Laura Alfaro, Nicholas Bloom, Paola Conconi, Harald Fadinger, Patrick Legros, Andrew Newman, Raffaella Sadun, John Van Reenen
Abstract We jointly study firm boundaries and the allocation of decision rights within them by confronting an incomplete-contracts model with data on vertical integration and delegation for thousands of firms around the world. Integration has an option value: it confers authority to delegate or centralize decision rights, depending on who can best solve problems that arise in the course of an uncertain production process. In line with the model’s predictions, we find that firms are more likely to integrate suppliers that produce more valuable inputs and operate in industries with more dispersed productivity, and that firms delegate more decisions to integrated suppliers that produce more valuable inputs and operate in more productive industries.
{"title":"Come Together: Firm Boundaries and Delegation","authors":"Laura Alfaro, Nicholas Bloom, Paola Conconi, Harald Fadinger, Patrick Legros, Andrew Newman, Raffaella Sadun, John Van Reenen","doi":"10.1093/jeea/jvad027","DOIUrl":"https://doi.org/10.1093/jeea/jvad027","url":null,"abstract":"Abstract We jointly study firm boundaries and the allocation of decision rights within them by confronting an incomplete-contracts model with data on vertical integration and delegation for thousands of firms around the world. Integration has an option value: it confers authority to delegate or centralize decision rights, depending on who can best solve problems that arise in the course of an uncertain production process. In line with the model’s predictions, we find that firms are more likely to integrate suppliers that produce more valuable inputs and operate in industries with more dispersed productivity, and that firms delegate more decisions to integrated suppliers that produce more valuable inputs and operate in more productive industries.","PeriodicalId":48297,"journal":{"name":"Journal of the European Economic Association","volume":"31 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-05-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135473941","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This article uses China’s family planning policies to quantify and explain spillovers in fertility decisions. We test whether ethnic minorities decreased their fertility in response to the policies, although only the majority ethnic group, the Han Chinese, were subject to birth quotas. We exploit the policy rollout and variation in pre-policy age-specific fertility levels to construct a measure of the negative shock to Han fertility. Combining this measure with variation in the local share of Han, we estimate that a woman gives birth to 0.63 fewer children if the average completed fertility among her peers is exogenously reduced by one child. The fertility response of minorities is driven by cultural proximity with the Han and by higher educational investments, suggesting that spillovers operate through both social and economic channels. These results provide evidence that social multipliers can accelerate fertility transitions.
{"title":"Spillovers in Childbearing Decisions and Fertility Transitions: Evidence from China","authors":"Pauline Rossi, Yun Xiao","doi":"10.1093/jeea/jvad025","DOIUrl":"https://doi.org/10.1093/jeea/jvad025","url":null,"abstract":"Abstract This article uses China’s family planning policies to quantify and explain spillovers in fertility decisions. We test whether ethnic minorities decreased their fertility in response to the policies, although only the majority ethnic group, the Han Chinese, were subject to birth quotas. We exploit the policy rollout and variation in pre-policy age-specific fertility levels to construct a measure of the negative shock to Han fertility. Combining this measure with variation in the local share of Han, we estimate that a woman gives birth to 0.63 fewer children if the average completed fertility among her peers is exogenously reduced by one child. The fertility response of minorities is driven by cultural proximity with the Han and by higher educational investments, suggesting that spillovers operate through both social and economic channels. These results provide evidence that social multipliers can accelerate fertility transitions.","PeriodicalId":48297,"journal":{"name":"Journal of the European Economic Association","volume":"222 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-04-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135802662","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract We propose a new measure of deviations from expected utility theory. For any positive number e, we give a characterization of the datasets with a rationalization that is within e (in beliefs, utility, or perceived prices) of expected utility (EU) theory, under the assumption of risk aversion. The number e can then be used as a measure of how far the data is to EU theory. We apply our methodology to data from three large-scale experiments. Many subjects in these experiments are consistent with utility maximization, but not with EU maximization. Our measure of distance to expected utility is correlated with the subjects’ demographic characteristics.
{"title":"Approximate Expected Utility Rationalization","authors":"Federico Echenique, Taisuke Imai, Kota Saito","doi":"10.1093/jeea/jvad028","DOIUrl":"https://doi.org/10.1093/jeea/jvad028","url":null,"abstract":"Abstract We propose a new measure of deviations from expected utility theory. For any positive number e, we give a characterization of the datasets with a rationalization that is within e (in beliefs, utility, or perceived prices) of expected utility (EU) theory, under the assumption of risk aversion. The number e can then be used as a measure of how far the data is to EU theory. We apply our methodology to data from three large-scale experiments. Many subjects in these experiments are consistent with utility maximization, but not with EU maximization. Our measure of distance to expected utility is correlated with the subjects’ demographic characteristics.","PeriodicalId":48297,"journal":{"name":"Journal of the European Economic Association","volume":"241 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-04-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135802664","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This paper studies the consequences of asset bubbles for economies that are vulnerable to persistent stagnation. Stagnation is the result of a shortage of assets that creates an oversupply of savings and puts downward pressure on the level of interest rates. Once the zero lower bound on the nominal interest rate binds, the real rate cannot adjust further downward, forcing output to fall instead. In such context, bubbles are useful as they expand the supply of assets, absorb excess savings, and raise the natural interest rate—the real rate that is compatible with full employment—crowding in consumption and raising welfare. However, a risky bubble that can collapse with positive probability is smaller and less effective in doing so than a safe bubble. In this case, fiscal policy in the form of promised bailout transfers in case of a bubble collapse, can support an existing bubble and improve its size.
{"title":"Bubbles and Stagnation","authors":"Inês Xavier","doi":"10.1093/jeea/jvad024","DOIUrl":"https://doi.org/10.1093/jeea/jvad024","url":null,"abstract":"Abstract This paper studies the consequences of asset bubbles for economies that are vulnerable to persistent stagnation. Stagnation is the result of a shortage of assets that creates an oversupply of savings and puts downward pressure on the level of interest rates. Once the zero lower bound on the nominal interest rate binds, the real rate cannot adjust further downward, forcing output to fall instead. In such context, bubbles are useful as they expand the supply of assets, absorb excess savings, and raise the natural interest rate—the real rate that is compatible with full employment—crowding in consumption and raising welfare. However, a risky bubble that can collapse with positive probability is smaller and less effective in doing so than a safe bubble. In this case, fiscal policy in the form of promised bailout transfers in case of a bubble collapse, can support an existing bubble and improve its size.","PeriodicalId":48297,"journal":{"name":"Journal of the European Economic Association","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-04-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135932609","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Julián Díaz-Saavedra, R. Marimon, João Brogueira de Sousa
Facing an ageing population and historical trends of low employment rates, pay-as-you-go (PAYG) pension systems, currently in place in several European countries, imply very large economic and welfare costs in the coming decades. In an overlapping generations economy with incomplete insurance markets and frictional labour markets, an employment fund, which can be used while unemployed or retired, can enhance production efficiency and social welfare. With an appropriate design, the sustainable Backpack employment fund (BP) can greatly outperform (measured by average social welfare in the economy) existing pay-as-you go systems and also Pareto dominate a full privatization of the pension system, as well as a standard fully funded defined contribution pension system. We show this in a calibrated model of the Spanish economy, by comparing the effect of its ageing transition under these different pension systems and by showing how a front-loaded transition, from the PAYG to the BP system can be Pareto improving, while minimizing the cost of the reform.
{"title":"A Worker’s Backpack as an Alternative to Payg Pension Systems","authors":"Julián Díaz-Saavedra, R. Marimon, João Brogueira de Sousa","doi":"10.1093/jeea/jvad021","DOIUrl":"https://doi.org/10.1093/jeea/jvad021","url":null,"abstract":"\u0000 Facing an ageing population and historical trends of low employment rates, pay-as-you-go (PAYG) pension systems, currently in place in several European countries, imply very large economic and welfare costs in the coming decades. In an overlapping generations economy with incomplete insurance markets and frictional labour markets, an employment fund, which can be used while unemployed or retired, can enhance production efficiency and social welfare. With an appropriate design, the sustainable Backpack employment fund (BP) can greatly outperform (measured by average social welfare in the economy) existing pay-as-you go systems and also Pareto dominate a full privatization of the pension system, as well as a standard fully funded defined contribution pension system. We show this in a calibrated model of the Spanish economy, by comparing the effect of its ageing transition under these different pension systems and by showing how a front-loaded transition, from the PAYG to the BP system can be Pareto improving, while minimizing the cost of the reform.","PeriodicalId":48297,"journal":{"name":"Journal of the European Economic Association","volume":"1 1","pages":""},"PeriodicalIF":3.6,"publicationDate":"2023-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41360545","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract We consider the problem of a leader who can assign rewards for citizens for different anti-regime actions. Citizens face a coordination problem in which each citizen has a private, endogenous degree of optimism about the likelihood of regime change. Because more optimistic citizens are easier to motivate, the choice of optimal rewards entails optimal screening. This leads to a distribution of anti-regime actions. A key result is the emergence of a vanguard, consisting of citizens who engage in the endogenous, maximum level of action. Other citizens participate at varying degrees, with less optimistic citizens contributing less. We explore how the regime’s strength or the maximum reward available to the leader influences the distribution of actions. Moreover, we show that more heterogeneity (e.g., higher inequality) among potential revolutionaries reduces the likelihood of regime change. Our methodological contribution is that we deliver a sharp and novel marriage of screening and global games.
{"title":"Inspiring Regime Change","authors":"Stephen Morris, Mehdi Shadmehr","doi":"10.1093/jeea/jvad023","DOIUrl":"https://doi.org/10.1093/jeea/jvad023","url":null,"abstract":"Abstract We consider the problem of a leader who can assign rewards for citizens for different anti-regime actions. Citizens face a coordination problem in which each citizen has a private, endogenous degree of optimism about the likelihood of regime change. Because more optimistic citizens are easier to motivate, the choice of optimal rewards entails optimal screening. This leads to a distribution of anti-regime actions. A key result is the emergence of a vanguard, consisting of citizens who engage in the endogenous, maximum level of action. Other citizens participate at varying degrees, with less optimistic citizens contributing less. We explore how the regime’s strength or the maximum reward available to the leader influences the distribution of actions. Moreover, we show that more heterogeneity (e.g., higher inequality) among potential revolutionaries reduces the likelihood of regime change. Our methodological contribution is that we deliver a sharp and novel marriage of screening and global games.","PeriodicalId":48297,"journal":{"name":"Journal of the European Economic Association","volume":"72 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-03-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135733024","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This study proposes a real-time estimate of inattention, based on micro-level data. I show that a simple specification that estimates the persistence of a forecaster's deviation from the mean provides a direct estimate of parameters of information frictions according to prominent models of expectations. The new estimate can also be interpreted as a hybrid measure of both information frictions and behavioral frictions. Using the new specification, I revise several key findings documented in the previous literature. I find higher levels of inattention and document new forms of variations over time and across variables, horizons, individuals, and types of agents. I also report new results from long-run forecasts and document an unprecedented response to COVID-19.
{"title":"Tracking Inattention","authors":"Nathan Goldstein","doi":"10.1093/jeea/jvad022","DOIUrl":"https://doi.org/10.1093/jeea/jvad022","url":null,"abstract":"Abstract This study proposes a real-time estimate of inattention, based on micro-level data. I show that a simple specification that estimates the persistence of a forecaster's deviation from the mean provides a direct estimate of parameters of information frictions according to prominent models of expectations. The new estimate can also be interpreted as a hybrid measure of both information frictions and behavioral frictions. Using the new specification, I revise several key findings documented in the previous literature. I find higher levels of inattention and document new forms of variations over time and across variables, horizons, individuals, and types of agents. I also report new results from long-run forecasts and document an unprecedented response to COVID-19.","PeriodicalId":48297,"journal":{"name":"Journal of the European Economic Association","volume":"29 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-03-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136166875","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
James Cloyne, Clodomiro Ferreira, Maren Froemel, Paolo Surico
Abstract In response to a change in interest rates, younger firms not paying dividends adjust both their capital expenditure and borrowing significantly more than older firms paying dividends. The reason is that the debt of younger non-dividend payers is far more sensitive to fluctuations in collateral values, which are significantly affected by monetary policy. The results are robust to a wide range of possible confounding factors. Other channels, including movements in interest payments, product demand, profitability, and mark-ups, are also significant but seem unlikely to explain the heterogeneity in the response of capital expenditure. Our findings suggest that these types of financial frictions play an important role in the transmission of monetary policy.
{"title":"Monetary Policy, Corporate Finance, and Investment","authors":"James Cloyne, Clodomiro Ferreira, Maren Froemel, Paolo Surico","doi":"10.1093/jeea/jvad009","DOIUrl":"https://doi.org/10.1093/jeea/jvad009","url":null,"abstract":"Abstract In response to a change in interest rates, younger firms not paying dividends adjust both their capital expenditure and borrowing significantly more than older firms paying dividends. The reason is that the debt of younger non-dividend payers is far more sensitive to fluctuations in collateral values, which are significantly affected by monetary policy. The results are robust to a wide range of possible confounding factors. Other channels, including movements in interest payments, product demand, profitability, and mark-ups, are also significant but seem unlikely to explain the heterogeneity in the response of capital expenditure. Our findings suggest that these types of financial frictions play an important role in the transmission of monetary policy.","PeriodicalId":48297,"journal":{"name":"Journal of the European Economic Association","volume":"44 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-03-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135295060","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This paper links Native American racial self-identification with the rise in tribal gaming across the United States. We find that state policy changes allowing tribes to open casinos are associated with an increase in the probability that individuals with American Indian ancestors will self-identify as Native American and a decrease in the probability that individuals with no American Indian ancestry will self-identify as Native American. Moreover, we find that the magnitudes of the impacts are increasing in the strength of American Indian ancestral ties. Similar results hold when causal identification comes from American Indian casino openings across states over time and suggestive evidence shows stronger impacts if casinos are likely to pay per capita dividend payments to their members. These results are consistent with a conceptual framework in which we tie racial identification to economic motivations as well as social stigma associated with affiliating with a racial group for those without documented ancestral ties. Our results underscore the importance of economic incentives and social factors underlying the individual choice of racial identity.
{"title":"American Indian Casinos and Native American Self-Identification","authors":"Francisca M Antman, Brian Duncan","doi":"10.1093/jeea/jvad018","DOIUrl":"https://doi.org/10.1093/jeea/jvad018","url":null,"abstract":"Abstract This paper links Native American racial self-identification with the rise in tribal gaming across the United States. We find that state policy changes allowing tribes to open casinos are associated with an increase in the probability that individuals with American Indian ancestors will self-identify as Native American and a decrease in the probability that individuals with no American Indian ancestry will self-identify as Native American. Moreover, we find that the magnitudes of the impacts are increasing in the strength of American Indian ancestral ties. Similar results hold when causal identification comes from American Indian casino openings across states over time and suggestive evidence shows stronger impacts if casinos are likely to pay per capita dividend payments to their members. These results are consistent with a conceptual framework in which we tie racial identification to economic motivations as well as social stigma associated with affiliating with a racial group for those without documented ancestral ties. Our results underscore the importance of economic incentives and social factors underlying the individual choice of racial identity.","PeriodicalId":48297,"journal":{"name":"Journal of the European Economic Association","volume":"81 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-03-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135439784","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper studies the effects of carbon pricing on inflation dynamics. We construct a sample of carbon taxes implemented in Europe and Canada over three decades and estimate the response of inflation and price components to carbon pricing. Our empirical results suggest that carbon taxes did not significantly increase inflation, with dynamic effects estimated around zero in most specifications. Instead we find support for relative price changes, increasing the cost of energy but leaving the price of other goods and services unaffected. This is consistent with previous findings on the limited aggregate economic costs of carbon taxes. Based on the cross-section of taxes in Europe, we provide suggestive evidence that the response of inflation was especially muted in countries with revenue-neutral carbon taxes and autonomous central banks that can accommodate potential inflationary pressure associated with carbon pricing.
{"title":"Carbon Taxation and Greenflation: Evidence from Europe and Canada","authors":"Maximilian Konradt, Beatrice Weder di Mauro","doi":"10.1093/jeea/jvad020","DOIUrl":"https://doi.org/10.1093/jeea/jvad020","url":null,"abstract":"\u0000 This paper studies the effects of carbon pricing on inflation dynamics. We construct a sample of carbon taxes implemented in Europe and Canada over three decades and estimate the response of inflation and price components to carbon pricing. Our empirical results suggest that carbon taxes did not significantly increase inflation, with dynamic effects estimated around zero in most specifications. Instead we find support for relative price changes, increasing the cost of energy but leaving the price of other goods and services unaffected. This is consistent with previous findings on the limited aggregate economic costs of carbon taxes. Based on the cross-section of taxes in Europe, we provide suggestive evidence that the response of inflation was especially muted in countries with revenue-neutral carbon taxes and autonomous central banks that can accommodate potential inflationary pressure associated with carbon pricing.","PeriodicalId":48297,"journal":{"name":"Journal of the European Economic Association","volume":" ","pages":""},"PeriodicalIF":3.6,"publicationDate":"2023-03-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43216068","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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