Last updated: June 9th, 2017
Abstracts of Keynote lectures:
Claude d'Aspremont (Université Catholique de Louvain) .
Managerial objectives, competition regimes and delegation in a model à la Hotelling
Under the separation of ownership and control, the literature on strategic delegation in oligopoly has introduced various parameterized classes of managerial objective functions departing from pure profit maximization. The second-stage games derived from these classes resort to single strategic variables (either quantities or prices) and thus generate two parameterized set of equilibria, price- and quantity-equilibria. An alternative approach is to use price-quantity pairs as strategic variables. Then varying managerial attitudes can be compatible with profit maximization and allows to recover all classical competition regimes. The choice of the strategic variable is determined by introducing the first stage. On this basis, we give a general formulation of firms managerial objectives and then analyze the impact of this formulation in the Hotelling (1929) framework under brand loyalty. Finally, introducing the possibility for each manager to offer consumer price discounts is a way to enlarge the model and to endogenize our parameterization of various profit maximizing objectives.
Pierre-Philippe Combes (Université de Lyon)
The production function for housing: evidence from France (with Gilles Duranton and Laurent Gobillon)
We propose a new non-parametric approach to estimate the production function for housing. Our estimation treats output as a latent variable and relies on the first-order condition for profit maximization with respect to non-land inputs by competitive house builders. For parcels of a given size, we compute housing by summing across the marginal products of non-land inputs. Differences in non-land inputs are caused by differences in land prices that reflect differences in the demand for housing across locations. We implement our methodology on newly-built single family homes in France. We find that the production function for housing is reasonably well, though not perfectly, approximated by a Cobb-Douglas function and close to constant returns. After correcting for differences in user costs between land and non-land inputs and taking care of some estimation concerns, we estimate an elasticity of housing production with respect to non-land inputs of about 0.80.
Keith Head (University of British Columbia)
Brands in motion: how frictions shape multinational production (with Thierry Mayer)
Using disaggregated data on car assembly and trade, we estimate a model of multinational production. Decisions of which markets to enter, how much to sell in each, and which assembly locations to select for each market depend on three types of friction. In addition to the trade and multinational production costs emphasized in past work, we incorporate a third friction: regardless of production origin, selling costs in a market rise with separation from the brand’s headquarters. The estimation transparently recovers all the structural parameters. We then simulate the consequences of controversial trade policy changes: TPP, TTIP, Brexit, and NAFTA abrogation.
Kiminori Matsuyama (Northwestern University)
Engel's Law in the global economy: Demand-induced patterns of structural change and trade across countries
The expenditure shares are more skewed towards higher income-elastic sectors in richer countries. Through such an endogenous demand composition due to nonhomothetic demand (Engel’s Law), economic growth and globalization affect i) sectoral compositions in employment and in value-added, ii) variations in innovation rates and in productivity change across sectors, iii) intersectoral patterns of trade across countries, and iv) migration of industries from rich to poor countries. These effects, though interconnected, have been studied separately with misleading implications. This paper offers a unifying perspective on how economic growth and globalization affects interdependent patterns of structural change and trade across countries in the presence of Engel’s Law, capturing all these effects as well as their interactions. Among the main messages is that globalization magnifies, instead of reducing, the power of endogenous domestic demand composition differences as a driver of structural change.
Esteban Rossi-Hansberg (Princeton University)
Evaluating the economic costs of sea level rise
Sea-level rise will dislocate people and economic activity inland, away from current coastlines. We present a dynamic, spatial model of the world economy that accounts for migration, trade, and innovation. Accounting for the uncertainty of and spatial variability within sea-level change projections for the next two centuries, it projects migration flows and changes in local economic output and welfare. The output loss caused by the abandonment of coastal economic centers is partially offset by the expansion of inland centers, but the lesser attractiveness and greater congestion of these inland sites magnifies welfare losses. Losses are highly unequal, with declines in local output in many coastal localities more than an order of magnitude greater than the global decline.