CER-ETH Research Seminar, Fall Term 2018

Everyone who is interested is cordially invited!

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Speakers

Timo Boppart

Missing Growth from Creative Destruction

When products exit due to entry of better products from new producers, statistical agencies typically impute inflation from surviving products. This understates growth if creatively-destroyed products improve more than surviving products do. Accordingly, the market share of surviving products should shrink. Using entering and exiting establishments to proxy for creative destruction, we estimate missing growth in U.S. Census data on non-farm businesses from 1983–2013. We find: (i) missing growth is substantial — around half a percentage point per year; but (ii) missing growth did not accelerate much after 2005, and therefore does not explain the sharp slowdown in growth since then

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Paolo Piacquadio

The Measurement of Individual and Social Deprivation  

The reduction of poverty is a widely-shared policy goal. Yet, there is no consensus on how to measure poverty. Moreover, current indices face serious drawbacks. First, they may identify an increase in poverty even if a policy makes all poor better-off. Second, most indices are not robust to measurement errors. Third, the ethical viewpoints expressed by these indices are often unclear. In this paper, I address these drawbacks. The axiomatic characterization builds on intuitive principles inspired by resource fairness. Social deprivation ought to be measured by the sum of specific indices of individual deprivation which: (i) respect the preferences of individuals; (ii) compare individuals based on the set of attainments they are deprived of; and (iii) are continuous and convex. I illustrate the criteria using Norwegian register data. Finally, I extend the results to differences in needs and categorical dimensions of deprivation.

Frederic Vermeulen

Marital matching, economies of scales and intrahousehold allocations

We propose a novel structural method to empirically identify economies of scale in household consumption. We assume multi-person households with consumption technologies that define the public and private nature of expenditures through Barten scales. Our method recovers the technology by solely exploiting preference information revealed by households' consumption behavior. The method imposes no parametric structure on household decision processes, accounts for unobserved preference heterogeneity across individuals in different households, and requires only a single consumption observation per household. Our main identifying assumption is that the observed marital matchings are stable. We apply our method to data drawn from the US Panel Study of Income Dynamics (PSID), for which we assume that similar households (in terms of observed characteristics like age or region of residence) operate on the same marriage market and are characterized by a homogeneous consumption technology. This application shows that our method yields informative results on the nature of scale economies and intrahousehold allocation patterns. In addition, it allows us to define individual compensation schemes required to preserve the same consumption level in case of marriage dissolution or spousal death.”

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Francesco Ricci

Managing energy for development  

We represent in a formal model a policy argument concerning the pertinence of the adoption of a restrictive environmental policy limiting the use of abundant fossil energy resources in developing countries. The argument highlights the risk that such a policy may alt economic development, and therefore impose persistent environmental damages, as well as lower consumption levels. One assumption is crucial for the argument to hold: polluting energy is an essential input over the early phase of economic development, but not in the later phases following structural change. Using the model we characterize the dynamics of the efficient stance of environmental policy, i.e. fossil energy use, and compare regulation under alternative objectives and state of knowledge. Two additional arguments are considered, for the implementation of a strict or a soft environmental policy early on in developing economies.

Michael Burda

TBA

Ulrich Wagner

Emissions Trading, Firm Behavior, and the Environment: Evidence from French Manufacturing Firms

Market-based instruments of regulation hold the promise of minimizing total com- pliance costs by letting regulated firms choose how to comply. When regulation is incomplete, regulated firms have an additional margin of choice concerning the degree of compliance. Under these circumstances, opportunistic firm behavior not only mini- mizes compliance cost but it can also undermine the efficacy of regulation. We analyze this trade-off in the context of regulation aimed at internalizing global environmental externalities that cause climate change. Using administrative data on French manufac- turing firms we establish that the EU Emissions Trading Scheme caused treated firms to reduce carbon dioxide emissions by 13.5% relative to untreated firms. This substan- tial abatement was achieved by switching into (zero-carbon) electricity consumption rather than by down-scaling production. Further, we analyze whether firms complied in ways that would not reduce emissions globally, namely by (i) shifting pollution from regulated to unregulated plants within firm or by (ii) increasing foreign-sourced inter- mediates to replace domestic production. Our results support the view that regulated firms used the former channel, but there is no evidence that regulated firms imported more intermediates from abroad in order to reduce their emissions. Finally, we show that regulated firms ramped up emissions following the announcement but prior to the beginning of the policy, possibly to increase rents from free permit allocation.