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Jacob Edenhofer @jacobedenhofer.bsky.social · 5h

Declining business dynamism in Europe: The role of shocks, market power, and responsiveness

Analysis of business dynamism outside the US has been limited by the availability of comparable cross-country data. This column presents new insights on the trends and drivers of business dynamism using a novel dataset for 19 European countries. Across all 19 countries, the authors document structural declines in job reallocation rates and employment shares in young firms. The decline in job reallocation can be rationalised by both declines in the responsiveness of labour demand to productivity shocks and lower dispersion of productivity innovations. A new decomposition suggests that the decline in responsiveness can be attributed mainly to lower sales growth and stronger markup increases.

cepr.org

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Jacob Edenhofer @jacobedenhofer.bsky.social · 5h

Very helpful essay on the labour market effects of (generative) AI
digitaleconomy.stanford.edu/news/ai-and-...

AI and Labor Markets: What We Know and Don't Know

Postdoctoral Fellow Bharat Chandar writes about what we know--and don't know-- about AI and labor markets.

digitaleconomy.stanford.edu

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Jacob Edenhofer @jacobedenhofer.bsky.social · 19h

substack.com/@jaeyeonkim/...

The Contracting State and AI Policy

This Wednesday, I will give a talk at SAIS in Washington, DC, on how governments procure and govern AI technologies.

substack.com

Jacob Edenhofer @jacobedenhofer.bsky.social · 19h

kevinbryanecon.com/mokyraghionh...

A Nobel for Innovation: Mokyr, Aghion, and Howitt

kevinbryanecon.com

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Jacob Edenhofer @jacobedenhofer.bsky.social · 19h

www.theargumentmag.com/p/creative-d...

Creative destruction is a miracle. It’s also a political problem.

The Nobel Prize in Economics has a lesson for abundance liberals

www.theargumentmag.com

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Reposted by Jacob Edenhofer

Thread Reader by Skywriter @unroll.skywriter.blue · 1d

The thread as a shareable webpage: https://skywriter.blue/pages/did:plc:i7aui7bri52com7fiuiih63h/post/3m33i2mhj2c2v.

Page by Jacob Edenhofer | @jacobedenhofer.bsky.social - skywriter.blue

Yet another very interesting post by Laurenz Guenther! Let me add some thoughts, especially in light of the debate about the delegate vs. trustee models of representation. I'd argue that Laurenz's arguments point to a "trustee trap". By way of explanation: he points out that in Europe many...

skywriter.blue

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Reposted by Jacob Edenhofer

Jacob Edenhofer @jacobedenhofer.bsky.social · 1d

under-responsiveness on certain dimensions. See my substack for a short discussion of this.
If I had to bet, my money would be on 1, 2, and 4, though this is just a hunch.
I'd be interested to hear which of these explanations strikes you as most
jacobedenhofer.substack.com/p/explaining...

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Reposted by Jacob Edenhofer

Jacob Edenhofer @jacobedenhofer.bsky.social · 1d

3⃣Capture by progressive interest groups can -- for all the well-studied reasons -- also lead to scenarios, where politicians get trapped in a trustee equilibrium, despite shifts in salience and/or voter preferences.
4⃣The final reason harks back to Aldrich's seminal paper. Politicians might have to

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Reposted by Jacob Edenhofer

Jacob Edenhofer @jacobedenhofer.bsky.social · 1d

themselves as members of a moral, cosmopolitan, educated elite. Certain voter positions (e.g., xenophobic or ethnonationalist attitudes) conflict with that identity. Expressing such views would cause cognitive dissonance and threaten their self-image.
papers.ssrn.com/sol3/papers....

Identity as Self-Image

We review the economic literature on self-image, which conceptualizes identity as a set of beliefs about one’s core traits, values, goals, and social ties. Self

papers.ssrn.com

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Reposted by Jacob Edenhofer

Jacob Edenhofer @jacobedenhofer.bsky.social · 1d

than the average/median voter.
2⃣ Building on identity economics (Akerlof/Kranton; Benabou and Henkel), politicians’ choices are shaped not only by electoral incentives but also by their identity and the self-image they seek to maintain. Most politicians see
press.princeton.edu/books/paperb...

Identity Economics

How identity influences the economic choices we make

press.princeton.edu

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Reposted by Jacob Edenhofer

Jacob Edenhofer @jacobedenhofer.bsky.social · 1d

out of ignorance, but because social, institutional, or reputational incentives make responsiveness on this dimension too costly. The result is an aloof political elite.
I see four primary explanations.
1. Reputational
2. Identity-based
3. Interest-group capture
4. Party activist capture

1 1

Reposted by Jacob Edenhofer

Jacob Edenhofer @jacobedenhofer.bsky.social · 1d

politicians believe they should act as what Burke called "trustees", while voters tend to believe they should act as "delegates" (Locke). I want to introduce you to this paper by Fox and Shotts that sheds interesting light on this debate: ‘Delegates or Trustees?
substack.com/inbox/post/1...

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Jacob Edenhofer @jacobedenhofer.bsky.social · 1d

convincing and, of course, whether there are more compelling alternatives.

1

Jacob Edenhofer @jacobedenhofer.bsky.social · 1d

under-responsiveness on certain dimensions. See my substack for a short discussion of this.
If I had to bet, my money would be on 1, 2, and 4, though this is just a hunch.
I'd be interested to hear which of these explanations strikes you as most
jacobedenhofer.substack.com/p/explaining...

1 1 2

Jacob Edenhofer @jacobedenhofer.bsky.social · 1d

make persistent programmatic concessions to party activists to incentivse effort on their part, which, in turn, is important for their electoral prospects. If party activists are extreme on the cultural dimension, then this can push politician into what looks like a trustee trap of

1

Jacob Edenhofer @jacobedenhofer.bsky.social · 1d

3⃣Capture by progressive interest groups can -- for all the well-studied reasons -- also lead to scenarios, where politicians get trapped in a trustee equilibrium, despite shifts in salience and/or voter preferences.
4⃣The final reason harks back to Aldrich's seminal paper. Politicians might have to

1 1

Jacob Edenhofer @jacobedenhofer.bsky.social · 1d

themselves as members of a moral, cosmopolitan, educated elite. Certain voter positions (e.g., xenophobic or ethnonationalist attitudes) conflict with that identity. Expressing such views would cause cognitive dissonance and threaten their self-image.
papers.ssrn.com/sol3/papers....

Identity as Self-Image

We review the economic literature on self-image, which conceptualizes identity as a set of beliefs about one’s core traits, values, goals, and social ties. Self

papers.ssrn.com

1 1

Jacob Edenhofer @jacobedenhofer.bsky.social · 1d

than the average/median voter.
2⃣ Building on identity economics (Akerlof/Kranton; Benabou and Henkel), politicians’ choices are shaped not only by electoral incentives but also by their identity and the self-image they seek to maintain. Most politicians see
press.princeton.edu/books/paperb...

Identity Economics

How identity influences the economic choices we make

press.princeton.edu

1 1

Jacob Edenhofer @jacobedenhofer.bsky.social · 1d

1⃣The reputational channel refers to either the audience costs mainstream politicians incur when adopting culturally conservative politicians (e.g. the media backlash) or the stigma they incur in their social circle --which tends to be comprised of people who are likely much more culturally liberal

1

Jacob Edenhofer @jacobedenhofer.bsky.social · 1d

out of ignorance, but because social, institutional, or reputational incentives make responsiveness on this dimension too costly. The result is an aloof political elite.
I see four primary explanations.
1. Reputational
2. Identity-based
3. Interest-group capture
4. Party activist capture

1 1

Jacob Edenhofer @jacobedenhofer.bsky.social · 1d

be much closer to Laurenz's argument. What might such a trap look like, and when might it arise?
The trap consists in politicians consistently ignoring voter preferences on some issues, even salient ones (e.g. cultural identity, immigration, nationalism).
Crucially, I'd argue that they do so not

1 1

Jacob Edenhofer @jacobedenhofer.bsky.social · 1d

to judgeoutcomes instead.
A 'delegate trap' can arise when the % of competent politicians is too low so that even the competent ones have incentives to pander, rather than to use their competence for better policymaking.
Interestingly, the authors don't analyse a 'trustee trap', which seems to

1

Jacob Edenhofer @jacobedenhofer.bsky.social · 1d

agrees on what should be done, but not how the objective should be achieved) rises, competence more valuable.
- If voters are uncertain about whether politicians share their preferences, they focus on ideological alignment -> pandering. When they are very certain (either way), they can 'afford'

1

Jacob Edenhofer @jacobedenhofer.bsky.social · 1d

spread among politicians, outcomes proxy the latter better, with voters rewarding outcomes rather than ideological alignment.
- Ambitious incumbents have stronger incentives to build a reputation for competence, not just ideological alignment.
- As the share of 'valence' issues (where everyone

1

Jacob Edenhofer @jacobedenhofer.bsky.social · 1d

they base their evaluations on whether the politician’s policy choices align with their own preferences. Trustee eq arise when the % of skilled politicians is high enough; now, outcomes serve as reliable proxy for competence
Comparative statics: Trustee eq. more likely
- When competence is wide-

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