We study the educational choices of children of immigrants in a tracked school system. We first show that immigrants in Italy enroll disproportionately into vocational high schools, as opposed to technical and academically‐oriented ones, compared to natives of similar ability. The gap is greater for male students and it mirrors an analogous differential in grade retention. We then estimate the impact of a large‐scale, randomized intervention providing tutoring and career counseling to high‐ability immigrant students. Male treated students increase their probability of enrolling into the high track to the same level of natives, also closing the gap in grade retention. There are no significant effects on immigrant girls, who exhibit similar choices and performance as native ones in absence of the intervention. Increases in academic motivation and changes in teachers' recommendation regarding high school choice explain a sizable portion of the effect. Finally, we find positive spillovers on immigrant classmates of treated students, while there is no effect on native classmates.
The operation of markets and of politics are in practice deeply intertwined. Political decisions set the rules of the game for market competition and, conversely, market competitors participate in and influence political decisions. We develop an integrated model to capture the circularity between the two domains. We show that a positive feedback loop emerges such that market power begets political power, and political power begets market power, but that this feedback loop is bounded. With too much market power, the balance between politics and markets itself becomes lopsided and this drives a wedge between the interests of a policymaker and the dominant firm. Although such a wedge would seem pro‐competitive, we show how it can exacerbate the static and dynamic inefficiency of market outcomes. More generally, our model demonstrates that intuitions about market competition can be upended when competition is intermediated by a strategic policymaker.
We propose a method for constructing confidence intervals that account for many forms of spatial correlation. The interval has the familiar “estimator plus and minus a standard error times a critical value” form, but we propose new methods for constructing the standard error and the critical value. The standard error is constructed using population principal components from a given “worst‐case” spatial correlation model. The critical value is chosen to ensure coverage in a benchmark parametric model for the spatial correlations. The method is shown to control coverage in finite sample Gaussian settings in a restricted but nonparametric class of models and in large samples whenever the spatial correlation is weak, that is, with average pairwise correlations that vanish as the sample size gets large. We also provide results on the efficiency of the method.
The analysis of dynamic games hinges on assumptions about players' actions and beliefs at information sets that are not expected to be reached during game play. Under the standard notion of sequential rationality, these assumptions cannot be tested on the basis of observed, on‐path behavior. This paper introduces a novel optimality criterion, structural rationality , which addresses this concern. In any dynamic game, structural rationality implies weak sequential rationality (Reny (1992)). If players are structurally rational, assumptions about on‐path and off‐path beliefs concerning off‐path actions can be tested via suitable “side bets.” Structural rationality also provides a theoretical rationale for the use of a novel version of the strategy method (Selten (1967)) in experiments.
This essay describes the evolution and recent convergence of two methodological approaches to causal inference. The first one, in statistics, started with the analysis and design of randomized experiments. The second, in econometrics, focused on settings with economic agents making optimal choices. I argue that the local average treatment effects framework facilitated the recent convergence by making key assumptions transparent and intelligible to scholars in many fields. Looking ahead, I discuss recent developments in causal inference that combine the same transparency and relevance.
More than two decades ago, a well‐known study on heart attack treatments provided evidence suggesting that, when appropriately adjusted for quality, medical care prices were actually declining (Cutler, McClellan, Newhouse, and Remler (1998)). Our paper revisits this subject by leveraging estimates from more than 8000 cost‐effectiveness studies across a broad range of conditions and treatments. We find large quality‐adjusted price declines associated with treatment innovations. To incorporate these quality‐adjusted indexes into an aggregate measure of inflation, we combine an unadjusted medical‐care price index, quality‐adjusted price indexes from treatment innovations, and proxies for the diffusion rate of new technologies. In contrast to official statistics that suggest medical care prices increased by 0.53 percent per year relative to economy‐wide inflation from 2000 to 2017, we find that quality‐adjusted medical care prices declined by 1.33 percent per year over the same period.
We study a class of models of moral hazard in which a principal contracts with a counterparty, which may have its own internal organizational structure. The principal has non‐Bayesian uncertainty as to what actions might be taken in response to the contract, and wishes to maximize her worst‐case payoff. We identify conditions on the counterparty's possible responses to any given contract that imply that a linear contract solves this maxmin problem. In conjunction with a Richness property motivated by much previous literature, we identify a Responsiveness property that is sufficient—and, in an appropriate sense, also necessary—to ensure that linear contracts are optimal. We illustrate by contrasting several possible models of contracting in hierarchies. The analysis demonstrates how one can distill key features of contracting models that allow their findings to be carried beyond the bilateral setting.
THE WORLD CONGRESS OF THE ECONOMETRIC SOCIETY, which takes place once every five years, is arguably the most far-reaching global conference for economics and related fields. Due to the COVID-19 pandemic, the Executive Committee of the Society together with Bocconi University decided to lead the way into then-unchartered territory and organize a ground-breaking international virtual economics conference in record time during a very difficult period. Past President Orazio Attanasio, as Chair of the World Congress Organization and Main Lectures Committees, deserves credit for convincing many of the parties involved that this was the correct decision for the Society to take. The resulting event, though not without its challenges and flaws, posted record-breaking attendance, reaching more than 4200 people across 85 countries and 24 time zones, and presenting 73 live-streamed plenary, semi-plenary, and policy sessions and 1288 contributed presenters in 334 2-hour sessions with 14 hours of daily of continuous live content during five full days. Unfortunately, COVID-19 continued to ravage the world for the rest of 2020 until the present, upending most of the Society’s plans. For that reason, incoming President Penny Goldberg assembled an ad-hoc Virtual and Hybrid Conferences Committee chaired by At-large Executive Committee member Dirk Bergemann and made up of other Executive Committee members and representatives from the six regional standing committees. The menu of virtual tools and practical solutions for the organization of such meetings that this committee provided, together with a tremendous amount of work by committed program chairs, local organizers, and many volunteers, allowed the Society to hold all of its six scheduled regional meetings and two of its schools to date. In addition, it is anticipated that the final three 2021 regional meetings and its international school will also be completed by the end of the year. Most meetings were conducted entirely virtually, except in the case of Africa, whose regional meeting and companion school took place using a hybrid format, with some participants physically present in Abidjan (Ivory Coast) but many others attending online, a model that was also used by the Asian Summer School in Econometrics and Statistics that recently took place in Beijing. The Society owes special debts of gratitude to the officers and members of its regional standing committees, program chairs, local organizers, virtual vendors, and all those who helped it continue to meet its mission during such trying times. In addition to its meetings, the Society continued its other core activities, most notably ensuring publication of the Society’s flagship journal, Econometrica, and its two highly-rated open access journals, Quantitative Economics and Theoretical Economics. The editors of these journals, Chris Taber and Ran Spiegler, respectively, completed their terms at the end of June, 2021 and two new editors stepped in to take their places – Stéphane Bonhomme, who moved from editor of the Monograph Series to Quantitative Economics editor, and Simon Board, who took the helm at Theoretical Economics. The
2019 THROUGH MID-2020 SAW A PERIOD in which management decisions made by the Executive Committee the previous two years began to produce positive financial results, leaving the Econometric Society in its strongest financial position yet. The new royaltybased contract with Wiley Publishers combined with membership fee enhancements, robust membership drives, and solid investment returns even during a tumultuous market, put the Society in good shape to weather any future challenges. The new contract between Wiley and the Econometric Society went into effect in 2019. In 2019, the Society earned total institutional journal revenues of $721,383 compared to $698,010 the previous year. However, both figures include deferred revenues no longer accruing as a result of the new royalty-based contract. For 2019, real institutional publishing revenues came to $509,613 for the first full year under the new contract while $211,770 in deferred revenues was carried over from previous years. In exchange, henceforth Wiley will cover the cost of printing, distributing and disseminating the Econometric society journals. Unfortunately, 2019’s promising year-end results are unlikely to continue through 2020 given the onset of COVID-19. Universities and research centers’ libraries (all of which make up the bulk of institutional sales) all project no or very low growth for the remainder of 2020 so future institutional revenues are expected to compress. Membership revenues fared well too. In 2019, the Society added additional subscription rate options to its membership categories; increased rates across all categories; and for the first time added an auto-renew option for membership purchases. As a result of these changes, the number of year-end memberships (see the Secretary’s report for membership statistics) and total membership revenues increased substantially. Membership revenues jumped from $585,349 at end-of-year 2018 to $680,253 at end-of-year 2019, an increase of $94,904. The Society continued its relationship with Wells Fargo for its day-to-day banking and credit card processing, and with Vanguard to manage its investments. At the same time, the Society’s Investment Committee adjusted its investment strategy and saw gains emerge. By end-of-year 2019, the Society’s Central office investment holdings rose from end-of-year 2018 holdings of 2,357,604 to 2019 end-of-year holdings of $3,331,812, although part of the increase resulted from the transfer of $500,000 from Wells Fargo. The regional account totals, however, went from 2018 combined holdings of $613,413 to 2019 end-of-year holdings of $544,590. While the European region holds the majority of regional funds, Africa, Asia, Australasia, and Latin America’s regional accounts are subsidized by annual grants available to help with activities for young economists. A fundraising initiative for young African scholars was launched in June 2019, bringing in close to $30,000 through generous donations from the Society’s fellows and general membership base. The Society will continue to grow its Fund for African Scholars. The