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Using a survey of nearly 20,000 Mexican residents matched with data on 50 earthquakes, we observe evidence that people affected by an earthquake report a lower discount rate, implying greater patience. The effect is stronger for more intense earthquakes and is robust to controlling for a series of socioeconomic variables, locality, and event fixed effects. It is not driven by changes in risk aversion, expected future income streams, or life expectancy, nor is it impacted by people moving in or out of affected localities. People react in the same way regardless of their age at the time of the earthquake, in line with the life-long openness hypothesis. Estimates suggest that the effect of more intense earthquakes diminishes slowly, persisting over decades. This effect is independent of gender but varies with education and wealth. Finally, respondents who have experienced an earthquake adjust their savings and health-related behaviors in ways consistent with a decrease in their discount rate., info:eu-repo/semantics/published

We study the causal effect of literary awards on book sales, using France's most prestigious prize, the Goncourt. For this, we implement a regression discontinuity design, taking advantage of the fact that a committee of experts gives the prize to the book receiving the most votes. We observe that the Goncourt increases sales by 350 percent and that this effect is larger for books that sold fewer copies before the award. Additional results show that the prize results in more reviews on Amazon but increases the probability that they are negative. Finally, we report that the effect on sales is partly driven by an increase in word of mouth. These findings are consistent with a model where the Goncourt provides information on the existence of a book and where consumers use the prize as a quality signal and a coordination device but, as a result, read books that are too far from their tastes. This interpretation is backed by the finding that, despite its positive effect on sales, the Goncourt des Lycéens, a prize based on the same list of books as the Goncourt but awarded by a group of high-school students whose tastes are arguably doser to the public's than to those of experts, has no effect on the sentiment of reviews., info:eu-repo/semantics/published

In this online appendix, we provide extra evidence complementing our paper “A time to throw stones, a time to reap: How long does it take for democratic transitions to improve institutional outcomes?” accepted for publication in the Journal of Institutional Economics. First, we provide additional information on the dataset and the sample. Second, we discuss four democratic transitions that illustrate our main finding: Bangladesh in 1991, Senegal in 2000, Hungary in 1990, and Nicaragua in 1990. Third, we report a series of robustness checks: a non-parametric test, using alternative definitions of transitions, using an alternative set of control variables, dropping former socialist countries, including region-specific effects, distinguishing types of transitions, conditioning the effect of democratic transitions on GDP per capita, education, and whether the transfer of power was regular or not., info:eu-repo/semantics/published

An experiment using a representative survey of the German population shows that letting respondents report a number rather than asking them to choose from a list of predefined ranges lowers the response rate for both perceived past and expected inflation and decreases (increases) reported past (expected) inflation. Income, education, gender, objective and subjective knowledge about monetary policy, and political affiliation affect the effect's size but not its sign. East and West German respondents who were 15 or older when the Berlin Wall fell have reactions different from those who were younger at that time, which supports the 'impressionable years' hypothesis based on different inflation experiences.

We study the spatial distribution of the effect of oil and gas revenues on Brazilian municipalities, using variations in the international prices of oil and gas to establish causality. Oil and gas revenues increase economic activity, measured by night-time light emissions, in oil-producing municipalities but impose negative spill-overs on neighbouring municipalities. Spill-overs dominate beyond 150 km from oil activities and compensate direct effects in micro-regions. In oil municipalities, oil and gas revenues increase royalties, population, local real prices, crime, and real wages, essentially in manufacturing and services. Spillovers are negative on wages and prices and positive on royalties and crime., info:eu-repo/semantics/published

In this paper, we evaluate the impact of creditor rights and political risk on both the number and the value of cross-border M&A flows in a gravity model using a negative binomial model and Heckman’s two-stage selection model, respectively. Our results confirm that creditor-friendly rules and political risk decrease M&A inflows. The impact of formal legal rules is, however, almost entirely driven by politically stable countries, where those rules can be expected to hold. De jure rules therefore only matter where de facto implementation can be expected due to political stability.

We study the impact of banking crises on the level of democracy. We use an event-study method on a sample of up to 129 countries over the period 1975-2010 accounting for 94 systemic banking crises. We find that banking crises are followed by an improvement in democracy and report evidence suggesting that the relation is causal. The bulk of the improvement takes place between 3 and 10 year after the banking crisis. The impact of a banking crisis is greater in non-democratic countries and when the banking crisis is severe. We explain this finding by the fact that banking crises create windows of opportunity to contest autocratic regimes., info:eu-repo/semantics/published

In this paper, we examine the effect of studying business on the beliefs and values of students, carefully distinguishing between self-selection in the discipline and socialization during the first year of study. Using a survey of students in a leading Belgian business school, we observe significant differences between business students and students from other disciplines at the start of their first year in both their beliefs and values. We also discover that these differences persist or are reinforced at the end of the year. Moreover, we find changes in values of business students that take only one year to manifest. Furthermore, we find that business students over the course of the first year change their beliefs more than students from other disciplines. Accordingly, we report evidence of self-selection and socialization effects on both the values and beliefs of a typical business student. Moreover, we observe that while some values and beliefs of business students change over time, we do not observe changes for economics students. This suggests that the effect of studying business is not entirely driven by the role of economics in business studies., info:eu-repo/semantics/published

Using an original survey where French citizens were asked to assess corruption at all levels of government, we observe that institutional distance increases perceived corruption. Specifically, municipal governments are perceived as the least corrupt, followed by local governments, senators, deputies, and the national cabinet. The president of the Republic is perceived as slightly less corrupt than the national cabinet, but more corrupt than any other level of government. The relation is robust to alternative specifications, controlling for a series of individual and regional characteristics, and to alternative definitions of the dependent variable. It is not reducible to geographical distance. We observe similar results in other countries., info:eu-repo/semantics/published

Using a causal inference in a cross-country regression design made possible by the coincidence that the 2016 US Presidential election occurred during the fieldwork period of the European Social Survey (ESS8), we test whether Donald Trump’s unexpected win increased the willingness to report racist attitudes. The election significantly increased the gap between the opposition to different-race immigration, which did not change, vs. same-race immigration, which significantly decreased. The finding, robust to a large set of checks, is shown to be substantially shaped by socioeconomic and partisan identities. In particular, the causal effect of Donald Trump’s unexpected win on the willingness to report racist attitudes is stronger among old men living in urban areas. Moreover, the aggregate effect is driven by extreme right-wing units with high level of political interest., info:eu-repo/semantics/published

This paper investigates the evolution of foreign direct investment net inflows (FDI) around democratic transitions, in a panel of 115 developing countries from 1970 to 2014, using an event-study method. We find no effect of democratic transitions on FDI net inflows on average. We then distinguish the effect of democratic transitions per se and the effect of its consolidation. To do so, we specifically focus on consolidated democratic transitions, defined as transitions that did not reverse during five years at least. We find that consolidated democratic transitions do increase FDI net inflows. The bulk of the improvement appears ten years after the transition. Furthermore, the effect of consolidated democratic transitions on FDI is not limited to their impact on political risk. When controlling for the political risk index of the International Country Risk Guide, the intrinsic effect of consolidated democratic transitions appears immediately after the transition, suggesting that higher political risk accompanying the early years of democratic transitions offsets the positive intrinsic effect of democratictransition on FDI. The results are robust to controlling for GDP per capita and schooling, to alternative codings of the variables capturing the transition, disaggregating the political risk measure into several sub-components and the exclusion of outliers. Moreover local projections, propensity score matching, and IV estimates lend credence to a causal interpretation of our results. Furthermore the longer the democratic history of a country is, the fewer FDI this country may expect to attract thanks to a new democratic transition., info:eu-repo/semantics/published

In the midst of an ongoing nationwide campaign to collect funds for famine relief in Africa, a storm struck a locally famous outdoor music festival in Belgium. Five participants died, and several hundreds were wounded. We use this event to determine whether pro-social behavior, measured by donations to the campaign, can be affected by a local disaster. Applying a differences-in-differences identification strategy to campaign contributions at the municipality-day level, we show that, after the event, the municipalities affected by the disaster gave more money to the famine relief in Africa campaign than non-affected municipalities. We interpret this finding as evidence that donations to a faraway cause can be positively affected by a local disaster., info:eu-repo/semantics/published

Using two surveys, we study how respondents process visual cues to identify the political orientation (left- vs. right-wing) of members of the French National Assembly (referred to as “deputies”), based on official photographs only, to test the type of heuristic that they use. We first confirm that respondents outperform random guesses. Second, we find that their categorizations correlate with observable characteristics (gender, tie color, jewelry) and subjective assessments of deputies’ personality traits (attractiveness, competence, trustworthiness). Third, the objective visual cues that respondents use are consistent with the actual characteristics of left- and right-wing deputies, and respondents mistakenly react to subjective personality traits that differ little across the two groups of deputies. Fourth, left- and right-wing respondents use the same cues in the same way, attractiveness being the only exception. Fifth, the magnitude of the marginal impact of a characteristic on the probability of a respondent categorizing a photograph as left- or right-wing increases strictly with the representativeness of that characteristic. Finally, we find evidence that some characteristics correlate with categorization errors. Findings 1, 2, 4, and the finding that respondents use cues in the correct way are consistent with both Bayesian behavior and the representativeness heuristic. Findings 5, 6, and the finding that respondents react to subjective cues that do not differ across groups are at odds with Bayesian inference but consistent with the representativeness heuristic suggested by Kahneman and Tversky (1972) and recently modelled by Gennaioli and Shleifer (2010), and Bordalo et al. (forthcoming)., info:eu-repo/semantics/published

We study the relationship between major religious denominations and individuals’ levels of education, using the World Values Survey. In a first step, running country-by-country regressions, we report first-time evidence that no single denomination has a universal effect on education. Each denomination has a positive and statistically significant effect in some countries, a negative and statistically significant effect in others, and a statistically insignificant effect elsewhere. In a second step, we relate the sign of the impact of a denomination in a country to whether the denomination is a minority in that country. We find that denominations that are a minority in a country are more likely to be associated with a higher level of education, and less likely to be associated with a lower level of education in that country. In both steps, the findings are independent from the specification of the regressions used in the first stage to determine the sign of the impact of denominations on educational outcomes. The finding of the second step is moreover robust to defining minority denominations using various thresholds. It is robust to controlling for whether the denomination is a state religion, for the country’s level of democracy, per capita GDP, or level of education, to introducing denomination- and country- fixed effects, and to controlling for the identity of the largest other denomination in the country., info:eu-repo/semantics/published

info:eu-repo/semantics/published

This paper studies the impact of democratic transitions on institutional outcomes in a panel of 135 countries over the period 1984-2012, using an event study method. Our estimates suggest that the bulk of the improvement occurs during the three years following the transition. We can find no anticipation effect in average institutional outcomes. The results are robust to using alternative transition definitions and alternative codings of pre- and post-transition years, to changing the set of control variables, to excluding former socialist countries from the sample, and to dealing with endogeneity with IV regressions. When distinguishing full and partial democratic transitions, we find that both improve institutional outcomes. We find that the effect of democratic transitions is conditional on GDP per capita, education, and the regularity of the transition. When looking at specific components of institutional quality, we find that law and order, internal conflict, government stability, and ethnic tensions follow the general trend, while corruption, military in politics, bureaucratic quality, and investment profile indices are insensitive to democratic transitions., info:eu-repo/semantics/published

We explore the effect of foreign direct investment on economic growth in developing countries, distinguishing between mergers and acquisitions (“M&As”) and “greenfield” investment. A simple model underlines that, unlike greenfield investment, M&As partly represent a rent accruing to previous owners, and do not necessarily contribute to expanding the host country’s capital stock. Greenfield FDI should therefore have a stronger impact on growth than M&A sales. This hypothesis is supported by our empirical results, which show that greenfield FDI enhances growth, while M&As have no effect, at best, in a panel of up to 78 developing and emerging countries over 1987-2005., info:eu-repo/semantics/published

In this online appendix, we provide extra evidence complementing our paper “Mark My Words: Information and the Fear of Declaring an Exchange Rate Regime”: we control for electoral competitiveness, law and order, and central bank independence; we drop countries with high capital controls, and we run a bootstrap estimation., info:eu-repo/semantics/published

This paper studies the impact of social trust and formal legal and institutional determinants of capital accumulation in a panel of countries. It reports that formal determinants and trust interact, and that the two are substitutes. Specifically, the marginal impact of formal legal institutions decreases with trust, and vice versa. These findings apply both to total investment and to its foreign component, foreign direct investment., info:eu-repo/semantics/published

We investigate the impact of investment on growth in a sample of 85 developed and developing countries over 1984-2009, conditioning the marginal effect of investment on institutional quality. The panel structure of our dataset allows controlling for unobserved heterogeneity and dealing with the risk of endogeneity bias. We find that investment increases growth more in countries with high institutional quality than in countries with defective institutions. The results are robust to estimating the model separately for developed and developing countries, for each continent, and over two sub-periods. A jackknife experiment shows that they do not depend on any single country. The results are essentially driven by the quartiles of countries with the lowest and the highest institutional quality, and by the Government instability, Corruption, and Rule of law sub-components of the ICRG index., SCOPUS: ar.j, info:eu-repo/semantics/published

We test the notion that a government may rely less on taxes and more on inflation to finance its expenditures the larger the size of the shadow economy. In a sample of developed and developing countries over the 1999-2007 period, we indeed report a negative relation between the tax burden and the size of the shadow economy, and a positive relation between inflation and the size of the shadow economy. We provide evidence that both are conditional on central bank independence and the exchange rate regime. Both survive a series of robustness checks, controlling for reverse causality, simultaneity, level of development, and estimates of the shadow economy., info:eu-repo/semantics/published

In the paper, we argue that trust is the missing link relating education, institutions, and economic development. We argue that increased trust both increases education and improves legal and bureaucratic institutions, which in turn spurs economic development. We substantiate this intuition with a series of regressions that show that trust determines both education and the quality of institutions, and that education and institutions in turn affect GDP per capita., info:eu-repo/semantics/published

We explore the effect of foreign direct investment on economic growth in developing countries, distinguishing between mergers and acquisitions ("M&As") and "greenfield" investment. A simple model captures the key difference between the two types of FDI: unlike greenfield investment, M&As partly represent a rent accruing to previous owners, and do not necessarily contribute to expanding the host country's capital stock. The model suggests that greenfield FDI has a stronger impact on growth than M&A sales. This hypothesis is supported by our empirical results, which show that greenfield FDI enhances growth, while M&As have no effect, at best.

This paper investigates the role of a free press and of the circulation of information on the capacity of a country to declare an exchange regime that is different from the regime it de facto implements. We put forward consistent evidence that increased press freedom and easier access to information results in a lower probability of untruthfully reporting the regime that is implemented. The finding is resistant to a large set of robustness checks, including controlling for democracy., info:eu-repo/semantics/published

This paper studies the relationship between a microfinance institution (MFI) and its credit officers when the latter discriminate against a group of the target population. Using survey data from Uganda, we provide evidence that credit officers are more biased against disabled borrowers than other employees. In line with the evidence, we then build an agency model of a non-profit MFI and a discriminating credit officer. Since incentive schemes are costly and the MFI’s budget is limited, even a non-discriminating welfare-maximizing MFI may prefer paying smaller incentivizing compensation, and letting its credit officer discriminate to some extent., info:eu-repo/semantics/published

This paper aims at discovering the decision rule the Governing Council of the ECB uses to set interest rates. We construct a Taylor rule for each member of the council and for the euro area as a whole, and aggregate the interest rates they produce using several classes of decision-making mechanisms: chairman dominance, bargaining, consensus, voting, and voting with a chairman. We test alternative scenarios in which individual members of the council pursue either a national or a federal objective. We then compare the interest-rate path predicted by each scenario with the observed euro area's interest rate. We find that scenarios in which all members of the Governing Council are assumed to pursue Euro-area-wide objectives are dominated by scenarios in which decisions are made collectively by a council consisting of members pursuing national objectives. The best-performing scenario is the one in which individual members of the Governing Council follow national objectives, bargain over the interest rate, and their weights are based on their country's share of the zone's GDP.