Working papers

Abstract Following the recent contribution of Beaudry et al. [8], we exploit a three-sector optimal growth model without frictions to provide new insights regarding the emergence of endogenous medium-term fluctuations. Notably, our 3-sector model shows that matching the empirical evidence critically depends on agents' preferences, particularly the consumption of a bundle of (at least) two final goods. Endogenous fluctuations are therefore likely to occur through both relative inter-sector differences in capital intensity and intertemporal consumption allocations based on substitution effects between the two final consumed goods. We thoroughly characterize the economy's dynamics and establish the existence of clear conditions related to (Hopf) bifurcation values, as well as closely examining the theoretical periodicity of the corresponding limit cycles. Using a calibration of the US economy, our model is able to reproduce the observed peak range of spectral density at around 8 to 10 years of the cyclical component of gross domestic product, gross private investment, personal consumption expenditures, and of the corresponding price deflator series. Furthermore, such limit cycles are generated under very plausible technological parameters and estimates of the elasticities of intertemporal substitution.
Keywords Three-sector optimal growth models, Mid-term fluctuations, Hopf bifurcation, Endogenous cycle, Periodicity
Download HAL Google Scholar
Abstract Macroeconomic models in which exogenous, self-fulfilling changes in expectations play a significant role in output fluctuations are often discarded on two claims: they require implausible calibrations of structural parameters and they are enable to account for several empirical features associated with demand shocks. We show that these claims are only valid to the extent that they are applied to one-sector models. In contrast, we prove that two-sector models allow the existence of self-fulfilling prophecies for a large set of empirically realistic values for all the structural parameters, and that a two-sector model submitted to sunspot shocks can account not only for all the standard stylized facts associated with demand shocks, but also for other dimensions of the business cycle that standard RBC-type models cannot explain.
Keywords Indeterminacy, One and two-sector models, Endogenous labor supply, Income effect, Productive externalities, Permanent and transitory shocks
Download HAL Google Scholar
Abstract A set of agents is aware of the existence of an economic opportunity, and compete for the associated prize. We study incentives to communicate about the existence of this economic opportunity to uninformed agents when the winner of the prize shares it with others, through some exogenous sharing rule. Communicating about the opportunity has two conflicting effects: it increases competition, but it can also increase the likelihood of receiving a large share of the prize. We find that, for any sharing rule, there is a minimum equilibrium, which Pareto dominates all other equilibria. We also find that under bilaterally symmetric sharing, more sharing generates more communication. We then discuss these results along several extensions.
Keywords Investment, Communication, Sharing Network, Rival Opportunity
Download HAL Google Scholar
Abstract This paper shows how ethnic identities may become more salient due to natural resources extraction. We combine individual data on the strength of ethnic-relative to national-identities with geo-localized information on the contours of ethnic homelands and on the timing and location of mineral resources exploitation in 25 African countries, from 2005 to 2015. Our strategy takes advantage of several dimensions of exposure to resources exploitation: time, spatial proximity, and ethnic proximity. We find that the strength of an ethnic group identity increases when mineral resource exploitation in that group's historical homeland intensifies. We argue that this result is at least partly rooted in feelings of relative deprivation associated with the exploitation of the resources. We show that such exploitation has limited positive economic spillovers, especially for members of the indigenous ethnic group; and that the link between mineral resources and the salience of ethnic identities is reinforced among members of powerless ethnic groups, and groups with strong baseline identity feelings or living in poorer areas, or areas with a history of conflict. Put together, these finding suggest a new dimension of the natural resource curse: the fragmentation of identities, between ethnic groups and nations.
Keywords Identity, Ethnicity, Natural resources
Download HAL Google Scholar
Abstract We address the question of the measurement of social welfare and inequalities in the context of partially-ordered health variables. We propose a general framework based on the assumption that the distribution of well-being states forms an m-dimensional Boolean lattice. To this end, the distribution of well-being states is constructed based on the prevalence of a finite number of illnesses where each state represents the number of illnesses an individual may suffer from. The implementation of the framework involves breaking down the Boolean lattice into a set of linear extensions where all health states become fully ordered. The linear extensions account for all possible ordering of the health states based on the depth of health problems (i.e., the severity of health conditions). Having constructed these linear extensions, we then proceed on ranking distributions in terms of welfare by applying appropriate dominance criteria and employ aggregate metrics to provide a numerical representation of the social welfare and inequality associated with each distribution. An illustrative application of the methodology is provided.
Keywords Ordinal inequality, Partially-ordered variables, Stochastic dominance, Welfare function, Hammond dominance, Boolean lattice
Download HAL Google Scholar
Abstract This paper develops a theoretical framework to think about employees' effort choices, and applies this framework to assess the ability of existing laboratory designs to identify the effect of pay inequality on worker effort. The analysis shows that failure to control for a number of confounds-such as reciprocity towards the employer in multilateral gift-exchange games (vertical fairness), or the incentive to increase effort when feeling underpaid under piece rates (income targeting)-may lead to inaccurate interpretation of evidence of treatment effects. In light of these findings, the paper provides a set of recommendations on how to improve identification in the design of laboratory experiments in the future.
Keywords Pay inequality, Effort, Laboratory experiments, Reference dependence, Fairness
Download HAL Google Scholar
Abstract What is the role of income polarisation for explaining differentials in public funding of education? To answer this question, we provide a new theoretical modelling for the income distribution that can directly monitor income polarisation. It leads to a new income polarisation index where the middle class is represented by an interval. We implement this distribution in a political economy model with endogenous fertility and public/private educational choices. We show that when households vote on public schooling expenditures, polarisation matters for explaining disparities in public education funding across communities. Using micro-data covering two groups of school districts, we find that both income polarisation and income inequality affect public school funding with opposite signs whether there exist a Tax Limitation Expenditure (TLE) or not.
Keywords Education politics, Schooling choice, Income polarisation, Probabilistic voting, Bayesian inference
Download HAL Google Scholar
Abstract We analyse preference for redistribution and the perceived role of "circumstances" and "effort" in China within the framework of the belief in a just world hypothesis (BJW) using the 2006 CGSS. As this very rich data base does not include Dalbert questionnaire on GBJW and PBJW, we have completed the CGSS by a survey led during the COVID episode in Shanghai and Nanjing. Thanks to this new survey, we could identify the components of PBJW and GBJW inside the traditional opinion variables about the causes of poverty and the desire for redistribution of the CGSS. Using a tri-variate ordered probit model for explaining opinions, we show how treating the decision to migrate as an endogenous variable modifies the usual results of the literature concerning migrants and the effects of the Hukou status. The correlations found validate the distinction between personal BJW and general BJW, a distinction that has important policy implications for the status of migrants.
Keywords GHK simulator, Marginal effects, Binary endogenous, Conditional correlations, Hukou and migrant workers, Belief in a just world, Inequality perceptions, Preference for redistribution
Download HAL Google Scholar
Abstract This paper examines the question of non-anonymous Growth Incidence Curves (na-GIC) from a Bayesian inferential point of view. Building on the notion of conditional quantiles of Barnett (1976), we show that removing the anonymity axiom leads to a non-parametric inference problem. From a Bayesian point of view, an approach using Bernstein polynomials provides a simple solution and immediate confidence intervals, tests and a way to compare two na-GIC. The paper illustrates the approach to the question of academic wage formation and tries to shed some light on wether academic recruitment leads to a super stars phenomenon, that is a large increase of top wages, or not. Equipped with Bayesian na-GIC's, we show that wages at Michigan State University experienced a top compression leading to a shrinking of the wage scale. We finally analyse gender and ethnic questions in order to detect if the implemented pro-active policies were efficient.
Keywords Ethnic discrimination, Gender policy, Wage formation, Bayesian inference, Non-anonymous GIC, Conditional quantiles
Download HAL Google Scholar
Abstract The vast literature on earnings inequality has so far largely ignored the role played by hours of work. This paper argues that in order to understand earnings dispersion we need to consider not only the dispersion of hourly wages but also inequality in hours worked as well as the correlation between the two. We use data for the US, the UK, France, and Germany over the period 1991-2016 to examine the evolution of inequality in hours worked and of the correlation between individual hours and wages, assessing their contribution to recent trends in earnings inequality. We find that, other than in the US, hours inequality is an important force, and that it has increased over the period under analysis. The elasticity of hours with respect to wages has also played a key role, notably in the two continental economies. This elasticity used to be negative, thus tending to reduce inequality as those with lower hourly wages worked longer hours, but has increased over the past decades, becoming nil or positive, and hence eroding an important equalizing force. The paper examines which are the potential factors behind the change in the elasticity, notably the role of trade and labour market institutions
Keywords Earnings inequality, Working hours, Hours elasticity
Download HAL Google Scholar