International Economic Review

Publisher:: Wiley
Publication date:: 2021-02-01

ISBN:: 0020-6598

Issue Number

No. 64-4, November 2023

Latest documents

DRIVEN BY INSTITUTIONS, SHAPED BY CULTURE: HUMAN CAPITAL AND THE SECULARIZATION OF MARRIAGE IN ITALY
We show that in Italy the legalization of divorce unleashed the forces of secularization, making educated persons more likely to contract a civil instead of a religious marriage. This process, ignited by institutional change, is also shaped by culture: higher social capital or weaker family ties make the choice of civil marriage more responsive to education. These results emerge from both aggregate and individual data, and can be rationalized through a model of religiosity, education and marriage choices. In this framework, the option to divorce increases the relative returns to human capital ‐ thereby increasing the prevalence of civil marriage.
ON THE DISTRIBUTIONAL EFFECTS OF INTERNATIONAL TARIFFS
We provide a quantitative analysis of the distributional effects of the 2018 increase in tariffs by the United States and its major trading partners. We build a trade model with incomplete asset markets and households that are heterogeneous in their age, income, wealth, and labor skill. When tariff revenues are used to reduce distortionary taxes on consumption, labor, and capital income, the average welfare loss from the trade war is equivalent to a permanent 0.1% reduction in consumption. Much larger welfare losses are concentrated among retirees and low‐wealth households, whereas only wealthy households experience a welfare gain.
A PANEL CLUSTERING APPROACH TO ANALYZING BUBBLE BEHAVIOR
This study provides new mechanisms for identifying and estimating explosive bubbles in mixed‐root panel autoregressions with a latent group structure. A postclustering approach is employed that combines k‐means clustering with right‐tailed panel‐data testing. Uniform consistency of the k‐means algorithm is established. Pivotal null limit distributions of the tests are introduced. A new method is proposed to consistently estimate the number of groups. Monte Carlo simulations show that the proposed methods perform well in finite samples; and empirical applications of the proposed methods identify bubbles in the U.S. and Chinese housing markets and the U.S. stock market.
OPTIMAL PAYMENT CONTRACTS IN TRADE RELATIONSHIPS
In buyer–seller relationships, offering trade credit to buyers fosters long‐term collaboration but seller provision varies systematically as relationships evolve. We study the optimal provision dynamics of trade credit when the seller's information about the buyer is incomplete. We show how the interaction of self‐enforcing relational contracts and formal contracts determines optimal payment contract choice. We find that payment contracts can be interpreted as screening technologies and imply distinct learning opportunities about the buyer's type. In line with empirical evidence, the model predicts that all transitions between payment terms lead to seller trade credit provision in the long run.
MODELING INTERREGIONAL PATIENT MOBILITY: THEORY AND EVIDENCE FROM SPATIALLY EXPLICIT DATA
This article provides theory and evidence on the spatial determinants of regional patient flows. We develop a theoretical model that explains a patient's choice to consult a general practitioner by a measure of spatial accessibility. We empirically test this gravity‐type model using regional patient flows and detailed data on the spatial distribution of residents and physicians in Austria. Our measure of spatial accessibility is a crucial determinant of patient flows that substantially increases the explanatory power of regular gravity models. Counterfactual simulations show heterogeneous effects of exiting physicians on health‐care accessibility and patient mobility.
LEARNING AND EVIDENCE IN INSURANCE MARKETS
I analyze a model of monopoly insurance contracting where the consumer has access to endogenous, costly evidence of his risk type. I characterize when the consumer is worse off if the insurer is allowed to condition contracts on evidence and when the ability to contract on evidence leads to a Pareto improvement. I compare the results to an analogous setting with perfect competition: Under perfect competition, when evidence acquisition costs are low, the ability to contract on evidence is always Pareto improving. For intermediate costs, I uncover a new source of unraveling.
STRUCTURAL INTERVENTIONS IN NETWORKS
Two types of interventions are commonly implemented in networks: characteristics interventions, which influence individuals' intrinsic incentives, and structural interventions, which target the social links among individuals. In this article, we provide a general framework to evaluate the distinct equilibrium effects of both types of interventions. We show that any structural intervention is outcome‐equivalent to an endogenously determined characteristics intervention. We present a wide range of applications of our theory, including evaluating a potential new link in a community, identifying the most wanted criminal(s) in delinquent networks, and determining whether a structural intervention improves certain welfare measures.
COSTLY INFORMATION AND SOVEREIGN RISK
The consequences of costly information acquisition for sovereign risk are explored in a quantitative sovereign default model. We identify information costs empirically using Bloomberg news‐heat data. The calibrated model microfounds heteroskedasticity in the country risk spread as measured by a novel metric we call the Crisis Volatility Ratio (CVR). Crises are endogenously more volatile because more information is acquired and priced. Recalibrated extant models do not generate CVRs in the empirical range, but ours does. Because effective risk tolerance depends on the information set, the model also suggests that risk premia fall with information costs.
THE SHAPING OF A GENDER NORM: MARRIAGE, LABOR, AND FOOT‐BINDING IN HISTORICAL CHINA
This article presents a theory that explains the rise of foot‐binding in historical China, in response to a gender‐asymmetric social mobility shock that dispersed men's quality distribution in the marriage market. The theory characterizes the marriage market equilibrium and women's competition strategies before and after the shock. Empirical evidence using archival data corroborates the theoretical predictions that greater men's social mobility opportunities encouraged foot‐binding and that a greater cost of women's labor discouraged foot‐binding. The article thus highlights that costly gender norms can be traced back to gender asymmetry in social mobility opportunities.
CATCHMENT AREAS, STRATIFICATION, AND ACCESS TO BETTER SCHOOLS
School Choice provides students with the opportunity to attend better schools than those in their neighborhood. This is crucial for students from disadvantaged areas where schools may be of lower quality. Our theoretical model and numerical simulations show that the widely used Deferred Acceptance (DA) algorithm has limitations in providing access to better schools (ABS). When schools have varying levels of quality and when there are priorities linked to neighborhood schools, the DA algorithm experiences significant limitations in providing ABS. Top Trading Cycles, when compared to DA, offers greater ABS, particularly for disadvantaged students.