|
on Central and Western Asia |
|
Issue of 2021‒05‒31
fifty-five papers chosen by |
| By: | Joanna Stavins |
| Abstract: | Consumer payments in the United States gradually have been shifting away from paper checks for the past several years. Cash use has declined as well, although at a much slower pace. As the number of check payments has decreased, those payments have been replaced with electronic and card payments. However, the transition from paper to electronic and card payments for bills has not proceeded in the same way as the transition for purchases. Using detailed consumer survey panel data collected over nine years, we track the same respondents over time and find that consumers who reduced their check or cash use for bill payments in a given year were more likely to reduce their check or cash use for purchases in the following year; but a reduction in check or cash use for purchases was not followed by the use of fewer checks or less cash for bill payments. The results suggest that a change in bill payment behavior may be a precursor to payment behavior changes in general. These results may help predict changes in payment instrument use for various transaction types as new payment methods, such as faster payments or central bank digital currency, become available to consumers in the future. |
| Keywords: | consumer payments; check; cards; electronic payments |
| JEL: | D12 D14 D15 |
| Date: | 2021–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbwp:91781&r= |
| By: | Frost, Jon; Gambacorta, Leonardo; Gambacorta, Romina |
| Abstract: | This paper analyses the role of financial development and financial technology in driving inequality in (returns to) wealth. Using micro data from the Survey on Household Income and Wealth (SHIW) conducted by the Bank of Italy for the period 1991-2016, we find evidence of the "Matthew effect" - a capacity of wealthy households to achieve higher returns than other households. With an instrumental variable approach, we find that financial development (number of bank branches) and financial technology (use of remote banking) both have a positive association with households' financial wealth and financial returns. While households of all wealth deciles benefit from the effects of financial development and financial technology, these benefits are larger when moving toward the top of the wealth distribution. Still, the economic significance of this gap fell in the last part of the sample period, as remote banking became more widespread. |
| Keywords: | banks; Financial Development; financial technology; Fintech; inequality |
| JEL: | D63 G10 G21 O15 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15014&r= |
| By: | Manohar Serrao; Aloysius Sequeira; K. V. M. Varambally |
| Abstract: | Financial inclusion and inclusive growth are the buzzwords today. Inclusive growth empowers people belonging to vulnerable sections. This in turn depends upon a variety of factors, the most important being financial inclusion, which plays a strategic role in promoting inclusive growth and helps in reducing poverty by providing regular and reliable sources of finance to the vulnerable sections. In this direction, the Government of India in its drive for financial inclusion has taken several measures to increase the access to and availing of formal financial services by unbanked households. The purpose of this paper is to assess the nature and extent of financial inclusion and its impact on the socio-economic status of households belonging to vulnerable sections focusing on inclusive growth. This has been analyzed with the theoretical background on financial access and economic growth, and by analyzing the primary data collected from the Revenue Divisions of Karnataka. The results show that there is a disparity in nature and extent of financial inclusion. Access to, availing of formal banking services pave the way to positive changes in the socio-economic status of households belonging to vulnerable sections which are correlated, leading to inclusive growth based on which the paper proposes a model to make the financial system more inclusive and pro-poor. |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2105.11716&r= |
| By: | Mercer-Blackman , Valerie (World Bank); Camingue-Romance, Shiela (Asian Development Bank) |
| Abstract: | How sensitive is inward foreign direct investment (FDI) from the United States (US) to developing Asia to corporate tax rates? This is a relevant question given the sweeping US tax bill effective in 2018, which provided incentives for US corporations abroad to repatriate profits. Using panel data at the country and sector level, we find that the effects are quite different across sectors, and that controlling for other factors such as market size, costs, openness, and the business environment, the corporate income tax rate differential is generally not statistically significant, including for global value chain-related FDI to developing Asia. It does have a small effect on service sectors such as financial intermediation and business services where sunk costs are small. |
| Keywords: | corporate tax; FDI; fiscal policy; foreign investment; Tax and Jobs Act; sectors |
| JEL: | F21 H25 H30 |
| Date: | 2020–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbewp:0628&r= |
| By: | Valencia Caicedo, Felipe |
| Abstract: | This chapter surveys the usage of Instrumental Variables (IVs) and Regression Discontinuity Designs (RDDs) in economic history. I document the positive trends of economic history articles employing these methods using three different samples: top 20 journals in economics, top 5 journals in economic history and top five general interest journals in economics from 2000-2020. I detail two broad phases: seminal articles published from 2001 to 2011, and a second wave of studies refining these techniques appearing from 2012 to today (2020). I discuss some methodological refinements that have appeared recently in the econometrics field-in the IV and RDD fronts. I then present a practical guide on regression diagnostics, acknowledging that there are other useful sources of identification available to tackle potential endogeneity issues. |
| Keywords: | econometrics; economic history; instrumental variables; Regression Discontinuity Designs; survey |
| JEL: | A33 C1 C26 C36 N01 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15208&r= |
| By: | Thomas Klitgaard |
| Abstract: | The fiscal packages passed in 2020 and 2021 to help the economy cope with the pandemic caused a dramatic increase in federal government borrowing. One might have expected that foreign investors were important buyers of this new debt, but that was not the case. They were instead net sellers of Treasury securities. Still, the amount of money flowing into the United States increased last year, which helped fund the government’s borrowing, if only indirectly. The upturn in inflows, though, was quite modest as a surge in domestic personal saving largely covered the government’s heightened borrowing needs. How the reliance on foreign funds changes in 2021, when the government deficit will again be quite elevated, will depend on whether domestic personal saving remains high. |
| Keywords: | COVID-19; pandemic; budget deficit; financial flows; saving; investment; spending; balance of payments; financial account; federal government; fiscal policy |
| JEL: | F00 H0 |
| Date: | 2021–05–21 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:91864&r= |
| By: | Glossner, Simon; Matos, Pedro Pinto; Ramelli, Stefano; Wagner, Alexander F |
| Abstract: | During the COVID-19 market crash, U.S. stocks with higher institutional ownership -- in particular, those held more by active, short-term, and more exposed institutions -- performed worse. Portfolio changes through the first quarter of 2020 reveal that institutional investors prioritized corporate financial strength over "soft" environmental and social performance. Trading data from a large discount brokerage (Robinhood) confirm that retail investors acted as liquidity providers. The effects did not reverse in the second quarter. Overall, the results suggest that when a tail risk realizes, institutional investors amplify price crashes by fire-selling and seeking shelter in "hard" measures of firm resilience. |
| Keywords: | Coronavirus; corporate cash holdings; Corporate Debt; COVID-19; ESG; Institutional Ownership; leverage; Retail investors; tail risk |
| JEL: | F14 G01 G12 G14 G32 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15070&r= |
| By: | Xin Jin |
| Abstract: | This paper presents a framework of imitating the price behavior of the underlying stock for reinforcement learning option price. We use accessible features of the equities pricing data to construct a non-deterministic Markov decision process for modeling stock price behavior driven by principal investor's decision making. However, low signal-to-noise ratio and instability that appear immanent in equity markets pose challenges to determine the state transition (price change) after executing an action (principal investor's decision) as well as decide an action based on current state (spot price). In order to conquer these challenges, we resort to a Bayesian deep neural network for computing the predictive distribution of the state transition led by an action. Additionally, instead of exploring a state-action relationship to formulate a policy, we seek for an episode based visible-hidden state-action relationship to probabilistically imitate principal investor's successive decision making. Our algorithm then maps imitative principal investor's decisions to simulated stock price paths by a Bayesian deep neural network. Eventually the optimal option price is reinforcement learned through maximizing the cumulative risk-adjusted return of a dynamically hedged portfolio over simulated price paths of the underlying. |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2105.11376&r= |
| By: | Buss, Adrian; Uppal, Raman; Vilkov, Grigory |
| Abstract: | We develop a dynamic general-equilibrium framework with multiple households and multiple risky assets to explain how less- and more-sophisticated households differ in their portfolio and wealth dynamics. Differences in sophistication are modeled via heterogeneous confidence about asset returns, coupled with Bayesian learning. Consistent with recent empirical evidence, less-sophisticated households overinvest in safe assets, hold underdiversified portfolios concentrated in familiar assets, are trend chasers, and earn lower absolute and risk-adjusted investment returns. Notably, this behavior is a consequence of optimal choices rather than investment mistakes. The model explains why this behavior, despite learning, persists for long periods, thereby exacerbating wealth inequality. |
| Keywords: | Belief formation; household finance; investors' expectations; trend chasing; Wealth Inequality |
| JEL: | D53 G11 G51 G53 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15116&r= |
| By: | Junko Koeda (Waseda University, 1-6-1 Nishi-Waseda, Shinjuku-ku, Tokyo 169-8050 Japan,); Yosuke Kimura (Tokyo Institute of Technology,) |
| Abstract: | This study constructs and analyzes a dataset of Japanese government bond's maturity structure for the fiscal years 1965?2019. Using the maturity structure data at the end of each fiscal year for the past three decades, this study proposes extracting the bond supply factor from the maturity structure variables, and structurally estimates a canonical preferred-habitat term structure model. The results provide a debt maturity equation in the fiscal year cycle, and demonstrate that two yield factors (bond supply factor and short-term interest rate) can account for annual-frequency variations in Japanese bond yields. The supply factor also explains the continued decline in the long-term interest rate in a zero lower bound environment for the past two decades. |
| Keywords: | maturity structure, yield curve, debt management, Japan, supply factor, bond yield |
| JEL: | E43 E52 G11 G12 H63 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:wap:wpaper:2103&r= |
| By: | Stiebale, Joel; Südekum, Jens; Woessner, Nicole |
| Abstract: | We study the impact of a recent digital automation technology - industrial robotics - on the distribution of sales, productivity, markups, and profits within industries. Our empirical analysis combines data on the industry-level stock of industrial robots with firms' balance sheet data for six European countries from 2004 to 2013. We find that robots dis-proportionally raise productivity in those firms that are already most productive to begin with. Those firms are able to increase their markups and overall profits, while they tend to decline for less profitable firms within the same industry, country and year. We also show that robots contribute to the falling aggregate labor income share through a rising concentration of industry sales in highly productive firms with low firm-specific labor shares. In sum, our paper suggests that robots boost the emergence of superstar firms within European manufacturing, and thereby shifts the functional income distribution away from wages and towards profits. |
| Keywords: | automation; Labor Share; Markups; productivity; robots; Superstar Firms |
| JEL: | D4 L11 O33 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15080&r= |
| By: | Maican, Florin; Orth, Matilda |
| Abstract: | This paper studies the determinants of economies of scope and quantifies their impact on the extensive and intensive product margins in retail. We use a framework based on a multi-product technology to model stores' incentives to expand product variety. Using novel Swedish data on product categories and stores, we find that high-productivity stores offer more product categories and sell more of all product categories. Stores with high demand shocks specialize in fewer product categories and sell more top-selling product categories. Policy simulations show that investments in technology increase the extensive and intensive product margins, especially benefitting stores in urban markets because of their productivity advantage. Learning from demand to increase productivity and variety is crucial in rural markets. Reducing the role of uncertainty in both productivity and demand shocks endorses product variety and raises sales and market share. |
| Keywords: | Competition; Economies of scope; product variety; productivity; retail; technology |
| JEL: | L11 L13 L25 L81 M21 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15084&r= |
| By: | Andrew F. Haughwout; Donghoon Lee; Joelle Scally; Wilbert Van der Klaauw |
| Abstract: | In our first post in this series we showed that mortgage provisions under the CARES ACT and its subsequent extensions resulted in a rapid take-up of mortgage forbearances, under which borrowers had the option to pause or reduce debt service payments without inducing a delinquency notation on their credit reports. Here we examine the forbearance take-up rate of a group of mortgage borrowers we expect to have been particularly hard hit by the pandemic recession: small business owners. Relatively little is known about how small business owners have fared over the past year in terms of their personal finances. Were they able to continue making mortgage payments on their homes? Did they draw on home equity to help fund their business operations? |
| Keywords: | small business; household finance; CCP; Consumer Credit Panel |
| JEL: | D14 |
| Date: | 2021–05–19 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:91820&r= |
| By: | Acalin, Julien; Rebucci, Alessandro |
| Abstract: | Using a new equity price-based measure of the global financial cycle, this paper evaluates the relative importance of global financial shocks for quarterly equity returns and output growths in a large sample of advanced and emerging economies, as well as in South Korea and China--two countries on different sides of the trilemma triangle of international finance. We document that global financial shocks in both China and South Korea explain a substantial share of equity return variability (20 and 50 percent of total variance, respectively), but a much smaller portion of real output fluctuations (less than 10 percent in Korea and negligible in the case of China). We also find that the combination of a closer capital account and a more rigid exchange rate regime, as in China, is associated with some costs in terms of diversification opportunities quantified by very large exposures to domestic financial and real shocks, dwarfing the contribution of any other shock in the model. More surprisingly, the combination of a relatively open capital account and a flexible exchange rate, as in South Korea, not only is associated with a higher exposure to the global financial cycle than in China but also with a significant incidence of domestic financial shocks on output fluctuations. |
| Keywords: | business cycles; China; Factor-models; Global financial cycle; Panel VARs; South Korea |
| JEL: | C38 E44 F44 G15 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15190&r= |
| By: | Ozili, Peterson K |
| Abstract: | Achieving high levels of financial inclusion has been a policy priority for policy makers in many countries as policy makers seek to reduce the level of financial exclusion to low levels. There have also been increased interest in financial inclusion research by academics. This paper proposes some index and ratios of financial inclusion and financial exclusion. The proposed index, measures and ratios are easy to compute and are comparable across countries. Policy makers, analysts and academics will find it useful. |
| Keywords: | Financial inclusion, financial exclusion, poverty, access to finance, index, inclusive growth, development |
| JEL: | G00 G21 O17 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:107866&r= |
| By: | Arrow, Kenneth J |
| Abstract: | Summaries by Nobel laureate Kenneth J. Arrow of his 1962 lectures on general equilibrium theory at Northwestern University. These summaries were widely circulated but unpublished. Reissued here, edited with updated notation. With permission of the Arrow family. |
| Keywords: | Social and Behavioral Sciences, Competitive equilibrium, general equilibrium, Brouwer fixed point theorem, Kakutani fixed point theorem, stability of equilibrium |
| Date: | 2021–05–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsdec:qt1tj1x5r0&r= |
| By: | Olkhov, Victor |
| Abstract: | We make three remarks to the main CAPM equation presented in the well-known textbook by John Cochrane (2001). First, we believe that any economic averaging procedure implies aggregation of corresponding time series during certain time interval Δ and explain the necessity to use math expectation for both sides of the main CAPM equation. Second, the first-order condition of utility max used to derive main CAPM equation should be complemented by the second one that requires negative utility second derivative. Both define the amount of assets ξmax that delivers max to utility. Expansions of the utility in a Taylor series by price and payoff variations give approximations for ξmax and uncover equations on price, payoff, volatility, skewness, their covariance’s and etc. We discuss why market price-volume positive correlations may prohibit existence of ξmax and main CAPM equation. Third, we argue that the economic sense of the conventional frequency-based price probability may be poor. To overcome this trouble we propose new price probability measure based on widely used volume weighted average price (VWAP). To forecast price volatility one should predict evolution of squares of the value and the volume of market trades aggregated during averaging interval Δ. The forecast of the new price probability measure may be the main tough puzzle for CAPM and finance. However investors are free to chose any probability measure they prefer as ground for their investment strategies but should be ready for unexpected losses due to possible distinctions with real market trade price dynamics. |
| Keywords: | asset pricing, volatility, price probability, market trades |
| JEL: | C02 D40 D53 G10 G12 |
| Date: | 2021–05–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:107938&r= |
| By: | Ahrens, Steffen (FU Berlin); Bosch-Rosa, Ciril (TU Berlin); Kassner, Bernhard (LMU Munich) |
| Abstract: | We study the relationship between overconfidence and the political and financial behavior of a nationally representative sample. To do so, we introduce a new method of eliciting overconfidence that is simple to understand, quick to implement, and captures respondents\' excess confidence in their own judgment. Our results show that, in line with theoretical predictions, an excessive degree of confidence in one\'s judgment is correlated with lower portfolio diversification, larger stock price forecasting errors, and more extreme political views. Additionally, we find that overconfidence is correlated with voting absenteeism. These results appear to validate our method and show how overconfidence is a bias that permeates several aspects of peoples\' life. |
| Keywords: | overconfidence; soep; survey; |
| JEL: | C83 D91 G41 |
| Date: | 2021–05–26 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:283&r= |
| By: | Christoph J. B\"orner; Ingo Hoffmann; Jonas Krettek; Lars M. K\"urzinger; Tim Schmitz |
| Abstract: | Cryptocurrencies (CCs) become more interesting for institutional investors' strategic asset allocation and will be a fixed component of professional portfolios in future. This asset class differs from established assets especially in terms of the severe manifestation of statistical parameters. The question arises whether CCs with similar statistical key figures exist. On this basis, a core market incorporating CCs with comparable properties enables the implementation of a tracking error approach. A prerequisite for this is the segmentation of the CC market into a core and a satellite, the latter comprising the accumulation of the residual CCs remaining in the complement. Using a concrete example, we segment the CC market into these components, based on modern methods from image / pattern recognition. |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2105.12336&r= |
| By: | Timothy DeLise |
| Abstract: | This research investigates pricing financial options based on the traditional martingale theory of arbitrage pricing applied to neural SDEs. We treat neural SDEs as universal It\^o process approximators. In this way we can lift all assumptions on the form of the underlying price process, and compute theoretical option prices numerically. We propose a variation of the SDE-GAN approach by implementing the Wasserstein distance metric as a loss function for training. Furthermore, it is conjectured that the error of the option price implied by the learnt model can be bounded by the very Wasserstein distance metric that was used to fit the empirical data. |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2105.13320&r= |
| By: | Nail Kashaev; Victor H. Aguiar |
| Abstract: | We generalize the stochastic revealed preference methodology of McFadden and Richter (1990) for finite choice sets to settings with limited consideration. Our approach is nonparametric and requires partial choice set variation. We only impose a monotonicity condition on attention first proposed by Cattaneo et al. (2020) and a stability condition on the marginal distribution of preferences. Our framework is amenable to statistical testing. These new restrictions extend widely known parametric models of consideration. |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2105.11268&r= |
| By: | Egger, Peter; Erhardt, Katharina; Nigai, Sergey |
| Abstract: | We use firm-level data for 15 countries and 13 manufacturing sectors to estimate firm-level productivity parameters and to establish representative country-sector-specific empirical productivity distributions. We use these distributions against the backdrop of multi-sector versions of the models of Eaton and Kortum (2002) and Melitz (2003) to quantify the role of technology in shaping international trade flows. We find that, on average, absolute advantage measured as productivity differences across countries within sectors explains 15% and 21% of the total variation in bilateral trade shares in the models of Eaton and Kortum (2002) and Melitz (2003), respectively. In contrast, on average, comparative advantage measured as productivity differences across sectors within countries explains 39% and 47% of the variation in trade flows in these two models. We also demonstrate that empirical productivity distributions entail quantitatively important micro-to-macro implications for marginal responses of trade flows to changes in trade costs, for gravity-type estimation of trade models, and for comparative statics isomorphism between the customarily parameterized models of international trade. We confirm the predictions of the two aforementioned models under empirical productivity distributions in the data. |
| Keywords: | Empirical trade analysis; Productivity distributions; Quantitative trade analysis; technology |
| JEL: | F1 F10 F12 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15160&r= |
| By: | Luisa Corrado; Daniela Fantozzi |
| Abstract: | In this paper we investigate the effect of standard and non-standard monetary policy implemented by the ECB on income inequality in Italy. We use a novel database based on the survey micro level data on Income and Living Conditions (EU-SILC, Istat) in a repeated cross-section experiment which enables us to compute measures of inequality and the distribution over time for different incomes and subgroups of individuals. The identification strategy is based on the monetary surprises estimated in the Euro area Monetary Policy Event-Study Database (EA-MPD) for the Euro area. Using a battery of Local Projections, we evaluate the impact of monetary policy by comparing the performance of the impulse response functions of our inequality measures in different policy scenarios: 1999-2012 (pre-QE) and 1999-2017 (including the QE period). The main findings show that an expansionary unconventional monetary policy shock compressed inequality of disposable, labor and financial income more persistently than a conventional monetary shock. These effects are heterogeneous and seem to benefit mostly the bottom of the distribution. The impact on financial wealth is ambiguous favoring the wealthy households mainly in the short-run. Our evidence suggests that QE is associated with a decrease in Italian households’ inequality. |
| Keywords: | Income Inequality, monetary policy, Local Projections, Survey Data, High-Frequency Data |
| JEL: | C81 D31 E52 E58 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:529&r= |
| By: | Nano, Enrico (Graduate Institute of International and Development Studies, Geneva); Panizza, Ugo (Graduate Institute of International and Development Studies, Geneva); Viarengo, Martina (Graduate Institute of International and Development Studies, Geneva) |
| Abstract: | We examine the role of financial aid in shaping the formation of human capital in economics. Specifically, we study the impact of a large merit-based scholarship for graduate studies in affecting individuals' occupational choices, career trajectories, and labor market outcomes of a generation of Italian economists with special focus on gender gaps and the role of social mobility. We construct a unique dataset that combines archival sources and includes microdata for the universe of applicants to the scholarship program and follow these individuals over their professional life. Our unique sample that focuses on the high end of the talent and ability distribution also allows us to analyze the characteristics of top graduates, a group which tends to be under-sampled in most surveys. We discuss five main results. First, women are less likely to be shortlisted for a scholarship as they tend to receive lower scores in the most subjective criteria used in the initial screening of candidates. Second, scholarship winners are much more likely to choose a research career and this effect is larger for women. Third, women who work in Italian universities tend to have less citations than men who work in Italy. However, the citation gender gap is smaller for candidates who received a scholarship. Fourth, women take longer to be promoted to the rank of full professor, even after controlling for academic productivity. Fifth, it is easier to become a high achiever for individuals from households with a lower socio-economic status if they reside in high social mobility provinces. However, high-achievers from lower socio-economic status households face an up-hill battle even in high social mobility provinces. |
| Keywords: | human capital formation, financial aid, career trajectories, gender gaps |
| JEL: | I22 I24 J16 J24 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14368&r= |
| By: | Dew-Becker, Ian; Giglio, Stefano W; Kelly, Bryan |
| Abstract: | We study the pricing of shocks to uncertainty and volatility using a wide-ranging set of options contracts covering a variety of different markets. If uncertainty shocks are viewed as bad by investors, they should carry negative risk premia. Empirically, however, uncertainty risk premia are positive in most markets. Instead, it is the realization of large shocks to fundamentals that has historically carried a negative premium. In other words, we find that the return premium for gamma is negative while that for vega is positive. These results imply that it is jumps, for which exposure is measured by gamma, not forward-looking uncertainty shocks, measured by vega, that drive investors' marginal utility. In further support of the jump interpretation, the return patterns are more extreme for deeper out of the money options. |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15239&r= |
| By: | Candia, Bernardo (University of California, Berkeley); Coibion, Olivier (University of Texas at Austin); Gorodnichenko, Yuriy (University of California, Berkeley) |
| Abstract: | Introducing a new survey of U.S. firms' inflation expectations, we document key stylized facts involving what U.S. firms know and expect about inflation and monetary policy. The resulting time series of firms' inflation expectations displays unique dynamics, distinct from those of households and professional forecasters. By any typical definition of "anchored" expectations, the inflation expectations of U.S. managers appear far from anchored, much like those of households. And like households, U.S. managers are largely uninformed about recent aggregate inflation dynamics or monetary policy. These results complement existing evidence on firms' inflation expectations from other countries and confirm that inattention to inflation and monetary policy is pervasive among U.S. firms as well. |
| Keywords: | expectations, surveys, anchoring, rational inattention |
| JEL: | E3 E4 E5 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14378&r= |
| By: | Ludovic A. Julien |
| Abstract: | This paper deals with the existence of a non-cooperative sequential equilibrium in interrelated markets with heterogeneous atomic traders. Since this model features a rich set of strategic interactions, there are two kinds of problems associated with the existence of equilibrium. First, existence and uniqueness of followers' strategies are not guaranteed. Second, the no-trade equilibrium is always an equilibrium outcome. To overcome these two difficulties we consider a differentiable approach. We show that the set of equations which determines the strategies of followers is a variety with the required dimension, i.e. the vector mapping which defines this set is a local C²-diffeomorphism. The continuous differentiability of followers' strategies is critical for the existence of an interior equilibrium. Unlike the simultaneous move games, exchange can take place in one subgame while autarky can hold in another subgame, in which case only leaders (followers) make trade. Some examples buttress the approach and discuss the assumptions made on the primitives. |
| Keywords: | Pure strategies, diffeomorphisms, Stackelberg-Nash equilibrium |
| JEL: | C72 D52 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2021-14&r= |
| By: | Lee, Seungcheol; Luetticke, Ralph; Ravn, Morten O |
| Abstract: | We examine the impact of frictional financial intermediation in a HANK model. An incentive problem restricts banking sector leverage and gives rise to an equilibrium spread between the returns on savings and debt. The size of this spread impacts on the wealth distribution and movements in it subject borrowers and savers to different intertemporal prices. The model generates a financial accelerator that is larger than in a representative agent setting, derives mainly from consumption rather than investment, and works through a countercyclical interest rate spread. Credit policy can mute this mechanism while stricter regulation of banking sector leverage inhibits households' ability to smooth consumption in response to idiosyncratic risk. Thus, although leverage restrictions stabilize at the aggregate level, we find substantial welfare costs. |
| Keywords: | business cycles; Financial Frictions; incomplete markets; macroprudential policy; monetary policy |
| JEL: | C11 D31 E32 E63 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15133&r= |
| By: | Satoshi Hoshino (Faculty of Economics, Okayama Shoka University / Research Fellow, Graduate School of Economics, Kobe University); Daisuke Ida (Faculty of Economics, Momoyama Gakuin University / Research Fellow, Graduate School of Economics, Kobe University) |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:koe:wpaper:2116&r= |
| By: | Guenzel, Marius; Malmendier, Ulrike M. |
| Abstract: | One of the fastest-growing areas of finance research is the study of managerial biases and their implications for firm outcomes. Since the mid 2000s, this strand of Behavioral Corporate Finance has provided theoretical and empirical evidence on the influence of biases in the corporate realm, such as overconfidence, experience effects, and the sunk-cost fallacy. The field has been a leading force in dismantling the argument that traditional economic mechanisms- selection, learning, and market discipline-would suffice to uphold the rational manager paradigm. Instead, the evidence reveals behavioral forces to exert a significant influence at every stage of a CEO's career. First, at the appointment stage, selection does not impede the promotion of behavioral managers. Instead, competitive environments oftentimes promote their advancement, even under value-maximizing selection mechanisms. Second, while at the helm of the company, learning opportunities are limited since many managerial decisions occur at low frequency, and their causal effect is clouded by self-attribution bias and difficult to disentangle from that of concurrent events. Third, at the dismissal stage, market discipline does not ensure the firing of biased decision-makers as board members themselves are subject to biases in their evaluation of CEOs. By documenting how biases affect even the most educated and influential decision-makers, such as CEOs, the field has generated important insights into the hard-wiring of biases. Biases do not simply stem from a lack of education or is restricted to low-ability agents. Instead, biases are significant elements of human decision-making at the highest levels of organizations. An important question for future research is how to limit, in each CEO career phase, the adverse effects of managerial biases-from refining selection mechanisms, designing and implementing corporate repairs, and reshaping corporate governance to accounting not only for incentive misalignments but also for biased decision-making. |
| Keywords: | Behavioral Corporate Finance; CEO Careers; corporate governance; Financing; investment; Managerial Biases; mergers and acquisitions; Organizational economics |
| JEL: | G3 G32 G34 G4 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15103&r= |
| By: | Pugno, Maurizio |
| Abstract: | The rise and decline of the Italian economy over the past 60 years form a surprisingly regular parabola, if the main European partner economies are taken as benchmark, so that its vertex equal to 1 means that Italy completely caught-up Europe around the 1990s. This implies that, in order to repeat that experience of catching-up, Italy needs to grow at extraordinary rates, which are not on the horizon. The paper shows that the Italians’ morale is even in worse conditions and explores why. The analysis firstly focuses on subjective well-being (and other subjective indices), thus finding another parabola and with more worrying features than the economic parabola. Then it explores the role of education in shaping the long-run dynamics of both the economy and subjective well-being. As a first result, the paradox of the excess supply of educated workers in Italy becomes clearer. The second result shows how poor education weakened Italians’ ability to fully enjoy their income, in particular after the shocks of the 1990s. An education policy thus becomes urgent to provide both specialized skills for production and general skills for people’s lives, thus definitively reinforcing the recent weak rebound in educational levels. |
| Keywords: | economic decline, subjective well-being, education, Italy |
| JEL: | I25 I31 J24 O15 O52 |
| Date: | 2021–05–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:107948&r= |
| By: | Akerlof, Robert; Rayo, Luis |
| Abstract: | We augment Becker's classic model of the family by assuming that, in addition to caring about consumption, the family wishes to further a subjective story, or narrative, that captures its deeply held values. Our focus is on two stories that in many ways are polar opposites. The first one--the protector narrative--gives rise to a type of traditional family where gender roles are distinct, men and women are pushed towards "separate spheres," and men are expected to be tough and authoritarian. The second one--the fulfillment narrative--gives rise to a type of modern family where roles are less distinct, family members have greater latitude in their decisions, and marriages are based to a greater extent on romantic love. We derive a rich bundle of behaviors associated with each story, and using survey data, we show that our findings are consistent with a variety of empirical patterns. |
| Keywords: | Family; Gender norms; Marriage; narratives |
| JEL: | D10 Z10 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15152&r= |
| By: | Mary Amiti; Sebastian Heise |
| Abstract: | A rapidly growing literature has shown that market concentration among domestic firms has increased in the United States over the last three decades. Using confidential census data for the manufacturing sector, we show that typical measures of concentration, once adjusted for sales by foreign exporters, actually stayed constant between 1992 and 2012. We reconcile these findings by linking part of the increase in domestic concentration to import competition. Although concentration among U.S.-based firms rose, the growth of foreign firms, mostly at the bottom of the sales distribution, counteracted this increase. We find that higher import competition caused a decline in the market shares of the top twenty U.S. firms. |
| Keywords: | market concentration; markups; import competition; international trade |
| JEL: | F14 F60 L11 |
| Date: | 2021–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:91745&r= |
| By: | Gill, Andrej; Heinz, Matthias; Schumacher, Heiner; Sutter, Matthias |
| Abstract: | The financial industry has been struggling with widespread misconduct and public mistrust. Here we argue that the lack of trust into the financial industry may stem from the selection of subjects with little, if any, trustworthiness into the financial industry. We identify the social preferences of business and economics students, and follow up on their first job placements. We find that during college, students who want to start their career in the financial industry are substantially less trustworthy. Most importantly, actual job placements several years later confirm this association. The job market in the financial industry does not screen out less trustworthy subjects. If anything the opposite seems to be the case: Even among students who are highly motivated to work in finance after graduation, those who actually start their career in finance are significantly less trustworthy than those who work elsewhere. |
| Keywords: | Experiment; Financial Industry; selection; social preferences; trustworthiness |
| JEL: | C91 G20 M51 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15147&r= |
| By: | Stephen Broadberry; Alexandra M. de Pleijt |
| Abstract: | Estimates of capital formation and the stock of capital in Britain are provided for the period 1270-1870 and used to analyse economic growth. (1) We chart the growing importance of fixed relative to working capital, the declining importance of land and the growth of net overseas assets. (2) Kaldor’s stylised facts of a rising capital-labour ratio and a stationary capital-output ratio are broadly confirmed, but only if attention is confined to fixed capital. (3) Extensive form growth accounts suggest that output growth was driven largely by factor input growth, while intensive form growth accounts suggest that TFP growth was more important than capital deepening in explaining the growth of output per head. (4) The investment share of GDP increased substantially during the transition from pre-industrial to modern economic growth. |
| Date: | 2021–02–27 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:esohwp:_186&r= |
| By: | Esther Yusuf Enoch; Abubakar Mahmud Digil; Usman Abubakar Arabo |
| Abstract: | This study evaluates the effect of collection policy on portfolio quality of microfinance banks in Adamawa State, Nigeria. Real data were collected from 51 credit officers, then a multi-stage sampling method was used to select a sample of 21 respondents from the population (i.e., 51 credit officers). In addition, we used regression analysis and descriptive statistics to analyze the data collected and to also test our proposed hypothesis. Based on the evaluation performed, the results showed that collection policy has a higher effect on portfolio quality. Hence, the study showed that microfinance banks should adhere to strict or stiff debt collection policy as strictness in collection policy help the banks to recover their loans, thereby improving the portfolio quality of the bank. |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2105.10991&r= |
| By: | Espinoza, Mariela; Lopez, Alma S.; Torres, Victor H.; Zamora, Cesar E. |
| Abstract: | Abstract- The objective of the study is to analyze and conclude on the different topics that involve the relationship between globalization in companies and the competitiveness reach they generate, and it is also analysed by, state of art as this is to make use of research and opinions already analyzed along with personal opinion that is shared and a new more detailed research on the issues would be reached on a new outcome, which could defined in the discovery of the importance in the administration of companies or the reasons for the internationalization, which are defined in the conclusion of the issues that are financial globalization, be said as the opening mass markets or the reasons companies have for seeking internationalization, or the factors lead them to choose to form economic blocs or agglomerations. |
| Keywords: | Keywords— Globalization, Enterprises, Competitiveness, Economic crowds, Markets. |
| JEL: | F6 |
| Date: | 2021–05–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:107896&r= |
| By: | Edwin Fourrier-Nicolai (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Michel Lubrano (School of Economics, Jiangxi University of Finance and Economics, AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | The growth incidence curve of Ravallion and Chen (2003) is based on the quantile function. Its distribution-free estimator behaves erratically with usual sample sizes leading to problems in the tails. We propose a series of parametric models in a Bayesian framework. A first solution consists in modelling the underlying income distribution using simple densities for which the quantile function has a closed analytical form. This solution is extended by considering a mixture model for the underlying income distribution. However in this case, the quantile function is semi-explicit and has to be evaluated numerically. The alternative solution consists in adjusting directly a functional form for the Lorenz curve and deriving its first order derivative to find the corresponding quantile function. We compare these models first by Monte Carlo simulations and second by using UK data from the Family Expenditure Survey where we devote a particular attention to the analysis of subgroups. |
| Keywords: | bayesian inference,growth incidence curve,inequality |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03225236&r= |
| By: | De Polis, Andrea; Delle Monache, Davide; Petrella, Ivan |
| Abstract: | We document a substantial increase in downside risk to US economic growth over the last 30 years. By modeling secular trends and cyclical changes of the predictive density of GDP growth, we recover an accelerating decline in the skewness of the conditional distributions, with significant, procyclical variations. Decreasing trend-skewness, turning negative in the aftermath of the Great Recession, is associated with the long-run growth slowdown stared in the early 2000s. Short-run skewness fluctuation imply negatively skewed predictive densities ahead, and during recessions, often anticipated by deteriorating financial conditions, while positively skewed distributions characterize expansions. The model delivers competitive out-of-sample (point, density and tail) forecasts, improving upon standard benchmarks, due to financial conditions providing strong signals of increasing downside risk. |
| Keywords: | Business cycle; Downside risk; financial conditions; score driven models; Skewness |
| JEL: | C53 E32 E44 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15109&r= |
| By: | Thomas Delcey (REHPERE - CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Guillaume Noblet (REHPERE - CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This article offers a historical analysis of the contributions of U.S. interwar agricultural economics to the economics of information. Concerned with improving the circulation of information on agricultural markets, agricultural economists analyzed the relationship between agents' information and the behavior of prices on agricultural commodity exchanges, thus anticipating modern debates on informational efficiency. We show that these debates were part of a more general context of agricultural market reform led by the U.S. administration to improve the production and diffusion of economic information. We argue that such reforms were a prerequisite for theoretical discussions on information, and established institutional tools that are still active today, such as the USDA market news service. |
| Date: | 2021–05–17 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03227973&r= |
| By: | Mariacristina De Nardi; Eric French; John Bailey Jones; Rory McGee |
| Abstract: | While the savings of retired singles tend to fall with age, those of retired couples tend to rise. We estimate a rich model of retired singles and couples with bequest motives and uncertain longevity and medical expenses. Our estimates imply that while medical expenses are an important driver of the savings of middle-income singles, bequest motives matter for couples and high-income singles, and generate transfers to non-spousal heirs whenever a household member dies. The interaction of medical expenses and bequest motives is a crucial determinant of savings for all retirees. Hence, to understand savings, it is important to model household structure, medical expenses, and bequest motives. |
| JEL: | D1 D12 D15 E21 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28828&r= |
| By: | Helios Herrera (University of Warwick [Coventry], CEPII - Centre d'études prospectives et d'informations internationales); Antonin Macé (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Matias Nùnez (CREST - Centre de Recherche en Economie et Statistique [Bruz] - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz], IP Paris - Institut Polytechnique de Paris, GENES - Groupe des Ecoles Nationales d'Economie et Statistique - Institut national de la statistique et des études économiques (INSEE)) |
| Abstract: | We study how door die threats ending negotiations affect gridlock and welfare in the ratification of deals/treaties between opposing parties. Failure to agree in any period, as usual, implies a status-quo disagreement payoff and a continuation of the negotiation: a renegotiated amended agreement to be ratified next period. However, under brinkmanship, agreement failure in any period may precipitate instead a "hard" outcome, worse than the status-quo and than any feasible agreement. Such brinkmanship threats improve the scope for agreement, but also entail costs as we show. With symmetric parties only more extreme brinkmanship is beneficial: when an agreement is unlikely to begin with mild brinkmanship only reduces welfare by increasing the equilibrium chance of a hard outcome. If a party is advantaged it typically benefits even from mild threats, as the expected agreement shifts in its favor, while only extreme brinkmanship threats can benefit the disadvantaged party. |
| Keywords: | Hard Brexit,Gridlock,Government Shutdown,Collective Search |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-03225030&r= |
| By: | Mueller-Dethard, Jan; Weber, Martin |
| Abstract: | Does the evaluation of a portfolio of stocks depend on its composition of winner and loser stocks? To test this, we define a simple, counting-based measure of performance - the number of winner relative to the number of loser stocks in a portfolio - and examine how this composition measure affects individuals' willingness to invest in a portfolio. We derive testable predictions for the proposed composition measure from a framework which combines category-based thinking with mental accounting. Consistent with our predictions, we find across all experiments that individuals allocate larger investments to portfolios with more winner than loser stocks relative to alternative portfolios with more loser than winner stocks, although both portfolios (1) have realized identical overall portfolio returns and (2) show identical expected risk-return characteristics. Building on our experimental findings, we analyze fund flows of exchange-traded funds on leading equity market indices. We identify that the proposed portfolio composition measure is positively related to future net fund flows. |
| Keywords: | investment behavior; Mental accounting; Portfolio composition; risk preferences |
| JEL: | D84 G11 G12 G40 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15012&r= |
| By: | Bianchi, Francesco; Ludvigson, Sydney C.; Ma, Sai |
| Abstract: | This paper combines a data rich environment with a machine learning algorithm to provide estimates of time-varying systematic expectational errors ("belief distortions") about the macroeconomy embedded in survey responses. We find that such distortions are large on average even for professional forecasters, with all respondent-types over-weighting their own forecast relative to other information. Forecasts of inflation and GDP growth oscillate between optimism and pessimism by quantitatively large amounts. To investigate the dynamic relation of belief distortions with the macroeconomy, we construct indexes of aggregate (across surveys and respondents) expectational biases in survey forecasts. Over-optimism is associated with an increase in aggregate economic activity. Our estimates provide a benchmark to evaluate theories for which information capacity constraints, extrapolation, sentiments, ambiguity aversion, and other departures from full information rational expectations play a role in business cycles. |
| Keywords: | beliefs; Biases; Expectations; Machine Learning |
| JEL: | E17 E27 E32 E7 G4 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15003&r= |
| By: | Baker, Scott R.; Johnson, Stephanie; Kueng, Lorenz |
| Abstract: | Households tend to hold substantial amounts of non-financial assets in the form of inventory. Households can obtain significant financial returns from strategic shopping and optimally managing these inventories of consumer goods. In addition, they choose to maintain liquid savings - household working capital - not just for precautionary motives but also to support this inventory management. We demonstrate that households earn high returns from inventory management at low levels of inventory, though returns decline rapidly as inventory levels increase. We provide evidence using scanner and survey data that supports this conclusion. High returns from inventory management that are declining in wealth offer a new rationale for poorer households not to participate in risky financial markets, while wealthier households invest in both financial assets and working capital. |
| Keywords: | financial returns; household working capital; Inventory; Stock Market Participation; stockpiling |
| JEL: | D11 D12 D13 D14 E21 G11 G51 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15191&r= |
| By: | Martinez Miera, David; Repullo, Rafael |
| Abstract: | This paper shows the relevance of market power to assess the effects of safe interest rates on financial intermediaries' risk-taking decisions. We consider an economy where (i) intermediaries have market power in granting loans, (ii) intermediaries monitor borrowers which lowers their probability of default, and (iii) monitoring is costly and unobservable which creates a moral hazard problem with uninsured depositors. We show that lower safe rates lead to lower intermediation margins and higher risk-taking when intermediaries have low market power, but the result reverses for high market power. We examine the robustness of this result to introducing non-monitored market finance, heterogeneity in monitoring costs, and entry and exit of intermediaries. We also consider the effect of replacing uninsured by insured deposits, market power in raising deposits, and funding with both deposits and capital. |
| Keywords: | Bank monitoring; bank risk-taking; Imperfect Competition; intermediation margins; monetary policy |
| JEL: | E52 G21 L13 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15063&r= |
| By: | Ekor, Maxwell; Orekoya, Tayo; Musa, Philip; Damisah, Osikwemhe |
| Abstract: | The debt and economic growth debate remain topical in Nigeria given the controversies that often trail the government’s plan to always borrow to fund the annual budget deficits. This study provides an empirical contribution to the national discourse by assessing the impact of foreign debt on the Nigerian economy. Applying a dynamic variant of the auto-regressive distributed lag model, the main result from this study is that in the long run, external debt accumulation and the associated service payments have negative effects on the economy. The policy implication is that government should always ensure that external debt accretion is sustainable and used for infrastructure development. |
| Keywords: | Economic Growth; External Debt; Auto-Regressive Distributed lag Model |
| JEL: | H61 H62 H63 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:107844&r= |
| By: | Rizos, Anastasios; Kapopoulos, Panayotis |
| Abstract: | The growth-enhancing property of a well-functioned judicial system is documented on the back of the safeguarding of property rights and legal investor protection, the well-functioning of financial markets, the support to entrepreneurship and the upholding of the firm growth. We investigate the effects of judicial efficiency on economic growth, using a new dataset over the period 2010-2018 drawn by the EU Justice Scoreboard study. More specifically, we estimate a static growth equation controlling for alternative judicial efficiency measures. Our findings corroborate that the inefficiencies in the operation of judicial systems pose obstacles to economic growth, and consequently, positive developments in judicial efficiency can be growth enhancing. Specifically, inefficiencies in the operation of judicial systems, measured alternatively as (a) lengthier court proceedings, (b) lower rates of clearance of accumulated unresolved cases, (c) increasing burden of pending cases and (d) a high inflow of new cases, all undermine economic growth. Our results justify the further adoption of judicial reforms in European Union members, that strengthen the enforcement of private contracts, incentivizing the domestic and external investment decisions and supporting the European economies to achieve and sustain robust growth rates. Finally, we find that civil origin legal systems, which are characterized by a higher degree of formalism in judicial procedures relative to common law origin systems, hinder economic growth. |
| Keywords: | judicial efficiency, economic growth, disposition time, clearance rate, caseload |
| JEL: | C23 C26 K40 O43 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:107861&r= |
| By: | Zimpelmann, Christian (IZA); Gaudecker, Hans-Martin von (University of Bonn); Holler, Radost (Bonn Graduate School of Economics); Janys, Lena (University of Bonn); Siflinger, Bettina M. (Tilburg University) |
| Abstract: | Using customized panel data spanning the entire year of 2020, we analyze the dynamics of working hours and household income across different stages of the CoVid-19 pandemic. Similar to many other countries, during this period the Netherlands experienced a quick spread of the SARS-CoV-2 virus, adopted a set of fairly strict social distancing measures, gradually reopened, and imposed another lockdown to contain the second wave. We show that socio-economic status is strongly related to changes in working hours, especially when strict economic restrictions are in place. In contrast, household income is equally unaffected for all socio-economic groups. Examining the drivers of these observations, we find that pandemic-specific job characteristics (the ability to work from home and essential worker status) explain most of the socio-economic gradient in total working hours. Furthermore, household income is largely decoupled from shocks to working hours for employees. We provide suggestive evidence that large-scale labor hoarding schemes have helped insure employees against demand shocks to their employees. |
| Keywords: | essential workers, coronavirus, working from home, labor market, inequality, mitigation policies, COVID-19 |
| JEL: | D31 J21 J22 J24 J33 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14382&r= |
| By: | Suh, Ellie |
| Abstract: | This study examines retirement saving activity outside the state and workplace pension saving schemes among British adults aged between 30 and 49 on the premise that individuals are increasingly encouraged to save for their retirement in the new pension policy structure in Britain. The issue of under-saving among the younger adults has been studied with the focus on internal characteristics, such as undesirable attitudinal or behavioural tendencies (‘won't save’), or on external factors, such as income (‘can't save’). Building on these discussions, this study tests the role of internal characteristics and further examines the interplay between internal and external factors. The decision-making process for retirement saving is mapped based on the Model of Financial Planning with minor modifications. The analysis utilises the fourth wave of the Wealth and Assets Survey (2012/2014), and is conducted in the structural equation modelling framework. Results show that younger adults’ discretionary retirement saving is an outcome of a complex interplay between internal and external factors. Financial resilience, which indicates current financial behaviours and wellbeing, is found to be the strongest predictor for identifying a discretionary retirement saver, but it is closely connected to individuals’ income and home-ownership. The findings also suggest that social and economic arrangements are important to consider as social ageing, individuals’ projection on their lifestages, may be more informative than age per se for understanding younger adults’ retirement saving behaviour. These findings have important implications for the policies that aim to increase retirement saving participation. |
| Keywords: | retirement saving; young adults; financial resilience; saving behaviours; structural equation modelling (SEM); Wealth and Assets Survey (WAS) |
| JEL: | F3 G3 N0 |
| Date: | 2021–04–23 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:110492&r= |
| By: | Thomas von Brasch; Arvid Raknerud (Statistics Norway) |
| Abstract: | In a seminal paper, Feenstra (1994) developed an instrumental variable estimator which is becoming increasingly popular for estimating demand elasticities. Soderbery (2015) extended this estimator and created a routine which was shown to be more robust to data outliers when the number of time periods is small or moderate. In this paper, we extend the Feenstra/Soderbery (F/S) estimator along two important dimensions to obtain a more efficient estimator: we handle the cases where there are no simultaneity problems, i.e. when supply is either elastic or inelastic, and we generalize the current practice of choosing a particular reference variety by creating a pooled estimator across all possible reference varieties. Using a Monte Carlo study, we show that our proposed estimator reduces the RMSE compared to the F/S estimator by between 60 and 90 percent across the whole parameter space. |
| Keywords: | Demand elasticity; Panel data; Two-stage estimator |
| JEL: | C13 C33 C36 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:951&r= |
| By: | Laura Chioda; David Contreras-Loya; Paul Gertler; Dana Carney |
| Abstract: | We study the medium-term impacts of the Skills for Effective Entrepreneurship Development (SEED) program, an innovative in-residence 3-week mini-MBA program for high school students modeled after western business school curricula and adapted to the Ugandan context. The program featured two separate treatments: the hard-skills MBA features a mix of approximately 75% hard skills and 25% soft skills; the soft skills curriculum has the reverse mix. Using data on 4400 youth from a nationally representative sample in a 3-arm field experiment in Uganda, the 3.5 year follow-up demonstrated that training was effective in improving both hard and soft skills, but only soft skills were directly linked to improvements in self-efficacy, persuasion, and negotiation. The skill upgrade was rewarded in substantially higher earnings; 32.1% and 29.8% increases in earnings for those who attended hard- and soft-training, respectively, most of which, was generated through self-mployment. Furthermore, youth in both groups were more likely to start enterprises and more successful in ensuring their businesses' survival. The program led to significantly larger profits (24.2% and 27.2% for hard- and soft- treatment arms respectively) and larger business capital investments (38.4% and 32.6% for SEED hard and SEED soft, respectively). Both SEED curricula were very cost-effective; two months worth of the extra earnings caused by the training alone would exceed the cost of the program. These benefits abstract from the job- and business-creation benefits of the program, which were substantial: relative to the control group, SEED entrepreneurs created 985 additional jobs and 550 new businesses. |
| JEL: | J24 L26 O1 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28845&r= |
| By: | Kensuke Tanaka |
| Abstract: | Predicting future economic trends appropriately is essential to economic policy making. Currently, the DSGE model approach is a benchmark economic forecasting technique widely employed. However, large external shocks, such as large-scale natural disasters and COVID-19, challenge current approaches to economic forecasting. Multiple approaches will be needed in this situation, including reduced-form model and indicator-based approaches. This paper discusses different forecasting approaches, by comparing forecasts during normal times and crisis periods. The Medium-term Projection Framework (MPF), used in the Economic Outlook for Southeast Asia, China and India series, receives particular attention. The paper also examines challenges unique to developing Asia and large external shock periods. The measurement of potential output, difficulties in modelling the credit channel, and the incorporation of Big Data pose challenges regarding developing Asian countries, and large external shocks may force deviation from assumptions of traditional frameworks such as rational expectations. Finally, this paper points out that natural disasters will be a useful proxy for large shocks in Developing Asia. Il est essentiel de prévoir de manière appropriée les futures tendances économiques pour étayer les décisions de politique économique. Actuellement, l'approche modèle DSGE (d'équilibre général dynamique et stochastique) est une technique de prévision économique de référence largement utilisée. Cependant, les chocs externes importants, tels que les catastrophes naturelles à grande échelle et le COVID-19, posent des défis dans les prévisions économiques. L'utilisation de diverses approches, en particulier celle en forme réduite et celles fondées sur des indicateurs, sera grandement utile. Ce papier examine différentes approches de prévision, en comparant les prévisions en temps normal et en période de crise. Il observe notamment le cadre de projection à moyen terme (MPF) utilisé dans les projections de la série Perspectives économiques de l'Asie du Sud-Est, la Chine et l'Inde de l’OCDE. Le papier examine ensuite les défis de la prévision qui sont uniques aux pays asiatiques en développement ou aux grandes périodes de chocs externes. La mesure des résultats potentiels, des difficultés à modéliser le canal du crédit bancaire et l'intégration du « Big Data » sont des défis pour les pays d'Asie en développement, tandis que les chocs externes importants peuvent forcer la distanciation des cadres économiques traditionnels, tels que les anticipations rationnelles. Le papier montre enfin que les catastrophes naturelles représentent un indicateur utile des chocs importants dans l'Asie en développement. |
| Keywords: | COVID-19, Developing Asia, DSGE model, Forecasting, large external shocks, natural disasters, time series analysis |
| JEL: | C53 E17 O20 O53 Q54 |
| Date: | 2021–05–27 |
| URL: | http://d.repec.org/n?u=RePEc:oec:devaaa:345-en&r= |
| By: | Ewens, Michael; Malenko, Nadya |
| Abstract: | Venture capital (VC) backed firms face neither the governance requirements nor a major separation of ownership and control of their public peers. These differences suggest that independent directors could play a unique role on private firm boards. This paper explores the dynamics of VC-backed startup boards using new data on board member entry, exit, and individual director characteristics. We document several new facts about board size, the allocation of control, and composition dynamics. At formation, a typical board has four members and is entrepreneur-controlled. Independent directors are found on the median board after the second financing event, when control over the board becomes shared, with independent directors holding the tie-breaking vote. These patterns are consistent with independent directors playing both a mediating and advising role over the startup life cycle, and thus representing another potential source of value-add to entrepreneurial firm performance. |
| Keywords: | Allocation of control; Board Of Directors; corporate governance; Independent Directors; Mediation role; venture capital |
| JEL: | G24 G34 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15024&r= |
| By: | Pottier, Antonin; Combet, Emmanuel; Cayla, Jean-Michel; de Lauretis, Simona; Nadaud, Franck |
| Abstract: | This article provides a panorama of greenhouse gas (GHG) emission inequalities between French households. It presents in a detailed and critical manner the methodological conventions that are used to compute “household emissions”, including the related assumptions. The most common responsibility principle, the “consumer responsibility”, assigns to households the emissions of the products that they consume, resulting in the carbon footprint. It focuses attention on the contributions of individuals, on their choices, and it may obscure the role of non-individual actors and also the collective component of GHG emissions, and it neglects the dimensions of responsibility that are not related to consumption choices. We estimate the distribution of household carbon footprints based on data from the 2011 French Household Budget Survey. Household emissions tend to increase with income, but they also show a strong variability linked to geographical and technical factors that force the consumer to use fossil fuels. Based on sectoral surveys (ENTD 2008; PHEBUS 2013), we also reconstruct household CO2 emissions linked to housing and transport energy. For transport, emissions are proportional to the distance travelled due to the predominant use of private cars. Urban settlement patterns constrain both the length of daily commuting and access to less carbon-intensive modes of transport. For housing, while the size of the dwelling increases with income and distance from urban centres, the first factor to account for variability of emissions is the heating system: this has little to do with income but more to do with settlement patterns, which constrain access to the various energy carriers. Finally, we discuss the difficulties, both technical and conceptual, that are involved in estimating emissions from the super-rich (the top 1 percent). |
| Keywords: | Environmental Economics and Policy |
| Date: | 2021–05–24 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemwp:311053&r= |