Project acronym BEHAVFRICTIONS
Project Behavioral Implications of Information-Processing Frictions
Researcher (PI) Jakub STEINER
Host Institution (HI) NARODOHOSPODARSKY USTAV AKADEMIE VED CESKE REPUBLIKY VEREJNA VYZKUMNA INSTITUCE
Call Details Consolidator Grant (CoG), SH1, ERC-2017-COG
Summary BEHAVFRICTIONS will use novel models focussing on information-processing frictions to explain choice patterns described in behavioral economics and psychology. The proposed research will provide microfoundations that are essential for (i) identification of stable preferences, (ii) counterfactual predictions, and (iii) normative conclusions.
(i) Agents who face information-processing costs must trade the precision of choice against information costs. Their behavior thus reflects both their stable preferences and the context-dependent procedures that manage their errors stemming from imperfect information processing. In the absence of micro-founded models, the two drivers of the behavior are difficult to disentangle for outside observers. In some pillars of the proposal, the agents follow choice rules that closely resemble logit rules used in structural estimation. This will allow me to reinterpret the structural estimation fits to choice data and to make a distinction between the stable preferences and frictions.
(ii) Such a distinction is important in counterfactual policy analysis because the second-best decision procedures that manage the errors in choice are affected by the analysed policy. Incorporation of the information-processing frictions into existing empirical methods will improve our ability to predict effects of the policies.
(iii) My preliminary results suggest that when an agent is prone to committing errors, biases--such as overconfidence, confirmatory bias, or perception biases known from prospect theory--arise under second-best strategies. By providing the link between the agent's environment and the second-best distribution of the perception errors, my models will delineate environments in which these biases shield the agents from the most costly mistakes from environments in which the biases turn into maladaptations. The distinction will inform the normative debate on debiasing.
Summary
BEHAVFRICTIONS will use novel models focussing on information-processing frictions to explain choice patterns described in behavioral economics and psychology. The proposed research will provide microfoundations that are essential for (i) identification of stable preferences, (ii) counterfactual predictions, and (iii) normative conclusions.
(i) Agents who face information-processing costs must trade the precision of choice against information costs. Their behavior thus reflects both their stable preferences and the context-dependent procedures that manage their errors stemming from imperfect information processing. In the absence of micro-founded models, the two drivers of the behavior are difficult to disentangle for outside observers. In some pillars of the proposal, the agents follow choice rules that closely resemble logit rules used in structural estimation. This will allow me to reinterpret the structural estimation fits to choice data and to make a distinction between the stable preferences and frictions.
(ii) Such a distinction is important in counterfactual policy analysis because the second-best decision procedures that manage the errors in choice are affected by the analysed policy. Incorporation of the information-processing frictions into existing empirical methods will improve our ability to predict effects of the policies.
(iii) My preliminary results suggest that when an agent is prone to committing errors, biases--such as overconfidence, confirmatory bias, or perception biases known from prospect theory--arise under second-best strategies. By providing the link between the agent's environment and the second-best distribution of the perception errors, my models will delineate environments in which these biases shield the agents from the most costly mistakes from environments in which the biases turn into maladaptations. The distinction will inform the normative debate on debiasing.
Max ERC Funding
1 321 488 €
Duration
Start date: 2018-06-01, End date: 2023-05-31
Project acronym ELECTRIC CHALLENGES
Project Current Tools and Policy Challenges in Electricity Markets
Researcher (PI) Natalia FABRA PORTELA
Host Institution (HI) UNIVERSIDAD CARLOS III DE MADRID
Call Details Consolidator Grant (CoG), SH1, ERC-2017-COG
Summary The fight against climate change is among Europe’s top policy priorities. In this research agenda, I propose to push out the frontier in the area of Energy and Environmental Economics by carrying out policy-relevant research on a pressing issue: how to design optimal regulatory and market-based solutions to achieve a least cost transition towards a low-carbon economy.
The European experience provides unique natural experiments with which to test some of the most contentious issues that arise in the context of electricity markets, including the potential to change households’ demand patterns through dynamic pricing, the scope of renewables to mitigate market power and depress wholesale market prices, and the design and performance of the auctions for renewable support. While there is a body of policy work on these issues, it generally does not meet the required research standards.
In this research, I will rely on cutting-edge theoretical, empirical, and simulation tools to disentangle these topics, while providing key economic insights that are relevant beyond electricity markets. On the theory front, I propose to develop new models that incorporate the intermittency of renewables to characterize optimal bidding as a key, broadly omitted ingredient in previous analysis. In turn, these models will provide a rigorous structure for the empirical and simulation analysis, which will rely both on traditional econometrics for casual inference as well as on state-of-the-art machine learning methods to construct counterfactual scenarios for policy analysis.
While my focus is on energy and environmental issues, my research will also provide methodological contributions for other areas - particularly those related to policy design and policy evaluation. The conclusions of this research should prove valuable for academics, as well as to policy makers to assess the impact of environmental and energy policies and redefine them where necessary.
Summary
The fight against climate change is among Europe’s top policy priorities. In this research agenda, I propose to push out the frontier in the area of Energy and Environmental Economics by carrying out policy-relevant research on a pressing issue: how to design optimal regulatory and market-based solutions to achieve a least cost transition towards a low-carbon economy.
The European experience provides unique natural experiments with which to test some of the most contentious issues that arise in the context of electricity markets, including the potential to change households’ demand patterns through dynamic pricing, the scope of renewables to mitigate market power and depress wholesale market prices, and the design and performance of the auctions for renewable support. While there is a body of policy work on these issues, it generally does not meet the required research standards.
In this research, I will rely on cutting-edge theoretical, empirical, and simulation tools to disentangle these topics, while providing key economic insights that are relevant beyond electricity markets. On the theory front, I propose to develop new models that incorporate the intermittency of renewables to characterize optimal bidding as a key, broadly omitted ingredient in previous analysis. In turn, these models will provide a rigorous structure for the empirical and simulation analysis, which will rely both on traditional econometrics for casual inference as well as on state-of-the-art machine learning methods to construct counterfactual scenarios for policy analysis.
While my focus is on energy and environmental issues, my research will also provide methodological contributions for other areas - particularly those related to policy design and policy evaluation. The conclusions of this research should prove valuable for academics, as well as to policy makers to assess the impact of environmental and energy policies and redefine them where necessary.
Max ERC Funding
1 422 375 €
Duration
Start date: 2018-09-01, End date: 2023-08-31
Project acronym ENFORCE
Project ENgineering FrustratiOn in aRtificial Colloidal icEs:degeneracy, exotic lattices and 3D states
Researcher (PI) pietro TIERNO
Host Institution (HI) UNIVERSITAT DE BARCELONA
Call Details Consolidator Grant (CoG), PE3, ERC-2018-COG
Summary Geometric frustration, namely the impossibility of satisfying competing interactions on a lattice, has recently
become a topic of considerable interest as it engenders emergent, fundamentally new phenomena and holds
the exciting promise of delivering a new class of nanoscale devices based on the motion of magnetic charges.
With ENFORCE, I propose to realize two and three dimensional artificial colloidal ices and investigate the
fascinating manybody physics of geometric frustration in these mesoscopic structures. I will use these soft
matter systems to engineer novel frustrated states through independent control of the single particle
positions, lattice topology and collective magnetic coupling. The three project work packages (WPs) will
present increasing levels of complexity, challenge and ambition:
(i) In WP1, I will demonstrate a way to restore the residual entropy in the square ice, a fundamental longstanding
problem in the field. Furthermore, I will miniaturize the square and the honeycomb geometries and investigate the dynamics of thermally excited topological defects and the formation of grain boundaries.
(ii) In WP2, I will decimate both lattices and realize mixed coordination geometries, where the similarity
between the colloidal and spin ice systems breaks down. I will then develop a novel annealing protocol based
on the simultaneous system visualization and magnetic actuation control.
(iii) In WP3, I will realize a three dimensional artificial colloidal ice, in which interacting ferromagnetic
inclusions will be located in the voids of an inverse opal, and arranged to form the FCC or the pyrochlore
lattices. External fields will be used to align, bias and stir these magnetic inclusions while monitoring in situ
their orientation and dynamics via laser scanning confocal microscopy.
ENFORCE will exploit the accessible time and length scales of the colloidal ice to shed new light on the
exciting and interdisciplinary field of geometric frustration.
Summary
Geometric frustration, namely the impossibility of satisfying competing interactions on a lattice, has recently
become a topic of considerable interest as it engenders emergent, fundamentally new phenomena and holds
the exciting promise of delivering a new class of nanoscale devices based on the motion of magnetic charges.
With ENFORCE, I propose to realize two and three dimensional artificial colloidal ices and investigate the
fascinating manybody physics of geometric frustration in these mesoscopic structures. I will use these soft
matter systems to engineer novel frustrated states through independent control of the single particle
positions, lattice topology and collective magnetic coupling. The three project work packages (WPs) will
present increasing levels of complexity, challenge and ambition:
(i) In WP1, I will demonstrate a way to restore the residual entropy in the square ice, a fundamental longstanding
problem in the field. Furthermore, I will miniaturize the square and the honeycomb geometries and investigate the dynamics of thermally excited topological defects and the formation of grain boundaries.
(ii) In WP2, I will decimate both lattices and realize mixed coordination geometries, where the similarity
between the colloidal and spin ice systems breaks down. I will then develop a novel annealing protocol based
on the simultaneous system visualization and magnetic actuation control.
(iii) In WP3, I will realize a three dimensional artificial colloidal ice, in which interacting ferromagnetic
inclusions will be located in the voids of an inverse opal, and arranged to form the FCC or the pyrochlore
lattices. External fields will be used to align, bias and stir these magnetic inclusions while monitoring in situ
their orientation and dynamics via laser scanning confocal microscopy.
ENFORCE will exploit the accessible time and length scales of the colloidal ice to shed new light on the
exciting and interdisciplinary field of geometric frustration.
Max ERC Funding
1 850 298 €
Duration
Start date: 2020-01-01, End date: 2024-12-31
Project acronym Forecasting
Project New Methods and Applications for Forecast Evaluation
Researcher (PI) Barbara Rossi
Host Institution (HI) UNIVERSIDAD POMPEU FABRA
Call Details Consolidator Grant (CoG), SH1, ERC-2013-CoG
Summary Forecasting is a fundamental tool in Economics, Statistics, Business and other sciences. Judging whether forecasts are good and robust is of great importance since forecasts are used everyday to guide policymakers' and practitioners' decisions. The proposal aims at addressing four important issues that researchers encounter in practice.
A first issue is how to assess whether forecasts are optimal in the presence of instabilities. Optimality is an important property of models’ forecasts: if forecasts are not optimal, then the model can be improved. Existing methods to assess forecast optimality are not robust to the presence of instabilities, which are widespread in the data. How to obtain such robust methods and what they tell us about widely used economic models’ forecasts is the first task of this project.
A second problem faced by forecasters in practice is to evaluate density forecasts. Density forecasts are important tools for policymakers since they quantify uncertainty around forecasts. However, existing methodologies focus on a null hypothesis that is not necessarily the one of interest to the forecaster. The second task is to develop tests for forecast density evaluation that address forecasters’ needs.
A third, important question is “Why Do We Use Forecast Tests To Evaluate Models’ Performance?”. The third task of this project is to understand the relationship between traditional in-sample and forecast evaluation tests, and develop a framework that helps to understand under which circumstances forecast tests are more useful than typical in-sample tests.
A final question is how researchers can improve models that do not forecast well. Model misspecification is widespread, still economists are often left wondering exactly which parts of their models are misspecified. The fourth task is to propose an empirical framework for addressing this issue. By estimating time-varying wedges, we assess where misspecification is located, and how important it is.
Summary
Forecasting is a fundamental tool in Economics, Statistics, Business and other sciences. Judging whether forecasts are good and robust is of great importance since forecasts are used everyday to guide policymakers' and practitioners' decisions. The proposal aims at addressing four important issues that researchers encounter in practice.
A first issue is how to assess whether forecasts are optimal in the presence of instabilities. Optimality is an important property of models’ forecasts: if forecasts are not optimal, then the model can be improved. Existing methods to assess forecast optimality are not robust to the presence of instabilities, which are widespread in the data. How to obtain such robust methods and what they tell us about widely used economic models’ forecasts is the first task of this project.
A second problem faced by forecasters in practice is to evaluate density forecasts. Density forecasts are important tools for policymakers since they quantify uncertainty around forecasts. However, existing methodologies focus on a null hypothesis that is not necessarily the one of interest to the forecaster. The second task is to develop tests for forecast density evaluation that address forecasters’ needs.
A third, important question is “Why Do We Use Forecast Tests To Evaluate Models’ Performance?”. The third task of this project is to understand the relationship between traditional in-sample and forecast evaluation tests, and develop a framework that helps to understand under which circumstances forecast tests are more useful than typical in-sample tests.
A final question is how researchers can improve models that do not forecast well. Model misspecification is widespread, still economists are often left wondering exactly which parts of their models are misspecified. The fourth task is to propose an empirical framework for addressing this issue. By estimating time-varying wedges, we assess where misspecification is located, and how important it is.
Max ERC Funding
501 860 €
Duration
Start date: 2014-07-01, End date: 2019-06-30
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 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 M-POWER
Project The Aggregate Implications of Market Power
Researcher (PI) Jan Kamiel S. De Loecker
Host Institution (HI) KATHOLIEKE UNIVERSITEIT LEUVEN
Call Details Consolidator Grant (CoG), SH1, ERC-2018-COG
Summary It has been long understood by economists that market power can negatively affect welfare by limiting output, stifling innovation, and introducing inefficiencies in the overall allocation of production. On the one hand, there is ample evidence from case-studies, that the presence of market power, in the form of explicit or implicit cartels and other practices of anti-competitive behavior, can lead to substantial damages to producers and consumers in a given market. On the other hand, very little is known about the broad cross- sectional and time-series patterns of market power across sectors, regions and countries. In addition, and perhaps more importantly, if market power is at all present, does it affect so-called aggregate outcomes in the product and factor markets? For example should the analysis of productivity growth and investment take into account the presence of market power, and does market power play a role in labor market outcomes, such as e.g. in the recently reported decline in the labor share across a variety of countries? This project aims to fill the gap in the literature by applying recently developed techniques to, first of all, systematically document markups, across firms in the entire economy, and secondly, to analyze the implications for producers and consumers in the economy at large, including both product and input markets. While the macroeconomic literature on misallocation has considered a variety of distortions that affect the allocation of inputs across plants, the project introduces an empirical framework to quantify the welfare loss from market power. Special attention is given to the impact on productive inefficiency. The overall aim is to better understand, and quantify, how market power affects the allocation of resources in the context of heterogeneous producers, and empirically quantify the trade-off of price and cost effects.
Summary
It has been long understood by economists that market power can negatively affect welfare by limiting output, stifling innovation, and introducing inefficiencies in the overall allocation of production. On the one hand, there is ample evidence from case-studies, that the presence of market power, in the form of explicit or implicit cartels and other practices of anti-competitive behavior, can lead to substantial damages to producers and consumers in a given market. On the other hand, very little is known about the broad cross- sectional and time-series patterns of market power across sectors, regions and countries. In addition, and perhaps more importantly, if market power is at all present, does it affect so-called aggregate outcomes in the product and factor markets? For example should the analysis of productivity growth and investment take into account the presence of market power, and does market power play a role in labor market outcomes, such as e.g. in the recently reported decline in the labor share across a variety of countries? This project aims to fill the gap in the literature by applying recently developed techniques to, first of all, systematically document markups, across firms in the entire economy, and secondly, to analyze the implications for producers and consumers in the economy at large, including both product and input markets. While the macroeconomic literature on misallocation has considered a variety of distortions that affect the allocation of inputs across plants, the project introduces an empirical framework to quantify the welfare loss from market power. Special attention is given to the impact on productive inefficiency. The overall aim is to better understand, and quantify, how market power affects the allocation of resources in the context of heterogeneous producers, and empirically quantify the trade-off of price and cost effects.
Max ERC Funding
1 575 000 €
Duration
Start date: 2019-04-01, End date: 2024-03-31
Project acronym MacroColl
Project The Macroeconomics of Collateral
Researcher (PI) Alberto Miguel Martin
Host Institution (HI) Centre de Recerca en Economia Internacional (CREI)
Call Details Consolidator Grant (CoG), SH1, ERC-2013-CoG
Summary Financial markets constitute the backbone of modern economies, intermediating resources from those who have them (i.e., lenders) to those who can put them to productive use (i.e., borrowers). The defining feature of these markets is that they entail the exchange of goods today for a borrower’s promise to deliver goods in the future. These promises are sustained by guarantees, which are akin to the amount of future income that borrowers can credibly pledge to lenders. I refer to this pledgeable income as an economy’s stock of collateral. This stock determines the amount and type of promises that can be traded in an economy and, in turn, this set of promises determines the transactions that can be carried out. Intuitively, when this set of promises is large, resources find their most productive uses and efficiency is high.
This raises a general question: what are the key determinants of the set of promises that an economy is able to sustain, and why does it vary?
In macroeconomic models, it is commonly assumed that all promises are backed by only one kind of collateral, i.e. usually that of private borrowers, and that this collateral is ‘fundamental’, i.e. it consists of output. Real-world financial markets, however, rely on many types of collateral to guarantee promises. In this proposal, I focus on three such types. First, collateral may be ‘bubbly’, i.e. promises can be backed by nothing else but the income that the sale of new promises is expected to bring in the future. Second, collateral need not be private, as government promises are sustained by pledging public income. Third, collateral need not be homogenous, as it may differ in quality or type across entrepreneurs, and this quality may not be perfectly observed by all. I address the following broad questions. How do economies produce these different types of collateral? How do they interact with one another? Is there a role for policy in maintaining the efficient level and composition of collateral?
Summary
Financial markets constitute the backbone of modern economies, intermediating resources from those who have them (i.e., lenders) to those who can put them to productive use (i.e., borrowers). The defining feature of these markets is that they entail the exchange of goods today for a borrower’s promise to deliver goods in the future. These promises are sustained by guarantees, which are akin to the amount of future income that borrowers can credibly pledge to lenders. I refer to this pledgeable income as an economy’s stock of collateral. This stock determines the amount and type of promises that can be traded in an economy and, in turn, this set of promises determines the transactions that can be carried out. Intuitively, when this set of promises is large, resources find their most productive uses and efficiency is high.
This raises a general question: what are the key determinants of the set of promises that an economy is able to sustain, and why does it vary?
In macroeconomic models, it is commonly assumed that all promises are backed by only one kind of collateral, i.e. usually that of private borrowers, and that this collateral is ‘fundamental’, i.e. it consists of output. Real-world financial markets, however, rely on many types of collateral to guarantee promises. In this proposal, I focus on three such types. First, collateral may be ‘bubbly’, i.e. promises can be backed by nothing else but the income that the sale of new promises is expected to bring in the future. Second, collateral need not be private, as government promises are sustained by pledging public income. Third, collateral need not be homogenous, as it may differ in quality or type across entrepreneurs, and this quality may not be perfectly observed by all. I address the following broad questions. How do economies produce these different types of collateral? How do they interact with one another? Is there a role for policy in maintaining the efficient level and composition of collateral?
Max ERC Funding
979 800 €
Duration
Start date: 2014-09-01, End date: 2019-08-31
Project acronym Market Design
Project Market Design: Theory and Applications in Development
Researcher (PI) William Martin Fuchs
Host Institution (HI) UNIVERSIDAD CARLOS III DE MADRID
Call Details Consolidator Grant (CoG), SH1, ERC-2015-CoG
Summary There are two components to my research plan.
First is the study of dynamic markets for real and financial assets in which traders might have asymmetric information. In particular I aim to understand how different characteristics of the market such as frequency of trade and transparency affect the efficiency with which these markets operate. This is a stepping stone to then be able to understand how these markets can be designed or regulated to improve their efficiency. Allowing for competition among market places can also indicate if the best way to intervene in these markets is by fostering competition or if direct government intervention is called for.
Second, market imperfections are exacerbated in developing countries due to the poor rule of law and poor institutional framework. Thus, important welfare gains can potentially be achieved by mitigating these imperfections and fostering the development of markets. I plan to work on these issues by combining theoretical analysis with controlled randomized trials to validate the theoretical insights in the field. For example there are many durable goods such as solar lights that would greatly enhance the welfare of poor rural households. These markets have been very slow to develop due to the lack of credit of final consumers and uncertainty about product quality. By properly designing the self-enforcing agreements between the producers of these goods and the retailers we can ensure retailers get access to financing from the producers. In turn this would allow retailers to extend financing to final consumers. Work on the field will surely uncover other frictions which we can study theoretically how to overcome and again test in the field with further controlled randomized trials.
Summary
There are two components to my research plan.
First is the study of dynamic markets for real and financial assets in which traders might have asymmetric information. In particular I aim to understand how different characteristics of the market such as frequency of trade and transparency affect the efficiency with which these markets operate. This is a stepping stone to then be able to understand how these markets can be designed or regulated to improve their efficiency. Allowing for competition among market places can also indicate if the best way to intervene in these markets is by fostering competition or if direct government intervention is called for.
Second, market imperfections are exacerbated in developing countries due to the poor rule of law and poor institutional framework. Thus, important welfare gains can potentially be achieved by mitigating these imperfections and fostering the development of markets. I plan to work on these issues by combining theoretical analysis with controlled randomized trials to validate the theoretical insights in the field. For example there are many durable goods such as solar lights that would greatly enhance the welfare of poor rural households. These markets have been very slow to develop due to the lack of credit of final consumers and uncertainty about product quality. By properly designing the self-enforcing agreements between the producers of these goods and the retailers we can ensure retailers get access to financing from the producers. In turn this would allow retailers to extend financing to final consumers. Work on the field will surely uncover other frictions which we can study theoretically how to overcome and again test in the field with further controlled randomized trials.
Max ERC Funding
1 516 288 €
Duration
Start date: 2016-08-01, End date: 2021-07-31
Project acronym Mechan-of-Chromo
Project Unfolding the Mechanism of Chromosome Cohesion and Condensation using Single-Molecule Biophysical Approaches
Researcher (PI) Fernando Moreno-Herrero
Host Institution (HI) AGENCIA ESTATAL CONSEJO SUPERIOR DEINVESTIGACIONES CIENTIFICAS
Call Details Consolidator Grant (CoG), PE3, ERC-2015-CoG
Summary The global folding of the chromosome is mediated by Structural Maintenance of Chromosome (SMC) proteins, which stabilize the higher-order chromatin architecture by bringing distant DNA sequences together. Despite over a decade of work on these systems, their mechanism remains unknown, largely because of difficulty in re-capitulating physiological DNA binding and condensation in vitro. Moreover, traditional biochemical approaches are poorly suited for the study of processes that are fundamentally mechanical in nature. However, key breakthroughs, including the discovery that SMC is loaded by Spo0J protein at parS sites in vivo, and that parS sites act as global condensation centres for the chromosome have opened new possibilities to study chromosome organisation using single-molecule (SM) approaches. Importantly, our recent experiments with Magnetic Tweezers (MT) have already revealed a novel function of Spo0J in condensing DNA via a parS-independent binding mechanism.
Inspired by these recent discoveries, I have devised a series of novel SM biophysical approaches with the ambitious goal of determining the mechanism of action of SMC complexes, including understanding the role of SMC loaders and SMC accessory subunits, and how these proteins are regulated by ATP binding and hydrolysis for chromosome organisation. The rationale behind this approach is that SM methods are particularly well-suited for monitoring DNA cohesion and condensation where manipulation of individual DNA molecules, measurement of forces, and addition of proteins and buffer solutions can be carefully controlled. High throughput MT will be combined with fast video imaging, optical trapping, and fluorescence; and will be used to interrogate hypothetical models for SMC-DNA interactions. Finally, the novel assays developed here may be applicable to other protein-DNA interactions including variant SMC-like proteins specialized for other biological functions such as DNA repair.
Summary
The global folding of the chromosome is mediated by Structural Maintenance of Chromosome (SMC) proteins, which stabilize the higher-order chromatin architecture by bringing distant DNA sequences together. Despite over a decade of work on these systems, their mechanism remains unknown, largely because of difficulty in re-capitulating physiological DNA binding and condensation in vitro. Moreover, traditional biochemical approaches are poorly suited for the study of processes that are fundamentally mechanical in nature. However, key breakthroughs, including the discovery that SMC is loaded by Spo0J protein at parS sites in vivo, and that parS sites act as global condensation centres for the chromosome have opened new possibilities to study chromosome organisation using single-molecule (SM) approaches. Importantly, our recent experiments with Magnetic Tweezers (MT) have already revealed a novel function of Spo0J in condensing DNA via a parS-independent binding mechanism.
Inspired by these recent discoveries, I have devised a series of novel SM biophysical approaches with the ambitious goal of determining the mechanism of action of SMC complexes, including understanding the role of SMC loaders and SMC accessory subunits, and how these proteins are regulated by ATP binding and hydrolysis for chromosome organisation. The rationale behind this approach is that SM methods are particularly well-suited for monitoring DNA cohesion and condensation where manipulation of individual DNA molecules, measurement of forces, and addition of proteins and buffer solutions can be carefully controlled. High throughput MT will be combined with fast video imaging, optical trapping, and fluorescence; and will be used to interrogate hypothetical models for SMC-DNA interactions. Finally, the novel assays developed here may be applicable to other protein-DNA interactions including variant SMC-like proteins specialized for other biological functions such as DNA repair.
Max ERC Funding
1 894 999 €
Duration
Start date: 2016-06-01, End date: 2021-05-31
