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Equilibrium Selection in a Cashless Economy with Transaction Frictions in the Bond Market - Marzo, Massimiliano; Zagaglia, Paolo
The present paper introduces two bonds in a standard New-Keynesian model to study the role of segmentation in bond markets for the determinacy of rational expectations equilibria. We use a strongly-separable utility function to model ‘liquid’ bonds that provide transaction services for the purchase of consumption goods. ‘Illiquid’ bonds, instead, provide the standard services of store of value. We interpret liquid bonds as mimicking short-term instruments, and illiquid bonds to represent long-dated instruments. In this simple setting, the expectation hypothesis holds after log-linearizing the model and after pricing the bonds according to an affine scheme. We assume that monetary policy...
The Minority Game Unpacked: Coordination and Competition in a Team-based Experiment - Devetag, Giovanna; Pancotto, Francesca; Brenner, Thomas
In minority games, players in a group must decide at each round which of two available options to choose, knowing that only subjects who picked the minority option obtain a positive reward. Previous experiments on the minority and similar congestion games have shown that players interacting repeatedly are remarkably able to coordinate efficiently, despite not conforming to Nash equilibrium behavior. We conduct an experiment on a minority-of-three game in which each player is a team composed by three subjects. Each team can freely discuss its strategies in the game and decisions must be made via a majority rule. Team discussions...
Did Growth and Reforms Increase Citizens’ Support for the Transition? - Golinelli, Roberto; Rovelli, Riccardo
How did post-communist transformations affect people’s perceptions of their
economic and political systems? We model a pseudo-panel with 89 country-year
clusters, based on 13 countries observed between 1991 and 2004, to identify the
macro and institutional drivers of the public opinion. Our main findings are: (i) When
the economy is growing, on average people appreciate more extensive reforms;
they dislike unbalanced reforms. (ii) Worsening of income distribution and higher
inflation interact with an increasing share of the private sector in aggravating
nostalgia for the past regime. (iii) Cross-country differences in the attitudes towards
the present and future (both in the economic and political dimensions) are largely
explained by differences...
Informed Principals in the Credit Market when Borrowers and
Lenders Are Heterogeneous - Barigozzi, Francesca; Tedeschi, Piero
Both borrowers and lenders can be socially responsible (SR). Ethical banks commit to financing only ethical projects, which have social profitability but lower expected revenues than standard projects. Instead, no credible commitment exists for SR borrowers. The matching between SR borrowers and ethical banks reduces the frictions caused by moral hazard. However, when the type of the borrowers is not observable, then standard borrowers have incentives to invest in ethical projects pretending to be SR. We show that the separation of borrowers entails costs that are paid by SR entrepreneurs but are relatively low because standard lenders offer an outside...
Paying Positive to Go Negative: Advertisers' Competition and Media Reports - Blasco, Andrea; Pin, Paolo; Sobbrio, Francesco
This paper analyzes a two-sided market for news where advertisers may pay a media outlet to conceal negative information about the quality of their own product (paying positive to avoid negative) and/or to disclose negative information about the quality of their competitors' products (paying positive to go negative). We show that whether or not advertisers have negative consequences on the accuracy of news reports ultimately depends on the extent of correlation among advertisers' products. Specifically, the lower is the correlation among the qualities of the advertisers' products, the (weakly) higher is the accuracy of the media outlet' reports. Moreover, when...
Intellectual Property Rights, Product Complexity, and the Organization of Multinational Firms - Naghavi , Alireza; Spies , Julia; Toubal , Farid
This paper studies how the Intellectual Property Right (IPR) regime in destination countries influences the way multinationals structure the international organization of their production. In particular, we explore how multinationals divide tasks of different complexities across countries with different levels of IPR protection. The analysis studies the decision of firms between procurement from related parties and outsourcing to independents suppliers at the product level. It also breaks down outsourcing into two types by distinguishing whether or not they involve technology sharing between the two parties. We combine data from a French firm-level survey on the mode choice for each transaction...
Intellectual Property Rights, Migration and Diaspora - Naghavi, Alireza; Strozzi, Chiara
In this paper we study theoretically and empirically the role of the interaction between skilled migration and intellectual property rights (IPRs) protection in determining innovation in developing countries (South). We show that although emigration from the South may directly result in the well-known concept of brain drain, it also causes a brain gain effect, the extent of which depends on the level of IPRs protection in the sending country. We argue this to come from a diaspora channel through which the knowledge acquired by emigrants abroad can flow back to the South and enhance the skills of the remaining workers...
Autocracies and Development in a Global Economy: A Tale of Two Elites - Akerman, Anders; Larsson, Anna; Naghavi, Alireza
This paper studies how comparative advantage and the political elites' endowments shape long-run performance in an economy with imperfect political institutions. In a capital-scarce economy, an autocrat catering to the needs of landowners favours openness to trade at an early stage of development, while an autocrat complying with the preferences of capitalists chooses to shelter the economy from trade. The trade regime interacts with economic institutions, and with policies on capital mobility, to govern capital accumulation. A landed autocrat neglects to improve institutions and blocks foreign capital to maximize extractable rents, leading the economy towards stagnation. By contrast, a capitalist...
The Grand Experiment of Communism: Discovering the Trade-off between Equality and Efficiency - Farvaque, Etienne; Mihailov, Alexander; Naghavi, Alireza
This paper aims to explain the rise and fall of communism by exploring the interplay between economic incentives and social preferences transmitted by ideology. We introduce inequality-averse and inefficiency-averse agents and analyze their conflict through the interaction between leaders with economic power and followers with ideological determination. The socioeconomic dynamics of our model generate a pendulum-like switch from markets to a centrally-planned economy abolishing private ownership, and back to restoring market incentives. The grand experiment of communism is thus characterized to have led to the discovery of a trade-off between
equality and efficiency at the scale of alternative economic systems....
Impatience, Anticipatory Feelings and Uncertainty: A Dynamic Experiment on Time Preferences - Casari, Marco; Dragone, Davide
We study intertemporal choices through an experiment that elicits a subject's plan and then tracks its implementation over time. There are two main results. When facing a costly task to be completed under a deadline, two thirds of subjects prefer anticipating it rather than postponing it. Choice reversals are common although present-biased preferences alone cannot explain them. This evidence is compatible with models based on anticipatory feelings and stochastic utility.
Corporate Social Responsibility and Firms Ability to Collude - Lambertini, Luca; Tampieri, Alessandro
We examine a duopoly with polluting production where firms adopt a form of corporate social responsibility (CSR) to define their objective functions. Our analysis focuses on the bearings of CSR on collusion over an infinite horizon, sustained by either grim trigger strategies or optimal punishments. Our results suggest that assigning a weight to consumer surplus has a pro-competitive effect under both full and partial collusion. Conversely, a higher impact of productivity on pollution has an anti-competitive effect under partial collusion, while exerting no effect under full collusion. Under partial collusion, the analysis of the isoquant map of the cartel reveals...
Social Background Effects on School and Job Opportunities - Tampieri, Alessandro
This paper proposes a theory on how students social background affects their school attainment and job opportunities. We study a setup where students differ in ability and social background, and we analyze the interaction between a school and an employer. Students with disadvantaged background are penalized compared to other students: they receive less teaching and/or are less likely to be hired. A surprising result is that policy aiming to subsidize education for disadvantaged students might in fact decrease their job opportunities.
Opt out or Top up? Voluntary Healthcare Insurance and the Public vs. Private Substitution - Fabbri, Daniele; Monfardini, Chiara
We investigate whether people enrolled into voluntary health insurance (VHI) substitute public consumption with private (opt out) or just enlarge their private consumption, without reducing reliance upon public provisions (top up). We study the case of Italy, where a mixed insurance system is in place. To this purpose, we specify a joint model for public and private specialist visits counts, and allow for different degrees of endogenous supplementary insurance coverage, looking at the insurance coverage as driven by a trinomial choice process. We disentangle the effect of income and wealth by going through two channels: the direct impact on the...
A supply side story for a threshold model: Endogenous growth of the free and open source community - Rullani, Francesco; Zirulia, Lorenzo
The study of social institutions producing and disseminating knowledge has mainly concentrated
on two main concepts: Science and Technology. This paper examines a recent institutional form
that seems not to resemble either of the other two; that is, knowledge-intensive communities,
where individuals freely exchange knowledge through information and communication
technology. Using free and open source software as an example, we develop a model where this
phenomenon is confronted with Technology with respect to its ability to attract researchers.
Foreign Ownership, Firm Performance, and the Geography of Civic Capital - Burker, Matthias; Franco, Chiara; Minerva, Gaetano Alfredo
It is well established in the literature that foreign affiliates are subject to a series of governance and assimilation costs that deteriorate their performance. This is particularly relevant for firms which have been recently acquired by foreign investors. We employ the variation in civic capital across Italian provinces as an exogenous determinant of these governance costs. We derive the testable implication that there should be a clean evidence of a negative effect of foreign ownership on performance in areas where civic capital is low. As the level of local civic capital increases, this reduces the scope for internal transaction costs,...
Labor markets and labor market institutions in transition economies - Lehmann, Hartmut; Muravyev, Alexander
This paper summarizes the evolution of labor markets and labor market institutions and
policies in the countries of Central and Eastern Europe as well as of Central Asia over the last
two decades. The main focus is on the evolution of labor market institutions, which are
among candidate explanations for the very diverse trajectories of labor markets in the region.
We consider recent contributions that attempt to assess the effect of labor market institutions
on labor market performance of TEs, including the policy-relevant issue of complementarity
NIMBY Clout on the 2011 Italian Nuclear Referendum - Pignataro, Giuseppe; Prarolo, Giovanni
This paper claims that the 2011 Italian referendum on nuclear power is taking shape as a clean laboratory for the measurement of one of the main aspects of the NIMBY (Not In My BackYard) issue. Since the citizens voted on the possibility for the government to set up new nuclear plants in well-known sites, we identify community preferences for their locations across Italian municipalities using the turnout rate. The Fukushima nuclear disaster that happened a few months before the referendum may have magnified negative attitudes toward nuclear power. Thus, taking into account regional and political features that may influence ideological...
Growth of Incumbent Firms and Entrepreneurship in Vietnam - Santarelli, Enrico; Tran, Hien Thu
This paper analyzes the relationship between the performance of incumbent firms and the net entry of new firms by combining different theoretical views of entrepreneurship. It shows that new knowledge and ideas created but not commercialized by incumbents are an important source of entrepreneurial opportunities for nascent firms. Different regression models to treat dynamics and endogeneity issues are applied to test the research hypothesis that growth of incumbent firms in a region will stimulate start-up activities by creating new profit opportunities for potential entrepreneurs. Vietnam’s regional micro-data from 2000 to 2008 are used for this test. Four controlling indicators –...
Credit Markets with Ethical Banks and Motivated Borrowers - Barigozzi, Francesca; Tedeschi, Piero
This paper investigates banks’ corporate social responsibility. The credit market is composed of two sectors: one for standard and one for ethical projects. Since ethical banks are committed to investing in ethical projects, standard and ethical banks compete in the market for ethical projects. The latter have also a social profitability, but a lower expected revenue with respect to standard ones. If their expected revenue is not too low, ethical projects are undertaken by motivated borrowers. The latter obtain a benefit (a social responsibility premium) from accomplishing ethical projects in general and a premium for successful interaction when trading with...
More Schooling, More Children: Compulsory Schooling Reforms and Fertility in Europe - Fort, Margherita; Schneeweis, Nicole; Winter-Ebmer, Rudolf
We study the relationship between education and fertility, exploiting compulsory schooling reforms in England and Continental Europe, implemented between 1936 and 1975. We assess the causal effect of education on the number of biological children and the incidence of childlessness. We find surprising results for Continental Europe: the additional education generated by compulsory schooling expansions led to an increase in the number of biological children per woman and a decrease in childlessness. The results for England point in the opposite direction. Moreover, for the Continent we find that education during this time led to fewer women who remained unmarried over...