Highlights 2024

WP 24/07

In "A Peace Baby Boom? Evidence from Colombia's Peace Agreement" Mounu Prem joint with María Elvira Guerra-Cújar, Paul Rodríguez-Lesmes, and Juan F. Vargas study what happens to households’ preferences, perceptions, and constraints regarding fertility choices when violence ends? Using administrative data from Colombia, we find that the end of a long internal conflict differentially increased fertility by 3.2 percent in areas exposed to violence. The effect is present across all reproductive ages and larger in municipalities with higher levels of violence exposure at baseline. This differential fertility increase is not driven by health supply indicators, by the mortality of newborns and infants, or by differential migration. We provide evidence consistent with an increased perception of security, higher returns for childbearing, and more parental investment.

WP 24/06

In "Landmines: The Local Effects of Demining" Mounu Prem joint with Miguel E. Purroy and Juan F. Vargas study the socio-economic impact of anti-personnel landmines removal. These artifacts thwart long-term development. However, mine removal may have no impact on socioeconomic outcomes if it fails to achieve full mine clearance. Using geolocated data on demining operations in Colombia and exploiting its staggered adoption, we show that humanitarian demining increases economic activity and academic achievement, especially where market access is superior. Instead, economic activity does not react to partial demining events that occur as a byproduct of ground military operations. Rather, this alternative demining treatment is more likely to exacerbate extractive activities.

WP 24/05

In "A European Climate Bond" Marco Pagano, together with Irene Monasterolo, Antonia Pacelli and Carmine Russo present a new policy idea. They start from the observation that Europe faces a large climate investment gap: the resources currently budgeted for climate investment programs by the EU and its Member States cover less than half of the investment needs in this area. Based on estimates by the EU commission, the investment gap can be expected to amount to €370 billion per year. To fill this gap, the paper proposes the joint issuance of climate bonds by the European Stability Mechanism. These bonds would be funded by selling greenhouse gas emission allowances via the Emissions Trading System, extended to cover all sectors. This scheme could provide a substantial amount of additional funding to EU climate policies: even in the scenario associated with the lowest possible PDV of future revenues, the fiscal capacity generated by this scheme would be of the same order of magnitude as the funding already budgeted for EU climate policies. Access to the resulting funds would be conditional on countries' performance on the implementation of climate projects. European climate bonds would not only accelerate climate investment, but also meet the demand for a safe, liquid and green asset, increase the resilience of European countries to sovereign crises, as well as promote the greening of both investors' portfolios and monetary policy.

WP 24/04

In “When is Trust Robust?” Daniele Terlizzese, together with Luca Anderlini and Larry Samuelson, argue that an equilibrium with a high level of trust is fragile, as it can be disrupted by the infusion in the society of a small mass of agents that behave as if the prevailing equilibrium were one with low trust. Conversely, an equilibrium with low trust can withstand a much larger infusion of agents believing to be in the high trust equilibrium. The result is a consequence of the convexity of the cost that society imposes on cheaters. The convexity, in turn, follows naturally from the assumption that society punishes more heavily cheaters who are believed not to have a good reason for cheating (called “scoundrels” in the paper). Surprisingly, the fewer are the scoundrels, the more fragile is the high trust equilibrium.

WP 24/03

In "Bayesian estimation of the normal location model: A non-standard approach", Franco Peracchi, together with Giuseppe De Luca and Jan R. Magnus, consider estimating the location parameter in the normal location model and study the sampling properties of estimators derived from a Bayesian approach that places a prior on a scaled version of the location parameter, interpreted as the `population t-ratio'. This non-standard approach is motivated by the fact that, in model selection and model averaging, it is the t-ratio rather than the parameter estimate that plays an important role. They show that the finite-sample distribution of the proposed estimators is not centered at the value of the target parameter, and is generally non-normal. They also show that the speed at which the estimation bias vanishes as the sample size increases critically depends on the choice of prior. In the asymptotic theory, they prove uniform √n-consistency of the proposed estimators and obtain their asymptotic distribution under a general moving-parameter setup that includes both the fixed-parameter and the local-parameter settings as special cases. Their results have direct implications for the WALS estimator of Magnus, Powell and Prüfer (2010) and may also be helpful for other model selection or model averaging procedures.

WP 24/02

In “Tournament Auctions” Luca Anderlini and GaOn Kim examine auctions in which all but one of the participants bid first to gain the opportunity to compete with the last bidder. Only the winner of the first round competes with the last bidder in a second-price round. This second round finally assigns the object to be sold to the highest of the two bidders. At first sight this may look like a twist on a standard auction format, but instead it has unexpected features. Bidders in the first round consistently bid above their values. If the last bidder is sufficiently stronger than the others and there are sufficiently many bidders, the tournament auction increases the expected revenue for the auctioneer relative to the standard auction format.

WP 24/01

In "Fear to Vote: Explosions, Salience, and Elections" Mounu Prem, together with Juan F. Vargas, Miguel E. Purroy, Felipe Coy, and Sergio Perilla study how antipersonnel landmines thwart democratic accountability and the consolidation of post-conflict democratic institutions. They do so by exploiting the randomness in the timing of landmine explosions relative to election days, comparing the electoral outcomes of voting polls located close to a pre-election explosion with those of polls near a post-election blast. They show that landmine explosions are salient stimuli that pro- duce fear, reducing political participation. While the turnout reduction takes place across the ideological spectrum, they document that the explosions induce shifts in the political preferences of individuals who do vote, which are inconsistent with retrospective voting.