Economics – Page 15

Why Do Labels Work? – Barcelona GSE Master Projects 2014

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2014. The project is a required component of every master program.

Why Do Labels Work? A Theoretical Analysis and Proposed Test Design of Mechanisms Underlying Labeled Cash Transfers

Authors:

Angela Bouzanis, Victoria Gonsior, Rozália Kepes, and Eva Werli

Master Program:

Economics

Paper Abstract:

Labeled Cash Transfers (LCTs) are Unconditional Cash Transfers (UCTs) with a specific label attached stating the purpose of the cash transfer in order to guide recipients in allocating funds. Recent economic research has provided evidence for the efficiency of LCTs, but the literature is still missing theoretical foundations. In this paper, we propose four mechanisms based on behavioral economics that have the potential to explain why LCTs work. We construct a theoretical framework for designing labels based on (1) mental accounting, (2) lying aversion, (3) social norms, and (4) informational updates. Additionally, we put forward a randomized controlled trial (RCT) with four treatments according to these four theories in order to test which of these mechanisms have a significant effect on educational outcomes. While at this stage we cannot analyze results, we present our identification strategy and address some general issues and specific concerns regarding our experiment.

Read the full paper or view slides below:

[slideshare id=37413123&doc=labels-slides-140728024936-phpapp01]

Band-Aids to Major Surgery: Making Healthcare Work in the U.S.

Editor’s Note: The following post comes from Sergio Gutiérrez. Sergio is a Chicago-based designer and strategist working at the intersection of people, business, and technology. He graduated from BGSE’s MSc Economics of Science and Innovation in 2011.

So, as it seems, healthcare in the U.S. seems to be in of trouble and, all the voices say, design can do a lot to solve the problem. For this reason, many design and innovation consulting firms are making healthcare a strong focus area. For any designer —or any person trained to solve problems for that matter— this type of problem, because of its complexity, potential impact, and evident “higher purpose” is also very attractive.

However, regardless all the hype around this topic, thinking of design as the main driver for structural change may prove a bit unrealistic — as much as I would like to think that design can save the world. In reality, given the magnitude of the problem in the U.S., this needs to be attacked from different angles, with various strategies and tools and, probably, the most critical ones will have to come from outside the design field.

The system that is supposed to take care of us is very sick.

To help you gauge the magnitude of the U.S. healthcare problem, let me start with some background info — it won’t hurt, I promise: This is what we pay for our healthcare in the U.S…

The U.S. 2010 healthcare expenditure was 18% of the GDP, up to $2.6 trillion. That is roughly double the OECD average and this figure is projected to grow up to 26% of GDP by 2037 (scary).
The U.S. has the highest healthcare administration costs in the World at triple the OECD average.
Cost of healthcare per capita is above $8,200. That is more than double the OECD average of $3,200. Second, but not even close, is Switzerland with $5,200.

This is what we get…

There are fewer physicians and hospital beds per person than in most other OECD countries.
Life expectancy has increased over the last few decades but less than compared to other economies. Between 1960 and 2010, 9 years compared in the U.S. to 11 years on average on OECD countries.
33% Americans were obese as of 2009 compared to an average 16% in the OECD countries.
The cost of certain procedures is much higher in the U.S. and the industry seems to favor more expensive diagnosis procedures.
In 2012, 46% of the U.S. population were underinsured or uninsured at some point, if not all year.
The system is terribly complex, especially for users: a new study to be released in September shows how only 14% of all insured Americans “can explain all four key health insurance concepts: deductible, co-pay, co-insurance, out-of-pocket maximum”. Can you?
And finally, healthcare bills is the number one reason for family bankruptcy in the U.S.

A vicious circle

Hate is in the air: The effect of Czech and German radio on elections in pre-war Czechoslovakia

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2014. The project is a required component of every master program.

Hate is in the air: The effect of Czech and German radio on elections in pre-war Czechoslovakia

Authors:

Bruno Baránek, Kryštof Krotil, and Samuel Škoda

Master Program:

Economics

Paper Abstract:

In this paper we assess the role of radio broadcasting in parliamentary elections of 1935 in Czechoslovakia. In our main specification, we regress the vote shares of multiple parties on the signal strengths of Czech and German radio while controlling for demographic and socio-economic characteristics. In particular, we focus on SdP – the ethnic German party with separatist tendencies, which was supported by Hitler’s NSDAP. We find that propaganda contained in the German broadcasts had a polarizing effect on the Czechoslovak political spectrum as it increased the number of votes for SdP and also for Czech communists and nationalists. This increase was compensated by the fall in votes for centrist democratic parties. On the other hand, the Czech radio, which was politically neutral, tended to neutralize the effect of the German radio.

Read the full paper or view slides below:

[slideshare id=36945734&doc=german-czech-radio-slides-140714042219-phpapp02]

Firms in conflict: adapt or perish

Being an entrepreneur is a difficult activity, and being an entrepreneur in a developing country is even more difficult. But being an entrepreneur in a developing country affected by a violent conflict situation seems almost impossible. In fact, it is not.

Francesco Amodio (Economics ’10) is a PhD student in the GPEFM doctoral program organized by Universitat Pompeu Fabra with the Barcelona GSE. He and co-author Michele Di Maio (University of Naples Parthenope) have published the following post on the blog of the Stockholm International Peace Research Institute (SIPRI):

Firms in conflict: adapt or perish

Being an entrepreneur is a difficult activity, and being an entrepreneur in a developing country is even more difficult. But being an entrepreneur in a developing country affected by a violent conflict situation seems almost impossible. In fact, it is not.

Read the full post on the SIPRI blog.

This week, Francesco is co-organizing the first Barcelona GSE Phd Jamboree. The Jamboree is a two-day workshop for GPEFM and IDEA students to share ideas and get feedback on their work in progress.

Note to all Barcelona GSE students and alumni:

If you have been published on the web or in a print publication and would like The Voice to link to your work, please send us a link and a short excerpt.

Transitioning from the BGSE to a PhD

(Originally posted at Econ Point of View)

Determining whether to apply for a Ph.D. program or not, going through each application, and then finally making a decision is exhausting. It forces, rightfully so, the young economist to look on his experiences and his goals. I asked myself over and over about where I had been, where I am, and where I want to go. Here are some of my reflections.

How the heck did I end up here?

Some people find their vocation early in life and take the exact right steps. Other people find their vocation while reading Exchange and Production after a long workday. I took this indirect route. Until I discovered economics, academics were the means and not the ends for me. During my undergraduate, I did well in difficult physics and political science programs and on the football field. This ultimately led to an enjoyable well-paying job. That was my goal for college and I surpassed it.

However, when I started studying economics, my goals drastically changed. Economics turned my life anew. Suddenly, the good job was inadequate. I could not stop researching economics. My free time turned into economics time. Through blogs, ¨pop¨economics, and academic work, I had found my passion. It just kept building. I woke up to read Hayek on information before work and fell asleep to Kirzner on competition and price theory. Throughout my day, I listened to lectures, followed blogs, and economics audiobooks. Economics became my life and it spread from how I made decisions to how I spoke. Continue reading “Transitioning from the BGSE to a PhD”

Spotlight on Faculty Research: Profs. Alessandra Bonfiglioli and Gino Gancia

Alessandra Bonfiglioli (PhD, Stockholm) and Gino Gancia (PhD, Stockhold) are both Barcelona GSE Affiliated Professors. Last year, they jointly published an article titled “Uncertainty, Electoral Incentives and Political Myopia” in the Economic Journal.

IS THIS THE RIGHT TIME TO ADOPT POLICIES FOR THE LONG TERM?

In this recent article, Alessandra Bonfiglioli (UPF) and Gino Gancia (CREI) argue that periods of high economic uncertainty like the current one are particularly favorable for the adoption of long-term policies, such as fiscal stabilizations and other structural reforms. The reason is that high uncertainty implies that economic performance and electoral outcomes depend more on luck and less on policy choices. This makes politicians less reluctant to adopt policies with current costs but future benefits. Continue reading “Spotlight on Faculty Research: Profs. Alessandra Bonfiglioli and Gino Gancia”

Cash Transfers and Labor Supply in Peru

(Editor’s Note: The following post was written by BGSE alumnus Fernando Fernandez (Economics ’13). Fernando is currently a Research Fellow at the Inter-American Development Bank in Washington, D.C.)

The paper:

What do you do when you receive your monthly payment? Do you leave the office a bit earlier and have some drinks with your friends? Now, imagine you are a self-employed, non-paid, agricultural worker who works to support your family in the Andeans regions of Peru. Moreover, suppose you are credit constrained and with limited access to markets. What would you do if you start receiving monthly cash transfers from your generous government? Would not you take a break? After all, you work very hard and need some rest, right?

Such a program does exist and is named JUNTOS (“together” in Spanish). It gives around US $40 per month to mothers of poor children if they send their kids to school and to health centers on a regular basis. The objective of the program is to reduce current and future poverty through cash transfers and investments in children’s human capital.

Labor economists would say that JUNTOS generates an income effect: if your income is higher you would consume more leisure and work less (assuming that leisure is a normal good). However, most of the empirical literature on cash transfers and labor supply find no effects on participation in the labor market, hours of work, and earnings. This literature relies on comparisons between households who receive the transfer to households who do not. Does this mean that labor supply does not respond to cash transfers?

A Balkan Spring?

A joke often retold in Bosnia and Herzegovina says: “Why is there no sex in any state firms or government buildings? Because everyone is related to each other”. Thanks to prevailing nepotism in the public sector, that is. This joke perfectly portrays the self-ironic attitude of the Balkan mentality that develops as one quickly learns that succeeding in life evolves more around building “a network” than spending time in the library. Yet, in February of 2014, “that joke isn’t funny anymore”^[1]. 30 years after the Sarajevo Winter Olympic Games, 20 years after the War ended, 10 years after SFOR (NATO) peacekeepers left Bosnia, 2014 might be a contender to being another historical moment in Bosnia and Herzegovina. The people have had enough of their everyday life being joke material. And we have been witnesses to this in the last days as thousands of people have taken on the streets of several cities around the country. Could this pave the way for a Balkan Spring?

Modeling Independence

Ryan D. Griffiths, Pablo Guillen, and Ferran Martinez i Coma of the University of Sydney released a working paper (PDF) in September with a model of Catalan independence. The abstract:

We propose a game theoretical model to assess the capacity of Catalonia to become a recognized, independent country with at least a de facto European Union (EU) membership. Support for Catalan independence is increasing for reasons pertaining to identity and economics. Spain can avoid a vote for independence by effectively ‘buying-out’ a proportion of the Catalan electorate with a funding agreement favorable to Catalonia. If, given the current economic circumstances, the buying-out strategy is too expensive, a pro-independence vote is likely to pass. Our model predicts an agreement in which Spain and the European Union accommodate Catalan independence in exchange for Catalonia taking a share of the Spanish debt. If Spain and the EU do not accommodate, Spain becomes insolvent, which in turn destabilizes the EU. The current economic woes of Spain and the EU both contribute to the desire for Catalan independence and make it possible.

HT: Tyler Cowen

Meeting Chomsky

(Editor’s Note: The following post was written by alumnus Miguel Ángel Santos (ITFD ’11 and Economics ’12). Follow him on Twitter @miguelsantos12 or at his blog)

The first time I heard of Noam Chomsky was in the early nineties. During my senior year in college I was assigned to read a small book, “The true thinkers of our time”(1989), a gallery of interviews with a select group of scientists from a wide array of disciplines. The author, a French journalist named Guy Sorman, had chosen them using three simple criteria: 1) once they showed up in their corresponding disciplines it became impossible to keep on thinking about it in the same way; 2) they had to be alive; and 3) they were willing to talk to him.

The book covered a wide spectrum, from the origins of the universe all the way to modern economic thinking. Each section presented two or three opposing views on the same topic, which were fiercely discussed and smartly presented, allowing amateurs to grasp the frontiers of human knowledge.

Chomsky had made his way into the group deservedly. He had revolutionized the field of linguistics, posing a theory that conceived language as a biological capacity. He identified common patterns to all languages (i.e. all made up plurals by adding characters in the end, none at the beginning) and hypothesized that while the environment allows our linguistic capacity to develop, it falls short of explaining its extraordinary complexity.

I mention this to highlight the thinker, the man working alone and facing the problems and puzzles of his time through a sheer exercise of athletic thought and intelligence. The fame and scientific status he earned by making his most relevant contributions early in his life (all date from around his thirties) would be applied later to bring the world’s attention on a set of political causes, most of them left-winged, all rooted in the United States plethora of foreign policy wreckages. He became an outcast, a role he obviously feels very comfortable with, always pointing towards the elephant in the room.

This latter version of Chomsky is the one most people are familiar with.