Operations Research
http://lists.repec.org/mailman/listinfo/nep-ore
Operations Research
2020-09-07
Stationarity and ergodicity of Markov switching positive conditional mean models
http://d.repec.org/n?u=RePEc:pra:mprapa:102503&r=ore
A general Markov-Switching autoregressive conditional mean model, valued in the set of nonnegative numbers, is considered. The conditional distribution of this model is a finite mixture of nonnegative distributions whose conditional mean follows a GARCH-like dynamics with parameters depending on the state of a Markov chain. Three different variants of the model are examined depending on how the lagged-values of the mixing variable are integrated into the conditional mean equation. The model includes, in particular, Markov mixture versions of various well-known nonnegative time series models such as the autoregressive conditional duration (ACD) model, the integer-valued GARCH (INGARCH) model, and the Beta observation driven model. Under contraction in mean conditions, it is shown that the three variants of the model are stationary and ergodic when the stochastic order and the mean order of the mixing distributions are equal. The proposed conditions match those already known for Markov-switching GARCH models. We also give conditions for finite marginal moments. Applications to various mixture and Markov mixture count, duration and proportion models are provided.
Aknouche, Abdelhakim
Francq, Christian
Autoregressive Conditional Duration, Count time series models, finite mixture models, Ergodicity, Integer-valued GARCH, Markov mixture models.
2020-08-18
Updating Variational Bayes: Fast Sequential Posterior Inference
http://d.repec.org/n?u=RePEc:msh:ebswps:2020-27&r=ore
Variational Bayesian (VB) methods produce posterior inference in a time frame considerably smaller than traditional Markov Chain Monte Carlo approaches. Although the VB posterior is an approximation, it has been shown to produce good parameter estimates and predicted values when a rich classes of approximating distributions are considered. In this paper we propose the use of recursive algorithms to update a sequence of VB posterior approximations in an online, time series setting, with the computation of each posterior update requiring only the data observed since the previous update. We show how importance sampling can be incorporated into online variational inference allowing the user to trade accuracy for a substantial increase in computational speed. The proposed methods and their properties are detailed in two separate simulation studies. Two empirical illustrations of the methods are provided, including one where a Dirichlet Process Mixture model with a novel posterior dependence structure is repeatedly updated in the context of predicting the future behaviour of vehicles on a stretch of the US Highway 101.
Nathaniel Tomasetti
Catherine Forbes
Anastasios Panagiotelis
importance sampling, forecasting, clustering, Dirichlet process mixture, variational inference
2020
Linear IV Regression Estimators for Structural Dynamic Discrete Choice Models
http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-674&r=ore
In structural dynamic discrete choice models, unobserved or mis-measured state variables may lead to biased parameter estimates and misleading inference. In this paper, we show that instrumental variables can address such measurement problems when they relate to state variables that evolve exogenously from the perspective of individual agents (i.e., market-level states). We define a class of linear instrumental variables estimators that rely on Euler equations expressed in terms of conditional choice probabilities (ECCP estimators). These estimators do not require observing or modeling the agent's entire information set, nor solving or simulating a dynamic program. As such, they are simple to implement and computationally light. We provide constructive arguments for the identification of model primitives, and establish the estimator's consistency and asymptotic normality. Four applied examples serve to illustrate the ECCP approach's implementation, advantages, and limitations: dynamic demand for durable goods, agricultural land use change, technology adoption, and dynamic labor supply. We illustrate the estimator's good finite-sample performance in a Monte Carlo study, and we estimate a labor supply model empirically for taxi drivers in New York City.
Myrto Kalouptsidi
Paul T. Scott
Eduardo Souza-Rodrigues
dynamic discrete choice, unobserved states, instrumental variables, identification, Euler equations
2020-08-26
The Economic Consequences of R̂ = 1: Towards a Workable Behavioural Epidemiological Model of Pandemics
http://d.repec.org/n?u=RePEc:nbr:nberwo:27632&r=ore
This paper reviews the literature on incorporating behavioural elements into epidemiological models of pandemics. While modelling behaviour by forward-looking rational agents can provide some insight into the time paths of pandemics, the non-stationary nature of Susceptible-Infected-Removed (SIR) models of viral spread makes characterisation of resulting equilibria difficult. Here I posit a shortcut that can be deployed to allow for a tractable equilibrium model of pandemics with intuitive comparative statics and also a clear prediction that effective reproduction numbers (that is, R) will tend towards 1 in equilibrium. This motivates taking R̂=1 as an equilibrium starting point for analyses of pandemics with behavioural agents. The implications of this for the analysis of widespread testing, tracing, isolation and mask-use is discussed.
Joshua S. Gans
2020-07
Digitalization in Two-Sided Platform
http://d.repec.org/n?u=RePEc:mde:wpaper:0146&r=ore
In this paper we study the effects of the introduction of a new two sided platform endowed with artificial intelligence in a market where a firm provides a brick and mortar platform to buyers and sellers. In our theoretical model we show that the decision of whether to introduce the new platform depends on the reduction of the search cost for the consumers. We also show that the introduction of the platform enlarges the market with more consumers using both platforms. Finally we study the welfare effect of the introduction of the platform opening the discussion on whether certain artificial intelligence devices for shopping should be regulated.
Filomena Garcia
Muxin Li
e-Commerce; Intermediary; Two-sided markets
2020-04
Imposing Equilibrium Restrictions in the Estimation of Dynamic Discrete Games
http://d.repec.org/n?u=RePEc:mtl:montec:10-2019&r=ore
Imposing equilibrium restrictions provides substantial gains in the estimation of dynamic discrete games. Estimation algorithms imposing these restrictions – MPEC,NFXP, NPL, and variations – have different merits and limitations. MPEC guarantees local convergence, but requires the computation of high-dimensional Jacobians. The NPL algorithm avoids the computation of these matrices, but – in games – may fail to converge to the consistent NPL estimator. We study the asymptotic properties of the NPL algorithm treating the iterative procedure as performed in finite samples. We find that there are always samples for which the algorithm fails to converge, and this introduces a selection bias. We also propose a spectral algorithm to compute the NPL estimator. This algorithm satisfies local convergence and avoids the computation of Jacobian matrices. We present simulation evidence illustrating our theoretical results and the good properties of the spectral algorithm.
Victor Aguirregabiria
Mathieu Marcoux
2019-09
On strategy-proofness and single-peakedness:median-voting over intervals
http://d.repec.org/n?u=RePEc:lau:crdeep:20.04&r=ore
We study correspondences that choose an interval of alternatives when agents have single-peaked preferences over locations and ordinally extend their preferences over intervals. We extend the main results of Moulin (1980) to our setting and show that the results of Ching (1997) cannot always be similarly extended. First, strategy-proofness and peaks-onliness characterize the class of generalized median correspondences (Theorem 1). Second, this result neither holds on the domain of symmetric and single-peaked preferences, nor can in this result min/max continuity substitute peaks-onliness (see counter-Example 3). Third, strategy-proofness and voter-sovereignty characterize the class of ecient generalized median correspondences (Theorem 2).
Bettina Klaus
Panos Protopapas
correspondences; generalized median correspondences; single-peaked preferences;strategy-proofness
2020-07
Series expansions and direct inversion for the Heston model
http://d.repec.org/n?u=RePEc:arx:papers:2008.08576&r=ore
Efficient sampling for the conditional time integrated variance process in the Heston stochastic volatility model is key to the simulation of the stock price based on its exact distribution. We construct a new series expansion for this integral in terms of double infinite weighted sums of particular independent random variables through a change of measure and the decomposition of squared Bessel bridges. When approximated by series truncations, this representation has exponentially decaying truncation errors. We propose feasible strategies to largely reduce the implementation of the new series to simulations of simple random variables that are independent of any model parameters. We further develop direct inversion algorithms to generate samples for such random variables based on Chebyshev polynomial approximations for their inverse distribution functions. These approximations can be used under any market conditions. Thus, we establish a strong, efficient and almost exact sampling scheme for the Heston model.
Simon J. A. Malham
Jiaqi Shen
Anke Wiese
2020-08
Bayesian Value-at-Risk Backtesting: The Case of Annuity Pricing
http://d.repec.org/n?u=RePEc:pra:mprapa:101698&r=ore
We propose a new Unconditional Coverage backtest for VaR-forecasts under a Bayesian framework that significantly minimise the direct and indirect effects of p-hacking or other biased outcomes in decision-making, in general. Especially, after the global financial crisis of 2007-09, regulatory demands from Basel III and Solvency II have required a more strict assessment setting for the internal financial risk models. Here, we employ linear and nonlinear Bayesianised variants of two renowned mortality models to put the proposed backtesting technique into the context of annuity pricing. In this regard, we explore whether the stressed longevity scenarios are enough to capture the experienced liability over the foretasted time horizon. Most importantly, we conclude that our Bayesian decision theoretic framework quantitatively produce a strength of evidence favouring one decision over the other.
Leung, Melvern
Li, Youwei
Pantelous, Athanasios
Vigne, Samuel
Bayesian decision theory; Value-at-Risk; Backtesting; Annuity pricing; Longevity risk
2019-11
Learning Structure in Nested Logit Models
http://d.repec.org/n?u=RePEc:arx:papers:2008.08048&r=ore
This paper introduces a new data-driven methodology for nested logit structure discovery. Nested logit models allow the modeling of positive correlations between the error terms of the utility specifications of the different alternatives in a discrete choice scenario through the specification of a nesting structure. Current nested logit model estimation practices require an a priori specification of a nesting structure by the modeler. In this we work we optimize over all possible specifications of the nested logit model that are consistent with rational utility maximization. We formulate the problem of learning an optimal nesting structure from the data as a mixed integer nonlinear programming (MINLP) optimization problem and solve it using a variant of the linear outer approximation algorithm. We exploit the tree structure of the problem and utilize the latest advances in integer optimization to bring practical tractability to the optimization problem we introduce. We demonstrate the ability of our algorithm to correctly recover the true nesting structure from synthetic data in a Monte Carlo experiment. In an empirical illustration using a stated preference survey on modes of transportation in the U.S. state of Massachusetts, we use our algorithm to obtain an optimal nesting tree representing the correlations between the unobserved effects of the different travel mode choices. We provide our implementation as a customizable and open-source code base written in the Julia programming language.
Youssef M. Aboutaleb
Moshe Ben-Akiva
Patrick Jaillet
2020-08
Inefficient Cooperation under Stochastic and Strategic Uncertainty
http://d.repec.org/n?u=RePEc:pot:cepadp:20&r=ore
Stochastic uncertainty can cause difficult coordination problems that may hinder mutually beneficial cooperation. We propose a mechanism of ex-post voluntary transfers designed to circumvent these coordination problems and ask whether it can do so. To test this, we implement a controlled laboratory experiment based on a repeatedly played Ultimatum Game with a stochastic endowment. Contrary to our hypothesis, we find that allowing voluntary transfers does not entail an efficiency increase. We suggest and analyze two main reasons for this finding: First, the stochastic uncertainty forces proposers to accept high strategic uncertainty if they intend to cooperate by claiming a low amount (which many proposers do not). Second, many responders behave only incompletely conditionally cooperative by transferring too little (which hinders cooperation in future periods).
Lisa Bruttel
Werner Güth
Juri Nithammer
Andreas Orland
stochastic uncertainty, strategic uncertainty, cooperation, Ultimatum Game, experiment
2020-09
Sovereign Bond-Baked Securities in EMU:Do they mean accrued safety in the European sovereign debt market or simply a way to ‘privatize’ public debt?
http://d.repec.org/n?u=RePEc:pra:mprapa:102248&r=ore
The aim of this article is to verify whether the creation of safe assets (sovereign bond-backed securities, SBBS) proposed in 2012 by the so-called group of ‘euro-nomics’ is a way to promote financial safety and risk-sharing in the EMU. In particular, attention is given to the shortcomings associated with the process of securitization. This is important, because securitization was, prior to the subprime crisis, considered an innovative means of increasing safety in private debt markets. The question is whether sovereign debt is a candidate for securitization and, if so, what implications this carries over to the debt structure itself and respective contractual design. My conclusion is that the creation of SBBS really implies a ‘privatization’ of sovereign debt, with advantages to the functioning of financial markets in ‘normal’ times but with possible insufficiencies in moments of financial distress. Moreover, lessons from the subprime crisis should not be forgotten.
Costa Cabral, Nazaré
safe assets, sovereign bond-backed securities, securitization, subprime crisis, sovereign debt
2020
Transactions Costs and the Equity Premium Puzzle
http://d.repec.org/n?u=RePEc:cbt:econwp:20/16&r=ore
Campbell and Cochrane's (1999b) habit formation model is able to resolve the equity premium and riskless interest rate puzzles, but only for high values of relative risk aversion. In this paper, I incorporate transactions costs in the Campbell and Cochrane model and find that the required level of relative risk aversion at the steady state reduces from 35 to 15. Thus, transactions costs seem able to reduce, but not completely solve, the remaining puzzle.
Sanghyun Hong
Transaction Costs; Equity Premium Puzzle
2020-08-01
Inputs, Incentives, and Self-selection at the Workplace
http://d.repec.org/n?u=RePEc:mtl:montec:13-2019&r=ore
This paper studies how asymmetric information over inputs affects workers’ response to incentives and self-selection at the workplace. Using daily records from a Peruvian egg production plant, we exploit a sudden change in the worker salary structure and find that workers’ effort, firm profits, and worker participation change differentially along the two margins of input quality and worker type. Firm profits increase differentially from high productivity workers, but absenteeism and quits of these workers also differentially increase. Evidence shows that information asymmetries over inputs between workers and managers shape the response to incentives and self-selection at the workplace.
Francesco Amodio
Miguel A. Martinez-Carrasco
asymmetric information, input heterogeneity, incentives, self-selection
2019-12
Capital Flows in Risky Times: Risk-On / Risk-Off and Emerging Market Tail Risk
http://d.repec.org/n?u=RePEc:fip:fedkrw:88624&r=ore
This paper characterizes the implications of risk-on/risk-off shocks for emerging market capital flows and returns. We document that these shocks have important implications not only for the median of emerging markets flows and returns but also for the left tail. Further, while there are some differences in the effects across bond vs. equity markets and flows vs. asset returns, the effects associated with the worst realizations are generally larger than on the median realization. We apply our methodology to the COVID-19 shock to examine the pattern of flow and return realizations: the sizable risk-off nature of this shock engenders reactions that reside deep in the left tail of most relevant emerging market quantities.
Anusha Chari
Karlye Dilts Stedman
Christian T. Lundblad
Capital flows; Emerging markets; risk-on/risk-off; COVID-19; Tail risk; Quantile regression
2020-07-01
Short- and Long-run Impacts of Bursting Bubbles
http://d.repec.org/n?u=RePEc:kyo:wpaper:1036&r=ore
Uninsured investment risks are introduced into a textbook AK model. There are no financial frictions. Depending on insurance market development, asset bubbles emerge in an infinitely-lived agent economy. A collapse of bubbles has short-run impacts. At the moment of the collapse of bubbles, aggregate demand decreases immediately. This instantly triggers sharp declines in all of GDP, consumption, investment, capital utilization, and wealth-to-GDP, although capital remains constant in the short run. Consistently with data, investment decreases more than consumption. The bubbles also has long-run impacts. The decreased investment depresses long-run growth. The economy falls into a prolonged recession.
Takeo Hori
Ryonghun Im
asset bubbles, uninsured idiosyncratic investment risks, instant contraction, aggregate demand, prolonged recession
2020-08
"Big Mac Real" Income Inequality : A Multinational Study
http://d.repec.org/n?u=RePEc:lis:liswps:775&r=ore
Using the Big Mac Index, we offer a simple approach to study the real income inequality. We provide a multidimensional real income inequality analysis by exploring the Coefficient of Variation and the Big Mac Affordability of households across all income deciles of 28 countries for years 2000 to 2013.
Orkideh Gharehgozli
Vidya Atal
2019-10
Interest Rate Uncertainty and Sovereign Default Risk
http://d.repec.org/n?u=RePEc:nbr:nberwo:27639&r=ore
International data suggests that fluctuations in the level and volatility of the world interest rate (as measured by the US treasury bill rate) are positively correlated with both the level and volatility of sovereign spreads in emerging economies. We incorporate an estimated time-varying process for the world interest rate into a model of sovereign default calibrated to a panel of emerging economies. Time variation in the world interest rate interacts with default incentives in the model and leads to state contingent effects on borrowing and sovereign spreads which resemble those found in the data. The model delivers up to one-half of the positive comovement between the level and volatility of world interest rate and the level of sovereign spreads seen in emerging economies. Moreover, the model also delivers significant positive co-movements between the volatility of the spread and the process for the world interest rate which is also consistent with the data. Our model provides one potential source for the observed bunching in default probabilities observed across nations, namely the world interest rate process. Our model generates a positive and significant correlation (0.51) between the spreads of two nations with uncorrelated income processes. This is close to the observed mean correlation in the data (0.61).
Alok Johri
Shahed Khan
César Sosa-Padilla
2020-08
Selection and Incentives under Time Pressure: The Importance of Framing
http://d.repec.org/n?u=RePEc:iza:izadps:dp13474&r=ore
In this paper we investigate whether the framing of the incentives used to foster participation into contexts characterized by high degrees of time pressure affects individuals' self-selection. At this aim we run a lab-in-the-field experiment structured in two parts. The first part investigates individual characteristics that affect performance under time pressure, while the second is devoted to analyze how the decision to work under time pressure is affected by the reward/punishment framing of incentives. We find that individuals characterized by a high degree of risk aversion perform worse under time pressure. Nonetheless, when facing a penalty incentive scheme these individuals are more likely to choose to work with strict term limits, suggesting that penalty contracts might generate adverse selection problems.
De Paola, Maria
Gioia, Francesca
Pupo, Valeria
time pressure, bonus, penalty, incentive schemes, framing, selection, lab-in-the-field experiment
2020-07
Da confluência entre Big Data e Direito da Concorrência: As concentrações digitais - O caso Facebook/WhatsApp
http://d.repec.org/n?u=RePEc:mde:wpaper:0148&r=ore
A economia digital revolucionou a estrutura tradicional e o funcionamento dos mercados. Os dados pessoais são considerados o “novo petróleo” da actividade económica, um recurso fundamental cuja recolha e análise em larga escala são potenciadas pelo desenvolvimento das TIC. A simbiose entre Big Data e Big Analytics pode promover um ambiente concorrencial benéfico, para empresas e consumidores, mas à medida que se expandem as fronteiras da inovação e da ciência surgem preocupações que colocam em causa esta nova dinâmica de mercado. Pugnamos que, na circunstância em que as empresas concorrem nos mercados digitais orientados por dados e os consumidores, enquanto titulares de dados pessoais, são negativamente afectados, designadamente pelo decréscimo da qualidade do tratamento dos dados pessoais, há lugar à intersecção entre o direito da concorrência e o direito da protecção de dados que justifica uma intervenção coordenada com vista à análise holística das questões suscitadas. As plataformas digitais multilaterais com modelos de negócio assentes na monetização de Big Data através da publicidade apresentam um desafio aos instrumentos de concorrência tradicionais, baseados no preço, que se encontram desadequados para proceder a uma apreciação cabal destes mercados. Através da análise da decisão da CE na operação de concentração Facebook/WhatsApp demonstramos a necessidade de melhor compreensão do funcionamento das plataformas multilaterais e a premência na adequação das ferramentas de análise jusconcorrenciais à apreciação das concentrações motivadas por dados num contexto digital.
Ana Rodrigues Bidarra
Big Data; direito da concorrência; protecção de dados pessoais; controlo de concentrações; plataformas multilaterais
2020-04
Information Frictions and Access to the Paycheck Protection Program
http://d.repec.org/n?u=RePEc:nbr:nberwo:27624&r=ore
The Paycheck Protection Program (PPP) extended 669 billion dollars of forgivable loans in an unprecedented effort to support small businesses affected by the COVID-19 crisis. This paper provides evidence that information frictions and the “first-come, first-served” design of the PPP program skewed its resources towards larger firms and may have permanently reduced its effectiveness. Using new daily survey data on small businesses in the U.S., we show that the smallest businesses were less aware of the PPP and less likely to apply. If they did apply, the smallest businesses applied later, faced longer processing times, and were less likely to have their application approved. These frictions may have mattered, as businesses that received aid report fewer layoffs, higher employment, and improved expectations about the future.
Christopher Neilson
John Eric Humphries
Gabriel Ulyssea
2020-07
Systematic Liquidity Risk Premia
http://d.repec.org/n?u=RePEc:cbt:econwp:20/15&r=ore
This paper examines the β4 liquidity risk premium documented in Acharya and Pedersen (2005). We decompose this premium into two components: the covariation of liquidity costs with (i) market dividend growth shocks and (ii) shocks to the variance of market returns. In 1963-2017 US stock market data, the former is approximately three times larger than the latter. Liquidity volatility is primarily incorporated in stock prices via its common variation with business, rather than financial, shocks.
Glenn Boyle
Sanghyun Hong
Liquidity Risk; Asset Pricing
2020-08-01
Blockchain Vending Machine: A Smart Contract-Based Peer-to-Peer Marketplace for Physical Goods
http://d.repec.org/n?u=RePEc:pra:mprapa:101733&r=ore
In this paper, we propose an autonomous vending machine that is governed by a public Blockchain and smart contracts platform. Set up as a decentralized autonomous organization, it serves as an open marketplace for physical goods, where anyone can buy and/or sell objects. We propose a basic architecture for the machine, analyze pricing and fee mechanisms and examine potential pitfalls. Moreover, we discuss open issues, possible extensions and further areas for improvement. We conclude that the deployment of such machines could significantly improve our understanding of decentralized autonomous organizations and build a bridge between virtual and physical markets. Insights gained from such an experiment may raise important questions for further research.
Schär, Fabian
Schuler, Katrin
Wagner, Tobias
Blockchain, Decentralized Autonomous Organization, Distributed Ledger, Internet of Things, Smart Contract, Tokenization.
2020
Generalizable and Robust TV Advertising Effects
http://d.repec.org/n?u=RePEc:nbr:nberwo:27684&r=ore
We provide generalizable and robust results on the causal sales effect of TV advertising for a large number of products in many categories. Such generalizable results provide a prior distribution that can improve the advertising decisions made by firms and the analysis and recommendations of policy makers. To provide generalizable results, we base our analysis on a large number of products and clearly lay out the research protocol used to select the products. We characterize the distribution of all estimates, irrespective of sign, size, or statistical significance. To ensure generalizability, we document the robustness of the estimates. First, we examine the sensitivity of the results to the assumptions made when constructing the data used in estimation. Second, we document whether the estimated effects are sensitive to the identification strategies that we use to claim causality based on observational data. Our results reveal substantially smaller advertising elasticities compared to the results documented in the extant literature, as well as a sizable percentage of statistically insignificant or negative estimates. Finally, we conduct an analysis of return on investment (ROI). While our results show that many brands perform better with their observed advertising than they would without advertising, we document considerable over-investment in advertising at the margin.
Bradley Shapiro
Günter J. Hitsch
Anna Tuchman
2020-08
COMMON-VALUE GROUP CONTESTS WITH ASYMMETRIC INFORMATION
http://d.repec.org/n?u=RePEc:bgu:wpaper:2007&r=ore
Din Cohen
Aner Sela
Group contests, asymmetric information
2020
CONTINUITY AND ROBUSTNESS OF BAYESIAN EQUILIBRIA IN TULLOCK CONTESTS
http://d.repec.org/n?u=RePEc:bgu:wpaper:2003&r=ore
Ezra Einy
Diego Moreno
Aner Sela
Tullock Contests, Incomplete Information, Robustness of Equilibria
2020
Persuasion Bias in Science : An Experiment on Strategic Sample Selection
http://d.repec.org/n?u=RePEc:mtl:montec:14-2019&r=ore
We experimentally test a game theoretical model of researcher-evaluator interaction à la Di Tillio, Ottaviani, and Sørensen (2017a). Researcher may strategically manipulate sample selection using his private information in order to achieve favourable research outcomes and thereby obtain approval from Evaluator. Our experimental results confirm the theoretical predictions for Researcher’s behaviour but find significant deviations from them about Evaluator’s behaviour. However, comparative statics are mostly consistent with the theoretical predictions. In the welfare analysis, we find that Researcher always benefits from the possibility of manipulation, in contrast to the theoretical prediction that he some-times is hurt by it. Consistent with theoretical predictions, Evaluator benefits from the possibility of Researcher’s manipulation when she leans towards approval or is approximately neutral but is hurt by that possibility when she leans against approval.
Arianna Degan
Ming Li
Huan Xie
persuasion bias, research conduct, manipulation, sample selection, experiment, randomized controlled trials
2019-11
MANIPULATION AND (MIS)TRUST IN PREDICTION MARKETS
http://d.repec.org/n?u=RePEc:bgu:wpaper:2012&r=ore
Lawrence Choo
Todd R. Kaplan
Roâ€™i Zultan
prediction markets, policy, experiment
2020
A Paradox for Inequality Indices
http://d.repec.org/n?u=RePEc:inq:inqwps:ecineq2020-559&r=ore
This paper identifies a paradox for inequality indices which is similar to the well known Simpsonâ€™s paradox in statistics. For the Gini and Bonferroni indices, concrete examples of the paradox are provided and general methods are described for obtaining examples of the paradox for arbitrary sizepopulation.
Satya Chakravarty
Palash Sarkar
inequality, paradox, Gini index, Bonferroni index, Simpsonâ€™s paradox
2020-08
Molecular Genetics, Risk Aversion, Return Perceptions, and Stock Market Participation
http://d.repec.org/n?u=RePEc:nbr:nberwo:27638&r=ore
We show that molecular variation in DNA related to cognition, personality, health, and body shape, predicts an individual’s equity market participation and risk aversion. Moreover, the molecular genetic endowments predict individuals’ return perceptions, most of which we find to be strikingly biased. The genetic endowments also strongly associate with many of the investor characteristics (e.g., trust, sociability, wealth) shown to explain heterogeneity in equity market participation. Our analysis helps elucidate why financial choices are heritable and how genetic endowments can help explain the links between financial choices, risk aversion, beliefs, and other variables known to explain stock market participation.
Richard Sias
Laura Starks
Harry J. Turtle
2020-08
The Business Cycle Mechanics of Search and Matching Models
http://d.repec.org/n?u=RePEc:fip:feddwp:88636&r=ore
This paper estimates a real business cycle model with unemployment driven by shocks to labor productivity and the job separation rate. We make two contributions. First, we develop a new identification scheme based on the matching elasticity that allows the model to perfectly match a range of labor market moments, including the volatilities of unemployment and vacancies. Second, we use our model to revisit the importance of shocks to the job separation rate and highlight how their correlation with labor productivity affects their transmission mechanism.
Joshua Bernstein
Alexander W. Richter
Nathaniel A. Throckmorton
Real Business Cycles; Estimation; Unemployment; Separation Rate; Vacancies
2020-08-25
The $100 Million Nudge: Increasing Tax Compliance of Businesses and the Self-Employed using a Natural Field Experiment
http://d.repec.org/n?u=RePEc:nbr:nberwo:27666&r=ore
This paper uses a natural field experiment to examine the effectiveness of specific nudges on tax compliance amongst firms and the self-employed in the Dominican Republic. In collaboration with the Dominican Republic’s tax authority, we designed messages for more than 28,000 self-employed workers and over 56,000 firms. Leveraging administrative tax data, we find evidence that our nudges (increasing the salience of prison sentences or public disclosure of tax evaders) have large effects on increasing tax compliance, primarily working through the channel of decreasing claimed tax exemptions. Interestingly, we find that firms are more impacted than the self-employed, and that firm size is critically linked to nudge effectiveness: larger firms are considerably more influenced by nudges than smaller firms. We find this latter result noteworthy given the paucity of evidence showing significant behavioral impacts of nudges amongst the largest players in a market. Overall, our messages increased tax revenue by $193 million (roughly 0.23% of the Dominican Republic’s GDP in 2018), with over $100 million constituting income that the government would not have received without our field experimental nudges.
Justin E. Holz
John A. List
Alejandro Zentner
Marvin Cardoza
Joaquin Zentner
2020-08
When should infrastructure assets be renewed?: the economic impact of cumulative tonnes on railway infrastructure
http://d.repec.org/n?u=RePEc:hhs:trnspr:2020_004&r=ore
This paper provides empirical evidence on the optimal timing of rail infrastructure renewal. Using an econometric approach on data from the Swedish railway network, we establish a relationship between cumulative tonnes and maintenance costs, as well as between cumulative tonnes and infrastructure failures that cause train delays. Together with average values on delay hours per failure and assumptions on passengers per train, we perform example calculations on the optimal timing for a track renewal. This timing will depend on the case considered, such as whether traffic intensity is high or low. Empirical evidence on the relationship between line capacity utilisation and delay time can provide more robust estimates for the different cases considered by an infrastructure manager. Still, the results in this paper is a significant step towards a usable cost-benefit analysis model for the timing of rail infrastructure renewals.
Nilsson, Jan-Eric
Odolinski, Kristofer
Railway; Infrastructure; Optimization; Renewal; Maintenance; Train Delays
2020-08-28