Portail HAL Paris School of Economics (PSE)
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Capital controls and foreign reserves against external shocks: Combined or alone?
No full textInternational audienceLong considered suboptimal, capital controls and FX interventions are now recognized as prudential measures. Yet, whether they are used in combination remains an open question. Thanks to a rich dataset from 1950, we investigate how the response of FX reserves to an exogenous US monetary shock depends on capital controls. The response is insignificant with a very close capital account. By contrast, for a significant number of countries, FX reserves and capital controls are combined to tame the effects of an international financial shock. Yet, as countries open up financially, FX reserves replace capital controls. There is no one-sizes-fits-all recipe
Rethinking capital and wealth taxation
No full textInternational audienceThis paper reviews recent developments in the theory and practice of optimal capital taxation. We emphasize three main rationales for capital taxation. First, the frontier between capital and labour income flows is often fuzzy, thereby lending support to a broad-based, comprehensive income tax. Next, the very notions of income and consumption flows are difficult to define and measure for top wealth holders where capital gains due to asset price effects dwarf ordinary income and consumption flows. Therefore the proper way to tax billionaires is a progressive wealth tax. Finally, as individuals cannot choose their parents, there are strong meritocratic reasons why we should tax inherited wealth more than earned income or self-made wealth for which individuals can be held responsible, at least in part. This implies that the ideal fiscal system should also include a progressive inheritance tax, in addition to progressive income and wealth taxes. We then confront our prescriptions with historical experience. Although there are significant differences, we argue that observed fiscal systems in modern democracies bear important similarities with this ideal triptych
What do Happiness Data Mean? Theory and Survey Evidence
No full textInternational audienceWhat utility notion—e.g. flow/lifetime, self/family-centered—do self-reported well-being (SWB) questions measure? Existing applications make different assumptions regarding the (i) life domains, (ii) time horizons, and (iii) other-regarding preferences captured by SWB data. To obtain relevant evidence, we ask survey respondents what they had in mind regarding (i)–(iii) when answering commonly used—life satisfaction, happiness, ladder—and new SWB questions. We find that respondents’ self-reports differ from researchers’ assumptions and differ across SWB questions and sociodemographic groups. At the same time, simple SWB-question wording tweaks are effective in moving self-reports toward desired interpretations. We outline actionable suggestions for SWB researchers
Place-based Policies: Opportunity for Deprived Schools or Zone-and-Shame Effect?
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Linking confidence biases to reinforcement-learning processes.
No full textInternational audienceWe systematically misjudge our own performance in simple economic tasks. First, we generally overestimate our ability to make correct choices-a bias called overconfidence. Second, we are more confident in our choices when we seek gains than when we try to avoid losses-a bias we refer to as the valence-induced confidence bias. Strikingly, these two biases are also present in reinforcement-learning (RL) contexts, despite the fact that outcomes are provided trial-by-trial and could, in principle, be used to recalibrate confidence judgments online. How confidence biases emerge and are maintained in reinforcement-learning contexts is thus puzzling and still unaccounted for. To explain this paradox, we propose that confidence biases stem from learning biases, and test this hypothesis using data from multiple experiments, where we concomitantly assessed instrumental choices and confidence judgments, during learning and transfer phases. Our results first show that participants' choices in both tasks are best accounted for by a reinforcement-learning model featuring context-dependent learning and confirmatory updating. We then demonstrate that the complex, biased pattern of confidence judgments elicited during both tasks can be explained by an overweighting of the learned value of the chosen option in the computation of confidence judgments. We finally show that, consequently, the individual learning model parameters responsible for the learning biases-confirmatory updating and outcome context-dependency-are predictive of the individual metacognitive biases. We conclude suggesting that the metacognitive biases originate from fundamentally biased learning computations
The dark side of transparency: mission variety and industry equilibrium in decentralised public good provision
No full textInternational audienceWe study the implications of transparency policies on decentralised public good provision by the non-profit sector. We present a model where imperfect monitoring of the use of funds interacts with the competitive structure of the non-profit sector under alternative informational regimes. Increasing transparency regarding the use of funds may have ambiguous effects on total public good provision and on donors’ welfare. On the one hand, transparency encourages all non-profit firms to engage more actively in curbing fund diversion. On the other hand, it tilts the playing field against non-profits facing higher monitoring costs, pressing them to give up on their missions. This effect on the extensive margin implies that transparency policies lead to a reduction in the diversity of social missions addressed by the non-profit sector. We show that the negative impact of transparency on social mission variety and on donors’ welfare is highest for intermediate levels of asymmetry in monitoring costs
Land Without Masters: local political competition since the Peruvian Land Reform (1969-1980)
No full textCan the historical exposure to redistribution spur local political competition and electoral participation in later elections? This study analyzes the massive land expropriation process executed under military rule in Peru from 1969 to 1980 and its effects over local politics with the return to democracy. The implementation of the reform was based on the creation of Agrarian Reform Zones (ARZ) and the use of regional offices for local execution located in high-priority reform areas within each ARZ. These zones were conceived and delimited for entirely different purposes a decade prior to the reform. Using the distance from a district to an ARZ office as an instrument, I show changes towards a more politically competitive local environment in land reform affected districts. In line with strategic responses to political competition, post-reform elections boost the participation of candidates with specific attributes: more educated, older and with indigenous background. Furthermore, candidates report more partisan experience but are also less associated with traditional politics. Evidence on driving mechanisms such as a dampened capacity of local elites for political capture, the growth of peasant-based social organization, and changes in voters' preferences towards redistribution go in line with this interpretation
All (electoral) politics is local? Candidate's regional roots and vote choice
No full textInternational audienceMany authors argue that candidates are more popular among voters from their own region. Two potential explanations have been suggested: voters’ identification with their home region, and the representation of regional interests. The information on candidates’ residence can be transmitted to voters in different ways, the most easily accessible way being information printed on the ballot paper. However, most studies on “friends and neighbour voting” use aggregate data. Studies that rely on individual level data usually put respondents in hypothetical situations and confront them with synthetic candidates, reducing their realism. To bridge this gap and to test the effect of providing information on the candidates’ residence, we use data from a survey experiment to analyze voters’ responses to ballot paper information on the regional background of real candidates in the 2014 European election in Germany. We find that voters in an open list PR election are more likely to support regional candidates if ballot paper information on the candidates’ geographic background helps them to do so. The appeal of personal ties is a stronger explanation for vote preference than the one based on regional interests
The Local Labor Market Effects of Modern Manufacturing Capital: Evidence from France
No full textInternational audienceUsing an event study methodology and comprehensive micro data from the French manufacturing sector, we analyze the local labor market effects of investments in modern manufacturing capital, including modern automation technologies. We estimate that commuting zones with higher investments in modern manufacturing capital and automation benefit from higher labor demand, with an increase in both local employment and wages. Our findings are consistent with a task-based model where the productivity effects of modern capital investments and automation outweigh their displacement effect
Calibrated Clustering and Analogy-Based Expectation Equilibrium
No full textFamilies of normal-form two-player games are categorized by players into K analogy classes applying the K-means clustering technique to the data generated by the distributions of opponent's behavior. This results in Calibrated Analogy-Based Expectation Equilibria in which strategies are analogy-based expectation equilibria given the analogy partitions and analogy partitions are derived from the strategies by the K-means clustering algorithm. We discuss various concepts formalizing this, and observe that distributions over analogy partitions are sometimes required to guarantee existence. Applications to games with linear best-responses are discussed highlighting the differences between strategic complements and strategic substitutes