|
on Central and Western Asia |
| By: | Steven N. Kaplan (University of Chicago - Booth School of Business; NBER); Morten Sorensen (Dartmouth College - Tuck School of Business; CEPR); Anastasia A. Zakolyukina (University of Chicago - Booth School of Business) |
| Abstract: | We use detailed assessments of CEO personalities to explore the option-based measure of CEO overconfidence, Longholder, introduced by Malmendier and Tate (2005a) and widely used in the behavioral corporate finance and economics literatures. Longholder is significantly related to several specific characteristics and is negatively related to general ability. These relations also hold for overconfidence measures derived from CEOs’ earnings guidance. Investment-cash flow sensitivities are larger for both Longholder and less able CEOs. Overall, Longholder CEOs have many of the same characteristics traditionally associated with overconfident individuals, including lower general ability, supporting the interpretation of this measure as reflecting overconfidence. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2020-115&r=all |
| By: | Paul A. Gompers (Harvard University - Harvard Business School; NBER); Steven N. Kaplan (University of Chicago - Booth School of Business; NBER); Vladimir Mukharlyamov (Georgetown University - McDonough School of Business) |
| Abstract: | We survey more than 200 private equity (PE) managers from firms with $1.9 trillion of assets under management (AUM) about their portfolio performance, decisionmaking and activities during the Covid-19 pandemic. Given that PE managers have significant incentives to maximize value, their actions during the current pandemic should indicate what they perceive as being important for both the preservation and creation of value. PE managers believe that 40% of their portfolio companies are moderately negatively affected and 10% are very negatively affected by the pandemic. The private equity managers—both investment and operating partners— are actively engaged in the operations, governance, and financing in all of their current portfolio companies. These activities are more intensively pursued in those companies that have been more severely affected by the Covid-19 pandemic. As a result of the pandemic, they expect the performance of their existing funds to decline. They are more pessimistic about that decline than the VCs surveyed in Gompers et al. (2020b). Despite the pandemic, private equity managers are seeking new investments. Relative to the 2012 survey results reported in Gompers, Kaplan, and Mukharlyamov (2016): the PE investors place a greater weight on revenue growth for value creation; they give a larger equity stake to management teams; and, they also appear to target somewhat lower returns. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2020-140&r=all |
| By: | Christopher J. Jarvis; Gaelle Pierre; Benedicte Baduel; Dominique Fayad; Alexander de Keyserling; Babacar Sarr; Mariusz A. Sumlinski |
| Abstract: | This IMF Departmental Paper presents the key areas in which countries of the Middle East, North Africa, and the Caucasus and Central Asia (MECA) can enhance governance and fight corruption to achieve their economic policy goals. It draws on advances that have already taken hold in the region. |
| Keywords: | Institutional governance;Corruption;Inclusive growth;Middle East and Central Asia;Fiscal governance;Anti-money laundering and combating the financing of terrorism (AML/CFT);Fiscal transparency;Revenue administration transparency and accountability;Good Governance;EconomicGovernance;Corruption;Inclusive Growth |
| Date: | 2021–01–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfdps:2021/001&r=all |
| By: | Hyojung Kang (Economics Department and International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University); Jorge Martinez-Vazquez (International Center for Public Policy, Georgia State University, USA) |
| Abstract: | Foreign Direct Investment (FDI) is widely considered among the most effective instruments for the promotion of economic development. However, not all FDI leads to inclusive economic growth, lifting the welfare of the poorest groups in developing countries. This paper examines the conditions under which FDI can effectively lead to inclusive growth. By using a fixed effects regression with annual data for 68 countries from 1990 to 2015, we find that FDI has the most positive effect on inclusive growth when there is a sufficiently large manufacturing sector and a developed enough infrastructure base in the host country. These not very optimistic results emphasize the critical importance of the host country’s absorptive capacity. A smaller technological or knowledge gap with the foreign firms is required for FDI to lead to more linkages and spillovers, and ultimately job creation for the poor. The results cast doubt on development strategies that rely on FDI as a sufficient policy for inclusive growth. |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper2104&r=all |
| By: | Datta, Namita; Robinson, Danielle |
| Abstract: | This Jobs Solutions Note identifies practical solutions for development practitioners to proactively integrate gender inclusion in digital jobs programs. Based on curated knowledge and evidence for a specific topic and relevant to jobs, the Jobs Solutions Notes are not intended to be exhaustive; they provide key lessons, solutions and approaches synthesized from the experiences of the World Bank Group and partners. This Note draws from S4YE’s 2018 annual report, Digital Jobs for Youth: Young Women in the Digital Economy, highlighting new and emerging strategies to designing gender-inclusive digital jobs interventions for youth. The Note employs a nuanced definition of 'digital jobs' to enable practitioners and policy makers to develop a range of interventions tailored to specific contexts and target groups, to improve young women’s employment outcomes from digital jobs programs. |
| Keywords: | young woman; limited access to finance; youth; digital skills; labor force participation rate; income-generating opportunity; computers and the internet; project design and implementation; Fragile, Conflict & Violence; small and medium size enterprise; skill need; youth employment; skill training programs; skills and support; labor market opportunities; youth unemployment rate; self-employment and entrepreneurship; lack of content; highly skilled worker; approach to training; needs of woman; digital gender divide; availability of transport; informal labor market; barrier to woman; return on investment; private sector partner; support for entrepreneur; private sector company; women in technology; access to ict; fragile and conflict; technical skills training; creative problem solving; people with disability; Gender and ICT; opportunity for woman; civil society actor; local labor market; barriers for woman; gender mainstreaming strategy; business process outsourcing; digital economy; female entrepreneur; digital divide |
| Date: | 2020–04–29 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:jbsgrp:32005465&r=all |
| By: | Robert S. Harris (University of Virginia - Darden School of Business); Tim Jenkinson (University of Oxford - Said School of Business); Steven N. Kaplan (University of Chicago - Booth School of Business; NBER); Ruediger Stucke (Warburg Pincus LLC) |
| Abstract: | We present new evidence on the persistence of U.S. private equity (buyout and venture capital) funds using cash-flow data sourced from Burgiss’s large sample of institutional investors. Previous research, studying largely pre-2000 data, finds strong persistence for both buyout and venture capital (VC) firms. Using ex post or most recent fund performance (as of June2019), we confirm the previous findings on persistence overall as well as for pre-2001 and post-2000 funds. However, when we look at the information an investor would actually have – previous fund performance at the time of fundraising rather than final performance – we find little or no evidence of persistence for buyouts, both overall and post-2000. For post-2000 buyouts, the conventional wisdom to invest in previously top quartile funds does not hold. Using previous fund PME at fundraising, we find modest persistence, but it is driven by bottom, not top quartile performance. On the other hand, persistence for VC funds persists even when using information available at the time of fundraising. Therefore, the conventional wisdom of investors holds for VC. |
| JEL: | G11 G24 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2020-167&r=all |
| By: | Jesse Perla (University of British Columbia - Vancouver School of Economics); Carolin Pflueger (University of Chicago - Harris School of Public Policy; NBER); Michal Szkup (University of British Columbia - Vancouver School of Economics) |
| Abstract: | We investigate how a combination of limited liability and preexisting debt distort firms’ investment and equity payout decisions. We show that equity holders have incentives to “double-sell†cash flows in default, leading to overinvestment, provided that the firm has preexisting debt and the ability to issue new claims to the bankruptcy value of the firm. In a repeated version of the model, we show that the inability to commit to not double-sell cash flows leads to heterogeneous investment distortions, where high leverage firms tend to overinvest but low leverage firms tend to underinvest. Permitting equity payouts financed by new debt mitigates overinvestment for high leverage firms, but raises bankruptcy rates and exacerbates low leverage firms’ tendency to underinvest—as the anticipation of equity payouts from future debt raises their cost of debt issuance. Finally, we provide empirical evidence consistent with the model. |
| JEL: | E20 E22 E44 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2020-122&r=all |
| By: | NEIFAR, MALIKA; Dhouib, Salma ; Bouhamed, Jihen ; Ben Abdallah, Fatma ; Arous, Islem ; Ben Braiek, Fatma ; Mrabet, Donia |
| Abstract: | The key objective of this study is to shed light on the relationship between the stock market and macroeconomic factors (Interest rate, Consumer Price Index, Exchange rate) in United Kingdom for the period Pre Global Financial Crisis 2008 (GFC); from January 1999 to December 2007. The finding of Johansen Cointegration, and Granger and Toda Yamamoto (TY) Causality tests show respectively that there is no co-integration between variables, no causal relation is detected from macro factors to stock return, and a unidirectional causal relation is depicted from exchange rate to stock price. While from VAR Granger non Causality/Block Exogeneity Wald Tests results, both inflation (INF) and exchange rate growth (EXCG) Granger cause the UK stock market Return. Moreover, the ARDL specification show a stable long run effect of all considered macroeconomic factors on the UK stock price. Precisely, the results of the ECM show that all considered macroeconomic factors drives UK stock price toward long-run equilibrium at a fast speed. |
| Keywords: | UK Stock market, Macroeconomic variables, Causality, ECM, Cointegration, ARDL model, F_PSSTest |
| JEL: | C32 E44 G14 |
| Date: | 2021–02–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:106246&r=all |
| By: | Rodrigo Adão (University of Chicago - Booth School of Business; NBER); Costas Arkolakis (Yale University - Department of Economics; NBER); Sharat Ganapati (Georgetown University - Department of Economics) |
| Abstract: | We measure the role of firm heterogeneity in counterfactual predictions of monopolistic competition trade models without parametric restrictions on the distribution of firm fundamentals. We show that two bilateral elasticity functions are sufficient to nonparametrically compute the counterfactual aggregate impact of trade shocks, and recover changes in economic fundamentals from observed data. These functions are identified from two semiparametric gravity equations governing the impact of bilateral trade costs on the extensive and intensive margins of firm-level exports. Applying our methodology, we estimate elasticity functions that imply an impact of trade costs on trade flows that falls when more firms serve a market because of smaller extensive margin responses. Compared to a baseline where elasticities are constant, firm heterogeneity amplifies both the gains from trade in countries with more exporter firms, and the welfare gains of European market integration in 2003-2012. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2020-161&r=all |
| By: | Linda Schilling (École Polytechnique - CREST; CEPR); Jesús Fernández-Villaverde (University of Pennsylvania - Department of Economics; CEPR; NBER); Harald Uhlig (University of Chicago - Department of Economics; CEPR; NBER) |
| Abstract: | A central bank digital currency, or CBDC, may provide an attractive alternative to traditional demand deposits held in private banks. When offering CBDC accounts, the central bank needs to confront classic issues of banking: conducting maturity trans- formation while providing liquidity to private customers who suffer “spending†shocks. We analyze these issues in a nominal version of a Diamond and Dybvig (1983) model, with an additional and exogenous price stability objective for the central bank. While the central bank can always deliver on its nominal obligations, runs can nonetheless occur, manifesting themselves either as excessive real asset liquidation or as a failure to maintain price stability. We demonstrate an impossibility result that we call the CBDC trilemma: of the three goals of efficiency, financial stability (i.e., absence of runs), and price stability, the central bank can achieve at most two. |
| Keywords: | Central bank digital currency, monetary policy, bank runs, financial intermediation, inflation targeting, CBDC trilemma |
| JEL: | E58 G21 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2020-180&r=all |
| By: | Dutta, Sourish |
| Abstract: | The crucial and growing role performed by different financial intermediaries such as venture capitalists and angel investors as well as more traditional intermediaries such as commercial banks in developing entrepreneurial or innovative firms and boosting product market innovations has led to great research interest in the economics of innovation and entrepreneurial finance. Besides this, there are some important factors or developments which have affected the entrepreneurial finance in general as well as its influence upon different entrepreneurial or innovative firms. Indeed, it is also true that the financial and ownership structures of the different entrepreneurial firms and the legal as well as the institutional environment, in which they operate, itself affects the product market innovations (Chemmanur and Fulghieri, 2014). Therefore, in this paper, I want to target a broad theme i.e. analysis of the mechanisms behind this scenario, especially, in the context of the Indian market system. |
| Date: | 2019–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:sdxqv&r=all |
| By: | Masashige Hamano (Waseda University); Francesco Zanetti (University of Oxford) |
| Abstract: | This study provides new insights on the allocative effect of monetary policy. It shows that contractionary monetary policy exerts a non-trivial reallocation effect by cleansing unproductive firms and enhancing aggregate productivity. At the same time, however, reallocation involves a reduction in the number of product variety that is central to consumer preferences and hurts welfare. A contractionary policy prevents the entry of new firms and insulates existing firms from competition, reducing aggregate productivity. Under demand uncertainty, the gain of the optimal monetary policy diminishes in firm heterogeneity and increases in the preference for product variety. We provide empirical evidence on US data, which corroborates the relevance of monetary policy for product variety that results from firm entry and exit, and provides limited support to the cleansing effect of monetary policy. |
| Keywords: | Monetary policy; firm heterogeneity; product variety; reallocation |
| JEL: | E32 E52 L51 O47 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:bbk:bbkcam:2004&r=all |
| By: | Sergey Pekarski (National Research University Higher School of Economics); Anna Sokolova (National Research University Higher School of Economics) |
| Abstract: | We revisit the link between the risk of sovereign default and default costs. Contrary to prior literature, we show that higher costs of default may result in higher default probabilities, lower bond prices, and fiscal limits that are not pinned down by economic fundamentals. Government debt sustainability depends on private investment behavior, which is affected by expectations about defaults and capital returns. We argue that this feedback loop gives rise to multiple equilibria. In `bad' equilibria, investors expect default and low capital returns; their low capital investment tightens the governments' fiscal constraints and reduces the probability of debt repayment, validating investor pessimism. In `good' equilibria, optimistic investors choose higher capital investment; this results in higher future fiscal surpluses, raises the probability of debt repayment and validates investor optimism. |
| Keywords: | sovereign default, default costs, fiscal limit, multiple equilibria |
| JEL: | E62 H30 H60 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:243/ec/2021&r=all |
| By: | Ken-ichi Hashimoto (Kobe University); Ryonghun Im (Kyoto University); Takuma Kunieda (Kwansei Gakuin University); Akihisa Shibata (Kyoto University) |
| Abstract: | This paper uses a dynamic general equilibrium model to examine whether financial innovations destabilize an economy. Applying a neoclassical production function, we demonstrate that as financial frictions are mitigated, the economy loses stability and a flip bifurcation occurs at a certain level of financial frictions under an empirically plausible elasticity of substitution between capital and labor. Furthermore, the amplitude of fluctuations increases as financial frictions are mitigated and is maximized when the financial market approaches perfection. These outcomes imply that financial innovations are likely to destabilize an economy. |
| Keywords: | Financial innovations, endogenous business cycles, financial destabilization, heterogeneous agents. |
| JEL: | E13 E32 E44 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:kyo:wpaper:1054&r=all |
| By: | Mikko Nurminen (Turku School of Economics, FI-20014 University of Turku, Finland) |
| Abstract: | Health care markets in developed countries have become increasingly concentrated, while at the same time there has been an increasing trend of mergers and acquisitions (M&As) in these markets. I study the impact of M&As in the diagnostic procedure market, a market that is an important part of the health care industry and patient care, but has received little attention in this context. I use detailed nationwide register data from the Finnish private health care sector. My difference-in-difference estimates show that M&As increased prices in blood tests in both the acquiring and acquired units, but not in X-rays and MRIs. I additionally estimate a patient demand model that reveals that prices have little impact on the choice of provider while the referring physician's influence is large, potentially contributing to the firms' ability to increase their price margins. |
| Keywords: | Diagnostic Services, Mergers and Acquisitions, Market Power, Private Health Care |
| JEL: | L11 I11 J21 K21 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:tkk:dpaper:dp139&r=all |
| By: | Meqbel Mishary Aliedan (KFU - King Faisal University) |
| Abstract: | This study examines the impact of overall business climate on the environmental sustainability factor by specifically considering the ASEAN countries named as Philippines, Malaysia, Vietnam and Singapore. This paper fills the gap of the previous researches by majorly considering the trade openness, competitiveness and ease of doing business as independent variables, environmental sustainability as a dependent variable, while GDP and inflation are studied as controlling variables. All the variables data are collected from the country's official sites over the period of 2000-2015. The long-run equilibrium relationship between the tested variables is confirmed by Kao and Pedroni based panel cointegration tests. According to the fully modified ordinary least square (FMOLS) results, the trade openness, ease of doing business, and GDP cause a significant negative influence on the environmental sustainability within the selected states as compared to competitiveness based independent variables. This paper is an informative approach in front of their state's business community, government, policymakers, natives, and other related ones to consider the negative influence of overall business climate on the environment. In addition, there are some limitations like if industrialization and population growth are considered as controlling variables then more significant and authentic outcomes will be generated. |
| Keywords: | Trade Openness,Competitiveness,Ease of Doing Business,GDP,Inflation,Environmental Sustainability |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03121009&r=all |
| By: | Braun, Benjamin |
| Abstract: | The world around central banks has shifted. Europe is confronting an unprecedented combination of environmental, economic, and social challenges. Reducing carbon emissions to zero fast enough to avoid catastrophic global warming is difficult; doing so while also reducing economic inequality so as to avert social disintegration and democratic backsliding is very difficult. Addressing this twin challenge will require the state – and the European Union – to deploy all economic policy instruments already at its disposal, and to develop new ones and coordinate their use in new ways. The paper proceeds in three steps. The first section discusses three distinct challenges – legal, political, and ideational – for the debate on the future of central banking. The remainder of the paper will tackle the two main ideational challenges, namely, institutional amnesia (forgetting past realities of central banking) and strategic ignorance (ignoring present realities of central banking). To overcome institutional amnesia, the second section briefly reviews the history of central banking, showing that the price stability is only one of several goals that central banking has, historically, been associated with. To overcome strategic ignorance, the third section reviews three mandate-remote, or ‘extracurricular’ areas of recent ECB activity. |
| Date: | 2021–02–17 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:3skmx&r=all |
| By: | Edoardo Beretta (USI - Università della Svizzera italiana = University of Italian Switzerland); Alvaro Cencini (USI - Università della Svizzera italiana = University of Italian Switzerland) |
| Abstract: | On the basis of the identity between each country's global imports (commercial and financial) and exports (commercial and financial), which is one of the fundamental economic principles of the balance of payments, the paper highlights why and how the leading account of transactions from/to the rest of the world needs to be reformed. As a strategic goal, the balance of payments should finally move beyond its current purely statistical and simple-entry bookkeeping approach in order to improve its macroeconomic relevance. This would also imply a new way of carrying out cross-border payments, which could in turn pave the way for a new system of international payments. The development of an economic account of the nation as a whole and the introduction of a consistent way of recording transactions following a truly double-entry bookkeeping would also erase statistical discrepancies ex ante and reflect the necessary equality (identity) of credits and debits both for all transactions taken together and for each of them separately. The balance of payments is already a powerful economic tool, but only through a money-consistent reform would it display its full potential. |
| Keywords: | balance of payments,double-entry bookkeeping,nation's economic account,reserve assets |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03121404&r=all |
| By: | Vincent Bodart (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); François Courtoy (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Erica Perego (CEPII, Paris, France) |
| Abstract: | With commodities becoming international financial securities, commodity prices are affected by the international financial cycle. With this evidence in mind, this paper reconsiders the macroeconomic adjustment of developing commodity-exporting countries to changes in world interest rates. We proceed by building a model of a small open economy that produces a non-tradable good and a storable tradable commodity. The difference with standard models of small open economies lies in the endogenous response of commodity prices which -due to commodity storage- adjust to variations in international interest rates. We find that the endogenous response of commodity prices amplifies the reaction of commodity exporting countries to international monetary shocks. This suggests that commodity exporting countries are more vulnerable to unfavourable international monetary disturbances than other small open economies. In particular, through the commodity price channel, even those small open commodity-exporting economies that are disconnected from international financial markets can be affected by the international financial cycle. |
| Keywords: | Storable commodity, International financial shock, Developing economies |
| JEL: | E32 F41 G15 Q02 |
| Date: | 2021–01–23 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvir:2021002&r=all |
| By: | N'Golo Kone |
| Abstract: | This paper addresses the estimation issue that exists when estimating the traditional mean-variance portfolio. More precisely, the efficient mean-variance is estimated by a double regularization. These regularization techniques namely the ridge, the spectral cut-off, and Landweber-Fridman involve a regularization parameter or penalty term whose optimal value needs to be selected efficiently. A data-driven method has been proposed to select the tuning parameter. We show that the double regularized portfolio guarantees to investors the maximum expected return with the lowest risk. In empirical and Monte Carlo experiments, our double regularized rules are compared to several strategies, such as the traditional regularized portfolios, the new Lasso strategy of Ao et al. (2019), and the naive 1/N strategy in terms of in-sample and out-of-sample Sharpe ratio performance, and it is shown that our method yields significant Sharpe ratio improvements and a reduction in the expected utility loss. |
| Keywords: | Portfolio selection, efficient mean-variance analysis, double regularization |
| JEL: | C52 C58 G11 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1453&r=all |
| By: | Johannes Buckenmaier (University of Zurich); Eugen Dimant (University of Pennsylvania & CESifo); Ann-Christin Posten (University of Cologne); Ulrich Schmidt (Kiel Institute for the World Economy) |
| Abstract: | Economic theory suggests that the deterrence of deviant behavior is driven by a combination of severity and certainty of punishment. This paper presents the first controlled experiment to study a third important factor that has been mainly overlooked: the swiftness of formal sanctions. We consider two dimensions: the timing at which the uncertainty about whether one will be punished is dissolved and the timing at which the punishment is actually imposed, as well as the combination thereof. By varying these dimensions of delay systematically, we find a surprising non-monotonic relation with deterrence: either no delay (immediate resolution and immediate punishment) or maximum delay (both resolution and punishment as much as possible delayed) emerge as most effective at deterring deviant behavior and recidivism. Our results yield implications for the design of institutional policies aimed at mitigating misconduct and reducing recidivism. |
| Keywords: | Deterrence; Institutions; Punishment; Swiftness; Uncertainty |
| JEL: | C91 D02 D81 K42 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:065&r=all |
| By: | Jeehoon Han (University of Chicago - Harris School of Public Policy); Bruce D. Meyer (University of Chicago - Harris School of Public Policy); James X. Sullivan (University of Notre Dame - Department of Economics) |
| Abstract: | This paper addresses the economic impact of the COVID-19 pandemic by providing timely and accurate information on the impact of the current pandemic on income and poverty to inform the targeting of resources to those most affected and assess the success of current efforts. We construct new measures of the income distribution and poverty with a lag of only a few weeks using high frequency data from the Basic Monthly Current Population Survey (CPS), which collects income information for a large, representative sample of U.S. families. Because the family income data for this project are rarely used, we validate this timely measure of income by comparing historical estimates that rely on these data to estimates from data on income and consumption that have been used much more broadly. Our results indicate that at the start of the pandemic government policy effectively countered its effects on incomes, leading poverty to fall and low percentiles of income to rise across a range of demographic groups and geographies. Simulations that rely on the detailed CPS data and in aggregate closely match total payments made show that the entire decline in poverty that we find can be accounted for by the rise in government assistance including unemployment insurance benefits and the Economic Impact Payments. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2020-84&r=all |
| By: | Hongwei Chuang (IUJ Research Institutey, International University of University) |
| Abstract: | We find high momentum stocks with preserving substantial "fundamental value" are more likely to rebound after unexpected financial shocks. The portfolio test show that our proposed investment strategy can inherit more portfolio downside risk, especially the momentum crash during turbulent times. |
| Keywords: | Momentum; Financial Crisis; Fama-French Factors; Systemic Risk |
| JEL: | G11 G12 G14 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:iuj:wpaper:ems_2021_02&r=all |
| By: | Raju, Rajan; Agarwalla, Sobhesh Kumar |
| Abstract: | How many stocks are required to reduce unsystematic risk significantly is an important question for investors. While there is a large body of research on the subject in the United States, there is little formal work on this question in India. We show that a 15-20 stock portfolio, the traditional market rule-of-thumb for a diversified portfolio, is likely inadequate to minimise unsystematic risk. We show that an investor could target to reduce diversifiable risk by 90% with a 90% confidence with a portfolio of 40-50 stocks. We build a practical framework that serves as a baseline for investors to target a specific reduction in diversifiable unsystematic risk at a chosen confidence level. |
| Date: | 2021–02–23 |
| URL: | http://d.repec.org/n?u=RePEc:iim:iimawp:14648&r=all |
| By: | Peter Ganong (University of Chicago - Harris School of Public Policy); Pascal J. Noel (University of Chicago - Booth School of Business) |
| Abstract: | There are two prevailing theories of borrower default: strategic default—when debt is too high relative to the value of the house—and adverse life events—such that the monthly payment is too high relative to available resources. It has been challenging to test between these theories in part because adverse events are measured with error, possibly leading to attenuation bias. We develop a new method for addressing this measurement error using a comparison group of borrowers with no strategic default motive: borrowers with positive home equity. We implement the method using high-frequency administrative data linking income and mortgage default. Our central finding is that only 3 percent of defaults are caused exclusively by negative equity, much less than previously thought; in other words, adverse events are a necessary condition for 97 percent of mortgage defaults. Although this finding contrasts sharply with predictions from standard models, we show that it can be rationalized in models with a high private cost of mortgage default. |
| JEL: | E20 G21 R21 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2020-100&r=all |
| By: | Joel HELLIER (LEM-CNRS (Univ. Lille, France)) |
| Abstract: | We review the channels through which the different dimensions of globalization and their interactions impact inequality in advanced economies. North-South trade of final goods, of intermediate goods and of tasks (offshoring) and the interplay between trade and technology generate winners (high skilled workers and capital owners) and losers (low and medium skilled workers) and raises inequality. To make everyone win, a share of the winners’ gain should be redistributed to the losers. But the increasing international mobility of the winners and of the tax bases they own (capital and high incomes) generates tax competition and a race to the bottom of the related tax rates. This tends to reduce the existing social transfers but it also hinders the redistribution necessary to offset trade-driven inequality. In addition, globalization (i) modifies anti-inequality policies by producing an inequality-unemployment tradeoff and a redistribution-progressivity tradeoff, and (ii) fosters public debt and/or over-taxation of the middle class if the governments compensate the increase in social risks, generating a middle class curse and a social democracy curse. It can also hamper skill upgrading which is a major means to fight growing inequality in the longer term. Finally, (i) partial approaches and estimates which do not encompass the diverse interactions highlighted here could reveal to be misleading and (ii) combating globalization-related inequality should focus on tax and social rules avoidance rather than on trade restrictions. |
| Keywords: | Globalization; Inequality; Social policies; Tax competition, Trade. |
| JEL: | E25 F16 H2 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:inq:inqwps:ecineq2021-575&r=all |
| By: | Justin E. Holz (University of Chicago - Harris School of Public Policy); John A. List (University of Chicago - Department of Economics; NBER); Alejandro Zentner (University of Texas at Dallas - Naveen Jindal School of Management); Marvin Cardoza (Direccion General de Impuestos Internos); Joaquin Zentner (Inter-American Development Bank) |
| Abstract: | 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. |
| JEL: | C93 H2 H26 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2020-113&r=all |
| By: | Lubos Pastor (University of Chicago - Booth School of Business; NBER; CEPR; National Bank of Slovakia); M. Blair Vorsatz (University of Chicago - Booth School of Business) |
| Abstract: | We present a comprehensive analysis of the performance and flows of U.S. actively-managed equity mutual funds during the COVID-19 crisis of 2020. We find that most active funds underperform passive benchmarks during the crisis, contradicting a popular hypothesis. Funds with high sustainability ratings perform well, as do funds with high star ratings. Fund outflows surpass pre-crisis trends, but not dramatically. Investors favor funds that apply exclusion criteria and funds with high sustainability ratings, especially environmental ones. Our finding that investors remain focused on sustainability during this major crisis suggests they view sustainability as a necessity rather than a luxury good. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2020-96&r=all |
| By: | Bonciani, Dario (Bank of England); Oh, Joonseok (Freie Universität Berlin) |
| Abstract: | Standard New Keynesian models deliver puzzling results at the effective lower bound of short-term interest rates: greater price flexibility amplifies the fall in output in response to adverse demand shocks; labour tax cuts are contractionary; the multipliers of wasteful government spending are large. These outcomes stem from a failure to characterise monetary policy correctly. Both analytically and numerically, we show that allowing the central bank to respond to inflation with quantitative easing (QE) can resolve all these paradoxes. In quantitative terms, mild adjustments to the central bank’s balance sheet are sufficient to obtain results more in line with conventional wisdom. |
| Keywords: | Policy paradoxes; unconventional monetary policy; quantitative easing; liquidity trap; effective lower bound |
| JEL: | E52 E58 E62 E63 |
| Date: | 2021–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0908&r=all |
| By: | Bandiera, Oriana; Prat, Andrea; Hansen, Stephen; Sadun, Raffaella |
| Abstract: | We develop a new method to measure CEO behavior in large samples via a survey that collects high-frequency, high-dimensional diary data and a machine learning algorithm that estimates behavioral types. Applying this method to 1,114 CEOs in six countries reveals two types: “leaders,” who do multifunction, high-level meetings, and “managers,” who do individual meetings with core functions. Firms that hire leaders perform better, and it takes three years for a new CEO to make a difference. Structural estimates indicate that productivity differentials are due to mismatches rather than to leaders being better for all firms. |
| JEL: | J50 |
| Date: | 2020–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:101423&r=all |
| By: | Debnath, R.; Mittal, V.; Jindal, A. |
| Abstract: | About 70% of India’s current energy mix comprises of coal, and the increase in generation from renewable energy (RE) sources is affecting the health of the power system. We investigated this effect through a cross-sectional of asset utilisation, cost and the social disruption caused by accelerating RE into the Indian Power System. We also derived a challenge-roadmap for the power system using bibliometric analysis. The review-driven interpretivist results revealed that increasing RE generation is pushing the coal plants to operate in low-loading conditions, causing heightened wear and tear of the plant as they are not suitable for flexible operation. It had tremendously increased the operation and maintenance costs of the brownfield plants. While there is a growing scope for cross border trade of electricity, the existing regulatory mechanism poses severe implementation challenges. Social disruption due to shift from coal-economy illustrated a holistic view of the political economy of the Indian power system that can potentially cause large-scale conflict and disrupt the national economy at an unprecedented scale. Policy implications outlined by our study for the draft Electricity (Amendment) Bill 2020 include scoping a socio-technical framework which supports just energy transition through better financial support mechanisms for flexible operation of coal plants. Focusing on clean-up over shut-down of coal plants and facilitating investments in battery storage technologies and cross-border electricity trade as RE and conventional fuel reach market parity. |
| Keywords: | Power System, Flexibility, Coal economy, Social disruption, Energy Transition, Electricity Bill 2020 |
| JEL: | Q4 Q42 Q48 |
| Date: | 2020–11–17 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:20106&r=all |
| By: | Kono, Tatsuhito; Okuno, Masaya; Yamaura, Kazuho |
| Abstract: | This paper constructs an evacuation decision-making model that takes cognitive dissonance into consideration. The purpose of this construction is to clarify the psychological mechanism for the evacuation behavior of residents during an emergency, based on Akerlof and Dickens (1982). Specifically, we empirically explore people’s psychological mechanism (e.g. cognitive dissonance) for evacuation behavior when a tsunami disaster occurs. As a result, we show that the level of anxiety depends on the area where residents live and that the average anxiety of residents is mostly correlated to the level of damage of past disasters, and that it is affected also by the ages of residents. Since the level of anxiety largely affects an individual’s evacuation behavior, this result can indicate for what kinds of people intervention and assistance are required based on the level of anxiety. |
| Keywords: | Disaster mitigation, Cognitive dissonance, Evacuation behavior |
| JEL: | D03 R0 |
| Date: | 2020–02–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:106245&r=all |
| By: | Carina Neisser (University of Cologne and IZA Bonn) |
| Abstract: | The elasticity of taxable income (ETI) is a key parameter in tax policy analysis. To examine the large variation found in the literature of taxable and broad income elasticities, I conduct a comprehensive meta-regression analysis using information from 61 studies containing 1,720 estimates. My findings reveal that estimated elasticities are not immutable parameters. They are correlated with contextual factors and the choice of the empirical specification influences the estimated elasticities. Finally, selective reporting bias is prevalent, and the direction of bias depends on whether deductions are included in the tax base. |
| Keywords: | elasticity of taxable income; income tax; behavioural response; meta-regression analysis |
| JEL: | C81 H24 H26 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:067&r=all |
| By: | Rodrigo Adao (University of Chicago - Booth School of Business); Paul E. Carrillo (George Washington University - Department of Economics); Arnaud Costinot (Massachusetts Institute of Technology - Department of Economics); Dave Donaldson (Massachusetts Institute of Technology - Department of Economics; CEPR; BREAD: NBER); Dina Pomeranz (University of Zurich - Department of Economics; CEPR) |
| Abstract: | We develop a new factor content approach to study the impact of trade on inequality. Our analysis generalizes the theoretical results of Deardorff and Staiger (1988) and improves on past empirical implementations of these results. Combined with unique administrative data from Ecuador, our approach yields measures of individual-level exposure to exports and imports, for both capital and labor income, as well as estimates of the incidence of such exposure across the income distribution. We find that international trade raises earnings inequality in Ecuador, especially in the upper-half of the income distribution. However, the drop in inequality experienced by Ecuador over the last decade would have been less pronounced in the absence of trade. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2020-182&r=all |
| By: | Knut Are Aastveit; Hilde C. Bjørnland; Jamie L. Cross |
| Abstract: | Do inflation expectations and the associated pass-through of oil price shocks depend on demand and supply conditions underlying the global market for crude oil? We answer this question with a novel structural vector autoregressive model of the global oil market that jointly identifies transmissions of oil demand and supply shocks through the real price of oil to both expected and realized inflation. Our main insight is that US households form their expectations of inflation differently when faced with long sustained increases in the price of oil, such as the early millennium oil price surge of 2003 to 2008, as compared to short and sharp price fluctuations that characterized much of the twentieth century. We also find that oil demand and supply shocks can explain a large proportion of expected and realized inflation dynamics during multiple periods of economic significance, and resolve disagreements around the role of oil prices in explaining the missing deflation puzzle of the Great Recession. |
| Keywords: | inflation expectations, inflation pass-through, oil prices |
| JEL: | E31 D84 Q41 Q43 |
| Date: | 2020–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:bno:worpap:2020_05&r=all |
| By: | Susan Thomas (xKDR); Diya Uday (xKDR) |
| Abstract: | Under-utilisation of land as collateral for loans is often attributed to the poor quality of the land records infrastructure, which is seen to both increase the cost of closing credit transactions and the risk in collection if a loan fails. In this paper, we examine the link between the heterogeneity of the quality of the land records infrastructure across states and the access to credit by households in these states using two new data-sets for the analysis. The state-level variation in land record quality is measured using the NCAER Land Records Services Index score while the Consumer Pyramids household data is used to capture household borrowing. Our findings are that there is a weak link between the borrowing patterns of households and quality of land records infrastructure, particularly the availability of spatial records. However, it does not appear that this is sufficient to capture the extent to which households are able to access credit from formal financial sources. |
| JEL: | E2 G2 R1 R5 O4 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:anf:wpaper:1&r=all |
| By: | Ojo, Marianne; Roedl, Marianne |
| Abstract: | As well as highlighting why unconventional and conventional accommodative monetary policies have been propagated as being crucial to achieving dual mandates and goals of leading central bank economies, drawing from lessons and experiences whereby accommodative monetary policies have been instigated as a means of addressing prolonged periods of low inflation, this paper highlights how such experiences can also be used to bolster the proposition that "since monetary policy space is limited, and since many of the challenges faced are beyond mandates of central banks, these should be addressed through structural and fiscal policies. " The concept and notion of central bank independence has been interpreted and applied differently across several jurisdictions over the decades. As the financial environment over the years, with the emergence of more complex trading and financial instruments, the traditional tools of central banking - as well as monetary policy tools and channels of transmission have adapted to cope with corresponding changes, challenges and demands of the financial environment. Why are interest rates at such historically low levels? These constitute some of the questions, amongst several research objectives which will be highlighted under the introductory section, that this paper aims to address. |
| Keywords: | counter-cyclical instruments; Effective Lower Bound; interest rate; accommodative monetary policies; asset purchase program; quantitative easing; uncertainty; government bonds; negative interest rates; inflation |
| JEL: | E3 E5 E52 E58 E6 E62 K2 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:106266&r=all |
| By: | Hanappi, Hardy |
| Abstract: | In its 500 years of evolution, the capitalist mode of production has produced different forms of the most abstract incarnation of what the human species uses as the material carrier of general social value - of money. Social value in disguise permeates all internal models of social agents, from individuals via households and firms to state agencies. In a sense, we have arrived at a situation where the largest and most powerful social agents are still a handful of nation-states, of self-determined ‘global players’. Their respective national value system is partly made comparable by the existence of a military hegemon, the USA and its US Dollar. Less powerful nation-states are aligned along with the dominance of the US Dollar. To fulfil its manifold tasks, the global Dollar system has developed highly complex features, most of them incorporated in what today is called ‘international finance’. If the victory of a single nation-state (‘America first’) over a democratic global governance system fails, this will also imply a different sign-system for global social value. Not just different geographical location, but also other dimensions of diversity will have to be taken into account. In short, the complexity of a new form of world money will rise dramatically. By following the historical and logical evolution of money this contribution sketches some basic features of an upcoming complex global money. |
| Keywords: | Money, Political Economy, Complexity |
| JEL: | B52 E40 E50 P0 |
| Date: | 2021–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:106285&r=all |
| By: | Häfner, David |
| Abstract: | This dissertation is dedicated to the analysis of three superordinate economic principles in varying market environments: market efficiency, the behavior of market participants and information asymmetry. Sustainability and social responsibility have gained importance as investment criteria in recent years. However, responsible investing can lead to conflicting goals with respect to utility-maximizing behavior and portfolio diversification in efficient markets. Conducting a meta-analysis, this thesis presents evidence that positive (non-monetary) side effects of responsible investing can overcome this burden. Next, the impact of the EU-wide regulation of investment research on the interplay between information asymmetry, idiosyncratic risk, liquidity and the role of financial analysts in stock markets is investigated. An empirical analysis of the emerging primary and secondary market for cryptocurrencies yields further insights about the effects of information asymmetry between investors, issuers and traders. The efficient allocation of resources is dependent on the market microstructure, the behavior of market participants, as well as exogenous shocks. Against this background, this thesis is dedicated to the empirical analysis of limit order books, the rationality of traders and the impact of COVID-19. Due to its young history, the market for cryptocurrencies yields a suitable research subject to test classical financial theories. This doctoral thesis reveals parallels between the microstructure of cryptocurrency and stock markets and uncovers some previously unknown statistical properties of the cryptocurrency market microstructure. An initial examination of the impact of COVID-19 further shows that cryptocurrencies with a high market capitalization seem to react to macroeconomic shocks similar to stock markets. This cumulative dissertation comprises six stand-alone papers, of which three papers have already been published. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:dar:wpaper:125278&r=all |
| By: | Botsari, Antonia; Kiefer, Kilian; Lang, Frank; Pal, Kristian |
| Abstract: | In light of recent EU policy initiatives such as the Capital Markets Union (CMU) action plan, this working paper provides unique insights from Venture Capital (VC) general partners/management companies, Private Equity Mid-Market (PE MM) managers and Business Angels (BA). Specifically, based on the first 2020 waves of the EIF VC, PE MM and BA Surveys, the report focuses on generating insights around three main topics of SME financing: Scale-up financing, Exit environment & Initial Public Offerings (IPOs) and policy-related implications of the above. The study attempts to piece together evidence from the three surveys, provides market insights from respondents in light of recent policy initiatives, and serves as an informative instrument to policy-makers and practitioners. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:eifwps:202169&r=all |
| By: | Cristina Angelico (Bank of Italy); Juri Marcucci (Bank of Italy); Marcello Miccoli (International Monetary Fund); Filippo Quarta (Bank of Italy) |
| Abstract: | Using Italian data from Twitter, we employ textual data and machine learning techniques to build new real-time measures of consumers' inflation expectations. First, we select some relevant keywords to identify tweets related to prices and expectations thereof. Second, we build a set of daily measures of inflation expectations on the selected tweets combining the Latent Dirichlet Allocation (LDA) with a dictionary-based approach, using manually labelled bi-grams and tri-grams. Finally, we show that the Twitter-based indicators are highly correlated with both monthly survey-based and daily market-based inflation expectations. Our new indicators provide additional information beyond the market-based expectations, the professional forecasts, and the realized inflation, and anticipate consumers' expectations proving to be a good real-time proxy. Results suggest that Twitter can be a new timely source to elicit beliefs. |
| Keywords: | inflation expectations, Twitter data, text mining, big data, survey-based measures, market-based measures, forecasting |
| JEL: | E31 C53 C55 D84 E58 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1318_21&r=all |
| By: | Toptancı, Ali İskan |
| Abstract: | Blockchain in Supply Chain Management (SCM) is expected to become a more demanded technology in the next five years. The global blockchain supply chain market is projected to grow at a combined annual growth rate of 87%, from $ 45 million in 2018 to $ 3 billion by 2023. Blockchain will improve the business for all global supply chain stakeholders by providing enhanced traceability, facilitating digitization, and securing the chain of custody. This study provides a synthesis of the current challenges in global supply chain and trade operations, as well as the relevant capabilities and potential of blockchain. In addition, this study will present leading pilot initiatives to implement blockchain technology in supply chains and the logistics industry to meet various needs. By discussing the effects of blockchain on customs and government institutions; The difficulties in ensuring the wide distribution of blockchain technology in global supply chain management will be discussed. |
| Keywords: | Supply Chain Management,Blockchain,Global Trade,Logistics |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esrepo:229619&r=all |
| By: | Santiago Gamba-Santamaria; Luis Fernando Melo-Velandia; Camilo Orozco-Vanegas |
| Abstract: | Using Colombian credit vintage data, we decompose the non-performing loans into one component that captures the evolution of the payment capacity of borrowers, and other component that captures changes in the credit risk taken by the financial system at the time of loan disbursement. We use intrinsic estimators and penalized regression techniques to overcome the perfect multicollinearity problem that the model entails. We find that these two type of components have evolved differently over time, and that good economic conditions and loose financial conditions improve the payment capacity of borrowers to meet their obligations, and in turn, they tend to coincide with the financial system engaging in riskier loans. Finally, we advocate the use of this methodology as a policy tool that is easy to apply by financial and economic authorities that dispose of a constant flow of credit vintage information. Through it, they will be able to identify the origin of the credit risk materialization and curb the risk taken by the financial system. **** RESUMEN: Usando información de cosechas de crédito, en este documento descomponemos la cartera en mora en un componente que captura la evolución de la capacidad de pago de los deudores y otro componente que captura los cambios en la toma de riesgo de crédito del sistema financiero al momento del desembolso. Utilizamos estimadores intrínsecos y técnicas de regresión penalizadas para solucionar el problema de multicolinealidad perfecta asociado a la estimación de los parámetros de los modelos. Encontramos que estos dos tipos de componentes han evolucionado de manera diferente a lo largo del tiempo y que buenas condiciones económicas y condiciones financieras laxas mejoran la capacidad de pago de los deudores para cumplir con sus obligaciones y, a su vez, tienden a coincidir con el otorgamiento de préstamos de mayor riesgo por parte del sistema financiero. Finalmente, recomendamos el uso de esta metodología como herramienta de política de fácil aplicación por parte de las autoridades financieras y económicas que disponen de un flujo constante de información de cosechas de crédito. A través de ella las autoridades podrían identificar el origen de la materialización del riesgo crediticio y contener la toma de riesgo del sistema financiero. |
| Keywords: | Cosechas de crédito, cartera en mora, regresiones penalizadas, estimadores intrínsecos, credit vintages, non-performing loans, elastic net regressions, intrinsic estimators. |
| JEL: | C13 C20 G21 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:bdr:borrec:1154&r=all |
| By: | Jose Maria Barrero (Instituto Tecnológico Autónomo de México Business School); Nicholas Bloom (Stanford University - Department of Economics; NBER); Steven J. Davis (University of Chicago - Booth School of Business; Hoover Institution; NBER) |
| Abstract: | We survey 15,000 Americans over several waves to investigate whether, how, and why working from home will stick after COVID-19. The pandemic drove a mass social experiment in which half of all paid hours were provided from home between May and October 2020. Our survey evidence says that 22 percent of all full work days will be supplied from home after the pandemic ends, compared with just 5 percent before. We provide evidence on five mechanisms behind this persistent shift to working from home: diminished stigma, better-than-expected experiences working from home, investments in physical and human capital enabling working from home, reluctance to return to pre-pandemic activities, and innovation supporting working from home. We also examine some implications of a persistent shift in working arrangements: First, high-income workers, especially, will enjoy the perks of working from home. Second, we forecast that the postpandemic shift to working from home will lower worker spending in major city centers by 5 to 10 percent. Third, many workers report being more productive at home than on business premises, so post-pandemic work from home plans offer the potential to raise productivity as much as 2.4 percent. |
| Keywords: | COVID, working-from-home |
| JEL: | D13 D23 E24 J22 G18 M54 R3 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2020-174&r=all |
| By: | Ravshanbek Khodzhimatov; Stephan Leitner; Friederike Wall |
| Abstract: | We focus on how individual behavior that complies with social norms interferes with performance-based incentive mechanisms in organizations with multiple distributed decision-making agents. We model social norms to emerge from interactions between agents: agents observe other the agents' actions and, from these observations, induce what kind of behavior is socially acceptable. By complying with the induced socially accepted behavior, agents experience utility. Also, agents get utility from a pay-for-performance incentive mechanism. Thus, agents pursue two objectives. We place the interaction between social norms and performance-based incentive mechanisms in the complex environment of an organization with distributed decision-makers, in which a set of interdependent tasks is allocated to multiple agents. The results suggest that, unless the sets of assigned tasks are highly correlated, complying with emergent socially accepted behavior is detrimental to the organization's performance. However, we find that incentive schemes can help offset the performance loss by applying individual-based incentives in environments with lower task-complexity and team-based incentives in environments with higher task-complexity. |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2102.12309&r=all |
| By: | Talat Genc (Department of Economics and Finance, University of Guelph, Guelph ON Canada); Pietro De Giovanni (LUISS University) |
| Abstract: | We consider behavioral issues in a new dynamic model in which a manufacturer (M) makes pricing and green investment decisions while facing heterogeneous customers including emotional, conscious, and rational consumers. Emotional consumers base their purchasing decisions on M's green investments. Their emotions are stochastic, dynamic, and accumulate over time. The investment is made over time and is subject to time-to-build so that there is a time-lag between investment and production. Differently, conscious consumers respond to both green investments and prices and have no memory on M's past green initiatives. The rational consumers are not sensitive to environmental issues and base their decisions only on product price. Our findings suggest that M should have a careful look to the emotional consumers, who have the largest impact on investments, prices, and profits. Therefore, firms should first think to satisfy the emotional consumers and then all other segments. When firms have environmental targets or restrictions, all segments must be satisfied independent of their impact on the profits. This finding contributes to the literature by highlighting that the trade-off between economic and environmental performance exists also in presence of consumer segments. |
| Keywords: | Green product investment; Consumer heterogeneity; Uncertainty; Skimming strategy; Penetration strategy. |
| JEL: | D01 D91 D4 L11 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:gue:guelph:2021-01&r=all |
| By: | Supreet Kaur (University of California, Berkeley - Department of Economics; NBER); Sendhil Mullainathan (University of Chicago - Booth School of Business; NBER); Suanna Oh (Paris School of Economics); Frank Schilbach (Massachusetts Institute of Technology - Department of Economics; NBER) |
| Abstract: | We test whether increasing cash-on-hand raises the productivity of poor workers. Our motivation is psychological. Concerns about money can create mental burdens such as worry, stress, or sadness. These in turn could interfere with the ability to work effectively. We empirically test for this possibility using a field experiment with piece-rate manufacturing workers in India. We randomize the timing of income receipt, so that on a given day some workers have more cash-on-hand than others. This manipulation holds constant wages and piece rates, as well as human and physical capital. On cash-rich days, average productivity increases by 0.11 standard deviations (6.2%); this effect is concentrated among relatively poorer workers. Mistakes also decline on these days — an effect that is again concentrated among poorer workers. Having more cash-on-hand thus enables workers to work faster while making fewer errors, suggesting improved cognition. We argue that mechanisms such as gift exchange, trust, and nutrition cannot account for our findings. Instead, our results suggest a range of psychological mechanisms wherein alleviating financial concerns allows workers to be more attentive and productive at work. |
| JEL: | D03 D14 D31 J24 O1 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2021-07&r=all |
| By: | Matteo Aquilina (Financial Conduct Authority); Eric Budish (University of Chicago - Booth School of Business; NBER) |
| Abstract: | We use stock exchange message data to quantify the negative aspect of high-frequency trading, known as “latency arbitrage.†The key difference between message data and widely-familiar limit order book data is that message data contain attempts to trade or cancel that fail. This allows the researcher to observe both winners and losers in a race, whereas in limit order book data you cannot see the losers, so you cannot directly see the races. We find that latency-arbitrage races are very frequent (about one per minute per symbol for FTSE 100 stocks), extremely fast (the modal race lasts 5-10 millionths of a second), and account for a large portion of overall trading volume (about 20%). Race participation is concentrated, with the top 6 firms accounting for over 80% of all race wins and losses. Most races (about 90%) are won by an aggressive order as opposed to a cancel attempt; market participants outside the top 6 firms disproportionately provide the liquidity that gets taken in races (about 60%). Our main estimates suggest that eliminating latency arbitrage would reduce the market’s cost of liquidity by 17% and that the total sums at stake are on the order of $5 billion annually in global equity markets. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2020-86&r=all |
| By: | Alina K. Bartscher; Moritz Kuhn; Moritz Schularick; Paul Wachtel |
| Abstract: | This paper aims at an improved understanding of the relationship between monetary policy and racial inequality. We investigate the distributional effects of monetary policy in a unified framework, linking monetary policy shocks both to earnings and wealth differentials between black and white households. Specifically, we show that, although a more accommodative monetary policy increases employment of black households more than white households, the overall effects are small. At the same time, an accommodative monetary policy shock exacerbates the wealth difference between black and white households, because black households own less financial assets that appreciate in value. Over multi-year time horizons, the employment effects are substantially smaller than the countervailing portfolio effects. We conclude that there is little reason to think that accommodative monetary policy plays a significant role in reducing racial inequities in the way often discussed. On the contrary, it may well accentuate inequalities for extended periods. |
| Keywords: | Monetary policy; Racial inequality; Income distribution; Wealth distribution; Wealth effects |
| JEL: | E40 E52 J15 |
| Date: | 2021–02–04 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmoi:89808&r=all |
| By: | Orley Ashenfelter; Stepan Jurajda |
| Abstract: | We use highly consistent national-coverage price and wage data to provide evidence on wage increases, labor-saving technology introduction, and price pass-through by a large low-wage employer facing minimum wage hikes. Based on 2016-2020 hourly wage rates of McDonald’s Basic Crew and prices of the Big Mac sandwich collected simultaneously from almost all US McDonald’s restaurants, we find that in about 25% of instances of minimum wage increases, restaurants display a tendency to keep constant their wage ‘premium’ above the increasing minimum wage. Higher minimum wages are not associated with faster adoption of touch-screen ordering, and there is near-full price pass-through of minimum wages, with little heterogeneity related to how binding minimum wage increases are for restaurants. Minimum wage hikes lead to increases in real wages (expressed in Big Macs an hour of Basic Crew work can buy) that are one fifth lower than the corresponding increases in nominal wages. |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp684&r=all |
| By: | Antonio M. Espín (Department of Social Anthropology, University of Granada); Manuel Correa (Department of Applied Economics, University of Granada); Alberto Ruiz-Villaverde (Department of Applied Economics, University of Granada) |
| Abstract: | There is much debate as to why economics students display more self-interested behavior than other students: whether homo economicus self-select into economics or students are instead “indoctrinated†by economics learning, and whether these effects impact on preferences or beliefs about others’ behavior. Using a classroom survey (n>500) with novel behavioral questions we show that, compared to students in other majors, econ students report being: (i) more self-interested (in particular, less compassionate or averse to advantageous inequality) already in the first year and the difference remains among more senior students; (ii) more likely to think that people will be unwilling to work if unemployment benefits increase (thus, assuming others are motivated primarily by self-interest), but only among senior students. These results suggest self-selection in preferences and indoctrination in beliefs. |
| Keywords: | self-selection, indoctrination, self-interest, inequality aversion, beliefs |
| JEL: | A11 A13 A22 D31 D63 D9 I22 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:21-03&r=all |
| By: | Natasha Sarin (University of Pennsylvania - Carey Law); Lawrence H. Summers (Harvard University - Harvard Kennedy School of Law); Owen M. Zidar (Princeton University - Department of Economics & School of International and Public Affairs; NBER); Eric Zwick (University of Chicago - Booth School of Business; NBER) |
| Abstract: | We argue the revenue potential from increasing tax rates on capital gains may be substantially greater than previously understood. First, many prior studies focus primarily on short-run taxpayer responses, and so miss revenue from gains that are deferred when rates change. Second, the composition of capital gains has shifted in recent years, such that the share of gains that are highly elastic to the tax rate has likely declined. Third, focusing on capital gains tax collection may understate fiscal spillovers from decreasing the preferential tax treatment for capital gains. Fourth, additional base-broadening reforms, like eliminating stepped-up basis and making charitable giving a realization event, will decrease the elasticity of the tax base to rate changes. Overall, we do not think the prevailing assumption of many in the scorekeeping community—that raising rates to top ordinary income levels would raise little revenue—is warranted. A crude calculation illustrates that raising capital gains rates to ordinary income levels could raise $1 trillion more revenue over a decade than other estimates suggest. Given the magnitudes at stake, scorekeeping procedures employed in evaluating capital gains should be made more transparent and be the subject of external professional debate and review. |
| JEL: | H0 H2 H3 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2021-10&r=all |
| By: | Ricardo Correa (Board of Governors of the Federal Reserve System); Wenxin Du (University of Chicago - Booth School of Business; NBER); Gordon Liao (Board of Governors of the Federal Reserve System) |
| Abstract: | We characterize how U.S. global systemically important banks (GSIBs) supply short-term dollar liquidity in repo and foreign exchange swap markets in the post-Global Financial Crisis regulatory environment and serve as the "lenders-of-second-to-last-resort". Using daily supervisory bank balance sheet information, we find that U.S. GSIBs modestly increase their dollar liquidity provision in response to dollar funding shortages, particularly at period-ends, when the U.S. Treasury General Account balance increases, and during the balance sheet taper of the Federal Reserve. The increase in the dollar liquidity provision is mainly financed by reducing excess reserve balances at the Federal Reserve. Intra-firm transfers between depository institutions and broker-dealer subsidiaries within the same bank holding company are crucial to this type of "reserve-draining" intermediation. Finally, we discuss factors that contributed to the repo spike in September 2019 and the subsequent response of U.S. GSIBs to recent policy interventions by the Federal Reserve. |
| Keywords: | Liquidity, global banks, repos, reserves, covered interest rate parity |
| JEL: | G2 F3 E4 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2020-89&r=all |
| By: | Pawel Dziewulski (University of Sussex); Roy Allen (University of Western Ontario); John Rehbeck (Ohio State University) |
| Abstract: | This paper re-examines research that studies economic rationality using experimental data generated by nonhuman animals (e.g. rats, pigeons, monkeys, etc.). The standard experimental methodology to elicit choices from nonhuman animals allows a researcher to test three types of economic rationality: standard deterministic utility maximization, average choice rationality, and random utility maximization. Most of the research has evaluated whether animals satisfy average choice rationality. We describe the difference between these models and check each type of rationality on capuchin monkey data from Chen et al. (2006). We reject standard deterministic utility maximization, but cannot reject either average choice rationality or random utility maximization. This paper is the first to provide a statistical test for average choice rationality. |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:sus:susewp:0321&r=all |
| By: | Adam S. Posen (Peterson Institute for International Economics) |
| Abstract: | Rebuilding the global economy is essential to addressing many interlocking problems at once, including recovery from the COVID-19 pandemic, climate change, inequality, and limiting international conflict. In the summer of 2020, the Peterson Institute for International Economics (PIIE) enlisted scholars and stakeholders to deliver 39 memoranda to a wide range of top policymakers and institutions. The authors called for dozens of specific measures to counter an economic crisis that was activated by a global pandemic but that was also years in the making. The memoranda were originally published from October through December 2020 on the Rebuilding the Global Economy microsite. Some of the recommendations have since been implemented. This PIIE Briefing collects the memoranda in a single volume. The mandate of the Institute's "Rebuilding the Global Economy" project has been to connect a long-term strategy with precise policy actions to achieve rapid results at the start of a new US presidential administration. The emphasis has been on advising policymakers and senior officials, as well as the public, in the United States and the European Union, and at the Bretton Woods international economic institutions. At least in the initial phase of the project, PIIE restricted itself to places where the authors had standing and experience to speak. Other nations, regions, and institutions merit the same voice on rebuilding the global economy, so while the Institute does not presume to speak for them, its leadership is encouraging them to engage with the Institute in offering their own similar advice. Many memoranda stress that the disorders they are addressing have accumulated slowly over the last two decades or even longer, culminating with the nationalism and protectionism of recent years and finally in the COVID-19 pandemic and the worldwide economic shock of 2020–21. |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:iie:piiebs:piieb21-1&r=all |
| By: | Zhiguo He (University of Chicago - Booth School of Business; NBER); Jing Huang (University of Chicago - Booth School of Business); Jidong Zhou (Yale University - School of Business) |
| Abstract: | Open banking facilitates data sharing consented by customers who generate the data, with a regulatory goal of promoting competition between traditional banks and challenger fintech entrants. We study lending market competition when sharing banks’ customer data enables better borrower screening or targeting by fintech lenders. Open banking could make the entire financial industry better off yet leave all borrowers worse off, even if borrowers could choose whether to share their data. We highlight the importance of equilibrium credit quality inference from borrowers’ endogenous sign-up decisions. When data sharing triggers privacy concerns by facilitating exploitative targeted loans, the equilibrium sign-up population can grow with the degree of privacy concerns. |
| Keywords: | Open banking, data sharing, banking competition, digital economy, winner’s curse, privacy, precision marketing |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2020-168&r=all |
| By: | Stephen J. Davis (University of Chicago - Booth School of Business); Dingqian Liu (American University - Department of Economics); Xuguang Simon Sheng (American University - Department of Economics) |
| Abstract: | Stock prices and workplace mobility trace out striking clockwise paths in daily data from mid-February to late May 2020. Global stock prices fell 30 percent from 17 February to 12 March, before mobility declined. Over the next 11 days, stocks fell another 10 percentage points as mobility dropped 40 percent. From 23 March to 9 April, stocks recovered half their losses and mobility fell further. From 9 April to late May, both stocks and mobility rose modestly. This dynamic plays out across the 35 countries in our sample, with a few notable exceptions. We also find that stricter lockdown policies, both in-country and globally, drove larger declines in national stock prices conditional on pandemic severity, workplace mobility, and income support and debt relief policies. Looking more closely at the two largest economies, the pandemic had greater effects on stock market levels and volatilities in the U.S. than in China. Narrative evidence confirms the dominant – and historically unprecedented – role of pandemic-related developments for stock prices in both countries. The size of the global stock market crash in reaction to the pandemic is many times larger than a standard asset-pricing model implies. |
| Keywords: | Stock prices, lockdown policies, market shutdowns, coronavirus, COVID-19, workplace mobility, China |
| JEL: | E32 E44 E65 G12 G18 I18 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2020-156&r=all |
| By: | Austan Goolsbee (University of Chicago - Booth School of Business; NBER); Chad Syverson (University of Chicago - Booth School of Business; NBER) |
| Abstract: | The collapse of economic activity in 2020 from COVID-19 has been immense. An important question is how much of that collapse resulted from government-imposed restrictions on activity versus people voluntarily choosing to stay home to avoid infection. This paper examines the drivers of the economic slowdown using cellular phone records data on customer visits to more than 2.25 million individual businesses across 110 different industries. Comparing consumer behavior over the crisis within the same commuting zones but across state and county boundaries with different policy regimes suggests that legal shutdown orders account for only a modest share of the massive changes to consumer behavior (and that tracking county-level policy conditions is significantly more accurate than using state-level policies alone). While overall consumer traffic fell by 60 percentage points, legal restrictions explain only 7 percentage points of this. Individual choices were far more important and seem tied to fears of infection. Traffic started dropping before the legal orders were in place; was highly influenced by the number of COVID deaths reported in the county; and showed a clear shift by consumers away from busier, more crowded stores toward smaller, less busy stores in the same industry. States that repealed their shutdown orders saw symmetric, modest recoveries in activity, further supporting the small estimated effect of policy. Although the shutdown orders had little aggregate impact, they did have a significant effect in reallocating consumer activity away from “nonessential†to “essential†businesses and from restaurants and bars toward groceries and other food sellers. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2020-80&r=all |
| By: | Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Richard Grieveson (The Vienna Institute for International Economic Studies, wiiw); Doris Hanzl-Weiss (The Vienna Institute for International Economic Studies, wiiw); Sebastian Leitner (The Vienna Institute for International Economic Studies, wiiw); Isilda Mara (The Vienna Institute for International Economic Studies, wiiw); Hermine Vidovic (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | The EU member states in Central and Eastern Europe (EU-CEE) were experiencing rising labour shortages prior to the COVID-19 pandemic, and ongoing demographic decline means that the issue is likely to resurface once the pandemic is over. As a result, the bargaining power of labour has increased, wages have been generally rising ahead of labour productivity, and industrial action (strikes) – the level of which has remained low in recent decades – has emerged in some instances. In the face of labour and skill shortages, people have been investing in education. The share of employees with tertiary education has increased and vocational training has gained in importance, although active labour market policies have been used only selectively. Employers have increasingly been investing in fixed assets, especially in manufacturing, and the degree of robotisation has risen strongly. Despite domestic concerns that automation would generate massive job losses, our findings suggest that capital deepening has taken place faster where labour was in higher demand. Thus, labour was not substituted with capital, but rather the complementary effect prevailed. Employment actually increased in EU-CEE over the past two decades. Employers could hire not only the formerly unemployed, but also the formerly inactive, and used the relaxed immigration policies to attract foreign workers, especially from Ukraine and the Western Balkan countries. Czechia, Hungary, Slovenia and Slovakia have become net receivers of migrants, while in Bulgaria and Poland immigration largely compensates for the natives who go abroad. However, immigration from non-European countries as a general solution to the problem of labour shortages in EU-CEE is highly problematic in the current domestic political context. Overall, both our findings for the EU-CEE region over recent years and the experience of Western Europe during the ‘golden age’ (1950-1973) suggest that labour shortages are not in themselves an obstacle to rapid structural change and income growth. However, for such an economic model to be sustainable, more active government policies will be needed, such as greater public investment in education and training, higher minimum wages in order to encourage automation, and more extensive welfare networks in order to deal with the possible negative short-run side-effects of automation. |
| Keywords: | labour shortages, trade unions, migration policy, active labour market policy, investment, vocational training, ‘golden age’, populism |
| JEL: | J21 J23 J24 J31 J52 J61 N14 N34 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:wii:rpaper:rr:452&r=all |
| By: | Andersson, Henrik (Uppsala University); Engström, Per (Uppsala University); Nordblom, Katarina (Department of Economics, School of Business, Economics and Law, Göteborg University); Wanander, Susanna (The Swedish Tax Agency) |
| Abstract: | We study what induces delinquent taxpayers to pay their taxes due. We use high quality administrative data from the Swedish Tax Agency. We find a strong effect of the standard enforcement regime: a threat of having the debt handed over to the Enforcement Agency increases payments by roughly 10 percentage points. When including actual enforcement, payment increases by around 20 percentage points compared to those who do not risk enforcement. In a field experiment, we compare these effects of standard enforcement to those of much milder nudges, consisting of letters reminding tax delinquents to pay their taxes due. We find that a “pure nudge”, i.e., the inclusion of an extra piece of paper with no valuable information, has an effect of 7-8 percentage points for those who do not risk enforcement upon non-payment. However, the same nudge has no detectable effect for the group at risk of enforcement. Social-norm messages in turn increase payments both for those who risk enforcement and for those who do not, but to a much smaller degree. We also find that a pure nudge works much better for those who receive a physical letter than for those who receive information electronically, while the reaction to the social-norm nudge is significant for those who get the electronic information. |
| Keywords: | tax compliance; RCT; nudge; quasi-experiment; regression discontinuity |
| JEL: | C21 D03 D91 H24 H26 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0799&r=all |
| By: | Kamila Urbańska; Agnieszka Parkitna |
| Abstract: | The objective of this article is identification of SME business environment factors affecting success during a pandemic. The research was based on a deductive approach and was conducted in the first months of the pandemic in 2020 in the Lower Silesia. The research technique used GOOGLE electronic survey questionnaire and the collected data were statistically processed (SPSS). The study used sample, which allowed to select a set of population elements and determine the representativeness and reliability of the research sample. The theses and hypotheses presented were verified based on the data collected in the quantitative study. The specificity of the distributions of the variables was established. Nonparametric tests were used to analyze the data. Correlations between variables were tested using Spearman's test. To verify the specific hypotheses, the non-parametric Kruskal Willis Test for independent samples was used, which is a non-parametric alternative to the one-way analysis of variance between groups. Thus, rankings were performed. The results of the analysis of the collected data confirmed the previous literature analysis conducted in the theoretical part of the paper. The verification of the research hypotheses on the assumptions of the influence of the environment on the success of enterprises during pandemmic did not confirm what may be the reason for the initial shock of the market and the lack of preparation of entrepreneurs for the new economic reality during pandemic. The verification of the specific hypotheses showed that the empirical approach adopted coincided with the conceptual approach formed based on the theoretical analysis of the literature on the subject. In addition, it was shown that there are statistically significant correlations between the variables describing 6 pairs out of seven Scales of describing variables, the magnitude of which was described in the study. On this basis, it can be presumed that the success of enterprises is possible under the conditions of pandemic and the research identifies the environmental factors affecting them. Practical Implications: The analysis of the results obtained in the study is partially consistent with the literature studies on the impact of the environment on micro and small enterprises conducted before the pandemic. Nevertheless, the assumptions made at the stage of selecting the research sample, allow to formulate a thesis about the broader universality of the confirmed regularities, which should be confirmed in extended research. Which is an important contribution to further discussion. The paper describes the diagnosed competence gap in the area of SME enterprise management in the current economic conditions of the pandemic. Which is an extremely complicated task due to the lack of precedents giving guidance to enterprises resulting from history and literature on the subject. In view of this, the identification of environmental factors leading to the maintenance of success in such unusual conditions, which are at the same time adequate to the dynamically changing environment, is a desirable goal to achieve in scientific and practical aspects. |
| Keywords: | Success, SME enterprises, Factors |
| JEL: | D91 G41 L32 P12 P42 |
| Date: | 2021–02–18 |
| URL: | http://d.repec.org/n?u=RePEc:ahh:wpaper:worms2103&r=all |