Documents de travail

Sovereign Risk, Financial Fragility and Debt Maturity
Dallal Bendjellal

This paper studies the transmission of a sovereign debt crisis in which a shift in default risk generates a recession and gives rise to a doom loop between sovereign distress and bank fragility with important amplification effects. The model is used to investigate the macroeconomic and welfare effects of altering debt maturity during the crisis. Short-term maturities alleviate the bankers' losses on long-term bonds and moderate the recession at the cost of higher levels of debt in the future. In contrast, long-term maturities are more effective to reduce the households' welfare losses as they lower default risk and distortionary taxes.

Mots clés: debt crisis, sovereign default risk, financial fragility, maturity dynamics
Téléchargement Icône PDF wp_2022_-_nr_22.pdf (850.11 Ko)
Pollution versus Inequality: Tradeoffs for Fiscal Policy
Camille Hainnaux
Thomas Seegmuller

In this paper, we investigate the impact of redistribution and polluting commodity taxation on inequality and pollution in a dynamic setting. We build a two-sector Ramsey model with a green and a polluting good. Households are heterogeneous, which allows for income inequality, and have a level of subsistence consumption for the polluting commodity, modeled by non-homothetic preferences. Increasing the tax rate has a mixed effect depend on the level of subsistence consumption. A low level allows to tackle both the pollution and inequality issues. Under a high level of it, pollution increases: if inequality can be reduced through redistribution, taxation does not allow to solve for environmental degradation. Looking at the stability properties of the economy, we find that the level of subsistence consumption and the externality matter. A high subsistence level of polluting consumption leads to instability or indeterminacy of the steady-state, while the environmental externality plays a stabilizing role in the economy. This leaves room for taxation and redistribution: increasing the tax rate and redistributing more towards workers play a key role in the occurrence of indeterminacy and instability.

Mots clés: externalities; heterogeneous agents; inequality; pollution; redistribution; taxation
Téléchargement Icône PDF wp_2022_-_nr_21.pdf (661.07 Ko)
Determinants of compliance with fiscal rules: misplaced efforts or hidden motivations?
Carolina Ulloa-Suárez

The effects of the COVID-19 pandemic led many governments to suspend their fiscal rules to gain additional fiscal space to mitigate the social and economic consequences of the health crisis. As a result, the return and subsequent compliance with fiscal rules have been compromised, and the opportunity to improve them and consider the new global macroeconomic conditions has emerged. Understanding what elements relate to increased compliance with the rules and what has worked and has not can shed light on upcoming reforms. This paper uses an empirical model to investigate Latin American countries' factors influencing numerical compliance with fiscal rules. We associate three groups of specific factors with a greater or lesser probability of compliance with the rule: the macroeconomic and political environment of the countries and the design features of the enforced rules. We find that only changes in the macroeconomic and political context are associated with higher levels of compliance. In contrast, the institutional design of the fiscal rules does not seem to play an essential role in the compliance outcome. This result suggests that adjustments in this direction are not decisive for rule compliance.

Mots clés: fiscal rules, Latin America, Compliance
Téléchargement Icône PDF wp_2022_-_nr_20.pdf (475.08 Ko)
The multiple dimensions of selection into employment
Kenza Elass

A vast literature on gender wage gaps has examined the importance of selection into employment. However, most analyses have focused only on female labour force participation and gaps at the median. The Great Recession questions this approach both because of the major shift in male employment that it implied but also because women's decisions to participate seem to have been different along the distribution, particularly due to an "added worker effect". This paper uses the methodology proposed by Arellano and Bonhomme (2017) to estimate a quantile selection model over the period 2007-2018. Using a tax and benefit microsimulation model, I compute an instrument capturing the male selection induced by the crisis as well as female decisions: the potential out-of-work income. Since my instrument is crucially determined by the welfare state, I consider three countries with notably different benefit systems-the UK, France and Finland. My results imply different selection patterns across countries and a sizeable male selection in France and the UK. Correction for selection bias lowers the gender wage gap and, in most recent years, reveals an increasing shape of gender gap distribution with a substantial glass ceiling for the three countries.

Mots clés: gender wage gap, sample selection, quantile selection model, wage inequality, quantiles, selection, glass ceilings, sticky floors
Téléchargement Icône PDF wp_2022_-_nr_19.pdf (1.86 Mo)
Mental health effects of COVID-19 lockdowns: a Twitter-based analysis
Sara Colella
Frédéric Dufourt
Vincent A. Hildebrand
Rémi Vivès

We derive a mental health indicator measuring the frequency of words expressing anger,
anxiety and sadness from a fixed population of Twitter users located in France. During
the first COVID-19 lockdown, our indicator did not reveal a statistically significant mental
health response, while the second lockdown triggered a sharp and persistent deterioration
in all three emotions. In addition, DID and event study estimates show a more severe
mental health deterioration among women and younger users during the second lockdown.
Our results suggest that successive stay-at-home orders significantly worsen mental health
across a large segment of the population.

Mots clés: COVID-19, lockdown, mental health, Twitter data, well-being
Téléchargement Icône PDF wp_2022_-_nr_18.pdf (2.31 Mo)
Filling the "decency gap"? Donors' reaction to the US policy on international family planning aid
Nathalie Ferrière

I study the reaction of donors to the US allocation of family planning aid. Family planning offers an interesting case to understand donor interactions. First, projects are relatively similar from one donor to another, easing substitution between donors. Second, one donor, the US, dominates the sector but its foreign policy on family planning has undergone several changes, related to domestic debates on abortion. European donors clearly express their position against these changes and pledge to substitute the US. Exploiting the timing of the Mexico City Policy to instrument the US allocation, I find that, on average, other donors do not react to the US. Donors only react in countries where abortion is on request suggesting that budget constraints do not allow donors to compensate for the US withdrawal in all countries.

Mots clés: Family planning, Foreign Aid, Global Gag Rule, Donors coordination
Téléchargement Icône PDF wp_2022_-_nr_17.pdf (473.39 Ko)
Production Networks and International Fiscal Spillovers
Michael B. Devereux
Karine Gente
Changhua Yu

This paper analyzes the impact of fiscal spending shocks in a dynamic, multi-country model with international production networks. We first derive a decomposition of the effects of a fiscal spending shock on the GDP of any country. This decomposition defines the response as the sum of a Direct, Income, and Price effect. The Direct Effect depends only on structural parameters and is independent of assumptions about monetary policy, wage setting, or capital mobility, while the Price Effect is zero in the aggregate across countries. We apply this decomposition to an analysis of fiscal spillovers in the Eurozone, using the production network structure from the World Input Output Database (WIOD). We find that fiscal spillovers from Germany and some other large Eurozone countries may be large, and within the range of empirical estimates. Without international production network linkages, spillovers would be only a third as large as predicted by the baseline model. Finally, we explore the diffusion of identified government spending shocks at the sectoral level, both within and across countries, using an empirical measure of the response, based on the theoretical decomposition. The empirical estimates are strongly consistent with the theoretical model.

Mots clés: production network, fiscal policy, spillovers, Eurozone, nominal rigidities
Téléchargement Icône PDF wp_2022_-_nr_16.pdf (1.15 Mo)
Emissions pricing instruments with intermittent renewables: second-best policy
Nandeeta Neerunjun

I analyze emissions pricing to support the integration of a renewable resource into an electricity mix composed of an emissions-intensive technology. I consider the intermittent nature of the resource such as wind energy and incremental externalities that become severe for high emissions levels. I show that an emissions tax is inefficient when consumers are on flat-rate electricity tariffs and cannot adapt their consumption to varying production. The tax is inefficient even with flexibility in the markets when consumers are on varying tariffs. The renewable resource induces variability in fossil-fueled electricity production and associated marginal damage that does not match a predetermined tax. I study an Emissions Trading Scheme that provides flexibility at the policy level. Emissions permits are traded at varying prices. Since the emissions cap must still be predetermined, I show that it leads to inefficient permits prices that do not match the marginal damages. I also find that the two emissions pricing instruments are not implemented equivalently since the tax differs from the prices of permits.

Mots clés: electricity, renewables, intermittency, emissions tax, Emissions Trading Scheme
Téléchargement Icône PDF wp_2022_-_nr_15.pdf (939.51 Ko)
Quantile Regression Analysis of Censored Data with Selection An Application to Willingness-to-Pay Data
Victor Champonnois
Olivier Chanel
Costin Protopopescu
Recurring statistical issues such as censoring, selection and heteroskedasticity often impact the analysis of observational data. We investigate the potential advantages of models based on quantile regression (QR) for addressing these issues, with a particular focus on willingness to pay-type data. We gather analytical arguments showing how QR can tackle these issues. We show by means of a Monte Carlo experiment how censored QR (CQR)-based methods perform compared to standard models. We empirically contrast four models on flood risk data. Our findings confirm that selection-censored models based on QR are useful for simultaneously tackling issues often present in observational data.
Mots clés: Censored Quantile Regression; Contingent Valuation; Flood; Monte Carlo Experiment; Quantile Regression; Selection Model; Willingness to Pay
Téléchargement Icône PDF wp_2022_-_nr_14.pdf (833.71 Ko)
Rational housing demand bubble
Lise Clain-Chamosset-Yvrard
Xavier Raurich
Thomas Seegmuller

We provide a unified framework with demand for housing over the life cycle and financial frictions to analyze the existence and macroeconomic effects of rational housing bubbles. We distinguish a housing price bubble, defined as the difference between the housing market price and its fundamental value, from a housing demand bubble, which corresponds to a situation where a pure speculative housing demand exists. In an overlapping generation exchange economy, we show that no housing price bubble occurs. However, a housing demand bubble may occur, generating a boom in housing prices and a drop in the interest rate, when households face a binding borrowing constraint. Multiplicity of steady states and endogenous fluctuations can occur when credit market imperfections are moderate. These fluctuations involve transitions between equilibria with and without a housing demand bubble that generate large fluctuations in housing prices consistent with observed patterns. We finally extend the basic framework to a production economy and we show that a housing demand bubble increases the housing price, housing price to income ratio and economic growth.

Mots clés: Bubble; Housing; Self-ful lling uctuations
Téléchargement Icône PDF wp_2022_-_nr_13.pdf (870.41 Ko)
Cross-Sector Interactions in Western Europe: Lessons From Trade Credit Data
Melina London

Large-scale analyses to map interactions between financial health at the sectoral level are still scarce. To fill the gap, in this paper, I map a network of predictive relationships across the financial health of several sectors. I provide a new advanced indicator to track propagation of financial distress across industries and countries on a monthly basis. I use defaults on trade credit as a measure of firms’ worsening financial conditions in a sector. To control for omitted-variable bias, I apply a high- dimensional VAR analysis, and isolate direct cross-sector causalities `a la Granger from common exposure to macroeconomic shocks or to third-sector shock. I show that monitoring some key sectors–among which construction, wholesale and retail, or the automotive sector–can improve the detection of financial distress in other sectors. Finally, I find that those financial predictive relationships correlates with the input-output structure in the considered economies. Such structure of financial interactions reflect the propagation of financial distress along the supply chain.

Mots clés: trade credit; network; cross-sector financial interdependencies
Téléchargement Icône PDF wp_2022_-_nr_12.pdf (1.1 Mo)
Under-Reporting of Firm Size Around Size-Dependent Regulation Thresholds: Evidence from France
Philippe Askenazy
Thomas Breda
Vladimir Pecheu

The existence of a peak at 49 employees in the firm size distribution in France, followed by a permanent decrease in the number of firms has been the starting point of political discourses and academic studies on the cost of size-dependent regulations at 50-employee. These features of the distribution are visible when firm size is declared by employers in fiscal data but not when it is reconstructed from individual-level social security data. This working paper explores these differences both from statistical and institutional viewpoints. It provides evidence showing that a large proportion of employers manipulate the firm size they declare in their fiscal documents. This manipulation generates the particular shape of the size distribution in the fiscal data. We discuss the rationale for such behavior: the key point is that the under-declaration in fiscal data is not subject to substantial sanctions and it can allow firms not to comply with the labor law. Event studies and comparisons of firms below and above the 50-employee threshold suggest that this threshold may only have limited effects on firm performance or growth potential. Consequently the welfare costs of the regulations at 50-employee might be smaller than what was found by some of the studies that assume a perfect compliance with the law.

Mots clés: regulations, firm size, firm dynamics, economic cost, non-compliance
Téléchargement Icône PDF wp_2022_-_nr_11.pdf (1.32 Mo)
Correcting the Reproduction Number for Time-Varying Tests: a Proposal and an Application to COVID-19 in France
Christelle Baunez
Michaël Degoulet
Stéphane Luchini
Matteo L. Pintus
Patrick A. Pintus
Miriam Teschl

We provide a novel way to correct the effective reproduction number for the time-varying amount of tests, using the acceleration index as a simple measure of viral spread dynamics (Baunez et al., 2021). Not doing so results in the reproduction number being a biased estimate of viral acceleration and we provide a formal decomposition of the resulting bias, involving the useful notions of test and infectivity intensities. When applied to French data for the COVID-19 pandemic (May 13-November 19, 2020), our decomposition shows that the reproduction number, when considered alone, consistently underestimates the resurgence of the pandemic since the summer of 2020, compared to the acceleration index which accounts for the time-varying volume of tests. Because the acceleration index aggregates all relevant information and captures in real time the sizable time variation featured by viral circulation, it is a more parsimonious indicator to track the dynamics of an infectious disease outbreak in real time, compared to the equivalent alternative which would be to complement the reproduction number with the test and infectivity intensities.

Mots clés: COVID-19; reproduction number; testing; acceleration index; real-time analysis; France
Téléchargement Icône PDF wp_2022_-_nr_10.pdf (1.99 Mo)
The Academic Market and the Rise of Universities in Medieval and Early Modern Europe (1000-1800)
David de la Croix
Frédéric Docquier
Alice Fabre
Robert Stelter

We argue that market forces shaped the geographic distribution of upper-tail human capital across Europe during the Middle Ages, and contributed to bolstering universities at the dawn of the Humanistic and Scienti c Revolutions. We build a unique database of thousands of scholars from university sources covering all of Europe, construct an index of their ability, and map the academic market in the medieval and early modern periods. We show that scholars tended to concentrate in the best universities (agglomeration), that better scholars were more sensitive to the quality of the university (positive sorting) and migrated over greater distances (positive selection). Agglomeration, selection and sorting patterns testify to an integrated academic market, made possible by the use of a common language (Latin).

Mots clés: upper-tail human capital, universities, discrete choice model, scholars, sublications, agglomeration
Téléchargement Icône PDF wp_2022_-_nr_09.pdf (11.11 Mo)
The Inverted Leading Indicator Property and Redistribution Effect of the Interest Rate
Patrick A. Pintus
Yi Wen
Xiaochuan Xing

The interest rate at which US firms borrow funds has two features: (i) it moves in a countercyclical fashion and (ii) it is an inverted leading indicator of real economic activity: low interest rates today forecast future booms in GDP, consumption, investment, and employment. We show that a Kiyotaki-Moore model accounts for both properties when interest-rate movements are driven, in a significant way, by self-fulfilling belief shocks that redistribute income away from lenders and to borrowers during booms. The credit-based nature of such self-fulfilling equilibria is shown to be essential: the dynamic correlation between current loanable funds rate and future aggregate economic activity depends critically on the property that the interest rate is state-contingent. Bayesian estimation of our benchmark DSGE model on US data shows that the model driven by redistribution shocks results in a better fit to the data than both standard RBC models and Kiyotaki-Moore type models with unique equilibrium.

Mots clés: endogenous collateral constraints, state-contingent interest rate, redistribution shocks, multiple equilibria
Téléchargement Icône PDF wp_2022_-_nr_08.pdf (732.97 Ko)
Exit polls and voter turnout in the 2017 French elections
Alberto Grillo
Eva Raiber

Belgian and Swiss media regularly interfere during French elections by releasing exit polls before polling stations close. These foreign media profit from a law forbidding the same behavior by their French counterparts to receive large inflows of web visits from France. We exploit the unusual timing and degree of confidence with which exit polls were released in the second round of the 2017 presidential elections to investigate their effect on voter turnout. Our analysis is based on comparing turnout rates at different times on the election day, in the first and second round, and with respect to previous elections. We find a significant decrease in turnout of around 3 to 4 percentage points after the exit polls' publication which is suggestive of a causal effect, although similar trends were observed in previous elections. The effect is stronger in departments close to the Belgian border shortly after the release of the exit polls. We do not find clear evidence that either candidate benefited from the decrease in turnout, yet we cannot exclude the presence of a small underdog effect which reduced the winning margin by around 1 percentage point.

Mots clés: exit polls, voter turnout, underdog effect, bandwagon effect
Téléchargement Icône PDF wp_2022_-_nr_07.pdf (995.2 Ko)
Loss Aversion and Conspicuous Consumption in Networks
Yann Bramoullé
Christian Ghiglino

We introduce loss aversion into a model of conspicuous consumption in networks. Agents allocate their income between a standard good and a status good to maximize a Cobb-Douglas utility. Agents interact over a connected network and compare their status consumption to their neighbors' average consumption. Loss aversion has a profound impact. If loss aversion is large enough relative to income heterogeneity, a continuum of Nash equilibria appears and all agents consume the same quantity of status good. Otherwise, there is a unique Nash equilibrium and richest agents earn strict status gains while poorest agents earn strict status losses.

Mots clés: loss Aversion, conspicuous consumption, social networks
Téléchargement Icône PDF wp_2022_-_nr_06.pdf (645.36 Ko)
Residential segregation matters to racial income gaps: Evidence from South Africa
Florent Dubois
Christophe Muller

We contend that residential segregation should be an essential component of the analyses of socio-ethnic income gaps. Focusing on the contemporary White/African gap in South Africa, we complete Mincer wage equations with an Isolation index that reflects the level of segregation in the local area where individuals dwell. We decompose the income gap distribution into detailed composition and structure components. Segregation is found to be the main contributor of the structure effect, ahead of education and experience, and to make a sizable contribution to the composition effect. Moreover, segregation is found to be harmful at the bottom of the African income distribution, notably in relation to local informal job-search networks, while it is beneficial at the top of the White income distribution. Specific subpopulations are identified that suffer and benefit most from segregation, including for the former, little educated workers in agriculture and mining, often female, confined in their personal networks. Finally, minimum wage policies are found likely to attenuate most segregation’s noxious mechanisms, while a variety of policy lessons are drawn from the decomposition analysis by distinguishing not only compositional from structural effects, but also distinct group-specific social positions.

Mots clés: residential segregation, post-apartheid South Africa, distribution analysis, generalized decompositions
Téléchargement Icône PDF wp_2022_-_nr_05.pdf (554.09 Ko)
Poverty Measurement under Income and Price Dispersions
Christophe Muller

This chapter discusses facts, methods and empirical results that pertain to poverty measurement under income and price dispersions. The correlation of prices and living standards is examined, and its origins are considered, in terms of whether such origins are related to consumer preferences, economic interactions and market imperfections.

Then, the relationship of price dispersion and aggregate social indicators - including poverty measures - is analysed by combining stochastic hypotheses about prices and incomes with normative properties of social and poverty indicators.

Finally, empirical results about how dispersed heterogeneous price indices affect poverty measurement, anti-poverty targeting and poverty-alleviation price reforms are reviewed.

Mots clés: poverty, prices, living standards, price dispersion, poverty alleviation, price indices
Téléchargement Icône PDF wp_2022_-_nr_04.pdf (355.85 Ko)
Matching with Recall
Yann Bramoullé
Brian W. Rogers
Erdem Yenerdag

We study a two-period one-to-one dynamic matching environment in which agents meet randomly and decide whether to match early or defer. Crucially, agents can match with either partner in the second period. This "recall" captures situations where, e.g., a firm and worker can conduct additional interviews before contracting. Recall has a profound impact on incentives and on aggregate outcomes. We show that the likelihood to match early is nonmonotonic in type: early matches occur between the good-but-not-best agents. The option value provided by the first-period partner provides a force against unraveling, so that deferrals occur under small participation costs.

Mots clés: dynamic matching, unraveling, recall
Téléchargement Icône PDF wp_2022_-_nr_03.pdf (1.28 Mo)
Altruism Networks, Income Inequality, and Economic Relations
Yann Bramoullé
Rachel E Kranton

What patterns of economic relations arise when people are altruistic rather than strategically self-interested? This paper introduces an altruism network into a simple model of choice among partners for economic activity. With concave utility, agents effectively become inequality averse towards friends and family. Rich agents preferentially choose to work with poor friends despite productivity losses. Hence, network inequality-the divergence in incomes within sets of friends and family-is key to how altruism shapes economic relations and output. Skill homophily also plays a role; preferential contracts and productivity losses decline when rich agents have poor friends with requisite skills.

Téléchargement Icône PDF wp_2022_-_nr_02.pdf (591.96 Ko)
The (Market) Value of State Honors
Stéphane Benveniste
Renaud Coulomb
Marc Sangnier

State awards to civilians are a widespread social phenomenon across space and time. This paper quantifies the impact of State awards given to Directors on the stock value of their firms. We link a comprehensive dataset of recipients of the Légion d'honneurthe most prestigious official award in France-over the 1995-2019 period to Board positions in French listed firms. We document large abnormal returns in the stocks of recipients' firms at the date of the award, suggesting that awards signal valuable access to policy-makers. This interpretation is corroborated by the absence of any market reaction for recipients who were already identified before award receipt as being close to the Government.

Mots clés: Awards, State Honors, Symbolic Capital, Political Connections
Téléchargement Icône PDF wp_2022_-_nr_01.pdf (23.59 Mo)