Young Economist Award

2023 Award Recipients (in alphabetical order of author):

Paper: The Institutional Role of the Italian Mafia: Enforcing Contracts When the State Does Not

Author: Federica Braccioli

Motivation: The ineffectiveness of the judicial system can be an obstacle for the correct functioning of democracies and can explain the rise of criminal organizations that act as a substitute of the State. In particular, focusing on the case of Italy, anecdotal evidence suggests that informal contract enforcement can be provided by organized crime, i.e., by the Mafia. However, there is no systematic evidence on when this happens and through which mechanism.

The paper provides a unified framework to study the interactions between the ineffectiveness of the State in contract enforcement and the demand for the Mafia’s services.

Theoretically, the paper builds a simple model where citizens engaging in transactions need a third party to solve potential conflicts. The State does not manage to satisfy the entire demand for contract enforcement. Even if the intervention of the Mafia may generate negative externality (e.g., threats or extortion), there exists an equilibrium where both the Mafia and the State provide contract enforcement. The main testable prediction of the model is that a decrease in the tribunal’s effectiveness increases the share of the population served by the Mafia.

This prediction is tested empirically. The paper constructs a novel database on: i) the location of active Mafia groups; ii) the number of pending civil cases, and iii) judges’ retirement. The latter are confidential data from the Superior Council of the Judiciary and are used as instrumental variable for State’s enforcement capacity. Results show that, as the State weakens its contract enforcement capacity, the Mafia gains control over the territory.

The paper represents an interesting contribution to the literature in economics and it has important policy implications.

Paper: Why Do We Discriminate? The Role of Motivated Reasoning

Author: Markus Eyting

Motivation: Discrimination's far-reaching impact on economies, societies, and politics makes it a critical concern worldwide. Within the field of economics, discrimination is typically studied as two types: taste-based and statistical. This paper introduces a new perspective.

The paper shows how motivated reasoning—our tendency to hold biased beliefs— plays a substantial role in driving discrimination. Notably, the paper emphasizes that conventional informational treatments fail to counteract these biased beliefs effectively. Through a series of focused experiments, the author untangles the connection between motivated beliefs and ethnic discrimination. This exploration also yields innovative strategies to tackle such biases head-on - a core aspect of the paper's novelty.

The paper's significance lies in its practical implications for shaping policies and scholarly conversations. By addressing this ever-important issue in a nuanced and innovative way, the research provides a stepping stone for understanding and counteracting discrimination more comprehensively and efficiently.

Paper: Structural Change and the Rise in Markups

Authors: Ricardo Marto

Motivation:  The discussion surrounding the increase in markups has persisted for over a decade, yet it continues to be a prominent concern within both academic and policy spheres. This paper distinguishes itself in this saturated field by meticulously analyzing the role of the burgeoning service sector as a pivotal driver behind the escalation in markups. Employing a sophisticated yet credible mechanism, the paper artfully bridges macroeconomic modeling with micro-level data and evidence. This notable contribution resonates across Macro, Finance, and Industrial Organization literatures and adds a nuanced layer to the ongoing discourse. 

More specifically, the paper documents that the rise of services is the key driver of the rise in markups. This rise is consistent with the pattern of structural change shifting economic activity and consumption from manufacturing toward services and characterized by an increase in the relative price of services.

A two-sector model of structural change is built and calibrated to U.S. data over the 1980-2015 period. The model is used to assess the quantitative importance of structural change for understanding the rise in markups revealing that skill-biased technological change, which reduces marginal costs but increases income inequality, was the main driver of the rise in markups. In particular, keeping income inequality at its 1980 level would have lead to a decline in the aggregate markup. In contrast, changes in fixed costs seem to have played a minor role in the increase in markups.

The findings in this paper have important implications for the interpretation of the rise of markups. Jointly modeling changes in demand and supply provides a new avenue for analyzing markups and market power. In addition, the increasing importance of services poses new challenges that have yet to be quantified.

Award Committee: Sule Alan, Francesco Decarolis and Mara Squicciarini

Past Award Winners (of the most recent eligibility rules)

2022 Award 

Paper: Keeping up with "The Joneses'': reference dependent choice with social comparisons
Author: Alastair Langtry

Paper: Displacement, a step on women’s early marriage? Natural disasters and cultural norms 
Author: Laura Muñoz Blanco

Paper: Guns and Kidneys: How Transplant Tourism Finances Global Conflict
Author: Alison Schultz

2021 Award 

Paper: Free and Protected: Trade and Breaks in Long-Term Persistence 
Author: Sebastian Ellingsen

Paper: Female Entrepreneurship and Financial Frictions 
Authors: Marta Morazzoni and Andrea Sy

Paper: Who Are the Credit Constrained Among Unemployed Workers? Answers from Conditional versus Unconditional Income Transfers
Authors: Victor Hernandez Martinez and Kaixin Liu 


2020 Award

Paper: Monetary Policy and Production Networks: An Empirical Investigation
Author: Mishel Ghassibe

Paper: Cyclical Attention to Saving
Author: Alistair Macaulay

Paper: Who Watches the Watchmen? Local News and Police Behavior in the United States
Authors: Nicola Mastrorocco and Arianna Ornaghi

2019 Award

Paper: When Income Effects are Large: Labor Supply Responses and the Value of Welfare Transfers
Author: Giulia Giupponi

Paper: The Aggregate Importance of Intermediate Input Substitutability
Author: Cian Ruane

Paper: The Gains from Reshaping Infrastructure: Evidence from the Division of Germany
Author: Marta Santamaria

2018 Award

Paper: Happily Ever After: Immigration, Natives’ Marriage, and Fertility
Author: Michela Carlana

Paper: Collateral, Misallocation, and Aggregate Productivity: Evidence from the U.S. Housing Boom
Author: Sebastian Doerr

Paper: How Strategic are Political Activists? Evidence From a Natural Field Experiment
Author: Lukas Hensel

2017 Award

Paper: A Kinked-Demand Theory of Price Rigidity
Author: Stéphane Dupraz

Paper: Fiscal Rules and the Selection of Politicians: Evidence from Italian Municipalities
Author: Matteo Gamalerio

Paper: Does Teacher Sorting Across and Within Schools Explain Inequality in Education Outcomes?
Author: Petra Thiemann

2016 Award

Paper: How Do Consumers Respond to Transitory Income Shocks? Reconciling Longitudinal Studies and Natural Experiments
Author: Jeanne Commault

Paper: Financial Intermediation, Resource Allocation, and Macroeconomic Interdependence
Author: Galip Kemal Ozhan

Paper: Lobbying, Inside and Out: How Special Interest Groups Influence Policy Choices
Author: Stephane Wolton