Kathia Bahloul Zekkari*, Matteo Sestito**

Internal seminars
phd seminar

Kathia Bahloul Zekkari*, Matteo Sestito**

Asset bubble, growth and endogenous labor supply*
Identity conflict, ethnocentrism and social cohesion: evidence from Sub-Saharan Africa**
Tuesday, April 6 2021| 11:00am to 12:30pm

Anushka Chawla: anushka.chawla[at]univ-amu.fr
Kenza Elass: kenza.elass[at]univ-amu.fr
Carolina Ulloa Suarez: carolina.ulloa-suarez[at]univ-amu.fr


*Bubbles are often associated to a rise of growth and labor. Their collapse is often accompanied by a reduction in working hours and a recession of economic growth. Taking this empirical evidence into account, we examine the interaction between asset bubbles, labor supply and economic growth. We consider an overlapping generations with elastic labor model in which we introduce productive public spending and lump-sum transfers. The latter two are financed by tax burden on capital and labor incomes. First, we find that asset bubbles can (cannot) emerge when the labor supply is higher (lower) than its value in the equilibrium without bubble. Second, we show that labor supply is promoted by bubbles. The growth rate is also boosted by bubbles when the positive effect of labor supply occurred thanks to bubble (crowding-in effect) dominates the negative effect of bubbles (crowding-out effect).

**This paper uses a novel dataset on ethnic warfare to shed lights on how conflict affects social identification and cohesion. A large body of anecdotal studies illustrates how the saliency of ethnic identities increases at times of conflict. This paper uses data from eighteen sub-Saharan countries to provide econometric evidence for such a claim. The effect of ethnic conflict on various measures of social capital is also investigated. Consistently with other literature on the argument, identity conflict is shown to have a positive impact on local civic engagement. The finding is understood as a result of the ethnocentric dynamics generated by conflict: as ethnic warfare increases ethnic identification, in-group cooperation follows suit. This parochial interpretation is further strengthened by the use of remote violence and the conditionality of conflict-induced pro-social behaviour on low levels of ethnic fractionalisation.

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