|
on Central and Western Asia |
| By: | Don Fullerton; Shan He |
| Abstract: | Circular Economy literature recommends longer lasting products, in order to reduce pollution from extraction, production, and disposal. Our economic analysis finds conditions where consumers choose lives that are too short – a “durability gap”. Then policies targeting durability raise welfare. While externalities are corrected by Pigovian taxes that ignore durability, raising the output tax nonetheless induces consumers to pay more for goods that last longer. Second, if the tax is suboptimal, a durability mandate raises welfare. Third, internalities have ambiguous effects. Fourth, a social discount rate less than private discount rate is the strongest case for policy to favor durability. |
| JEL: | H21 H23 Q58 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29073&r= |
| By: | Hilscher, Jens; Raviv, Alon; Reis, Ricardo |
| Abstract: | This paper proposes a new method for measuring the impact of inflation on the real value of public debt. The distribution of debt debasement is based on two inputs: the distribution of privately held nominal debt by maturity, for which we provide new estimates, and the distribution of risk-adjusted inflation dynamics, for which we provide a novel copula estimator using options data. We find that inflation by itself is unlikely to lower the U.S. fiscal burden significantly because debt is concentrated at short maturities and perceived inflation shocks have little short-run persistence and are small. |
| Keywords: | inflation; debt debasement; value at risk; inflation derivatives; debt maturity structure; financial repression; GG009759; GA682288; OUP deal |
| JEL: | F3 G3 E6 |
| Date: | 2021–02–09 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:107543&r= |
| By: | Belitski, Maksim (University of Reading); Guenther, Christina (WHU Vallendar); Kritikos, Alexander S. (DIW Berlin); Thurik, Roy (Erasmus University Rotterdam) |
| Abstract: | The existential threat to small businesses, based on their crucial role in the economy, is behind the plethora of scholarly studies in 2020, the first year of the COVID-19 pandemic. Examining the 14 contributions of the special issue on the "Economic Effects of the COVID-19 Pandemic on Entrepreneurship and Small Businesses," the paper comprises four parts: a systematic review of the literature on the effect on entrepreneurship and small businesses; a discussion of four literature strands based on this review; an overview of the contributions in this special issue; and some ideas for post-pandemic economic research. |
| Keywords: | small businesses, entrepreneurs, COVID-19, economic effects |
| JEL: | L26 J38 I18 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14630&r= |
| By: | Barbara Annicchiarico; Stefano Carattini; Carolyn Fischer; Garth Heutel |
| Abstract: | We study the relationship between business cycles and the design and effects of environmental policies, particularly those with economy-wide significance like climate policies. First, we provide a brief review of the literature related to this topic, from initial explorations using real business cycle models to New Keynesian extensions, open-economy variations, and issues of monetary policy and financial regulations. Next, we provide a list of the main findings that emerge from this literature that are potentially most relevant to policymakers, including the impacts of policy on volatility and how to design policy to adjust to cycles. Finally, we propose several important remaining research questions. |
| JEL: | E32 Q58 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29032&r= |
| By: | Ghislain H. Demeze-Jouatsa; Roland Pongou; Jean-Baptiste Tondji |
| Abstract: | Frequent violations of fair principles in real-life settings raise the fundamental question of whether such principles can guarantee the existence of a self-enforcing equilibrium in a free economy. We show that elementary principles of distributive justice guarantee that a pure-strategy Nash equilibrium exists in a finite economy where agents freely (and non-cooperatively) choose their inputs and derive utility from their pay. Chief among these principles is that: 1) your pay should not depend on your name, and 2) a more productive agent should not earn less. When these principles are violated, an equilibrium may not exist. Moreover, we uncover an intuitive condition -- technological monotonicity -- that guarantees equilibrium uniqueness and efficiency. We generalize our findings to economies with social justice and inclusion, implemented in the form of progressive taxation and redistribution, and guaranteeing a basic income to unproductive agents. Our analysis uncovers a new class of strategic form games by incorporating normative principles into non-cooperative game theory. Our results rely on no particular assumptions, and our setup is entirely non-parametric. Illustrations of the theory include applications to exchange economies, surplus distribution in a firm, contagion and self-enforcing lockdown in a networked economy, and bias in the academic peer-review system. Keywords: Market justice; Social justice; Inclusion; Ethics; Discrimination; Self-enforcing contracts; Fairness in non-cooperative games; Pure strategy Nash equilibrium; Efficiency. JEL Codes: C72, D30, D63, J71, J38 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2107.12870&r= |
| By: | Marianne Bertrand; Chang-Tai Hsieh; Nick Tsivanidis |
| Abstract: | India's Industrial Disputes Act (IDA) of 1947 requires firm with more than 100 workers to pay large costs if they shrink their employment. Since the early 2000s, large Indian manufacturing firms have increasingly relied on contract workers who are not subject to the IDA. By 2015, contract workers accounted for 38% of total employment at firms with more than 100 workers compared to 20% in 2000. Over the same time period, the thickness of the right tail of the firm size distribution in formal Indian manufacturing plants increased, the average product of labor for large firms declined, the job creation rate for large firms increased, and the probability that large firms introduce new products rose. We provide evidence that these outcomes were caused by an increased reliance on contract labor among large establishments. A model of firm growth subject to firing costs suggests the rise of contract labor increased TFP in Indian manufacturing by 7.6%, occurring all through a one-time reduction in misallocation between large and small firms with negligible change in the long-run growth rate. |
| JEL: | J23 J4 J5 O0 O4 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29151&r= |
| By: | Scott R. Baker; Lorenz Kueng |
| Abstract: | The growth of the availability and use of detailed household financial transaction microdata has dramatically expanded the ability of researchers to understand both household decision-making as well as aggregate fluctuations across a wide range of fields. This class of transaction data is derived from a myriad of sources including financial institutions, FinTech apps, and payment intermediaries. We review how these detailed data have been utilized in finance and economics research and the benefits they enable beyond more traditional measures of income, spending, and wealth. We discuss the future potential for this flexible class of data in firm-focused research, real-time policy analysis, and macro statistics. |
| JEL: | C81 D14 G5 H31 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29027&r= |
| By: | Maksim Belitski; Christina Guenther; Alexander S. Kritikos; Roy Thurik |
| Abstract: | The existential threat to small businesses, based on their crucial role in the economy, is behind the plethora of scholarly studies in 2020, the first year of the COVID-19 pandemic. Examining the 14 contributions of the special issue on the “Economic Effects of the COVID-19 Pandemic on Entrepreneurship and Small Businesses,” the paper comprises four parts: a systematic review of the literature on the effect on entrepreneurship and small businesses; a discussion of four literature strands based on this review; an overview of the contributions in this special issue; and some ideas for post-pandemic economic research. |
| Keywords: | Small businesses, entrepreneurs, COVID-19 pandemic, economic effects |
| JEL: | L26 J38 I18 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1961&r= |
| By: | Dobbie, Will; Liberman, Andres; Paravisini, Daniel; Pathania, Vikram S. |
| Abstract: | This paper tests for bias in consumer lending using administrative data from a high-cost lender in the United Kingdom. We motivate our analysis using a new principal-agent model of bias where loan examiners maximize a short-term outcome, not long-term profits, leading to bias against illiquid applicants at the margin of loan decisions. We identify the profitability of marginal applicants using the quasi-random assignment of loan examiners. Consistent with our model, we find significant bias against immigrant and older applicants when using the firm’s preferred measure of long-run profits, but not when using the short-run measure used to evaluate examiner performance. |
| Keywords: | discrimination; consumer credit |
| JEL: | J15 J16 |
| Date: | 2021–08–05 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:104984&r= |
| By: | Melise Jaud; Madina Kukenova; Martin Strieborny |
| Abstract: | This paper examines the transmission process from finance to the real economy in the context of product-level export survival. We find that conditional on the specific financial needs of exported products, banks and stock markets play distinctive roles in helping exporters survive in foreign markets. Stock markets rather than banks help exporters who lack easily collateralizable tangible assets. Active rather than large stock markets facilitate exports of products requiring high levels of working capital. And the trade credit can act as a substitute only for bank financing and only in the presence of well-established export links. |
| Keywords: | finance and export survival, transmission from finance to real economy, banks versus stock markets |
| JEL: | F14 G10 G21 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:gla:glaewp:2021_14&r= |
| By: | Andrés Fernández; Daniel Guzman; Ruy E. Lama; Carlos A. Vegh |
| Abstract: | To explain the fact that government spending and tax policy are procyclical in emerging and developing countries, we develop a model for the joint behavior of optimal tax rates and government spending over the business cycle. Our set-up relies on financial frictions, which have been shown to be critical features of emerging markets, captured by various degrees of asset market incompleteness as well as varying levels of debt-elastic interest rate spreads. We first uncover a novel theoretical result within a simple static framework: incomplete markets can account for procyclical government spending but not necessarily procyclical tax policy. Explaining procyclical tax policy also requires that the ratio of private to public consumption comoves positively with the business cycle, which leads to larger fluctuations in the tax base. We then show that the procyclicality of tax policy holds in a more realistic DSGE model calibrated to emerging markets. Finally, we illustrate how larger financial frictions, which amplify the business cycle through more procyclical fiscal policies, have sizeable Lucas-type welfare costs. |
| JEL: | F41 F44 H21 H30 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29149&r= |
| By: | Charles I. Jones |
| Abstract: | The nonrivalry of ideas gives rise to increasing returns, a fact celebrated in Paul Romer's recent Nobel Prize. An implication is that the long-run rate of economic growth is the product of the degree of increasing returns and the growth rate of research effort; this is the essence of semi-endogenous growth theory. This paper interprets past and future growth from a semi-endogenous perspective. For 50+ years, U.S. growth has substantially exceeded its long-run rate because of rising educational attainment, declining misallocation, and rising (global) research intensity, implying that frontier growth could slow markedly in the future. Other forces push in the opposite direction. First is the prospect of "finding new Einsteins": how many talented researchers have we missed historically because of the underdevelopment of China and India and because of barriers that discouraged women inventors? Second is the longer-term prospect that artificial intelligence could augment or even replace people as researchers. Throughout, the paper highlights many opportunities for further research. |
| JEL: | E0 O4 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29126&r= |
| By: | Christina E. Hoicka (University of Victoria, Canada); Jessica Conroy (York University, Canada); Anna Berka (Massey University, New Zealand) |
| Abstract: | Cities as large centres of energy demand and population are important spatially and materially in a renewable energy transition. This study draws on available literature on material dimensions, energy decentralization, and regional approaches to provide a conceptual framework to analyse emerging city renewable energy transition plans for their material- and place-based actor scalar strategies. This framework outlines how the increase in renewable energy provided to cities results in new locations of productivity, interscalar relationships between new and centralized actors, and socio-economic outcomes. We use this to analyse 47 ambitious renewable energy transition plans in densely populated cities. Empirically, this study confirms that, for the most part, regions are important emerging actors in the decentralization of energy systems in a renewable energy transition; that city renewable energy transitions involve the forging of new economic relationships between cities and neighbouring communities and regions, and, as the community energy literature emphasises, that the involvement of a wide range of civic and local actors is important in shaping renewable energy transitions for cities. Further research can investigate how the institutional context is shaping these distinct actor material strategies and emerging interscalar relationships across regions. The socio-economic outcomes, particularly as they relate to new economic relationships between cities and the surrounding region and the re-spatialization of productivity and benefits, should also be examined. |
| Keywords: | Renewable energy transition, cities, decentralization, regional approaches, carbon neutral |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:aoe:wpaper:2106&r= |
| By: | Larojan, Chandrasegaran |
| Abstract: | This study investigates the impact of accounting ratios on stock market price of top twenty companies based on the highest market capitalization listed in the Colombo Stock Exchange (CSE). The objectives of this study were to examine the impact of Earnings per Share (EPS) on stock market price; to examine the impact of Dividend per Share (DPS) on stock market price, to examine the impact of Price Earnings ratio (PE) on stock market price and to examine the impact of Market to Book ratio (MB) on stock market price. The panel data was collected from the top twenty companies for the period of five years from 2015 to 2019. EPS, DPS, PE and MB ratios were used as the proxies for the independent variables and stock price was used as the proxy for the dependent variable for this study. In order to perform the inferential analysis Pearson correlation analysis, panel regression with fixed effect, random effect and pooled linear regression were used. Hausman test was adopted in order to choose either random effect regression or fixed effect regression. According to pooled regression analysis, EPS, DPS and PE ratios had positive significant impact on stock market price. MB ratio had a negative significant impact on stock market price. According to fixed effect regression analysis, EPS, PE and MB ratios had positive insignificant impact on stock market price whereas DPS had a positive significant impact on stock market price. This study offers an insight to the potential investors to make the rational investment decisions in the stock market. |
| Date: | 2021–07–11 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:xwk7r&r= |
| By: | Ahmed, Osama; Glauben, Thomas; Heigermoser, Maximilian; Prehn, Sören |
| Abstract: | Income growth, changing consumer preferences and technological progress are having a transformative effect on global food trade and, in particular, wheat markets. This is evidenced by two main developments: First, the growing demand for wheat in Asia and Africa is increasingly being met by the European Union (EU) and the Black Sea Region (BSR), which have replaced the United States (US) as the major players on the global wheat market. Second, and as a consequence, the Euronext futures market, which reflects the supply and demand fundamentals in the EU and the BSR, is becoming more important for international wheat price discovery. In light of these two changes, the EU and the BSR must take more responsibility for ensuring global food security and combating hunger and malnutrition. To achieve this, greater international cooperation is required, in particular between the big Western and Eastern economic powers. Unrestricted international trade is vital to ensure sufficient supply of food worldwide, while escalating economic sanctions and countersanctions endanger food security, especially in importdependent regions. Public debate on trade and economic sanctions must therefore be more objective and better take into account both regional and global needs. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iamopb:41e&r= |
| By: | Moh’d, Shamis Said; Ozgur, Ceyhun; Mohd, Mohd Yaziz; Khalfan, Mohamed Hafidh |
| Abstract: | This study aims at quantifying fundamental components such as the country economy, stock market development, economic sectors, and company’s performance computed by Data Envelopment Analysis (DEA) built-in MATLAB program and combined using a top-down approach. It was conducted in the East African region specifically Kenya, Tanzania, Uganda, and Rwanda from 2015 to 2018. A secondary data extracted from the listed company’s websites, capital market authorities of each country, and World Bank. The study found that the combined performance of various components has a great impact on screening the stocks to be used for portfolio construction. It gives a signal to the authorities of capital markets, investors, policymakers, and other regulatory bodies to take immediate measures on designing policies and best practices. Further recommendation to the capital market authorities within the region is to ensure the growth of managerial and operational performance of stock exchanges. Also, regulatory bodies, policymakers, and higher-level administration of each country within the region to take responsibility to uplift the country's economy as well as economic sectors growth. The board of directors and management of listed companies should formulate strategies to improve both managerial and operational performance. |
| Date: | 2021–07–11 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:mqh46&r= |
| By: | Dünhaupt, Petra; Herr, Hansjörg |
| Abstract: | In the last decades in particular, national governments as well as development agencies and international organizations have increasingly turned to participation in global value chains (GVCs) as a development strategy. However, whether the positive development effects of integration are large enough to warrant trade liberalization cannot be answered in a straightforward manner. In this article, we show how development recommendations by international institutions and Western governments have changed since World War II and now ultimately recommend integration into GVCs. Deregulation and liberalization of international trade and capital flows have fueled two opposing trends, which also affect GVCs: on the one hand, there is increasing concentration at the corporate level. On the other hand, globalization has resulted in more countries participating in international trade including via industrial production. Both developments have led to multinationals being able to expand their rent-seeking opportunities while also reducing production costs, especially for simple manufactured goods. Today, it is no longer sufficient for a country to industrialize in order to catch up with the rest of the world, as the prices for industrial goods and quality of productions have fallen tremendously in some cases, at least in comparison to developed countries. Integration into GVCs seems to provide only minimal macroeconomic benefits beyond the positive effects for individual companies and sectors. Industrial policy therefore seems indispensable for catch-up development. |
| Keywords: | Global Value Chains,economic development,industrial policy,export market share concentration,import price development |
| JEL: | B27 F13 F63 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ipewps:1652021&r= |
| By: | Jason Allen; Milena Wittwer |
| Abstract: | In traditional over-the-counter (OTC) markets, investors trade bilaterally through intermediaries referred to as dealers. An important regulatory question is whether to centralize OTC markets by shifting trades onto centralized platforms. We address this question in the context of the liquid Canadian government bond market. We document that dealers charge markups even in this market and show that there is a price gap between large investors who have access to a centralized platform and small investors who do not. We specify a model to quantify how much of this price gap is due to platform access and assess welfare effects. The model predicts that not all investors would use the platform even if platform access were universal. Nevertheless, the price gap would close by 32%–47%. Welfare would increase by 9%–30% because more trades are conducted by dealers who have high values to trade. |
| Keywords: | Financial institutions; Market structure and pricing |
| JEL: | D40 D47 G10 G20 L10 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:21-39&r= |
| By: | Patrick Reichert; Marek Hudon; Ariane Szafarz; Robert K. Christensen |
| Abstract: | In today’s multisector configurations, there is little clarity about whether and how public and private subsidies influence social enterprises’ pursuit of financial stability. We address the strategic role of donors in the social-business life cycle whereby social enterprise start-ups rely on subsidies, while mature social enterprises strive for independence from donors. To address the “missing middle,” we develop a typology of subsidy instruments and an intermediary signaling model to clarify how subsidies shape the evolution of outcomes for social enterprises. We argue that source variation matters for certain instruments like corporate intangibles and governmentally subsidized credit guarantees, which trigger crowding-in effects and attract commercial partners, while preventing perverse crowding-out effects, such as soft budget constraints. To illustrate this commercialization story, we draw upon a microfinance case study, demonstrating how public and private donors can induce crowding-in and crowding-out effects. In short, our subsidy typology helps unpack the signals that public and private subsidies send to commercial funders of social enterprises and how they shape the path to future financial independence. |
| Keywords: | Subsidy; Crowding-in; Crowding-out; Signaling theory; Resource acquisition; Social finance |
| JEL: | H83 G23 H81 M16 M14 G21 |
| Date: | 2021–08–10 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:2013/329773&r= |
| By: | Alvaro Guinea; Alet Roux |
| Abstract: | A model is proposed that models Bitcoin prices by taking into account market attention. Assuming that market attention follows a mean-reverting Cox-Ingersoll-Ross process and allowing it to influence Bitcoin returns (after some delay) leads to a tractable affine model with semi-closed formulae for European put and call prices. A maximum likelihood estimation procedure is proposed for this model. The accuracy of its call and put prices outperforms a number of standard models when tested on real data. |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2107.12447&r= |
| By: | Klakow Akepanidtaworn; Rick Di Mascio; Alex Imas; Lawrence Schmidt |
| Abstract: | Are market experts prone to heuristics, and if so, do they transfer across closely related domains—buying and selling? We investigate this question using a unique dataset of institutional investors with portfolios averaging $573 million. A striking finding emerges: while there is clear evidence of skill in buying, selling decisions underperform substantially—even relative to random selling strategies. This holds despite the similarity between the two decisions in frequency, substance and consequences for performance. Evidence suggests that an asymmetric allocation of cognitive resources such as attention can explain the discrepancy: we document a systematic, costly heuristic process when selling but not when buying. |
| JEL: | D91 G02 G12 G4 G41 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29076&r= |
| By: | Martin Kittel; Wolf-Peter Schill |
| Abstract: | To decarbonize the economy, many governments have set targets for the use of renewable energy sources. These are often formulated as relative shares of electricity demand or supply. Implementing respective constraints in energy models is a surprisingly delicate issue. They may cause a modeling artifact of excessive electricity storage use. We introduce this phenomenon as 'unintended storage cycling', which can be detected in case of simultaneous storage charging and discharging. In this paper, we provide an analytical representation of different approaches for implementing minimum renewable share constraints in models, and show how these may lead to unintended storage cycling. Using a parsimonious optimization model, we quantify related distortions of optimal dispatch and investment decisions as well as market prices, and identify important drivers of the phenomenon. Finally, we provide recommendations on how to avoid the distorting effects of unintended storage cycling in energy modeling. |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2107.13380&r= |
| By: | Marcelo A. T. Aragão |
| Abstract: | To mistarget and to mistime the issuance of a Central Bank Digital Currency (CBDC) can be detrimental to welfare. This holds even for tentative experiments under controlled conditions since this may prompt unintended expectations by economic agents. To counteract the uncertainty that is inherent in any innovation, academics and central bank researchers have been active in developing models of a prospective economy, or at least of prospective markets, where a fiat currency in digital form coexists. Irrespective of whether such a proposal entails a positive or negative stance, we contend that it is possible to infer from this body of work: opportunities, risks, and policy guidelines they imply (or fail to address). This paper, therefore, is a survey of this model development activity that, we aim to show, results in a better understanding of the economic implications of a CBDC. For this purpose, we have selected and reviewed twenty-nine proposals. I have classified them with respect to motivations, preoccupations, and foundations, observing what they conclude regarding the potential for coexistence with private alternatives and for harm to policy mandates. I have identified knowns, i.e., what models imply, and unknowns, i.e., what models omit or oversimplify. I have found that our analysis can give focus to further research that can steer the ongoing legal and technical design efforts. |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:bcb:wpaper:554&r= |
| By: | Biagio Bossone |
| Abstract: | This article speaks to post-Keynesian economists and their fundamental vision of monetary production economies. It focuses on the role of commercial banks as creators of money in monetary production economies and studies the rent-extraction power of banks in the form of "seigniorage." The article examines how the relative size of banks in the payment system combines with their capacity to determine quantities and prices in the market for demand deposits and gives them the power to extract seigniorage from the economy; it clarifies the distinction between seigniorage originating from commercial bank money creation and profits derived from pure financial intermediation; and analyzes how seigniorage affects the economy’s price level and resource distribution. The article draws political-economy and economic-policy implications. |
| Keywords: | Commercial banks; Interest rate; Money creation; Prices; Resource distribution; Seigniorage |
| JEL: | E19 E20 E31 E40 E52 E58 E62 G21 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2111&r= |
| By: | Kumar Sur, Pramod |
| Abstract: | Can a domestic policy implemented by the government in the past help explain the puzzling practice of health care usage today? I study this question in the context of India, where households' use of primary health care services presents a paradox. A significant fraction of Indian households uses fee-charging private health care services even though most providers have no formal medical qualifications. The private share of health care use is even higher in markets where qualified doctors offer free care through public clinics. Combining contemporary household-level data with archival records, I examine the aggressive family planning program implemented during the emergency rule in the 1970s and explore whether the coercion, disinformation, and carelessness involved in implementing the program could partly explain the puzzle. Exploiting the timing of the emergency rule, state-level variation in the number of sterilizations, and an instrumental variable approach, I show that the states heavily affected by the sterilization policy have a lower level of public health care usage today. I demonstrate the mechanism for this practice by showing that the states heavily affected by forced sterilizations have a lower level of confidence in government hospitals and doctors and a higher level of confidence in private hospitals and doctors in providing good treatment. |
| Keywords: | Health care market, health care usage, confidence in institutions, sterilization, persistence, India, I11, N35, I12, J13 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:agi:wpaper:00000186&r= |
| By: | Jagjit Chadha; Hande Kucuk; Adrian Pabst |
| Abstract: | {Foreward by Jagjit Chadha) The National Institute of Economic and Social Research has focussed on furthering our understanding of fiscal policy throughout most of its life. And so I was delighted when the Nuffield Foundation gave us the opportunity to ask some hard questions about our current fiscal settlement. With the Covid-19 pandemic continuing to throw much of our normal loci completely off beam, it is a good time to consider the role of fiscal policy. Our work has been motivated by the simple observation that we need to re-examine carefully the objectives, instruments and framework guiding fiscal policy. Naturally, some aspects of our current fiscal settlement have involved worthwhile and probably enduring innovations, such as the establishment of the Office for Budget Responsibility in 2010. But it is abundantly clear that the fiscal settlement in the Long Expansion of 1992-2007 and in the period following the global financial crisis of 2007-8 need careful re-framing if we are to tackle the deep seated economic problems revealed by EU exit and the Covid-19 pandemic. Fiscal policy represents a complex, multifaceted attempt by the state to fill gaps in the market economy and encourage the private sector to locate productive practices. But to meet those objectives fiscal policies have to be both sufficiently flexible to respond to changing circumstances but also be guided by some form of principles or rules that allow progress to be judged and expectations formed about the likely path of public expenditure, taxes and debt. Too much fiscal policy operates by the smoke and mirrors of political surprise and partial leak rather than the more sober manner of timetabled meetings and clear, minuted decisions that characterise monetary policy, to name but one example. The large number of fiscal rules we have had to observe since 2010 alongside an increasing frustration with economic performance tell us that the post-2010 fiscal settlement has failed. It makes no sense to be in thrall to arbitrary rules that do not match society's broader demands for policy to be condoned by what I have called “Budgetarians†, who think it is sufficient to assess fiscal policy in terms of whether that arbitrary target will or will not be hit at some equally arbitrary date coincidental with a parliamentary term. The sad but obvious fact is that the demands of the economy cannot be folded into political horizons. In this Occasional Paper we have collected a number of views from a variety of experts. We have worked with two former central bankers to try and understand the meaning of fiscal space both from the supply side of debt issuance and the demand side of investment demand. Two former Chief Secretaries to the Treasury provide considerable details from their times in office. And a former Whitehall civil servant helps us understand the approaches to spending controls. We have commissioned an academic contribution on how to approach the current debt problem following Covid-19 but also an introspection from an academiccum-market participant on the value of debt. Original work from myself and colleagues at NIESR examines the political framework, the theory of monetary and fiscal interactions, how politicians seem to revise expenditure plans, how changes in economic prospects also matter for revision and then the case of issuing different types of debt. Finally, we are very grateful that two former Chancellors have agreed to write Forewords to this book and that the current Head of the Government Economic Service has supported our interest in developing more attention on fiscal policy. Obviously, none of them necessarily agree with any of the points made or conclusions drawn. It is our simple hope that our line of enquiry will motivate serious examination of our fiscal settlement. While what we say cannot necessarily be thought to be the Treasury View, it is certainly the view from Dean Trench Street. |
| Keywords: | Monetary policy, fiscal framework, macroprudential policy, central banks, fiscal policy |
| JEL: | E52 E58 E62 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesro:61&r= |
| By: | Tong, Antonia |
| Abstract: | Compared to a Chinese investor, the U.S. investors invest in Fin-Tech evergreen fund is not a strange financial activity. In the fast-developing of different technology nowadays, the US. Fin-Tech evergreen investors are always attempting to catch the wave of the opportunity to invest in new financial technology companies that will almost like investing in Apple, Microsoft, SpaceX, or Teslar twenty years ago. This article intends to introduce, compare, and analyst the fin-tech evergreen development in both the USA and China. Fin-Tech Evergreen financing is a concept used to describe the gradual infusion of funds into a fin-tech company. It is feasible to organize for the receipt of venture capital money in advance. Nevertheless, with FinTech's evergreen investment, investors provide cash in incremental payments throughout the company's or product's development phase. It is a perpetual fund architecture with no set end date. It frequently provides investors with the ability to exit their commitment and allows the fund manager to acquire additional cash. Investors are allowed to reinvest cash generated by realized returns, thus the term "evergreen." With a thorough explanation of the two most powerful economic powers' investment direction of the evergreen fund, the general public will learn more about the evergreen fund's future and destiny. |
| Date: | 2021–08–13 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:ybfr6&r= |
| By: | Erick Rangel González; Luis Fernando López Ornelas |
| Abstract: | Foreign Direct Investment (FDI) is often identified as a driver of economic growth, although there is no consensus on this topic in the international empirical evidence regarding its effect on labor productivity. This document analyzes the effects of Foreign Direct Investment on labor productivity in the manufacturing sector in Mexico during the 2007-2015 period by using panel data and federative entities as unit of analysis. The estimates are calculated by the generalized method of moments, which allows to consider for possible endogeneity problems. The results indicate a positive and statistically significant effect of FDI as a proportion of manufacturing GDP on the growth rate of labor productivity when the latter is estimated with the Manufacturing Labor Productivity Index published by INEGI. Similar results are found if growth in labor productivity is estimated by using manufacturing GDP per worker, although the latter have less statistical power in some specifications. |
| JEL: | J01 J24 Q29 R11 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2021-12&r= |
| By: | Kenneth Gillingham |
| Abstract: | Electric vehicles are declining in cost so rapidly that they may claim a large share of the vehicle market by 2030. This paper examines a set of practical regulatory design considerations for fuel-economy standards or greenhouse gas standards in the context of highly uncertain electric vehicle costs in the next decade. The analysis takes a cost-effectiveness approach and uses analytical modeling and simulation to develop insight. I show that counting electric vehicles under a standard with a multiplier or assuming zero upstream emissions can reduce electric vehicle market share by weakening the standards. Further, there are tradeoffs from implementing a backstop conventional vehicle standard along with a second standard that also includes electric vehicles, but such a backstop offers the possibility of ensuring that low-cost conventional vehicle technologies are exploited. |
| JEL: | H23 Q48 Q53 Q54 Q58 R48 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29067&r= |
| By: | Advani, Arun (University of Warwick, CAGE, the Institute for Fiscal Studies (IFS), and the LSE International Inequalities Institute (III)); Tarrant, Hannah (London School of Economics III) |
| Abstract: | In this paper, we review the existing empirical evidence on how individuals respond to the incentives created by a net wealth tax. Variation in the overall magnitude of behavioural responses is substantial: estimates of the elasticity of taxable wealth vary by a factor of 800. We explore three key reasons for this variation: tax design, context, and methodology. We then discuss what is known about the importance of individual margins of response and how these interact with policy choices. Finally, we use our analysis to systematically narrow down and reconcile the range of elasticity estimates. We argue that a well-designed wealth tax would reduce the tax base by 7-17% if levied at a tax rate of 1%. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1368&r= |
| By: | Melise Jaud; Madina Kukenova; Martin Strieborny |
| Abstract: | We find that foreign investors facilitate efficiency-enhancing structural change in the recipient countries. After countries liberalize their stock markets and allow foreign investors to acquire equity stakes in domestic firms, products that do not correspond to the liberalizing countries' comparative advantage disappear disproportionately faster from their export portfolios. At the same time, the overall long-term export performance of the liberalizing countries improves. Domestic stock market development does not play the same disciplining role in forcing termination of inefficient exports, suggesting a unique role for foreign investors in improving resource allocation in the real economy. |
| Keywords: | financial liberalization and structural change, disciplining role of foreign investors, export dynamics |
| JEL: | G15 F65 O16 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:gla:glaewp:2021_15&r= |
| By: | Serena Ng |
| Abstract: | The coronavirus is a global event of historical proportions and just a few months changed the time series properties of the data in ways that make many pre-covid forecasting models inadequate. It also creates a new problem for estimation of economic factors and dynamic causal effects because the variations around the outbreak can be interpreted as outliers, as shifts to the distribution of existing shocks, or as addition of new shocks. I take the latter view and use covid indicators as controls to 'de-covid' the data prior to estimation. I find that economic uncertainty remains high at the end of 2020 even though real economic activity has recovered and covid uncertainty has receded. Dynamic responses of variables to shocks in a VAR similar in magnitude and shape to the ones identified before 2020 can be recovered by directly or indirectly modeling covid and treating it as exogenous. These responses to economic shocks are distinctly different from those to a covid shock, and distinguishing between the two types of shocks can be important in macroeconomic modeling post-covid. |
| JEL: | C18 E0 E32 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29060&r= |
| By: | Benno Torgler |
| Abstract: | The field of behavioral taxation dates back at least to the 1950s. In this contribution I will explore the opportunities and challenges in the area, with a particular focus on tax compliance. I will focus on the data required to make further progress, discussing what can be improved when working with surveys and how the fie ld could benefit from open government data initiatives. I focus on collaborative efforts among scientists as well as with the government or the tax administration and examine many potenti al areas of exploration. The opportunities currently emerging due to digitalization provide not only interesting avenues for collaborations but also a natural method of using tools such as lab and field experiments. In addition, I will discuss potential dangers faced by the field of behavioral economics that also threaten the field of behavioral taxation. |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:cra:wpaper:2021-25&r= |
| By: | Jiranyakul, Komain |
| Abstract: | Contributing to the controversial issue on the impact of government spending on economic growth, this paper shows that government spending has long-run impact in stimulating aggregate output in Thailand during the floating exchange rate regime. The results reveal that the long-run relationship between aggregate output, government expenditures and private consumption is stable. Based on quarterly dataset during 1997Q3 to 2019Q4, the results suggest that expansionary fiscal policy is effective under the floating exchange rate regime. Furthermore, the traditional version of the Wagner’s law is supported since an expansion in aggregate output causes government expenditure to increase. Therefore, the findings in this paper support both Keynesian hypothesis and the Wagner’s law. |
| Keywords: | Government expenditures, real GDP, cointegration, causality |
| JEL: | E62 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109054&r= |
| By: | Pierre Januard (PHARE - Philosophie, Histoire et Analyse des Représentations Économiques - UP1 - Université Paris 1 Panthéon-Sorbonne) |
| Abstract: | Thomas Aquinas's short text on the activity of merchants in his early work the Commentary on the Sentences is a milestone in the understanding of trade and in the treatment of a deficit of information about the trade's finality and the intention of the merchant. Three levels of risk can thus be distinguished, relating to the licitness of the trade, the conditions of the trading activity, and the remuneration of merchants; and these in turn encounter three types of risk: analytical risks, commercial risks and strategic risks. The treatment of trade activity in the Commentary on the Sentences thus offers a new understanding of later works such as De regno and the Summa theologiae. |
| Keywords: | Thomas Aquinas,scholastics,trade,merchant,just price,risk |
| Date: | 2021–08–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03313255&r= |
| By: | George A. Alessandria; Shafaat Y. Khan; Armen Khederlarian; Kim J. Ruhl; Joseph B. Steinberg |
| Abstract: | We study the growth of Chinese imports into the United States from autarky during 1950-1970 to about 15 percent of overall imports in 2008, taking advantage of the rich heterogeneity in trade policy and trade growth across products during this period. Central to our analysis is an accounting for the dynamics of trade, trade policy, and trade-policy expectations. We isolate the lagged effects of past reforms and the current effects of uncertainty about future reforms. We build a multi-industry, heterogeneous-firm model with a dynamic export participation decision to estimate a path of trade-policy expectations. We find that being granted Normal Trade Relations (NTR) status in 1980 was largely a surprise and that, in the early stages, this reform had a high probability of being reversed. The likelihood of reversal dropped considerably during the mid 1980s, and, despite China's accession to the World Trade Organization (WTO) in 2001, changed little throughout the late 1990s and early 2000s. Thus, although uncertainty depressed trade substantially following the 1980 liberalization, much of the trade growth that followed China's WTO accession was a delayed response to previous reforms rather than a response to declining uncertainty. |
| JEL: | F1 F14 F62 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29122&r= |
| By: | Vimal Balasubramaniam; John Y. Campbell; Tarun Ramadorai; Benjamin Ranish |
| Abstract: | We build a cross-sectional factor model for investors' direct stock holdings, by analogy with standard time-series factor models for stock returns. We estimate the model using data from almost 10 million retail accounts in the Indian stock market. We find that stock characteristics such as firm age and share price have strong investor clienteles associated with them. Similarly, account attributes such as account age, account size, and extreme underdiversification (holding a single stock) are associated with particular characteristic preferences. Coheld stocks tend to have higher return covariance, suggestive of the importance of clientele effects in the stock market. |
| JEL: | G11 G51 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29065&r= |
| By: | Martin Ravallion |
| Abstract: | Thirty years of distributional data are used to study the short-term impacts of popular macroeconomic indicators on real household incomes from the poorest to the richest Americans. The appropriate weights on unemployment versus inflation vary across the distribution. The unemployment rate matters at all levels, but especially so for the poorest. Inflation rates matter at middle incomes, though Okun’s famous Misery Index only performs well for the top income groups. GDP growth matters at all levels and proportionately more for the poorest, though only via the unemployment rate. Recessions are poverty-increasing, and skewness-decreasing, but with ambiguous effects on overall inequality. |
| JEL: | D31 E31 E32 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29050&r= |
| By: | Johannes Stroebel; Jeffrey Wurgler |
| Abstract: | We survey 861 finance academics, professionals, and public sector regulators and policy economists about climate finance topics. They identify regulatory risk as the top climate risk to businesses and investors over the next five years, but they view physical risks as the top risk over the next 30 years. By an overwhelming margin, respondents believe that asset prices underestimate climate risks. We also tabulate opinions about the correlation between growth and climate change; social discount rates appropriate for projects that mitigate the effects of climate change; most influential forces for reducing climate risks; and, most important research topics. |
| JEL: | G12 G14 G32 H43 Q54 Q56 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29136&r= |
| By: | Marjit, Sugata; Mandal, Biswajit |
| Abstract: | In this paper we revisit the influential theory of monopolistic competition and optimum product variety as developed by Dixit and Stiglitz (1977) with applications in international trade by Krugman (1979,1980), by modeling fixed and variable costs of production in terms of underlying use of skilled and unskilled labor in a single good model. This is different from earlier work on multi sector variant of Krugman cum Heckscher-Ohlin-Samuelson model such as Helpman (1981) and others. In our structure factor endowment and factor intensities determine both number of varieties and output per variety in a closed economy mimicking the features of Heckscher-Ohlin-Samuelson model. Differences in factor endowments across countries determine the pattern of trade between varieties and output per variety, which is indeterminate in a standard single good Dixit-Stiglitz-Krugman model. Later we reflect on wage inequality and unemployment providing some interesting results. |
| Keywords: | Monopolistic Competition,Trade,Wage Inequality,Unemployment |
| JEL: | D43 F11 J31 E24 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:911&r= |
| By: | Benjamin R. Handel; Kate Ho |
| Abstract: | In this paper we outline the tools that have been developed to model and analyze competition and regulation in health care markets, and describe particular papers that apply them to policy-relevant questions. We focus particularly on the I.O. models and empirical methods and analyses that researchers have formulated to address policy-relevant questions, although we also provide an overview of the institutional facts and findings that inform them. We divide the chapter into two broad sections: (i) papers considering competition and price-setting among insurers and providers and (ii) papers focused specifically on insurance and market design. The former set of papers is largely concerned with models of oligopolistic competition; it is often focused on the US commercial insurance market where prices are market-determined rather than being set administratively. The latter focuses on insurance market design with an emphasis on issues raised by asymmetric information, leading to adverse selection and moral hazard. In addition, we discuss the literature on consumer choice frictions in this market and the significant implications of those frictions for I.O. questions. |
| JEL: | I11 L13 L2 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29137&r= |
| By: | Le Bihan Hervé,; Marx Magali,; Matheron Julien. |
| Abstract: | A number of central banks in advanced countries use ranges, or bands, around their inflation target to formulate their monetary policy strategy. The adoption of such ranges has been proposed by some policymakers in the context of the Fed and the ECB reviews of their strategies. Using a standard New Keynesian macroeconomic model, we analyze the consequences of tolerance range policies, characterized by a stronger reaction of the central bank to inflation when inflation lies outside the range than when it is close to the target, ie the central value of the band. We show that a tolerance band should not be a zone of inaction: the lack of reaction within the band endangers macroeconomic stability and leads to the possibility of multiple equilibria; the trade-off between the reaction needed outside the range versus inside seems unfavorable: a very strong reaction, when inflation is far from the target, is required to compensate a moderately lower reaction within tolerance band; these results, obtained within the framework of a stylized model, are robust to many alterations, in particular allowing for the zero lower bound. |
| Keywords: | Monetary policy; inflation ranges; inflation bands; ZLB; endogenous regime switching. |
| JEL: | E31 E52 E58 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:820&r= |
| By: | Ulrike Malmendier |
| Abstract: | This article establishes four key findings of the growing literature on experience effects in finance: (1) the long-lasting imprint of past experiences on beliefs and risk taking, (2) recency effects, (3) the domain-specificity of experience effects, and (4) imperviousness to information that is not experience-based. I first discuss the neuroscientific foundations of experience-based learning and sketch a simple model of its role in the stock market based on Malmendier et al. (2020a,b). I then distill the empirical findings on experience effects in stock-market investment, trade dynamics, and international capital flows, highlighting these four key features. Finally, I contrast models of belief formation that rely on “learned information” with models accounting for the neuroscience evidence on synaptic tagging and memory formation, and provide directions for future research. |
| JEL: | D03 D8 D83 D87 D9 E17 E52 E7 G02 G4 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29074&r= |
| By: | Christopher P Chambers; Federico Echenique |
| Abstract: | Given demand data for a group of agents, we seek to make counterfactual welfare statements. Our main result considers whether there are convex preferences for which some candidate allocation is Pareto optimal. We show that this candidate allocation is possibly efficient if and only if it is efficient for the incomplete relation derived from the revealed preference relations and convexity. Similar ideas are used to address related questions: when the Kaldor criterion may be used to make welfare comparisons, what prices can be Walrasian equilibrium prices, and the possibility of a representative consumer when the income distribution is endogenous. |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2108.03277&r= |
| By: | Filippo Gusella; Anna Maria Variato |
| Abstract: | In recent years the names of Minsky and Piketty gained increasing notoriety to researchers because the two authors investigated issues of financial instability and income inequality, which represent both two unsolved macroeconomic problems of the new millennium, and evidence contradicting the long†run implications of mainstream macroeconomics. By combining these two names we set ourselves an ambitious goal, going beyond the technical aspects of the model presented in the paper. Indeed, not only we want to contribute directly to the debate meant at clarifying the controversial relationship between financial instability and income inequality; we also aim at addressing a broader issue which is the explanation of the reasons why a theoretical revolution in macroeconomics has not yet occurred, and why financial aspects still play a subordinate role to real factors in the explanation of growth and cycles. In this broader perspective Minsky and Piketty are assumed as extreme examples of the opposite poles of heterodoxy and orthodoxy. Both target and argumentative line of the contribution are quite unconventional, as usually financial instability and income inequality, are treated as separate if not independent issues of inquiry; and methodological reflection is no longer a customary explicit part of technical papers. We discuss possible reasons why these two circumstances happen. The theoretical framework proposed in this paper builds on Ferri (2016), who presents a class of demandled models in a medium†run time horizon. This class of models is not conventional too, though it belongs to “pedagogical models†, we consider especially relevant tool for macroeconomics. Among the different specifications investigated by the author, we select the nearest to possible comparison with Piketty (2014) and then we introduce corporate debt into the financial account of firms. Because of the non†linearity of the model, we explore its dynamic properties with numerical simulations. Such simulations are also performed to assess the parameters enabling to support the Financial Instability Hypothesis. Aiming at deepening the comprehension of robustness properties, we also consider analytic results from a linearized version of the model. Obviously, the criticism addressed to Piketty with respect to the definition and measurement of inequality can be extended to our model too, as we use the same expedient to check the evolution of inequality. This leads to emphasize the relevance of the issue of measurement as a critical one for future developments. Nevertheless, this does not impinge on the achievement of our purpose. Indeed, our analysis confirms the utility of pedagogical models. Furthermore, it underlines the need of a change of economic vision such that complexity comes as a substantial part of representation. In terms of future perspectives these considerations point out the need for macroeconomic epistemology to resume constructive dialectics: a mixture of plural narratives and foundations for new visions of economic policy. Those just proposed at the end of the paper differ from orthodox ones as they call for financial regulation, they underline qualitative aspects and heterogeneity; but such embryonal policy suggestions stem from the overall perspective described in the paper, a perspective rooted into Ferri’s notion of medium†run, and qualified by Minsky through an eclectic approach leading to networks of balance†sheets: two ways highly overlapping though not totally equivalent to represent the reality of and endogenously unstable capitalism lying at the edge of chaos. |
| Keywords: | Economic Inequality, Financial Instability Hypothesis, Endogenous Cycles |
| JEL: | B41 D31 E32 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:frz:wpaper:wp2021_15.rdf&r= |
| By: | Guillermo Angeris; Akshay Agrawal; Alex Evans; Tarun Chitra; Stephen Boyd |
| Abstract: | The rise of Ethereum and other blockchains that support smart contracts has led to the creation of decentralized exchanges (DEXs), such as Uniswap, Balancer, Curve, mStable, and SushiSwap, which enable agents to trade cryptocurrencies without trusting a centralized authority. While traditional exchanges use order books to match and execute trades, DEXs are typically organized as constant function market makers (CFMMs). CFMMs accept and reject proposed trades based on the evaluation of a function that depends on the proposed trade and the current reserves of the DEX. For trades that involve only two assets, CFMMs are easy to understand, via two functions that give the quantity of one asset that must be tendered to receive a given quantity of the other, and vice versa. When more than two assets are being exchanged, it is harder to understand the landscape of possible trades. We observe that various problems of choosing a multi-asset trade can be formulated as convex optimization problems, and can therefore be reliably and efficiently solved. |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2107.12484&r= |
| By: | Hory Marie Pierre,; Levieuge Grégory,; Onori Daria. |
| Abstract: | In this paper, we demonstrate that the size of the fiscal multiplier depends both on currency mismatch and home bias. Our demonstration is based on a real two-country dynamic stochastic general equilibrium model with incomplete and imperfect international financial markets, external debt and financial frictions. We show that if home bias is high, the terms of trade improve following a fiscal stimulus. This reduces the private real debt burden denominated in foreign currency, decreases the external finance premium born by firms, and stimulates investment. Thus, the larger the proportion of firms' debt denominated in foreign currency is, the higher the fiscal multiplier. In contrast, the terms of trade deteriorate when home bias is low. This increases the real debt burden and the external finance premium. Hence, in this case, the fiscal multiplier decreases as the share of firms' debt denominated in foreign currency increases. |
| Keywords: | Fiscal Multiplier, Terms of Trade, Currency Mismatch, DSGE Model, Financial Frictions. |
| JEL: | E62 F34 F41 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:813&r= |
| By: | Giovanni Dosi; Luigi Marengo; Jacopo Staccioli; Maria Enrica Virgillito |
| Abstract: | Are IPRs institutions meant to foster innovative activities or conversely to secure appropriation and profitability? Taking stock of a long-term empirical evidence on the pharmaceutical sector in the US, we can hardly support IPRs intended as an innovation rewarding institution. According to our analysis, pharma patents have constituted legal barriers to protect intellectual monopolies rather than an incentive and a reward to innovative efforts. Patenting strategies appear to be quite aggressive in extending knowledge borders and enlarging the space protected from the possibility of infringements. This is also witnessed by the fact that patent applications are very skewed in the covered trade names and patent thickness expands over time. Conversely, the number of patents protecting new drugs approved by the FDA which draw upon government-sponsored research - as such a mark for quality - falls. Firm-level analysis on profitability confirms strong correlation, restricted to listed pharmaceutical firms, between patent portfolio and profit margins. |
| Keywords: | Intellectual property rights; patents; pharmaceutical industry. |
| Date: | 2021–08–11 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2021/26&r= |
| By: | Marla Ripoll |
| Abstract: | Official recession figures ignore the costs associated with the loss of human life due to COVID-19. This paper constructs full recession measures that take into account the death toll. Our model features tractable heterogeneity, constant relative risk aversion to mortality risk, and age-specific survival rates. Using an estimated one-year death toll of 500 thousand people and a 3.5% recession, we find that the corresponding full recession is 24% on average across individuals, 13% for a median voter, and 7% for planner with moderate inequality aversion. |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:pit:wpaper:7143&r= |
| By: | Sehnbruch, Kirsten |
| Abstract: | This paper proposes a methodology for measuring Quality of Employment (QoE) deprivation from a multidimensional perspective in six Central American countries (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama) using a dataset specifically designed to measure employment conditions. Building on previous work on multidimensional poverty and employment indicators, the paper uses the Alkire/Foster (AF) method to construct a synthetic indicator of the QoE at an individual level. It selects four dimensions that must be considered as essential to QoE deprivation: income, job stability, job security and employment conditions. These dimensions then subdivide into several indicators, a threshold for each indicator and dimension is established before defining an overall cut-off line that allows for the calculation of composite levels of deprivation. The results generated by this indicator show that Central American countries can be divided into three distinct and robust performance groups in terms of their QoE deprivation. Overall, approximately 60% of the deprivation levels are attributable to non-income variables, such as occupational status and job tenure. The methodology used can allow policymakers to identify and focus on the most vulnerable workers in a labour market and highlights the fact that having a formal written contract is no guarantee of good job quality, particularly in the case of women. |
| Keywords: | multidimensional indicators research; labour markets; employment; job quality; Latin America; Central America; GP1\100170; Springer deal |
| JEL: | R14 J01 N0 |
| Date: | 2021–04–29 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:109003&r= |
| By: | Imane El Ouadghiri (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique); Remzi Uctum (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | The goal of this paper is to investigate forecast heterogeneity and time variability in the formation of expectations using disaggregated monthly survey data on macroeconomic indicators provided by Bloomberg from June 1998 to August 2017. We show that our panel of forecasters are not rational and are moderately heterogeneous and thus confirm that previously well-established results on asset prices hold for macroeconomic indicators. The estimation of our flexible hybrid forecast model-defined at any time as a combination of the extrapolative, regressive, adaptive and interactive heuristics-using the Bai and Perron (1998) methodology reveals a significant timedependence in the structural model with some inertia in extrapolative and adaptive profiles. Changes in the formation of expectations are triggered mostly by financial shocks, and uncertainty is dealt with by using complex processes in which the fundamentalist component overweighs chartist activity. Forecasters whose models combine different relevant rules and display high temporal flexibility provide the most accurate forecasts. Authorities can then stabilize the domestic markets by encouraging fundamentalists' forecasts through increased transparency policy. |
| Keywords: | dynamic heterogeneity,flexible forecast model,formation of expectations,individual survey data,macroeconomic indicators |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03319091&r= |
| By: | Chatzinikolaou, Dimos (Democritus University of Thrace, Department of Economics); Demertzis, Michail (Democritus University of Thrace, School of Law); Vlados, Charis (Democritus University of Thrace, Department of Economics) |
| Abstract: | In today’s unprecedented transformation in the global socio-economic system caused by the COVID-19 pandemic crisis and the escalating fourth industrial revolution, reinforcing innovative entrepreneurship appears a significant policy objective that can lead to overall socio-economic development. In this drastically changed context, entrepreneurship support policies seem that they need to be both conceptually and practically readjusted, simultaneously at the macro, meso, and micro levels. This paper investigates the case of public entrepreneurship policies in the European Union (EU), aiming to find specific patterns and suggest a new multilevel policy framework. Initially, the article offers a brief overview of the related trends created in the emerging post-COVID-19 era. Next, the “competitiveness web” perspective in terms of “macro-meso-micro” level synthesis is presented, considering that it can function as a theoretical framework for entrepreneurship reinforcement. Recent EU entrepreneurship support policy guidelines are then explored, emphasizing the latest trends and the development opportunities arising with the EU Recovery and Resilience Facility establishment to deal with the consequences of the current health and socio-economic crisis. Upon this basis, the paper concludes in a proposal for an integrated “macro-meso-micro” policy, placing at the epicenter the mechanism of the Institutes of Local Development and Innovation (ILDI). This policy aims to strengthen the spatially-located firms to reposition and readapt the “Stra.Tech.Man” potential they have and activate in their local business ecosystem (strategy-technology-management synthesis). |
| Keywords: | Competitiveness web; Entrepreneurship support policy; EU Recovery and Resilience Facility (RRF); European integration; European public policy; ILDI; Macro-meso-micro; Post-COVID-19 era; Stra.Tech.Man approach |
| JEL: | L26 L53 O52 |
| Date: | 2021–04–07 |
| URL: | http://d.repec.org/n?u=RePEc:ris:duthrp:2021_005&r= |
| By: | Kritikos, Alexander S. (DIW Berlin); Schiersch, Alexander (DIW Berlin); Stiel, Caroline (DIW Berlin) |
| Abstract: | In Germany, the productivity of professional services, a sector dominated by micro and small firms, declined by 40 percent between 1995 and 2014. This productivity decline also holds true for professional services in other European countries. Using a German firm-level dataset of 700,000 observations between 2003 and 2017, we analyze this largely uncovered phenomenon among professional services, the 4th largest sector in the EU15 business economy, which provide important intermediate services for the rest of the economy. We show that changes in the value chain explain about half of the decline and the increase in part-time employment is a further minor part of the decline. In contrast to expectations, the entry of micro and small firms, despite their lower productivity levels, is not responsible for the decline. We also cannot confirm the conjecture that weakening competition allows unproductive firms to remain in the market. |
| Keywords: | business services, labor productivity, productivity slowdown |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14610&r= |
| By: | Ibrahim A. Adekunle (Babcock University, Nigeria); Abayomi T. Onanuga (Olabisi Onabanjo University, Ago-Iwoye, Nigeria); Ibrahim A. Odusanya (Olabisi Onabanjo University, Ogun State, Nigeria) |
| Abstract: | In this study, we examine the benefits of financial integrations in four of Africa regional trade blocs: COMESA, ECCAS, CEN-SAD and ECOWAS. We regress de-jure and de-facto indices of financial integration on growth outcome using the dynamic system generalised method of moment and pooled mean group estimation procedure. Findings revealed that total foreign asset and liabilities and foreign liabilities as a percentage of GDP are inversely related to growth outcomes in COMESA. In CEN-SAD, we found that foreign liabilities as a percentage of GDP hurts growth. In ECCAS, growth-financial integration relationship showed that foreign liabilities as a percentage of GDP inhibit real per capita GDP in the long run. In ECOWAS, foreign liabilities as a percentage of GDP is inversely related to real per capita GDP in the long run. Policy implications of our findings were discussed. |
| Keywords: | Financial Integration; Economic Growth; system GMM; Pooled Mean Group; Regional Trade Bloc; Africa |
| JEL: | F36 F43 O47 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:21/052&r= |
| By: | Xiaotie Deng; Yotam Gafni; Ron Lavi; Tao Lin; Hongyi Ling |
| Abstract: | We study competition among contests in a general model that allows for an arbitrary and heterogeneous space of contest design, where the goal of the contest designers is to maximize the contestants' sum of efforts. Our main result shows that optimal contests in the monopolistic setting (i.e., those that maximize the sum of efforts in a model with a single contest) form an equilibrium in the model with competition among contests. Under a very natural assumption these contests are in fact dominant, and the equilibria that they form are unique. Moreover, equilibria with the optimal contests are Pareto-optimal even in cases where other equilibria emerge. In many natural cases, they also maximize the social welfare. |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2107.13363&r= |
| By: | Acemoglu, Daron (MIT); Pekkarinen, Tuomas (VATT, Helsinki); Salvanes, Kjell G. (Norwegian School of Economics); Sarvimäki, Matti (Aalto University) |
| Abstract: | Upon assuming power for the first time in 1935, the Norwegian Labour Party delivered on its promise for a major schooling reform. The reform raised minimum instruction time in less developed rural areas and boosted the resources available to rural schools, reducing class size and increasing teacher salaries. We document that cohorts more intensively affected by the reform significantly increased their education and experienced higher labor income. Our main result is that the schooling reform also substantially increased support for the Norwegian Labour Party in subsequent elections. This additional support persisted for several decades and was pivotal in maintaining support for the social democratic coalition in Norway. These results are not driven by the direct impact of education and are not explained by higher turnout, or greater attention or resources from the Labour Party targeted towards the municipalities most affected by the reform. Rather, our evidence suggests that cohorts that benefited from the schooling reform, and their parents, rewarded the party for delivering a major reform that was beneficial to them. |
| Keywords: | education, human capital, schooling reform, labor, voting, social democracy |
| JEL: | P16 I28 J26 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14617&r= |
| By: | Arye Hillman; Ngo Van Long |
| Abstract: | Immigration policies in western democracies have often been contrary to the policies predicted by the mainstream theory of international economics. In particular, political parties that, according to economic theory, should adopt policies beneficial for lower-income voter-constituencies, have not protected workers from labor-market competition or from a fiscal burden of financing welfare-dependent immigrants. We explain the contradiction by accounting for immigrants as future voters. We identify a political principal-agent problem based on ego-rents from political office. Our theory predicts voter defection from worker-supported political-establishment parties to new-entrant anti-immigration political candidates and parties. We give a hearing to alternative interpretations of the evidence. Les politiques d'immigration dans les démocraties occidentales ont souvent été contraires aux politiques prédites par la théorie dominante de l'économie internationale. En particulier, les partis politiques qui, selon la théorie économique, devraient adopter des politiques favorables aux électeurs à faible revenu, n'ont pas protégé les travailleurs de la concurrence sur le marché du travail ou du fardeau fiscal du financement des immigrés dépendants de l'aide sociale. Nous expliquons la contradiction en considérant les immigrés comme futurs électeurs. Nous identifions un problème politique principal-agent basé sur les rentes de l'ego des fonctions politiques. Notre théorie prédit la défection des électeurs des partis soutenus par les travailleurs vers les nouveaux candidats et partis politiques anti-immigration. Nous donnons une audience aux interprétations alternatives. |
| Keywords: | International migration,labor-market adjustment,immigrant welfare dependency,immigration amnesties,political entry barriers,multiculturalism,ethics of migration,exceptionalism, Migration internationale,ajustement du marché du travail,dépendance à l'aide sociale des immigrés,amnisties de l'immigration,barrières politiques à l'entrée,multiculturalisme,éthique de la migration,exceptionnalisme |
| JEL: | F22 F66 H53 P16 |
| Date: | 2021–08–10 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2021s-24&r= |
| By: | Amadou Barry; Karim Oualkacha; Arthur Charpentier |
| Abstract: | The fixed-effects model estimates the regressor effects on the mean of the response, which is inadequate to summarize the variable relationships in the presence of heteroscedasticity. In this paper, we adapt the asymmetric least squares (expectile) regression to the fixed-effects model and propose a new model: expectile regression with fixed-effects $(\ERFE).$ The $\ERFE$ model applies the within transformation strategy to concentrate out the incidental parameter and estimates the regressor effects on the expectiles of the response distribution. The $\ERFE$ model captures the data heteroscedasticity and eliminates any bias resulting from the correlation between the regressors and the omitted factors. We derive the asymptotic properties of the $\ERFE$ estimators and suggest robust estimators of its covariance matrix. Our simulations show that the $\ERFE$ estimator is unbiased and outperforms its competitors. Our real data analysis shows its ability to capture data heteroscedasticity (see our R package, \url{github.com/AmBarry/erfe}). |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2108.04737&r= |