2022

1. Arturo Aguilar, Marta Vicarelli. "El Niño and children: Medium-term effects of early-life weather shocks on cognitive and health outcomes", World Development, Volume 150, February 2022.

Abstract:

The fact that shocks in early life can have long-term consequences is well established in the literature. This paper examines the effects of extreme precipitations on cognitive and health outcomes and shows that impacts can be detected as early as 2 years of age. Our analyses indicate that negative conditions (i.e., extreme precipitations) experienced during the early stages of life affect children’s physical, cognitive and behavioral development measured between 2 and 6 years of age. Affected children exhibit lower cognitive development (measured through language, working and long-term memory and visual-spatial thinking) in the magnitude of 0.15 to 0.19 SDs. Lower height and weight impacts are also identified. Changes in food consumption and diet composition appear to be key drivers behind these impacts. Partial evidence of mitigation from the delivery of government programs is found, suggesting that if not addressed promptly and with targeted policies, cognitive functioning delays may not be easily recovered.

2. Gutiérrez, Emilio, Jaakko Meriläinen, and Adrián Rubli. "Electoral Repercussions of a Pandemic: Evidence from the 2009 H1N1 Outbreak." , Journal of Politics, February 7, 2022.

Abstract:

Do electorally concerned politicians have an incentive to contain epidemics when public-health interventions may have an economic cost? We revisit the first pandemic of the 21st century and study the electoral consecuences of the 2009 H1NI outbreak in Mexico. Leveraging detailed administrative data an a difference- in differences approach, we document a statistically significant, negative effect of local epidemic outbreaks on the electoral performance of the governing party. The effect (i) is not driven by differences in containment policies; (ii) implies that the epidemic may have shifted outcomes of close electoral races;  (iii) persists al least three years after the pandemic. Part of the negative impact of incumbent vote share can be attributed turned in a decrease in turnout, and the findings are also in line with voters learning about the effectiveness of goverment policies or incumbent competence.

3.  Meriläinen, Jaakko and Janne Tukiainen. "The Advantage of Incumbents in Coalitional Bargaining." Forthcoming in Legislative Studies Quarterly. 2022.

Abstract:

Political parties frequently form coalitions with each other to pursue office or policy payoffs. Contrary to a prominent argument, the distribution of rents within the coalition does not always reflect the relative sizes of the coalition members. We propose that this is at least partially due to an incumbency advantage in coalitional bargaining. To evaluate this argument empirically, we construct a data set of candidates, parties, and members of the executive in Finnish local governments. We first use a regression discontinuity design to document a personal incumbency advantage in nominations to executive municipal boards. We then show that an incumbency premium is present also at the party level. Using an instrumental variable strategy that hinges on within-party close elections between incumbents and non-incumbents, we find that, ceteris paribus, having more re-elected incumbents increases party’s seat share in the executive.

4. Dehdari, Sirus, Konstantinos Matakos, Jaakko Meriläinen, and Janne Tukiainen.  "A Pink Slip for the Blue Reform: Is Selection, Experience, or Ideology the Elixir of Populists' Survival?" Journal of Political Institutions and Political Economy 3(1), 1-21. March 9, 2022.

Abstract:

Why do some populist parties thrive while others fail or split? Is it possible for populists to maintain anti-establishment nature while being in a coalition with the mainstream parties? We study the populist Finns Party that split while being part of a coalition government. The splinter party Blue Reform retained its part in government and most of the experienced political personnel, yet it failed in the next election while the rump party remained popular. Leveraging rich data on electoral candidates and voters, we explore various potential drivers of the electoral persistence of populist parties: candidate quality, selection, office perks, and ideological motivations. Our results indicate that ideological proximity with voters and their demand for descriptive representation are keys for the electoral success of populist parties. This has implications for the political and policy consequences of including populists in government. In particular, our work highlights that there are limits on the electoral returns to ideological moderation, and that political experience and the perks of office alone do not guarantee populists’ survival.

5. Isa Kuosmanen, Jaakko Meriläien. "Labor Market Effects of Open Borders: Evidence from the Finnish Construction Sector after EU Enlargement". Journal of Human Resources, accepted for publication (May 30, 2022).

Abstract:

The eastern enlargement of the EU differentially exposed workers in different regions and occupations in Finland to foreign workforce, in particular to posted workers. Using a triple-differences strategy and detailed individual-level administrative data, we document robust evidence that the entry of new EU countries decreased the annual earnings of vulnerable workers relative to less vulnerable workers in the construction sector. This decrease was persistent even ten years after the enlargement and economically meaningful, about 9 percent (roughly a month’s salary per year), on average. We also show a small increase in unemployment and provide evidence on different adjustment mechanisms.

6. Meriläinen, Jaakko. "Political Selection and Economic Policy." Accepted for publication in Economic Journal. 2022

Abstract:

Does political selection matter for policy in representative governments? I use administrative registry data on local politicians in Finland to study how commonly used indicators of politician quality influence economic policies. Exploiting exogenous variation generated by close electoral races that shift the quality composition of local councils, I show that electing more high-income, incumbent, and competent politicians (defined as those who have a higher income relative to others with similar observable characteristics) improves fiscal sustainability outcomes but does not decrease the size of the public sector. I also provide suggestive evidence that electing more university-educated local councilors leads to an increase in public spending without any adverse effects on fiscal sustainability. To reconcile these findings, I combine the micro-data on electoral candidates with unique survey data on their policy positions. Different measures of quality are differentially associated with economic ideology, and these correlations tally with the policy effects.

7. Emilio Gutiérrez, Adrián Rubli and Tiago Tavares, "Information and Behavioral Responses during a Pandemic: Evidence from Delays in Covid-19 Death Reports"  Journal of Development Economics,  Volume154. January, 2022.

Abstract:

Providing information is important for managing epidemics, but issues with data accuracy may hinder its effectiveness. Focusing on Covid-19 in Mexico, we ask whether delays in death reports affect individuals’ beliefs and behavior. Exploiting administrative data and an online survey, we provide evidence that behavior, and consequently the evolution of the pandemic, are considerably different when death counts are presented by date reported rather than by date occurred, due to non-negligible reporting delays. We then use an equilibrium model incorporating an endogenous behavioral response to illustrate how reporting delays lead to slower individual responses, and consequently, worse epidemic outcomes.

8. Meriläinen, Jaakko, Matti Mitrunen, and Tuomo Virkola. "Famine, Inequality, and Conflict." Accepted for publication, Journal of the European Economic Association. 2022.

Abstract:

This paper employs newly-collected historical data from Finland to present evidence of historically contingent, long-run consequences of a famine. We document high levels of local inequality in terms of income and land distribution until a violent uprising in 1918. These inequalities partly originated from the famine of 1866-1868 which increased the concentration of land and power to large landowners. We further show that regions with more exposure to the famine had more labor coercion by the early 1900s. These inner tensions led to violent conflict following the Russian Revolution and the Finnish independence from the Russian Empire. Using micro-data on all the casualties of the 1918 Finnish Civil War, we demonstrate that the famine plausibly contributed to local insurgency participation through these factors. Although unsuccessful in replacing the government, the insurgency led to significant policy changes, including radical land redistribution and a full extension of the franchise. These national reforms led to a more drastic shift towards equality in locations more affected by the famine with greater pre-conflict inequality. Our findings highlight how historical shocks can have large and long-lasting, but not straightforward impacts.

9. Ruy Lama, Gustavo Leyva and Carlos Urrutia. "Labor Market Policies and Business Cycles in Emerging Economies" IMF Economic Review, 70 p 300-337. 2022.

Abstract:

We build a small open economy business cycle model with search and matching frictions to assess the impact of labor market policies on the dynamics of employment and other macroeconomic variables in emerging economies. The model features an endogenous selection mechanism by which inefficient jobs are destroyed in recessions, thus linking labor market dynamics and aggregate productivity. In a quantitative version of the model calibrated to the Mexican economy, we find that reducing labor taxes and increasing firing costs would have mitigated the fall in employment during the Great Recession of 2008–2009. However, by preventing firms from dismissing low-productive workers, higher firing costs would have impaired this selection mechanism, thus generating a larger fall in TFP and delaying the recovery. Cutting labor taxes, in contrast, have minor effects on productivity by mainly affecting hiring decisions. An extension of the model shows that lowering labor taxes provides an additional productivity boost by expanding formal hirings and reducing the informality rate.

10. Ignacio N Lobato, Carlos Velasco. "Single step estimation of ARMA roots for nonfundamental nonstationary fractional models". The Econometrics Journal, Volume 25, Issue 2, May 2022, Pages 455–476,

Abstract:

We propose a single step estimator for the autoregressive and moving average roots (without imposing causality or invertibility restrictions) of a nonstationary Fractional ARMA process. These estimators employ an efficient tapering procedure, which allows for a long memory component in the process, but avoids estimating the nonstationarity component, which can be stochastic and/or deterministic. After selecting automatically the order of the model, we robustly estimate the AR and MA roots for trading volume for the thirty stocks in the Dow Jones Industrial Average Index in the last decade. Two empirical results are found. First, there is strong evidence that stock market trading volume exhibits nonfundamentalness. Second, noncausality is more common than noninvertibility.

11. James E. Atl, Amalie Jensen, Horacio Larreguy, David D. Lassen and John Marshall. "Diffusing Political Concerns: How Unemployment Information Passed between Social Ties Influences Danish Voters". The Journal of Politics Volume 84, Number 1, January 2022.

Abstract:

While social pressure is widely believed to influence voters, evidence that information passed between social ties affects beliefs, policy preferences, and voting behavior is limited. We investigate whether information about unemployment shocks diffuses through networks of strong and mostly weak social ties and influences voters in Denmark. We link surveys with population-level administrative data that log unemployment shocks afflicting respondents’ familial, vocational, and educational networks. Our results show that the share of second-degree social ties—individuals that voters learn about indirectly—that became unemployed within the last year increases a voter’s perception of national unemployment, self-assessed risk of becoming unemployed, support for unemployment insurance, and voting for left-wing political parties. Voters’ beliefs about national aggregates respond to all shocks similarly, whereas subjective perceptions and preferences respond primarily to unemployment shocks afflicting second-degree ties in similar vocations. This suggests that information diffusion through social ties principally affects political preferences via egotropic—rather than sociotropic—motives.

12. Leopoldo Fergusson, Horacio Larreguy and Juan Felipe Riaño. "Political Competition and State Capacity: Evidence from a land allocation program in Mexico" The Economic Journal, 132 (November, 2022), 2815–2834.

Abstract:

We develop a model of the politics of state capacity building undertaken by incumbent parties that have a comparative advantage in clientelism rather than in public goods provision. The model predicts that, when challenged by opponents, clientelistic incumbents have the incentive to prevent investments in state capacity. We provide empirical support for the model’s implications by studying policy decisions by the Institutional Revolutionary Party that affected local state capacity across Mexican municipalities and over time. Our difference-in-differences and instrumental variable identification strategies exploit a national shock that threatened the Mexican government’s hegemony in the early 1960s.

13.  Eric Arias, Horacio Larreguy, John Marshall and Pablo Querubin. "Priors Rule: When Do Malfeasance Revelations Help Or Hurt Incumbent Parties?". Journal of the European Economic Association, Volume 20, Issue 4, August 2022, Pages 1433–1477.

Abstract:

Effective policy-making requires that voters avoid electing malfeasant politicians. However, informing voters of incumbent malfeasance in corrupt contexts may not reduce incumbent support. As our simple learning model shows, electoral sanctioning is limited where voters already believed incumbents to be malfeasant, while information’s effect on turnout is non-monotonic in the magnitude of reported malfeasance. We conducted a field experiment in Mexico that informed voters about malfeasant mayoral spending before municipal elections, to test whether these Bayesian predictions apply in a developing context where many voters are poorly informed. Consistent with voter learning, the intervention increased incumbent vote share where voters possessed unfavorable prior beliefs and when audit reports caused voters to favorably update their posterior beliefs about the incumbent’s malfeasance. Furthermore, we find that low and, especially, high malfeasance revelations increased turnout, while less surprising information reduced turnout. These results suggest that improved governance requires greater transparency and citizen expectations.

14. Alexandros Fakos, Plutarchos Sakellaris, Tiago Tavares. "Investment slumps during financial crises: The real effects of credit supply". Journal of Financial Economics, Volume 145, Issue 1, July 2022. Pages 29-44.

Abstract:

Using new census-type data and a dynamic structural model, we study the effect of credit supply on investment by manufacturing firms during the Greek depression. Real factors (profitability, uncertainty, and taxes) account for only a fraction of the substantial drop in investment observed in the data. The reduction in credit supply has significant real effects, explaining 11–32% of the investment slump. We also find that exporting firms, which reduce investment and deleverage despite their improved profitability during the crisis, face a contraction in credit supply similar to that of non-exporters, suggesting that the credit-supply shock has a significant common component.

15. Emilio Gutiérrez, Adrián Rubli, tiago Tavares. "Information and behavioral responses during a pandemic: Evidence from delays in Covid-19 death reports". Journal of Development Economics, vol 154, January 2022.

Abstract:

Providing information is important for managing epidemics, but issues with data accuracy may hinder its effectiveness. Focusing on Covid-19 in Mexico, we ask whether delays in death reports affect individuals’ beliefs and behavior. Exploiting administrative data and an online survey, we provide evidence that behavior, and consequently the evolution of the pandemic, are considerably different when death counts are presented by date reported rather than by date occurred, due to non-negligible reporting delays. We then use an equilibrium model incorporating an endogenous behavioral response to illustrate how reporting delays lead to slower individual responses, and consequently, worse epidemic outcomes.

16. Mauricio Romero, Justin Sandefur "Beyond Short-Term Learning Gains: the Impact of Outsourcing Schools in Liberia After Three Years", The Economic Journal, Volume 132, Issue 644, May 2022, Pages 1600–1619.

Abstract:

Outsourcing the management of ninety-three randomly-selected government primary schools in Liberia to eight private operators led to learning gains of 0.18σ� after one year, but these effects plateaued in subsequent years (reaching 0.2σ� after three years). Beyond learning gains, the programme reduced corporal punishment (by 4.6 percentage points from a base of 51%), but increased dropout (by 3.3 percentage points from a base of 15%) and failed to reduce sexual abuse. Despite facing similar contracts and settings, some providers produced uniformly positive results, while others presented trade-offs between learning gains, access to education, child safety, and financial sustainability.

17. Mauricio Romero, Juan Bedoya, Monica Yanez-Pagans, Marcela Silveyra, Rafael de Hoyos, "Direct vs indirect management training: Experimental evidence from schools in Mexico", Journal of Development Economics Volume 154, January 2022.

Abstract: