Documents de travail

2018-58
Child Labor and Schooling Decisions among Self-Help Groups Members in Rural India
Jean-Marie Baland
Timothée Demont
Rohini Somanathan

This paper investigates the consequences of the participation in informal microfinance groups, known as Self-Help Groups (SHGs), on children’s education and work in rural India. We analyze first-hand data collected from a panel of households in areas where new groups were formed in 2002. We observe these households three times over a five year period, which allows us to examine medium-term effects of SHG participation. We find a robust and strong increase in treated children’s secondary school enrollment rate over time, by about 20 percentage points, to be compared with a baseline rate of 45%. This effect stems from a quicker grade progression, leading to lower drop-out rates between primary and secondary school. We find no decrease in overall child labor (but a reorientation towards part-time domestic work), indicating that there is no clear substitution between labor and education for children of secondary-school age in rural India. Contrary to what is usually believed, we show that credit does not play any direct role in the increased schooling. However, we find evidence that it partly follows from social interactions within SHGs, under the form of peer effects. Our findings indicate that microfinance groups can have large effects on the human capital of participants and their families, though such effects can take time to materialize and happen through unintended channels.

Mots clés: microfinance, self-help groups, education, child labor, peer effects, India
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2018-57
A community based program promotes sanitation
María Laura Alzúa
Habiba Djebbari
Amy J. Pickering

Basic sanitation facilities are still lacking in large parts of the developing world, engendering serious environmental health risks. Interventions commonly deliver in-kind or cash subsidies to promote private toilet ownership. In this paper, we assess an intervention that provides information and behavioral incentives to encourage villagers in rural Mali to build and use basic latrines. Using an experimental research design and carefully measured indicators of use, we find a sizeable impact from this intervention: latrine ownership and use almost doubled in intervention villages, and open defecation was reduced by half. Our results partially attribute these effects to increased knowledge about cheap and locally available sanitation solutions. They are also associated with shifts in the social norm governing sanitation. Taken together, our findings, unlike previous evidence from other contexts, suggest that a progressive approach that starts with ending open defecation and targets whole communities at a time can help meet the new Sustainable Development Goal of ending open defecation.

Mots clés: sanitation, behavioral change, community-based intervention, social norm
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2018-56
Communication and Commitment with Constraints
Raghul S Venkatesh

An informed and an uninformed agent both contribute to a joint coordination game such that their actions are substitutable and constrained. When agents are allowed to share information prior to the coordination stage, in the absence of commitment , there is full information revelation as long as constraints are not binding. The presence of binding constraints results in only partial revelation of information in equilibrium. The most informative equilibrium is strictly pareto dominant. Allowing for limited commitment strictly increases (ex ante) welfare of both agents. I completely characterize the optimal commitment mechanism for the uninformed agent. Finally, I apply the theoretical results to the problem of information sharing and binding agreements in international alliances.

Mots clés : asymmetric information, cheap talk, commitment, strategic substitutes
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2018-55
On Information Aggregation in International Alliances
Raghul S Venkatesh

I develop a model of strategic communication to study information aggregation in an alliance between multiple players. An alliance exhibits four features: i) imperfect private information among players; ii) substitutability in actions; iii) constraints on the action set; and iv) preference heterogeneity (biases). The main result of the paper derives conditions for full information aggregation within the alliance under a public communication protocol. Full information aggregation ensues as long as players' biases are sufficiently cohesive with respect to the constraints on the action set. When players can (costlessly) choose an action set ex ante, I derive the precise conditions on the minimal action set such that there is full information aggregation. Comparative statics uncovers two sources for the differences in the size of the minimal action set between players: bias over outcomes (preference effect) and degree of interdependency (interdependency effect). The results are discussed in the context of burden sharing incentives during military interventions within NATO.

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2018-54
Accounting for Protest Attitudes in Willingness to Pay for Universal Health Coverage
Mohammad Abu-Zaineh, Olivier Chanel, Khaled Makhloufi

In their attempts to implement universal health coverage (UHC), different developing countries encounter different types of obstacles. In Tunisia, major challenges include a widespread informal sector and protestors’ general discontent with rising economic insecurity and inequality, the rollback of the state and public welfare. We apply a contingent valuation survey to a non-healthcare-covered Tunisian sample vis-à-vis joining and paying for a health insurance scheme. We pay attention to the nature of the willingness- to-pay (WTP) values obtained, distinguishing genuine null from protest values. The latter may reflect not only protesters’ beliefs regarding the survey, but also their lack of trust in government’s commitment to ensuring the provision of quality healthcare. We use alternative econometric modeling strategies to account and correct for selection issues arising from protest answers. Our results support the presence of self- selection and, by predicting protesters’ WTP, allow the “true” sample mean WTP to be computed. This appears to be about 14% higher than the elicited mean WTP. The WTP of the poorest non-covered respondents represents about one and a half times the current contributions of the poorest formal sector enrollees, suggesting that voluntary affiliation to the formal health insurance scheme could be a step towards achieving UHC. Overall, we highlight the importance of taking into account protest positions for the evaluation of progress towards UHC.

Mots clés : willingness-to-pay, contingent valuation, universal health coverage, self-selection, protest attitude
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2018-53
Local Linear Dependence Measure for Functionally Correlated Variables
Loann D. Desboulets, Costin Protopopescu

We propose a new correlation measure for functionally correlated variables based on local linear dependence. It is able to detect non-linear, non-monotonic and even implicit relationships. Applying the classical linear correlation in a local framework combined with tools from Principal Components Analysis the statistic is capable of detecting very complex dependences among the data. In a first part we prove that it meets the properties of independence, similarity invariance and dependence and the axiom of continuity. In a second part we run a numerical simulation over a variety of dependences and compare it to other dependence measures in the literature. The results indicate that we outperform existing coefficients. We also show better stability and robustness to noise.

Mots clés : local correlation, Pearson coefficient, PCA, non-parametric statistic, implicit dependence, non-monotonic, non-linear
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2018-52
A Review on Variable Selection in Regression Analysis
Loann D. Desboulets

In this paper, we investigate on 39 Variable Selection procedures to give an overview of the existing literature for practitioners. "Let the data speak for themselves" has become the motto of many applied researchers since the amount of data has significantly grew. Automatic model selection have been raised by the search for data-driven theories for quite a long time now. However while great extensions have been made on the theoretical side still basic procedures are used in most empirical work, eg. Stepwise Regression. Some reviews are already available in the literature for variable selection, but always focus on a specific topic like linear regression, groups of variables or smoothly varying coefficients. Here we provide a review of main methods and state-of-the art extensions as well as a topology of them over a wide range of model structures (linear, grouped, additive, partially linear and non-parametric). We provide explanations for which methods to use for different model purposes and what are key differences among them. We also review two methods for improving variable selection in the general sense.

Mots clés : variable selection, automatic modelling, sparse models
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2018-51
Co-movements in Market Prices and Fundamentals: A Semiparametric Multivariate GARCH Approach
Loann D. Desboulets

In this paper we investigate on Multivariate GARCH models to assess the co-movements between stock prices of american firms listed on main markets and fundamentals. Co-movements can be seen as correlations. The latter are usually estimated via standard GARCH models such as the Dynamic Conditional Correlation (Engle, 2002) or the Baba-Engle-Kraft-Kroner (Baba et al., 1990). Nevertheless more flexible models such as the Orthogonal GARCH of Alexander (2001) can be used as well. We also introduce a new Semi-parametric Orthogonal GARCH as a natural non-linear extension of the Orthogonal GARCH. A Montecarlo simulation is conducted to evaluate finite sample performance of each model before applying them to the data. Empirical results show evidence that during crises, prices are less correlated with fundamentals that in normal periods.

Mots clés : non-parametric, Multivariate GARCH, dynamic correlation, PCA
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2018-50
Federal Minimum Wage Hikes Do Reduce Teenage Employment
Stephen Bazen, Vêlayoudom Marimoutou

In 2002 we published a paper in which we used state space time series methods to analyse the teenage employment-federal minimum wage relationship in the US (Bazen and Marimoutou, 2002). The study used quarterly data for the 46 year period running from 1954 to 1999. We detected a small, negative but statistically significant effect of the federal minimum wage on teenage employment, at a time when some studies were casting doubt on the existence of such an effect. In this note we re-estimate the original model with a further 16 years of data (up to 2015). We find that the model satisfactorily tracks the path of the teenage employment-population ratio over this 60 year period, and yields a consistently negative and statistically significant effect of minimum wages on teenage employment. The conclusion reached is the same as in the original paper, and the elasticity estimates very similar: federal minimum wage hikes lead to a reduction in teenage employment with a short run elasticity of around -0.13. The estimated long run elasticity of between -0.37 and -0.47 is less stable, but is nevertheless negative and statistically significant.

Mots clés : minimum wage, teenage employment, state space methods, unobserved components model
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2018-49
Ricœur, Rawls and the Aporia of the Just
Feriel Kandil

The article conducts a comparative study between Ricœur’s and Rawls’ thought on justice. Whereas Ricoeur focuses on the dialectic between the just and the good, Rawls is concerned with the ideal conditions under which a universal consensus on the principles of justice may be reached. Ricœur gives much importance to reading Rawls. He offers many commentaries, especially on Rawls’s major contribution, A Theory of Justice. This chapter focuses on such comments and on the relating paradoxical interpretation of Rawls’s approach to justice Ricœur provides. First, this chapter suggests that, with his interpretation of Rawls’s major contribution, Ricœur contributes to put the light on the conflicts between the just and the good. These conflicts are the key elements of what may be referred to as the aporia of the just, which consists in the contradictory requirements coming from the just considered as a virtue of either institutions or individuals. Second, this chapter shows that whereas the aporia is a major problem in Rawls’ approach to justice, it is at the core of the dialectic dynamic Ricœur sees within moral life. In his work, the aporia leads to what we call the three paradoxes of justice, which are the paradoxes with legal, distributive and political justice. Considering such paradoxes, Ricœur takes the ethics of practical wisdom as a necessary recourse. The latter provides fair decision makers with the resources needed for the aporia to be, if not resolved, at least eased.

Mots clés : social justice, distributive justice, legal justice, political justice, the just, the good, principles of justice, Kant, Aristotle, Ricœur, Rawls, political paradox, sense of justice
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2018-48
Trade Policy and Market Power: Firm-level Evidence
Alan Asprilla, Nicolas Berman, Olivier Cadot, Melise Jaud

This paper identifies the effect of trade policy on market power through new data and a new identification strategy. We use a large dataset containing export values and quantities by product and destination for all exporting firms in 12 developing and emerging countries over several years, merged with destination-product specific information on tariffs and non-tariff barriers. We identify market power by observing how exporting firms price discriminate across markets in reaction to variations in bilateral exchange rates. Pricing-to-market is prevalent in all regions of our sample, even among small firms, although it is increasing in firm size, in accordance with theory. More importantly, we find that the effect of non-tariff measures is not isomorphic to that of tariffs: the pricing-to-market behavior we observe suggests that, while tariffs reduce the market power of foreign firms through classic rent-shifting effects, non-tariff measures alter market structure and reinforce the market power of non-exiting firms, domestic and foreign ones alike.

Mots clés : trade policy, non-tariff measures, tariffs, exchange rate, price discrimination
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2018-47
Financial Constraints, Institutions, and Foreign Ownership
Ron Alquist, Nicolas Berman, Rahul Mukherjee, Linda L. Tesar

We develop a model of cross-border acquisitions in which the foreign acquirer's ownership choice reflects a trade-off between easing the target's credit constraints and the costs of operating in an environment with weak institutions. Data on domestic and foreign acquisitions in emerging markets over the period 1990-2007 support the model predictions. The share of full foreign acquisitions is higher in sectors more reliant on external finance, in countries with lower financial development, and in countries with higher institutional quality. Sectoral external finance dependence accentuates the effect of country-level financial development and institutional quality. By contrast, the level of foreign ownership in partial acquisitions is insensitive to institutional factors and depends weakly on financial factors.

Mots clés : foreign direct investment, foreign ownership, mergers and acquisitions, financial development, institutional quality
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2018-46
Demand Learning and Firm Dynamics: Evidence from Exporters
Nicolas Berman, Vincent Rebeyrol, Vincent Vicard

This paper provides direct evidence that learning about demand is an important driver of firms' dynamics. We present a model of Bayesian learning in which firms are uncertain about their idiosyncratic demand in each of the markets they serve, and update their beliefs as noisy information arrives. Firms are predicted to update more their beliefs to a given demand shock, the younger they are. We test and empirically confirm this prediction, using the structure of the model together with exporter-level data to identify idiosyncratic demand shocks and the firms’ beliefs about future demand. Consistent with the theory, we also find that the learning process is weaker in more uncertain environments.

Mots clés : firm growth, belief updating, demand, exports, uncertainty
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2018-45
Asymptotics of Cholesky GARCH Models and Time-Varying Conditional Betas
Serge Darolles, Christian Francq, Sébastien Laurent

This paper proposes a new model with time-varying slope coefficients. Our model, called CHAR, is a Cholesky-GARCH model, based on the Cholesky decomposition of the conditional variance matrix introduced by Pourahmadi (1999) in the context of longitudinal data. We derive stationarity and invertibility conditions and prove consistency and asymptotic normality of the Full and equation-by-equation QML estimators of this model. We then show that this class of models is useful to estimate conditional betas and compare it to the approach proposed by Engle (2016). Finally, we use real data in a portfolio and risk management exercise. We find that the CHAR model outperforms a model with constant betas as well as the dynamic conditional beta model of Engle (2016).

Mots clés : multivariate-GARCH, conditional betas, covariance
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2018-44
Generating Univariate Fractional Integration within a Large VAR(1)
Guillaume Chevillon, Alain Hecq, Sébastien Laurent

This paper shows that a large dimensional vector autoregressive model (VAR) of finite order can generate fractional integration in the marginalized univariate series. We derive high-level assumptions under which the final equation representation of a VAR(1) leads to univariate fractional white noises and verify the validity of these assumptions for two specific models.

Mots clés : long memory, vector autoregressive model, marginalization, final equation representation
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2018-43
Volatility Estimation and Jump Detection for drift-diffusion Processes
Sébastien Laurent, Shuping Shi

Logarithms of prices of financial assets are conventionally assumed to follow drift-diffusion processes. While the drift term is typically ignored in the infill asymptotic theory and applications, the presence of nonzero drifts is an undeniable fact. The finite sample theory and extensive simulations provided in this paper reveal that the drift component has a nonnegligible impact on the estimation accuracy of volatility and leads to a dramatic power loss of a class of jump identification procedures. We propose an alternative construction of volatility estimators and jump tests and observe significant improvement of both in the presence of nonnegligible drift. As an illustration, we apply the new volatility estimators and jump tests, along with their original versions, to 21 years of 5-minute log-returns of the NASDAQ stock price index.

Mots clés : diffusion process, nonzero drift, finite sample theory, volatility estimation, jumps
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2018-42
Complementary Monopolies with Asymmetric Information
Didier Laussel, Joana Resende

We investigate how asymmetric information on final demand affects strategic interaction between a downstream monopolist and a set of up-stream monopolists, who independently produce complementary inputs. We study an intrinsic private common agency game in which each supplier i independently proposes a pricing schedule contract to the assembler, specifying the supplier's payment as a function of the assembler's purchase of input i. We provide a necessary and sufficient equilibrium condition. A lot of equilibria satisfy this condition but there is a unique Pareto-undominated Nash equilibrium from the suppliers' point of view. In this equilibrium there are unavoidable efficiency losses due to excessively low sales of the good. However, suppliers may be able to limit these distortions by implicitly coordinating on an equilibrium with a rigid (positive) output in bad demand circumstances.

Mots clés : complementary inputs, asymmetric information, private common agency games
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2018-41
Threshold Regressions for the Resource Curse
Nicolas Clootens, Djamel Kirat

This paper analyzes the behavior of cross-country growth rates with respect to resource abundance and dependence. We reject the linear model that is commonly-used in growth regressions in favor of a multiple-regime alternative. Using a formal sample-splitting method, we find that countries exhibit different behaviors with respect to natural resources depending on their initial level of development. In high-income countries, natural resources play only a minor role in explaining the differences in national growth rates. On the contrary, in low-income countries abundance seems to be a blessing but dependence restricts growth.

Mots clés : natural resources, growth, resource curse, threshold regressions
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2018-40
Is the Output Growth Rate in NIPA a Welfare Measure?
Jorge Duran, Omar Licandro

Bridging modern macroeconomics and the economic theory of index numbers, this paper shows that real output growth as measured by National Income and Product Accounts (NIPA) is a welfare based measure. In a two-sector dynamic general equilibrium model of heterogeneous households, recursive preferences and quasi-concave technology, individual welfare depends on present and future consumption. In this context, the Bellman equation provides a representation of preferences over current consumption and investment. Applying standard index number theory to this representation of preferences, it is shown that the Fisher-Shell true quantity index is equal to the Divisia index in turn well approximated by the Fisher ideal chain index used in NIPA.

Mots clés : growth measurement, quantity indexes, equivalent variation, NIPA, Fisher-Shell index, Divisia index, embodied technical change
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2018-39
Technology, Market Structure and the Gains from Trade
Giammario Impullitti, Omar Licandro, Pontus Rendahl

We study the gains from trade in a new model with oligopolistic competition, firm heterogeneity, and innovation. Lowering trade costs reduces markups on domestic sales but increases markups on export sales, as firms do not pass the entire reduction in trade costs onto foreign consumers. Trade liberalisation can also reduce the number of firms competing in each market, thereby increasing markups on both domestic and export sales. For the majority of exporters, however, the pro- competitive effect prevails and their average markups decline. The incomplete pass-though and the reduction in the number of competitors instead dominate for top-exporters – the top 0.1% of firms – which end up increasing their markup. In a quantitative exercise we find that the aggregate effect of trade-induced markup changes is pro-competitive and accounts for the majority of the welfare gains from trade. Trade-induced changes in competition affect survival on domestic and export markets and firms’ decision to innovate. All exporters, and especially the top exporters, increase their market size after liberalisation which, in turn, encourages them to innovate more. Hence, top exporters contribute negatively to welfare gains by increasing their markups but positively by increasing innovation and productivity. Firms’ innovation response accounts for a small but non-negligible share of the welfare gains while the contribution of selection is U-shaped, being negative for small liberalisations and positive otherwise. A more globalised economy is therefore populated by larger, fewer and more innovative firms, each feature representing an important source of the gains from trade.

Mots clés : gains from trade, heterogeneous firms, oligopoly, innovation, endogenous markups, endogenous market structure
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2018-38
Altruism and Risk Sharing in Networks
Renaud Bourlès, Yann Bramoullé, Eduardo Perez-Richet

We provide the first analysis of the risk-sharing implications of altruism networks. Agents are embedded in a fixed network and care about each other. We study whether altruistic transfers help smooth consumption and how this depends on the shape of the network. We identify two benchmarks where altruism networks generate efficient insurance: for any shock when the network of perfect altruism is strongly connected and for any small shock when the network of transfers is weakly connected. We show that the extent of informal insurance depends on the average path length of the altruism network and that small shocks are partially insured by endogenous risk-sharing communities. We uncover complex structural effects. Under iid incomes, central agents tend to be better insured, the consumption correlation between two agents is positive and tends to decrease with network distance, and a new link can decrease or increase the consumption variance of indirect neighbors. Overall, we show that altruism in networks has a first-order impact on risk and generates specific patterns of consumption smoothing.

Mots clés : altruism, networks, risk sharing, Informal Insurance
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2018-37
Diffusion Centrality: Foundations and Extensions
Yann Bramoullé, Garance Genicot

We first clarify the precise theoretical foundations behind the notion of diffusion centrality. This allows us to address a minor inconsistency in the model description of Banerjee et al. (2013). We then identify unnatural implicit assumptions in the model of political intermediation proposed by Cruz, Labonne & Querubfn (2017). We introduce two extensions of diffusion centrality, targeting centrality and reachability, which we believe better capture features of contexts with targeted requests. We derive general explicit formulas to compute these new measures.

Mots clés : diffusion centrality, Katz-Bonacich centrality, political intermediation, targeting
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2018-36
The Wall’s Impact in the Occupied West Bank: A Bayesian Approach to Poverty Dynamics Using Repeated Cross-Sections
Tareq Sadeq, Michel Lubrano

In 2002, the Israeli government decided to build a wall inside the occupied West Bank. The wall had a marked effect on the access to land and water resources as well as to the Israeli labour market. It is difficult to include the effect of the wall in an econometric model ex- plaining poverty dynamics as the wall was built in the richer region of the West Bank. So a diff-in-diff strategy is needed. Using a Bayesian approach, we treat our two-period repeated cross-section data set as an incomplete data problem, explaining the income-to-needs ratio as a function of time invariant exogenous variables. This allows us to provide inference results on poverty dynamics. We then build a conditional regression model including a wall variable and state dependence to see how the wall modified the initial results on poverty dynamics. We find that the wall has increased the probability of poverty persistence by 58 percentage points and the probability of poverty entry by 18 percentage points.

Mots clés : Bayesian inference, pseudo panels, data augmentation, walls, poverty dynamics
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2018-35
GCC Sovereign Wealth Funds: Why do they Take Control?
Jeanne Amar, Jean-François Carpantier, Christelle Lecourt

In this paper we examine the investment strategy of sovereign wealth funds (SWFs) of the Gulf Cooperation Council (GCC) countries. GCC SWFs are considered as relatively opaque investors and strongly politicized, raising some concerns for perceived political and security risks. We investigate what are the drivers of majority cross- border equity acquisitions made by these institutional investors over the period 2006-2015. Using both Logit and ordered Logit models, we test if the usual determinants of SWFs investments still stand when we look at influential (> 10%) or majority (> 50%) acquisitions made by GCC SWFs. We find that GCC SWFs do not consider financial characteristics of the targeted firms when they acquire large cross-border stakes but rather the characteristics of the country (countries in the European union and/or countries with a high level of shareholders protection), suggesting that their motives may go beyond pure profit maximization. We also find that transparent funds are more likely to take influential or majority stakes and that they do so predominantly in non-strategic sectors. Overall, our results indicate that even if GCC SWFs do not seek only for financial returns, acquiring majority stakes is not a lever for GCC governments to get strategic interests in the target countries.

Mots clés : sovereign wealth funds, cross-border majority acquisitions, ordered logit model, GCC
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2018-34
Reforms and the Real Exchange Rate: The Role of Pricing-to-Market
Lise Patureau, Céline Poilly

The paper investigates how endogenous markups affect the extent to which policy reforms can influence international competitiveness. In a two-country model where trade costs allow for international market segmentation, we show that endogenous pricing-to-market behavior of firms acts as an important transmission channel of the policies. By strengthening the degree of competition between firms, product market deregulation at home leads to a reduction in domestic markups, which generally leads to an improvement in the international competitiveness of the Home country. Conversely, the power of competitive tax policy to depreciate the real exchange rate is dampened, as domestic firms take the opportunity of the labor tax cut to increase their markups. The variability of markups also affects the normative implications of the reforms. This indicates the importance of taking into account endogenous pricing-to-market behavior when intending to correctly evaluate the overall effects of the reforms.

Mots clés : exchange rate, product market deregulation, fiscal reform, endogenous firm entry, pricing-to-market, endogenous markups
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2018-33
Immigrants' Wage Performance in a Routine Biased Technological Change Era: France 1994-2012
Catherine Laffineur, Eva Moreno Galbis, Jeremy Tanguy, Ahmed Tritah,

Over the period 1994-2012, immigrants’ wage growth in France has outperformed that of natives on average by more than 14 percentage points. This striking wage growth performance occurs despite similar changes in employment shares along the occupational wage ladder. In this paper we investigate the sources of immigrants’ relative wage performance focusing on the role of occupational tasks. We first show that immigrants’ higher wage growth is not driven by more favorable changes in general skills (measured by age, education and residence duration), and then investigate to what extent changes in task-specific returns to skills have contributed to the differential wage dynamics through two different channels: different changes in the valuation of skills (“price effect”) and different occupational sorting (“quantity effect”). We find that the wage growth premium of immigrants is not explained by different changes in returns to skills across occupational tasks but rather by the progressive reallocation of immigrants towards tasks whose returns have increased over time. Immigrants seem to have taken advantage of ongoing labor demand restructuring driven by globalization and technological change. In addition im- migrants’ wages have been relatively more affected by minimum wage increases, due to their higher concentration in this part of the wage distribution.

Mots clés : wage dynamics, tasks, immigrants, skills
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2018-32
Network Matching Efficiency along the Economic Cycle: Direct and Indirect Ties
Arnaud Herault, Eva Moreno Galbis, Francois-Charles Wolff

There is a large consensus in the literature on the major role of social networks as a helpful instrument to find a job. In this paper, we study the social network matching rate along the economic cycle both from a theoretical and empirical perspective. Using the French Labor Force Survey for the period 2003-2012, we find that the relationship between the network matching rate based on direct ties and the job finding rate is decreasing and convex as predicted by our theoretical setup. Results are completely modified when we consider a measure of the network matching rate based on indirect ties related to the share of peers in a job. In this case, we find a linearly increasing relation between the network matching rate and the job finding rate. This underlines not only the heterogeneous ways through which network membership may influence the individuals’ performance on the labor market, but also the different behaviors of these driving factors along the economic cycle.

Mots clés : employment, network matching rate, direct and indirect ties, job finding rate, immigrants
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2018-31
Non-Balanced Endogenous Growth and Structural Change: When Romer Meets Kaldor and Kuznets
Christian Ghiglino, Kazuo Nishimura, Alain Venditti

We propose a model of non-balanced endogenous growth in which the final good, which can be either consumed or used as capital, is produced using two intermediate inputs, one being “knowledge-intensive”. Agents working in the knowledge-intensive sector need to accumulate technological knowledge and thus have to decide how to split their individual unit of time between accumulation of technological knowledge (research) and work. Agents working in the second sector do not need to accumulate knowledge and thus devote all their individual unit of time to work. Individual knowledge therefore becomes a labor-augmenting factor, and knowledge accumulation leads to an unbounded increase in TFP in the knowledge-intensive sector, and thus to endogenous capital deepening. The asymmetry in the growth rates of TFP leads to non-balanced growth. Labor (number of workers) reallocations across sectors occur, leading to a greater increase in output for the knowledge-intensive sector. We show that non-balanced growth is consistent with Kaldor facts, as the asymptotic equilibrium is above all characterized by a constant interest rate and capital share in national income. However, 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. We therefore extend the Lucas [19] finding and prove the existence of non-convergence across countries in a framework with structural change.

Mots clés : two-sector model, technological knowledge, non-balanced endogenous growth, structural change, Kaldor and Kuznets facts
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2018-30
Competitive Equilibrium Cycles for Small Discounting in Discrete-Time Two-Sector Optimal Growth Models
Alain Venditti

We study the existence of endogenous competitive equilibrium cycles under small discounting in a two-sector discrete-time optimal growth model. We provide precise concavity conditions on the indirect utility function leading to the existence of period-two cycles with a critical value for the discount factor that can be arbitrarily close to one. Contrary to the continuous-time case where the existence of periodic-cycles is obtained if the degree of concavity is close to zero, we show that in a discrete-time setting the driving condition does not require a close to zero degree of concavity but a symmetry of the indirect utility function’s concavity properties with respect to its two arguments.

Mots clés : two-sector optimal growth model, small discounting, period-two cycles, strong and weak concavity
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2018-29
Time-varying Consumption Tax, Productive Government Spending, and Aggregate Instability
Mauro Bambi, Alain Venditti

In this paper we investigate if government balanced-budget rules together with endogenous taxation may lead to aggregate instability in an endogenous growth framework. After highlighting the differences with the exogenous growth framework, we prove that under counter-cyclical consumption taxes, while there exists a unique balanced growth path, sunspot equilibria based on self-fulfilling expectations occur through a form of global indeterminacy. In addition, we argue that this result is empirically plausible for a large set of OECD countries and that it may also emerge with endogenous income taxes.

Mots clés : endogenous growth, time-varying consumption tax, global indeterminacy, self-fulfilling expectations, sunspot equilibria
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2018-28
A Note on Balanced-Budget Income Taxes and Aggregate (In)Stability in Multi-Sector Economies
Nicolas Abad, Alain Venditti

We examine the impact of balanced-budget labor income taxes on the existence of expectation- driven business cycles in a two-sector version of the Schmitt-Grohé and Uribe (SGU) [18] model with constant government expenditures and counter-cyclical taxes. Our results show that the destabilizing impact of labor income taxes strongly depends on the capital intensity difference across sectors. Local indeterminacy is indeed more likely when the consumption good sector is capital intensive, as the minimal tax rate decreases, and less likely when the investment good sector is capital intensive, as the minimal tax rate increases. The implication of this result can be quantitatively significant. Indeed, when compared to SGU, local indeterminacy can be either completely ruled out for all OECD countries when the investment good is sufficiently capital intensive, or drastically improved, delivering indeterminacy for a larger set of OECD countries, if the consumption good is sufficiently capital intensive. Focusing however on recent estimates of the sectoral capital shares corresponding to the empirically plausible case of a capital intensive consumption good, we find that there is a significant increase of the range of economically relevant labor tax rates (from a minimum tax rate of 30% to 24.7%) for which local indeterminacy arises with respect to the aggregate formulation of SGU.

Mots clés : aggregate (in)stability, local indeterminacy, expectations-driven fluctuations, labor income taxes, balanced-budget rule, infinite-horizon two-sector model, capital intensity difference
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2018-27
On Sunspot Fluctuations in Variable Capacity Utilization Models
Frédéric Dufourt, Alain Venditti, Rémi Vives

We investigate the extent to which standard one sector RBC models with positive externalities and variable capacity utilization can account for the large hump- shaped response of output when the model is submitted to a pure sunspot shock. We refine the Benhabib and Wen (2004) model considering a general type of additive separable preferences and a general production function. We provide a detailed theoretical analysis of local stabilities and local bifurcations as a function of various structural parameters. We show that, when labor is infinitely elastic, local indeterminacy occurs through Flip and Hopf bifurcations for a large set of values for the elasticity of intertemporal substitution in consumption, the degree of increasing returns to scale and the elasticity of capital- labor substitution. Finally, we provide a detailed quantitative assessment of the model and conclude with mixed results. We show that although the model is able theoretically to generate a hump-shaped dynamics of output following an i.i.d. sunspot shock under realistic parameter values, the hump is too persistent for the model to be considered fully satisfactory from an empirical point of view.

Mots clés : Indeterminacy, real business cycles, sunspot shock, capacity utilization, externalities
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2018-26
Non-Separable Preferences do not Rule Out Aggregate Instability under Balanced-Budget Rules: A Note
Nicolas Abad, Thomas Seegmuller, Alain Venditti

We investigate the role of non-separable preferences on the occurrence of macroeconomic instability under a balanced-budget rule where government spending is financed by a tax on labor income. Considering a one-sector neoclassical growth model with a large class of non-separable utility functions, we find that expectations-driven fluctuations easily occur when consumption and labor are Edgeworth substitutes or weak Edgeworth complements. Under these properties, an intermediate range of tax rates and a sufficiently low elasticity of intertemporal substitution in consumption lead to instability.

Mots clés : Indeterminacy, expectations-driven business cycles, labor income taxes, balanced-budget rule, non-separable preferences
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2018-25
Introduction to Financial Frictions and Debt Constraints
Raouf Boucekkine, Kazuo Nishimura, Alain Venditti

This is an introduction to the special section on financial frictions and debt constraints.

Mots clés : rational bubbles, credit and borrowing constraints, public debt constraints, (in)complete markets, heterogeneous agents, sunspot fluctuations
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2018-24
Introduction to International Financial Markets and Banking Systems Crises
Raouf Boucekkine, Kazuo Nishimura, Alain Venditti

This note introduces to the literature streams explored in the special section on international financial markets and banking systems crises. All topics tackled are related to the Great Recession. A brief overview of the research questions and related literatures is provided.

Mots clés : financial frictions, financial instability, international transmission, credit crunch, banking and sovereign debt crisis
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2018-23
Physicians’ Incentives to Adopt Personalized Medicine: Experimental Evidence
David Bardey, Samuel Kembou Nzale, Bruno Ventelou

We study physicians’ incentives to use personalized medicine techniques, replicating the physician’s trade-offs under the option of personalized medicine information. In a laboratory experiment where prospective physicians play a dual-agent real-effort game, we vary both the information structure (free access versus paid access to personalized medicine information) and the payment scheme (pay-for-performance (P4P), capitation (CAP) and fee-for-service (FFS)) by applying a within-subject design. Our results are threefold. i) Compared to FFS and CAP, the P4P payment scheme strongly impacts the decision to adopt personalized medicine. ii) Although expected to dominate the other schemes, P4P is not always efficient in transforming free access to personalized medicine into higher quality patient care. iii) When it has to be paid for, personalized medicine is positively associated with quality, suggesting that subjects tend to make better use of information that comes at a cost. We conclude that this last result can be considered a “commitment device”. However, quantification of our results suggests that the positive impact of the commitment device observed is not strong enough to justify generalizing paid access to personalized medicine.

Mots clés : personalized medicine, fee-for-service, capitation, pay-for-performance, physician altruism, laboratory experiment
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2018-22
Wage Satisfaction and Wage History: How the Present Shapes the Past
Alberto Prati

Although satisfaction measures strongly depend on personal history, the relationship between memory and current well-being is still unclear. This article is dedicated to empirically investigating if current wage satisfaction affects the ability to date past wage changes. We match answers from a French national survey with administrative records, to compare the recalled and actual wage history. Our data support and extend some previous findings from the psychology literature: relatively remote events are recalled as closer in time, while relatively recent events are recalled as further in time. An instrumental variable strategy shows that these effects – respectively known as “forward” and “backward telescoping” – are partially caused by current satisfaction, so that, ceteris paribus, people who are satisfied with their wage tend to date wage cuts as more remote than they actually are. We suggest that this pattern of imperfect recall, which we denote as hedonic telescoping, opens a new perspective in the understanding of the well-known phenomenon of hedonic adaptation.

Mots clés : recall bias, wage satisfaction, wage history, hedonic adaptation, hedonic telescoping
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2018-21
Bubble on Real Estate: The Role of Altruism and Fiscal Policy
Lise Clain-Chamosset-Yvrard, Thomas Seegmuller

In this paper, we are interested in the interplay between real estate bubble, aggregate capital accumulation and taxation in an overlapping generations economy with altruistic households. We consider a three-period overlapping generations model with three key elements: altruism, portfolio choice, and financial market imperfections. Households realise different investment decisions in terms of asset at different periods of life, face a binding borrowing constraint and leave bequests to their children. We show that altruism plays a key role on the existence of a productive real estate bubble, i.e. a bubble in real estate raising physical capital stock and aggregate output. The key mechanism relies on the fact that a real estate bubble raises income of retired households. Because of higher bequests, there children are able to invest more in productive capital. Introducing fiscal policy, we show that raising real estate taxation dampens capital accumulation.

Mots clés : bubble, altruism, real estate, credit, overlapping generations
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2018-20
Managing Competition on a Two-Sided Platform
Paul Belleflamme, Martin Peitz

On many two-sided platforms, users on one side not only care about user participation and usage levels on the other side, but they also care about participation and usage of fellow users on the same side. Most prominent is the degree of seller competition on a platform catering to buyers and sellers. In this paper, we address how seller competition affects platform pricing, product variety, and the number of platforms that carry trade.

Mots clés : network effects, two-sided markets, platform competition, intermediation, pricing, Imperfect Competition
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2018-19
Inclusive Cognitive Hierarchy in Collective Decisions
Yukio Koriyama, Ali Ozkes

We study the implications of structural models of non-equilibrium thinking, in which players best respond while holding heterogeneous beliefs on the cognitive levels of others. We introduce an inclusive cognitive hierarchy model, in which players are capable of projecting the self to others in regard to their cognitive level. The model is tested in a laboratory experiment of collective decision-making, which supports inclusiveness. Our theoretical results show that inclusiveness is a key factor for asymptotic properties of deviations from equilibrium behavior. Asymptotic behavior can be categorized into three distinct types: naïve, Savage rational with inconsistent beliefs, and sophisticated.

Mots clés : collective decision-making, bounded rationality, cognitive hierarchy, information aggregation
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2018-18
Secular Stagnation: New Challenges for the Industrialized Countries in the 21st Century
Gilles Dufrenot, Meryem Rhouzlane

This paper attempts to provide an overview of the main challenges facing industrialized in a context of secular stagnation. There is no consensus on the meaning of this concept and various alternative views coexist. We present the key issues in the debates today, accounting for phenomena like the slowdown in factor productivity, liquidity and safety traps, the decline of natural interest rates, the historical downward trend of potential growths and low inflation rates. We provide a bird’s eye survey of the available literature on the causes of secular stagnation from a historical perspective, the symptoms, the main causes as well as some policies proposed to overcome it. We give some illustrations for the United Kingdom, the United States, the euro area and Japan.

Mots clés : secular stagnation, natural interest rates, history, industrialized countries
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2018-17
Transborder Ethnic Kin and Local Prosperity: Evidence from Night-Time Light Intensity in Africa
Christophe Muller, Pierre Pecher

Ethnicity often occupies a core role in integrated social, economic, and political development processes, which have mostly been studied within specific countries. Across countries, social and economic development may be supported by political capabilities achieved by ethnic kin abroad, although there is little hard evidence on politico-economic interactions through ethnic networks. We fill this gap by providing the first robust empirical evidence of the substantial effects of political predominance of transborder ethnic kin on local economic development in Africa. This is achieved by specifying and estimating dynamic spatial models of geolocalised luminosity and matching these data with other geolocalised information on geographic, political, and ethnic characteristics. Spatial and ethnic network effects are separately identified and jointly analysed. Not only distinct spatial effects and transborder ethnic effects are exhibited, but also are their complex dynamics and spatial distribution features in terms of local development. The results draw attention to the relevance of a broader international perspective on policies affecting ethnic politics within countries.

Mots clés : local development, ethnic networks, institutions
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2018-16
Male Reproductive Health, Fairness and Optimal Policies
Johanna Etner, Natacha Raffin, Thomas Seegmuller

Based on epidemiological evidence, we consider an economy where agents differ through their ability to procreate. Households with impaired fertility may incur health expenditures to increase their chances of parenthood. This health heterogeneity generates welfare inequalities that deserve to be ruled out. We explore three different criteria of social evaluation in the long-run: the utilitarian approach, which considers the well- being of all households, the ex-ante egalitarian criterion, which considers the expected well-being of the worst-off social group, and the ex-post egalitarian one, which only considers the realized well-being of the worst- off. In an overlapping generations model, we propose a set of economic instruments to decentralize each solution. To correct for the externality and inequalities, both a preventive (a taxation of capital) and a redistributive policy are required.

Mots clés : reproductive health, fairness, egalitarianism, optimal policy, OLG model
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2018-15
Pollution and Growth: The Role of Pension on the Efficiency of Health and Environmental Policies
Armel Ngami, Thomas Seegmuller

This paper analyses the effect of a pay-as-you-go pension system on the evolution of capital and pollution, and on the efficiency of an environmental versus health policy. In an overlapping generations model (OLG), we introduce endogenous longevity that depends on pollution and health expenditures. Global dynamics may display multiple balanced growth paths (BGP). We show that by discouraging savings, a policy that promotes the pension system enlarges the environmental poverty trap. More surprisingly, the environmental policy has contrasted effects according to the significance of the pension system. If it has a low size, a raise of the environmental policy enlarges the environmental poverty trap and leads to a rise in capital over pollution at the highest stationary equilibrium. In contrast, in economies where intergenerational solidarity is well developed, capital over pollution decreases at the highest BGP. In such a case, the environmental policy does not necessarily lead to a better longevity and growth.

Mots clés : longevity, environment, Health, pension system, growth, Pollution
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2018-14
International Credit Markets and Global Business Cycles
Patrick A. Pintus, Yi Wen, Xiaochuan Xing

This paper stresses a new channel through which global financial linkages contribute to the co-movement in economic activity across countries. We show in a two-country setting with borrowing constraints that international credit markets are subject to self-fulfilling variations in the world real interest rate. Those expectation-driven changes in the borrowing cost in turn act as global shocks that induce strong cross-country co-movements in both financial and real variables (such as asset prices, GDP, consumption, investment and employment). When firms around the world benefit from unexpectedly low debt repayments, they borrow and invest more, which leads to excessive supply of collateral and of loanable funds at a low interest rate, thus fueling a boom in both home and abroad. As a consequence, business cycles are synchronized internationally. Such a stylized model thus offers one way to rationalize both the existence of a world business-cycle component, documented by recent empirical studies through dynamic factor analysis, and the factor’s intimate link to global financial markets.

Mots clés : world interest rate, international co-movement, self-fulfilling equilibria
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2018-13
Geographic Environmental Kuznets Curves: The Optimal Growth Linear-Quadratic Case
Raouf Boucekkine, Giorgio Fabbri, Salvatore Federico, Fausto Gozzi

We solve a linear-quadratic model of a spatio-temporal economy using a polluting one-input technology. Space is continuous and heterogenous: locations differ in productivity, nature self-cleaning technology and environmental awareness. The unique link between locations is transboundary pollution which is modelled as a PDE diffusion equation. The spatio-temporal functional is quadratic in local consumption and linear in pollution. Using a dynamic programming method adapted to our infinite dimensional setting, we solve the associated optimal control problem in closed-form and identify the asymptotic (optimal) spatial distribution of pollution. We show that optimal emissions will decrease at given location if and only if local productivity is larger than a threshold which depends both on the local pollution absorption capacity and environmental awareness. Furthermore, we numerically explore the relationship between the spatial optimal distributions of production and (asymptotic) pollution in order to uncover possible (geographic) Environmental Kuznets Curve cases.

Mots clés : growth, geography, transboundary pollution, infinite dimensional optimal control problems
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2018-12
Group Targeting under Networked Synergies
Mohamed Belhaj, Frédéric Deroïan

A principal targets agents organized in a network of local complementarities, in order to increase the sum of agents' effort. We consider bilateral public contracts à la Segal (1999). The paper shows that the synergies between contracting and non-contracting agents deeply impact optimal contracts: they can lead the principal to contract with a subset of the agents, and to refrain from contracting with central agents.

Mots clés : multi-agent contracting, Network, synergies, aggregate effort, optimal group targeting
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2018-11
Business Training and Loan Repayment: Theory and Evidence from Microcredit in France
Renaud Bourlès, Anastasia Cozarenco, Dominique Henriet, Xavier Joutard

Although most Microfinance Institutions (MFIs) invest in non-financial services such as business training, empirical evidence on the impact of training on microborrowers’ performance is at best mixed. We address this issue by accounting for business training allocation and its possible effects on borrowers’ behavior. We first show empirically (using data from a French MFI) that the relationship between business training allocation and borrowers’ risk is complex and non- linear. By taking this into account, we establish a positive effect of business training on the survival time of loans. These results are robust to controlling for the MFI’s selection process. We moreover propose a theoretical explanation for the non-linear relationship between borrowers’ risk and training allocation based on reverse asymmetric information, showing that it can lead to increased MFI outreach.

Mots clés : microcredit, business training, reverse asymmetric information
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2018-10
Stochastic Petropolitics: The Dynamics of Institutions in Resource-Dependent Economies
Raouf Boucekkine, Fabien Prieur, Chrysovalantis Vasilakis, Benteng Zou

We provide an analysis of institutional dynamics under uncertainty by means of a stochastic differential game of lobbying with two players (conservatives vs liberals) and three main ingredients. The first one is uncertainty inherent in the institutional process itself. The second considers resource windfalls volatility impact on economic and institutional outcomes. Last but not least, the resource windfall level matters in the relative bargaining power of the players. We compute a unique closed-loop equilibrium with linear feedbacks. We show that the legislative state converges to an invariant distribution. Even more importantly, we demonstrate that the most likely asymptotic legislative state is favorable to the liberals. However, the more volatile resource windfalls, the less liberal is the most likely asymptotic state. Finally, we assess the latter prediction on a database covering 91 countries over the period 1973-2005. We focus on financial liberalization policies. We find that as the resources revenues volatility increases, the financial liberalization index goes down. We also find that this property remains robust across different specifications and sample distinctions.

Mots clés : institutional dynamics, petropolitics, lobbying games, revenue-dependent lobbying power, stochastic dynamic games, stochastic stability
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2018-09
Exchange Rate Policy and External Vulnerabilities in Sub-Saharan Africa: Nominal, Real or Mixed Targeting?
Fadia Al Hajj, Gilles Dufrenot, Benjamin Keddad

This paper discusses the theoretical choice of exchange rate anchors in Sub-Saharan African countries that are facing external vulnerabilities. To reduce instability, policymakers choose among promoting external competitiveness using a real anchor, lowering the burden of external debt using a nominal anchor or using a policy mix of both anchors. We observe that these countries tend to adopt mixed anchor policies. We solve a state space model to explain the determinants of and the strategy behind this policy. We find that the choice of policy mix is a two-step strategy: First, authorities choose the degree of nominal exchange rate flexibility according to the velocity of money, trade openness, foreign debt, degree of exchange rate pass-through and exchange rate target zone. Second, authorities seek to stabilize the real exchange rate depending on the degree of trade integration with the rest of world and the degree of foreign exchange interventions. We conclude with regime-switching estimations to provide empirical evidence of how these economic fundamentals influence exchange rate policy in Sub-Saharan Africa.

Mots clés : African countries, exchange rate policy, external vulnerabilities, regime-switching model
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2018-08
Household Fuel Use in Rural China
Christophe Muller, Huijie Yan

The household transition from dirty to clean fuels is important because of its economic, health and environment consequences, locally, nationally and globally. In order to study fuel choices, a non-separated farm household model for fuel demands is developed. Then, discrete choice equations of fuel uses, consistent with this theoretical model, are estimated using microeconomic household panel data from rural China.The estimation results support the theoretical approach that implies that the fuel demands depend not only on income, fuel prices, and demand-side socioeconomic factors, as would occur in the standard fuel demand models in the literature, but also on food prices, agricultural assets, and original household and community characteristics that shape the household responses to market failures. Finally, we present a few policy simulations that reveal the complex substitution impact of energy price policies in China.We provide the first evidence on: price sensitivity of fuel stacking, that food prices exert some pressure on the fuel transition, the role of farm work and activity specialization in fuel choices. Policies should incorporate some of the complexity of the non-separated decisions of rural households in this context of market failures. The complex cross-price effects imply that the policy pricing mechanisms should account for all energy types and food prices. Finally, market-based policies should be coupled with policy interventions aimed at increasing the opportunity cost of dirty fuels.

Mots clés : fuel use, China, consumption demand, energy
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2018-07
Proximités et Solidarités : de l’État-Providence aux Communs Sociaux
Jacques Garnier, Jean-Benoît Zimmermann

Dans cet article, nous nous intéressons à la coévolution des inégalités sociales, des dispositifs de solidarité et du système économique à travers trois grandes phases durant lesquelles les dispositifs de solidarité ont combiné de manière différenciée deux grandes formes de solidarité, par les proximités (par en bas) vs par l’attribution de droits (par en haut). Avec la globalisation de l'économie et la crise des années 2008 et suivantes, les inégalités sociales se sont accentuées et ont revêtu un aspect spatial marqué, jusqu’à une échelle micro-locale. En nous appuyant sur une approche théorique en termes de proximité et en nous référant aux situations largement évoquées aujourd’hui dans la littérature, nous analysons l’incapacité des politiques publiques à répondre efficacement à cette accentuation par la seule prise en compte de la proximité géographique. De nouvelles solidarités « par le bas » tendent en revanche à apporter des réponses hors de la dualité Etat-marché; elles s’apparentent à de nouvelles formes de communs que nous désignons comme « communs sociaux ». Nous montrons en quoi ces communs se distinguent des modalités anciennes de solidarité communautaire. Nous soulignons enfin à quelles conditions ces communs sont susceptibles de constituer des réponses justes et durables à l’accentuation actuelle des inégalités sociales.

Mots clés : France, inégalités, solidarité, proximité, communs territoriaux, communs sociaux
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2018-06
Inside the Engine Room of Digital Platforms: Reviews, Ratings, and Recommendations
Paul Belleflamme, Martin Peitz

The rise and success of digital platforms (such as Airbnb, Amazon, Booking, Expedia, Ebay, and Uber) rely, to a large extent, on their ability to address two major issues. First, to effectively facilitate transactions, platforms need to resolve the problem of trust in the implicit or explicit promises made by the counterparties; they post reviews and ratings to pursue this objective. Second, as platforms operate in marketplaces where information is abundant, they may guide their users towards the transactions that these users may have an interest in; recommender systems are meant to play this role. In this article, we elaborate on review, rating, and recommender systems. In particular, we examine how these systems generate network effects on platforms.

Mots clés : platforms, network effects, ratings, recommender systems, digital economics
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2018-05
Mean Growth and Stochastic Stability in Endogenous Growth Models
Raouf Boucekkine, Patrick A. Pintus, Benteng Zou

Under uncertainty, mean growth of, say, wealth is often defined as the growth rate of average wealth, but it can alternatively be defined as the average growth rate of wealth. We argue that stochastic stability points to the latter notion of mean growth as the theoretically relevant one. Our discussion is cast within the class of continuous-time AK-type models subject to geometric Brownian motions. First, stability concepts related to stochastic linear homogenous differential equations are introduced and applied to the canonical AK model. It is readily shown that exponential balanced-growth paths are not robust to uncertainty. In a second application, we evaluate the quantitative implications of adopting the stochastic-stability-related concept of mean growth for the comparative statics of global diversification in the seminal model due to Obstfeld (1994).

Mots clés : endogenous stochastic growth, mean growth, stochastic stability, AK model, global diversification
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2018-04
Targeting the Key Player: An Incentive-Based Approach
Mohamed Belhaj, Frédéric Deroïan

We consider a network game with local complementarities. A policymaker, aiming at minimizing or maximizing aggregate effort, contracts with a single agent on the network to trade effort change against transfer. The policymaker has to find the best agent and the optimal contract to offer. Our study shows that for all utilities with linear best-responses, it only takes two statistics about the position of each agent on the network to identify the key player: the Bonacich centrality and a weighted measure of the number of closed walks originating from the agent. We also characterize key players under linear quadratic utilities for various contractual arrangements.

Mots clés : key player, Network, Linear Interaction, incentives, contract, limited budget
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2018-03
Tying the Politicians’ Hands: The Optimal Limits to Representative Democracy
Didier Laussel

We study the optimal delegation problem which arises between the median voter (writer of the constitution) and the (future) incumbent politician when not only the state of the world and but also the politician’s type (preferred policy) are the policy-maker’s private information. We show that it is optimal to tie the hands of the politician by imposing him/her both a policy floor and a policy cap and delegating him/her the policy choice only in between. The delegation interval is shown to be the smaller the greater is the uncertainty about the politician’s type. These results apply outside the specific problem to which our model is applied here.

Mots clés : representative democracy, optimal delegation, political uncertainty
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2018-02
Optimal Cash Transfers with Distribution Regressions: An Application to Egypt at the Dawn of the XXIst Century
Christophe Muller

Social programmes for poverty alleviation involve eligibility rules and transfer rules that often proxy-means tests. We propose to specify the estimator in connection with the poverty alleviation problem. Three distinct stages emerge from the optimization analysis: the identification of the poor, the ranking of their priorities and the calculus of the optimal transfer amount. These stages are implemented simultaneous by using diverse distribution regression methods to generate fitted-values of living standards plugged into the poverty minimization programme to obtain the transfer amounts. We apply these methods to Egypt in 2013. Recentered Influence Function (RIF) regressions focusing on the poor correspond to the most efficient transfer scheme. Most of the efficiency gain is obtained by making transfer amounts varying across beneficiaries rather than by varying estimation methods. Using RIF regressions instead of quantile regressions delivers only marginal poverty alleviation, although it allows for substantial reduction of the exclusion of the poor.

Mots clés : targeting, poverty, optimizing estimator
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2018-01
The Causal Effect of Infrastructure Investments on Income Inequality: Evidence from US States
Emma Hooper, Sanjay Peters, Patrick A. Pintus

Through utilizing US state-level data at annual frequency from 1976 to 2008, this paper documents a causal effect of infrastructure investments, specifically public spending on highways, on income inequality. The number of seats in the US House of Representatives Committee On Appropriations serves as a valid instrument to identify quasi-random variations in state-level spending on highways. When a given state gains an additional committee member, which is rather exogenous, new federal grants are allocated to that state, resulting in the state government slashing its investment expenditures on highways. In other words, a crowding-out effect of federal funding for state investment in highways is at play. The main contribution of this paper is to show that such committee-driven cuts in spending on highways cause an increase in income inequality within a two-year horizon. In addition, we show that wages paid for construction jobs correlate positively and strongly with spending on highways at the state level. This further provides suggestive evidence that the construction sector plays an important role in the transmission channel from a rise in state spending on highways to a reduction in income inequality.

Mots clés : public infrastructure, highways, income inequality, US state panel data, instrument variable
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