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Claude Fluet, Thomas Lanzi

Septembre 2021

Two opposed parties seek to infl‡uence an uninformed decision maker. They invest in acquiring information and select what to disclose. The decision maker then adjudicates. We compare this benchmark with a procedure allowing adversarial cross-examination. A cross-examiner tests the opponent in order to persuade the decision maker that the opponent is deceitful. How does the opportunity or threat of cross-examination affect the parties' ’behavior? How does it affect the quality of decision-making? We show that decision-making deteriorates because parties are less likely to acquire information and because cross-examination too often makes the truth appear as falsehood. Next, we consider a form of controlled cross-examination by permitting the cross-examined to be re-examined by his own advocate, i.e., counter-persuasion. More information then reaches the decision maker. Decision-making may or may not improve compared to the benchmark depending on how examination is able to trade off type 1 and 2 errors.


Claude Fluet : Université Laval, CRREP.
Thomas Lanzi : Université de Lorraine, BETA.


For helpful comments and suggestions on an earlier version of this paper, we thank Jesse Bull, Bertrand Crettez, Andrew Daughety, Erik Talley, Navin Kartik, Kathryn Spier, Joshua Teitelbaum, and the participants of the 8th Annual Law and Economic Theory Conference 2018. Financial support from SSHRC Canada is gratefully acknowledged (grant 435-2023-1671).

 

Benoît Carmichael, Gilles Boevi Koumou, Kevin Moran

Août 2021

We use an equivalent form of Markowitz's mean-variance utility function, based on Rao's Quadratic Entropy (RQE), to enrich the standard capital asset pricing model (CAPM), both in the presence and in the absence of a risk-free asset. The resulting equilibrium, which we denote RQE-CAPM, offers important new insights about the pricing of risk. Notably, it reveals that the reason for which the standard CAPM does not price idiosyncratic risk is not only because the market portfolio is law of large numbers diversified but also because the model implicitly assumes agents' total risk aversion and their correlation diversification risk preference balance each other exactly. We then demonstrate that idiosyncratic risk is priced in a general RQE-CAPM where agents' total risk aversion and their correlation diversification risk preference coefficients are not necessary equal. Our general RQE-CAPM therefore offers a unifying way of thinking about the pricing of idiosyncratic risk, including cases where such risk is negatively priced, and is relevant for the literature assessing the idiosyncratic risk puzzle. It also provides a natural theoretical underpinning for the empirical tests of the CAPM or the pricing of idiosyncratic risk performed in some existence studies.
 


Benoît Carmichael : Université Laval.
Gilles Boevi Koumou : Africa Institute for Research in Economics and Social Sciences (AIRESS), Université Mohamed VI Polytechnique.
Kevin Moran : Université Laval, CRREP.

We thank our discussant, Dmitry Matveev at the 52nd Annual Conference of the Canadian Economics Association and all participants for useful feedback.

François Seyler, Arthur Silve

Juin 2021

A protracted legislative battle culminated in the abolition of slavery in Brazil in 1888. We build a new data set of roll-call votes on 1884-1888 emancipation bills in the legislature, and connect it to local features of the districts. This allows us to unpack how the material interests of each of the 122 electoral districts coalesced into an abolitionist coalition. Our results help reconcile previous theories of labor coercion. We find that slavery-intensive districts opposed emancipation. In line with a labor demand effect, we also find more support for emancipation where immigrants provided an alternative source of labor, and in line with an outside option effect, where enslaved persons could more easily escape. A two-pronged instrumental variables strategy that uses variation in (a) history and geography and (b) heteroskedasticity with respect to the regressors supports a causal interpretation of our main results.

François Seyler : Université Laval.
Arthur Silve : Université Laval.

 

We thank Daron Acemoglu, Charles Angelucci, José De Sousa, Christian Dippel, Mauricio Drelichman, James Fenske, Claudio Ferraz, Bernard Fortin, Jeffry Frieden, Marion Goussé, Marion Mercier, Christoph Mikulaschek, Eric Rasmusen, Sulin Sardoschau, and participants to seminars at Harvard, at the Vancouver School of Economics, and Paris-1 for comments at various stages of this project. We also thank Leonardo Monasterio for the digitized version of the censuses, and the extremely kind and helpful staff at various archives in São Paulo, Rio de Janeiro, Curitiba, and Brasilia.

Jeffry Frieden, Arthur Silve

Mai 2021

Why do some societies embrace innovative technologies, policies, and ideas, while others are slow to adopt, or even resist, them? We focus on features of an innovation that are expected to affect the incumbent elite’s economic activities, and hence the elite’s reaction. The elite can choose whether to appropriate the innovation for itself; encourage its adoption; tax, regulate, or limit or block it. Six features of the innovation affect the elite response: i) whether it is easy to replicate; ii) whether it complements or competes with the elite’s sources of income; iii) whether its impact is broad or narrow; iv) whether it is location-dependent, and v) concealable; vi) whether it requires large fixed costs. Some of these factors have been considered in other work; here we assess them together. We provide illustrative evidence of the relevance and generality of the model to understand the fate of a variety of innovations.
 


Jeffry Frieden : Harvard University.
Arthur Silve : Université Laval.


We thank Peter Buisseret, Andrew Coe, Arnaud Dellis, Nicola Persico, Ron Rogowski, Petros Sekeris, Armand Terrien, and seminar participants at the APSA formal theory workshop and at the universities of Bordeaux, Harvard, Laval, Montpellier, and Strasbourg for comments.

Vincent Boucher, Yann Bramoulé

Avril 2021

We revisit and rehabilitate linear models of interactions in binary outcomes. Building on Heckman and MaCurdy (1985), we characterize when these models are statistically well defined. We then characterize and assess their game-theoretic microfoundations. We show that linear models of interactions admit sensible microfoundations under incomplete information and independence, but unconventional ones under complete information. We propose two simple estimators and revisit the empirical analyses of teenage smoking and peer effects of Lee, Li, and Lin (2014) and of entry into airline markets of Ciliberto and Tamer (2009). Our reanalyses highlight the main advantages of the linear framework and suggest that the estimations in these two studies suffer from endogeneity problems.

Vincent Boucher: Laval University, CRREP, CREATE.
Yann Bramoullé: Aix-Marseille University.


 We thank Habiba Djebbari, Arthur Lewbel, participants at seminars and conferences for their helpful comments, and Aureo de Paula for invaluable feedback. This work was supported by the French National Research Agency Grant ANR-17-EURE-0020. This research uses data from Add Health, a program directed by Kathleen Mullan Harris and designed by J. Richard Udry, Peter S. Bearman, and Kathleen Mullan Harris at the University of North Carolina at Chapel Hill, and funded by Grant P01-HD31921 from the Eunice Kennedy Shriver National Institute of Child Health and Human Development, with cooperative funding from 23 other federal agencies and foundations. Special acknowledgment is given to Ronald R. Rindfuss and Barbara Entwisle for assistance in the original design. Information on how to obtain Add Health data files is available on the Add Health website  http://www.cpc.unc.edu/addhealth). No direct support was received from Grant P01-HD31921 for this research. Replication codes are available at https:
//github.com/vincentboucherecn/linearbinaryinteractions. We used Hlavac (2018) for some tables.

Vincent Boucher, Semih Tumen, Michael Vlassopoulos, Jackline Wahba, Yves Zenou

Avril 2021

We study the social integration of ethnic minority children in the context of an early childhood program conducted in Turkey aimed at preparing 5-year-old native and Syrian refugee children for primary school. We randomly assign children to groups with varying ethnic composition and find that exposure to children of the other ethnicity leads to an increase in the formation of interethnic friendships, especially for Turkish children. We also find that the Turkish language skills of Syrian children are better developed in classes with a larger presence of Turkish children. We then develop a model of friendship formation with two key mechanisms: preference bias and congestion in the friendship formation process. Structural estimation of the model suggests that interethnic exposure reduces the share of own-ethnicity friends (homophily) and has a non-monotonic effect on the propensity to form own-ethnicity friendships beyond what would be expected given the size of the group (inbreeding homophily). Counterfactual analysis indicates that improvement in the language skills of Syrian children can offset more than half of the effect that ethnic bias has on friendship formation patterns. Finally, we find that for Syrian children exposure to Turkish children in the pre-school program has a long-term effect on primary school absenteeism.
 


Vincent Boucher: Laval University.
Semih Tumen: TED University, IZA, ERF.
Michael Vlassopoulos: University of Southampton, IZA.
Jackline Wahba: University of Southampton, IZA.
Yves Zenou: Monash University, CEPR, IZA.


We thank Salma Mousa, Luigi Minale, Sandra Sequeira, Jorge Garcia-Hombrados, Cevat Aksoy, Orkun Saka, Pinar Ozel, Serdar Polat, Matt Lowe, Michele Pellizzari, and audiences at the 13th Migration and Development Conference, the EBRD & KCL Workshop on the Economics and Politics of Migration, 2nd LSE Workshop on Political Economy of Turkey, the 2021 AEA/ASSA, and the New Zealand Economics eSeminar Series for useful comments.

Liza Charroin, Bernard Fortin, Marie Claire Villeval

Avril 2021

If individuals tend to behave like their peers, is it because of conformity, that is, the preference of people to align behavior with the behavior of their peers; homophily, that is, the tendency of people to bond with similar others; or both? We address this question in the context of an ethical dilemma. Using a peer effect model allowing for homophily, we designed a real-effort laboratory experiment in which individuals could misreport their performance to earn more. Our results reveal a preference for conformity and for homophily in the selection of peers, but only among participants who were cheating in isolation. The size of peer effects is similar when identical peers were randomly assigned and when they were selected by individuals. We thus jointly reject the presence of a self-selection bias in the peer effect estimates and of a link strength effect.

Liza Charroin: University of Paris 1.

Bernard Fortin: Laval University, CIRPÉE, CIRANO, IZA.

Marie Claire Villeval: Univ Lyon, IZA.

We thank Vincent Boucher, Yann Bramoullé, Yan Chen, Alain Cohn, Russell Davidson, Claude Fluet, Steeve Marchand and Bruce Shearer for helpful discussions. We also thank seminar participants at Aix Marseille School of Economics, Beta at Université de Lorraine, CREST in Paris, the Erasmus Institute in Rotterdam, ICES at George Mason University, Laval University, the University of Michigan SBEE seminar, Purdue University, Shandong University, the Universities of Glasgow and Heidelberg, and Virginia Tech University for helpful comments. Aristide Houndetoungan provided exceptional research assistance. We are also grateful to  uentin Thevenet who programmed the experiment. Support for this research was provided by the French National Research Agency (FELIS, ANR-14-CE28-0010-01), the CORTEX Laboratory of Excellence (ANR-11-LABX-0042) of Université de Lyon, within the program Investissements d’Avenir (ANR-11-IDEX-007), and IDEXLYON from Université de Lyon (INDEPTH-IDEX/SBP/2018/03) within the Programme Investissements d’Avenir (ANR-16-IDEX-0005) operated by the French National Research Agency.

William Arbour, Guy Lacroix, Steeve Marchand, Risk Assessment

Janvier 2021

Increasing evidence suggests that incarceration, under certain circumstances, can improve inmates’ social reintegration upon release. Yet, the mechanisms through which incarceration can lead to successful rehabilitation remain largely unknown. This paper finds that participation in social rehabilitation programs while incarcerated can significantly reduce recidivism. This result is entirely driven by inmates whose risk and needs were evaluated by a widely used assessment tool identifying their criminogenic needs. For this group, we estimate that participation in these programs reduces recidivism by about 9 percentage points within three years following release. Our results suggest targeting criminogenic needs is crucial for successful rehabilitation. We also find considerable heterogeneous program treatment effects: inmates with a high overall risk score, or who exhibit procriminal attitudes, benefit little if at all from program participation. We investigate the stability of the treatment effect coefficients and conclude they unlikely suffer from an omitted variable bias.

William Arbour : University of Toronto 
Guy Lacroix  : Université Laval
Steeve Marchand :  Applied Economic & Social Research, University of Melbourne 
 

Claude-Denys Fluet, Murat C. Mungan

Décembre 2020

Punishment causes reputational losses in addition to more tangible losses. Lowering the probability of punishment reduces these reputational losses by diluting the informational value of verdicts. These considerations better align the positive as well as normative implications of law enforcement models with intuition and empirics: Crime is more responsive to the certainty rather than the severity of punishment even absent risk-seeking offenders (positive), which causes extreme Beckerian punishments to be inefficient when sanctions are socially costly to impose (normative). Moreover, in some cases optimal enforcement is 'anti-Beckerian': Punishment is symbolic and detection costs are incurred solely to provide reputational incentives.
 

Claude Fluet : Université Laval, CRREP, CRED
Murat C. Mungan : George Mason University, Antonin Scalia Law School
 

Claude-Denys Fluet, Murat C. Mungan

Octobre 2020

We analyze the interactions between social norms, the prevalence of regulated acts, and  policies. These interactions are impacted by people’s inability to directly observe actors’ behavior. Norms are ineffctive incentivizers when acts are committed either very frequently or very infrequently, because noisy signals of behavior are then too weak to alter people’s beliefs about others’ behavior. This cuts against the dynamics of the ‘honor-stigma’ model (Bénabou and Tirole 2006, 2011) and reverses its implications with even moderately noisy signals. With unobservable acts, the review process through which incentives are provided becomes an additional policy variable whose optima we characterize.
 


Claude Fluet : Université Laval, CRREP, CRED.
Murat C. Mungan : George Mason University, Antonin Scalia Law School.

 

For valuable comments and suggestions, we thank Jesse Bull, Ezra Friedman, Andreea Cosnita-Langlais, Carlos Oyarzun, Jennifer Reinganum, Sarath Sanga, Abraham Wickelgren, and the participants of the 7th Annual Law and Economic Theory Conference, the 2017 Economics Seminar at Université Paris Nanterre, the 2020 Soshnick Colloquium on Law and Economics at Northwestern Pritzker School of Law, and the 2020 University of Queensland Economic Theory Seminar.

Octobre 2020

I present a model of peer effects in which the dependent variable takes integer values. I present an incomplete information game rationalizing the model, and I provide sufficient conditions under which the equilibrium of the game is unique. I estimate the model’s parameters using the Nested Partial Likelihood method. I show that the counting nature of the dependent variable is important and that assuming incorrectly that it is continuous significantly underestimates the peer effects. I estimate peer effects on the the number of extracurricular activities in which students are enrolled. Increasing the number of activities in which friends are enrolled by one implies an increase of 0.295 in the number of activities in which students are enrolled, when controlling for network endogeneity. Ignoring the endogeneity of the network overestimates the peer effects. 
 

Elysée Aristide Houndetoungan : Université Laval, Department of Economics.


I would like to thank Vincent Boucher for his helpful comments and insights. I would also like to thank Bernard Fortin, Arnaud Dufays, Luc Bissonnette, and Maripier Isabelle for helpful comments and discussions. Thank you also to the participants of the Applied Young Economists webinar at Monash University. I provide an easy-to-use R package—named CDatanet—for implementing the model and methods used in this paper.

The package is located at github.com/ahoundetoungan/CDatanet. 

This research uses data from Add Health, a program directed by Kathleen Mullan Harris and designed by J. Richard Udry, Peter S. Bearman, and Kathleen Mullan Harris at the University of North Carolina at Chapel Hill, and funded by Grant P01-HD31921 from the Eunice Kennedy Shriver National Institute of Child Health and Human Development, with cooperative funding from 23 other federal agencies and foundations. Special acknowledgment is given to Ronald R. Rindfuss and Barbara Entwisle for assistance in the original design. Information on how to obtain Add Health data files is available on the Add Health website (www.cpc.unc.edu/addhealth). No direct support was received for this research.
 

Hillel Rapoport, Sulin Sardoschau, Arthur Silve

Septembre 2020

We examine both theoretically and empirically how migration affects cultural change in home and host countries. Our theoretical model integrates various compositional and cultural transmission mechanisms of migration-based cultural change for which it delivers distinctive testable predictions on the sign and direction of convergence. We then use the World Value Survey for the period 1981-2014 to build time-varying measures of cultural similarity for a large number of country pairs and exploit within country-pair variation over time. Our evidence is inconsistent with the view that immigrants are a threat to the host country’s culture. While migrants do act as vectors of cultural diffusion and bring about cultural convergence, this is mostly to disseminate cultural values and norms from host to home countries (i.e., cultural remittances).
 

Hillel Rapoport : Paris School of Economics, University Paris 1 Panthéon-Sorbonne, and CEPII.
Sulin Sardoschau : Humboldt University, Department of Economics.
Arthur Silve : Université Laval, Department of Economics.
 

We thank Alberto Alesina, Simone Bertoli, George Borjas, Gustavo De Santis, Frédéric Docquier, William Easterly, Jeffry Frieden, Oded Galor, Libertad Gonzalez, Thierry Mayer, Florian Mayneris, Marion Mercier, Nathan Nunn, Mathias Thoenig, Thierry Verdier, Romain Wacziarg, David Weil, and participants at various conferences including the AFD-World Bank Migration and Development Conference, the OECD-CEPII conference on Immigration in OECD countries, World Bank Globalization: Contents and Discontents, NEUDC 2018, CEA / CDESG conference 2018, 4th Workshop on Migration, Health, and Well-Being, AFSE 2018, EEA 2018, Migration Worskshop at the Barcelona summer forum 2019, SIOE 2019, and seminar audiences at Laval, Lausanne, Erasmus University, Louvain, Luxembourg, IDB, Humboldt University, Paris 1 Panthéon-Sorbonne, UQAM, PSE and Brown.

Kevin Moran, Dalibor Stevanovic, Adam Kader Touré

Septembre 2020

This paper constructs a measure of Canadian macroeconomic uncertainty, by applying the Jurado et al. (2015) method to the large database of Fortin-Gagnon et al. (2020). This measure reveals that the COVID-19 pandemic has been associated with a very sharp rise of macroeconomic uncertainty in Canada, confirming other results showing similar big increases in uncertainty in the United States and elsewhere. The paper then uses a structural VAR to compute the impacts on the Canadian economy of uncertainty shocks calibrated to match these recent increases. We show that such shocks lead to severe economic downturns, lower inflation and sizeable accommodating measures from monetary policy. Important distinctions emerge depending on whether the shock is interpreted as originating from US uncertainty –in which case the downturn is deep but relatively short– or from specifically Canadian uncertainty, which leads to shallower but more protracted declines in economic activity. 
 

Kevin Moran : Université Laval.
Dalibor Stevanovic : UQAM
Adam Kader Touré : UQAM

We thank Hugo Couture for excellent research assistance. Any errors and omissions are our own.

José De Sousa, Amélie Guillin, Julie Lochard, Arthur Silve

Juillet 2020

Is culture a determinant of a jurisdiction’s comparative advantage? U.S. states that display a high level of generalized trust specialize in more “complex” industries that use contracts more intensively in their input-output relationships. This pattern is not driven by differences in states’ other observable characteristics or by unobservable time-varying industry- or state-specific factors, and it does not reflect selection by export destination. Theoretical considerations suggest that trust may be endogenous to the location of complex industries. An instrumental variable strategy that leverages the contemporary trust impact of historical racial discrimination confirms that trust factors into the comparative advantage of U.S. states.
 

José De Sousa : University Paris-Saclay, RITM.
Amélie Guillin : ERUDITE, UPEC.
Julie Lochard : ERUDITE, UPEC.
Arthur Silve : Department of Economics, Université Laval.

We thank Andrew Bernard, Matilde Bombardini, Carl Gaigné, Matthieu Crozet, Hartmut Egger, Keith Head, Miren Lafourcade, Claire Lelarge, Clément Nedoncelle, Sandra Poncet, Grégory Ponthière, Volker Nitsch, Andrew Rose, Farid Toubal, and seminar participants at British Columbia, Cologne (EEA), Darmstadt, INRA, Paris 1, Paris-Est Créteil, and Paris-Saclay for their helpful comments and insightful discussions. We are grateful to Thomas Michielsen for his help and his cooperation with the capital stocks data.

Vincent Boucher, Carlo L. Del Bello, Fabrizio Panebianco, Thierry Verdier, Yves Zenou

Juillet 2020

We propose a model of intergenerational transmission of education wherein children belong to either high-educated or low-educated families. Children choose the intensity of their social activities, while parents decide how much educational effort to exert. We characterize the equilibrium and show the conditions under which cultural substitution or complementarity emerges. Using data on adolescents in the United States, we structurally estimate our model and find that, on average, children’s homophily acts as a complement to the educational effort of high-educated parents but as a substitute for the educational effort of low-educated parents. We also perform some policy simulations. We find that policies that subsidize social interactions can backfire for low-educated students because they tend to increase their interactions with other low-educated students, which reduce the education effort of their parents and, thus, their chance of becoming educated.
 

Vincent Boucher : Department of Economics, Université Laval. CRREP. CREATE.
Carlo L. Del Bello : Italian Tax Agency, Italy.
Fabrizio Panebianco : Catholic University of Milan, Italy.
Thierry Verdier : Paris School of Economics, Ecole des Ponts ParisTech, PUC-Rio, and CEPR
Yves Zenou : Department of Economics, Monash University, CEPR, and IZA

 


The authors acknowledge the financial support of ERC 324004 Grant TECTACOM, ERC STRATEMOTIONS - GA 324219 and the Spanish Ministry of Economia y Competitividad under Grant ECO2017-87245-R. This research uses data from Add Health, a program directed by Kathleen Mullan Harris and designed by J. Richard Udry, Peter S. Bearman, and Kathleen Mullan Harris at the University of North Carolina at Chapel Hill, and is funded by Grant P01-HD31921 from the Eunice Kennedy Shriver National Institute of Child Health and Human Development, with cooperative funding from 23 other federal agencies and foundations. Special acknowledgment is given to Ronald R. Rindfuss and Barbara Entwisle for assistance in the original design. Information on how to obtain Add Health data files is available on the Add Health website (http://www.cpc.unc.edu/addhealth). No direct support was received from Grant P01-HD31921 for this research.
Replication codes are available here: https://github.com/vincentboucherecn/CulturalTransmission

Sylvain Dessy

Mai 2020

Having young children can push women into self-employment to reconcile the demands of motherhood with their professional ambitions. However, if self-employment offers very few opportunities for decent pay and access to wage employment depends on education, then, motherhood may no longer matter to women’s self-employment. In this paper, we formalize this idea theoretically and test it empirically using data from Nigeria. We use an identification strategy that corrects selection bias and the endogeneity of fertility jointly. We find no evidence of a causal effect of motherhood on women’s self-employment. This result is robust to several alternative specifications. However, we also find that motherhood increases the probability of self-employment for single women but not for married women. These findings suggest that the social setting governs the importance of motherhood for women’s self-employment.
 

Jean-Louis Bago : Department of Economics, Université Laval. CRREP. 
Sylvain Dessy : Department of Economics, Université Laval. CRREP.


We are very grateful to Bruce Shearer, Bernard Fortin, Sonia Laszlo, and Luca Tiberti for helpful comments at various stages of this paper. We thank participants at the January 11th, 2019 CRREP/CDR conference held in Quebec City, Canada, and the 2019 meeting of the Canadian Economics Association held in Banff, Alberta, Canada. 
Jean-Louis acknowledges financial support from the Centre de recherche sur les risques, les enjeux économiques, et les politiques publiques for the conduct of this project.

Vincent Boucher, Elysée Aristide Houndetoungan

Avril 2020

We study the estimation of peer effects through social networks when researchers do not observe the entire network structure. Special cases include sampled networks, censored networks, misclassified links, and aggregated relational data. We assume that researchers can obtain a consistent estimator of the distribution of the network. We show that this assumption is sufficient for estimating peer effects using a linearin-means model. We provide an empirical application to the study of peer effects on students academic achievement using the widely used Add Health database and show that network data errors have a first-order downward bias on estimated peer effects.
 

Vincent Boucher : Department of Economics, Université Laval. CRREP. CREATE. CIRANO
Elysée Aristide Houndetoungan : Cy Cergy Paris Université and Thema.
 


Disclaimer

We would like to thank Isaiah Andrews, Yann Bramoullé and Bernard Fortin for their helpful comments and insights, as always. We would also like to thank Eric Auerbach, Arnaud Dufays, Stephen Gordon, Chih-Sheng Hsieh, Arthur Lewbel, Tyler McCormick, Angelo Mele, Francesca Molinari, Onur Özgür, Eleonora Patacchini, Xun Tang, and Yves Zenou for helpful comments and discussions. Thank you also to the participants of the Applied/CDES seminar at Monash University, the Economic seminar at the Melbourne Business School, the Econometric workshop at the Chinese University of Hong Kong, and the Centre of Research in the Economics of Development workshop at the Université de Namur. This research uses data from Add Health, a program directed by Kathleen Mullan Harris and designed by J. Richard Udry, Peter S. Bearman, and Kathleen Mullan Harris at the University of North Carolina at Chapel Hill, and funded by Grant P01-HD31921 from the Eunice Kennedy Shriver National Institute of Child Health and Human Development, with cooperative funding from 23 other federal agencies and foundations. Special acknowledgment is given to Ronald R. Rindfuss and Barbara Entwisle for assistance in the original design. Information on how to obtain Add Health data files is available on the Add Health website (http://www.cpc.unc.edu/addhealth). No direct support was received from Grant P01-HD31921 for this research. An R package, including all replication codes is available at: https://github.com/ahoundetoungan/PartialNetwork.

Marc Beltempo, Georges Bresson, Guy Lacroix

Avril 2020

Background: Adult studies have shown that nursing overtime and unit overcrowding is associated with increased adverse patient events but there exists little evidence for the Neonatal Intensive Care Unit (NICU).

Objectives: To predict the onset on nosocomial infections and medical accidents in a NICU using machine learning models.

Subjects: Retrospective study on the 7,438 neonates admitted in the CHU de Québec NICU (capacity of 51 beds) from 10 April 2008 to 28 March 2013. Daily administrative data on nursing overtime hours, total regular hours, number of admissions, patient characteristics, as well as information on nosocomial infections and on the timing and type of medical errors were retrieved from various hospital-level datasets.

Methodology: We use a generalized mixed effects regression tree model (GMERT) to elaborate predictions trees for the two outcomes. Neonates’ characteristics and daily exposure to numerous covariates are used in the model. GMERT is suitable for binary outcomes and is a recent extension of the standard tree-based method. The model allows to determine the most important predictors.

Results: DRG severity level, regular hours of work, overtime, admission rates, birth weight and occupation rates are the main predictors for both outcomes. On the other hand, gestational age, C-Section, multiple births, medical/surgical and number of admissions are poor predictors.

Conclusion: Prediction trees (predictors and split points) provide a useful management tool to prevent undesirable health outcomes in a NICU.


Marc Beltempo : Department of Pediatrics, McGill University Health Centre.
Georges Bresson :  Department of Economics, Université Paris II.
Guy Lacroix : Department of Economics, Université Laval.

Marc Beltempo, Georges Bresson, Jean-Michel Etienne, Guy Lacroix

Mars 2020

The paper investigates the effects of nursing overtime on nosocomial infections and medical accidents in a neonatal intensive care unit (NICU). The literature lacks clear evidence on this issue and we conjecture that this may be due to empirical and methodological factors. We thus focus on a single NICU, thereby removing much variation in specialty mixes such neonatologists, fellows, residents, nurse practitioners that are observed across units. We model the occurrences of both outcomes using a sample of 3,979 neonates which represents over 84,846 observations (infant/days). We use a semiparametric panel data Logit model with random coefficients. The non-parametric components of the model allow to unearth potentially highly non-linear relationships between the outcomes and various policy-relevant covariates. We use the mean field variational Bayes approximation method to estimate the models. Our results show unequivocally that both health outcomes are affected by nursing overtime. Furthermore, they are both highly sensitive to infant and NICU-related characteristics.

Marc Beltempo : Department of Pediatrics, McGill University Health Centre.
Georges Bresson : Department of Economics, Université Paris II.
Jean-Michel Etienne : Department of Economics, Université Paris-Sud
Guy Lacroix : Department of Economics, Université Laval.

Bruce Shearer

Mars 2020

We conducted a series of field experiments to investigate the ability of experimentally measured risk preferences to predict the contractual choices of workers in the real labour market. In a first set of experiments we measured workers’ risk preferences using the lottery approach of Holt and Laury (2002). We did this twice: once for low-stakes lotteries (LSL) and once for high-stakes (HSL). Each worker subsequently made 12 decisions, choosing between his/her regular piece-rate contract and a series of fixed wage contracts, each offereing a different fixed wage. One of the twelve decisions was then chosen at random and the worker was paid according to his/her choice for that decision over a period of two working days. The risk preferences measured from the HSL effectively predict the contract choices; those from the LSL are irrelevant. We also find that high-ability workers prefer piece-rate contracts.
 

Jean-Louis Bago : Department of Economics, Université Laval.
Bruce Shearer : Department of Economics, Université Laval. CRREP, CIRANO and IZA.

We thank Sylvain Dessy, Claude-Denis Fluet, Bernard Fortin, Sonia Laszlo, and Luca Tiberti for helpful comments and suggestions. We also thank participants at the Canadian Economic Association Meetings (McGill, 2018) and the Societé canadienne des sciences économiques (Ottawa, 2017). Financial support from SSHRC (Shearer), FRQSC (Shearer) and CRREP (Bago) is gratefully acknowledged.

Georges Bresson, Guy Lacroix, Mohammad Arshad Rahman

Janvier 2020


This article develops a Bayesian approach for estimating panel quantile regression with binary outcomes in the presence of correlated random effects. We construct a working likelihood using an asymmetric Laplace (AL) error distribution and combine it with suitable prior distributions to obtain the complete joint posterior distribution. For posterior inference, we propose two Markov chain Monte Carlo (MCMC) algorithms but prefer the algorithm that exploits the blocking procedure to produce lower autocorrelation in the MCMC draws. We also explain how to use the MCMC draws to calculate the marginal effects, relative risk and odds ratio. The performance of our preferred algorithm is demonstrated in multiple simulation studies and shown to perform extremely well. Furthermore, we implement the proposed framework to study crime recidivism in Quebec, a Canadian Province, using a novel data from the administrative correctional files. Our results suggest that the recently implemented “tough-on-crime” policy of the Canadian government has been largely successful in reducing the probability of repeat offenses in the post-policy period. Besides, our results support existing findings on crime recidivism and offer new insights at various quantiles.
 

Georges Bresson : Department of Economics, Université Paris II.
Guy Lacroix : Department of Economics, Université Laval.
Mohammad Arshad Rahman : Department of Economic Sciences, Indian Institute of Technology.

Badi H. Baltagia, Georges Bresson, Anoop Chaturvedi, Guy Lacroix

Janvier 2020

This paper extends the work of Baltagi et al. (2018) to the popular dynamic panel data model. We investigate the robustness of Bayesian panel data models to possible misspecification of the prior distribution. The proposed robust Bayesian approach departs from the standard Bayesian framework in two ways. First, we consider the e-contamination class of prior distributions for the model parameters as well as for the individual effects. Second, both the base elicited priors and the econtamination priors use Zellner (1986)’s g-priors for the variance-covariance matrices. We propose a general “toolbox” for a wide range of specifications which includes the dynamic panel model with random effects, with cross-correlated effects `a la Chamberlain, for the Hausman-Taylor world and for dynamic panel data models with homogeneous/heterogeneous slopes and cross-sectional dependence. Using a Monte Carlo simulation study, we compare the finite sample properties of our proposed estimator to those of standard classical estimators. The paper contributes to the dynamic panel data literature by proposing a general robust Bayesian framework which encompasses the conventional frequentist specifications and their associated estimation methods as special cases.

Badi H. Baltagi : Department of Economics and Center for Policy Research, Syracuse University.
Georges Bresson : Department of Economics, Université Paris II.
Anoop Chaturvedi : Department of Statistics, University of Allahabad, India.
Guy Lacroix : Department of Economics, Université Laval.

Yann Bramoulé, Habiba Djebbari, Bernard Fortin

Janvier 2020

We survey the recent, fast-growing literature on peer effects in networks. An important recurring theme is that the causal identification of peer effects depends on the structure of the network itself. In the absence of correlated effects, the reflection problem is generally solved by network interactions even in non-linear, heterogeneous models. By contrast, microfoundations are generally not identified. We discuss and assess the various approaches developed by economists to account for correlated effects and network endogeneity in particular. We classify these approaches in four broad categories: random peers, random shocks, structural endogeneity and panel data. We review an emerging literature relaxing the assumption that the network is perfectly known. Throughout, we provide a critical reading of the existing literature and identify important gaps and directions for future research.
 

Yann Bramoullé : Aix-Marseille School of Economics, Aix-Marseille University. CNRS.
Habiba Djebbari : Aix-Marseille School of Economics, Aix-Marseille University. EHESS, CNRS et IZA.
Bernard Fortin : Département d'économique, Université Laval. CRREP, CIRANO et IZA.

Arnaud Dufays, Alain Coën

Septembre 2019

Change-point processes are one flexible approach to model long time series. We propose a method to uncover which model parameter truly vary when a change-point is detected. Given a set of breakpoints, we use a penalized likelihood approach to select the best set of parameters that changes over time and we prove that the penalty function leads to a consistent selection of the true model. Estimation is carried out via the deterministic annealing expectation-maximization algorithm. Our method accounts for model selection uncertainty and associates a probability to all the possible time-varying parameter specications. Monte Carlo simulations highlight that the method works well for many time series models including heteroskedastic processes. For a sample of 14 Hedge funds (HF) strategies, using an asset based style pricing model, we shed light on the promising ability of our method to detect the time-varying dynamics of risk exposures as well as to forecast HF returns.
 


Arnaud Dufays : Département des sciences de gestion, Université Namur et Département d'économique, Université Laval. CRREP et CeReFiM.
Elysee Aristide Houndetoungan : Département d'économique, Université Laval.
Alain Coën : Department of Finance, UQAM.

Maéva Doumbia

Juin 2019

Bertrand, Kamenica, and Pan (2015) show that among married couples in the United States, the distribution of the share of the household income earned by the wife exhibits a sharp drop just to the right of 50%. They argue that this drop is consistent with a gender identity norm prescribing that a husband should earn more than his wife. We investigate this phenomenon in Canada at the national level but also across provinces. First, we document the presence of gender norms in Canada over the 1990-2014 period using three international data sets (the World Value Survey, the European Values Study and the International Social Survey Program). We find that Western Canada is relatively more traditional than Eastern Canada. Then we show that it exists a significant discontinuity at the 50% threshold in the distribution of the wife’s relative income, using the 2006 and 2016 Census data. This discontinuity is larger in Ontario and Western Canada than in Quebec and the Atlantic provinces.
 

Maéva Doumbia : Department of Economics, Université Laval.
Marion Goussé : Department of Economics, Université Laval.

Marion Goussé gratefully acknowledges financial support from FRQ-SC. Part of the analysis presented in this paper was conducted at the Quebec Interuniversity Centre for Social Statistics which is part of the Canadian Research Data Centre Network (CRDCN). The services and activities provided by the QICSS are made possible by the financial or in-kind support of the Social Sciences and Humanities Research Council (SSHRC), the Canadian Institutes of Health Research (CIHR), the Canada Foundation for Innovation (CFI), Statistics Canada, the Fonds de recherche du Québec - Société et culture (FRQSC), the Fonds de recherche du Québec - Santé (FRQS) and the Quebec universities. The views expressed in this paper are those of the authors, and not necessarily those of the CRDCN or its partners.
 

Bernard Fortin, Nicolas Jacquemet, Bruce Shearer

Juin 2019

We develop and estimate a structural model that incorporates service intensity and endogenous contract choice into the standard labour supply framework. We apply our model to data collected on specialist physicians working in Quebec(Canada). These physicians are typically paid a fee-for-service (FFS) contract. Our panel data set covers a period of policy reform which allowed physicians either to remain on FFS or to adopt a mixed remuneration (MR) contract, under which they receive a per diem as well as a reduced FFS. We estimate the preference parameters of physicians governing the choice of contract and their hours worked and services provided. We use our estimates to simulate labour supply elasticities, to predict (ex ante) the effects of contracts on physician behaviour, and to evaluate selection effects. The supply of services is reduced under a MR contract, suggesting incentives matter. The hours spent seeing patients is less sensitive to incentives than the supply of services. Our results suggest that a reform forcing all physicians to adopt the MR system would have had substantially larger effects on physician behaviour than were measured under the observed reform.

Bernard Fortin : Département d’économique, Université Laval and CRREP, CIRANO and IZA.
Nicolas Jacquemet : Paris School of Economics and University Paris I Panthéon-Sorbonne.
Bruce Shearer : Département d’économique, Université Laval and CRREP, CIRANO and IZA.
 

The authors thank the Collège des médecins du Québec for making its survey data available and the Régie de l’assurance maladie du Québec and Marc-André Fournier for the construction of the database. This article was partly written while Fortin and Shearer were visiting the University Paris 1 Panthéon-Sorbonne. We thank participants at the Maurice Marchand Meeting in Health Economics (Lyon), the ADRES workshop on the Econometric Evaluation of Public Policies (Paris), the Canadian Economics Association (Montréal), the European Workshop on Econometrics and Health Economics (Thessalonique), the European Economic Association (Vienna) and the Econometric Society Winter Meeting (Chicago). We also thank seminar participants at CREST, the Free University of Amsterdam and Paris-Dauphine University. We are grateful to Michel Truchon as well as Bruno Crépon, Arnaud Dellis, Brigitte Dormont, Pierre-Yves Geoffard, Guy Laroque, Pierre-Thomas Léger, Pierre-Carl Michaud, and Marie-Claire Villeval for useful discussions and comments. We acknowledge research support from the Canadian Institute of Health Research (CIHR), le Fonds de recherche du Québec en société et culture (FRQSC), and the Canada Research Chair in Social Policies and Human Resources at the Université Laval.
 

 

Chih-Sheng Hsieh, Lung-Fei Lee, Vincent Boucher

Mai 2019

In this paper, we model network formation and network interactions under a unified framework. The key feature of our model is to allow individuals to respond to incentives that stem from interaction benefits of certain activities when they choose friends (network links), while capturing homophily in terms of unobserved characteristic variables in network formation and activities. There are two advantages of this modeling approach: first, one can evaluate whether incentives from certain interactions are important factors for friendship formation or not. Second, in addition to homophily effects in terms of unobserved characteristics, inclusion of incentive effects in the network formulation also corrects possible friendship selection bias on activity outcomes under network interactions. A theoretical foundation of this unified model is based on a sub-game perfect equilibrium of a two-stage game. A tractable Bayesian MCMC approach is proposed for the estimation of the model, and we demonstrate its finite sample performance in a simulation study. We apply the model to study empirically American high school students’ friendship networks from the Add Health dataset. We consider two activity variables, GPA and smoking frequency, and find a significant incentive effect from GPA, but not from smoking, on friendship formation. These results suggest that the benefit of interactions in academic learning is an important factor for friendship formation, whereas the interaction benefit of smoking is not. On the other hand, from the perspective of network interactions, both GPA and smoking frequency are subject to significant positive interaction (peer) effects.
 

Chih-Sheng Hsieh : Department of Economics, The Chinese University of Hong Kong.
Lung-Fei Lee : Department of Economics, The Ohio State University.
Vincent Boucher : Department of Economics, Université Laval.

A previous version of this paper was circulated under the title, “A structural modeling approach for network formation and social interactions with applications to students’ friendship choices and selectivity on activities.” The authors are grateful to the editor, Christopher Taber, two anonymous referees, Matthew Jackson, as well as conference participants at 2013 AMES in Singapore and seminar participants at Academia Sinica, Chicago Booth, Chinese University of Hong Kong, Lingnan University, National Taiwan University, Ohio State University, Shanghai University of Finance and Economics, and Xiamen University for helpful comments. Thanks also to Murray Hay for proofreading the manuscript. Vincent Boucher gratefully acknowledge financial support from SSHRC (430-2016-00777). This research uses data from Add Health, a program project directed by Kathleen Mullan Harris and designed by J. Richard Udry, Peter S. Bearman, and Kathleen Mullan Harris at the University of North Carolina at Chapel Hill, and funded by grant P01- HD31921 from the Eunice Kennedy Shriver National Institute of Child Health and Human Development, with cooperative funding from 23 other federal agencies and foundations. Special acknowledgment is due Ronald R. Rindfuss and Barbara Entwisle for assistance in the original design. Information on how to obtain the Add Health data files is available on the Add Health website (http://www.cpc.unc.edu/addhealth). No direct support was received from grant P01-HD31921 for this analysis.
 

Bruce Shearer, Nibene Habib Somé, Bernard Fortin

Avril 2019

We measure the response of physicians to monetary incentives using matched administrative and time-use data on specialists from Québec (Canada). These physicians were paid fee-for-service contracts and supplied a number of different services. We model physician behaviour and derive a conditional earnings function that returns the maximum earnings a physician can generate in the labour market, conditional on total hours worked. The earnings function is estimated using both limitedinformation methods and full-information methods. Limited-information methods impose fewer restrictions on the data, but are less informative over incentive effects. Le Chatelier effects imply that they identify lower bounds to the own-price substitution effects. Full-information methods explain earnings and hours simultaneously. They identify the full response to incentives, including income effects. Our results confirm that physicians respond to financial incentives. The own-price substitution effects of a relative price change are both economically and statistically significant. Income effects are present, but are overridden when prices are increased for individual services. They are more prominent in the presence of broad-based fee increases. In such cases, the income effect empirically dominates the substitution effect, which leads physicians to reduce their supply of services.

Bruce Shearer : Département d’économique, Université Laval, CRREP, CIRANO and IZA. Bruce.Shearer@Ecn.Ulaval.Ca.
Nibene Habib Somé : Department of epidemiology and biostatistics, Western University and Institute for clinical evaluative sciences (ICES). Nsome@UWO.Ca
Département d’économique, Université Laval, CRREP, Industrial Alliance Research Chair on the Economics of
Demographic Change, CIRANO. Bernard.Fortin@Ecn.Ulaval.Ca.

Financial support from CIHR and FRQSC is gratefully acknowledged. We thank participants to workshops and seminars in Paris School of Economics and Canadian Health Economics Study Group for useful discussion.

Bruno Deffains, Claude-Denys Fluet

Février 2019

We consider legal obligations against a background of social norms, e.g., societal norms, professional codes of conduct or business standards. Violations of the law trigger reputational sanctions insofar as they signal non-adherence to underlying norms, raising the issue of the design of offences. When society is only concerned with the trade-off between deterrence and enforcement costs, legal standards defining offences should align on underlying norms so long as the latter are not too deficient. When providing productive information to third parties is also a concern, legal standards should either align on underlying norms with fines that trade off deterrence against the provision of information; or legal standards should be more demanding and enforced with purely symbolic sanctions, e.g., public reprimands. Our analysis has implications for general law enforcement and regulatory policies.

Bruno Deffains : Université Panthéon Assas, CRED and Institut Universitaire de France - Bruno.Deffains@u-paris2.fr
Claude Fluet : Université Laval, CRREP and CRED - Claude.Fluet@fsa.ulaval.ca

We thank Robert Cooter, Jennifer Reinganum, and Kathryn Spier for very helpful comments on an earlier version and are particularly grateful to two anonymous referees and the Editor, Andrew Daughety. Claude Fluet acknowledges financial support from SSHRC Canada (grant 435-2013-1671).

Sylvain Dessy, Francesca Marchetta, Roland Pongou, Luca Tiberti

Février 2019

In communities highly dependent on rainfed agriculture for their livelihoods, the common occurrence of climatic shocks such as droughts can lower the opportunity cost of having children, and raise fertility. Using longitudinal household data from Madagascar, we estimate the causal effect of drought occurrences on fertility, and explore the nature of potential mechanisms driving this effect. We exploit exogenous within-district year-to-year variation in rainfall deficits, and find that droughts occurring during the agricultural season significantly increase the number of children born to women living in agrarian communities. This effect is long lasting, as it is not reversed within four years following the drought occurrence. Analyzing the mechanism, we find that droughts have no effect on common underlying factors of high fertility such as marriage timing and child mortality. Furthermore, droughts have no significant effect on fertility if they occur during the non-agricultural season or in non-agrarian communities, and their positive effect in agrarian communities is mitigated by irrigation. These findings provide evidence that a low opportunity cost of having children is the main channel driving the fertility effect of drought in agrarian communities.

Sylvain Dessy : Department of Economics and CRREP, Université Laval, Quebec, Canada; sdes@ecn,ulaval.ca
Francesca Marchetta : Université Clermont Auvergne, CNRS, IRD, CERDI, Clermont-Ferrand, France; francesca.marchetta@uca.fr
Roland Pongou : University of Ottawa, ONT, Canada and Harvard University, Boston, USA; rop103@harvard.edu
Luca Tiberti : Department of Economics, Université Laval, and PEP; luca.tiberti@ecn.ulaval.ca

Acknowledgments: Francesca Marchetta acknowledges the support received from the Agence Nationale de la Recherche of the French government through the program "Investissements d’avenir" (ANR-10-LABX-14-01)"; Luca Tiberti acknowledges the support from the Partnership for Economic Policy (PEP), which is financed by the Department for International Development (DFID) of the United Kingdom (UK Aid) and the International Development Research Centre (IDRC) of Canada. We are grateful to seminar participants at the University of Ottawa, theWorld Bank, and the CRREP/CDR conference (01-11-2019)

Guy Lacroix, Francois Lalibertée-Auger, Pierre-Carl Michaud, Daniel Parent

Décembre 2018

We investigate the returns to college attendance in Canada in terms of health and mortality reduction. To do so, we first use a dynamic health microsimulation model to document how interventions which incentivize college attendance among high school graduates may impact their health trajectory, health care consumption and life expectancy. We find large returns both in terms of longevity (4.1 years additional years at age 51), reduction in the prevalence of various health conditions (10-15 percentage points reduction in diabetes and 5 percentage points for stroke) and health care consumption (27.3% reduction in lifetime hospital stays, 19.7 for specialists). We find that education impacts mortality mostly by delaying the incidence of health conditions as well as providing a survival advantage conditional on having diseases. Second, we provide quasi-experimental evidence on the impact of college attendance on long- term health outcomes by exploiting the Canadian Veteran's Rehabilitation Act, a program targeted towards returning WW-II veterans and which incentivized college attendance. The impact on mortality are found to be larger than those estimated from the health microsimulation model (hazard ratio of 0.216 compared to 0.6 in the simulation model) which suggest substantial returns to college education in terms of healthy life extension which we estimate around one million canadian dollars.

Guy Lacroix
Francois Lalibertée-Auger
Pierre-Carl Michaud :  Department of Applied Economics, HEC Montréal, 3000 chemin Côte-Ste-Catherine, Montréal, H3T2A7
Daniel Parent

 

We acknowledge funding from the National Institute of Aging trough grant R01AG040176-06. We are grateful to Statistics Canada trough the Quebec Interuniversity Center for Social Statistics (QICSS) for granting access to the data used for this project. We thank Sébastien Box-Couillard and Aurélie Coté- Sergent for excellent research assistance. Part of the analysis presented in this paper was conducted at the Quebec Interuniversity Centre for Social Statistics which is part of the Canadian Research Data Centre Network (CRDCN). The services and activities provided by the QICSS are made possible by the financial or in-kind support of the Social Sciences and Humanities Research Council (SSHRC), the Canadian Institutes of Health Research (CIHR), the Canada Foundation for Innovation (CFI), Statistics Canada, the Fonds de recherche du Qubec - Socit et culture (FRQSC), the Fonds de recherche du Qubec - Sant (FRQS) and the Quebec universities. The views expressed in this paper are those of the author(s), and not necessarily those of the CRDCN or its partners. All errors are our own.

 

Thierry Kamionka, Guy Lacroix

Novembre 2018

The paper investigates the links between homeownership, employment and earnings for which no consensus exists in the literature. Our analysis is cast within a dynamic setting and the endogeneity of each outcome is assessed through the estimation of a flexible panel multivariate model with random effects. The data we use are drawn from the French sample of the EU Survey on Income and Living Conditions for the years 2004–2013. The error terms are both correlated across equations and autocorrelated. Individual random effects are also correlated across equations. The model is estimated using a simulated maximum likelihood estimator and particular care is given to the initial conditions problem. Our results show that while homeowners have longer employment and unemployment spells, they must contend with lower earnings than tenants upon reemployment. They also stress the importance of unobserved heterogeneity in explaining the transitions on the labour and housing markets, and the relationship between earnings and the latter two. Failure to properly account for this is likely to yield biased parameter estimates.


Thierry Kamionka : CNRS and CREST, Timbre J390. 15, Boulevard Gabriel Péri. 92245 Malakoff Cedex. France - kamionka@ensae.fr
Guy Lacroix : Département d’économique, Unversité Laval and Department of Applied Economics, HEC Montréal, CIRANO, Canada - Guy.Lacroix@hec.ca

Arthur Silve, Thierry Verdier

Septembre 2018

Il est fréquent que de voir des guerres civiles éclater simultanément dans des pays voisins. Ceci tient notamment à ce que ces pays présentent des caractéristiques communes, et aussi à ce qu’une guerre civile favorise l’apparition de conflits dans les pays voisins. La littérature empirique dissocie habituellement ces deux explications. Nous proposons un modèl de la contagion des guerres civiles, qui illustre que certaines caractéristiques des pays sont affectées par le risque de contagion. En particulier, un gouvernement peut éviter la contagion en investissant dans la qualité de ses institutions. La complémentarité stratégique entre les institutions de pays voisins génère des regroupements de pays selon leur capacité étatique. Ceci suggère que les effets de contagion ont pu jusque là être sous-estimés par la littérature empirique.

Arthur Silve : Université Laval, arthur.silve@ecn.ulaval.ca.
Thierry Verdier : École d’Économie de Paris, École des Ponts-ParisTech, PUC-Rio et CEPR, thierry.verdier@ens.fr.

Vincent Boucher, Finagnon Antoine Dedewanou, Arnaud Dufays

Septembre 2018

We study peer effects on the formation of beliefs regarding college participation. We present a structural model of learning in friendship networks. We show that the model is identified and we present a Bayesian estimation procedure. We estimate the model using data on teenagers’ beliefs regarding college participation, controlling for preferences and academic achievement. We find that, on average, friends’ beliefs account for about 12% of the updating process. We also find strong heterogeneity among schools and individuals. In particular, we find substantial unobserved individual heterogeneity, which casts doubt on the efficiency of network-targeted public policies.

Vincent Boucher: Corresponding author. Department of Economics, Université Laval, CRREP and CREATE, vincent.boucher@ecn.ulaval.ca
Finagnon A. Dedewanou: Department of Economics, Université Laval, CRREP, finagnon-antoine.dedewanou.1@ulaval.ca
Arnaud Dufays: Department of Economics, Université Namur, Associate professor, Université Laval, Arnaud.Dufays@unamur.be

Kevin Moran

Août 2018

This paper compares the environments in Bernanke et al. (1999) and Gertler and Karadi (2011), two popular frameworks used to incorporate financial frictions in macroeconomic modelling. We show that the key practical difference between the two frameworks lies in their implications for the link between leverage and expected future spreads of capital returns over safe rates: while the former pairs leverage to one-period-hence such spreads, the latter connects it to a distributed lag of all future spreads. We argue that this difference between the two frameworks is more crucial than the distinction often discussed in the literature, which is related to the specific location of the friction on the borrower-intermediary-entrepreneur financing chain. The paper then compares quantitative versions of the frameworks, estimated using Bayesian procedures and decoupling parameter settings related to steady states from those involving the economy’s dynamic solution around that steady state. We find that when this flexible approach in used, the friction proposed by Gertler and Karadi (2011), which emphasize long-term forward-looking behavior in the leverage equation, is preferred by aggregate data.

Abdellah Manadir: Department of Economics, Université Laval, abdellah.manadir.1@ulaval.ca
Kevin Moran: Corresponding Author. Department of Economics, Université Laval, kevin.moran@ecn.ulaval.ca

Jean Armand Gnagne, Kevin Moran

Août 2018

This paper develops a monitoring and forecasting model for the aggregate monthly number of commercial bank failures in the U.S. We extract key sectoral predictors from the large set of macroeconomic variables proposed by McCracken and Ng (2016) and incorporate them in a hurdle negative binomial model to predict the number of monthly commercial bank failures. We uncover a strong and robust relationship between the predictor synthesizing housing industry variables and bank failures. This relationship suggests the existence of a link between developments in the housing sector and the vulnerability of commercial banks to non-performing loans increases and asset deterioration. We assess different specifications

Jean Armand Gnagne
Kevin Moran

Kevin Moran, Imad Rherrad

Août 2018

This paper assesses the contribution of Canadian and International (US) confidence data, drawn from consumer and business sentiment surveys, for forecasting Canadian GDP growth. The targeting approaches of Bai and Ng (2008) and Bai and Ng (2009) are employed to extract promising predictors from large databases each containing between several dozen and several hundred time series. The databases are categorised between those containing macroeconomic (Canadian and US) and confidence (Canadian and US) data, allowing us to assess the specific value added of international and confidence data. We find that forecasting ability is consistently improved by considering information from national confidence data; by contrast, their US counterparts appear to be helpful only when combined with national time-series. Overall, most relevant gains in forecasting performance are observed for short-term (up to threequarters-ahead) horizons, perhaps reflecting the timing advantage in the releases of sentiment data.

Kevin Moran : Department of Economics, Université Laval. Email: kevin.moran@ecn.ulaval.ca
Simplice Aimé Nonoy : Department of Economics, Université Laval. Email: simplice-aime.nono.1@ulaval.ca
Imad Rherrad : Ministère des Finances du Québec. Email: imad.rherrad@finances.gouv.qc.ca

Koffi Akakpo, Marie-Amélie Boucher, Vincent Boucher

Juillet 2018

We consider a decision maker who is responsible for issuing flood warnings for the population. The population is uncertain about the credibility of the warnings and adjusts its beliefs following false alerts or missed events. We show that low credibility leads the decision maker to issue warnings for lower probabilities of flooding. In practice, those probabilities are provided by hydrological forecasts. We therefore use our model to compare welfare under alternative real-world hydrological forecasts. We find that when forecasts include non-realistic extreme scenarios, the economy may remain stuck in a state characterized by many false alerts and poor credibility.

Koffi Akakpo: Department of Economics, Université Laval, CREATE; koffi.akakpo.2@ulaval.ca
Marie-Amélie Boucher: Department of Civil and Building Engineering, Université de Sherbrooke; marie-Amelie.Boucher@usherbrooke.ca
Vincent Boucher: Department of Economics, Université Laval, CRREP and CREATE; vincent.boucher@ecn.ulaval.ca

Julie Beugnot, Guy Lacroix, Olivier Bargain

Juillet 2018

In this paper we analyse the link between homeownership and various aggregate and individual labour market outcomes. Our aim is to investigate the likely consequences of public policies that promote homeownership. To this end, we develop a circular firm-worker matching model with Nash-bargained wage setting and free market entry. Homeowners are assumed to be less mobile than tenants and to bear higher mobility costs. Our numerical exercises show that tenants usually have lower unemployment rates and lower wage rates than homeowners. Importantly, workers’ performances do not necessarily improve following an increase in the proportion of homeowners. The latter crucially depends on the relative utility enjoyed by homeowners and tenants when unemployed. In the aggregate, nevertheless, we find that the unemployment rate generally increases following an increase in the proportion of homeowners. Yet, the link between the two can be reversed if the homeowners’ utility is lower than that of tenants when unemployed. Our model thus identifies a number of conditions under which Oswald’s conjecture is likely to hold or not. Thus, our results do not necessarily support the view that policies fostering homeownership are adequate public policies given their potentially negative effect on the labour market.

Julie Beugnot : CRESE EA3190, Univ. Bourgogne Franche-Comté, F-25000 Besançon, France, julie.beugnot@univ-fcomte.fr
Olivier Charlot : THEMA, Université de Cergy-Pontoise, olivier.charlot@u-cergy.fr
Guy Lacroix : Department of economics, Université Laval, Québec, HEC-Montreal and CIRANO, Canada, Guy.Lacroix@ecn.ulaval.ca

Olivier Bargain, Guy Lacroix, Luca Tiberti

Juillet 2018

Recent advances in the collective model literature suggest ways to estimate the complete allocation of resources within households, using assignable goods and assuming adult preference similarity across demographic groups (or across spouses). While it makes welfare analysis at the individual level possible, the predictive power of the model is unknown. We propose the ?rst validation of this approach, exploiting a unique dataset from Bangladesh in which the detailed expenditure on private goods by each family member is collected. Individualized expenditure allows us to test the identifying assumptions and to derive ?observed?resource sharing within families, which can be compared to the resource allocation predicted by the model. Sharing between parents and children is well predicted on average while the model detects key aspects like the extent of pro-boy discrimination. Results overall depend on the identifying good: clothing provides the best ?t compared to other goods as it best validates the preference-similarity assumption. The model leads to accurate measures of child and adult poverty, indicating the size and direction of the mistakes made when using the traditional approach based on per adult equivalent expenditure (i.e. ignoring within-household inequality). This assessment of existing approaches to measure individual inequality and poverty is crucial for both academic and policy circles and militates in favor of a systematic use of collective models for welfare analyses.

Olivier Bargain : Bordeaux Université, Av. Leon Duguit, Pessac, France; olivier.bargain@u-bordeaux.fr
Guy Lacroix
Luca Tiberti

Claude-Denys Fluet, Thomas Lanzi

Juillet 2018

Two parties with opposed interests invest in acquiring evidence which they may only partially disclose. The decision maker then adjudicates. This set-up is compared with one permitting cross-examination of the other party?s report. Now the decision maker can better assess whether a report was deceitful through withholding of evidence. Nevertheless, decision-making need not be improved. The parties invest less in gathering evidence because they are less able to successfully manipulate information and because cross-examination is a substitute in potentially countering the other party. From the decision maker?s standpoint, there is too much cross-examination at the expense of too little direct evidence.

Bruce Shearer, Nibene Habib Somé, Bernard Fortin

Mai 2018

We measure the response of physicians to monetary incentives using matched administrative and time-use data on specialists from Québec (Canada). These physicians were paid fee-for-service contracts and supplied a number of different services. Our sample covers a period during which the Québec government changed the prices paid for clinical services. We apply these data to a multitasking model of physician labour supply, measuring two distinct responses. The first is the labour-supply response of physicians to broad-based fee increases. The second is the response to changes in the relative prices of individual services. Our results confirm that physicians respond to incentives in predictable ways. The own-price substitution effects of a relative price change are both economically and statistically significant. Income effects are present, but are overridden when prices are increased for individual services. They are more prominent in the presence of broad-based fee increases. In such cases, the income effect empirically dominates the substitution effet, which leads physicians to reduce their supply of clinical services.

Bruce Shearer : Département d’économique, Université Laval, CRREP, CIRANO and IZA. Bruce.Shearer@Ecn.Ulaval.ca
Nibene Habib Somé : Department of Epidemiology and Biostatistics, Schulich School of Medicine, University of Western Ontario. Nsome@UWO.ca
Bernard Fortin : Département d’économique, Université Laval, CRREP, CIRANO and IZA. Bernard.Fortin@Ecn.Ulaval.ca

Marion Leturcq

Avril 2018

We show how the legal settings of unmarried cohabitation affect partners' labor market outcomes. In Canada, cohabiting couples are automatically entitled to certain rights after a few years of cohabitation. In some provinces, ex-cohabiting partners can claim for alimony upon separation, in others they can claim for an equal split of all the assets acquired during the relationship. As legal settings of unmarried cohabitation differ across time, provinces and duration of the relationship, it provides a unique framework to analyze how different levels of commitment affect couples' decision regarding labor market supply. Using cross-provinces variation in the legal settings and minimum duration for eligibility, we show that unmarried cohabiting men increase their labor force supply when they become eligible to a more committed cohabitation regime, whereas women decrease theirs. Higher levels of commitment induce larger e ects on labor market outcomes.

Marion Goussé : Economics Department, Laval University - marion.gousse@ecn.ulaval.ca
Marion Leturcq : INED - marion.leturcq@ined.fr

Marie-Hélène Gagnon, Gabriel Power

Avril 2018

This paper investigates international index return predictability using option-implied information. We document the significant predictive power of the variance risk premium (VRP), Foster-Hart risk (FH), and higher-order moments for horizons ranging from 1 to 250 days. Our results from predictive regressions show that these four risk-neutral metrics, which have the advantage of daily updating, perform well internationally. VRP and FH risk are significant predictors for several horizons, including less than one month (VRP) and longer horizons (FH). Risk-neutral skewness and kurtosis are significant for several countries across multiple horizons. Out-of-sample forecasts and utility gain calculations confirm the statistical and economic significance of these risk-neutral variables internationally.

Marie-Hélène Gagnon : FSA ULaval, CRREP, IHEIQ, CEPCI, Marie-Helene.Gagnon@fsa.ulaval.ca
Gabriel J. Power : FSA ULaval, CRREP, CRIB, Gabriel.Power@fsa.ulaval.ca
Dominique Toupin : Université Laval, dominique.toupin.1@ulaval.ca

Martin Boyer, Philippe De Donder, Claude-Denys Fluet, Marie-Louise Leroux, Pierre-Carl Michaud

Mars 2018

We examine the different hypotheses which have been put forward to explain the low demand for long-term care insurance using the results from a survey of 2000 Canadians that was conducted in the autumn of 2016. Defining the natural market of long-term care insurance buyers as the one catering to individuals aged between 50 and 70, we find that a remarkable proportion of this natural market has never been approached to purchase such protection. We estimate that approximately 60% of this natural market is currently under-served. After eliminating risk perception and demand side explanations for the low market penetration of long-term care insurance, we conclude that supply-side factors and the crowding-out by government programs are the most likely culprits in explaining the low proportion of Canadians that purchase LTC insurance from private providers.

Martin Boyer, HEC Montréal
Philippe De Donder, ESG UQAM
Claude Fluet, Université Laval
Marie-Louise Leroux, ESG UQAM
Pierre-Carl Michaud, HEC Montréal

Arthur Silve, Thierry Verdier

Mars 2018

Civil conflicts spill over into neighboring countries. This paper proposes a theory of the contagion of civil wars. Weak territorial control facilitates the emergence of a regional market for war inputs in the “porous frontier.” The contagion effect is nonlinear and creates multiple equilibrium situations of regional complexes of civil conflicts. This helps explain the observed patterns of regional clustering of conflict and institutional quality, and raises identification issues in the measurement of the contagion effect. We also derive a positive spillover of civil wars: governments are sometimes in a position to avoid contagion by improving their institutions. Finally, we explore the policy implications for military intervention, and military and institutional cooperation.

Arthur Silve: Université Laval - arthur.silve@ecn.ulaval.ca

,

Thierry Verdier : PSE and École des Ponts-ParisTech, PUC-Rio, CEPR. - thierry.verdier@ens.fr

Anyck Dauphin , Bernard Fortin, Guy Lacroix

Mars 2018

Collective rationality is seldom if ever rejected in the literature, raising doubt about its falsifiability. We show that the standard approach to test the collective model with distribution factors may yield misleading inference. We develop a new test procedure to assess its validity. Our approach extends to households that potentially include more than two decision-makers (e.g., polygamous households, adult children). We provide a brief and informal meta-analysis that suggests that much of the evidence in favour of collective rationality in the empirical literature appears to be inconsistent with our test. We illustrate the latter using data from a survey we have conducted in Burkina Faso. Collective rationality within monogamous households is not rejected using the standard testing procedure while it is clearly rejected using our proposed test procedure. Furthermore, our test also rejects collective rationality for bigamou households. We conclude that the household efficiency does yield empirically falsifiable restrictions despite being scarcely rejected in the literature.

Anyck Dauphin : Université du Québec en Outaouais and CDESG
 

,

Bernard Fortin : Department of economics, Université Laval, CRREP and CIRANO

,

Guy Lacroix : Department of economics, Université Laval, CRREP and CIRANO

Julie Beugnot, Bernard Fortin, Guy Lacroix, Marie Claire Villeval

Mars 2018

We investigate whether peer effects at work differ by gender and whether gender differences in peer effects -if any- depend on work organization. We develop a social network model with gender heterogeneity that we test in a real-effort laboratory experiment. We compare sequential networks in which information flows from peers to the worker and simultaneous networks where it disseminates bi-directionally. We identify strong gender differences as females disregard their peers’ performance in simultaneous networks, while males are influenced by peers in both networks. Females may perceive the environment in simultaneous networks as being more competitive than in sequential networks.

Julie Beugnot : CRESE EA3190, Univ. Bourgogne Franche-Comté, F-25000 Besançon, France
Bernard Fortin : Department of economics, Université Laval, CRREP and CIRANO, Canada
Guy Lacroix : Department of economics, Université Laval, CRREP, IZA and CIRANO, Canada
Marie Claire Villeval : Université de Lyon, France; CNRS, GATE Lyon St Etienne, France; IZA, Department of Public Finance, University of Innsbruck

Guy Lacroix

Mars 2018

Immigrants often experience difficulties integrating the local labor market. In Canada, the government of Quebec implemented a program back in 1996 that explicitly selected highly qualified workers (Bachelors’, Masters’ or PhD’s). This paper investigates the extent to which the return to foreign-acquired human capital is different from the education acquired in Quebec. Specifically, we seek to estimate the benefits of post-migration education over foreign-education on the transitions between qualified and unqualified jobs and unemployment by means of a multiple-spells and multiple-states model. Our results indicate that immigrants originating from well-off countries have no need to further invest in domestic education. On the other hand, immigrants from poorer countries, despite being highly qualified, benefit greatly from such training in the long run as it eases their transitions into qualified and unqualified jobs and out of unemployment. Our results also indicate that selection into domestic education needs to be accounted for to avoid significant selection problems.

Marie Albertine Djuikom : PhD Candidate, Department of economics, Université Laval, Canada
Guy Lacroix : Department of economics, Université Laval, CRREP, IZA and CIRANO, Canada

Paola Balloon, John Cockburn, Setou Diarra, Sylvain Dessy

Février 2018

We analyze the causal effect of parental education on the potential mismatch between child monetary poverty and multidimensional deprivations. First, in a simple model of parental investment in child outcomes, we demonstrate that the misalignment between household monetary resources and parental education causes a mismatch. Indeed, a match between poverty and deprivation occurs whenever household consumption expenditure and parental education are correlated. Second, using micro-level data from Tanzania, we find that parental education has a negative effect on the probability that a monetarily non-poor child suffers some basic deprivations, and a positive effect on the likelihood that a monetarily poor child suffers no basic deprivations.

Paola Ballon: School of Geography and the Environment, University of Oxford - paola.ballon@ouce.ox.ac.uk
John Cockburn: Corresponding author - Partnership for Economic Policy - john.cockburn@pep-net.org
Sylvain Dessy: Department of Economics and CRREP, Université Laval - sdes@ecn.ulaval.ca
Setou Diarra: Department of Economics, University of Ottawa

Charles Bellemare, Guy Lacroix

Décembre 2017

We investigate the determinants and extent of labor market discrimination toward people with acute physical disabilities (wheelchair users) using data from a large scale field experiment conducted in the province of Quebec (Canada). Applications (cover letters and CVs) were randomly sent to 1477 private firms operating in two urban regions (Montréal and Québec City) advertising open positions requiring various skill levels. The applications were randomly generated to cover a broad spectrum of potential determinants of discrimination (gender, skill level, work history, workplace adjustment costs, etc.). We find that average callback rates of disabled and non-disabled applicants is 14.4% and 31%, respectively, yielding a differential callback rate of 46%. We also investigate whether the differential may result from accessibility constraints related to the physical infrastructures where firms are located (poor and access to an elevator, availability of wheelchair, etc.). The latter are found to have no explanatory power. In addition, applications which explicitly mention that the candidate is eligible to a government subsidy to cover the cost of workplace adaptations and assistive technology do not yield higher callback rates.

Charles Bellemare : Charles.Bellemare@ecn.ulaval.ca
Marion Goussé
Guy Lacroix
Steeve Marchand

Martin Boyer, Philippe De Donder, Claude-Denys Fluet, Marie-Louise Leroux, Pierre-Carl Michaud

Septembre 2017

We conduct a stated-choice experiment where respondents are asked to rate various insurance products aimed to protect against financial risks associated with long-term care needs. Using exogenous variation in prices from the survey design, and objective risks computed from a dynamic microsimulation model, these stated-choice probabilities are used to predict market equilibrium for long-term care insurance using the framework developped by Einav et al. (2010). We investigate in turn causes for the low observed take-up of long-term care insurance in Canada despite substantial residual out-of-pocket financial risk. We first find that awareness and knowledge of the product is low in the population: 44% of respondents who do not have long-term care insurance were never offered this type of insurance while overall 31% report no knowledge of the product. Although we finnd evidence of adverse selection, results suggest it plays a minimal role in limiting take-up. On the demand side, once respondents have been made aware of the risks, we finnd that demand remains low, in part because of misperceptions of risk, lack of bequest motive and home ownership which may act as a substitute.

Martin Boyer, HEC Montréal
Philippe De Donder, ESG UQAM
Claude Fluet, Université Laval
Marie-Louise Leroux, ESG UQAM
Pierre-Carl Michaud, HEC Montréal

Vincent Boucher

Septembre 2017

I present a behavioural model of network formation with positive network externalities in which individuals have preferences for being part of a clique. The behavioural model leads to an associated supermodular (Topkis, 1979) normalform game. I show that the behavioural model converges to the greatest Nash equilibrium of the associated normal-form game. I propose an approximate Bayesian computation (ABC) framework, using original summary statistics, to make inferences about individuals' preferences, and provide an illustration using data on high school friendships.

Boucher: Department of Economics, Universitée Laval, CRREP and CREATE, vincent.boucher@ecn.ulaval.ca

Vincent Boucher

Septembre 2017

I propose a simple simulation procedure for large games with multiple equilibria. The simulation procedure is based on a best-response dynamic. The implied equilibrium selection mechanism is intuitive: more stable equilibria are selected with higher probability.

Boucher: Department of Economics, Universitée Laval, CRREP and CREATE, vincent.boucher@ecn.ulaval.ca

Charles Bellemare, Alexander Sebald, Sigrid Suetens

Août 2017

Psychological games of guilt aversion assume that preferences depend on (beliefs about) beliefs and on the guilt sensitivity of the decision-maker. We present an experiment designed to measure guilt sensitivities at the individual level for various stake sizes. We use the data to estimate a structural choice model that allows for heterogeneity, and permits that guilt sensitivities depend on stake size. We find substantial heterogeneity of guilt sensitivities in our population, with 60% of decision makers displaying stake-dependent guilt sensitivity. For these decision makers, we find that average guilt sensitivities are significantly different from zero for all stakes considered, while significantly decreasing with the level of stakes.

Bellemare: Département d’économique, Université Laval, CRREP, - cbellemare@ecn.ulaval.ca

Sebald: Department of economics, University of Copenhagen - Alexander.Sebald@econ.ku.dk

Suetens: Tilburg University, CentER, and TILEC - S.Suetens@uvt.nl

Claude-Denys Fluet, Murat C. Mungan

Août 2017

Fault-based liability regimes require an inquiry into the nature of the defendant’s conduct, whereas this type of inquiry is absent in strict liability regimes. Therefore, verdicts reached through fault-based liability regimes can convey superior information compared to verdicts reached through strict liability regimes. Further reflection reveals that this advantage is enjoyed by fault-based liability regimes only if the evidence related to the nature of defendants’ actions is such ciently informative. Otherwise, admitting such evidence can add noise to the information conveyed through verdicts. Therefore, liability regimes have a function of tuning signals conveyed on to third parties, which, in turn, causes deterrence effects by a¤ecting the informal sanctions imposed on defendants who are found liable. We construct a model wherein this function is formalized, and we identify the optimal liability regime and burden of proof as a function of various factors (e.g. the commonality of the harmful act, and the informativeness of the evidence).

Fluet: Université Laval, CRREP, CRED - claude.fluet@fsa.ulaval.ca

Mungan: George Mason University, Antonin Scalia Law School - mmungan@gmu.edu

Badi H. Baltagia, Georges Bresson, Anoop Chaturvedi, Guy Lacroix

Août 2017

The paper develops a general Bayesian framework for robust linear static panel data models using ε-contamination. A two-step approach is employed to derive the conditional type-II maximum likelihood (ML-II) posterior distribution of the coeffcients and individual effects. The ML-II posterior densities are weighted averages of the Bayes estimator under a base prior and the data-dependent empirical Bayes estimator. Two-stage and three stage hierarchy estimators are developed and their finite sample performance is investigated through a series of Monte Carlo experiments. These include standard random effects as well as Mundlak-type, Chamberlain-type and Hausman-Taylor-type models. The simulation results underscore the relatively good performance of the three-stage hierarchy estimator. Within a single theoretical framework, our Bayesian approach encompasses a variety of specifications while conventional methods require separate estimators for each case.

Baltagi : Department of Economics and Center for Policy Research, Syracuse University, Syracuse, New York, U.S.A. and Department of Economics, Leicester University, Leicester, UK - bbaltagi@maxwell.syr.edu

Bresson: Université Paris II / Sorbonne Universités, France - bresson-georges@orange.fr

Chaturvedi: University of Allahabad, India - anoopchaturv@gmail.com

Lacroix: Départment d'économique, Université Laval, Québec, Canada - Guy.Lacroix@ecn.ulaval.ca

Claude-Denys Fluet

Juin 2017

We conduct an experiment where participants choose between actions that provide private benefits but may also impose losses on strangers. Three legal environments are compared: no law, strict liability for the harm caused to others, and an efficiently designed negligence rule where damages are paid only when the harmful action causes a net social loss. Legal obligations are either perfectly enforced (Severe Law) or only weakly so (Mild Law), i.e., material incentives are then nondeterrent. We investigate how legal obligations and social norms interact. Our results show that liability rules strengthen pro-social behavior and suggest that strict liability has a greater effect than the negligence rule.

Deffains : Université Paris 2, CRED, University  of Liverpool, bruno.deffains@u-paris2.fr
Espinosa : Université Paris 2, CRED, romain.espinosa@u-paris2.fr
Fluet : Université Laval, CRREP, CRED, claude.fluet@fsa.ulaval.ca

Mbéa Bell, Sylvain Dessy

Mars 2017

This paper compares a clean energy standard (CES) and a carbon tax (CT), using theory and quantitative experiments. A two-stage duopolistic competition in the electricity sector between a polluting plant and its non-polluting rival anchors the model underlying these experiments. The CT induces both plants to contribute to clean electricity, whereas the CES only incentivizes the non-polluting plant. Ultimately, what matters for the ranking of these instruments is the size of the pre-existing competitive gap between the two rival plants. When this gap is sufficiently small, the CES becomes the more cost-effective instrument, irrespective of the pre-specified emissions reduction target.

Mbéa Bel : Département d'Économique Université Laval and CREPP. Email: mbea.bell.1@ulaval.ca
Sylvain Dessy : Département d'Économique Université Laval and CREPP. Email: sylvain.dessy@ecn.ulaval.ca

Maria Adelaida Lopera

Mars 2017

We study how social interactions influence entrepreneurs' attitudes toward risk. We conduct two risk-taking experiments within workshops organized for young Ugandan entrepreneurs. Between the two experiments, the entrepreneurs participate in a networking activity where they build relationships and discuss with each other. We collect detailed data on peer network formation and on participants' choices before and after the networking activity. Our design implicitly controls for homophily effects (i.e. the tendency of individuals to develop relationships with people who have similar characteristics). We find that risk aversion is affected by social conformity. Participants tend to become more (less) risk averse in the second experiment if the peers they discuss with are on average more (less) risk averse in the first experiment. This suggests that social interactions play a role in shaping risk preferences.

Lopera : University of Munich (e-mail: malopera@econ.lmu.de)
Marchand : Université Laval (e-mail: steeve.marchand@ecn.ulaval.ca)

Rokhaya Dieye, Bernard Fortin

Janvier 2017

This paper explores gender peer effects heterogeneity in adolescent Body Mass Index (BMI). We propose a utility-based non-cooperative social network model with effort technology. We allow the gender composition to influence peer effects. We analyze the possibility of recovering the fundamentals of our structural model from the best-response functions. We provide identification conditions of these functions generalizing those of the homogeneous version of the model. Extending Liu and Lee [2010], we consider 2SLS and GMM strategies to estimate our model using Add Health data. We provide tests of homophily in the formation of network and reject them after controlling for network (school) fixed effects. The joint (endogenous plus contextual) gender homogeneous model is rejected. However, we do not reject that the endogenous effects are the same.This suggests that the source of gender peer effects heterogeneity is the contextual effects. We find that peers’ age, parents’ education, health status, and race are relevant for the latter effects and are gender-dependent.

Dieye: Department of Economics-Laval University, and Grenoble Applied Economics Laboratory-INRA, Université Grenoble Alpes, France: rokhaya.dieye.1@ulaval.ca
Fortin: Department of Economics-Laval University, CIRPÉE, IZA, and CIRANO: bernard.fortin@ecn.ulaval.ca

Jean-Marie Dufour, Richard Luger

Janvier 2017

This paper develops tests of the null hypothesis of linearity in the context of autoregressive models with Markov-switching means and variances. These tests are robust to the identification failures that plague conventional likelihood-based inference methods. The approach exploits the moments of normal mixtures implied by the regime-switching process and uses Monte Carlo test techniques to deal with the presence of an autoregressive component in the model specification. The proposed tests have very respectable power in comparison to the optimal tests for Markov-switching parameters of Carrasco et al. (2014) and they are also quite attractive owing to their computational simplicity. The new tests are illustrated with an empirical application to an autoregressive model of U.S. output growth.

Dufour: William Dow Professor of Economics, McGill University, Centre interuniversitaire de recherche en analyse des organisations (CIRANO), and Centre interuniversitaire de recherche en économie quantitative (CIREQ) : jean-marie.dufour@mcgill.ca
Luger: Département de finance, assurance et immobilier, Université Laval : richard.luger@fsa.ulaval.ca

Sylvain Dessy, Setou Diarra, Roland Pongou

Décembre 2016

Public policy addressing the harmful practice of adolescent marriage tends to leave out men, as prospective grooms. Using micro-level data from Nigeria in combination with plausible instrumental variables, we find that a male's education significantly decreases the likelihood that he marries an adolescent girl. We show that this negative relationship is not a mere mechanical effect reflecting the endogeneity between schooling and marriage-timing decisions, and that it is stronger where patriarchal gender norms are weaker. We develop a model that explains this causal effect as resulting from the complementarity between father's and mother's education in the production of child quality.

Sylvain Dessy : Department of Economics and CRREP, Université Laval. Email: sdes@ecn.ulaval.ca
Setou Diarra : Department of Economics and CRREP, Université Laval. Email: setou-mamadou.diarra.1@ulaval.ca
Roland Pongou : Department of Economics, University of Ottawa. Email: roland.pongou@uottawa.ca

 

Arnaud Dufays, Maciej Augustyniak, Luc Bauwens

Décembre 2016

A new model - the factorial hidden Markov volatility (FHMV) model - is proposed for financial returns and their latent variances. It is also applicable to model directly realized variances. Volatility is modeled as a product of three components: a Markov chain driving volatility persistence, an independent discrete process capable of generating jumps in the volatility, and a predictable (data-driven) process capturing the leverage effect. An economic interpretation is attached to each one of these components. Moreover, the Markov chain and jump components allow volatility to switch abruptly between thousands of states, and the transition matrix of the model is structured in such a way as to generate a high degree of volatility persistence. In-sample results on six financial time series highlight that the FHMV process compares favorably to state-of-the-art volatility models. A forecasting experiment shows that it also outperforms its competitors when predicting volatility over time horizons ranging from one to one hundred days.

Maciej Augustyniak : Département de mathématiques et de statistique, Université de Montréal ; Quantact
Actuarial and Financial Mathematics Laboratory ; augusty@dms.umontreal.ca
Luc Bauwens : Université catholique de Louvain, CORE, B-1348 Louvain-La-Neuve, Belgium ; Université
Côte d'Azur - SKEMA, France ; luc.bauwens@uclouvain.be
Arnaud Dufays : Département d'économique, UniversitéLaval, 1025 avenue des Sciences-Humaines,
Quebec City, Quebec ; arnaud.dufays@ecn.ulaval.ca

Vincent Boucher

Décembre 2016

We present a flexible model of wage dynamics where information about job openings is transmitted through social networks. The model is based on Calvò-Armengol & Jackson (2004, 2007) and extends their results outside the stationary distribution, and under observed and unobserved heterogeneity. We present an empirical application using the British Household Panel Survey by exploiting direct information about individual's social networks. We find that having more employed friends leads to more job offers but to lower wages due to higher mismatch. We also find that non-relative friends are more helpful than relatives, and that women benefit relatively more from their male friends.

Boucher: Department of Economics, Université Laval, CRREP and CREATE vincent.boucher@ecn.ulaval.ca.
Goussée: Department of Economics, Université Laval and CRREP, marion.gousse@ecn.ulaval.ca

Arnaud Dufays

Décembre 2016

Change-point time series specifications constitute flexible models that capture unknown structural changes by allowing for switches in the model parameters. Nevertheless most models suffer from an over-parametrization issue since typically only one latent state variable drives the switches in all parameters. This implies that all parameters have to change when a break happens. To gauge whether and where there are structural breaks in realized variance, we introduce the sparse change-point HAR model. The approach controls for model parsimony by limiting the number of parameters which evolve from one regime to another. Sparsity is achieved thanks to employing a nonstandard shrinkage prior distribution. We derive a Gibbs sampler for inferring the parameters of this process. Simulation studies illustrate the excellent performance of the sampler. Relying on this new framework, we study the stability of the HAR model using realized variance series of several major international indices between January 2000 and August 2015.

Arnaud Dufays: Université Laval https://sites.google.com/site/websiteofarnauddufays/
Jeroen V.K. Rombouts : ESSEC Business School, Av. B. Hirsch, Cergy Pontoise, rombouts@essec.edu

Kevin Moran, Simplice Aime Nono

Octobre 2016

This paper assesses the contribution of confidence - or sentiment - data in predicting Canadian economic slowdowns. A probit framework is specified and applied to an indicator on the status of the Canadian business cycle produced by the OECD. Explanatory variables include all available Canadian data on sentiment (which arise from four different surveys) as well as various macroeconomic and financial data. The model is estimated via maximum likelihood and sentiment data are introduced either as individual variables, as simple averages (such as confidence indices) and as confidence factors extracted, via principal components' decompositions, from a larger dataset in which all available sentiment data have been collected. Our findings indicate that the full potential of sentiment data for forecasting future business cycles in Canada is attained when all data are used through the use of factor models.

Kevin Moran : Department of Economics, Universit.é Laval, kevin.moran@ecn.ulaval.ca
Simplice Aimé Nono : Department of Economics, Laval University, simplice-aime.nono.1@ulaval.ca
Imad Rherrad : Ministère des Finances du Québec. Email: imad.rherrad@finances.gouv.qc.ca

Bernard Fortin, Safa Ragued

Octobre 2016

Almost 40% of Canadian youth who left postsecondary education in 1999 had returned two years later. This paper investigates the extent to which schooling discontinuities affect post-graduation starting wages and whether the latter are influenced by the reasons behind these discontinuities. We use data from the 2007 National Graduate Survey. We apply Lewbel’s (2012) generated instruments approach. The source of identification is a heteroscedastic covariance restriction of the error terms that is a feature of many models of endogeneity. We also perform two-stage quantile regressions. We find a positive effect on wages of temporary interruption for men who held a full-time job during their out-of-school spell(s). Both men and women witness a wage decrease if their interruption depends on health issues. Women bear a wage penalty if their interruption is due to a part-time job, to lack of money, or is caused by reasons other than health, work, and money.

Bernard Fortin : Department of Economics, Laval University, IZA, CIRANO bernard.fortin@ecn.ulaval.ca
Safa Ragued : Department of Economics, Laval University, Quebec, Canada. Email: safa.ragued.1@ulaval.ca

Septembre 2016

We extend the search-matching model of the marriage market of Shimer and Smith (2000) to allow for labor supply, home production, match-specific shocks and endogenous divorce. We study nonparametric identification using panel data on marital status, education, family values, wages, and market and non market hours, and we develop a semiparametric estimator. We estimate how much sorting results from time use specialization or homophilic preferences. We estimate how equilibrium marriage formation affects the wage elasticities of market and non market hours. We estimate individuals’ willingness to pay for marriage and quantify the redistributive effect of intrahousehold resource sharing.

Goussé : Université Laval, Départment of Economics marion.gousse@ecn.ulaval.ca
Jacquement: Paris School of Economics and Université Paris nicolas.Jacquemet@univ-paris1.fr
Robin : Sciences Po, Paris and University College of London,  jeanmarc.robin@sciences-po.fr

Stephen Gordon

Août 2016

This study explores the ‘brain drain’ explanation for the concentration of incomes in Canada during the past thirty years, namely, that high-skilled Canadians have made use of the high salaries on offer in the United States to extract higher salaries at home. If this is the case, then for a given level of US salaries, the threat to accept outside offers should be more credible when the Canadian dollar is depreciating against the US dollar, and weaker when the Canadian dollar is appreciating. The data are broadly consistent with this claim: income concentration worsened during the depreciations of the 1980s and 1990s, and eased when the Canadian dollar began to appreciate in value. The paper develops a simple two-parameter model based on the propositions that high earners in Canada can use US salaries to bargain for higher salaries, and that Canadian high earners can shelter part of their income from personal income taxes. It also offers some preliminary evidence about the parameter values consistent with available data. The results suggest that higher top marginal personal income tax rates may actually accentuate top-end after-tax income inequality. If high earners are able to use their bargaining power to extract pay increases to offset higher tax rates, the the burden of increased taxes will be pushed down to those lower down in the income distribution, leaving the after-tax income distribution more unequal than it was before.

Stephen Gordon: Département d’économique, Université Laval, stephen.gordon@ecn.ulaval.ca

Simon Brière, Bernard Fortin, Guy Lacroix

Juin 2016

Pour des CV semblables en tout point, Samira Benounis recevra-t-elle moins dʼinvitations à un entretien dʼembauche que Valérie Tremblay dans la région de la Capitale-Nationale (Québec, Canada) ? Cet article tente de répondre à cette question à partir dʼune expérience utilisant la méthode de testing par envoi de CV. Nos résultats montrent que, toutes choses égales par ailleurs, la probabilité dʼêtre invitée à un entretien dʼembauche diminue de 11 % lorsque la candidate a un nom dʼorigine maghrébine plutôt que québécoise. Ce constat suggère la présence dʼune discrimination à lʼembauche des candidates dʼorigine maghrébine dans la région de la Capitale-Nationale.

Simon Brière : Département dʼéconomique, Université Laval et CIRPÉE, simon.briere.2@ulaval.ca
Bernard Fortin : Département dʼéconomique, Université Laval, CIRPÉE et CIRANO, bernard.fortin@ecn.ulaval.ca
Guy Lacroix : Département dʼéconomique, Université Laval, CIRPÉE et CIRANO, Guy.Lacroix@ecn.ulaval.ca

Gilles Boevi Koumou, Kevin Moran

Septembre 2015

This paper proposes a new formulation of the Maximum Diversification indexation strategy based on Rao’s Quadratic Entropy (RQE). It clarifies the investment problem underlying the Most Diversified Portfolio (MDP) formed with this strategy, identifies the source of the MDP’s out-of-sample performance, and suggests dimensions along which this performance can be improved. We show that these potential improvements are quantitatively important and are robust to portfolio turnover, portfolio risk, estimation window, and covariance matrix estimation.

Carmichael: Département d’économique, Université Laval benoit.carmichael@ecn.ulaval.ca
Koumou: CIRPÉE et Département d’économique, Université Laval nettey-boevi-gilles-b.koumou.1@ulaval.ca
Moran: CIRPÉE et Département d’économique, Université Laval kevin.moran@ecn.ulaval.ca

Arnaud Dufays

Septembre 2015

Sequential Monte Carlo (SMC) methods are widely used for non-linear filtering purposes. Nevertheless the SMC scope encompasses wider applications such as estimating static model parameters so much that it is becoming a serious alternative to Markov-Chain Monte-Carlo (MCMC) methods. Not only SMC algorithms draw posterior distributions of static or dynamic parameters but additionally provide an estimate of the marginal likelihood. The tempered and time (TNT) algorithm, developed in the paper, combines (off-line) tempered SMC inference with on-line SMC inference for drawing realizations from many sequential posterior distributions without experiencing a particle degeneracy problem. Furthermore, it introduces a new MCMC rejuvenation step that is generic, automated and well-suited for multi-modal distributions. As this update relies on the wide heuristic optimization literature, numerous extensions are already available. The algorithm is notably appropriate for estimating Change-point models. As an example, we compare Change-point GARCH models through their marginal likelihoods over time.

Dufays : Département d’économique and CIRPÉE, arnaud.dufays@ecn.ulaval.ca

Paul Blais-Morisset, Vincent Boucher, Bernard Fortin

Septembre 2015

Chaque année, une part significative des dépenses gouvernementales est consacrée au sport de niveau professionnel ou amateur. Certains analystes affirment que ces investissements contribuent fortement au succès d’un pays aux Jeux olympiques (JO). Nous présentons une analyse économétrique du nombre de médailles obtenues aux JO. Nous introduisons l’investissement public en sport comme facteur potentiellement important du nombre de médailles remportées par un pays, en prenant soin de contrôler pour l’hétérogénéité inobservable des pays participants aux JO. Nous présentons, à notre connaissance, la première modélisation du succès olympique utilisant des spécifications de comptage (count data model) en panel estimées à l’aide de variables instrumentales et captant les caractéristiques individuelles et invariantes des nations. Selon les spécifications du modèle retenues, un pays aux caractéristiques moyennes aurait dû accroître son investissement de 72 à 94 millions de dollars, ceteris paribus, afin d’obtenir une médaille supplémentaire aux JO d’été de Londres en 2012..

Blais-Morisset : Université Laval, Département d’économique paul.blais.morisset.1@ulaval.ca
Boucher : CIRPÉE et CREATE, Département d’économique, Université Laval vincent.boucher@ecn.ulaval.ca
Fortin : CIRPÉE et CIRANO, Département d’économique, Université Laval bernard.fortin@ecn.ulaval.ca

Jean Armand Gnagne, Kevin Moran

Juin 2015

This paper assesses the impact that a widely-based Securities Transaction Tax (STT) could have on the likelihood of systemic financial crises. We apply the methodology developed by Demirgüç-Kunt and Detragiache (1998) [IMF Staff Papers 45 (1)] to a panel dataset of 34 OECD countries for the sample 1973 – 2012, using a measure of a country’s average bid-ask spread in financial markets as a proxy for the likely effect of a STT on transactions costs. Our results indicate that the establishment of a STT could sizeably increase the risk of financial crises.

Carmichael: Département d’économique, Université Laval and CIRPÉE benoit.carmichael@ecn.ulaval.ca
Gnagne: Département d’économique, Université Laval and CIRPÉE jean-armand.gnagne.1@ulaval.ca
Moran: Département d’économique, Université Laval and CIRPÉE kevin.moran@ecn.ulaval.ca

Vincent Boucher

Mai 2015

This paper estimates the causal impact of party affiliation (Republican or Democrat) of U.S. governors on pollution. Using a regression discontinuity design, gubernatorial election data, and air quality data from U.S. Environmental Protection Agency (EPA), we find that pollution is lower under Democratic governors. We identify that this is mostly due to environmental policies enacted by Democratic governors.

Beland: Department of Economics, Louisiana State University lbeland@lsu.ed
Boucher: Department of Economics, Université Laval and CIRPÉE vincent.boucher@ecn.ulaval.ca

André-Marie Taptué

Mai 2015

In the context of polarized societies, income homogeneity is linked to the frequency andthe intensity of social unrest. Most homogenous countries exhibit a lower frequency of intense social conflicts and less homogeneous countries show a higher frequency of moderate social conflicts. This paper develops a methodology to compare the degree of homogeneity of two income distributions. We use for that purpose and index of polarization that does not account for alienation. This index is the identification component of polarization that measures the degree to which individuals feel alike in an income distribution. This development leads to identification dominance curves and derives first-order and higher-order stochastic dominance conditions. First-order stochastic dominance is performed through identification dominance curves drawn on a support of identification thresholds. These curves are used to determine whether identification, homogeneity, or similarity of individuals is greater in one distribution than in another for general classes of polarization indices and ranges of possible identification thresholds. We also derive the asymptotic sampling distribution of identification dominance curves and test dominance between two distributions using Intersection Union tests and bootstrapped p-values. Our methodology is illustrated by comparing pairs of distributions of eleven countries drawn from the Luxembourg Income Study database.

Taptué: Département d’économique and CIRPÉE, Université Laval, Canada andre-marie.taptue.1@ulaval.ca

André-Marie Taptué

Mai 2015

This paper shows how to compare the size of the middle class in income distributions using a polarization index that do not account for identification. We derive a class of polarization indices where the antagonism function is constant in identification. The comparison of distributions using an index from this class motivates the introduction of an alienation dominance surface, which is a function of an alienation threshold. We first prove that a distribution has a large alienation component in polarization compared to another if the former always has a larger dominance surface than the latter regardless of the value of the alienation threshold. Then, we show that the distribution with large dominance surface is more concentrated in the tails and has a smaller middle class than the other distribution. We implement statistical inference and test dominance betweenpairs of distributions using the asymptotic theory and Intersection Union tests. Our methodology is illustrated in comparing the declining of the middle class across pairwise distributions of twenty-two countries from the Luxembourg Income Study data base.

Taptué: Département d’économique and CIRPÉE, Université Laval, Canada andre-marie.taptue.1@ulaval.ca

Gilles Boevi Koumou, Kevin Moran

Mai 2015

This paper extends the use of Rao(1982b)’s Quadratic Entropy (RQE) to modern portfolio theory. It argues that the RQE of a portfolio is a valid, flexible and unifying approach to measuring portfolio diversification. The paper demonstrates that portfolio’s RQE can encompass most existing measures, such as the portfolio variance, the diversification ratio, the normalized portfolio variance, the diversification return or excess growth rates, the Gini-Simpson indices, the return gaps, Markowitz’s utility function and Bouchaud’s general free utility. The paper also shows that assets selected under RQE can protect portfolios from mass destruction (systemic risk) and an empirical illustration suggests that this protection is substantial.

Carmichael: CIRPÉE et Département d’économique, Université Laval benoit.carmichael@ecn.ulaval.ca
Koumou: Corresponding author. CIRPÉE et Département d’économique nettey-boevi-gilles-b.koumou.1@ulaval.ca
Moran: CIRPÉE et Département d’économique, Université Laval Canada kevin.moran@ecn.ulaval.ca

Vincent Boucher, Bernard Fortin

Février 2015

We study some recent developments and challenges in the empirics of the effects of social networks. We focus in particular on researchers’ ability to make policy recommendations based on a standard linear econometric model. We examine the potential compatibility between this type of econometric model and a microeconomic theoretical approach based on fundamentals, such as preferences, technology and decision processes. We discuss sources of identification for the social multiplier as well as for the identity of the key player. We study the possibility of testing endogeneity in network formation. We analyse the use of proxy variables and their impact for the causal interpretation of the peer effect coefficients. Our analysis suggests that greater care should be taken in grounding econometric network models to sound and credible theoretical underpinnings.

Boucher: Department of Economics, Université Laval, CIRPÉE vincent.boucher@ecn.ulaval.ca
Fortin: Department of Economics, Université Laval, CIRPÉE and CIRANO bernard.fortin@ecn.ulaval.ca

Décembre 2014

We assess whether global social welfare has improved in the last decades despite (or because of) the substantial increase in global population. We use for this purpose a relatively unknown but simple and attractive social evaluation approach called criticallevel generalized utilitarianism (CLGU). CLGU posits that social welfare increases with population size if and only if the new lives come with a level of living standards higher than that of a critical level. Despite its attractiveness, CLGU poses a number of practical difficulties that may explain why the literature has left it largely unexplored. We address these difficulties by developing new procedures for making partial CLGU orderings. The headline result is that we can robustly conclude that world welfare has increased between 1990 and 2005 if we judge that lives with per capita yearly consumption of more than $1,248 necessarily increase social welfare; the same conclusion applies to Sub-Saharan Africa if and only if we are willing to make that same judgement for lives with any level of per capita yearly consumption above $147. Otherwise, some of the admissible CLGU functions will judge the last two decades’ increase in global population size to have lowered global social welfare.

Cockburn: Département d’économique, PEP and CIRPÉE, Université Laval, Canada jcoc@ecn.ulaval.ca
Duclos: Département d’économique, PEP, CIRPÉE, Université Laval, Canada and FERDI jyves@ecn.ulaval.ca
Zabsonré: zabagnes@yahoo.fr

Charles Bellemare, Luc Bissonnette, Sabine Kröger

Novembre 2014

This paper discusses the choice of the number of participants for within-subjects (WS) designs and between-subjects (BS) designs based on simulations of statistical power allowing for different numbers of experimental periods. We illustrate the usefulness of the approach in the context of field experiments on gift exchange. Our results suggest that a BS design requires between 4 to 8 times more subjects than a WS design to reach an acceptable level of statistical power. Moreover, the predicted minimal sample sizes required to correctly detect a treatment effect with a probability of 80% greatly exceed sizes currently used in the literature. Our results suggest that adding experimental periods in an experiment can substantially increase the statistical power of a WS design, but have very little effect on the statistical power of the BS design. Finally, we discuss issues relating to numerical computation and present the powerBBK package programmed for STATA. This package allows users to conduct their own analysis of power for the different designs (WS and BS), conditional on user specified experimental parameters (true effect size, sample size, number of periods, noise levels for control and treatment, error distributions), statistical tests (parametric and nonparametric), and estimation methods (linear regression, binary choice models (probit and logit), censored regression models (tobit)).

All authors: Université Laval, Department of Economics
Bellemare: charles.bellemare@ecn.ulaval.ca
Bissonnette: luc.bissonnette@ecn.ulaval.ca
Kröger: sabine.kroger@ecn.ulaval.ca

Vincent Boucher

Novembre 2014

I present a model of conformism in social networks that incorporates both peer effects and self-selection. I find that equilibrium behaviors are linked through the Laplacian matrix of the equilibrium network. I show that conformism has positive social value and that social welfare can be bounded by network centrality and connectivity measures. I apply the model using empirical data on high school student participation in extracurricular activities. I find that the local effects of conformism (i.e. endogenous peer effect for a fixed network structure) range from 7.5% to 45%, depending on the number of peers that an individual has. Simulations show that the optimal policies of an inequality-averse policy-maker change in relation to the size of a school. Small schools should encourage shy students to integrate more with other students, while large schools should focus on promoting role models within the school.

Boucher : Department of Economics, Université Laval; and CIRPÉE vincent.boucher@ecn.ulaval.ca

Charles Bellemare, Bruce Shearer

Mai 2014

We present results from a field experiment designed to measure the importance of managerial commitment to a contract within a firm that pays its workers piece rates. In the tree planting industry the piece rate paid to workers is determined as a function of the difficulty of the terrain to be planted. During the experiment, workers began planting a terrain at a trial piece rate, but were told this rate would be revised upwards if, after a few work days, average productivity was below that observed on a similar (control) terrain on which the firm had committed to the contract. Our results suggest that worker productivity was 20% to 40% lower in the absence of commitment. The reduction was less pronounced when workers had less time to benefit from any subsequent increase in the piece rate. This provides support for models of worker turnover as a means of overcoming ratchet effects.

Bellemare : Département d’économique, Université Laval, CIRPÉE, IZA cbellemare@ecn.ulaval.ca

 

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Shearer : Département d’économique, Université Laval, CIRPÉE, IZA, CIRANO bruce.shearer@ecn.ulaval.ca