WORKING PAPERS 2021

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2021-37

Learning by litigating: An application to antitrust commitments

Andreea Cosnita-Langlais, Jean-Philippe Tropeano

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Abstract
This paper examines the impact of commitment decisions on the efficiency of antitrust enforcement. We discuss the optimal use of commitments considering past rulings as a source of knowledge to better assess future similar antitrust cases. Our framework combines two key effects: the deterrence of the anticompetitive behavior by the different enforcement regimes, and the dynamic perspective through litigation as a source of learning. We show that if the level of penalty is high enough, the antitrust authorities undervalue the dynamic informational benefit of litigation and tend to over-use commitments.
Mot(s) clé(s)
antitrust, commitments, deterrence, legal learning
2021-36

Unintended Consequences of the Global Derivatives Market Reform

Pauline Gandré, Mike Mariathasan, Ouarda Merrouche, Steven Ongena

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Abstract
The G-20’s global over-the-counter (OTC) derivatives market reform has caused a dramatic shift in the geography of the global derivatives market. Following the early implementation of the reform in the US and associated increase in the cost of trading derivatives, US banks shifted up to 60 percent of their OTC derivatives activity abroad, particularly towards less regulated jurisdictions. This implies an increase in global risk as risk is shifted to jurisdictions that are less prepared to monitor it and deal with the consequences. Further, we find that foreign subsidiaries in more tightly regulated jurisdictions have increased risk-taking overall.
Mot(s) clé(s)
Bank regulation, Regulatory arbitrage, OTC Markets, Derivatives, Cross-border financial institutions, Financial risk.
2021-35

The correspondence between Baumol and Galbraith (1957–1958) An unsuspected source of managerial theories of the firm.

Alexandre Chirat

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Abstract
Baumol’s impact on the development of managerial theories of the firm is investigated here through material found in Galbraith’s archives. In 1957 Galbraith published a paper claiming that the impact of macroeconomic policies varies with market structures (competitive versus oligopolistic). That publication prompted Baumol (1958b) to send Galbraith a manuscript dealing extensively with a crucial question of managerial theories of the firm, namely, the trade-off between sales and profits. I argue that Baumol’s critiques and Galbraith’s answers largely explain the way Baumol (1958a, 1959) framed his alternative model of the behavior of corporations. He reasoned in terms of maximization of sales with a profit constraint as their main objective. In return, Business Behavior, Value and Growth fostered the development of Marris’ (1964) and Galbraith’s (1967) theories of the corporation. While Tullock (1978) provides a narrative in which the sales maximization hypothesis has two main branches – Baumol for the one and Galbraith-Marris for the other – the paper demonstrates that these branches are intimately connected.
Mot(s) clé(s)
Baumol – Galbraith – Theory of the firm – Managerialism – Marginalisme
2021-34

Innovation Performance and the Signal Effect: Evidence from a European Program

Nadine Levratto, Aurélien Quignon

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Abstract
This paper seeks to estimate the effect of a European policy that subsidizes innovation investments. By carefully selecting observables, we compare recipients of the program with non-recipient firms to overcome the endogeneity of R&D grants. We conduct a difference-in-differences design on the universe of a unique firm-level dataset of European SMEs between 2008 and 2017. We find a significant effect of proof of concept grants, which implies an increase in the number of patent applications and the probability of patenting. There are positive impacts on credit financing, which suggest a signal effect to investors about the project quality of young firms.
Mot(s) clé(s)
R&D subsidies, Innovation, Patent, Financing constraints, H2020
2021-33

Designing acceptable anti-COVID-19 policies by taking into account individuals’ preferences: evidence from a Discrete Choice Experiment

Thierry Blayac, Dimitri Dubois, Sebastien Duchene, Phu Nguyen-Van, Bruno Ventelou, Marc Willinger

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Abstract
In the need to assess anti-COVID-19 policies in terms of public acceptability, we report the key results of a Discrete Choice Experiment based on a representative sample of the French population. Preference-ranking analysis is performed for the whole population and by subgroups. Results show that wearing masks, transport limitations, and digital-tracking are well accepted. However, restaurant closures and excessive leisure travel restrictions are not. The acceptability depends on personal characteristics: political orientation, health vulnerability, or age. The young population differs from others, in terms of policies preferences and in their claim for monetary compensation, suggesting a tailored policy for them.
Mot(s) clé(s)
Covid-19, policy design, discrete choice experiment, individual preferences, acceptability
2021-32

Social incentive factors in interventions promoting sustainable behaviors: A meta-analysis

Phu Nguyen-Van, Anne Stenger, Tuyen Tiet

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Abstract
Based on a meta-analysis, this paper highlights the strength and relevance of several social incentive factors concerning pro-environmental behaviors, including social influence, network factors (like network size, network connection and leadership), trust in others, and trust in institutions. Firstly, our results suggest that social influence is necessary for the emergence of pro-environmental behaviors. More specifically, an internal social influence (i.e., motivating people to change their perceptions and attitudes) is essential to promote pro-environmental behaviors. Secondly, network connection encourages pro-environmental behaviors, meaning that the effectiveness of a conservation policy can be improved if connections among individuals are increased. Finally, trust in institutions can dictate individual behaviors to shape policy design and generate desired policy outcomes.
Mot(s) clé(s)
Meta-analysis; Network; Pro-environmental behavior; Social influence; Social incentive; Trust
2021-31

Modeling ex-ante risk premia in the oil market

Georges Prat, Remzi Uctum

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Abstract
Using Consensus Economics survey-based data we show that oil price expectations are not rational, implying that the ex-ante premium is a more relevant concept than the widely popular ex-post premium. We propose for the 3- and 12-month horizons a portfolio choice model with risky oil assets and a risk-free asset. At the maximized expected utility the risk premium is defined as the product of the risk price by the expected oil return volatility. We show that the representative investor can be risk averse or risk seeking depending on the state of nature, implying that the price of risk is positive or negative, respectively. The price of risk and expected volatility being unobservable magnitudes, a state-space model, where the risk prices are represented as stochastic unobservable components and where expected volatilities depend on historical squared returns, is estimated using Kalman filtering. We find evidence of significant disparities of risk prices according to horizons: higher amplitudes and risk seeking behaviour are associated with short horizons and lower fluctuations and risk aversion attitude characterize longer horizons. We show that macroeconomic, financial and oil market-related factors drive risk prices whose signs are consistent with the predictions of prospect theory. An upward sloped term structure of oil risk premia prevails in average over the period.
Mot(s) clé(s)
oil market, oil price expectations, ex-ante risk premium
2021-30

La résilience des territoires français face à la crise. Une première évaluation de l’ampleur du choc

Lara Abdel Fattah, Mounir Amdaoud

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Abstract
This article seeks to measure the impact of the Covid-19 outbreak on local employment in metropolitan France. Based on an extensive literature on economic resilience and the first available local data on the number of job losses, we highlight, on the one hand, the differences in the resilience of employment areas in the face of the crisis and, on the other hand, the key explanatory factors behind these disparities. The first econometric results show a significant influence of the density, the level of employment in the industry, the productive structure and the entrepreneurial dynamics of the territory.
However, no relationship was found between employment areas with high levels of excess mortality and those that exhibit large job losses.
Mot(s) clé(s)
Covid-19, economic resilience, employment, employment areas
2021-29

Port-city linkages and multi-level hinterlands: the case of France

Mounir Amdaoud, César Ducruet, Marc-Antoine Faure

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Abstract
The objective of this research is to examine the similarities between port traffic structure and economic structure of French port cities. Such an exercise is challenged by the core-periphery pattern of the French economy favouring transhipment. Based on the combination of Automated Identification System (AIS) data and employment data, it performs complementary analyses of the mutual specialization between ports and cities. Main results show that while larger cities handle more diversified traffic, the cross-specialization is blurred by the complexity of trade networks and supply chains. We then propose a novel methodology whereby the spatial unit of analysis is enlarged according to the type and volume of port traffic, thus considerably improving the statistical significance and economic meaningfulness of the observed linkages.
Mot(s) clé(s)
AIS; hinterland; maritime transport; port city; specialization; supply chain
2021-28

Attitudes on past-in-present educational discrimination. Insights from a representative factorial survey

Matthieu Bunel, Élisabeth Tovar

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Abstract
In this paper, we provide evidence on attitudes on past-in-present educational discrimination, i.e. educational discrimination that occurred in the past but has present-time negative effects on the probability of success in fair-in-form employment selection processes. To do so, we use an original factorial survey experiment, and collect data from a representative sample of the US population. We find that a significant majority of respondents support the costly compensation of past-in-present educational discrimination. Moreover, we find that respondents are as sensitive to past-in-present educational discrimination than to present-time employment discrimination. We find that causal effects on attitudes are stronger for the intentionality of the discrimination than for its financial consequences on the discriminated group. Last, attitudes appear to be more driven by the respondents’ political perspective than by their own real-world identity.
Mot(s) clé(s)
attitudes, educational discrimination, factorial survey, past-in-present discrimination
2021-27

When Berle and Galbraith brought political economy back to life : Study of a cross-fertilization (1933-1967)

Alexandre Chirat

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Abstract
This paper provides a reconstruction of the intellectual cross-fertilization between Adolf Berle and John Kenneth Galbraith to account for their institutionalist challenge against “conventional economics” so as to bring political economy back to life. To do so, I go back to the genesis of Modern Corporation and Private Property before analyzing Berle and Galbraith’s answers to a set of fundamentals questions. What is the nature of modern competition ? What is the nature of the modern corporation ? What is the role of the State ? Lastly, how should American liberalism be reinvented to cope with the social issues of an affluent society ? Their answers to these questions reveal the deep affinities between the theoretical and political dimensions of their works, so that this work lies at the crossroads of the history of economic thought and the history of American liberalism in the postwar period.
Mot(s) clé(s)
institutionalism - managerialism - liberalism - political economy.
2021-26

Economie du travail en prison : enjeux, résultats et recommandations

Benjamin Monnery, Anna Montagutelli, Saïd Souam

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Abstract
In France as in other countries, prison faces the challenge of securing inmates' reentry and preventing recidivism. Theoretically, prison work offers a direct opportunity to improve reentry prospects, but only one quarter of prisoners have access to work today in France, compared to 36% twenty years ago. This article provides a summary of the challenges at stake with prison work. It reviews the theoretical and empirical research on the impacts of rehabilitation programs and discusses the potentiel effects of prison work on social welfare. The article also makes the case that the supply of prison work and public spending in this area are insufficient in France, considering the externalities involved. Finally, the article develops public policy recommendations for prison work to deliver its full potential.
Mot(s) clé(s)
prison ; work ; reentry ; recidivism ; public policies
2021-25

Scaling up SME's credit scoring scope with LightGBM

Bastien Lextrait

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Abstract
Small and Medium Size Enterprises (SMEs) are critical actors in the fabric of the economy. Their growth is often limited by the difficulty in obtaining financing. Basel II accords enforced the obligation for banks to estimate the probability of default of their obligors. Currently used models are limited by the simplicity of their architecture and the available data. State of the art machine learning models are not widely used because they are often considered as black boxes that cannot be easily explained or interpreted. We propose a methodology to combine high predictive power and powerful explainability using various Gradient Boosting Decision Trees (GBDT) implementations such as the LightGBM algorithm and SHapley Additive exPlanation (SHAP) values as post-prediction explanation model. SHAP values are among the most recent methods quantifying with consistency the impact of each input feature over the credit score. This model is developed and tested using a nation-wide sample of French companies, with a highly unbalanced positive event ratio. The performances of GBDT models are compared with traditional credit scoring algorithms such as Support Vector Machine (SVM) and Logistic Regression. LightGBM provides the best performances over the test sample, while being fast to train and economically sound. Results obtained from SHAP values analysis are consistent with previous socio-economic studies, in that they can pinpoint known influent economical factors among hundreds of other features. Providing such a level of explainability to complex models may convince regulators to accept their use in automated credit scoring, which could ultimately benefit both borrowers and lenders.
Mot(s) clé(s)
Credit scoring, SMEs, Machine Learning, Gradient Boosting, Interpretability
2021-24

Return spillovers between green energy indexes and financial markets: a first sectoral approach

Capucine Nobletz

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Abstract
This paper assesses the interconnectedness between global green energy and sectoral stock indexes. We show that green energy return spillovers need to be monitored. The green energy index has a significant degree of financial openness, and it is tightly interconnected with sectors producing similar goods as materials or industrials. Over time, the green energy return spillovers vary according to global events and economic/financial uncertainties. Spillovers rose during the pandemic crisis, illustrating the "fly to liquidity" mechanism.
Mot(s) clé(s)
Marchés financiers, Indices boursiers verts, Indices sectoriels, Analyse de réseaux
2021-23

Dating business cycles in France: A reference chronology

Antonin Aviat, Frédérique Bec, Claude Diebolt, Catherine Doz, Denis Ferrand, Laurent Ferrara, Eric Heyer, Valérie Mignon, Pierre-Alain Pionnier

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Abstract
This paper proposes a reference quarterly chronology for periods of expansion and recession in France since 1970, carried out by the Dating Committee of the French Economic Association (AFSE). The methodology used is based on two pillars: (i) econometric estimations from various key data to identify candidate periods, and (ii) a narrative approach that describes the economic background that prevailed at that time to finalize the dating chronology. Starting from 1970, the Committee has identified four economic recession periods: the two oil shocks 1974-75 and 1980, the investment cycle of 1992-93, and the Great Recession 2008-09 spawned by the Global Financial Crisis. The peak before the Covid-19 recession has been identified in the last quarter of 2019.
Mot(s) clé(s)
Business cycles, French economy, Dating, Narrative approach, Econometric modeling
2021-22

Les cycles économiques de la France : une datation de référence

Antonin Aviat, Frédérique Bec, Claude Diebolt, Catherine Doz, Denis Ferrand, Laurent Ferrara, Eric Heyer, Valérie Mignon, Pierre-Alain Pionnier

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Abstract
This article proposes a quarterly dating of recession and expansion periods of the French economy since 1970, carried out by the AFSE (Association Française de Science Economique)’s cycle dating committee. The methodology used is based on two pillars: (i) econometric estimates from a dataset to identify candidate periods, and (ii) a narrative approach that details the economic context of the time to finalize our dating. From 1970 to nowadays, the committee identified four periods of economic recession: the two oil shocks of 1974-75 and 1980, the investment cycle of 1992-93, and the Great Recession of 2008-09 spawned by the global financial crisis. The peak prior to the Covid recession has been dated to the last quarter of 2019.
Mot(s) clé(s)
Business cycles, French economy, dating, narrative approach, econometric models
2021-21

Misère du concept de "dette publique"

Baptiste Bridonneau

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Abstract
Is the term ‘public debt’, taken in its macroeconomic dimension, the right concept for the reality it tries to capture? There is no immediate indication that macroeconomic ‘public debt’ is a debt, i.e. a reality to be paid back. Indeed, the State, with its allegedly infinite character, may continually postpone its repayment, by rolling over its public debt contracts. Saying that macroeconomic ‘public debt’ always has the properties of a debt is tantamount to naturalizing this reality in the form of a sum to be repaid, and denying the fact that it may never be. The article thus reveals the performative character of the ‘public debt’ concept: it does not acknowledge the existence of a pre-existing macroeconomic debt, but calls for it to exist as such. Hence the symbolic interest of succeeding in thinking of macroeconomic ‘public debt’ as something else than a debt. The article proposes a new concept to replace that of macroeconomic ‘public debt’.
Mot(s) clé(s)
public debt; methodological holism; emergent properties; performativity; symbolic power
2021-20

Monetary autonomy of CESEE countries and nominal convergence in EMU: a cointegration analysis with structural breaks

Léonore Raguideau-Hannotin

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Abstract
This paper investigates the monetary autonomy of Central Eastern and South Eastern European countries with the Euro area. These countries are European Union Member States that have not adopted yet the Euro single currency. Despite high degree of convergence as measured by Maastricht criteria, four of them do no plan to enter the Euro area soon. We therefore assess monetary autonomy of these countries over the long run through the use of a multivariate cointegration methodology with structural breaks (Johansen et al., 2000). This methodology allows us to capture the multidimensional aspects of monetary autonomy in the context of nominal convergence in the Economic and Monetary Union, by including both domestic and Euro area variables into the system (policy rates, infation rates, exchange rate). It also enables us to exploit all information contained in the macroeconomic series of these countries, for which broken economic history translates into non-stationary time series with breaks. Our empirical results suggest that modelling structural breaks changes the number and/or nature of cointegrating relations between our variables compared to the standard error correction model without breaks. With this modelling, we find monetary policy spillover from the Euro area to Bulgaria, the Czech Republic, Hungary and Romania. The inclusion of Euro area inflation to our baseline model enriches the cointegrating relations for the Czech Republic and Bulgaria. Poland is found to be the most monetary-independent country of our
study across the various models estimated. On the other hand, Romania's monetary interdependence with Euro area is better modelled without taking into account any structural break.
Mot(s) clé(s)
Central Eastern and South Eastern European countries, Economic and Monetary Union, European Union, nominal convergence, monetary autonomy, structural breaks, cointegration, integration, CESEE, EU, EMU
2021-19

Monetary Policy and Business Cycle Synchronization in Europe

Roman Mestre, Rémi Odry

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Abstract
In this paper, we investigate the role of the monetary policy adopted by the European Central Bank (ECB) in business cycle synchronization in Europe between 2000 and 2018. To this aim, we employ wavelets to compute the pairwise business cycle correlations (BCC) at different frequencies and use Generalized Method of Moments (GMM) dynamic estimators in panel to explain their variations. Our results show that monetary policy has a long-term impact on the synchronization of business cycles in Europe. More specifically, we find that the adopted unconventional monetary policies impact positively the synchronization. Finally, we show that fiscal policies can be used as tools to fix country-specific movements of business cycles.
Mot(s) clé(s)
Business cycle synchronization, Monetary policy, EMU, Europe
2021-18

Technological Progress and Carbon Price Formation: an Analysis of EU-ETS Plants

Marc Baudry, Anouk Faure

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Abstract
This study investigates the nature of technological progress in six manufacturing industries covered under the EU-ETS, plus the power sector, and its effect on carbon price formation using marginal abatement cost curves. We adopt a technological frontier framework, which we calibrate to input and output data at the plant level from 2013 to 2017, with a directional distance function approach. Our results reveal that most of the time, technological progress resulted in inflating baseline emissions, despite decreasing the carbon intensity of production. In our sample industries, technological progress therefore leads to increase abatement efforts, raising the equilibrium price of carbon.
Mot(s) clé(s)
Directed technological change, frontier analysis, EU-ETS
2021-17

Gestion du risque climatique : les déterminants des stratégies d’adaptation des agriculteurs en Afrique Subsaharienne

Louise Ella Desquith, Olivier Renault

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Abstract
Abstract
This article is a review of the literature on the determinants of farmers’ adaptation choice in sub-Saharan Africa. A set of studies has highlighted the existence of inequalities in adaptation at local level that suggests paying more attention to its micro determinants. Maddison (2007) emphasizes the importance of the perception of agricultural change in the adaptation process. Paradoxically, a recent literature shows that farmers have a good perception of climate change but do not really engage in adaptation strategies even when financial or institutional resources are not binding. This paradox suggests that beliefs, prone to develop in uncertain contexts, play an important role in the choice of adaptation. The specificity of the sub-Saharan households’ beliefs must be considered in policies aimed at developing adaptation.
Mot(s) clé(s)
Climate change, Adaptation, Vulnerability, perceptions, beliefs
2021-16

Survivors Benefits and Conjugal Behavior. Evidence from the Netherlands

Simon Rabaté, Julie Tréguier

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Abstract
This paper investigates the impact of survivors insurance on marital behavior. We study the 1996 Dutch reform which considerably tightened eligibility rules to survivors' benefits. Exploiting a discontinuity in date of birth eligibility to survivors insurance and using a rich and exhaustive Dutch population administrative dataset, we carry out a regression discontinuity design and we find no evidence of the reform on divorce probability. Exploring possible explanations for our zero-effect result, we study how labor supply responses can compensate the income drop the reform induced. We find a strong increase in the labor force participation of widows after the reform. However this response does not completely offset the decrease in income generated form the cut in survivors benefits.
Mot(s) clé(s)
divorce, marriage dissolution, survivor benefits, labor supply, income effect, unearned income
2021-15

Privacy, Competition, and Multi-Homing

Marc Bourreau, Jean-Marc Zogheib

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Abstract
Two firms compete in prices and information disclosure levels. Firms derive revenues from two possible channels, i.e., by selling their service to consumers and by exploiting user data, sold to a monopoly data broker. A consumer signing up to one firm's service decides on the amount of personal information to provide. In a single-homing framework, firms engage in either a strict privacy regime with no information disclosure and high prices or a flexible privacy regime with positive disclosure levels and low prices, depending on consumer valuations. With the possibility of multi-homing, firms face issues in the monetization of multi-homing user data, which affects privacy regimes. On top of consumer valuations, the incentives to multi-home and product differentiation also impact firms' strategies. Firms may even end up engaging in a zero-privacy regime with maximal disclosure levels if monetization issues on multi-homing user data are not too significant.
Mot(s) clé(s)
competition, online privacy, information disclosure, multi-homing.
2021-14

Noncooperative oligopoly equilibrium in markets with hierarchical competition

Ludovic A. Julien

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Abstract
This paper deals with the existence of a non-cooperative sequential equilibrium in interrelated markets with heterogeneous atomic traders. Since this model features a rich set of strategic interactions, there are two kinds of problems associated with the existence of equilibrium. First, existence and uniqueness of followers' strategies are not guaranteed. Second, the no-trade equilibrium is always an equilibrium outcome. To overcome these two difficulties we consider a differentiable approach. We show that the set of equations which determines the strategies of followers is a variety with the required dimension, i.e. the vector mapping which defines this set is a local C²-diffeomorphism. The continuous differentiability of followers' strategies is critical for the existence of an interior equilibrium. Unlike the simultaneous move games, exchange can take place in one subgame while autarky can hold in another subgame, in which case only leaders (followers) make trade. Some examples buttress the approach and discuss the assumptions made on the primitives.
Mot(s) clé(s)
Pure strategies, diffeomorphisms, Stackelberg-Nash equilibrium
2021-13

Green Energy Indexes & Financial Markets: An In-Depth Look

Capucine Nobletz

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Abstract
This paper aims to provide better transparency around green energy indexes. After selecting green energy indexes that meet the established criteria, we build a database listing the companies in these indexes and compare them with a financial benchmark. Our study allows investors to adjust their hedging horizons with green concerns, to pave the way for further academic analyses, or issue a new call to public authorities on the need to redirect financial flows towards greener activities.
Mot(s) clé(s)
Financial markets, Green energy indexes
2021-12

Macroeconomic effects of EU value chain participation

Mariam Camarero, Antonia Lopez Villavicencio, Cecilio Tamarit

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Abstract
In this paper we analyze some macroeconomic effects derived from the participation of EU countries in global and regional value chains over the period 1990-2019. By employing local projections, we show that the impact of value chain participation on economic performance depends crucially on the country's position in the production chain. While backward participation is linked to better economic performance, forward participation leads to declining domestic output and a rise in unemployment. Moreover, we find evidence of important heterogeneity among EU countries, with peripheral and CEE countries being more sensitive to shocks in the participation indicators. Our results are robust to different controls.
Mot(s) clé(s)
Global Value Chains, EU; local projections, VAR
2021-11

On the desirability of the West African monetary union

Cécile Couharde, Carl Grekou, Valérie Mignon

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Abstract
In this paper, we investigate from a policy coordination viewpoint the desirability of the West African monetary union project, ECO. Our approach is built around the inclusion of national objectives in the regional integration perspective. Thanks to cluster analysis, we identify two groups of countries with relatively homogenous sustainable exchange rate paths in West Africa. We also find that no single currency peg nor a freely floating exchange rate regime would be preferable for any of the countries or groups of economies. Overall, our findings argue in favor of two ECOs —at least in a first step, i.e., one for each of the two identified zones. Each ECO would serve as a virtual anchor —with some flexibility— for the considered group, and would be determined by a basket of currencies mainly composed of euro and US dollar.
Mot(s) clé(s)
Monetary integration; West Africa; CFA franc zone; ECOWAS.
2021-10

European farmers’ responses to higher commodity prices: cropland expansion or forestlands preservation?

Chouaib Jouf, Laté Lawson

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Abstract
This paper analyses the impact of European farmers’ responsiveness to changes in agri-commodities prices on their trade-off between agricultural expansion and forestland preservation. We investigate this issue by estimating a recursive model using a comprehensive dataset of European agricultural holdings over the period 2008-2017, covering 128 regions (26 countries). Our main finding is that there is indeed evidence of such a trade-off. An increase in commodity prices leads to higher cropland profitability, which in turn causes deforestation in the 128 European regions considered. Replicating the analysis on different subsamples confirms the robustness of these findings.
Mot(s) clé(s)
Agricultural commodities prices; Land-use; Cropland; Woodland.
2021-9

Green consumption: The impact of trust and pessimism

Maria José Montoya Villalobos

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Abstract
This paper proposes a green consumption model under uncertainty, where we consider green goods as impure public goods and analyze the comparative statics of green consumption. We consider that the environmental efficacity of green goods is uncertain, and we model uncertainty with risk perceptions, specifically with trust (defined as a belief about the veracity of the available information) and pessimism/optimism (which represents the consumer's probability estimation of the realization of the worst possible outcome when consuming green goods). We study their respective impact on green consumption and consider individuals with heterogeneous beliefs. Pessimism has a negative impact on green demand; meanwhile, an increase in trust does not always imply an increase in green demand. We determine the impact of uncertainty on the equilibrium and the socially optimal level of private voluntary provision and show that green consumption decreases with pessimism at the equilibrium. Meanwhile, at the optimum, an increase in pessimism will
decrease the individual's contributions for both the pessimist and optimist consumers. Moreover, we also find that the sub-optimality of the Nash equilibrium, in the presence of an impure public good, is not straightforward under uncertainty.
Mot(s) clé(s)
Green consumption, trust, pessimism, uncertainty, impure public goods.
2021-8

Monetary Policy and the Racial Unemployment Rates in the US

Hamza Bennani

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Abstract
This paper analyses the effects of monetary policy on labor market responses of different racial groups in the US from 1970-2013. Employing a narrative approach to identify monetary policy shocks and local projections, we find that monetary policy has a significant impact on White's unemployment rate. Empirical evidence indicates that an accommodative monetary shock affects positively and significantly White workers, while the effect on African-American workers is more uncertain and not significant for the Hispanic workers. These results are robust when considering unconventional monetary policy measures in the specification and when exploring the impact of monetary policy on different genders and age groups. Finally, we highlight that these results are mainly driven by a \enquote{recession effect}, whereby as a result of occupational, segregation minorities do not benefit from the Federal Reserve's accommodative monetary policy during recessions. Our findings suggest that monetary policy is ineffective in reducing the unemployment gap among minorities in the US, and that the Fed should specifically target the African-American unemployment rate in its reaction function. Finally, structural policies that aim to improve the skills of minorities and the fight against racial discrimination in the labor market, in particular during recessions, are also likely to mitigate the racial unemployment gap.
Mot(s) clé(s)
minorities; monetary policy; employment.
2021-7

Corruption and distortion of public expenditures: Evidence from Africa

Luc-Désiré Omgba, Harouna Sedgo

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Abstract
This study investigates the effect of corruption on the trade-off between capital and current expenditures in a panel of 48 African countries over the period 2000-2016.
Based on statistical yearbooks, we compile disaggregated data on public finances for African countries and find that a high prevalence of corruption distorts the composition of public expenditures at the expense of the share of capital expenditure. Specifically, an increase in corruption by one standard deviation is associated with a decrease in the proportion of capital expenditure from 29\% to 16\%. The results are robust to various specifications and estimation methods, including the fixed effects and instrumental variables approach. The supportive argument demonstrates that it seems more beneficial for corrupted bureaucrats to manipulate public spending in favor of current rather than capital expenditures. The latter relies on formal and traceable procedures, whereas current expenditure is known to be more open to the use of discretionary allocation.
Mot(s) clé(s)
Corruption; capital expenditure; current expenditure; public expenditure; Africa
2021-6

Do IMF Reports Affect Market Expectations ? A Sentiment Analysis Approach

Hamza Bennani, Cécile Couharde, Yoan Wallois

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Abstract
We introduce an original dataset based on the qualitative content of the Regional Economic Outlook (REO) reports published by the International Monetary Fund (IMF). Exploiting this rich database, we gauge several measures of IMF sentiment based on the REO reports towards 16 countries in three regions, Asia and Pacific, Europe and Western Hemisphere, from 2007 to 2018 and examine their impact on financial markets. We find that the qualitative content of the REO reports has significant repercussions on stock market returns in Europe and bond yields in Asia and Pacific over short time horizons, these impacts disappearing over time. We also demonstrate that the impact of IMF sentiment is robust to the use of an
alternative sentiment measure that focuses exclusively on negative words.
Mot(s) clé(s)
Financial markets, High frequency, IMF, Sentiment index, Text analysis
2021-5

Les effets de l’interaction entre les marchés financiers et la réglementation bancaire sur la structure des flux bancaires internationaux vers les pays émergents

Samira Hellou

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Abstract
The development of financial markets and banking activity coupled with the strengthening of banking regulations has largely affected the new structure of external financing of emerging countries. Indeed, the financial markets influence the behavior of international banks in a context of regulatory strengthening which implies a contraction of the bank flows volume and a decrease in the maturity of these flows. The empirical results, for 37 emerging countries, confirm that financial markets have influenced differently the volume and the term structure of bank flows from developed to emerging countries according to the regulatory context.
Mot(s) clé(s)
Financial markets, Banking flows, Emerging countries
2021-4

Public vs. Private Investments In Network Industries

Marc Bourreau, Jean-Marc Zogheib

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Abstract
We study the competition between a private firm and public firms on prices and
investment in new infrastructures. While the private firm maximizes its profits,
public firms maximize the sum of their profits and consumer surplus, subject to a
budget constraint. We consider two scenarios of public intervention, with a national
public firm and with local public firms. In a monopoly benchmark, we find that the
national public firm has the highest coverage and charges a uniform price allowing
cross-subsidies between high-cost and low-cost areas. Moreover, the private firm
covers as much as local public firms. In a mixed duopoly, a stronger competitive
pressure drives firms' prices up while it drives down (up) the national public (private)
firm's coverage.
Mot(s) clé(s)
public firms, investment, network industries, mixed duopoly.
2021-3

The policy drivers of self-employment: New evidence from Europe

Mark Baker, Balázs Egert, Gábor Fülöp, Annabelle Mourougane

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Abstract
Using cross-country time series panel regressions for the last two decades, this paper seeks to identify the main policy and institutional factors that explain the share of self-employment across European countries. It looks at the aggregate share of self-employed as well as its breakdown by age, skill and gender. The generosity of unemployment benefits, and to a lesser extent, spending on active labour market policies appear to be robust determinants of the long-term share of self-employed in European countries. No significant relation could be identified between the stringency of employment protection and aggregate self-employment. However, there are significant, and oppositely signed, impacts on high- and low-skilled self-employed separately. Both the tax wedge and the minimum wage appear to be related positively to the share of self-employed in the long term, but the relation holds for some categories of workers only.
Mot(s) clé(s)
self-employment, labour market, labour market regulations, labour market institutions, Europe
2021-2

What do bankrupcty prediction models tell us about banking regulation? Evidence from statistical and learning approaches

Pierre Durand, Gaëtan Le Quang

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Abstract
Prudential regulation is supposed to strengthen financial stability and banks' resilience to new economic shocks. We tackle this issue by evaluating the impact of leverage, capital, and liquidity ratios on banks default probability. To this aim, we use logistic regression, random forest classification, and artificial neural networks applied on the United-States and European samples over the 2000-2018 period. Our results are based on 4707 banks in the US and 3529 banks in Europe, among which 454 and 205 defaults respectively. We show that, in the US sample, capital and equity ratios have strong negative impact on default probability. Liquidity ratio has a positive effect which can be justified by the low returns associated with liquid assets. Overall, our investigation suggests that fewer prudential rules and higher leverage ratio should reinforce the banking system's resilience. Because of the lack of official failed banks list in Europe, our findings on this sample are more delicate to interpret.
Mot(s) clé(s)
Banking regulation ; Capital requirements ; Basel III ; Logistic ; Statistical learning classification ; Bankruptcy prediction models.
2021-1

Walking the tightrope: avoiding a lockdown while containing the virus

Balázs Egert, Yvan Guillemette, Fabrice Murtin, David Turner

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Abstract
Empirical work described in this paper explains the daily evolution of the reproduction rate, R, and mobility for a large sample of countries, in terms of containment and public health policies. This is with a view to providing insight into the appropriate policy stance as countries prepare for a potentially protracted period characterised by new infection waves. While a comprehensive package of containment measures may be necessary when the virus is widespread and can have a large effect on reducing R, they also have effect on mobility and, by extension, economic activity. A wide-ranging package of public health policies – with an emphasis on comprehensive testing, tracing and isolation, but also including mask-wearing and policies directed at vulnerable groups, especially those in care homes – offer the best approach to avoiding a full lockdown while containing the spread of the virus. Such policies may, however, need to be complemented by selective containment measures (such as restricting large public events and international travel or localised lockdowns) both to contain local outbreaks and because implementing some of the recommended public health policies may be difficult to achieve or have unacceptable social costs.
Mot(s) clé(s)
Covid-19, lockdown, non-pharmaceutical interventions, mobility
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