Economics

Servicio de Estudios, Banco de España, Madrid and Facoltà di Economia, Università degli Studi di Roma "Tor Vergata", Rome. We are grateful to Jesus Gonzalo, Guillermo Llorente and Oreste Tristani for their comments and suggestions and Florentina Alvarez and Luis del Barrio for ...

In this paper we focus in the period of political turmoil starting in September 2017 in Catalonia. Our research question is the following: can the Catalan crisis be tracked by the searches done by the public on different consumption items in the Internet? We do so by focusing in two set of consumption categories: Travel to Catalonia from the main international markets (France, Germany and United Kingdom) and searches on the main consumption categories done from Catalonia and from other five big regions (Madrid, Valencia, Aragón, Andalucía and Basque Country). The preliminary results show that the uncertainty in the political situation has translated unto a decline in searches on terms associated with tourism activities in Barcelona, one broad measure shows that searches for the term "Barcelona hotel" has declined by 12%, year on year for September 2017 to January 2018, by comparison searches for hotel in other comparable Spanish regions have increased slightly. When comparing searches done from Catalonia with other regions through simple time series models, a sizeable negative residual for Catalonia is present in October 2017-the most difficult period in the Catalan conundrum-which is not observed in other geographical areas. This is the case for some search topics associated to durable goods and Catering and Accommodation services. The political turmoil in Catalonia had significant negative effects in two consumption categories: Theaters and Restaurants.

Most people use web search tools to collect information on goods or services they intend to buy. Given the prominence of Google among the search engines and the availability of Google trends (GT) as a tool packaging some characteristics of those searches (geography, topic, categories, among others) it is only natural to use this instrument in order assess trends in the market. In this paper we build indicators reflecting the real estate market stance. To do so we rely GT’s TOPIC ́s option that approximates the concept (housing, purchase, sale ...) instead of the exact wordings used by searchers. This approach is particularly useful in a country with several official languages and an important foreign market. The baseline quarterly model describes house sales (measured by its year-onyear growth rate) as an autoregressive AR (1/4) model and unemployment rate as a covariate. The alternative augments the baseline with contemporary a Google indicator. The models are estimated for 2004Q1-...

The monitoring of the regional economic situation takes on particular importance in highly decentralised countries, such as Spain. Against this background, this article summarises the key aspects of the BayFaR model (Bayesian Factor model for Regions), a new tool used by the Banco de Espana for the short-term forecasting of the GDP of the Spanish economy and of its biggest regions. The tool allows monthly indicators of activity to be combined with quarterly GDP, the benchmark variable for conjunctural analysis. In Spain’s case, however, it is necessary to use alternative measures of this variable. This is because the official statistics do not provide a homogeneous measure for all the regions, nor one that is consistent with INE’s national quarterly GDP.

The monitoring of the regional economic situation takes on particular importance in highly decentralised countries, such as Spain. Against this background, this article summarises the key aspects of the BayFaR model (Bayesian Factor model for Regions), a new tool used by the Banco de España for the short-term forecasting of the GDP of the Spanish economy and of its biggest regions. The tool allows monthly indicators of activity to be combined with quarterly GDP, the benchmark variable for conjunctural analysis. In Spain's case, however, it is necessary to use alternative measures of this variable. This is because the official statistics do not provide a homogeneous measure for all the regions, nor one that is consistent with INE's national quarterly GDP.

This paper reviews some of the applications that use the vast swathes of information provided by Internet user searches for economic analysis and forecasting. This enormous volume of information, available in real time, can be handled by analysts thanks to statistical tools such as "Google Insights for Search", which allow trends in different areas of interest to be classified and evaluated. Previous work focused predominantly on the labour market, on the housing market, on retail sales and on consumer confidence. This paper presents a very specific application for the Spanish economy: British tourist inflows to Spain (the Spanish tourist industry's main customers). The improvement in the forecasting provided by the short-term models that include the G-indicator depends on the benchmark model. This does, however, allow an adjusted indicator of the inflow of British tourists to be obtained with a lead of almost one month. This is but an initial step in the use of on-line searches for constructing leading indicators of economic activity. Other applications to be explored are car sales, consumer confidence and house purchases. The chief characteristic of these procedures is that, with time and the continuous growth of Internet use, results can only improve in the future. It should nonetheless be recalled that the construction of these G-indicators requires caution so as to avoid mistakes arising, inter alia, from the different use of language in different countries. Not taking due caution and blindly confiding in these indicators may lead to erroneous results being obtained.

An auction marketplace like eBay consists of (i) an individual auction design; and (ii) a multiauction platform design, i.e., the set of rules that organize and convey information about multiple individual auctions. This paper shows that two aspects of eBay's platform design -sequencing of auctions by unique ending time, and provision of information about both current and near-future objects for sale -substantially increase the social surplus generated by single-unit second-price auctions when the goods traded are imperfect substitutes. The remaining ine¢ ciency from not using a multi-object auction is surprisingly small. JEL Classi…cation: D44, D82, D83, L13, L81

Buy prices are puzzling: it makes sense for a seller at auction to set a minimum bidding level (i.e., a reserve price), surely, but a maximum? We explore the use of maximum bidding levels (buy prices) in online auctions and provide a rational explanation for this seemingly irrational auction mechanism. We show that augmenting an English auction with a buy price can improve the seller's profits by partially insuring (and therefore increasing the expected payment from) some risk-averse bidders. Perhaps more surprising is that the English auction augmented with a buy price can also be superior even to the first-price sealed-bid and Dutch auctions when bidders are risk averse.

Polities di¤er in the extent to which political parties can pre-commit to carry out promised policy actions if they take power. Commitment problems may arise due to a divergence between the ex ante incentives facing national parties that seek to capture control of the legislature and the ex post incentives facing individual legislators, whose interests may be more parochial. We study how di¤erences in "party discipline" shape …scal policy choices. In particular, we examine the determinants of national spending on local public goods in a three-stage game of campaign rhetoric, voting, and legislative decision-making. We …nd that the rhetoric and reality of pork-barrel spending, and also the e¢ ciency of the spending regime, bear a non-monotonic relationship to the degree of party discipline.

We generalize the Antràs and Helpman (2004) model of the international organization of production in order to accommodate varying degrees of contractual frictions. In particular, we allow the degree of contractibility to vary across inputs and countries. A continuum of firms with heterogeneous productivities decide whether to integrate or outsource the production of intermediate inputs, and from which country to source them. Final-good producers and their suppliers make relationship-specific investments which are only partially contractible, both in an integrated firm and in an arm's-length relationship. We describe equilibria in which firms with different productivity levels choose different ownership structures and supplier locations, and then study the effects of changes in the quality of contractual institutions on the relative prevalence of these organizational forms. Better contracting institutions in the South raise the prevalence of offshoring, but may reduce the relative prevalence of FDI or foreign outsourcing. The impact on the composition of offshoring depends on whether the institutional improvement affects disproportionately the contractibility of a particular input. A key message of the paper is that improvements in the contractibility of inputs controlled by final-good producers have different effects than improvements in the contractibility of inputs controlled by suppliers.

We develop a simple general equilibrium model for studying the impact of workers'relativewage concerns on resource allocation and the organization of production. We characterize equilibria for the closed economy and for an open economy in which an intermediate input can be produced o¤shore. In the closed economy, …rms that are otherwise identical may have di¤erent hiring practices and pay di¤erent wages to low-skill workers. In the open economy, some …rms perform all production at home while others produce all of the intermediate input o¤shore. We show that relative-wage concerns add to incentives for o¤shoring. O¤shore production may take place in the presence of relative-wage concerns in situations where it would not be pro…table in their absence. And if o¤shoring takes place with or without such concerns, the extent of o¤shore production is greater in the former setting than in the latter. We further show that when workers are concerned about relative pay, the equilibrium does not maximize the economy's net output. Nonetheless, the competitive equilibrium with o¤shoring is constrained Pareto e¢ cient.

We study a two-country two-sector model of international trade in which one sector produces homogeneous products while the other produces differentiated products. The differentiatedproduct industry has firm heterogeneity, monopolistic competition, search and matching in its labor market, and wage bargaining. Some of the workers searching for jobs end up being unemployed. Countries are similar except for frictions in their labor markets, which include efficiency of matching, cost of vacancies, firing costs, and unemployment benefits. We study the interaction of labor market rigidities and trade impediments in shaping welfare, trade flows, productivity, and unemployment. We show that both countries gain from trade but that the flexible countrywhich has lower labor market frictions-gains proportionately more. A flexible labor market confers comparative advantage; the flexible country exports differentiated products on net. A country benefits from lowering frictions in its labor market, but this harms the country's trade partner. And the simultaneous proportional lowering of labor market frictions in both countries benefits both of them. The model generates rich patterns of unemployment. In particular, better labor market institutions do not ensure lower unemployment, and unemployment and welfare can both rise in response to a policy change or falling trade costs. for editorial assistance, and Helpman thanks the National Science Foundation for financial support. simple way, which can be related to a variety of labor market features, such as the cost of vacancies, the efficiency of matching in labor markets, firing costs and unemployment insurance. We focus the analysis on search and matching frictions in Sections 2-6, and show in Section 7 how the results generalize to economies with firing costs and unemployment benefits. We show, however, that even the simpler search and matching frictions generate rich patterns of unemployment in response to both variation across countries in labor market rigidities and changes in trade impediments.

The empirical analysis in "International R&D Spillovers" is first revisited by applying modern panel cointegration estimation techniques to an expanded data set that we have constructed for the purpose of this study. The new estimates confirm the key results reported in Coe and Helpman about the impact of domestic and foreign R&D capital stocks on TFP. In addition, we show that domestic and foreign R&D capital stocks have measurable impacts on TFP even after controlling for the impact of human capital. Furthermore, we extend the analysis to include institutional variables, such as legal origin and patent protection, in order to allow for parameter heterogeneity based on a country's institutional characteristics. The results suggest that institutional differences are important determinants of total factor productivity and that they impact the degree of R&D spillovers.

In this paper we develop a multi-sector general equilibrium model of firm heterogeneity, worker heterogeneity and labor market frictions. We characterize the distributions of employment, unemployment, wages and income within and between sectors as a function of structural parameters. We find that greater firm heterogeneity increases unemployment, wage inequality and income inequality, whereas greater worker heterogeneity has ambiguous effects. We also find that labor market frictions have non-monotonic effects on aggregate unemployment and inequality through within and between-sector components. Finally, high ability workers have the lowest unemployment rates but the greatest wage inequality, and income inequality is lowest for intermediate ability. Although these results are interesting in their own right, the main contribution of the paper is in providing a framework for analyzing these types of issues.

This paper develops a new framework for examining the distributional consequences of trade liberalization that is consistent with increasing inequality in every country, growth in residual wage inequality, rising unemployment, and reallocation within and between industries. While the opening of trade yields welfare gains, unemployment and inequality within sectors are higher in the trade equilibrium than in the closed economy. In the open economy changes in trade openness have nonmonotonic effects on sectoral unemployment and inequality. Aggregate unemployment and inequality depend on within-and between-sector components, and the sectoral composition effects complicate the impact of the opening of trade and of reductions in trade impediments on these aggregate variables. However, when countries are nearly symmetric, the sectoral composition effects enhance the within-sector effects, and both aggregate inequality and aggregate unemployment increase with trade liberalization.