Working papers results

A common explanation for African current underdevelopment is the extractive character of institutions established during the colonial period. Yet, since colonial extraction is hard to quantify, its precise mecha- nisms and magnitude are still unclear. In this paper, I tackle these issues by focusing on colonial trade in French Africa. By using new data on export prices, I show that the colonizers used trade monopsonies and coercive labor institutions to reduce prices to African agricultural producers way below world market prices. As a consequence, during the colonial period, extractive institutions cut African gains from trade by at least one-half.

Motivated by dynamic asset pricing, we extend the dual pairs'theory of Dieudonne'(1942) and Mackey (1945) to pairs of modules over a Dedekind complete f-algebra with multiplicative unit. The main tools are:

a Hahn-Banach Theorem for modules of this kind;

a topology on the f-algebra that has the special feature of coinciding with the norm topology when the algebra is a Banach algebra and with the strong order topology of Filipovic, Kupper, and Vogelpoth (2009), when the algebra of all random variables on a probability space is considered.

As a leading example, we study in some detail the duality of conditional Lp-spaces.

How can laboratory experiments help us understand banking crises, including the usefulness of various policy responses? After giving a concise introduction to the field of experimental economics more generally, I attempt to provide answers. I discuss methodological issues and survey relevant work that has been done.

Because journals favor clear stories researchers' may gain by engaging in scientific misconduct, ranging from shady practices like running more sessions hoping for significance to outright data fabrication. To set researchers' incentives straight, we propose sealed-envelope submissions, where editors' and referees' evaluations are based only on the interest of the research question and on the proposed empirical method.

We introduce imperfect information in stock prices determination. Agents receive a noisy signal about the structural shock driving future dividend variations. Equilibrium stock prices include a transitory 'noise bubble' which can be responsible for boom andbust episodes unrelated to economic fundamentals. We propose a non-standard VAR procedure to estimate impulse response functions to noise shock and the bubble component of stock prices. Noise explains a large fraction of US stock prices. The dot-com bubble is explained by noise. The 2007 stock price boom is not a bubble, whereas the following stock market crisis is due to negative noise shocks.

We investigate the role of 'noise' shocks as a source of business cycle fluctuations. To do so we set up a simple model of imperfect information and derive restrictions for identifying the noise shock in a VAR model. The novelty of our approach is that identification is reached by means of dynamic rotations of the reduced form residuals. We find that noise shocks generate hump-shaped responses of GDP, consumption and investment and account for quite a sizable fraction of their prediction error variance at business cycle horizons.

We build a model of a limit order book and examine the consequences of adding a dark pool. Starting with an illiquid book, we show that book and consolidated fill rates and volume increase, but the spread widens, depth declines and welfare deteriorates. When book liquidity increases, more orders migrate to the dark pool and large traders'welfare improves; but while the spread-increase is dampened, the depth-reduction is amplified and small traders are still worse off. All effects are stronger for a continuous than for a periodic dark pool and when the tick size is large.

IIf citizens of different countries belonging to an economic union adhere to different and deeply rooted cultural norms, when these countries interact their leaders may find it impossible to agree on efficient policies, especially in hard times. Political leaders' actions are bound to express policies that do not violate these norms. This paper provides a simple positive theory and a compelling case study of the importance of cultural clashes when economies integrate, as well as a normative argument about the desirability of institutional integration. Namely, we argue that a political union, with a common institutions and enforcement of rules, is a solution which is most beneficial the greater is cultural diversity in an economic union.

In deciding whether to join a coalition or not, an agent must consider both i) the expected power of the coalition and ii) her position in the vertical structure within the coalition. We establish the existence of a positive relationship between the degree of inequality in remuneration across ranks within coalitions and the number of coalitions to be formed endogenously in stable systems. An inherent feature of such coalitions is that they are mixed and balanced, rather than segregated, in terms of members abilities. When the surplus of a coalition is assumed to be linear in its relative power conditional on its size, we also establish the existence of stable systems and characterise them fully: a system is stable if and only if all coalitions are of an ecient size and every agent is paid her marginal contribution.

We consider a decision maker who ranks actions according to the smooth ambiguity criterion of Klibanoff et al. (2005). An action is justifiable if it is a best reply to some belief over probabilistic models. We show that higher ambiguity aversion expands the set of justifiable actions. In turn, this implies that higher ambiguity aversion expands the set of rationalizable actions of a game. Our results follow from a generalization of the duality lemma of Wald (1949) and Pearce (1984).