Ulrike Malmendier, Professor

Open (1) Research in Behavioral Economics and Behavioral Finance

Open. Apprentices needed for the fall semester. Please do NOT contact faculty before September 11th (the start of the 4th week of classes)! Enter your application on the web beginning August 16th. The deadline to apply is Tuesday, August 29th at 8 AM.

Looking for highly motivated apprentices interested in behavioral economics or behavioral finance research for 2017 Fall semester. We list here three different research projects open for recruitment. If selected, you will be likely to assist with one of them or similar projects based on your interest.

Institutional Memory: Building on an emerging literature in (behavioral) micro and macro on how past experiences affect belief formation, this project is among the first to consider institution-level and aggregate implications. Questions applied to the banking sector are: Do past events and corporate performance shape future behavior? Does the memory of past banking crises explain heterogeneity in future risk taking behavior of banks? Apprentices will help answer these questions by working closely with historical bank data and by offering important feedback and ideas on data processing and empirical identification strategies. For more information on this project, please see a related precursor: http://eml.berkeley.edu/~ulrike/Papers/AER%20PnP%20proofs%20Mar26%202015.pdf

Scarred Consumption: Do the experiences of macroeconomic shocks have long-term impacts on individuals’ consumption choices? Does the experience of economic downturn induce more cautious consumption, even when times have become better? In this paper, we shed light on those questions by first building up a consumption-savings model comparing the rational agents in traditional literature and the agents with experience-based learning, and then by documenting extensive empirical evidence from multiple data sources including the Panel Survey of Income Dynamics and Nielson Homescan Panel. This paper also extends the concept of “experience effects” into a new array. The potential implications of the paper include offering micro-foundations in understanding long-term effects of economic shocks and explaining the macro dynamics of consumer spending. Apprentices on this project will assist with proof-reading the draft, editing the flow of the paper and providing thoughts on future improvements.

Lawyer Expertise and Negotiation Outcomes: Traditional contract theory mainly focuses on aspects such as contractibility or verifiability, and tends to abstract from individual traits of negotiating parties. Here in this paper, we explore the effects of lawyer expertise on the negotiation outcomes of M&A deals. We find evidence indicating that lawyers with longer experience and a better educational background achieve contracts that are more beneficial to their clients. The findings highlight the importance of modelling more formally the role of the negotiating parties in contract theory and imply shifts from the standard paradigm of optimal contract design. Apprentices will help with tasks such as paper revisions, model refinements and empirical test modifications.



Qualifications: Applicants should have excellent grades, experience with coursework in economics and mathematics (Econ101a, Econ141 (or Econ C142), Math54 and Math104 preferred), a good work ethic, attention to detail, a strong intellectual curiosity, and experience of working with data. Experience in STATA, R, Python or other programming languages is a plus though not required. Students interested in graduate school in economics or a related field are especially encouraged to apply. Interested students should write, in 400 words or less, a statement of interest and qualifications, including which projects you are most passionate about. Qualified applicants will then be given a short data collection task and interview at a later date.

Weekly Hours: 6-9 hrs

Related website: http://www.econ.berkeley.edu/~ulrike/research.html

Closed (2) (Ancient) Law and its Role for Financial and Economic Development (Or: Business Corporations in the Roman Republic)

Closed. This professor is continuing with Spring 2017 apprentices on this project; no new apprentices needed for Fall 2017.

This project is primarily suitable for outstanding students in Ancient History or Classics (ideally with some interest in law and/or in economics) or students in Economics or Legal Studies with a very strong background in Ancient History, Latin, and ideally Ancient Greek. This coming semester I am particularly keen to hire someone able to read ancient Greek, even just a little, and Latin.

OVERVIEW: One of the most exciting areas of research in Economics is the “Law and Economics”/”Law and Finance.” This research starts from a central question in Economics: what are the causes of financial development and economic growth? Why do some countries flourish while others do not? The “Law and Finance” literature suggests that there is causal effect of countries’ legal systems on economic development. If, for example, market participants are protected against expropriation and legal rules keep transaction costs low, it will be easier to make economic progress than otherwise. The “counter-research” of the “Law and Politics” literature claims that this line of argument confounds cause and correlation. Economic development might be correlated with having a good legal system, but legal system and economic development are both outcomes of the political environment and the dominant political interests in a country.
One reason why this debate is so fierce is that definitive empirical evidence for either of those approaches is hard to come by. In order to cleanly distinguish the causal impact of law and of politics one would need to observe an exogenous “shock” to the system, i.e., some kind of perfect natural experiment that changes either legal or political circumstances in a country without the influence of other fundamental changes in the country. Given the scarcity of such natural experiments, careful and detailed analyses of individual historical cases have become a valuable part of the literature, even if they stop short of proving causality. In fact, much of the literature revolves around specific historical examples, mostly taken from the last two centuries.
In my research, I am expanding the current body of evidence to ancient Rome. I focus on a specific cornerstone of financial and economic development: the emergence of the business corporation. Contrary to widespread belief, the earliest predecessor of the modern business corporation was not the English East India Company but the Roman societas publicanorum, i.e. the “society of government leaseholders.” I use the Roman case to shed light on the “law and finance” versus “politics and finance” debate. It illustrates the limitations of the existing law and finance theories. In this case, legal restrictions (or the lack of legal development) per se appear to matter little as long as the law as practiced is flexible and adapts to economic needs. In fact, one of the most important periods of legal development, “classical Roman law,” appears to be negatively correlated with financial and economic development. I also show that ‘the law as practiced’ reflects prevalent political interests.

This line of research builds on previous research I have conducted on the societas publicanorum (published as a book) and in the area of Law and Finance (published in an economics book chapter and a refereed journal article). The involvement of the URAP student(s) would consist of several steps:
Introduction
1. Getting to know the “Law and Finance” research (i.e., reading a few recent research articles in economics, which I will provide)
2. Getting to know the relevant research in Roman Law, especially on the societas publicanorum (i.e., read some overview articles)


Qualifications: This line of research builds on previous research I have conducted on the societas publicanorum (published as a book) and in the area of Law and Finance (published in an economics book chapter and a refereed journal article). The involvement of the URAP student(s) would consist of several steps: Introduction 1. Getting to know the “Law and Finance” research (i.e., reading a few recent research articles in economics, which I will provide) 2. Getting to know the relevant research in Roman Law, especially on the societas publicanorum (i.e., read some overview articles) Research 1. Help write brief overview articles on “societas” and “publicani” 2. Help with a research chapter (for a book project) linking the findings on the societas publicanorum to the modern law-and-finance debate. 3. Help finishing up the book project.

Weekly Hours: 6-9 hrs

Related website: http://www.econ.berkeley.edu/~ulrike/research.html