Bowen, Dmitriev, and Galperti study social learning via news sharing. Each period agents receive the same quantity and quality of first-hand information and have the opportunity to share it with friends. Some agents (possibly a few) share information selectively. Selective sharing generates heterogeneous news diets across agents, who, however, are aware of it and update beliefs via Bayes' rule. The researchers show that, contrary to standard learning results, agents' beliefs can diverge in this environment. This occurs if and only if agents hold misperceptions (even minor) about friends' access to first-hand information and if its quality is low. Bowen, Dmitriev, and Galperti show that abundant information can exacerbate belief polarization. That is, when the quantity of first-hand information grows indefinitely agents can hold opposite degenerate beliefs. Intuitively, polarization worsens with misperception and imbalance of news diets. Polarization can also worsen when information quality rises or when the agents' social networks expand, despite providing them with more information. Information aggregation can mitigate, and even eliminate, polarization.
This paper was distributed as Working Paper 28465, where an updated version may be available.
This paper provides a quantitative analysis of the effects of the early lawand-economics movement on the U.S. judiciary. Ash, Chen, and Naidu focus on the Manne Economics Institute for Federal Judges, an intensive economics course that trained almost half of federal judges between 1976 and 1999. Using the universe of published opinions in U.S. Circuit Courts and 1 million District Court criminal sentencing decisions, they estimate the differences-in-differences effect of Manne program attendance using judge fixed effects. Selection into attendance was limited -- the program was popular across judges from all backgrounds, was regularly oversubscribed, and admitted judges on a first-come first-served basis -- and the researchers further adjust for machine-learning-selected covariates predicting the timing of attendance. Ash, Chen, and Naidu find that after attending economics training, participating judges use more economics language in their opinions, issue more conservative decisions in economics-related cases, rule against regulatory agencies more often, favor more lax enforcement in antitrust cases, and impose more/longer criminal sentences. The law-and-economics movement had policy consequences via its influence in U.S. courts, showing that theoretical legal ideas can directly influence economic policies by persuading federal judges.
Gitmez, Sonin, and Wright offer a model in which heterogeneous agents make individual decisions with negative external effects such as the extent of social distancing during pandemics. Because of the externality, the agents have different individual and political preferences over the policy response. Personally, they might prefer a low-level response, yet would vote for a higher one because it deters the others. In particular, agents want one level of slant in the information they base their actions on and a different level of slant in public announcements. The model accounts for numerous empirical regularities of the public response to COVID-19.
This paper examines how political events that sharpen identity can affect day to day economic behaviour, even in contexts that lack prescriptive social norms about group behavior. Nardotto and Sequeira study the impact of the Brexit Referendum on consumer choices in the UK between British and EU grocery products. Using a unique panel dataset from a major retailer in the UK with almost a billion shopping trips for 12 million shoppers, they find that consumers respond to the referendum results by increasing consumption of UK products (by 3%) and reducing demand for EU products (by 12%). The researchers provide further evidence that changes in consumption are driven by national identity being top of mind: the increase in consumption of UK products is 4% higher in days following intense social media discussion on Brexit. Consistent with the identity mechanism, this effect is stronger when there is more discussion on the politics of regaining sovereignty as opposed to the economic consequences or social issues associated with Brexit. Nardotto and Sequeira provide suggestive evidence that attention alone cannot drive these effects: the day after England wins a EURO 2016 football match results in almost no changes to consumption patterns. Overall, these findings underscore the importance of political events associated with deep changes to perceived identity in shaping routine economic decisions, and the mediating role that the media can play by keeping it top of mind.
This paper examines the social costs of patronage ties through the lens of a devastating earthquake in China, 2008. Using an original dataset covering 1,064 buildings in the quake-affected area, Cao finds that, conditional on seismic intensity, the probability of collapse increases by 13.4 percentage points (86 percent) for buildings constructed under the authority of connected county officials. The researcher then examines heterogeneous effects along multiple dimensions, through which he finds suggestive evidence that the poorer building quality likely reflect underlying corruption by connected officials. The building level findings are supplemented with an analysis of county-level aggregates in which Cao finds that one additional year of having a connected official is associated with an 8 percent increase in mortality and a 3 percent increase in direct economic loss from the earthquake. These findings bring to light a massive yet otherwise invisible social cost of patronage networks and corruption more broadly: they create vulnerabilities that may lead to very high social costs in some states of the world, yet of which the consequences can remain deeply hidden over a long period of time.
Institutions of justice, like prisons, can be used to serve economic and other extrajudicial interests, with lasting deleterious effects. Archibong and Obikili study the effects on incarceration when prisoners are used primarily as a source of labor using evidence from British colonial Nigeria. They digitized sixty-five years of archival records on prisons from 1920 to 1995 and provide new estimates on the value of prison labor and the effects of labor demand shocks on incarceration. The researchers find that prison labor was economically valuable to the colonial regime, making up a significant share of colonial public works expenditure. Positive economic shocks increased incarceration rates over the colonial period. This result is reversed in the postcolonial period, where prison labor is not a notable feature of state public finance. Archibong and Obikili document a significant reduction in contemporary trust in legal institutions, like police, in areas with high historic exposure to colonial imprisonment. The resulting reduction in trust is specific to legal institutions today.
Do right-wing populists radicalize xenophobes? Using data from nearly 12 million traffic stops, Grosjean, Masera, and Yousaf show that the probability that a police officer stops a Black driver increases by 4.2% after a rally led by Donald Trump during his 2015-2016 campaign. The effect is immediate, lasts for up to 50 days after the rally, and is due only to discretionary stops. Moreover, Grosjean, Masera, and Yousaf observe significantly larger effects in areas with more racist attitudes today, or those that historically relied more heavily on slavery. By contrast, they neither observe an increase in the rates of stops of White or other racial minority drivers, nor any effect of the campaign events of the other 2016 candidates to the Republican nomination or to the presidency. Results from a 2016 online experiment confirm that Trump's inflammatory racial speech specifically aggravated respondents' prejudice that Blacks are violent. The researchers take this as evidence that Trump's campaign radicalized racial prejudice against Blacks as well as the expression of the latter in a critical and potentially violent dimension: police behavior.
Campante, Depetris-Chauvin, and Durante study how fear can affect the behavior of voters and politicians by looking at the Ebola scare that hit the U.S. a month before the 2014 midterm elections. Exploiting the timing and location of the four cases diagnosed in the U.S., they show that heightened concern about Ebola, as measured by online activity, led to a lower vote share for the Democrats in congressional and gubernatorial elections, as well as lower turnout, despite no evidence of a general anti-incumbent effect (including on President Obama's approval ratings). The researchers then show that politicians responded to the Ebola scare by mentioning the disease in connection with immigration, terrorism, and President Obama in newsletters, tweets and campaign ads. This response came only from Republicans, especially those facing competitive races, suggesting a strategic use of the issue in conjunction with topics perceived as favorable to them. Survey evidence suggests that voters responded with increasingly conservative attitudes on immigration but not on other ideologically-charged issues. Taken together, their findings indicate that emotional reactions associated with fear can have a strong electoral impact, that politicians perceive and act strategically in response to this, and that the process is mediated by issues that can be plausibly associated with the specific fear-triggering factor.
This paper was distributed as Working Paper 26897, where an updated version may be available.