Working Papers Archive

Title: Sharp Identification Regions in Models with Convex Predictions: Games, Individual Choice, and Incomplete Data

Creation Date:
07/2009

Revision Date:
09/2010

Publication Status:
Revise and Resbmit

Title: Partial Identification Using Random Set Theory

Creation Date:
04/2010

Revision Date:
01/2010

Publication Status:
Revise and Resbmit

Title: The Real and Financial Consequences of Property Rights: Evidence from a Natural Experiment Abstract:
The 2007 Property Law in China gave creditors (primarily banks) more rights over the assets underlying their secured loans to private firms and checked the power of local governments to expropriate the assets of private firms. We use the 2007 Property Law as a natural experiment for understanding the real and financial effects of property rights on firms. We find that firms increased the quantity and efficiency of their investments after the enactment of the law. We also document that firms had more access to external finance: firms became less dependent on their internal cash flows for financing their investments, firms issued more debt, firms held less cash, the marginal value of their cash fell and the cash flow sensitivity of their cash dropped. We argue that the beneficial impacts of this law should have been more profound for firms that had a large stock of tangible assets and more growth opportunities and less profound for politically connected firms. Our estimates confirm these predictions. Consistent with the above findings, we find that the property law had a strong announcement effect: firms that had better growth opportunities, lower cash flows, higher tangibility and that lacked political connections had higher cumulative abnormal returns around the time when the law was announced. Additional tests suggest that the increased protections from government expropriation influenced firms primarily through the strengthening of creditor rights.

Creation Date:
05/2013

Revision Date:
05/2013

JEL Codes:
K11, G31, G38

Title: The 'Great Divergence’ Reconsidered: Partisan Transaction Cost Theory and Income Inequality in the American States Abstract:
The evidence is decidedly mixed as to whether income inequality rises when Right party governments are in power while declining when Left parties control government. This study advances a partisan transaction cost theory of income inequality which predicts that government capacity undermines partisan efforts at shaping the income distribution, and also becomes an increasingly effective check on partisan influence as citizen affluence rises. These predictions are tested using a panel data design analyzing the average Adjusted Gross Income (AGI) reported on IRS tax returns in the American states from 1980−2003 comprising the top 10% of the income distribution. The econometric evidence provides strong support for the theory. This study not only offers a compelling rationale for understanding why Right party governments prefer small government, but also explains why Left party governments have been ineffective at reducing income inequality during the past few decades.

Creation Date:
01/2013

Revision Date:
01/2013

Title: Valid Tests When Instrumental Variables Do Not Perfectly Satisfy the Exclusion Restriction Abstract:
There is a growing consensus that it is difficult to pick instruments that do not perfectly satisfy the exclusion restriction. Drawing on results from Berkowitz, Caner, and Fang (2012), this paper contains a non-technical summary of how valid inferences can be made when instrumental variables come close to satisfying the exclusion restriction. Although the Anderson-Rubin (1949) test statistic is robust to weak identification, it assumes that the instruments are perfectly orthogonal to the structural error term and is therefore oversized under mild violations of the orthogonality condition. The fractionally resampled Anderson- Rubin (FAR) test is a modification of the Anderson and Rubin (AR) test that accounts for violations of the orthogonality condition. We show that in small samples the size of the resampling block of the FAR test can be modified to obtain valid critical values and analyze its size and power properties. We focus on power and not in size-adjusted power because the FAR test uses only one critical value in its application. User-written commands to implement the AR and FAR tests in Stata are described.

Creation Date:
01/2013

Revision Date:
01/2013

Title: Finance and Growth: A Counter-Example from the Origins of Banking in Russia Abstract:
This paper examines the effect of banking on economic growth in modern Russia. To overcome simultaneity and selection, we exploit regional banking variation induced by the creation of “specialized banks� in the last years of the Soviet Union (1988-1991). Consistent with the qualitative work of Hellman [1993] and Johnson [2000], we show that these reforms generated an ideal natural experiment in that the concentration of specialized banks is jointly uncorrelated with predictors of future growth, including pre-banking income, unemployment, anti-market sentiment, institutional quality, and government interference in the economy. Results indicate that while the presence of one additional specialized bank per million inhabitants increased total within-state lending to private firms and individuals by 10 to 20 percent in the early 2000s, it had no effect on investment or per capita income, though it did modestly reduce unemployment. Data on lending suggest this ineffectiveness may be due to lower risk-taking and greater government connections. Thus, evidence here suggests that private ownership in the context of a competitive market may not be sufficient to transform socialist institutions. Instead, it indicates that the political origins of banking are important in determining whether finance affects growth.

Creation Date:
08/2011

Revision Date:
01/2012

Title: The Emergence of Bank-Issued Credit in Russia: An Empirical Characterization Abstract:
Bank-issued credit is an important source of external financing for dynamic firms in transition economies. However, banks with a primary mission of issuing loans to private firms have only recently emerged in Russia. While this emergence (and subsequent expansion) appears to be carrying significant implications for Russia’s continuing economic development, it is a far from universal phenomenon when viewed from a regional perspective. The purpose of this paper is to document regional patterns of the emergence and expanding importance of bank-issued credit within Russia; to note its relationship with regional patterns of economic activity; and to seek an empirical account of the regional variations we observe. In pursuing the latter objective, we document that regional variations in the influence of the communist party evident in the former Soviet Union retain remarkable explanatory power in accounting for regional variations in bank-financing activity. An account of the persistence of this influence will be the subject of future research.

Creation Date:
02/2010

Revision Date:
03/2010

Title: Campaign Rhetoric and the Hide-&-Seek Game Abstract:
We present a model of political campaigning where a candidate chooses between promoting oneself (positive campaign) or attacking the rival (negative campaign). The media validates the claims made by candidates, and the quality of a candidate is not fully revealed unless there is a debate about her suitability, i.e. she is the subject of both a positive and a negative campaign. Negative campaigns may be used either to expose the rival candidate (informative role) or to turn attention away from oneself (non-informative role). Our model suggests that in order to ascertain the effect of negative advertising, studies should take into account the profile of messages (i.e. messages employed by both candidates) rather than the individual message in isolation. Voter expectation about candidate quality plays a major role in campaign selection: while the incidence of negative campaigning goes down as the expected prior improves, the probability of selection of the correct candidate is non-monotonic in the said prior.

Creation Date:
01/2011

Revision Date:
11/2012

Title: Strategic Information Revelation when Experts Compete to Influence (R&R at RAND Journal of Economics) Abstract:
We consider a persuasion game where multiple experts with potentially conflicting self-interests attempt to persuade a decision-maker, say, a judge. The judge prefers to take an action that is most appropriate given the true state of the world but the experts' preferences over the actions are independent of the state. The judge has no commitment power and takes his best action given the experts' reports. Experts have private types: an informed expert observes the state but an uninformed expert does not. An expert cannot lie but an informed expert may conceal information by pretending to be uninformed. We offer a general characterization of the equilibrium. We show that an increase in the quality of an expert (i.e., his prior likelihood of being informed) can reduce the judge's ex-ante expected payoff. Moreover, the judge's expected payoff may be maximized when the experts have identical (but extreme) agenda rather than conflicting self-interests.

Creation Date:
09/2011

Revision Date:
01/2012

Title: Resistance, Redistribution and Investor Friendliness (R&R in Journal of Development Economics) Abstract:
Poor communities sometimes resist private investment and destroy economic surplus even if the government has the willingness and ability to redistribute. We interpret such acts of resistance as demands for redistribution: destruction contains credible information about how affected groups value surplus, which helps the government in implementing the optimal redistribution policy. Destruction is increasing in the extent of political marginalization of the affected group. While resistance has informational value, it has two distinct costs: it directly reduces surplus and also reduces the investor's incentives to create surplus. The government uses a tax/subsidy on the investor to maximize weighted social surplus, and we show that the possibility of destruction may force the government to be too soft in its negotiations with the investor. We discuss conditions under which the government should ban resistance or should allow resistance but compensate the investor for its losses incurred in order to enhance social welfare.

Creation Date:
10/2011

Revision Date:
01/2012

Title: Conflict and Mobility Abstract:
We study the role of inter-group differences in the emergence of conflict. In our setting, two groups compete for the right to allocate societyÕs resources, and we allow for costly inter-group mobility. The winning group offers an allocation, that the opposition can either accept, or reject and wage conflict. Expropriating a large share of resources increases political strength by attracting opposition members, but such economic exclusion implies lower per capita shares and higher risk of conflict. In equilibrium, allocations are non-monotonic in the cost of mobility. Moreover, limited commitment with respect to mobility gives rise to inefficient conflict in equilibrium.

Creation Date:
12/2011

Revision Date:
01/2012

Title: Compulsory and Voluntary Voting Mechanisms: An Experimental Study Abstract:
We report on an experiment comparing compulsory and voluntary voting mechanisms. Theory predicts that these different mechanisms have different implications both for the sincerity of the voting decisions and for the participation decisions of voters, and we find strong support for these theoretical predictions in our experimental data. Voters are able to adapt the sincerity of their votes or their participation decisions to the different voting mechanisms in such a way as to make the welfare differences between these mechanisms negligible. We argue that this finding may account for the co-existence of these two voting mechanisms in nature.

Creation Date:
12/2011

Revision Date:
01/2012

Title: Preference Monotonicity and Information Aggregation in Elections (Accepted at Econometrica)

Creation Date:
05/2006

Revision Date:
12/2008

Title: How Much to Make and How Much to Buy: Explaining Plural Sourcing Strategies (forthcoming in Strategic Management Journal) Abstract:
While many theories of the firm seek to explain when firms make rather than buy, in practice firms often make and buy the same input- they engage in plural sourcing. We argue that explaining the mix of external procurement and internal sourcing for the same input requires a consideration of complementarities across and constraints within modes of procurement. We create analytical foundations for making empirical predictions about when plural sourcing is likely to be optimal and why the optimal mix of internal and external sourcing may vary across situations. Our framework also proves useful for assessing the possible estimation biases in transaction level make-or-buy studies arising from ignoring complementarities and constraints.

Creation Date:
05/2008

Revision Date:
05/2008

Publication Status:
Forthcoming in Stragetic Management Journal

Title: Distortions to Agricultural Incentives in Egypt Abstract:
. . .

Creation Date:
05/2007

Revision Date:
07/2008

Publication Status:
World Bank Agricultural Distortions Working Paper 36

Title: Transient Products but Persistent Trade Patterns Abstract:
. . .

Creation Date:
05/2007

Revision Date:
05/2008

Title: Rational Regional Trade Agreements Abstract:
. . .

Creation Date:
05/2007

Revision Date:
05/2007

Publication Status:
USAID Jordan (2007)

Title: Jordan – United States Free Trade Agreement Economic Impact Study: Searching for Effects of the FTA on Exports` Imports and Trade Related Investments.

Creation Date:
01/2006

Revision Date:
01/2006

Publication Status:
USAID Jordan (2007)

Title: Measuring the Welfare Effects of Trade Policy Alternatives: The EU`s Eastern Enlargement Abstract:
. . .

Creation Date:
10/2006

Revision Date:
10/2006

Title: An Experimental Test of the Lucas Asset Pricing Model Abstract:
We implement a dynamic asset pricing experiment in the spirit of Lucas (1978) with storable assets and non-storable cash. In one treatment we impose diminishing marginal returns to cash to incentivize consumption-smoothing across periods, while in a second treatment there is no induced motive for trade. In the former case subjects smooth consumption, and assets trade at a discount relative to the risk-neutral fundamental price. This under-pricing is a departure from the `bubbles` observed in the experimental asset pricing experiments of Smith et al. (1988). In our second treatment with no induced motive for trade, assets trade at a premium relative to expected value and shareholdings are highly concentrated.

Creation Date:
02/2010

Revision Date:
05/2013

JEL Codes:
C90, D51, D91, G12

Title: All-Pay Auctions vs. Lotteries as Provisional Fixed-Prize Fundraising Mechanisms Abstract:
We study two provisional fixed-prize mechanisms for funding public goods: an all-pay auction and a lottery. In our setting, the public good is provided only if the participants' contributions are greater than the fixed-prize value; otherwise contributions are refunded. We prove that in this provisional fixed prize setting, lotteries can outperform all-pay auctions in terms of expected public good provision. Specifically, we state conditions under which the provisional fixed prize all-pay auction mechanism generates zero public good provision, while the provisional fixed prize lottery mechanism generates positive public good provision. We test these predictions in a laboratory experiment where we vary the number of participants, the marginal per capita return (mpcr) on the public good and the mechanism for awarding the prize, either a lottery or an all-pay auction. Consistent with the theory, we find that the mpcr matters for contribution amounts under the lottery mechanism. However, inconsistent with the theory bids are always significantly higher than predicted and there is no significant difference in public good contributions under either mechanism. We suggest how a non-expected utility approach involving probability weighting can help to explain over-bidding in our experiment.

Creation Date:
11/2011

Revision Date:
10/2012

JEL Codes:
C72, D44, H41

Title: Macroeconomics: A Survey of Laboratory Research Abstract:
This chapter surveys laboratory experiments addressing macroeconomic phenomena. The first part focuses on experimental tests of the microfoundations of macroeconomic models discussing laboratory studies of intertemporal consumption/savings decisions, time (in)consistency of preferences and rational expectations. Part two explores coordination problems of interest to macroeconomists and mechanisms for resolving these problems. Part three looks at experiments in specific macroeconomic sectors including monetary economics, labor economics, international economics as well-as large scale, multi-sector models that combine several sectors simultaneously. The final section addresses experimental tests of macroeconomic policy issues.

Creation Date:
02/2008

Revision Date:
08/2012

JEL Codes:
C9, E0

Title: Learning, Forecasting and Optimizing: An Experimental Study Abstract:
Rational Expectations (RE) models have two crucial dimensions: 1) agents correctly forecast future prices given all available information, and 2) given expectations, agents solve optimization problems and these solutions in turn determine actual price realizations. Experimental testing of such models typically focuses on only one of these two dimensions. In this paper we consider both forecasting and optimization decisions in an experimental cobweb economy. We report results from four experimental treatments: 1) subjects form forecasts only, 2) subjects determine quantity only (solve an optimization problem), 3) they do both and 4) they are paired in teams and one member is assigned the forecasting role while the other is assigned the optimization task. All treatments converge to Rational Expectation Equilibrium (REE), but at very different speeds. We observe that performance is the best in treatment 1) and worst in the treatment 3). We further find that most subjects use adaptive rules to forecast prices. Given a price forecast, subjects are less likely to make conditionally optimal production decisions in treatment 3) where the forecast is made by themselves, than in treatment 4) where the forecast is made by the other member of their team, which suggests that "two heads are better than one" in finding REE.

Creation Date:
10/2011

Revision Date:
07/2012

JEL Codes:
C91, C92, D83, D84

Title: Cooperation and Signaling with Uncertain Social Preferences Abstract:
This paper investigates incomplete information and signaling about players` inequity aversion in the simultaneous and sequential-move Prisoner`s Dilemma game. We show that only a pooling equilibrium can be sustained where a player unconcerned about inequity aversion initially cooperates in order to disguise himself as a player concerned about inequity in payoffs. This disguising strategy induces the uninformed player to cooperate in the last period of their interaction, at which time the unconcerned player takes the opportunity to defect, i.e., he `backstabs` the uninformed player. Despite this last-minute defection, our results show that the introduction of incomplete information can actually lead to a Pareto improvement under certain conditions. We then connect the predictions of this `backstabbing` equilibrium with frequently observed endgame behavior in finitely-repeated experiments.

Creation Date:
03/2012

Revision Date:
03/2012

JEL Codes:
C72, C73, D82

Title: Real-Time, Adaptive Learning via Parameterized Expectations Abstract:
We explore real time, adaptive nonlinear learning dynamics in stochastic macroeconomic systems. Rather than linearizing nonlinear Euler equations where expectations play a role around a steady state, we instead approximate the nonlinear expected values using the method of parameterized expectations. Further we suppose that these approximated expectations are updated in real time as new data become available. We argue that this method of real-time parameterized expectations learning provides a plausible alternative to real-time adaptive learning dynamics under linearized versions of the same nonlinear system and we provide a comparison of the two approaches.

Creation Date:
07/2010

Revision Date:
02/2012

JEL Codes:
C62, D83

Title: Compulsory versus Voluntary Voting: An Experimental Study Abstract:
We report on an experiment comparing compulsory and voluntary voting mechanisms. Theory predicts that these different mechanisms have important implications both for the sincerity of voting decisions and for the participation decisions of voters, and we find strong support for these theoretical predictions in our experimental data. Voters are able to adapt the sincerity of their votes or their participation decisions to the different voting mechanisms in such a way as to make the efficiency differences between these mechanisms negligible. We argue that this finding may account for the co-existence of these two voting mechanisms in nature.

Creation Date:
05/2012

Revision Date:
01/2012

JEL Codes:
C92, D72, D83.

Title: Group Size and Cooperation Among Strangers Abstract:
We study how group size affects cooperation in an infinitely repeated n-player Prisoner`s Dilemma (PD) game. In each repetition of the game, groups of size n ≤ M are randomly and anonymously matched from a fixed population of size M to play the n-player PD stage game. We provide conditions for which the contagious strategy (Kandori, 1992) sustains a social norm of cooperation among all M players. Our main finding is that if agents are sufficiently patient, a social norm of society-wide cooperation becomes easier to sustain under the contagious strategy as n → M.

Creation Date:
08/2012

Revision Date:
01/2012

JEL Codes:
C72, C73, C78, Z13.

Title: On the Use of Fines and Lottery Prizes to Increase Voter Turnout Abstract:
We consider implementation issues regarding two mechanisms that have been used to increase voter turnout in elections: fines and lotteries. We focus on the amount of the fine or lottery prize needed to achieve full participation. We then propose a combined, self-financing mechanism by which the fines imposed on non-participants are used to finance the prize that is awarded by lottery to one of the individuals choosing to participate in voting. We argue that this combined mechanism has some advantages over the other two mechanisms and merits consideration.

Creation Date:
08/2012

Revision Date:
01/2012

Title: Gift Exchange versus Monetary Exchange: Theory and Evidence Abstract:
This paper reports findings from an experiment that implements the Lagos-Wright (2005) model of monetary exchange. We find that subjects generally avoid the autarkic equilibrium of that model and make trading decisions consistent with the model`s monetary equilibrium. Aliprantis, Camera and Puzzello (ACP, 2007) show that providing periodic access to centralized markets as in the Lagos and Wright framework may facilitate the sustainability of social norms of gift exchange, thus rendering money inessential in decentralized exchange. We also explore this hypothesis by replacing the centralized market of the Lagos-Wright model with a version of the centralized market of ACP`s model. We find that the essentiality of money is not threatened by the presence of centralized meetings. Indeed, the efficiency of allocations is significantly higher in the environment with money than without money, suggesting that money plays a role as an efficiency enhancing coordination device.

Creation Date:
11/2011

Revision Date:
11/2011

Title: Are Dynamically Inefficient Equilibria Learnable? Abstract:
We consider the stability under adaptive learning dynamics of steady state equilibria in Diamond`s (1965) overlapping generations growth model with capital and money. Interior steady state equilibria of this model can be either dynamically inefficient or dynamically efficient. We show that a necessary condition for an equilibrium of this model to be stable under adaptive learning is that the equilibrium is dynamically efficient. In other words, adaptive learning can be used as a selection criterion to exclude dynamically inefficient equilibria. We also provide conditions under which a dynamically efficient equilibrium of this model involving the use of both capital and money will be stable under adaptive learning dynamics.

Creation Date:
07/2011

Revision Date:
01/2011

JEL Codes:
D83, E43, E52.

Title: How do Women Entrepreneurs Perform in Egypt? Empirical Evidence From Egypt Abstract:
The purpose of this paper is twofold: 1) To explain how women owned MSEs differ from men owned MSEs in terms of human and financial capital; 2) To what extent do these differences/similarities affect the performance of the MSE? Using econometric techniques (i.e. logistical analysis), the analysis in this study is based on the 2003 MSE dataset made available by the ERF (Economic Research Forum of the Middle East and North Africa, Iran and Turkey). The sample size consists of 5000 private MSEs. The paper evaluates the effect of aspects of human and financial capitals on three measures of performance of MSEs in Egypt for men and women. Measures of performance are: growth (increase in employment from one year ago); success (rise in revenues from one year ago); and efficiency (growth in returns on sales (ROS) from one year ago). Preliminary findings show gender differences in terms of general, and specific human capital, as well as financial capital, where women are at a disadvantage. Empirical findings reveal that women are better performers than men in generating revenues, despite the fact that their revenues are almost one third their males’ counterparts. What’s more interesting is that women are no different from men in terms of employment growth or the efficiency of running their businesses.

Creation Date:
01/2011

Revision Date:
01/2011

Title: The Gendered Aspects of MSEs in MENA: Evidence from Egypt and Turkey

Creation Date:
08/2010

Revision Date:
01/2010

Publication Status:
ERF Working Paper, August 2010, No. 535

Title: Education-Occupation Mismatch and the Effect on Wages of Egyptian Workers Abstract:
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Creation Date:
04/2009

Revision Date:
04/2009

Title: Preferences for Eerly Retirement among Older Government Employees in Egypt Abstract:
. . .

Creation Date:
02/2007

Revision Date:
02/2008

Title: Labor Supply of Egyptian Married Women When Self-Employment Is An Option: Participation And Hours Of Work Abstract:
. . .

Creation Date:
02/2003

Revision Date:
02/2008

Title: Does Wealth Affect Female Labor Participation? Evidence from Egypt Abstract:
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Creation Date:
02/2004

Revision Date:
02/2008

Title: Have Economic Reforms Paid Off? Gender Occupational Inequality in the New Millennium in Egypt Abstract:
. . .

Creation Date:
02/2007

Revision Date:
02/2008

Title: The Effects of Structural Adjustment on Youth Unemployment in Egypt Abstract:
. . .

Creation Date:
02/2005

Revision Date:
02/2008

Title: Wage Inequality by Education and Gender in MENA: Contrasting the Egyptian and Moroccan Experiences in the 1990s Abstract:
. . .

Creation Date:
02/2005

Revision Date:
02/2008

Title: The Effect of Trade Liberalization on Industrial Segregation and Wage Determination: Evidence from Egypt Abstract:
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Creation Date:
02/2007

Revision Date:
02/2008

Title: Determinants of Early Retirement in Egypt Abstract:
. . .

Creation Date:
10/2006

Revision Date:
10/2006

Title: The Egyptian Labor Market in the New Millennium Abstract:
. . .

Creation Date:
10/2006

Revision Date:
10/2006

Title: The Determinants of Employment Status in Egypt Abstract:
Egyptian labor market is moving from a period of high overall unemployment to one where unemployment is increasingly concentrated among specific groups whose access to the private-sector labor market is limited. Educated young women are more adversely affected than their male counterparts by the transition to a private-sector-led economy. There is no systematic link between youth unemployment among new entrants and poverty unless it is the head of the household who is unemployed. An economic policy environment that is favorable for labor-intensive, export-oriented industries would help absorb the new entrants into the labor market, and the prospect is particularly good for young female workers. Policymakers should consider a reduction in the femalespecific employer mandates (such as the existing provision for a generous maternity leave) that raise the cost of hiring women.

Creation Date:
06/2000

Revision Date:
09/2006

Publication Status:
IFPRI ; FCND Discussion Paper No. 88

Title: Why Does the MENA Region Have Such High Unemployment Rates?

Creation Date:
04/2006

Revision Date:
09/2006

Publication Status:
Forthcoming in Labor Markets in the Middle East and North Africa; Routledge 2009

Title: Wage Inequality` Returns to Education and Gender Premia in MENA

Creation Date:
06/2006

Revision Date:
09/2006

Publication Status:
Forthcoming in: Labor Markets in the Middle East and North Africa; Routledge 2009

Title: The Interaction of Entry Barriers and Financial Frictions in Growth Abstract:
We construct a model in which aggregate growth is driven by the continual entry of new firms that face barriers to entry that are exacerbated by financial frictions. We show that economies with more severe financial frictions have lower levels of output and consumption along the balanced growth path compared to economies with lower levels of financial frictions, even though all economies grow at the same, constant, rate. Improvements in financial markets generate faster-than-trend growth as the economy transitions to the new balanced growth path. The model generates sharp predictions regarding the rate of firm creation and aggregate output levels, as well as aggregate growth rates; these predictions are borne out in the cross country data.

Creation Date:
03/2011

Revision Date:
08/2012

Title: A Theory of Rollover Risk, Sudden Stops, and Foreign Reserves in Emerging Economies Abstract:
Emerging economies, unlike advanced economies, have accumulated large foreign reserves holdings. We argue that this policy is an optimal response to an increase in foreign debt rollover risk. In our model, reserves play a crucial role in reducing debt rollover crises (`sudden stops`), akin to the role of bank reserves in preventing bank runs. An unexpected increase in rollover risk leads to a global rise in sudden stops, prompting emerging economies to update their priors about the risk they face. We show that a global increase in rollover risk explains the outburst of sudden stops in the late 1990s, the subsequent increase in foreign reserves holdings, and the salient absence of sudden stops ever since.

Creation Date:
09/2010

Revision Date:
07/2012

Title: The Lost Generation of the Great Recession Abstract:
This paper analyzes the effects of the Great Recession on different generations. While older generations have suffered the largest decline in wealth due to the collapse in asset prices, younger generations have suffered the largest decline in labor income. Potentially, the young may benefit from the purchase of cheaper assets, especially if they have access to credit. To analyze the impact of these channels, I construct an overlapping generations model with borrowing constraints in which households choose a portfolio over housing as well as risk-free and risky financial assets. Shocks to labor efficiency and uncertainty regarding the return on risky assets generate a recession with a drop in asset prices and cross-sectional changes in consumption, investment, and wealth that are consistent with the recent recession. In particular, younger generations experience the largest decline in nondurable consumption and housing investment, a fact that is supported by the data. Overall, the young suffer the largest welfare losses, equivalent to a 5 percent reduction in lifetime consumption.

Creation Date:
10/2011

Revision Date:
07/2012

Title: China's Fare Share? The Growth of Chinese Exports in World Trade Abstract:
The growth of Chinese exports in market share over the past two decades is a singular event in the history of world trade. Using data from 1995-2010, we document this growth in a variety of ways. We show that the expanded trade is pervasive. Virtually every country in the world has seen China claim a larger share of its import market. Then, we use Constant Market Share (CMS) analysis to determine which country or countries have lost market share as China’s trade has grown. Contrary to much discussion in the popular press, we find strong evidence that other developing countries have not seen export shares fall as a result of China’s gains. Rather, our results suggest that China’s share growth has come largely at the expense of exporters based in developed countries, especially Japan and the United States.

Creation Date:
03/2011

Revision Date:
01/2012

JEL Codes:
F14, P33

Publication Status:
Forthcoming in Review of World Economics

Title: The Growth of Chinese Exports: New Market Entry Abstract:
Over the period of 1995-2005 an increasing number of differentiated products have been exported from developing countries. For example, while Chinese products had exported to 40.5% more markets on average, the corresponding numbers for Japan and the United States were almost constant. Using the bilateral trade data of 128 countries from 144 products, we study the determinants of China’s success in market access at the product level. We estimate a Probit model based on the heterogeneous-firm model at the product level for each year and find strong evidence that China’s success in accessing foreign markets is due to productivity growth of industries, probably engendered by firm level technological advance of existing firms or entry of foreign firms that have begun to produce in and export from China.

Creation Date:
03/2011

Revision Date:
01/2012

JEL Codes:
F14, P33

Title: Lobbying as a Transport Industry

Creation Date:
01/2006

Revision Date:
01/2006

Title: Ignorance and Bliss: Early Onset Mood Disorders, Human Capital Accumulation, and Labor Market Outcomes in Early Adulthood Abstract:
Though the link between adolescent depression and high school completion has been demonstrated in several previous studies, this paper extends the analysis of early onset mood disorders to include several long-term outcomes. Using data from the National Longitudinal Survey of Youth 1997 cohort (NLSY-97) this study establishes a link between early onset mood disorders and post-secondary education, labor market outcomes, marriage, criminal activity and substance abuse. This paper contributes to the existing literature in two important ways. First, the NLSY- 97 follows respondents from high school into early adulthood, enabling me to make an argument against reverse causality. Second, I observe symptoms of depression over time, which provides insight into the mechanisms by which adolescent depression affects long-term outcomes. The results indicate that the long-term effects of early onset depression are significant, and result from both the initial depressive episode as well as recurrent symptoms experienced later in life.

Creation Date:
06/2011

Revision Date:
01/2011

Title: Student Responses to the Changing Cost of Post-Secondary Education Abstract:
At a time when many public institutions are raising tuition rates in order to make up for decreasing state funding it is particularly important to understand how tuition rates affect the education and labor market decisions of students. The existing literature dealing with the cost of education focuses primarily on two outcome variables: school enrollment numbers and time to graduation. While these outcomes are undoubtedly useful for university administrators, this focus provides an incomplete picture of how students adapt to changes in the cost of education. Using state variation in tuition and financial aid this study examines a wider variety of student responses and develops a simple model to illustrate tradeoffs between formal human capital accumulation and labor market participation. My empirical analysis, however, does provides only limited evidence that post-secondary education costs affect student labor force participation. This lack of empirical evidence may result from one of several data limitations, including small sample size, low levels of average variation in the cost of post-secondary education, and a weak correlation between average public tuition and state financial aid expenditures and the actual costs facing individual students. Despite these limitations, my findings indicate that increases in the availability of need-based financial aid is positively correlated with full-time enrollment in both 2-year as well as private institutions, and that increases in tuition are negatively correlated with full-time enrollment.

Creation Date:
01/2011

Revision Date:
01/2011

Title: The Cost of Euro Adoption in Central and Eastern Europe: A Welfare Analysis Abstract:
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Creation Date:
03/2007

Revision Date:
03/2007

Title: Giving Little by Little

Creation Date:
01/2006

Revision Date:
01/2006

Title: Dynamic Network Formation

Creation Date:
01/2006

Revision Date:
01/2006

Title: Cooperative Behavior and Social Interaction

Creation Date:
01/2006

Revision Date:
01/2006

Title: Discriminatory Competition and Local competition

Creation Date:
01/2006

Revision Date:
01/2006

Title: Information Use and Transference

Creation Date:
01/2006

Revision Date:
01/2006

Title: Tax Increment Financing

Creation Date:
01/2006

Revision Date:
01/2006

Title: Communication and Coordination-Palgrave Entry

Creation Date:
01/2006

Revision Date:
01/2006

Title: From Divergence to Convergence: Re-evaluating the History Behind China`s Economic Boom Abstract:
China’s long-term economic dynamics pose a formidable challenge to economic historians. The Qing Empire (1644-1911), the world’s largest national economy prior to the 19th century, experienced a tripling of population during the 17th and 18th centuries with no signs of diminishing per capita income. In some regions, the standard of living may have matched levels recorded in advanced regions of Western Europe. However, with the Industrial Revolution a vast gap emerged between newly rich industrial nations and China’s lagging economy. Only with an unprecedented growth spurt beginning in the late 1970s has the gap separating China from the global leaders been substantially diminished, and China regained its former standing among the world’s largest economies. This essay develops an integrated framework for understanding this entire history, including both the long period of divergence and the more recent convergent trend. The analysis sets out to explain how deeply embedded political and economic institutions that had contributed to a long process of extensive growth subsequently prevented China from capturing the benefits associated with new technologies and information arising from the Industrial Revolution. During the 20th century, the gradual erosion of these historic constraints and of new obstacles created by socialist planning eventually opened the door to China’s current boom. Our analysis links China’s recent economic development to important elements of its past, while using the success of the last three decades to provide fresh perspectives on the critical obstacles undermining earlier modernization efforts, and their removal over the last century and a half.

Creation Date:
01/2012

Revision Date:
01/2012

Title: China`s Economic Development and Global Interaction in the Long Run Abstract:
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Creation Date:
06/2008

Revision Date:
06/2008

Title: Can China Sustain Rapid Growth Despite Flawed Institutions? Abstract:
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Creation Date:
05/2008

Revision Date:
05/2008

Title: Appendix to “Forecasting China’s Economic Growth to 2025” in China`s Great Economic Transformation, ed. L. Brandt and T.G. Rawski (Cambridge, 2008) Abstract:
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Creation Date:
10/2007

Revision Date:
05/2008

Title: URBAN AIR QUALITY IN CHINA: HISTORICAL AND COMPARATIVE PERSPECTIVES

Creation Date:
10/2006

Revision Date:
10/2006

Title: Efficient High-Dimensional Importance Sampling Abstract:
The paper describes a simple, generic and yet highly accurate Efficient Importance Sampling (EIS) Monte Carlo (MC) procedure for the evaluation of high-dimensional numerical integrals. EIS is based upon a sequence of auxiliary weighted regressions which actually are linear under appropriate conditions. It can be used to evaluate likelihood functions and byproducts thereof, such as ML estimators, for models which depend upon unobservable variables. A dynamic stochastic volatility model and a logit panel data model with unobserved heterogeneity (random effects) in both dimensions are used to provide illustrations of EIS high numerical accuracy, even under small number of MC draws. MC simulations are used to characterize the finite sample numerical and statistical properties of EIS-based ML estimators.

Creation Date:
06/2007

Revision Date:
01/2007

Publication Status:
Forthcoming in Journal of Econometrics

Title: Classical and Bayesian Analysis of Univariate and Multivariate Stochastic Volatility Models Abstract:
In this paper, Efficient Importance Sampling (EIS) is used to perform a classical and Bayesian analysis of univariate and multivariate Stochastic Volatility (SV) models for financial return series. EIS provides a highly generic and very accurate procedure for the Monte Carlo (MC) evaluation of high-dimensional interdependent integrals. It can be used to carry out ML-estimation of SV models as well as simulation smoothing where the latent volatilities are sampled at once. Based on this EIS simulation smoother a Bayesian Markov Chain Monte Carlo (MCDC) posterior analysis of the parameters of SV models can be performed.

Creation Date:
06/2007

Revision Date:
01/2004

Title: What Explains Schooling Differences Across Countries? Abstract:
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Creation Date:
05/2010

Revision Date:
05/2010

Title: International Technology Diffusion: Geographic Localization at the Industry Level Abstract:
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Creation Date:
05/2010

Revision Date:
05/2010

Title: A Contribution to the Economic Theory of Fertility Abstract:
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Creation Date:
05/2010

Revision Date:
05/2010

Title: Immigrant Group Size and Political Mobilization: Evidence from the European Migration Abstract:
Abstract: The United States absorbed nearly 22 million immigrants from Europe between 1880 and 1915. How did these immigrants, largely from undemocratic European states, become integrated into the American political system? This paper uses a newly assembled dataset of urban populations in the United States prior to World War I to investigate the decision of newly arrived immigrants to mobilize politically, focusing on the citizenship choice of foreign-born individuals in city wards. I find that immigrants were more likely to become politically active as their ethnic group’s share of the electorate grew, particularly in wards where the Democratic Party likely needed the vote of new immigrants to win elections.

Creation Date:
01/2012

Revision Date:
02/2013

Title: Did the Americanization Movement Succeed?: An Evaluation of the Effect of English-Only and Compulsory Schooling Laws on Immigrants' Education Abstract:
One of the main arguments in support of English-only instruction and compulsory schooling legislation in the early twentieth century was that such laws were needed to force immigrants to learn English and “Americanize.� We provide the first estimates of the effect of the compulsory schooling laws and statutes requiring English as the language of instruction on the school enrollment, work, literacy and English fluency of immigrant children (either foreign-born children or children of foreign-born parents). We find that English schooling statutes were effective in increasing the literacy of foreign-born children though the effects are modest on average. Compulsory schooling laws also affected the enrollment of immigrants and these effects were much larger for children born abroad than for native-born children. Similarly, continuation school laws affected the enrollment of immigrants but not of children with native-born parents.

Creation Date:
08/2011

Revision Date:
08/2012

Title: Cognitive Disparities, Lead Plumbing, and Water Chemistry

Creation Date:
01/2011

Revision Date:
01/2011

Title: Why the Market for Quack Medicines Flourished for 150 Years

Creation Date:
01/2010

Revision Date:
01/2010

Title: Did the Trusts Want a Federal Antitrust Law? An Event Study of State Antitrust Enforcement and Passage of the Sherman Act

Creation Date:
01/2010

Revision Date:
01/2010

Title: Did Frederick Brodie Discover the World`s First Environmental Kuznets Curve? Coal Smoke and the Rise and Fall of the London Fog

Creation Date:
01/2010

Revision Date:
01/2010

Title: When Bioterrorism Was No Big Deal

Creation Date:
01/2010

Revision Date:
01/2010

Title: Deprivation and Disease in Early Twentieth Century America

Creation Date:
01/2010

Revision Date:
01/2010

Title: Lead, Mortality, and Productivity

Creation Date:
01/2010

Revision Date:
01/2010

Title: Water Lead in Early Twentieth Century Massachusetts

Creation Date:
01/2010

Revision Date:
01/2010

Title: Competition and Corruption: Lessons from 150 Years of Industrial Governance

Creation Date:
01/2010

Revision Date:
01/2010

Title: The Letters of John Sherman and the Origins of Antitrust

Creation Date:
01/2010

Revision Date:
01/2010

Title: Historical Predictions Regarding the Safety of Lead Water Pipes

Creation Date:
01/2010

Revision Date:
01/2010

Title: The External Validity of Laboratory Experiments: Qualitative rather than Quantitative Effects

Creation Date:
01/2011

Revision Date:
01/2011

Title: Speculative Overpricing in Asset Markets with Information Flows

Creation Date:
01/2012

Revision Date:
01/2012

Title: Costly Communication in Groups: Theory and an Experiment Abstract:
I develop a novel model of group-based deliberation in which communication is costly in two directions: agents must pay separate costs to send and to receive messages. Equilibrium strategies have an intuitive characterization - those with the best information send, those with the worst information receive. But free-riding leads to less information exchange than is optimal. Testing the model`s predictions with an experiment I find that subjects overcommunicate when costs are high, but fail to benefit from this as much as they should. In welfare terms the experiment finds that listening costs are more harmful to welfare, in contrast with theory, which indicates sending costs. The experiment also suggests that the existence of costly communication channels can reduce total welfare.

Creation Date:
06/2012

Revision Date:
06/2012

JEL Codes:
C72, C92, D83, D84

Title: Communication With Multiple Senders and Multiple Dimensions: An Experiment Abstract:
We implement the Battaglini (2002) model of multi-sender-multi-dimension cheap talk in the laboratory, analyzing the effects of sender competition on information transmission. Our results indicate that competing senders provide enough information for close to full revelation, but receiver`s ability to use this information crucially depends on senders` biases. Receivers are close to full extraction when biases identify an ex-ante trustworthy sender. When there is no ex-ante trustworthy source, fully exploiting sent messages requires information to be inferred across dimensions. However, receivers seem to treat dimensions as separate choices, and are much closer to best-responding within each separate dimension.

Creation Date:
04/2012

Revision Date:
04/2012

JEL Codes:
C72, C92, D83, D84

Title: A Field Study on Matching with Network Externalities Abstract:
We study the effects of network externalities on a unique matching protocol for faculty in a large U.S. professional school to offices in a new building. We collected institutional, web, and survey data on faculty`s attributes and choices. We first identify the different layers of the social network: institutional affiliation, coauthorships, and friendships. We demonstrate and quantify the effects of network externalities on choices and outcomes. Furthermore, we disentangle the different layers of the social network and quantify their relative impact. Finally, we assess the matching protocol from a welfare perspective. Our study suggests the importance and feasibility of accounting for network externalities in general assignment problems and evaluates a set of techniques that can be employed to this end.

Creation Date:
09/2009

Revision Date:
09/2011

JEL Codes:
D02, D61, D62, D85, C93

Publication Status:
Forthcoming in the American Economic Review

Title: Clearinghouses for Two-Sided Matching: An Experimental Study Abstract:
We study the performance of two-sided matching clearinghouses in the laboratory. Our experimental design mimics the Gale-Shapley (1962) mechanism, utilized to match hospitals and interns, schools and pupils, etc., with an array of preference profiles. Several insights come out of our analysis. First, only 48% of the observed match outcomes are fully stable. Furthermore, among those markets ending at a stable outcome, a large majority culminates in the best stable matching for the receiving-side. Second, contrary to the theory, participants on the receiving-side of the algorithm rarely truncate their true preferences. In fact, it is the proposers who do not make offers in order of their preference, frequently skipping potential partners. Third, market characteristics affect behavior and outcomes: both the cardinal representation and the span of the core influence whether outcomes are stable or close to stable, as well as the number of turns it takes markets to converge to the final outcome.

Creation Date:
12/2009

Revision Date:
12/2009