Economics by Barcelona GSE alumni at CaixaBank Research (Vol. 2)

Recent work by alumni at CaixaBank Research

It’s our second roundup of articles by Barcelona GSE Alumni who are now working as research assistants and economists at CaixaBank Research in Barcelona (see Vol. 1).

This roundup includes posts and videos from the second half of 2018 and early 2019, listed in reverse chronological order. Click each author’s name to view all of his or her articles from CaixaBank Research in English, Catalan, and Spanish.

Education as a lever for inclusive growth

Ricard Murillo ’17 (International Trade, Finance, and Development)

The importance of education for people’s well-being throughout all stages of their lives is beyond any doubt. At the economic level, individuals with higher levels of education tend to enjoy higher employment rates and income levels. What is more, all the indicators suggest that in the years to come, the role of education will be even more important. The challenges posed by technological change and globalisation have a profound effect on the educational model.


Social cohesion and inclusive growth: inseparable

Javier Ibáñez de Aldecoa ’18 (Economics)

Faced with the major transformation of the productive system brought about by technological change and globalisation, as well as the challenges posed by an ageing population, it is important to take action to strengthen social cohesion – an indispensable element if we are to carry out reforms that foster an inclusive and sustained form of growth.


The central banks, at the helm of a more volatile environment

Adrià Morron ’12 (Economics) and Ricard Murillo ’17 (ITFD)

The US and the euro area are at different stages of their financial cycles: while the Fed’s monetary policy is close to becoming neutral or even restrictive, the ECB remains in clearly accommodative territory. However, to some extent, both are facing a common risk: the decoupling between their monetary policy and the financial conditions. The two institutions will try to manage their tools carefully, in order to facilitate a gradual adjustment of the financial conditions in the US and, in the case of the euro area, to keep them in accommodative territory.


Regulation more appropriate to the nature of the banking sector

Gerard Arqué ’09 (Macroeconomic Policy and Financial Markets)

Thanks to the implementation of the measures introduced following the financial crisis, today the financial sector is more robust than before. This will help to minimise the impact to the economy and financial stability in periods of upheaval, since countries with better-capitalised banking systems tend to experience shorter recessions and less contraction in the supply of credit. However, the outstanding tasks we have mentioned should be properly addressed sooner rather than later.

Bonus video! An unconventional monetary policy cycle

Adrià Morron ’12 (Economics)

Central banks are facing the challenge of removing the extraordinary measures imposed during the financial crisis of 2007-2008 and the subsequent economic recession. In normal times, central banks would simply raise interest rates up to the desired level. However, monetary policy is currently in a rather unconventional cycle.


Source: Caixabank Research

If you’re an alum and you’re also writing about Economics, let us know where we can find your stuff!

The heterogenous effects of environmental taxation on green investment

IND+I Science award for research by Kinga Tchorzewska ’15 (Economics)

award

I am honoured and overjoyed to have received the IND+I Science award in the category of “Green Industry for Sustainable Growth.” Big thank you to Magdalena Dominguez ’17 and Rodrigo Martinez ’17 for representing me at the award ceremony! So delighted and motivated even more to work hard towards research on public policies and green innovation!

Fellow BGSE alum Magdalena Domínguez ’15 collects the prize on Kinga’s behalf

About the paper

This paper investigates the effectiveness of environmental taxation at stimulating adoption of energy efficient and pollution abating technologies across manufacturing firms.

To that aim, we use the fact that Spain does not have a consolidated environmental taxation policy at the national level, instead there exist significant differences between regions in implementation of the environmental taxes e.g.  air pollution taxes, waste taxes and others. We use categorical treatment matching to study the heterogenous effects of different levels of taxation on adoption of green technologies. We assess the effects between firms forced to pay environmental taxation (treated) and those that did not have to pay such taxes (controls) as well as between different levels of environmental taxation (small, medium, large). We control for time and firm fixed effects thanks to the use of a panel data set of 2,562 Spanish firms between 2008 and 2014.

We find that environmental taxation is ineffective at stimulating green technologies adoption at low levels of environmental taxation. As we increase the level of taxation the effect increases. Additionally, we find that even low levels of environmental taxation can be effective if combined with public financing. In that case the effect is stronger than from providing public financing alone.

The research leading to these results has received funding from RecerCaixa (RecerCaixa project 2016: The climate change challenge: policies for energy transition) and it is supervised by my advisor Prof. José Garcia-Quevedo.

I would also like to add that I will be awarded a SEBAP Research Mobility Grant this month, which is financing my current stay at University of Illinois at Urbana-Champaign, working with Prof. Tatyana Deryugina.

Kinga

Kinga Tchorzewska ’15 is a visiting scholar at University of Illinois at Urbana-Champaign. She is an alum of the Barcelona GSE Master’s in Economics.

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Fake News, Immigration and Opinion Polarisation

A poster by Carlo Borella ’17 (Economics) has won the Festival Prize at the 2019 LSE Research Festival.

A poster created by Carlo Alessandro Borella ’17 has won the Festival Prize at the 2019 LSE Research Festival. This prize was awarded to the shortlisted submission that best engaged with the LSE Festival theme “New World (Dis)Orders” as judged by LSE Director Minouche Shafik.

Carlo’s poster is based on a paper of that same title that he wrote with fellow Barcelona GSE alum, Diego Rossinelli ’17 (Economics). That paper was published in SocioEconomic Challenges a few months after they graduated from the Barcelona GSE Master’s.

Carlos receives the award at the LSE Research Festival

About the paper

Nowadays, it is hard to venture online without coming across a heated discussion over “Fake News”; as a result, people are finding hard times moving through an entirely new distorted era of misinformation. In this paper, we investigate the effect of fake news on people’s opinion polarisation.

Carlo and his winning poster
Carlo and his winning poster. See the full-size poster

About the authors

Carlo Borella is a research assistant and Master’s student at the London School of Economics and Political Science.

Diego Rossinelli is a specialist in social policy evaluation at the Ministry of Development and Social Inclusion of Peru.

Both are graduates of the Barcelona GSE Economics Master’s Program.

Unlucky Cohorts: Estimating the Long-Term Effects of Entering the Labor Market in a Recession in Large Cross-Sectional Data Sets

A new publication by Hannes Schwandt (GPEFM ’12) in the Journal of Labor Economics

Hannes Schwandt (GPEFM ’12) is Assistant Professor of Economics at Northwestern University’s School of Education and Social Policy, currently visiting Stanford University’s Institute for Economic Policy Research (SIEPR). His paper, “Unlucky Cohorts: Estimating the Long-term Effects of Entering the Labor Market in a Recession in Large Cross-sectional Data Sets” (with Till von Wachter) has just been published in the January 2019 issue of the Journal of Labor Economics. The paper has garnered attention from major media outlets including The Economist and The Financial Times.

Abstract

This paper studies the differential persistent effects of initial economic conditions for labor market entrants in the United States from 1976 to 2015 by education, gender, and race using labor force survey data. We find persistent earnings and wage reductions, especially for less advantaged entrants, that increases in government support only partly offset. We confirm that the results are unaffected by selective migration and labor market entry by also using a double-weighted average unemployment rate at labor market entry for each birth cohort and state-of-birth cell based on average state migration rates and average cohort education rates from census data.

Media attention

See how media outlets covered this paper (subscription may be required):

Mothers’ Care: Reversing Early Childhood Health Shocks through Parental Investments

Working paper co-authored by Barcelona GSE alum Cristina Bellés-Obrero (Economics ’12, GPEFM ’17)

Adult and baby holding hands

Barcelona GSE alum Cristina Bellés-Obrero (Economics ’12, GPEFM ’17) has co-authored a new working paper with Antonio Cabrales (UCL), Sergi Jiménez-Martín (UPF and Barcelona GSE) and Judit Vall-Castello (CRES-UPF) on “Mothers’ Care: Reversing Early Childhood Health Shocks through Parental Investments.”

Cristina shares a summary of the paper and some notes about the writing process:

The paper

Health shocks at birth are important in and of themselves. But they also have an impact on outcomes later in life, such as education, productivity or adult health.  There is a large literature showing that health shocks at birth lead to important negative outcomes later on.  For instance, children born with low birth weight have a higher probability of having adverse health and developmental outcomes in the medium run (Johnson and Schoemi (2011a,b), Case et al. (2005)).  However, there is much less research on the potential factors that can compensate those early life shocks. This represents an important element with strong implications for policy makers. 

In this paper, jointly with Antonio Cabrales, Sergi Jimenez and Judit Vall, we identify one of these factors.  In particular, we want to answer the following question: Are educated parents able to reverse a negative health shock that their children experience at birth?

To answer this question we study the causal effect of a child labor regulation on the short and long-term health of the affected individuals’ descendants. In 1980 a child labor reform took place in Spain, which increased the minimum legal age to work from 14 to 16 years old. A previous paper shows that this reform increased the education of both women and men. At the same time, the reform decreased the fertility and marriage rates of individuals affected, and importantly, it was detrimental for their male children’s health at delivery. At birth, male babies from more educated mothers have worse perinatal health outcomes, such as lower birth weight or low maturity. We estimated that the reform caused 618 more births at less than 37 weeks of gestation, 837 more first multiple births, and 768 extra births with low birth weight. On the other hand, we do not find the same negative impact of the reform over female babies. 

Given the size of the effects that we find on birth outcomes and the established links between health at birth and long-term health, we would expect that the deterioration of infant health at birth would persist in the medium and long term unless there is a compensation mechanism. Yet, in the medium run, we find that the effects of the reform on objective health outcomes are insignificant for both males and females. Thus, we can conclude that educated parents can reverse negative shocks at birth.

Our data suggest that the long term reversal is achieved through maternal vigilance. The male children of treated mothers with higher education are perceived as having worse health even at older ages. Their objective health status is, however, indistinguishable from that of other boys. This suggests more concerned mothers. These boys are also more likely to have private health insurance. This latter trait is significant. In Spain private health insurance is purchased in addition to the universal public health coverage. This double coverage allows beneficiaries to avoid the system gatekeeper and, hence, to have quicker access to specialists and additional tests and checkups. 

The process

We started this paper in 2017 as a follow-up project. In a previous paper, Elena Del Rey, Sergi Jimenez and Judit Vall analyze the effects of the child labor reform over education and labor market outcomes. They find that the reform increased the educational attainment of both men and women affected by the regulation. In particular, they find that the reform reduced the number of early school leavers (individuals not finishing compulsory education) by 7.6% in the case of men, and by 11% in the case of women. They also find a positive effect in the probability of attaining post-compulsory education. The reform decreased the number of individuals that do not attain any level of post-compulsory education by 3.3% for men and 2.7% for women.. 

In a different paper, we show that the reform decreased marriage and fertility rates for affected women. At the same time, we also find evidence that the reform is detrimental for the health of the offspring at the moment of delivery. We document three channels contributing to this detrimental effect: the postponement in age of delivery, the increase in single mothers, and the increase in the likelihood that those women engage in unhealthy behaviors such as smoking.

Thus, the reform had a positive effect on the parents, that are now more educated, but a detrimental effect on their children’s health at the moment of delivery. This reform, then, constitute a perfect setting to analyze parent’s education as a possible factor that will allow the reversal of negative health shocks at birth. 

The effects of markets, uncertainty and search intensity on bitcoin returns

Forthcoming publication by Economics alum Orestis Vravosinos ’18

BItcoin research by Barcelona GSE Alumni

Orestis Vravosinos ’18 (Economics) shares his recent work on bitcoin, joint with professors Theodore Panagiotidis (University of Macedonia) and Thanasis Stengos (University of Guelph).

The paper is in press and currently available online in the International Review of Financial Analysis. It first appeared as a working paper of the Rimini Centre for Economic Analysis (RCEA).


Bitcoin has been gaining more and more attention by investors and researchers since its introduction by Nakamoto (2008). It possesses three main appealing features: (i) direct transactions without bank intermediation, (ii) low transaction fees and (iii) anonymity. The consumer base and transaction frequency in the digital currencies market and the number of businesses and organizations that accept bitcoin as a means of payment have been considerably expanding. Apart from its increasing use in transactions, literature suggests that bitcoin has some favorable characteristics as an asset.

In the paper we examine the impact of shocks in stock markets, exchange rates, gold, oil, central bank rates, internet trends and policy uncertainty on bitcoin returns employing alternative VAR and Factor- Augmented VAR (FAVAR) models and using generalized and local impulse response functions. We also use factor and principal component (PC) analysis to capture the magnitude of the effects that European, US and China-Japan markets have on bitcoin returns.

Our results suggest a significant interaction between bitcoin and traditional stock markets, a weaker with FX markets and the macroeconomy and an anemic importance of popularity measures. Lastly, we reveal the increased impact of Asian markets on bitcoin compared to other geographically-defined markets, which however appears to have waned in the last two years after the Chinese regulatory interventions. This has been accompanied by a sudden contraction of CNY’s share in bitcoin trading volume and a rapid expansion of USD’s share.

References

Panagiotidis, T., Stengos, T. and Vravosinos, O. (2018). The effects of markets, uncertainty and search intensity on bitcoin returns. International Review of Financial Analysis, doi: 10.1016/j.irfa.2018.11.002

 

Feedback rating to decrease bribery: Evidence from the Kyrgyz Republic

Research by Francesco Amodio ’10 (Economics) and co-authors at The World Bank and Barcelona GSE

Kyrgyz currency

Francesco Amodio ’10 (Economics) co-authored this article for VoxDev with Barcelona GSE Research Professor Giacomo De Giorgi along with World Bank economists Jieun Choi and Aminur Rahman. In the article, the team gives an overview of a field experiment they conducted and theoretical model they developed that describes the interaction between firms and inspectors.

“In collaboration with the World Bank Group and the State Tax Service of the Kyrgyz Republic, we designed an incentive scheme for tax inspectors that rewards them based on the anonymous evaluation submitted by inspected firms. In theory, this should increase the bargaining power of firms in their relationship with tax officials, and decrease the bribe size. However, if firms pay bribes instead of taxes, bribes can increase on the extensive margin, and tax revenues could decrease.”

They found that anonymous rating of inspectors can decrease bribes and increase tax revenues as long as it takes into account market structure considerations.

Read the full article and find links to the research on VoxDev

Francesco Amodio is a graduate of the Barcelona GSE Master’s Program in Economics and the GPEFM PhD Program (UPF and Barcelona GSE). He is currently Assistant Professor of Economics at McGill University in Montreal, Canada. Follow him on Twitter or visit his website

Aishwarya Deshpande ’18 writes on Behavioral Development Economics

Economics alum Aishwarya Deshpande ’18 has written an article for Behavioral Scientist magazine.

Photo credit: Ruben Bagues/Unsplash

In honor of Nobel Laureate Richard Thaler’s famous book Nudge turning 10, Aishwarya Deshpande (Economics ’18) writes in Behavioral Scientist magazine about the emerging subfield in development economics, namely behavioral development economics. The subfield aims to incorporate insights informed by behavioral science to address issues of persistent inequality, poverty alleviation and welfare.

Aishwarya had the pleasure of reading various academic papers that addressed these issues with innovative approaches in preparation for the essay. She finds that ‘last mile’ between intention and action can be bridged by understanding the limitations of the human mind, which potentially has many policymaking implications.

Excerpt:

Behavioral science has come a long way in the past 50 years. While many of the early, pioneering studies took place in sanitized “lab” environments, with subjects from Western countries, the past decade has seen an explosion of behavioral science research in the messier environment of the developing world. This work has given us greater insight into how and why the world’s poorest populations make the decisions they do. But perhaps more importantly, this work has allowed behavioral scientists to directly improve the well-being of the world’s poorest and most vulnerable populations.

Read the full article on Behavioral Scientist

Aishwarya Deshpande is a student in the Master of Brain and Cognition Program at Universitat Pompeu Fabra (UPF). She holds a Master’s in Economics from the Barcelona Graduate School of Economics. Follow her on Twitter

Spillover Effects from the Financial Sector: A Network Analysis for the Eurozone

Master project by Jordi Gutiérrez, Domenic Kellner, Philip King, Simon Neumeyer, and Dorota Scibisz

figure

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2018. The project is a required component of every master program.


Authors:

Jordi Gutiérrez, Domenic Kellner, Philip King, Simon Neumeyer, and Dorota Scibisz

Master’s Program:

Economics

Paper Abstract:

We identify contemporaneous and Granger-causal linkages between the 86 biggest companies, representing both the financial and real sectors, of the Eurozone economy that serve as paths of shock transmission. Network analysis lends itself very naturally to the study of systemic risk due to its preoccupation with interconnections and notions of centrality. We employ an estimation methodology introduced by Barigozzi and Brownlees (2018) using market data for daily volatilities from the Eurostoxx index. Our results are in line with the existing literature – the banking sector is found to be highly interconnected and responsible for most Granger-network spillovers. Moreover, only a small subset of firms appear to Granger-cause other residual volatilities, providing support for regulators’ targeting of Systemically Important Financial Institutions.

Conclusions:

Following the work of Barigozzi and Brownlees (2018), this paper applies the nets algorithm to study the interconnectedness of the 86 biggest firms in the Eurozone for a sample period spanning from May 2008 to April 2018. We have estimated two sparse networks of return volatilities that allow us to measure systemic risk and detect patterns of its transmission. Compared to the original study of the US economy, we have utilised a more detailed set of industries. What is more, country-specific volatilities were added as an extra factor in order to obtain more precise firm-specific residual volatilities, while still uncovering a large number of connections.

At the contemporaneous level almost all industries exhibit high connectedness, a pattern which became immediately apparent on the initial heatmaps of residual correlations. Even when controlling for sectoral and country volatilities we find clusters of firms reacting strongly with other firms within the same business area. These co-movements are especially remarkable within the banking, industrial, and technological sectors.

However, it is a small subset of companies, mostly financial firms, that displays high interconnectedness at the Granger-causal level. Consequently, we conclude that banks are particularly important risk transmitters in the Eurozone network. The subset of banks is especially susceptible to volatilities stemming from other sectors. This makes intuitive sense as we can think of banks being highly leveraged when compared with other entities (Freixas et al., 2015). Moreover, banks amplify and transmit shocks to all the other sectors, which reflects their unique economic role as financial intermediaries. Altogether, this provides empirical support for the regulatory targeting of certain Systemically Important Financial Institutions.

Download the full paper [pdf]


More about the Economics Program at the Barcelona Graduate School of Economics

CNN interview with Miguel Angel Santos (ITFD ’11, ECON ’12) on the crisis in Venezuela

Miguel Angel Santos was interviewed on CNN’s Global Portfolio where he shared his analysis of the economic crisis in Venezuela.

Master’s alum Miguel Angel Santos was interviewed on CNN’s Global Portfolio where he shared his analysis of the economic crisis in Venezuela. From his post on LinkedIn:

“The collapse of Venezuela has a magnitude never before seen: it is the only country in the top ten of falls in GDP in five years in history (ninth, 45%), of falls in imports (third, 75%), and is also projected as one of the most intense hyperinflations in history, comparable only to Germany and Zimbabwe. There is no country on those three lists which has suffered collapses in imports, production, and hyperinflation at this level of intensity. It’s unprecedented.”

 

Miguel Angel is a graduate of both the Barcelona GSE Master’s Program in International Trade, Finance, and Development and the Master’s Program in Economics. He is now Adjunct Lecturer in Public Policy at Harvard Kennedy School, and Senior Research Fellow at the Center for International Development (CID) at Harvard University.