Publications
We study how altruism networks affect the demand for formal insurance. Agents with CARA utilities are connected through a network of altruistic relationships. Incomes are subject to a common shock and to a large individual shock, generating heterogeneous damages. Agents can buy formal insurance to cover the common shock, up to a coverage cap. We find that ex-post altruistic transfers induce interdependence in ex-ante formal insurance decisions. We characterize the Nash equilibria of the insurance game and show that agents act as if they are trying to maximize the expected utility of a representative agent with average damages. Altruism thus tends to increase demand of low-damage agents and to decrease demand of high-damage agents. Its aggregate impact depends on the interplay between demand homogenization, the zero lower bound and the coverage cap. We find that aggregate demand is higher with altruism than without altruism at low prices and lower at high prices. Nash equilibria are constrained Pareto efficient.
Prior to the Covid-19 crisis, the integration of epidemiology and economics that is, economic epidemiology modelling (epi-econ), was relatively limited. The emergence of the Covid-19 crisis has prompted an unprecedented surge in this literature. This paper identifies and develops the main conceptual and modelling challenges involved in the expanding epi-econ stream, with a particular attention to the mathematical issues due, in particular, to the non-convex nature of epi-econ models. Recent extensions are also examined and a few future areas of research highlighted.
Objectives
We propose a general framework for estimating long-term health and economic effects that takes into account four time-related aspects. We apply it to a reduction in exposure to air pollution in the Canton of Geneva.
Study design
Methodological developments on the evaluation of long-term economic and health benefits, with an empirical illustration.
Methods
We propose a unified framework—the comprehensive impact assessment (CIA)—to assess the long-term effects of morbidity and mortality in health and economic terms. This framework takes full account of four time-related issues: cessation lag, policy/technical implementation timeframe, discounting and time horizon. We compare its results with those obtained from standard quantitative health impact assessment (QHIA) in an empirical illustration involving air pollution reduction in the canton of Geneva.
Results
We find that by neglecting time issues, the QHIA estimates greater health and economic benefits than the CIA. The overestimation is about 50% under reasonable assumptions and increases ceteris paribus with the magnitude of the cessation lag and the discount factor. It decreases both with the time horizon and with the implementation timeframe.
Conclusion
A proper evaluation of long-term health and economic effects is an important issue when they are to be used in cost-benefit analyses, particularly for mortality, which often represents the largest fraction. We recommend using the CIA to calculate more accurate values.
We propose a framework for the analysis of choice behaviour when the latter is made explicitly in chronological order. We relate this framework to the traditional choice theoretic setting from which the chronological aspect is absent, and compare it to other frameworks that extend this traditional setting. Then, we use this framework to analyse various models of preference discovery. We characterise, via simple revealed preference tests, several models that differ in terms of (1) the priors that the decision-maker holds about alternatives and (2) whether the decision-maker chooses period by period or uses her knowledge about future menus to inform her present choices. These results provide novel testable implications for the preference discovery process of myopic and forward-looking agents.
This paper examines the role of social interactions in contract enforcement within the postcolonial Arab world, with a specific focus on Morocco. Through extensive interviews with members of the industrial elite during the import-substituting industrialization (ISI) period, we uncover a significant risk of contractual breaches. Despite this risk, there was a reluctance to use social connections to penalize those who breached contracts. Legal recourse was also rarely pursued. Instead, business leaders leaned on their social networks to assess potential partners and resolve disputes through bilateral channels. This reliance on social ties was facilitated by the close-knit and compact nature of the business community. In the post-ISI era, characterized by a larger and more diverse industrial elite, there was a noticeable increase in contractual disputes, accompanied by a shift towards more aggressive resolution methods. We present a theoretical model that elucidates how these dynamics naturally emerge from an environment where economic and social interactions are intertwined.
How will structural change unfold beyond the rise of services? Motivated by the observed dynamics within the service sector we propose a model of structural change in which productivity is endogenous and output is produced with two intermediate substitutable capital goods. In the productive sector the accumulation of specialized skills leads to an unbounded increase in TFP, as sector becoming asymptotically dominant. We are then able to recover the increasing shares of workers, the increasing real and nominal shares of the output observed in productive service and IT sectors in the US. Interestingly, the economy follows a growth path converging to a particular level of wealth that depends on the initial price of capital and knowledge. As a consequence, countries with the same fundamentals but lower initial wealth will be characterized by lower asymptotic wealth.
We study a 2-player stochastic differential game of lobbying. Players invest in lobbying activities to alter the legislation in her own benefit. The payoffs are quadratic and uncertainty is driven by a Wiener process. We consider the Nash symmetric game where players face the same cost and extract symmetric payoffs, and we solve for Markov Perfect Equilibria (MPE) in the class of affine functions. First, we prove a general sufficient (catching up) optimality condition for two-player stochastic games with uncertainty driven by Wiener processes. Second, we prove that the number and nature of MPE depend on the extent of uncertainty (i.e. the variance of the Wiener processes). In particular, we prove that while a symmetric MPE always exists, two asymmetric MPE emerge if and only if uncertainty is large enough. Third, we study the stochastic stability of all the equilibria. We notably find, that the state converges to a stationary invariant distribution under asymmetric MPE. Fourth, we study the implications for rent dissipation asymptotically and compare the outcomes of symmetric vs asymmetric MPE in this respect, ultimately enhancing again the role of uncertainty.
We investigate how the relationship between capital accumulation and pollution is affected by the source of pollution: production or consumption. We are interested in polluting waste that cannot be naturally absorbed, but for which recycling efforts aim to avoid massive pollution accumulation with harmful consequences in the long run. Based on both environmental and social welfare perspectives, we determine how the interaction between growth and polluting waste accumulation is affected by the source of pollution, i.e., either consumption or production, and by the fact that recycling may or may not act as an income generator, i.e., either capital-improving or capital-neutral recycling efforts. Several new results are extracted regarding optimal recycling policy and the shape of the relationship between production and pollution. Beside the latter concern, we show both analytically and numerically that the optimal control of waste through recycling allows to reaching larger (resp., lower) consumption and capital stock levels under consumption-based waste compared to production-based waste while the latter permits to reach lower stocks of waste through lower recycling efforts.
We study a 2-player stochastic differential game of lobbying. Players invest in lobbying activities to alter the legislation in her own benefit. The payoffs are quadratic and uncertainty is driven by a Wiener process. We consider the Nash symmetric game where players face the same cost and extract symmetric payoffs, and we solve for Markov Perfect Equilibria (MPE) in the class of affine functions. First, we prove a general sufficient (catching up) optimality condition for two-player stochastic games with uncertainty driven by Wiener processes. Second, we prove that the number and nature of MPE depend on the extent of uncertainty (i.e. the variance of the Wiener processes). In particular, we prove that while a symmetric MPE always exists, two asymmetric MPE emerge if and only if uncertainty is large enough. Third, we study the stochastic stability of all the equilibria. We notably find, that the state converges to a stationary invariant distribution under asymmetric MPE. Fourth, we study the implications for rent dissipation asymptotically and compare the outcomes of symmetric vs asymmetric MPE in this respect, ultimately enhancing again the role of uncertainty.
This paper examines the interaction between three financial markets: energy and non-energy commodities, bonds and equities, in a particular context of high inflation worldwide, that of Russia–Ukraine war. Our data cover the period January 2016-October 2022. Using a SETAR-GARCH C-Vine Copula model, we provide evidence of two inflation breakouts within COVID pandemic and shortly before Russia–Ukraine war, for all assets considered, and particularly for US 10-Year bond, as an inflation-indexed asset. Over the Russia–Ukraine war period, both linear and nonlinear models explain the studied assets’ behavior faced with high inflation. C-Vine Copula analysis shows that oil prices (WTI), as an inflation-producing assets, impact the volatility of financial markets (VIX) in times of war. This analysis indicates also that the NASDAQ index, as an inflation-exposed assets, is sensitive to commodities and energy prices that drive inflation. Furthermore, we find a high positive Kendall’s tau for all combinations between US 10-Year and all other assets. These results provide strong evidence of the association between US 10-Year futures, as a vehicle of inflation, and all studied assets. Lastly, our findings confirm the evidence that Russia–Ukraine war generated two significant shocks, Gas (NG) prices and financial markets’ volatility (VIX). This study is of crucial interest to policy and decision makers to the extent that it provides a framework for understanding, in a context of high inflation, the mechanisms linked to the vehicles for transmitting this inflation, its pricing process, and its impact on the equity market.
