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Seminars 2006
December 27, 2006
Dmitriy Stolyarov (University of Michigan)
«Pay the Giants: Complementary Ideas and the Stock Market» (joint with John Laitner)

We build a general equilibrium model where growth is driven by new ideas that can have varying degrees of complementarity with previous innovations. The novel feature is that some private agents can appropriate the value of knowledge spillovers that their innovations create. That is, future innovators are expected to pay the giants whose shoulders they stand on. We demonstrate how recently available NBER data on patent citations can be used to measure the degree of complementarity and how the rest of the model can be calibrated to the US economy. We find that he complementarity between ideas has been rising throughout 1980s and 990s. This is consistent with either technological change that shifted nnovation to sectors with high complementarity or a change in patent policy that allowed more overlaps in property rights. In both cases, the market value of businesses rises, because the probability that future innovators will pay for existing knowledge goes up. The preliminary simulations of the model indicate that the stockmarkets respond strongly even to slight permanent changes in the complementarity parameter. For example, a change in policy that requires each new patent to make one more citation is enough to raise the long-run market value to GDP ratio by 20 percent. The model may thus help explain why the market value to GDP ratio in the US now is 60 percent higher than it was 25 years ago.

December 26, 2006, Tuesday, 13:20 
Anna Rubinchik (Colorado), joint paper with Jean-Francois Mertens (CORE)
«Intergenerational Equity and the Discount Rate for Cost-benefit Analysis»

Current Office of Management and Budget (OMB) guidelines use the interest rate as a basis for the discount rate, and have nothing to say about an intergenerationally fair discount rate. We derive this discount rate by differentiating a social welfare function with respect to perturbations in individual endowments (which induce perturbations of equilibria) in an overlapping generations model with exogenous growth. A traditional utilitarian approach leads to too high values, and in a wide range, while Relative Utilitarianism implies it equals the growth rate of real per-capita consumption, independent of the interest rate. The differentiation is based on a novel method, applicable to arbitrary policy-variations, and that reveals a deep and very general property of exogenous growth models.

December 21, 2006, Thursday, 13:20
Michael Golosov (MIT)
«Menu Costs and Phillips Curves»

December 13, 2006, 13:20 -CANCELLED
Xin Zhang (UCLA)
«Legitimization of the illegitimate»

December 6, 2006, 13:20
Shlomo Weber (CORE)
«Costs and Benefits of Diversity»

November 28, 2006 (Tuesday), 13:20, room 720 
Christian Gianella, William Tompson (OECD):
«OECD Economic Survey of the Russian Federation, 2006»

November 22, 2006
Georgy Egorov (Harvard University) and Konstantin Sonin (NES, CEFIR)
«Coalition Formation in Political Games»

November 16, 2006
Markus Eller (CEFIR)
«Foreign Direct Investments in the Financial Sector and Economic Growth in Central and Eastern Europe: The Crucial Role of the Efficiency Channel»

We examine the impact of financial sector FDI (FSFDI) on economic growth via the efficiency channel. We estimate a panel data model for 11 Central and Eastern European countries in a cross-country growth accounting framework over 1996 to 2003. We find a hump-shaped impact of FSFDI on economic growth. Medium FSFDI supports growth if human capital suffices. Above a certain threshold, crowding-out of local physical capital via foreign bank entry slows growth. We combine the FDI-growth and the finance-growth-literature and conclude that the level and quality of foreign investment influences the financial sectors´ contribution to growth in emerging markets.

November 8, 2006
Mikhail Drougov (University of Oxford, Nuffield College)
«Information and Delay in an Agency Model»

Negotiations often take long time even if a delay in the agreement is 
inefficient. One typical explanation is the existence of private information of at least one party; the time is then a discriminating instrument. The paper starts by pointing out that this result does not hold once the traded quantity is not fixed as in most bargaining models; the quantity outperforms the time as a discriminating instrument, that is, there is no delay. Moreover, Coase conjecture does not hold either. We then study how a signal arriving in the course of negotiations affects the delay in the agreement. Unlike investment-under-uncertainty models, a better signal not only improves contracting in the future but also in the present. Therefore, the delay is in general not monotonic in the quality of information. The value of information can be negative over some range as better information may aggravate the principalís commitment problem.

November 1, 2006
Marek Jarocinski (ECB)
«Prior for growth rates and small sample bias in time series»

October 18, 2006
Oleg Itskhoki (Harvard University)
«Real Rigidities, the Currency of Invoicing, and Exchange Rate Pass-Through»

October 16, 2006
Maxim Mironov (Chicago University)
«Economics of Spacemen: Tax Evasion and Firm Performance. Evidence from Russian banking transaction data»

August 31, 2006 (Thursday), 13.20, r.720
Alexander Matros (University of Pittsburgh)
«An Election Model»

We consider the following game. K players compete in N simultaneous contests. Each player i has a limited resource Xi and mustdecide how to allocate it to N contests. In each contest, if player i allocates more resources than player j, player i has a higher chance to win the contest than player j. We find a unique symmetric Nash equilibrium. Moreover, if individual resources are private information, there exists a unique monotonic symmetric Bayesian equilibrium.

August 16, 2006
Oleg Shchetinin (Toulouse)
«Altruism in Career Concerns Model»

August 9, 2006
Aleh Tsyvinski (Harvard University)
«New Dynamic Public Finance: A User’s Guide»

August 2, 2006
Subbotin Viktor (North-Western University)
«Bootstrap of the Maximum Rank Correlation Estimator»

July 26, 2006
Maria Petrova (Harvard)
«Mass media and special interest groups»

July 19, 2006
Ruben Enikolopov (Harvard)
«Public Employment and Vote Buying»

July 13, 2006 
Scott Gelbach (University of Wisconsin-Madison)
«The Impact of Interstate War on Domestic Political Institutions»

July 12, 2006 
Sergey Tsyplakov (Moore School of Business, University of South Carolina)
«Investment Frictions and Leverage Dynamics»

July 10, 2006 (Monday), 13.20, r.52
Nikolai Roussanov (University of Chicago)
«Status, Diversification, and Entrepreneurial Risk»

June 28, 2006
Maxim Nikitin (HSE)
«Deterrence, Lawsuits, and Litigation Outcomes Under Court Errors»

This paper presents a strategic model of liability and litigation under court errors. Our framework allows for endogenous choice of level of care and endogenous likelihood of filing and disputes. We derive sufficient conditions for a unique universally-divine mixed-strategy perfect Bayesian equilibrium under low court errors. In this equilibrium, some defendants choose to be grossly negligent; some cases are filed; and, some lawsuits are dropped, some are resolved out-of-court and some go to trial. We find that court errors in the size of the award, as well as damage caps and split-awards, reduce the likelihood of trial but increase filing and reduce the deterrence effect of punitive damages. We derive conditions under which the adoption of the English rule for allocating legal costs reduces filing.

14 June, 2006
Stanislav Kolenikov (University of Missouri)
«Bayesian Statistical Methods»

June 7, 2006
Andrei Markevich (Warwick University)
«The Dictatorís Dilemma: to Punish or to Assist? Control Party Commission under Stalin»

June 6, 2006 (Tuesday), 13.20, r. 720
Mikhail Klimenko (Georgia Institute of Technology)
FDI policies in industries with network externalities

June 5, 2006 (Monday), 17.00, r. 720
Professor Bernard Black (University of Texas at Austin — School of Law)
«The Anatomy of Financial Tunneling in an Emerging Market»

May 31, 2006
Anatoly Peresetsky, Alexander Karminsky, Sergei Golovan (NES/CEFIR)
«Russian Banks Private Deposit Interest Rates and Deposit Insurance»

May 22, 2006 (Monday!)
Nurlan Turdaliev (McGill University, Montreal)
«Central Bank Communication»

April 26, 2006
Georgy Egorov, Sergei Guriev, and Konstantin Sonin
«Media Freedom, Bureaucratic Incentives, and the Resource Curse:A Study in Non-democratic Politics»

April 21, 2006
Professor Bertrand Melenberg (Tilburg University)
«Model Risk and Regulatory Capital»

In this paper we propose a general framework for the quantification of model risk. This framework allows one to allocate regulatory capital to positions in a given market depending on the extent to which this market can be reliably modelled. The approach is based on computing worst-case risk measures over sets of models that are  in some appropriate sense close to a nominal model. In general, any set of  models could be used, but we illustrate how, in particular, past data can be used to construct such model sets in a statistically meaningful way. This empirically based approach allows us to decompose the model risk into estimation risk, misspecification risk, and identification risk. The method is general in the sense that it can be applied with any of the usual risk measures such as value-at-risk and expected shortfall. We present an application to stock portfolios and find that, for usually applied specifications, imsspecification risk is much more important than estimation risk. The combination of estimation risk and misspecification risk that we find explains half of the multiplication factors employed by the Bank of International Settlements (BIS). The remaining other half can be attributed to additional misspecification and identification risk, and, possibly, other risk factors.

April 19, 2006
Elena Pokatovich, Mark Levin (HSE)
«Economics of Illegal Services: red light, blue background»

April 14, 2006
Salavat Gabdrakhmanov (Chicago University)
«Competitive Innovation and Information Flows in a Growing Industry»

April 12, 2006
Professor Stephen G. Cecchetti (International Business School, Brandeis University)
«Monetary policy and asset price bubbles»

April 10, 2006
Alex Posazhennikov (Universoty of Nottingham)
«Cooperation and Competition: Evolution of Preferences in Games»

April 7, 2006 01.00 pm
Julia Shvets (Cambridge)
«Law enforcement and firms' external finance: evidence from Russia»

March 29, 2006
Tymofiy Mylovanov (University of Bonn)
«Noisy Information Transmission»

March 22, 2006 
Timothy Frye (Ohio State University)
«Original Sin, Good Works, and Property Rights in Russia: Evidence from a Survey Experiment of Business Elites»


Are property rights obtained through dubious means forever tainted with original sin or can rightholders make their ill-gotten gains legitimate by doing good works? This is a critical question for developing and transition countries where privatization is often opaque and businesspeople may receive property, but remain unwilling to use it productively due to concerns about the vulnerability of their rights to political challenge. Using a survey of 660 businesspeople conducted in Russia in 2005, I find that the original sin of an illegal privatization is difficult to expunge. Property rights transferred through a legally questionable privatization are seen as illegitimate even a decade after privatization. Businesspeople, however, can improve the perceived legitimacy of property rights by doing good works, such as investing in the firm or providing public goods for the region. Finally, managers that provide public goods for their region are more likely to invest in their firms than those who did not. This suggests a possible political rationale for the provision of public goods by private firms. These findings have implications for political economy and contemporary Russia.

March 15, 2006
Andrei Bremzen, Egor Egorov and Dima Shakin
«Electoral Mandate and Voting Behavior: Evidence from Russian State Duma»

February 21, 2006
Alexei Savvateev (CEMI, Moscow, and CORE, Louvain-La-Neuve, Belgium)
«Coalition-proof incentive contracts»

The paper presents suffcient conditions for group strategy-proofness in mechanism design and multi-agency problems. These conditions are Spence-Mirrlees single crossing property on the agentsí preferences profiles and order semi-invariance and payoff complementarity of proposed incentive schemes. Applications include serial cost sharing of non-convex public goods, as well as scenarios of a principal with multiple agents paradigm under perfect monitoring and costly enforcement. The examples provided are those of tax evasion and pollution control problems.

February 10, 2006
Brad Strum (Princeton University)
«Discretionary Monetary Policy Design in a Sticky-Price Input/ Output Economy»

February 6, 2006
Dmytro Hryshko (University of Houston)
«Informational Assumptions on Income Processes and Consumption In the Buffer Stock Model of Savings»

February 3, 2006
Yaraslau Zayats (University of North Carolina at Chapel Hill)
«Schooling, Wages, and the Role of Unobserved Ability in the Philippines»

February 2, 2006, 4:30 pm
Anton Nakov (Universitat Pompeu Fabra)
«Optimal and Simple Monetary Policy Rules with Zero Floor on the Nominal Interest Rate»

February 01, 2006 
Natalia Ponomareva (University of Sydney)
«Forecastability of Inflation and Nominal Income Growth. The Case of Korea»

January 27, 2006
Christian Gianella (OECD)
«35 hours week : a reassessment of the long run employment effects»

January 26, 2006, 16:30
Leonid Azarnert (Tel-Aviv University)
«Free Education: When and Where?"

January 25, 2006
Jenny Hunt
Bribery: Who Pays, Who Refuses, What Are The Payoffs?

January 23, 2006 cancelled
Samir Makdisi (American University of Beirut)
«Democracy and development in the Arab World»

January 17, 2006, 16.30
Michael Schwarz
«Bid Ask Spreads and Market Microstructure: Are narrow spreads always feasible?"

This paper describes a simple example of an institution that can maintain narrow bid ask spreads even in a market for a security where an uninformed specialist frequently trades with investors who have private information about the security’s value.

January 12, 2006
Serguey Braguinsky (State University of New York at Buffalo)
«Competitive Innovation and Information Flows in a Growing Industry»

Case studies reveal a pattern of rapid industrial growth propelled by innovation and quick diffusion of new technologies, especially among emerging industries exposed to global competition. At the firm level, the distribution of innovative activity is highly skewed, while productivity growth is not strongly related to a firm’s innovative activity. In this paper, we develop a dynamic model of a competitive industry that is consistent with these stylized facts. We derive an equilibrium growth path, along which a leading firm invests in increasing the stock of technological knowledge and chooses not to prevent spillovers to other firms as long as the industry remains relatively small. As the industry expands including new entry, the leader’s optimal amount of investment gradually declines. The leading firm may also choose to start keeping its innovations secret somewhere along the equilibrium growth path, bringing technology diffusion and further expansion of the industry to a halt. Policy implications include beneficial effects of the absence of tariff protection, and possible beneficial effects of moderate costs of intellectual property rights protection.

January 11, 2006
Yuliya Meshcheryakova (Victoria University of Wellington)
«Macroeconomic Effects of International Outsourcing»

I present a two-country neoclassical growth model of international outsourcing consistent with the empirical observation that capital and unskilled labor are substitutes. The model studies the static effects of outsourcing, and also its dynamic effects on investment, the real interest rate, and the current account balance. The model predicts a decline in the capital stock and output of U.S. manufacturing, a rising U.S. skill premium, a lower real interest rate, and a boom in the export sectors of unskilled-laborabundant countries such as China. There will be a decrease in the world (physical) capital stock due to more efficient use of the world’s unskilled labor resources. U.S. unskilled workers and domestic investors lose, whereas Chinese unskilled workers gain from outsourcing. Nearly all the benefits associated with outsourcing are enjoyed by China. With standard consumer preferences the U.S. runs a current account deficit at all times. However, with an endogenous rate of time preference outsourcing causes only a temporary deterioration of the U.S. current account. The deficit arises as U.S. households borrow from countries such as China, in part to be able to increase foreign direct investment (FDI) into China. The predictions of the model are broadly consistent with recent evidence of lower global savings and investment rates, a widening of the U.S. current account deficit, and lower real interest rates. Finally, I study the effects of a U.S. import tariff on intermediate goods.
Seminars are held at 1.20 pm in the conference room (office 720), unless noted otherwise.

Seminars are open to the public.
For additional information please call: (495) 105 5002
Nakhimovsky prospect 47, office 920 & 720 117418 Moscow Russia
Phone: +7 (495) 925 5002 Fax: +7 (495) 925 5003
E-mail: cefir (at)
Centre for Economic and Financial