MPI Econ Workshop

January 11, 2017 - 14:00
Alia Gizatulina
University of St. Gallen
Designer Uncertainty and Bet-On-The-Liar Mechanism
January 17, 2017 - 14:00
Ioanna Grypari
MPI Bonn
One Tick and You're Out: The Effects of the Master Lever on Senators' Positions (joint with Olga Gorelkina)
Abstract:
This paper accounts for the effects of the master lever (ML), aka the straight-ticket voting option, on elected US senators from 1960 till 2012. The ML, still present in some states, allows voters to select a specific party for all elections listed on a ballot, as opposed to filling out each office individually. Introducing it leads to an increase in the number of partisan votes, and thus changes the groups of voters targeted by parties and shifts the positions of senatorial candidates. Theoretically, we examine this change in tradeoffs by building a model of pre-election competition. Empirically, we use a triple-difference estimator to account for selection into treatment and find that, controlling for party trends, the ML leads to a right-wing shift of senatorial positions; an effect that is larger for the Republican party. We use the theory to explain how the political climate, as observed in the data, implies the specific result.
January 25, 2017 - 14:00
Rafael Aigner
DIW Econ
The Fehmarn Belt Duopoly – Can the Ferry Compete with a Tunnel? (with Katharina Weber)
Abstract:
The Fehmarn Belt is a strait between Denmark and Germany, currently served by a ferry operator. We analyse competition between the ferry service and a planned tunnel, the Fehmarn Belt Fixed Link. We develop a differentiated duopoly model to addresses two questions: 1. Will the tunnel induce the ferry to exit the market, once it operates? 2. Will the tunnel’s toll revenue suffice to cover its cost? Using real-world data and traffic forecasts, we show that it should not be taken for granted that the ferry exits the market, and that if the ferry competes, the tunnel project will make a loss.
February 1, 2017 - 14:00
Valentin Wagner
University of Düsseldorf
Seeking Risk or Answering Smart? Framing in Elementary Schools
Abstract:
This paper investigates how framing manipulations affect the quantity and quality of decisions. In a field experiment in elementary schools, 1,377 pupils are randomly assigned to one of three conditions in a multiple-choice test: (i) gain frame (Control), (ii) loss frame (Loss), and (iii) gain frame with a downward shift of the point scale (Negative). On average, pupils in both treatment groups answer significantly more questions correctly compared to the \traditional grading". This increase is driven by two different mechanisms. While pupils in the Loss Treatment increase significantly the quantity of answered questions---seek more risk---pupils in the Negative Treatment seem to increase the quality of their answers---answer more accurately. Moreover, differentiating pupils by their initial ability shows that a downward shift of the point scale is superior to loss framing. High-performers increase performance in both treatment groups, but motivation is significantly crowded out for low-performers only in the Loss Treatment.
February 8, 2017 - 14:00
Francesco Cerigioni
Universitat Pompeu Fabra and Barcelona Graduate School of Economics
Stochastic Choice and Familiarity: Inertia and the Mere Exposure Effect
Abstract:
Inertia is a key component of human decision making as the endowment effect or the status-quo bias have shown, but what is its source? Is it possible to incorporate the dynamic effect of experiences on behavioral inertia in a still tractable model? In this paper we propose an answer to these questions. We model a decision maker that experiences the mere exposure effect. The more he chooses an alternatives the higher is the probability he chooses it again. We show that the model allows us not only to give a more general description of the well-known phenomenon of the status-quo bias, and hence to obtain the endowment effect, loss aversion and present bias as a consequence, but also to quantify the behavioral inertia that affects our decision maker choices. In particular, we show that it is possible to have accurate forecasts of the kind of heterogeneity we should expect to emerge from an homogeneous population of individuals exposed to different choices. Finally, we provide a choice theoretical foundation of the model and we discuss some possible extensions.
February 15, 2017 - 14:00
Nikita Zakharov
University of Freiburg, Institute for Economic Research
Does Independent Media Matter in Non-Democratic Election? Experimental Evidence from Russia (with Ruben Enikolopov, Michael Rochlitz and Koen Schoors)
Abstract:
We conducted two parallel field experiments to test how exposure to independent online media affects voting behavior in a non-democratic election. Both experiments took part during Russian Parliamentary Election in September 2016, and were organized across cities of average size in European part of Russia by providing free access to an independent Russian channel „TV-Rain“ which normally charges fees for subscription. In the first experiment we randomly distributed free monthly subscriptions to the channel during a telephone survey of 1211 respondents in 12 random cities 10 day before the election and then we collected data on their voting behavior during the second wave of the telephone survey after the election. We find that respondents who used free subscription were more likely to cast their ballot and less likely to vote for the incumbent party on average and as compared to respondents who intended to use the subscription but were unsuccessful due to technical problems with activation codes. The perception of Parliamentary Election being unfair has been also significantly influenced by the exposure to the independent TV channel. The second experiment established a free access to the channel at the city level: population of 15 randomly chosen cities were offered a free monthly subscription which was supplemented with an advertisement campaign through Russian social network (Vkontakte). The treatment has significantly increased the consumption of the independent channel as measured by the growth in number of visitors of the website. The increase in consumption of the media resulted in 3 percent higher turnout rate at the level of the electoral districts in treated cities, but we find no results for change in the vote share of the incumbent party. Because “TV-Rain” did not participate in electoral campaign and abstained from any political advertisement, we attribute the effect purely to the independent provision of the news and the absence of the censorship.
February 21, 2017 - 14:00
Alex Smolin
University of Bonn
Evaluation Theory of Wage Growth
Abstract:
A principal owns a firm, hires an agent of uncertain productivity, and designs a policy of evaluating his performance. The agent observes ongoing evaluations and decides whether to quit. His wage at firm evolves proportionally to perceived productivity, his outside option is fixed. Both parties are risk-neutral. I show that all equilibria are Pareto-efficient and leave no rents to the agent. In a minimally informative equilibrium, the agent's wage deterministically grows with tenure for a broad class of parameters. The resulting wage profile can be explicitly calculated and may exhibit discontinuities.
March 22, 2017 - 14:00
Milena Nikolova
IZA - Institute for the Study of Labor
Your Spouse is Fired! How much do you care?
Abstract:
This study is the first to provide a causal estimate of the subjective well-being effects of spousal unemployment at the couple level. Using German panel data on married and cohabiting partners for 1991-2013 and information on exogenous job termination induced by workplace closure, we show that spousal unemployment reduces the life satisfaction of indirectly-affected spouses. The impact is equally pronounced among female and male partners. Importantly, the results are not driven by an income effect, but likely reflect the psychological costs of unemployment. Our findings are robust to a battery of sensitivity checks and imply that public policy programs aimed at mitigating the negative consequences of unemployment need to consider within-couple spillovers.
March 29, 2017 - 14:00
Paul Schempp
MPI Bonn
Liquidity Creation, Capital Requirements and Regulatory Arbitrage (joint with Stephan Luck)
Abstract:
We present a model in which bank can create liquid claims by issuing equity as well as by relying on sales of risky assets in downturns, i.e., market-based liquidity creation. In the constrained-efficient allocation, liquidity creation partially relies on market-based liquidity creation, which necessarily induces fire sales in downturns. However, the inability of banks to contract future financing terms gives rise to a pecuniary externality, and there is a tendency for leverage to be excessive. In equilibrium, each single bank relies too much on market-based liquidity creation and fire sale effects are too strong. A natural way to address the pecuniary externality is to impose a uniform capital requirement, which acts like a tax on short-term debt. However, if regulatory arbitrage is possible, the inefficiency re-emerges: while regulated banks are not excessively leveraged, a shadow banking sector emerges and grows too large, inducing excessively high costs of fire sales. We argue that if regulatory arbitrage cannot be addressed directly, capital requirements need to be complemented by a Pigouvian subsidy for bank equity.
April 19, 2017 - 14:00
Martin Obradovits
University of Innsbruck, Department of Economics
The Loss-Leading Puzzle" (with Roman Inderst)
Abstract:
Why do manufacturers oppose “loss leading” of their products by retailers and why do their protests receive support from consumer interest groups and policymakers? We provide a solution to this puzzle when consumers are salient thinkers, showing how in this case loss leading shifts profits from manufacturers of high-quality (branded) products to retailers and how, when the extent of one-stop shopping is sufficiently large and retail competition sufficiently intense, this crowds out high quality. We identify conditions for when a prohibition of loss leading enhances consumer and overall welfare and for when such a policy backfires.
April 26, 2017 - 14:00
Emilio Calvano
University of Bologna
Can We Trust the Algorithms that Recommend Products Online? A Theory of Biased Advice with No Pecuniary Incentives and Lab Evidence
Abstract:
We study the incentives of an agent (call him ‘RS’ - ‘Recommendation System’) which owns a technology that predicts the suitability of a finite set of options for another agent needs (call her ‘C’ - ‘Consumer’). We consider a model in which RS chooses an object from a finite set which is then consumed by C. Furthermore we assume that the ‘ability’ of RS is unknown to C. We show that if RS’s objective is to persuade C that he is good then ‘Recommendation Bias’ arises. That is RS’s choice is suboptimal from C’s perspective. Next, we bring the theory to the lab to test if consumers learn about accuracy from experience and if biasing recommendations pays off for the RS.
May 3, 2017 - 14:00
Marie Lalanne
Goethe University of Frankfurt - SAFE Research Center
Do Social Ties Lead to Job Referrals: Evidence from US Board Appointments
Abstract:
A growing number of empirical papers are investigating the effects of referrals on labor market outcomes by proxying referrals with social network information. By combining data on professional networks and actual referrals, this paper investigates whether individuals do refer others they share a work history with, therefore providing empirical support for the proxies extensively used in the literature. I use data on board appointments to US publicly listed firms between 2004 and 2008. I first estimate the effect of having social ties with incumbent board members on the probability to be hired on a board and find a positive effect as in the literature. I then relate the existence of social ties to the actual occurrence of referrals. Because unobservable individual characteristics might be driving both labor market outcomes and social networks, I control for the type of firms individuals worked for through placebo networks. When an incumbent and an entrant board members have worked together in the past (real social tie), the incumbent is significantly more likely to refer the entrant. When the incumbent and the entrant board members have worked in the same firm in the past but not at the same time (placebo tie), the incumbent is also more likely to refer the entrant but to a much lower extent or in a non-significative way. This evidence shows that social networks do matter beyond their work history signaling and, importantly, provides empirical support for using social networks as a proxy for referrals.
May 11, 2017 - 14:00
Martin Guzi
Masaryk University
Unstable Political Regimes and Wars as Drivers of International Migration (joint with Alicia Adsera, Carles Boix, and Mariola Pytlikova)
Abstract:
This paper contributes to literature on the determinants of international migration by focusing on whether migration flows respond to political conditions in origin and destination and to political violence, armed conflict and wars. Within standard migration theory, political instability acts as push factors in origins. We expect that people are more likely to emigrate from authoritatian regimes and origins affected by ethnic conflicts and wars in search for a better life. To investigate these hypotheses, we combine: (1) annual data on international migration flows and stocks in 42 destination countries from 223 countries of origin for the period 1980-2010 and UN/world Bank migration data obtained from changes in stocks of foreign population across (decennial) censuses from 160 origin/destinations; (2) data on wars, coup d’etat, revolutions and democratic regimes from different sources; (3) controls of socio- cultural-economic conditions in origins and destinations, and political rights and naturalization regimes for the years 1965-2010. Preliminary findings confirm that political instability in the sending countries triggers the outflow of people and the effect of violence varies with the kind and intensity of war and internal conflicts. These outcomes are robust to the choice of indicators -- particularly for long-lasting and high intense ethnic conflicts.
May 30, 2017 - 14:00
Ctirad Slavik
CERGE-EI
Wage Risk and the Skill Premium (joint with Hakki Yazici)
Abstract:
The skill premium has gone up significantly in the United States in the last five decades. During the same period, individual wage volatility has also increased. By incorporating the technology-education race model of Tinbergen (1974) into a standard incomplete markets model, this paper proposes a mechanism through which a rise in individual wage risk leads to an increase in skill premium. In our benchmark quantitative exercise, the rise in individual wage risk observed between 1967 and 2010 accounts for about 1/3 of the overall increase in skill premium during the same period.