Project acronym GLOBALMACRO
Project Global Production Networks and Macroeconomic Interdependence
Researcher (PI) Julian DI GIOVANNI
Host Institution (HI) UNIVERSIDAD POMPEU FABRA
Call Details Consolidator Grant (CoG), SH1, ERC-2016-COG
Summary Researchers and policymakers alike have highlighted the potential efficiency gains of a global production structure. However, such linkages also raise the possibility of risks. This proposal tackles both empirical and theoretical challenges in incorporating the microeconomic structure of trade and international production networks in the study of the propagation of shocks internationally, and their impact on macroeconomic interdependence. Using newly constructed micro-level datasets, I provide quantitative analysis of the importance of the linkages in multicountry general equilibrium models of trade. First, using firm export and imported-input linkages, I provide a novel model-based estimation strategy to identify the role of country and firm-level shocks, and the implications of these estimates for the transmission of shocks across borders. By using structural trade models to estimate shocks at the firm level and studying the implications for the transmission of shocks across borders, I help bridge the micro-macro nexus in international economics. Second, I take an even more granular focus by studying the role of firm-to-firm production linkages in transmitting shocks across countries. To do so, I exploit a novel matching procedure between a country’s administrative dataset and cross-country firm-level data. I further build on these data by adding in domestic bank-firm relationships. This strategy allows for the study of how financial shocks are exported abroad via firms’ trade and multinational linkages. Third, I incorporate the insights from the empirical work into a full-scale multicountry general equilibrium model of trade, which allows for firm-level heterogeneity and microeconomic and macroeconomics shocks. I use the model for a quantitative study of the cross-country transmission of the different shocks via trade. This allows me to perform counterfactuals and examine the impact of policies, such as how opening to trade impacts macroeconomic interdependence.
Summary
Researchers and policymakers alike have highlighted the potential efficiency gains of a global production structure. However, such linkages also raise the possibility of risks. This proposal tackles both empirical and theoretical challenges in incorporating the microeconomic structure of trade and international production networks in the study of the propagation of shocks internationally, and their impact on macroeconomic interdependence. Using newly constructed micro-level datasets, I provide quantitative analysis of the importance of the linkages in multicountry general equilibrium models of trade. First, using firm export and imported-input linkages, I provide a novel model-based estimation strategy to identify the role of country and firm-level shocks, and the implications of these estimates for the transmission of shocks across borders. By using structural trade models to estimate shocks at the firm level and studying the implications for the transmission of shocks across borders, I help bridge the micro-macro nexus in international economics. Second, I take an even more granular focus by studying the role of firm-to-firm production linkages in transmitting shocks across countries. To do so, I exploit a novel matching procedure between a country’s administrative dataset and cross-country firm-level data. I further build on these data by adding in domestic bank-firm relationships. This strategy allows for the study of how financial shocks are exported abroad via firms’ trade and multinational linkages. Third, I incorporate the insights from the empirical work into a full-scale multicountry general equilibrium model of trade, which allows for firm-level heterogeneity and microeconomic and macroeconomics shocks. I use the model for a quantitative study of the cross-country transmission of the different shocks via trade. This allows me to perform counterfactuals and examine the impact of policies, such as how opening to trade impacts macroeconomic interdependence.
Max ERC Funding
1 381 250 €
Duration
Start date: 2017-05-01, End date: 2022-04-30
Project acronym GOPG
Project Globalization, Optimal Policies and Growth
Researcher (PI) Gino Gancia
Host Institution (HI) Centre de Recerca en Economia Internacional (CREI)
Call Details Starting Grant (StG), SH1, ERC-2009-StG
Summary This project studies the challenges that policy makers face in a world where globalization is proceeding at high speed and knowledge creation is the key to prosperity. It consists of two main parts: one focuses on optimal growth policies, the other on policy externalities induced by market integration. The first part builds on the premise that fostering innovation requires appropriate regulations on product market competition and on Intellectual Property Rights. The following questions will be addressed. What are the optimal competition and IPR policies when economic growth requires both innovation and technology diffusion? Are competition and IPR policies complements or substitutes? How does the optimal policy mix change with economic development? How do optimal contractual relationships evolve with development? What are the misallocations created by market power when sectors and firms are heterogeneous in technology and in the exposure to foreign competition? Are trade liberalization and competition policy complements or substitutes? The second part studies the consequences of and remedies to the growing mismatch between economic and political borders created by globalization. The following questions will be addressed: Why does the size of governments increase with globalization? Does higher international factor mobility lead to a race to the bottom in taxation? What is the effect of trade openness on pollution and environmental regulations? Can globalization induce governments to adopt more stringent environmental regulations? Does market integration call for a reorganization of the world political structure? Can the tendency to reinforce supra-national entities and the process of political fragmentation within states be complementary reactions to globalization?
Summary
This project studies the challenges that policy makers face in a world where globalization is proceeding at high speed and knowledge creation is the key to prosperity. It consists of two main parts: one focuses on optimal growth policies, the other on policy externalities induced by market integration. The first part builds on the premise that fostering innovation requires appropriate regulations on product market competition and on Intellectual Property Rights. The following questions will be addressed. What are the optimal competition and IPR policies when economic growth requires both innovation and technology diffusion? Are competition and IPR policies complements or substitutes? How does the optimal policy mix change with economic development? How do optimal contractual relationships evolve with development? What are the misallocations created by market power when sectors and firms are heterogeneous in technology and in the exposure to foreign competition? Are trade liberalization and competition policy complements or substitutes? The second part studies the consequences of and remedies to the growing mismatch between economic and political borders created by globalization. The following questions will be addressed: Why does the size of governments increase with globalization? Does higher international factor mobility lead to a race to the bottom in taxation? What is the effect of trade openness on pollution and environmental regulations? Can globalization induce governments to adopt more stringent environmental regulations? Does market integration call for a reorganization of the world political structure? Can the tendency to reinforce supra-national entities and the process of political fragmentation within states be complementary reactions to globalization?
Max ERC Funding
450 000 €
Duration
Start date: 2009-09-01, End date: 2014-08-31
Project acronym GREENLULUS
Project Green Locally Unwanted Land Uses
Researcher (PI) Isabelle Michelle Sophie Anguelovski
Host Institution (HI) UNIVERSITAT AUTONOMA DE BARCELONA
Call Details Starting Grant (StG), SH3, ERC-2015-STG
Summary This project examines the role played by the restoration and creation of environmental amenities in the redistribution of urban quality of life. Since no large-scale study has been conducted to measure if greener cities are less racially and socially equitable, I will analyze whether greening projects tend to increase environmental inequalities in 40 cities in the US and Europe and under which conditions such projects can address equity concerns. First, the study will a) develop a new method (an index) to quantify the racial and social impact of greening projects and to compare cities’ performance with each other; b) provide a spatial and quantitative analysis of neighborhood demographic, real estate, and environmental data; and c) apply the index methodology on a unique ranking of cities. Second, my research will analyze the response of private investors to the greening projects and identify the impact of new development projects proposed, approved, and implemented during or upon the completion of greening projects on the neighborhood socio-demographic characteristics. I will assess the extent to which development projects seem to encourage and/or accelerate gentrification, as such projects have been shown to be signs of residents’ exclusion. Additionally, this study will qualitatively analyze cases of community mobilization developed in response to new environmental amenities, through fieldwork in 16 critical neighborhoods (one neighborhood case per city) among the 40 cities. Last, this study will use qualitative methods to analyze the policies and measures that municipalities develop to address exclusion in “greening” neighborhoods. This groundbreaking longitudinal, systematic, in-depth, and large-scale project in the field of environmental justice will lead to a paradigm shift by hypothesizing that the social and racial inequities present in sustainability projects make green amenities Locally Unwanted Land Uses (LULUs) for poor residents and people of color.
Summary
This project examines the role played by the restoration and creation of environmental amenities in the redistribution of urban quality of life. Since no large-scale study has been conducted to measure if greener cities are less racially and socially equitable, I will analyze whether greening projects tend to increase environmental inequalities in 40 cities in the US and Europe and under which conditions such projects can address equity concerns. First, the study will a) develop a new method (an index) to quantify the racial and social impact of greening projects and to compare cities’ performance with each other; b) provide a spatial and quantitative analysis of neighborhood demographic, real estate, and environmental data; and c) apply the index methodology on a unique ranking of cities. Second, my research will analyze the response of private investors to the greening projects and identify the impact of new development projects proposed, approved, and implemented during or upon the completion of greening projects on the neighborhood socio-demographic characteristics. I will assess the extent to which development projects seem to encourage and/or accelerate gentrification, as such projects have been shown to be signs of residents’ exclusion. Additionally, this study will qualitatively analyze cases of community mobilization developed in response to new environmental amenities, through fieldwork in 16 critical neighborhoods (one neighborhood case per city) among the 40 cities. Last, this study will use qualitative methods to analyze the policies and measures that municipalities develop to address exclusion in “greening” neighborhoods. This groundbreaking longitudinal, systematic, in-depth, and large-scale project in the field of environmental justice will lead to a paradigm shift by hypothesizing that the social and racial inequities present in sustainability projects make green amenities Locally Unwanted Land Uses (LULUs) for poor residents and people of color.
Max ERC Funding
1 453 868 €
Duration
Start date: 2016-06-01, End date: 2021-05-31
Project acronym HEARTHEALTHYHOODS
Project Social and Physical Urban Environment and Cardiovascular Health: The Much Needed Population Approach
Researcher (PI) Manuel Carlos Franco Tejero
Host Institution (HI) UNIVERSIDAD DE ALCALA
Call Details Starting Grant (StG), SH3, ERC-2013-StG
Summary Previous research has shown that the environments where we live and work have a major impact on our health. Given the economic and public health burden of cardiovascular diseases in Europe, we propose to measure specific aspects of the social and physical urban environment and to assess their contribution to cardiovascular risk. These results will provide the scientific evidence needed to develop population-wide preventive interventions.
Specifically, for this project we will assess the food, physical activity and tobacco environments of 90 neighbourhoods in Madrid, Spain, using three complementary approaches: inhabitant perceptions, geographic information systems and systematic social observation. We will then correlate these data with cardiovascular health obtained from two different sources: first, a primary care-based cohort study including 2200 persons from 90 neighbourhoods, and second, a whole-population study including every inhabitant of the targeted neighbourhoods using primary care electronic health records (>99% coverage).
The methodology of this proposal includes state-of-the-art qualitative and quantitative tools. We will combine ecometrics, geography, sociology and anthropology, to obtain a comprehensive description of the environments within which our population resides and works. In addition, the cohort study will include direct measures of cardiovascular health indicators, constituting a robust and multi-faceted source of data. The whole-population study offers the potential to have a complete portrait of the cardiovascular health of the 2.2 million inhabitants of our designated neighbourhoods. Cohort studies of this kind offer the opportunity for collaborative work, which can lead to a large and extended multidisciplinary scientific project.
This proposal offers a novel way of understanding cardiovascular health by combining a social science perspective with high-quality cardiovascular data collection within a rigorous epidemiological design.
Summary
Previous research has shown that the environments where we live and work have a major impact on our health. Given the economic and public health burden of cardiovascular diseases in Europe, we propose to measure specific aspects of the social and physical urban environment and to assess their contribution to cardiovascular risk. These results will provide the scientific evidence needed to develop population-wide preventive interventions.
Specifically, for this project we will assess the food, physical activity and tobacco environments of 90 neighbourhoods in Madrid, Spain, using three complementary approaches: inhabitant perceptions, geographic information systems and systematic social observation. We will then correlate these data with cardiovascular health obtained from two different sources: first, a primary care-based cohort study including 2200 persons from 90 neighbourhoods, and second, a whole-population study including every inhabitant of the targeted neighbourhoods using primary care electronic health records (>99% coverage).
The methodology of this proposal includes state-of-the-art qualitative and quantitative tools. We will combine ecometrics, geography, sociology and anthropology, to obtain a comprehensive description of the environments within which our population resides and works. In addition, the cohort study will include direct measures of cardiovascular health indicators, constituting a robust and multi-faceted source of data. The whole-population study offers the potential to have a complete portrait of the cardiovascular health of the 2.2 million inhabitants of our designated neighbourhoods. Cohort studies of this kind offer the opportunity for collaborative work, which can lead to a large and extended multidisciplinary scientific project.
This proposal offers a novel way of understanding cardiovascular health by combining a social science perspective with high-quality cardiovascular data collection within a rigorous epidemiological design.
Max ERC Funding
1 467 896 €
Duration
Start date: 2014-04-01, End date: 2019-03-31
Project acronym HISTROOTS
Project HISTORICAL ROOTS OF CONFLICT AND DEVELOPMENT: FROM PREHISTORY TO THE COLONIZATION EXPERIENCE
Researcher (PI) Marta Reynal Querol
Host Institution (HI) UNIVERSIDAD POMPEU FABRA
Call Details Consolidator Grant (CoG), SH1, ERC-2014-CoG
Summary I plan to study the effect of history on conflict and economic development with two historical microscopes.
Following the lead of the new institutional economics, part of the literature argues that institutions cause differences in productivity and factor endowments which, in turn, explain economic development. An alternative view assumes that human capital shapes institutional changes and, therefore, institutions are endogenous. In the first part of the project, which is the core of the research proposal, I will try to move one step further in this debate by taking an approach that uses administrative data on the first colonizers of Latin America. The data contain some personal characteristics on each of the settlers from 1492 to 1599 (town of origin in Spain, occupation, education, city of arrival in the Americas, etc). Using within-country analysis, since we have information on the precise destinations of the first “pobladores” (settlers), and the different institutional set-ups during the first years of colonization for different geographical areas in Latin America, I will reexamine the issue of institutions versus human capital in the explanation of economic development and conflict. The institutions in the initial times of colonization were not the same in all the regions of Latin America and, in many cases, represented an evolution of pre-Colombian institutions. The new data allows also the analysis of the interaction between human capital and institutions in the initial times. In addition the migrations and the evolution of institutions during the first century of colonization provide also some guidance for the research on the sources of institutional persistence.
In the second part I plan to go further back in time to understand how very old conflicts influence current conflict. I will construct a dataset with the location of old conflicts using archaeological evidence to analyze the dynamics of conflict by regions in the very long run.
Summary
I plan to study the effect of history on conflict and economic development with two historical microscopes.
Following the lead of the new institutional economics, part of the literature argues that institutions cause differences in productivity and factor endowments which, in turn, explain economic development. An alternative view assumes that human capital shapes institutional changes and, therefore, institutions are endogenous. In the first part of the project, which is the core of the research proposal, I will try to move one step further in this debate by taking an approach that uses administrative data on the first colonizers of Latin America. The data contain some personal characteristics on each of the settlers from 1492 to 1599 (town of origin in Spain, occupation, education, city of arrival in the Americas, etc). Using within-country analysis, since we have information on the precise destinations of the first “pobladores” (settlers), and the different institutional set-ups during the first years of colonization for different geographical areas in Latin America, I will reexamine the issue of institutions versus human capital in the explanation of economic development and conflict. The institutions in the initial times of colonization were not the same in all the regions of Latin America and, in many cases, represented an evolution of pre-Colombian institutions. The new data allows also the analysis of the interaction between human capital and institutions in the initial times. In addition the migrations and the evolution of institutions during the first century of colonization provide also some guidance for the research on the sources of institutional persistence.
In the second part I plan to go further back in time to understand how very old conflicts influence current conflict. I will construct a dataset with the location of old conflicts using archaeological evidence to analyze the dynamics of conflict by regions in the very long run.
Max ERC Funding
1 699 664 €
Duration
Start date: 2015-05-01, End date: 2020-04-30
Project acronym IllegalPharma
Project Competitive Dynamics in the Informal Economy: The case of Illegal Pharmaceutical Drugs
Researcher (PI) LUIS FRANCISCO DIESTRE MARTIN
Host Institution (HI) INSTITUTO DE EMPRESA SL
Call Details Starting Grant (StG), SH1, ERC-2016-STG
Summary This project aims to develop a competitive dynamics theory of the informal economy, which is currently lacking in academic research. Specifically, this project will adopt an institutional theory perspective to better understand three fundamental outcomes in the informal economy: market entry (illegal businesses’ decision to be active in a specific niche), price competition (price differentials between legal and illegal products), and product quality (quality of products sold in illegal businesses). The main conceptual proposition suggested in this project is that selling products through illegal means may still be perceived as a legitimate activity. Building on this statement, it will be proposed that the degree in which actors perceive the sale of an illegal product as a more or less legitimate activity will influence (1) entrepreneurs’ decision to illegally enter such market, (2) consumers’ willingness to pay for such illegal product (i.e., price differential versus the legal version of the product) and (3) manufacturers’ motivation to keep quality standards for that illegal product. The empirical setting for this study will be the illegal sale of pharmaceutical drugs. The sale of illegal pharmaceuticals accounts for more than 10% of the medicines market and over €30 billion in annual earnings (World Health Organization, 2003). It represents one of the biggest challenges for societies in that, attending to the WHO’s Department of Essential Medicines and Health Products, anywhere from 100,000 to a million people die every year due to falsified drugs. Accordingly, this study aims to provide two main contributions: (1) an academic contribution by developing a radically new theory of the competitive dynamics in the informal economy, and (2) a practical contribution by providing a better understanding of the determinants of the informal economy that could help policy makers and regulators in their goal of fighting the trading of illegal medicines.
Summary
This project aims to develop a competitive dynamics theory of the informal economy, which is currently lacking in academic research. Specifically, this project will adopt an institutional theory perspective to better understand three fundamental outcomes in the informal economy: market entry (illegal businesses’ decision to be active in a specific niche), price competition (price differentials between legal and illegal products), and product quality (quality of products sold in illegal businesses). The main conceptual proposition suggested in this project is that selling products through illegal means may still be perceived as a legitimate activity. Building on this statement, it will be proposed that the degree in which actors perceive the sale of an illegal product as a more or less legitimate activity will influence (1) entrepreneurs’ decision to illegally enter such market, (2) consumers’ willingness to pay for such illegal product (i.e., price differential versus the legal version of the product) and (3) manufacturers’ motivation to keep quality standards for that illegal product. The empirical setting for this study will be the illegal sale of pharmaceutical drugs. The sale of illegal pharmaceuticals accounts for more than 10% of the medicines market and over €30 billion in annual earnings (World Health Organization, 2003). It represents one of the biggest challenges for societies in that, attending to the WHO’s Department of Essential Medicines and Health Products, anywhere from 100,000 to a million people die every year due to falsified drugs. Accordingly, this study aims to provide two main contributions: (1) an academic contribution by developing a radically new theory of the competitive dynamics in the informal economy, and (2) a practical contribution by providing a better understanding of the determinants of the informal economy that could help policy makers and regulators in their goal of fighting the trading of illegal medicines.
Max ERC Funding
1 374 185 €
Duration
Start date: 2017-05-01, End date: 2022-04-30
Project acronym INFOCOMP
Project Information and Competition
Researcher (PI) F Xavier Vives Torrents
Host Institution (HI) UNIVERSIDAD DE NAVARRA
Call Details Advanced Grant (AdG), SH1, ERC-2008-AdG
Summary The project deals with economies with private information. Despite the growing body of work about economies with dispersed information there are at least three important stumbling blocks in the received literature that prevent scientific progress: lack of understanding of the dynamics of markets involving complementarities and information; consideration of public information as exogenous; and avoidance or extreme simplification of welfare analysis (e.g. because of the lack of a well-defined welfare benchmark and/or the presence of reduced-form un-modeled agents such as noise traders). I plan to contribute to remove these obstacles to progress by developing the theory of games with strategic complementarities and incomplete information; introducing static and dynamic models where public information is endogenous; doing away with noise traders and replacing them by hedgers, and performing a welfare analysis with an appropriate welfare benchmark for private information economies. This will be accomplished by developing a series of models where agents can use complex strategies (such as supply functions or demand schedules) and where dynamics matter. The tools used will involve game theory, information economics, market microstructure analysis, theoretical industrial organization and financial intermediation theory. The potential applications will concentrate mostly on industrial organization, and banking and finance.
Summary
The project deals with economies with private information. Despite the growing body of work about economies with dispersed information there are at least three important stumbling blocks in the received literature that prevent scientific progress: lack of understanding of the dynamics of markets involving complementarities and information; consideration of public information as exogenous; and avoidance or extreme simplification of welfare analysis (e.g. because of the lack of a well-defined welfare benchmark and/or the presence of reduced-form un-modeled agents such as noise traders). I plan to contribute to remove these obstacles to progress by developing the theory of games with strategic complementarities and incomplete information; introducing static and dynamic models where public information is endogenous; doing away with noise traders and replacing them by hedgers, and performing a welfare analysis with an appropriate welfare benchmark for private information economies. This will be accomplished by developing a series of models where agents can use complex strategies (such as supply functions or demand schedules) and where dynamics matter. The tools used will involve game theory, information economics, market microstructure analysis, theoretical industrial organization and financial intermediation theory. The potential applications will concentrate mostly on industrial organization, and banking and finance.
Max ERC Funding
1 290 000 €
Duration
Start date: 2009-05-01, End date: 2014-04-30
Project acronym INFORMATIVEPRICES
Project Market Selection, Frictions, and the Information Content of Prices
Researcher (PI) Alp Enver Atakan
Host Institution (HI) KOC UNIVERSITY
Call Details Consolidator Grant (CoG), SH1, ERC-2015-CoG
Summary This project studies information aggregation in multiple-linked auction markets with large numbers of goods and bidders. Past work assumes bidders trade in a single, centralized, frictionless auction market. Instead, I study bidders with unit demand who decide to purchase one of many possible goods which are on auction in distinct markets. The goods traded in each market are identical, common-value objects and the price is determined by a uniform-price auction. Bidders receive imperfect signals about the state of the world and select to bid in one of the auction markets. The markets differ in institutional structure and therefore frictions. Market frictions result from imperfect competition, government interventions, informational frictions, and preference heterogeneity. All such frictions render the gains from trade uncertain.
I address the following questions: How do market frictions affect information aggregation if bidders can strategically choose between markets? What are the mechanisms through which market imperfections disrupt information aggregation? Which market’s price is a better statistic for market participants’ information? Which market attracts better-informed bidders? Do prices aggregate beliefs more accurately in good times or in bad?
Initial findings suggest that the proposed framework can prove particularly fruitful in addressing these questions. Specifically, I show if the gains from trade are uncertain in even one market, then prices do not aggregate information in any of the markets. In contrast, if all markets are frictionless, then the price in each market aggregates information. These findings are driven by how bidders self-select across markets: Better-informed bidders select frictional markets while uninformed, pessimistic bidders select the safety of frictionless markets. These findings suggest a novel mechanism through which market imperfections in one market can have widespread effects across all linked markets.
Summary
This project studies information aggregation in multiple-linked auction markets with large numbers of goods and bidders. Past work assumes bidders trade in a single, centralized, frictionless auction market. Instead, I study bidders with unit demand who decide to purchase one of many possible goods which are on auction in distinct markets. The goods traded in each market are identical, common-value objects and the price is determined by a uniform-price auction. Bidders receive imperfect signals about the state of the world and select to bid in one of the auction markets. The markets differ in institutional structure and therefore frictions. Market frictions result from imperfect competition, government interventions, informational frictions, and preference heterogeneity. All such frictions render the gains from trade uncertain.
I address the following questions: How do market frictions affect information aggregation if bidders can strategically choose between markets? What are the mechanisms through which market imperfections disrupt information aggregation? Which market’s price is a better statistic for market participants’ information? Which market attracts better-informed bidders? Do prices aggregate beliefs more accurately in good times or in bad?
Initial findings suggest that the proposed framework can prove particularly fruitful in addressing these questions. Specifically, I show if the gains from trade are uncertain in even one market, then prices do not aggregate information in any of the markets. In contrast, if all markets are frictionless, then the price in each market aggregates information. These findings are driven by how bidders self-select across markets: Better-informed bidders select frictional markets while uninformed, pessimistic bidders select the safety of frictionless markets. These findings suggest a novel mechanism through which market imperfections in one market can have widespread effects across all linked markets.
Max ERC Funding
1 089 432 €
Duration
Start date: 2016-05-01, End date: 2021-04-30
Project acronym InfoSampCollectJgmt
Project The Implications of Selective Information Sampling for Individual and Collective Judgments
Researcher (PI) Gael Georges Marcel LE MENS
Host Institution (HI) UNIVERSIDAD POMPEU FABRA
Call Details Consolidator Grant (CoG), SH3, ERC-2017-COG
Summary Much research has shown that judgments are the products of imperfect information processing heuristics. Recently, an alternative theoretical perspective has been proposed. It emphasizes that people form judgments by observing information samples about the alternatives. Sampling-based theories can explain numerous judgment patterns such as risk aversion, overconfidence, illusory correlations, the in-group out-group bias, or social influence.
The sampling approach has illustrated how these and other important patterns of human judgments can be parsimoniously explained by assuming a common source of bias. But at least two important questions remain:
1. How do sampling explanations for judgment biases can be integrated with explanations that focus on information-processing biases in order to explain judgment patterns in naturally occurring environments?
2. What are the implications of selective information sampling for collective judgments and the distribution of beliefs and attitudes over social networks?
I set to answer these pressing questions by (1) developing integrative belief formation models that incorporate both sampling-based mechanisms and information processing-based mechanisms; (2) collecting and analyzing experimental and field data to test these integrative models and uncover how the two classes of mechanisms interact; (3) building on these insights to develop models that lead to testable predictions about collective judgments and test these predictions with field and experimental data; (4) running experiments to measure the extent to which social network driven information sampling can contribute to opinion polarization.
The project will carry novel prescriptions to limit judgment biases such as the prevalence of negative stereotypes about socially distant others or the resistance to institutional change. It will also carry prescriptions to limit the emergence of collective illusions, and contain the polarization of opinions across social groups.
Summary
Much research has shown that judgments are the products of imperfect information processing heuristics. Recently, an alternative theoretical perspective has been proposed. It emphasizes that people form judgments by observing information samples about the alternatives. Sampling-based theories can explain numerous judgment patterns such as risk aversion, overconfidence, illusory correlations, the in-group out-group bias, or social influence.
The sampling approach has illustrated how these and other important patterns of human judgments can be parsimoniously explained by assuming a common source of bias. But at least two important questions remain:
1. How do sampling explanations for judgment biases can be integrated with explanations that focus on information-processing biases in order to explain judgment patterns in naturally occurring environments?
2. What are the implications of selective information sampling for collective judgments and the distribution of beliefs and attitudes over social networks?
I set to answer these pressing questions by (1) developing integrative belief formation models that incorporate both sampling-based mechanisms and information processing-based mechanisms; (2) collecting and analyzing experimental and field data to test these integrative models and uncover how the two classes of mechanisms interact; (3) building on these insights to develop models that lead to testable predictions about collective judgments and test these predictions with field and experimental data; (4) running experiments to measure the extent to which social network driven information sampling can contribute to opinion polarization.
The project will carry novel prescriptions to limit judgment biases such as the prevalence of negative stereotypes about socially distant others or the resistance to institutional change. It will also carry prescriptions to limit the emergence of collective illusions, and contain the polarization of opinions across social groups.
Max ERC Funding
1 158 625 €
Duration
Start date: 2018-05-01, End date: 2023-04-30
Project acronym INSECUREASSETS
Project SECURITIES IN TIMES OF INSECURITY: ASSET RETURNS AND HOLDINGS DURING POLITICAL, SOCIAL AND ECONOMIC CRISES IN EUROPE, 1900-1950
Researcher (PI) Hans-Joachim Voth
Host Institution (HI) UNIVERSIDAD POMPEU FABRA
Call Details Advanced Grant (AdG), SH1, ERC-2008-AdG
Summary This project assembles a new dataset on asset returns in four European countries between 1900 and 1950. Most of the information we have today about the performance of different asset classes comes from relatively 'tranquil', stable periods. Yet what happens to the value of one's savings matters all the more when times are not good, and labor income is low. This is the fundamental insight of the consumption capital asset pricing model. The four countries in this study experienced among them the full range of 'horrors and disasters' that could befall investors. By going beyond published statistics on index values, we will obtain a much more accurate picture of how investors fared. Systematically collecting individual-level return data for four European countries at a time of great turmoil will allow me to address a number of canonical asset pricing puzzles: Why are average returns on stocks so high? Why do bonds generally do so poorly? And why would anyone hold gold, given that the long-run average return is quite low? If the recent literature on pricing assets via their value in 'disaster periods' is right, we should find that holding stocks turned out to be much riskier than normally assumed, based on the standard data sets for rich countries in the last fifty years. The opposite ought to be true for bonds and gold. To find out, I will use a wealth of notarial and bank records, combined with tax-based material, a close reading of the legal literature, and probates, to track as closely as possible how individual investors fared in an age characterized by war, political turmoil, revolution, and expropriation.
Summary
This project assembles a new dataset on asset returns in four European countries between 1900 and 1950. Most of the information we have today about the performance of different asset classes comes from relatively 'tranquil', stable periods. Yet what happens to the value of one's savings matters all the more when times are not good, and labor income is low. This is the fundamental insight of the consumption capital asset pricing model. The four countries in this study experienced among them the full range of 'horrors and disasters' that could befall investors. By going beyond published statistics on index values, we will obtain a much more accurate picture of how investors fared. Systematically collecting individual-level return data for four European countries at a time of great turmoil will allow me to address a number of canonical asset pricing puzzles: Why are average returns on stocks so high? Why do bonds generally do so poorly? And why would anyone hold gold, given that the long-run average return is quite low? If the recent literature on pricing assets via their value in 'disaster periods' is right, we should find that holding stocks turned out to be much riskier than normally assumed, based on the standard data sets for rich countries in the last fifty years. The opposite ought to be true for bonds and gold. To find out, I will use a wealth of notarial and bank records, combined with tax-based material, a close reading of the legal literature, and probates, to track as closely as possible how individual investors fared in an age characterized by war, political turmoil, revolution, and expropriation.
Max ERC Funding
2 099 800 €
Duration
Start date: 2009-04-01, End date: 2014-03-31
