Monthly Archives: December 2012

general, Interviews, Visiting Lecturers

Do Women Receive Lighter Prison Sentences?: An Interview with Professor Ronald Oaxaca

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Let’s start in your early years. You finished your BA at California State University. How did you come to study economics?

That’s a good question. I originally planned to major in history and I made an appointment with the chairmen of the Department of History to talk about it, but he happened to be out of town. And I never rescheduled. In the meantime I had a friend who said, “I took a really interesting course called Principles of Economics. You might want to take it.’ And so I took it the next semester and I loved it. It was a discipline that had mathematics and business. It had everything. After that I was captivated.

What motivated you to focus on the gender gap?

I took graduate labor economics and I had an interest in racial discrimination. And I knew a lot of people had done work in that field. But I thought that there had not been a lot of work done on gender discrimination—at least not by economists—and I was right.

So I started thinking about how to apply a model by Gary Becker, that he originally intended to be used to look at racial differences in labor market outcomes, and I decided that that could be applied to research on gender.

So after you graduated, it took you two years to publish your most famous papers, and you got famous for this ‘Oaxaca-Blinder decomposition.’  The decomposition has become so famous that there is now even a Stata command. How did you feel that someone had made this ?

I found out from one of my graduate students. He rushed to my office and said ‘There is a Stata command with your name on it!’. So he downloaded it on my computer, and I was amazed. In fact, it really made doing the work easier!

Beyond the gender gap, what are your other research interests? I see you are going towards crime economics?

There is still a story about decompositions in the paper I presented at CERGE-EI, but instead of looking at labor market outcomes between men and women, this paper looks at differences in prison sentences between men and women. It tries to understand how much of the gap we observe can be explained by circumstances such as women committing less serious crimes, and how much of it is unexplained, and thus may be the contribution of judges’ preferences.

So what are the conclusions from this research?

 We show that, unlike in the labor market, in prison sentences women are in fact favored. There is an unexplained gap. If we look at the majority group, white males and white females, we find that male prison sentences are on average 20 months longer. When you control for the nature of crimes committed, then we can explain 14 months of that gap. But there are still six months that you cannot explain by anything other than judges having a preference in favor of women.

It is very interesting, and one can conjecture as to why that is the case. Some have said, ‘what if judges believe that women learn their lesson faster than men, so then it would be socially inefficient to put them in prison as long as men?’ There are two problems with that idea: one is that we already control for their past criminal history. If they learn their lesson quicker, they wouldn’t have a criminal history as severe as men, so we already controlled for that. The other problem is that even if we really believe that’s true, there is no way you can implement that as part of the legal system. Because where does that end?

Continue reading Do Women Receive Lighter Prison Sentences?: An Interview with Professor Ronald Oaxaca →

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general, Interviews, Visiting Lecturers

Man Bites Dog – An Interview with Dr. Kristoffer Nimark

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A dog bites a man… no one cares. But how about a man biting a dog? That’s news. Dr. Kristoffer Nimark explores economic events that make news, and how media focus can exacerbate the impact of those events. Dr. Nimark lectured at CERGE-EI this fall about his research, and also sat down for a brief interview. Check it out:   

 Why did you choose to become an economist? 

I started to become interested in economics in the 90s. When I was in high school we had a big economic crisis in Sweden, not unlike the crisis we have now in Spain. And I saw the public debate where people had differing views that were irreconcilable with each other. I wanted to learn economics so I could understand it myself and see which arguments were valid. So I started my undergrad studies in Sweden and later I continued with my PhD at the EUI (The European University Institute) in Florence.

What is your current research?

Mostly my research is about methodological issues about how to model economies where individual agents know different things about things that all the agents care about. So you can think about how a lot of economic decisions depend on the actions of other agents in an economy. For example, if you’re a firm that wants to invest, you would like to know how much your competitors are investing; or if you’re a trader in the stock market or bond market you might be interested in knowing what other traders are willing to pay for a bond at the next trading opportunity.

Once agents have different information, predicting other peoples’ actions becomes more difficult, because you don’t know the same things anymore. And I’m trying to solve these models on how to predict the actions of others. I may want to predict the actions that other agents are taking, and they are trying to predict the actions that I am taking. And since their actions will depend on their expectations of my actions, I need to form predictions about their predictions of my expectations. So we run into methodological issues and try to understand how to solve these dilemma models.

In the paper you presented at CERGE-EI (‘Man-Bites-Dog Business Cycles’) you proposed some information structures which are different from the existing literature on ‘rational inattention.’ Can you tell us about it?

So my paper “Man-Bites-Dog Business Cycles” features one specific feature of news media: unusual events are considered more ‘newsworthy’ than more common events. The title of the paper refers to how when a dog bites a man it is normal, but it is unusual when a man bites a dog. It is only the latter event that will make news.

In the context of the paper, this means that when you have unusual macroeconomic developments like a crisis or a boom, the mainstream media is more likely to focus on the economy. Since the news media is more likely to focus on the economy when we have a recession or a boom, it influences the business cycle. In particular, I show that this intense media focus can exacerbate things—you get stronger booms and recessions than you would otherwise.

Very interesting. What are your main conclusions?

My main finding is that the economy appears to respond strongly to shocks that don’t seem large enough to really justify the types of crises we observe. The model shows how we have sometimes extremely strong responses to only small changes in fundamentals. So even if there is only a small change in productivity, you have a very large change in output, and vice-versa. And this can be partly explained by the intense media focus.

So in this sense, the media focus on the economy is a bad thing?

I don’t show in the paper that this is suboptimal. It’s still possible that this media response is good, that a strong response is appropriate. I don’t really discuss this.

We students are making decisions about our topics for our PhD thesis. Where is the gap in economic research today?

You shouldn’t think too much about it. When you choose a topic as a PhD student you should choose something that you find interesting enough to work on—something you are willing to spend 60-70 hours a week on it for three years. Some people find it’s interesting to work on new things and they’ve identified some gaps in economic thinking they think are important. And I think that’s great, and that’s often very good research. But you shouldn’t artificially look for gaps, especially if you don’t find it interesting—and you won’t be able to convince other people that it’s interesting!

The most important thing is to work on something you find interesting yourself. Most people don’t think it’s interesting to repeat other people’s work, so in one sense it always means plugging some gap somewhere.

Dr. Nimark is a researcher at CREI  (Centre de Recerca en Economia Internacional), adjunct professor at Universitat Pompeu Fabra, and affiliated professor at Barcelona GSE.

Read the paper Man-Bites-Dog Business Cycles

Interviewer: Sophio Khozrevanidze, 2nd Year PhD Student

Friday, 5 October 2012


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general, Interviews, Visiting Lecturers

Going Once, Going Twice, and Gone! Auction Theory with Professor Paul Milgrom

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 httpv://www.youtube.com/watch?v=bErO0-ujMQg

Fall semester in CERGE –EI was full of interesting events for researchers and students. One of the most memorable is surely the Market Design Conference in October, and in particular the visit of Professor Paul Milgrom from Stanford University.

While serving as a professor in Yale and Northwestern Universities, Paul Milgrom received wide recognition for his revolutionary innovations in practical market design. Currently Dr. Milgrom holds a position as the Shirley and Leonard Ely Professor of Humanities and Sciences in the Department of Economics at Stanford University.

Professor MIlgrom is widely recognized by economists to be the father of the celebrated “linkage principle,” which is extensively used as a valuable strategic tool in market design, particularly multi-unit auctions and procurement. One of Milgrom’s stellar academic contributions was in designing and conducting the first spectrum auctions for US Federal Communication Commission (FCC), which allowed the government to raise enormous amounts of money for spectrum licenses. Modifications of Milgroms’ auction rules for spectrums have been employed all over the world, and now most spectrum licenses are sold through these types of auctions.

At the conference at CERGE-EI, Professor Milgrom gave a public lecture about his recent work for the FCC on the ‘Incentive Auction in the US’. In particular, these types of auctions serve to redistribute efficiently existing 3G licenses. The main challenge in this type of market situation is to achieve satisfaction from both sides: consumers and suppliers (license holders) of 3G services.

During his lecture, Professor Milgrom discussed all possible drawbacks of the ongoing redistribution of the licenses, and showed that one can overcome existing problems by applying “incentive auction” rules. The main intuition is that smaller licenses will be redistributed to bigger providers and hence bigger providers will receive more market power and they will be willing to pay for these licenses. Incentive auction rules develop a unique efficient matching mechanism where first the FCC buys broadcast licenses from providers, and then it repackages them in an efficient way and sells them through the auction again.

The most fascinating thing for CERGE-EI students was to see an immediate application of the economic theory into practice.  Professor Milgrom’s presentation motivated a great deal of discussion on further improvements and modifications on the incentive auction rules. After the lecture, Milgrom kindly agreed to a brief interview, which you can see on our Youtube page. From our side, we want to sincerely thank professor Milgrom for his participation in the conference and his openness to discussing new ideas from CERGE-EI students!

Author: Oksana Oryshchyn

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