M2 Choice – Economics of Markets and Organizations (EMO)

Meet_the_board_ArthurCurrent student – Arthur Biamouret

Which aspects of your chosen program were the most challenging?

The M2 EMO is not technically or theoretically difficult, but I think that the hardest part for me was to do theory. After my gap year – two internships and a trip – I was expecting to do applied economics, but the M2 EMO is still quite theoretical. Obviously, we do not learn this for fun, we need it in our future jobs and it was very useful for interviews. But still, you need to be ready to go through some Cournot, Bertrand and Hotelling models for one more year. Fortunately, most of it was not difficult, and was interesting and well supported by very good applied papers.

Which was your favourite course(s) and why? 

My favorite course was Empirical Analysis of Firm Behavior. The teacher (Mathias Reynaert) is very good and the course is focused on applied methodologies. We had two homeworks to do, which allowed us to practice STATA and to apply the economic theory seen during the previous years. During this class, we discussed interesting topics using applied papers and real life examples. Moreover, the class was a good complement to another one which was more theoretical.

What do you plan to do next?

After the M2 EMO, I would like to work as a consultant in competition economics. I have always been interested in competition issues since we, as consumers, can feel the consequences of those decisions in our daily lives (telecommunication, retail, transports, etc). I have always wanted to be at the heart of those decisions which often strongly impact people’s environment. Moreover, competition issues are present in every sector, and working as a consultant will give me the opportunity to discover diverse topics and methodologies. For the next six months I am going to Brussels in order to do my internship with the firm Positive Competition.

M2EMO_AlumniAlumni – August Aubach Altès

What are you up to now?

I am an economic consultant at Analysis Group in Paris. The vast majority of our cases concern French and European competition matters. My primary job is to integrate industrial organisation theory and econometrics, along with current quantitative methods, to analyse the conduct and market dynamics at issue in antitrust litigation and merger investigations. At present, I am involved in an important case that involves competition in digital media markets.

I started as an intern in June 2019 and then received an offer as a full-time Analyst in December. One of the main reasons I decided to stay at Analysis Group is that the firm offers the right balance between academia and the real world. The work allows me to deepen my understanding of market structures and firms’ strategic choices, from both a theoretical and an empirical perspective. The work environment at Analysis Group promotes cooperation and knowledge sharing. I am currently working with and learning from experts in industrial organisation. I would like to pursue a Ph.D. in economics, with a specialisation in industrial organisation, and I believe that this experience will undoubtedly help me shape my future research.

What skills acquired from TSE do you find useful in your work?

TSE gave me a comparative advantage over other graduate students with similar profiles. Courses at TSE provide the skill set that is required for any job. As one might expect, hard skills such as economic reasoning, data analysis, computer programing and writing abilities are essential in all types of consulting work. However, the above-mentioned is a necessary, but not sufficient, condition to stand out, and it is the set of soft skills that I learned at TSE – such as time management, teamwork and flexibility – that are crucial. These skills have proven particularly useful, as most of the work is done in teams – that is, working regularly with people who have different backgrounds and work styles.

Regarding the EMO track, it has positioned me ideally for this role by giving me the opportunity to analyse in class many competition cases from a variety of standpoints. The opportunity to engage with these cases – such as horizontal mergers, exclusionary contracts and collusive behaviours in two-sided markets – allowed me to understand how economic agents should be understood depending on their incentives and on the configuration of the market. Therefore, one of the main takeaways from the EMO master that I have implemented at Analysis Group is that each case should be analysed from a rigorous and critical economic perspective, and as an independent and unique event.

Taxe carbone et redistribution

Taxe carbone et redistribution

Alors que Greta Thumberg s’indigne au sommet de l’ONU pour le climat, les émissions de gaz à effet de serre ne cessent de s’élever. Pour respecter la barre des deux degrés choisie par la COP 21, la concentration de CO2 devrait se stabiliser puis diminuer. Or elle augmente, à hauteur de 2 ppm (partie par million) par an. Il y a quelques mois , le gouvernement français annonça une augmentation de la taxe carbone. Une vague de contestation déferla sur le territoire français, les Gilets Jaunes, et une partie de la population s’indigna de l’égocentrisme des manifestants : c’est pourtant l’avenir des générations futures qui est en jeu ! Mais n’aurait-on pas oublié l’aspect inégalitaire de la taxe carbone ?

 

Quésaco « taxe carbone » ?

La taxe carbone ou CCE (Contribution Climat Énergie) existe depuis 2014. Elle s’ajoute à d’autres taxes qui sont la TICPE (Taxe Intérieur sur la Consommation de Produit Énergétique) et la TVA. En 2018, 61,4 % du prix du SP 95 correspond à des taxes. La TICPE représente à elle seule 73 % du montant des taxes, ce qui en fait la quatrième source de revenu de l’état. La CCE, quant à elle, est relative aux quantités de CO2 émises par la source d’énergie utilisée (essence, gazole, fioul…). Elle a vu sa valeur augmenter progressivement, passant de 7 euros à 55 euros par tonne de CO2 émise entre 2014 et 2019. L’ambition de la Loi finance de 2018 était d’atteindre 86,4 euros/t CO2 en 2022.

Contrairement aux autres taxes sur les carburants, la taxe carbone a pour mission d’intérioriser les externalités dues à l’émission de CO2. Cette taxe pigouvienne vise à atteindre un signal prix en accord avec le bien commun. Pour les économistes, calculer le coût de la tonne peut se révéler complexe. En effet, le cycle de vie du CO2 s’étale sur environ 80 ans, ce qui force à anticiper l’ensemble des dommages résultant de cette consommation tout au long de cette période. Payer une taxe carbone c’est donc transférer des fonds du présent vers les générations suivantes.

Une tonne de CO2 émise entraînerait 1200 euros de dommage sur la période. Avec un taux d’actualisation de 4% (voir Christian Gollier, « Le climat après la fin du mois »), cela conduit à payer 50 euros aujourd’hui. Une évaluation en accord avec le rapport de Stern et Stiglitz de 2017, évaluait la tonne de CO2 entre 40 et 80 euros. On estime qu’en moyenne, un être humain émet 5,5 tonnes de CO2 par an. Le gouvernement toucherait alors une recette carbone par tête d’environ 275 euros.

Payer une taxe carbone, c’est donc payer le vrai prix de sa consommation. Alors pourquoi des milliers de personne ont-elles occupé des ronds-points un peu partout en France ?

 

Opposition à la taxe carbone

Après les Bonnets Rouges en 2015, le mouvement populaire d’octobre 2018 fait à nouveau remonter des oppositions à la mise en place de la taxe.

Entre 2016 et 2018, la taxe carbone passe de 22 euros à 44,6 euros/t/CO2. En parallèle, le prix annuel moyen du baril de Brent augmente d’environ 60 %. L’augmentation des prix des carburants qui a mis le feu aux poudres est donc le résultat d’une augmentation de la taxe carbone mais surtout d’une augmentation des cours du pétrole. Les deux cumulés ont bien évidemment rendu le coup encore plus rude, mais surtout pour qui ?

Il est important de se souvenir que la taxe carbone constitue un instrument fiscal régressif : les taxes sur les carburants prennent une part relative dans les revenus des plus démunis supérieure à celle des plus aisés. Il faut aussi prendre en compte le facteur géographique : les zones péri-urbaines voire rurales abritent beaucoup de personnes à bas revenus. L’éloignement des services, et l’absence ou le manque de transport en commun conduisent inévitablement à une très forte dépendance aux carburants. Le manque de produits de substitution piège ces personnes, et les condamne à subir de plein fouet la hausse des prix.

« Jaune de rage » pouvait-on voir écrit sur les pancartes, trois mots qui illustrent le sentiment d’injustice ressenti par les manifestants. Un sentiment compréhensible quand on sait que 45 % des émissions de CO2 en Europe proviennent d’entreprises soumises à une taxe carbone deux fois moins importante que pour le reste des agents (dont les ménages).

Cette différence provient de l’European Trading Scheme (ETS), marché des quotas d’émission mis en place à partir de 2005. À la suite de la mise en place du système, une augmentation de 10% des investissements verts des entreprises a conduit à une diminution de leurs émissions. Arrivent les crises des subprimes et de la dette souveraine qui entraînent une diminution de la production et donc de la demande de quotas d’émissions. Actuellement le prix de la t/CO2 pour ces entreprises s’élève à 25 euros, son plus haut niveau depuis 2008. Un écart de prix aberrant, et ce même sur le plan de l’efficacité économique : le signal prix doit être le même pour tous.

Enfin, se pose le problème de l’utilisation des recettes de la taxe carbone. En 2016 par exemple, sur les 3,8 milliards de recettes, 3 milliards sont affectés au Crédit d’Impôt pour la Compétitivité et l’Emploi (CICE). Le montant des fonds affectés à la transition écologique est donc minoritaire. L’utilisation des recettes est floue pour la population. Dans un contexte de suppression de l’ISF, augmenter la taxe carbone dont une partie des recettes est allouée au budget général constitue au minimum un mauvais message politique. Ces messages sont déterminants, car en fin de compte, c’est à la génération actuelle d’accepter la transition.

Pour autant, l’impact du CO2 sur le réchauffement climatique nous force à agir.  Malgré son aspect inégalitaire et un système global encore imparfait (ETS, manque de coordination internationale, etc), une taxe carbone doit voir le jour. La question est : comment la rendre acceptable ?

 

Solutions et redistribution

« La goutte d’eau qui fait déborder le vase » est l’expression parfois employée pour dénoncer l’importance de la hausse des prix des carburants dans le mouvement des Gilets Jaunes. Comme on a pu le voir, c’est l’augmentation simultanée des cours du pétrole et de la CCE qui en est à l’origine. Dans un contexte de hausse des prix d’un produit peu substituable, est-il avisé de la part du gouvernement d’augmenter la pression fiscale ?

Entre 2000 et 2002, la TIPP flottante variait en sens inverse des cours du pétrole. Une hausse des cours du Brent était donc amortie par une diminution de la taxe. Un tel mécanisme en 2018 aurait évité en théorie une hausse trop brusque. Or, ce n’est pas l’objectif d’une taxe carbone. Cette dernière doit mesurer l’impact des émissions de CO2 dont la valeur ne dépend absolument pas des cours du pétrole. De plus, si chaque pays adoptait cette pratique, les exportateurs de pétrole n’auraient qu’à augmenter leurs prix jusqu’à réduire la part de la taxe à zéro.

Tout réside en réalité dans l’allocation des recettes.

La commission Rocard donne une première piste : utiliser une partie des recettes pour financer des projets bas carbones, et l’autre pour réduire les charges sociales. En moyenne annuelle, la charge sociale s’élève à 28 055 euros / ind. En reprenant les chiffres cités plus haut, on comprend que, même en utilisant toutes les recettes carbone (soit 275 euros / ind), l’effet serait marginal, et le serait de plus en plus puisque tout l’intérêt de la taxe réside dans la diminution des émissions, donc des recettes.

En revanche, Helmuth Cremer et Norbert Ladoux montrent que rendre une partie des recettes de la taxe pigouvienne à ceux pour qui elle est la plus lourde à supporter, permet de donner un aspect redistributif à la politique environnementale. Une idée dans la lignée de la tribune du 17 Janvier 2019 du Wall Street journal, signée par 27 lauréats du prix Nobel d’économie. Ces derniers défendent unanimement une taxe carbone dont l’ensemble des recettes serait redistribué uniformément à la population. Christian Gollier soutient l’idée de Cremer et Ladoux, considérant que la redistribution doit être orientée seulement vers les personnes les plus démunies, mais tout en conservant une part des recettes pour d’autres utilisations.

 

En quelques mots…

Le processus de lutte contre les émissions de CO2 sera décisif pour la préservation d’un milieu viable pour l’Homme, ainsi que dans la sauvegarde de nos équilibres démocratiques. Les mouvements populaires nous montrent que la transition écologique doit être équitable, au risque d’entraîner la création de faux adversaires. Dans ce sens, lutter contre les émissions de CO2 en conservant nos valeurs démocratiques nécessitera des processus de redistribution aussi réfléchis, voire plus, que la taxe carbone.

 

Par Maël Jammes

 

 

Interview with Julien Grenet from PSE

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Julien Grenet is a researcher at the CNRS, an Associate Professor at Paris School of Economics, and one of the founders of the Institut des Politiques Publiques. He is specialised in education economics, public economics and market design. He is known by the general public for his participation in the public debate and the vulgarisation of economic concepts in some media such as France Culture.

 

He agreed to talk to the magazine about his work as a researcher, the importance for economists to be involved in the public debate and about modern issues that the french educational system is facing today.

 

Why did you create l’Institut des Politiques Publiques? What are its specificities?

We created l’Institut des Politiques Publiques – IPP – with Antoine Bozio in 2011. It followed a six-year period that Antoine spent in London working for the Institute for Fiscal Studies – IFS, which is our main inspiration for IPP. What was lacking in France was an institute that evaluates public policy, tries to put together the insights of academic research and translates them into policy brief reports targeting a broader audience such as policymakers, journalists and citizens. We felt that there was a very good academic research in public policies existing in France, but most of the results were not really conveyed to the general debate, which is, in my opinion, quite unfortunate. IFS was a good model to import in France. We started small but we have  grown up ever since, trying to cover a broad range of topics that are interesting for the public debate, such as tax policies, education, housing, pension, and environment. We also work on health issues.

What is your opinion, as a researcher, on the role of economists in the public debate?

I do not want to be judgmental on what we should do or not do. There are different ways to contribute to the public debate. From my point of view, you do so through the academic output you produce that then spills over onto the public debate. You should also try to meet policymakers. The important thing is to participate in the debate on topics that you know, and only on them. Unfortunately, it is not always the case, and that sort of attitude may damage the reputation of economists. I am personally trying to restrict my interventions to questions on education or housing, since I have worked on it.

Why did you choose to study education, and more specifically social segregation and selection processes, as your main topic?

I started to study education because it was the topic of my Master thesis. What drove me to this is that I come from a family of teachers whose social mobility upwards was entirely due to school.  I was shocked in a way by the fact that through the education system, my family managed to climb up the social ladder. Today, we sometimes have the impression that it does not play this role anymore, and we wonder what is wrong with our educational system. I think the tools of economists have a lot to say. What we can learn with economics is improving the efficiency of the educational system.

I went into it for personal reasons; afterwards, the topics that I have addressed are more random. I started working on the return of education, which is a very classic question. Then, since I was working in the same office as Gabrielle Fack, who was working on housing, we thought about working on something in between those two fields of interest. We started working on the effect of school zoning (“la carte scolaire” in French) on housing prices. We thought that this system was one way to assign students to schools, but we actually found out there were many others. We started reading about the school choice mechanism and got interested in that. It is a very dynamic field in economics: how to assign students to schools? How to assign teachers to schools? How to drive students to higher education programs?

In France, there has been a lot going on on the subject lately, and this is important for the public debate. We heard a lot about Admission Post Bac and Parcoursup; those are, in my opinion, important technical tools for policy implications or policy effects. We empirically know quite little about how their effect in the real world. I think this is where we, as economists, can contribute: by improving these tools.

According to the OECD, France is one of the most unequal countries in terms of climbing up the social ladder. What is your analysis?

I think that there are many reasons to it; yet, we can hardly identify them. What the OECD has shown is that at the age of 15, your performance is more determined by your social background in France than in any other country. France is typically in the top three countries where social determinism is the strongest at school.

One reason is that our educational system, especially the middle school system – between 11 and 15 years old – is highly segregated. From research, we know that ghetto schools harm students who are studying there beyond the effect of social background. This segregation in the school system increases inequalities. This might be due to different things: the level of residential segregation is very high in France, and the way we assign students to schools is far from being optimal. As we are assigning students to their local school, if the neighborhood is segregated, then the school is going to be segregated too.

There are many other ways to assign students that we could use. For instance, there is what we call “control school choice” that tries to achieve a balance in the social composition. We could also redesign the school boundaries, or “school catchment”, so that they would be more diverse in their intake students. That is one important topic to be addressed: can we reduce segregation in school by using different methods of assignment?

There is also a problem with how teachers are assigned to school. Typically, young teachers, who are inexperienced, are assigned to the most deprived schools in France, which is obviously a problem. We know that teachers have their biggest efficiency improvement during their first few years of teaching. Hence, students from deprived schools have less probability to benefit from the most efficient teaching.

There is also an issue with the educational system. The French system is very good at selecting an elite and the whole system is created to detect these students who go all their way up to “classes préparatoires”, “grandes écoles” and so on. However, it is not so good to have as many students as possible to succeed. We have a very strong elite but, in the meantime, we are losing a lot of students along the way. France has a high drop-out rate: many students quit school with no certification. Another problem with the system is that vocational courses are seen as a personal failure, unlike many other countries. Therefore, a lot of students who follow this path feel like they failed their studies.

Your research focuses on assignment algorithms. What consequences did you find of such algorithms on students’ choices?

France is a very centralised country; hence, it is more inclined to use these algorithms to assign students and teachers than other countries. There has been very little involvement of researchers and economists to design these algorithms. In fact, a lot of research on this assignment mechanism comes from the U.S.. It is a branch of design mechanism theory which received a lot of visibility thanks to the Nobel prize of Alvin Roth and Lloyd Shapley in 2012. They really transformed the landscape in many dimensions:  for example, the assignment of students to school in the U.S. has been completely redesigned in many cities using these algorithms. Kidney exchanges now rely on these algorithms, and there are many new applications, such as social housing allocation.

In France, in my opinion, the main problem is the fact that there is not enough transparency about these algorithms. They exist in order to produce the best possible matching between students and schools, to try to maximize satisfaction while respecting several priority rules. The problem is that, the way the algorithms and the priority rules work are not well known. This has led many people to reject the whole idea of selecting people with algorithms because they feel that there is a black box, like a lottery, when in fact, an algorithm is just a tool.

What really matters is the way you design priorities. If you have two students who apply to a school and there is only one seat left, which student has the priority over the other is a political decision depending on which criteria you promote – students with better grades, students who live closer to the school, students with a lower social background, … This is not sufficiently explained and democratically decided. The issue today is to bring research into these algorithms, so that there are more discussions and a better understanding of the way they work.

You are currently working on a project on social mix. Why it is a topic of interest? What are your preliminary results and your analysis?

We have already said that the lack of social mobility is one of the reasons why there is so little mobility upward in France. The question is how to address this problem. We have several potential ways of doing it. We could use the  , we could redesign the school catchment area, we could also close some schools and send some students away from their original choice, like in the city center rather than in a suburban area.

We do not have many empirical results telling us in which case we should use this or that tool nor do we know the actual effect of some tools on segregation. Moreover, these effects are mitigated by the behavior of the parents: if they decide to send their child to a private school, we might not get as much social mix as we initially wanted. Therefore, we are trying to evaluate different ways to assign students to school in order to create social mix and evaluate their effect. To do so, we are using several experiments that were launched across the country, and we try to compare the effect of these experiments on social mix.

The reason why we want to increase social mix is because we believe it is going to reduce inequalities. We are interested in the effect of social mixing on both students’ performance and their non cognitive aptitudes: their self-confidence, their social fatalism and the way they perceive others – the perception of difference. What we are trying to use here is the fact that, in some experiments, even if we found a large effect on social mix,

We try to evaluate this through surveys that are conducted in schools. We are now proceeding in the second wave; two other waves  are coming. What we try to evaluate is how does the change of the school social composition individually affect the students through their performance in school and their non-cognitive outcomes. If we look at the literature, there is no evidence of this, especially on the non-cognitive aptitudes, because we cannot really measure it with administrative data. We need to go to the schools and directly ask students some questions. That is our contribution to the literature: trying to answer one of these questions.

Finally, what results in your research were you surprised of?

I did not anticipate the fact that this students’ assignment mechanism would have such a big impact on the composition of schools. I started to work on these assignment mechanisms looking at several high schools in Paris. In 2013, the educational authority of Paris adopted an algorithm to replace the manual procedure. As a part of the algorithm, they created a bonus for low-income students. This bonus would increase their priority, and as a result, the social segregation in high schools in Paris went down by 30 % in only two years, which is huge. This had not been anticipated by the local education authority because they did not think that the way the bonus had been created would make that bonus so large. They did not realise that they gave almost automatically their first choice to low-income students. This completely changed the landscape of Paris, which was the most segregated area in France. This is no longer the case.

By working on this data, I realised that these tools are in fact even more powerful than any reform. For instance, the “assouplissement de la carte scolaire” was relaxing these schools’ catchment areas, so that students could apply to schools that are away from their homes. In reality, this had very little effect on the social composition, whereas these school choice algorithms, like the one implemented in Paris, had a huge impact with very little coverage in the media. The numbers shown in the graph are explanatory: the low-income students now have a bigger set of choices than before. This is one of the surprises of research and economics: it is not because something is not looked upon by researchers or does not get any attention, that it is not existing. You can be like an archeologist: you can dig the results up that were unknown until now and they can change the way you see and understand the educational system.

 

By Thomas Séron

Should we use new economic methods to assess the impact of collusion on welfare in vertical markets? The example of the “Yoghurt case”

 

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Céline Bonnet is a director of research at INRAE within TSE

 

If literature has widely covered collusion in horizontal markets, it has not given enough attention to collusion in vertical markets, and more precisely on how to properly evaluate the impact of cartels on total welfare. As we observe convictions for collusion among prominent manufacturers, economists try to advise authorities on new approaches to better consider the strategies of retailers, and better assess the impact of collusion on both manufacturers and retailers, as well as on consumers.

 

 

 

A concentrated market which has become the scene of anti-competitive practices

Over the past 30 years in France, the retail sector has known successive mergers that strengthened the bargaining power of big retailers against manufacturers. The food retail sector, for example, is dominated by eight major groups, including Carrefour and Leclerc, who represent about 40% of the total sales. To counteract this concentration trend, manufacturers of the food industry also decided to engage in a consolidation movement in the early 2000s. The increase of concentration among both retailers and manufacturers has led to higher prices for consumers.

Despite that trend, retailers have still searched for new innovative strategies to differentiate themselves and be more competitive on the market. Big retailers have played the strategy of Private Labels – PLs: they sell store-owned brands, such as, for example, la Marque Repère in Leclerc. PLs are then sold along with National Brands – NBs, established manufacturer brands – giving retailers advantages on both horizontal and vertical markets. They can differentiate from other retailers who might sell the same NBs, and they gain bargaining power against NBs manufacturers, which will lose market shares for the benefit of PLs manufacturers if they charge too high prices. Indeed, PLs products can be substitutes for NBs products, and are often sold at a relatively low price.

The concentration of manufacturers, along with increasing selling prices, also facilitated collusion and other anti-competitive practices. This can be illustrated by the “yoghurt case.

In 2015, French authorities charged 10 major PLs producers of the French dairy desserts sector – such as Yoplait and Lactalis – for having colluded from 2006 to 2012. Indeed, even though PLs are retailer-owned brands, one PL manufacturer may produce for several retailers at the same time. This gives PLs producers incentives to collude. If the price proposed by the retailer is too low, they can reduce their market share in the concerned retailer’s store and sell somewhere else. Retailers will suffer from this strategy, as they need PLs products to differentiate and bargain. Hence, the bargaining power of PLs producers increases with collusion.

 

A traditional estimation method of collusion effects has become outdated

To assess the variation in welfare caused by the collusion, the French competition authorities used a traditional economic approach, consisting in mainly focusing on the horizontal collusion, and fixing the retailers’ response. The flaw of this method is that it does not take into account vertical relations between PLs producers and retailers, and hence neglects the strategic response of the retailers. It also ignores the potential  “umbrella effect”, which arises when an increase in PLs products’ wholesale prices diverts demand to the substitute product (NBs) and thus distort NBs products’ wholesale prices and market share. A forthcoming paper  (C. Bonnet, Z. Bouamra-Mechemache, Empirical methodology for the evaluation of collusive behaviour in vertically-related markets: an application to the “yogurt cartel” in France) addresses this issue and applies this new methodology to the “Yoghurt case.

 

A new economic initiative to assess the impact of a cartel on welfare applied to the “Yoghurt case

The idea is to model a competitive setting – or non-collusive counterfactual – to obtain the prices and quantities that would have been observed in such environment, and then compare it with the prices and quantities we currently observe on the market. This new method differs from the traditional one in the sense that the negotiation of the choice of the wholesale prices is modelled as a Nash bargaining game, and not as a unilateral decision from the manufacturers that retailers have to accept. The results from this paper concluded that there was profitable collusion among PLs manufacturers. It also showed that the profit variation for retailers was quite ambiguous, and that PLs producers were not necessarily the only winners of the cartel.

Faculty article

In the competitive setting, by decreasing the wholesale price of PLs products, we would expect that the market share – and hence the wholesale and retail prices – of NBs products would decrease due to a drop in NBs demand. Indeed, in the yoghurt market, we observe an asymmetric substitution between the two types of products: NBs products are more sensitive to a change in the prices of PLs products than the other way around. Strangely, the simulation showed a decrease in market share and wholesale prices for NBs products, but not a decrease in retail prices. In fact, the « umbrella effect » causes a decrease in wholesale prices of NBs products following the decrease in the wholesale prices of PLs products. NBs and PLs manufacturers clearly lose profit in the competitive setting compared to collusion. The novelty then is to take into account the optimal strategy of the retailer, which is actually to slightly increase the retail price of the NBs products: clients will be attracted by the low prices of PLs products, and the retailers will extract a maximum of surplus from consumers who still want to buy NBs products. The retailer actually gains from PLs products but loses from the increase in NBs products’ prices because of the asymmetric substitution. The overall result varies from one retailer to another: for some, the negative effect of NBs products exceeds the positive effect of PLs products, but not for others.

Hence, both PLs and NBs manufacturers are better off with collusion, while the results for retailers are mitigated. The study also found that consumers are worse off with collusion, but the loss is relatively low – less than 1% of the consumer surplus. Overall, total welfare has increased on the yoghurt market.

 

The “yoghurt case” is an example of how variations in welfare can be wrongly estimated when not taking into account all the strategies of all players of the game. With this new methodology, consisting in considering both inter and intra brand competition, as well as a supply model that includes vertical linkages between manufacturers and producers, competition authorities can better evaluate profit sharing between providers and sellers. In the “yoghurt case”, having more precise information on the providers of each seller would have allowed to estimate the exact impact of collusion on each provider.

 

By Céline Bonnet

 

 

THE (UNDER)REPRESENTATION OF WOMEN IN ECONOMICS

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The Nobel Memorial Prize in Economic Sciences was awarded this year to Esther Duflo and two other researchers for their work on global poverty reduction. The prize was first established in 1968, and only one woman, Elinor Ostrom, had previously been awarded in economic sciences.

In the workplace, men and women should be considered equivalent in terms of rights, benefits, obligations and opportunities. Sad to relate, in all fields of economics, women represent 19% of the workforce on average worldwide. We must ask ourselves: why do we have so few women in economics? Why is it a problem? And how can we bridge this gender gap ?

 

Why are there so few women in economics ?

Over recent years, economists have slowly started to develop an interest in the gender gap in the economic field. Data has shown the existence of a « leaky pipeline »: women struggle to advance in economics, they face barriers in publishing, promotion and tenure, and appear to be sideline the more they try to progress. In the US in 2017, according to the CSWEP – Committee on the Status of Women in the Economics Profession, new PhD students in economics were approximately 33% females, falling to 29% for assistant professors, to 23% for tenured associate professors and to 14% for full professors. Similarly, if we take a closer look at the top 300 institutions in terms of research output, we see that they have few female researchers. This confirms the existence of a leaky pipeline, but it does not explain its damage.

In 2017, Alice Wu received a lot of attention when she published her working paper about an American professional forum dedicated to the higher education job market. She exposed sexist comments and gender stereotypes underwent by women economists. The thirty words most associated with conversation about women are disrupting: “hot”, “pregnant”, “slut”, “prostitute”, “dated”, … And the list is catastrophic. But on the male side, the trend is much different: “adviser”, “prepare”, “mathematician”, “goals”, … This scandal, largely related by newspapers, led to many reports of women in economics experiencing inappropriate behavior in job interviews, seminars, meetings and conferences.

Gender gap applies to all fields of science, but it is almost double in economics than in the others. In universities, only about 20% to 30% of undergraduate students in economics are female. A study published in 2006 found that they start introductory economics courses being more skeptical about the subject than men, and the difference increases between the start and the end of the course, despite no differences in their performance.

Moreover, if we examine shares of paper by gender composition, we see that in economics, women publish on average less papers than men. Economists have studied this difference and have shown that women are held to higher editorial standards than men in economics. Besides, women are 17% less likely to get tenure than men with similar publication records, which shows that their publications do not count fully for their promotion.

These higher expectations also occur in student evaluations of female teachers. In economics and business, student evaluations of courses are systematically worse for women teachers than those for men, and these poor evaluations can affect tenure decisions.

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Why is the underrepresentation of women in economics a problem ?

As executive director of the Washington State Investment Board, Theresa Whitmarsh is one of very few women to wield a big influence in her industry. At the World Economic Forum Annual Meeting in 2014, she said: « If you exclude 50% of the talent pool, it’s no wonder you find yourself in a war for talent ». Women are not totally excluded from economics, but the rate is very low. Theresa Whitmarsh pointed out the fateful consequence of women’s underrepresentation in economics: universities and firms lose potential employees.

Moreover, a study has shown that topics favoured by women in research are different than those favoured by men: women are more attracted by health, education and welfare than by macroeconomics and monetary economics. It has shown that male economists were more skeptical of regulation and high minimum wages, and less likely to favour redistribution, than women were. Therefore the low rate of women in economics implies less research in those topics, and less investment in them, which could lead to a non-optimisation of policy decisions.

 

What can be done ?

Gender gap in economists will not disappear naturally. It is in favour of the common good to raise the rate of women in economics, and actions can be done.

Collecting information and building solidarity is the first step to mend the leaky pipeline. The International Association for Feminist Economics has tried to collect data to understand the problem so it can be solved. One of the solutions is to support early-career pipeline and mentoring programmes; their goal is to help participants to develop skills and networks. The CSWEP sponsors these types of programmes, and economists have studied its effectiveness and report that the mentoring program had a positive effect on a number of professional outcomes, such as the number of publications.

Some economists also think that the way the subject is presented to undergraduate students should be revised. Economics are taught most of the time in a lecture format, but it has been shown that active learning increases exam scores and decreases failure rates relative to traditional lecturing, with particular benefit for women in male-dominated fields. Additionally, universities are starting to create programmes that give support to women. For instance, Harvard has created its Undergraduate Women in Economics Challenge, an initiative to encourage more undergraduate women to major in economics.

Finally, the hardest thing to remove is implicit and institutional barriers. The glass ceiling is everywhere at anytime, and universities and employers have to change their behaviour to ensure representation of women in economics. A lot can be done: removing identifiers in university exams, committing to fair and relevant admissions or hiring criteria, collecting more evidence on candidates’ competencies, scrutinizing the drop-out rate of female undergraduates, using nudges, … Some interventions are easier than others. For example, studies show that having more female teachers and female professors in universities is a powerful encouragement for women seeking postgraduate positions. But if the number of women in universities could be easily raised, the problem would already have been solved.

To conclude, underrepresentation of women in economics is not a female problem, it is an economic problem. As Lael Brainard, a member of the US Federal Reserve’s Board of Governors, said, women and men should start to bring « diversity in the economics profession in order to help policy makers make better decisions in promoting a healthier economy ». We have to continue to recognise the problem, measure it objectively and find solutions. To all the actual and future female economists that are reading this article, one final comment: Go Girls!

 

by Alice Crolard 

 

References

Emmanuelle Auriol, Guido Friebel, Sascha Wilhem,  Women in European Economics, 04-2019

Kasey Buckles, University of Notre Dame, NBER and IZA, Fixing the Leaky Pipeline: Strategies for making economics work or women at every stage, 2019

Amanda Bayer, Cecilia Elena Rouse, Diversity in the economics profession: new attack on an old problem, 2016

Anne Boring, Soledad Zignano, Economics: where are the women ? Banque de France, 03-07-2018

https://blocnotesdeleco.banque-france.fr/en/blog-entry/economics-where-are-women

Donna Ginther, Women and economics, The Economist, 19-01-2017

https://www.economist.com/christmas-specials/2017/12/19/women-and-economics

Peter Vanham, To woman on a mission to close the gender gap in Finance, Forbes, 20-01-2016

https://www.forbes.com/sites/worldeconomicforum/2016/01/20/the-woman-on-a-mission-to-close-the-gender-gap-in-finance/#4dc399fb6abe

Inès Goncalves Rapaso. A few good (wo)men – on the representation of women in economics,  Bruegel, 15-01-2018

https://bruegel.org/2018/01/a-few-good-women-on-the-representation-of-women-in-economics/