https://cepr.org/ en https://cepr.org/publications/dp20822 Surveys consistently show large heterogeneity of macroeconomic beliefs across consumers, and yet very little is known about consumers' higher-order beliefs. In this paper, we conduct a series of novel surveys eliciting inflation forecasts from U.S. consumers. Crucially, we ask respondents to report their higher-order beliefs of consumers across the political spectrum. In this context, we document new facts regarding the role of partisanship in both own- and higher-order beliefs. We find that higher-order beliefs differ substantially from own beliefs. Qualitatively, consumers correctly understand the "partisan gap" in inflation forecasts: consumers affiliated with the current president have lower inflation expectations. However, the "perceived" (higher-order) partisan gap is larger than the actual partisan gap in inflation forecasts. These patterns are true both unconditionally as well as under simple conditional (hypothetical) political scenarios. Information treatments from partisan news sources are successful at moving inflation expectations in the intended direction. Our results show that political identity is an important driver of own and higher-order beliefs. 2025-11-09T00:00:00+0000 Rupal Kamdar, Walker Ray, Mauricio Ulate 78d87ee1-978f-4762-b310-305d06675d0f Discussion paper DP20822 Monetary Economics and Fluctuations, Political Economy https://cepr.org/publications/dp20819 We characterize investments in supply chain resilience in a geopolitical duopoly. The domestic firm balances the option to benefit from potential competitive advantages against riskiness and geopolitical instability associated with foreign sourcing. We show that the domestic firm has insufficient incentives to invest in supply chain resilience, thereby justifying a subsidy policy. We characterize conditions for underinvestment. We also characterize a number of factors which are central for optimal subsidy policy. 2025-11-07T00:00:00+0000 Thomas Gehrig, Rune Stenbacka cdf78515-4b00-4b05-ba20-23b546ff9501 Discussion paper DP20819 International Trade and Regional Economics https://cepr.org/publications/dp20820 How should governments design climate policies in the presence of inequality, uninsurable risk, and fiscal constraints? To address this question, we develop a climate--economy model with incomplete markets and idiosyncratic labor-income risk, where Ricardian equivalence fails and optimal long-run capital taxes are positive. We analytically show that the optimal carbon tax equals the social cost of carbon (SCC) adjusted for fiscal distortions. Calibrating the model to the U.S., we show that these deviations are quantitatively negligible: high levels of household inequality, income risk, and fiscal distortions do not, in themselves, justify lowering climate ambitions. Welfare gains under the optimal policy come almost entirely from efficiency and environmental amenities, with almost no effect on redistribution and insurance, and are fairly evenly distributed across households. 2025-11-07T00:00:00+0000 Thomas Douenne, Sebastian Dyrda, Albert Jan Hummel, Marcelo Pedroni e08205f1-62b1-40e6-aff6-4e7ef08d1125 Discussion paper DP20820 Climate Change and the Environment https://cepr.org/publications/dp20821 History shows that public debt is a powerful tool for societies to trade with themselves in the future. Debt allows governments to spread the costs of public goods over time, while taxes provide the revenue needed for debt service. History also shows that there are limits to the power of public borrowing. Effective debt management requires balancing borrowing, interest rates, growth and inflation. Failure to do so results in unsustainable debt levels and fiscal crises. However, this essay argues that we need to reevaluate the balance of risks and benefits of sovereign debt. While the stated aim is to understand the past, the essay also speaks to current debates. 2025-11-07T00:00:00+0000 Rui Esteves 4005af14-3856-423b-90d7-ac13d6acfa4f Discussion paper DP20821 Economic History, International Macroeconomics and Finance https://cepr.org/publications/dp20818 Using a novel global dataset of executive pay contracts, we show that the surge in ESG and other compensation metrics is more about securing shareholder consent than directing managerial effort. ESG metrics – classified according to SASB standards – are often added in areas of existing strength, with negligible impact on overall ESG outcomes. Instead, metrics of any type are added after high say-on-pay dissent and are often chosen to align with proxy advisors’ preferences. Pay metrics increase say-on-pay approval and reduce both shareholder proposals and shareholder dissent on managerial proposals. These findings challenge contract theory’s prediction that metrics are selected to direct attention to neglected objectives and suggest that the surge in ESG and other metrics reflects conformity pressures and the desire to appease shareholders. 2025-11-07T00:00:00+0000 Nickolay Gantchev, Mariassunta Giannetti, Marcus Hober 2f22b1ad-17fe-40a8-9adc-e265299a7d85 Discussion paper DP20818 Banking and Corporate Finance, Climate Change and the Environment https://cepr.org/publications/dp20815 This paper evaluates the usefulness of crowd-sourced Chinese genealogical data for quantitative research in demography and economic history. I first examine whether genealogies — despite well-known selection biases — produce demographic patterns consistent with established historical knowledge of China. Comparisons with existing studies show that aggregate population-growth trends and sex ratios over time align reasonably well with established demographic and historical findings, suggesting that genealogies, though selective, capture coherent and interpretable patterns. Building on these plausibility checks, the paper argues that the main value of genealogical data lies in their scalability and temporal depth, particularly as crowd-sourced digitization vastly expands the number of available records. These features make genealogies well suited to analyses that leverage variation across regions and over time, an approach that is central in modern economic history. 2025-11-06T00:00:00+0000 Melanie Meng Xue 337210a1-b746-4147-ba50-2fc97554612e Discussion paper DP20815 Economic History https://cepr.org/publications/dp20817 This paper investigates the existence, magnitude and drivers of the sovereign greenium: the yield discount on sovereign and quasi-sovereign green bonds relative to conventional bonds. Using a dataset of 332 matched pairs of green and conventional bonds issued between 2014 and 2023 by sovereigns, sovereign-backed agencies, and multilateral development institutions, we analyze secondary-market pricing to capture both cross-sectional and time-varying heterogeneity. We find a small but statistically significant greenium, averaging about 2 basis points for advanced economies and nearly 13 basis points for emerging markets. The greenium is larger for lower-rated issuers and increases when climate transition risks become more salient or when issuers are more vulnerable to climate change. Interaction effects indicate that global awareness of transition risks and domestic climate vulnerability jointly amplify the greenium. While green sovereign bonds trade at lower yields, the resulting fiscal savings are economically modest relative to total interest expenditures. A novel analysis of bond documentation shows that sovereign green bonds contain no binding commitments regarding environmental outcomes, suggesting that the observed greenium reflects symbolic rather than contractual sustainability value. 2025-11-06T00:00:00+0000 Ugo Panizza, Shuyang Shi, Beatrice Weder di Mauro, Mitu Gulati ceba91d4-5b78-429d-a807-3becb08bfbb1 Discussion paper DP20817 International Macroeconomics and Finance, Climate Change and the Environment https://cepr.org/publications/dp20816 Using novel data from the notorious 1922 Teapot Dome scandal, we assess costs of informed trading by corrupt officials and company insiders involved in illegal federal oil lease contracts. We estimate insider gains of nearly $300 million (2025 terms). Market makers widened bid-ask spreads for oil stocks, raising costs for all investors. Despite legal insider trading, insiders only partially bid up share prices before public revelation, temporarily evading detection and delaying full information incorporation until salient news coverage broke. Our analysis underscores how cronyism and insider trading distort resource allocation and disadvantage uninformed investors, with lessons for modern regulation. 2025-11-06T00:00:00+0000 Caroline Fohlin, Noah MacDonald ccc9f10f-b2ba-47a7-81dc-2c13a598177b Discussion paper DP20816 Economic History, Political Economy, Asset Pricing https://cepr.org/publications/dp20814 This paper reviews the theoretical and empirical foundations of peer and network effects, aiming to bridge insights from both literatures. We first examine the main identification challenges in linear-in-means models — reflection, correlated effects, and sorting — and show how introducing explicit network structures can help address them. We also review reduced-form strategies based on within-school cohort composition, exposure to peers’ shocks, random assignment, and exogenous variation in network links. The analysis then develops the microfoundations of peer effects through linear–quadratic network games, linking equilibrium behavior to network centrality and highlighting the role of key players. Using this framework, we discuss how structural models of network formation and individual effort choices can resolve endogeneity concerns. The paper concludes with recent advances on non-linear and multiplex interactions, where individuals respond to specific peers and operate across multiple, interdependent layers. 2025-11-05T00:00:00+0000 Yves Zenou d009bbcc-d7fd-434d-81dc-f0e06eed4551 Discussion paper DP20814 Labour Economics https://cepr.org/publications/dp20811 During the Soviet Union’s First Five-Year Plan, Western know-how and technology were extensively infused into industry through technical assistance agreements and work contracts with specialists and foreign companies. We study the causal effects of this purposeful state-led policy on labor productivity using the largest single recruitment effort of Western expertise, namely Karelian Technical Aid. This allows us to exploit exogenous variation in transfer of technology within one sector: the wood processing industry. Combining detailed individual-level data on over 5,000 North American specialists with a novel panel of accounting data on the universe of Soviet enterprises in Karelia and the Northern Region during the interwar period, we document large and persistent causal productivity gains. Important drivers of successful technology absorption were local human capital and the absence of language barriers. 2025-11-04T00:00:00+0000 Andrei Markevich, Torsten Santavirta a240d8eb-4287-4266-9140-bca3c82c5166 Discussion paper DP20811 Development Economics, Economic History, Macroeconomics and Growth, Political Economy https://cepr.org/publications/dp20812 Using equity mutual fund holdings and transactions, we show that managers actively tilt toward high-beta stocks when monetary policy is contractionary and short rates rise. This “reaching for beta” is persistent, elevates sector-wide net buying of high-beta stocks, and attracts fund inflows under tighter policy. It raises funds' raw but not risk-adjusted returns and induces temporary stock-level price pressure that subsequently reverts. We show that reaching for beta is consistent with fund managers counteracting investor outflows by boosting expected returns. Unlike reaching for yield in bonds, tighter policy increases risk-taking in equities, revealing a beta channel of monetary policy transmission. 2025-11-04T00:00:00+0000 Egemen Genc, Emanuel Moench, Altan Pazarbasi 493b4cd7-3be3-4326-8b13-f01b67bacdb2 Discussion paper DP20812 Monetary Economics and Fluctuations, Asset Pricing https://cepr.org/publications/dp20813 We introduce an asset supply-and-demand approach to analyze the trajectory of US aggregate wealth, real interest rates, and fiscal sustainability. Our framework uses micro-founded and easy-to-implement sufficient statistics to quantify how shifts in demographics, inequality, and other forces affect asset market equilibrium. From 1950 to the present, rapid population aging, rising income inequality, increasing foreign demand for US assets, and declining productivity growth all contributed to a surge in asset demand. Asset supply initially fell, then turned around sharply, mainly driven by increases in government debt and the value of capitalized profits. Overall, asset demand won the race, and interest rates fell. Looking ahead to 2100, population aging will continue to strongly push up asset demand, but at current tax and benefit levels, asset supply will win the race, as rising entitlement costs push up government debt even more. While rising asset demand creates space for debt to eventually reach 250% of GDP without higher interest rates, stabilizing debt at any level requires a permanent fiscal adjustment of at least 10% of GDP. 2025-11-04T00:00:00+0000 Adrien Auclert, Hannes Malmberg, Matthew Rognlie, Ludwig Straub 1d0d24c3-f695-4c25-acfe-7448ebf6adec Discussion paper DP20813 Monetary Economics and Fluctuations https://cepr.org/publications/dp20809 Do central slums provide essential economic and social benefits to the poor? We collected bespoke data for 5,000 households to study mass forced clearances in Addis Ababa. Evictees were offered alternative subsidized housing further from the center. Exploiting sharp clearance zone boundaries, regression-discontinuity estimates show negative impacts on social networks, but positive impacts on work, earnings, housing quality and environmental amenity. Relocating households close to their ex-ante neighbors eliminates social costs. Slums are not essential: relocation policies can be designed to fully compensate residents, and the sale value of cleared land more than covers the cost. 2025-11-03T00:00:00+0000 Gharad Bryan, Simon Franklin, Tigabu Getahun, Sarah Winton a5b571cd-ae49-4ad6-bffe-966174eec5c3 Discussion paper DP20809 Development Economics, Labour Economics https://cepr.org/publications/dp20808 Individuals sometimes take extraordinary personal risks to resist and fight oppressive regimes. Material incentives alone fail to fully explain these life-threatening decisions, which appear to be largely driven by a profound sense of injustice and strong emotional motivations. This paper provides evidence of the significant role that immaterial incentives play in motivating rebellion, by examining the formation of subversive identities in Italy following World War I. We reconstruct the history of Italian families, tracing patterns of dissent and rebellion from the early 20th century through World War II. Using these novel data, we examine how a government propaganda campaign—the passage of the train carrying the Unknown Soldier—interacted with personal histories of grievance and loss, fostering the formation of subversive identities and increasing the likelihood of rebellion against the rising Fascist regime. Looking at individual participation in the armed resistance in WWII, we next isolate the longer-term role of the post-WWI propaganda campaign, the emergence of oppositional identities within families, and the role of early political dissenters in catalyzing the armed fight that put an end to the dictatorship. 2025-11-03T00:00:00+0000 Matteo Cervellati, Elena Esposito, Giacomo Plevani, Alessandro Saia c5fa9aa9-fbba-4ccc-9f86-f9a17b81de20 Discussion paper DP20808 Economic History, Political Economy https://cepr.org/publications/dp20810 Industrialization boosts aggregate incomes, but its distributional effects remain debated. We study the impact of coal-driven industrialization on unskilled labor incomes using novel panel data on wages from 667 Prussian localities (1800-1879), extended with county-level data through 1914. Exploiting spatial variation in coal proximity in difference-in-differences and event-study designs, we find that wage gains in coal-rich regions emerged once industrialization accelerated in the 1850s and continued to grow until WWI. Evidence from 3,000 household accounts shows that coal proximity raised labor incomes primarily for low-skilled workers, with weaker effects for high-skilled and mechanical occupations. This pattern suggests that industrialization reduced wage inequality by compressing the local skill premium. Mediation analysis indicates that wage gains for unskilled workers were primarily driven by technology adoption and the increasing demand for low-skilled labor, rather than by sectoral change or the spread of the factory system. 2025-11-03T00:00:00+0000 Ann-Kristin Becker, Erik Hornung ef204814-6b86-445f-92af-34c7685e55c9 Discussion paper DP20810 Economic History, Labour Economics https://cepr.org/publications/dp20807 Trade conflicts, geopolitical tensions, digital disruption, and the climate crisis pose major challenges for the European Union (EU) and its member states. As called for in the Draghi Report, industrial policy measures can increase competitiveness, strengthen resilience, and facilitate the twin transformation. This article explores ways in which competition policy can be realigned to better accommodate industrial policy objectives. Using German competition law as a reference point, it presents options with which legislatures and competition authorities can respond to current challenges, reconcile conflicting objectives, and adapt the decision-making framework. It then considers elements of a competition-oriented industrial policy, understood as an evidence-based, targeted approach in which competition serves both as a guiding principle and as a control variable. 2025-11-03T00:00:00+0000 Tomaso Duso, Martin Peitz 7792c7da-b7ef-47bb-91aa-82f3f9f5d566 Discussion paper DP20807 https://cepr.org/publications/dp20806 We observe a rich set of public information signals available to participants in the Survey of Professional Forecasters (SPF) and decompose individual forecast revisions into those due to public information and a remainder due to residual information. We find that SPF forecasters overreact to residual information at almost all forecast horizons and for almost all forecast variables. In addition, forecasts are overly anchored to prior beliefs for all variables at all forecast horizons. We show analytically that overconfidence in private information qualitatively generates both of these features. It also implies that forecast errors correlate positively with past forecast revisions at the consensus level, but negatively at the individual level, as documented previously in the literature. Estimating Bayesian updating models on SPF data, we show that overconfidence in private information also replicates the observed patterns quantitatively. All estimated models display strong and statistically significant overconfidence in private information. 2025-11-02T00:00:00+0000 Klaus Adam, Pei Kuang, Shihan Xie 1a71ca32-1ef8-4330-b1ca-b9631ddfa881 Discussion paper DP20806 Monetary Economics and Fluctuations https://cepr.org/publications/dp20805 We use data on firm-level prices and output to estimate the dynamics of markups, marginal cost and prices over the life-cycle of Danish manufacturing firms. Markups increase by 8 percentage points over the first 20 years of firms’ lives. This reflects a substantial decrease of marginal cost that is only partially passed on into prices. The increase in markups coincides with increased product turnover — both introductions and discontinuations — among young firms. We show that despite the strong age profile in markups, and an increasing average firm age due to declining entry, the direct effect of firm aging on recent markup trends is small. Our findings have implications for a number of other macroeconomic theories and trends. 2025-11-02T00:00:00+0000 Klaus Adam, Tobias Renkin, Gabriel Züllig f17865b7-fcfa-482a-9f62-d700bb016b47 Discussion paper DP20805 Macroeconomics and Growth https://cepr.org/publications/dp20804 Complementarity between consumption and work is essential for heterogeneous-agent models' ability to generate realistic multiplier effects from aggregate demand shocks, while avoiding puzzling predictions. We show how parameterizing complementarity — in the spirit of Frisch's “utility acceleration”— separately from income effects is necessary to achieve both. HANK models equipped with such complementarity deliver plausible fiscal multipliers and simultaneously resolve two key challenges in the literature: a “trilemma” of matching marginal propensities to earn (MPEs) and to consume (MPCs), and a Catch-22 “dilemma” of resolving the forward guidance puzzle. We establish these results analytically in a tractable HANK framework and confirm them in a calibrated quantitative HANK model. Standard utility functions, however, constrain either complementarity or income effects — or both — thereby forcing multipliers to depend exclusively on one or the other. We introduce two flexible parametric forms that allow arbitrary, independent calibration of complementarity and income effects: a quasi-separable “GHH-CRRA” utility and a “CCRRA” (constant complementarity and relative risk aversion) specification. 2025-11-02T00:00:00+0000 Florin Bilbiie, Fergal Hanks, Sean Lavender 0f979e89-323a-4e8e-82c4-d624cbe538c9 Discussion paper DP20804 Monetary Economics and Fluctuations https://cepr.org/publications/dp20803 Urban transportation projects are massive public investments that can transform cities. This article reviews evidence on how these projects shape where people live, and how their benefits are shared across income groups. A simple model helps organize the findings. Three factors are especially important: who uses the new transportation mode, where it is built, and how easily people can relocate. Projects serving a narrow group in a specific area tend to increase segregation and inequality. These impacts can be severe if poorer households face barriers to relocation, as happened with the Interstate Highway System. Projects with broad spatial coverage and use by all income groups, like Bus Rapid Transit in developing countries, tend to have more modest segregation effects and broadly shared welfare gains. 2025-11-01T00:00:00+0000 Prottoy Akbar, Victor Couture f766406b-5781-4b2c-aa93-8ca35556fdf9 Discussion paper DP20803 International Trade and Regional Economics https://cepr.org/publications/dp20801 Artificial Intelligence (AI) is reshaping offshoring and globalization by automating knowledge work and altering trade patterns. We analyze this transformation in a two-region world where firms structure work hierarchically to use knowledge efficiently: the most knowledgeable individuals specialize in problem-solving, while others perform routine work. Before AI, the Advanced Economy specializes in problem-solving services, while the Emerging Economy focuses on routine knowledge work. We model AI as a technology that converts compute into autonomous “AI agents,” which serve as perfect substitutes for humans with a given level of knowledge. Reflecting the concentration of AI infrastructure in advanced economies, we assume that all compute is located in the Advanced Economy. We show that basic AI reduces the Advanced Economy’s net exports of problem-solving services, potentially reversing pre-AI trade patterns. In contrast, sophisticated AI increases the Advanced Economy’s net exports of problem-solving services, reinforcing existing trade patterns. We also examine the effects of restricting AI autonomy, finding that a global restriction redistributes AI’s benefits toward lower-skilled workers, while a regional restriction—such as banning autonomous AI in the Emerging Economy—does little to benefit lower-skilled workers and harms the most knowledgeable individuals in that region. Our results underscore the need for a coordinated global approach to AI regulation. 2025-11-01T00:00:00+0000 Enrique Ide, Eduard Talamas 9509aec0-ffd8-4d7d-9bfd-257a536da273 Discussion paper DP20801 International Trade and Regional Economics, Organizational Economics, Political Economy https://cepr.org/publications/dp20802 US college-educated couples with children marry at higher rates than those without a college degree. We argue that marriage, which entails lower separation risk and more equitable asset division if separation occurs, provides insurance to the lower-earning spouse, facilitating child investment. Investing in children is more valuable for college-educated couples, who are more likely to send their children to college. Using an OLG model of marriage, cohabitation, wealth accumulation, and educational investments where college is costly and completion is risky, we find that high college costs reduce incentives to marry among couples without a college degree. These differences in union choice by education heighten differences in children’s educational attainment and reduce intergenerational mobility. 2025-11-01T00:00:00+0000 Effrosyni Adamopoulou, Anne Hannusch, Karen Kopecky, Tim Obermeier d5ed5b12-6bb9-4cb8-b135-5eb0acf56a1c Discussion paper DP20802 Macroeconomics and Growth https://cepr.org/publications/dp20800 The literature on long-run asset returns has continued to grow steadily, particularly since the start of the new millennium. We survey this expanding body of evidence on historical return premia across the major asset classes — stocks, bonds, and real assets — over the very long run. In addition, we discuss the benefits and pitfalls of these long-run data sets and make suggestions on best practice in compiling and using such data. We report the magnitude of these risk premia over the current and previous two centuries, and we compare estimates from alternative data compilers. We conclude by proposing some promising directions for future research. 2025-10-31T00:00:00+0000 David Chambers, Elroy Dimson, Antti Ilmanen, Paul Rintamäki b145d250-cfcc-49eb-86ab-f03c412bf83a Discussion paper DP20800 Asset Pricing https://cepr.org/publications/dp20798 This paper provides the first experimental evidence on the long-term effects of work-study programs, leveraging a randomized lottery design from a national program in Uruguay. Participation leads to a persistent 11 percent increase in formal labor earnings seven years after the program, driven by a 4 percent increase in the monthly probability of being employed and a 6 percent increase in monthly wages. Effects are significantly larger for men, while remaining positive for women. The program is highly cost-effective, outperforming most job training programs and reaching levels comparable to early childhood investments. 2025-10-30T00:00:00+0000 Mery Ferrando, Noemi Katzkowicz, Thomas Le Barbanchon, Diego Ubfal 1e4e868d-ef73-4130-b58a-54f087e9ae26 Discussion paper DP20798 Development Economics, Labour Economics https://cepr.org/publications/dp20799 We study the anatomy of the international portfolio finance network. As global financial linkages have become denser over time, cross-border portfolio equity positions have grown in importance relative to debt for Emerging markets and Advanced economies. Using the framework developed by Stavrakeva and Rey (2024), we construct a novel proxy of daily foreign investor holdings in both equity and long-term sovereign debt markets across 32 currency areas. Leveraging an instrumental variable strategy, we identify an effect of foreign equity ETF inflows on exchange rates and local stock market prices. Our high-frequency proxy enables us to interpret episodes of turbulence in international finance. It should prove useful to assess how persistent the current shocks to the international financial system are likely to be. 2025-10-30T00:00:00+0000 Hélène Rey, Vania Stavrakeva 9928b4ff-0d5c-4ed0-b366-c6e0a7898a1e Discussion paper DP20799 International Macroeconomics and Finance, Asset Pricing, Banking and Corporate Finance https://cepr.org/publications/dp20797 How do minimum wages affect informality? We study the near-doubling of the real minimum wage from 2000 to 2009 in Brazil, where 46% of the workforce is informal. Using labor force surveys covering the informal sector, we show the minimum wage exhibits near full passthrough to informal employees working in formal firms, about half of all informal employees. The formal-to-informal reallocation elasticity with respect to the formal wage is small: -0.28. Our findings illustrate how minimum wages can positively affect living standards for workers thought beyond the reach of labor law, a sizable share of the workforce in developing economies. 2025-10-30T00:00:00+0000 Ellora Derenoncourt, Francois Gerard, Lorenzo Lagos, Claire Montialoux 4f15b6df-dfe7-465a-93d5-831c37dd7d41 Discussion paper DP20797 Development Economics, Labour Economics https://cepr.org/publications/dp20796 This paper examines earnings differences between first-generation and continuing generation college graduates across 24 OECD countries using data from the OECD Survey of Adult Skills (PIAAC). In all but two of the countries analysed, first-generation graduates earn less than their peers from college-educated families, with an average gap across all countries of approximately 8%. We investigate potential mechanisms behind this result and find that first-generation graduates are less likely to pursue postgraduate education, more likely to hold vocational degrees, and tend to have lower cognitive skills. These findings highlight the need for policy interventions to enhance educational mobility and promote equality of opportunity. 2025-10-29T00:00:00+0000 Alessandro Fabbri, Michele Pellizzari 0193e90a-ca75-4693-9bfe-53c881ebbc1f Discussion paper DP20796 Labour Economics https://cepr.org/publications/dp20795 Many studies find that increases in agricultural prices reduce armed civil conflict in producing regions. However, the effect on the onset of the most lethal conflicts—civil wars—remains unclear. I identify three methods of constructing commodity price indices in the literature and employ all three to estimate the effect of international agricultural price shocks on civil war onset using a global panel of 118 countries over the 1957-2007 period. The first method, where the price index is constructed based on a basket of agricultural commodities with country-specific commodity weights fixed over time, shows that increases in agricultural prices reduced civil war onset in the global sample, with stronger effects after 1980 and in Sub-Saharan Africa. The second method, where the price index is based solely on each country’s principal agricultural export, shows that increases in agricultural prices reduced civil war onset in the global sample over 1980-2007, again with stronger effects in Sub-Saharan Africa. The third method, where the price index is based on an agricultural commodity basket with time-varying commodity weights, yields estimates that are not statistically significant at conventional levels. Effect sizes are largest with the fixed-weight basket index. Thus, conclusions depend on how the price index is constructed. Evidence from the fixed-weight basket index—designed to isolate price effects—indicates that increases in international agricultural prices reduced the risk of civil war onset globally between 1957 and 2007. 2025-10-29T00:00:00+0000 Antonio Ciccone 782f723f-da04-46e2-9e92-7d55acaf6929 Discussion paper DP20795 Development Economics, International Trade and Regional Economics, Macroeconomics and Growth, Political Economy https://cepr.org/publications/dp20792 We offer a unifying empirical model of covered and uncovered currency premia, interest rates and spot and forward exchange rates, both in the cross section and time series of currencies. We find that the rich empirical patterns are in line with a partial equilibrium model of the currency market, where hedged and unhedged currency is supplied by intermediary banks subject to value-at-risk balance-sheet constraints, emphasizing the frictional nature of equilibrium currency premia and exchange rate dynamics. In the cross section, the excess supply of local-currency savings is the key determinant of low relative interest rates, negative covered and uncovered currency premia, cheap forward dollars; and vice versa. In the time series, covered currency premia change infrequently and in concert across currencies, driven by aggregate financial market conditions. In contrast, uncovered currency premia move frequently in response to currency-specific demand shocks, which we capture with the dynamics of net currency futures positions of dealer banks. Exchange rate depreciations in response to negative shifts in currency demand are followed by small persistent appreciations that generate predictable expected returns necessary to ensure intermediation of currency demand shocks, irrespective of their financial or macroeconomic origin. Changes in net futures positions of dealer banks account for most of the variation in the spot exchange rate for every currency. 2025-10-28T00:00:00+0000 Mai Chi Dao, Pierre-Olivier Gourinchas, Oleg Itskhoki a581d39c-8687-4a5f-9c12-a983d6e12cf5 Discussion paper DP20792 International Macroeconomics and Finance, Asset Pricing https://cepr.org/publications/dp20794 We study linear–quadratic games of incomplete information with Gaussian uncertainty, where each player's payoff depends on a privately observed type and a common state. The designer observes the state, elicits types, and sells action recommendations. We characterize all implementable mechanisms with Gaussian joint distributions of actions and fundamentals, and identify the players-optimal, consumer-optimal, and revenue-maximizing designs. In games of strategic complements (substitutes), these optimal mechanisms maximally correlate (anticorrelate) players’ actions. When type uncertainty is large, recommendations become deterministic linear functions of the state and reports, but remain only partially revealing. 2025-10-28T00:00:00+0000 Alessandro Bonatti, Munther Dahleh, Thibaut Horel f3b76990-f9ec-40ba-8b34-0cafacd1d99e Discussion paper DP20794 Industrial Organization https://cepr.org/publications/dp20791 An increasing number of developing countries are restricting non-renewable natural resource exports to encourage domestic processing, move up the global value chain, and spur local development. This paper studies the local labor-market effects of Indonesia’s voluntary export ban on unprocessed nickel and bauxite in 2014, previously a major source of export revenue. Exploiting plausibly exogenous variation in the timing of the ban, opening of new processing facilities, and the location of Indonesia's mineral deposits, we find that — after an initial dip — major investments in nickel processing increased employment in nickel mining districts. New smelters drove structural change, shifting jobs from agriculture to mining and manufacturing. In sharp contrast, the ban only led to very limited investment in bauxite processing, causing bauxite production and local employment to fall. We also find that nickel processing raised mining employment in Indonesia's coal districts, which provide the main source of energy for nickel processing. 2025-10-28T00:00:00+0000 Maarten Bosker, Else-Marie van den Herik, Paul Pelzl, Steven Poelhekke 02a0388d-b55d-4130-9e5f-4450acef6944 Discussion paper DP20791 Development Economics, International Trade and Regional Economics https://cepr.org/publications/dp20793 Interviews allow employers to learn about workers, but do they also enable workers to learn about firms? Studying 500,000 interview reports from Glassdoor, we find candidates for high-paying jobs are more likely to reject a job offer if they believe the interview was easy. Easy interviews appear to convey poor "fit" as those who accept offers after easy interviews are two-fifths of a standard deviation less satisfied with their jobs and 10 percent less likely to remain with their employer for at least one year. Analysis of interview narratives using large language models reveals difficult interviews signal colleague ability whereas easy interviews convey a nonselective process. In a small-scale randomized field experiment, an exogenous increase in difficulty elevated perceived difficulty and boosted applicant engagement with the vacancy. Interviews offer workers a preview of match quality, highlighting a channel through which labor markets may become less efficient if firms automate hiring with AI. 2025-10-28T00:00:00+0000 Elliott Ash, Soumitra Shukla, Jason Sockin fee920c6-10d7-47a0-b5b2-981a063252d4 Discussion paper DP20793 Labour Economics, Organizational Economics https://cepr.org/publications/dp20777 Portugal’s empire began with the conquest of Ceuta (1415) and lasted until the decolonization process (1974-1975). Portugal, therefore, both led the first wave of Western colonization and became the last to relinquish its empire during the twentieth century. Concentrating on the African and Asian dimensions of Portugal's empire, I offer a comparison with other European empires, summarizing relevant events and chronologies. Issues covered include openness ver-sus protection, slavery and slave trading, the role of early colonial settlers, and the empire's impact on both the metropolitan economy and the regions that were colonized. 2025-10-27T00:00:00+0000 Nuno Palma 1f559abc-1362-4d90-8a5c-1099f684b1a6 Discussion paper DP20777 Development Economics, Economic History https://cepr.org/publications/dp20789 This paper analyzes the Trump administration’s 2025 “reciprocal tariffs,” imposed under the International Emergency Economic Powers Act (IEEPA) after a declaration of national emergency tied to U.S. trade deficits. We assess both the economic rationale and the legal implications of using IEEPA to raise U.S. tariffs and abandon Most Favored Nation (MFN) treatment. The Executive Order’s claims—that trade deficits have surged, result from a lack of reciprocity, and have caused an “emergency” in manufacturing—rest on economic fallacies. Merchandise trade deficits are long-standing and largely endogenous; tariffs based on bilateral imbalances neither correct unfair foreign practices nor address any true emergency, let alone an ‘unusual and extraordinary threat’ as required by the statute. We further argue that the tariffs fail IEEPA’s requirement that emergency measures “deal with” the asserted threat and that Congress never intended IEEPA to delegate sweeping tariff powers. The episode illustrates the perils of “commandeering the customs” through emergency powers to pursue trade policy by executive fiat. 2025-10-27T00:00:00+0000 Gene M. Grossman, Alan O. Sykes 54218b22-d4cf-4dff-b0df-29385ee64edb Discussion paper DP20789 International Trade and Regional Economics https://cepr.org/publications/dp20790 Utilizing critical recent data advances, we analyze short-maturity real interest rates as well as term spreads based on conceptually consistent multi-century data. In contrast to an extensive literature the past few decades, we find strong evidence of trend stationarity in long horizon series, relatively fast adjustment speeds, and a paucity of structural breaks — results that survive out of sample tests. Our evidence runs contrary to consensus in the literature that long-run r* is permanently lower post-financial crisis. Relatedly, we show that term spreads are secularly rising while inflation volatility falls — a finding questioning some influential term structure models. 2025-10-27T00:00:00+0000 Kenneth Rogoff, Barbara Rossi, Paul Schmelzing 85ebbb93-f5b3-4a9d-bd21-ab21662e6545 Discussion paper DP20790 Monetary Economics and Fluctuations https://cepr.org/publications/dp20787 The classic search models assume that consumers adhere to a particular method of search (sequential or non-sequential) and that they know the true price distribution. In this paper, we evaluate how well the search cost estimates from classic models predict search outcomes — the amount of search and purchase prices — when these assumptions are violated. To this end, we conduct an online experiment in which we vary searchers' information about the price distribution of a homogeneous good. For each treatment, we (i) estimate search costs, (ii) fit each model to the estimated search cost distribution to obtain in- and out-of-sample predictions about outcomes, and (iii) compare predicted and realized outcomes. We find that the prediction performance of each model is largely robust to violations of the informational assumption. Further, the prediction performance of the sequential and non-sequential search model are similar, despite the fact that the search environment strongly favors sequential search. 2025-10-26T01:00:00+0000 Adrian Düll, Heiko Karle, Simon Martin, Heiner Schumacher 6fdee8f5-2163-4f14-9d0f-aeb37bb00426 Discussion paper DP20787 Industrial Organization https://cepr.org/publications/dp20786 A buyer and a seller can privately learn the quality of an asset - initially unknown to both - by incurring a fixed cost before trading. Asset quality determines their valuations and the seller makes a take-it-or-leave-it price offer. Under a weak "lemons-like" condition, asymmetric information arises endogenously when learning costs are small; as these costs vanish, the seller learns for sure but the buyer remains uninformed with probability bounded away from zero. Nevertheless, efficient limiting equilibria always exist; the buyer earns strictly positive surplus in such an equilibrium if, and only if, she can learn after knowing the price offer. 2025-10-26T01:00:00+0000 Maarten Janssen, Santanu Roy 4b911080-a654-46e4-ad36-db815751afd2 Discussion paper DP20786 Industrial Organization https://cepr.org/publications/dp20788 We document new empirical patterns linking the institutional design of American innovation to postwar productivity and growth of the U.S. economy. Using recently digitized patent data that distinguish funding sources and ownership structures, we find that government-funded but privately-owned patents — though only 2% of the total — account for roughly 20% of medium-term fluctuations in TFP and GDP growth. These patents are also associated with stronger business-sector investment in R&D. Privately funded patents display significant but smaller aggregate comovements, whereas publicly owned patents have muted average effects yet are more prevalent among disruptive innovations in health and biotechnology. Patents funded by the NIH and NSF exhibit the strongest links to subsequent productivity gains and R&D spillovers, while research institutes and universities outperform for-profit firms in transforming public funds into high-impact innovation. Taken together, our findings highlight the central role of government support in sustaining U.S. technological leadership and economic growth. 2025-10-26T01:00:00+0000 Andrea Gazzani, Joseba Martinez, Filippo Natoli, Paolo Surico 912880e2-5208-4615-abc6-d3265a0f3354 Discussion paper DP20788 Macroeconomics and Growth https://cepr.org/publications/dp20781 Why do political campaigns so often yield unexpected results? We address this question by separately estimating the direct effect of a campaign on targeted voters and the indirect effect on others in the same social environment. Partnering with a local NGO during Argentina’s 2023 presidential election, we randomized the distribution of leaflets providing an expert assessment of the consequences of the potentially dangerous proposals by the outsider candidate Javier Milei. Exploiting Argentina’s unique sub-precinct election reporting system, we show that the campaign reduced Milei’s support among directly treated voters, as expected, but increased his support among untreated voters in treated precincts, producing a backfiring, net-positive effect for Milei. A pre-registered replication confirmed these opposite-signed effects. Using theory and a survey experiment, we show that the minority of voters who disbelieved the campaign were more motivated to discuss it with peers, convincing them to support Milei. This mobilization effect appears especially likely when campaigns criticize outsider candidates. Our results highlight how campaigns aimed at anti-elite candidates can unintentionally mobilize support for them. 2025-10-25T01:00:00+0100 Georgy Egorov, Sergei Guriev, Maxim Mironov, Ekaterina Zhuravskaya e8ba38a5-fdda-4c61-b53b-87008d4be937 Discussion paper DP20781 Political Economy https://cepr.org/publications/dp20783 This paper examines the nature of long-term care for older adults with cognitive impairments in England. Long-term care (LTC), which in England is commonly referred to as adult social care, is care that supports daily activities of living for older and disabled individuals to enhance their quality of life. This includes care services ranging from nursing home stays to home-based assistance with tasks like washing, dressing, and eating. For older people with cognitive impairment, such as dementia for example, there may be additional specialized care and support that is necessary. This paper shows that the high care needs of older individuals is largely attributable to those with cognitive impairments: approximately half of the total care costs of the age 65+ population in England are attributable to the 8.5% of individuals with cognitive limitations. 2025-10-25T01:00:00+0100 James Banks, Eric French, Jeremy McCauley 5b080ace-b0c2-4958-9d55-9e5c477f3b13 Discussion paper DP20783 Public Economics https://cepr.org/publications/dp20785 In 1919, the Danish craft and industrial sector permanently adopted the 8-hour workday, representing the largest reduction in working hours in the country’s history. We collected quarterly data on hourly wages and employment from 1914 to 1931 across occupation groups, covering Copenhagen and the aggregate of the provinces in Denmark. By exploiting variation in percent work-time reductions across occupation groups and regions, we examine the income and employment effects of the reform. Our findings reveal only a compensating rise in hourly wages in Copenhagen, though this increase was insufficient to offset the decline in weekly earnings due to fewer working hours. Furthermore, we observe that the reduction in working hours was mitigated by new hires, particularly of unskilled workers. Overall, our results suggest that reductions in work hours were not (in any region) fully compensated by gains in hourly wages but tend to support the "work-sharing" hypothesis. 2025-10-25T01:00:00+0100 Marius Fredagsvik Gunnesmo, Casper Worm Hansen 85e3ca90-67fd-46c1-8bd2-9733010a7f3c Discussion paper DP20785 Economic History https://cepr.org/publications/dp20784 This paper estimates the stochastic process of how dementia incidence evolves over time. We proceed in two steps: first, we estimate a time trend for dementia using a multi-state Cox model. The multi-state model addresses problems of both interval censoring arising from infrequent measurement and also measurement error in dementia. Second, we feed the estimated mean and variance of the time trend into a Kalman filter to infer the population level dementia process. Using data from the English Longitudinal Study of Aging (ELSA), we find that dementia incidence is no longer declining in England. Furthermore, our forecast is that future incidence remains constant, although there is considerable uncertainty in this forecast. Our two step estimation procedure has significant computational advantages by combining a multi-state model with a time series method. To account for the short sample that is available for dementia, we derive expressions for the Kalman filter’s convergence speed, size, and power to detect changes and conclude our estimator performs well even in short samples. 2025-10-25T01:00:00+0100 Jerome Simons, Yuntao Chen, Eric Brunner, Eric French 04da482d-dc33-4862-8827-3b554144863f Discussion paper DP20784 Public Economics https://cepr.org/publications/dp20779 From 1900 to 1940, ordinary working- and middle-class families saved for retirement and contingencies via ordinary life insurance policies. These policies combined insurance and savings in a single financial instrument that paid its face value to insured individuals who survived until maturity and to beneficiaries if the insured died before the maturity date. The popularity of these policies peaked before WWII when a substantial share of all households and most of the middle class invested in them. This paper explains why these policies were the most popular savings vehicle of their day. Ordinary life policies were well suited to the early twentieth-century economic environment. They had good returns; low risks; tax advantages; and little correlation with returns of competing investments, like bank deposits, building and loan shares, postal savings deposits, real estate, or stocks. The policies protected households from poverty in old age, from the premature death of their breadwinner, and from other risks including disability and deflation. Understanding how households saved in the past has implications for a wide range of literatures in the social sciences. 2025-10-25T01:00:00+0100 Vellore Arthi, Gary Richardson, Mark Van Orden a7961d61-7247-4912-b391-a6e12b6e0b28 Discussion paper DP20779 Economic History, Banking and Corporate Finance https://cepr.org/publications/dp20782 Using data from the Health and Retirement Study (HRS) and the English Longitudinal Study of Ageing (ELSA), we estimate the impact of health on employment for individuals close to retirement age. Estimating the model separately by race and gender, we find that racial differences in employment can be partly explained by the worse health of minorities as well as the larger impact of health on employment for minorities. 2025-10-25T01:00:00+0100 Richard Blundell, Jack Britton, Monica Costa Dias, Eric French, Weijian Zou 48a4f48f-a3d8-4e3a-b59a-e93055c8b2ae Discussion paper DP20782 Public Economics https://cepr.org/publications/dp20780 The canonical view of bankruptcy law is that it solves a market failure by imposing a collective choice process that supplants the market. We propose that bankruptcy law instead catalyzes the market if that process provides scope for rent seeking. Considering collective action problems as the central friction, as in the canonical theory, we argue that such a law induces activist investing that improves the efficiency of distressed restructuring. This expands the purview of bankruptcy law from a focus on bargaining issues to an active role in regulating corporate control contestability. We interpret the evolution of Chapter 11 and the surrounding market environment through this lens. 2025-10-25T01:00:00+0100 Mike Burkart, Samuel Lee, Vladimir Vladimirov 4efa3696-3f72-44c9-b186-d2fb9ce627a2 Discussion paper DP20780 Banking and Corporate Finance https://cepr.org/publications/dp20772 China’s unprecedented expansion of higher education in 1999, increased annual college enrollment from 1 million to 9.6 million by 2020. We trace the global ripple effects of that expansion by examining its impact on US graduate education and local economies surrounding college towns. Combining administrative data from China’s college admissions system and US visa data, we leverage the centralized quota system governing Chinese college admissions for identification and present three key findings. First, the expansion of Chinese undergraduate education drove graduate student flows to the US: every additional 100 college graduates in China led to 3.6 Chinese graduate students in the US. Second, Chinese master’s students generated positive spillovers, driving the birth of new master’s programs, and increasing the number of other international and American master's students, particularly in STEM fields. And third, the influx of international students supported local economies around college towns, raising job creation rates outside the universities, as well. Our findings highlight how domestic education policy in one country can reshape the academic and economic landscape of another through student migration and its broader spillovers. 2025-10-24T01:00:00+0100 Ruixue Jia, Gaurav Khanna, Hongbin Li, Yuli Xu fbbcd66c-bbbe-4b07-af6b-0036930fa04a Discussion paper DP20772 Development Economics, Labour Economics, Public Economics https://cepr.org/publications/dp20773 Exploiting three decades of detailed regional data for Germany, we find that when the Green Party is successful at the polls, local hazardous emissions decline. The level of political representation matters, too. Green politicians’ gaining influence at county level is followed largely by a decline in air pollutants that have an immediate adverse health effect. In contrast, when the Green party joins the state government, only greenhouse gas emissions that affect the welfare of future generations via climate change decline. The primary mechanism to achieve lower emissions appears to be a reduction in output, rather than more efficient energy use. 2025-10-24T01:00:00+0100 Michael Koetter, Alexander Popov af350108-ac69-4e8a-a3c9-c476a28980b5 Discussion paper DP20773 Public Economics, Climate Change and the Environment https://cepr.org/publications/dp20771 This paper examines whether increasing individuals’ awareness of their own confidence can influence financial behaviour. In a pre-registered online experiment with nearly 3,000 U.S. adults, we test the effects of a novel metacognitive intervention: personalised feedback on implicit confidence about one’s financial abilities, as measured by a custom Implicit Association Test (IAT), paired with an explanation of the importance of self-confidence in financial abilities. Treated participants show a significant reduction in “don’t know” responses on financial literacy tests and their performance in an incentivised investment task significantly improves: treated participants are less likely to make clearly dominated choices, more likely to select efficient allocations, and choose portfolios closer to the efficient frontier. These effects persist two weeks later in a follow-up survey with obfuscated framing. Heterogeneity analyses show stronger effects for females and for participants who understate their confidence (i.e. whose reported confidence is lower than what their IAT suggests). Keywords: Confidence, Confidence awareness, Personal finance, Financial literacy, Survey experiment. 2025-10-24T01:00:00+0100 Ines Lee, Ana Lleó-Bono, Christopher Rauh, Eileen Tipoe 42f97372-b5d9-4dd2-aef8-60cbf6296b64 Discussion paper DP20771 Labour Economics, Public Economics https://cepr.org/publications/dp20774 This paper investigates the role of administrative capacity in shaping procurement outcomes using rich Italian data on public works. We analyse the duration of the three main phases – planning, awarding, and execution – for observationally equivalent projects. First, we document substantial heterogeneity across contracting authorities: their fixed effects account for a sizeable share of the variation in procurement length, and delays tend to persist across all phases, pointing to structural differences in organizational capacity. These differences are strongly correlated with indicators of administrative quality. Second, we show that the identity of the procurement manager (RUP) matters, even within the same organization. Observable characteristics such as education or tenure explain only a limited fraction of the variation, highlighting the importance of unobservable factors such as tacit knowledge, effort, and managerial skills. Third, in the execution phase, both procuring authorities and firms play a crucial role: execution times are shorter when projects are awarded to more productive firms, and higher-ability managers are more likely to select such firms. 2025-10-24T01:00:00+0100 Audinga Baltrunaite, Sauro Mocetti, Gabriele Rovigatti 2a7d42a9-6318-46d3-b3fe-471f41ba5c12 Discussion paper DP20774 Public Economics https://cepr.org/publications/dp20778 In this paper, we revisit the question of how to manage financial crises using the framework proposed in Bianchi and Mendoza (2018). We show that this model economy exhibits a multiplicity of constrained-efficient equilibria, which arises because the private shadow value of collateral influences the forward-looking asset price. Among these equilibria, the specific one studied by Bianchi and Mendoza (2018) can be implemented using a tax/subsidy on debt alone. In that case, both the ex ante tax and ex post subsidy are quantitatively important for welfare under the optimal time-consistent policy. Limiting either component can lead to a welfare loss relative to the unregulated competitive equilibrium, highlighting the complementarity between crisis prevention and crisis resolution tools. We also show that, under certain conditions, all Pareto-dominant constrained-efficient equilibria entail the unconstrained allocation chosen by a social planner subject to the country budget constraint, and this allocation can be implemented with purely ex post policies. 2025-10-24T01:00:00+0100 Gianluca Benigno, Alessandro Rebucci, Aliaksandr Zaretski 8a58655d-9692-41a2-bb41-10a382177b06 Discussion paper DP20778 International Macroeconomics and Finance, Monetary Economics and Fluctuations, Asset Pricing, Banking and Corporate Finance