Discussion Paper No. 434
October 24, 2023
Self-preferencing, Quality Provision, and Welfare in Mobile Application Markets
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Abstract:
Platforms often display their products ahead of third-party products in search. Is this due to consumers preferring platform-owned products or platforms engaging in self-preferencing by biasing search towards their own products? What are the welfare implications? I develop a structural model of mobile application markets to identify self-preferencing and quantify its welfare effects, taking into account third-party developers' quality adjustment. A new dataset on app downloads, prices, characteristics, and search rankings is used to estimate the model. Estimates indicate self-preferencing. Simulations show higher consumer welfare and third-party profits without self-preferencing.
Keywords:
competition policy; platform design; consumer search; endogenous product choice;
JEL-Classification:
D12; D83; L13; L86;
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Discussion Paper No. 433
Religion and Growth
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Abstract:
We use the elements of a macroeconomic production function—physical capital, human capital, labor, and technology—together with standard growth models to frame the role of religion in economic growth. Unifying a growing literature, we argue that religion can enhance or impinge upon economic growth through all four elements because it shapes individual preferences, societal norms, and institutions. Religion affects physical capital accumulation by influencing thrift and financial development. It affects human capital through both religious and secular education. It affects population and labor by influencing work effort, fertility, and the demographic transition. And it affects total factor productivity by constraining or unleashing technological change and through rituals, legal institutions, political economy, and conflict. Synthesizing a disjoint literature in this way opens many interesting directions for future research.
Keywords:
religion; growth; Christianity; Judaism; Islam; preferences; norms; institutions; capital; saving; financial development; human capital; education; population; labor; demography; fertility; total factor productivity; technological change; rituals; political economy; conflict;
JEL-Classification:
Z12; O40; N30; I25; O15;
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Discussion Paper No. 432
October 19, 2023
Monopsony and Automation
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Abstract:
We examine the impact of labor market power on firms' adoption of automation technologies. We develop a model that incorporates labor market power into the task-based theory of automation. We show that, due to higher marginal cost of labor, monopsonistic firms have stronger incentives to automate than wage-taking firms, which could amplify or mitigate the negative employment effects of automation. Using data from US commuting zones, our results show that commuting zones that are more exposed to industrial robots exhibit considerably larger reductions in both employment and wages when their labor markets demonstrate higher levels of concentration.
Keywords:
automation; employment; labor market concentration; industrial robots; wage setting;
JEL-Classification:
J23; J30; J42; L11; O33;
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Discussion Paper No. 431
Export Induced Spatial Divergence
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How does export liberalization affect firm location choice and the spatial concentration of economic activity? We address these questions using the geo-coordinates of Chinese manufacturing firms and find that export widens inter-city and intra-city spatial disparities by reinforcing initially large industry centers. We first show that there has been an increased spatial concentration across cities in response to improved foreign market access. Only industry city pairs that were large initially increase their employment density following trade liberalization. Second, there has also been an increased spatial concentration within cities. For a given industry, districts closer to city centers are getting denser, mainly driven by the extensive margin. Third, the above effects are not exclusive to industries directly exposed to export shocks but also spill over positively to upstream and downstream industries and negatively to industries competing for the same workers locally.
Keywords:
firm location; localization; spatial concentration; regional inequality; export; comparative advantage;
JEL-Classification:
F6; F14; R12;
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Discussion Paper No. 430
October 13, 2023
Organizational Change and Reference-Dependent Preferences
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Abstract:
Reference-dependent preferences can explain several puzzling observations about organizational change. We introduce a dynamic model in which a loss-neutral firm bargains with loss-averse workers over organizational change and wages. We show that change is often stagnant or slow for long periods followed by a sudden boost in productivity during a crisis. Moreover, it accounts for the fact that different firms in the same industry often have significant productivity differences. The model also demonstrates the importance of expectation management even if all parties have rational expectations. Social preferences explain why it may be optimal to divide a firm into separate entities.
Keywords:
organizational change; productivity; reference points; loss aversion; social preferences;
JEL-Classification:
D23; D91; L2;
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Discussion Paper No. 429
September 19, 2023
Can Patience Account for Subnational Differences in Student Achievement? Regional Analysis with Facebook Interests
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Decisions to invest in human capital depend on people’s time preferences. We show that differences in patience are closely related to substantial subnational differences in educational achievement, leading to new perspectives on longstanding within-country disparities. We use social-media data – Facebook interests – to construct novel regional measures of patience within Italy and the United States. Patience is strongly positively associated with student achievement in both countries, accounting for two-thirds of the achievement variation across Italian regions and one-third across U.S. states. Results also hold for six other countries with more limited regional achievement data.
Keywords:
patience; student achievement; regions; social media;
JEL-Classification:
I21; Z10;
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Discussion Paper No. 428
Recession Experiences During Early Adulthood Shape Prosocial Attitudes Later in Life
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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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Abstract:
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;