Work in progress

In theory, free and fair elections can improve the selection of politicians and incentivize them to exert effort. In practice, incumbency advantage and coordination issues may lead to the (re)election of bad politicians. We ask whether these two forces compound each other. Using an RDD in French two-round local and parliamentary elections, we find that winning an election increases candidates’ chances to win the next election by 25.1 percentage points. Close winners are more likely to run again and more likely to win, conditional on running, than close losers. Incumbents’ electoral advantage results from a lower number of ideologically close competitors, indicating that parties on the winning side coordinate more effectively than the losing side, and from more personalized campaign communication. A complementary RDD reveals that candidates who marginally qualify for the runoff also rally voters, but without affecting the number of competitors on their side. We conclude that party coordination and voters rallying candidates who won or gained visibility in an election both contribute to their success in future races, absent any actual difference in quality with candidates on the losing side.

We analyze the annuitization decision at retirement in a favorable environment with no adverse selection into the pool of individuals taking the annuitization decision and with low average price of an annuity. Using administrative data from a large Swiss insurance company over the period 2008-2015, we document that annuitization choices strongly respond to financial incentives, by the Money Worth ratio, and the tax rates on annuity and lump sum. However, even in this favorable environment, only 42.6% of the retirees fully annuitize, against 45% taking full lump sum. We provide evidence for "passive" adverse selection, as individuals from high mortality municipalities are less likely to annuitize and more responsive to changes in the annuity price. Our findings show that individual characteristics matter too. Annuitization rates are higher for women and lump-sum payments are more likely among French and Italian speaking individuals. As French and Italian-speaking Swiss are more likely to leave inheritance, these findings provide supporting evidence that individual preferences for bequest effect annuitization decisions.

Women are still largely underrepresented in STEM disciplines. This is partially due to women performing worse than men in the standardized math tests used for admission into STEM. As these tests feature strict time constraints, we investigate the role of time pressure in originating gender gaps in math tests. We run a randomized experiment with university students, who took a 20-question (10 on logic and 10 on algebra) standardized math test under three different scenarios: high (45 seconds per question), low (20 minutes overall) and no time pressure. We show that eliminating time pressure reduces the gender gaps in the average math score by 40% (50% in logic and 30% in algebra). All students use more time to complete their test under no time pressure, but there is no gender difference in the time increase. Findings from an additional attentiveness and working memory test suggest that time pressure may reduce students’ performance by creating anxiety, which is particularly disruptive for women. Remarkably, the predictive power of the math tests for university performance is equally high under the different time pressure scenarios. Hence, eliminating time pressure from math tests increases gender equality without reducing the effectiveness of the selection process.

Nationalist demands for more autonomy or independence – on the rise in Europe – create uncertainty. Regulatory uncertainty emerges from the sharing of legal and administrative responsibilities between central and regional authorities. Political uncertainty stems from unilateral moves towards full independence. To evaluate the costs of uncertainty, we use two empirical methodologies to analyze the Catalan-Spanish negotiation for the Catalan Statute and the quest for independence. Using Catalan survey data, we estimate that entrepreneurs, concerned about the business environment, oppose joint Catalan-Spanish fiscal responsibility and independence. Using an event approach methodology, we estimate that the immediate stock market reaction to the approval of the Catalan Statute was negative for (Catalan) firms in the tradable sector. The political uncertainty due to the 2017 referendum had an even stronger negative stock market effect on all Catalan firms. Our findings are consistent with costly regulatory and political uncertainty from quests for more autonomy or independence.