Tarek Alexander Hassan's Papers

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International Macroeconomics and Finance

The Social Cost of Near-Rational Investment: Why we should worry about volatile stock markets (with Thomas M. Mertens), March 2008.

Abstract: This paper shows that excess volatility in stock returns can drastically reduce welfare even if there is an observed disconnect between the stock market and capital investment. We introduce near-rational investors into a standard neoclassical model of a small open economy. While individual investors suffer only small losses due to small errors in their expectation of future returns, these errors get magnified as information aggregates in the economy and result in excess volatility of stock returns. The higher variablility of stock returns triggers a rise in risk premia and depresses the steady state level of capital stock. Excess volatility in stock returns thus lowers the level of aggregate output. Our calibration shows that the resulting welfare loss is on the order of several percent of aggregate consumption.

The Mechanics of the Exorbitant Privilege: Why it is cheap to borrow dollars, in progress

History of Economic Development

Social Structure and Development: A Legacy of the Holocaust in Russia (with Daron Acemoglu and James A. Robinson), in progress.

Abstract: We document a persistent effect of the mass murder of Jews by the Nazis during World War II on long-run economic and political outcomes within Russia . For example, areas that experienced the Holocaust most intensely have lower GDP per capita and lower average wages today; and they exhibit a consistently higher vote share for Communist candidates in popular votes since the collapse of the Soviet Union . These patterns are robust and are unlikely to be driven by various omitted factors. We provide evidence that the most likely mechanism linking the Holocaust to current outcomes is the changes it induced in the social structure, in particular the size of the middle class, across different regions of Russia . Before World War II, Russian Jews were predominantly in white collar (middle class) occupations and the Holocaust appears to have had a direct negative effect on the size of the middle class after the war. Moreover, this effect persists to the present. The data do not provide support for other potential effects of the Holocaust on long-run economic and political outcomes and bolsters our case that impact of the Holocaust is largely through its influence on social structure.

Voting for Hamas (with James A. Robinson), in progress

The Role of Social Ties in Economic Transition: Evidence from German re-unification (with Konrad B. Burchardi), in progress