The Happiness Gap in Eastern Europe

with Simeon Djankov and Elena Nikolova
Download the paper; publised version: Journal of Comparative Economics; short summary: Financial Times blog

Citizens in Eastern Europe are less satisfied with life than their peers in other countries. This happiness gap has persisted, despite predictions to the contrary by earlier scholars. It holds after controlling for a variety of covariates, such as the standard of living, life expectancy and Eastern Orthodox religion. Armed with a battery of surveys from the early 1990s to 2014, we argue that the transition unhappiness gap is explained by how post-communist countries perceive their governments. Eastern Europeans are more likely to link their life satisfaction to perceived corruption and government performance, as compared to those in other countries. Our results suggest that that the transition from central planning is still incomplete, at least in the psychology of people.

Higher Wages for Low-Income Workers Lead to Higher Productivity

with Justin Wolfers; a contribution featured in Raising Lower-Level Wages: When and Why It Makes Economic Sense; press coverage: The Atlantic, Vox, Wall Street Journal, Bloomberg.

Reducing Government Debt Ratios in an Era of Low Growth

with Paolo Mauro; press coverage: Wall Street Journal
Download the paper

This Policy Brief proposes an extended accounting approach that fully recognizes the importance of economic growth in this regard, by keeping track of the impact of growth on the primary fiscal surplus. Reducing high debt ratios will be challenging because the range of options for reducing debt is more limited than it once was and economic growth in the next decade is expected to be lower as a result of population aging and the lingering effects of the global financial crisis.

Fiscal Tightening and Economic Growth

with Paolo Mauro
Download the paper; summary:

Public discourse has been heavily influenced by simple charts analyzing the correlations between measures of fiscal "austerity" and economic growth for small samples of countries over limited time periods. This policy brief analyzes the correlations in the data starting from the simplest and gradually building up, in a step-by-step, transparent manner, to multivariate regressions based on various samples of countries for different periods. The results show that simple correlations are no longer significant when considering longer sample periods putting lower weight on outliers (Greece). Broadening the sample beyond Europe, a tightening of fiscal policy is significantly associated with lower economic growth only in some specifications. On the whole, the data offer partial support to the notion that fiscal choices and output growth are correlated.

Learning About Income Inequality: What is the Impact of Information on Perceptions of Fairness and Preferences for Redistribution?

Download the paper; press coverage: Bloomberg

Slides: Canadian Economics Association (June 2013), Econometric Society Summer School on Bounded Rationality (August 2013), Tilburg Institute for Behavioral Economics Research (August 2013), European Economics Association (August 2013), International Society for New Institutional Economics at Duke University (June 2014).

Summary: Exposure to a basic income table or graph makes subjects slightly more likely to view government efforts to curb inequality as desirable, but most respondents continue to believe the U.S. is the most mobile country, even after exposure to information.

Abstract: This paper studies whether limited information about inequality accounts for the (optimistic) beliefs and the (anti-tax) preferences of American voters. Unlike standard surveys, this experiment examines preferences for taxation while controlling for perceived economic opportunity, beliefs about how the economy works, and views about the sources of inequality. Random assignment to information exposure about income inequality is used to identify a causal relationship between awareness about income inequality and the perceived fairness of the economy. The first effect of information is an increase in pessimism about economic opportunity. After exposure to data, subjects are less likely to believe that people who work hard can get ahead in life through hard work alone (the odds of holding this view fall by one third). Many subjects say they are surprised by the data, and learning how much households in the top 0.1% earn raises support for general, unspecified government action against inequality by about 6 percentage points. However, the subjects who are exposed to information are not more willing to take specific action (pay higher taxes) compared to the uninformed control group.

Work in progress

Political Decay in Europe: An Examination of Preferences for
Democratic Institutions

Predicting Economic Perceptions: A Disciplined Approach to a Multidimensional Problem

Resting research projects & Discussant slides & Selected presentations

Making Macroprudential Policy Practical in the U.S. and Beyond

Boston Fed 59th Economic Conference. Adam S. Posen with Tomas Hellebrandt and Jan Zilinsky: Slides.

Does Personal Experience Make Investors Loyal? Customers of Apple and Facebook choose single-stock allocations

Preferences for diversification are strongly influenced by investment menus. When stocks of Apple are offered, the appeal of an index fund falls by 35%. Menu effects are strong for everyone, including the financially literate subjects.

Is stock ownership shaped by social forces?

Using sub-national data, this study shows that people are less likely to have ever owned stocks if they live in regions with strong family ties. In regions with high levels of trust, stock ownership rates are substantially higher (as previously shown with cross-country data).

Slides from the EEA conference in Malaga.


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