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The Non-Democratic Roots of Elite Capture: Evidence From Soeharto Mayors in Indonesia

Econometrica 2017 85(6), 1991-2010 open access
Democracies widely differ in the extent to which powerful elites and interest groups retain influence over politics. While a large literature argues that elite capture is rooted in a country's history, our understanding of the determinants of elite persistence is limited. In this paper, we show that allowing old-regime agents to remain in office during democratic transitions is a key determinant of the extent of elite capture. We exploit quasi-random from Indonesia: Soeharto-regime mayors were allowed to finish their terms before being replaced by new leaders. Since mayors' political cycles were not synchronized, this event generated exogenous variation in how long old-regime mayors remained in their position during the democratic transition. Districts with longer exposure to old-regime mayors experience worse governance outcomes, higher elite persistence, and lower political competition in the medium run. The results suggest that slower transitions towards democracy allow the old-regime elites to capture democracy.

Contract Negotiation and the Coase Conjecture: A Strategic Foundation for Renegotiation-Proof Contracts

Econometrica 2017 85(2), 585-616 open access
What does contract negotiation look like when some parties hold private information and negotiation frictions are negligible? This paper analyzes the above question and provides a foundation for renegotiation-proof contracts in a related environment. The model extends the framework of the Coase conjecture to situations in which the quantity or quality of the good is endogenously determined and to more general environments in which the traded goods are complements or substitutes. All equilibria converge to a unique outcome as frictions become negligible, which is separating, efficient, and straightforward to characterize.

Uncertainty and Unemployment

Econometrica 2017 85(6), 1675-1721 open access
This paper studies the impact of time-varying idiosyncratic risk at the establishment level on aggregate unemployment fluctuations and on the labor market over the period 1972-2009. I build a tractable search-and-matching model of the labor market with firm dynamics and heterogeneity in productivity and sizes, in which I introduce time-varying idiosyncratic volatility. The model features directed search and allows for endogenous separations, entry and exit of establishments, and job-to-job transitions. I show, first, that the model can replicate salient features of the behavior of firms at the microeconomic level. Second, I find that the introduction of time-varying idiosyncratic volatility improves the fit of search-and-matching models for a range of business cycle moments. In a series of counterfactual experiments, I then show that time-varying idiosyncratic risk is important to account for the magnitude of fluctuations in aggregate unemployment for past US recessions, including in particular the recessions of 1990-1991 and 2001. Though the model can account for about 40% of the total increase in unemployment for the 2007-2009 recession, uncertainty alone does not seem sufficient to explain the magnitude and persistence of unemployment observed during that period.

Altruism in Networks

Econometrica 2017 85(2), 675-689 open access
We provide the first analysis of altruism in networks. Agents are connected through a fixed, weighted network and care about the well-being of their network neigh-bors. Given some initial distribution of incomes, agents may provide financial support to their poorer friends. We characterize the Nash equilibria of this transfer game for general networks and utility functions. We show that equilibria solve a well-behaved maximization program, related to classical problems of optimal transportation on networks. We build on this reformulation and establish existence, uniqueness in consumptions and generic uniqueness in transfers. We show that transfers are affected by the geometry of the altru-istic network. They flow through shortest paths and chains of transfers emerge when the network is not transitive. We analyze the effects of changes in incomes and in the network. When an agent suffers a negative income shock, the equilibrium consumption of every agent decreases weakly. We characterize the impact of small redistributions and show that decreasing income inequality may increase consumption inequality. We also characterize the impact of a small increase in altruism. While altruistic networks reduce inequality, more altruism may lead to more inequality.

Dual-Donor Organ Exchange

Econometrica 2017 85(5), 1645-1671 open access
Owing to the worldwide shortage of deceased‐donor organs for transplantation, living donations have become a significant source of transplant organs. However, not all willing donors can donate to their intended recipients because of medical incompatibilities. These incompatibilities can be overcome by an exchange of donors between patients. For kidneys, such exchanges have become widespread in the last decade with the introduction of optimization and market design techniques to kidney exchange. A small but growing number of liver exchanges have also been conducted. Over the last two decades, a number of transplantation procedures emerged where organs from two living donors are transplanted to a single patient. Prominent examples include dual‐graft liver transplantation, lobar lung transplantation, and simultaneous liver‐kidney transplantation. Exchange, however, has been neither practiced nor introduced in this context. We introduce dual‐donor organ exchange as a novel transplantation modality, and through simulations show that living‐donor transplants can be significantly increased through such exchanges. We also provide a simple theoretical model for dual‐donor organ exchange and introduce optimal exchange mechanisms under various logistical constraints.

Bargaining With Asymmetric Information: An Empirical Study of Plea Negotiations

Econometrica 2017 85(2), 419-452 open access
This paper empirically investigates how sentences to be assigned at trial impact plea bargaining. The analysis is based on the model of bargaining with asymmetric information by Bebchuk, 1984. I provide conditions for the nonparametric identification of the model, propose a consistent nonparametric estimator, and implement it using data on criminal cases from North Carolina. Employing the estimated model, I evaluate how different sentencing reforms affect the outcome of criminal cases. My results indicate that lower mandatory minimum sentences could greatly reduce the total amount of incarceration time assigned by the courts, but may increase conviction rates. In contrast, the broader use of non‐incarceration sentences for less serious crimes reduces the number of incarceration convictions, but has a very small effect over the total assigned incarceration time. I also consider the effects of a ban on plea bargains. Depending on the case characteristics, over 20 percent of the defendants who currently receive incarceration sentences would be acquitted if plea bargains were forbidden.

An Econometric Model of Network Formation With Degree Heterogeneity

Econometrica 2017 85(4), 1033-1063 open access
I introduce a model of undirected dyadic link formation which allows for assortative matching on observed agent characteristics (homophily) as well as unrestricted agent-level heterogeneity in link surplus (degree heterogeneity). Like in fixed effects panel data analyses, the joint distribution of observed and unobserved agent-level characteristics is left unrestricted. Two estimators for the (common) homophily parameter, ?0, are developed and their properties studied under an asymptotic sequence involving a single network growing large. The first, tetrad logit (TL), estimator conditions on a sufficient statistic for the degree heterogeneity. The second, joint maximum likelihood (JML), estimator treats the degree heterogeneity \{Ai0\}i = 1N as additional (incidental) parameters to be estimated. The TL estimate is consistent under both sparse and dense graph sequences, whereas consistency of the JML estimate is shown only under dense graph sequences.

EXcess Idle Time

Econometrica 2017 85(6), 1793-1846 open access
The gCube System - AquaMaps Species View Portlet<br> --------------------------------------------------<br> <br> Species view explorer portlet for AquaMaps suite<br> <br> <br> This software is part of the gCube Framework (https://www.gcube-system.org/): an<br> open-source software toolkit used for building and operating Hybrid Data<br> Infrastructures enabling the dynamic deployment of Virtual Research Environments<br> by favouring the realisation of reuse oriented policies.<br> <br> The projects leading to this software have received funding from a series of <br> European Union programmes including: <br> * the Sixth Framework Programme for Research and Technological Development - <br> DILIGENT (grant no. 004260); <br> * the Seventh Framework Programme for research, technological development and <br> demonstration - D4Science (grant no. 212488), D4Science-II (grant no. <br> 239019),ENVRI (grant no. 283465), EUBrazilOpenBio (grant no. 288754), iMarine <br> (grant no. 283644); <br> * the H2020 research and innovation programme - BlueBRIDGE (grant no. 675680), <br> EGIEngage (grant no. 654142), ENVRIplus (grant no. 654182), Parthenos (grant <br> no. 654119), SoBigData (grant no. 654024);<br> <br> <br> Version<br> --------------------------------------------------<br> <br> 1.3.3-4.0.0-130288 (2016-11-27)<br> <br> Please see the file named "changelog.xml" in this directory for the release notes.<br> <br> <br> <br> Authors<br> --------------------------------------------------<br> <br> * Fabio Sinibaldi (fabio.sinibaldi-AT-isti.cnr.it) Istituto di Scienza e Tecnologie dell'Informazione "A. Faedo" - CNR, Pisa (Italy). <br> <br> Maintainers<br> -----------<br> <br> * Fabio Sinibaldi (fabio.sinibaldi-AT-isti.cnr.it) Istituto di Scienza e Tecnologie dell'Informazione "A. Faedo" - CNR, Pisa (Italy). <br> <br> <br> <br> Download information<br> --------------------------------------------------<br> <br> Source code is available from SVN: <br> http://svn.research-infrastructures.eu/public/d4science/gcube/trunk/portlets/user/aquamapsspeciesview<br> <br> Binaries can be downloaded from the gCube website: <br> https://www.gcube-system.org/<br> <br> Installation<br> --------------------------------------------------<br> <br> Installation documentation is available on-line in the gCube Wiki:<br> https://wiki.gcube-system.org/gcube/index.php/AquaMaps_Suite<br> <br> Documentation <br> --------------------------------------------------<br> <br> Documentation is available on-line in the gCube Wiki:<br> https://wiki.gcube-system.org/gcube/index.php/AquaMaps_Suite<br> https://wiki.gcube-system.org/gcube/index.php/AquaMaps_Suite<br> <br> <br> Support <br> --------------------------------------------------<br> <br> Bugs and support requests can be reported in the gCube issue tracking tool:<br> https://support.d4science.org/projects/gcube/<br> <br> <br> Licensing<br> --------------------------------------------------<br> <br> This software is licensed under the terms you may find in the file named "LICENSE" in this directory.<br>

The Evolution of Culture and Institutions: Evidence From the Kuba Kingdom

Econometrica 2017 85(4), 1065-1091 open access
We use variation in historical state centralization to examine the long-term impact of institutions on cultural norms. The Kuba Kingdom, established in Central Africa in the early 17th century by King Shyaam, had more developed state institutions than the other independent villages and chieftaincies in the region. It had an unwritten constitution, separation of political powers, a judicial system with courts and juries, a police force, a military, taxation, and significant public goods provision. Comparing individuals from the Kuba Kingdom to those from just outside the Kingdom, we find that centralized formal institutions are associated with weaker norms of rule following and a greater propensity to cheat for material gain. This finding is consistent with recent models where endogenous investments to inculcate values in children decline when there is an increase in the effectiveness of formal institutions that enforce socially desirable behavior. Consistent with such a mechanism, we find that Kuba parents believe it is less important to teach children values related to rule-following behaviors.

Networks in Conflict: Theory and Evidence From the Great War of Africa

Econometrica 2017 85(4), 1093-1132 open access
We study from both a theoretical and an empirical perspective how a network of military alliances and enmities affects the intensity of a conflict. The model combines elements from network theory and from the politico-economic theory of conflict. We obtain a closed-form characterization of the Nash equilibrium. Using the equilibrium conditions, we perform an empirical analysis using data on the Second Congo War, a conflict that involves many groups in a complex network of informal alliances and rivalries. The estimates of the fighting externalities are then used to infer the extent to which the conflict intensity can be reduced through (i) dismantling specific fighting groups involved in the conflict; (ii) weapon embargoes; (iii) interventions aimed at pacifying animosity among groups. Finally, with the aid of a random utility model, we study how policy shocks can induce a reshaping of the network structure.