A Pedagogical Note on Risk Sharing Versus Instability in International Financial Integration: When Obstfeld Meets Stiglitz

in Open Economies Review (2019)

The pure risk sharing mechanism implies that financial liberalization is growth enhancing for all countries as the world portfolio shifts from safe low-yield capital to riskier high-yield capital. This ... [more ▼]

The pure risk sharing mechanism implies that financial liberalization is growth enhancing for all countries as the world portfolio shifts from safe low-yield capital to riskier high-yield capital. This result is typically obtained under the assumption that the volatilities for risky assets prevailing under autarky are not altered after liberalization. We relax this assumption within a simple two-country model of intertemporal portfolio choices. By doing so, we put together the risk sharing effect and a well defined instability effect. We identify the conditions under which liberalization may cause a drop in growth. These conditions combine the typical threshold conditions outlined in the literature, which concern the deep characteristics of the economies, and size conditions on the instability effect induced by liberalization. [less ▲]

Essays on Chinese Internal Migrant Workers' Choices: Children's location and education

Doctoral thesis (2018)

The Impact of Unilateral Commitment on Transboundary Pollution

in Environmental Modeling & Assessment (2018), 23

To reach a common target of environmental quality, countries can choose to commit to a stream of pollution abatement right from the beginning of the game or decide upon abatement at each moment of time ... [more ▼]

To reach a common target of environmental quality, countries can choose to commit to a stream of pollution abatement right from the beginning of the game or decide upon abatement at each moment of time. Though most of the previous literature studies homogeneous strategies where no country or all countries commit to a (same) predefined policy, reality goes along a different way: some countries make more efforts than others to reduce pollutant emission. The main novelty of this paper resides in the introduction of this kind of heterogeneous strategic behavior currently observed among large pollution nations. We find that the pollution level can be lower under heterogeneous than under homogeneous strategies. A stringent environmental quality target will induce the committed player to produce an abatement effort that more than compensates the free-riding attitude of the non-committed player. [less ▲]

Mean growth and stochastic stability in endogenous growth models

in Economics Letters (2018)

Immigration, occupational choice and public employment

in Annales d'Economie et de Statistique (2017)

This paper investigates the theoretical effects of immigration in an occupational choice model with three sectors: a low-skilled, a high-skilled and a public sector. The originality of our approach is to ... [more ▼]

This paper investigates the theoretical effects of immigration in an occupational choice model with three sectors: a low-skilled, a high-skilled and a public sector. The originality of our approach is to consider (i) inter-sectoral mobility of labor and (ii) public employment. The combination of these two features yields a new mechanism by which immigration can have positive effects. The model demonstrates that immigration increases wages in the high-skilled and the public sectors, provided that the immigrant workforce is not too large and the access to public jobs is not too easy. The average wage of natives may also increase accordingly. Moreover, immigration may improve workers’ welfare in each sector. Finally, the mechanism underlying these results does not require complementarity between natives and immigrants. [less ▲]

To Migrate With orWithout the Children—A Theoretical Note

in Economics Bulletin (2017), 37(2), 686-696

Tens of millions of young children were left behind by their migrant parents who left to find a job elsewhere to gain a better income and improve their families' living standards. Many studies suggest ... [more ▼]

Tens of millions of young children were left behind by their migrant parents who left to find a job elsewhere to gain a better income and improve their families' living standards. Many studies suggest that migrant parents should bring their children rather than leave them behind, especially EU internal migrants. In this short note, we give an economic reasoning for the choice of migrant parents. Our finding shows that emotionally, bringing the children makes both children and parents better off; however, economically, that may not be the case. The ambiguity depends on the forgone opportunity cost, relocation cost of children, children's motivation, and the quality of the public school at the origin and destination. [less ▲]

Optimal Income Taxation for the Alleviation of Working-Poverty When Domestic Work is Rewarded

E-print/Working paper (2016)

The increase in income needed for working households to escape relative poverty may be achieved either by households supplying more hours of paid work on the labor market, or by policy makers adjusting ... [more ▼]

The increase in income needed for working households to escape relative poverty may be achieved either by households supplying more hours of paid work on the labor market, or by policy makers adjusting income taxation, minimum wages and social transfers targeted at working households. While past work has given considerable attention to the latter policy instruments, theoretical work on how income taxation could minimize working-poverty is scarce. Our study aims to fill this gap. Unlike the traditional optimal income taxation literature, which considers that households allocate time only between consumption and leisure, we explicitly model households’ decisions as including domestic work, which is a social contribution and should be rewarded. This new framework highlights (i) the importance of emphasizing the difference between domestic work and real leisure and, (ii) the policy implications of non-market time allocation. [less ▲]

Differential Games with (A) symmetric Players and Heterogeneous Strategies

in Journal of Reviews on Global Economics (2016), 5

One family of heterogeneous strategies in differential games with (a)symmetric players is developed in which one player adopts an anticipating open-loop strategy and the other adopts a standard Markovian ... [more ▼]

One family of heterogeneous strategies in differential games with (a)symmetric players is developed in which one player adopts an anticipating open-loop strategy and the other adopts a standard Markovian strategy. Via conjecturing principle, the anticipating open-loop strategic player plans her strategy based on the possible updating the rival player may take. These asymmetric strategies should be appropriate choices in some modelling circumstances and they frame one of the infinitely many non-degenerate Markovian Nash Equilibrium. Except the stationary path, this kind of strategy makes the study of short-run trajectory possible, which usually are not subgame perfect. However, the short-run non-perfection may provide very important policy suggestions. [less ▲]

Does tax competition increase disparity among jurisdictions?

E-print/Working paper (2015)

This paper investigates whether a less-developed economy can catch up with a more developed one when they compete for foreign direct investments. The main message of the paper is that jurisdictional ... [more ▼]

This paper investigates whether a less-developed economy can catch up with a more developed one when they compete for foreign direct investments. The main message of the paper is that jurisdictional competition can enable the lagging country to catch up if capital mobility is sufficiently high and the productivity gap is not too large. Further, we show that size asymmetry reinforces (weakens) the productivity catch-up resulting from interjurisdictional competition when the lagging economy is small (large). Finally, we demonstrate that the development gap widens when capital becomes less mobile, which is at odds with previous findings. [less ▲]

Institutional dynamics under revenue volatility and revenue-dependent lobbying power: A stochastic differential game approach

E-print/Working paper (2015)

We propose an analysis of institutional dynamics under uncertainty by the means of a stochastic differential lobbying game with two main ingredients. The rst one is uncertainty inherent in the ... [more ▼]

We propose an analysis of institutional dynamics under uncertainty by the means of a stochastic differential lobbying game with two main ingredients. The rst one is uncertainty inherent in the institutional process itself. The second one has to do with the crucial role of resource windfalls in economic and political outcomes, shaping lobbying power and adding a second source of uncertainty. First, we focus on uncertainty surrounding the institutional process only and show that its main consequence is the existence of multiple equilibria with very distinct features: symmetric equilibria which lead the economy to reach almost surely a stable pointwise institutional steady state in the long run even in the absence of the retaliation motive put forward by the deterministic lobbying literature, and asymmetric equilibria which only show up under uncertainty and do no allow for stochastic convergence to a steady state. Second, when accounting for the two sources of uncertainty together with resource revenue-dependent lobbying power, we show that revenue volatility tends to stabilize institutional dynamics compared to the deterministic counterpart. [less ▲]