|
on Central and Western Asia |
| By: | Cândida Ferreira |
| Abstract: | This paper uses panel Granger causality estimations with the approaches developed by NairReichert and Weinhold (2001), and Bangake and Eggoh (2011) as well as the Dumitrescu and Hurlin (2012) test, with the algorithm developed by Lopez and Weber (2017), to analyse the causality relations between all the nine IMF financial development indices, and the real GDP growth considering a sample of 46 countries spread by all continents over the interval 1990-2017. The results obtained reveal the dynamic character of these causality relations and overall,no significant differences were found when comparing the results obtained for the financial institutions indices with those regarding the financial markets indices. The results confirm the existence of bidirectional causality, although not with the same statistical robustness for all the IMF indices, addressing relevant aspects of the financial development: access, depth and efficiency of the financial institutions and markets. |
| Keywords: | Panel Granger causality; financial development; IMF financial development indices; financial institutions and markets; economic growth. |
| JEL: | C33 E02 E44 F43 G20 O43 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp01792021&r= |
| By: | Mateusz Buczyński (Interdisciplinary Doctoral School, University of Warsaw); Marcin Chlebus (Faculty of Economic Sciences, University of Warsaw) |
| Abstract: | This study proposes a new GARCH specification, adapting a long short-term memory (LSTM) neural network's architecture. Classical GARCH models have been proven to give substantially good results in the case of financial modeling, where high volatility can be observed. In particular, their high value is often praised in the case of Value-at-Risk. However, the lack of nonlinear structure in most of the approaches entails that the conditional variance is not represented in the model well enough. On the contrary, recent rapid advancement of deep learning methods is said to be capable of describing any nonlinear relationships prominently. We suggest GARCHNet - a nonlinear approach to conditional variance that combines LSTM neural networks with maximum likelihood estimators of probability in GARCH. The distributions of the innovations considered in the paper are: normal, t and skewed t, however the approach does enable extensions to other distributions as well. To evaluate our model, we have executed an empirical study on the log returns of WIG 20 (Warsaw Stock Exchange Index) in four different time periods throughout 2005 and 2021 with varying levels of observed volatility. Our findings confirm the validity of the solution, however we present several directions to develop it further. |
| Keywords: | Value-at-Risk, GARCH, neural networks, LSTM |
| JEL: | G32 C52 C53 C58 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:war:wpaper:2021-08&r= |
| By: | Tabea Bucher-Koenen (ZEW-Leibniz Centre for European Economic Research and Mannheim University); Andreas Hackethal (Goethe University Frankfurt and SAFE); Johannes Koenen (ARCEcon); Christine Laudenbach (University of Bonn) |
| Abstract: | We show that financial advisors recommend more costly products to female clients, based on minutes from about 27,000 real-world advisory meetings and client portfolio data. Funds recom-mended to women have higher expense ratios controlling for risk, and women less often receive rebates on upfront fees for any given fund. We develop a model relating these findings to client stereotyping, and empirically verify an additional prediction: Women (but not men) with higher financial aptitude reject recommendations more frequently. Women state a preference for delegat-ing financial decisions, but appear unaware of associated higher costs. Evidence of stereotyping is stronger for male advisors. |
| Keywords: | credence goods, financial aptitude, consumer protection, financial literacy, discrimination |
| JEL: | G2 E2 D8 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:095&r= |
| By: | Servaas Storm (Delft University of Technology) |
| Abstract: | The Rebuilding Macroeconomic Theory Project, led by David Vines and Samuel Wills (2020), is an important, albeit long overdue, initiative to rethink a failing mainstream macroeconomics. Professors Vines and Wills, who must be congratulated for stepping up to the challenge of trying to make mainstream macroeconomics relevant again, call for a new multiple-equilibrium and diverse (MEADE) paradigm for macroeconomics. Their idea is to start with simple models, ideally two-dimensional sketches, that explain mechanisms that can cause multiple equilibria. These mechanisms should then be incorporated into larger DSGE models in a new, multiple-equilibrium synthesis to see how the fundamental pieces of the economy fit together, subject to it being 'properly micro-founded'. This paper argues that the MEADE paradigm is bound to fail, because it maintains the DSGE model as the unifying framework at the center of macroeconomic analysis. The paper reviews 10 fundamental weaknesses inherent in DSGE models which make these models irreparably useless for macroeconomic policy analysis. Mainstream macroeconomics must put DSGE models, once and for all, in the Museum of Implausible Economic Models – and learn important lessons from non-DSGE macroeconomic approaches. |
| Keywords: | New Keynesian DSGE models; rational expectations; micro-foundations; loanable funds model; Lucas critique; multiple equilibria; income distribution; demand-led growth; money and monetary production economy. |
| JEL: | E20 E60 F60 O10 O40 |
| Date: | 2021–02–14 |
| URL: | http://d.repec.org/n?u=RePEc:thk:wpaper:inetwp148&r= |
| By: | Sebastian Doerr; Thomas Drechsel; Donggyu Lee |
| Abstract: | This paper shows that rising income inequality reduces job creation at small firms. High-income households save relatively less in the form of bank deposits while small firms depend on banks. We argue that a higher share of income accruing to top earners therefore erodes banks' deposit base and their lending capacity for small businesses, thus reducing job creation. Exploiting variation in top incomes across US states and an instrumental variable strategy, we establish that a 10 percentage point (pp) increase in income share of the top 10% reduces the net job creation rate of small firms by 1.5–2 pp, relative to large firms. The effects are stronger at smaller firms and in bank-dependent industries. Rising top incomes also reduce bank deposits and increase deposit rates, in line with a reduction in the supply of household deposits. We then build a general equilibrium model with heterogeneous households that face a portfolio choice between high-return investments and low-return deposits that insure against liquidity risk. Banks use deposits to lend to firms of different sizes subject to information frictions. We study job creation across firm sizes under counterfactual income distributions. |
| Keywords: | income inequality, job creation, small businesses, bank lending, household heterogeneity, financial frictions |
| JEL: | D22 D31 G21 L25 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:944&r= |
| By: | Maggie Sklar |
| Abstract: | Since the start of the Covid-19 pandemic in 2020, retail investors have increasingly participated at higher rates in the U.S. equities markets, particularly in day trading and short-term trading. In January 2021, amid a surge of online postings and interest by retail investors who use free trading apps, GameStop stock began moving up and down by billions of dollars a day—resulting in big gains for some investors and billions in losses for others. To the extent the proliferation of free trading democratizes the market, increases the diversity of participants able to participate in the market, and contributes to vibrant and healthy markets, this activity has positive benefits. These recent developments pose new questions for policymakers, such as whether the ability for users to gather together on social media and move the price of a financial product—for reasons unrelated to market news or market fundamentals—is a larger vulnerability, whether this activity fits into tools to prevent or stop market manipulation or not, and if there is a gap in regulatory ways to address such activity. |
| Keywords: | financial economics; general financial markets |
| JEL: | G1 |
| Date: | 2021–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhpd:91989&r= |
| By: | Sharma, Rajesh; Sinha, Avik; Kautish, Pradeep |
| Abstract: | The consistent performance on the economic front and alarmingly increasing air pollution in the eight emerging economies of South and Southeast Asia compelled us to scrutinize whether the association between per capita income and carbon dioxide (CO2) emissions remained nonlinear during the study period (1990-2015). Further, we intended to examine the long-run impacts of financial development, trade expansion, and nonrenewable energy consumption on CO2 emissions. Considering the possibility of the cross-sectional dependency, we employed a relatively new approach, i.e. the cross-sectional augmented distributed lag mean estimation. The simulation results of the study confirmed an N-shaped environmental Kuznets curve in the selected emerging economies. Further, the improvements in the financial sector, nonrenewable energy consumption, and trade expansion contributed to increasing the level of CO2 emissions in the long run. Based on the outcomes, we proposed the policy framework, which may help in achieving Sustainable Development Goals. |
| Keywords: | CO2 emissions; financial development; nonrenewable energy resources; South and Southeast Asian countries; CS-DL |
| JEL: | Q5 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:108163&r= |
| By: | Cruzatti C., John |
| Abstract: | This paper analyzes the effects of Free Trade Agreements (FTAs) on various measures of local development in 207 countries over the 1990-2015 period. Using a Difference-in-Differences approach, I exploit spatial and time variation by comparing regions with (exogenously determinded) exploitable and non-exploitable land before and after FTAs are "activated". I show that FTAs have a limited yet positive impact on a region's human development (as measured by the Human Development Index). The results also indicate that this limited impact can be explained by the positive effects of Free Trade Agreements on economic activity (night lights and GDP), together with the lack of significant influence on patterns of inequality (distribution of night lights among population). Finally, I also show that FTAs' impacts on human development are stronger for urbanized regions. Conversely, there is neither clear evidence of a weaker positive effect if trade partners belong to the Global North nor if the agreements include arrangements beyond the elimination of tariffs and quotas. |
| Keywords: | FTAs; Human Development; Economic Activity; Inequality |
| Date: | 2021–06–09 |
| URL: | http://d.repec.org/n?u=RePEc:awi:wpaper:0702&r= |
| By: | Juan Carlos Cuestas (Department of Economics and Finance, Tallinn University of Technology, Estonia; IEI and Department of Economics, Universitat Jaume I, Castellón, Spain); Merike Kukk (Department of Economics and Finance, Tallinn University of Technology, Estonia); Natalia Levenko (Department of Economics and Finance, Tallinn University of Technology, Estonia) |
| Abstract: | In this paper we investigate house price misalignments and how they affect the real economy. We estimate the long-term relationship between house prices and the fundamentals that determine long-term house prices for a panel of European countries with dynamic OLS, using data from 2005-2018. We find that income has been the main driver of fundamental house prices in all countries, while the supply of dwellings has calmed the rise in house prices in some of them. We calculate house price misalignments, which are deviations of house prices from the fundamental value, and we employ them in the growth model. The results of the growth regression indicate that house price imbalances amplify business cycles in the short term, but in the long term house price overvaluations slow economic growth down. The findings imply that it is crucial to take measures to stabilise housing cycles. |
| Keywords: | housing markets, fundamental house price, misalignments, imbalances, overvaluation, economic growth |
| JEL: | E21 E44 R21 R31 G01 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:jau:wpaper:2021/07&r= |
| By: | Eran Yashiv (The Eitan Berglas School of Economics, Tel Aviv University) |
| Abstract: | This paper studies outcomes for workers moving from a poor to a rich economy employing a job tasks based approach. It uses a data case, whereby a worker could decide to work in a richer economy and place himself there by a daily or weekly commute. This set-up faciliates the disentanglement of income differences motives from a plethora of other motives. Thus it eschews the bias inherent in many studies. The paper emphasizes the idea that tasks are tied to locations, and workers choose a location-task-wage ‘pack.’ The task demanded, which is a bundle of skills, constrains human capital returns for movers. Relatively low task returns generate a substantial offset to the productivity gain for migrants, stemming from the rich economy having higher TFP and capital. |
| Keywords: | movers and stayers, rich and poor economies, migranttasks, location-task-wage bundle, pure income effects, TFP differentials, human capital differences, self-selection |
| JEL: | E24 F22 F66 J24 J31 J61 O15 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:crm:wpaper:2119&r= |
| By: | Kowalczyk, Stanisław; Kwasek, Mariola |
| Abstract: | The paper discusses the position of agriculture in the economy at various levels of economic development and in various schools of economic theory. The complexity of the analyzed area is a consequence of the fact that agriculture is one of the first forms of conscious and organized human activity. Its importance for society and economy results from the main goal of this activity, which is to satisfy the basic human need, the need to satisfy hunger. The study depicts three basic perspectives from which agriculture is presented in economic theory: (i) relations between agriculture and other sectors of the economy, (ii) the main forces shaping the mechanism of changes and the development of agriculture, and (iii) basic directions (paths) taking place in a time of changes in agriculture. In the second part of the paper, one of the three main perspectives illustrating the position of agriculture in the economy and in the theory of economics, i.e., the relations between agriculture and other sectors of the economy, was subject to empirical verification. The assessment was carried out on the example of Polish agriculture and its evolution over time. The analysis covers the changes that occurred after 1950 in areas such as the potential of agriculture in the economy (land, labor, and capital resources), the contribution of agriculture to creating added value (GNI/GDP), agricultural production, participation in foreign trade and changes in food consumption. |
| Keywords: | Agricultural and Food Policy, Food Consumption/Nutrition/Food Safety |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iafepa:311268&r= |
| By: | Frank Veneroso |
| Abstract: | According to Frank Veneroso, a broad subset of today's US stock market has become what he calls a "pure price-chasing bubble." Examination of the history of comparable pure price-chasing bubbles shows there has been a set of key causal factors that contributed to these rare market events. The most extreme such case was an over-the-counter market in Kuwait called the "Souk al-Manakh." This exemplar of a pure price-chasing phenomenon may shed light--albeit unflattering--on the current US equity market, Veneroso contends. |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levyop:op_66&r= |
| By: | Gulliksson, Mårten (Örebro University School of Science and Technology); Oleynik, Anna (University of Bergen); Mazur, Stepan (Örebro University School of Business) |
| Abstract: | In this paper, we consider optimal portfolio selection when the covariance matrix of the asset returns is rank-deficient. For this case, the original Markowitz’ problem does not have a unique solution. The possible solutions belong to either two subspaces namely the range- or nullspace of the covariance matrix. The former case has been treated elsewhere but not the latter. We derive an analytical unique solution, assuming the solution is in the null space, that is risk-free and has minimum norm. Furthermore, we analyse the iterative method which is called the discrete functional particle method in the rank-deficient case. It is shown that the method is convergent giving a risk-free solution and we derive the initial condition that gives the smallest possible weights in the norm. Finally, simulation results on artificial problems as well as real-world applications verify that the method is both efficient and stable. |
| Keywords: | Mean–variance portfolio; Rank-deficient covariance matrix; Linear ill-posed problems; Second order damped dynamical systems |
| JEL: | C10 C44 |
| Date: | 2021–06–02 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:oruesi:2021_012&r= |
| By: | Lou, Dong |
| Abstract: | Using comprehensive administrative data from the UK, we examine trading by different investor groups in government bond markets. Our sample covers virtually all secondary market trading in gilts and contains detailed information of each transaction, including the identities of both counterparties. We find that hedge funds' daily trading positively forecasts gilt returns in the following one to five days, which is then fully reversed in the following month. A part of this short-term return predictability is due to hedge funds' front-running other investors' future demand. Mutual fund trading also positively predicts gilt returns, but over a longer horizon of one to two months. This return pattern does not revert in the following year and is partly due to mutual funds' ability to forecast changes in short-term interest rates. |
| Keywords: | asset managers; Government bonds; Informed trading; return predictability |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15028&r= |
| By: | Tanweer Akram |
| Abstract: | There are several widely used benchmark models of the long-term interest rate in quantitative finance. However, these models have yet to incorporate Keynes's valuable insights about interest rate dynamics. The Keynesian approach to interest rate dynamics can be readily incorporated in the benchmark models of the long-term interest rate. This paper modifies several benchmark interest rate models. In these modified models the long-term interest rate is related to the short-term interest rate and a Wiener process. The Keynesian approach to interest rate dynamics can be useful in addressing theoretical and policy issues. |
| Keywords: | Long-Term Interest Rate; Bond Yields; Monetary Policy; Short-Term Interest Rate; John Maynard Keynes |
| JEL: | E12 E43 E50 E58 E60 G10 G12 G41 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_988&r= |
| By: | Jelson Serafim |
| Abstract: | This study provides evidence for the relationship between private credit, stock market indicators, income inequality, and poverty. Using the annual data that ranges from 1992 to 2018 on 9 African economies. We had applied the estimation method of the Autoregressive Distributed Lag Model (ARDL) to model the long-run effect. Besides, we use Dumitrescu and Hurlin Panel causality to test for checking the direction of causality. The results of long-run estimates indicate that the stock market indicators have a significant positive impact on income inequalities, but have a negative and significant impact on poverty. Further, our findings show that private credit adversely reduces income inequalities. Our results also establish significant short-run causalities among stock market indicators, private credit, income inequalities, and Poverty. |
| Keywords: | Private Credit, Stock market, income inequality, poverty. |
| JEL: | G10 G20 I30 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp01772021&r= |
| By: | Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Sahamkhadam, Maziar (Linnaeus University); Stephan, Andreas (Jönköping International Business School and CESIS, KTH) |
| Abstract: | Did Corporate Social Responsibility investing benefit shareholders during the COVID-19 pandemic crisis? Distinguishing between downside tail risk and upside reward potential of stock returns, we provide evidence from 5,073 stocks listed on stock markets in ten countries. The findings suggests that better ESG ratings are associated with lower downside risk, but also with lower upside return potential. Thus, ESG ratings help investors to reduce their risk exposure to the market turmoil caused by the pandemic, while maintaining the fundamental trade-off between risk and reward. |
| Keywords: | ESG; COVID 19; downside risk; upside potential; Sustainalytics; financial markets |
| JEL: | D22 G11 G14 G32 |
| Date: | 2021–05–27 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cesisp:0488&r= |
| By: | Yoshihiko Norimasa (Bank of Japan); Kazuki Ueda (Bank of Japan); Tomohiro Watanabe (Nippon Life Insurance Company) |
| Abstract: | This study uses panel quantile regression to examine the risk of capital outflows in times of stress (capital flows-at-risk, CFaR) for 16 emerging economies. Our analysis shows that changes in financial conditions in advanced economies and in the monetary policy stance of the United States affect the risk of large capital outflows for some countries. In particular, we find that tighter financial conditions in advanced economies during a phase when the U.S. monetary policy stance is changing significantly affect emerging economies' CFaR. Further, using government debt as a measure of emerging economies' structural vulnerability, we find that an increase in government debt substantially raises the risk of capital outflows in times of stress. Moreover, while in the case of debt investment, CFaR tend to be greater the higher the level of government debt, in the case of other investment (consisting mainly of bank lending), CFaR tend to increase when financial conditions in advanced economies deteriorate. |
| Keywords: | Risk of Capital Outflows (CFaR: Capital Flows-at-Risk); Global Factors; Local Factors; Panel Quantile Regression; Relative Entropy |
| JEL: | E52 F32 F34 F37 |
| Date: | 2021–05–26 |
| URL: | http://d.repec.org/n?u=RePEc:boj:bojwps:wp21e05&r= |
| By: | Le Ha Thu (National Graduate Institute for Policy Studies, Tokyo, Japan); Roberto Leon-Gonzalez (National Graduate Institute for Policy Studies, Tokyo, Japan) |
| Abstract: | Forecasting macroeconomic variables in the rapidly changing macroeconomic envi- ronments faced by developing and emerging countries is an important task for central banks and policy-makers, yet often presents a number of challenges. In addition to the structural changes in the economy, the time-series data are usually available only for a small number of periods, and predictors are available in different lengths and frequencies. Dynamic model averaging (DMA), by allowing the forecasting model to change dynamically over time, permits the use of predictors with different lengths and frequencies for the purpose of forecasting in a rapidly changing economy. This study uses DMA to forecast inflation and growth in Vietnam, and compares its forecast- ing performance with a wide range of other time-series methods. Some results are noteworthy. First, the number and composition of the optimal predictor set changed, indicating changes in the economic relationships over time. Second, DMA frequently produces more accurate forecasts than other forecasting methods for both the inflation and the economic growth rate of Vietnam. |
| Keywords: | Bayesian, dynamic model averaging, forecasting macroeconomic variables, Vietnam |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:ngi:dpaper:21-03&r= |
| By: | Lagerborg, Andresa Helena; Pappa, Evi; Ravn, Morten O |
| Abstract: | We use fatalities in mass shootings in the U.S. as an instrument for autonomous declines in consumer confi dence to estimate the dynamic causal effects of sentiment shocks. Declining confi dence is recessionary and sets off a severe contraction in the labor market, while having less evident nominal effects. Sentiment shocks explain a non-negligible part of cyclical fluctuations. We demonstrate that in a model with heterogeneous agents, nominal rigidities and search-and-matching frictions, a wave of pessimism can take the economy from a normal state on a path towards a high-unemployment sunspot limit, inducing dynamics that resemble the empirical patterns. |
| Keywords: | Consumer confidence; Demand Shocks; incomplete markets; instrumental variables; Search and Matching |
| JEL: | C36 E0 E32 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15098&r= |
| By: | Sharma, Rajesh; Sinha, Avik; Kautish, Pradeep |
| Abstract: | In the preceding two decades, the expansion of financial services has played a vital role in pursuing economic growth agendas in the developing Asian nations. However, its harmful effect on environmental quality cannot be denied. In this backdrop, in the present study, we investigated whether the financial sector development moderated the ecological footprint, carbon footprint, and land footprint in the eight developing nations of South and Southeast Asia from 1990-2015. In doing so, we included the per capita income, energy solutions, and trade expansions as determinants of the ecological indicators. The results of the second-generation unit root tests and Westerlund’s cointegration test reported the long-run stability and cointegration, respectively. To navigate the possible cross-country dependency, we employed the cross-sectional augmented autoregressive distributed lag approach (CS-ARDL). The results confirmed that per capita income, energy solutions, trade expansion, and financial sector development invigorated the ecological footprint, carbon footprint, and land footprint in the long run. Further, it is reported that the development in the financial sector has a significant moderating impact on the nexus between energy and environmental footprints. In other words, the financial sector development drove the association between the overall environmental quality and energy solutions in the long run. Similarly, we observed that the financial sector development worked as a significant mediator between environmental proxies and trade expansion. By including the ecological footprint, carbon footprint, and land footprint as environmental proxies, the study provides the wider environmental spectrum. Based on the outcomes of the study, we proposed a novel scheme, which may help to address the harmful environmental impacts of the financial sector development in the selected developing nations. |
| Keywords: | Ecological footprint; carbon footprint; land footprint, South Asian countries; Southeast Asian countries; per capita income; energy |
| JEL: | Q5 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:108161&r= |
| By: | Pugatch, Todd (Oregon State University); Schroeder, Elizabeth (Oregon State University) |
| Abstract: | We assess whether a light-touch intervention can increase socioeconomic and racial diversity in undergraduate Economics. We randomly assigned over 2,200 students a message with basic information about the Economics major; the basic message combined with an emphasis on the rewarding careers or financial returns associated with the major; or no message. Messages increased the proportion of first generation and underrepresented minority (URM) students majoring in Economics by five percentage points. This effect size was sufficient to reverse the gap in Economics majors between first generation/URM students and students not in these groups. Effect sizes were larger and more precise for better-performing students and first generation students. Extrapolating to the full sample, the treatment would double the proportion of first generation and underrepresented minority students majoring in Economics. |
| Keywords: | college major choice, diversity in economics, higher education, nudges, randomized control trial |
| JEL: | I21 I23 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14418&r= |
| By: | Fenske, James; Gupta, Bishnupriya; Yuan, Song |
| Abstract: | How did the 1918 influenza pandemic affect female labor force participation in India over the short run and the medium run? We use an event-study approach at the district level and four waves of decadal census data in order to answer this question. We find that districts most adversely affected by influenza mortality saw a temporary increase in female labor force participation in 1921, an increase that was concentrated in the service sector. By 1931, this increase had been reversed. We find suggestive evidence that distress labor supply by widows and rising wages help account for these results. |
| Keywords: | Cultural norms; Demographic shocks; Female Labour Force Participation |
| JEL: | J11 J21 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15077&r= |
| By: | Jessica Battisto; Nathan Y. Godin; Claire Kramer; Asani Sarkar |
| Abstract: | Small businesses not only account for 47 percent of U.S employment but also provide a pathway to success for minorities and women. During the coronavirus pandemic, these small businesses—especially those owned by minorities—were hard hit as consumers reduced spending disproportionately on services that require in-person physical interaction, such as hotels and restaurants. In response, the U.S. government launched the Paycheck Protection Program (PPP) to provide guaranteed and potentially forgivable small business loans. In this post, we examine financial technology (fintech) lenders participating in the PPP and find that, while disbursing only a small share of total loan amounts, they provide important support to minority business owners, who have in the past been underserved by the traditional banking industry. |
| Keywords: | small business loans; inequality; Paycheck Protection Program (PPP); Fintech |
| JEL: | E51 G21 I3 I1 |
| Date: | 2021–05–27 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:92112&r= |
| By: | Ingrid Harvold Kvangraven (University of York, UK); Surbhi Kesar (Azim Premji University, India) |
| Abstract: | This paper critically engages with various aspects of the decolonization movement in economics and its implications for the discipline. We operationalize the insights from this engagement using a survey of 498 economists that explores how faculty across different kinds of departments, disciplines, geographies, and identities perceive the problems of economics teaching, how they think economics pedagogy should be reformed, if at all, and how they relate to decolonial critiques of economics pedagogy. Based on the survey findings, we conclude that the mainstream of the field’s emphasis on technical training and rigor, within a narrow theoretical and methodological framework, likely stands in the way of the very possibility for decolonizing economics, given its strong contrast to key ideas associated with the decolonization agenda, such as positionality, centering power relations, exposing underlying politics of defining theoretical categories, and unpacking the politics of knowledge production. Nonetheless, the survey responses clearly chart out the challenges that the field faces in terms of decolonizing pedagogy, which is a first step towards debate and change. |
| Keywords: | Economics teaching, economics pedagogy, decolonial theory, postcolonial theory, decolonizing economics |
| JEL: | A20 B40 B50 F54 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:new:wpaper:2110&r= |
| By: | Henri Njangang (University of Dschang, Cameroon); Simplice A. Asongu (Yaoundé, Cameroon); Sosson Tadadjeu (University of Dschang , Cameroon); Yann Nounamo (University of Douala, Douala, Cameroon) |
| Abstract: | This paper aims to investigate the effect of financial development on economic complexity using a panel dataset of 24 African countries over the period 1983-2017. The empirical evidence is based on two different approaches. First, we adopt the Hoechle (2007) procedure which produces Driscoll-Kraay standard errors to account for heteroscedasticity and cross–sectional dependence. Second, we implement the system Generalized Method of Moments to account for endogeneity. The results show that financial development increases economic complexity in Africa. Looking at the regional difference, the results show that this effect is less beneficial for SSA countries. |
| Keywords: | Financial development, Economic complexity, Panel data analysis, Africa |
| JEL: | G20 G24 E02 P14 O55 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:abh:wpaper:21/018&r= |
| By: | O'Brien, Martin (Central Bank of Ireland); Wosser, Michael (Central Bank of Ireland) |
| Abstract: | Growth at Risk (GaR) provides a methodology for understanding how financial conditions and the level of financial vulnerabilities contribute to the possibility of future episodes of weak economic growth. Using the GaR framework, we show that the likelihood and severity of future weak or negative economic growth in Ireland rises during periods where risks to financial stability are growing. In particular, we show that near term tail risks are heavily influenced by prevailing financial market conditions, but that medium horizon risks are more dependent upon systemic financial vulnerabilities, such as when credit growth is excessive. Our empirical analysis also suggests that structural characteristics of Ireland’s economy or financial system make it more exposed to potential weak growth outcomes, compared with other countries in our sample. We discuss how macroprudential policy can be better informed by tracking developments in the severity and likelihood of weak or negative economic outcomes made possible by a GaR framework. |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:fsnote:2/fs/21&r= |
| By: | Luis Santos Pinto; Paola Colzani |
| Abstract: | We use a laboratory experiment to study the causal impact of self-confidence on bargaining with joint production. We exogenously manipulate the self-confidence of subjects regarding their relative performance by employing easy and hard tasks. Subjects are randomly matched into pairs and each pair bargains over a joint surplus which can be either high or low. The size of the joint surplus depends on the pair’s relative performance on the task. Our main experimental findings are as follows. First, the percentage of bargaining failures when subjects perform the easy task is more than triple than when they perform the hard task. Second, there is a remarkably high percentage of bargaining failures when subjects perform the easy task and bargain over a low surplus. Third, when subjects perform the easy task and bargain over a high surplus, all pairs reach an agreement and most settle on the equal split. Our findings shed light on the conditions and mechanisms under which overconfidence causes bargaining failures. |
| Keywords: | Overconfidence, Bargaining, Joint Production, Laboratory Experiment |
| JEL: | C79 C91 C92 D91 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:lau:crdeep:21.07&r= |
| By: | Ellison, Martin; Lee, Sang Seok; O'Rourke, Kevin Hjortshøj |
| Abstract: | How did countries recover from the Great Depression? In this paper we explore the argument that leaving the gold standard helped by boosting inflationary expectations and lowering real interest rates. We do so for a sample of 30 countries, using modern nowcasting methods and a new dataset containing more than 230,000 monthly and quarterly observations for over 1,500 variables. In those cases where the departure from gold happened on clearly defined dates, it seems clear that inflationary expectations rose in the wake of departure. IV regressions and synthetic matching techniques suggest that the relationship is causal. |
| Keywords: | gold standard; Great Depression; inflationary expectations |
| JEL: | F33 N10 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15061&r= |
| By: | Yossi Yakhin (Bank of Israel); Inon Gamrasni (Bank of Israel) |
| Abstract: | The housing market is characterized by persistent deviations from the long-run equilibrium, and these deviations affect market dynamics in the short run. Therefore, any empirical analysis of the housing market must identify these long-run relations. This paper estimates an econometric model for the housing market in Israel for the years 1980â2019, where the long-run relations are estimated based on the theoretical model of DiPasquale and Wheaton (1992). We utilize the model to learn about the characteristics of the Israeli housing market and about the factors driving home prices, rents, and construction activity during the sample period. The model sheds light on the interaction between home prices and rents: A rise in rents pushes prices higher as it increases the return from home ownership. In contrast, an increase in home prices reduces rents because it stimulates housing supply. We also find that both demand and supply are inelastic in the long run; as a result, external shocks to the market are mainly manifested as changes in prices rather than quantities. As for the factors behind the surge in home prices that started in 2008, the estimation of the model suggests that about half of the rise in prices during 2008â11 was driven by undervaluation of homes in the preceding period. Monetary policy also supported prices during that period, though our estimates suggest that it played a minor role. Supply-side shortage had a moderate but persistent effect on house prices, and starting in 2012 supply shortage alongside rising household income are the main factors supporting prices. The acceleration in construction activity in recent years closed much of the supply shortage toward the end of the sample period. |
| Keywords: | Housing Market, Home Prices, Cointegration, Error Correction Model |
| JEL: | C22 R21 R31 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:boi:wpaper:2021.08&r= |
| By: | Sevilla, Almudena; Smith, Sarah |
| Abstract: | The status of women in economics in the US has come increasingly under the spotlight. We exploit high quality administrative data to paint the first comprehensive picture of the status of women in UK academic economics departments in research-intensive universities. Our evidence indicates that, as in the US, women in economics are under-represented and are paid less than men. The issues facing women in economics in the UK are similar to other disciplines particularly STEM but have received less national policy attention to date. We conclude with a discussion of interventions that might improve the status of women in academia and we present new evidence that a UK academic diversity programme (Athena Swan) has narrowed the gender pay gap at a senior level. |
| Keywords: | Academia; Gender; gender wage gap; Women in Economics |
| JEL: | A14 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15034&r= |
| By: | Irina Skvortsova (National Research University Higher School of Economics); Anna Vershinina (National Research University Higher School of Economics) |
| Abstract: | In this paper we investigate cognitive biases as a potential reason for the varied results of M&A in emerging capital markets. We focus on two cognitive biases, CEO overconfidence and availability bias, which significantly influence CEO behavior, encouraging them to be irrational in M&A deals. Based on 237 M&A deals closed by Russian firms during the period 2005–2019 we empirically prove that CEO overconfidence destroys value, and availability bias creates value in M&A deals in the Russian market. We show that due to the low level of corporate governance in emerging capital markets, all corporate governance mechanisms can mitigate CEO irrationalities in M&A. |
| Keywords: | M&A performance, emerging capital markets, cognitive biases, CEO overconfidence, availability bias. |
| JEL: | G34 G41 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:82/fe/2021&r= |
| By: | Portes, Jonathan |
| Abstract: | I review trends in migration to the UK since the Brexit referendum, examining first the sharp fall in net migration from the EU that resulted, and then the recent more dramatic exodus of foreign-born residents during the covid-19 pandemic. I describe the new post-Brexit system, and review studies which attempt to estimate both the impact on future migration flows and on GDP and GDP per capita. Finally, I discuss the wider economic impact of the new system and some of the policy implications. |
| Keywords: | Immigration,Great Britain,productivity |
| JEL: | E24 J24 J61 M53 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:854&r= |
| By: | Gambarova, Z.; Glycopantis, D. |
| Abstract: | We consider zero-sum and a non zero-sum games of two players with generalized, not necessarily linear, utility functions and infinite, compact pure strategy spaces. Emphasis is given to comparisons with results obtained in mathematical theorems. The games chosen make specific points in relation to the conditions of the theorems. The idea of δ functions is exploited to construct mixed strategies. We interpret their significance in joining pure strategies and show the application in confirming NE. Uniqueness of NE is looked at. An issue is also how far an analogy can be drawn from the case of the finite matrix games. The usually discussed game theory problems are easy to analyze but they do not cover the whole range of possibilities. |
| Keywords: | Nash Equilibrium (NE); Infinite games; Compact set of strategies; Reaction functions; Dirac δ function; Mixed strategies; Quasi-concave utility function; Nash-von Neumman-Debreu-Fan-Glisberg theorems; multiple Nash equilibria; minimax theorem; saddle point; games with perfect recall; behavioural strategies |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:cty:dpaper:21/02&r= |
| By: | Simplice A. Asongu (Yaounde, Cameroon); Rexon T. Nting (University of Wales, London, UK) |
| Abstract: | This study investigates direct and indirect linkages between financial development and inclusive human development in data panels for African countries. It employs a battery of estimation techniques, notably: Two-Stage Least Squares, Fixed Effects, Generalized Method of Moments and Tobit regressions. The dependent variable is the inequality adjusted human development index. All dimensions of the Financial Development and Structure Database (FDSD) of the World Bank are considered. The main finding is that financial dynamics of depth, activity and size improve inclusive human development, whereas the inability of banks to transform mobilized deposits into credit for financial access negatively affects inclusive human development. Policies should be tailored to improve mechanisms by which credit facilities can be provided to both households and business operators. Surplus liquidity issues resulting from the inability of banks to transform mobilized deposits into credit can be resolved by enhancing the introduction of information sharing offices (like public credit registries and private credit bureaus) that would reduce information asymmetry between lenders and borrowers. This study complements the extant literature by assessing the nexus between financial development and inclusive human development in Africa. |
| Keywords: | Banking; human development; Africa |
| JEL: | E00 G20 I00 O10 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:abh:wpaper:21/006&r= |
| By: | Chakraborty, Tanika (Indian Institute of Management); Mukherjee, Anirban (University of Calcutta) |
| Abstract: | We propose a regional inequality-based mechanism to explain the heterogeneity in the spread of Covid-19 and test it using data from India. We argue that a core-periphery economic structure is likely to increase the spread of infection because it involves movement of goods and people across the core and peripheral districts. Using nightlights data to measure regional inequality in the degree of economic activity, we find evidence in support of our hypothesis. Further, we find that regions with higher nightlight inequality also experience higher spread of Covid-19 only when lockdown measures have been relaxed and movement of goods and services are near normal. Our findings imply that policy responses to contain Covid-19 contagion needs to be heterogeneous across India, depending on the ex-ante economic structure of a region. |
| Keywords: | COVID-19, contagion, core-periphery, nightlight, industrial-heterogeneity |
| JEL: | I15 I18 R1 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14400&r= |
| By: | Richard K. Green (University of Southern California) |
| Abstract: | In 1998, I published a paper that showed that under a wide range of specifications, residential investment led GDP, while non-residential investment did not. That papers was followed by a number of others, including Coulson and Kim (2000), Davis and Heathcoate (2005) and Leamer (2007) that used more sophisticated techniques than my paper, but found the same outcome— that residential investment led GDP. Leamer famously announced that housing was the business cycle. But in light of the Great Financial Crisis, the subsequent crash in residential investment, and the fundamental changes in the mortgage market, I thought it worth revisiting housing as a leading indicator. I have found that it is a much weaker leading indicator than before, and that it is much less sensitive to Federal Reserve Policy—especially changes in the Federal Funds Rate—than before. It is possible that the increasing stringency of local land use policy had interfered with the ability of the Federal Reserve to use housing as an instrument on monetary policy. |
| Date: | 2021–05–27 |
| URL: | http://d.repec.org/n?u=RePEc:cth:wpaper:gru_2021_024&r= |
| By: | Luc Arrondel (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); Marlene Haupt (University of Applied Sciences Ravensburg-Weingarten); María Mancebón (University of Zaragoza - Universidad de Zaragoza [Zaragoza]); Gianni Nicolini (University of Rome "Tor Vergeta" - University of Rome "Tor Vergeta"); Manuel Wälti (Swiss National Bank - Swiss National Bank); Jasmira Wiersma (University of Groningen [Groningen]) |
| Abstract: | If the idea of familiarizing individuals with savings is an old one, it is especially since the early 2000s that the economist's modern concept of financial literacy has been the object of particular attention. The literature, essentially empirical, has developed considerably since then. It is during this period that the Organisation for Economic Co-operation and Development (OECD) launched its Financial Literacy Programme. The objective of this chapter was to describe financial literacy and financial education programs in Western Europe: France, Germany, Italy, Spain, Switzerland, and the Netherlands. A first observation concerns financial literacy: to varying degrees, the residents of these countries are far from financially literate. A second observation concerns the heterogeneity of financial literacy. In all countries, financial literacy depends on age, education, and gender (higher among men, older people, and graduates). Some determinants appear to be more specific to the culture of each country (for example, political opinion in France, political past history in Germany (West vs. East), or language area in Switzerland). Finally, it appears that financial education programs have been in Western Europe since the mid-2000s, probably offered more systematically in centralized countries. |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-03243830&r= |
| By: | Adrian, Tobias; Boyarchenko, Nina; Giannone, Domenico |
| Abstract: | We estimate the evolution of the conditional joint distribution of economic and financial conditions. While the joint distribution is approximately Gaussian during normal periods, sharp tightenings of financial conditions lead to the emergence of additional modes. The U.S. economy has historically resolved quickly to the "good" mode, but we conjecture that poor policy choices could lead to prolonged periods of multimodality. We argue that multimodality arises naturally in a macro-financial intermediary model with occasionally binding intermediary constraints. |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15088&r= |
| By: | Advani, Arun (University of Warwick and Institute of Fiscal Studies (IFS)); Ash, Elliot (ETH Zurich); Cai, David (ETH Zurich); Rasul, Imran (University College London and IFS) |
| Abstract: | How does economics compare to other social sciences in its study of issues related to race and ethnicity? We assess this using a corpus of 500? 000 academic publications in economics, political science, and sociology. Using an algorithmic approach to classify race-related publications, we document that economics lags far behind the other disciplines in the volume and share of race-related research, despite having higher absolute volumes of research output. Since 1960, there have been 13,000 race-related publications in sociology, 4,000 in political science, and 3,000 in economics. Since around 1970, the share of economics publications that are race-related has hovered just below 2% (although the share is higher in top-5 journals) ; in political science the share has been around 4% since the mid-1990s, while in sociology it has been above 6% since the 1960s and risen to over 12% in the last decade. Finally, using survey data collected from the Social Science Prediction Platform, we …nd economists tend to overestimate the amount of race-related research in all disciplines, but especially so in economics JEL Classification: A11 ; Z13 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1358&r= |
| By: | Crafts, Nicholas (University of Sussex and CAGE, University of Warwick) |
| Abstract: | In 1930 Keynes opined that by 2030 people would work only 15 hours per week. As such, this prediction will not be realised. However, expected lifetime hours of leisure and non-market work in the UK rose by 60 per cent between 1931 and 2011, considerably more than Keynes would have expected. This reflects increases in life expectancy at older ages and much longer expected periods of retirement. Leisure in retirement contributes to high life satisfaction for the elderly but building up savings to pay for it is a barrier to working only 15 hours per week. |
| Keywords: | Leisure ; Life Expectancy ; Retirement ; Work JEL Classification: J22 ; J26 ; N34 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1360&r= |
| By: | Ofori, Isaac K.; Asonngu, Simplice A. |
| Abstract: | Motivated by the projected rebound of foreign direct investment (FDI) inflow to sub-Saharan Africa (SSA) following the implementation of the AfCFTA and the finalization of the Africa Investment Protocol, we examine how FDI modulates the effects of various governance dynamics on inclusive growth in SSA. We do this by testing two hypotheses– first, whether unconditionally FDI and various governance indicators (rule of law, control of corruption, regulatory quality, governance effectiveness, political stability, and voice and accountability) foster inclusive growth in SSA; and second, whether these governance dynamics engender positive synergy with FDI on inclusive growth in SSA. Using data from the World Bank’s World Governance Indicators and the World Development Indicators for the period 1990–2020, we employ several fixed effects, random effects, and the system GMM estimators for the analysis. First, we find that FDI and all our governance dynamics are significant inclusive growth enhancers in SSA. Second, though FDI amplifies the effects of all our governance dynamics on inclusive growth in SSA, governance effectiveness, voice and accountability, and political stability are keys. Policy recommendations are provided. |
| Keywords: | AfCFTA; Economic Integration; FDI; Governance; Inclusive Growth; Africa |
| JEL: | F15 F6 O43 O55 R58 |
| Date: | 2021–06–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:108178&r= |
| By: | Petr Polak; Nikol Polakova; Anna Tlusta |
| Abstract: | We use more than 1,600 estimates from 71 studies to investigate the relation between international trade flows and tariffs. Our results suggest that the empirical literature suffers from the presence of publication bias, which has exaggerated the effect (the true elasticity is closer to zero). After accounting for publication bias, we estimate the trade elasticity with respect to tariffs to be between -0.9 and -2.0. The results of Bayesian model averaging, which takes into account model uncertainty, show that the differences among estimates are systematically driven by the type of data (panel and level of aggregation), the data source (WITS vs. other databases), control variables (distance and trade agreements dummy), and estimation techniques (use of country-level fixed effects). The effect is also diminishing over time. |
| Keywords: | BMA, international trade, meta-analysis, publication bias, tariffs, trade costs |
| JEL: | F12 F13 F14 O24 O30 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:wpaper:2020/15&r= |
| By: | Daniel Nathan (Bank of Israel) |
| Abstract: | This paper decomposes the Israeli term structure of interest rates into two parts: the expected path of real interest rates and the risk premia for 01/1985â12/2019. We carry out the estimation using a discrete-time essentially affine term structure model (ATSM). ATSM models are essentially reduced-form models: they assume that latent factors drive the economy, and are extensively used by major central banks to infer risk premia in the term structure. The results show that part of the decline in real yields since 1985 was accompanied by a substantial decrease in the real risk premium; the compensation investors require to hold government indexed-bonds has gone down substantially. The compensation has been as high as 3% for the 10-year real yield and has gone down to around zero in recent years. The inflation risk premium (an inflation compensation which is part of the nominal yield curve), has also shown a significant drop in recent years. The inflation risk premium has become slightly negative in recent years after being as high as 2.5% in early 2000 for the 10-year nominal yield. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:boi:wpaper:2021.04&r= |
| By: | Niklas Engbom |
| Abstract: | Recent micro evidence of how workers search for jobs is shown to have critical implications for the macroeconomic propagation of labor market shocks. Unemployed workers send over 10 times as many job applications in a month as their employed peers, but are less than half as likely per application to make a move. I interpret these patterns as the unemployed applying for more jobs that they are less likely to be a good fit for. During periods of high unemployment, it consequently becomes harder for firms to assert who is a good fit for the job. By raising the cost of recruiting, a short-lived adverse shock has a persistent negative impact on the job finding rate. I provide evidence that firms spend more time on recruiting when unemployment is high, quantitatively consistent with the theory. |
| JEL: | E24 E32 J63 J64 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28829&r= |
| By: | Nina Boyarchenko; Lars C. Larsen; Paul Whelan |
| Abstract: | Since the advent of electronic trading in the late 1990s, S&P 500 futures have traded close to 24 hours a day. In this post, which draws on our recent Staff Report, we document that holding U.S. equity futures overnight has earned a large positive return during the opening hours of European markets. The largest positive returns in the 1998–2019 sample have accrued between 2 a.m. and 3 a.m. U.S. Eastern time—the opening of European stock markets—and averaged 3.6 percent on an annualized basis, a phenomenon we call the overnight drift. |
| Keywords: | overnight drift; inventory risk management; daylight savings time (DST) |
| JEL: | G1 |
| Date: | 2021–05–26 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:92064&r= |
| By: | Armando N. Meier |
| Abstract: | Previous work has shown that preferences are not always stable across time, but surprisingly little is known about the reasons for this instability. I examine whether variation in people’s emotions over time predicts changes in risk attitudes. Using a large panel data set, I identify happiness, anger, and fear as significant correlates of within-person changes in risk attitudes. Robustness checks indicate a limited role of alternative explanations. An event study around the death of a parent or child further confirms a large relationship between emotions and risk attitudes. |
| Keywords: | Emotions, happiness, risk attitudes, risk preferences, preference stability, SOEP |
| JEL: | D01 D90 D91 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp1118&r= |
| By: | Gagliardi, Nicola; Grinza, Elena; Rycx, François |
| Abstract: | In this paper, we explore the impact of workers’ tenure on firm productivity, using rich longitudinal matched employer-employee data on private Belgian firms. We estimate a production function augmented with a firm-level measure of tenure. We deal with endogeneity, which arises from unobserved firm heterogeneity and reverse causality, by applying a modified version of Ackerberg et al.’s (2015) control function method, which explicitly removes firm fixed effects. Consistently with recent theoretical predictions, we find that tenure exhibits an inverted-U-shaped relationship with respect to productivity. The existence of decreasing marginal returns to tenure is corroborated in our analysis on the tenure composition of the workforce. We also find that the impact of tenure differs widely across workforce and firm dimensions. Tenure is particularly beneficial for productivity in contexts characterized by a certain degree of routineness and lower job complexity. Along the same lines, our findings indicate that tenure exerts stronger (positive) impacts in industrial and high capital-intensive firms, as well as in firms less reliant on knowledge- and ICT-intensive processes. |
| Keywords: | Tenure,Firm productivity,Semiparametric methods to estimate production functions,Longitudinal matched employer-employee data |
| JEL: | D24 M59 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:852&r= |
| By: | José Pedro Pontes |
| Abstract: | We describe formally the relationship between population density and per capita income along the two growth regimes put forward by KUZNETS (1960), BOSERUP (1965) and TAMURA (2002). We consider a spatial economy where an undifferentiated consumer good is produced by a continuum of competitive agents. Each agent requires one unit of a capital good to produce the final good and the two goods are assumed to be perfect substitutes in production. Under the first growth regime (called “classical” or “Malthusian”), each agent self-produces the capital good by shifting resources that would otherwise produce one unit of the final good. This economy shows marginal decreasing returns of labour. Population growth brings about congestion and the elasticity of output per worker (and income per capita) is negative. A structural change takes place following a sufficient increase in population density and decrease in transport costs. Then, the supply of capital goods is outsourced to a specialized industry, operating in spatial monopolistic competition in line with SALOP (1979). Under this “modern” growth regime, the specialization of the capital goods production is a source of increasing returns in the aggregate economy. The elasticity of per capita income with respect to population density becomes positive just after the structural transition, but this effect may not persist in the long run. If the outsourcing of capital goods is matched by a rising importance in final production of activities which are not land-based, then aggregate increasing returns can be sustained in the long run. Otherwise, the positive sign of elasticity will be transitory and a further increase in population density will revert the economy to a situation where the use of increasing amounts of labour with non-reproducible resources determines mainly a congestion effect. |
| Keywords: | Economic Development, Population Density, Industrialization, Spatial Competition, Technological Change, Economies of Agglomeration. |
| JEL: | O12 O33 R11 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp01782021&r= |
| By: | Cynthia Armas (Universitat de Barcelona); Fernando Sánchez-Losada (Universitat de Barcelona) |
| Abstract: | An increase in the supply of skilled labor has been common across the world. However, despite the rise in skilled labor force, not all countries have achieved high income levels, even when their structural transformation follows the same path (from agriculture to industry and, then, from industry to services). Skilled workers might end up in either high or low TFP sectors, according to two opposite theories of structural change (skill-biased structural transformation and stagnant structural transformation). We show that directed technical change is needed to achieve skill-biased structural transformation and, therefore, skilled workers are allocated to high TFP sectors. We present macrodata and microdata evidence to identify the existence of directed technical change. We reveal that in the U.S., South Korea and France, skilled workers have ended up in high TFP sectors due to the existence of directed technical change in the process of structural transformation, but not in Canada. There is a lack of clear evidence for Italy and Spain. |
| Keywords: | Structural change, directed technical change, unskilled and skilled sectors. |
| JEL: | J24 O14 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ewp:wpaper:412web&r= |
| By: | Brandt, Lennart; Saint Guilhem, Arthur; Schröder, Maximilian; Van Robays, Ine |
| Abstract: | Financial asset prices contain a rich set of real-time information on the economy. To extract this information, it is crucial to understand the driving factors behind financial market developments. In this paper, we exploit daily cross-asset price movements in a sign-restricted BVAR model to analyse the extent to which euro area and US yields, equity prices, and the euro-US dollar exchange rate are jointly driven by monetary policy, macro and global risk factors. A novelty is that we allow for cross-Atlantic spillovers while also accounting for the unique role of the US in the global financial system. Our results underline the importance of US spillovers and shifts in global risk sentiment for understanding the dynamics of euro area financial variables. Euro area shocks transmit much less to US financial markets in comparison, with global risk shocks being more important instead. Using the daily shocks as instruments in a Proxy-SVAR, we demonstrate that the transmission of financial market movements to the macroeconomy depends on the underlying driver, thereby illustrating why it matters to look into the driving factors in the first place. JEL Classification: C32, C54, E44, E52 |
| Keywords: | financial conditions, high-frequency identification, international transmission, large-scale asset purchases, monetary policy |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20212560&r= |
| By: | Emanuel Kohlscheen; Marco Jacopo Lombardi; Egon Zakrajšek |
| Abstract: | Using an international panel data set, we analyze the implications of rising income inequality for aggregate consumption. We document that greater concentration of (after-tax) income in the top decile is associated with a significantly larger and more persistent contraction in consumption in the aftermath of economic downturns. These findings are consistent with lower propensities to consume among wealthier households and imply that disparities in income flows at turning points of the business cycle can significantly influence macroeconomic outcomes. |
| Keywords: | consumption, income inequality, recessions, financial crises, cross-country evidence |
| JEL: | D31 E20 E32 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:943&r= |
| By: | Chavleishvili, Sulkhan; Engle, Robert F.; Fahr, Stephan; Kremer, Manfred; Manganelli, Simone; Schwaab, Bernd |
| Abstract: | Macro-prudential authorities need to assess medium-term downside risks to the real economy, caused by severe financial shocks. Before activating policy measures, they also need to consider their short-term negative impact. This gives rise to a risk management problem, an inter-temporal trade-off between expected growth and downside risk. Predictive distributions are estimated with structural quantile vector autoregressive models that relate economic growth to measures of financial stress and the financial cycle. An empirical study with euro area and U.S. data shows how to construct indicators of macro-prudential policy stance and to assess when interventions may be beneficial. JEL Classification: G21, C33 |
| Keywords: | financial conditions, growth-at-risk, macro-prudential policy, quantile vector autoregression, stress testing |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20212565&r= |
| By: | Daruich, Diego; Fernández, Raquel |
| Abstract: | The idea of universal basic income (UBI)---a set income that is given to all without any conditions---is making an important comeback but there is no real evidence regarding its long-term consequences. This paper provides a very inexpensive evaluation of such a policy by studying its dynamic consequences in a general equilibrium model with imperfect capital markets and labor market shocks, in which households make decisions about education, savings, labor supply, and with intergenerational linkages via skill formation. The steady state of the model is estimated to match US household data. We find that a UBI policy that gives all households a yearly income equivalent to the poverty line level has very different welfare implications for those alive when the policy is introduced relative to future generations. While a majority of adults (primarily older non-college workers) would vote in favor of introducing UBI, all future generations (operating behind the veil of ignorance) would prefer to live in an economy without UBI. The expense of the latter leads to lower skill formation and education, requiring even higher tax rates over time. Modeling automation as an increased probability of being hit by an ``out-of-work'' shock, the model is also used to provide insights on how the benefits of UBI change as the environment becomes riskier. The results suggest that UBI may be a useful transitional policy to help current individuals whose skills are more likely to become obsolete and are unprepared for the increased risk, while, simultaneously, education policies may be implemented to increase the likelihood that future cohorts remain productive and employed. |
| Keywords: | Human Capital; Labor Supply; taxation; universal basic income |
| JEL: | H24 H31 I38 J24 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14869&r= |
| By: | Janeway, W.; Nanda, R.; Rhodes-Kropf, M. |
| Abstract: | We review the growing literature on the relationship between venture capital booms and startup financing, focusing on three broad areas: First, we discuss the drivers of large inflows into the venture capital asset class, particularly in recent years -- which are related to but also distinct from macroeconomic business cycles and stock market fluctuations. Second, we review the emerging literature on the real effects of venture capital financing booms. A particular focus of this work is to highlight the potential impact that booms (and busts) can have on the types of firms that VCs choose to fund and terms at which they are funded, independent of investment opportunities -- thereby shaping the trajectory of innovation being conducted by startups. Third, an important insight from recent research is that booms in venture capital financing are not just a temporal phenomenon but can also be seen in terms of the concentration of VC investment in certain industries and geographies. We also review the role of government policy, exploring the degree to which it can explain the concentration of VC funding in the US over the past forty years in just two broad areas – information and communication technologies (ICT) and biotechnology. We conclude by highlighting promising areas of further research. |
| Keywords: | Venture capital, start-ups, innovation |
| JEL: | G24 L26 M13 O30 |
| Date: | 2021–06–03 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2147&r= |
| By: | Josef Bajzik (Charles University & Czech National Bank, Prague, Czech Republic); Dominika Ehrenbergerova (Charles University & Czech National Bank, Prague, Czech Republic); Tomas Havranek (Charles University, Prague, Czech Republic & CEPR) |
| Abstract: | Several central banks have leaned against the wind in the housing market by increasing the policy rate preemptively to prevent a bubble. Yet the empirical literature provides mixed results on the impact of short-term interest rates on house prices: the estimated semi-elasticities range from -12 to positive values. To assign a pattern to these differences, we collect 1,447 estimates from 31 individual studies that cover 45 countries and 69 years. We then relate the estimates to 39 characteristics of the financial system, business cycle, and estimation approach. Our main results are threefold. First, the mean reported estimate is exaggerated by publication bias, because insignificant results are underreported. Second, omission of important variables (liquidity and long-term rates) likewise exaggerates the effects of short-term rates on house prices. Third, the effects are stronger in countries with more developed mortgage markets and generally later in the cycle when the yield curve is flat and house prices enter an upward spiral. |
| Keywords: | Interest rates, house prices, monetary policy transmission, meta-analysis, publication bias, Bayesian model averaging |
| JEL: | C83 E52 R21 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2021_17&r= |
| By: | Fon, Roger; Filippaios, Fragkiskos; Stoian, Carmen; Lee, Soo-Hee |
| Abstract: | Foreign direct investment (FDI) inflows into Africa have increased since the turn of the millennium, mainly due to FDI growth into African countries by multinational enterprises (MNEs) from developing economies. While African governments view this growth as a positive development for the continent, many governments in the West have raised concerns regarding the institutional impact of investments from developing economies. This paper examines the impact of FDI flows on institutional quality in African countries by distinguishing investments from developed versus developing economies. Previous empirical studies have found a significant relationship between FDI flows and institutional quality in African countries but regard the relationship as MNEs rewarding African countries for adopting institutional reforms. However, little attention has been paid to the reverse causality, i.e. that FDI can cause an institutional change in African countries. Using bilateral greenfield FDI flows between 56 countries during 2003-2015, we find no significant FDI effect from developed and developing economies on institutional quality in host countries. However, aggregate FDI flows from developed and developing economies have a significant positive effect on host country institutional quality but differ concerning the impact's timing. In contrast, we find no significant effect of FDI flows from China on host country institutional quality. Our results are robust to alternative measures of institutional quality. |
| Keywords: | foreign direct investment; co-evolution; institutions; multinational enterprises; Internal OA fund |
| JEL: | F3 G3 R14 J01 |
| Date: | 2021–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:108968&r= |
| By: | Michel Lubrano (https://www.amse-aixmarseille.fr/en); Zhou Xun (School of Economics and Management, Nanjing University of Finance and Economics, China) |
| Abstract: | This survey paper reviews the recent Bayesian literature on poverty measurement. After introducing Bayesian statistics, we show how Bayesian model criticism could help to revise the international poverty line. Using mixtures of lognormals to model income, we derive the posterior distribution for the FGT, Watts and Sen poverty indices, then for TIP curves (with an illustration on child poverty in Germany) and finally for Growth Incidence Curves. The relation of restricted stochastic dominance with TIP and GIC dominance is detailed with an example on UK data. Using panel data, we show how to decompose poverty into total, chronic and transient poverty, comparing child and adult poverty in East Germany when redistribution is introduced. When a panel is not available, a Gibbs sampler is used to build a pseudo panel. We illustrate poverty dynamics by examining the consequences of the Wall on poverty entry and poverty persistence in occupied West Bank. |
| Keywords: | Bayesian inference, mixture model, poverty indices, stochastic dominance, poverty dynamics |
| JEL: | C11 C46 I32 I38 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:2133&r= |
| By: | Antonin Pottier (EHESS - CIRED); Emmanuel Combet (ADEME); Jean-Michel Cayla (EDF); Simona de Lauretis (EDF – CIRED); Franck Nadaud (CNRS - CIRED) |
| 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: | Greenhouse Gas Emissions, Carbon Footprint, Emissions Inequality, Household Expenditure Distribution, Responsibility |
| JEL: | D12 D30 Q56 R20 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2021.14&r= |