Media and behavioral response: the case of #BlackLivesMatter

Economics master project by Julie Balitrand, Joseph Buss, Ana Monteiro, Jens Oehlen, and Paul Richter ’19

source: Texas Public Radio

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects. The project is a required component of all Master’s programs at the Barcelona GSE.

Abstract

We study the effects of the #BlackLivesMatter movement on the law abiding behavior of African-Americans. First, we derive a conceptual framework to illustrate changes in risk perceptions across different races. Second, we use data from the Illinois Traffic Study Dataset to investigate race ratios in police stops. For identification, we apply a linear probability OLS regression on media coverage as well as an event study framework with specific cases. We find that the number of black people committing traffic law violations is significantly reduced after spikes in media coverage and notable police shootings. In the latter case, we further find that the effect holds for an approximate ten day period. We argue that these observed changes in driving behavior are a result of the updated risk beliefs.

Game Tree. Balitrand et al.

Conclusions

Beginning with our model, we show that media related changes in risk perceptions cause a change in the proportion of people committing crimes. Using this model, we further predict that this change would be different across different racial groups. More specifically, it predicts that Blacks became more cautious in order to decrease the chance of a negative interaction with the police. On the other hand, whites were predicted to not change their behavior, since the violence in media coverage is not relevant to their driving decisions.

In order to test our model, we develop a hypothesis testing strategy that allows us disentangle police actions from civilian decisions. By considering the proportion of stopped people who are black at nighttime, we completely remove any effect caused by changes in policing intensity and bias. Instead, we create a testable hypothesis that only focuses on the differences in behavior between racial groups.

To test this hypothesis, we use a linear probability model along with traffic data from Illinois. We test the hypothesis using both an event study approach, as well as using media intensity data from the GDELT Project. Both approaches verify our model’s predictions with high significance levels. Therefore, we have shown that Blacks became more cautious in response to these events compared to other racial groups. In addition, our robustness check on the total number of stops supports the claim that non-blacks do not have a significant response to media coverage of police brutality toward Blacks. This leads to the conclusion that the expected proportion of Blacks breaking traffic laws goes down in response to coverage of these events.

An implicit assumption in our model was that as media coverage goes to zero, Blacks would revert back to their original level of caution. To test this we looked at three days intervals following each media event. We showed that after approximately 10 days, the coefficients were not significant anymore, showing that the media only caused a short term change in behavior. Since this was a robustness check, and not a main focus of our model, we did not investigate this further. This is an interesting conclusion, and warrants future analysis.

On a final note, we want to address the type of media we use for our analysis. Our model section considers media in a general sense. This can include, but is not limited to, social media platforms such as Twitter and Facebook, as well as more traditional media platforms such as television and print newspapers. All of these sources cover police brutality cases at similar intensities. We use TV data for media intensity, since it affects the broadest demographic and therefore best represents the average driver’s exposure to the topic. Different media age medians might affect different demographics more or less. For example, social media may have a greater effect on younger drivers than older drivers. We believes this topic warrants further analysis, in a addition to the topic of the previous paragraph.

Authors: Julie Balitrand, Joseph Buss, Ana Monteiro, Jens Oehlen, and Paul Richter

About the Barcelona GSE Master’s Program in Economics

Brexit, digital money, and (Super) Mario, oh my!

Fall 2019 roundup of CaixaBank Research by Barcelona GSE alumni

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It’s time once again to check in with Barcelona GSE Alumni who are now Economists and Senior Economists at CaixaBank Research in Barcelona. As part of their duties, they regularly publish working papers and reports on a range of topics. Below are some of their latest contributions.

(If you’re a Barcelona GSE alum and you’re also writing about Economics, Finance, or Data Science, let us know where we can find your stuff!)


The «sense and sensibility» of the ECB’s communication

Gabriel L. Ramos ’19 (Finance) and Adrià Morron ’12 (Economics)

Communication is one of the most powerful monetary policy tools. For this reason, CaixaBank Research has developed an index to measure the sentiment of the ECB’s statements.Our ECB sentiment index shows a strong correlation with euro area economic activity indicators and foresees changes in the reference interest rate. The index notes a significant deterioration in ECB sentiment between late 2017 and Q3 2019 and shows how geopolitical uncertainty has affected the ECB’s view of the economic outlook.


The United Kingdom’s potential for Spain after Brexit

Javier Ibañez de Aldecoa ’18 (Economics) with Claudia Canals and Josep Mestres Domènech

In this article, we analyse the extent to which it will be more difficult for Spanish companies to establish relations for international expansion with the United Kingdom following Brexit. We use the CaixaBank Index for Business Internationalisation (CIBI), which classifies foreign countries according to the potential for internationalisation they offer for Spanish companies, and we analyse the impact of the four Brexit scenarios put forward by the Bank of England.


The e-monetary policy of the new digital economy

Adrià Morron ’12 (Economics) and Ricard Murillo ’17 (International Trade, Finance and Development)

Digital technologies permeate the debate on the future of the economy. Monetary policy and its main vehicle, money, are no exception. More and more products are sold over the internet and cash is used less and less. This new digital economy creates new demands on the financial sector and digital money emerges as a new means of payment that appeals to consumers. How does all this affect monetary policy? What can central banks do (and what are they doing) about it?


The farewell of (Super) Mario Draghi

Adrià Morron ’12 (Economics)

Mario Draghi ends his eight-year mandate at the ECB on October 31, leaving the central bank at the cutting edge of monetary policy. Under Draghi’s leadership, the ECB has offered significant support to the recovery of the euro area. However, the latest measures have raised doubts over the margin for action and effectiveness of monetary policy. Christine Lagarde, with a less technical profile but a vision of continuity in monetary policy, will take over in a sombre economic environment in which signs of fragmentation between ECB members have appeared.


Source: CaixaBank Research

Why we need to discuss gender in a different way

Economics ’18 alumni Eva Schoenwald, deputy chair, and Iakov Frizis, editor-in-chief, of the Women in Economics Initiative

Originally posted by the authors on Women in Economics

Recent years have seen significant improvements in female representation in the workplace. Information campaigns, feminist associations, female employment quotas and a rising number of female role models all contribute to an improved gender balance in Western European and US workplaces.

Despite this progress, we remain far from achieving gender balance in the workplace. A significant contributor to the reform slowdown is the emergence of diversity fatigue and inclusion backlash among many companies trying to implement more gender inclusion in the workplace. It becomes increasingly clear that we need to find a way to redefine popular gender discourse if we wish to deliver more inclusion. 

According to the 2018 Global Gender Gap Report, current projections place the closing of the gender gap at 108 years from now. Yet success stories of female economists such as Esther Duflo, Christine Lagarde and Laurence Boone make it easy to cast data aside. They often let us forget about the existence of glass cliffs, implicit gender bias in recruitment and publication processes, pregnancy discrimination, sexual harassment, office favouritism, lack of role models, and restroom gossip, just to name a few. As compelling as success stories might be, they seem not to be bellwethers for reform. 

In the fight against gender discrimination, we face an elusive enemy. A recent International Labour Organisation survey found discrimination and unconscious gender bias to be among the five main challenges for women holding leadership positions. Unconscious bias stems from social norms, values, and experiences that contribute to decision-making. Such bias often manifests itself in an overall masculine corporate culture, along with preconceptions related to social roles and abilities of men and women, and the masculine nature of management positions.

Limited reflection on the effect of unconscious bias towards women in the workplace risks understating the urgency to push for more equality, allowing for a feeling of diversity fatigue to set in. Cundiff and Vescio (2016) show that individuals with strong gender stereotypes are less prone to attribute workplace gender disparities to discrimination. In 2017, James Damore, a Google engineer, unintentionally sided publicly with Cundiff and Vescio when he sued his employer on the grounds of intolerance against individuals holding unpopular political beliefs. The lawsuit came as a response to Google terminating the contract of Mr. Damore, following his drafting of an internal memo in which he argued that female underrepresentation in the tech industry is due to abilities, rather than flagrant discrimination. 

The Google case describes too well the feeling of exhaustion towards diversity and inclusion issues that motivates us to take action. The recent gender inclusion backlash points to a need to revisit how we discuss gender. We should both question the validity of the design of inclusion programmes and acknowledge that we still have a long way to go until we reach equality of opportunity between genders. 

We need to reinvent the way we discuss gender by taking the focus away from high-level gender policies and fairness approaches. Instead, we propose to address gender stereotypes and to develop a strong performance-oriented approach to discussing inclusion. Only by acknowledging that our profession has a gender issue will we be able to revisit this old problem through a new perspective – one that brings together practitioners across both genders, to work towards a more inclusive workplace. 

About the Women in Economics Initiative

Together with some friends, we have recently launched the Women in Economics Initiative (WiE). The Women in Economics Initiative was established to advance gender equality in the field of economics. Our goal is to encourage equal opportunity and a balanced representation of genders in the economics profession across the academic, business and public sectors. To achieve this, we offer a platform that highlights the work of women economists, a network to connect and exchange ideas and interactive data about the status of diversity in economics.

We are looking for new members, supporters as well as submissions of articles from women economists on their work.

Eva Schoenwald ’18 is a quantitative researcher at Nesta and deputy chair of WiE. She is an alum of the Barcelona GSE Master’s in Economics.

LinkedIn | Twitter

Iakov Frizis ’18 is a senior economist at PwC Luxembourg and editor-in-chief of WiE. He is an alum of the Barcelona GSE Master’s in Economics.

LinkedIn | Twitter

How Destructive is Innovation?

Publication in Econometrica by Daniel Garcia-Macia ’11 (Economics)

cover image

Daniel’s paper “How Destructive is Innovation?” (with Chang-Tai Hsieh & Peter Klenow) has been published in Econometrica (September 2019).

The paper has received media attention in NBER Digest, Chicago Booth Review, Financial Times, and Bloomberg.

Paper abstract

Entrants and incumbents can create new products and displace the products of competitors. Incumbents can also improve their existing products. How much of aggregate productivity growth occurs through each of these channels? Using data from the U.S. Longitudinal Business Database on all nonfarm private businesses from 1983 to 2013, we arrive at three main conclusions: First, most growth appears to come from incumbents. We infer this from the modest employment share of entering firms (defined as those less than 5 years old). Second, most growth seems to occur through improvements of existing varieties rather than creation of brand new varieties. Third, own‐product improvements by incumbents appear to be more important than creative destruction. We infer this because the distribution of job creation and destruction has thinner tails than implied by a model with a dominant role for creative destruction.

Daniel Garcia-Macia ’11 (PhD, Stanford University) is an Economist at the International Monetary Fund. He is an alum of the Barcelona GSE Master’s in Economics.

Small Numbers, Big Concerns: Practices and Organizational Arrangements in Rare Disease Drug Repurposing

Publication by Burcu Kucukkeles ’12 (Economics)

Burcu Kücükkeles (Economics ’12) has published a paper in the Academy of Management Discoveries. In this paper, “Small Numbers, Big Concerns: Practices and Organizational Arrangements in Rare Disease Drug Repurposing,” Burcu and her colleagues looked into the societal challenge of developing drugs for rare diseases (a rare disease is a condition that affects less than 200,000 people in the United States or 1 in 2,000 people in the European Union).

By studying the market and government failures in rare diseases and practices of two nonprofit organizations, Burcu and her colleagues contribute to the Agenda on the Sustainable Development Goals beyond the implications of their study to the management literature.

Burcu is currently a PhD candidate at the Chair of Strategic Management and Innovation, Department of Management, Technology, and Economics, ETH Zurich. Voice readers are welcome to email her for access to the full paper or with any questions about this research: burcuk [ at ] ethz [. ]ch

Paper Abstract

Due to their small market size, many rare diseases lack treatments. While government incentives exist for the development of drugs for rare diseases, these interventions have yielded insufficient progress. Drawing on an in-depth case study of rare diseases therapies, we explore how the practices of two nonprofit organizations allowed them to circumvent the endemic market and government failures involving positive externalities by using generic drug repurposing—i.e., seeking new therapeutic applications for existing generic drugs. Beyond elucidating the potential of generic drug repurposing for those suffering from rare diseases, our discoveries provide important insights into the mutual constitution of organizational arrangements for societal challenges and the practices they host. By showing how organizational arrangements can both reinforce and extend practices such that they enable practitioners to achieve a standard of excellence, our study advances practice theory and research on the comparative efficacy of alternative organizational arrangements for tackling societal challenges.

alumni

Burcu Kucukkeles ’12 is PhD Candidate at ETH Zurich and an alum of the Barcelona GSE Master’s in Economics.

How do firms adjust to rises in the minimum wage? Survey evidence from Central and Eastern Europe

Publication by Nataša T. Jemec ’09 (Economics) and Ludmila Fadejeva ’11 (Macro)

Nataša Todorović Jemec ’09 (Economics) and Ludmila Fadejeva ’11 (Macroeconomic Policy and Financial Markets) have published a paper in the IZA Journal of Labour Policy, together with a few other colleagues from central banks of new EU member states. The paper, “How do firms adjust to rises in the minimum wage? Survey evidence from Central and Eastern Europe,” studies the transmission channels for rises in the minimum wage using a unique firm-level dataset from eight Central and Eastern European countries.

They wrote the publication within the ECB Wage Dynamics Network (WDN). At the time, Nataša and Ludmila were working at the Central Bank of Slovenia and the Central Bank of Latvia respectively, and they were their banks’ representatives in the WDN. Increase of the minimum wage was a common topic of many new EU members, and they decided to write a paper on that based on the data that they collected through a WDN survey in their countries.

Researchers can use this form to request access to the data of the WDN network which includes many EU countries.

Paper abstract

We study the transmission channels for rises in the minimum wage using a unique firm-level dataset from eight Central and Eastern European countries. Representative samples of firms in each country were asked to evaluate the relevance of a wide range of adjustment channels following specific instances of rises in the minimum wage during the recent post-crisis period. The paper adds to the rest of literature by presenting the reactions of firms as a combination of strategies and evaluates the relative importance of those strategies. Our findings suggest that the most popular adjustment channels are cuts in non-labour costs, rises in product prices, and improvements in productivity. Cuts in employment are less popular and occur mostly through reduced hiring rather than direct layoffs. Our study also provides evidence of potential spillover effects that rises in the minimum wage can have on firms without minimum wage workers.

About the authors

Nataša T. Jemec ’09 is a Senior Economist at IMAD. She is an alum of the Barcelona GSE Master’s in Economics.

Ludmila Fadejeva ’11 is a Senior Econometrician at the Bank of Latvia. She is an alum of the Barcelona GSE Master’s in Macroeconomic Policy and Financial Markets.

On the evolution of altruistic and cooperative behaviour due to schooling system in Spain

Economics master project by Shaily Bahuguna, Diego Loras Gimeno, Davina Heer, Manuel E. Lago, and Chiara Toietta ’19

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects. The project is a required component of all Master’s programs at the Barcelona GSE.

Abstract

This paper aims to find a pattern in the evolution of altruistic and cooperative behaviour whilst distinguishing across different types of schools in Spain. In specific, we design a controlled laboratory experiment by running the standard dictator game and a public goods game in a public and private (“concertada”) high school. Using a sample of 180 students, we compare 12 and 16 year old children to distinguish the evolutionary pattern and test if there is a significant change by the type of schooling system. Alongside, we control for variants such as parental wealth status, religious views and ethical opinions. Interestingly, evidence from our data highlights that altruism levels rise throughout public school education whilst it falls in private schools. On the contrary, cooperation levels are relatively stable in public schools but rise in private schools. The results from this paper can be exploited to understand how education may influence selfish and individualistic behaviour in our society. 

Key results

Diff-in-Diff (Altruism (L) & Cooperation (R))

Our results show that at the initial stage, i.e. for the first year students, the level of altruism is higher in public schools and this prevails throughout the students’ education in a public school. On the other hand, we observe an opposite trend for students attending private school, as over the four years of education, the average level of altruism declines. In regards to cooperation, we find some surprising results. Although students attending a public school initially show higher levels of cooperation than private schools, over the course of their education, this gap is not only reduced but it is also surpassed by the private school. Our results are in line with previous research which state that females are more likely to donate and cooperate than males but contradict the popular view in literature that income has a positive correlation with both dependent variables.

Authors: Shaily Bahuguna, Diego Loras Gimeno, Davina Heer, Manuel E. Lago, and Chiara Toietta

About the Barcelona GSE Master’s Program in Economics

An Empirical Framework: Financial Globalization and Threshold Effects

Economics master project by Eimear Flynn, Florencia Saravia, Josefina Cenzon, Nimisha Gupta, and Selena Tezel ’19

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects. The project is a required component of all Master’s programs at the Barcelona GSE.

Abstract

Is financial globalization beneficial to economies at all levels of development? Or are there certain “threshold” levels of financial, institutional and economic development a country must first attain in order to realize the growth benefits of globalization? Kose, Prasad and Taylor (2009) develop a unified empirical framework to answer this question. The debate on the literature is ongoing. Yet few studies have explored these questions in a post-crisis context. In this paper, we replicate and extend their work, paying close attention to the period 2005-2014. Our analysis yields three key results. First, the financial depth threshold above which countries can benefit from financial globalization increases from 66% to 81% when we consider the extended period. Second, the proportion of countries with depth levels above this threshold declines over time. Finally, the coefficients are smaller in absolute value over the period 1975-2014. Taken together, these results imply a breakdown in the relationship between financial depth, openness and growth since the Great Recession. Financial deepening on its own can no longer ensure positive growth effects of financial integration.

Conclusion

In the paper, we examine two periods 1975-2004 and 1975-2014 and test for threshold effects in three variables, financial depth, institutional quality and trade openness. This paper is unique in its inclusion of the years immediately before and following the Great Recession. Following a surge in international financial integration between 2005 and 2007, financial openness plummeted with the onset of the crisis in 2007. This effect was most pronounced in advanced economies. As economic growth rates declined, countries turned their backs on financial globalization. Financial flows have since rebounded, albeit not to their pre-crisis levels. The effect of this volatility on the relationship between financial openness and economic growth however is not well understood.

thresh_FD_Graph
Overall Financial Openness Coefficient and Financial Depth in 1975-2014 vs 1975-2004

We analyze changes in the financial depth threshold over time as well as changes in the proportion of countries with depth levels above this threshold over time. We present three key findings. We first document an increase in the threshold level of financial depth from 66% to 81% when we extend the period to 2014. It follows that the proportion of countries with levels of depth above this threshold decreases over time. Our estimate of 66% for the period 1975-2004 is remarkably close to that of Kose et al. Secondly, the coefficient estimates are smaller and less significant which points to a breakdown in the relationship between financial openness and growth in the post-crisis period. Finally, we identify significant threshold effects of institutional quality.

Together these results point to a weaker relationship between financial openness and growth in the post-crisis period. Our estimates suggest that once a country reaches the threshold level of financial depth, further improvements in depth stop being important quite rapidly. It is now more difficult for countries to attain the benefits of financial integration, not just because the threshold of financial depth is higher but because financial depth alone may no longer be sufficient to ensure growth. The trade-off that further financial deepening can generate between higher growth and a higher risk of crisis needs to be addressed. The Great Recession was a reminder that financial depth and financial stability need not go hand in hand. The risks of financial deepening are more evident than before. Focusing only on the long run growth view overlooks this trade-off. In order to conduct policy relevant research, a new approach that realistically accounts for both the growth and crisis effects of financial deepening is required.

Authors: Eimear Flynn, Florencia Saravia, Josefina Cenzon, Nimisha Gupta, and Selena Tezel

About the Barcelona GSE Master’s Program in Economics

Quantification of Instruments’ Strength

Economics master project by Oriol González, Marko Irisarri, Santiago Iglesias, Asier Beristain and Manuel Cabado ’19

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects. The project is a required component of all Master’s programs at the Barcelona GSE.

Abstract

Weak identification is known to yield unreliable standard instrumental variables (IV) inference. A large literature has focused on addressing this issue by proposing methods to detect weak instruments, mainly through the first-stage F-statistic. Our paper evaluates the weak identification in two leading empirical analyses by using the novel alternative approach developed by Ganics, Inoue and Rossi (2018), who base their tests on confidence intervals for the bias of the two-stage least squares estimator, and the size distortion of the associated Wald test. We illustrate the behavior of the tests in empirical settings, and compare how the conclusions differ to those using the standard tests. Our findings suggest that, in our empirical application, the results obtained using this approach are in line with those using previous tests in the literature, confirming it to be a robust alternative. An R package to directly compute these novel tests is also presented.

Main conclusions

The contribution of our paper is mainly twofold. On the one hand, we aim at motivating the usefulness of the novel approach developed by Ganics et al. (2018) to evaluate the robustness of empirical analyses to the potential presence of weak instruments. On the other hand, we make these tests accessible to researchers via the proposed R function. The paper shows how recent tests applied to previous literature unveil new interesting information about the results obtained and hence the conclusions drawn from them. We highlight the consequences of IV estimates displaying both high sampling uncertainty and high specification uncertainty, as minor specification changes can lead to very different estimates, which is in line with current findings in the IV literature (see Yogo, 2004; Kleibergen and Mavroeidis, 2009; Mavroeidis, 2010; Mavroeidis et al., 2014; Ganics, 2017; or Barnichon and Mesters, 2019). Another remarkable issue that arises, mirroring the recent findings in Young (2019), is the importance of the baseline assumptions on the structure of the error variance to correctly interpret the estimation results.

girtest
Output retrieved by the proposed girtest function in R

References

  • Barnichon, R. and Mesters, G. (2019), ‘Identifying modern macro equations with old shocks’, Barcelona GSE Working Paper Series (Working Paper n◦1097).
  • Ganics, G. (2017), Essays in macroeconometrics, PhD thesis, Universitat Pompeu Fabra.
  • Ganics, G., Inoue, A. and Rossi, B. (2018), ‘Confidence intervals for bias and size distortion in IV and local projections-IV models’, Banco de España Working Paper.
  • Kleibergen, F. and Mavroeidis, S. (2009), ‘Weak instrument robust tests in gmm and the new keynesian phillips curve’, Journal of Business & Economic Statistics 27(3), 293-311.
  • Mavroeidis, S. (2010), ‘Monetary policy rules and macroeconomic stability: some new evidence’, American Economic Review 100(1), 491-503.
  • Mavroeidis, S., Plagborg-Møller, M. and Stock, J. H. (2014), ‘Empirical evidence on inflation expectations in the new keynesian phillips curve’, Journal of Economic Literature 52(1), 124-88.
  • Yogo, M. (2004), ‘Estimating the elasticity of intertemporal substitution when instru- ments are weak’, Review of Economics and Statistics 86(3), 797-810.
  • Young, A. (2019), ‘Consistency without inference: Instrumental variables in practical application’, Unpublished manuscript.

About the Barcelona GSE Master’s Program in Economics

Bank Assets, Liquidity and Credit Cycles

Forthcoming publication by Federico Lubello ’12 (Economics)

My paper, “Bank Assets, Liquidity and Credit Cycles” with Ivan Petrella (Warwick and CEPR) and Emiliano Santoro (University of Copenhagen) has been accepted at the Journal of Economic Dynamics and Control. In the paper, we uncover a close connection between the collateralization of bank loans, macroeconomic amplification and the degree of procyclicality of bank leverage.

Abstract

We study how bank collateral assets and their pledgeability affect the amplitude of credit cycles. To this end, we develop a tractable model where bankers intermediate funds between savers and borrowers. If bankers default, savers acquire the right to liquidate bankers’ assets. However, due to the vertically integrated structure of our credit economy, savers anticipate that liquidating financial assets (i.e., loans) is conditional on borrowers being solvent on their debt obligations. This friction limits the collateralization of bankers’ financial assets beyond that of real assets (i.e., capital). In this context, increasing the pledgeability of financial assets eases more credit and reduces the spread between the loan and the deposit rate, thus attenuating capital misallocation as it typically emerges in credit economies à la Kiyotaki and Moore (1997). We uncover a close connection between the collateralization of bank loans, macroeconomic amplification and the degree of procyclicality of bank leverage.

Federico Lubello ’12 is a Research Economist at Banque centrale du Luxembourg. He is an alum of the Barcelona GSE Master’s in Economics.

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