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Matthias Doepke, UCLA
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THIS PAGE IS NO LONGER BEING UPDATED. PLEASE GO TO MY NEW RESEARCH PAGE. Working Papers
Journal Publications
Other Publications
International Labor Standards and the Political Economy of Child Labor Regulation With Fabrizio Zilibotti Abstract: Child labor is a persistent phenomenon in many developing countries. In recent years, support has been growing among rich-country governments and consumer groups for the use of trade policies, such as product boycotts and the imposition of international labor standards, to reduce child labor in poor countries. In this paper, we discuss research on the long-run implications of such policies. In particular, we demonstrate that such measures may have the unintended side effect of lowering domestic support for banning child labor within developing countries, and thus may contribute to the persistence of the child-labor problem. Keywords: Child Labor, Political Economy, International Labor Standards, Trade Sanctions. The paper (September 2008): The Baby Boom and World War II: A Macroeconomic Analysis With Moshe Hazan and Yishay Maoz Abstract: We argue that one major cause of the U.S. postwar baby boom was the increased demand for female labor during World War II. We develop a quantitative dynamic general equilibrium model with endogenous fertility and female labor-force participation decisions. We use the model to assess the long-term implications of a one-time demand shock for female labor, such as the one experienced by American women during wartime mobilization. For the war generation, the shock leads to a persistent increase in female labor supply due to the accumulation of work experience. In contrast, younger women who turn adult after the war face increased labor-market competition, which impels them to exit the labor market and start having children earlier. In our calibrated model, this general equilibrium effect generates a substantial baby boom followed by a baby bust, as well as patterns for age-specific labor-force participation and fertility rates that are consistent with U.S data. Keywords: Fertility, Female Labor-Market Participation, Baby Boom, World War II. The paper (December 2007): A non-technical summary with a discussion of policy implications: Colonies With Andrea Eisfeldt Abstract: In many developing countries, the institutional framework governing economic life has its roots in the colonial period, when the interests of European settlers clashed with those of the native population or imported slaves. We examine the economic implications of this conflict in a framework where institutions are represented by the number of people with property-rights protection, i.e., "gun owners." In the model, gun owners can protect their own property, they can exploit others who do not own guns, and they may decide to extend property rights by handing out guns to previously unarmed people. The theory generates a "reversal of fortune" between colonies with many and few oppressed: income per capita is initially highest in colonies with many oppressed that can be exploited by gun owners, but later on excessive concentration of economic power becomes a hindrance for development. Keywords: Colonization, Property Rights, Slavery, Development.
The paper (January 2007): Inflation as a Redistribution Shock: Effects on Aggregates and Welfare With Martin Schneider Abstract: Episodes of unanticipated inflation reduce the real value of nominal claims and thus redistribute wealth from lenders to borrowers. In this study, we consider redistribution as a channel for aggregate and welfare effects of inflation. We model an inflation episode as an unanticipated shock to the wealth distribution in a quantitative overlapping-generations model of the U.S. economy. While the redistribution shock is zero sum, households react asymmetrically, mostly because borrowers are younger on average than lenders. As a result, inflation generates a decrease in labor supply as well as an increase in savings. Even though inflation-induced redistribution has a persistent negative effect on output, it improves the weighted welfare of domestic households. Keywords: Inflation, Redistribution, Welfare.
The paper (May 2006): Women's Liberation: What's in It for Men? With Michèle Tertilt Forthcoming, Quarterly Journal of Economics. Abstract: The nineteenth century witnessed dramatic improvements in the legal rights of married women. Given that they took place long before women gained the right to vote, these changes amounted to a voluntary renouncement of power by men. In this paper, we investigate men's incentives for sharing power with women. In our model, women's legal rights set the marital bargaining power of husbands and wives. We show that men face a tradeoff between the rights they want for their own wives (namely none) and the rights of other women in the economy. Men prefer other men's wives to have rights because men care about their own daughters and because an expansion of women's rights increases educational investments in children. We show that men may agree to relinquish some of their power once technological change increases the importance of human capital. We corroborate our argument with historical evidence on the expansion of women's rights in England and the United States. Keywords: Women's Rights, Political Economy, Human Capital, Return to Education. The paper (December 2008): A non-technical summary: An interview discussing the paper:
To Segregate or to Integrate: With David de la Croix Review of Economic Studies, 76(2), 597-628, April 2009. Abstract: How is the quality of public education affected by the presence of private schools for the rich? Theory and evidence suggest that the link depends crucially on the political system. We develop a theory that integrates private education and fertility decisions with voting on public schooling expenditures. We find that the presence of a large private education sector benefits public schools in a broad-based democracy where politicians are responsive to low-income families, but crowds out public-education spending in a society that is politically dominated by the rich. The main predictions of the theory are consistent with state-level and micro data from the United States as well as cross-country evidence from the PISA study. Keywords: Public Education, Private Education, Probabilistic Voting, Democracy.
A non-technical summary: Politics and the Structure of Eduation Funding (published in Vox). The same in French: Financement privé de l'éducation, inégalités et démocratie. Occupational Choice and the Spirit of Capitalism With Fabrizio Zilibotti Quarterly Journal of Economics, 123(2), 747-793, May 2008. Abstract: The British Industrial Revolution triggered a reversal in the social order whereby the landed elite was replaced by industrial capitalists rising from the middle classes as the economically dominant group. Many observers have linked this transformation to the contrast in values between a hard-working and thrifty middle class and an upper class imbued with disdain for work. We propose an economic theory of preference formation in which both the divergence of attitudes across social classes and the ensuing reversal of economic fortunes are equilibrium outcomes. In our theory, parents shape their children's preferences in response to economic incentives. If financial markets are imperfect, this results in the stratification of society along occupational lines. Middle-class families in occupations that require effort, skill, and experience develop patience and work ethic, whereas upper-class families relying on rental income cultivate a refined taste for leisure. These class-specific attitudes, which are rooted in the nature of pre-industrial professions, become key determinants of success once industrialization transforms the economic landscape. Keywords: Endogenous Preferences, Social Classes, Stratification, Industrial Revolution.
Inflation and the Redistribution of Nominal Wealth With Martin Schneider Journal of Political Economy, 114(6), 1069-1097, December 2006. Abstract: This study quantitatively assesses the effects of inflation through changes in the value of nominal assets. It documents nominal asset positions in the United States across sectors and groups of households and estimates the wealth redistribution caused by a moderate inflation episode. The main losers from inflation are rich, old households, the major bondholders in the economy. The main winners are young, middle-class households with fixed-rate mortgage debt. Besides transferring resources from the old to the young, inflation is a boon for the government and a tax on foreigners. Lately, the amount of U.S. nominal assets held by foreigners has grown dramatically, increasing the potential for a large inflation-induced wealth transfer from foreigners to domestic households. Keywords: Inflation, Redistribution.
Aggregate Implications of Wealth Redistribution: With Martin Schneider Journal of the European Economic Association, 4(2-3), 493-502, April-May 2006. Abstract: This paper shows that a zero-sum redistribution of wealth within a country can have persistent aggregate effects. Motivated by the case of an unanticipated inflation episode, we consider redistribution shocks that shift resources from old to young households. Aggregate effects arise because there are asymmetries in the reaction of winners and losers to changes in wealth. We focus on two sources of asymmetries: differences in the average age of winners and losers, and differences in their labor force status. Keywords: Redistribution, Aggregate Effects.
Dynamic Mechanism Design with Hidden Income and Hidden Actions With Robert M. Townsend Journal of Economic Theory 126(1), 235-285, January 2006. Abstract: We develop general recursive methods to solve for optimal contracts in dynamic principal-agent environments with hidden states and hidden actions. In our baseline model, the principal observes nothing other than transfers. Nevertheless, optimal incentive-constrained insurance can be attained. Starting from a general mechanism with arbitrary communication, randomization, full history dependence, and without restrictions on preferences or technology, we show how the optimal contract can be efficiently implemented as a recursive direct mechanism. Our methods generalize to environments with multiple actions and additional states, some of which may be observable. The key to implementing these extensions is to introduce multiple layers of off-path utility bounds. Keywords: Mechanism Design, Partial Insurance, Dynamic Contracts.
Earlier versions with additional proofs and
numerical results:
The Macroeconomics of Child Labor Regulation With Fabrizio Zilibotti American Economic Review 95(5), 1492-1524, December 2005. Abstract: We develop a positive theory of the adoption of child labor laws. Workers who compete with children in the labor market support the introduction of a child labor ban, unless their own working children provide a large fraction of family income. Fertility decisions lock agents into specific political preferences, and multiple steady states can arise. The introduction of child labor laws can be triggered by skill-biased technological change that induces parents to choose smaller families. The theory can account for the observation that in Britain regulations were first introduced after a period of rising wage inequality, and coincided with rapid fertility decline. Keywords: Child Labor, Voting, Fertility, Inequality. An earlier version of this paper circulated under the title: "Voting with your Children: A Positive Analysis of Child-Labor Laws."
Read an article in The Region about this paper: Why Johnny Can't Work A static version of the model that illustrates the main ideas in a simplified framework (useful for teaching purposes). Child Mortality and Fertility Decline: Does the Barro-Becker Model Fit the Facts? Journal of Population Economics 18(2), 337-366, June 2005. Abstract: I compare the predictions of three variants of the altruistic parent model of Barro and Becker for the relationship between child mortality and fertility. In the baseline model fertility choice is continuous, and there is no uncertainty over the number of surviving children. The baseline model is contrasted to an extension with discrete fertility choice and stochastic mortality and a setup with sequential fertility choice. The quantitative predictions of the models are remarkably similar. While in each model the total fertility rate falls as child mortality declines, the number of surviving children increases. The results suggest that factors other than declining infant and child mortality are responsible for the large decline in net reproduction rates observed in industrialized countries over the last century. Keywords: Fertility, Infant Mortality, Child Mortality, Demographic Transition.
Social Class and the Spirit of Capitalism With Fabrizio Zilibotti Journal of the European Economic Association 3(2-3), 516-524, April-May 2005. Abstract: The British Industrial Revolution was a time of major socio-economic transformations. We review a number of recent economic theories which analyze the transition from a preindustrial world characterized by high fertility, stationary standards of living, and rigid social hierarchies to modern capitalism. One of the key social transformations that accompanied the Industrial Revolution was the economic decline of the aristocracy. Standard theories of wealth inequality cannot explain why the aristocrats, in spite of their superior wealth and education, failed to be the main protagonists and beneficiaries of industrialization. We discuss recent research based on a model of endogenous preferences that is consistent with the demise of aristocracy. Keywords: Endogenous Preferences, Industrial Revolution, Social Class.
Show Me the Money: Retained Earnings and the Real Effects of Monetary Shocks Recherches Economiques de Louvain, 71(1), 5-34, 2005. Abstract: The empirical literature on monetary policy shocks documents that contractionary shocks are followed by a persistent rise in interest rates and a persistent fall in output. Standard monetary business cycle models can account for the initial effects of monetary shocks, but have difficulty generating persistence. In this paper, I examine whether frictions that affect the asset allocation decisions of households can lead to persistent effects. In the model economy, households hold two assets, one used for transactions (the checking account) and one used for investment (the savings account). There is a small transaction cost for moving funds between the accounts. Another key feature of the economy is that the business sector accumulates retained earnings and credits profits to the consumers only with a delay. I show that in this environment monetary shocks have persistent effects even when the adjustment cost is very small. Keywords: Monetary Shocks, Retained Earnings, Persistence, Business Cycles, Flow of Funds.
Accounting for Fertility Decline During Journal of Economic Growth 9(3), 347-383, September 2004. Abstract: In every developed country, the economic transition from pre-industrial stagnation to modern growth was accompanied by a demographic transition from high to low fertility. Even though the overall pattern is repeated, there are large cross-country variations in the timing and speed of the demographic transition. What accounts for falling fertility during the transition to growth? To answer this question, this paper develops a unified growth model which delivers a transition from stagnation to growth, accompanied by declining fertility. The model is used to determine whether government policies that affect the opportunity cost of education can account for cross-country variations in fertility decline. Among the policies considered, education subsidies have only minor effects, while accounting for child-labor regulations is crucial. Apart from influencing fertility, the policies also have large effects on the evolution of the income distribution in the course of development. Keywords: Growth, Fertility, Demographic Transition, Education, Child Labor, Income Distribution.
An earlier, more detailed version under the title "Growth and Fertility in the Long Run"
is also available (May 2000): Public versus Private Education when Differential Fertility Matters With David de la Croix Journal of Development Economics 73(2), 607-629, April 2004. Abstract: We assess the merits of different education systems in a framework that accounts for the joint decision problem of parents regarding fertility and education. Specifically, we compare the implications of a public and a private schooling regime for economic growth and inequality. We find that private schooling leads to higher growth when there is little inequality in human capital endowments across families. In contrast, when inequality is high, public education yields higher growth by reducing fertility differentials. In addition, public schooling leads to income convergence, while private schooling can result in ever increasing inequality. Our analysis highlights the importance of accounting for endogenous fertility differentials when analyzing educational policies. Keywords: Growth, Inequality, Fertility, Public Education, Private Education.
Inequality and Growth: Why Differential Fertility Matters With David de la Croix American Economic Review 93(4), 1091-1113, September 2003. Abstract: We develop a new theoretical link between inequality and growth. In our model, fertility and education decisions are interdependent. Poor parents decide to have many children and invest little in education. A mean-preserving spread in the income distribution increases the fertility differential between the rich and the poor, which implies that more weight gets placed on families who provide little education. Consequently, an increase in inequality lowers average education and, therefore, growth. We find that this fertility-differential effect accounts for most of the empirical relationship between inequality and growth. Keywords: Growth, Inequality, Differential Fertility, Human Capital, Education.
Origins and Consequences of Child Labor Restrictions: A Macroeconomic Perspective With Dirk Krueger Published in Frontiers in Family Economics, edited by Peter Rupert, Emerald Press, 2008. Abstract: In this paper we investigate the positive and normative consequences of child-labor restrictions for economic aggregates and welfare. We argue that even though the laissez-faire equilibrium may be inefficient, there are usually better policies to cure these inefficiencies than the imposition of a child-labor ban. Given this finding, we investigate the potential political-economic reasons behind the emergence and persistence of child-labor legislation. Our investigation is based on a structural dynamic general equilibrium model that provides a coherent and uniform framework for our analysis. Keywords: Child Labor, Welfare, Efficiency, Political Economics.
Working paper version (October 2006): Humankapital, politischer Wandel und langfristige Wirtschaftsentwickung Plenary talk at the annual meeting of Verein für Socialpolitik 2007, published in Perspektiven der Wirtschaftspolitik, 9(3), 73-89, May 2008. Abstract: Seit Mitte der achtziger Jahre hat die neue Wachstumstheorie verstärkt Aufmerksamkeit auf Humankapital als eine Quelle des Wirtschaftswachstums gelenkt. Neuere empirische Ergebnisse weisen allerdings darauf hin, dass Bildungsinvestitionen nur geringe soziale Externalitäten erzeugen und dass der direkte Beitrag des Humankapitals zum Wirtschaftswachstum relativ gering ist. In dieser Arbeit wird der Beitrag des Humankapitals zur Wirtschaftsentwicklung im Rahmen der langfristigen Wachstumstheorie dargestellt, deren Gegenstand ist, den Übergang von Ländern von vor-industrieller Stagnation zu stetigem Wirtschaftswachstum zu erklären. Hier erweist sich, dass Humankapital nicht nur direkte Produktivitätseffekte erzeugt, sondern auch als Auslöser verschiedener entwicklungsfördernder politischer Reformen dienen kann.
Growth Takeoffs Entry prepared for New Palgrave Dictionary of Economics, 2nd Edition. Abstract: Following a phase of near-constant living standards lasting from Stone Age until the onset of the Industrial Revolution, a large number of countries have experienced growth takeoffs, in which stagnation gives way to sustained economic growth. What causes some countries to enter a growth takeoff, while others remain poor? We discuss three mechanisms that can trigger a growth takeoff in a country previously captured in a poverty trap: fertility decline, structural change, and accelerating technological progress. Keywords: Industrial Revolution, Demographic Transition, Structural Change. The paper (January 2006): The Research Agenda: Matthias Doepke on the Transition from Stagnation to Growth The EconomicDynamics Newsletter, 87(2), April 2007. An overview of my research on economic growth.
Research papers presented on this page are based upon work supported by the National Science Foundation under grants No. SES-0217051 and SES-0519265. |
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Matthias Doepke / UCLA / Revised April 7, 2008 Send me mail: doepke@econ.ucla.edu. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||