Microeconomics & International Trade Seminars

Thursdays, 1:40 - 3:00 PM
In-Person, E2 499, unless otherwise noted

Spring 2022

March 31
Shachar Kariv, UC Berkeley
"Ever Since Allais"
Host: Kristian Lopez Vargas
The Allais critique of expected utility theory (EUT) has led to the development of theories of choice under risk that relax the independence axiom, but which adhere to the conventional axioms of ordering and monotonicity. Unlike many existing laboratory experiments designed to test independence, our experiment systematically tests the entire set of axioms, providing much richer evidence against which EUT can be judged. Our within-subjects analysis is nonparametric, using only information about revealed preference relations in the individual-level data. For most subjects we  find that departures from independence are statistically significant but minor relative to departures from ordering and/or monotonicity.

April 14
Bryan Graham, UC Berkeley
"Simulated maximum likelihood (SML) estimation of supermodular complete information discrete games with many players and/or actions"
Host: Natalia Lazzati

April 21
Frank Wolak, Stanford University
"Designing Nonlinear Price Schedules for Urban Water Utilities to Balance Revenue and Conservation Goals"
Host: Jessie Li
This paper formulates and estimates a household-level, billing-cycle water demand model under increasing block prices that accounts for the impact of monthly weather variation, the amount of vegetation on the household’s property, and customer-level heterogeneity in demand due to household demographics. The model utilizes US Census data on the distribution of household demographics in the utility’s service territory to recover the impact of these factors on water demand. An index of the amount of vegetation on the household’s property is obtained from NASA satellite data. The household-level demand models are used to compute the distribution of utility-level water demand and revenues for any possible price schedule. Knowledge of the structure of customer-level demand can be used by the utility to design nonlinear pricing plans that achieve competing revenue or water conservation goals, which is crucial for water utilities to manage increasingly uncertain water availability yet still remain financially viable. Knowledge of how these demands differ across customers based on observable household characteristics can allow the utility to reduce the utility-wide revenue or sales risk it faces for any pricing plan. Knowledge of how the structure of demand varies across customers can be used to design personalized (based on observable household demographic characteristics) increasing block price schedules to further reduce the risk the utility faces on a system-wide basis.

April 28
Jeff Smith, University of Wisconsin-Madison 
"Learning More about Teachers: Estimating Teacher Value-Added and Treatment Effects on Teacher Value-Added in Northern Uganda"
Host: Gueyon Kim
This paper uses longitudinal data from a school-based RCT in northern Uganda to estimate teacher value-added. We first provide lower bounds on the variation in teacher effectiveness – 0.23 SDs in local-language reading and 0.19 in English reading – the first estimates from sub-Saharan Africa. Second, comparing our estimates under years of random assignment of students to classrooms with years under business-as-usual assignment, we find no evidence of non-random sorting of students to teachers. Third, we measure the causal effects of providing high-impact teacher training and support and find the variation in teacher effectiveness increases by 52% in local language reading, likely by improving already-effective teachers the most. Fourth, we find that observed teacher characteristics are weakly correlated with teacher effectiveness and the gains in quality caused by the training.

May 12
Matthew Gentzko, Stanford University
"Advertising Prices in Equilibrium: Theory and Evidence"
Host: Dong Wei 
Existing theories of media competition imply that advertisers will pay a lower price in equilibrium to reach consumers who multi-home. We generalize and extend this theoretical result and test it using data from television and social media advertising. We find that television outlets whose viewers watch more television charge a lower price per viewer to advertisers. This finding helps rationalize well-known stylized facts such as a premium for younger and more male audiences on television. Also consistent with the theory, we show that social media advertising markets feature a premium for older audiences. A quantitative version of our model whose only free parameter is a scale normalization can explain 44 percent of the variation in price per impression across owners of television networks.

Alessandra Voena, Stanford University
"Cultural Institutions and Structural Change: Dowries as Pensions When Sons Migrate"
Host: George Bulman
This paper examines whether an important cultural institution in India – dowry – can enable male migration by increasing liquidity at the time of marriage. We hypothesize that one cost of migration is the disruption of traditional elderly support structures, where sons co-reside with parents and care for them in their old age.
Dowry can attenuate this cost by providing sons and parents with a liquid transfer that eases constraints on income sharing. To test this, we collect two novel datasets on property rights over dowry among migrants and among families of migrants. Net transfers of dowry to a man’s parents are common. Consistent with using dowry for income sharing, transfers occur more when sons migrate, especially when they work in higher-earning occupations. Nationally representative data confirms that migration rates are higher in areas with stronger historical dowry traditions. Finally, exploiting a large-scale highway construction program, we show that men from areas with stronger dowry traditions have a higher migration response to a reduction in migration costs. Despite its potential negative consequences, dowry may have a role to play in facilitating migration and therefore, structural change.

May 26
Richard Mansfield, CU Boulder
"The Skill and Sectoral Incidence of the China WTO Shock among U.S. Workers: an Equilibrium Matching Approach"
Host: George Bulman 
This paper reveals the underappreciated role of labor market competition among imperfectly substitutable workers as well as non-manufacturing industries in mediating the earnings, welfare, and employment incidence of changes in the international trade environment.  We merge hundreds of millions of LEHD job match records with firm-level import and export records from the LFTTD and use them to estimate a very large scale assignment model of the entire U.S. labor market that simultaneously accommodates frictions from switching regions, industries, trade engagement status, and even particular employers. We construct firm-level estimates of employment impact of China's WTO entry via three different channels (import competition, export competition, and increased importing opportunities) using exogenous tariff gap variation, and combine them with the model to evaluate the shock's worker-level incidence. Our results show that all three channels contribute meaningfully to the overall shock incidence.    Differential firm-level exposure combined with labor market competition causes the shock's impact to vary widely among workers initially employed at different pay levels by firms with different patterns of trade engagement in different sectors. Importantly, our model uncovers overlooked populations of workers whose employment and earnings prospects are quite sensitive to trade shocks: currently unemployed jobseekers and entry-level service workers.  These vulnerable workers directly and indirectly compete for jobs with laid-off workers from trade-exposed firms in a variety of industries.

June 2
Saad Gulzaar, Standford University
"Fires: Political Economy and Health Impacts of Crop Stubble Burning in South Asia"
Host: Ajay Shenoy 
Air pollution from crop residue burning in South Asia is one of the largest public health emergencies on the planet. While governments have adopted legislation to stop it, the practice remains widespread. We study the political economy foundations of crop burning. Using micro-level spatial data on administrative jurisdictions, fire occurrence and wind direction in India and Pakistan, we show that the incidence of fires increases when the pollution externality is likely borne by a neighboring jurisdiction. We also document that actual externality worsens health outcomes in downstream jurisdictions. Our results indicate that administrative strategic incentives substantially increase the level of pollution experienced by citizens.

Winter 2022

January 13
Vira Semenova, UC Berkeley
"Inference on weighted average value function in high-dimensional state space"
Host: Julian Martinez
This paper gives a consistent, asymptotically normal estimator of the expected value function when the state space is high-dimensional and the first-stage nuisance functions are estimated by modern machine learning tools. First, we show that value function is orthogonal to the conditional choice probability, therefore, this nuisance function needs to be estimated only at n-1/4 rate. Second, we give a correction term for the transition density of the state variable. The resulting orthogonal moment is robust to misspecification of the transition density and does not require this nuisance function to be consistently estimated. Third, we generalize this result by considering the weighted expected value. In this case, the orthogonal moment is doubly robust in the transition density and additional second-stage nuisance functions entering the correction term. We complete the asymptotic theory by providing bounds on second-order asymptotic terms.

January 27
Louis Putterman, Brown University
"Algorithmic Leviathan or Individual Choice: Choosing Sanctioning Regimes in the Face of Observational Error"
Host: Kristian Lopez Vargas
Laboratory experiments are a promising tool for studying how competing institutional arrangements perform and what determines preferences between them. Reliance on enforcement by peers vs. formal authorities is a key example. That people incur costs to punish free riders is a well-documented departure from non-behavioral game theoretic predictions, but how robust is peer punishment to informational problems? We report experimental evidence that reluctance to personally impose punishment when choices are reported unreliably may tip the scales towards rule-based and algorithmic formal enforcement even when observation by the center is equally prone to error. We provide new and consonant evidence from treatments in which information quality differs for authority versus peers, and confirmatory patterns in both binary decision and quasi-continuous decision variants. Since the role of formal authority is assumed by a computer in our experiment, our findings are also relevant to the question of willingness to entrust machines to make morally fraught decisions, a choice increasingly confronting humans in the age of artificial intelligence.    

February 3
Severin Borenstein, Berkeley Haas
"Coordination versus Environmental Adaptation: How Much Does Standardized Time Change Behavior?"
Host: Natalia Lazzati
The practice of standardizing the designation of time is a central device for coordinating activities and economic behaviors across individuals. However, there is nearly always a tension between an individual coordinating activities with others and carrying out those activities at their own preferred time. When time is standardized across large geographic areas, that tension is enhanced, because norms about the “clock times” of activities conflict with local environmental conditions created by natural or “solar” time. We study this tension by examining how geographic and temporal variation in solar time within time zones affects the timing of a range of common behaviors in the United States. Specifically, we estimate the degree to which people shift their online behavior (through Twitter), their commute (using data from the Census), and their visits to businesses and other establishments (using foot traffic data). We find that, on average, a one-hour shift in the differential between solar time and clock time—approximately the width of a time zone—leads to shifting the clock time of behavior by between 10 and 20 minutes. This result shows that while adapting to local environmental factors significantly offsets the differential between solar time and clock time, the behavioral nudge and coordination value of clock time has the larger influence on activity. We also study how the trade-off differs across activities and population demographics.

February 10
David Dillenberger, University of Pennsylvania
"Allocation Mechanisms without Reduction"
Host: Gerelt Tserenjigmid
We study a simple variant of the house allocation problem (one-sided matching). We demonstrate that agents with recursive preferences may systematically prefer one allocation mechanism to the other, even among mechanisms that are considered to be the same in standard models, in the sense that they induce the same probability distribution over successful matchings. Using this, we propose a new priority groups mechanism and provide conditions under which it is preferred to two popular mechanisms, random top cycle and random serial dictatorship.

February 17
Steven Durlauf, University Chicago
"A Trajectories-Based Approach to Measuring Intergenerational Mobility"
Host: Gueyon Kim
This paper develops an approach to intergenerational mobility in which the trajectories of childhood and adolescent family characteristics define the conditioning objects for assessing the persistence of socioeconomic status across generations. As such we move beyond the idea that family influences can be summarized by a scalar measure such as permanent income. This perspective leads to the use of functional regression methods that allow us to analyze how parental income and family structure at different points in time are associated with future outcomes. We are able to characterize collections of trajectories that lead to relative success versus deprivation in children and produce novel insights in the determinants of mobility versus persistence. Offspring economic and educational success are associated with rising income trajectories for parents, as well as the levels of the trajectories. Further, later adolescence parental income plays a relatively large role on offspring educational and economic outcomes. We are further able to evaluate interactions between trajectory values at different ages. Here we find a complicated pattern of dynamic complements and substitutes in the ways that family characteristics affect children, one that suggests the presence of both dynamic complementarity and substitutability.

February 24
Takuya Ura, UC Davis
"Slow Movers in Panel Data"
Host: Julian Martinez
Panel data often contain stayers (units with no within-variations) and slow movers (units with little within-variations). In the presence of many slow movers, conventional econometric methods can fail to work. We propose a novel method of robust inference for the average partial effects in correlated random coefficient models robustly across various distributions of within-variations, including the cases with many stayers and/or many slow movers in a unified manner. In addition to this robustness property, our proposed method entails smaller biases and hence improves accuracy in inference compared to existing alternatives. Simulation studies demonstrate our theoretical claims about these properties: the conventional 95% confidence interval covers the true parameter value with 37-93% frequencies, whereas our proposed one achieves 93-96% coverage frequencies.

March 10
Paulina Oliva, USC
"The Power of Perception: Air Pollution Information and Avoidance Behavior"
Host: Jeremy West
We conduct a randomized controlled trial in Mexico City to determine willingness to pay (WTP) for SMS air quality alerts and to study the causal effects of alerts, and N95 masks on the value of information and avoidance behavior. We find largely positive WTP for the SMS service, suggesting large-scale provision of this service could be cost-effective. We also find that perception of air pollution, rather than actual air pollution correlates strongly with WTP for the SMS service. Contrary to our hypothesis, we do not find any causal effects of N95 mask provision on elicited WTP. SMS alerts increase individuals’ perception about air pollution levels, and some of the self-reported avoidance behaviors. However, these self-protection measures are out-of-synchrony with alerts. We pose that this seemingly puzzling behavior is consistent with a model where (a) individuals’ priors for air pollution levels are biased downwards at the baseline and (b) the pollution threshold that triggers an action by individuals is not the same as the provider’s threshold for issuing an air pollution alert.

Fall 2021

September 30
Arun Chandrashekhar, Standford University
"Selecting the Most Effective Nudge: Evidence from a Large-Scale Experiment on Immunization" 
Host: Ariel Zucker
We evaluate a large-scale set of interventions to increase demand for immunization in Haryana, India. The policies under consideration include the two most frequently discussed tools--reminders and incentives--as well as an intervention inspired by the networks literature. We cross-randomize whether (a) individuals receive SMS reminders about upcoming vaccination drives; (b) individuals receive incentives for vaccinating their children; (c) influential individuals (information hubs, trusted individuals, or both) are asked to act as "ambassadors" receiving regular reminders to spread the word about immunization in their community. By taking into account different versions (or "dosages") of each intervention, we obtain 75 unique policy combinations. We develop a new statistical technique--a smart pooling and pruning procedure--for finding a best policy from a large set, which also determines which policies are effective and the effect of the best policy. We proceed in two steps. First, we use a LASSO technique to collapse the data: we pool dosages of the same treatment if the data cannot reject that they had the same impact, and prune policies deemed ineffective. Second, using the remaining (pooled) policies, we estimate the effect of the best policy, accounting for the winner's curse. The key outcomes are (i) the number of measles immunizations and (ii) the number of immunizations per dollar spent. The policy that has the largest impact (information hubs, SMS reminders, incentives that increase with each immunization) increases the number of immunizations by 44% relative to the status quo. The most cost-effective policy (information hubs, SMS reminders, no incentives) increases the number of immunizations per dollar by 9.1%.

October 7
Ricardo Reyes-Heroles, Federal Reserve Board
"Escaping the Losses from Trade: The Impact of Heterogeneity and Skill Acquisition"
Host: Brenda Samaneigo
Future generations of workers can invest in education, acquire skill and avoid the negative consequences of trade openness for low-skilled workers. However, not all members of these future generations might have the resources required to make such investments. In this paper we exploit variation in exposure to import penetration shocks across space in the United States to show that greater import penetration increases college enrollment and that this increase is driven by future workers in richer households. To analyze the welfare implications of the effects of trade openness on college enrollment, we propose a dynamic multi-region model of international trade with heterogeneous agents. The model features incomplete credit markets and costly endogenous skill acquisition. We calibrate the model to match changes in aggregate trade data for the United States and differential import exposure across U.S. regions. Lower import barriers generate increased college enrollment and welfare gains for all workers in the long-run. However, these gains are concentrated on workers with a college education, whose welfare gains are twice as large as those of non-college workers. While all workers in the manufacturing sector lose from grater trade openness, a small number of college educated workers in manufacturing with low wealth experience the greatest losses. Increasing college enrollment for new cohorts over time plays a crucial role in allowing new generations of workers to escape the potential welfare losses form trade. However, poor dynasties take the longest to acquire skills. They are therefore the last to experience positive gains from trade openness, and entire generations may not realize any gains within a life-time.

October 14
Felipe Gonzalez, PUC - Chile
"The Economics of the Public Option: Evidence from Local Pharmaceutical Markets"
Host: Alonso Villacorta
We study the economic and political effects of competition by state-owned firms, leveraging the decentralized entry of public pharmacies to local markets in Chile around local elections. Public pharmacies sell drugs at a third of private pharmacy prices, because of a stronger upstream bargaining position and downstream market power in the private sector, but are also of lower quality. Exploiting a field experiment and quasi-experimental variation, we show that public pharmacies affected consumer shopping behavior, inducing market segmentation and price increases in the private sector. This segmentation created winners and losers, as consumers who switched to public pharmacies benefited, whereas consumers who stayed with private pharmacies were harmed. The countrywide entry of public pharmacies would reduce yearly consumer drug expenditure by 1.6 percent, which outweighs the costs of the policy by 52 percent. Mayors that introduced public pharmacies received more votes in the subsequent election, particularly by the target population of the policy.

October 21
Shaowei Ke, University of Michigan
"Learning from a Black Box"
Host: Gerelt Tserenjigmid
We study a decision maker’s learning behavior when she receives recommendations from a black box, i.e., the decision maker does not understand how the recommendations are generated. We introduce four reasonable axioms and show that they cannot be satisfied simultaneously. We analyze various relaxations of the axioms. In one relaxation, we introduce and characterize an updating rule, the contraction rule, which has two parameters that map each recommendation to a recommended belief and the trustworthiness of the recommendation, respectively. The decision maker’s posterior is formed by mixing her prior with the recommended belief according to the trustworthiness measure.

October 28
Seema Jayachandram, Northwestern University
"Using Machine Learning and Qualitative Interviews to Design a Five-Question Survey Module for Women's Agency"
Host: Brenda Samaneigo / Galina Hale
Open-ended interview questions elicit rich information about people's lives, but in large-scale surveys, social scientists often need to measure complex concepts using only a few close-ended questions. We propose a new method to design a short survey measure for such cases by combining mixed-methods data collection and machine learning. We identify the best survey questions based on how well they predict a "gold standard'' measure of the concept derived from qualitative interviews. We apply the method to create a survey module and index for women's agency. We measure agency for 209 women in Haryana, India, first, through a semi-structured interview and, second, through a large set of close-ended questions. We use qualitative coding methods to score each woman's agency based on the interview, which we treat as her true agency. To determine the close-ended questions most predictive of the "truth," we apply statistical algorithms that build on LASSO and random forest but constrain how many variables are selected for the model (five in our case). The resulting five-question index is as strongly correlated with the coded qualitative interview as is an index that uses all of the candidate questions. This approach of selecting survey questions based on their statistical correspondence to coded qualitative interviews could be used to design short survey modules for many other latent constructs.

November 18 - CANCELLED
Shachar Kariv, UC Berkeley
"Ever Since Allais"
Host: Kristian Lopez Vargas
The Allais critique of expected utility theory (EUT) has led to the development of theories of choice under risk that relax the independence axiom, but which adhere to the conventional axioms of ordering and monotonicity. Unlike many existing laboratory experiments designed to test independence, our experiment systematically tests the entire set of axioms, providing much richer evidence against which EUT can be judged. Our within-subjects analysis is nonparametric, using only information about revealed preference relations in the individual-level data. For most subjects we find that departures from independence are statistically significant but minor relative to departures from ordering and/or monotonicity.

December 2 - CANCELLED
Steven Durlauf, University of Chicago
Host: Gueyon Kim