City Design, Planning, Policy Innovations: The Case of Hermosillo

IDB publication co-authored by Miguel Angel Santos (ITFD ’11, Economics ’12)

credit: IDB

After a lengthy review process we are proud to announce that our book “City Design, Planning, Policy Innovations: The Case of Hermosillo” is published and available for download from the Inter-American Development Bank. Cutting edge research on cities featuring my work with Douglas Barrios, my colleague at the Center for International Development’s Growth Lab at the Harvard Kennedy School. Thanks to Andreina Seijas and Diego Arcia for the superb coordination and editing work.

About the book

This publication summarizes the outcomes and lessons learned from the Fall 2017 course titled “Emergent Urbanism: Planning and Design Visions for the City of Hermosillo, Mexico” (ADV-9146). Taught by professors Diane Davis and Felipe Vera, this course asked a group of 12 students to design a set of projects that could lay the groundwork for a sustainable future for the city of Hermosillo—an emerging city located in northwest Mexico and the capital of the state of Sonora. Part of a larger initiative funded by the Inter-American Development Bank and the North-American Development Bank in partnership with Harvard University, ideas developed for this class were the product of collaboration between faculty and students at the Graduate School of Design, the Kennedy School’s Center for International Development and the T.H. Chan School of Public Health.

Miguel Angel Santos (ITFD ’11, Economics ’12) is Director of Applied Research at the Growth Lab at Harvard Kennedy School.

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The UK productivity puzzle

Speech by Gavin Jackson ’12 (Economics) to the Oxford Economics Society

Image: OES

This June, Gavin Jackson ’12 (Economics) returned to his undergrad alma mater, University of Oxford, and gave a talk to the Oxford Economics Society about the slowdown in productivity in the United Kingdom and where productivity in the UK might be headed.

He listed five contributing factors to the slowdown: “changes in financial regulation, the patent cliff, mismeasurement of telecommunications, attempts to cope with climate change, and the troubles with getting more oil out of the North Sea.”

Looking ahead, he remarked, “I don’t think we can or should go back to the past. We do not want to go back on environmental on financial regulation, as the US is doing right now. But what we can do as a society is try to be open to new opportunities and technologies that are coming along and that means investing in the basics of education, infrastructure and research to make sure that we are able to make the most of things like e-commerce and working out what to do about those who lose out from these transitions.”

Gavin Jackson ’12 is an Economics Reporter at the Financial Times. He is an alum of the Barcelona GSE Master’s in Economics.

LinkedIn | FT Articles

The Zero Lower Bound was irrelevant

Blog post for AIER by Brian C. Albrecht ’14 (Economics of Public Policy)

empty building floor

Brian Albrecht is a PhD candidate at the University of Minnesota and a graduate of the Barcelona GSE Master’s Program in Economics of Public Policy, as well as a past editor of the Barcelona GSE Voice. He is also a contributor to the Sound Money Project, a blog from the American Institute for Economic Research (AIER).

In a recent post, Brian talks about a recent paper by Barcelona GSE professors Davide Debortoli, Jordi Galí, and Luca Gambetti, “On the Empirical (Ir)Relevance of the Zero Lower Bound Constraint.” He writes:

Many economics writers, including Ben BernankeNeil Irwin, and Justin Wolfers, worry that the Fed will not be able to combat the next recession. Current interest rates, the sad story goes, are already close to zero. Since a downturn will push the economy to the zero lower bound (ZLB), the Fed will not be able to lower rates further, thereby prolonging the recession.

Of course, for such a story to make sense, the ZLB must be a fundamental constraint that inhibits monetary policy. In a new NBER working paper, Davide Debortoli, Jordi Galí, and Luca Gambetti consider whether the ZLB was actually the problem during the last recession. They say the ZLB was irrelevant. The authors come to this conclusion by studying two types of evidence: measures of macro volatility, and the response of macro variables to aggregate shocks through a vector autoregression.

Brian C. Albrecht for Sound Money

Read Brian’s full post on this paper and find a list of all his recent posts over on the AIER website.

alumni

Brian C. Albrecht ’14 is a PhD candidate in Economics at the University of Minnesota. He is an alum of the Barcelona GSE Master’s in Economics of Public Policy.

Twitter | Website

Asymmetric Social Distance Effects in the Ultimatum Game

Publication by Orestis Vravosinos ’18 (Economics) with Kyriakos Konstantinou

The Ultimatum Game Comic
Comic author: Zach Weinersmith

A paper by Orestis Vravosinos (Economics ’18, UPF MRes in Economics ’19) and Kyriakos Konstantinou (LSE) has just been published in the Review of Behavioral Economics. Below is an overview of the paper.


The Ultimatum Game

Given that in experiments ultimatum game outcomes are often significantly different from Nash equilibrium predictions under standard assumptions on preferences, many studies have examined the impact of fairness on players’ considerations and how the effect of the sense of fairness on players’ actions may vary, while other factors change. It has been argued that increased stakes (larger sum of money distributed) can reduce sensitivity to fairness of player 2 making it more likely that she accepts lower shares of the total sum, thus, giving player 1 the opportunity to offer a lower share.

Social Distance

Social distance has also been found to affect fairness. In the existing literature, social distance commonly varies only from players being close relatives or friends to complete strangers, even though negatively-valenced relationships can be important from an economic point of view. Our study aims to fill this gap by introducing negatively-valenced relationships between the players. We argue that altruistic and empathetic behavior of the proposer towards the responder may not vary (increase) as significantly in the region of negative relationships compared to the region of positive relationships. Similarly, social distance effects stemming from reciprocity may vary less in the region of negative relationships. Thus, we hypothesize that in the ultimatum game social distance effects are asymmetric with their magnitude varying more in the spectrum of positively compared to negatively-valenced relationships.

Our experimental results support this hypothesis; in the region of positively-valenced relationships, the proposers increase the percentage they offer as relationship quality increases more drastically compared to when the relationship is negatively-valenced, in which case they appear more invariant to relationship effects. Also, by eliciting a minimum share which the responder is willing to accept out of the total sum, we provide clearer results on the social distance and stakes effects on the latter’s behavior. Last, we find a negative effect of relationship quality on the minimum acceptable share. This contradicts a strand of the literature which suggests that closer-“in-group” individuals may be punished more severely, so that cooperation in a group is maintained.

References

Orestis Vravosinos and Kyriakos Konstantinou (2019), “Asymmetric Social Distance Effects in the Ultimatum Game”, Review of Behavioral Economics: Vol. 6: No. 2, pp 159-192.

Orestis Vravosinos

Orestis Vravosinos ’18 is an MRes student at GPEFM (UPF and Barcelona GSE). He is an alum of the Barcelona GSE Master’s in Economics.

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Setting an example? Spillover effects of Peruvian Magnet Schools

Economics ’18 master project turned working paper by alumni Mariel Bedoya, Karen Espinoza, Bruno Gonzaga, and Alejandro Herrera Jiménez

What started out as a Barcelona GSE master project has developed into a full-fledged working paper by four alumni of the Master’s in Economics Class of 2018: Mariel Bedoya, Karen Espinoza, Bruno Gonzaga, and Alejandro Herrera Jiménez.

The team after submitting their Economics master project, June 2018

The paper, “Setting an example? Spillover effects of Peruvian Magnet Schools,” is now part of the Development Research Working Paper Series of the Institute for Advanced Development Studies (INESAD), a research center in La Paz, Bolivia.

Mariel explains that the idea to research this topic occurred to her because before doing the master in BGSE, she worked in the Ministry of Education of Peru, in the Impact Evaluation Division.

“The topic was interesting for us because although there is plenty of literature studying these selective schools’ first order effects (that is, effects on the students who directly benefited from the creation of these schools), we found scarce evidence about second-order effects (effects on students who shared environments with the high achieving student previously). Even more, analyzing externalities seemed of importance for a program such as COAR in Peru since the expenditure per student for the program is relatively high,” Mariel says.

The team has presented their research in three seminars so far, two in Peru and one in Bolivia.

“We aim to continue this research project in the near future. We got the opportunity of presenting findings of our research for public servants within the Ministry of Education last year, including the Director of the Division of Specialized Education Services, who is in charge of the COAR Program. This research complements ongoing efforts of the Ministry of Education of evaluating COAR’s first order effects. They seemed keen on helping us, especially because we do not have yet the necessary data to conclude on the mechanisms that may be driving the results we find, and they would like us to tell them more about this point in particular. We hope to have a new version of this paper by the end of the year.”

About the authors

Mariel Bedoya ’18 is a Policy and Research Associate with Abdul Latif Jameel Poverty Action Lab (J-PAL) in Peru. LinkedIn | Twitter

Bruno Gonzaga ’18 is a Senior Analyst in the Juncture Analysis Department of the Central Reserve Bank of Peru. LinkedIn | Twitter

Alejandro Herrera Jiménez ’18 is an Associate Researcher at INESAD in Bolivia. LinkedIn | Twitter

Karen Espinoza ’18 is Coordinator of the Innovation Lab of the Ministry of Education in Peru (MineduLAB). LinkedIn

The Transition to the Knowledge Economy, Labor Market Institutions, and Income Inequality in Advanced Democracies

Publication by Angelo Martelli ’11 (Economics)

Angelo Martelli '11

Hot off the press! My publication “The Transition to the Knowledge Economy, Labor Market Institutions, and Income Inequality in Advanced Democracies” with David Hope (King’s College) is finally out in World Politics.

A good read for all those interested in understanding the extent to which the relationship between the changing nature of work and income inequality is influenced by national labor market institutions.


Paper abstract

Recent work in comparative political economy has found that labour market institutions can mitigate the inequality-enhancing effects of the transition to the knowledge economy (Hope and Martelli 2019). While this work enhances our understanding of the role and importance of labour market institutions in the post-industrial era, it cannot tell us much about the underlying mechanisms. This paper aims to fill that gap in the literature by undertaking a micro-level econometric study on Denmark using a unique longitudinal dataset with linked employer-employee data, the Integrated Database for Labour Market Research (IDA). The central analysis in the paper will explore the influence of union membership and collective bargaining on within and between firm inequality in knowledge-intensive sectors. It will also test competing hypotheses as to why labour market institutions have been able to damp down the effects of the transition to the knowledge economy on income inequality.

A couple of takeaways

The transition to the knowledge economy began in earnest after the crisis of Fordism in the 1970s. Figure 1 (below) shows the employment expansion in knowledge-intensive service sectors, such as finance, insurance, business services, and telecommunications, between 1970 and 2006. Growth of knowledge employment was ubiquitous in the advanced democracies over this period; the average employment expansion was close to nine percentage points. The rise of the knowledge economy is clearly demonstrated by this substantial shift in economic structure away from traditional industries and toward ICT-intensive service sectors.

figure 1

Figure 2 (below) shows that for the income share of the top 1 percent, an increase in knowledge employment is associated with an increase in inequality when wage coordination and collective bargaining coverage are very weak, but has little or no effect when they’re at their highest levels.

figure 2

You can read more about this research in a blog post I wrote with my coauthor based on a previous version of the paper on LSE’s European Politics and Policy blog (EUROPP).

Next we are planning to work on A Micro-Level Study of the Knowledge Economy, Institutions, and Income Inequality.

alumni

Angelo Martelli ’11 is a Postdoctoral Research Fellow at LSE. He is an alum of the Barcelona GSE Master’s in Economics.

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The long journey from research to impact: remittance regulation in sub-Saharan Africa

Antonia Esser ’11 (International Trade, Finance, and Development)

portrait

I started to work on remittances around three years ago when I joined my current organization, the Centre for Financial Regulation and Inclusion (or Cenfri in short) as a researcher. We are an independent, not-for-profit think-and-do-tank based in Cape Town, South Africa, trying to answer complex questions around the role of the financial sector in improving individuals’ welfare in emerging economies. Remittances is one of our key focus areas and we have received donor funding from Financial Sector Deepening Africa (FSDA) to understand why the cost of sending funds into Africa is still the highest in the world.

According to the World Bank, the average cost of sending remittances globally stood at just under 7% of the total value of the transfer in the first quarter of this year; in sub-Saharan Africa (SSA), consumers had to pay on average 9.25% – by far the most expensive region in the world. The SDGs want to bring down the cost to between three and five percent. Most disturbingly, intra-Africa transfers can cost way more than 15% in some corridors, even when the countries are neighbours (e.g. Nigeria and Cameroon where a transfer can cost 15%). The following graphic shows the average prices some time in 2017 between the UK and selected African countries.

chart
The cost of sending remittances to and within Africa are the highest in the world. Sources: FSDA (2017) and The World Bank (2017)

When one considers that around 80% of African migrants stay within Africa, this is an incredibly high burden in terms of cost that reduces the positive impact of these essential flows for recipients. Many migrants are therefore forced to use informal mechanisms that are often cheaper, more trusted and more convenient. Yet informal mechanisms can be fronts for illicit financial flows, including money laundering and the financing of terrorism. They also indirectly influence competition as they mask the true size of a remittance corridor, deterring providers from entering the market.

Formal remittance flows are now higher than the value of official development assistance (ODA) and foreign direct investment (FDI). They have shown to have significant positive impact as they flow directly in the hands of those that rely on these funds as a primary source of income, and they tend to be more stable than ODA or FDI.

Based on all this evidence, FSDA asked us to understand the cost drivers and why it is still so expensive to send money to and within the continent despite all the innovations in the FinTech space with apps from players such as WorldRemit. We embarked on a journey to collect evidence through stakeholder interviews (with private sector players such as money transfer organisations, banks, FinTechs, and post offices, as well as regulators, policy makers and experts), mystery shopping, speaking to consumers, and ploughing through existing literature. We travelled to important remittance markets such as Nigeria, Ethiopia, Côte d’Ivoire and Uganda last year to understand the situation on the ground.

What I’ve learned since then is that remittances are an incredibly complicated business. It consists of providers in the first mile (where cash sending happens), the middle mile (where the processing of payments happens) and the last mile (where the recipient collects the money). The value chain is therefore very long and brings with it not only partnership complications but also technical issues. Cross-border money transfers are heavily regulated due to money laundering fears and severe risk exposure, but especially in Africa capital outflows of any kind are also heavily controlled in many markets still. To get a money transfer license can sometimes take a decade, we heard from some providers.

Overall, there were many interesting insights but at the end of the day we narrowed the reasons for the high costs down to four categories: business case barriers, regulatory barriers, infrastructure barriers and consumer-facing barriers. We then evaluated the number of citations and their impact on cost and access for the consumer to show how severe the barrier is for both providers and consumers:

Chart summarizing insights
Click to view the full-size image

From these insights we produced a range of reports, that you can access here, if you are interested, with the aim to disseminate them at key events and bring them into relevant discussions with the various stakeholders.

One avenue we are pursuing is to reduce the regulatory burden for providers to stimulate competition, especially in intra-Africa corridors. Many cross-border corridors are still dominated by one or two companies such as Western Union or MoneyGram that can set their prices freely. They are helped by the regulation as the licensing requirements in some cases can be incredibly high. For example, you may need to show capital of USD 20 million, be operational in at least seven countries for at least ten years. Of course, none of the newer players that can offer cheaper remittances through using apps, for example, can meet all
these requirements.

We were therefore on the hunt to influence regulators to revise some of the regulations. And a lot of regulation touches cross-border remittances: payment system act, banking act, foreign exchange act, agent banking regulation, e-money regulation, telecommunications regulation, cross-border transfer regulation etc – the list goes on and on. Every country seems to have their own set of rules and regulations that need to be made interoperable or at least harmonise to reduce the regulatory burdens in a value chain that can cross many jurisdictions. Definitely not an easy task! Many African countries are still heavily dependent on natural resources, such as Nigeria on oil for example. Their exchange rate with the dollar is fixed by the central bank. Yet, the Nigerian Naira is overvalued, leading to a parallel shadow market where one can get better rates for dollars on the streets of Lagos, impacting the use of formal remittance channels. But of course, the regulator is very concerned with financial stability and the impact a devaluation could have on foreign exchange reserves, inflation etc. Attracting more formal remittances does not sway the regulator enough to change the exchange rate policies. All of these realities need to be taken into consideration when approaching the regulators to try and achieve change based on research, and of course protocols play a huge role.

As part of this effort to reach regulators and based on the research we had done, I was recently invited to attend the inaugural meeting of experts, organized by the African Institute for Remittances (AIR), which is a programme established by the African Union. We were called from all over the continent based on our research and professional experience to build a cohort that would give technical assistance to willing African regulators. Last month we met in Mombasa, Kenya, and learned more about the planned interventions. On the one hand, we want to achieve better remittance data quality in the individual countries as the data can be questionable, but on the other hand we want to assist with writing the right kind of regulation that fosters innovation, reduces cost without reducing the access for consumers, and incentivise the uptake of formal remittance mechanisms.

I learned which data point to allocate to which balance of payment code at the central bank to make sure there is consistency across countries. I also learned how we will go about understand the regulatory background, as of course there is a difference between de jure and de facto regulation, i.e. we need to understand how regulation is interpreted from a stakeholder point of view.

So far it has been an exciting journey to see how we can take our insights into regulatory change. Some countries have already shown interest in being assessed and assisted and we will receive a list of our country missions as the expert cohort soon. Judging from our past work with regulators, this process can take many months, years if not decades but the potential impact of such fundamental changes is immense, especially for the individual person on the ground. System-level impact takes patience and perseverance.

ITFD taught me to be precise and on-point with my research to effect change – policy makers do not want to read 300 pages no matter how well-researched the material is. Insights need to be relatable and digestible, yet you also need to be able to raise funding for important interventions even if they seem cumbersome. We are lucky that FSDA has such a mandate and I look forward to continuing this journey with them and the African Union. Hopefully I will be able to report a significant drop in remittance prices due to regulatory change soon..ish.

portrait

Antonia Esser ’11 is an Associate at Cenfri in Cape Town, South Africa. She is an alum of the Barcelona GSE Master’s in International Trade, Finance, and Development.

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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.