# 2018

1. A. Gomberg, ** "Revealed Votes"**, Social Choice and Welfare Volume 51, 2018.

**Resumen:**

In this paper I consider choice correspondences defined on a novel domain: the decisions are assumed to be taken not by individuals, but by committees, whose membership is observable and variable. In particular, for the case of two alternatives I provide a full characterization of committee choice structures that may be rationalized with two common decision rules: unanimity with a default and weighted majority.

2. I. Lobato y C. Velasco, * "Efficiency Improvements for Minimum Distance Estimation of Causal and Invertible ARMA Model", *forthcoming in Economics Letters.

**Resumen:**

In this note we analyze efficiency improvements over the Gaussian maximum likelihood (ML) estimator for frequency domain minimum distance (MD) estimation for causal and invertible autoregressive moving average (ARMA) models. The analysis complements Velasco and Lobato (2017) where optimal MD estimation, which employs information in higher order moments, is studied for the general possibly non causal or non-invertible case. We consider MD estimation that combines in two manners the information contained in second, third, and fourth moments. We show that for both MD estimators efficiency improvements over the Gaussian ML occur when the distribution of the innovations is platykurtic. In addition, we show that asymmetry alone is not associated with efficiency improvements.

3. E. Gutierrez y K. Teshima,** "Abatement Expenditures, Technology Choice, and Environmental Performance: Evidence from Firm Responses to Import Competition in Mexico****",*** *Journal of Development Economics Volumen 133, 2018.

**Resumen:**

Abatement expenditures are not the only available tool for firms to decrease emissions. Technology choice can also indirectly affect environmental performance. We assess the impact of import competition on plants' environmental outcomes. In particular, exploiting a unique combination of Mexican plant-level and satellite imagery data, we measure the effect of tariff changes due to free-trade agreements on three main outcomes: plants' fuel use, plants' abatement expenditures, and measures of air pollution around plants' location. Our findings show that import competition induced plants in Mexico to increase energy efficiency, reduce emissions, and in turn reduce direct investment in environmental protection. Our findings suggest that the general technology upgrading effect of any policy could be an important determinant of environmental performance in developing countries and that this effect may not be captured in abatement data.

4. A. Nikandrova y R. Pancs, * "Dynamic Project Selection"*, Theoretical Economics13, 2018.

**Resumen:**

We study a normative model of an internal capital market, used by a company to choose between its two devisions’ pet projects. Each project’s value is initially unknown to all but can be dynamically learned by the corresponding division. Learning can be suspended or resumed at any time and is costly. We characterize an internal capital market that maximizes the company’s expected cash flow. This market has indicative bidding by the two divisions, followed by a spell of learning and then firm bidding, which occurs at an endogenous deadline or as soon as either division requests it.

5. A. Elbittar, A. Gomberg, C. Martinelli y T. Palfrey, ** "Ignorance and Bias in Collective Decisions", ** forthcoming in Journal of Economic Behavior and Organization (2017).

**Resumen:**

We study theoretically and experimentally a committee with common interests. Committee members do not know which of two alternatives is the best, but each member can acquire privately a costly signal before casting a vote under either majority or unanimity rule. In the experiment, as predicted by Bayesian equilibrium, voters are more likely to acquire information under majority rule, and attempt to counter the bias in favor of one alternative under unanimity rule. As opposed to Bayesian equilibrium predictions, however, many committee members vote when uninformed. Moreover, uninformed voting is strongly associated with a lower propensity to acquire information. We show that an equilibrium model of subjective prior beliefs can account for both these phenomena, and provides a good overall fit to the observed patterns of behavior both in terms of rational ignorance and biases.

6. P. Evdokimov y U.Garfagnini, * " Third-party manipulation of conflict: an experiment"*, forthcoming in Experimental Economics.

**Resumen:**

We design a laboratory experiment in which an interested third party endowed with private information sends a public message to two conflicting players, who then make their choices. We find that third-party communication is not strategic. Nevertheless, a hawkish message by a third party makes hawkish behavior more likely while a dovish message makes it less likely. Moreover, how subjects respond to the message is largely unaffected by the third party’s incentives. We argue that our results are consistent with a focal point interpretation in the spirit of Schelling.

7. D. Mishra y T. Sharma * "A simple budget-balanced mechanism", *Social Choice and Welfare, Volume 50, 2018.

**Resumen:**

In the private values single object auction model, we construct a satisfactory mechanism - a dominant strategy incentive compatible and budget-balanced mechanism satisfying equal treatment of equals. Our mechanism allocates the object with positive probability to only those agents who have the highest value and satisfies ex-post individual rationality. This probability is at least (1 − 2/n ), where n is the number of agents. Hence, our mechanism converges to efficiency at a linear rate as the number of agents grow. Our mechanism has a simple interpretation: a fixed allocation probability is allocated using a second-price Vickrey auction whose revenue is redistributed among all the agents in a simple way. We show that our mechanism maximizes the utilitarian welfare among all satisfactory mechanisms that allocate the object only to the highest-valued agents.

8. I. Kheifets, * "Multivariate Specification Tests Based on a Dynamic Rosenblatt Transform"* , forthcoming in Computational Statistics and Data Analysis.

**Resumen:**

This paper considers parametric model adequacy tests for nonlinear multivariate dynamic models. It is shown that commonly used Kolmogorov-type tests do not take into account cross-sectional nor time-dependence structure, and a test, based on multi-parameter empirical processes, is proposed that overcomes these problems. The tests are applied to a nonlinear LSTAR-type model of joint movements of UK output growth and interest rate spreads. A simulation experiment illustrates the properties of the tests in finite samples. Asymptotic properties of the test statistics under the null of correct specification and under the local alternative, and justification of a parametric bootstrap to obtain critical values, are provided.

9. J.M. Da Rocha M. Mendes Tavares y D. Restuccia **" Firing Costs, Misallocation, and Aggregate Productivity" ** Journal of Economic Dynamics and Control, 2018.

**Resumen:**

We study the impact of firing costs on aggregate total factor productivity (TFP) in a dynamic general-equilibrium framework where the evolution of establishment-level productivity is not invariant to the policy. Firing costs not only generate static factor misallocation, but also distort the selection of establishment’s growth by size, contributing to larger aggregate TFP losses. Numerical experiments indicate that firing costs equivalent to 5 year’s wages imply a reduction in TFP of more than 20 percent. Factor misallocation accounts for 20 percent of the productivity loss, whereas the remaining 80 percent arises from distorted selection in the productivity process.

10. B. Turhan, ** "Welfare and Incentives in Partitioned School Choice Markets" **, Forthcoming in Games and Economic Behavior.

**Resumen:**

Divided enrollment systems cause school assignments to be unfair and wasteful. The iterative version of the student-optimal stable mechanism (I-SOSM), proposed byManjunath and Turhan (2016), achieves individually rational and fair assignments in such partitioned school choice markets for any number of iterations. It also reaches anon-wasteful matching when iterated sufficiently many times. This paper examines the effects of partition structure of schools on students’ welfare and on incentives students face under the I-SOSM. I find that when school partition gets coarser students’ welfare weakly increases under the I-SOSM for any number of iterations. I also show that under coarser school partitions the I-SOSM becomes weakly less manipulable for students (when iterated sufficiently many times to reach a stable assignment) according to the “as strongly manipulable as” criteria defined by Pathak and Sönmez (2013). These results suggest that when full integration is not possible keeping school partition as coarse as possible benefits students with respect to their welfare and incentives they face if stability is a concern for policymakers.

11. P. Evdokimov y U. Garfagnini,** "Communication and Behavior in Organizations: An Experiment", **forthcoming in Quantitative Economics.

**Resumen:**

We design a laboratory experiment to study behavior in a multidivisional organization facing a trade-off between coordinating its decisions across the divisions and meeting division-specific needs that are known only to the division managers. The managers communicate their private information through cheap talk. While the results show close to optimal communication, we also find systematic deviations from optimal behavior in how the communicated information is used. Specifically, subjects' decisions show worse than predicted adaptation to the needs of the divisions in decentralized organizations and worse than predicted coordination in centralized organizations. We show that the observed deviations disappear when uncertainty about the divisions' local needs is removed and discuss the possible underlying mechanisms.

12. A. Gomberg, E. Gutierrez, P. López y A. Vasquez, ** "Coattails and the Forces that Drive Them: Evidence from Mexico", **forthcoming in European Journal of Political Economy.

**Resumen:**

Coattails and the forces behind them have important implications for the understanding of electoral processes and their outcomes. By focusing our attention on neighboring electoral sections that face the same local congressional election, but different municipal elections, and assuming that political preferences for local legislative candidates remain constant across neighboring electoral sections, we exploit variation in the strength of the municipal candidates in each of these electoral sections to estimate coattails from municipal to local congressional elections in Mexico. A one percentage increase in vote share for a municipal candidate translates, depending on his or her party, into an average of between 0.45 and 0.78 percentage point increase in vote share for the legislative candidates from the same party (though this effect may not have been sufficient to affect an outcome in any electoral district in our sample). In addition, we find that a large fraction of the effect is driven by individuals switching their vote decision in the legislative election, rather than by an increase in turnout.

13. E. Colla, J.M. Da Rocha, J. García-Cutrín, M.J. Gutiérrez and R. Prellezo, "** A bayesian estimation of the economic effects of the Common Fisheries Policy on the Galician Fleet: a dynamic stochastic general equilibrium approach"** , Forthcoming in Ocean and Coastal Management.

**Resumen:**

What would have happened if a relatively looser fisheries policy had been implemented in the European Union (EU)? Using Bayesian methods a Dynamic Stochastic General Equilibrium (DSGE) model is estimated to assess the impact of the European Common Fisheries Policy (CFP) on the economic performance of a Galician (north-west of Spain) fleet highly dependant on the EU southern stock of hake. Our counterfactual analysis shows that if a less effective CFP had been implemented during the period 1986-2012, "fishing opportunities” would have increased, leading to an increase in labor hours of 4.87%. However, this increase in fishing activity would have worsened the profitability of the fleet, dropping wages and rental price of capital by 6.79% and 0.88%, respectively. Welfare would also be negatively affected since, in addition to the increase in hours worked, consumption would have reduced by 0.59%.