This is the first post on this channel. What will happen here at all?
I am a first-year student of a bachelor's program in economics who is fond of this subject. Also, I am attracted to academic career therefore I want to develop myself in this direction. Now I have no idea what aspect of economics is the most interesting for me. This is the purpose of the creation of this channel.
Here I will publish summaries of different economic papers and other interesting materials. First, I want to create some kind of database of the works I read (an attempt to store everything in Mendeley was unsuccessful), secondly, to get an idea of ​​the various fields and research methods, and thirdly, to practice writing short reviews of works in English. Therefore, you should not expect any thematic consistency. Probably, it will be in this way, but after certain interests will be formed. So far this is a space for some scientific kaleidoscope.

A Comparative Analysis of the Cash Handout Policy of Hong Kong and Macau by Bruce Kam Kwan Kwong (2013). Journal of Current Chinese Affairs.
https://journals.sub.uni-hamburg.de/giga/jcca/article/download/670/670-695-1-PB.pdf

In this paper, the author analyzes the cash handout policy comparing Hong Kong and Macau cases. Kwong argues that cash handout is implemented even if it can be avoided due to politicians’ self-interest surpassing public opinion.

The major difference of cash handout police from traditional social security measures is that each resident gets it without going through the assessment process. The purpose of implementing such measures are (1) easing economic difficulties during the crisis, (2) gaining support, and (3) acquire power among people in newly established government.

Newly established Macao government receives significant revenue from the gaming business. The fist hand-out was conducted to the detriment of new housing construction which led to protests. Kwong shows that the economic situation was quite good: the living standards rose. The hand-out policy acquires a long-term character, and its major function was stabilizing the political atmosphere. But, according to the data, it was successful only in 2009 where was a drop in numbers of protestants which indicates the efficiency of this scheme only in the short run. The government planned to reduce the amount of cash handout, but it failed due to the Hong Kong government announcement about their cash payment initiative.

Kwong describes Scheme $6,000 - Hong Kong’s Cash Handout Policy, which was not supported by people, because money was only accessible after retirement and not a whole population was included in the program. Also, the population’s concerns about hyperinflation, impeding economic recessions, and awareness of Macao scheme makes the government turn to immediate cash payment policy. The change in politicians’ position was dictated by political reasons: gain support showing that they take into account the population’s opinion.

Kwong concludes that the cash handout policy can be good as a one-off scheme during the crisis, but, as we see in the Macau case, in the long run, the public disconnect will rise due to government ineffectiveness. Also, politicians should examine if a cash handout policy is efficient in appeasing the people. The economic situation in both cases was not crucial, thus, such a policy was wasteful. It would be better to target particular groups.

Baumol effect


This effect was described by William J. Baumol and William G Bowen in their paper Performing arts, the economic dilemma; a study of problems common to the theater, opera, music, and dance (Bamoul & Bowen, 1966). The main idea is that in every economic sector there is an increase in wages despite the presence of productivity growth. This observation contradicts traditional economic theory which argues that there is a positive relationship between wages and productivity. In the articles, authors notice that in the quaternary sector (art, education, etc.) we cannot find the growth of productivity and provide a famous example with the string quartet, but in these industries, the wages increase was comparable to the average in the economy. The authors suggest that it can be explained by the need to prevent the outflow of workers in more profitable spheres.

According to the Chicago Booth’s Initiative on Global Markets poll the majority of economists agree with this result, and the main question is connected with the determination of spheres where the effect takes place. For example, it is arguable that the productivity of the education industry did not increase even though professors can spend the same amount of time reviewing student’s papers as they spent 50 years ago. The more common opinion is that the cultural industry is a good example of the Baumol effect but (Tambovtsev, 2012) argues that there are other explanations of wages’ increase in the art industry, and he suggests the presence of cultural stereotypes as a reason for such cost disease.

Links:
Original Bamoul & Bowen work: https://archive.org/details/performingartsec00baum
Article on Chicago Booth’s Initiative on Global Markets study: https://review.chicagobooth.edu/economics/2017/article/diagnosing-william-baumol-s-cost-disease
Mentioned Tambovtsev’s paper: http://www.econorus.org/repec/journl/2012-14-132-134r.pdf

Public Goods and Ethnic Divisions by Alberto Alesina, Reza Baqir and William Easterly


Alesina et al. analyze the effect of heterogeneity of preferences among ethnic groups on the production of public goods. Authors conclude that there exists a relation between ethnic fragmentation and productive public goods (roads, education, etc.) in the USA. The result is consistent with the theories stating that more polarized societies appreciate public goods less.


In the first part of the paper, the authors construct a model that reflects the social choice on the amount and the type of public good. Using majority rule and two-period voting, Alesina et al. prove that the amount of public good provided in equilibrium depends on median voter’s preferences, and it decreases with the growth of ‘median distance from the median’, which is a proxy for the polarization of preferences. If this variable is high, then the larger part of the population has preferences that are far from the chosen type of public good, therefore the more resources are devoted to private consumption.


The second part focuses on empirical analysis. Authors measure how different types of public goods are affected by ethnic fragmentation on three levels – cities, metropolitan cities, and countries in the USA. In regressions ethnical fragmentation was used as an explanatory variable with control for income per capita, city size, educational attainment, income inequality, age structure. The main conclusion is that ethical fragmentation is negatively associated with the share of expenditure on the productive public good. The share of the budget for police positively relates to the level of heterogeneity, the same effect was observed with spending on medical institutions. Authors show that polarized local communities do not invest enough in education, therefore we observe higher government expenditures on education in such cities. Also, there exists a higher fiscal deficit even after intergovernmental transfers which positively depend on fragmentation level.

Alberto Alesina, Reza Baqir, William Easterly, 1999. "Public Goods And Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1243-1284
https://www.nber.org/papers/w6009

Democracy, Technology, and Growth by Philippe Aghion, Alberto Alesina, and Francesco Trebbi

This paper belongs to the literature investigating relationships between democracy and economic growth. There is no consensus about the direction of causation. In this article, Alesina et. al. provides an analysis implying the distinction between firms based on their positions toward the technological frontier.

The first part contains a model which represents firms’ decision-making process in terms of investing in innovations. First, the authors divide on advanced and backward companies in the intermediate sector. Second, they investigate the dependence of the decision of innovations on entry barriers. Third, Alesina et. al. add a politician, who decides about entry policy and can take bribes, to provide an analysis of firms’ behavior concerning innovations according to the level of democracy. The main results are the following: a) democratic institution enhance the growth of more advanced sectors since backward firms cannot catch up with the frontier anyway, b) this effect is ensured by freedom of entry in markets, c) as a result, advanced economies benefit more from the democratic institution, therefore the demand for democracy positively depends on income per capita.

The empirical part comprises an estimation of effect which democracy level and the distance to the technological frontier make on the growth rate, value added, and employment. Aggregate indicators from the Polity IV database (2005) and the Freedom House measures of civil liberties and political rights were used as measurements for democracy. Leaving behind methodological details, we can highlight authors’ findings: a) there is no robust effects of democracy on aggregate growth (in several provided specifications), b) firms which are closer to the technological frontier experience positive influence of the democracy, c) advanced firms benefit from an increase in democracy in terms of the drop in the unemployment rate.


Alesina, Alberto, Philippe Aghion, Francesco Trebbi, and E Helpman. 2008. “Democracy, Technology and Growth.” Institutions and Economic Performance, 511-43. Cambridge, MA: Harvard University Press.
https://dash.harvard.edu/bitstream/handle/1/27759624/w13180.pdf?sequence=1&isAllowed=y

Some notes from the lecture of John Nye within RSSIA 2020

Information Transmission and Market integration: The Impact of Telegraph Construction on the Grain Markets in Late Imperial China by Yu Hao, Yuanzhe Li, John V.C. Nye

The work contributes to the growing literature devoting to information transmission’s impact on the structure of the market and its performance. Authors analyze how the introduction of the telegraph in Imperial China affects the difference in rice prices among prefectures. It was shown that the introduction of the telegraph promoted rice market integration.

To create a background, John V.C. Nye told about China’s technology gap caused by the actions of the ruling dynasty in the 19th century. The most popular way for trade and information transmissions was waterways, but they had the obvious limitation – poor weather conditions preventing from traveling.

Taking the data of telegraph introduction in different regions and price of rice, the authors construct a model to catch the effect of the telegraph on price change, comparing situations where one or both trading regions have telegraphs. It was found that the introduction of the telegraph to both prefectures decreases price difference by 20%, and it mitigates the price fluctuations caused by natural disasters. The authors show that the bigger effect takes place in regions where waterways were less accessible. Also, telegraph positively influences the growth of urbanization and industrialization.

John V.C. Nye pointed out that a more general possible conclusion from this paper could be a connection between the telegraph introduction and subsequent the 1911 Revolution (all presented data covers the period up to 1910).

What Have We Learned from Market Design? by A.Roth.


In this essay A.Roth summarizes economists’ progress in market design: we have learned not only how to analyze markets, but also how to build and fix them. The author formulates criteria that help describe the effectiveness of a market. They serve for analyzing and finding problems that should be fixed to ensure the market’s work. I will describe these factors leaving the specification of the examples of the designed market which A. Roth provides.

1. Thickness.
It stands for a market’s ability to attract enough agents for transacting. There should be both a sufficient number of ‘producers’ and ‘consumers’. This criterion was violated, for example, on the kidney market, where people who were incompatible donors for particular patients exited the ‘market’ whereas they can donate to other patients.

2. Overcoming congestion
Congestion can be potentially brought by the thickness. It means that a participant should have enough time for making a decision and driving a bargain. Also, such a market should provide transactions fast enough. The American medical market epitomizes falling into congestion since students of medical colleges do not have enough time to explore all possible offers, and they should approve or reject offers immediately that creates inefficiency.

3. Safety
Participation should be relatively easy for agents to prevent them from acting outside the market. Also, it ensures the absence of engaging in strategic behavior that reduces overall welfare. For instance, the old mechanism of school choice in New York City and Boston, where parents try to act strategically to improve their outcomes, were inefficient since plenty of children were not enrolled automatically.

A. Roth pays attention to the repugnant transactions which are a constraint on market design (for example, kidney transplants which are regulated by government norms forbidding any payments).
From a methodological perspective, the author points out that experiments are useful for diagnosing and understanding market failures, they help test different designs to choose a better one. For instance, the introduction of different algorithms to create chains of donors and patients in the UK precedes the final design of the kidney exchange system.

Roth, A. (2009). What Have We Learned from Market Design? Innovation Policy and the Economy, 9(1), 79-112. DOI:10.1086/592422


For more details about designed markets see A. Roth’s other papers, for example, (Roth, A. E., T. Sönmez, M. U. Ünver., 2004) and (Roth, A. E., and E. Peranson, 1999.) or his book ‘Who Gets What - And Why: The Hidden World of Matchmaking and Market Design’.


Roth, A. E., and E. Peranson. 1999. “The Redesign of the Matching Market for American Physicians: Some Engineering Aspects of Economic Design.” American Economic Review 89, no. 4:748–79.

Roth, A. E., T. Sönmez, and M. U. Ünver. 2004a. “Kidney Exchange.” Quarterly Journal of Economics 119 (May): 457–88.

Plan to return here.
Now some stuff in Russian about places hosting the Olympic Games:

https://www.sports.ru/tribuna/blogs/evidencebased/2840308.html

In his lecture, The Future of Capitalism, Paul Collier explains why the pure capitalistic system experience crises. In the beginning, he highlights two intertwined divisions – spatial and educational. The first one is connected with inequality between big cities and provinces, and the second is inequality between the less-educated and high-educated. He argues that such divisions led to the loss of shared identity and common purpose. It was a factor why capitalism went wrong. The idea of the individualism which implies the explanation of success by personal efforts without regarding luck led to the increased distances between new classes. Successful people do not recognize the connection with the rest population and do not feel a moral obligation for their luck. Such a crisis manifests in Brexit or Trump’s win since people try to rebel against such a regime.


The beneficial side of capitalism – producing a decentralized level of decision-making – should be accompanied by a sense of common goal. In this regard, P. Collier refers to the distinguishing feature of humans: sociality and creativity. People want to be a part of a group and be admired, and it does not work well because of divisions, so here we need an element of the socialistic system that dealt well with creating a sense of commonness. The better social order should still inherit decentralization from capitalism because humans are creative, they can deal with uncertainty, but such skills could be implemented only in a decentralized system.

https://en-lectorium.nes.ru/lekczii/future-of-capitalism.html

Notes from Guido Tabellini lecture Is Europe an optimal political area?

Tabellini addressed trade-off that was discussed in Alberto Alesina's works on the size of the country (see (Alesina & Spolaore &Wacziarg, 2000), (Alesina & Spolaore, 1995): the large political area allows to exploit economies of scale, but it leads to difficulties in decision making due to the need to respond to different preferences. According to Eurobarometer (2016), Europeans prefer decision-making at the European level about fighting terrorism, promoting peace and democracy, defense, foreign policy, etc. So the question that Tabellini has discussed was whether heterogeneity of preferences is a stumbling block to further European integration.

They use surveys among European and US citizens measuring cultural traits since cultural heterogeneity can prevent integration. Authors have questions on religiosity, gender equality, sexual morality, the state's economic role, and civic capital. Taking this data, researchers measure the distance in values between people in one country and between people living in different countries with control over social-demographic features. What they found out is that Europeans from different countries are not more different than within one country.

This result was approved by conducting the same comparison between French's and Turkey's citizens. Here there is a big difference.

Using the estimation of distance, researchers show that Europe's cultural center coincides with the economic core, which is Germany. However, the cultural periphery does not coincide with the geographic or with the economic periphery. It matters since the combination of differences and cultural differences make political integration more complicated, but this result shows much heterogeneity within countries.
Authors provide intertemporal analysis of change in cultural heterogeneity. What they get is that Europeans have become more different, but it is not just the feature of between country distances; it is also shared within countries.

Measuring the influence of European integration, authors show that countries became more similar in terms of government quality. However, there is a divergence on PISA scores since the South has improved, but the North, Sweden, in particular, has deteriorated during this period. Thus, European countries diverge in some dimensions and converge in others.

This analysis concludes that heterogeneity in the deeply held cultural traits does not seem to be a stumbling block, despite the lack of institutional and cultural convergence. As Tabellini mentioned, the reason is a weak European identity that can be improved in case we want to enhance political integration.

https://www.aeaweb.org/articles?id=10.1257/aer.90.5.1276
https://www.nber.org/papers/w5050

Robert J. Shiller on Narrative economics


The author draws attention to the importance of analysis of the narrative that constitutes human behavior. In particular, there is a need to conduct quantitative studies on changes in popular narratives.

In the beginning, R. Shiller introduces the Kermack-McKendrick model on epidemic processes. Then, the author discusses how such models could be used in terms of information spreading. It faces limitations since information could be disseminated faster due to social media, also some stories are more popular than others, etc. Nevertheless, R. Shiller provides graphs showing the number of references to some economic theories through time arguing that they are similar to the results provided by Kermack-McKendrick.

Then, the paper provides a perspective on how narratives influence the economic environment during major crises (Great Depression (1929-1941), Great Recession (2007-9), and what narratives could we observe now. R. Shiller shows that during crises people’s behavior was influenced by the information environment. For example, during the Great Depression they save more thinking that prices will fall, but it leads to the greater economic decline. One of the successful techniques was President Roosevelt’s addresses via radio with explanations why it is important to spend money.

R. Shiller concludes with notes about the need for further research on narratives. It is more available now due to the access to large amounts of data and the variation of tools for analysis.
https://cowles.yale.edu/sites/default/files/files/pub/d20/d2069.pdf

Corruption and driver’s license

The process of obtaining the driver’s license is organized and regulated by the government. This fact leads to the idea that this field could be fruitful for corruption studying.

M. Bertrand, S. Djankov, R. Hanna, S. Mullainathan in their work Obtaining a driver's license in India: an experimental approach to studying corruption indicate the existence of corruption in regional transport offices (RTO’s) and analyze the role of agents who support applicants in this scheme.

The study is based on experimental data. The authors divide candidates into 3 groups: individuals in the first group will obtain a bonus if they manage to get the license within 32 days (30 days is a minimum required to get the permanent license), participants assigned to the second group were offered to take free driving lessons, and the third group just participated in surveys. The results of the first group can help to connect a higher willingness to pay with the ability to get a license within a shorter period. The second group was divided in order to investigate whether social important characteristics (the ability to drive) are ignored. Also, participants of all these groups took the independent test after getting the license to prove their ability to drive.

The results are as follows:

1) The highest willingness to pay enables one to get a license faster. Also, candidates from the first group pay more extralegal payments than others. A relatively bigger share of license getters in this group cannot drive.

2) Nevertheless, the better driving skills in the second group increases the probability to obtain a drivers’ license compared to the third group. Besides, the less share of these participants fails the independent test.

Then, the author analyzes the role of agents in the process of getting a driver's license. It was shown by experimental data that even good drivers resource to the agents’ service. Survey data provides evidence that the agent guaranteed getting the license and reduces the probability of examination (ROT does not examine all applicants). Another experiment was designed to explore the illegal services that agents could provide. According to the paper, 100% of participants who stated that they cannot drive and have no time to study were promised to get a license by the agent, also there are opportunities to get a license without appropriate documents or within a period shorter than official, but it imposes higher costs.

Thus, the agents are the institution through which corruption is presented. In the Deli case, we observe that the social considerations are not fully ignored in the allocation of licenses, but the corruption scheme leads to higher rates of unsafe drivers.

It is interesting to look at the Russian situation. From anecdotal evidence, we know that the process of getting the license is highly corruptive. According to the legislation, studying in driving schools is obligatory. Thus, we can reason that this measure could reduce the negative impact of corruption in terms of satisfying social considerations. I have not found any articles that focus on corruption in the process of getting a license in Russia, therefore we can only speculate about it.
https://scholar.harvard.edu/files/remahanna/files/1_qje_driving_license.pdf

Red tape and corruption by Sergei Guriev

The red tape is associated with costs non-pecuniary such as wasted time in queues that can be an obstacle for organizing business, for example. Also, such a system relates to the fostering of corruption. Nevertheless, it can be treated as a mechanism to distinguish agents and reveal eligible ones.

The paper provides a theoretical analysis of the relationship between the level of corruption and the red tape. S. Guriev constructs the principal–bureaucrat–agent model. There are two types of agents - good and bad, depending on their private value. The purpose of the red tape in this model is to create a method to distinguish the agents: it is represented by the sequences of the test, which can be costlessly passed by the good type and are associated with a cost for the bad one. The role of the bureaucracy is to choose the level of the red tape and inform the principal of the agent’s results. She also can take a bribe before (ex ante) or after the test (ex post). The former type of bribe serves for the reduction of the red tape, and the latter - to encourage the bureaucrat to misreport the results. The principal offers set on contracts to the bureaucrat and provides goods. She also can control the distribution ex post (it influences the realization of the contracts).
In addition to the adverse selection problem, the principal faces a moral hazard problem in two dimensions: the bureaucrat can set an inefficient level of the red tape and distort the agent’s type due to the presence of bribes.

The solution of the model provides the following insight: the principal can obtain the truthful report on agents’ types but it is connected with a higher than optimal level of the red tape.

Thus, having two effects - a lower level of the red tape due to having bigger ex ante bribe and a higher level of the red tape to reveal information and extort bribes - S. Guriev has shown that the second one prevails.

S. Guriev (2004), Red tape and corruption, Journal of Development Economics, Volume 73, Issue 2, pages 489-504,
https://www.sciencedirect.com/science/article/abs/pii/S0304387803001652

The Great Reversal: How America Gave Up on Free Markets by Thomas Philippon

The main argument of the book is that there is an increased monopolization in the USA market. The author supports his claim by providing various measurements that approximate the competitiveness of the market and compares US and EU cases.

Before addressing the insights, I want to draw attention to the thoroughness of the study: T. Philippon explains each step that he does, comments on graphs and measurement, and briefly discusses the economic concepts needed to understand the reasoning, therefore this book is an example of a good popular science book.

Concerning the results, from the analysis of the US market, the author concludes about higher market concentration relying on increased profit margins and persistent market shares of the leaders. It is relevant for all industries regardless of the international competition's presence. Testing different hypotheses, the author provides evidence that there is an effect of star firms, the hypothesis, that connects the competition decline with that accumulation of intangible assets, is relevant for retail and wholesale trade sectors, the globalization influences the manufacturing sector. Nevertheless, the decrease in competition in most industries, according to the author, could be explained by weaker domestic competition. Therefore, it is interesting to compare the EU case that in the beginning modeled its institutions after the USA. It was found that European markets are more competitive and cheaper. In addition to competition analysis, lobbying, the integration of Europe, antitrust legislation, financing political campaigns were discussed in the first three parts.

The fourth part is devoted to the examination of particular industries - finance, health care, and stars of the internet economy (Google, Amazon, Facebook, Apple, Microsoft (GAFAM)). Each part provides an overview of the industry and the analysis of concentration mechanisms.

Thus, the book provides a great analysis of the market concentration in the USA, complementing it with the main economics theories and the discussion of other interesting issues such as the need for antitrust regulation, reforms in the healthcare system, technological influence on productivity, the impact of star firms, etc.

People associate behavioral economics with some biases and effects that do not go in line with classical economic theory. The important thing is that behavioral findings could be used to improve empirical prediction and policies’ design. This pragmatic perspective is described in R. Chetty's paper Behavioral Economics and Public Policy: A Pragmatic Perspective.

The author distinguishes the implication of behavioral economics in three areas:

1. Introduction of new policy tools. In the example of retirement savings, the author compares neoclassical subsidies and behavioral default and automatic enrolment. The evidence suggests that defaults could achieve results that are unattainable by subsidies. Also, the benefits of this theory include possibilities to extrapolate the results and using the model for the analysis of savings. Other new tools provided by behavioral economics are simplification and reduction of numbers of offers health plans, providing information (for example, about the application process to improve students’ enrolment), framing (loss-framing to stimulate teachers), social-comparison (information about neighbors’ actions to adjust a household's behavior).

2. The provision of better predictions for existing policies. Here R. Chetty focuses on the Earned Income Tax Credit (EITC) to show that the effect of EITC varies across the country, which cannot be explained by neoclassical theory. The implication of behavioral features in the model improves the predictions (in this case - income reporting behavior). Besides, it can be used for generating counterfactuals for the policy’s estimation.

3. Generating new welfare implications. The author provides the case of neighborhood choice. According to empirical results, children's future well-being varies across neighborhoods conditional on parent income. Another result shows that moving to a better neighborhood has little or no impact on adults' earnings. Also, it was found that living in a place where children benefit from the neighborhood does not relate to higher costs of living. First, the behavioral theory provides several explanations of this phenomenon: present bias (long-term benefit vs immediate costs for moving), luck information about the effect on children, projection bias (people do not recognize opportunities to find new friends, for example), scarcity in cognitive capacity (poor people concern about immediate needs). Second, we obtain new tools to measure welfare. In this perspective, introducing the model R. Chetty shows the difference between experienced utility (actual well-being as a function of choices) and decision utility (the objective that a person maximizes making the choice), which is explained by the presence of biases. Then, this gap resembles the externalities, and, similarly, could be regulated by new tools without causing distortions. Also, the author describes several methods to measure experienced utility: subjective well-being (data on self-reported happiness; limitations: this measure could be distorted), sufficient statistics (revealed preference in an environment where agents are known to maximize experienced utility; limitations: such environment without biases may not be founded), structural model (to estimate the demand as a function of the degree of behavioral bias and extrapolate to the case with no bias; limitations: it depends on the model assumptions).

Thus, the paper provides an overview of the possibilities that behavioral economics provides for practical goals, including creating new tools, improving analysis of existing policies, and suggests models for measuring variables and explaining the observed behavior.

Chetty, R. (2015). Behavioral Economics and Public Policy: A Pragmatic Perspective. The American Economic Review, 105(5), 1-33. Retrieved January 16, 2021, from http://www.jstor.org/stable/43821845

Social media plays an important role in politics nowadays. Among other things, it provides a space for political communication, since users could easily share facts and opinions. At the same time, lower costs for generating and sharing content extend the threat of falsehood or alternative facts. One of the tools that are devoted to dealing with alt-facts’ expansion is fact-checking, and a paper Checking And Sharing Alt-facts by E. Henry, S. Guriev, and E. Zhuravskaya shed light on the effects of fact-checking.

The paper analyses the results of a randomized experiment conducted in the period of the European Election Campaign in France (2019). The experiment included two waves. Each part was organized as follows: a representative sample of the French population eligible to vote was divided into three groups. The first was exposed to alt-facts, the second was imposed with fact-checking, and the third had a choice whether to see fact-checking or not. Also, participants were allowed to share alt-facts on their page on Facebook, or people participating in the first wave could share the news with participants from the second one. Also, people who viewed the fact-checking were able to share it as well. The important notion here is that sharing the news required several clicks (to show the will to share, to affirm the action, and to share on FB). Besides, the authors collected the socio-demographic information and characteristics that illustrated a person's style of using social media, political view, and altruism level.

The insights from the paper are the following:

- Fact-checking information reduces the sharing of alt-facts by about 30%, and the effect is significant for both viewers and non-viewers. Besides, the authors construct an analytical model showing the viewers, who choose it voluntarily, have a higher propensity to share fact-checking. Also, the reduction in sharing alt-facts is bigger for this group if we adjust actual sharing for ex ante predicted propensity to share.

- Exploring the mechanisms of reduction sharing of alt-facts, the author defined two categories of cost and benefits obtained by sharing: 1) those depend on the type and size of the audience, a) those related to altruism, religiosity, social image concerns. As the authors conclude, there is no effect on the decision to share alt-checks concerning type and size of auditory (FB friends vs other participants), therefore the mechanism could be explained by increased moral costs from sharing potentially incorrect facts.

- Socio-economics characteristics matter: men share both alt-facts and fact-checking more, people whose motivation of sharing is the intention to influence share more, altruistic and religious people share more. The ideological alignment plays a role.

- Each step of sharing the news (number of clicks) reduces the number of users who get to the next page by about 75%.

Thus, this paper draws insights on effects brought by fact-checking mechanisms on the scale of sharing alt-facts, that could be used by policymakers or companies.

Henry, Emeric, Sergei Guriev, And Ekaterina Zhuravskaya. “Checking And Sharing Alt-facts.” Sciences Po Economics Discussion Papers 2020–06. Paris: Département D’économie De Sciences Po, June 2020.

The need for redistribution could be motivated by ethical criteria like in the case of income inequality. Also, it could be implemented to fix market failure connected, for example, with externalities. There are cases in which these explanations do not work, so is it effective to redistribute resources here?

(Acemoglu & Robinson, 2001) build a formal model of ineffective redistribution of resources. Two main assumptions are the following: 1) the political system cannot commit to the future policy, 2) the political power of the group positively depends on its size. They mention several arguments for presence of inefficient redistribution:
1. Such methods are harder to reverse, and serve as commitment;
2. The amount of redistribution endogenous, and inefficient methods are used to reduce redistribution;
3. It is possible to exploit uncertainty about policy efficiency to support a particular group.

Authors consider a two-period economy with two industries - farming and manufacturing. In the basic model, people are divided between sectors, and they cannot change the occupation, and in the first period, newcomers decide which job to get. Manufacturers are taxed, and farmers receive a subsidy that can be provided in two forms - to agents who are farmers at the beginning of the period and to all farmers. Existing farmers prefer the second option, but the first one could be the case when we consider that farmers have political power and extend it in the next period by attracting new farmers. (Acemoglu & Robinson, 2001) show that there are efficient equilibria where political power is not contested and inefficient in another case.
The authors extend the model to analyze situations in which workers could switch the occupation at some costs. The higher these costs are, the more specific skills a worker has, and that makes change harder. Interesting results in that a lower degree of skills’ specificity may increase the level of inefficiency of redistribution.

(Acemoglu & Robinson, 2001) mention several applications of their theory:
1. Agricultural policy: literature denied the opportunity to use lump-sum transfers, but authors connect it with the desire to save political power.
2. Labor market policy: creating higher firing costs could be explained in this framework as well - such policies maintain future political power and engage workers in collective actions.
3. International trade policy: most economists agree that tariffs and quotas for domestic industries are inefficient tools, and the model could explain the implementation of such policies by a wish to attract new workers who, otherwise, would be more productive in the other sectors.

Acemoglu, D., & Robinson, J. (2001). Inefficient Redistribution. The American Political Science Review, 95(3), 649-661. Retrieved February 8, 2021, from http://www.jstor.org/stable/3118239

Thinking about the organization of payment cards or operating industries we consider the model of two-sided markets to describe their work. In The Economics of Two-Sided Markets, R. Marc describes several features of synch markets and provides their implications for antitrust regulation.

Two-sided markets are defined as a market structure where two sets of agents interact via a platform and the decision of each of them affects the outcomes of the other. So, the difference from one-sided markets that also could have intermediaries is that sellers gain from the platform’s success with the buying side. The emphasis on intermediaries creates a distinction between the literature on two-sided markets and works devoted to the network effect.

R. Marc mentions two strategies that a platform chooses - pricing and openness exemplifying their manifestation in media, payment card, and operating system industries. The price depends not only on demand and costs, as it is on a one-sided market, but also on the effect of customers’ participation on the other side and profit extracted from that participation. For example, lowering prices could attract customers from the other platform, which degenerates the value of competitors’ platforms, and therefore increases the new customers’ influx. The important notion here is that two-sided markets are prone to evolve towards a situation where one side uses a single platform whereas the other - several. That creates a monopoly of the platform over the access to members that do not use other intermediaries. It can explain favor to customers in pricing. Within two-sided markets, standard price discrimination allows capturing more of the surplus due to demand heterogeneity.

The openness refers to two strategic issues - the number of sides and the relation to competing platforms. In the first case, the platform should determine whether it plans to be one-sided, two-sided, or multi-sided, and here there is a trend to switch from a one-sided model to two-sided when the firm becomes more established. Within the second issue firms may seek incompatibility, compatibility, or integration.

Among other strategies, R. Marc mentions innovations, advertising, and quality investments that allow platforms to shape the market structure.

In the final part, R. Marc addresses the public policy issues arguing that such markets could tip to a single dominant platform that draws the attention of regulators. The important issue is that regulation should take into account the influence of the intervention on both sides and other platforms, which creates additional difficulties in resolutions of antitrust cases.

Thus, the article provides the definition of a two-sided market and several features relating to the platforms’ strategies in pricing, openness, advertising, innovation, and quality investments. Relying on them, R. Marc states several arguments regarding the public policy on platforms’ operation.


Rysman, Marc. 2009. "The Economics of Two-Sided Markets." Journal of Economic Perspectives, 23 (3): 125-43. DOI: 10.1257/jep.23.3.125