Working Papers

Authors: Tony Syme

Jul 2020

Unemployment in the 1930s was low in France by international standards, nevertheless there was a virulent drive to expel immigrant workers as a means of limiting domestic unemployment. This involved not only the repatriation of the foreign chômeur, but also legislation to displace the foreign worker from his workplace. This paper extends the current debate over the effectiveness of this strategy with the use of two archival datasets. The inability of the State to reach its immigrant employment targets is confirmed, but it is suggested that it was not that unemployed Frenchmen were not willing to take the unattractive jobs that immigrants held, but that employers were unwilling to substitute their foreign workers with their French unemployed equivalents that undermined this repatriation drive. One implication is that the repatriation of foreign workers that did take place compromised the economic recovery that would begin in 1936.

Authors: Valerie Lechene, Martin Browning, University of Copenhagen

Jul 2020

Several models of intra-household decision making have been suggested in the literature. One important dichotomy is between non-cooperative and cooperative models (including specific models of bargaining). The other important distinction is between models that allow for caring and those that do not. We present a framework that includes all suggested models and variants as special cases. We derive the theoretical predictions of these models for the relationship between expenditures on goods and the intra-household distribution of income. We estimate and test between these relationships using Canadian household expenditure data. We conclude that there is evidence that both husbands and wives care for each other in the sense that with an unequal distribution of incomes the high income partner behaves as a `Becker dictator` and there is local income pooling. We further find that for about half of the households in our sample (those with mor

Authors: Michela Cella

Jul 2020

In this paper we analyze a simple two-sided adverse selection model with one principal and one agent. They are both risk neutral and have private information about their type. We also assume that the private information of the principal is correlated with the one of the agent. The main result of the paper is that the principal can extract a larger share of the surplus from the agent than in the case where her information is public. The principal can design such a contract because she exploits the fact that her type is an informative signal on the agent`s one. We fully characterize the equilibrium of the principal agent game in which different types of principal offer the same menu of contracts that leave the agent uninformed about the principal`s type. This gives more freedom to the principal when setting the transfers because the agent`s constraints need to hold only at an interim stage. The principal gains from a peculiarity of the co

Authors: Edoardo Gallo

Jul 2020

This paper presents a bargaining model between individuals belonging to different groups where the equilibrium outcome depends on the communication network within each group.  Belonging to a group gives an informational advantage: connections help to gather information about past transactions and this information can be used to make more accurate demands in future bargaining rounds.  In the long-term there is a unique stochastically stable equilibruim which depends on the peripheral or least connected individuals in each group.  Comparative statistics shows that a denser and more homogeneous network allows members of a group to obtain a better deal.  An empirical analysis of the observed price differential between Asian and white buyers in New York's Fulton fish market is consistent with these predictions.  An extension explores an alternative set-up where buyers and sellers belong to the same communication network:

Authors: John Knight, Sai Ding and Alessandra Guariglia

Jul 2020

This paper addresses the hotly-debated question: do Chinese firms overinvest?  A firm-level dataset of 100,000 firms over the period of 2000-07 is employed for this purpose.  We initially calculate measures of investment efficiency, which is typically negatively associated with overinvestment.  Despite wide disparities across various ownership groups, industries and regions, we find that corporate investment in China has become increasingly efficient over time.  However, based on direct measures of overinvestment that we subsequently calculate, we find evidence of overinvestment for all types of firms, even in the most efficient and most profitable private sector.  We find that the free cash flow hypothesis provides a good explanation for China's overinvestment, especially for the private sector, while in the sector, overinvestment is attributable to the poor screening and monitoring of enterprises by banks.

Individual View

Authors: Tim Jenkinson, Leonie Bell, Department of Economics, University of Oxford.

Jul 2020

This paper examines the impact of a major change in dividend taxation introduced in the UK in July 1997. The reform was structured in such a way that the immediate impact fell almost entirely on the largest investor class in the UK, namely pension funds. We analyse the behaviour of share prices around the ex-dividend day both before and after the reform to test clientele effects and the impact of taxation on the valuation of companies. We find strong clientele effects in the UK, which are consistent with the distortions introduced by the tax system (before the reform dividend income was tax-advantaged in the UK). We also find significant changes in the valuation of dividend income after the reform, in particular for high-yielding companies. These results provide strong support for the hypothesis that taxation affects the valuation of companies, and that pension funds were the effective marginal investors for high-yielding companies.

Individual View

Authors: Florian Ploeckl

Jul 2020

Urbanization has been extensively used as a proxy for economic activity.  The urban status of settlements is usually determined by an ad hoc population size household.  This paper proposes a new threshold, taking into account the effect of local agricultural endowments.  The new population threshold is a population size, such that for smaller settlements these endowments influence their size, while for larger they do not.  This results in an endogeneous, data based threshold.  The idea is practically shown for Saxony in the 19th century.  The relevance of a different classification is demonstrated in four particular examples, the development of urbanization over time, Gibrat's law, the impact of geography on town locations and the spatial relationship between towns and villages.  The resulst demonstrate that the underlying classification scheme matters for the conclusions drawn from urban data.

Individual View

Authors: Mark Armstrong,John Vickers

Jul 2020

We present a tractable class of multiproduct monopoly models that involve a generalized form of homothetic preferences. This class includes CES, linear and logit demand. Within the class, profit-maximizing quantities are proportional to efficient quantities. We discuss cost-passthrough, including cases where optimal prices do not depend on other products’costs. We show how the analysis can be extended to Cournot oligopoly. Finally, we discuss optimal monopoly regulation when the firm has private information about its vector of marginal costs, and show that if the probability distribution over costs satisfies an independence property, then optimal regulation leaves relative price decisions to the firm.

Individual View


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