ניירות דיון 2021


1-2021 "Globalization and Global Crises: Rest of the World vs. Israel"

Assaf Razin


Post WWII globalization forces are facing headwinds in the form of global crises-the “The Great Recession” and the “The Pandemic Recession”. Israel’s trade and financial globalization, however, is steadily rising. The pandemic-induced slump in economic activity is deep, as consumer spending, investment spending, and export demand tumble. Central banks, tied down by the zero interest rate, resort to semi-fiscal expansionary policies. Indeed, the stabilization burden falls on fiscal policy. The paper provides an overview of the new globalization trends in the world and in Israel, with emphasis on the role of global crises, the Global Financial Crisis, and the Pandemic Crisis in changing globalization long-term trends. When the coronavirus hit, supply chains and production have been disrupted. However, the impact of the pandemic shock is not on the supply side only. On the demand side, the desire to invest has plunged, while people across the rich world are now saving much of their income. Would this short-term changes can reinforce the re-trending of the globalization, which is observed since the Global Financial Crisis? The paper focuses on the issue and provides different observation in comparing the advanced economies and Israel.

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2-2021 "Strong Employers and Weak Employees: How Does Employer Concentration Affect Wages?"

Efraim Benmelech, Nittai K. Bergman, Hyunseob Kim


We analyze the effect of local-level labor market concentration on wages. Using plant-level U.S. Census data during 1978–2016, we find that: (1) local-level employer concentration exhibits substantial cross-sectional variation; (2) consistent with labor market monopsony power, there is a negative relation between local-level employer concentration and wages that strengthens over time; (3) instrumenting concentration with merger activity shows that increased employer concentration decreases wages; (4) the negative relation between employer concentration and wages increases when unionization rates are low; and (5) the link between productivity growth and wage growth is stronger when labor markets are less concentrated. Our results emphasize the role of local labor market monopsonies in influencing firm wage-setting.

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Publlished in Journal of Human Resources, April 2022, 57 (S) S200-S250


3-2021 "Financing Labor"

Efraim Benmelech, Nittai K. Bergman, Amit Seru


Financial market imperfections can have significant impact on employment decisions of firms. We illustrate the economic importance of this channel by showing that employment decisions are constrained by _firms' financial health and liquidity. Our main analysis uses a collage of three `quasi-experiments' to trace the effects of finance on employment. The results suggest that _financial constraints and the availability of credit play an important role in _firm-level employment decisions, as well as aggregate unemployment outcomes.

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Review of Finance, Volume 25, Issue 5, September 2021, Pages 1365–1393

4-2021 "Non-Manipulable Machine Learning: The Incentive Compatibility of Lasso"

Mehmet Caner, Kfir Eliaz


We consider situations where a user feeds her attributes to a machine learning method that tries to predict her best option based on a random sample of other users. The predictor is incentive-compatible if the user has no incentive to misreport her covariates. Focusing on the popular Lasso estimation technique, we borrow tools from high-dimensional statistics to characterize sufficient conditions that ensure that Lasso is incentive compatible in large samples. In particular, we show that incentive compatibility is achieved if the tuning parameter is kept above some threshold. We present simulations that illustrate how this can be done in practice.

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5-2021 "On-call jobs: Contracts with lumpy effort"

Daniel Bird, Alexander Frug


An agent performs randomly arriving tasks that are rare and “difficult,” and a principal may provide frequent but low-value compensation. We characterize the optimal contract for both the case where the principal observes the arrival of opportunities and the case where the agent may conceal them from the principal. The optimal contracts reveal appealing qualitative features that vary with the assumed information structure and the players’ discount rates. Unless the players use the same discount rate and opportunities are observable, the players’ ability to realize gains from interaction decreases when the degree of “lumpiness” in opportunities increases.

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Submitted to Journal of the European Economic Association


6-2021 "Optimal Contracts with Randomly Arriving Tasks"

Daniel Bird, Alexander Frug


Workers are rarely assigned to perform the same task throughout their career. Instead, their assignments may change randomly over time to comply with the fluctuating needs of the organisation where they are employed. In this paper, we show that this typical randomness in workplaces has a striking effect on the structure of long-term employment contracts. In particular, simple intertemporal variability in the worker's tasks is sufficient to generate a rich promotion-based dynamics in which, occasionally, the worker receives a (permanent) wage raise and his future work requirements are reduced.

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Published in The Economic Journal, Volume 131, Issue 637, July 2021, Pages 1905–1918


7-2021 "The Macroeconomics of Automation: Data, Theory, and Policy Analysis"

Nir Jaimovich, Itay Saporta-Eksten, Henry Siu, Yaniv Yedid-Levi


During the last four decades, the U.S. has experienced advances in automation and a fall in the employment in middle-wage, "routine-task-intensive," occupations. These processes have been at the center of policy discussions aimed at those who were adversely affected by automation. We contribute to these discussions by developing an empirically relevant general equilibrium model, featuring heterogeneous agents, labor force participation, occupational choice, and investment in physical and automation capital. We use this framework to evaluate the allocation and welfare distributional consequences of different polices. First, we consider the retraining of workers who were adversely affected by automation. Second, we consider redistribution policies that transfer resources to these workers. Our framework emphasizes general equilibrium effects such as displacement effects of retraining programs, complementarities between the various factors of production, and the effects of distortionary taxation that is required to fund these programs.

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Published in Journal of Monetary Economics Available online 8 July 2021


8-2021 "How Bayesian Persuasion can Help Reduce Illegal Parking and Other Socially Undesirable Behavior"

Pen´elope Hern´andez and Zvika Neeman


We consider the question of how best to allocate enforcement resources across different locations with the goal of deterring unwanted behaviour. We rely on “Bayesian persuasion” to improve deterrence. We focus on the case where agents care only about the expected amount of enforcement resources given messages received. Optimization in the space of induced mean posterior beliefs involves a partial convexification of the objective function. We describe interpretable conditions under which it is possible to explicitly solve the problem with only two messages: “high enforcement” and “enforcement as usual.” We also provide a tight upper bound on the total number of messages needed to achieve the optimal solution in the general case, as well as a general example that attains this bound.

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Accepted to American Economic Journal: Microeconomics


9-2021 "Politics and Gender in the Executive Suite"

Alma Cohen, Moshe Hazan and David Weiss


Are the political preferences of CEOs associated with the representation and compensation of women in the executive suite? We find that Democratic CEOs (those who contribute more to Democratic candidates) are associated with higher representation of women in the executive suite. To explore causality, we use an event study approach and show that replacing a Republican with a Democratic CEO is associated with 20%-60% in more women in m the executive suite. Finally, we show that Democratic CEOs associated with a significant reduction (or even disappearance) of the gender gap in the level and performance-sensitivity of executive pay.

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10-2021 "Getting Beneath the Veil of Intergenerational Mobility: Evidence from Three Cities"

Oren Danieli, Tanaya Devi and Roland G. Fryer, Jr.


We develop a data driven way to design the optimal policy experiment for increasing chances of escaping poverty. We collected data from in-person surveys of almost 1,000 individuals who were reared in poverty in Memphis, Tulsa, and New Orleans, and asked about their childhood health, parental income, home environment as a child, childhood experiences, lifetime traumas, neighborhood safety, a host of psychological skills, beliefs, and current income. Using typical descriptive approaches to motivate an intervention implicitly assumes one can alter individual characteristics in any way the data deem predictive – e.g. sending youth to college to increase future income, regardless of any adverse childhood experiences – even if one rarely observes adults with adverse childhoods going to college in the data. We replace this assumption with four axioms about the cost of altering any combination of individual characteristics. Under these axioms, the optimal experiment replicates the way people escape poverty in real life. We test our method using a case where a data-driven experiment was already run, as well as simulations. We also analyze the robustness of the results if one of the axioms is violated. We find that educational attainment is the most important determinant of mobility. Yet, many other variables – traditionally ignored by economists – are almost equally important predictors: resilience, Big  personality skills, grit, self-esteem, the number of adults trusted, trouble with the police when young, and other adverse childhood experiences. Fathers present in own neighborhood did not matter. This suggest that income-increasing interventions for the poor need to be broader than simply human capital or place-based policies.

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11-2021 “The Deterrence Effect Revisited: Spatial Analysis of the Impact of Police Presence on the Probability of Crime”

Toger Marina, Benenson Itzhak, Weisburd Sarit 


Smart data-driven policing aims to achieve maximum visibility, short response times, and minimal crime with limited resources. At the heart of data driven policing, there is a need to understand how the spatiotemporal patterns of police presence impact the occurrence and distribution of crime. The causal impact of police presence on crime remains a mystery with some researchers finding that relocating police forces did not significantly impact crime occurrence, while others report that concentrated police presence decreases the probability of crime in the area.  Recently available high-resolution spatial data on police presence and emergency calls to police enable revisiting this question with big-data analysis techniques. In this project, we analyse detailed AVL records of police locations alongside crime locations, time-stamped from 911 call records in Dallas, Texas USA during 2009. We develop a statistical model of spatiotemporal dependence between police vehicles and emergency calls and document the correlation between the location of law enforcement and the probability of reported misconduct. The critical issue of significance of the revealed dependency is studied with the help of statistical simulation, based on randomised datasets: mapping out the relationship void of any interaction effect between police and crime and contrast these simulations to what is actually observed in the data  We find that the proximity of police officers to a given location is more likely to be positively correlated with an increase in future crime than a decrease, even when controlling for geographic fixed effects. We suggest possible mechanisms for this relationship and discuss the implications for optimising preventative patrol with the goal of reducing crime.

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12-2021 "Marketization and the Fertility of Highly Educated Women along the Extensive and Intensive Margins"

Moshe Hazan, David Weiss, Hosny Zoabi


This paper documents a convergence in fertility rates along the extensive and intensive margins between women with advanced degrees and other women over the last four decades in the U.S. It then estimates the effect of the cost of home production substitutes on fertility in the extensive and intensive margins, and allows this effect to vary by women’s educational group. The decline in thee cost of home production substitutes, relative to a highly educated woman’s own wage can explain 11.9% of the increase in the number of own children in the household. When looking separately at the intensive and extensive margins, it finds that the decline in relative childcare cost can account for 6.6% of the increase in fertility in the intensive margin and 16.1% of the decline in childlessness rates of women with advanced degrees.

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13-2021 "Economic Theory: Economics, Methods and Methodology"

Itzhak Gilboa, Andrew Postlewaite, Larry Samuelson and David Schmeidler


Economic theory comprises three types of inquiry. One examines economic phenomena, one develops analytical tools, and one studies the scienti…c endeavor in economics in general and in economic theory in particular. We refer to the first as economics, the second as the development of economic methods, and the third as the methodology of economics. The same mathematical result can often be interpreted as contributing to more than one of these categories. We discuss and clarify the distinctions between these categories, and argue that drawing the distinctions more sharply can be useful for economic research.

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14-2021 "Sampling-Based Reasoning and the Emergence of Reciprocity"

Ran Spiegler


I study an infinite-horizon trust game, in which at each period, a distinct player chooses whether to put trust in the next player. Players are limited to bounded-recall strategies. Each player forms his belief regarding his opponent’s strategy on the basis of sample data, drawn from the long-run play path. In equilibrium, players best-reply to their belief. I demonstrate how the combination of sampling error and the representative-sample aspect of players’’sampling procedure lead to the emergence of reciprocal behavior.

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