Working papers

Formation of Children’s Cognitive and Socio-Emotional Skills: Is All Parental Time Equal?
Hélène Le Forner

Although it is recognized that parental time is a strong determinant of child development, little is known about heterogeneity across the effects of parental time. Using the Longitudinal Survey of Australian Children, I model the cognitive and socio-emotional skills production functions for children born in 1999-2000, from 4 to 11 years old, using, among others, a cumulative value-added and a generalized method of moments model. I find that the effect on children's verbal and socioemotional skills of time spent on educational activities with the father is smaller than that with the mother or both parents together. For socio-emotional skills, this difference seems to be driven by fathers who spend little time with their children.

Keywords: child development; cognitive skills; socio-emotional skills; parental time investment
Download PDF icon wp_2021_-_nr_17.pdf (2.74 MB)
Beyond social determinants of health: an application of the Health Capability Model to rural Senegal
Marion Coste

This study investigated elements affecting the ability to achieve optimal health (health capability) in people living in the rural area of Niakhar, Senegal, using data from the 12356 ANRS AmBASS survey. A structural equation modelling (SEM) strategy was used to develop a multidimensional and dynamic health capability model (Ruger, 2010) that allowed the analysis of determinants of health to be extended beyond the usual one-way study between determinants and health status found in the literature. Three factors (dimensions) were identified: 1) access to local healthcare services, 2) participation in decisionmaking, and 3) current self-reported health status. The model analyzed interactions between these dimensions as well as the dimensions' relationships with other demographic, psychosocial and economic variables (household size and resources, age, gender, education, marital status, intrinsic motivation, etc.) Results reveal a much greater diversity of variables associated with shortfalls in the various dimensions of health capability than what would have appeared had a standard unidimensional model been used. This SEM-based strategy could be an attractive alternative to traditional approaches to measure determinants of health and provide valuable empirical results for policy-makers.

Keywords: determinants of health, capability approach, simultaneous equation model, sub-Saharan Africa
Download PDF icon wp_2021_-_nr_16.pdf (624.96 KB)
The Transmission Channels of Government Spending Uncertainty
Anna Belianska
Aurélien Eyquem
Céline Poilly

Higher uncertainty about government spending generates a persistent decline in the economic activity in the Euro Area. This paper emphasizes the transmission channels explaining this empirical fact. First, a Stochastic Volatility model is estimated on European government consumption to build a measure of government spending uncertainty. Plugging this measure into a SVAR model, we stress that government spending uncertainty shocks have recessionary, persistent and humped-shaped effects. Second, we develop a New Keynesian model with financial frictions applying to a portfolio of equity and long-term government bonds. We argue that a portfolio effect-resulting from the imperfect substitutability among both assets-acts as a critical amplifier of the usual transmission channels.

Keywords: government spending uncertainty, stochastic volatility, portfolio adjustment cost
Download PDF icon wp_2021_-_nr_15.pdf (1 MB)
Managing intermittency in the electricity market
Jean-Henry Ferrasse
Nandeeta Neerunjun
Hubert Stahn

We analyze the integration of intermittent renewables-based technologies into an electricity mix comprising of conventional energy. Intermittency is modeled by a contingent electricity market and we introduce demand-side flexibility through the retailing structure. Retailers propose diversified electricity contracts at different prices allowing consumers to choose their optimal electricity consumption. These contracts are modeled by a set of state-contingent electricity delivery contracts. We show existence and uniqueness of a competitive equilibrium of the contingent wholesale and retail markets. We provide a welfare analysis and only obtain constraint efficiency due to a limited number of delivery contracts. Finally, we discuss the conditions under which changing the set of delivery contracts improves penetration of renewables and increases welfare. This provides useful policy insights for managing intermittency and achieving renewable capacity objectives.

Keywords: electricity market, renewables, intermittency, demand exibility
Download PDF icon wp_2021_-_nr_14.pdf (584.71 KB)
Fertility Regulation and Family Influence in Tunisia
Olfa Frini
Christophe Muller

We revisit fertility analysis in Tunisia by examining family interference in birth control through: woman’s marriage age, post-marriage delay in the first use of contraception, past and current contraceptive use, and choice of the birth control methods.

Using data from the 2001 PAP-FAM Tunisian survey, we find that the significant effects of covariates arise and vanish across stage-specific equations as women progress in their lifecycle. In Tunisia, family links and socio-cultural environment appear to greatly shape fertility regulation in the direction of higher fertility. This calls for more intensive involvement of the extended families in family planning policies. This also suggests that the resurgence of traditionalist politico-religious movements, often associated with youth radicalization, may affect future fertility in Tunisia through an increase in family influences on birth control by married women.

Keywords: fertility regulation, age at marriage, birth control, family interference, contraception, Tunisia
Download PDF icon wp_2021_-_nr_13.pdf (1.05 MB)
Are epidemiological indicators misleading under uncertainty? An evaluation and a remedy from an economic perspective
Christelle Baunez
Michaël Degoulet
Stéphane Luchini
Patrick A. Pintus
Miriam Teschl

Even though much has been learned about the new pathogen SARS-CoV-2 since the beginning of the COVID-19 pandemic, a lot of uncertainty remains. In this paper we argue that what is important to know under uncertainty is whether harm accelerates and whether health policies achieve deceleration of harm. For this, we need to see cases in relation to diagnostic effort and not to look at indicators based on cases only, such as a number of widely used epidemiological indicators, including the reproduction number, do. To do so overlooks a crucial dimension, namely the fact that the best we can know about cases will depend on some welldefined strategy of diagnostic effort, such as testing in the case of COVID-19. We will present a newly developed indicator to observe harm, the acceleration index, which is essentially an elasticity of cases in relation to tests. We will discuss what efficiency of testing means and propose that the corresponding health policy goal should be to find ever fewer cases with an ever-greater diagnostic effort. Easy and low-threshold testing will also be a means to give back people’s sovereignty to lead their life in an “open” as opposed to “locked-down” society.

Keywords: uncertainty, acceleration index, anti-fragility, reproduction factor, test strategy, sovereignty
Download PDF icon wp_2021_-_nr_12.pdf (464.78 KB)
Optimal lockdowns: Analysing the efficiency of sanitary policies in Europe during the first wave
Ewen Gallic
Michel Lubrano
Pierre Michel

Uprising in China, the global COVID-19 epidemic soon started to spread out in Europe. As no medical treatment was available, it became urgent to design optimal non-pharmaceutical policies. With the help of a SIR model, we contrast two policies, one based on herd immunity (adopted by Sweden and the Netherlands), the other based on ICU capacity shortage. Both policies led to the danger of a second wave. Policy efficiency corresponds to the absence or limitation of a second wave. The aim of the paper is to measure the efficiency of these policies using statistical models and data. As a measure of efficiency, we propose the ratio of the size of two observed waves using a double sigmoid model coming from the biological growth literature. The Oxford data set provides a policy severity index together with observed number of cases and deaths. This severity index is used to illustrate the key features of national policies for ten European countries and to help for statistical inference. We estimate basic reproduction numbers, identify key moments of the epidemic and provide an instrument for comparing the two reported waves between January and October 2020. We reached the following conclusions. With a soft but long lasting policy, Sweden managed to master the first wave for cases thanks to a low R 0 , but at the cost of a large number of deaths compared to other Nordic countries and Denmark is taken as an example. We predict the failure of herd immunity policy for the Netherlands. We could not identify a clear sanitary policy for large European countries. What we observed was a lack of control for observed cases, but not for deaths.

Keywords: SIR models, phenomenological models, double sigmoid models, sanitary policies, herd immunity, ICU capacity constraint
Download PDF icon wp_2021_-_nr_11.pdf (853.73 KB)
The impact of paternity leave on mothers' employment in Europe
Johanne Bacheron

In this paper, I use a pseudo-panel approach with data from the European Union Labour Force Survey to study the impact of paternity leave policies on mothers' employment in ten countries. Using a dynamic Difference-inDifference strategy, I show that paternity leave increased mothers' employment rate by up to 17% in the long run, and average hours worked by 2 to 4%. There is substantial heterogeneity across countries in the effect of paternity leave policies. The impact on employment rates is positive and significant in eight of the ten countries of the sample, while the impact on hours worked can be either positive or negative. I find no evidence that the reforms had any impact on Greece or Portugal.

Keywords: paternity leave, labour supply, gender equality
Download PDF icon wp_2021_-_nr_10.pdf (640.57 KB)
Shutdown policies and conflict worldwide
Nicolas Berman
Mathieu Couttenier
Nathalie Monnet
Rohit Ticku

We provide evidence on the impact of Covid-19 restriction policies on conflicts worldwide. We combine daily information on conflict events and government policy responses to limit the spread of coronavirus to study how demonstrations and violent events vary following shutdown policies. We use the staggered implementation of restriction policies across countries to identify the dynamic effects in an event study framework. Our results show that imposing a nationwide shutdown reduces the number of demonstrations, which suggests that public demonstrations are hampered by the rising cost of participation. However, the reduction is short-lived, as the number of demonstrations are back to their pre-restriction levels in two months. In contrast, we observe that the purported increase in mobilization or coordination costs, following the imposition of Covid-19 restrictions, has no impact on violent events that involve organized armed groups. Instead, we find that the number of events, on average, increase slightly following the implementation of the restriction policies. The rise in violent events is most prominent in poorer countries, with higher levels of polarization, and in authoritarian countries. We discuss the potential channels that can explain this heterogeneity.

Keywords: COVID-19, coronavirus, conflict, violence
Download PDF icon wp_2021_-_nr_09.pdf (873.66 KB)
The benefits of being misinformed
Marcus Roel
Manuel Staab

In the spirit of Blackwell (1951), we analyze how two fundamental mistakes in information processing-incorrect beliefs about the world and misperception of information-affect the expected utility ranking of information experiments. We explore their individual and combined influence on welfare and provide necessary and sufficient conditions when mistakes alter and possibly reverse the ranking of information experiments. Both mistakes by themselves reduce welfare in a model where payoff relevant actions also generate informative signals. This is true for naive decisionmakers, unaware of any errors, as well as for sophisticated decision-makers, who account for the possibility of mistakes. However, mistakes can interact in non-obvious ways and an agent might be better off suffering from both, rather than just one. We provide a characterization when such positive interactions are possible. Surprisingly, this holds true only for naive decision-makers and thus naivete can be beneficial. We discuss implications for information acquisition and avoidance, welfare-improving belief manipulation, and policy interventions in general.

Keywords: ranking of experiments, information acquisition, misperception, confirmation bias, overconfidence, underconfidence
Download PDF icon wp_2021_-_nr_08.pdf (385.09 KB)
Valuation of Ecosystem Services and Social Choice: The Impact of Deliberation in the context of two different Aggregation Rules
Mariam Maki Sy
Charles C. Figuières
Helene Rey-Valette
Richard B Howarth
Rutger de Wit

This paper describes an empiric study of aggregation and deliberation used during citizens' workshops for the preference elicitation of 20 different ecosystem services (ESs) delivered by the Palavas coastal lagoons located on the shore of the Mediterranean Sea close to Montpellier (S. France). The impact of deliberation for the preference elicitation of 20 different ecosystem services (ESs) was studied by gathering and aggregating individual preferences before deliberation that were compared to the collective aggregation after deliberation. The same aggregation rules were used before and after deliberation and we compared two different aggregation methods, i.e. Rapid Ecosystem Services Participatory Appraisal (RESPA) and Majority Judgement (MJ). RESPA had been specifically tested for ESs, while MJ evaluates the merit of each item, an ES in our case, in a predefined ordinal scale of judgment. The impact of deliberation was strongest for the RESPA method. This new information acquired from application of social choice theory is particularly useful for ecological economics studying ES, and more practically for the development of deliberative approaches for public policies.

Keywords: ecosystem services, preference elicitation, non-monetary methods, deliberation, social choice theory, coastal lagoons
Download PDF icon wp_2021_-_nr_07.pdf (611.22 KB)
Entrepreneurship, growth and productivity with bubbles
Lise Clain-Chamosset-Yvrard
Xavier Raurich
Thomas Seegmuller

Entrepreneurship, growth and total factor productivity are larger when there is a financial bubble. We explain these facts using a growth model with financial bubbles in which individuals face heterogeneous wages and returns on productive investment. The heterogeneity in the return of in- vestment separates individuals between savers and entrepreneurs. Savers buy financial assets, which are deposits or a financial bubble. Entrepreneurs incur in a start-up cost and borrow to invest in productive capital. The bubble provides liquidities to credit-constrained entrepreneurs. These liquidities increase investment and entrepreneurship when the start- up cost is large enough, which explains that growth and entrepreneurship can be larger with bubbles. Finally, productivity can be larger when the bubble further increases the investment of more productive entrepreneurs. This can occur when the return of investment is correlated with wages.

Keywords: bubble, entrepreneurship, growth, productivity
Download PDF icon wp_2021_-_nr_06.pdf (411.94 KB)
Terrorism, Insurgency, State Repression, and Cycles of Violence
Christophe Muller
Pierre Pecher

Over the last half century, violent conflicts between ethno-religious organizations and states have shaped the political and economic development context in developing countries. However, global empirical evidence on the dynamic and strategic underpinnings of these phenomena is lacking. Here, we investigate the dynamic violent relationships between the organizations that represent minorities at risk and the governments in Middle-Eastern and North African countries. Our estimates of dynamic panel data models of discrete strategic responses reveal dampened cycles of violence between states and insurgent politico-ethnic organizations due to violent mutual responses. However, such cycles are absent when the organizations target civilians instead, which is more likely after an insurgency spell. Finally, we provide an original game-theoretical interpretative framework for our results, which allows us to identify, on average and under sensible restrictions, the Stag Hunt game as an appropriate representation of the (possibly reduced-form) general strategic situations that link states and minority organizations in MENA.This is at odds with the frequent use of the prisoner's dilemma setting in the literature, or of other ad hoc strategic hypotheses, to analyze conflicts.

Keywords: terrorism, insurgency, cycles of violence, conflict theory
Download PDF icon wp_2021_-_nr_05.pdf (6.63 MB)
Long-run stability of money demand and monetary policy: the case of Algeria
Raouf Boucekkine
Mohammed Laksaci
Mohamed Touati-Tliba

We estimate the demand for money for monetary aggregates M1 and M2, and cash in Algeria over the period 1979-2019, and study its long-run stability. We show that the transaction motive is significant for all three aggregates, especially for the demand for cash, reflecting the weight of informal economy “practices”. The elasticity of the scale variable is very close to unity for M2 and M1, and even equal to unity for cash demand (1.006). The elasticity of inflation is also significant for all three aggregates, although its level is higher in the case of cash demand (-6.474). Despite the persistence of certain financial repression mechanisms, interest rate elasticity is significant for all three aggregates, but higher for M1 and cash. The same observation is made for elasticity of the exchange rate, reflecting the effect of monetary substitution, especially for M1 and cash. Finally, our study concludes that the demand for money in terms of M1 remains stable, the same observation being confirmed for the M2 aggregate. However, the demand for fiat currency proves not to be stable. The consequences for the optimal design of monetary policy in Algeria are clearly stated.

Keywords: monetary policy, money demand, long-run stability, resource-rich countries, Algeria, co-integration
Download PDF icon wp_2021_-_nr_04.pdf (1.18 MB)
Kirzner and Rothbard on an Austrian theory of entrepreneurship: the heirs of both Menger and Mises discuss action and the role of institutions.
Gilles Campagnolo
Christel Vivel

This paper is the last part of a trilogy on the theory and history of entrepreneurship in Austrian school of economics. The triptych ends with contemporary members by comparing Israel Kirzner and Murray Rothbard. The migration of the Austrian school induced a new assessment of Austrian traits in a new setting. While we do not focus on the history of the Austrian school in America as such, we will stress how Kirzner focused his view of entrepreneurship on the concepts of alertness, discovery by opportunity and the equilibrating action of the entrepreneur – while Rothbard’s contribution was more ideologically engaged.

Keywords: Austrian School of Economics, entrepreneurship, institutions, Kirzner (Israel), methodology, Rothbard (Murray)
Download PDF icon wp_2021_-_nr_03.pdf (713.69 KB)
How does information on minimum and maximum food prices affect measured monetary poverty? Evidence from Niger
Christophe Muller
Nouréini Sayouti

Do households facing an interval of prices rather than a simple price alter the results of poverty analyses? To address this question, we exploit a unique dataset from Niger in which agropastoral households provide the minimum and maximum prices they paid for each consumed product in each season. We estimate poverty measures based on this price information using several absolute poverty line methodologies. Prices are used for valuing household consumption bundles, estimating household-specific price indices, valuing minimal calorie requirements, and extrapolating the link between food poverty and consumption.
The results for Niger show statistically significant differences in the estimated chronic and dynamic poverties for these approaches, especially for international poverty comparisons and seasonal transient poverty monitoring. Specifically, using minimum and maximum prices generates gaps in the estimated poverty rates for Nigerien agropastoral households that exceed regional poverty disparities, which implies that regional targeting priorities in poverty alleviation policies would be reversed if these alternative prices are utilized.
This result suggests that typically estimated poverty statistics, which assume that each household, or even cluster, faces a unique price for each product in a given period, may be less accurate for policy monitoring than generally believed.

Keywords: poverty, prices, Niger, social policies
Download PDF icon wp_2021_-_nr_02.pdf (759.08 KB)
Urbanisation and the onset of modern economic growth
Liam Brunt
Cecilia García-Peñalosa

A large literature characterizes urbanisation as the result of productivity growth attracting rural workers to cities. We incorporate economic geography elements into a growth model and suggest that causation runs the other way: when rural workers move to cities, the resulting urbanisation produces technological change and productivity growth. Urban density leads to knowledge exchange and innovation, thus creating a positive feedback loop between city size and productivity that sets off sustained economic growth. The model is consistent with the fact that urbanisation rates in Western Europe, and notably in England, reached unprecedented levels by the mid-18 th century, the eve of the Industrial Revolution.

Keywords: industrialization, urbanisation, innovation, long-run growth
Download PDF icon wp_2021_-_nr_01.pdf (782.32 KB)