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