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This paper uses a uniquely granular online retail dataset that spans Russia's enormous currency depreciation in late 2014 to show that firms choose to offer lower quality products in response to rising input costs. We show that this reallocation is not driven by an income shock or "flight from quality". To explain quality downgrading, we construct a model of demand and firm dynamics where consumers value low prices and high qualities, and firms draw product cost and quality from a joint distribution on entry. We argue that a positive correlation between marginal cost and quality can explain quality downgrading. After verifying this correlation in the data, we calibrate the model and simulate a counterfactual cost shock. The model is able to generate a reallocation in offerings towards low cost, low quality products, and yields starkly different welfare implications following an exchange rate shock than a model with only cost heterogeneity.

This paper investigates how migration and location choice decisions depend on a large set of location characteristics, with particular focus on measuring the importance and nature of non-monetary costs of moving. We employ a stated-preference approach to elicit respondents’ choice probabilities for a set of hypothetical choice scenarios, using two waves from the NY Fed’s Survey of Consumer Expectations. Our stated probabilistic choice approach allows us to recover the distribution of individual-level preferences for location and mobility attributes without concerns about omitted variables and selection biases that hamper analyses based on observed mobility choices alone. We estimate substantial heterogeneity in the willingness-to-pay (WTP) for location characteristics and in moving costs, both across and within demographic groups. We find moving costs to be strongly associated with attachment to the current neighborhood and dwelling and to social networks. Our results indicate evidence of sorting into current locations based on preferences for location attributes as well as a strong negative association between respondents’ non-monetary moving costs and their moving expectations and actual mobility decisions.

Long hours worked associated with higher hourly wages are common to many occupations, known as nonlinear occupations. Over the last four decades, both the share of workers in nonlinear occupations and their relative wage premium have been increasing. Females in particular have been facing rising experience premiums, especially in these types of occupations. We quantitatively explore how these changes have affected the female labor supply over time using a quantitative, dynamic general equilibrium model of occupational choice and labor supply at both the extensive and intensive margins. Our decomposition analysis finds that rising experience premiums are important in explaining the intensive margin of female labor supply, which has continued to increase even in the most recent period. Meanwhile, technical changes biased toward nonlinear occupations help to explain recent stagnating female employment rates. Finally, a counterfactual experiment suggests that, if the barrier aspects of nonlinearities had instead gradually vanished, female employment over this same time period would have been considerably higher at the expense of significantly lower labor supplies at the intensive margin.

This paper uses transaction-level customer data from the largest bank in Denmark to estimate the change in consumer spending caused by the COVID-19 pandemic and the resulting shutdown of the Danish economy. We find that aggregate spending was on average 27% below the counterfactual level without the pandemic in the seven weeks following the shutdown. The spending drop was mostly concentrated on goods and services whose supply was directly restricted by the shutdown, suggesting a limited role for spillovers to non-restricted sectors through demand in the short term. The spending drop was larger for individuals with more ex ante exposure to the adverse consequences of the crisis in the form of job loss, wealth destruction, severe disease and disrupted consumption patterns and, most notably, for individuals with an ex post realization of crisis-related unemployment.

We study the aggregate consequences of the Social Security Disability Insurance (DI) program, focusing on the role of complementarity between heterogeneous human capital. First, we develop and estimate a wage process in which individuals' human capital comprises (pure) labor and experience, and their efficiencies are affected by disability. We find that older workers are more experience-abundant, and that disability causes a smaller loss in the efficiency of experience than it does in the efficiency of labor. Further, the estimated aggregate production technology shows that labor and experience are complementary inputs. Combining these empirical results with a structural general equilibrium model, we analyze the labor market implications of removing the DI program. Removal of the DI program induces an increase in the relative supply of experience, thus affecting the marginal productivities of inputs and wages of all workers in the economy. Despite the increased labor market entry of disabled workers, the aggregate productivity may increase in the counterfactual economy, thanks to the complementarity between labor and experience.

This paper argues that the canonical search-and-matching model cannot generate the observed cyclical asymmetry of the unemployment rate. In the United States, the unemployment rate raises quickly and abruptly at the onset of contractions and declines slowly and gradually during expansions. This pattern produces positive skewness in the distribution of unemployment rate changes, while the model produces a counterfactually negative skewness. The key feature of the model responsible for this counterfactual prediction is the convexity of hiring costs in aggregate employment, which leads to excessive responsiveness of job vacancies to positive shocks in periods of high unemployment. I argue that the inability of the model to replicate the cyclical asymmetry in the data stands regardless of its ability to generate realistic fluctuations in unemployment. Furthermore, high replacement rates and real wage rigidity (both fixed and downward rigid wages) - commonly used to enhance amplification of shocks - do not resolve the puzzle, rather they make it worse.

We assess the effects of land markets on misallocation and productivity both empirically and quantitatively. Exploiting variation from a land certification reform across time and space in Ethiopia, we find that certification facilitates rentals and improves agricultural productivity. We calibrate a quantitative macroeconomic model with heterogeneous household farms facing institutional costs to land markets using the micro panel data. The effect of a counterfactual reallocation from no rentals to efficient rentals increases zone-level agricultural productivity by 43 percent on average. While our estimated institutional costs are strongly associated with land certification across zones, there are nontrivial residual frictions to rental market activity, implying that land certification only partially captures the overall effects of rentals. A full certification reform accounts for about one-fourth of the overall productivity gains from land rentals. This result highlights the importance of comprehensive reforms alleviating frictions to land transactions beyond the granting of certificates.

I study, both empirically and theoretically, the economic and financial consequences of corporate lobbying. Firms lobby politicians to increase their share of government contracts, but political competition creates firm-level risk, inflating their cost of capital and reducing their incentive to invest in research and development (R&D). I document an annual 6–8% return premium for stocks of high-lobbying firms, which compensates investors for political risk. An estimated model in which firms can lobby and innovate and investors are risk averse replicates key features of corporate lobbying in the U.S., including the well-established paradox that lobbying contributions are small relative to the policies at stake. The model predicts that if investors ceased seeking compensation for political risk, R&D investment would increase by 6% and the innovation rate by 0.4% points. The risk-premium costs of lobbying are quantitatively and economically important even if the resources “wasted” on lobbying are objectively small.

Foreign direct investment (FDI) can increase productivity and wages. However, it is also often accompanied by primary income deficits as foreign-owned firms repatriate their profits. The welfare effects of FDI are thus ambiguous. A particularly illustrative example of this phenomenon are the Visegrad 4 (V4) countries (Czech Republic, Hungary, Poland, Slovakia). This paper investigates whether FDI can be beneficial in the presence of profit repatriation using a general equilibrium model calibrated to the V4 economies. Counterfactual simulations suggest that the benefits of FDI outweigh the costs for these countries. On average, a 1% increase in the share of foreign firms is associated with a 0.17% increase in welfare. However, incentivising foreign firms to reinvest more of their profits domestically is, ceteris paribus, welfare-improving. A 10-percentage-point increase in the profit repatriation rate is associated with a 1.06% welfare gain on average.

This paper studies the short- and long-run eects of large rms on economic development. We use evidence from one of the largest multinationals of the 20th Century: The United Fruit Company (UFCo). The rm was given a large land concession in Costa Rica ---one of the so-called "Banana Republics"--- from 1899 to 1984. Using administrative census data with census-block geo-references from 1973 to 2011, we implement a geographic regression discontinuity (RD) design that exploits a quasi-random assignment of land. We nd that the rm had a positive and persistent eect on living standards. Regions within the UFCo were 29% less likely to be poor than nearby counterfactual locations in 1973, with only 56% of the gap closing over the following four decades. Company documents explain that a key concern at the time was to attract and maintain a sizable workforce, which induced the rm to invest heavily in local amenities that likely account for our result. We then build a dynamic spatial model in which a rm's labor market power within a region depends on how mobile workers are across locations and run counterfactual exercises. The model is consistent with observable spatial frictions and the RD estimates, and shows that the firm increased aggregate welfare by 2.9%. This eect is increasing in worker mobility: If workers were half as mobile, the rm would have decreased aggregate welfare by 6%. The model also shows that a local monopsonist compensates workers mostly through local amenities keeping wages low, and leads to higher welfare levels than a counterfactual with perfectly competitive labor markets in all regions, if we assume amenities increase local productivity.

This paper studies the impact of a minimum wage policy in a labor market with a private and a public sector. We develop a two-sector search and matching model with minimum wage and heterogeneous workers in their human capital. We structurally estimate the model using data for Chile, a country with a large fraction of employment in the public sector and a binding minimum wage. Counterfactual analysis shows that institutional features of public sector employment reduce labor market frictions and mitigate the negative effect of the minimum wage on unemployment and welfare.

Before the 2008 crisis, the cross-sectional skewness of banks’ leverage went up and macro risk concentrated in the balance sheets of large banks. Using a model of profit-maximizing banks with heterogeneous Value-at-Risk constraints, we extract the distribution of banks’ risk-taking parameters from balance sheet data. The time series of these estimates allow us to understand systemic risk and its concentration in the banking sector over time. Counterfactual exercises show that (1) monetary policymakers confront the trade-off between stimulating the economy and financial stability, and (2) macroprudential policies can be effective tools to increase financial stability.

We investigate whether joining the European Monetary Union and losing the ability to set monetary policy affected the economic growth of 12 Eurozone countries. We use the synthetic control approach to create a counterfactual scenario for how each Eurozone country would have evolved without adopting the Euro. We let this matching algorithm determine which combination of other developed economies best resembles the pre-Euro path of twelve Eurozone economies. Our estimates suggest that there were some mild losers (France, Germany, Italy, and Portugal) and a clear winner (Ireland). Nevertheless, a GDP decomposition analysis suggests that the drivers of the economic gains and losses are heterogeneous.

We study the relationship between dowries – wealth transfers from the bride’s family to the groom or his family at the time of marriage – and individual-level poverty in rural India. Based on the estimates of a collective household model, we show that the share of household consumption expenditure allocated to a woman is strongly associated with the dowry she paid at the time of her marriage. We compute poverty rates separately for women and men and find that women’s poverty relative to men decreases with dowry. Moreover, women who paid dowries are less likely to be poor relative to women who did not, even when their households’ consumption expenditures are the same. Our counterfactual policy analysis indicates that abolishing or reducing dowries (through anti-dowry laws or taxes, for example) may have the unintended effect of aggravating intra-household inequality and increasing women’s risk of living in poverty after marriage.

This paper studies the effect of state-owned enterprises (SOEs) on the dynamics of the Chinese urban labor market. Using longitudinally matched monthly panel data, we document very low labor force dynamics in the state sector, which leads to a high long-term unemployment rate. We develop and estimate an equilibrium search and matching model with three differences between the state and non-state sectors: labor productivity, labor adjustment cost, and workers’ bargaining power. Counterfactual analysis shows that, among the three channels, reducing the bargaining power of state sector workers is most effective in reducing unemployment duration and unemployment rate.

This paper aims to investigate the causal links between intergenerational living arrangements and marital fertility in Japan, using data from the 2010 and 2015 Japanese National Fertility Surveys (...

This study investigates the potential for internationalisation of the naira in the quest for a common West African currency, despite some weak institutional challenges attributed to Nigeria. We employed a two-stage currency internationalisation modelling approach, where the first stage estimates the model, and the second stage employs ‘counterfactual simulations’ to predict the trend in the currency ratio of the proposed currency for internationalisation (in this case, the naira). We also account for the ‘tipping effect’ and ‘network externalities’, as recommended in the literature. The results provide evidence that supports the ‘tipping effect’ and ‘network externalities’, which show that accounting for ‘network externalities’ may cause inconsistency in the results. Our simulation exercise shows that improvements in the financial and macroeconomic development levels are prerequisites for the internalisation of the naira in West Africa. The results of the policy simulation also show that the reserve ratio of the naira is consistently higher than that of the CFA franc, which indicates that the naira is a better reserve currency anchor for the proposed single currency in West Africa, compared with the CFA franc. This is also reinforced by evidence that the naira in its worst performing period is better than the CFA franc in its best performing period. Key words: Currency internationalisation, institutional reform, naira, ECOWAS, Nigeria.

Environmental regulation can interact with agricultural markets to produce underappreciated competitiveness and leakage effects. This paper measures effective carbon tax stringency by structurally recovering the domestic supply schedule for a trade-exposed beef cattle industry such that elasticities and carbon tax rates change with product prices (i.e., due to the curvature of the supply function). Two basic propositions from the economics of taxation -- that excess burdens increase in elasticities and tax rates -- are shown to cause the stringency of uniform carbon policy to vary nonlinearly with output prices. Based on the domestic supply function, the relationship between marginal excess burden, a measure of policy stringency from the industry's perspective, and product prices is estimated. Several policy-relevant counterfactual scenarios are explored. Results show that with moderately high output prices, supply elasticities are small and the efficiency cost of a $40/tCO2e carbon tax (gross of environmental benefits) is less than $0.01 per dollar tax revenue. As prices decline, supply curves become increasingly elastic and marginal excess burdens grow rapidly.

The theoretical literature on price-matching guarantees (PMGs) finds that this policy has both a competition-softening and a competition-enhancing effect. Which effect dominates depends on market structure. This paper is the first to propose a structural framework to measure the impact of PMGs on market competition through a counterfactual analysis. The structural model proposed here can be estimated using price data alone. I estimate the model using data from the automotive tire market, and I find that the competition-softening effect is stronger than the competition-enhancing effect. PMGs keep transaction prices between 1% and 8% higher than they would be in the absence of such policy. PMGs exert the strongest effect on price-sensitive consumers, who tend to be the poorest. This consumer segment pays up to 10% higher prices in the presence of PMGs. The tire market has some unique features that facilitate the competition-enhancing effect of PMGs. Hence, that the competition-softening effect dominates even in the tire market suggests that PMGs may increase prices in many other markets, too.

Since the 2001 recession, average core inflation has been below the Federal Reserve’s 2% target. This deflationary bias is a predictable consequence of a symmetric monetary policy strategy that fails to recognize the risk of encountering the zero-lower-bound. An asymmetric rule according to which the central bank responds less aggressively to above-target inflation corrects the bias, improves welfare, and reduces the risk of deflationary spirals – a pathological situation in which inflation keeps falling indefinitely. This approach does not entail any history dependence or commitment to overshoot the inflation target and can be implemented with an asymmetric target range. A counterfactual simulation shows that a modest level of asymmetry would have removed the deflationary bias observed in the United States.

With countries increasingly adopting the Goods and Services Tax (GST) as their system of commodity taxes replacing the myriad of sales, excise and other form of indirect taxes, there is a move towards the two features that characterize the GST: uniform tax rates across items and identical tax rates across regions. When India introduced the GST in 2017, it followed several other countries in departing from the first feature but in keeping with universal practice embraced the second feature. The chief motivation of this paper is to subject this latter feature to critical scrutiny. The study examines the four GST rates in India by comparing them with counterfactual evidence based on preference based optimal commodity tax rates estimated by taking into account regional diversity in prices and spending. The benchmarking suggests that the current top GST rates (12%, 16% and 28%) are much higher than can be justified by the optimal rates. The Indian evidence is also in favor of departing from the universal practice in GST of adopting a uniform tax across items. The paper makes a methodological contribution by proposing a procedure for calculating spatial prices that can be applied to a wide basket of items. The study provides evidence on the redistributive potential of indirect taxation by showing the progressive nature of the optimal commodity taxes. The latter result is of particular significance in developing countries where indirect taxes raise the greater share of revenue and provide an important policy tool for tackling increasing inequality. The study concludes with a list of policy lessons as the country seeks to make further changes to its GST. While there is a significant literature on harmonization of indirect taxes across countries that belong to a single economic grouping such as the EU, there is no such literature between regions within a large heterogeneous country. The present study on tax harmonization between the states in India attempts to fill this gap.

This paper uses new, large-scale vehicle registry data from Norway and a two-sided market framework to show nonneutrality of different subsidies and estimate their impact on electric vehicle adoption when network externalities are present. Estimates suggest a strong positive connection between electric vehicle purchases and both consumer price and charging station subsidies. Counterfactual analyses suggest that between 2010 and 2015, every dollar spent on station subsidies resulted in more than twice as many additional electric vehicle purchases than the same amount spent on price subsidies. However, this relation inverts with increased spending, as station subsidies’ impact tapers off faster. (JEL D12, D62, D85, H25, L62, Q54)

This paper examines the role of confidence in Chinese monetary policy under uncertainty. Using a smooth transition vector autoregression (STVAR) model conditional on uncertainty, we find that monetary policy is considerably less effective in high-uncertainty status. We further conduct counterfactual decompositions to isolate the role of confidence in the transmission of monetary policy shocks, and show that the effectiveness of proactive monetary policy is reduced if it fails to inspire entrepreneurs’ confidence. These results are robust to alternative measurements of uncertainty.

This paper analyzes the effects of credit frictions in a trade model where heterogeneous firms select both into exporting and into two types of external finance. In our framework, small producers face stronger credit frictions, pay a higher borrowing rate and rely on bank finance, whereas large firms have access to cheaper bond finance. We show that an increase in credit frictions induces firms to select into bank finance, which attenuates the negative implications on product variety and welfare. In the open economy, the presence of effective financial intermediation increases the welfare gains from trade. In a counterfactual analysis, we exploit that our framework nests a model with credit frictions and one type of finance as a special case, and we show that endogenous selection into external finance is an important channel of adjustment.

We investigate a structural model of demographic-economic interactions for England during 1570 to 1850. We estimate that the annual rate of population growth consistent with constant real wages was 0.4% before 1760 but 1.5% thereafter. We find that exogenous shocks increased population growth dramatically in the early decades of the Industrial Revolution. Simulations of our model show that if these demographic shocks had occurred before the Industrial Revolution the impact on real wages would have been catastrophic and that these shocks were largely responsible for very slow growth of real wages during the Industrial Revolution.

We develop a general equilibrium model to study the impact of HIV/AIDS on human capital accumulation decisions and on aggregate output. We calibrate the model targeting a sample of Sub-Saharan African countries, separately for 1995-2004 and 2010-2017. Our results show that the scale-up of ART treatments since mid-2000s, and the additional reductions in the transmission rate have had a significant impact on output. Counterfactual exercises suggest significant output gains from further increasing ART treatment and decreasing infectiousness. The output gains are substantially larger than the costs. We find that treatment and policies that reduce infection (e.g. condom use) are substitutes.

Corrupt government hiring is common in developing countries. This paper uses original data to document the operation and consequences of corrupt hiring in a health bureaucracy. Hires pay bribes averaging 17 months of salary, but contrary to conventional wisdom, their observable quality is comparable to counterfactual merit-based hires. Exploiting variation across jobs, I show that the consequences of corrupt allocations depend on the correlation between wealth and quality among applicants: service delivery outcomes are good for jobs where this was positive and poor when negative. In this setting, the correlation was typically positive, leading to relatively good performance of hires. (JEL D73, I11, J16, J24, J45, M51, O17)

We measure the effects of firm policies on racial pay differences in Brazil. Non-Whites are less likely to be hired by high-wage firms, explaining about 20 percent of the racial wage gap for both genders. Firm-specific pay premiums for non-Whites are also compressed relative to Whites, contributing another 5 percent for that gap. A counterfactual analysis reveals that about two-thirds of the underrepresentation of non-Whites at higher-wage firms is explained by race-neutral skill-based sorting. Non-skill-based sorting and differential wage setting are largest for college-educated workers, suggesting that the allocative costs of discriminatory hiring and pay policies may be relatively large in Brazil. (JEL J15, J24, J31, J41, J46, J71, O15)

Fire sales induced by investor redemptions have powerful spillover effects among funds that hold the same assets, hurting peer funds' performance and flows, and leading to further asset sales with negative bond price impact. A one‐standard‐deviation increase in our fire‐sale spillover measure leads to a 45 (90) bp decrease in peer fund returns (flows) and a two percentage point increase in the likelihood of a large bond price drop. The results hold in a regression‐discontinuity design addressing identification concerns. Timing, heterogeneity, instrumental‐variable, and placebo tests further support the price‐impact mechanism. Model‐based counterfactual and stress‐test analyses quantify the financial stability implications.

We incorporate institutions into a neoclassical growth model so as to account for macroeconomic differences, as in the data, in 12 Eurozone countries. Modelling institutions in a generic way, we assume that weak institutions are reflected in ill-enforced property rights. When we calibrate and solve the model for each country separately, our results are: (i) including weak institutions helps the model vis-à-vis the data more in the periphery than in the core of the Eurozone; (ii) institutional failures, and their adverse effects on incentives, are worse in the periphery countries and this contributes in explaining lower long-term growth and higher output volatility in these countries; (iii) the same shock affects different countries differently depending on their institutional structure and the mix of fiscal policies; and (iv) counterfactual scenarios imply that periphery countries with weak institutions could gain a lot had their institutional quality been like that in the core.

In October, nations of the world will begin negotiations for the post‐2020 Global Biodiversity Framework under the Convention on Biological Diversity. An influential ambition is “bending the curve of biodiversity loss,” which aims to reverse the decline of global biodiversity indicators. A second relevant, yet less prominent, milestone is the 20th anniversary of the publication of The Unified Neutral Theory of Biodiversity and Biogeography. Here, I apply neutral theory to show how global biodiversity indicators for population size (Living Planet Index) and extinction threat (Red List Index) decline under neutral ecological drift. This demonstrates that declining indicators are not solely caused by deterministic species‐specific or geographical patterns of biodiversity loss. Instead, indicators are sensitive to nondirectional stochasticity. Thus, “bending the curve” could be assessed relative to a counterfactual based on neutral theory, rather than static baselines. If used correctly, the 20‐year legacy of neutral theory can be extended to make a valuable contribution to the post‐2020 Global Biodiversity Framework., Global biodiversity indicators for populations (Living Planet Index) and extinction threat (Red List Index) decline under random ecological drift. The consequence of this is that prominent aspirations to “bend the curve of biodiversity loss” may be untenable, at least in terms of current biodiversity metrics. The Unified Neutral Theory of Biodiversity and Biogeography—which celebrates its 20th anniversary this year—could be used as a counterfactual against which to measure progress toward the post‐2020 Global Biodiversity Framework.

On March 22, 2020, the State of New York issued a “stay-at-home” policy, wherein all non-essential businesses were on pause until June 8, 2020. The bike-sharing system (BSS) and yellow taxi system (YTS) in Manhattan were substantially affected. This sudden drop in demand can impact not only short and long-term mobility but also the sustainability of transport network. Given that few empirical studies are focusing on the impacts of the “stay-at-home” policy on the BSS and YTS, this further substantiates the importance of analyzing how the policy affects the overall transportation system in New York City (NYC). This paper aims to fill this gap by quantifying the impacts of the “stay-at-home” policy on the two aforementioned transportation systems. Specifically, the following three research gaps are summarized in this study: I) The hidden biases in current “stay-at-home” policy estimation methods were not properly addressed; II) The policy impacts on BSS and YTS during different periods of the effective day were unclear; III) The sensitivity of uncontrolled confounders in long-term policy impact estimations was poorly discussed. We addressed these important research gaps by introducing robust statistical approaches like regression discontinuity design (RDD) and propensity score matching (PSM) methods, which can overcome methodological challenges such as counterfactual restoration, spatiotemporal heterogeneities, and unmeasured confounders. The BSS and YTS were studied at the aggregated neighborhood levels. Results demonstrate that the impacts on BSS have higher variations than YTS usage. The monthly average treatment effects on the treated (ATT) for BSS ranged from −72% to −28% respectively in March and June, while YTS ranged from −96% to −94%. Evidence suggests that demand for BSS surged on weekends in May and June. Understanding the impact of this short-term yet significant policy change on travel behavior will help optimize supply and demand management strategies, thereby improving the long-term sustainability should similar situations arise in the future.

Consumers’ health plan choices are highly persistent even though optimal plans change over time. This paper separates two sources of inertia, inattention to plan choice and switching costs. We develop a panel data model with separate attention and choice stages, linked by heterogeneity in acuity, i.e., the ability and willingness to make diligent choices. Using data from Medicare Part D, we find that inattention is an important source of inertia but switching costs also play a role, particularly for low-acuity individuals. Separating the two stages and allowing for heterogeneity is crucial for counterfactual simulations of interventions that reduce inertia. (JEL D12, G22, H51, I13, I18, L65)

The political instability and social unrest in Tunisia since 2011, generated a short-term foresight of the macroeconomic management which contributed to the deterioration of the country’s macroeconomic fundamentals. The objective of this paper is to provide the policy makers with quantitative arguments showing the importance to undertake the macroeconomic stabilization and the structural reforms that improve the total factor productivity, one of the main engines of a sustained economic growth. To that end, the paper employs a financial dynamic general equilibrium model calibrated using six flow-of-funds accounts representing the Tunisian economy in 2010. In a first stage, I reproduce the main macroeconomic variables observed for the Tunisian economy over 2011–2018. In a second stage, the model is used to compare the impacts of counterfactual policy scenarios on the Tunisian macroeconomic performance. The results show that the economy could perform much better, in relation to a battery of macroeconomic indicators (economic growth, unemployment, public external and domestic debts, current account, fiscal balance) under alternative economic policies. The most insightful results are obtained under the scenario of a total factor productivity’s growth progressing at its average level of 2001–2010. Indeed, this could generate an average yearly gain in terms of GDP growth of 3.45 percentage points and a reduction of the average unemployment rate by 7 percentage points over the same time horizon.

Justified communication equilibrium (JCE) is an equilibrium refinement for signaling games with cheap-talk communication. A strategy profile must be a JCE to be a stable outcome of nonequilibrium learning when receivers are initially trusting and senders play many more times than receivers. In the learning model, the counterfactual “speeches” that have been informally used to motivate past refinements are messages that are actually sent. Stable profiles need not be perfect Bayesian equilibria, so JCE sometimes preserves equilibria that existing refinements eliminate. Despite this, it resembles the earlier refinements D1 and NWBR, and it coincides with them in co-monotonic signaling games. (JEL C70, D82, D83, J23, M51)

In this paper, I develop an integrated approach to collective models and matching models of the marriage market. In the collective framework, both household formation and the intra-household allocation of bargaining power are taken as given. This is no longer the case in the present contribution, where both are endogenous to the determination of equilibrium on the marriage market. I characterize a class of "proper'' collective models which can be embedded into a general matching framework with imperfectly transferable utility. In such models, the bargaining sets are parametrized by an analytical device called distance function, which plays a key role both for writing down the usual stability conditions and for estimation. In general, however, distance functions are not known in closed-form. I provide an efficient method for computing distance functions, that works even with the most complex collective models. Finally, I illustrate my results with a proof-of-concept application that uses PSID data. I identify the sharing rule and its distribution and consider two counterfactual experiments of women empowerment, both of which are shown to affect the sharing rule and the investment of couples in public goods.

Guinea-Bissau is among the world’s most unequal countries. Its use of the CFA currency, pegged to the euro and controlled by France, raises continuing concern . This paper investigates the impact of joining the C.F.A zone (1997) on Guinea-Bissau per capita GDP, fisheries capture, and rice yields. In the absence of randomization, we apply a synthetic control method SCM (Abadie and Gardeazabal, 2003) to build a counterfactual using a weighted combination of potential countries as control units and estimate the effects of entering the CFA zone on economic growth. The SCM results for Guinea-Bissau suggested that joining the CFA union contributed substantially to the decline of per capita GDP, fisheries capture, and rice yields. Other economic indicators such as cotton seed net per capita production and cashew nuts yields included in our study were inconclusive. Overall, Guinea-Bissau did not show evidence of economic growth after it entered the Franc zone. The country has been in long-term decline since then.

I develop a structural model of mortgage demand and lender competition to study how leverage regulation affects the U.K. mortgage market. Using variation in risk‐weighted capital requirements across lenders and mortgages with different loan‐to‐values (LTVs), I show that a 1‐percentage‐point increase in risk‐weighted capital requirements increases lenders' marginal cost of originating mortgages by about 26 basis points (11%) on average. I use the estimated model to study proposed leverage regulations. Counterfactual analyses show that large lenders exploit a regulatory cost advantage, which increases concentration by about 20%, and suggest that banning high‐LTV mortgages may reduce large lenders' equity buffer.

This study analyzes the effects of a feed-in-tariff (FIT) scheme’s transition on renewable energy investments. We model an individual’s investment decisions as a public goods game where the FIT scheme’s purchasing price acts as a subsidy that lowers the individual’s investment cost. Using a laboratory experiment, we study the effects of a decreasing purchasing price by comparing it to a counterfactual situation where the FIT scheme is not introduced. Although a high purchasing price induces higher investments, this external incentive seems to crowd out an individual’s intrinsic motivation: when the purchasing price decreases to zero, an individual’s investments are lower than they are in the counterfactual situation. Considering the possibility that motivation crowding out has occurred during the FIT phase-out process, it is important to introduce a new policy instrument without a break to stimulate renewable energy investments.

This research investigates homogeneity in the transposition of European Directives using as an example the EU policy on tobaccos regulated by Directive 2011/64. We analyse the effect of excise duti...

There are two approaches to measuring COVID-19 deaths–‘COVID associated deaths’ and ‘excess deaths’. An excess deaths framework is preferable, as there is measurement error in COVID associated deaths, due to issues relating to imperfect information about deaths that are directly attributable to COVID-19. The standard measure of excess deaths (comparison of deaths to a 5-year average) is subject to an omitted variables problem, as it attributes the entirety of the variation in mortality to COVID-19. We propose a method to estimate a refined measure of COVID-19 excess deaths in England and Wales that addresses the omitted impact of the first blanket lockdown. Using the counterfactual, we obtain a first stage estimate of excess deaths. In the second stage, this is decomposed into estimates of a refined measure of COVID-19 excess deaths and the excess mortality impact of lockdown. Our results suggest: (i) a refined estimate of mean weekly COVID-19 excess deaths that is 63% of standard excess deaths; and (ii) a positive net excess mortality impact of the lockdown. We make a case that (ii) is due to the Peltzman offsetting effect, i.e. the intended mortality impact of the lockdown was more than offset by the unintended impact.

We adapt a conditional counterfactual quantile decomposition structure to identify the contributions of relative consumption behaviours and potential market imperfections to observed expenditure di...

I study a college-admissions model with two need-blind colleges and heterogeneous students. In a game in which colleges can choose a financial aid policy and either binding, nonbinding, or no early admissions, a unique equilibrium outcome exists. In equilibrium, the more prestigious and wealthier college is more selective, has a more generous financial aid policy, and offers nonbinding early admissions, whereas the other college offers a binding program. Compared to the counterfactual in which only regular admissions are offered, early admissions make the more prestigious college worse off, the other college better off, and students, in the aggregate, better off.

In this paper we investigate the causal effects of consuming illegal drugs on educational attainment, employment, and wages. To identify these effects we develop and estimate a dynamic structural model to jointly consider decisions of whether to consume drugs, attend school, participate in the labor force, and save. Using data from the National Longitudinal Survey of Youth 1997 (NLSY97), we focus our analysis on males; the period of analysis begins at age 13, when they are young enough to have had no experience with drugs. Contrary to findings in the literature, non-drug users have higher wages than marijuana and/or hard drug users. This effect is small for individuals who consume marijuana in low doses but increases with the frequency of drug use. Results from a counterfactual experiment suggest that a 30 percent increase in the price of marijuana each period would reduce the number of marijuana consumers among the 13- to 30-year-olds by 16 percent. Individuals who are dissuaded from consuming marijuana due to the higher price would increase their level of education, their annual income, and work more.

The shock on human capital caused by COVID-19 is likely to have long lasting consequences, especially for children of low-educated families. Applying a counterfactual exercise we project the effects of school closures and other lockdown policies on the intergenerational persistence of education in 17 Latin American countries. First, we retrieve detailed information on school lockdowns and on the policies enacted to support education from home in each country. Then, we use these information to estimate the potential impact of the pandemic on schooling, high school completion, and intergenerational associations. In addition, we account for educational disruptions related to household income shocks. Our findings show that, despite that mitigation policies were able to partly reduce instructional losses in some countries, the educational attainment of the most vulnerable could be seriously affected. In particular, the likelihood of children from low educated families to attain a secondary schooling degree could fall substantially. Supplementary Information The online version contains supplementary material available at 10.1007/s10888-021-09501-x.

We use a simple structural matching model with unobserved heterogeneity to produce counterfactual marriage patterns of two kinds: counterfactuals that hold the match surplus constant across markets and counterfactuals that hold the joint utility constant. These counterfactuals allow us to decompose matching patterns into an intensive margin (who marries whom) and an extensive margin (how many and who remain single). We apply this approach to US data from 1962 to 2017 and show that marital patterns can explain about 1/3 of the rise in income inequality, the intensive margin contributing for 5%, the extensive margin for the remaining 95%. The extensive margin is itself driven for 2/3 by a change in the total number of singles and 1/3 by a change in the distribution of types among singles.

This study investigated the emotional and behavioral potential of counterfactual thinking within sustainable tourism. Despite the growing interest in the determinants of sustainable tourist behavior, studies hardly seek detailed cognitive explanations. Furthermore, use of selective samples, survey techniques or other data-driven methods prevent existing frameworks from establishing causal linkages to attitudes or behavior. Across two experimental studies, counterfactual thinking—a goal-oriented cognitive process—was investigated with respect to environmental attitudes and behavioral improvement. Findings provided evidence for the utility of counterfactuals in the sustainable tourism domain. Feelings for the environment of a destination may change, and intentions for sustainable behavior may improve as a consequence of counterfactual thoughts. Theoretical and practical implications were discussed for sustainable tourism and environmental behavior.

The aim of mediation analysis is to identify and evaluate the mechanisms through which a treatment affects an outcome. The goal is to disentangle the total treatment effect into two components: the indirect effect that operates through one or more intermediate variables, called mediators, and the direct effect that captures the other mechanisms. This paper reviews the methodological advancements in causal mediation literature in economics, in particular focusing on quasi-experimental designs. It defines the parameters of interest under the counterfactual approach, the assumptions and the identification strategies, presenting the Instrumental Variables (IV), Difference-in-Differences (DID) and the Synthetic Control (SC) methods.

Los programas y las políticas públicas se diseñan e implementan con el objetivo de cambiar algún comportamiento o aspecto de la vida de una persona, como su educación, sus ingresos, su alimentación, etc. Esta implementación se basa en la teoría del cambio para lograr sus objetivos. Sin embargo, determinar si estos programas o políticas públicas logran los impactos o resultados esperados es una labor que a menudo no es abordada por los implementadores de las políticas públicas. La evaluación de impacto de las políticas públicas es una acción fundamental dentro de la gestión pública, pues permite obtener información sobre los impactos que tienen dichas políticas o programas en la población beneficiaria y así poder estudiar la posibilidad de ampliar el alcance, modificar, sugerir cambios o detener la ejecución. En esta revisión sistemática se evaluaron 22 estudios sobre evaluación de impacto. La temporalidad de los estudios evaluados va desde el año 1983 hasta el año 2017. Uno de los principales hallazgos está referido a la importancia de estimar un contrafactual creíble que permita identificar de manera adecuada el impacto de la aplicación de una determinada política pública. Otro de los aspectos a resaltar es que la metodología para evaluar una determinada política pública depende de los datos con los que se cuenta y de las características de la intervención. Finalmente, los modelos econométricos utilizados para estimar los impactos no son, en ningún caso, modelos rígidos. Mucho dependerá de la habilidad y la creatividad del investigador para plantear una propuesta metodológica que cumpla con el objetivo planificado.