FACHBEREICH WIRTSCHAFTSWISSENSCHAFTEN DEPARTMENT OF ECONOMICS B ONN E CON N EWS

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1 FACHBEREICH WIRTSCHAFTSWISSENSCHAFTEN DEPARTMENT OF ECONOMICS B ONN E CON N EWS Universität Bonn, Adenauerallee 24-42, D Bonn Redaktion / Editing: Regina Haverkamp, Fachbereich Wirtschaftswissenschaften Phone: +49 (0) ; Fax: +49 (0) ; econnews@uni-bonn.de No. 464 VERANSTALTUNGEN / ACTIVITIES: January 18-22, 2016 Tuesday, Jan 19, 2016 IZA Research Seminar 12:00, IZA, Schaumburg-Lippe-Str. 9 Finance and Insurance Seminar 12:00, Juridicum, Faculty Lounge, Room Bonn Law Econ Workshop 18:00, Juridicum, Room 055 Wednesday, Jan 20, 2016 Micro Workshop BGSE 12:00, Juridicum, Room 055 Macro/Econometrics/Finance Workshop 12:30, Juridicum, Fakultätszimmer MPI Econ Workshop 14:00, MPI, Kurt-Schumacher-Straße 10, Seminarzimmer, Ground Floor Micro Theory Seminar 16:30, Juridicum, Fakultätszimmer Thursday, Jan 21, 2016 Macrohistory Seminar 12:15 Kaiserplatz 7 9, Room Special Lecture 16:15, Juridicum, Lecture Hall K Friday, Jan 22, 2016 Applied Micro Workshop 12:15, Juridicum, Room th Manchot Lecture 17:15 Juridicum, Lecture Hall C Marco Manacorda, Queen Mary Univ. of London and IZA Liberation Technology: Mobile Phones and Political Mobilization in Africa Eva Schliephake, Univ of Bonn Capital Regulation, Shadow Lending and Competition Georg von Wangenheim, Univ. of Kassel Failing to Protect the Tenant How Restricting the Landlord s Right to Pass on Modernization Costs to Tenants Increases Rents Dezsö Szalay, Univ. of Bonn Delegated Information Acquisition, Authority, and Communication Jens Herold, BGSE Monetary Policy Rules and Demographic Change Nicolas Roux, MPI Bonn Monitoring, Transparency and Accountability Brett Green, Univ. of Berkeley On Breakthroughs, Deadlines, and the Nature of Progress: Contracting for Multistage Projects Faustine Perrin, Univ. of Lund Gender Equality during the French Development Process Susan Athey, Stanford Univ. Machine Learning meets Econometrics: Heterogeneous Treatment Effects in Experiments and Observational Studies Johannes Abeler, Univ. of Oxford Preferences for Truth -Telling Susan Athey, Stanford Univ. The internet and the News Media

2 IZA RESEARCH SEMINAR Marco Manacorda, Queen Mary Univ. of London and IZA Liberation Technology: Mobile Phones and Political Mobilization in Africa (with Andrea Tesei) Can digital information and communication technology foster mass political mobilization? We use a novel geo-referenced dataset for the entire African continent between 1998 and 2012 on the coverage of mobile phone signal together with georeferenced data from multiple sources on the occurrence of protests and on individual participation in protests to bring this argument to empirical scrutiny. We find that mobile phones are instrumental to mass mobilization when reasons for grievance emerge, i.e during economic downturns. Estimated effects are if anything larger once we use an instrumental variable approach that relies on differential trends in coverage across areas with different incidence of lightning strikes. We show that these results are in line with insights from a network model with imperfect information: recessions increase the probability of a protest occurring, as they decrease individuals opportunity cost of participation, and this effect gets magnified by strategic complementarities in protest provision. Mobile phones amplify this effect, as they make individuals more responsive to both changes in economic conditions - a mechanism that we ascribe to enhanced information - and to their neighbors participation - a mechanism that we ascribe to enhanced coordination. Empirically both effects are at play, but the first effect dominates, highlighting the channels through which digital ICT can alleviate the collective action problem. FINANCE AND INSURANCE SEMINAR Eva Schliephake, Univ Bonn Capital Regulation, Shadow Lending and Competition (with David Martinez-Miera) We analyze endogenous competition and capital regulation of banks that are confronted with the competitive pressure of shadow banks and its impact on the stability of the whole financial system. We define banks as those financial institutions that have access to the safety net and underlie banking regulation in exchange. Shadow banks are those institutions that are not covered by the safety net but also do not have to comply with regulation. Tightening regulation may increase bank stability but can also result in higher funding cost, which can translate into lower credit. Bank regulators trade-off these two effects when setting the optimal regulation. A more competitive shadow banking sector might negatively affect the stability but can absorb a part of the credit loss steaming from tighter regulation. We show, how, when the banking sector is not competitive enough, a more competitive shadow banking sector can result in tighter bank regulation, safer banks and higher welfare. However, in already highly competitive banking sectors the coexistence of shadow banking may be detrimental for welfare. BONN LAW ECON WORKSHOP Georg von Wangenheim, Univ. Kassel Failing to Protect the Tenant How Restricting the Landlord s Right to Pass on Modernization Costs to Tenants Increases Rents Residential rent control legislation in Germany is based on caps on rent increases for sitting tenants. The cap for so-called ordinary rent increases is given by the reference rent customary in the locality BONN ECON NEWS NO. 464 PAGE 2

3 ( Vergleichsmiete ), which is defined as the average rent agreed upon in new rental agreements over the previous four years. The landlord may increase the rent above the reference rent only in two cases. One is a swap of tenants, the other is an extraordinary rent increase following modernization of the building, for example with improvements of thermal efficiency or interior design features. While in the first case the contracting parties are mostly free to agree on any rent level, the extraordinary rent increase in the second case is capped at a certain percentage of the modernization costs. In an effort to alleviate the financial burden of modernizations on tenants, the government coalition intends to lower this percentage. We show that such a move will not only lead to fewer landlords modernizing their property, but that those landlords who do modernize will do so more extensively. This results in higher extraordinary rent increases for tenants in buildings undergoing modernization and more frequent displacement of weak incumbent tenants through more affluent ones. The intended reform will therefore fail in achieving its desired effects and will often induce even opposite effects. MICRO WORKSHOP BGSE Dezsö Szalay, Univ. of Bonn Delegated Information Acquisition, Authority, and Communication A decision-maker needs to make a choice. Having no time time to acquire information before deciding herself, the decision maker is forced to rely on delegated expertise. Should she delegate decision-making to the expert as well or should she have him report back to her? Unable to control breadth and depth of the issues the expert looks into directly, communication serves as an indirect means of keeping the expert's information acquisition in check. If the expert pays relatively too much attention to issues of relevance only to himself, then the decision-maker counterbalances the expert's overly enthusiastic recommendations by a more conservative decision-making policy. In contrast, delegated decision-making has no such provision and makes the expert look into issues of interest only to himself. The pareto best equilibria under communication are always better for the decision-maker than the outcome under delegated decision-making; for relatively badly aligned interests, all communication equilibria are better than the delegation outcome. MACRO/ECONOMETRICS/FINANCE WORKSHOP Jens Herold, BGSE Monetary Policy Rules and Demographic Change Do economies with aging societies react more strongly to monetary policy shocks that work through the asset price channel? And should the central bank take asset prices into account when deciding its monetary policy?using a synthesis of an OLG model that represents the demand-side of the economy and a NK model representing the supply side - this paper models responses to monetary policy under different demographic profiles. Additionally, the effectiveness of monetary policy will be discussed under a new Taylor rule that accounts for changes in asset prices. MPI ECON WORKSHOP Nicolas Roux, MPI Bonn Monitoring, Transparency and Accountability Directors' reputation suffers from governance failures regardless of whether they are at fault. Because their career prospects strongly depend on their reputation, they have strong incentives to monitor the BONN ECON NEWS NO. 464 PAGE 3

4 executives. On the other hand, if their oversight reveals a governance failure, they are tempted to sweep it under the rug. This disclosure issue makes their oversight less deterrent, and in turn undermines their motivation to engage in monitoring. This paper asks whether reducing the ability of directors to hide bad news helps mitigate this problem. We study the question in a standard disclosure model, where the director decides how much information to acquire about an output, and whether to report it to a principal (the shareholders, the market...). The novelty is the presence of an agent, the executive, whose effort controls the value of the output. In this model, reducing the ability of directors to hide bad news means informing the principal about how much the director knows, i.e. making the monitoring effort transparent. We show that it is not always desirable to make monitoring transparent and that it depends on the strength of the director's and the executive's incentives. MICRO THEORY SEMINAR Brett Green, Univ. of Berkeley On Breakthroughs, Deadlines, and the Nature of Progress: Contracting for Multistage Projects We study the optimal incentive schemes for multistage projects. Staged financing, pervasive in both venture capital and research grants, arises as a feature of the optimal contract. The nature of progress plays an important role. When progress is tangible, incentives are provided through a series of deadlines and a reward scheme that decreases over time. Early progress in one stage gives the agent more time and funding to complete the next one. When progress is intangible, unverifiable progress reports are used despite the fact that the information in the report has no social value. The optimal contract involves a soft deadline wherein the principal guarantees funding up to a certain date if the agent reports progress at that date, then the principal gives him a relatively short deadline to complete the project if not, then a probationary phase begins in which the project is terminated at a constant rate until progress is reported. We explore the implications for welfare and optimal project design. MACROHISTORY SEMINAR Faustine Perrin, Univ. of Lund Gender Equality during the French Development Process The enlightenment of the long-run relationship between gender equality and economic growth is hampered by the lack of information and resources on the various dimensions of gender equality. This paper is a first attempt to assess the size of the gender gap in a historical perspective. Exploiting a unique census-based dataset of 86 French counties in the mid-19th century, I construct a Historical Gender Gap Index measuring the size of the gap between men and women in three critical areas: economic opportunities, educational attainment, and health. The county comparisons afford the identification of the strengths and weaknesses of French regions in closing the gender gap. I find that France can be divided into two main areas. In particular, I show that Northern counties that have succeeded the best in narrowing the gap display better economic performance. SPECIAL LECTURE Susan Athey, Stanford Univ. Machine Learning meets Econometrics: Heterogeneous Treatment Effects in Experiments and Observational Studies BONN ECON NEWS NO. 464 PAGE 4

5 APPLIED MICRO WORKSHOP Johannes Abeler, Univ. of Oxford Preferences for Truth -Telling Private information is at the heart of many economic activities. In recent years, a mostly experimental literature has evolved across economics, psychology and sociology that tries to empirically understand how people report private information. The experimental paradigm that has been used most widely is due to Fischbacher & Föllmi-Heusi (JEEA 2013): subjects roll a die in private, report their outcome and get a monetary payoff proportional to their report. In this paper, we document the empirical patterns shown by this burgeoning literature and formalize and generalize the suggested reasons for the observed behaviour. We then conduct new experiments to disentangle these reasons and show that none of the proposed models is able to explain the data. We compile a list of stylized facts that any model of lying behaviour should be able to explain and provide one example utility function that does. 11 TH MANCHOT LECTURE SEE ATTACHED POSTER Redaktionsschluss / Deadline BONN ECON NEWS No. 465 WEDNESDAY, JAN 20, :00 BONN ECON NEWS by (pdf): send to majordomo@listserv.uni-bonn.de with "subscribe econ-news" or "unsubscribe econ-news" in the body of the BONN ECON NEWS NO. 464 PAGE 5

6 The Bonn Graduate School of Economics in collaboration with the Universitätsgesellschaft Bonn proudly announces the 11 th Manchot Lecture sponsored by the Jürgen Manchot Stiftung and to be delivered by Professor Susan Athey The Economics of Technology Professor Professor of Economics (by courtesy), School of Humanities and Sciences Graduate School of Business Stanford University The Internet and the News Media Friday, January 22 nd, 2016 at 17:15 Juridicum, Adenauerallee 24-42, lecture hall C The Manchot Lecture is open to the public and addresses a general audience interested in economic research.