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Fongoni
Marco Fongoni
Faculty
,
Aix-Marseille Université
,
Faculté d'économie et de gestion (FEG)
Status
Assistant professor
Research fields
Behavioral and experimental economics
Macroeconomics
Thesis
2017
,
University of Strathclyde
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Contact
marco.fongoni[at]univ-amu.fr
Address
Îlot Bernard du Bois
Publications
This paper develops a theoretical framework to think about employees' effort choices, and applies this framework to assess the ability of existing experimental designs to identify the effect of pay inequality on worker effort. The analysis shows that failure to control for a number of confounds—such as reciprocity towards the employer in multi-lateral gift-exchange games (vertical fairness), or the incentive to increase effort when feeling underpaid under piece rates (income targeting)—may lead to inaccurate interpretation of evidence of treatment effects. In light of these findings, the paper provides a set of recommendations on how to improve identification in the design of controlled experiments in the future.
In 2020, Berlin introduced a rigorous rent-control policy responding to soaring prices by capping rents: the Mietendeckel (rent freeze). The German Constitutional Court revoked the policy only one year later. Although successful in lowering rents during its duration, the consequences for Berlin’s rental market and close-by markets are per se not clear. This article evaluates the short-term causal supply-side effects in terms of prices, quantities, and landlords’ strategic behavior. We develop a theoretical framework capturing the key features of first-generation rent control policies and Berlin-specific aspects. Using a rich pool of detailed rent advertisements, predictions are tested, and further empirical causal inference techniques are applied for comparing price trajectories of dwellings inside and outside the policy’s scope. Mechanically, advertised rents drop significantly upon the policy’s enactment. A substantial rent gap along Berlin’s administrative border emerges, and rapidly growing rents in Berlin’s (unregulated) adjacent municipalities are observed. Landlords started adopting a hedging strategy insuring themselves against the risk of contractually long-term fixed low rents following a potentially unconstitutional law. Whereas this hedge was beneficial for landlords, the risk was completely borne by tenants. Moreover, the number of available properties for rent dropped significantly, a share of which appears to be permanently lost for the rental sector. This hampers a successful housing search for first-time renters and people moving within the city. Overall, negative consequences for renters appear to outweigh positive ones.
This paper was accepted by Victoria Ivashina, finance.
Funding: This research benefits from funding by the FNR Luxembourg National Research Fund [CORE Grant 3886] (ASSESS) and the OeNB Anniversary Fund [Grant 18767] (LocHouse). M. Fongoni further thanks the Department of Economics at the University of Strathclyde for support and acknowledges funding from the French government under the “France 2030” investment plan managed by the French National Research Agency [Reference ANR-17-EURE-0020] and from the Excellence Initiative of Aix-Marseille University - A*MIDEX.
Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.4775.
We develop a model of asymmetric reciprocity and optimal wage setting based on contractual incompleteness, fairness, and reference dependence and loss aversion in the evaluation of wages by workers. The model establishes a positive wage-effort relationship capturing a worker’s ‘asymmetric reference-dependent reciprocity’, in which loss aversion implies negative reciprocity is stronger than positive reciprocity. Our theory provides an explanation for the observed asymmetry and dynamics of workers’ reciprocity and establishes a micro-foundation for downward wage rigidity, the implications of which shed new light on a forward-looking firm’s optimal wage setting and hiring decisions.
This paper develops a search and matching framework in which workers are characterized by asymmetric reference-dependent reciprocity and firms set wages by considering the effect that these can have on workers' effort and, therefore, on output. The cyclical response of effort to wage changes can considerably amplify shocks, independently of the cyclicality of the hiring wage, which becomes irrelevant for unemployment volatility, and firms' expectations of downward wage rigidity in existing jobs increases the volatility of job creation. The model is consistent with evidence on hiring and incumbents' wage cyclicality, and provides novel predictions on the dynamics of effort.
We investigate how the incompleteness of an employment contract—discretionary and noncontractible effort—can affect an employer’s decision about cutting nominal wages. Using matched employer-employee payroll data from Great Britain linked to a survey of managers, we find support for the main predictions of a stylized theoretical framework of wage determination: nominal cuts are at most half as likely when managers believe that their employees have significant discretion over how they do their work, although the involvement of employees, via information sharing, reduces this correlation. We also describe how contract incompleteness and wage cuts vary across different jobs. These findings provide the first observational quantitative evidence that managerial beliefs about contractual incompleteness can account for their hesitancy over nominal wage cuts. This has long been conjectured by economists based on anecdotes, qualitative surveys, and laboratory and field experiments. This paper was accepted by Marie Claire Villeval, behavioral economics and decision analysis. Funding: M. Fongoni acknowledges funding under the “France 2030” Investment Plan managed by the Agence Nationale de la Recherche [Grant ANR-17-EURE-0020] and funding from the Excellence Initiative of Aix-Marseille University—A*MIDEX. C. Singleton thanks the Economic and Social Research Council and Administrative Data Research UK [Grant ES/T013877/1] for funding the Wage and Employment Dynamics Project. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.02297.
This paper develops a search and matching framework in which workers are characterised by asymmetric reference-dependent reciprocity, and firms set wages by considering the effect that these can have on workers’ effort, and therefore on output. The cyclical response of effort to wage changes can considerably amplify shocks, independently of the cyclicality of the hiring wage, which becomes irrelevant for unemployment volatility; and firms’ expectations of downward wage rigidity in existing jobs increases the volatility of job creation. The model is consistent with evidence on hiring and incumbents’ wage cyclicality, and provides novel predictions on the dynamics of effort.
This paper develops a search and matching framework in which workers are characterized by asymmetric reference-dependent rec-iprocity and firms set wages by considering the effect that these can have on workers' effort and, therefore, on output. The cyclical response of effort to wage changes can considerably amplify shocks, independently of the cyclicality of the hiring wage, which becomes irrelevant for unemployment volatility, and firms' expectations of downward wage rigidity in existing jobs increases the volatility of job creation. The model is consistent with evidence on hiring and incumbents' wage cyclicality, and provides novel predictions on the dynamics of effort.
