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Global Challenges 2022  

March 3rd, Alexia Delfino (Bocconi University)

Female Entrepreneurship and Trust in the Market

Commerce requires trust, but trust is difficult when one group consistently threatens to expropriate or mistreat another. If men have a comparative advantage at violence, then without rule-of-law, unequal bargaining power can lead women to segregate into low-return industries and avoid entrepreneurship altogether. We present a model of female entrepreneurship that predicts women will only start businesses that interact primarily with men when external authorities, such as courts, can enforce contracts ex post, and when social norms support female bargaining power ex ante. The model’s predictions are supported both in cross-national data and with a new census of Zambian manufacturers. In Zambia, female entrepreneurs collaborate less, learn less from fellow entrepreneurs, earn less and segregate into industries with more women, but gender differences are ameliorated when women have access to adjudicating institutions, such as Lusaka’s “Market Chiefs” who are empowered to adjudicate small commercial disputes. We experimentally induce variation in local institutional quality in an adapted trust game, and find that this also reduces the gender gap in trust and economic activity.

 

May 5th, Fabrizio Zilibotti (Yale)

Growing Like India: The Unequal Effects of Service-Led Growth

We construct a spatial equilibrium model where agents have nonhomothetic preferences over final goods that differ in the intensity of use of consumer services as production inputs. Over time, the expansion of employment in consumer services is both a consequence (income effects) and a cause (productivity growth) of the development process. We estimate the model using household data from the Indian NSS exploiting granular information on sectoral employment at the district level and individual data for consumption expenditure. We find that productivity growth in consumer services was an important driver of rising living standards between 1987 and 2011 accounting for 1/3 of aggregate welfare gains. However, these gains are heavily skewed toward high-income households living in cities, because such individuals spend a large share of their budget on consumer service intensive goods. Productivity growth in the service sector is also a powerful driver of the process of structural change shifting employment out of agriculture into the service sector with only limited industrialization.

 

June 9th, Edoardo Maria Acabbi (Universidad Carlos III de Madrid)

A Labor Market Sorting Model of Scarring and Hysteresis

What are the long-run consequences of business cycle fluctuations for the skill distribution in the labor force? How is the sorting between firms and workers altered by aggregate fluctuations at different stages of the working life? And finally, what are the aggregate effects of changes in sorting for earnings dynamics, potential productivity and labor misallocation in the long run? We address these questions by proposing a tractable search equilibrium model of the labor market with aggregate risk, firm and worker heterogeneity, life-cycle dynamics and endogenous human capital accumulation. We show that sorting of workers to firms is a key factor in increasing the persistence of fluctuations, directly relating labor reallocation to economic hysteresis. We estimate the model on Italian administrative matched employer-employee data. Our estimates highlight the long term supply-side hysteresis effects of business cycles.

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