Ongoing ERC Projects
The Role of Educational Constraints in Shaping Inequalities (UNEQUALED)
ERC Consolidator Grant 2021
Awardee : Ghazala AZMAT
Project UNEQUALED aims to study educational constraints faced by individuals at a stage when they are planning their future investments in human capital. Despite its importance, understanding the determinants of educational choices has been a longstanding challenge for two important reasons. First, it requires broad, representative, data. Secondly, because the environment in which individuals’ educational plans are formed, and adjust, is typically endogenous to their characteristics.
Different parts of project UNEQUALED target specific questions that will help construct an overall picture. The project will seek to understand, and quantify, the role of the different barriers in leading to unequal learning and opportunities and the effects of easing the constraints. Specifically asking: Can the easing of technological constraints reduce learning inequality? What role does ICT access and training play for distance learning? Does differential social exposure within the classroom impact student outcomes? Can role models help an individual reach their goal? How important are psychological (or socio-emotional) barriers for achievement?
I plan to combine economic concepts with field interventions, experiments, and rich econometric and analytical tools to analyze big datasets and to causally estimate the impact of the components that drive the adjustment in educational plans, and, ultimately, how these factors into later educational outcomes. All projects will aim to capture the short and long-run impacts.
Consult the UNEQUALED project information on CORDIS' website (forthcoming)
Read the announcement of the awarding of the ERC Grant to Ghazala AZMAT
Bipartite Network Models for Marriage and Labour Markets (MARNET)
ERC Advanced Grant 2020
Awardee : Jean-Marc ROBIN
Research proposal MARNET aims at improving our empirical knowledge of markets structured as bipartite networks (all connections involve two different categories of agents) by providing better statistical models of network formation and of the effects of the network structure on outcomes.
The use of random graphs, in which an edge between two nodes is the realization of a random draw, to model networked social, technological and biological systems has been subject to a novel and vigorous effort over the last twenty years. I will contribute to the knowledge corpus on networked economic systems with two separate research lines: first, in studying marriage formation and intrahousehold resource allocation; second, in studying wage dynamics and employment mobility using linked employer-employee data.
The first research line aims to better understand why different marriage markets (regions, countries, time periods) look different. My aim is to disentangle and quantify the sources of differentiation that relate to standard socio-economic variables, such as education and wages, from those that relate to culture and social norms. Various extensions will be considered to improve the design and realism of the model (aging and fertility, lots of heterogeneity, unobserved heterogeneity, housing and asset accumulation).
In the second research line, I will use recent advances in dynamic random graphs to model individual wage dynamics and the mobility of workers across firms. The main empirical objective is to quantify the degree of assortative matching of workers and firms in the labour market, and the relative contributions of worker and firm heterogeneity in wages. Several extensions will be considered (time-varying types, subjecting the network structure to pre-determined firm sizes, opening firm nodes by modelling wage dynamics and occupational mobility within firms).
Information and Misinformation Economics: Design, Manipulations, and Countermeasures (IMEDMC)
ERC Consolidator Grant 2020
Awardee : Eduardo PEREZ
Informational environments are largely endogenous. They can be, and often are, chosen or designed by individuals or organizations with specific objectives in mind. As recognized by a large literature in economics, information plays a crucial role in shaping the outcome of downstream decisions by strategic players (i.e. at the receiving end of informative signals). However, the structure of information also impacts decisions by strategic agents upstream of the generation of signals, as agents mould the underlying reality differently depending on how other players will eventually be informed about it. Finally, designed information production systems are susceptible to manipulations by third party agents pursuing their own interests.
I will seek to further our understanding of socially or privately optimal information designs, how they shape upstream and downstream decisions, how they can be manipulated by private interests, and how to best anticipate and counter such manipulations. I will rely on the analysis of a largely unexplored designer-agent-receiver class of games, in which the designer picks an information generation system, the agent takes an upstream decision affecting the states of the world, or manipulates the production of information, and receivers choose downstream actions based on realized signals.
The project is organized around the different technologies available to the agent. I will consider fake news production, which is the fabrication of signals that pass as informative but are in fact independent of the truth; state falsification, which consists in falsifying the state of the world, or feeding the information production process with falsified data; pure agency, which is the possibility for the agent to secretly deviate to a different but undistinguishable information generation technology; and state shifting, which is the upstream effort an agent can exert to actually transform the probability distribution of states of the world.
Campaign Finance, Information, and Influence: A Comprehensive Approach Using Individual-Level Data and Computer Science Tools (PARTICIPATE)
ERC Starting Grant 2020
Awardee : Julia CAGÉ
The goal of PARTICIPATE is to develop a comprehensive approach to the study of campaign finance, information and influence, using new individual-level data and investigating recent changes in participation behaviors. What are the motives behind small campaign contributions? Does tax policy affect political giving? Why are so few politicians from the working class and can this change? What is the ability of the media to induce citizens to make electoral decisions they would not make if reporting were unbiased? While there is evidence at the macro level on the flow of money in elections, news consumption, or the extent of charitable giving, relatively little is known at the micro level, e.g. on individual-level behaviours such as the motivations of small donors, the tax-price elasticity of political donations, or the exposure to competing information flows. PARTICIPATE will help fill this gap. By providing groundbreaking evidence on new forms of participation, it will lead to the reassessment of influential theories of special interest groups and policy formation. One distinguishing feature of the proposal is to combine comprehensive individual-level datasets and the use of computer sciences tools (such as natural language processing techniques and machine learning).
PARTICIPATE will advance the existing research in three steps. First, I will propose a unified analysis of political contributions. This will include a groundbreaking assessment of the importance of small campaign donations, and a combined study of charitable giving and political contributions investigating the impact of tax policy on donations. Fundraising success can lead to the emergence of new candidates. I will then consider citizens’ decision to run for elections, and investigate the role played by network in political selection. Finally, given the importance of media organizations in shaping participation, I will study the changing patterns of information propagation and political influence.
Historical Migrations, Trade, and Growth (HMTG)
ERC Advanced Grant 2020
Awardee: Thomas CHANEY
Do international migrations foster economic dynamism and growth? Does the presence of immigrants and their descendants alter the attitudes and actions of natives towards foreigners? How do cities emerge and survive? Does economic growth increase wellbeing in the long run? These are but a few of the questions that I explore in this proposed research.
The unifying theme of this research is to test the hypothesis that direct contact between individuals affects their preferences and the technologies they use. This research is articulated around eight distinct projects, each exploring this hypothesis from different angles, at different points in time, and over different horizons. The unifying methodology is to use historical data. Using data spanning the Neolithic, the Bronze Age, the Middle Age, and modern history, working with a team composed of both economists and historians, combining a variety of theoretical, empirical, and methodological contributions, I answer the following questions:
Do migrants contribute to local innovation and growth (project 1.1)? Does the presence of neighbors of foreign ancestry alter the attitudes of local residents towards foreigners (project 1.2)? How does the ethnic composition of cities shape the geography of global altruism (project 1.3)? How do local interactions between Assyrian merchants in the Bronze Age affect the emergence of ancient firms (coalitions) and aggregate trade (project 2.1)? Can the local interactions between travellers explain the emergence of cities in the Neolithic (project 2.2)? Do local interactions between city dwellers and traveling merchants explain the survival and growth of new cities in 13th Century France (project 2.3)? How do migration and trade flows affect the diffusion of technology over millennia (project 3.1)? And finally, as language is the key medium through which individuals interact, how to use written words to quantify the growth in wellbeing in the short and long run (project 3.2)?
Equilibrium Methods for Resource Allocations and Dynamic Pricing (EQUIPRICE )
ERC Consolidator Grant 2020
Awardee: Alfred GALICHON
This project seeks to build an innovative economic toolbox (ranging from modelling, computation, inference, and empirical applications) for the study of equilibrium models with gross substitutes, with applications to models of matching with or without transfers, trade flows on networks, multinomial choice models, as well as hedonic and dynamic pricing models. While under-emphasized in general equilibrium theory, equilibrium models with gross substitutes are very relevant to these problems as each of these problems can be recast as such.
Thus far, almost any tractable empirical model of these problems typically required making the strong assumption of quasilinear utilities, leading to a predominance of models with transferable utility in applied work. The current project seeks to develop a new paradigm to move beyond the transferable utility framework to the imperfectly transferable utility one, where the agent’s utilities are no longer quasi-linear.
The mathematical structure of gross substitutes will replace the structure of convexity underlying in models with transferable utility.
To investigate this class of models, one builds a general framework embedding all the models described above, the “equilibrium flow problem.” The gross substitute property is properly generalized and properties (existence of an equilibrium, uniqueness, lattice structure) are derived. Computational algorithms that rely on gross substitutability are designed and implemented. The econometrics of the problem is addressed (estimation, inference, model selection). Applications to various fields such as labor economics, family economics, international trade, urban economics, industrial organization, etc. are investigated.
The project touches upon other disciplines. It will propose new ideas in applied mathematics, offer new algorithms of interest in computer science and machine learning, and provide new methods in other social sciences (like sociology, demography and geography).
Motivated Reading of Evidence (MOREV)
ERC Starting Grant 2019
Awardee: Jeanne HAGENBACH
Economists have distinguished for a long time soft and hard information with the understanding that cheap talk is more prone to subjective interpretation than hard evidence. In fact, any piece of evidence carries some of the true underlying information that agents are usually assumed to be willing and able to access. For various reasons, agents may however prefer to avoid disturbing truths or maintain wrong but encouraging beliefs. In MOREV, I propose to study motivated reading of evidence, that is, study how individuals interpret hard information in ways that serve their own purposes. I wish to identify the goals that push the reading of evidence in systematic ways. I also want to study how agents manage to distort this reading, for example by choosing not to read or reason about available evidence. The MOREV project is divided into two parts, each bringing the recent literature on motivated beliefs to a new area of study.
In part 1, I will focus on agents' motivated reading of evidence about other individuals (their ability, their socio-economic characteristics, etc.). Indeed, one may not view a person the same way ahead of cooperative or competitive tasks. It is wellestablished that how close agents feel to each other (as network members or in terms of social identity) affects what they do to each other. I propose to investigate experimentally and theoretically the converse relationship: how do agents’ strategic goals affect their perception of others?
In part 2, I will focus on agents' motivated reading of evidence about products. For example, consumers may purposefully distort their beliefs about some attributes to make their purchasing plans easier to execute or take on. To do so, agents may not interpret vague information skeptically or, more generally, use motivated reasoning processes. By studying these ideas in the lab and in new models, I aim at bringing a novel explanation to the fact that, in many markets, information does not unravel as theory predicts.
Firm-to-Firm Trade Networks (TRADENET)
ERC Starting Grant 2017
Awardee : Isabelle MEJEAN
This project analyzes the propagation of shocks through international trade. The microeconomic structure of trade networks is argued to favor the propagation and amplification of shocks with an end-effect on the dynamics and volatility of aggregate trade. The exploitation of highly disaggregated firm-to-firm trade data offers a unique opportunity to analyze these questions into details.
The first part of the proposal studies the determinants of trade networks. I build a search-and-matching framework to explain the formation of bilateral trade relationships as a matching process between individual exporters in one country and individual buyers located in another country. This framework allows explaining the structure of trade networks observed in the data, both in the cross-section and over time. The model is also used to revisit several puzzles of the international economic literature, including the question of welfare gains from trade and the convergence to the law of one price.
The second part of the proposal studies the consequences of the structure of trade networks for the volatility of trade and its resilience to relative price shocks. I study how the observed connections between individual firms help propagate individual and aggregate shocks, with an end-effect on the volatility of aggregate trade and the comovement of GDPs across countries. The high concentration of trade networks and the strength of production linkages, within and across countries, help amplify the aggregate effect of individual shocks. I also analyze how the structure of trade networks shapes the response of aggregate trade to relative price shocks. The nature and history of firm-to-firm relationships is argued to have implications for the aggregate elasticity of trade.
Housing, Finance, and the Macroeconomy, 1870-2015 (SAFEHOUSE)
ERC Consolidator Grant 2017
Awardee : Moritz SCHULARICK
*The Department is partner since 2022: the hosting institution is the University of Bonn
Popular wisdom has it that no other investment is as ‘safe as houses’. Households have rigorously followed this investment advice. At the beginning of the 20th century, home ownership was the exception, not the rule. 100 years later, about two thirds of Europeans own the houses they live in. Homes have become the most important asset of households and mortgage loans have driven the growth of the financial sector, becoming its main asset. In the 2008 crisis, the housing market was the epicentre of shocks to the wealth of households and the health of banks. The rise of debt-financed home ownership has transformed household portfolios and the balance sheets of banks. Yet the effects on the macroeconomy and the implications for financial stability are not well understood. We do not have a good understanding of how risky residential real estate is as an asset, how growing housing wealth affected the overall wealth distribution, or why housing and credit markets are prone to creating boom-bust cycles. SafeHouse aims to close this gap and break new ground in the macroeconomic and financial history of housing markets in 13 European countries as well as Australia, Canada, Japan and the U.S. from 1870–2015. I will pursue three main goals. First, I will determine the long-run price of housing risk, its time variation, and geographic heterogeneity, based on an extensive data collection effort. Second, I will track the evolution of housing wealth in the 20th century and quantify its contribution to much-debated trends in wealth inequality. Third, I will study the causes of boom-bust episodes in housing markets, focusing in particular on the interaction between house prices and credit supply. By combining the production of new historical data with state-of-the-art quantitative analysis, SafeHouse will open new avenues for macroeconomic and financial research on housing markets, inequality, and financial stability.
Social Preferences, Well-Being, and Policy (SOWELL)
ERC Consolidator Grant 2015
Awardee : Yann ALGAN
"The goal of my project is to develop advanced research into the foundations of social preferences and well-being. If high value is placed on social cooperation and well-being for human development, then it becomes an urgent task to elaborate appropriate theories and measures, to understand their foundations, and to identify policies that will enhance them.
I will advance this research in three steps: 1) The first stage will break new ground in the theory and measurement of social preferences and well-being, by exploiting the "Big Data" revolution and exporting behavioral economics into the field with online representative samples of societies and organizations. 2) The next stage will exploit those new large-scale behavioral measures to analyze the foundations of social preferences, sorting out the role of social cognition, individual life experience and social norms. 3) The third step will be to evaluate how policy affects social preferences and well-being, and in particular in the realms of education, employment and institutions. This project will yield proposals for a new agenda in the assessment of policies, by integrating criteria based on their impact on social cooperation and happiness.
I will propose cutting-edge methods to carry out this research. First I will use the revolutionary possibilities of Big Data to test theories of happiness by exploiting high-frequency behavioral measurements of well-being from Web 2.0. Second I will use computational sciences to develop an online laboratory aimed at studying social behaviors on representative samples of the population and how they relate with real world production and policy, thus addressing the lack of external validity that currently hampers experimental economics. Last, I will combine these new measurements of behavior with randomized trials, in order to assess policy within a new paradigm based on social preferences and well-being. My research is both theoretical, empirical and trans-disciplinary."