Young Economist Award

2022 Award Recipients (in alphabetical order of author):

Paper: Keeping up with "The Joneses'': reference dependent choice with social comparisons 

Author: Alastair Langtry

Motivation: In recent decades, the most skilled workers have been increasingly sorting into the most productive cities and firms, literally pulling away from their less successful peers. Such heightened sorting has naturally caused greater inequality across workers, firms, and places. But what has caused worker sorting to increase? This paper highlights and models theoretically a novel mechanism rooted in social psychology.

The underlying insight is two-fold. First, workers' rational expectations of the welfare impact of social comparisons mitigate sorting. Intuitively, high achievers find it appealing to have some less accomplished colleagues whom they can effortlessly feel superior to. Second, this appeal of workplace heterogeneity is blunted when social comparisons on a wider scale become easier, as they plausibly have as a result of improvements in information technology and the rise of social media. If you're exposed to a constant stream of online news about your most successful peers' latest accomplishments, the stress of living up to them becomes impossible to escape. Then you might as well join them in the most productive firm.

The paper presents these insights and derives their implications in a model of reference-dependent choice whose reference point is determined by social comparisons within an endogenously chosen social network. The equilibrium features a harmful rat race: everyone exerts wasteful effort to impress others, in turn raising their incentive to do the same. Stronger social comparisons outside the workplace - whether over time or across individuals - imply stronger endogenous sorting and thus higher income and greater income segregation, but not necessarily higher welfare.

Overall, the paper presents an intuitive novel insight about first-order real-world trends. It rigorously analyses it through a state-of-the-art network game with negative externalities and endogenous network formation. It derives distinctive theoretical predictions that can hopefully be tested empirically, providing confirmation of the theory's potential to shed light on the determinants of socio-economic inequality and segregation - both in the workplace and in other important contexts such as education or residential location choice.

Paper: Displacement, a step on women’s early marriage? Natural disasters and cultural norms

Author: Laura Muñoz Blanco

Motivation: Child and early marriage is associated with entrenched poverty and gender inequalities. It affects women disproportionately, and has been linked to poor education, economic and health outcomes for both women and their children. Despite its huge costs, early marriage remains widespread in many of the world’s poorest communities. Growing attention has been devoted to study this practice, but we still lack understanding of its determinants and how best to tackle them from a policy perspective. 

This paper contributes to close this gap. Taking the case of Indonesia, where earthquakes of varying intensities are common, the paper studies what happens when natural disasters forcibly displace local communities.  Large earthquakes deal a huge blow to the finances and economic circumstances of affected communities and can induce mass relocations. In communities where the marriage of a daughter carries a bride price, or where newly formed couples live with the brides’ family (matrilocal), the marrying of young daughters can be an important insurance mechanism against negative income shocks. It can also serve as a means of facilitating social integration in receiving communities when families lose their networks after relocation.

Earthquakes in Indonesia are scattered both geographically and in time; they are largely unpredictable too. Exploiting the scattered occurrence of destructive earthquakes interacted with the socio-economic characteristics of the communities that they affect and the timing of a policy reform affecting the financial circumstances of the poorest families, this paper produces new evidence on the socio-economic drivers of child and early marriage. Estimates rely on a rich combination of individual-level longitudinal data, geological data on the time, place and intensity of earthquakes, and historic ethnographic data on marital norms and traditions.

Estimates show strong evidence of anticipation of time of marriage in communities affected by large earthquakes. This holds both among those who are displaced, usually living closer to the epicentre of the earthquake, and among those who stay behind in their original communities. The paper then exploits differences in marital traditions to establish that responses are larger in (and indeed only statistically different from zero for) communities where the marriage of girls carries a significant economic payoff to the bride’s family, either because of bride price or matrilocal traditions. Suggestive evidence also points to the importance of social motivations in anticipating marriage. The paper then shows novel evidence of the role of benefits in attenuating the importance economic drivers of early marriage. Exploiting the introduction of unconditional cash transfers targeted at the poorest families, estimates show that financial transfers attenuate the impact of displacement precisely among families that face the strongest incentives to anticipate their daughters’ time of marriage due to the traditions they observe.

Paper: Guns and Kidneys: How Transplant Tourism Finances Global Conflict

Authors: Alison Schultz

Motivation: “Transplant tourism” refers to the illegal activity by patients in high-income countries who travel to lower-income destinations with the aim of obtaining an organ for financial compensation. The vast margins in the black market for organs make transplant tourism a lucrative business: kidney recipients report to pay between USD 100,000 and USD 200,000 while donors report to receive only a fraction of that, typically below USD 10,000. International security agencies therefore worry that non-state armed groups in lower-income countries could participate in the global trade for organs and use the proceedings to finance local conflicts.

Despite the poignancy and high sensitiveness of this concern voiced by the international community, formal and systematic evidence on the possible causal relationship between global organ demand, armed groups’ involvement in transplant tourism, and non-state violent attacks was lacking.

This paper proposes a novel identification strategy that exploits exogenous variation in kidney demand abroad (as measured by the number of waiting list patients in the United States) to measure the extent by which global demand for kidneys increases the likelihood of local conflicts in eight countries knows for illegal transplanting. To do so, the analysis uses geo-referenced data on conflict events and hand-collected data on local transplant infrastructure across cells of 0.5◦ latitude × 0.5◦ longitude (about 55km × 55km at the equator). 

Overall, the paper finds a positive and significant impact of higher global demand for kidneys on local conflicts in Argentina, Armenia, Bulgaria, Hungary, India, Pakistan, Russia, and South Africa. This effect is stronger for an increase in the number of U.S. waiting list patients with labor income but is absent for an increase in the number of waiting list patients on dialysis, who cannot travel and cannot participate to transplant tourism. Furthermore, Alison’s analysis shows that non-state armed groups with access to transplant infrastructure perform a higher number of violent attacks whenever kidney demand increases. Her analysis reveals that armed groups enhance their fighting capacities with transplant tourism, both in their home region and abroad.

Award Committee: Monica Costa Dias, Giacomo Ponzetto and Paolo Surico

Past Award Winners (of the most recent eligibility rules)