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Working Papers
Journal Publications
| To Segregate or to Integrate: Education Politics and Democracy, with David de la Croix.
Forthcoming, Review of Economic Studies.
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| Occupational Choice and the Spirit of Capitalism, with Fabrizio Zilibotti.
Quarterly Journal of Economics, May 2008.
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| Inflation and the Redistribution of Nominal Wealth, with Martin Schneider.
Journal of Political Economy, December 2006.
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| Aggregate Implications of Wealth Redistribution: The Case of Inflation, with Martin Schneider.
Journal of the European Economic Association, April-May 2006.
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| Dynamic Mechanism Design with Hidden Income and Hidden Actions, with Robert Townsend.
Journal of Economic Theory, January 2006.
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| The Macroeconomics of Child Labor Regulation, with Fabrizio Zilibotti.
American Economic Review, December 2005.
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| Child Mortality and Fertility Decline: Does the Barro-Becker
Model Fit the Facts? Journal of Population Economics, June 2005.
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| Social Class and the Spirit of Capitalism, with Fabrizio Zilibotti.
Journal of the European Economic Association, April-May 2005.
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| Show Me the Money: Retained Earnings and the Real
Effects of Monetary Shocks.
Recherches Economiques de Louvain, 1/2005.
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| Accounting for Fertility Decline During the Transition to Growth.
Journal of Economic Growth, September 2004.
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| Public versus Private Education when Differential Fertility Matters,
with David de la Croix.
Journal of Development Economics, April 2004.
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| Inequality and Growth: Why Differential Fertility Matters,
with David de la Croix.
American Economic Review, September 2003.
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Other Publications
Women's Liberation: What's in It for Men?
With Michèle Tertilt
Abstract:
The nineteenth century witnessed dramatic improvements in the legal
rights of married women. Given that these changes took place long
before women gained the right to vote, they amounted to a voluntary
renouncement of power by men. In this paper, we investigate men's
incentives for sharing power with women. In our model, women's legal
rights set the marital bargaining power of husbands and wives. We
show that men face a tradeoff between the rights they want for their
own wives (namely none) and the rights of other women in the
economy. Men prefer other men's wives to have rights because men
care about their own daughters and because an expansion of women's
rights increases educational investments in children. We show that
men may agree to relinquish some of their power once technological
change increases the importance of human capital. We corroborate our
argument with historical evidence on the expansion of women's rights
in England and the United States.
Keywords: Women's Rights, Political Economy, Human Capital, Return to Education.
The paper (March 2008):
[ PostScript | PDF ]
A non-technical summary: Women's Rights: What's in It for Men? (published in
Vox).
The Baby Boom and World War II: A Macroeconomic Analysis
With Moshe Hazan
and Yishay Maoz
Abstract:
We argue that one major cause of the U.S. postwar baby boom was the
increased demand for female labor during World War II. We develop a
quantitative dynamic general equilibrium model with endogenous
fertility and female labor-force participation decisions. We use the
model to assess the long-term implications of a one-time demand
shock for female labor, such as the one experienced by American
women during wartime mobilization. For the war generation, the shock
leads to a persistent increase in female labor supply due to the
accumulation of work experience. In contrast, younger women who turn
adult after the war face increased labor-market competition, which
impels them to exit the labor market and start having children
earlier. In our calibrated model, this general equilibrium effect
generates a substantial baby boom followed by a baby bust, as well
as patterns for age-specific labor-force participation and fertility
rates that are consistent with U.S data.
Keywords: Fertility, Female Labor-Market Participation, Baby Boom, World War II.
The paper (December 2007):
[ PostScript | PDF ]
A non-technical summary:
[ PDF ]
Colonies
With Andrea Eisfeldt
Abstract:
In many developing countries, the institutional framework governing
economic life has its roots in the colonial period, when the
interests of European settlers clashed with those of the native
population or imported slaves. We examine the economic
implications of this conflict in a framework where institutions are
represented by the number of people with property-rights protection,
i.e., "gun owners." In the model, gun owners can protect their own
property, they can exploit others who do not own guns, and they may
decide to extend property rights by handing out guns to previously
unarmed people. The theory generates a "reversal of fortune"
between colonies with many and few oppressed: income per capita is
initially highest in colonies with many oppressed that can be exploited
by gun owners, but later on excessive concentration of economic
power becomes a hindrance for development.
Keywords: Colonization, Property Rights, Slavery, Development.
The paper (January 2007):
[ PostScript | PDF ]
Origins and Consequences of Child Labor Restrictions: A Macroeconomic Perspective
With Dirk Krueger
Abstract:
In this paper we investigate the positive and normative consequences
of child-labor restrictions for economic aggregates and welfare. We
argue that even though the laissez-faire equilibrium may be
inefficient, there are usually better policies to cure these
inefficiencies than the imposition of a child-labor ban. Given this
finding, we investigate the potential political-economic reasons
behind the emergence and persistence of child-labor legislation. Our
investigation is based on a structural dynamic general equilibrium
model that provides a coherent and uniform framework for our
analysis.
Keywords: Child Labor, Welfare, Efficiency, Political Economics.
The paper (October 2006):
[ PostScript | PDF ]
Inflation as a Redistribution Shock: Effects on Aggregates and Welfare
With Martin Schneider
Abstract:
Episodes of unanticipated inflation reduce the real value of nominal
claims and thus redistribute wealth from lenders to borrowers. In
this study, we consider redistribution as a channel for aggregate
and welfare effects of inflation. We model an inflation episode as
an unanticipated shock to the wealth distribution in a quantitative
overlapping-generations model of the U.S. economy. While the
redistribution shock is zero sum, households react asymmetrically,
mostly because borrowers are younger on average than lenders. As a
result, inflation generates a decrease in labor supply as well as an
increase in savings. Even though inflation-induced redistribution
has a persistent negative effect on output, it improves the weighted
welfare of domestic households.
Keywords: Inflation, Redistribution, Welfare.
The paper (May 2006):
[ PostScript |
PDF ]
To Segregate or to Integrate:
Education Politics and Democracy
With David de la Croix
Forthcoming, Review of Economic Studies.
Abstract:
How is the quality of public education affected by the presence of
private schools for the rich? Theory and evidence suggest that the
link depends crucially on the political system. We develop a
theory that integrates private education and fertility decisions
with voting on public schooling expenditures. We find that the
presence of a large private education sector benefits public schools
in a broad-based democracy where politicians are responsive to
low-income families, but crowds out public-education spending in a
society that is politically dominated by the rich. The main
predictions of the theory are consistent with state-level and micro
data from the United States as well as cross-country evidence from
the PISA study.
Keywords: Public Education, Private Education, Probabilistic Voting, Democracy.
The paper (July 2008):
[ PostScript | PDF ]
A non-technical summary: Politics and
the Structure of Eduation Funding (published in
Vox).
The same in French:
Financement privé de l'éducation, inégalités
et démocratie.
Occupational Choice and the Spirit of Capitalism
With Fabrizio Zilibotti
Quarterly Journal of Economics, 123(2), 747-793, May 2008.
Abstract:
The British Industrial Revolution triggered a reversal in the social
order whereby the landed elite was replaced by industrial
capitalists rising from the middle classes as the economically
dominant group. Many observers have linked this transformation to
the contrast in values between a hard-working and thrifty middle
class and an upper class imbued with disdain for work. We propose an
economic theory of preference formation in which both the divergence
of attitudes across social classes and the ensuing reversal of
economic fortunes are equilibrium outcomes. In our theory, parents
shape their children's preferences in response to economic
incentives. If financial markets are imperfect, this results in the
stratification of society along occupational lines. Middle-class
families in occupations that require effort, skill, and experience
develop patience and work ethic, whereas upper-class families
relying on rental income cultivate a refined taste for leisure.
These class-specific attitudes, which are rooted in the nature of
pre-industrial professions, become key determinants of success once
industrialization transforms the economic landscape.
Keywords: Endogenous Preferences, Social Classes, Stratification, Industrial Revolution.
The article:
[ PDF ]
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Working paper version (September 2007):
[ PostScript |
PDF ]
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Inflation and
the Redistribution of Nominal Wealth
With Martin Schneider
Journal of Political Economy, 114(6), 1069-1097, December 2006.
Abstract:
This study quantitatively assesses the effects of inflation through
changes in the value of nominal assets. It documents nominal asset
positions in the United States across sectors and groups of
households and estimates the wealth redistribution caused by a
moderate inflation episode. The main losers from inflation are rich,
old households, the major bondholders in the economy. The main
winners are young, middle-class households with fixed-rate mortgage
debt. Besides transferring resources from the old to the young,
inflation is a boon for the government and a tax on foreigners.
Lately, the amount of U.S. nominal assets held by foreigners has
grown dramatically, increasing the potential for a large
inflation-induced wealth transfer from foreigners to domestic
households.
Keywords: Inflation, Redistribution.
Aggregate Implications of Wealth Redistribution:
The Case of Inflation
With Martin Schneider
Journal of the European Economic Association, 4(2-3), 493-502,
April-May 2006.
Abstract:
This paper shows that a zero-sum redistribution of wealth within a
country can have persistent aggregate effects. Motivated by the case
of an unanticipated inflation episode, we consider redistribution
shocks that shift resources from old to young households. Aggregate
effects arise because there are asymmetries in the reaction of
winners and losers to changes in wealth. We focus on two sources of
asymmetries: differences in the average age of winners and losers,
and differences in their labor force status.
Keywords: Redistribution, Aggregate Effects.
Dynamic Mechanism Design with Hidden Income and Hidden Actions
With Robert M. Townsend
Journal of Economic Theory 126(1), 235-285, January 2006.
Abstract:
We develop general recursive methods to solve for optimal
contracts in dynamic principal-agent environments with hidden
states and hidden actions. In our baseline model, the principal
observes nothing other than transfers. Nevertheless, optimal
incentive-constrained insurance can be attained. Starting from a
general mechanism with arbitrary communication, randomization,
full history dependence, and without restrictions on preferences
or technology, we show how the optimal contract can be efficiently
implemented as a recursive direct mechanism. Our methods
generalize to environments with multiple actions and additional
states, some of which may be observable.
The key to implementing these extensions is to
introduce multiple layers of off-path utility bounds.
Keywords: Mechanism Design, Partial Insurance, Dynamic Contracts.
Earlier versions with additional proofs and
numerical results:
The Macroeconomics of Child Labor Regulation
With Fabrizio Zilibotti
American Economic Review 95(5), 1492-1524, December 2005.
Abstract:
We develop a positive theory of the adoption of child labor laws.
Workers who compete with children in the labor market support the
introduction of a child labor ban, unless their own working
children provide a large fraction of family income. Fertility
decisions lock agents into specific political preferences, and
multiple steady states can arise. The introduction of child labor
laws can be triggered by skill-biased technological change that
induces parents to choose smaller families. The theory can account
for the observation that in Britain regulations were first
introduced after a period of rising wage inequality, and coincided
with rapid fertility decline.
Keywords: Child Labor, Voting, Fertility, Inequality.
An earlier version of this paper circulated under the title:
"Voting with your Children: A Positive Analysis of Child-Labor Laws."
Read an article in
The Region about this paper:
Why Johnny Can't Work
A static version of the model
that illustrates the main ideas in a simplified framework (useful for teaching purposes).
Child Mortality and Fertility Decline: Does the Barro-Becker
Model Fit the Facts?
Journal of Population Economics 18(2), 337-366, June 2005.
Abstract:
I compare the predictions of three variants of the altruistic
parent model of Barro and Becker for the relationship between
child mortality and fertility. In the baseline model fertility
choice is continuous, and there is no uncertainty over the number
of surviving children. The baseline model is contrasted to an
extension with discrete fertility choice and stochastic mortality
and a setup with sequential fertility choice. The quantitative
predictions of the models are remarkably similar. While in each
model the total fertility rate falls as child mortality declines,
the number of surviving children increases. The results suggest
that factors other than declining infant and child mortality are
responsible for the large decline in net reproduction rates
observed in industrialized countries over the last century.
Keywords: Fertility, Infant Mortality, Child Mortality,
Demographic Transition.
Social Class and the Spirit of Capitalism
With Fabrizio Zilibotti
Journal of the European Economic Association 3(2-3), 516-524, April-May 2005.
Abstract:
The British Industrial Revolution was a time of major
socio-economic transformations. We review a number of recent
economic theories which analyze the transition from a
preindustrial world characterized by high fertility, stationary
standards of living, and rigid social hierarchies to modern
capitalism. One of the key social transformations that accompanied
the Industrial Revolution was the economic decline of the
aristocracy. Standard theories of wealth inequality cannot explain
why the aristocrats, in spite of their superior
wealth and education, failed to be the main protagonists and
beneficiaries of industrialization. We discuss recent research based on a model
of endogenous preferences that is consistent with the demise of
aristocracy.
Keywords: Endogenous Preferences, Industrial Revolution, Social Class.
The article:
[ PDF ]
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Working paper version (September 2004):
[ PostScript |
PDF ]
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Show Me the Money: Retained Earnings and the Real
Effects of Monetary Shocks
Recherches Economiques de Louvain, 71(1), 5-34, 2005.
Abstract:
The empirical literature on monetary policy shocks documents that
contractionary shocks are followed by a persistent rise in
interest rates and a persistent fall in output. Standard monetary
business cycle models can account for the initial effects of
monetary shocks, but have difficulty generating persistence. In
this paper, I examine whether frictions that affect the asset
allocation decisions of households can lead to persistent effects.
In the model economy, households hold two assets, one used for
transactions (the checking account) and one used for investment
(the savings account). There is a small transaction cost for
moving funds between the accounts. Another key feature of the
economy is that the business sector accumulates retained earnings
and credits profits to the consumers only with a delay. I show
that in this environment monetary shocks have persistent effects
even when the adjustment cost is very small.
Keywords: Monetary
Shocks, Retained Earnings, Persistence, Business Cycles,
Flow of Funds.
The article:
[ PDF ]
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Working paper version (November 2003):
[ PostScript | PDF ]
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Accounting for Fertility Decline During
the Transition to Growth
Journal of Economic Growth 9(3), 347-383, September 2004.
Abstract:
In every developed country, the economic transition from
pre-industrial stagnation to modern growth was accompanied by a
demographic transition from high to low fertility. Even though the
overall pattern is repeated, there are large cross-country
variations in the timing and speed of the demographic transition.
What accounts for falling fertility during the transition to
growth? To answer this question, this paper develops a unified
growth model which delivers a transition from stagnation to
growth, accompanied by declining fertility. The model is used to
determine whether government policies that affect the opportunity
cost of education can account for cross-country variations in
fertility decline. Among the policies considered, education
subsidies have only minor effects, while accounting for
child-labor regulations is crucial. Apart from influencing
fertility, the policies also have large effects on the evolution
of the income distribution in the course of development.
Keywords: Growth, Fertility, Demographic Transition, Education, Child
Labor, Income Distribution.
An earlier, more detailed version under the title "Growth and Fertility in the Long Run"
is also available (May 2000):
[ PostScript | PDF ]
Public versus Private Education when Differential Fertility Matters
With David de la Croix
Journal of Development Economics 73(2), 607-629, April 2004.
Abstract:
We assess the merits of different education systems in a framework
that accounts for the joint decision problem of parents regarding
fertility and education. Specifically, we compare the implications
of a public and a private schooling regime for economic growth and
inequality. We find that private schooling leads to higher growth
when there is little inequality in human capital endowments across
families. In contrast, when inequality is high, public education
yields higher growth by reducing fertility differentials. In
addition, public schooling leads to income convergence, while
private schooling can result in ever increasing inequality. Our
analysis highlights the importance of accounting for endogenous
fertility differentials when analyzing educational policies.
Keywords: Growth, Inequality, Fertility, Public Education, Private Education.
Inequality and Growth: Why Differential Fertility Matters
With David de la Croix
American Economic Review 93(4), 1091-1113, September 2003.
Abstract:
We develop a new theoretical link between inequality and growth.
In our model, fertility and education decisions are
interdependent. Poor parents decide to have many children and
invest little in education. A mean-preserving spread in the income
distribution increases the fertility differential between the rich
and the poor, which implies that more weight gets placed on
families who provide little education. Consequently, an increase
in inequality lowers average education and, therefore, growth. We
find that this fertility-differential effect accounts for most of
the empirical relationship between inequality and growth.
Keywords: Growth, Inequality, Differential Fertility, Human Capital, Education.
The article:
[ PDF ]
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Working paper version (September 2002):
[ PostScript | PDF ]
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Humankapital, politischer Wandel und langfristige
Wirtschaftsentwickung
Plenary talk at the annual meeting of Verein für
Socialpolitik 2007,
published in Perspektiven der Wirtschaftspolitik, 9(3), 73-89, May 2008.
Abstract:
Seit Mitte der achtziger Jahre hat die neue Wachstumstheorie
verstärkt Aufmerksamkeit auf Humankapital als eine Quelle des
Wirtschaftswachstums gelenkt. Neuere empirische Ergebnisse weisen
allerdings darauf hin, dass Bildungsinvestitionen nur geringe
soziale Externalitäten erzeugen und dass der direkte Beitrag des
Humankapitals zum Wirtschaftswachstum relativ gering ist. In dieser
Arbeit wird der Beitrag des Humankapitals zur Wirtschaftsentwicklung
im Rahmen der langfristigen Wachstumstheorie dargestellt, deren
Gegenstand ist, den Übergang von Ländern von vor-industrieller
Stagnation zu stetigem Wirtschaftswachstum zu erklären. Hier
erweist sich, dass Humankapital nicht nur direkte
Produktivitätseffekte erzeugt, sondern auch als Auslöser
verschiedener entwicklungsfördernder politischer Reformen dienen
kann.
The article:
[ PDF ]
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Working paper version (November 2007):
[ PostScript | PDF ]
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Growth Takeoffs
Entry prepared for New Palgrave Dictionary of Economics, 2nd Edition.
Abstract:
Following a phase of near-constant living standards
lasting from Stone Age until the onset of the Industrial Revolution,
a large number of countries have experienced growth takeoffs, in
which stagnation gives way to sustained economic growth. What causes
some countries to enter a growth takeoff, while others remain poor?
We discuss three mechanisms that can trigger a growth takeoff in a
country previously captured in a poverty trap: fertility decline,
structural change, and accelerating technological progress.
Keywords: Industrial Revolution, Demographic Transition, Structural Change.
The paper (January 2006):
[ PostScript | PDF ]
The Research Agenda: Matthias Doepke on the Transition from Stagnation to Growth
The EconomicDynamics Newsletter, 87(2), April 2007.
An overview of my research on economic growth.
The article:
[ HTML |
PDF ]
Research papers presented on this page
are based upon work supported by the National Science Foundation under
grants No. SES-0217051 and SES-0519265.
