Michaelmas Term 2022 — Talks & Materials
By Chris Hyland
Broad Topic: Monetary Economics, Theoretical Macroeconomics. Specific Topic: Financial Stability and Banking.
Abstract
This paper develops a tractable general equilibrium model to study the monetary policy and financial stability implications of the introduction of a retail central bank digital currency (retail CBDC). I construct a model that contains a heterogenous banking sector exhibiting market power, endogenous default, incomplete markets, and credit and deposit markets. My model replicates multiple channels through which monetary policy operate: the deposits channel, the bank lending and the risk-taking channel. I show that the transmission of monetary policy is dampened and household welfare loss arises. The introduction of a a retail CBDC is shown to improve the transmission of monetary policy. Furthermore, a retail CBDC is shown to increase competition in the monopolistic banking sector, thereby leading to a crowding in of savings via bank deposits, expanding bank intermediation, and thereby increasing output. However, a tradeoff naturally arises in the form of an increase in financial instability.
By Yang Xu
Broad Topic: Networks. Specific Topic: Team Production.
Abstract
An increasing number of economists publish in teams. This paper examines what makes two economists collaborate and how much productivity gain comes with collaborations. As the difference in average publication quality (journal quality index) narrows, collaboration likelihood increases. Similarity in log citations and same-institution affiliation also increase collaboration probability. Evidence for horizontal and vertical sorting is found; average collaboration gain is ~9% for two-person teams and ~20% for three-person teams.
By Carlos Gonzalez
Broad Topic: Adaptive Treatment, Public Policy Design. Specific Topic: Bandit Algorithms, Information Economics.
Abstract
When the policymaker is unable to distinguish across agents’ ability, classic adverse selection mechanisms may emerge leading to market unraveling. Here, I consider the problem of repeatedly choosing policy parameters, like public sector wages, in an adverse selection context, where the policymaker does not know the DGP of agents' types. The policymaker has the mandate to maximize social welfare subject to monopolistic and competitive equilibria considerations. However, unlike traditional bandit problems, (i) feedback is asymmetric across agents' decisions, and (ii) the policymaker may not observe utility at the end of the period. This paper builds on previous literature on sequential public policy design, generalizing feedback as a function of agent's decisions. Moreover, for the first time, I introduce perfect competition considerations into the repeated game, maximizing consumer surplus. Non-zero measure of full-information feedback brings hope for sublinear regret, even for unknown sample size. Finally, the sequential characterization of the problem is very amenable to contextual characterization, (partially) escaping adverse selection when informative covariates are available.
By Hubert Wu
Broad Topic: Microeconomic Theory. Specific Topic: Estimation of Preference Heterogeneity.
Abstract
Heterogeneity in preferences is important in many domains. Existing empirical approaches have trade-offs: parametric methods may be unfalsifiable, while revealed-preference methods are non-parametric and harder to use for further economic analysis. This paper introduces a semi-parametric approach grounded in economic theory that generates falsifiable predictions and yields economic content beyond a binary identification of heterogeneity, with multiple empirical applications.
By Andrew Paulley
Broad Topic: Empirical Industrial Organization. Specific Topic: Price Regulations.
Abstract
In the 1980s, provincial governments across Canada saw auto insurance premiums balloon and insurance company profits soar. Some provinces created public monopolies; others (like Ontario) regulated private insurers. We analyse approved premium-rate-change applications in Ontario from 1999–2022 to assess whether oversight controlled profits and whether consumers overpaid.
02/12 — Estimating the Price and Quality Relationship in U.S. Hospitals
By Elodie Chervin
Broad Topic: Health Economics. Specific Topic: Price Regulation in Inelastic-demand Markets.
Abstract
We address selection when patients choose hospitals to uncover the price-quality relationship. Using an IV based on quasi-random ambulance assignments and administrative data, we show higher prices associate with lower mortality (and higher spending), with this relationship concentrated in less-concentrated hospital markets; in concentrated markets, higher-price hospitals increase spending without detectable mortality benefits.