From:                              Sophie Roughton <>

Sent:                               Montag, 16. Juli 2018 11:30

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Subject:                          CEPR Discussion Paper Update Week Ending 15/07/2018


Summary of CEPR Discussion Papers for the week ending 15/07/2018

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CEPR Discussion Papers for the week ending 15 July 2018




Summary of Discussion Papers uploaded to our website week ending 15/07/2018 (for details see below).
This email lists all the CEPR Discussion Papers uploaded to in the last week. Clicking on the Discussion Paper number in the list below will take you to the abstract page for that paper and clicking on the PDF link will take you directly to the paper itself if you are a Corporate Member of CEPR, a CEPR Research Fellow or Affiliate or a subscriber to CEPR Discussion Papers.
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DP13051 Are Bureaucrats Really Paid Like Bureaucrats?

Author(s): Ruben Enikolopov

Date of Publication: July 2018

Programme Area(s): LE, PE

Keyword(s): city managers, bureaucrats, pay for performance, incentives of politicians

Abstract: Abstract Traditionally, bureaucrats are viewed as a stereotypical example of employees with flat pay schedules and low-powered incentive schemes. This paper provides evidence that the wages of a particular group of senior bureaucrats - city managers in US cities - are tightly connected to city outcomes. City outcomes affect city managers' wages not only in the city in which they are currently employed, but also in the city in which they work afterwards. At the same time, the salaries of city managers do not react to observable exogenous shocks to city outcomes. These results suggest that the relationship between city outcomes and the wages of city managers reflects a reward for performance, rather than rent extraction, and that the power of these incentives is sufficiently strong.



DP13050 Who benefits from universal child care? Estimating marginal returns to early child care attendance

Author(s): Thomas Cornelissen, Christian Dustmann, Anna Raute, Uta Schönberg

Date of Publication: July 2018

Programme Area(s): LE

Keyword(s): Universal child care, child development, marginal treatment effects

Abstract: In this paper, we examine the heterogeneous treatment effects of a universal child care (preschool) program in Germany by exploiting the exogenous variation in attendance caused by a reform that led to a large staggered expansion across municipalities. Drawing on novel administrative data from the full population of compulsory school entry examinations, we find that children with lower (observed and unobserved) gains are more likely to select into child care than children with higher gains. This pattern of reverse selection on gains is driven by unobserved family background characteristics: children from disadvantaged backgrounds are less likely to attend child care than children from advantaged backgrounds but have larger treatment effects because of their worse outcome when not enrolled in child care.



DP13049 Factors that Fit the Time Series and Cross-Section of Stock Returns

Author(s): Martin Lettau, Markus Pelger

Date of Publication: July 2018

Programme Area(s): FE

Keyword(s): Cross Section of Returns, Anomalies, expected returns, high-dimensional data, Latent Factors, Weak Factors, PCA

Abstract: We develop an estimator for latent asset pricing factors that fit the time-series and cross- section of expected returns. Our estimator generalizes Principal Component Analysis (PCA) by including a penalty on the pricing error in expected returns. We show that our estimator strongly dominates PCA and finds weak factors with high Sharpe-ratios that PCA cannot detect. Studying a large number of characteristic sorted portfolios we find that five latent factors with economic meaning explain well the cross-section and time-series of returns. We show that out-of-sample the maximum Sharpe-ratio of our five factors is more than twice as large as with PCA with significantly smaller pricing errors. Our factors are based on only a subset of the stock characteristics implying that a significant amount of characteristic information is redundant.



DP13048 Innovating in less developed regions: what drives patenting in the lagging regions of Europe and North America

Author(s): Andrés Rodríguez-Pose, Callum Wilkie

Date of Publication: July 2018

Programme Area(s): IT

Keyword(s): Innovation, lagging regions, R&D, patenting, Canada, Europe, United States

Abstract: Not all economically-disadvantaged -“ 'less developed' or 'lagging' - regions are the same. They are, however, often bundled together for the purposes of innovation policy design and implementation. This paper attempts to determine whether such bundling is warranted by conducting a regional level investigation for Canada, the United States, on the one hand, and Europe, on the other, to (a) identify the structural and socioeconomic factors that drive patenting in the less developed regions of North America and Europe, respectively; and (b) explore how these factors differ between the two contexts. The empirical analysis, estimated using a mixed-model approach, reveals that, while there are similarities between the drivers of innovation in North America's and Europe's lagging regions, a number of important differences between the two continents prevail. The analysis also indicates that the territorial processes of innovation in North America's and Europe's less developed regions are more similar to those of their more developed counterparts than to one another.



DP13047 Caseworker's discretion and the effectiveness of welfare-to-work programs

Author(s): Jonneke Bolhaar, Nadine Ketel, Bas van der Klaauw

Date of Publication: July 2018

Programme Area(s): LE

Keyword(s): field experiment, welfare-to-work, caseworkers

Abstract: In this paper we focus on the role of caseworkers in the assignment and take-up of welfare-to-work programs. We conduct a field experiment that generates exogenous variation in the assignment to different policy regimes to caseworkers. The experiment allows us to provide evidence on the effectiveness of welfare-to-work programs and to study how caseworkers exploit their discretion in assigning these programs to welfare recipients. We find substantial heterogeneity in how caseworkers assign welfare-to-work programs. Participation in the experiment and learning about the effectiveness of the different programs does not induce caseworkers to focus more on the effective programs. This implies that obtaining knowledge about welfare-to-work programs is not enough to improve policy, also effort on implementation is required.



DP13046 Gravity and Migration before Railways: Evidence from Parisian Prostitutes and Revolutionaries

Author(s): Morgan Kelly, Cormac Ó Gráda

Date of Publication: July 2018

Programme Area(s): EH


Abstract: Abstract Although urban growth historically depended on large inflows of migrants, little is known of the process of migration in the era before railways. Here we use detailed data for Paris on women arrested for prostitution in the 1760s, or registered as prostitutes in the 1830s and 1850s; and of men holding identity cards or joining the army in the 1790s, to examine patterns of female and male migration. We supplement these with data on all women and men buried in 1833. We find that distance was a stronger deterrent to female migration than to male (consistent with more limited employment opportunities for women) that falls with the appearance of railways. Migration was highest from areas of high living standards, measured by literacy rates, with the largest impact again for women, especially those from higher social classes.



DP13045 The Supply of Skill and Endogenous Technical Change: Evidence From a College Expansion Reform

Author(s): Pedro Carneiro, Kai Liu, Kjell G Salvanes

Date of Publication: July 2018

Programme Area(s): LE

Keyword(s): endogenous technical change, College Reform, Supply of Skills

Abstract: We examine the labor market consequences of an exogenous increase in the supply of skilled labor in several cities in Norway, resulting from the construction of new colleges in the 1970s. We find that skilled wages increased as a response, suggesting that along with an increase in the supply there was also an increase in demand for skill. We also show that college openings led to an increase in the productivity of skilled labor and investments in R&D. Our findings are consistent with models of endogenous technical change where an abundance of skilled workers may encourage firms to adopt skill-complementary technologies, leading to an upward-sloping long-run demand for skill.



DP13044 The Role of Parenthood on the Gender Gap among Top Earners

Author(s): Aline Butikofer, Sissel Jensen, Kjell G Salvanes

Date of Publication: July 2018

Programme Area(s): LE

Keyword(s): Gender Gap, top jobs, parenthood

Abstract: Is the wage penalty due to motherhood larger among highly qualified women? In this paper, we study the effect of parenthood on the careers of high-achieving women relative to high-achieving men in a set of high-earning professions with either nonlinear or linear wage structures. Using Norwegian registry data, we find that the child earnings penalty for mothers in professions with a nonlinear wage structure, MBAs and lawyers, is substantially larger than for mothers in professions with a linear wage structure. The gender earnings gap for MBA and law graduates is around 30%, but substantially less for STEM and medicine graduates, 10 years after childbirth. In addition, we provide some descriptive statistics on the role of fertility timing on the child earnings penalty.



DP13043 Monetary Policy and Macroprudential Policy: Different and Separate?

Author(s): Lars E O Svensson

Date of Publication: July 2018

Programme Area(s): MEF

Keyword(s): Financial Stability, Financial crises, leaning against the wind

Abstract: The paper discusses how monetary and macroprudential policies can be distinguished, how appropriate goals for the two policies can be determined, whether the policies are best conducted separately or coordinately and by the same or different authorities, and how they can be coordinated when desired. The institutional frameworks in Canada, Sweden, and the UK are briefly compared. The Swedish example of monetary policy strongly "leaning against the wind" and the subsequent policy turnaround is summarized, as well as what estimates have been found of the costs and benefits of leaning against the wind.



DP13042 The Rise and Fall of the Natural Interest Rate

Author(s): Gabriele Fiorentini, Alessandro Galesi, Gabriel Pérez-Quirós, Enrique Sentana

Date of Publication: July 2018

Programme Area(s): IMF

Keyword(s): Natural rate of interest, Kalman filter, observability, demographics

Abstract: We document a rise and fall of the natural interest rate (r*) for several advanced economies, which starts increasing in the 1960's and peaks around the end of the 1980's. We reach this conclusion after showing that the Laubach and Williams (2003) model cannot estimate r* accurately when either the IS curve or the Phillips curve is flat. In those empirically relevant situations, a local level specification for the observed interest rate can precisely estimate r*. An estimated Panel ECM suggests that the temporary demographic effect of the young baby-boomers mostly accounts for the rise and fall.



DP13041 When Short-Time Work Works

Author(s): Pierre Cahuc, Francis Kramarz, Sandra Nevoux

Date of Publication: July 2018

Programme Area(s): LE, PE

Keyword(s): Short-time work, unemployment, employment

Abstract: Short-time work programs were revived by the Great Recession. To understand their operating mechanisms, we first provide a model showing that short-time work may save jobs in firms hit by strong negative revenue shocks, but not in less severely-hit firms, where hours worked are reduced, without saving jobs. The cost of saving jobs is low because short-time work targets those at risk of being destroyed. Using extremely detailed data on the administration of the program covering the universe of French establishments, we devise a causal identification strategy based on the geography of the program that demonstrates that short-time work saved jobs in firms faced with large drops in their revenues during the Great Recession, in particular when highly levered, but only in these firms. The measured cost per saved job is shown to be very low relative to that of other employment policies.



DP13040 Mixed Bundling in Retail DVD Sales: Facts and Theories

Author(s): Luís M B Cabral, Gabriel Natividad

Date of Publication: July 2018

Programme Area(s): IO

Keyword(s): mixed bundling; price discrimination; durable goods

Abstract: Many DVD titles are sold in retail stores in bundles, typically a bundle of two different titles with common characteristics: same lead actor/actress, same director, same genre, etc. This suggests that consumer valuations are positively correlated across the bundle components, which in turn runs counter to the received wisdom that bundling is most profitable when valuations are negatively correlated. In this paper, we propose a solution to this puzzle, one that is based on the observation that DVDs are sequentially released durable goods. At the time the second title is released, it is likely that high-valuation buyers will have bought the first one. For this reason, even though ex-ante valuations are positively correlated, ex-post -- that is, at the time the second title is released -- valuations are negatively correlated. We provide sufficient conditions such that mixed bundling increases revenues and the revenue increase is greater the more positively correlated valuations are. We also provide empirical confirmation of this prediction as well as an independent estimate from a calibrated analytical model.



Sophie Roughton
0207 183 8812



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