Department Brown Bag Seminars

Wednesday 12:001:05 p.m.
499 Engineering II

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"
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"
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"
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"

Winter 2018

February 7
Ajay Shenoy
"Untenable Hypothesis: Do Insecure Land Rights deter Investment?"
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"
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"

Fall 2017

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”
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"
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"
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"
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."
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"
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"