Discussion Paper No. 428
September 19, 2023
Recession Experiences During Early Adulthood Shape Prosocial Attitudes Later in Life
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Abstract:
This paper explores whether the experience of a severe recession during early adulthood shapes individuals’ prosocial attitudes. The analysis uses survey responses to experimentally validated questions that measure prosocial attitudes for approximately 65,000 respondents in 75 countries. The identification approach exploits variation in recession experiences across 78 different birth cohorts. We find that exposure to a recession during early adulthood is associated with lower levels of prosociality later in life. The effect only emerges for experiences during impressionable years (age 18-25), mainly affects prosocial attitudes among men, and is orthogonal to the effect of experiences with democracy.
Keywords:
prosocial attitudes; impressionable years; experience effects; cohort effects;
JEL-Classification:
D91; E30; E71;
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Discussion Paper No. 427
Defying Gravity: What Drives Productivity in Remote Teams?
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Abstract:
How can teams organize for productive online collaboration? The coronavirus pandemic has led to a large and persistent shift toward remote work. Using fine-grained data from the world's largest platform for open-source software development, we find that the pandemic reduced the productivity of previously co-located teams substantially, whereas similar teams with remote work experience remained resilient. While access to remote talent and experience are important for overall team success, our results highlight the crucial role of communication for productive online collaboration. We find suggestive evidence that, with their peers shifting to online work, remote workers become better integrated into their teams' communication. We conclude that while teams' performance may suffer from the shift to remote work, setting up systems for effective online communication can help mitigate productivity loss.
Keywords:
gravity model; open source; knowledge workers; knowledge flows; remote work; online labor markets; COVID-19;
JEL-Classification:
J01; M54; O30; F14;
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Discussion Paper No. 426
September 15, 2023
Banking Crises under a Central Bank Digital Currency (CBDC)
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Abstract:
One of the main concerns associated with central bank digital currencies (CBDC) is the disintermediating effect on the banking sector in general, and the risk of bank runs in times of crisis in particular. This paper examines the implications of an interest-bearing CBDC on banking crises in a dynamic bank run model with a financial accelerator. The analysis distinguishes between bank failures due to illiquidity and due to insolvency. In a numerical exercise, CBDC leads to a reduction in the net worth of banks in normal times but mitigates the risk of a bank run in times of crisis. The financial stability implications also depend on how CBDC is accounted for on the asset side of the central bank balance sheet: if CBDC issuance is offset by asset purchases, it delays the onset of both types of bank failures to larger shocks. In contrast, if CBDC issuance is offset by loans to banks, it substantially impedes failures due to illiquidity, but only marginally affects bank failures due to insolvency.
Keywords:
central bank digital currency; financial intermediation; financial stability; bank runs;
JEL-Classification:
E42; E58; G01; G21;
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Discussion Paper No. 425
Selective Default Expectations
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This paper explores how selective default expectations affect the pricing of sovereign bonds in a historical laboratory: the German default of the 1930s. We analyze yield differentials between identical government bonds traded across various creditor countries before and after bond market segmentation. We show that, when secondary debt markets are segmented, a large selective default probability can be priced in bond yield spreads. Selective default risk accounted for one third of the yield spread of German external bonds over the risk-free rate during the 1930s. Selective default expectations arose from differences in the creditor countries' economic power over the debtor.
Keywords:
sovereign risk; debt default; secondary markets; creditor discrimination;
JEL-Classification:
F13; F34; G12; G15; H63; N24; N44;
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Discussion Paper No. 424
September 11, 2023
Abadie's Kappa and Weighting Estimators of the Local Average Treatment Effect
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In this paper we study the finite sample and asymptotic properties of various weighting estimators of the local average treatment effect (LATE), several of which are based on Abadie's (2003) kappa theorem. Our framework presumes a binary treatment and a binary instrument, which may only be valid after conditioning on additional covariates. We argue that one of the Abadie estimators, which is weight normalized, is preferable in many contexts. Several other estimators, which are unnormalized, do not generally satisfy the properties of scale invariance with respect to the natural logarithm and translation invariance, thereby exhibiting sensitivity to the units of measurement when estimating the LATE in logs and the centering of the outcome variable more generally. On the other hand, when noncompliance is one-sided, certain unnormalized estimators have the advantage of being based on a denominator that is bounded away from zero. To reconcile these findings, we demonstrate that when the instrument propensity score is estimated using an appropriate covariate balancing approach, the resulting normalized estimator also shares this advantage. We use a simulation study and three empirical applications to illustrate our findings. In two cases, the unnormalized estimates are clearly unreasonable, with ``incorrect'' signs, magnitudes, or both.
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JEL-Classification:
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Discussion Paper No. 423
Peer Effects Heterogeneity and Social Networks in Education
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This study focuses on the role of heterogeneity in network peer effects by accounting for network-specific factors and different driving mechanisms of peer behavior. We propose a novel Multivariate Instrumental Variable (MVIV) estimator which is consistent for a large number of networks keeping the individual network size bounded. We apply this approach to estimate peer effects on school achievement exploiting the network structure of friendships within classrooms. The empirical evidence presented is based on a unique network dataset from German upper secondary schools. We show that accounting for heterogeneity is not only crucial from a statistical perspective, but also yields new structural insights into how class size and gender composition affect school achievement through peer behavior.
Keywords:
network heterogeneity; peer effects; multivariate instrumental variables; minimum distance estimation; school achievement;
JEL-Classification:
D85; L14; I21; C30; C36;
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Discussion Paper No. 422
Bit by Bit: Colocation and the Death of Distance in Software Developer Networks
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Digital work settings potentially facilitate remote collaboration and thereby decrease geographic frictions in knowledge work. Here, I analyze spatial collaboration patterns of some 191 thousand software developers in the United States on the largest code repository platform GitHub. Despite advanced digitization in this occupation, developers are geographically highly concentrated, with 79.8% of users clustering in only ten economic areas, and colocated developers collaborate about nine times as much as non-colocated developers. However, the colocation effect is much smaller than in less digital social or inventor networks, and apart from colocation geographic distance is of little relevance to collaboration. This suggests distance is indeed less important for collaboration in a digital work setting while other strong drivers of geographic concentration remain. Heterogeneity analyses provide insights on which types of collaboration tend to colocate: the colocation effect is smaller within larger organizations, for high-quality projects, among experienced developers, and for sporadic interactions. Overall, this results in a smaller colocation effect in larger economic areas.
Keywords:
geography; digitalization; networks; knowledge economy; colocation;
JEL-Classification:
L84; O18; O30; R32;
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Discussion Paper No. 421
Automation and Polarization
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We develop an assignment model of automation. Each of a continuum of tasks of variable complexity is assigned to either capital or one of a continuum of labor skills. We characterize conditions for interior automation, whereby tasks of intermediate complexity are assigned to capital. Interior automation arises when the most skilled workers have a comparative advantage in the most complex tasks relative to capital, and because the wages of the least skilled workers are sufficiently low relative to their productivity and the effective cost of capital in low-complexity tasks. Minimum wages and other sources of higher wages at the bottom make interior automation less likely. Starting with interior automation, a reduction in the cost of capital (or an increase in capital productivity) causes employment and wage polarization. Specifically, further automation pushes workers into tasks at the lower and upper ends of the task distribution. It also monotonically increases the skill premium above a skill threshold and reduces the skill premium below this threshold. Moreover, automation tends to reduce the real wage of workers with comparative advantage profiles close to that of capital. We show that large enough increases in capital productivity ultimately induce a transition to low-skill automation and qualitatively alter the effects of automation - thereafter inducing monotone increases in skill premia rather than wage polarization.
Keywords:
assignment; automation; inequality; polarization; tasks; wages;
JEL-Classification:
J23; J31; O33;
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Discussion Paper No. 420
August 31, 2023
Redistributive Income Taxation with Directed Technical Change
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What are the implications of (endogenous) directed technical change for the design of redistributive income taxes? I study this question in a Mirrleesian economy augmented to include endogenous technology development and adoption choices by firms. Under certain conditions, any progressive tax reform induces technical change that compresses the pre-tax wage distribution. The key intuition is that progressive tax reforms tend to increase labor supply of less skilled relative to more skilled workers, which induces firms to develop and use technologies that are more complementary to the less skilled. These directed technical change effects make the optimal tax scheme more progressive, raising marginal tax rates at the right tail of the income distribution and lowering them at the left tail. For reasonable calibrations, the impact of directed technical change on the optimal tax is quantitatively important: optimal marginal tax rates are reduced substantially for incomes below the median and increase monotonically over the bulk of the income distribution instead of being U-shaped (as in most of the previous literature).
Keywords:
optimal taxation; directed technical change; endogenous technical change; wage inequality;
JEL-Classification:
H21; H23; H24; J31; O33;
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Discussion Paper No. 419
August 25, 2023
Allegations of Sexual Misconduct, Accused Scientists, and Their Research
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Does the scientific community sanction sexual misconduct? Using a sample of scientists accused of sexual misconduct at US universities, we find that their prior work is cited less after allegations surface. The effect weakens with distance in the coauthorship network, indicating that researchers learn about allegations through their peers. Among the closest peers, male authors react more strongly, suggesting that they feel a greater need to disassociate themselves from the accused. In male-dominated fields, the effects on citations are more muted. Accused scientists are more likely to leave academic research, to move to non-university institutions, and to publish less.
Keywords:
sexual misconduct; scientific community; scientific impact;
JEL-Classification:
J16; M14; I23; K4;