Working Papers

10. “Asymmetric Trading Costs and Ancient Greek Cities.” With Yuxian Chen and Ferdinand Rauch. Rev. November 20, 2022. PDF. CEPR D.P.17204

Abstract. Asymmetric transport costs arise when shipping times from point i to point j differ from shipping from point j to i. We show that such asymmetric transport costs predict distinct patterns of location in a class of models using Dixit-Stiglitz preferences. We then study factors affecting the location of cities in ancient Hellas. Prevailing winds create an environment of asymmetric trade costs in ancient Greece. We show that predictions of these models are consistent with the location of ancient cities.

9. “The Diffusion of Epichoric Scripts and Coinage in the Ancient Hellenic Poleis.” With Yuxian Chen. April 4, 2022. PDF  SSRN working paper Supplementary Material. 

Abstract. The paper seeks to throw light at two discrete phenomena that were deemed as decisive for the development of the ancient Hellenic world and for urbanization in that part of the world via the emergence of sovereign urban entities, the Greek poleis. Although distinct, they are two conceptually and statistically interdependent aspects of total factor productivity. One is the emergence of the ancient Hellenic (Greek) alphabet, which we investigate via the diffusion of its predecessors, the epichoric, that is, its local ancient polis- and region-specific antecedent Hellenic scripts. It tackles, via formal economics tools, a phenomenon shrouded in mystery, namely how the Greek alphabet developed by tracking dates and locations where the various epichoric scripts diffused across the poleis of the ancient Hellenic world. The second is issue of coinage by Hellenic poleis, itself a path-breaking innovation, which allegedly started from ancient Lydia before it propagated in the Hellenic world and is matched only by the later development of coinage in China and India. Both these phenomena are motivated by means of simple theoretical models and are handled econometrically by means of similar econometric techniques, such as survival and other discrete but also linear regression methods, such as quasi-panel models of the spatial diffusion, while employing similar explanatory variables that allow for exploring their interdependence.

The underlying models of diffusion are modeled by means of novel applications of network tools, implemented on the system of poleis being defined as a weighted directed network. It is the asymmetry of maritime travelling and shipping costs that is responsible for directed weights. Network-based measures of centrality are also employed, in particular right and left eigenvector centrality (including Kleinberg’s concepts of authority and hub centrality), in order to control for proximity in the aggregate sense.

8. “On the Dynamics of Corruption.” With Costas Azariadis. November 5, 2022.  PDF

Abstract. We examine the impact of culture on the joint evolution of corruption and per capita GDP by augmenting the standard lifecycle model of capital accumulation with two endogenous state variables that describe institutions and social norms, and by two cultural parameters that proxy for individual propensity to anti-social behavior, and for group individualism or collectivism. We explore alternative political selection processes over institutions, defined over a one-dimensional agenda that pits “stronger” against `weaker” property rights.

For societies that share the same economic fundamentals but differ in culture, our main theoretical finding is the following: there exist cultural convergence clubs separated by a barrier that corresponds to a bifurcation in the space of culture and initial social norms. Societies with collectivist cultures and corruption-tolerant norms behave very differently from all others. Outcomes in those societies feature: (a) highly nonlinear GDP and corruption dynamics; (b) dominant roles for culture and social norms as engines of institutional quality and growth; (c) majorities that favor diluted property rights; and (d) slow convergence to balanced growth paths.
These results agree with illustrative scatter plots with international data for several alternative measures of corruption or culture, raising the likelihood that formal econometric tests of them will prove fruitful.

JEL codes: F43, O11, O43, O47, D70, E71, Z10. Keywords: growth, institutions, corruption, social norms, culture, voting, social interactions.

7. “International Tourism and Short-Run Growth.” With Yuxian Chen. August 30, 2020. PDF

Abstract.  Using a panel of 157 countries for 1995–2017, this paper explores the relationship between tourism specialization and short-run growth. Making use of bilateral tourism and manufacturing flows, differences in importing countries’ preference , and demand side shocks, defined in terms of GDP per capita of tourism-importing countries, we construct an instrument for tourism specialization. 2SLS estimation results are very close to those obtained with OLS estimation results, but are associated with larger standard errors. We find that an 1% increase in tourism specialization is (on average) associated with 0.01 percentage point (or 0.5% in terms of elasticity) increase in the growth rate of GDP per capita for OECD countries, though it does not have a statistically significant effect when all countries are included.

Voxeu.org post: “International tourism and short-run growth: Reviewing the trade-off in the age of COVID-19.” With Yuxian Chen. September 15, 2020

6.  “International and Intercity Trade, and Housing Prices in US Cities.” With Jeffrey P. Cohen. January 28, 2022. Revised. PDF

Abstract. Urban models often examine the consequences of domestic trade for city structure. We consider how GDP growth impacts Metropolitan Statistical Area (MSA) housing price growth, while allowing for iceberg shipping costs. We develop a theoretical model of spatial equilibrium among cities where there is capital mobility between them and explore its empirical predictions. Using instrumental variables (IV), and a unique set of instruments including time-varying MSA-level military contract awards, we identify city-level GDP growth impacts on city house price growth. This equation follows from imposing spatial equilibrium across cities. In general, our empirical estimation results confirm the signs of the relationships predicted by the theory, i.e., greater GDP growth in a city leads to higher house prices. Our theoretical approach, synthesis of MSA-level data, and empirical analysis are novel.

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INACTIVE AND IN-PROCESS WORKING PAPERS

6.  “Dynamics of COVID-19 Transmission within and across US Counties.” With Liuyi Ye. November 2020. Working Draft and Slides on request.

5. “On the Dynamics of Corruption.” With Costas Azariadis. June 25, 2020. Earlier version of paper with the same title, no. 9 above.PDF

Abstract. To examine the joint evolution of corruption and per capita GDP, we augment the standard lifecycle model of capital accumulation by three endogenous state variables that describe institutions and culture, and by three fixed parameters that proxy for personal morality and social interactions. Institutions that regulate economic incentives are decided by majority vote over a binary agenda that pits “strong” against `weak” property rights. Culture consists of slow changing social conventions which generate behavioral norms in the public and private sectors. Norms spread consumption externalities that impact the occupational opportunities of current households, and become in turn a reflection of past household choices. Our main theoretical finding is that societies with collectivist cultures and corruption-tolerant norms behave very differently from the individualistic ones of neoclassical growth theory. Collectivist society features include: (a) highly nonlinear GDP and corruption dynamics; (b) dominant roles for culture and social norms as engines of institutional quality, corruption and growth; and (c) majorities that favor diluted property rights, thus splitting the world economy into individualistic and collectivist convergence clubs with two distinct stable long-run states. These hypotheses receive a fair amount of support from international data.
Variations in social norms, culture and human capital typically explain more than half of the variance in per capita GDP across countries and time.
Many alternative measures of culture seem to be highly significant determinants of corruption and institutional quality. The fact that we control for culture in many alternative ways supports our confidence in the largely favorable tests of our main hypotheses.

JEL codes: F43, O11, O43, O47, D70, E71, Z10. Keywords: growth, institutions, corruption, social norms, culture, voting, social interactions.

4. “Vacancies in Housing and Labor Markets.” With Jeffrey E. Zabel. June 27, 2017. Under revision. PDF. The model of this paper is included in Ioannides and Zabel, “Housing and Labor Market Vacancies and Beveridge Curves: Theoretical Framework and Illustrative Statistics.” In: Ioannides, Yannis M., editor. Recent Developments in the Economics of Housing. Edward Elgar. 2019.  Vol. II. PDF on request.

Abstract. The Great Recession of 2007–2009 has prompted a focus on the link between the housing and business cycles. We model  the housing and labor markets by means of a DMP-type model that treats housing and labor supply as joint decisions and highlights the interdependence of vacancies in these markets. We estimate this  at the MSA level using data on housing vacancies from the US Census Bureau’s Housing Vacancy Survey (HVS) starting in 1986 and on job vacancies from the Conference Board’s Help-Wanted Index starting in 1951. In particular, we estimate a Beveridge Curvefor labor markets that includes spillovers from vacancies in the rental and homeownership housing markets, as well as  novel  Beveridge curves for owner and rental housing markets. We then estimate VAR models for housing and job vacancies. Results from impulse response functions show that shocks to rental  and  homeownership vacancies have negative and significant impacts on job vacancies.

3. “Why Productivity Enhancing Reforms Will Help Greece Exit the Crisis and Usher in Long Run Growth.” January 24, 2015. PDF.

Abstract.  The paper first assesses various ideas about getting growth started, and what might be hampering that. It also details what we could expect in the way of productivity growth when reforms currently envisioned and hopefully in progress are brought to fruition. The discussion draws extensively from the case of the Finnish Great Depression, an episode that all things considered is quite similar to the Greek crisis, which could well justify the term Greek Great Depression. It was precipitated by the shock of the collapse of the Soviet Union, Finland’s greatest trading partner at the time, but was also accompanied by a banking and credit crisis. It was followed by an admirable period of economic growth, which I find a rich source of lessons for the Greek crisis. The paper details growth-hampering features of the Greek educational system and discusses in depth growth-enhancing properties of market deregulation. Small improvements in each of many markets and industries can add up to significant contributions to Greece’s total factor productivity growth performance. Second, in the immediate aftermath of fiscal stabilization, the problem of the Greek trade deficit, which some consider as the principal cause of the crisis remains acute. The considerable improvement in unit labor costs that has taken place has not been followed by a commensurate improvement in the trade deficit. Recapturing and realizing gains in foreign markets is in part a problem that Greece shares with other “peripheral” EU countries, and to a degree not sufficiently appreciated and widely discussed. Real appreciation of the euro appears to be mainly due nominal exchange rate appreciation rather than domestic costs (measured via either unit labor costs or the consumer price index). This in turn suggests that in order for Greece to improve its advantage in international markets it needs to accelerate its effort at productivity improvements and just as much at growth-enhancing product market reforms.

2. “Searching for the Best Neighborhood: Mobility and Social Interactions,” with Giulio Zanella, April 2008. PDF Inactive.

Abstract.  The paper seeks to contribute to the social interactions literature by exploiting data on individuals’ self-selection into neighborhoods. We study a model in which households search for the best location in the presence of neighborhood effects in the formation of children’s human capital and in the process of cultural transmission. We use micro data from the PSID which we have merged, using geocodes, with contextual information at the levels of census tracts and of counties from the 2000 US Census. We control for numerous individual characteristics and neighborhood attributes and find, consistently with neighborhood effects models, that households with children, but not those without, are more likely to move out of neighborhoods whose attributes are not favorable to the production of human capital and the transmission of parents’ cultural traits, and to move into neighborhoods which instead exhibit desirable such attributes.

1. “Random Graphs and Social Networks: An Economics Perspective,” Revised June 2015. PDF

Abstract. This review of current research on networks emphasizes three strands of the literature on social networks. The first strand is composed of models of endogenous network formation from both the economics and the computer science literature. The review highlights the sensitive dependence of the topology of endogenous networks on parameters of the behavioral models employed. The second strand draws from the recent econophysics literature in order to review the recent revival of interest in the random graph theory. This mathematical tool allows one to study social networks that result from uncoordinated random action of individuals in setting up connections with others. The review explores a number of examples to assess the potential of recent research on random graphs with arbitrary degree distributions in accommodating more general behavioral motivations for social network formation. The third strand focuses on a specific model of social networks, Markov random graphs,  that is quite central in the mathematical sociology and spatial statistics literatures but little known outside those literatures. These are random graphs where the events that different edges are present are dependent, if edges are incident to the same node, and   independent, otherwise. The paper assesses the potential for economic applications with this particular tool. The paper concludes with an assessment  of observable consequences of optimizing behavior in networks for the purpose of estimation.