The Macroeconomics of Epidemics
Martin S. Eichenbaum, Sergio Rebelo, Mathias Trabandt
Review of Financial Studies,
No. 11,
2021
Abstract
We extend the canonical epidemiology model to study the interaction between economic decisions and epidemics. Our model implies that people cut back on consumption and work to reduce the chances of being infected. These decisions reduce the severity of the epidemic but exacerbate the size of the associated recession. The competitive equilibrium is not socially optimal because infected people do not fully internalize the effect of their economic decisions on the spread of the virus. In our benchmark model, the best simple containment policy increases the severity of the recession but saves roughly half a million lives in the United States.
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Bank Concentration and Product Market Competition
Farzad Saidi, Daniel Streitz
Review of Financial Studies,
No. 10,
2021
Abstract
This paper documents a link between bank concentration and markups in nonfinancial sectors. We exploit concentration-increasing bank mergers and variation in banks’ market shares across industries and show that higher credit concentration is associated with higher markups and that high-market-share lenders charge lower loan rates. We argue that this is due to the greater incidence of competing firms sharing common lenders that induce less aggressive product market behavior among their borrowers, thereby internalizing potential adverse effects of higher rates. Consistent with our conjecture, the effect is stronger in industries with competition in strategic substitutes where negative product market externalities are greatest.
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Trade Shocks, Labour Markets and Elections in the First Globalisation
Richard Bräuer, Wolf-Fabian Hungerland, Felix Kersting
IWH-CompNet Discussion Papers,
No. 4,
2021
Abstract
This paper studies the economic and political effects of a large trade shock in agriculture – the grain invasion from the Americas – in Prussia during the first globalisation (1871-1913). We show that this shock accelerated the structural change in the Prussian economy through migration of workers to booming cities. In contrast to studies using today’s data, we do not observe declining per capita income and political polarisation in counties affected by foreign competition. Our results suggest that the negative and persistent effects of trade shocks we see today are not a universal feature of globalisation, but depend on labour mobility. For our analysis, we digitise data from Prussian industrial and agricultural censuses on the county level and combine it with national trade data at the product level. We exploit the cross-regional variation in cultivated crops within Prussia and instrument with Italian trade data to isolate exogenous variation.
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War drives up energy prices ‒ High inflation weighs on economy Supply bottlenecks weigh on the manufacturing sector,...
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IWH Alumni The IWH would like to stay in contact with its former employees. We...
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Unethical Employee Behavior Against Coworkers Following Unkind Management Treatment: An Experimental Analysis
Sabrina Jeworrek, Joschka Waibel
Managerial and Decision Economics,
No. 5,
2021
Abstract
We study unethical behavior toward unrelated coworkers as a response to managerial unkindness with two experiments. In our lab experiment, we do not find that subjects who experienced unkindness are more likely to cheat in a subsequent competition against another coworker who simultaneously experienced mistreatment. A subsequent survey experiment suggests that behavior in the lab can be explained by individuals' preferences for norm adherence, because unkind management behavior does not alter the perceived moral appropriateness of cheating. However, having no shared experience of managerial unkindness opens up some moral wiggle room for employees to misbehave at the costs of others.
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The CompNet Competitiveness Database The Competitiveness Research Network (CompNet)...
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Joint Economic Forecast
Joint Economic Forecast The joint economic forecast is an instrument for evaluating...
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Deposit Competition and the Securitisation Boom
Danny McGowan, Huyen Nguyen
IWH Discussion Papers,
No. 6,
2021
Abstract
We provide novel evidence that regulatory-induced deposit market competition provoked banks to enter the securitisation market. Exploiting the state-specific removal of interstate bank branching restrictions across U.S states between 1994 and 2006 as an exogenous source of deposit competition, we document four key results. First, the interstate branching deregulation leads to an intensification of deposit market competition. Second, this rise in the cost of deposits increases the probability that a bank operates an ‘originate-to-distribute’ model by 6%. Third, the securitisation effect holds across bank asset classes but is most pronounced for mortgages. Finally, the results are strongest among small and single state banks owing to their reliance on deposit funding. The evidence is consistent with theories where increasing the cost of deposits creates incentives for banks to use securitisation as a cheaper loan funding model. The findings highlight a hitherto neglected supply-side explanation for the rapid expansion in securitisation before the financial crisis and speak to the debate about banking competition policy.
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