Research Seminars Series

The Streetlight Effect in Data-Driven Exploration

We consider settings such as innovation-oriented R&D where agents must explore across different projects with varying but uncertain payoffs. How does providing partial data on project payoffs affect individual performance and social welfare? While data can typically reduce uncertainty and improve welfare, we present a simple theoretical framework where data provision can decrease group and individual payoffs. In particular, we predict that when data shines a light on sufficiently attractive (but not optimal) projects, it can crowd-out exploration activity, lowering individual and group payoffs as compared to the case where no data is provided. We test our theory in an online lab experiment where we show that data provision on the true value of one project can hurt individual payoffs by 12% and reduce the group's likelihood of discovering the optimal outcome by 48%. Our results provide a theoretical and empirical foundation outlining the conditions under which the streetlight effect emerges, where data leads agents to look under the lamppost rather than engage in individually and socially beneficial exploration.

An Experiment on Gender Representation in Majoritarian Bargaining

Women are underrepresented in business, academic, and political decision-making bodies across the world. To investigate the causal effect of gender representation on multilateral negotiations, we experimentally manipulate the composition of triads in a majoritarian, divide-the-dollar game. We document a robust gender gap in earnings, driven largely by the exclusion of women from alliances rather than differential shares within alliances. Experiments with different subject pools show that distinct bargaining dynamics can underlie the same inequitable outcomes: While gender-biased outcomes can be caused by outright discrimination, they can also be driven by more complex dynamics related to differences in bargaining strategies. We identify two fundamental gender differences in bargaining dynamics. First, men are more likely to make opening offers and enjoy a payoff advantage for doing so, yet women that propose first do not and may even suffer backlash. Second, mixed-gender alliances are less stable when the excluded party is male rather than female. These findings show that there is no “one-size-fits-all” solution to the gender gap we uncovered and highlight the importance of studying bargaining dynamics in detail.

Does Portfolio Disclosure Make Money Smarter?

We provide causal evidence that mandatory portfolio disclosure helps investors evaluate and select hedge fund managers. Using a staggered difference-in-differences analysis, we demonstrate that investor capital flows better predict fund performance among funds that publicly disclose their portfolio holdings. Additional cross-sectional analyses suggest that this gain in selection ability varies with the informational value of disclosure. Furthermore, examining investor-level allocations, we find that institutional investors earn higher returns on their allocations to disclosing funds. Overall, these results help contribute to the cost-benefit analysis of mandatory portfolio disclosure.

Smoothed Semicovariance Estimation for Portfolio Selection

Minimizing the semivariance of a portfolio is analytically intractableand numerically challenging due to the endogeneity of the semicovariance matrix. In this paper, we introduce a smoothed estimator fort he portfolio semivariance. The extent of smoothing is determined by a single tuning constant, which allows our method to span an entire set of optimal portfolios with limit cases represented by the minimum semivariance and the minimum variance portfolios. The methodology is implemented through an iteratively reweighted algorithm, which is computationally efficient for optimization problems with many assets. Our numerical studies confirm the theoretical convergence of the smoothed semivariance estimator to the true semivariance. The resulting minimum smoothed semivariance portfolio performs well in- and out-of-sample compared to other popular selection rules.

On the validity of elicited risk attitudes

Increasing evidence points to the fact that the behavioral measures we use to elicit risk attitudes fail us. In recent years evidence has accumulated that our measures 1. correlate poorly with self-reported risk attitudes, real-world risk behaviors, and among themselves; 2. introduce distinct measurement errors and behavioral biases; 3. are not robust to sit-resit exercises.

Why do Risk Elicitation Tasks (RET) show so little predictive validity? Despite the large number of studies comparing risk elicitation procedures, the extent to which current RETs are able to capture self-reported or out-of-the-lab behavior is still partly unknown. Since each study can cover only a limited subset of tasks and self-reported or real-world behaviors, the map of the cross-correlations across tasks and behavior is far from being complete.

Luckily, the data to create such a map already exists. Experimental economists have been routinely eliciting risk attitudes for over three decades. In this presentation, I describe what we know so far about the psychometric validity of elicited risk attitudes, present a comprehensive, large dataset of the external validity of RETs, and describe two experimental designs (no data yet) aimed at tackling two of the main problems identified in the previous analyses -- measurement error and risk perception and modeling.

The ongoing effort, code and paper can be found at https://github.com/paolocrosetto/METARET and all data can be explored interactively at https://paolocrosetto.shinyapps.io/METARET_APP/

Informational Rents and the Excessive Entry Theorem: The Case of Hidden Action

Entry in a homogeneous Cournot-oligopoly is excessive if there is business stealing. This prediction assumes that production costs reduce profits and welfare equally. However, this need not be the case. If there is asymmetric information, suppliers or employees can utilize their superior knowledge to extract informational rents. Rent payments reduce profits and deter entry, but affect neither the optimal number of firms nor welfare directly. Therefore, entry becomes insufficient if informational rents are large enough. In the context of a moral hazard model, we show that insufficient entry occurs if entry costs are sufficiently high. Such costs lower the number of firms and, thereby, raise informational rents.

Global house prices since 1950

Stock-Oil Comovements Through Fear, Uncertainty, and Expectations: Evidence From Conditional Comoments

This paper investigates the dependencies and comovements between the S&P 500 and WTI by means of time-varying conditional comoments from April 1983 to December 2021 at the daily level. The conditional comoments mark a new pattern between the two markets’ dependencies since the 2008 global financial crisis (GFC). We employ three macroeconomic sentiment measures, including VIX (representing fear), economic policy uncertainty (representing uncertainty), and expected business condition index (representing expectation), to investigate the underlying mechanism for the new emerging stock-oil co-movements, using the time-varying parameter vector autoregression (TVP-VAR) to investigate the time-varying impulse responses, and the nonlinear autoregressive distributed lag (NARDL) model to analyze the asymmetries in the short- and long-run effects of the sentiment indices for the pre- and post-GFC periods. The conditional comoments of both markets change direction since the GFC, with crude oil showing a stronger dependence on the S&P 500’s return, skewness, and tail events than its counterpart. Overall, the time-varying impulse responses show heightened short-lived responses to the three sentiment indices after the 2008 GFC, with an asymmetric response from the conditional comoments of WTI (negative) and S&P 500 (positive) to the positive shocks in the fear index during the post-GFC period. The NARDL regression results prove that the explanatory power of the three sentiment indices increase largely after the GFC, pointing to the strong short-run asymmetries, and the ever-increasing effect of VIX . Further investigations reveal that oil-specific fear index (OVX) has weaker effect on stock-oil comoments than VIX.

Why Do People Commit Crime: Evidence from Inmates' Survey.

This project aims to document inmates' knowledge, perceptions, and preferences and examine how they differ from the general population and how they change over time. The project will also test selected theories explaining the causes of criminal behavior in a unified framework. The analysis will be based on survey, experimental, and administrative data collected from inmates in Czech prisons. Data collection includes two waves of surveys with around 500 inmates and 220 students and one wave of surveys with 1000 subjects representing the general population. Surveying inmates twice is key to measuring how their knowledge, perceptions, and preferences evolve during their incarceration.

Writing letters pays off: How to improve tax compliance quickly and efficiently?

Merged data of changes in real estate ownerships from the Cadastre Portal of the Slovak Republic and databases of taxplayers from the Financial Administration of the Slovak Republic revealed many sold properties over last 5 years, for which a capital gains tax was not paid. To improve the tax compliance, reminder letters were sent to potential evaders. In addition, reminder letters were also sent to former owners of properties that were sold in the current reporting period. On top of a baseline letter, we focused on behavioural effects of deterrence and morale and an explanatory effect of a graphical leaflet. The letters significantly increased the number of taxpayers paying the tax but there was no significant difference between the baseline letter and its behavioural modifications and the leaflet even backfired.

Effects of Universal and Unconditional Cash Transfers on Child Maltreatment

We estimate the effects of cash transfers on child well-being. To do so, we leverage program eligibility due to date of birth cutoffs and year-to-year variation in payment size from a universal and unconditional cash transfer, the Alaska Permanent Fund Dividend (PFD). Using linked individual-level administrative data on PFD payments and child maltreatment referrals, we find that an additional $1,000 to families reduces the likelihood that a child is referred to Children’s Services by age 3 by 2.0 percentage points, or about 10 percent, on average. Effects are driven by declines in neglect and physical abuse. Additionally, we show that larger cash transfers increase the probability that children live with their mothers and lower mortality by age 5.

The impact of the pandemic on local government financial vulnerability

The COVID-19 pandemic cut across geographical, sectorial and policy boundaries and imposed difficult health, economic and social challenges. Among many learnings, after the 2007/8 global financial crisis and the austerity period which followed it, what happened in 2020 offers an important experience to make local governments more financially resilient and ready to deal with similar shocks. This paper builds on a recent framework to investigate the impact of the first wave of the COVID-19 pandemic on local government financial vulnerability looking at both contingent and structural aspects. It addresses the need for a multi-country perspective on the effects of the pandemic and responds to calls to test existing models. Seven countries were chosen to represent different administrative contexts and traditions to understand what factors impact the local level in a time of crisis. Results demonstrate that not only contingent aspects, but also structural factors and the initial level of financial vulnerability influenced the responses to the pandemic, confirming findings about the importance of initial conditions and “path dependency” by previous studies.

Mental health and school entry age: Relative age effects within cohort

There is an established literature looking at the effects of school entry age and age within cohort on general well-being, social capital, and measures of human capital formation. in primary and secondary school. Researchers have additionally turned their attention to longer term university and adult labor market outcomes. Prior results are mixed, but when statistically significant impacts are found they have typically been favorable. This study uses a nationwide sample of undergraduate college students from over 360 institutions to ascertain if relative age is related to reported mental health at graduation. Various identification strategies are incorporated into the study including Regression Discontinuity Design and Instrumental Variable (IV) methods incorporating student birth date relative to kindergarten age cutoff as well as relative age within cohort via ordered logit models. Results suggest being older within cohort to be positively related to increased to incidence of depression and homesickness in the last year at college graduation, more consistently for females.

News and regional development

It is well-recognized that news coverage varies significantly between countries. The differences include what events are reported at what frequencies and in what tones. It is also well established that these differences contribute to variations in the economic development of countries. In addition, substantial heterogeneity characterizes the news media at the subnational (regional) level, which is most evident in the large numbers of regional newspapers and media outlets. In contrast to the national level, this heterogeneity has received much less attention in contemporary literature. More precisely, little is known about the degree that newspaper readers in distinct locations are exposed to different information, topics, journalistic opinions, and sentiments. Similarly, how regional socio-economic characteristics shape local news and how these in turn influence people’s behavior is far from being sufficiently researched. More often than not, it is the lack of data limiting empirical investigations.

The presentation will give an overview of the contemporary literature and highlight existing research avenues. It will be based on several empirical investigations utilizing the recently established RegNeS database, which features more than 16 million German-language media headlines published between July 2019 and February 2023 obtained from more than 250 regional and national news outlets. The empirical studies give insights into the relationship between regional news and regions’ socioeconomic development from various angles including innovation activities being reflected in regional news and the latter’s impact on COVID19-related health behavior.

Crafting telework: A conceptual process model and some empirical evidence among individuals and teams

In this talk, I will describe a model explicating telework as a dynamic process, theorizing that teleworkers continuously adjust – their identities, boundaries, and relationships – to meet needs for competence, autonomy and relatedness in their work and nonwork roles. The model uses the lens of job crafting to posit changes teleworkers make to enhance work-nonwork balance and job performance, including time-related individual differences to account for contingencies in dynamic adjustments. I will also discuss how feedback from work and nonwork role partners and one's self-evaluation results in an iterative process of learning to telework over time. In the second part of the talk, I will present empirical evidence that offers preliminary support for the dynamic telework crafting model, based on data collected from individual teleworkers as well as teleworking teams.

Willingness to use application-based taxi pooling services: Impacts of fare, route matching, detour time, and waiting time

The rapid development of information technology and smartphone applications has introduced new and unique transportation services. This article introduces one of these recently established systems in South Korea, called application-based taxi pooling service (ATPS). The service differs from regular ridesharing in that the participating drivers are already registered taxi drivers. This study aims to investigate users’ willingness to use ATPS from the perspective of service attributes during the morning commute time and late-night. For this, a discrete choice experiment survey was conducted over one week in 2019, targeting 1,000 Seoul citizens who used taxis at least once over the past month. As a methodology, mixed-effect logistic regression modeling is used to jointly predict users’ behavioral processes of ATPS adoption for different choice experiments constructed based on the combination of four service attributes: fare, route matching degree, detour time, and waiting time. The estimated models revealed the dynamic impacts of all four service attributes on the acceptance of ATPS, which vary depending on the time of the day. In particular, the impacts of discounted fare were almost zero during late-night, and users brought higher value to the waiting and detour times. Users’ conventional taxi use experience and personal preferences were also found to be important elements in the acceptance of ATPS. The findings of this study will provide reasonable guidelines for the deployment of ridesharing services in car-dominant cities where citizens have not yet been introduced to the concept of ATPSs.

The Right to Counsel: Criminal Prosecution in 19th Century London

Exploiting a novel data set of criminal trials in 19th century London, we evaluate the impact of an accused’s right to counsel on convictions. While lower-level crimes had an established history of professional representation prior to 1836, individuals accused of committing a felony did not, even though the prosecution was conducted by professional attorneys. The Prisoners’ Counsel At of 1836 remedied this and first introduced the right to counsel in common law systems. Using a difference-in-difference estimation strategy we identify the causal effect of defense counsel. We find the surprising result that the professionalization of the courtroom led to an increase in the conviction rate, which we interpret as a consequence of jurors feeling that the trial became fairer. We go further and employ a topic modeling approach to the text of the transcripts to provide suggestive evidence on how the trials changed when defense counsel was fully introduced.

Scapegoating migrants during a crisis can be socially and politically ineffective or even counterproductive

During economic, health, or political hardships, politicians often leverage citizens’ discontent and scapegoat minorities to obtain political support. This paper tests whether political campaigns scapegoating migrants for the health crisis affect social, political, and economic attitudes and behaviors. We implement an online nationally-representative survey experiment in Italy to analyze the effects of the strategic use of information about immigration on socio-political and economic attitudes and behavior. We manipulate the quantity and the content of information, including facts emphasizing the potential health consequences of immigration. Results show that information provisions associating immigration with health threats do not generate sizeable add-on effects compared to that based on immigration only. If anything, it increases disappointment towards Italians, reduces social and institutional trust, and undermines partisanship among extreme-right supporters. Overall, political campaigns based on these narratives appear relatively ineffective or, when successful, counterproductive from social and political viewpoints.

Crossing Borders: Labor Market Effects of European Integration

This paper studies the labor market effects of out- and in-migration in the context of cross-border commuting. It investigates an EU policy reform that granted Czech citizens full access to the German labor market, resulting in a Czech commuter outflow across the border to Germany. Exploiting the fact that the reform specifically impacted the Czech and German border regions, I use a matched difference-in-differences design to estimate its effects on local labor markets in both countries. Using a novel dataset on Czech regions, I show that municipalities in the Czech border region experienced a decrease in unemployment rates due to the worker outflow, while vacancies increased. For German border municipalities, I find evidence for slower employment growth (long-term) and slower wage growth (short-term), but no displacement effects for incumbent native workers.

Asymmetric responses of the markup to monetary shocks over the business cycle

A rich literature has long studied the asymmetric effects of monetary policy over the business cycle, generally presenting mixed results. Most of the empirical work, however, focuses on the responses of output and prices. Given the key role it plays in the transmission of monetary policy and the relatively scarce studies on the subject, this paper centers the analysis on the dynamics of the markup. Recent empirical findings suggest that, even when the New Keynesian models are not able to reproduce such dynamic, the markup decreases in response to a monetary policy tightening shock. This paper, by putting forward a local projections approach and analyzing the response of the markup during the period 1990m2-2016m12, argues that the dynamic of the markup may depend on whether the monetary policy tightening shock takes place during a period of expansion or recession. In this latter case, for instance, the New Keynesian model seems to do a good job, suggesting that only tightening mistakes may be successfully addressed within the basic New Keynesian framework

Monetary Policy with Heterogeneous Agents in open economies : US vs Europe

This paper seeks to quantitatively assess the key role of the three components of heterogeneity in open economies, namely the consumption gap between hand-to-mouth and Ramsey households, the consumption dispersion between Ramsey households and the existence of a fixed share of the two groups of households (HANK model) in the conduct of monetary policy in Europe and the US, as the two economies trade with each other. Using Bayesian estimation techniques, we estimate three models, a model with representative agents (RANK model), a model with heterogeneous agents so that the share of the two groups of households remains constant over time (TANK model) and the HANK model. We conclude that the HANK model plays a key role in the conduct of monetary policy in Europe and the United States and in the mitigation of cycles and fluctuations. The American economy is more sensitive to heterogeneity than the European one, because the differences in parameters between the models are greater in the USA than in Europe. Coordination between the two central banks on price stability always reveals that the HANK model attenuates fluctuations more than the other two models.

What Drives Marginal Q and Investment Fluctuations? Time-Series and Cross-Sectional Evidence

We explore whether marginal Q and investment fluctuate due to revisions in expected marginal profits or discount rates, and by how much of each. We infer marginal Q from the marginal cost of investment, derive a present-value relation, and conduct a VAR-based variance decomposition for marginal Q. We find that discount rates (expected investment returns) drive the bulk of fluctuations in average Q and investment in the time series, but play no role in driving the cross-section of portfolios' average Q and investment. That is, marginal profits are the sole determinant of the cross-section of marginal Q and investment.

Monetary Policy, Economic Uncertainty, and Firms R&D Expenditure

This paper studies the response of firms’ research and development (R&D) expenditure to monetary policy shocks in the US economy. Empirical results suggest that a 20 basis point increase in the interest rate decreases the aggregate R&D expenditure by 0.6 percent. Using Compustat firm-level data, I confirm that a monetary contraction leads to a persistent decline in US firms’ R&D expenditure. The effect on R&D expenditure is stronger for interest rate hikes and when firms face higher uncertainty. This is because economic uncertainty decreases firms’ leverage ratio and makes them more financially constrained, rendering R&D investment more vulnerable to contractionary policy shocks. I build a medium-scale DSGE model with endogenous output growth and financial frictions to interpret the empirical findings. The theoretical model highlights the importance of the credit channel for altering the effects of monetary policy on firms’ investment in R&D in the presence of economic uncertainty

Banks Equity Distribution, Credit Supply, and Economic Growth

This paper shows that the impact of credit supply on economic activity is conditioned by banks’ equity distribution. Using a myriad of publicly available data on bank’s balance sheet, and mortgage and business lending from the United States, we offer novel empirical evidence on how changes in the level of bank equity affects the impact of credit supply on economic activity. Our results show that areas exposed to lenders with high level of bank equity experience high levels of economic growth and employment. We also construct a quantitative model that rationalises this empirical evidence by showing how aggregate lending is influenced by banks’ equity distribution. Our model shows that the higher the bank equity exposure of an area is, the more credit supply is provided to the area. While the model shows that banks’ equity distribution matters for understanding the impact of mortgage credit on economic performance, it does not have the same explanatory power to explain the impact of business credit on economic growth, which may be more influenced by risk-return trade-off decisions.

On the endogeneity between stock market prices and bank runs. An experiment

Economic logic posits that a bank’s stock price should contain the relevant information about its financial health. For this reason, bank depositors may anchor their withdrawal decisions on their bank’s stock price in situations of financial stress. In doing so, the mere inference of “bad news” from the bank’s stock price can trigger a self-fulling bank-run. However, if the bank’s shareholders anticipate that depositors’ withdrawal behaviour may depend on the bank’s stock price, would “bad news” still be reflected in stock prices? Recognising this, would depositors still rely on stock prices to draw inferences about the bank’s health?

Tax Compliance After An Audit: Higher or Lower?

What is the compliance effect of experiencing a tax audit? Empirical studies typically report a positive effect, while laboratory experiments frequently report a negative effect. We show experimentally that whether a tax audit increases or decreases subsequent compliance hinges on the balance of learning opportunities, misperception of audit risk, and the confounding effect of censoring. After an audit, taxpayers lower their perceived risk of audit – consistent with a bomb-crater effect – when audit selection is exogenous. However, for an endogenous audit rule under which taxpayers can learn to reduce their audit risk by reporting higher income, learning effects outweigh probability misperception, resulting in an increase in post-audit tax compliance. Finally, we show that accounting for censoring effects can eliminate on its own the negative post-audit compliance effect frequently observed in laboratory experiments.

Support for Redistribution vs. Political trust: How Material Circumstances Make These Two Types of Welfare State Support Mutually Exclusive

Support for welfare system is conventionally measured by two different concepts. One focuses on people’s approval of redistribution principles and aims to capture citizens’ acceptance of a welfare state arrangement or some of its constitutive parts (i.e., specific welfare programs). Second option is more general and captures to what degree citizens trust the institutions and their main representatives. Both concepts – support for redistribution and political trust – inspired two broad streams of literature and thus it is surprising that the research has brought them together only to conclude that they have little in common (Svallfors 2002). This paper argues otherwise and proposes a theoretical argument that material circumstances constitute the common denominator impacting two distinctive supports for welfare system in a mutually exclusive way. As people are becoming wealthier, they are decreasingly willing to share their “well-deserved” resources, while their political trust increases possibly because they believe that the current political representation contributed to the improvement in their lives. On the other hand, as people are getting poorer, they tend to blame, and hence distrust the government, while their support for redistribution rises because it improves their own situation. This theoretical proposition is supported via several empirical tests. First, the very existence of these two opposite tendencies across various political systems is demonstrated via the cross-sectional European Social Survey data. Second, the internal validity of the role of material circumstances in people’s political trust and redistribution preferences is supported via analyses utilizing three wave panel surveys conducted in Norway and Germany. These findings advance our understanding of the role of material circumstances in peoples support for welfare systems—most importantly, they imply that welfare systems can enjoy only one kind of support within the same individuals.

Digital Access to Healthcare Services and Healthcare Utilization: A Quasi-Experiment

This paper assesses whether facilitating the digital access to healthcare services impacts healthcare utilization. We exploit the introduction of a user-friendly web portal allowing women aged 25-65 to manage online their appointments in the public cervical cancer screening program carried out by a North-Eastern Italian Local Health Unit (LHU) in November 2019. We report quasi-experimental evidence on how this intervention affected both the program participation and the ability of the LHU to collect information on women’s screening behaviour outside the program.

Curbing energy consumption through voluntary quotas: Experimental evidence

This paper studies experimentally the use of voluntary consumption quotas as a strategy to deal with energy shortages. We run an online experiment where subjects play a two-round Nash demand game that captures key features of electricity consumption decisions. Each player is assigned to a group of 10 players. In round 1 the total energy pool is 100 while in round 2 there is a 50% probability that the pool is halved. Players can choose to play the game or accept a quota policy that will guarantee them a given payoff per round. We test 3 different policies. The first guarantees a fixed payment of 5 while the others a fixed share of either 10% or 6% of the pool. Our results show that in the baseline treatment players usually over-extract leading to energy shortages. Moreover, in case of power cuts, players adjust their demand downwards but less than the decrease in the pool. When quota policies are offered, the majority of players accept them. However, the fixed payment has a significantly lower acceptance rate while the 10% is the most accepted. Finally, we simulate 20000 groups per treatment to check the effectiveness of quotas in reducing over-extractions. While in the baseline the outage rate is close to 100% in each round, every quota is effective in reducing the shortages. In this case, the 6% policy is the most effective in every round.

Higher educational decisions: An agent-based model of comparison between Italy and Germany

Tertiary education is largely accepted to be one of the most important determinants of lifetime earnings and, consequently, of social mobility. Despite low tuition fees and limited entry barriers, Italy and Germany show a lower level of attainment at the tertiary education level with respect to the EU average and the 2030 targets. We propose an agent-based model where agents decide whether attending university or leaving education and entering the labour market right after school. Individual preference to enrol at university will depend on (i) economic motivations, represented by expectations on future income; (ii) influence from peers; (iii) individual effort to obtain a university degree. Agents may benefit from a scholarship to pursue their university study career. The aim is to analyse the (economic) effect of the scholarship in the two countries and investigate potential differences given by their respective socioeconomic context.

Contributing to the European public budget? An experimental comparison across countries

In this paper, we use contribution decisions in a multilevel public goods game to investigate attitudes toward national public budgets and the European public budget in six countries members of the EU: Italy, Germany, France, Netherlands, Poland, and Portugal. The experimental design allows us to test whether and to what extent there are differences in the propensity to contribute to both national and European public goods in the six countries and whether there are differences in the degree to which each country group changes decisions when relative efficiency between the two public goods changes. Two hundred residents from each country were recruited through Prolific, and an overall sample of 1200 subjects participated in the online experiment. Overall we find evidence of the absence of marginal crowding-in, a presence of substitution effect, and a leveling-up effect. A few interesting differences emerge from the cross-countries analysis. At the same time, the control strategy gives insights into individual characteristics (e.g., feeling of belonging to a country vs. feeling of being a European citizen) associated with the choices. Attitudes toward the European budget seem to be grounded on beliefs that precede the most recent events, i.e., the COVID-19 pandemic and the war in Ukraine.

The Impact of Lockdown during COVID-19 on Abortion-Seeking Behavior in Spain

We estimate the impact of lockdown during the first wave of the COVID-19 pandemic on abortion-seeking behavior in Spain. We exploit the unexpected announcement and immediate implementation of a strict, nationwide lockdown which started in mid-March 2020 and lasted for 8 weeks. We explore two channels through which lockdown could have affected the need for and access to abortion services in Spain: limited social interactions and a potentially lower accessibility of health care services. We find evidence that due to a decrease in social interactions, the number of unwanted pregnancies conceived during lockdown fell by 45% among affected women. We do not find any effect on the supply side: neither travel restrictions nor overcrowded hospitals seem to have altered the accessibility of abortion services in Spain. In future work, we plan to explore also the third channel through which lockdown could have affected abortion-seeking behavior – the demand for abortion services.

Non-Cognitive Skills and Labour Market Performance of Immigrants

This paper investigates how non-cognitive skills, e.g., memory, empathy, attention, imagination, and social skills – measured by personality characteristics – relate to the relative labour market performance of immigrants. Using the German Socio-Economic Panel (SOEP) and the Five-Factor Model of personality as a proxy for the non-cognitive skills, we show that these skills matter for the labour market integration of immigrants in the host country. We use two comparison benchmarks. Compared to an average native, immigrants’ non-cognitive skills, e.g., extroversion or emotional stability, can lead to 5–15 percentage points lower life-time employment probability disadvantage implying faster and better overall integration on average. Comparing immigrants and natives with the same type and level of non-cognitive skills suggests that returns of extroversion and openness to experience are higher among immigrants, leading to 3–5 percentage points lower lifetime employment probability disadvantage. These results are robust with respect to self-selection, non-random returns to the home country, stability of personality, and estimators. Our detailed analysis suggests that non-cognitive skills (especially extroversion) are substitutes for cognitive skills (e.g., formal education and training) among low educated immigrants, while there is no significant relative return of non-cognitive skills among highly educated immigrants.

Real Oil Price Forecasting: Gains and Weaknesses of Text Data

Biology, religion and socioeconomic behavior: connecting our past findings to human health

Is in utero exposure to testosterone correlated with health and healthy lifestyle? Does religiosity have a non-linear effect on illness? We will discuss these research questions in close connection to our previous findings. In the past, using a large sample of individuals from the RMLS-HSE longitudinal survey, we observed clear links between a prenatal testosterone biomarker - measured 2D:4D digit ratios - and the levels of education obtained by men. Statistically significant positive associations of 2D:4D (lower prenatal T) with higher levels of education were found using difference generalized ordered logistic regressions. Moreover, using the same survey, we found that lower digit ratios (higher T) correlated with higher wages for women and for men. There was also some evidence of a potential non-linear, inverse U-effect of digit ratios on wages but this was sensitive to the choice of specification. These findings were consistent with earlier work on prenatal T and success in careers Coates et al. (2009) but inconsistent with the work of Gielen et al. (2016) who found differing effects for men and women. Besides, in our recent work Bryukhanov & Fedotenkov (2021), we documented a strong and causal relationship between religiosity and life satisfaction. Analogous identification strategies can be applied to health outcomes in causal and comparative context. (Paper 1, Paper 2, Paper 3)

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Paternal Circular Migration and Development of Socio-Emotional Skills of Children Left Behind

The study of how paternal absence due to circular migration affects the socio-emotional skills of children left behind is complicated by the potentially offsetting effects of fathers’ absences and remittances. To isolate the effect of a father’s absence, this paper focuses on remittance-receiving households and compares children whose fathers were at home with children whose fathers were still working abroad. Using data from a parent-child linked survey and experiment conducted in Fall 2019 in the Ternopil region of Ukraine, this paper finds evidence of the negative effect of a father’s current absence on children’s perseverance skills. Overall, this result suggests that circular migration is not necessarily a “triple-win” solution that benefits all involved parties. Indeed it can generate unintended consequences for the development of the socio-emotional skills of children left behind if not combined with complementary initiatives aimed at providing high-quality schooling in origin countries. (Paper)

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The Impact of Same-Race Teachers on Student Non-Test Academic Outcomes

It is well established that students taught by same-race teachers improve their performance on exams. However, little is known about whether the positive impact extends beyond test scores to student non-test academic outcomes, which are known to predict student long-term success. Using the random assignment of teachers within the Measures of Effective Teaching (MET) project, I show that same-race teachers not only improve the test scores of Black students, but also increase the effectiveness of communication as reported by Black students. I find evidence supporting one of three potential underlying mechanisms of the communication effect. Specifically, I find that neither i) higher general communication ability of Black teachers nor ii) more teacher attention directed towards same-race students can explain this effect. Rather, my results suggest that the effect is driven by more effective communication between Black teachers and Black students, which aligns with the literature on culturally relevant pedagogy. Overall, the findings suggest that training non-minority teachers in using culturally relevant pedagogy may improve the performance of disadvantaged minority students in the short term as a complement to diversification of the teacher labor force. (Paper)

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Macroeconomic effects of inflation targeting in emerging market economies

This paper examines the macroeconomic effects of inflation targeting in 44 emerging market economies (EMEs) during 1970–2017. We estimate a dynamic panel data model, taking into account the endogeneity of the inflation targeting regime and controlling for a variety of factors affecting macroeconomic performance in EMEs. The main findings from our empirical investigation are as follows: First, inflation targeting is associated with lower average inflation, though its favorable effects, as compared to alternative monetary strategies, are negligible; second, we provide firm evidence against the proposition that inflation targeting lowers inflation volatility. Our results are robust with respect to various modifications in the estimation procedure and to the inclusion of additional control variables (Paper).

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Longer Careers: A barrier to hiring and coworker advancement?

In response to the increasing fiscal burden imposed by public-pension systems, many countries have successfully encouraged older workers to delay retirement. These career extensions may significantly affect both the hiring and firing decisions of firms and the career progression of younger workers. To study these effects, we leverage reforms in the Netherlands in 2011 / 12 that gradually increased the eligibility age for public-pension benefits across birth cohorts. Using administrative linked employer-employee data, we first show that the reforms have significantly extended careers, doubling employment rates at ages that were directly affected by the reform. Next, we show that firms respond to the career extensions by delaying hiring, and hiring fewer workers overall. Co-workers experience slower earnings growth over the period of career extensions, which is mainly attributable to a reduction in hours worked rather than lower hourly wages, but their separation rates from the firm are not affected. We support these findings with a descriptive analysis of an earlier Dutch reform in 2006, which reduced the share of older workers taking up early retirement and reveals similar dynamics.

Do Unannounced Visits to Schools Affect Student Performance? Evidence from a Large-scale Monitoring Program in Peru

The findings from prior studies on the impact of low-stakes monitoring (monitoring unaccompanied by explicit incentives or punishments) on student achievement in developing countries are mixed. Moreover, as most of these initiatives were conducted on a small scale by non-governmental organizations, their findings may not be generalizable to large-scale government interventions. The current work investigates the educational impact of the Semaforo Escuela program – a large-scale monitoring system in Peru that conducts unannounced monthly school inspections, with the results reported to local education officials. I exploit the random variation in the selection of visited schools in the program’s first year to estimate the causal effects of low-stakes monitoring on student’s math and reading scores. Although I fail to find evidence that a monitoring visit enhances school-level student performance on average, I find that urban schools located at the bottom of the performance distribution or visited in the months preceding the exam date have a significant positive effect on reading test scores. (Paper)

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Education and Domestic Violence Evidence from a Natural Experiment in Turkey

We utilize a natural experiment, an education reform increasing compulsory schooling from five to eight years in Turkey, to obtain endogeneity-robust estimates of the effect of male education on the incidence of domestic violence against women. We find that husband’s education lowers the probability of physical, emotional and economic violence. Schooling lowers also the likelihood of an arranged marriage, and makes men less inclined to engage in various socially unacceptable behaviors. We show that these findings are very robust, and can be attributed to men’s education rather than to the education of their wives.

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Leveling Health Inequalities: Raising the School Leaving Age Reduces the Risk of Diseases and Severe Medical Conditions Related to Genetic Endowment

Health inequality has a significant genetic component and environments such as education can moderate the effects of genes. However, little is known about whether more years of education can effectively moderate the relationship between genetic conditions and severe contemporary diseases and medical conditions. I use UK Biobank data to investigate the relationship between education, genetic endowment, and four health conditions: heart attack, cancer, stroke, and type-2 diabetes. To avoid the potential endogeneity of education, I focus on the long-term health consequences of a 1972 increase in the school-leaving age (ROSLA). As a measure of genetic endowment, I use an index of genetic predispositions for obesity. Genetic predispositions are typically summarised by a weighted average of individual genetic markers, where weights are derived from analyses, performed on different populations, which correspond to select outcomes, such as obesity. This may skew the results of follow up studies of other outcomes, such as cancer. I introduce a two-step method that adjusts the available weights to new outcomes, and show that genetic predisposition for obesity increases the risks of the four diseases I study. The results based on my new method show that the additional year of schooling driven by the ROSLA reform diminished the importance of genetic predispositions for the risks of cancer and heart attack by 40%. The results offer new evidence on how environments moderate the inequalities in health that have been tilted from birth. (Paper)

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Prenatal Sex Detection Technology and Mothers’ Labour Supply in India

The advent of prenatal sex diagnostic technology (PSDT) in India in the mid-eighties has made it easier for women to identify the sex of children before their birth, giving them an option to attain their desired sex composition of children without having to undergo repeated pregnancies. In this paper, we investigate the impact of this technology on mothers’ labour supply using a triple differences estimator. Our strategy combines supply-driven changes in ultrasound availability over time with plausibly exogenous family-level variation in the incentive to sex-select and son preference at the local level. We find that PSDT had a significant negative impact on mothers’ labour supply. We further investigate various underlying channels linking prenatal sex selection and mothers’ labour supply and identify two important channels: changes in fertility and increased investment in firstborn girls. (Paper)

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Long-term effects of grade retention

Grade retention offers students a chance to catch up with unmastered material but also leads to less labor market experience by delaying graduation and labor market entry. This paper assesses this trade-off by using a test-based promotion cutoff in academic secondary school in the Netherlands. At the age of 28, I find no impact of retaining on final educational attainment, although retained students are later to graduate. Grade retention does lead to an annual earnings loss of about 3,100 euros (14%) at the same age. This loss is entirely due to the difference in experience created by the delayed later labor market entry, as starting earnings and earnings trajectories are not affected. Overall, there seems no benefit of grade retention for students around the cutoff.

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Value for money in job retention schemes

In our work we have examined the impact of three different short time work schemes on employment during the first wave of the COVID-19 pandemic in Slovakia. We apply the difference in differences (DiD) technique comparing treated firms with its synthetic controls that simulate the pre-pandemic behaviour. The presentation covers steps in finding the best identification strategy subject to various data and methodological limitations.

Take a complete picture of the Youth Guarantee

Using administrative data on jobseekers registered by the public employment agency, we describe the implementation of the Youth Guarantee through the Slovak active labour market policy (ALMP). By adopting a novel, double-machine-learning-based, dynamic estimation technique, we generate evidence on the impact of various types of ALMP programmes provided in different periods of the unemployment spell. The spectrum of ALMP programmes ranges from classroom training through hiring incentives and subsidised employment in the private sector to public works organised at the municipality level. We identify the impact of participation in a particular ALMP programme or sequences of ALMP programmes on the absence from registered unemployment after three years. Our empirical approach allows painting a complex picture of the Slovak Youth Guarantee implementation, yielding evidence in line with international experiences generalised by ALMP impact-evaluation meta-analyses. We contribute to this literature, by generating affirmative evidence from a particular case study which is only allowed thanks to the advanced functionality of our estimator.  (Authors: Soňa Dulíková, Lukáš Lafférs, Miroslav Štefánik)

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An explanatory mixed methods test of the impact of membership dues structures and mission orientation on association donations

This experimental study examines the effect of organizational membership fees on the willingness of association members to make charitable contributions (donations) to their association. Theoretically, the design tests six scenarios where public and private benefit are more prominent to explore and whether the amount of publicness in an organization’s mission (mission orientation) influences the donation amount. Practically, nonprofit leaders need more information regarding the relationship between membership dues and giving behavior to gauge the optimal membership scenario for maximum revenue generation. Using an explanatory sequential mixed methods design, the study assesses individuals’ willingness to donate to associations under three dues scenarios (no dues, dues with benefits, and sliding scale dues) with varying levels of public and private benefits. Responses demonstrate a significant difference between both professional and community association donations as well as between treatment groups. Themes emerged regarding dues and dues structures, personal finances, and the autonomy of giving to other charities.

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CANCELLED Low-Skilled Jobs, Language Proficiency and Refugee Integration: An Experimental Study

We study the causal effects of previous experience and language skills when newly arrived refugees in Sweden apply for job openings by means of a field experiment. Applications were sent from randomly assigned fictitious Syrian refugees with experience in jobs with low skill requirements and completed language training in Swedish to employers advertising low-skilled job vacancies. We find no evidence of sizeable effects from previous experience or completed language classes on the probability of receiving callback from employers. However, female applicants were more likely than males to receive a positive response. We conclude that previous experience and completed language training seem to provide at best a small positive signaling value when refugees apply for low-skilled jobs through formal channels.

Health’s Kitchen: TV, Edutainment and Nutrition

This paper investigates whether and how media exposure affects health behaviours. We exploit the idiosyncratic switchover to digital television in Italy and the consequent shift in the supply of food-related contents shown on the TV. By using a unique data-set based on four sources of data, we first provide evidence that food-shows contents affected individual choices, based on patterns of cuisine related information and recipes on the web. Then, we find that digital transition increased the size and improved the macronutrient composition of households’ food baskets, leading to a reduction in BMI among more exposed individuals. These findings question the negative stereotypes often associated with TV and highlight its potential as brand-new health policy lever.

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Education and Domestic Violence: Evidence from a Natural Experiment in Turkey

We utilize a natural experiment, an education reform increasing compulsory schooling from five to eight years in Turkey, to obtain endogeneity-robust estimates of the effect of male education on the incidence of domestic violence against women. We find that husband’s education lowers the probability of physical, emotional and economic violence. Schooling lowers also the likelihood of an arranged marriage, and makes men less inclined to engage in various socially unacceptable behaviors. We show that these findings are very robust, and can be attributed to men’s education rather than to the education of their wives.

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Loan Supply and Asset Price Volatility: An Experimental Study

This paper investigates credit cycles by means of an experiment based on a Kiyotaki & Moore (1997) model with heterogeneous expectations. The aim is to examine how a credit squeeze caused by high lender-level risk perceptions affects the real prices of a collateralised asset, with a special focus on the macroeconomic implications of rising price volatility in terms of total welfare and the number of bankruptcies that occur. To do that, a learning-to-forecast experiment (LtFE) is run where participants are asked to predict the future price of a collateralised asset and then rewarded based on the accuracy of their forecasts. The setting includes one lender and five borrowers in each of the twelve sessions split between six control groups (G1) and six treatment groups (G2). While in G1 the lender always satisfies borrowers’ loan demand (bankruptcies permitting), in G2 he/she is forced to close the entire credit market in case three or more bankruptcies occur in the previous round. Experimental results show that negative risk-driven supply shocks amplify the volatility of collateral prices. This surge in uncertainty worsens the agents’ ability to predict the future value of the collateralised asset and, as a consequence, the number of defaults increases and total welfare deteriorates.

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The Gates Effect in Public Goods Experiments: How Donors Focus on the Recipients Favored by the Wealthy

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Experiments involving multiple public goods with contribution thresholds capture many features of charitable giving environments. We present results from a laboratory experiment that introduces endowment and preference differences into such a framework to explore the impact of donor heterogeneity on public good success and payoffs. We observe that donors tend to focus on the recipients preferred by the wealthiest contributors, ignoring other potential recipients. We refer to this collective focus on the preferred good of the wealthiest as the Gates Effect, showing that the public goods preferred by the wealthiest are more salient even in the absence of seed money, matching grants, misperception of payoffs. The Gates Effect can reduce inequality within donor groups that succeed in funding a public good; however, it also affects the philanthropic agenda, reducing the variety of public goods that receive funding."

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Nudging for Tax Compliance: A Meta-analysis

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Abstract: Nudging has become an important policy instrument to improve tax collection. Nudges in the taxation context are mainly notifications sent to taxpayers on behalf of tax authorities. Despite their similarity, these interventions have differential impact across countries and regions. We synthesize the growing experimental literature in a meta-analytical framework and provide estimates of the average effects of different nudges on tax compliance. Compared to the average share of compliant taxpayers that receive no notifications in the control group (29.8%), i) a neutral notification increases the probability of compliance by 6.4%, ii) non-deterrence nudges, various notifications that do not contain threats, increase the probability compliance by 12.8%, and iii) deterrence nudges, notifications that contain threats of audit or punishment, increase the probability of compliance by 22.8%. Lastly, our findings suggest that the sample of studies under scrutiny may be susceptible to selective reporting of results, and highlight few study characteristics that can make nudging interventions more effective.

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Minimum Tax Reforms and Inter-temporal Shifting of Corporate Income: Evidence from Administrative Tax Records

We estimate how policies that facilitate inter-temporal shifting of corporate tax liability via tax carry-forwards increase responsiveness of corporate tax base to taxation. Using administrative 2010-2018 tax return data from Slovakia and bunching designs, we estimate corporate elasticity of taxable income (CETI) at kinks in the marginal rate schedule. Using reforms of tax carry-forwards, we estimate that shifting via carry-forwards can account for the entire CETI at kinks for top 13% companies with turnover above €500k and 21% of CETI for VAT non-registered companies. We provide corrected estimates of marginal excess burden net of intertemporal shifting.

Paper

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Revealed value of volunteering: A volunteer centre network

This article deals with the revealed value of volunteering. The revealed value approach is one way to determine the value of non-market goods or services. Most studies focused on the value of volunteering have built their research on the presumption that there is no way to reveal the value of volunteering, and therefore proxies must be used. This research uses a plausibility probe case study to explore and identify revealed information about the value of volunteering. The research was conducted using data over a seven-year period (2012–18) from ADRA, a large volunteer centre network in the Czech Republic that has 14 volunteer centres coordinating more than 2,500 volunteers in about 50 cities. I used the data about all the public funding of all the centres in this network between 2012 and 2018 in order to calculate the revealed value of volunteering from the perspective of various governmental institutions. I calculated the total value of volunteering, including financial grants, donations, and the value of volunteer hours. Interestingly, all three values were found within or slightly around the interval estimate of the value of volunteering.

Paper

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Can Survey-based Sentiment Affect Stock Returns? A Meta-analysis

Abstract: It is a standard practice to explain future stock returns by factors such as size or value premium. But the history of systemic events that led to asset bubbles and the advances in the behavioral finance field emphasized the importance of another factor influencing stock returns -- sentiment. Focusing on the direct survey-based measures of sentiment, we collect 1311 estimates from 30 primary studies to conduct the first meta-analysis of the underlying relation shedding light to ambiguous outcomes of current empirical literature. Our results suggest that there is non-negligible and negative relationship between sentiment and stock returns. In majority of specifications researchers tend to report this effect much stronger than it actually is but we also found presence of positive publication bias driving the results to less negative or even positive area. We reveal that sentiment effect is significantly stronger when flowing from individual investors compared to large institutions or when affecting stock market in US compared to Europe. Further, the effect also depends on several data and model characteristics. Finally, we propose implied estimates that may help to enhance predictive power of stock market models, but also conducting stress tests of financial markets and assessing risks to financial stability. Our results might be applied to specific pairs of survey-based sentiment and return series, but in general, we quantified the average effect of one unit increase in sentiment on monthly returns to be -0.54pp.

Authors: Zuzana Gric (ČNB, MUNI),  Josef Bajzík (ČNB, IES FSV UK), Ondřej Badura (VŠB)

The research seminar will be streamed on MS Teams: Link HERE

Informing Risky Migration: Evidence from a field experiment in Guinea

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Abstract: Can information provision reduce the risks associated with irregular migration? We address this question conducting a large-scale experiment with about 7,000 secondary school students in Guinea. Combining aggregate statistics and video-testimonies by migrants who settled in Europe, we study the effect of three information treatments: (i) about risks and costs of the journey; (ii) about economic outcomes in the destination country; and (iii) a treatment pooling (i) and (ii). We find that one month after the intervention, all three treatments affect beliefs about risks and economic conditions. However, 1.5 years after the intervention, only the first has a significant effect on migration outcomes: providing information about the risks and costs of the journey reduces international migration by 49%. The effect is driven by a decrease in migration without a visa (i.e., potentially risky and irregular). Furthermore, the reduction is bigger for students who at baseline underestimated the risks connected to international migration.

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Connectivity, centralisation and "robustness-yet-fragility" of interbank networks

This paper studies the effects that connectivity and centralisation have on the response of interbank networks to external shocks that generate phenomena of default contagion. We run numerical simulations of contagion processes on randomly generated networks, characterised by different degrees of density and centralisation. Our main findings show that the degree of robustness-yet-fragility of a network grows progressively with both its degree of density or centralisation, although at different paces. We also find that sparse and decentralised interbank networks are generally resilient to small shocks, contrary to what so far believed. The degree of robustness-yet-fragility of an interbank network determines its propensity to generate a too-many-to-fail problem. We argue that medium levels of density and high levels of centralisation prevent the emergence of a too-many-to-fail issue for small and medium shocks whilst drastically creating the problem in the case of large shocks. Finally, our results shed some light on the actual robustness-yet-fragility of the observed core-periphery national interbank networks, highlighting the existing risk of systemic crises.

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Dying for ignorance? 1918-influenza mortality, vaccination skepticism and vaccination behavior

How do societies respond to epidemic crisis in both stated political preferences and revealed health-related behavior? To answer this question, we link overmortality during the 1918-influenza to the political support of compulsory vaccination and to real vaccination behavior before and after the 1918-flu. We rely on the 1922 popular vote in Grisons when Grisons’ voters have to decide about compulsory vaccination in their canton. We find that a 1% higher overmortality during the 1918-flu reduces the support of the compulsory vaccination bill by almost 3%. The results are robust to different specifications regarding the definition of flu-affectedness, the inclusion of regional fixed effects and socio-economic variables. Other popular votes, by contrast, do not correlate with overmortality neither before nor after 1918. We are now digitizing real vaccination behavior at the municipality level using smallpox vaccination reports from 1907 to 1933. We aim to show whether revealed health-related behavior differ from the political statement by investigating a potential shift in vaccination abstinence after 1918. We further aim to distinguish among two potential channels to explain the results – cognitive dissonance and mistrust into experts or the government. The results might improve our understanding how epidemics might shift a society towards ignorance and mistrust into experts. Parallels to the COVID-19 epidemic show that part of the population are still acting ignorant today as our ancestors have done so 100 years ago.

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Delegation and overhead aversion with multiple threshold public goods

Abstract: Experimental studies have modeled individual funding of social projects as contributions to a threshold public good. We examine contributors’ behavior when faced with multiple threshold public goods and the possibility of coordinating contributions via an intermediary. Employing the experimental design developed in Corazzini (2020), we vary both the size of a ‘destination rule’, which places restrictions on the intermediary’s use of a contributor’s funds, as well as the overhead cost of the intermediary, modeled as a sunk cost incurred by the intermediary whether or not any public good is successfully funded. In an online experiment with live interaction, we show that subjects behave in line with equilibrium predictions with regard to the size of the destination rule, only increasing their contributions when there is no threat of expropriation by the intermediary. However, we find that the positive effect of a high destination rule is undone in the presence of overhead costs for the intermediary. While this is in direct conflict with the theory that predicts no role of such costs, it is in line with the sunk-cost bias as well as the phenomenon of ‘overhead aversion’ that is commonly exhibited by donors when selecting charities.

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Unintended Consequences of Immigration Policy on Children’s Human Capital

This study examines the unintended consequences of immigration enforcement policies on children’s human capital. Exploiting the temporal and geographic variation in the enactment of immigration enforcement policies, we find that English language proficiency of U.S.-born children with at least one undocumented parent is negatively affected by the introduction of immigration enforcement laws. We show that the reduction in children’s English proficiency are caused by changes in parental investment behavior. Increasing fear of being detected and deported leads undocumented parents to substitute children’s time in formal non-mandatory pre-school education with parental time spent at home. We find evidence that parental time investment is not as productive as time spent in pre-school. These developments lead ultimately to a reduction in children’s human capital. 

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Learning principles of individual and collective behavior from data

Have you ever wondered how are colonies of ants able to efficiently search for food, birds or fish collectively defend themselves against predators by forming flocks or schools, and why crowds of people behave like a fluid? Recent advances in automated tracking technology resulted in high-resolution recordings of individual trajectories and behavior of groups, often complemented by identification of stereotypical behaviors. But the main hurdle still remains to be data analysis and inference of informative models. I will talk about a class of probabilistic models, which is general enough to apply to a broad range of systems, incorporating individual and collective behavior, spatial and temporal dependence, discrete and continuous variables, deterministic and stochastic components and internal cognitive or behavioral state dependence. Our approach has two desirable features: (1) the maximum likelihood inference is tractably solvable by gradient descent, (2) model selection can be used to adjust model complexity to data. Multiple toy/real examples will be shown during the talk.​

Gulags, Crime, and Violence: Origins and Consequences of the Russian Mafia

This paper studies the origins and consequences of the Russian Mafia (vory-v-zakone). Using a web scraping method, I obtained a unique dataset that contains detailed biographies of more than 5,000 mafia leaders operating in 15 countries of the (former) Soviet Union at some point between 1916 and 2018. Using this data, I first show that Russian Mafia originated in the Gulag - Soviet system of forced labor camps which housed around 18 million prisoners between 1920s-1950s. Second, I document that the distance to the nearest camp is a strong negative predictor of mafia presence in Russia's communities in the mid-1990s. Finally, using an instrumental variable approach which exploits the spatial distribution of the gulags, I examine the effects of mafia presence in mid-1990s on local crime and violence. In particular, I show that the communities with mafia presence experienced a dramatic rise in crime driven by turf wars which erupted among rival clans around 1993 and lingered on until the late 1990s. This is suggested by a sharp increase in attacks against members of Russia's economic elite in places under mafia control.  Further heterogeneity analysis reveals that mafia presence led to a spike in violence against businessmen, fellow criminals, as well as law enforcement officers and judges, while the attacks against politicians remained unaffected.

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Rank incentives and social learning: evidence from a randomized controlled trial

In a 1-year randomized controlled trial involving thousands of university stu- dents, we provide real-time private feedback on relative performance in a semester-long on- line assignment. Within this setup, our experimental design cleanly identifies the behavioral response to rank incentives (i.e., the incentives stemming from an inherent preference for high rank). We find that rank incentives not only boost performance in the related assignment, but also increase the average grade across all course exams taken over the semester by 0.21 standard deviations. These beneficial effects remain sizeable across all quantiles and extend beyond the time of the intervention. The mechanism behind these findings involves social learning: rank incentives make students engage more in peer interactions, which lead them to perform significantly better across the board. Finally, we explore the virtues of real-time feedback by analyzing a number of alternative variations in the way it is provided.

Paper
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Delegation Based on Cheap Talk

We study a real effort environment, where a delegator has to decide if and to whom to delegate a task. Delegating to a person who is better at the task increases welfare. Potential delegatees send cheap-talk messages about their past performance before the delegator decides. We experimentally test the theoretical prediction that information transmission cannot occur. In our experiment, we vary the message space available to the delegatees and compare the information transmitted and the level of efficiency. Depending on the treatment, the sender can either submit a number indicating how many tasks she solved previously, an interval in which the number of tasks falls, or a free text message. We observe that messages contain information in all treatments. Interestingly, information transmission occurs only in the treatments where messages are intervals or free text but not if messages are exact. The highest efficiency is obtained in the free-text treatment, as delegators are able to extract information contained in the different styles of messages sent by subjects with different abilities.

The role of diagnostic ability in markets for expert services

In credence goods markets, experts have better information about the appropriate quality of treatment than their customers. Experts may exploit their informational advantage by defrauding customers. Market institutions have been shown theoretically to be effective in mitigating fraudulent expert behavior. We analyze whether this positive result carries over when experts are heterogeneous in their diagnostic abilities. We find that efficient market outcomes are always possible. However, inefficient equilibria can also exist. When such inefficient equilibria are played, a larger share of high-ability experts may lead to more inefficiencies relative to the efficient equilibria.

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Setbacks and learnings from doing experimental research: different contexts, multiple results?

Over the last years, the use of experimental research has received an increasing attention from Management academics and journal editors. While experimental research is popular among social psychologists (actually my background) it is still rare in the field of International Human Resource Management. The objective of this seminar is not to explain how to design an experimental research, but instead, present my own experience of using experimental designs to answer a few common questions in the management and business fields, such as: (1) Does the academic performance (GPA) and the participation in extracurricular activities (ECAs) affect the perceived employability of business graduates? (2) Does the effect of GPA and ECAs vary with the characteristics of the respondents and the cultural context? (3) Does a facultative internship affect the perceived employability of marketing graduates? What about the effect of an international versus a domestic facultative internship? (4) Does the use of a facial piercing influence the perceptions of interpersonal attraction, confidence and job suitability of hospitality receptionists? Starting from my first published paper (Pinto & Ramalheira, 2017) employing an experimental design, I then illustrate how this method was applied more broadly to examine the perceived employability of business graduates in other cultural contexts (e.g. China, Brazil, Italy) and to advance research in other fields, such as hospitality management, higher education and leadership. The seminar ends with a discussion of the challenges and learnings from employing (quasi) experimental designs.

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Reporting Peer Misbehavior: Experimental Evidence on the Effect of Monetary Incentives on Morally Controversial Behavior

Reporting a peer’s wrongdoing to an authority is a morally controversial decision: re-porting will likely result in a punishment for the peer (and harming others is unethical), but the punitive action might prevent further harm to the victims of the misconduct (which justifies reporting on a moral ground). A policymaker might want to encourage the solution of this moral dilemma in the direction of reporting, through financial incentives. Yet, material incentives sometimes backfire, especially in domains involving moral concerns. Using a field experiment with employees of the Ministry of Education in Afghanistan who are asked to confidentially report their colleagues’ absence, I show that reporting is lower among participants who are offered a monetary reward for their reports. This is the case, however, only for participants who expect their reports to be consequential (making their choice morally-charged). Among employees who are told instead that their reports are inconsequential and won't result in any penalty for their peers (making the choice more morally-neutral), incentives do not backfire.

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Where or Whom to Contract? An Empirical Study of Political Spillovers in Public Procurement

Abstract: OECD and other international organizations have been very keen in recommending principles and institutional safeguards to curb corruption and to enhance transparency and integrity in public procurement. Despite the fact that Portugal is being considered a good example of e-procurement policies and practices among European countries, this is a very sensitive issue.
Based on the the literature that provides evidence of a politicized administration of public procure- ment contracts, but limited to a specific municipality, this paper extends the analysis of political effects to other municipalities. Specifically, it asks if there is a relation between the political parties in power in a given municipality and the frequency of contracts awarded to a given firm?
Our results show that for political reasons private firms are more likely to win a contract in a given municipality if they have already won contracts in other municipalities led by the same political party. We rely on a dataset (’base.gov’) with information on all bids by private firms and all contracts awarded by the 308 Portuguese municipalities in the period between 2008 and 2017. This includes three electoral cycles and more than 250,000. The empirical results - the political proximity - is robust to a number controls, including geographic proximity. This result has political and public governance implications.

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Migration, Health, and Well-Being

Foreign-born individuals come with different health needs and different level of vulnerability. In the public debate today, immigration is often viewed as a threat to the access and the quality of health care services. The health needs of immigrants and refugees pose new challenges to health care systems. We discuss the main findings of the effects of immigration on demand and supply of health care in host countries. Moreover, immigrant inflows could have large effects on labour markets which can in turn affect natives’ health and their demand for health care. Understanding the health trajectories of immigrants are paramount to provide a correct assessment of the costs and benefits of migration.

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Wishful thinking about mood effect

There is increasing acceptance of the role played by mood in decision-making. However, the evidence of mood effect in the field, as proxied by external factors such as weather and weekday, is limited. Using two large datasets containing all car inspections in Sweden and England during 2016 and 2017, we study whether inspectors are more lenient on days when their mood is predicted to be good, and if car owners exploit this mood effect by submitting lower quality cars to be inspected on these days. Different sources of good mood are studied: Fridays, last working days before public holidays, paydays, sunny days, and days following major sports results, in a decreasing order of the car owner’s ability to plan for inspection, and hence the likelihood of selection bias. We find limited evidence to support the existence of mood effect in this domain, despite survey results showing belief to the contrary. In Sweden, failure rate is in fact higher on Fridays and last days before holidays, suggesting that the selection effect is stronger than any mood effect.

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Gender, willingness to compete and career choices along the whole ability distribution and by experimental task

This paper focuses on the relationship between experimentally measured willingness to compete and field data. Our sample consists of more than 1500 Swiss compulsory school students from the whole ability distribution. We elicit their willingness to compete in one of two tasks which differ in associated gender stereotypes. We relate our experimental measure to field data on ability and to students' choice of post-compulsory education. This enables us to make contributions in three directions. 1. We examine how willingness to compete varies with field-measured ability and whether this differs by gender. 2. We investigate the relationship between gender, willingness to compete and study choices along the whole ability distribution, in a comprehensive framework that includes specialization options both in the academic and the vocational track. 3. We examine whether the results depend on the task that is used to elicit willingness to compete. Our main findings are: 1. High-ability boys are more willing to compete than low-ability boys while the relationship between ability and willingness to compete is flat for girls. 2. Willingness to compete predicts choices both of academic specializations and of vocational careers. 3. The results are similar across our two experimental tasks.

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Free Mobility of Labor - How are neighboring labor markets affected by the EU Eastern enlargement?

In recent years, there has been growing opposition against the principle of free movement of labor within the EU. Criticism is often based on the belief that immigrants hurt residents' employment opportunities. Despite these discussions, there is little ex-post research on the impact of the increased immigration after the EU enlargement on old Member States' labor markets. In our paper, we first provide a descriptive analysis of employment from the new EU Member States in the Austrian labor market with a focus on the period around EU entry and free labor market access. Second, we exploit the observed patterns in immigration from the EU8 countries to identify the causal effect on workers and firms in the Austrian border region. More precisely, we use variation in the EU8 worker density across communities over time and over the distance to the closest EU8 border. We find that the share of EU8 employees among all employees in Austria increased by a factor of four from 1997 to 2015. With free access, we see a shift in the composition of migrants toward lower-qualified and younger groups. We can further show that the largest inflow of EU8 employment occurred in communities closer to the border.

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Anti-social Behavior in Groups

This paper provides strong evidence supporting the long-standing speculation that decision-making in groups has a dark side, by magnifying the prevalence of anti-social behavior towards outsiders. A large-scale experiment implemented in Slovakia and Uganda (N=2,309) reveals that deciding in a group with randomly assigned peers increases the prevalence of anti-social behavior that reduces everyone’s but which improves the relative position of own group. The effects are driven by the influence of a group context on individual behavior, rather than by group deliberation. The observed patterns are strikingly similar on both continents.

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On war and political behavior

This paper illustrates how a historical shock to political preferences can translate into observable electoral support as the political landscape evolves. During World War II, the Third Reich annexed the French eastern borderlands and their inhabitants were forcibly conscripted into the Wehrmacht.
In the first stage, survey data evidence is used to show how this forced conscription reduced political trust, affecting policy preferences. The data is then used to estimate the impact of conscription on municipality-level support for radical candidates and on abstention in elections during the 1965-2017 period. Identification exploits the fact that different birth cohorts were affected in each annexed region by using eligible births as an instrument for conscription. In earlier elections in which platforms were more similar, both radical and moderate candidates were penalized in municipalities where more men were conscripted, resulting in higher abstention. In more recent elections which were more polarized, conscription increased support for radical candidates.

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Trouble Underground: Demand Shocks and the Labor Supply Behavior of New York City Taxi Drivers

We investigate how New York City taxi drivers respond to positive changes in labor demand. Exploiting high-frequency variations in taxi demand due to subway service disruptions, we show that drivers work more when earnings opportunities are greater. We also explore whether income-targeting affects drivers’ behavior. Results show that drivers’ response to demand shocks is 40% smaller once they have reached their daily income target. Overall, while drivers’ behavior seems largely consistent with the standard model of labor supply, the large difference between below-target and above-target responses suggests that targeting behavior does nevertheless play an important role in determining drivers’ decisions.

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Distributive preferences and Effort Provision: What Determines What?

This paper analyzes the link between effort and distributive preferences in an environment, in which effort does not affect the amount to be distributed. We propose a model that suggests that such a link is bidirectional. People adapt their distributional choices to their performance in a self-serving way, but they also exert effort in line with their distributive preferences. The literature has documented a link running from effort to distributive preferences. We provide evidence of the reverse relationship: individuals who make egalitarian choices later make less effort than people who behave selfishly. Our results thus provide one explanation for self-serving assessments of fairness documented in the literature and place distributive preferences among the determinants of effort and productivity.

The Effect of R&D Subsidies Revisited

Abstract: The effects of research and development (R&D) subsidies on patenting are heterogeneous in nature. Moreover, endogeneity caused by a multi-step selection of grant applicants makes empirical evaluation difficult. We use a unique dataset on the evaluation of grant applications and a novel instrumental variable identification strategy, which originates from the grant evaluation process. WE estimate the causal effects of R&D subsidies in the Czech Republic over 2011-2014 on patenting in the next three years. We exploit the random assignment of experts, who evaluate grant applications, and their leniency to give higher scores as an instrumental variable. As a result, we show that R&D subsidies have a strong positive mid-term effect on the propensity to apply for patents and the number of patent applications. R&D subsidies lead to the patent applications of higher quality, i.e. firms are more likely to apply for patents of invention than utility models. The main findings are driven to a large extent by firms with higher prior research intensity.

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Work Motivation and Teams

We provide a new measure of work motivation and show that motivation shapes the effects of team incentives and observation by peers on performance. In particular, we measure motivation to work hard as the deviation from the money-maximizing benchmark in a real-effort experiment. While we find that average output increases in response to team incentives and observation, we find that highly motivated workers do not respond. The reason is that highly motivated workers already work hard and increasing effort even further is very costly to them.

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Misfortunes Never Come Singly: Consecutive Weather Shocks and Mortality in Russia

This paper examines the impacts of extremely hot and cold days on mortality in Russia, using a 25-year regional panel data. Unlike other studies, the sequence of those extreme days is also taken into account, that is, the impacts of both single and consecutive (i.e. heat waves and cold spells) extreme days are estimated simultaneously. We demonstrate the importance of accounting for the sequence of extreme days. We also disentangle the impacts of those extremes by age and gender. The findings suggest that single hot days increase mortality, while single cold days do not affect mortality. On the other hand, both consecutive hot and consecutive cold days increase mortality in females and males for all age groups, although males are affected more severely. Overall, consecutive days with extreme temperatures impose considerable costs to society in terms of years of life lost. Thus, ignoring the sequences of extreme days that are likely to increase in the future because of climate change may have critical implications for mitigation policies.

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Self-regulation and meta-regulation – regulating the members or the SRO? A theoretical and experimental study

Abstract: Regulatory investigations by Self-Regulatory organizations (SROs) have been recognized to usually be cheaper than investigations by the government. However, in practice, oversight by an SRO is mostly still supplied with forms of governmental oversight. The government may exert oversight over the SRO itself, a construction referred to as “meta-regulation" or "co-regulation", or over the members of the SRO. Indeed, the overall performance of SROs has been mixed and theoretical models show that SROs have incentives to set lax standards or cover up detected violations. However, some research indicate that meta-regulation, oversight of the SRO itself, may nonetheless not be necessary in some settings. Using a costly-state-verification model, DeMarzo et al. (2001; 2005) show that when the government implicitly threatens to perform additional investigations of the SROs members, a relatively "good" outcome can be established as an equilibrium. In this "good" outcome, the SRO chooses to follow high performance standards in order to pre-empt any of the (relatively costly) governmental investigations. As a result, no costly governmental investigations of the SRO's members take place, and no meta-regulation of the SRO is necessary.
I extend this model to include plausible settings where the actual rigor of oversight by the SRO can be verified only ex-post. I show that in such settings, the SRO may have incentives to announce stricter regimes than it effectively implements and that, as a result, a "bad", Pareto-inefficient outcome is established as an equilibrium. In the "bad" outcome, the SRO relinquishes all oversight to the government. The predictions of this model are supported by experimental tests. The "good" equilibrium can be re-established as an equilibrium with sufficient meta-regulation of the SRO. The results thus indicate a continuing need for meta-regulation in these settings. This form of meta-regulation may be of a relatively light-handed nature, limited to verifying and sanctifying that the SRO implements its announced policies.

Child Development and Parental Labor Market Outcomes

In this project, we investigate the effect of children’s development on parental labor market outcomes. Using an instrumental variable approach and accounting for sample selection, we find that mothers of boys with development difficulties (but not fathers) significantly reduce weekly working hours during the first three years of school. In contrast, mothers of girls with development problems reduce working hours only during the first year of school but increase their hours later on. We find that the reduction in working hours is associated with a fall in weekly earnings, although our estimates lack precision. Investigating potential channels, we find evidence that mothers increase the general time spend with their children as a response to reduced working hours. We do not find evidence, however, that the extra time is of higher quality.

The Good Outcomes of Bad News. A Randomized Field Experiment on Formatting Breast Cancer Screening Invitations

We ran a population-level randomized field experiment to ascertain whether a costless manipulation of the informational content (restricted or enhanced information) and the framing (gain or loss framing) of the invitation letter to the national breast cancer screening program affects the take-up rate. Our experiment involved more than 6,000 women aged 50- 69 targeted by the screening program of the Province of Messina in Sicily, randomly assigned to receive different invitation letter formats. Using administrative data from the Local Health Authority archives, we show that giving enhanced loss-framed information about the risks of not having a mammography increases take-up rate by about 25 percent with respect to all other treatments (no information; restricted gain-framed information; restricted loss-framed information; enhanced gain-framed information). Results are stronger for subjects living farther away from the screening site. For them, the manipulation may indicate higher perceived risks of negative outcomes that makes it worthwhile to participate in the screening program, in spite of longer travel time.

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Financial Speculations, Stress, and Gender: A Laboratory Experiment

In this paper we study the effects of acute stress on individual financial speculative behavior using a controlled laboratory experiment with 208 men and women. We employ a recently introduced measure that captures individual speculative behavior, the Speculation Elicitation Task, and an efficient stress-inducing procedure, the Trier Social Stress Test for Groups, and we pay special attention to the gender-specific effects. Our design allows for a separation of the main channels behind the treatment effects. We observe strong gender differences: The treatment – stress-inducing – procedure increases men's willingness to speculate compared to control men, but it decreases it for women by about the same amount. As we do not observe any change in the task-specific risk-preferences, concentration, and only a little change in the strategic expectations of shift in others' behavior and in beliefs, we conclude that the behavioral change is driven by the change in preferences, although in the opposite directions for both genders. The analysis of salivary cortisol and subjective mood shows that the subjects were under a considerable level of stress.

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40 years of Tax Evasion Games: a Meta-Analysis

Year 2018 marked the 40th anniversary of the first ever Tax Evasion Game published in the Journal of Public Economics by Friedland, Maital, and Rutenberg. This game has since been the subject of many other publications (more than 140 articles). In the present study, we collect more than 60 datasets recreating a Tax Evasion Game and run a meta-analysis on more than 220,000 observations and 15,000 subjects. The aim here is to set the impact of three types of variables (public policy, experimental context and sociodemographic of participants) on lab tax compliance.
The public policy variables are: tax rate, tax regime (progressive or proportional taxes); type of audit (endogenous or random audit); audit probability; fine size, and amnesty. The experimental variables are: framing of the experiment (loaded or not); way to ask for compliance in the instructions (relaxed or not); origin of income (earned or windfall); nature of income (self-employed or salaried job); redistribution to participants, public good fund, and pool of subjects (students or taxpayers). The sociodemographic variables are: age; gender; income; and studies.

Daughters and Divorce

What makes couples with daughters more likely to divorce than couples with sons? Using Dutch registry and U.S. survey data, we show that daughters are associated with higher divorce risks, but only when they are 13-18 years old. These age-specific results rule out explanations involving overarching son preferences and selection. Our findings are consistent with causal mechanisms involving relationship dynamics in families with teenage children. Survey evidence buttresses this interpretation. Subsample analyses show that the magnitude of the effect is linked to parental gender norms and that the effect is absent for fathers who grew up with sisters.

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Migration Policy Effects and Effectiveness

Mathias Czaika is a Professor in Migration and Globalisation at Danube University Krems in Austria. Mathias was formerly Director of International Migration Institute (IMI) at the University of Oxford in the UK.

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How to fix the existing copyright enforcement

Whether it is copyright infringement, hate speech or terrorist content, Internet intermediaries like Facebook, Twitter or YouTube are expected to essentially do the government's job -- enforcing the law. The legal scheme under which a lot of such delegated enforcement takes place is often referred to as notice \& takedown. According to empirical evidence, it leads to over-notification, over-compliance by providers and under-assertion of rights by affected content creators. We re-create these existing problems in a laboratory and then test a mechanism to address two of them: the overcompliance by providers, and the lack of complaints by creators. Through experiment, we show that our proposed solution gives more power to the users, who realize higher profits due to an improved accuracy of providers' assessment of content and leads to a significant reduction in over-compliance by providers.

Coordination and focal points under time pressure: Experimental evidence

We experimentally examine the effects of varying time pressure on the likelihood that two players coordinate on a label salient focal point in a coordination game. We consider both payoff-symmetric and payoff-asymmetric coordination games. In symmetric games there are no effects of time pressure on overall earnings and efficiency, since almost everyone coordinates on the focal point, regardless of how much time they have to decide. In asymmetric games we observe that higher time pressure only weakly significantly increases overall coordination, but it becomes significantly more likely that any coordination is on the focal outcome, so changes in time pressure also affect the distribution of the surplus.

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The Human Capital Cost of Radiation: Long-run Evidence from Exposure outside the Womb

This paper studies the long-term effect of radiation on cognitive skills. We use regional variation in nuclear fallout caused by the Chernobyl disaster in 1986, which led to a permanent increase in radiation levels in most of Europe. To identify a causal effect, we exploit the fact that the degree of soil contamination depended on rainfall within a critical ten-day window after the disaster. Based on unique geo-coded survey data from Germany, we show that people who lived in highly-contaminated areas in 1986 perform significantly worse in standardized cognitive tests 25 years later. This effect is driven by the older cohorts in our sample (born before 1976), whereas we find no effect for people who were first exposed during early childhood. These results are consistent with radiation accelerating cognitive decline during older ages. Moreover, they suggest that radiation has negative effects even when people are first exposed as adults, and point to significant external costs of man-made sources of radiation.

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Research findings from the global WageIndicator web survey on work and wages

On its websites WageIndicator invites web visitors to complete a survey on work and wages. This multi-country, multilingual survey is posted continuously in all 92 countries with a national WageIndicator website. These websites are frequently visited by people looking for information about wages, labour law, collective agreements, and alike (almost 40 million visitors in 2017). The data of the web survey has been used to analyse a range of topics. A study of health workers showed that the main migration pattern is to countries where the same language is spoken, followed by migration to neighbouring and former colonizing countries. Out-migrated health workers earn more and work fewer hours than comparable workers in source countries. Another study showed that wage dispersion among observationally similar workers is due to the intensity of tasks within occupations, though workers in high-wage occupations are less defined around a typical worker than those in other occupations. Other findings relate to variation in collective bargaining coverage, the gender pay gap, the structure of minimum wages around the world, self-identification of occupation in web surveys, and an informality-index for Sub-Saharan countries.

Bio: Prof. Kea Tijdens is a research coordinator at the University of Amsterdam/Amsterdam Institute for Labour Studies, and a scientific coordinator of WageIndicator Foundation.

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Stigma and prisoners

Prisoners are often stigmatized after their release which contributes to recidivism. However, little is known if and how much their beliefs are affected already before release: if a feeling of stigma arises during incarceration. In a lab-in-the-field experiment, we study if inmates expect to be stigmatized by people outside of prison in a standard trust game (and triple dictator game) and if it is reflected in their trustworthiness. Next, we test if a light-touch psychological intervention — self-affirmation — can mitigate the assumed impact of stigma, looking at the role of risk preferences and competitive confidence. In both games, senders are non-prisoners and receivers are 297 inmates from fifteen medium to high-security Czech prisons. We manipulate if the prison identity is revealed to senders or not, and inmates interact with both types in a within-subject design. Contrary to our expectations, inmates do not feel stigmatized as they expect to receive a higher transfer in the trust game when their prison identity is revealed. It can be fully explained by higher expected altruism in the dictator game. Inmates, however, do not send back more when their identity is revealed. Looking at the heterogeneity across types of prisoners, inmates not participating in any long-term prison-provided treatment drive the differences in beliefs. Unsurprisingly, self-affirmation does not affect trustworthiness nor beliefs when stigma is absent. Our results point to a more nuanced view on the stigmatization of prisoners: even though prisoners may expect statistical discrimination, they do not expect taste-based discrimination.

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Criminals on the Field: A Study of College Football

Economists have found mixed evidence on what happens when the number of police increases. On the one hand, more law enforcers means a higher probability of detecting a crime, which is known as the monitoring effect. On the other hand, criminals incorporate the increase into their decision-making process and thus may commit fewer crimes, constituting the deterrence effect. This study analyzes the effects of an increase in the number of on-field college football officials, taking players as potential criminals and officials as law enforcers. Analyzing a novel play by play dataset from two seasons of college football, we report evidence of a monitoring effect being present in the overall dataset. This effect is mainly driven by offensive penalties which are called in the area of jurisdiction of the added official. Decomposition of the effect provides evidence of the presence of the deterrence effect in cases of penalties with severe punishment or those committed by teams with moderate to high ability, suggesting that teams are able to strategically adapt their behavior following the addition of an official.

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Do Gender Quotas Damage Hierarchical Relationships? Evidence from Labor Market Experiments

Abstract: Although little is known about the support for gender quotas in hierarchical relationships, they are implemented in many organizations. We conduct a representative survey and a novel set of laboratory experiments to study opinions on gender quotas for managers and how they influence wage setting and worker effort. Our findings reveal that opinions and workplace reactions depend on the environment in which gender quotas are introduced. In our survey, we observe that the approval rating of gender quotas is low if there is no disadvantage against women in the manager selection process, even if they address gender differences in performance. Complementing this evidence, in our experiments we observe that quotas in such environments lead to lower wage and effort levels. However, in an environment where women are disadvantaged because of a biased selection process, we observe a high approval rating for quotas and that they increase wage and effort levels. Our results suggest that it is important to evaluate the existence and nature of disadvantage in the specific labor market before implementing gender quotas.

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Lying about Luck versus Lying about Performance

Abstract: I compare lying behavior in a real-effort task in which participants have control over outcomes and a task in which outcomes are determined by pure luck. Participants lie significantly more in the random-draw task than in the real-effort task, leading to the conclusion lying about luck is intrinsically less costly than lying about performance.

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Courts' Decisions, Cooperative Investments, and Incomplete Contracts

Abstract: Buyers are often concerned about the adequateness of the design of the goods they procure. To reduce the probability of a design failure, buyers may try to motivate the sellers to make relationship-specific investments. In this paper I study how courts’ decisions affect sellers’ cooperative investment and buyers’ specification of the good. In assigning liability for a defective design, in some countries courts examine how much real authority the seller had in performing the work, instead of considering how formal authority was contractually allocated between the parties. I show that this approach induces the sellers to invest, albeit suboptimally, but leads the buyers to inefficiently under-specify the design of the good. I find that this approach can also make it harder to sustain optimal relational contracting, leading to the conclusion that it cannot be justified on efficiency grounds.

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Revenues and expenditures of autonomous-connected-electric and shared vehicles

Authors: Martin Adler (VU Amsterdam), Stefanie Peer (WU Vienna), Tanja Sinozic (ITA, Vienna)

Abstract: This paper aims at providing an overview of the public finance implications of autonomous-connected-electric and shared vehicles (ACES). Fuel and vehicle taxation currently generate 5-10% of federal and up to 30% of local tax revenue in OECD countries. The pending introduction of ACES is expected to have significant impacts on (among others) fuel consumption, travel demand, and car ownership structures, infrastructure requirements, and as a consequence also on fiscal revenues and expenditures. We argue that the increased demand for mobility due to the availability of affordable ACES will render the introduction of targeted taxes in line with ‘user pays’ and ‘polluter pays’ principles necessary, and also feasible, through the digitalization of mobility systems and other innovations such as ubiquitous GPS tracking of vehicles. Moreover, we emphasize the (changing) relevance of different governance layers: with targeted taxation schemes and declining federal tax revenues from fuel, registration and circulation taxes, local governance entities are expected to increase in relevance. 

Commitment to Pay Taxes: A Field Experiment on the Importance of Promise

The ability of a tax authority to successfully collect taxes depends critically on both its relationship with the taxpayers and how strongly these taxpayers are committed to contributing to the common good. We present evidence on a new non-intrusive approach aimed at fostering the commitment to pay taxes. Using a between-subject design in a unique field setting, we experimentally test whether tax compliance can be increased by linking a voluntary promise of timely payment to a reward. We measure the change induced by an additional compliance promise through identifying the pure reward effect. We find that although previously compliant taxpayers are more likely to make a promise, the commitment to do so can improve payment behaviour. This effect, however, is strongly dependent on the type of reward to which the promise is linked. Compliance only increases when the reward is non-financial. No compliance effect is observed if cash is offered in return for promise fulfillment.

Link to paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2887289

The Winding Roads of Union Revitalization: the Old and New Challenges to Trade Unionism in Poland

(Coffee and cake will be available from 13:45 with the seminar starting promptly at 14:00)

Abstract: In the context of ongoing discussion on the changing nature of union power resources, this presentation will discuss selected trade union strategies adopted in Poland in the last decade with an aim of increasing their associational and (to the extent it was possible) structural power resources and, by these means, to reinforce their positions as the actors of industrial relations. The reference point for the lecture will be selected observations derived from the EC project PRECARIR and NCN-DFG project PREWORK both tackling the issue of the growth of precarious work in Poland from the perspective of workers and unionists themselves. The lecture will start from an overview of trade union situation in Poland in the context of: (a) the political-economic regime and its evolution after 1989 and, in particular, in the last decade, against the comparative background of selected other Central and Eastern European countries; (b) the labour market changes, in particular the spectacular rise of temporary Labour Code and non-Labour Code contracts; (c) the changes of  workers’ attitudes towards trade unions as documented by existing surveys and authors’ own research. In the main part of the lecture, I will discuss selected innovative union practices in Poland, including trade union organizing of precarious employees, mass media campaigns, street protest  (worker-citizens) actions and  making use of political instruments to better regulate employment conditions of precarious workers. Again, selected examples from other CEE countries will be given as the context for the discussion of the Polish case. In concluding discussion, I will attempt to assess intended and unintended outcomes of union practices with regards to the collective situation of workers, the position of trade unions and the political impact of union strategies in the country.

https://scholar.google.com/citations?user=SEK3hv4AAAAJ&hl=en

Extractive Institutions: A Little Goes a Long Way. The Soviet Occupation of Germany versus Austria

(Coffee and cake will be available from 12:45 with the seminar starting promptly at 13:00)

Abstract: As a consequence of World War II, Austria was divided into four different occupation zones for 10 years. Before tight travel restrictions came into place, about 11 percent of the population residing in the Soviet zone moved across the demarcation line. We exploit this large internal migration shock to further our understanding of why economic activity is distributed unevenly across space. Our analysis shows that the distorted population distribution across locations has fully persisted until today (60 years after the demarcation line become obsolete). An analysis of more direct measures of economic activity shows an even higher concentration in the former non-Soviet zone. This gap in economic activity is growing over time, mainly due to commuting streams out of the former Soviet zone. This shows that a transitory shock is capable of shifting an economy to a new spatial equilibrium, which provides strong evidence for the importance of increasing returns to scale in explaining the spatial distribution of economic activity.

Link to paper: https://econpapers.repec.org/paper/innwpaper/2016-23.htm

Hierarchies and honesty

Every organization rests on hierarchical structures. In organizations hierarchies are essential to structure and delegate which agent is responsible for which kind of task, but also which agent in the organization is required to report to other members of the organization. In the present study, we experimentally study reporting behavior in three-person coordination games. Subjects report the outcome of a private die-roll to their group. If all three reports are identical, payoffs are realized. We vary the reporting hierarchies, i.e., whether all subjects report simultaneously, as in flat hierarchies, or sequentially, as in steep hierarchies. We observe the highest levels of dishonest overreporting in flat reporting hierarchies. Our results show that honest leaders in steep hierarchies can induce honest follower behavior. In additional treatments, we investigate different motives for leaders to behave honest. Taken together, our results highlight the critical role of reporting hierarchies and leadership in shaping honesty in organizations. 

Contract enforcement and trustworthiness across ethnic groups: Experimental evidence from Northern Afghanistan

We study how the availability and use of an institution a financial sanction affects trust, trustworthiness, and moral intentions towards co-ethnics and non-co-ethnics using an economic experiment run with 420 adult males from peri-urban areas in Afghanistan. In contrast to previous studies on the behavioral effects of financial incentives, our subjects have little experience with formal institutions. We use a trust game with a requested back-transfer in which the investor can choose to impose a financial sanction for non-compliance. The sanction is costly to the trustee but cost-less to the investor. While sanctioning increases back-transfers in cross-ethnic pairs, it does not in co-ethnic pairs. Our results suggest that financial sanctions may crowd out moral incentives more strongly among one's own group, but have a much smaller behavioral effect when applied to individuals from a different ethnic group. The results have important implications for understanding how formal institutions affect cooperation in ethnically heterogeneous settings.

Dispute resolution or escalation? The strategic gaming of feedback withdrawal options in online markets

Many online markets encourage traders to make good after an unsatisfactory transaction by offering the opportunity to withdraw negative reputational feedback in a dispute resolution phase. Motivated by field evidence and guided by theoretical considerations, we use laboratory markets with two-sided moral hazard to show that this option, contrary to the intended purpose, produces an escalation of dispute. The mutual feedback withdrawal option creates an incentive to leave negative feedback, independent of the opponent’s behavior, to improve one’s bargaining position in the dispute resolution phase. This leads to distorted reputation information and less trust and trustworthiness in the trading phase. Buyers who refuse to give feedback strategically, even when it comes at a personal cost, mitigate the detrimental impact. It is also mitigated in markets with one-sided moral hazard and a unilateral feedback withdrawal option. 

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Road congestion and public transit

Road congestion and travel delays are a major obstacle to efficient transportation. We estimate the marginal external time cost of motor vehicle travel as well as the public-transit induced reduction in motor vehicle congestion for the city of Rome. We estimate the marginal external cost of car flow introducing an approach which allows for endogeneity and other statistical issues caused by reverse causality –.i.e. a situation where an increase in travel time results in a decrease in transport flow, a phenomenon sometimes labelled as hypercongestion, We make use of a quasi-experimental approach employing public transit strikes to account for endogeneity issues. The motor vehicle’s marginal external time cost is 4.1 minutes per kilometer during peak hours, which is substantial as it is about four times its marginal private time cost. By supplying public transit, motor vehicles’ travel time is reduced by 0.14 minutes per kilometer during peak hours. The external benefits of public transit justify current subsidy levels to public transit and suggest that even larger subsidies would be welfare improving. Large welfare gains could be achieved by bus-lanes and road pricing that would decrease congestion and increase public transit use.

Stock Market Contagion in Central and Eastern Europe: Unexpected Volatility and Extreme Co-exceedance

The presentation shows recent evidence about the existence and size of contagion from the U.S. stock market to six Central and Eastern European stock markets. A novel approach to the measurement of contagion is presented, that examines how volatility shocks in the U.S. stock market impact emerging stock markets in Europe. We will discuss whether stock markets in Europe are sensitive to the occurrence of un-expected negative events in the U.S., i.e. whether events in the U.S. are contagious. Finally, some implications are discussed, particularly to portfolio diversification opportunities.

Empirical approaches to the modelling of stock market networks

The talk focuses on the results of modeling stock market networks.  In the first part of the talk, general principles of network construction are introduced and several common widely used graph-theoretic algorithms for suitable subgraph selection, such as minimum spanning trees and planar maximally filtered graphs are confronted with their economic  rationale. Next, several econometric approaches to the construction of correlation based networks are presented, including DCC-MVGARCH and Granger causality. Finally, in its empirical part, the talk presents selected results on various approaches to the modelling of specific stock market networks.

Linguistic distance, networks and the regional location decisions of migrants to the EU

This paper analyzes the interaction between migrant networks and linguistic distance in the location decisions of migrants to the European Union at the regional level. We find that networks have a positive effect on location decisions while the effect of linguistic distance is, as expected, negative. We also find a positive interaction effect between the two variables: networks are thus more important the larger the linguistic distance between the home and host countries, and the negative effect of linguistic distance is smaller the larger the network size.

Rail passenger market opening: The British experience

European policy has focused in recent decades on liberalising Europe’s railway systems with a view to promoting competition and enhancing the performance of railways. Whilst legislation on passenger competition has moved more slowly than in freight, the 4^th Railway package envisages competition becoming much more extensive in the passenger sector in the coming years; covering both commercial services and public service contracts. In this presentation we ask what lessons can be learnt from Britain which has implemented the most ambitious reforms of the passenger rail sector, with all services (commercial and public service) being subject to competitive tendering – supplemented to a small degree (currently) by open access competition on long distance routes. Britain has taken a different approach to those countries within Europe that have opened their passenger markets to competition - most notably Sweden and Germany. These differences are important because they enable us to study the impact of competitive tendering and open access under a different set of circumstances to the wider European experience; and thus to draw a richer set of lessons about what works and in what circumstances. Britain also has a twenty year period over which the evidence can be documented and assessed, during which time the model has been reviewed and changed several times. Even the current position does not seem to be the final equilibrium, and the paper therefore also asks what directions future policy should take in Britain and what the lessons may be for other countries.

Bus and Rail Privatisation - British experience

Britain largely privatised its bus network following the Transport Act of 1986 and its rail network over the period 1994-7, but in very different ways. Whilst the bus network was completely deregulated, leaving commercial operators free to compete on the road and to choose their own routes, timetables and fares, rail passenger services were largely franchised, with controls on fares, frequences and the degree of on track competition. The experience of these two alternative approaches to privatisation will be reviewed and conclusions drawn on their effectiveness.

Cities and Economic Growth: Lessons from U.S. Industrialization, 1880-1930

Abstract: We investigate the role of industrial structure in labor productivity growth in U.S. cities between 1880 and 1930.  We find that increases in specialization were associated with faster productivity growth but that diversity only had positive effects on productivity performance in large cities.  We interpret our results as demonstrating the importance of Marshallian externalities. Industrial specialization increased considerably in U.S. cities at this time, partly as a result of improved transportation, and we estimate that this brought significant gains in labor productivity.  The American experience suggests that wider economic benefits of transport infrastructure investment in developing countries could be important.

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Psychological Costs of Currency Transition: Evidence from Euro Adoption

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Abstract: We analyze individual levels of life satisfaction in Slovakia, after that country adopted the Euro, following a spirited debate. We gauge the psychological cost of transition to the new currency by comparing individual life satisfaction, not only before and after Euro introduction, but by comparison with individuals with similar characteristics in the neighboring Czech Republic, which did not adopt the Euro. Both countries were economically and politically integrated for decades, and share similar macroeconomic indicators just before the currency change in Slovakia. We find evidence of substantial psychological costs of currency transition, which are especially important for the old, the unemployed, those with low education and in households with children. We believe these results suggest the importance of information and enlightened debate before a sweeping change in economic context such as the adoption of a new currency.

The deforestation Kuznets curve: Evidence from satellite data

We use satellite data on forest cover along national borders in order to study the determinants of deforestation differences across countries. We combine the forest cover information with data on homogeneous response units, which allow us to control for cross-country geoclimatic differences when assessing the drivers of deforestation. Income per capita appears to be the most robust determinant of differences in cross-border forest cover and our results present evidence of the existence of decreasing effects of income on forest cover as economic development progresses. 

Google searches and stock returns

We investigate whether Google searches can be used to forecast stock returns. We find that short-term (daily and weekly) increase in search activity leads to negative excess stock returns with subsequent reversal, whereas long-term (quarterly) increase in search activity leads to long-lasting positive returns.  The connection between searches and subsequent returns is much stronger for smaller companies. Finally, we examine a trading strategy based on our findings and notice that our strategy outperforms a passive strategy even after taking transaction costs into account.

Explaining the labor market gaps between immigrants and natives in the OECD

Andreas Bergh at IDEAS

In most OECD-countries, immigrants have lower employment and higher unemployment than natives. On average, the gap in labor market outcomes is larger in countries with more immigrant friendly attitudes. To explain this pattern, this paper developes a theory based on labor market institutions and welfare state institutions. In countries where labor market institutions give native workers more influence, and where the social safety net is more generous, native workers face less direct wage competition from immigration. As a result, the general population is more immigrant friendly and income inequality is dampened, but empoyment among immigrants suffer thwarting the potential economic benefits from immigration (and in some cases immigration becomes a financial burden for the public sector). The theory is confirmed using data for 21–28 OECD countries using OLS-regressions and Bayesian model averaging over all 512 theoretically possible model specifications to cope with the model selection problem which is particularly severe in small samples where the number of suggested explanations is high. The unemployment gap is bigger in countries where collective bargaining agreements cover a larger share of the labor market, and the employment gap is bigger in countries with more generous social safety nets. The education of immigrants and migrant integration policies have no explanatory value. Finally, the prediction that countries with smaller labor market gaps have higher income inequality is also supported by the data.

Indeterminacy, Misspecification and Forecastability: Good Luck in Bad Policy?

Marco Maria Sorge at IDEAS

Abstract: A recent debate in the forecasting literature revolves around the inability of macroeconometric models to improve on simple univariate predictors, since the onset of the so called Great Moderation. This paper explores the consequences of equilibrium indeterminacy for quantitative forecasting through standard reduced form forecast models. Exploiting U.S. data on both the Great Moderation and the preceding era, we first present evidence that (i) higher (absolute) forecastability obtains in the former rather than the latter period for all models considered, and that (ii) the decline in volatility and persistence captured by a finite-order VAR system across the two samples need not be associated with inferior (absolute or relative) predictive accuracy. Then, using a small-scale New Keynesian monetary DSGE model as laboratory, we generate artificial datasets under either equilibrium regime and investigate numerically whether (relative) forecastability is improved in the presence of indeterminacy. It is argued that forecasting under indeterminacy with e.g. unrestricted VAR models entails misspecification issues that are generally more severe than those one typically faces under determinacy. Irrespective of the occurrence of non-fundamental (sunspot) noise, for certain values of the arbitrary parameters governing solution multiplicity, the pseudo out-of-sample VAR-based forecasts of inflation and output growth can outperform simple univariate predictors. For other values of these parameters, by contrast, the opposite occurs. In general, it is not possible to establish a one-to-one relationship between indeterminacy and superior forecastability, even when sunspot shocks play no role in generating the data. Overall, our analysis points towards a 'good luck in bad policy' explanation of the (relative) higher forecastability of macroeconometric models prior to the Great Moderation period.

Housing regimes in post socialist countries

József Hegedüs at ResearchGate

Abstract:  Presentation adds to the research on the role of the housing sector in transition countries. The East European Housing Model (Hegedüs and Tosics, 1996) summarizes the main characteristics and elements of the housing system in the centrally planned economy, which was a social-economic system with high job security, low – highly subsidized – housing costs, and small income differences. The crucial question is how East European Housing Model has changed after the transition. Is it possible to define a post-socialist housing model or is the emerging new housing model similar to one of existing housing models in the developed world?

Career Breaks after Childbirth and the Role of Parental Leave Policies

Abstract: The Czech Republic is a country with a strong attachment of women to the labor market but one of the longest paid parental leave durations. Using a difference-in-differences methodology, we study the effect of two reforms of duration of parental allowance on the labor market status of mothers 2-7 years after childbirth. While the 1995 reform prolonged parental allowance from 3 to 4 years and the 2008 reform introduced a flexible schedule that allowed shortening of leave from 4 to 2 or 3 years, both reforms kept the job protection period at 3 years, allowing us to study the impact of monetary incentives setting aside changes in job security. We find that the 1995 reform prolonged the parental leave of at least one third of mothers and shifted the post-leave unemployment spell to the time when a child turns 4, while the 2008 reform achieved a reversal of the impact of the 1995 reform, but only to a lesser extent.

The Right Look: Conservative Politicians Look Better and Their Voters Reward It

Abstract: Previous research has established that good-looking political candidates win more votes. We extend this line of research by examining differences between parties on the left and on the right of the political spectrum. Our study combines data on personal votes in real elections with a web survey in which 2,513 non-Finnish respondents evaluated the facial appearance of 1,357 Finnish political candidates. We find that political candidates on the right are better looking in both municipal and parliamentary elections and that they have a larger beauty premium in municipal, but not in parliamentary, elections. As municipal candidates are relatively unknown, the beauty-premium gap indicates that voters - especially those to the right - use beauty as a cue for candidate ideology or quality in the municipal elections.

Information and Price Dispersion: Evidence from Retail Gasoline

Abstract: We examine the relationship between information and price dispersion in the retail gasoline market. We first show that the clearinghouse models in the spirit of Stahl (1989) generate an inverted-U relationship between information and price dispersion. Past empirical studies of this relationship have relied on (intertemporal) variation in internet usage and adoption to measure the number of consumers that have access to the clearinghouse. We construct a new measure of information based commuter data from Austria. Regular commuters can freely sample gasoline prices on their commuting route, giving us spatial variation in the share of informed consumers. We use detailed information on gas station level price to construct various measures of price dispersion. Our empirical estimates of the relationship are in line with the theoretical predictions.

Does the Czech tax and benefit system contribute to one of the Europe's lowest levels of relative poverty and inequality?

Abstract: The Czech population is one of the most equal societies in terms of households' disposable incomes and has the lowest level of relative poverty in Europe. We ask if the Czech tax and benefit system helps to achieve this low inequality and poverty. We test this hypothesis with the best available data on households from the Czech Statistical Office - the Survey of Income and Living Conditions (SILC) for direct taxes and social benefits combined with the Household Budget Survey (HBS) for indirect taxes. We thus combine detailed data on household's income and expenditure for the first time. We show that market income, especially due to the inclusion of pensions, is quite egalitarian. We find that the narrowly defined tax-benefit system (direct taxes and social benefits) actually does not change the poverty rate, while the indirect taxes increase it. The Czech tax and benefit system thus does not seem to contribute to the one of the world's lowest levels of relative poverty and inequality. We further provide the first estimates of the redistributive effectiveness of a number of social and tax policies. Among other findings, we show that aid in material need benefits are the most effective in decreasing poverty gap and income inequality, while the child allowance is the largest benefit in terms of coverage of poor individuals.

The Price of Luck

Abstract: We report the results of a simple statistical choice task based on independent and identically distributed (iid) variables. In our experiment subjects were asked to bet on the future performance of players in a coin toss task. Subjects exhibit a strong, irrational bias towards placing their bets on players with a good guessing history in the coin toss task. We also show that the result cannot be attributed to confusion induced by the BDM mechanism. Subjects' elicited preferences are compatible with prescriptive luck beliefs. That is, the idea that luck is a somehow deterministic and personal attribute.

Úvod do teorie zajištění­ a ocenění derivátů, aneb co nám Blackův-Scholesův model napovídá o zajišťovací­m riziku způsobeném cenovými skoky

Abstract: The talk will explore quadratic hedging of derivatives in a complete and incomplete financial market. Starting with a discrete-time setting we will provide several numerical illustrations one of which leads to the famous Black-Scholes formula in the continuous-time limit . The talk is based on joint work with Jan Kallsen and Stephan Denkl of CAU Kiel.

Transaction Costs and Inertia in Charitable Giving

Abstract: This paper uses a laboratory experiment to analyse the effect that transactions costs and inertia have on charitable giving. We conjecture that transaction costs are likely to have a greater effect on donations if the solicitations are received when potential donors are busy (when the opportunity cost of time is high) as opposed to when they have time on their hands to donate (when the opportunity cost of time is low). If donations do not have to be made immediately, inertia could also become a factor as people might intend to give, but then postpone making the payment until they have more time, and having postponed making the donation once, keep doing so until the opportunity to donate has passed. We find that introducing a transaction cost to a standard Dictator Game with charity as a recipient, and manipulating whether the donation can be made when we know subjects have time on their hands, reduces donations providing evidence of a transaction cost effect. Some weak evidence is found that giving people more time to donate reduces donations, which is consistent with an inertia effect.

Does Financing of Public Goods by Lotteries Crowd Out Pro-Social Incentives?

Abstract: We investigate the extent to which lottery financing of public goods crowds out voluntary contributions driven by social preferences. On average, we find presence of such crowding out effect. We then classify subjects by the strength of their conditional cooperation and find that the extent of crowding out is increasing with the the level of conditional cooperation, especially under a higher lottery prize. We interpret this finding as crowding-out of voluntary contributions driven by reciprocity.

Train Commuters' Scheduling Preferences: Evidence From a Large-Scale Reward Experiment

Abstract: We investigate the trip scheduling behavior of Dutch train commuters, using data collected during a large-scale reward experiment with more than 1000 participants. Railway subscription owners were invited to join an experiment where they could earn (distance-based) monetary rewards if they traveled outside the (morning and evening) peak hours. A dedicated smartphone app was used to observe the trip timing and routing behavior of the participants. Compared to the pre-measurement, the share of peak trips decreased by ca. 20% during the reward period, and by 9% during the post-measurement. We estimate departure time choice models, drawing from multiple data sources to compute the attribute values for all choice alternatives. We are able to derive plausible revealed preference (RP) values for the participants' willingness-to-pay for reducing travel time, schedule delays, the number of transfers and crowdedness, and for increasing reliability.

Corruption and Manipulation of Public Procurement: Evidence from the Introduction of Discretionary Thresholds

Abstract: We present a methodology for detecting manipulation of public procurement and evidence showing how policies that create discontinuous incentives to avoid transparent competition lead to manipulation and active waste by procurement officials. Our methodology exploits a natural experiment in which new discretionary thresholds in the anticipated value of procurements were established. Manipulations reveal through bunching of procurements below the new thresholds and affect 11% of relevant contracts. Manipulations lead to increases in the chance of allocating contracts to anonymously owned firms often related to corrupt behavior, increases in the final prices of procurements and preferential prices for anonymous contractors.