Relevance of the EU Banking Sector to Economic Growth

Using panel estimates and a sample including all 28 European Union (EU) countries, this paper seeks to improve upon the existing literature with empirical evidence on the role that banking institutions can play in promoting economic growth. Banking sector performance is proxied by relevant operational, capital, liquidity and asset quality financial ratios. Economic growth is represented by the annual gross domestic product (GDP) growth rate. The estimations take into account the recent international financial crisis and consider three panels: one for the time period 1998–2012, a second one for the years before the crisis (1998–2006) and another for the subinterval 2007–2012. The results allow us to draw conclusions not only about the importance of the various financial ratios to economic growth but also regarding reactions to the recent crisis.     

Measuring the Unmeasured: Cultural Heritage Studies in Honor of Prof. Francesco Forte

This paper presents the contributions of Francesco Forte to the measurement of art and cultural goods and services, as I worked with him as his co-author. These contributions range from the valuation of art goods by the art matrix we conceived, to the valuation of the cultural welfare of nations, regions and local communities. Our work also assessed the provision of cultural welfare at the national, regional and local level for the public and non-profit sectors and measured the efficiency and effectiveness of museum bureaucracies. We also studied the profitability of investments in the arts by considering product life cycles, artistic movements and economies. More recently, with Michele Caputo, we focused on the long-run life cycle and success of the movie industry for select countries competing with foreign movie industries and TV entertainment by adopting Caputo’s fractional derivatives theory, which captures the role of past history. Professor Forte and I also developed the Differential Touristic Development Index to measure the effects of art and cultural enterprises as tourist attractions. The most innovative contributions of Francesco Forte to the measurement of the economic value of cultural goods and services demonstrate that it is possible to “measure the unmeasured,” and therein improve public collection of statistical data with the goal of increasing the preservation and valuation of cultural goods and services and highlighting their potential as economic multipliers.     

Poor institutions as a comparative advantage

Classic theories of comparative advantage point to factor productivity and factor abundance as determinants of specialization and trade. Likewise, geography and topography can determine trade patterns. Institutions, however, are increasingly seen as important sources of comparative advantage. A global drug prohibition regime implies that institutional quality matters more than traditional sources in the drug trade. This paper theoretically models trade patterns of illicit goods and confirms the role of institutions empirically with respect to the drug trade. In particular, illicit enterprises gain force in countries where resources are scarce, drug enforcement is uncertain, and institutions are weak in absolute terms and relative to neighboring countries. I propose several policy alternatives that emphasize economic opportunity for the poor and institutional quality that complement drug prohibition.     

Using partial identification methods to estimate the effect of violence against women on their children’s health outcomes

A growing literature in economics seeks to estimate the costs of violence against women by examining, for example, its impact on the health outcomes of their children. However, it is difficult to assign a causal interpretation to these nonexperimental studies due to the presence of unobservable characteristics affecting violence and health outcomes simultaneously. The lack of credible instrumental variables applicable in several countries further limits our knowledge. I address this gap by using new partial identification methods to estimate the relative size of the unobservables needed to eliminate the estimated effects in nonexperimental studies. I also expand the external validity of the analysis by using data from five standardized nationally representative household surveys in Latin America. Consistent with previous studies, cross-sectional estimates show large negative associations between violence against women and an array of child health outcomes. However, when accounting for omitted variable bias, at best, two-thirds of the estimates remain robust and they are concentrated on the outcomes with the largest cross-sectional estimated impacts.     

Does European development have Roman roots? Evidence from the German Limes

This paper contributes to the understanding of the long-run consequences of Roman rule on economic development. In ancient times, the area of contemporary Germany was divided into a Roman and a non-Roman part. The study uses this division to test whether the formerly Roman part of Germany are more developed than the non-Roman part. This is done using the Limes Germanicus wall as geographical discontinuity in a regression discontinuity design framework. The results indicate that economic development—as measured by luminosity—is indeed significantly and robustly larger in the formerly Roman part of Germany. The study identifies the persistence of the Roman road network until the present as an important factor causing this developmental advantage of the formerly Roman part of Germany both by fostering city growth and by allowing for a denser road network.     

Peer effects on risk behaviour: the importance of group identity

This paper investigates whether and to what extent group identity plays a role in peer effects on risk behaviour. We run a laboratory experiment in which different levels of group identity are induced through different matching protocols (random or based on individual painting preferences) and the possibility to interact with group members via an online chat in a group task. Risk behaviour is measured by using the Bomb Risk Elicitation Task and peer influence is introduced by giving subjects feedback regarding group members’ previous decisions. We find that subjects are affected by their peers when taking decisions and that group identity influences the magnitude of peer effects: painting preferences matching significantly reduces the heterogeneity in risk behaviour compared with random matching. On the other hand, introducing a group task has no significant effect on behaviour, possibly because interaction does not always contribute to enhancing group identity. Finally, relative riskiness within the group matters and individuals whose peers are riskier than they are take on average riskier decisions, even when controlling for regression to the mean.     

Risk preferences under acute stress

Many important decisions are made under stress and they often involve risky alternatives. There has been ample evidence that stress influences decision making, but still very little is known about whether individual attitudes to risk change with exposure to acute stress. To directly evaluate the causal effect of psychosocial stress on risk attitudes, we adopt an experimental approach in which we randomly expose participants to a stressor in the form of a standard laboratory stress-induction procedure: the Trier Social Stress Test for Groups. Risk preferences are elicited using a multiple price list format that has been previously shown to predict risk-oriented behavior out of the laboratory. Using three different measures (salivary cortisol levels, heart rate and multidimensional mood questionnaire scores), we show that stress was successfully induced on the treatment group. Our main result is that for men, the exposure to a stressor (intention-to-treat effect, ITT) and the exogenously induced psychosocial stress (the average treatment effect on the treated, ATT) significantly increase risk aversion when controlling for their personal characteristics. The estimated treatment difference in certainty equivalents is equivalent to 69 % (ITT) and 89 % (ATT) of the gender-difference in the control group. The effect on women goes in the same direction, but is weaker and insignificant.