Daily Paper Digest

Housing markets are subject to search frictions. The matching function is a widely used tool in macroeconomics to summarize labour-market search frictions and has been estimated in an extensive literature. Limited data on home-buyers has precluded estimation of housing-market matching functions. This paper fills that gap using a novel dataset identifying buyers and their search behaviour in viewing properties. An event study based on the staggered removal of restrictions on housing purchases provides the first causal estimation of the elasticity of matches with respect to buyers for a constant-returns-to-scale Cobb-Douglas matching function, which is found to be around 0.5.

This paper studies how entrepreneurs sort into founding teams and how team composition shapes the equilibrium distribution of firms. We develop a theory of career choice and team formation in which skill complementarities make team entrepreneurship attractive for agents with unbalanced skill profiles, while talent similarity makes teaming preferable to other outside options. Using matched employer-employee and balance-sheet data from Portugal, we show that teams combining similar talent with diverse specializations create larger, more productive, and longer-lived firms. We also document a bias in meetings toward similarly-skilled founders and calibrate the model to match this evidence. Meeting bias lowers average wages and output by 12% and 13% respectively by distributing activity towards a higher number of less productive firms, while search frictions per se reduce wages and aggregate output by 15% and 13% respectively by preventing highly diverse but specialized individuals from forming successful teams.

This paper studies whether financial literacy shapes gender differences in wealth. Using data from the United States and the Netherlands, we document that women have lower financial literacy and confidence than men, are less likely to manage long-term investments within their households, and hold fewer financial assets, with the largest gaps among married agents. We build a life-cycle portfolio-choice model with endogenous financial literacy accumulation and marital dynamics centered around two wedges: a higher cost of literacy investment for married women and gender-specific perceived returns on risky assets. The calibrated model qualitatively matches untargeted life-cycle patterns in literacy and portfolio choice, accounting for a third of the gender gap in individual financial assets. Counterfactual exercises show that early-life financial education can narrow the gender knowledge gap, and portfolio-allocation rules may offset confidence and marriage-related wedges that education may not undo, lowering the wealth gap by 6%.

Using a unique data set on the ownership composition of euro area equity funds, we find substantial differences in the flow-performance sensitivity across mutual fund clienteles. Households, followed by insurers, display the weakest sensitivity, whereas investment funds—as investors in mutual funds—exhibit the strongest sensitivity. Crucially, these behavioral differences hold within the same fund-quarter, ruling out heterogeneity across funds as a potential driver. We relate these clientele effects to monitoring incentives and balance sheet constraints. Lastly, we find that households respond more strongly to poor performance when surrounded by more performance-sensitive investors, indicating strategic interactions in investor flows.

Cross-border payments are essential for global trade, remittances, and financial transactions, but remain inefficient compared to domestic payments. This column reviews developments in the wholesale, retail, and remittances segments and outlines the challenges and opportunities for cross-border payments. Emerging technologies such as distributed ledger technology and decentralised finance offer potential solutions, but also raise regulatory, governance, and supervisory concerns. Granular and higher-quality data are required to better assess the costs, speed, access, and efficiency of cross-border payments. Furthermore, public-private partnerships are crucial for fostering innovation, efficiency, and competitive payment systems.

Soaring rents, long waiting lists, and mounting political anger are forcing governments across Europe to address gaps in social housing provision. This column examines whether new homes can also transform children’s futures, by looking at outcomes for families that were randomly selected to move into the Olympic Village in Athens after the Games had finished. The main finding – that low-achieving adolescents gain substantially while no group is harmed – suggests that well-designed social housing can do more than provide shelter; it can create environments where struggling students reset their educational trajectories.