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Professor Ernesto Dal Bó from UCB Held Lectures at SEPKU

As part of the celebration of the 105th anniversary of Peking University`s School of Economics, Professor Ernesto Dal Bó, Dual-lecture professor at UC Berkeley Haas School of Business and Department of Political Science, paid a special visit to SEPKU for academic lectures and exchanges at the invitation of Director Zhang Pengfei, director of the Department of Resources, Environment and Industrial Economics at SEPKU, from November 26 to December 1.

On December 1, Professor Sun Qixiang, Dean of SEPKU, met with Professor Dal Bó. Dean Sun elaborated on the major achievements made by the SEPKU in recent years. The two sides discussed the possibility of further cooperation and exchange between the SEPKU and the Haas School of Management and the Political Department of UCB. During the lecture, Professor Dal Bó accepted an interview with a reporter from China Economic Weekly organized by the chief of People`s Daily.

During the visit, Professor Ernesto Dal Bó held lectures and exchanges on a series of experimental economics and political economy issues. These include the effectiveness of official selection methods and the practical role of material incentives in enhancing the attractiveness of civil service positions, the science and effectiveness of public policy design and its implementation, the non-institutional roots of national security and economic prosperity, and more.

The theme of the morning on Nov. 27th was "Who Will Become a Politician: An Empirical Study of Individual Competence and Demographic Representations”, which is to be published in the upcoming QJE, the world`s leading economics publication. Is it possible to select leaders who have both ability to work and social representation by voting? For this problem, the traditional economic model shows that free-riding incentives and lower opportunity costs make low-performing candidates have a comparative advantage in their candidacy. At the same time, if the elites have more human capital, the mechanism of selection based on competencies can lead to an imbalance in candidate representation. In order to validate these theoretical hypotheses, Professor Dal Bó and his collaborators studied the political selection model of Swedish municipal officials and members of parliament. Empirical analysis using exhaustive data including the capacity characteristics and social background of the entire population found four facts about inclusive meritocracy. Firstly, in the average sense, the ability of politicians to stand out is greater than the voters they represent, suggesting that political selection has a positive choice effect. Second, even with the family and social background of politicians in mind, this positive selection effect still exists. The individual ability of politicians rather than their family background is the key to their selection. Thirdly, the social background of politicians, both in terms of income from their parents and in the occupational social strata, is generally averaged. Finally, there is at most one weaker trade-off between politicians` ability and social representation, largely because of the strong positive selection effect of politicians with low socio-economic status. These facts show that it is possible to vote for leaders who are both capable and socially representative.

On the afternoon of the 27th, Professor Dal Bó lectured on the topic of "the Paradox of Human Civilization in Ancient Times: The Non-Institutional Root Cause of National Security and Economic Prosperity". Based on the existing anthropological and historical documents, Professor Dal Bó and his collaborators have constructed a theoretical model of the origin of civilization and specifically studied the above trade-offs faced by mankind on the path of civilization. An important feature of the model is to emphasize the impact of non-institutional factors such as the role of the physical geography in social productivity and national defensive capabilities, while solutions to defend civilizations rely on natural or man-made high defenses. The results of the model show that when the defensive capabilities are exogenous, higher initial productivity and prosperity-generating investment aggravate the conflict; but when defensive capabilities are endogenous, security and prosperity can occur simultaneously under certain conditions. Some economic shocks and military innovations have brought security and prosperity, such as the rise of civilizations of ancient Egypt and Sumer, while others have brought society back into the trap of conflicts and stagnation, such as the collapse of civilization in the late Bronze Age.

On the morning of the 28th, Professor Dal Bó gave a lecture entitled "Raising National Competence: The Role of Material Incentives in the Provision of Public Services" which has been published in QJE. In this paper, the author focuses on Mexico`s practical case for enhancing national capabilities. In 2011, Mexico launched a regional development plan to upgrade government capacity in 167 regions. An important part of the plan is to recruit 350 community development agents. The government department publishes different salaries randomly on the recruitment website. Candidates will then be tested on the intelligence, personality and motivation. After screening, job opportunities will be randomly allocated. This natural experiment offers good opportunities for assessing the role of pay incentives in attracting more and more qualified applicants, the elasticity of labor supply to government agencies, role of job attributes such as the distance to work and the attractiveness of the municipal environment in filling vacancies in the public sector, and the role of wages in recruiting staff in unprofessional public service positions. Based on the establishment of a normative theoretical model, the thesis of Professor Dal Bó and his collaborators conducted an empirical study on these issues. The results show that higher salaries can attract more capable applicants. It also shows that there is no evidence that the applicant has adverse selection effects on the motivation of the public sector. The higher wage level also increases the probability of applicants receiving work. The results of the measurement show that the labor supply elasticity is around 2. In addition, the farther the city is and the more its development lags behind, the lower the probability that applicants will accept the work. However, higher salaries help to narrow the recruitment gap between underdeveloped cities and developed cities.

The keynote address on the afternoon of the 28th was "Underestimating the Reform: Why Voters Will Support Invalid Policies," which is being published in the upcoming issue RES. In Professor Dal Bó`s thesis, it is assumed that voters may have systematic bias in assessing the potential impact of their policies on the grounds that they tend to underestimate the new equilibrium eventually resulting from the new policy. Voters tend to favor policies that directly create immediate benefits, even though these policies will eventually reduce the welfare of voters because people adjust their behavior. Conversely, even if the election produces greater indirect benefits, voters will be prejudiced against the direct costs of the policy. In order to study this issue, Professor Dal Bó and his collaborators conducted experiments. The results showed that most subjects would vote against policies that initially had a negative effect, even though those policies would later help the subjects overcome the prisoner`s dilemma and increase their benefits; on the contrary, most of the subjects would support direct benefits policies, even if those benefits would later lead to prisoners` dilemmas that ultimately undermine welfare. In explaining the mechanism, Professor Dal Bó and his collaborators concluded that both errors occurred because most of the subjects failed to fully anticipate the equilibrium effect of the new policy. More specifically, most of the subjects systematically underestimated the impact of policy changes on the behavior of others, and these erroneous beliefs led directly to the need for bad policies.

During the lecture, Prof. Ernesto Dal Bó had a lot of interaction with the audience. The teachers and students participating in the lectures conducted in-depth exchange and discussion on the research background, model setting and conclusions of the research on the practical problems. The series of lectures have achieved good results and effectively promoted PKU`s international academic exchanges and cooperation in economics and political science.

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