Visibly Fair Mechanisms
Priority-based allocation often requires eliminating justified envy, making serial dictatorship (SD) the only non-wasteful direct mechanism with that property. However, SD’s outcomes can conflict with the policymaker’s objectives. We introduce visible fairness, a framework where fairness is evaluated using coarser information. This is achieved by designing message spaces that strategically conceal information that could render desired allocations unfair. We characterize these mechanisms as generalizations of SD, establish conditions for strategy-proofness, and show how to implement distributional constraints. This creates a new trade-off: achieving distributional goals may require limiting preference elicitation, forgoing efficiency gains even when compatible with the constraints.
Inácio Bó, Gian Caspari, Manshu Khanna
Working Paper | No. 20250905 |
Keywords: matching theory, market design, indirect mechanisms
More Details
Housing, Health, and Life Expectancy Inequality in China
We document large inequality in life expectancy at age sixty across cities and sectors of employment in China using the regression discontinuity approach. The life expectancy is higher in larger cities and among public sector retirees, with a gap of over ten years between rural residents and tier-one city public sector retirees. To understand the inequality, we develop a dynamic optimization model of health investment and housing choice for retirees. We show that the inequality is largely attributable to the heterogeneity in income, in the coverage of publicly funded health insurance, and in the housing investment market. Counterfactual experiments indicate that equalizing publicly funded medical coverage will significantly reduce life expectancy inequality. A decline in house prices will reduce life expectancy more in tier-two and tier-three cities.
Yushan Hu, Penglong Zhang, Guozhong Zhu*
Working Paper | No. 20250904 |
Keywords: health production, medical insurance coverage, housing costs, life expectancy inequality
More Details
How Technological Innovation Shapes Financial Innovation: Substitution Effects Versus Knowledge Diffusion
The innovation of new financial products, processes, and services is a key driver of economic development and technological progress. Yet, the issue of how new technology itself affects financial innovation activity is not well understood. We argue that, although new technologies can spur financial innovation via knowledge spillovers, they can also lead to the “crowding out” of financial innovation by increasing the relative profitability of competing investment opportunities. To test our hypotheses, we use time-series data during 2005-2019 on the occurrence of major waves of non-financial innovation and their impact on firms’ financial patenting and the hiring of financial inventors. We find evidence of aggregate-level crowding-out in the earlier part of the sample: firms tend to shift from financial to non-financial patenting following the onset of an innovation wave.
Mark A. Chen*, Sophia Hu, Joanna Wang, Qinxi Wu
Working Paper | No. 20250903 |
Keywords: technological innovation, financial innovation, substitution effects, knowledge diffusion, patents, inventors, human capital
More Details
Fine Control of Conservatism for Robust Optimization by Adjustable Regret
Overconservatism has long been recognized as a major issue of robust optimization, despite its major advantages of tractability, performance guarantee, and limited information. A new criterion based on adjustable regret is proposed to address this issue by adapting the level of conservatism to the environment, while maintaining all the aforementioned advantages. The level of conservatism can be fine-tuned by maximizing the reward guarantee for scenarios representative of opportunities provided by experts as most likely values, leading to a simple heuristic to best catch opportunities. This criterion also supports a new approach to competitive ratio analysis that is applicable even to multistage problems. The new criterion is then applied to the one-way trading problem with analytical solutions, from which the competitive ratio is easily derived by the new approach.
Yingjie Lan*
Working Paper | No. 20250902 |
Keywords: robust optimization, decision criteria, overconservatism, convex conjugate, one-way trading
More Details
United on Divisive Waters: Decentralization of Irrigation and Conflict in India
Arguments for decentralizing local public goods often emphasize productivity gains, but such reforms can also shape social cohesion, particularly in diverse communities and for high-stake resources. Exploiting the staggered roll-out of irrigation decentralization across Indian states, we show that these reforms reduce rural riots and perceived village-level conflicts. Our mechanism analysis points at reform-induced increases in the opportunity cost of conflict and highlights increased labor supply in agriculture and strengthened cooperation, which expand irrigation access and ultimately boost agricultural productivity.
Krzysztof Krakowski, Karol Mazur*
Working Paper | No. 20250901 |
Keywords: agriculture, conflict, public goods, irrigation management
More Details
The Macroeconomic Impact of Agricultural Input Subsidies
Governments intervene in agriculture worldwide, a sector particularly susceptible to efficiency losses due to transaction costs. Upon introducing advantageous home production of food into a general equilibrium model with heterogeneous agents and incomplete markets, we show that agricultural input subsidy programs generate consumptionequivalent welfare gains of up to 3.8%. We demonstrate that Malawi's large program benefits society by mitigating the impact of transaction costs, redistributing resources to the poor, and providing insurance, thereby stimulating occupational mobility. We validate the model dynamics using an event study on the staggered introduction of input subsidy programs across Sub-Saharan Africa.
Karol Mazur, Laszlo Tetenyi
Working Paper | No. 20250702 |
Keywords: Agriculture, food security, structural change, misallocation
More Details
Non-affiliated Distribution and Fund Performance: Evidence from Bank Wealth Management Funds in China
Using the Measures for the Administration of Bank Wealth Management Funds Sales as an exogenous shock in fund distributions in Chinese BWM industry, we find that the increase in nonaffiliated distribution brokers causally improves fund performance. The effect is more pronounced when the distribution broker possesses greater market power, when the fund issuer exhibits greater distribution dependence, and when horizontal competition is stronger between the distribution broker and fund issuer. Our findings indicate that non-affiliated distribution mitigates agency problems by providing both ex-ante effort-inducing and ex-post performance-monitoring, underscoring the role of non-affiliated distribution as an effective external governance mechanism.
Shusong Ba, Baixiao Liu, Linlin Ma, Yan Shen, and Xingyi Zhan*
Working Paper | No. 20250701 |
Keywords: bank wealth management, non-affiliated distribution, fund performance, agency problem, external governance
More Details
Fight or Flee? The Role of Firms' Connected Social Media Outlets
We examine how firms leverage social media outlets to counteract the impact of negative news coverage in traditional media. Using a sample of Chinese public firms with established connections to social media outlets, we find that these connected outlets actively promote favorable narratives about the firms immediately following unfavorable coverage in traditional media. This effect is particularly pronounced for firms with strong incentives to stabilize stock prices or where managers face significant career concerns. Moreover, while traditional media coverage tends to highlight firms’ short-term underperformance, connected social media outlets shift the focus toward their long-term development prospects. Our findings highlight the proactive role firms play in managing reputational capital through social media, demonstrating how these outlets can serve as a tool for mitigating adverse media sentiment.
Zhiqian Jiang, Baixiao Liu, Yuchen Xu, Bohui Zhang*
Working Paper | No. 20250503 |
Keywords: social media outlet, reputational capital management, media connection, stock price stabilization, managerial career concern
More Details
Going Dark: Corporate Motivations for Covert Political Ties
Leveraging three unexpected leaks of donor lists from U.S. “dark money” organizations, we analyze firms whose anonymous political contributions were revealed, comparing them to similar firms without political contribution disclosures, to investigate the drivers of corporate involvement in covert political activities. On average, exposed firms saw a 3.7 percent rise in Tobin’s Q post-exposure. However, firms linked to donations that support attack advertisements (such as against then-President Barack Obama) suffered a 14.4 percent drop in Tobin’s Q. Our findings suggest that firms strategically use covert donations to avoid reputational damage, retaliation from political opponents, and misalignment with their publicly stated political stance. Consistent with these motivations, firms decrease (increase) their political disclosure practices following negative (positive) valuation responses to exposures.
Omrane Guedhami, April Knill, Baixiao Liu, Cayman Seagraves*
Working Paper | No. 20250502 |
Keywords: dark money groups, corporate political activity disclosure, corporate political connections, political contributions
More Details
The Dynamics of Agricultural Productivity Gaps: An Open-Economy Perspective
This paper draws on cross-country census data to study how agricultural productivity gaps have evolved over the last four decades. We find little tendency for gaps to decline on average despite global decreases in agricultural employment shares. We analyze the dynamics of agricultural productivity gaps through the lens of an open-economy model of structural change. We calibrate the model using international trade data, which are measured independently from sectoral value added and employment data. Quantitatively, the model predicts that relatively faster physical productivity growth in the non-agricultural sector has, in many countries, offset the movement of labor out of agriculture, leading to persistently lower value added per worker in agriculture. Consistent with the model's predictions, previous exports by sector are strong predictors of agricultural productivity gaps in the current cross-section of countries.
Douglas Gollin, David Lagakos, Xiao Ma, Shraddha Mandi
Working Paper | No. 20250501 |
More Details
