Working papers

Abstract Government fiscal actions influence forward-looking private agents' current and future decisions, which, in turn, impact fiscal performance. This paper highlights this expectation channel with a Barro-type endogenous growth model where an impatient government finances growth-enhancing spending through income taxes and public debt. Fiscal and macroeconomic outcomes emerge from the interplay of households and policymakers' preferences for public expenditure and private consumption. I find that the government's maximizing its own utility and facing an endogenous interest spread are sufficient ingredients to yield multiple equilibria, independently of the government's policy intentions. The economy almost always heads to the high public spending equilibrium, emphasizing the importance of fiscal institutions to tame government impatience and bolster fiscal credibility.
Keywords Fiscal policy, Credibility, Expectations
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Abstract This paper examines a novel negative impact of trade tariffs and the costs they induce by documenting how protectionism reversed the long-term improvements in education and the fertility transition that were well under way in late 19th-century France. The Méline tariff, a tariff on cereals introduced in 1892, was a major protectionist shock that shifted relative prices in favor of agriculture and away from industry. In a context in which the latter was more intensive in skills than agriculture, the tariff reduced the relative return to education, which in turn affected parents' decisions about the quantity and quality of children. We use regional differences in the importance of cereal production in the local economy to estimate the impact of the tariff. Our findings indicate that the tariff reduced enrolment in primary education and increased birth rates and fertility. The magnitude of these effects was substantial, with the tariff offsetting the increasing trend in enrolment rates and the decreasing one in birth rates by a decade.
Keywords Education, Fertility, Protectionism, France
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Abstract In many societies, parents are involved in selecting a spouse for their child, and integrate this with decisions about migration and educational investment. What type of spouse do parents want for their children? We estimate parents' spousal preferences based on survey choices between random profiles. Preference data are elicited from parents or other relatives who actively search for a spouse on behalf of their adult child in Kunming, China. Economic variables (income and real estate ownership) are important for the choice of sons-in-law, but not daughters-in-law. Education is valued on both sides. We simulate marriage outcomes based on preferences for age and education and compare them with marriage patterns in the general population. Homogamy by education can be explained by parental preferences, but not by age: parents prefer younger wives, yet most couples are the same age. Additionally collected preference data from students can explain age distributions. Survey data from parents suggest that while they prefer younger wives, they also accept wives of the same age. Overall, marriage markets have a likely positive influence on education investments for both boys and girls.
Keywords MATCHING, Parental matchmaking, China, Preference estimation, Marriage
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Abstract We study the effect of legalization of same-sex marriage on coming out in the United States. We overcome data limitations by inferring coming out decisions through a revealed preference mechanism. We exploit data on enrollment in seminary studies for the Catholic priesthood, hypothesizing that Catholic priests' vow of celibacy may lead gay men to self-select as a way to avoid a heterosexual lifestyle. Using a differencesin-differences design that exploits variation in the timing of legalization across states, we find that city-level enrollment in priestly studies fell by about 15% exclusively in states adopting the reform. The celibacy norm appears to be driving our results, since we find no effect on enrollment in deacon or lay ministry studies that do not require celibacy. We also find that coming out decisions, as inferred through enrollment in priestly studies, are primarily affected by the presence of gay communities and by prevailing social attitudes toward gays. We explain our findings with a stylized model of lifestyle choice.
Keywords Homosexuality, Religion, Identity
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Abstract In this paper we analyze how growing income/wealth inequality and the functional income distribution inequality have contributed to the sustained low potential growth observed in the industrialized economies during the last two decades, a period that includes the Great Recession (GR). Growing inequality may constitute a drawback for the recovery of these economies, especially after the Great Pandemic (GP). To this aim, we modify the semi-structural model originally proposed by Holston, Laubach and William, by considering the effects of several types of inequalities. We jointly estimate potential growth and the natural interest rates. We show that the latter can substantially modify the time path of the real interest rate that prevails when economies are at full strength and inflation is stable.
Keywords State-space model, G7, Natural interest rate, Inequality, Potential growth
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Abstract This paper estimates trade barriers in government procurement, a market that accounts for 12% of world GDP. Using data from inter-country input-output tables in a gravity model, we find that home bias in government procurement is significantly higher than in trade between firms. However, this difference has been shrinking over time. Results also show that trade agreements with provisions on government procurement increase cross-border flows of services, whereas the effect on goods is small and not different from that in private markets. Provisions containing transparency and procedural requirements drive the liberalizing effect of trade agreements.
Keywords Government procurement, Trade agreements, Gravity equation
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Abstract This paper estimates trade barriers in government procurement, a market that accounts for 12% of world GDP. Using data from inter-country input-output tables in a gravity model, we find that home bias in government procurement is significantly higher than in trade between firms. However, this difference has been shrinking over time. Results also show that trade agreements with provisions on government procurement increase cross-border flows of services, whereas the effect on goods is small and not different from that in private markets. Provisions containing transparency and procedural requirements drive the liberalizing effect of trade agreements.
Keywords Government procurement, Trade agreements, Gravity equation
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Abstract Using longitudinal data from the German SocioEconomic Panel, we analyze the effects of exposure to trade on the fertility and marital behavior of German workers. We find that individuals working in sectors that were more affected by import competition from Eastern Europe and suffered worse labor market outcomes were less likely to have children. In contrast, workers in sectors that benefited from increased exports had better employment prospects and higher fertility. These effects are driven by low-educated and married men, and reflect changes in the likelihood of having any child (extensive margin). While among workers exposed to import competition there is evidence of some fertility postponement, we find a significant reduction of completed fertility. There is instead little evidence of any significant effect on marital behavior.
Keywords International trade, Labor market outcomes, Fertility, Marriage
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Abstract There is strong evidence that national leaders matter for the performance of their nations, but little is known about what drives the direction of their effects. I assess how national leaders’ quality of governance, measured by six indicators, varies with their career and education. Using a sample of 1,000 rulers between 1931 and 2010, I identify three types of leaders: military leaders, academics, and politicians. I find that military leaders are associated with an overall negative performance, while politicians who have held important offices before taking power tend to perform well. Academics have on average non-significant effects. These results are partially driven by differences in policy decisions and in leadership styles. Military leaders (politicians) spend less (more) in health and education, are more (less) likely to establish a personalistic regime, to disrespect the constitution, and to move towards a non-electoral regime. Additionally, this paper highlights the weakness of using educational attainment as a proxy for politicians’ quality, and of growth as a measure of national leaders’ performance.
Keywords National leaders, Politicians&#039, quality, Leaders&#039, characteristics
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Abstract How will structural change unfold beyond the rise of services? Motivated by the observed dynamics within the service sector we propose a model of structural change in which productivity is endogenous and output is produced with two intermediate substitutable capital goods. In the progressive sector the accumulation of knowledge leads to an unbounded increase in TFP, as sector becoming asymptotically dominant. We are then able to recover the increasing shares of workers, the increasing real and nominal shares of the output observed in progressive service and IT sectors in the US. Interestingly, the economy follows a growth path converging to a particular level of wealth that depends on the initial price of capital and knowledge. As a consequence, countries with the same fundamentals but lower initial wealth will be characterized by lower asymptotic wealth.
Keywords Kaldor and Kuznets facts, Structural change, Non-balanced endogenous growth, Constant elasticity of substitution, Technological knowledge, Two-sector model
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Abstract A central idea in the institutions and development literature is whether the executive is adequately checked by the legislature and judiciary (North, 1990; Acemoglu et al., 2001; La Porta et al., 2004). This paper provides plausibly causal evidence on how increased constraints on the executive, through removal of Presidential discretion in judicial appointments, impacts judicial decision-making. In particular, we find that when the judge selection procedure in Pakistan changed, from the President appointing judges to appointments by judge peers, rulings in favor of the government decreased significantly and the quality of judicial decisions improved. The age structure of judges at the time of the reform and the mandatory retirement age law provide us with an exogenous source of variation in the implementation of the selection reform. We test for and provide evidence against potential threats to identification and alternative explanations for our findings. The analysis of mechanisms reveals that our results are explained by rulings in politically salient cases and by “patronage” judges who hold political office prior to their appointments. According to our estimates, Presidential appointment of judges results in additional land expropriations by the government worth 0.14 percent of GDP every year.
Keywords Court subversion, Expropriation risk, Property rights, Judges, President
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Abstract 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 Parental time investment, Socio-emotional skills, Cognitive skills, Child development
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Abstract 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
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Abstract 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
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Abstract 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 flexibility
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Abstract Background We revisit fertility regulation in Tunisia by examining the role of the extended family. As marriage is the exclusive acknowledged childbearing context, we examine fertility analysis in Tunisia through the se-quence: woman’s marriage age, post-marriage delay in the first use of contraception, and past and cur-rent contraceptive use. We trace the family socio-economic influences that operate through these deci-sions. Methods Using data from the 2001 PAP-FAM Tunisian survey, we estimate the duration and probability models of these birth control decisions. Results In Tunisia, family ties and socio-cultural environment appear to hamper fertility regulation that oper-ates through the above decisions. This is notably the case for couples whose marriages are arranged by the extended family or who benefit from financial support from both parental families. Conclusion This calls for family planning policies that address more the extended families. Keywords: Fertility regulation; Age at marriage; Birth control; Family influence; Contraception; Tunisia
Keywords Tunisia, Contraception, Family Interference, Birth control, Age at marriage, Fertility regulation
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Abstract 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
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Abstract 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
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Abstract 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
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Abstract 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 Violence, Conflict, Coronavirus, COVID-19
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