CER-ETH Research Seminar, Fall Term 2016

Everyone who is interested is cordially invited!

If you would like to receive our weekly invitation via e-mail, or if you have any other question, please contact Christian Waibel.

Speakers

Alexander Michaelidis

We document low stock market participation rates and high proportions of money in Japanese household portfolios. To replicate these facts, we introduce a money demand motive in a life-cycle portfolio choice model and calibrate the model’s structural parameters to match Japanese household fi…nancial data. Using counterfactual analysis we fi…nd that low expected stock returns, low expected infl‡ation and high …fixed costs of stock market participation are the main determinants of Japanese household portfolios.

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Amos Zemel

The literature on the economics of catastrophic environmental events tends to emphasize their common features: These events are abrupt occurrences at some unknown future date(s) that entail significant adverse consequences. In this work we focus attention on the differences between various types of such catastrophic occurrences and on the implications of these differences for the optimal responses to the variety of hovering risks.  We show that seemingly small differences in the specifications of the occurrence conditions and the expected damage may give rise to diametrical effects on the optimal long term policies designed to address them.

Mikhail Golosov

We study public debt in an economy in which taxes and transfers are chosen optimally subject to heterogeneous agents' diverse capacities to pay. We assume a government that commits to policies and can enforce tax and debt payments. If the government enforces perfectly, asset inequality is determined in an optimum competitive equilibrium but the level of government debt is not. In addition, welfare increases if the government commits not to enforce private debt contracts and introduces borrowing frictions. By doing so, it reduces competition on debt markets and gathers monopoly rents from providing liquidity. Regardless of whether the government chooses to enforce private debt contracts, the level of initial government debt does not aect an optimal allocation, but the distribution of net assets does.

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Jeanne Hagenbach

We study communication with evidence in the lab. Our experimental design involves a collection of sender-receiver games with various payoffs and permits partial disclosure. We use local and global properties of the sender's incentive graph to uncover behavioral regularities and explain performance across games. Sender types whose interests are aligned with those of the receiver fully disclose, while sender types whose interests are not aligned with those of the receiver remain silent or partially disclose. When partially disclosing senders mostly disclose favorable pieces of evidence and hide unfavorable ones. But the cognitive cost of partial disclosure, as measured by response times, is higher for both senders and receivers. Receivers take evidence into account and tend to be skeptical about vague messages in games whose graph is acyclic. They perform better in acyclic games, whereas senders perform better in cyclic games.

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Ronny Razin

We suggest a framework to analyse how individuals combine forecasts in potentially complex environments. We assume that individuals face ambiguity about the information sources from which these forecasts originated. We introduce a notion of "correlation capacity", i.e., the capacity of an individual to consider correlation across these information structures. Our framework captures the idea that there is a relation between complexity and ambiguity. Individuals that will perceive more complex environments can entertain a larger set of joint information structures which will result in greater ambiguity about the state of the world. We identify two effects: Due to ambiguity, more forecasts can create more confusion and individuals may become more cautious. On the other hand a large number of forecasts may provide sufficient information to overcome such ambiguity which results in possibly risky -and potentially wrong- behaviour. We use the model to study risky and cautious shifts in groups, booms and busts in financial markets, and jury decision making.

Martin Karlsson

Contingent on being claim-free for a whole calendar year, insured individuals in the German private health insurance market receive premium refunds, i.e. a payback of a multiple of monthly premiums. We assess the influence of such refunds on individual claiming behaviour exploiting unique claim-level data. An insurer policy increases the refunds of some plans to a higher level. Employing a difference-in-difference approach we find that the insured indeed reduce claiming in response to this shift. Intriguingly, these effects occur below as well as above the new refund level, and the latter effect is driven by reductions on the extensive margin. Individuals seem to understand and adjust their claiming behaviour to monetary incentives such as premium refunds.

Michael Haliassos

This paper uses unique administrative data and a quasi-field experiment of exogenous allocation of refugees in Sweden to estimate effects of exposure to financially literate neighbors on household financial behavior. The paper contributes evidence of a causal impact of financial literacy on behavior and points to a social multiplier of financial education initiatives. Exposure promotes saving for retirement in the medium run and stockholding in the longer run, more so when neighbors have economics or business education. Significant effects are only observed on educated or male-headed households. Findings point strongly to transfer of knowledge rather than mere imitation. They are relevant both for financial education and for refugee placement policies.

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