Working papers results

This paper explores the tradeoff between competition and financial inclusion given by the vertical integration between mobile network and money operators. Joining novel data on mobile money fees built through the WayBack machine, with sources on network coverage and financials, we examine the staggering across African operators and countries of platform interoperability – a policy that promotes transactions and competition across mobile money operators. Our findings show that interoperability lowers mobile money fees and reduces network coverage and mobile towers, especially in rural and poor districts. Interoperability also results in a decline in various survey metrics of financial inclusion.

We compute new estimates for Total Factor Productivity (TFP) growth in five European countries and in the United States. Departing from standard methods, we account for positive profits and use firm surveys to proxy for unobserved changes in factor utilization. These novelties have a major impact in Europe, where our estimated TFP growth series are less volatile and less cyclical than the ones obtained with standard methods. Based on our approach, we provide annual industry-level and aggregate TFP series, as well as the first estimates of utilization-adjusted quarterly TFP growth in Europe.

JEL Codes: E01, E30, O30, O40

We study the stabilizing role of benefit extensions. We develop a tractable quantitative model with heterogeneous agents, search frictions, and nominal rigidities. The model allows for a stabilizing aggregate demand channel and a destabilizing labor market channel. We characterize each channel analytically and find that aggregate demand effects quantitatively prevail in the US. When feeding-in estimated shocks, the model tracks unemployment in the two most recent downturns. We find that extensions lowered unemployment by a maximum of 0.35 pp in the Great Recession, while the joint stabilizing effect of extensions and benefit compensation peaked at 1.08 pp in the pandemic. 

We offer a theory of changing dimensions of political polarization based on endogenous social identity. We formalize voter identity and stereotyped beliefs as in Bonomi et al. (2021), but add parties that compete on policy and also spread or conceal group stereotypes to persuade voters. Parties are historically connected to different social groups, whose members are more receptive to the ingroup party messages. An endogenous switch from class to cultural identity accounts for three major observed changes: i) growing conflict over cultural issues between voters and between parties, ii) dampening of political conflict over redistribution, despite rising inequality, and iii) a realignment of lower class voters from the left to the right. The incentive of parties to spread stereotypes is a key driver of identity-based polarization. Using survey data and congressional speeches we show that - consistent with our model - there is evidence of i) and ii) also in the voting realignment induced by the ”China Shock” (Autor et al. 2020).

I show that offering monetary rewards to whistleblowers can backfire as a moral aversion to being paid for harming others can reverse the effect of financial incentives. I run a field experiment with employees of the Afghan Ministry of Education, who are asked to confidentially report on their colleagues’ attendance. I use a two-by-two design, randomizing whether or not reporting absence carries a monetary incentive as well as the perceived consequentiality of the reports. In the consequential treatment arm, where employees are given examples of the penalties that might be imposed on absentees, 15% of participants choose to denounce their peers when reports are not incentivized. In this consequential group, rewards backfire: only 10% of employees report when denunciations are incentivized. In the non-consequential group, where participants are guaranteed that their reports will not be forwarded to the government, only 6% of employees denounce absence without rewards. However, when moral concerns of harming others are limited through the guarantee of non-consequentiality, rewards do not backfire: the incentivized reporting rate is 12% 

Debt moratoria that allow borrowers to postpone loan payments are a frequently used tool intended to soften the impact of economic crises. We conduct a nationwide experiment with a large consumer lender in India to study how debt forbearance offers affect loan repayment and banking relationships. In the experiment, borrowers receive forbearance offers that are presented either as an initiative of their lender or the result of government regulation. We find that delinquent borrowers who are offered a debt moratorium by their lender are 4 percentage points (7 percent) less likely to default on their loan, while forbearance has no effect on repayment if it is granted by the regulator. Borrowers who are offered forbearance by their lender also have higher demand for future interactions with the lender: in a follow-up experiment conducted several months after the main intervention, demand for a non-credit product offered by the lender is 10 percentage points (27 percent) higher among customers who were offered repayment flexibility by the lender than among customers who received a moratorium offer presented as an initiative of the regulator. Overall, our results suggest that, rather than generating moral hazard, debt forbearance can improve loan repayment and support the creation of longer-term banking relationships not only for liquidity but also for relational contracting reasons. This provides a rationale for offering repayment flexibility even in settings where lenders are not required to provide forbearance.

Real-world contests are inherently uncertain since the player who exerts the highest effort can still lose. In this paper, I consider a general asymmetric incomplete information contest model with a nonparametric distribution of uncertainty in the contest success function. It generalizes all-pay auctions, Tullock contests, and rank-order tournaments with two asymmetric players. Uncertainty in the contest success function summarizes other factors that influence the contest win outcome apart from the efforts of the players, such as, for example, players’ reputation or luck. First, I nonparametrically identify and estimate the distribution of uncertainty using the information on contest win outcomes and efforts. Next, I nonparametrically identify and estimate the distributions of the players’ costs of exerting effort. The model provides a method to disentangle two sources of player’s advantage: asymmetry in the costs’ distributions and the effect of the uncertainty distribution on the winning probability. As an empirical example, I apply the model to the U.S. House of Representatives elections.

We study mean-variance approximations for a large class of preferences. Compared to the standard mean-variance approximation that only features a risk variability term, a novel index of variability appears. Its neglect in an empirical estimation may result in puzzling in ated risk terms of standard mean-variance approximations.

We consider a model of a limit order book and determine the optimal tick size set by a social planner who maximizes the welfare of market participants. In a 2-period model where only two agents arrive sequentially, the tick size is a friction that constrains investors to use discrete price grids, and as a consequence the optimal tick size is equal to zero. However, in a model with sequential arrival of more than two investors who can endogenously either take liquidity or supply liquidity by undercutting or queuing behind existing orders, the tick size is positive: it is a strategic tool a social planner uses to optimally affect the choice made by investors between liquidity demand and supply. In addition, the optimal tick size is a function both of the value of the asset and of trading volume. The policy implication of such findings is that the European tick size regime and the “Intelligent Ticks” Nasdaq proposal dominate Reg. NMS Rule 612 that formalizes the tick size regime for the U.S. markets. Using data  from the U.S. and the European markets we test our model’s empirical predictions.

We study how individuals comment on political news posted on Reddit’s main political forum during the 2016 US Presidential Election. We show that partisan users behave very differently from independents if the news is bad for a candidate. They avoid commenting unfavorable polls and scandals on their favorite candidate, but seek such news on its opponent. When they do comment bad news on their favorite candidate, they try to rationalize it, display a more negative sentiment, and are more likely to cite scandals of the opponent. This behavior is consistent with motivated reasoning, and with the predictions of a model of costly attention, where the cost of attention depends on whether the news is pleasant or unpleasant.