massive punishment for a sovereign who fails to pay what she is able, but no punishment, even in default, for a sovereign who pays what she is able. The central planner uses this debt contract to smooth consumption in the face of persistent output with stochastic shocks. We calibrate to the default experience of Greece in its 2010 debt crisis. This alternative debt contract can explain why: 1) countries with debt/GDP ratios higher than the value of standard default punishments do not default; 2) a sovereign in default always repays something; 3) crises follow an increase in debt which sometimes ends in a sudden stop; 4) debt becomes risky for different countries at different levels of debt/GDP; 5) haircuts and default duration are highly heterogeneous across default events.


April 18
Darrell Duffie, Stanford University
"Efficient Contracting in Network Financial Markets"
Host: Eric Aldrich
ABSTRACT: We model bargaining in over-the-counter network markets over the terms and prices of contracts. Of concern is whether bilateral non-cooperative bargaining is sufficient to achieve efficiency in this multilateral setting. For example, will market participants assign insolvency-based seniority in a socially efficient manner, or should bankruptcy laws override contractual terms with an automatic stay? We provide conditions under which bilateral bargaining over contingent contracts is efficient for a network of market participants. Examples include seniority assignment, close-out netting and collateral rights, secured debt liens, and leverage-based covenants. Given the ability to use covenants and other contingent contract terms, central market participants efficiently internalize the costs and benefits of their counterparties through the pricing of contracts. We provide counterexamples to efficiency for less contingent forms of bargaining coordination.


April 25
James Cloyne, UC Davis
"The Effect of House Prices on Household Borrowing: A New Approach"
Host: Hikaru Saijo
ABSTRACT: We investigate the effect of house prices on household borrowing using administrative mortgage data from the UK and a new empirical approach. The data contain household-level information on house prices and borrowing in a panel of homeowners, who refinance at regular and quasi-exogenous intervals. The data and setting allow us to develop an empirical approach that exploits house price variation coming from idiosyncratic and exogenous timing of refinance events around the Great Recession. We present two main results. First, there is a clear and robust effect of house prices on borrowing, but the responsiveness is smaller than recent US estimates. Second, the effect of house prices on borrowing can be explained largely by collateral effects. We study the collateral channel in two ways: through a multivariate heterogeneity analysis of proxies for collateral and wealth effects, and through a test that exploits interest rate notches that depend on housing collateral.


April 28 **NOTE DIFFERENT DAY**
VINCENZO QUADRINI, USC
"The Politics of Sovereign Default Under Financial Integration"
Host: Grace Gu
ABSTRACT: In this paper we study the role of portfolio diversification on optimal default of sovereign debt in a two-country model with large economies that are financially integrated.  Financial integration increases the incentives to default not only because part of the defaulted debt is owned by foreigners (the standard redistribution channel), but also because the endogenous macroeconomic cost for the defaulting country is smaller when financial markets are integrated.  We show that the sovereign default of one country may be triggered by higher debt (liquidity) issued by other countries.  Because the macroeconomic costs of default spill to other countries, creditor countries may find it beneficial ex-post to bail-out debtor countries.  Although bailouts create moral hazard problems, they can be welfare improving also ex-ante.


May 2
Jonathan Wright, Johns Hopkins
"Extracting Density Forecasts from Asset Prices"
Host: Eric Aldrich


May 16
Jim Nason, NC State University
"Inflation and Professional Forecast Dynamics: An Evaluation of Stickiness, Persistence, and Volatility
ABSTRACT: This paper studies the joint dynamics of U.S. inflation and average inflation predictions of the Survey of Professional Forecasters (SPF) on a sample from 1968Q4 to 2016Q1. The joint data generating process (DGP) is the unobserved components (UC) model of Stock and Watson (2007, “Why has US inflation become harder to forecast?,” Journal of Money, Credit and Banking 39(S1), 3–33) and the Coibion and Gorodnichenko (2015, “Information rigidity and the expectations formation process: A simple framework and new facts,” American Economic Review 105, 2644–2678) version of the sticky information (SI) model of Mankiw and Reis (2002, “Sticky information versus sticky prices: A proposal to replace the New Keynesian Phillips curve,” Quarterly Journal of Economics 117, 1295–1328). We add drift to gap inflation persistence in the Stock and Watson (SW)-UC model and place a time-varying frequency of forecast updating into the SI model. The joint DGP is a nonlinear state space model, which is estimated using Bayesian tools grounded in the auxiliary particle filter, particle learning, and the particle smoother. Estimates of trend inflation, which peak at about seven percent during the 1981–1982 recession, depend on the average SPF inflation predictions, especially at longer horizons. Gap inflation is estimated at nearly nine percent in 1975Q1, which is almost three times larger than at any other time in the sample. We also report that gap inflation stochastic volatility (SV) spikes during the 1973–1975 recession while the peak in trend inflation SV occurs during the 1981–1982 recession. These estimates of SV display co-movement with time-variation in SI inflation updating because it occurs frequently during the inflation of the 1970s and Volcker disinflation while updating becomes less frequent in the 1990s. We conclude the average member of the SPF is sensitive to the impact of permanent shocks on the conditional mean of inflation.
Disclaimer: "The views herein are those of the authors and do not represent the views of the Bank for International Settlements."


May 25 **NOTE DIFFERENT DAY**
Ivalina Kalcheva, UC Riverside
"Make and Take Fees in the U.S. Equity Market"
Host: Eric Aldrich
ABSTRACT: We study the effect of liquidity-based trading fees charged by the U.S. stock exchanges, on market outcomes for the period 2008-2010. Our exchange-level analysis reveals that an exchange's trading volume is decreasing in its net fee, relative to the net fee of other exchanges. Further, an increase in the take fee decreases trading volume relatively more than an increase in the make fee. At the exchange level, these changes in trading volume are not accompanied by changes in quoted or net-of-fees spreads.


June 6
Bill Branch, UC Irvine
"Asset Prices, Unemployment and Monetary Policy when Households Lack Commitment"
Host: Hikaru Saijo
ABSTRACT:
We study a Mortensen-Pissarides economy with a single twist: households who receive uninsurable idiosyncratic preference shocks, due to limited commitment, self-insure by accumulating claims on firms' profits.  The model can generate multiple steady states across which employment, the real interest rate, and market capitalization are positively correlated.  The model explains secular stagnation as a self fulfilling equilibrium where households are liquidity constrained, and both the real interest rate and the employment rate are low.  Under constant gain learning, the economy is recurrently drawn towards the secular stagnation equilibrium with the possibility of extended periods with low real interest and employment rates.  An extension of the model to include money and nominal bonds as assets implies the existence of a ``trap'' equilibrium where nominal interest rates are at an endogenous lower bound and the economy exhibits secular stagnation.  Learning dynamics imply that a financial sector shock, or a shock to beliefs, will generate endogenous escapes to the trap equilibrium.



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Microeconomics & International Trade

2017-18

Spring 2018

April 19
Chris Shannon, UC Berkeley
"Robust and Random Rationalizability"
Host: Natalia Lazzati
Abstract:
This paper studies revealed preference theories when data might be subject to measurement error. The paper proposes a general framework for rationalizing data and refuting theories robust to measurement error. The paper also considers noisy observations, and under several different assumptions on the distribution of errors, gives conditions under which features of a model might be estimated or tested using such data. Examples including consumer demand and general equilibrium illustrate the main results.   


April 26
Julie Cullen, UC San Diego
"Political Alignment, Attitudes Toward Government and Tax Evasion"
Host" George Bulman
Abstract:
We ask whether attitudes toward government play a causal role in the evasion of U.S. personal income taxes. We first use individual-level survey data to demonstrate a link between sharing the party of the president and trust in the administration generally and opinions on taxation and spending policy, more specifically. Next, we move to the county level, and measure tax behavior as elections, decided by the voting behavior in swing-states, push voters in partisan counties into and out of alignment with the party of the president. Using IRS data, we find that reported taxable income increases as a county moves into alignment, with the increases concentrated in income sources that are easily evaded, due to lack of third-party reporting. Corroborating the view that evasion falls, potentially suspect EITC claims and audit rates also fall. Our results provide real-world evidence that a positive outlook on government lowers tax evasion.


May 3
Paul Milgrom, Stanford
"Deferred-Acceptance Clock Auctions and Radio Spectrum Reallocation"
Host: Natalia Lazzati
Abstract:
A deferred-acceptance (DA) clock auction for procurement chooses winning bids by reducing prices in each round to the least attractive current bids. In contrast to Vickrey auctions, DA clock auctions for single-minded bidders are obviously strategy-proof and group strategy-proof, preserve winners' privacy, avoid intractable optimizations, can incorporate the auctioneer's budget constraint, and set prices to be no higher than either competitive equilibrium or Nash equilibrium in the related first-price auction. In simulations based on the US Incentive Auction, the DA clock auction used by the FCC leads to nearly efficient outcomes at a lower cost than a Vickrey auction while using a fraction of the computational effort.


May 10 - CANCELED DUE TO STRIKE ACTIVITIES
Emmanuel Saez, UC Berkeley
"Payroll Taxes, Firm Behaviro, and Rent Sharing: Evidence from a Young Workers' Tax Cut in Sweden"
Host: George Bulman/Carlos Dobkin
Abstract:
This paper uses administrative data to analyze a large and long-lasting employer payroll tax rate cut from 31% down to 15% for young workers (aged 26 or less) in Sweden. We uncover a crucial role of firm-level behavior and rent-sharing in the incidence of payroll tax cuts. At the market level, we find a zero effect on net-of-tax market wages of young treated workers relative to slightly older untreated workers, even after six years. We find a 2--3 percentage points increase in youth employment following the reform, primarily due to fewer separations, that is concentrated in high youth unemployment regions. We then focus on the firm-level effects of the resulting tax windfall. We sort firms by the size of the tax windfall and trace out graphically the time series of firms' outcomes. We proxy a firm's windfall with its share of treated young workers just before the reform. First, heavily treated firms  expand right after the reform: employment, capital, sales, value added, and profits all increase. These effects appear stronger in credit-constrained firms,  consistent with liquidity effects. Second, heavily treated firms increase the wages of all their workers collectively -- young as well as old -- consistent with rent sharing of the tax windfall. Wages of low paid workers rise more in percentage terms. Rather than through canonical market adjustment, payroll tax incidence on wages may largely occur through firm-level rent sharing.


May 17
Jeffrey Clemens, UC San Diego
"The Minimum Wage, Finge Benefits, and Worker Welfare"
Host: Jeremy West
Abstract:
This paper explores the relationship between the minimum wage, the structure of employee compensation, and worker welfare. We advance a conceptual framework that describes the conditions under which a minimum wage increase will alter the provision of fringe benefits, alter employment outcomes, and either increase or decrease worker welfare. Using American Community Survey data from 2011-2016, we find robust evidence that state-level minimum wage changes decreased the likelihood that individuals report having employer-sponsored health insurance. Effects are concentrated among workers in low-paying occupations and offset between 10 and 25% of wage increases associated with minimum wage hikes. We also find evidence that both insurance coverage and wage effects exhibit spillovers into occupations moderately higher up the skill distribution.


June 7
Rouyao Shi, UC Riverside
"Identification and Estimation of Nonparametric Hedonic Equilibrium Model with Unobserved Quality"
Host: Jessie Li
Abstract:
This paper studies a nonparametric hedonic equilibrium model in which certain product characteristics are unobserved. Unlike most previously studied hedonic models, both the observed and unobserved agent heterogeneities enter the structural functions nonparametrically. Prices are endogenously determined in equilibrium. Using both within-and cross-market price variation, I show that all the structural functions of the model are nonparametrically identified up to normalization. In particular, the unobserved product quality function is identified if the relative prices of the agent characteristics differ in at least two markets. Following the constructive identification strategy, I provide easy-to-implement series minimum distance estimators of the structural functions and derive their uniform rates of convergence. To illustrate the estimation procedure, I estimate the unobserved efficiency of American full-time workers as a function of age and unobserved ability.


Winter 2018

January 19
Sergii Meleshchuk
"Price Discrimination in International Trade: Empirical Evidence and Theory"
Host: Alan Spearot
ABSTRACT:
This paper investigates empirically and theoretically second-degree price discrimination in business-to-business transactions. I use highly detailed transaction-level Colombian imports data to document the presence of quantity discounts. To rationalize this fact, I develop a tractable theoretical framework that embeds nonlinear pricing (second-degree price discrimination) into a standard international trade model and characterize optimal policies. I show that welfare losses from second-degree price discrimination can be quite substantial. Furthermore, optimal tariffs are higher when firms use non-linear prices as compared to standard models. Finally, if the policymaker sets tariffs that are optimal under linear pricing, but firms use second-degree price discrimination, this will lead to significant welfare losses.


January 22
Golvine de Rochambeau
"Monitoring and Intrinsic Motivation: Evidence from Liberia's Trucking Firms"
Host: Alan Spearot
ABSTRACT: 
Severe information asymmetries are thought to make contracting particularly difficult within (and across) firms in developing countries. Standard principal-agent theory predicts that a new monitoring technology provided at zero cost should be widely adopted and unambiguously raise workers’ effort. I test this classical prediction using a field experiment with trucking companies in Liberia. While monitoring technologies increase agents’ extrinsic incentives to provide effort, they also do not allow worker to show that he or she does not need these incentives to work hard, which can crowd out effort. Overall, this paper demonstrates that, while new monitoring technologies can dramatically raise some workers’ productivity in settings where employment contracts are difficult to enforce, their use may lower the productivity of some workers – those who are intrinsically motivated to work hard.


January 23
Monica Moriacco
"Market Power in Input Markets: Theory and Evidence from French Manufacturing"
Host: Alan Spearot
ABSTRACT: 
This paper documents the market power of large buyers in foreign input markets, and evaluates its effect on the aggregate economy. I develop an empirical methodology to consistently estimate buyer power at the firm level, and apply it using longitudinal data on trade and production of French manufacturing firms from 1996-2007. My results show that the buyer power of large French importers is substantial, concentrated in key sectors, and it correlates with the size and productivity of the firm. I then incorporate heterogeneous buyer power in a general equilibrium model, and show that it induces large distortionary effects on the aggregate economy, worth about 3% of gross manufacturing output in France. In spite of such output distortions, total real income could potentially increase, due to transfers of rents from the foreign to the domestic economy. My analysis suggests that policies that spur import market integration can play a role in stimulating aggregate production.


January 29
Yuhei Miyauchi
"Matching & Agglomeration: Theory and Evidence from Japanese Firm-to-Firm Trade"
Host: Alan Spearot
ABSTRACT:
Why are economic activities geographically concentrated? In this paper, I argue that increasing returns in firm-to-firm matching is an important source of agglomeration. I open by providing reduced-form evidence of increasing returns in matching using a panel of firm-to-firm trade data covering over a million Japanese firms. Using unexpected supplier bankruptcies as an instrument, I show that the new supplier matching rate upon a supplier loss increases in locations and industries when there are more alternative suppliers, while this rate remains stable in the presence of other buyers looking for a match. Based on these findings, I develop a new structural trade model with dynamic firm-to-firm matching in input trade across space. In this economy, the presence of more suppliers increases input buyers' aggregate sales by improving the supplier matching rates and hence reducing production cost; this, in turn, attracts more suppliers to sell in the location. I calibrate the model to match the reduced-form estimates, and I show that this type of circular causation explains 7% and 16% of spatial inequality of the firm density and the real wages in Japan, respectively. Lastly, I analyze policies to promote economically lagged areas, and I find that (1) subsidies for input suppliers to sell in the target areas are much more effective than subsidies to produce in these areas in improving the welfare of these areas, and (2) improving transportation infrastructure initially decreases and then increases the welfare of the target areas.


January 30
Shoumitro Chaterjee
"Market Power and Spatial Competition in Rural India"
Host: Alan Spearot
ABSTRACT: 
In this paper, I argue that market power of intermediaries plays an important role in contributing to low incomes of farmers in India. I study the role of spatial competition between intermediaries in determining the prices that farmers receive in India by focusing on a law that restricts farmers to selling their goods to intermediaries in their own state. I show that the discontinuities in market power generated by the law translate into discontinuities in prices. Increasing spatial competition by one standard deviation causes prices received by farmers to increase by 6.4%. To shed light on spatial and aggregate implications, I propose and estimate a quantitative spatial model of bargaining and trade. Using this structural model, I estimate that the removal of the interstate trade restriction in India would increase competition between intermediaries substantially, thereby increasing the prices farmers receive and their output. Estimates suggest that average farmer prices and output would increase by at least 11% and 7% respectively. The value of the national crop output would therefore increase by at least 18%.


February 6
Lin Tian
"Division of Labor and Extent of Market: Theory and Evidence from Brazil"
Host: Alan Spearot
ABSTRACT: 
Firms are more productive in larger cities. This paper investigates a potential explanation that was first proposed by Adam Smith: Larger cities facilitate greater division of labor within firms. Using a dataset of Brazilian firms, I first document that division of labor is indeed robustly correlated with city size, controlling for firm size. I propose a theoretical model in which this relationship is generated by both a selection effect—firms endogenously sort across space—and a treatment effect—larger cities increase division of labor for all firms, by reducing the costs associated with greater division of labor. The model embeds a theory of firms' choice of the optimal division of labor in a spatial equilibrium model. Structural estimates derived from the model show that division of labor accounts for 16% of productivity advantage of larger cities in Brazil, half of which is due to firm sorting and the other half to the treatment effect of city size. The theory also generates a set of auxiliary predictions of firms' responses to a reduction in the cost of division of labor. Exploiting a quasi-experiment that changes the cost of division of labor within cities—the gradual roll-out of broadband internet infrastructure—I find causal empirical support for these predictions, which helps to validate the model. Finally, the quasi-experiment also provides validation for the structural estimation. The estimated model predicts changes in the average division of labor within different cities in response to the new broadband internet infrastructure, which I find are similar to the actual changes.


February 22
David Atkin, MIT
"How do we Choose our Identity? A Revealed Preference Approach using Food Consumption"
Host: Alan Spearot
Abstract:
Are identities fungible? How do people come to identify with specific groups? This paper proposes a revealed preference approach, using food consumption to uncover identity choices. We focus on ethnic and religious identities in India. We first show that consumption of identity goods (e.g. beef and pork) responds systematically to forces suggested by social identity research -- group status and group salience, with the latter proxied by Hindu-Muslim violence. Moreover, consistent with economic theory revealed identity choices respond to the cost of identifying with a group. We propose and estimate an appropriately modified demand system. Using these estimates, we quantify how the endogeneity of identity modified the effects of shocks following the 1991 economic reforms in India. While conflict and status have been at the focus of social identity research in recent decades, our results indicate that prices play a dominant role.  


March 1
Damon Clark, UC Irvine
How Much Does High School Pay? Evidence from Britain” 
Host: George Bulman
Abstract:
Would additional schooling improve the later-life outcomes of high school students at risk of dropping out? In this paper I exploit British compulsory schooling changes to estimate this return - comparing labor market outcomes of students who left high school at the earliest opportunity with students born a few days later who, because of a change in the compulsory schooling laws, were required to attend school for an extra year. I report estimates for a wide range of labor market outcomes.To interpret these estimates I draw on an in-depth survey of some of the affected students.


March 15
Matilde Bombardini, UBC
"TBA"
Host: Alan Spearot


Fall 2017

September 28
Natalie Cox, Princeton/SIEPR
"Pricing and Selection in the Student Loan Market: Evidence from Borrower Refinancing Decisions"
Host: George Bulman
ABSTRACT:
Advances in data-driven underwriting have both efficiency and equity implications. In the $1.3 trillion student loan market, private lenders offer a growing distribution of risk-based interest rates, while the federal loan program sets a uniform price. I measure changes in consumer surplus that occur as low-risk types refinance out of the government pool into the private market. I use a dataset from an online refinancer to estimate a structural model that relates borrowers’ repayment choices to interest rates. I estimate refinancing increases low-risk surplus by $1,302, and show substantial distortionary costs (32% of the average transfer) under a pooled, uniform interest rate. To maintain access to the current uniform rate, the government must subsidize high-risk borrowers $1,507 on average.


October 19
Karthik Muralidharan, UC San Diego
“Disrupting Education? Experimental Evidence on Technology-Aided Instruction in India"
Host: Jon Robinson
ABSTRACT:
We present experimental evidence on the impact of a personalized technology-aided after-school instruction program on learning outcomes. Our setting is middle-school grades in urban India, where a lottery provided winning students with a voucher to cover program costs. We find that lottery winners scored 0.36σ higher in math and 0.22σ higher in Hindi relative to lottery losers after just 4.5-months of access to the program. IV estimates suggest that attending the program for 90 days would increase math and Hindi test scores by 0.59σ and 0.36σ respectively. We find similar absolute test score gains for all students, but the relative gain was much greater for academically-weaker students because their rate of learning in the control group was close to zero. We show that the program was able to effectively cater to the very wide variation in student learning levels within a single grade by precisely targeting instruction to the level of student preparation. The program was cost effective, both in terms of productivity per dollar and unit of time. Our results suggest that well-designed technology-aided instruction programs can sharply improve productivity in delivering education.


October 24
Gustavo Bobonis, Toronto
"Vulnerability and Clientelism"
Host: Justin Marion
ABSTRACT:
Political clientelism is often deemed to undermine democratic accountability and representation. This study argues that economic vulnerability causes citizens to participate in clientelism. We test this hypothesis with a randomized control trial that reduced household vulnerability through a development intervention: constructing residential water cisterns in drought-prone areas of Northeast Brazil.  This exogenous reduction in vulnerability significantly decreased requests for private benefits from local politicians, especially by citizens likely to be involved in clientelist relationships. We also link program beneficiaries to granular voting outcomes, and show that this reduction in vulnerability decreased votes for incumbent mayors, who typically have more resources to engage in clientelism. Our evidence points to a persistent reduction in clientelism, given that findings are observed not only during an election campaign, but also a full year later.


October 26
Laura Giuliano, UC Merced
"Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior"
Host: Justin Marion
ABSTRACT:
We analyze how quits responded to arbitrary differences in own and peer wages at a large U.S. retailer. Regression-discontinuity (RD) estimates imply large causal effects of own wages on quits. However, this own-wage response could reflect comparisons either to market wages or to the wages of peers within the store. RD estimates based on peer wages show similarly large effects, and imply that the own-wage quit response mostly reflects peer comparisons. The peer-wage response cannot be explained by rational updating about own future wage growth, and it is driven by cases where the peers are paid more than the worker—suggesting that workers are concerned about fairness. After accounting for peer effects, quits appear fairly insensitive to wages—consistent with significant labor-market frictions.


November 9
Federico Echenique, Cal Tech
"On Multiple Discount Rates"
Host: Natalia Lazzati
ABSTRACT:
We study the problem of resolving conflicting discount rates via a social choice approach. We introduce several axioms in this context, seeking to capture the tension between allowing for intergenerational comparisons of utility, and imposing intergenerational fairness. Depending on which axioms are judged appropriate, we are led to one of several conclusions: utilitarian, maxmin, or a multi-utilitarian approach, whereby a utility stream is judged by the worst in a set of utilitarian weighting schemes across discount rates.


November 16
Gordon Dahl, UC San Diego
"Intergenerational Spillovers in Disability Insurance"
Host: George Bulman
ABSTRACT:
Does participation in a social program by parents have spillovers on their children's use of public assistance, future labor market outcomes, and human capital investments? From a policy perspective, what a child learns from his or her parents about employment relative to government support could matter for the financial stability of a variety of social insurance and safety net programs. While intergenerational concerns have figured prominently in policy debates for decades, the evidence base is scarce due to nonrandom participation and data limitations. In this paper we exploit a 1993 policy reform in the Netherlands which tightened disability insurance (DI) criteria for existing claimants, and use rich panel data to link parents to children's long-run outcomes. The key to our regression discontinuity design is that the reform applied to younger cohorts, while older cohorts were exempted from the new rules. We find that children of parents who were pushed out of DI or had their benefits reduced are 11 percent less likely to participate in DI themselves and earn two percent more in the labor market as adults. There is no effect on children's participation in other government safety net programs. As a result, intergenerational spillovers caused both reduced government transfers and increased tax revenue, resulting in 5,900 euros in cumulative child spillovers per treated parent by 2014. We find intriguing evidence that children anticipate a future with less reliance on DI, with treated children investing in an extra .12 years of schooling on average. Our findings have important implications for the evaluation of the costs and benefits of this and other policy reforms: ignoring parent-to-child spillovers underestimates the cost savings of the Dutch DI reform in the long run by almost 30 percent in present discounted value terms.


November 30
Ben Hansen, U of Oregon
"Drug Trafficking Under Parital Prohibition: Evidence from Recreational Marijuana"
Host: Jeremy West
ABSTRACT:
Marijuana is partially prohibited: though banned federally, it will soon be available to 21% of U.S. adults under state statutes. A chief concern among policy makers is marijuana trafficking from states with legal markets elsewhere. We measure trafficking with a natural experiment. Oregon opened a recreational market on October 1, 2015, next to Washington’s existing market. Using administrative data with the universe of recreational market sales, we find Washington retailers along the Oregon border experienced a 41% decline in sales following Oregon's market opening. In counties that are the closest crossing point for the majority of neighboring counties, the estimated decrease grows to 58%, and is the largest for the biggest transactions.  


December 7
Matthew Freedman, UC Irvine
"Is Your Lawyer a Lemon? Incentives and Selection in the Public Provision of Criminal Defense"
Host: Justin Marion
ABSTRACT:
Governments in the U.S. must offer free legal services to low-income people accused of crimes. These services are frequently provided by assigned counsel, who handle cases for indigent defendants on a contract basis. Court-assigned attorneys generally garner worse case outcomes than privately retained attorneys. Using detailed court records from one large jurisdiction in Texas, we find that the disparities in outcomes are primarily attributable to case characteristics and within-attorney differences across cases in which they are assigned versus retained. The selection of low-quality lawyers into assigned counsel and endogenous matching in the private market contribute less to the disparities.



2016-17

Fall

Time & Location of Seminars:
Thursdays 1:403:00 p.m.
499 Engineering II

September 22
Brian Giera, UC Santa Cruz
"The Reinvestment Puzzle: Evidence from a Field Experiment with Micro-Entrepreneurs in Urban Ethiopia"
Host: Ajay Shenoy
ABSTRACT: We use data from a field experiment with micro-entrepreneurs in Ethiopia to look at what prevents small firms from realizing high marginal returns to investment in their business. We put forward two explanations: (1) shop owners have trouble saving marginal profits to reinvest the following day and (2) shop owners make complex business decisions subject to informational and attention constraints. To test these ideas, we provided firms with an informal savings device (a leather wallet) to help earmark savings for the following day, and a rule-of-thumb informational poster to be placed in their business to help alleviate inattention/informational frictions. We found the wallet led to increased business savings, increased separation of personal and household money, and a 32% increase in profits over the previous month. The poster was found to increase hours worked, customers per day, investment per day, and daily/monthly profits ranging from 10-14%. We conclude that simplified and convenient management information can bring the performance of their micro-enterprise to the ``top of mind'', both during the day while they run their business, and at night when they head home. 


 

September 29
Melissa Dell, MIT
"Nation Building Through Foreign Intervention: Evidence from Discontinuities in Military Strategies"
Host: Ajay Shenoy
ABSTRACT: This study uses discontinuities in U.S. strategies employed during the Vietnam War to estimate their causal impacts. It identifies the effects of bombing by exploiting rounding thresholds in an algorithm used to target air strikes. Bombing increased the military and political activities of the communist insurgency, weakened local governance, and reduced non-communist civic engagement. The study also exploits a spatial discontinuity across neighboring military regions, which pursued different counterinsurgency strategies. A strategy emphasizing overwhelming firepower plausibly increased insurgent attacks and worsened attitudes towards the U.S. and South Vietnamese government, relative to a hearts and minds oriented approach.


October 13
Joseph Kuehn, Cal State-East Bay
"Estimating Auctions with Externalities:  The Case of USFS Timber Auctions"
Host: Justin Marion
ABSTRACT: This paper studies how bidding strategies and auction outcomes are affected by downstream competition, particularly for USFS timber auctions. This is done by extending the auction estimation literature to a model where outside competition affects bidding behavior in that bidders are then not only concerned with whether they win the auction, but also the identity of the winner if it is not them. Applying the estimation technique to the case of timber auctions, I find that downstream competition in the lumber industry affects the bidding behavior of mill bidders, sometimes leading to the misallocation of timber tracts.


November 10
Isaac Sorkin, Stanford University
"Ranking Firms Using Revealed Preference"
Host: Ajay Shenoy
ABSTRACT: Firms account for a substantial share of earnings inequality. Although the standard explanation is that search frictions support an equilibrium with rents, this paper finds a significant role for compensating differentials. To reach this finding, this paper develops a structural search model and estimates it on U.S. administrative data. The model analyzes how workers move between firms. Compensating differentials are revealed when workers systematically move to lower-paying firms, while rents are revealed when workers systematically move to higher-paying firms.Hope you all can make it.


November 17
Mattjew Gentzkow, Stanford University
"Measuring Polarization in High-Dimensional Data: Method and Application to Congressional Speech"
Host: Ajay Shenoy
ABSTRACT: We study trends in the partisanship of Congressional speech from 1873 to 2009. We define partisanship to be the ease with which an observer could infer a congressperson’s party from a fixed amount of speech, and we estimate it using a structural choice model and methods from machine learning. The estimates reveal that partisanship is far greater today than at any point in the past. Partisanship was low and roughly constant from 1873 to the early 1990s, then increased dramatically in subsequent years. Evidence suggests innovation in political persuasion beginning with the Contract with America, possibly reinforced by changes in the media environment, as a likely cause. Naive estimates of partisanship are subject to a severe finite-sample bias and imply substantially different conclusions.


December 1
Judson Boomhower, Stanford University
"Do Energy Efficiency Investments Deliver at the Right Time"
Host: Jeremy West
ABSTRACT: Electricity cannot be cost-effectively stored even for short periods of time. Consequently, wholesale electricity prices vary widely across hours of the day with peak prices frequently exceeding off-peak prices by a factor of ten or more. Most analyses of energy-efficiency policies ignore this variation, focusing on total energy savings without regard to when those savings occur. In this paper we demonstrate the importance of this distinction using novel evidence from a rebate program for air conditioners in Southern California. We estimate electricity savings using hourly smart-meter data and show that savings tend to occur during hours when the value of electricity is high. This significantly increases the overall value of the program, especially once we account for the large capacity payments received by generators to guarantee their availability in high-demand hours. We then compare this estimated savings profile with engineering-based estimates for this program as well as a variety of alternative energy-efficiency investments. The results illustrate a surprisingly large amount of variation in economic value across investments. 

Winter

Time and Location of Seminars:
Thursday 1:303:00 p.m.
499 Engineering II

January 17 (Note different day)
Lauren Bergquist, UC Berkeley
"Pass-through, Competition, and Entry in Agricultural Markets: Experimental Evidence from Kenya"
Host: Alan Spearot
ABSTRACT: African agricultural markets are characterized by low revenues for smallholder farmers and high food prices for consumers. There has long been concern that this price wedge between farmers and consumers – and the resulting loss in producer and consumer welfare – are driven in part by imperfect competition among the intermediaries that connect them. In this paper, I implement three randomized control trials that are tightly linked to a model of market competition in order to estimate key parameters governing the competitive environment of Kenyan agricultural markets. First, I reduce the marginal costs of traders in randomly selected markets, and find that only 22% of this cost reduction is passed through to consumers. Second, to elicit the shape of consumer demand that these traders face, I randomize price discounts and measure the quantities that customers purchase at these prices. Taken together, these estimates reveal a high degree of collusion among intermediaries, with large implied losses to consumer welfare and overall market efficiency. Third, given that a natural policy response to limited competition is to encourage greater firm entry, I randomly incentivize the entry of new traders into markets. By capturing the resulting effect on local market prices, I identify the implied change in the competitive environment due to entry. The findings have implications for the incidence of technological and infrastructure changes in African agriculture and for the policy responses aimed at improving the market environment.


January 19
Yulong Wang, Princeton
"Inference in the Threshold Model"
Host: Carlos Dobkin
ABSTRACT: This paper studies inference about the values of the parameters in the threshold model in a generalized method of moments (GMM) framework. First, we establish that the extensively studied least squares method leads to substantially oversized tests and confidence intervals when the coefficient change is not large. Second, by re-ordering the data to recast the threshold model as a structural break problem, we construct tests that control size under a large range of empirically relevant moderate coefficient changes and are approximately efficient in a well-defined sense. Finally, we modify our approach to encompass inference problems in a variety of additional widely studied models. The accuracy of the asymptotic approximations is evaluated by Monte Carlo simulations. The empirical applicability is illustrated through two applications: (i) testing if there exists a threshold effect of public debt on economic growth; (ii) constructing a confidence interval on the tipping point in the segregation problem studied by Card, Mas, and Rothstein (2008).


January 24 (Note different day)
Jessie Li, Stanford University
"The Numerical Delta Method and Bootstrap"
Host: Carlos Dobkin
ABSTRACT: This joint paper with Han Hong studies inference on nondifferentiable functions using methods based on numerical differentiation. The first part of the talk will show how the numerical delta method provides consistent inference for nondifferentiable functions that are directionally differentiable. The motivating example will be dominance testing on quantile treatment effects in the Tennessee STAR experiment. Other examples of directionally differentiable functions arise in economic applications such as threshold regression, incomplete auction models, and models with partially identified parameters. The second part of the talk will discuss a numerical bootstrap method that can consistently estimate the limiting distribution of estimators in many cases where the conventional bootstrap is known to fail. Examples include the maximum score estimator, LASSO, and 1-norm Support Vector Machine regression.


January 25 (Note different day)
Roy Allen, UC San Diego
"Identification of Average Demand Models"
Host: Carlos Dobkin
ABSTRACT: This paper, coauthored with John Rehbeck (UCSD), studies the nonparametric identification of a model of average demand with multiple goods, once unobservable heterogeneity has been integrated out. The model can be used for bundles, decisions under uncertainty, stochastic choice, and other examples. Optimizing behavior implies an analogue of Slutsky symmetry, which we exploit to show nonparametric identification of the model. Our main results do not rely on special regressors or identification at infinity. As a special case we provide new conditions for identification of additive random utility models (ARUM). These conditions also apply to a stochastic choice model allowing bounded rationality. In an illustrative application, we refute ARUM in favor of this more general model.


January 26
Yatang Lin, London School of Economics
"The Long Shadow of Industrial Pollution: Environmental Amenities and the Distribution of Skills"
Host: Alan Spearot
ABSTRACT: This paper presents theory and evidence on the role of environmental amenities in shaping the competitiveness of post-industrial cities. I assemble a rich database at a fine spatial resolution to examine the impact of historical pollution on the distribution of skilled workers and residents within cities today.  I find that census tracts downwind of highly polluted 1970s industrial sites were associated with higher pollution levels in the 1970s but not after 2000. However, they were less skilled and had lower wage and housing values in 2000, a pattern which became more prominent between 1980 and 2000. These findings suggest the presence of skill sorting on pollution and strong subsequent agglomeration effects.  To quantify the contribution of different mechanisms, I build and estimate a multi-sector spatial equilibrium framework that introduces heterogeneity in local productivity and workers' valuation for local amenities across sectors, and allows initial sorting to be magnified by production and residential externalities. Estimation of the model suggests that historical pollution is associated with lower current productivity and amenity levels. The effects are more pronounced for productivity, more skilled sectors and central tracts. I use the framework to evaluate the impact of counterfactual pollution cuts in different parts of cities on nationwide welfare and the cross-city distribution of skills.


January 27 (Note different day)
Matthew Grant, Yale University
"Why Special Economic Zones? Using Trade Policy to Discriminate Across Importers"
Host: Alan Spearot
ABSTRACT: Special economic zones (SEZs) are a common and economically important policy tool used around the world to lower tariffs on intermediate goods for selected manufacturers. Why would governments want to do this? In contrast to existing models of trade policy, which assume that the tariff on a good is uniform across all importers, I provide a theoretical framework in which tariff discrimination across importers is optimal policy for a government motivated by both political and welfare considerations. Optimal policy follows a simple two-tiered tariff rule, in which some importers are charged the prevailing tariff, and other firms are charged a reduced tariff. This policy is implemented in practice through selective permission to produce in SEZs. The model offers predictions about the relationship between SEZ size and import volumes in equilibrium. It also predicts that the final goods industries prioritized for duty-reduced access to a particular intermediate through SEZs will be politically influential, elastic users of the intermediate, and protected in equilibrium by a low ad-valorem equivalent final goods tariff. Using a novel data set I constructed from public records covering the universe of active SEZs in the United States, I show that the model's predictions about the size and industrial composition of SEZs are consistent with the way they are implemented in practice.


February 6 (Note different day)
Sharat Ganapati
"The Modern Wholesaler: Global Sourcing, Domestic Distribution, and Scale Economies"
Host: Alan Spearot


February 7 (Note different day)
Heitor Pellegrina, Brown University
"The Causes and Consequences of Agricultural Specialization in Brazil"
Host: Alan Spearot


February 23
Joel Sobel, UC San Diego
"Iterative Weak Dominance and Interval-Dominance Supermodular Games"
Host: Natalia Lazzati
ABSTRACT: This paper extends Milgrom and Robert's treatment of supermodular games in two ways.  It points out that their main characterization result holds under a weaker assumption. It refines the arguments to provide bounds on the set of strategies that survive iterative deletion of weakly dominated strategies. I derive the bounds by iterating the best-response correspondence. I give conditions under which they are independent of the order of deletion of dominated strategies. The results have implications for equilibrium selection and dynamic stability in games.


March 9
Gabriela Rubio, UC Merced
"How Love Conquered Marriage: Economic Development and the Disappearance of Arranged Marriages"
Host: Ajay Shenoy


March 16
Katherine Casey, Stanford University
"Debates: Voting and Expenditure Responses to Political Communication"
Host: Ajay Shenoy
ABSTRACT: Candidate debates have a rich history and remain integral to contemporary campaign strategy. There is, however, no evidence that they affect voter behavior. The scarcity of political information in the developing world offers an attractive testing ground. Using experimental variation in Sierra Leone, we find that public debate screenings build political knowledge that changes the way people vote, which triggers a campaign expenditure response by candidates, and fosters accountability pressure that disciplines the subsequent spending of elected officials.  We parse the effects of information conveyed about policy versus charisma, and find that both matter.  The results show how political communication can trigger a chain of events that begins with voters and ultimately influences policy.

Spring

Time & Location of Seminars:
Thursday 1:403:00 p.m.
499 Engineering II

April 6
Tarun Sabarwal, University of Kansas
"Directional Monotone Comparative Statics"

ABSTRACT: Many questions of interest in economics can be stated in terms of monotone comparative statics: If a parameter of a constrained optimization problem increases, when does its solution increase as well. This paper characterizes monotone comparative statics in different directions in finite-dimensional Euclidean space. These new characterizations are ordinal and retain the same flavor as their counterparts in the standard theory, showing new connections to the standard theory. The results are highlighted by several applications in consumer theory, producer theory and game theory. These applications were previously outside the scope of the standard theory of monotone comparative statics.  



April 20
Kelly Bedard, UC Santa Barbara
"Equal but Inequitable: Who Benefits from Gender-Neutral Tenure Clock Stopping Policies?"
Host: Rob Fairlie
ABSTRACT: Many skilled professional occupations are characterized by an early period of intensive skill accumulation and career establishment. Examples include law firm associates, surgical residents, and untenured faculty at research-intensive universities. High female exit rates are sometimes blamed on the inability of new mothers to survive the sustained negative productivity shock associated with childbearing and early childrearing in these environments. Gender-neutral family policies have been adopted in some professions in an attempt to “level the playing field.” The gender-neutral tenure clock stopping policies adopted by the majority of research-intensive universities in the United States in recent decades are an excellent example. But to date, there io empirical evidence showing that these policies help women. Using a unique data set on the universe of assistant professor hires at top-50 economics departments from 1985-2004, we show that the adoption of gender-neutral tenure clock stopping policies substantially reduced female tenure rates while substantially increasing male tenure rates.


April 27
James Sallee, UC Berkeley
"Corrective Policy and Goodhart’s Law: The Case of Carbon Emissions from Automobiles"
Host: Justin Marion
ABSTRACT: Firms sometimes comply with externality-correcting policies by gaming the measure that determines policy. We show theoretically that such gaming can benefit consumers, even when it induces them to make mistakes, because gaming leads to lower prices by reducing costs. We use our insights to quantify the welfare effect of gaming in fuel-consumption ratings for automobiles, which we show increased sharply following aggressive policy reforms. We estimate a structural model of the car market and derive empirical analogs of the price effects and choice distortions identified by theory. We find that price effects outweigh distortions; on net, consumers benefit from gaming.


May 4
Teevrat Garg, UC San Diego
"Human Capital Costs of Climate Change: Evidence from Test Scores in India"
Host: Ajay Shenoy
ABSTRACT: We present estimates of the effect of temperature on cognitive performance, and find that an additional 10 days in a year above 29C reduces math and reading test scores by 0.03 and 0.02 standard deviations respectively. However, in contrast to prior work, we find evidence for an income mechanism - hot days during the growing season reduce agricultural yields and test score performance with comparatively modest effects of hot days in the non-growing season. The roll-out of a conditional cash transfer program, by providing a safety net for the poor, weakens the link between temperature and test scores. Our results suggest that climate change will have disproportionate and large negative impacts on human capital accumulation of poor populations in agrarian economies, likely increasing the persistence of poverty.


May 11
Matt Jackson, Stanford University
"Gossip: Identifying Central Individuals in a Social Network"
Host: Ajay Shenoy
ABSTRACT: Is it possible to identify individuals who are highly central in a community without gathering any network information, simply by asking a few people?   If we use people's nominees as seeds for a diffusion process, will it be successful? We explore these questions theoretically, via surveys, and via field experiments. We show via a model of information flow how members of a community can, just by tracking gossip about others, identify highly central individuals in their network. Asking villagers in rural Indian villages to name good seeds for diffusion, we find that they accurately nominate those who are central according to a measure tailored for diffusion -- not just  those with many friends or in powerful positions. Finally, we run a randomized field experiment in 213 other villages that tests how effective it is to use such nominations as seeds for a diffusion process. Relative to random seeds or those with high social status, hitting at least one seed nominated by villagers leads to more than a 65% increase in the spread of information.


May 11
Matt Jackson, Stanford University
"Gossip: Identifying Central Individuals in a Social Network"
Host: Ajay Shenoy
ABSTRACT: Is it possible to identify individuals who are highly central in a community without gathering any network information, simply by asking a few people?   If we use people's nominees as seeds for a diffusion process, will it be successful? We explore these questions theoretically, via surveys, and via field experiments. We show via a model of information flow how members of a community can, just by tracking gossip about others, identify highly central individuals in their network. Asking villagers in rural Indian villages to name good seeds for diffusion, we find that they accurately nominate those who are central according to a measure tailored for diffusion -- not just  those with many friends or in powerful positions. Finally, we run a randomized field experiment in 213 other villages that tests how effective it is to use such nominations as seeds for a diffusion process. Relative to random seeds or those with high social status, hitting at least one seed nominated by villagers leads to more than a 65% increase in the spread of information.


May 30
Melanie Morten, Stanford University
"Migration and Walls: US-Mexico Migration between 2005-2014"
Host: Jon Robinson

ABSTRACT:
The labor market impacts of immigration have been hotly debated by economists. We study a period of wall-building along the Mexico-US border between 2006-2010 and novel bilateral migration data to show how the border wall changed migration patterns of Mexican migrants and affected both destination labor markets in the US and source labor markets in Mexico.

June 8
Elana Asparouhova, University of Utah
"Competitive Off-equilibrium: Theory and Experiment"
Host: Dan Friedman
ABSTRACT:
We propose a Marshallian model for price and quantity adjustment in parallel continuous double auctions. Investors submit orders only for small quantities, and at prices that maximize the local utility improvements. Pareto optimality, on which equilibrium asset pricing theory is built, is eventually reached. Experiments designed with the CAPM in mind show that, consistent with the theory (i) contrary to the standard Walrasian price adjustment model, price changes cross-autocorrelate with excess demands depending on covariances of liquidating dividends; (ii) a risk-weighted endowment portfolio is closer to mean-variance optimality than the market portfolio; (iii) individual portfolios are under-diversified, and more so when dividend covariances are positive.

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