CER-ETH Research Seminar, Fall Term 2019

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 Arnaud Goussebaïle.

Speakers

Marianne Andries

Title: Horizon-Dependent Risk Aversion and the Timing and Pricing of Uncertainty

Abstract:

Inspired by experimental evidence, we amend the recursive utility model to let risk aversion decrease with the temporal horizon. Our pseudo-recursive preferences remain tractable and retain appealing features of the long-run risk framework, notably its success at explaining asset pricing moments. Calibrating the agents’ preferences to explain the market returns observed in the data no longer implies an extreme preference for early resolutions of uncertainty; and captures key puzzles in finance on the valuation and demand for risk at long maturities.

Stephen Parente

Title: Spatial Competition, Innovation and Institutions: The Industrial Revolution and the Great Divergence

Abstract:

This paper considers the possible contribution of spatial competition to the Industrial Revolution and the Great Divergence. Rather than exclusively focusing on the incentives of producers to adopt labor-saving technology, we also consider the incentives of factor suppliers’ organizations such as craft guilds to resist. Once we do so, industrialization no longer depends on market size per se, but on spatial competition between the guilds’ jurisdictions. We substantiate our theory’s claim of spatial competition being an important channel for industrialization (i) by providing historical evidence on the relation between spatial competition, craft guilds and innovation, and (ii) by showing that the calibrated model correctly predicts the timings of the Industrial Revolution and the Great Divergence.

Dimitrios Xefteris

Title: Vote Trading in Power-Sharing Systems: A Laboratory Investigation

Abstract:

In theory, decentralized vote trading in power-sharing systems promotes: a) efficiency, by assigning greater decision-making power to individuals that care a lot about the election’s outcome, and b) dispersion of benefits, since even individuals that have little interest about the electoral result can profit by selling their votes. We experimentally test these intuitions in the laboratory and find that, indeed, allowing real subjects to trade votes for money in such systems increases collective welfare, and substantially redistributes it towards those that are less concerned about the election. Importantly, these findings hold true under alternative trading institutions, thus, reinforcing their empirical relevance.

Alessandro Tavoni

Title: Using visibility and social contagion to encourage adoption of non-normative behaviours

Abstract:

We partnered with a renewable energy supplier to implement a field experimental study comprising 20,648 customers in England and Wales to test the effects of image concerns and financial incentives on the willingness of individuals to publicly proclaim their green choices, in particular their private adoption of renewable energy tariffs. A first treatment isolates the effect of social image on the willingness of individuals to make their pro-environmental behaviour visible. Comparing to a second treatment, in which financial incentives are combined with social rewards, the effect of each of these two elements can be disentangled. To causally identify the effect of each intervention on behaviour in the experiment, we randomly assign 3,320 eligible geographical areas (`postcode sectors') to receive one of the two treatments or to be in our control group. Finally, the experimental design allows us to determine the effects of the visibility of pro-social behaviour on local peer adoption (i.e. social contagion).

Yann Bramoullé

Title: Altruism and Risk Sharing in Networks

Abstract:

We provide the first analysis of the risk-sharing implications of altruism networks. Agents are embedded in a fixed network and care about each other. We study whether altruistic transfers help smooth consumption and how this depends on the shape of the network. We identify two benchmarks where altruism networks generate efficient insurance: for any shock when the network of perfect altruism is strongly connected and for any small shock when the network of transfers is weakly connected. We show that the extent of informal insurance depends on the average path length of the altruism network and that small shocks are partially insured by endogenous risk-sharing communities. We uncover complex structural effects. Under iid incomes, central agents tend to be better insured, the consumption correlation between two agents is positive and tends to decrease with network distance, and a new link can decrease or increase the consumption variance of indirect neighbors. Overall, we show that altruism in networks has a first-order impact on risk and generates specific patterns of consumption smoothing.

Karine Nyborg

Title: The Third Theorem of Welfare Economics: Report from a Fictional Field Study

Abstract:

The perfectly competitive market – a hypothetical situation free of market failure – is the basis for the two fundamental welfare theorems, and an important benchmark for economic theory. The radical abstractions of this idea, however, make its full implications hard to grasp. I address this using literary fiction. Part I discusses fiction as a tool for economic theory. Part II is a story about a journey to the perfectly competitive market. Part III develops main theoretical insights based on the story: First, complete social isolation is needed to preclude market failure. Second, the requirements of symmetric information and no external effects are extremely hard to reconcile, leading to an impossibility theorem: if trade is permitted anytime, and deliberate, welfare-relevant learning is feasible, no perfectly competitive market can exist.

Treb Allen

Title: Border Walls

Abstract:

Between 2007 and 2010 the U.S. government built 548 miles of border wall along the U.S.-Mexico border. Using administrative data on 5.7 million (primarily unauthorized) Mexican migrants, we study how the border wall expansion affected migration patterns between Mexican municipalities and U.S. counties. The wall changed migrants' choice of route and their choice of destination within the U.S., but it did not have a large effect on the choice of whether or not to migrate. On net, we estimate the wall decreased annual migration flows by 46,000. Incorporating the decrease in migration into a spatial equilibrium model, we estimate that the wall increased (decreased) wages of low-educated (high-educated) U.S. workers by a modest $2.89 ($3.60) per year.

Klaus Desmet

Title:  The Cultural Divide

Abstract:

This paper conducts a systematic quantitative study of cultural convergence and divergence in the United States over time.
Using the General Social Survey (1972-2016), we assess whether cultural values have grown more or less heterogeneous, both overall
and between groups. Groups are defined according to 11 identity cleavages such as gender, religion, ethnic origin, family income
quintiles, geographic region, education levels, etc. We find some evidence of greater overall heterogeneity after 1993 when averaging
over all available values, yet on many issues heterogeneity changes little. The level of between-group heterogeneity is extremely small:
the United States is very pluralistic in terms of cultural attitudes and values, but this diversity is not primarily the result of cultural
divides between groups. On average across cleavages and values, we find evidence of falling between-group heterogeneity from 1972 to the late 1990s, and growing divides thereafter. We interpret these findings in light of a model of cultural change where
intergenerational transmission and forces of social influence determine the distribution of cultural traits in society.

Pierre-Carl Michaud

Title: Tax-Sheltered Retirement Accounts: Can Financial Education Improve Decisions?

Abstract:

We conduct a stated-choice experiment to analyze the decision to contribute to front- or back-loaded tax-sheltered savings accounts. Our experimental design includes a randomized financial education treatment that provides information on these accounts. We assess whether respondents learn about the tax implications of these accounts and make contribution choices that increase after-tax income when exposed to the intervention. We find that our intervention improves both the understanding of the tax implications of the savings accounts (an increase of 6 to 15 percent) and contribution decisions. We find effects on after-tax lifetime-income for respondents by up to $1,900 per scenario presented.