Working Papers CREI (Centre de Recerca en Economia Internacional)http://hdl.handle.net/10230/425502024-03-19T10:00:56Z2024-03-19T10:00:56ZSocial capital, government expenditures and growthPonzetto, Giacomo A. M.Troiano, Ugohttp://hdl.handle.net/10230/589662024-02-07T02:30:39Z2024-01-01T00:00:00ZSocial capital, government expenditures and growth
Ponzetto, Giacomo A. M.; Troiano, Ugo
This paper shows that social capital increases economic growth by raising government investment in human capital through better political incentives and selection. We provide empirical evidence that a greater share of output is spent on public education where social capital is higher, both across countries and across U.S. states. We develop a theoretical model of stochastic endogenous growth with imperfect political agency. Only some people correctly anticipate the future returns to current spending on public education. Greater social discusion of information makes this knowledge more wide-spread among voters. As a result, social capital alleviates myopic political incentivesto underinvest in human capital. It also helps voters select politicians who ensure high productivity in public education. Through this mechanism, we show that social capital raises the equilibrium growth rate of output and reduces its volatility.
2024-01-01T00:00:00ZMonetary policy in an unbalanced global economyFornaro, LucaRomei, Federicahttp://hdl.handle.net/10230/578142023-09-06T01:30:16Z2023-06-01T00:00:00ZMonetary policy in an unbalanced global economy
Fornaro, Luca; Romei, Federica
We study optimal monetary policy during times of exceptionally high global demand for tradable goods, relative to non-tradable ones. The optimal monetary response entails a rise in inflation, which helps rebalance production towards the tradable sector. While the inflation costs are fully bore domestically, however, the gains in terms of higher supply of tradable goods partly spill over to the rest of the world. National central banks may thus fall into a coordination trap, and implement an excessively tight monetary policy causing an unnecessarily sharp global contraction.
2023-06-01T00:00:00ZThe death and life of great British citiesHeblich, StephanNagy, David KrisztiánTrew, AlexZylberberg, Yanoshttp://hdl.handle.net/10230/575682023-07-14T01:30:42Z2023-07-03T00:00:00ZThe death and life of great British cities
Heblich, Stephan; Nagy, David Krisztián; Trew, Alex; Zylberberg, Yanos
This paper studies how cities’ industrial structure shapes their life and death. Our analysis exploits the large heterogeneity in the early composition of English and Welsh cities. We extract built-up clusters from early historical maps, identify settlements at the onset of the nineteenth century, and isolate exogenous variation in the nature of their rise during the transformation of the economy by the end of the nineteenth century. We then estimate the causal impact of cities’ population and industrial specialization on their later dynamics. We find that cities specializing in a small number of industries decline in the long run. We develop a dynamic spatial model of cities to isolate the forces which govern their life and death. Intratemporally, the model captures the role of amenities, land, local productivity and trade in explaining the distribution of economic activity across industries and cities. Intertemporally, the model can disentangle the role of aggregate industry dynamics from city-specific externalities. We find that the long-run dynamics of English and Welsh cities is explained to a large extent by such dynamic externalities à la Jacobs.
2023-07-03T00:00:00ZIdiosyncratic income risk and aggregate fluctuationsDebortoli, DavideGalí, Jordi, 1961-http://hdl.handle.net/10230/575672023-07-14T01:30:40Z2023-07-01T00:00:00ZIdiosyncratic income risk and aggregate fluctuations
Debortoli, Davide; Galí, Jordi, 1961-
We study the role of idiosyncratic income risk for aggregate fluctuations within a simple heterogeneous households framework. We show that the presence of idiosyncratic income shocks affects the economy’s response to an aggregate shock even in the absence of binding borrowing constraints and/or cyclical income risk. Their impact can be captured by a consumption-weighted average of the changes in consumption risk generated by an aggregate shock. We apply this framework to two example economies —an endowment economy and a New Keynesian economy— and show that under plausible calibrations the impact of idiosyncratic income risk on aggregate fluctuations is quantitatively small, since most of the changes in consumption risk are concentrated among poorer (low consumption) households.
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