|
on Central and Western Asia |
| By: | Bos, Iwan; Marini, Marco A.; Saulle, Riccardo |
| Abstract: | This paper examines capacity-constrained oligopoly pricing with sellers who seekmyopic improvements. We employ the Myopic Stable Set solution concept and establish the existence of a unique pure-strategy price solution for any given level of capacity. This solution is shown to coincide with the set of pure-strategy Nash equilibria when capacities are large or small. For an intermediate range of capacities, it predicts a price interval that includes the mixedstrategy support. This stability concept thus encompasses all Nash equilibria and offers a pure-strategy solution when there is none in Nash terms. It particularly provides a behavioral rationale for different pricing patterns, including Edgeworth price cycles and states of hyper-competition with supply shortages. We also analyze the impact of a change in firm size distribution. A merger among the biggest firms may lead to more price dispersion as it increases the maximum and decreases the minimum myopically stable price. |
| Keywords: | Bounded Rationality, Capacity Constraints, Mergers, Myopic Stable Set, Oligopoly Pricing, Supply Shortages |
| JEL: | C72 D43 L13 |
| Date: | 2021–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111176&r= |
| By: | Kodjo Adandohoin (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne); Jean-Francois Brun (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne) |
| Abstract: | This paper investigates second wave tax transition (transfer of tax pressure from border taxation towards domestic taxation) concerns in developing countries. It essentially focuses on the compensation effects of incomes and property taxes over international trade tax revenue losses in developing countries. Using a generalized method of moment estimator, we come to the evidence that, incomes and property taxes are poor instruments to balance trade tax revenue losses of trade liberalization in these countries. However, a mediating effect of financial development in the compensation nexus driven by corporate income taxes was found. We explain this result by the fact that the use of financial sector generates paper trails to government in order to enforce and raise corporate income taxes. Financial development may progressively crowd-out informal sector and leads to business formalization. Surprising, we do not find any mediating effect of financial development in the compensation patterns with personal income taxes. Nevertheless, some heterogeneities were discovered. Financial development mediates the compensation patterns of personal income taxes in Latin American countries, while the effect holds on corporate income taxes in African countries. We conclude the paper by highlighting the important role of financial development in second generation tax transition concerns over developing countries. |
| Keywords: | Income Taxes,Property Tax,Tax Transition,Developing Countries |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03470540&r= |
| By: | Lionel Fontagné (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Erica Perego; Gianluca Santoni |
| Abstract: | Pandemics, global warming, food security, ageing, depletion of certain raw materials... our economies are faced with global problems, calling for long term actions and raising intergenerational issues. To guide economic policies, it is therefore essential to have a sound framework for reflection. The MaGE (Macroeconometrics of the Global Economy) model, developed by CEPII, makes it possible to draw the fundamental trends of the world economy in the long term, up to 2050. Assuming that the current dynamics of growth and technological catch-up will continue, and taking into account demographic dynamics, the balance of economic power will be strongly transformed over the next generation. Above all, energy consumption is expected to continue to grow at a sustained rate, and even double, despite efforts to improve energy efficiency. Ambitious policies to decarbonize our economies will be necessary to make these prospects for economic growth sustainable. |
| Keywords: | Energy efficiency,Growth models,Long-term growth,Energy use,Total Factor Productivity |
| Date: | 2021–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-03474032&r= |
| By: | Frederic Boissay; Fabrice Collard; Jordi Galí; Cristina Manea |
| Abstract: | We study whether a central bank should deviate from its objective of price stability to promote financial stability. We tackle this question within a textbook New Keynesian model augmented with capital accumulation and microfounded endogenous financial crises. We compare several interest rate rules, under which the central bank responds more or less forcefully to inflation and aggregate output. Our main findings are threefold. First, monetary policy affects the probability of a crisis both in the short run (through aggregate demand) and in the medium run (through savings and capital accumulation). Second, a central bank can both reduce the probability of a crisis and increase welfare by departing from strict inflation targeting and responding systematically to fluctuations in output. Third, financial crises may occur after a long period of unexpectedly loose monetary policy as the central bank abruptly reverses course. |
| JEL: | E32 E44 E52 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29602&r= |
| By: | Simon Commander; Ruta Prieskienyte |
| Abstract: | Can autocracies and their associated institutions successfully implement economic policies that promote growth and investment? Can ‘good economics’ somehow offset the effects of ‘bad’ politics? Kazakhstan is a case where an autocratic regime has actively projected market-friendly policies and attracted significant amounts of incoming investment. These policies are to some extent reflected in the country’s governance ratings, although there has been a significant amount of investment disputes that question the attachment to the rule of law. Moreover, the political regime remains strongly personalised around the founder President, his family and associates. This is reflected in the economics of the autocracy whereby a large public sector and a set of privately held businesses coexist to mutual benefit. The latter have been formed around a very small number of highly connected individuals whose initial accumulation of assets allows them also to act as necessary gatekeepers for entrants. Competition as a result remains limited in both economic and political domains. Yet, uncertainties over the future leadership, along with latent rivalry over access to resources and markets, make the political equilibrium quite fragile. In short, ‘bad’ politics both squeezes the space for, and distorts the benefits from, ‘good’ economics. |
| Keywords: | Political networks, autocracy, investment |
| JEL: | D72 H11 L14 P26 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:sec:worpap:0015&r= |
| By: | Hélène Latzer (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Florian Mayneris |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-03515766&r= |
| By: | Mayukh Mukhopadhyay; Kaushik Ghosh |
| Abstract: | Non Fungible Token (NFT) Industry has been witnessing multi-million dollar trade in recent times. With rapid innovation of the NFT market environment by technology, innovation, and decentralization, it is becoming hard to distinguish between genuine NFT from fads and scams. This article discuss the NFT market microstructure, with a focus on price formation, market structure, transparency, and applications to other financial areas. Market manipulation in NFT market with the context of wash-sale patterns has also been surveyed. The article concludes by providing pointers on due-diligence activity that can be adopted by investors to mitigate NFT trading risk. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.03172&r= |
| By: | Zouhair Boumlik (Université Hassan 1er [Settat]); Badia Oulhadj (Université Hassan 1er [Settat]); Khaddouj Karim (Université Hassan 1er [Settat]) |
| Date: | 2021–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03423083&r= |
| By: | Wenting Song; Samuel Stern |
| Abstract: | This paper provides direct evidence of the importance of firm attention to macro-economic dynamics. We construct a text-based measure of firm attention to macro-economic news and document firm attention that is polarized and countercyclical. Differences in attention lead to asymmetric responses to monetary policy: expansionary monetary shocks raise market values of attentive firms more than those of inattentive firms, and contractionary shocks lower values of attentive firms by less. We use the measure to calibrate a quantitative model of rationally inattentive firms with hetero-geneous costs of information. Less attentive firms adjust prices slowly in response to monetary innovations, which yields non-neutrality. As average attention varies over the business cycle, so does the efficacy of monetary policy. |
| Keywords: | Business fluctuations and cycles; Inflation and prices, Monetary policy |
| JEL: | D83 E44 E52 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:22-3&r= |
| By: | Ferraz, Eduardo (Universidad del Rosario); Soares, Rodrigo R. (Insper, São Paulo); Vargas, Juan (Rosario University) |
| Abstract: | Intuitively, by increasing the opportunity cost of engaging in criminal activities, positive economic shocks should reduce crime. However, the empirical evidence on the relationship between economic shocks and criminal behavior is at best ambiguous. This may be because certain types of shocks make the booty more attractive and thus constitute an incentive to predate. Beyond this basic distinction between an "opportunity cost" and a "rapacity" mechanism that may mediate the effect of economic shocks on crime, this chapter proposes a simple conceptual framework to understand this nuanced relationship. We posit that the way that economic shocks shape criminal behavior depends on three factors: i) whether the shock comes from a legal or an illegal source, ii) the extent to which the shock source is more or less lootable, and iii) the presence of contextual factors that shape the relative importance of the opportunity cost and the rapacity effect, such as the underlying level of economic inequality, the institutional strength and law enforcement capacity of the state, and whether there are instances of accelerated and hazardous economic growth that likely create social disorganization and institutional unbalance. We use this taxonomy to review the seemingly inconclusive empirical evidence, and close by highlighting current persisting puzzles as well as areas where additional research on the relationship between economic shocks and crime would be welcome. |
| Keywords: | economic shocks, crime, opportunity cost, rapacity, illegal activity, inequality, institutions, social disorganization |
| JEL: | K42 J30 D74 F16 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14954&r= |
| By: | Mestiri, Sami |
| Abstract: | Bitcoin has received a lot of attention from both investors and analysts, as it forms the highest market capitalization in the cryptocurrency market. The use of parametric GARCH models to characterise the volatility of Bitcoin returns is widely observed in the empirical literature. In this paper, we consider an alternative approach involving non-parametric method to model and forecast Bitcoin return volatility. We show that the out-of-sample volatility forecast of the non-parametric GARCH model yields superior performance relative to an extensive class of parametric GARCH models. The improvement in forecasting accuracy of Bitcoin return volatility based on the non-parametric GARCH model suggests that this method offers an attractive and viable alternative to the commonly used parametric GARCH models. |
| Keywords: | Bitcoin; volatility; GARCH; Nonparametric; Forecasting. |
| JEL: | C14 C53 C58 |
| Date: | 2021–12–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111116&r= |
| By: | Martin M. Andreasen; Giovanni Caggiano; Efrem Castelnuovo; Giovanni Pellegrino |
| Abstract: | This paper uses a nonlinear vector autoregression and a non-recursive identification strategy to show that an equal-sized uncertainty shock generates a larger contraction in real activity when growth is low (as in recessions) than when growth is high (as in expansions). An estimated New Keynesian model with recursive preferences and approximated to third order around its risky steady state replicates these state-dependent responses. The key mechanism behind this result is that firms display a stronger upward nominal pricing bias in recessions than in expansions, because recessions imply higher inflation volatility and higher marginal utility of consumption than expansions. |
| Keywords: | New Keynesian Model, Nonlinear SVAR, Non-recursive identification, State-dependent uncertainty shock, Risky steady state |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2021-83&r= |
| By: | Massimo Filippini (ETH Zürich; University of Lugano - Faculty of Economics); Markus Leippold (University of Zurich; Swiss Finance Institute - University of Zurich); Tobias Wekhof (ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich) |
| Abstract: | This paper introduces the concept of sustainable finance literacy, which refers to retail investors' knowledge of regulations, norms, and standards for financial products with sustainable characteristics. We survey a large sample of Swiss households and measure different literacy concepts using two complementary approaches. First, we use traditional multiple-choice questions, and second, a novel approach based on open-ended questions that ask respondents to write a text response. We find that Swiss households, which typically show high financial literacy by international standards, exhibit a low level of sustainable finance literacy. Interestingly, multiple-choice questions lead to a gender gap, with women performing worse than men. However, this difference disappears when open-ended questions are used. Moreover, despite its low level, sustainable finance literacy is a highly significant factor for sustainable product ownership. Therefore, our results reveal an urgent need to establish transparent regulatory standards and strengthen information campaigns on sustainable financial products. |
| Keywords: | Sustainable finance literacy, sustainable finance products, ESG, household finance, open-ended questions, gender gap |
| JEL: | G02 G11 G18 C83 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2202&r= |
| By: | Boykett, Paul (Monash University) |
| Abstract: | A majority of households do not invest their savings and fewer make voluntary contributions to superannuation. This may increase their risk of financial hardship in later life and has raised questions about the role of governments and educators in addressing barriers to market entry. Our probit model framework measures the effect of financial literacy on market participation and contributes new evidence by analysing superannuation and demographical heterogeneity in market barriers. Results indicate that poor financial literacy deters voluntary superannuation contributions and traditional investment, particularly for low-income households. Evidence also suggests that financial advice facilitates market entry while improving financial literacy could shift investor’s financial market exposure towards superannuation in later life. These findings enrich our understanding of market barriers and help to guide superannuation policy. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:wrkesp:02&r= |
| By: | Ozili, Peterson K; Ndah, Honour |
| Abstract: | In this paper, we examine whether financial development is an important determinant of bank profitability. Using the robust ordinary least square and the generalized method of moments regression methodology, we find a significant negative relationship between the financial system deposits to GDP ratio and the non-interest income of Nigerian banks. This indicates that higher financial system deposits to GDP depresses the non-interest income of Nigerian banks. The result implies that the larger the size of the Nigerian financial system, the lower the profitability of banks in Nigeria. Also, we observe that bank concentration, nonperforming loans, cost efficiency and the level of inflation are significant determinants of the profitability of Nigerian banks. |
| Keywords: | Bank profitability, financial development, banks, return on assets, return on equity, Nigeria, financial system, bank concentration, economic growth, size of financial system, domestic credit to private sector |
| JEL: | F38 G20 G21 G28 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111337&r= |
| By: | Ozdemir, Huseyin (Gazi University); Ozdemir, Zeynel Abidin (Ankara HBV University) |
| Abstract: | We propose a new Sharpe ratio index obtained from return and volatility spillover indices to individual assets from the whole financial system. We use our new approach to shed light on a new perspective on a hot topic examining the safe-haven assets after Covid-19. To do that, we compare both hedge and safe-haven properties of gold, Bitcoin, and crude oil against G-7 stock markets by using daily return and volatility data from September 2013 to October 2021. Our empirical findings show that the hedging effectiveness of gold, Bitcoin, and crude oil varies overtime before the Covid-19 pandemic. Furthermore, according to our analysis results, only Bitcoin acts as a safe haven against G-7 stock markets during most of the Covid-19 pandemic time. |
| Keywords: | sharpe ratio, safe haven, hedge, spillover effect, G-7 countries |
| JEL: | C58 G10 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14888&r= |
| By: | Ruiz-García, J. C. |
| Abstract: | How do financial frictions affect firm dynamics, allocation of resources across firms, and aggregate productivity and output? Is the nature of productivity shocks that firms face primary for the effects of financial frictions? I first use a comprehensive dataset of Spanish firms from 1999 to 2014 to estimate non-parametrically the firm productivity dynamics. I find that the productivity process is non-linear, as persistence and shock variability depend on past productivity, and productivity shocks are non-Gaussian. These dynamics differ from the ones implied by a standard AR(1) process, commonly used in the firm dynamics literature. I then build a model of firm dynamics with financial frictions in which productivity shocks are non-linear and non-Gaussian. The model is consistent with a host of evidence on firm dynamics, financial frictions, and firms’ financial behaviour. In the model economy, financial frictions affect the firm life cycle. Without financial frictions, the size of an entrant firm will be three times larger. Furthermore, profit accumulation, which allows firms to overcome financial frictions, is slow, and it only speeds up when firms are mature. As a consequence, the average exiting firm is smaller than it would be without financial frictions. The aggregate consequences of financial frictions are significant. They result in misallocation of capital and reduce aggregate productivity by 16%. This figure is only 8% if productivity dynamics evolve according to a standard AR(1) process. |
| Keywords: | Firm Dynamics, Non-Linear Productivity Process, Financial Frictions, Misallocation |
| JEL: | E22 G32 O16 |
| Date: | 2021–08–03 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camjip:2103&r= |
| By: | Sinha, Avik; Sharif, Arshian; Adhikari, Arnab; Sharma, Ankit |
| Abstract: | Given the developing nations are moving towards attaining the sustainable energy future, the reliance on renewable energy solutions is rising. Therefore, the dependence on traditional fossil fuel-based solutions is getting reduced, and this might have an impact on the energy market commodities. Analyzing this impact might divulge several insights regarding the portfolio decisions, in presence of the transformations in developmental trajectory. In this study, we analyze the cross-quantile dependence of the returns on the energy market commodities and the market returns for Indian financial market over July 31, 2008 to March 31, 2020. For this purpose, we adopt a novel three-stage methodology comprising Dynamic Conditional Correlation GARCH, Cross-quantilogram, and Wavelet Coherence-based models. We find that the market returns have negative effect on returns on the energy market commodities. This impact has been found to be asymmetric in nature. Moreover, the moderating impact of policy uncertainty has been analyzed has been analyzed through partial cross-quantilogram approach, and the outcome shows that the impact remains same under extreme market conditions. The findings have significant portfolio decisions in an energy transition context. |
| Keywords: | India; Energy market commodity; Cross-quantilogram; Uncertainty; Volatility |
| JEL: | Q4 Q5 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111181&r= |
| By: | Laurence M. Ball; Daniel Leigh; Prachi Mishra; Antonio Spilimbergo |
| Abstract: | Large price changes in industries affected by the COVID-19 pandemic have caused erratic fluctuations in the U.S. headline inflation rate. This paper compares alternative approaches to filtering out the transitory effects of these industry price changes and measuring the underlying or core level of inflation over 2020-2021. The Federal Reserve’s preferred measure of core, the inflation rate excluding food and energy prices, has performed poorly: over most of 2020-21, it is almost as volatile as headline inflation. Measures of core that exclude a fixed set of additional industries, such as the Atlanta Fed’s sticky-price inflation rate, have been less volatile, but the least volatile have been measures that filter out large price changes in any industry, such as the Cleveland Fed’s median inflation rate and the Dallas Fed’s trimmed mean inflation rate. These core measures have followed smooth paths, drifting down when the economy was weak in 2020 and then rising as the economy has rebounded. |
| JEL: | E31 E58 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29609&r= |
| By: | Gomes, Luiz |
| Abstract: | Considered one of the leading economists of the 20th century, Nicholas Kaldor contributed to the development of modern economic thought in several fields, from cobweb models to tax issues. Kaldor is recognized worldwide for his work on economic development, the theory of distribution and economic growth. Nicholas Kaldor's concerns were directed at practical problems in economic policy. This work aimed to briefly investigate the contributions of Nicholas Kaldor to economic science. In this paper, we succinctly reviewed Nicholas Kaldor's main works. As Nicholas Kaldor's bibliographic production was quite extensive, some parts had to be highlighted, especially the growth models of theoretical framework I, with full employment, and the economic models of theoretical framework II, without full employment. The article is divided into sections and it has a conclusion. |
| Keywords: | Nicholas Kaldor, Economics, Economic Growth, Theory of Distribution. |
| JEL: | B20 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111352&r= |
| By: | Kato, Hayato; Okoshi, Hirofumi |
| Abstract: | Do low corporate taxes always favor multinational production in the course of eco- nomic integration? To investigate this, we propose a two-country model in which multi- nationals choose the locations of production plants and foreign distribution affiliates and shift profits between home plants and foreign affiliates by manipulating transfer prices in intra-firm trade. We show that when trade costs are high, plants are concentrated in the low-tax country; surprisingly, this location pattern reverses when they are low. Unlike existing models with single-plant firms, the impact of economic integration is non-monotonic: a fall in trade costs first decreases and then increases the share of plants in the high-tax country, which we empirically confirm. We also analyze tax competition and find that allowing for transfer pricing makes competition tougher. This indicates that international coordination on transfer-pricing regulation can potentially make the world better off. |
| Keywords: | Profit shifting; Multinational firms; Intra-firm trade; Trade costs; Foreign direct investment (FDI) |
| JEL: | F12 F23 H25 H26 |
| Date: | 2021–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111188&r= |
| By: | Adamopoulou, Effrosyni (University of Mannheim); Manaresi, Francesco (OECD); Rachedi, Omar (ESADE); Yurdagul, Emircan (Universidad Carlos III de Madrid) |
| Abstract: | Minimum wages alter the allocation of firm-idiosyncratic risk across workers. To establish this result, we focus on Italy, and leverage employer-employee data matched to firm balance sheets and hand-collected wage floors. We find a relatively larger pass-through of firm-specific labor-demand shocks into wages for the workers whose earnings are far from the floors, but who are employed by establishments intensive in minimum-wage workers. We study the welfare implications of this fact using an incomplete-market model. The asymmetric passthrough uncovers a novel channel which tilts the benefits of removing minimum wages toward high-paid employees at the expense of low-wage workers. |
| Keywords: | firm-specific shocks, pass-through, minimum wages, linked employer-employee data, general equilibrium, complementarities |
| JEL: | E24 E25 E64 J31 J38 J52 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14943&r= |
| By: | Olivier Jeanne |
| Abstract: | This paper presents a tractable model of a global economy in which countries can use a broad range of policy instruments---the nominal interest rate, taxes on imports and exports, taxes on capital flows or foreign exchange interventions. Low demand may lead to unemployment because of downward nominal wage stickiness. Markov perfect equilibria with and without international cooperation are characterized in closed form. The welfare costs of trade and currency wars crucially depend on the state of global demand and on the policy instruments that are used by national policymakers. Countries have more incentives to deviate from free trade when global demand is low. Trade wars lower employment if they involve tariffs on imports but raise employment if they involve export subsidies. Tariff wars can lead to self-fulfilling global liquidity traps. |
| JEL: | F16 F31 F33 F38 F40 F42 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29603&r= |
| By: | Mohajan, Haradhan |
| Abstract: | This paper is about the cradle to cradle (C2C) concept that is correlated with circular economy (CE). The C2C notion means; products should be without producing any waste. It is considered as a biometric procedure to design the products and materials in healthy ways. The C2C model is sustainable for present and future generations. In the past few years, C2C concept has grown wide interest among the nations of the world and the demand for environment friendly products has been increasing day by day globally. The C2C notion is based on the idea of non-waste production systems that do not harm the environment. Within the C2C framework, two distinct metabolisms: the biological metabolism and the technical metabolism are identified. In the study the development of C2C approach around the world is discussed. As the global natural resources are decreasing; C2C becomes new efficient strategy in production arena. Sustainable products, healthy materials, responsible consumption, and environmental responsibility are essential issues for the 21st century. The objective of C2C is the production without waste and elimination of the harmfulness from the products. C2C inspires that all products to be manufactured with alternative materials. This article tries for the successful implementation of C2C in the society. |
| Keywords: | Cradle to Cradle, Biological Nutrient, Recycling, Clean Environment, Upcycling |
| JEL: | D6 D61 F6 F63 F64 |
| Date: | 2021–10–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111334&r= |
| By: | Dubois, Pierre; Griffith, Rachel; O'Connell, Martin |
| Abstract: | The adoption of barcode scanning technology in the 1970's gave rise to a new form of data; scanner data. Soon afterwards researchers began using this new resource, and since then a large number of papers have exploited scanner data. The data provide detailed price, quantity and product characteristic information for completely disaggregate products at high frequency and typ- ically either track a panel of stores and/or consumers. Their availability has led to advances, inter alia, in the study of consumer demand, the mea- surement of market power, rms' strategic interactions and decision-making, the evaluation of policy reforms, and the measurement of price dispersion and in ation. In this article we highlight some of the pro and cons of this data source, and discuss some of the ways its availability to researchers has transformed the economics literature. |
| Date: | 2022–01–14 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:126393&r= |
| By: | Gomes, Luiz |
| Abstract: | Oskar Lange is generally known about his contribution in the debate on the feasibility of rational economic calculation under socialism. Although he is recognized as the theoretical "winner" of this debate, his contributions to economics extend over a wide range of topics and involve issues such as the economic organization of a society in transition to socialism, the relevance or not of econometrics, the meaning of Say's law and the use of cybernetics for economic planning. There are two points that are fundamental in Lange’s work, namely: (i) the economic viability of the socialist mode of production and (ii) the economics of the transition to socialism. The objective of the present article is to investigate Lange’s contributions in regard of these two points: the economic viability of socialism and the economics of the transition to socialism. |
| Keywords: | Oskar Lange, Socialism, Economic Planning, Law of Value, Market Socialism. |
| JEL: | B24 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111344&r= |
| By: | Elisa Darriet (LIRSA - Laboratoire interdisciplinaire de recherche en sciences de l'action - CNAM - Conservatoire National des Arts et Métiers [CNAM], LEMMA - Laboratoire d'économie mathématique et de microéconomie appliquée - UP2 - Université Panthéon-Assas - SU - Sorbonne Université); Marianne Guille (LEMMA - Laboratoire d'économie mathématique et de microéconomie appliquée - UP2 - Université Panthéon-Assas - SU - Sorbonne Université); Jean-Christophe Vergnaud (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, UP1 - Université Paris 1 Panthéon-Sorbonne) |
| Abstract: | The aim of this chapter is to investigate the relationship between financial literacy and numeracy. It turns out that numeracy and financial literacy are strongly correlated. In order to clarify this relationship, we review, in a first section, the general definition of numeracy and its most commonly used measures. We then try to enlighten the distinction that can be made between numeracy and financial literacy. In a second section, we focus on the relationship between numeracy and financial literacy using the main empirical studies performed. Since the analyses of their results show that numeracy is a key determinant of financial literacy, we highlight, in a third and final section, the key role that numeracy could have in education programs and consumer protection policies to improve financial decisions. |
| Keywords: | Financial literacy,Numeracy |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-03461252&r= |
| By: | Mitali Das; Gita Gopinath; Ṣebnem Kalemli-Özcan |
| Abstract: | We show that “preemptive” capital flow management measures (CFM) can reduce emerging markets and developing countries’ (EMDE) external finance premia during risk-off shocks, especially for vulnerable countries. Using a panel dataset of 56 EMDEs during 1996–2020 at monthly frequency, we document that countries with preemptive policies in place during the five year window before risk-off shocks experienced relatively lower external finance premia and exchange rate volatility during the shock compared to countries which did not have such pre-emptive policies in place. We use the episodes of Taper Tantrum and COVID-19 as risk-off shocks. Our identification relies on a difference-in-differences methodology with country fixed effects where preemptive policies are ex-ante by construction and cannot be put in place as a response to the shock ex-post. We control the effects of other policies, such as monetary policy, foreign exchange interventions (FXI), easing of inflow CFMs and tightening of outflow CFMs that are used in response to the risk-off shocks. By reducing the impact of risk-off shocks on countries’ funding costs and exchange rate volatility, preemptive policies enable countries’ continued access to international capital markets during troubled times. |
| JEL: | F3 F31 F41 F44 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29615&r= |
| By: | Lloyd, S.; Manuel, E.; Panchev, K. |
| Abstract: | We study how foreign financial developments influence the conditional distribution of domestic GDP growth. Within a quantile regression setup, we propose a method to parsimoniously account for foreign vulnerabilities using bilateral-exposure weights when assessing downside macroeconomic risks. Using a panel dataset of advanced economies, we show that tighter foreign financial conditions and faster foreign credit-to-GDP growth are associated with a more severe left tail of domestic GDP growth, even when controlling for domestic indicators. The inclusion of foreign indicators significantly improves estimates of ‘GDP-at-Risk’, a summary measure of downside risks. In turn, this yields time-varying estimates of higher GDP growth moments that are interpretable and provide advanced warnings of crisis episodes. Decomposing historical estimates of GDP-at-Risk into domestic and foreign sources, we show that foreign shocks are a key driver of domestic macroeconomic tail risks. |
| Keywords: | Financial stability, GDP-at-Risk, International spillovers, Local projections, Quantile regression, Tail risk |
| JEL: | E44 E58 F30 F41 F44 G01 |
| Date: | 2021–07–30 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camjip:2102&r= |
| By: | Marcos Escobar-Anel; Matt Davison; Yichen Zhu |
| Abstract: | This paper challenges the use of stocks in portfolio construction, instead we demonstrate that Asian derivatives, straddles, or baskets could be more convenient substitutes. Our results are obtained under the assumptions of the Black--Scholes--Merton setting, uncovering a hidden benefit of derivatives that complements their well-known gains for hedging, risk management, and to increase utility in market incompleteness. The new insights are also transferable to more advanced stochastic settings. The analysis relies on the infinite number of optimal choices of derivatives for a maximized expected utility (EUT) agent; we propose risk exposure minimization as an additional optimization criterion inspired by regulations. Working with two assets, for simplicity, we demonstrate that only two derivatives are needed to maximize utility while minimizing risky exposure. In a comparison among one-asset options, e.g. American, European, Asian, Calls and Puts, we demonstrate that the deepest out-of-the-money Asian products available are the best choices to minimize exposure. We also explore optimal selections among straddles, which are better practical choices than out-of-the-money Calls and Puts due to liquidity and rebalancing needs. The optimality of multi-asset derivatives is also considered, establishing that a basket option could be a better choice than one-asset Asian call/put in many realistic situations. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2201.03717&r= |
| By: | Bent Flyvbjerg; Dirk W. Bester |
| Abstract: | Most cost-benefit analyses assume that the estimates of costs and benefits are more or less accurate and unbiased. But what if, in reality, estimates are highly inaccurate and biased? Then the assumption that cost-benefit analysis is a rational way to improve resource allocation would be a fallacy. Based on the largest dataset of its kind, we test the assumption that cost and benefit estimates of public investments are accurate and unbiased. We find this is not the case with overwhelming statistical significance. We document the extent of cost overruns, benefit shortfalls, and forecasting bias in public investments. We further assess whether such inaccuracies seriously distort effective resource allocation, which is found to be the case. We explain our findings in behavioral terms and explore their policy implications. Finally, we conclude that cost-benefit analysis of public investments stands in need of reform and we outline four steps to such reform. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.03171&r= |
| By: | Arnault Pachot (IP - Institut Pascal - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne - INP Clermont Auvergne - Institut national polytechnique Clermont Auvergne - UCA - Université Clermont Auvergne); Adélaïde Albouy-Kissi (IP - Institut Pascal - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne - INP Clermont Auvergne - Institut national polytechnique Clermont Auvergne - UCA - Université Clermont Auvergne); Benjamin Albouy-Kissi (IP - Institut Pascal - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne - INP Clermont Auvergne - Institut national polytechnique Clermont Auvergne - UCA - Université Clermont Auvergne); Frédéric Chausse (IP - Institut Pascal - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne - INP Clermont Auvergne - Institut national polytechnique Clermont Auvergne - UCA - Université Clermont Auvergne) |
| Abstract: | The disruption of supplies during the Covid-19 crisis has led to shortages but has also shown the adaptability of some companies, which have succeeded in adapting their production chains quickly to produce goods experiencing shortages: hydroalcoholic gel, masks, and medical gowns. These productive jumps from product A to product B are feasible because of the know-how proximity between the two classes of products. The proximities were computed from the analysis of co-exports and resulted in the construction of the product space. Based on the product space, as well as the customer-supplier relationships resulting from the input-output matrices, we propose a recommender system for companies. The goal is to promote distributed manufacturing by recommending a list of local suppliers to each company. As there is not always a local supplier for a desired product class, we consider the proximity between products to identify, in the absence of a supplier, a substitute supplier able to adapt its production tools to provide the required product. Our experiments are based on French data, from which we build a graph of synergies illustrating the potential productive links between companies. Finally, we show that our approach offers new perspectives to determine the level of territories' industrial resilience considering potential productive jumps. |
| Keywords: | Network economics,Supply chain management Sustainable production,COVID-19 and economy,Econometric modeling |
| Date: | 2021–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03500970&r= |
| By: | Flögel, Franz; Hejnová, Tereza |
| Abstract: | An economy's ability to resist adverse shocks, such as an economic recession or natural disaster, is associated with its financial system structure due to different countercyclical funding capabilities. This paper uses a novel database of bank headquarter locations in a cross-country comparison to investigate whether a decentralised geographical structure cushioned economic shocks during the COVID-19 pandemic and the global financial crisis (GFC). Findings suggest that the impacts of decentralisation differ between the two crises: while a greater spread of regional banks was associated with economic resilience during the GFC, countries with more centralised banking systems performed better in the first year of the pandemic. Future studies of pandemic recovery paths will show if regional banks have lost their ability for countercyclical funding, or if this non-financial crisis has rendered financial structure less important. |
| Keywords: | COVID-19 pandemic,regional banks,soft information,economic resilience |
| JEL: | G21 D82 O47 R58 H12 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iatdps:2101&r= |
| By: | Leonor Modesto (UCP, Catolica Lisbon School of Business and Economics); Carine Nourry (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université); Thomas Seegmuller (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université); Alain Venditti (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université, École des hautes études commerciales du Nord (EDHEC)) |
| Abstract: | The relationship between public debt, growth and volatility is investigated in a Barro-type (1990) endogenous growth model, with three main features: we consider a small open economy, international borrowing is constrained and households have taste for domestic public debt. Therefore, capital, public debt and the international asset are not perfect substitutes and the economy is characterized by an investment multiplier. Whatever the level of the debt-output ratio, the existing BGP features expectation-driven fluctuations. If the debt-output ratio is low enough, there is also a second BGP with a lower growth rate. Hence, a lower debt does not stabilize the economy with credit market imperfections. However, a high enough taste for domestic public debt may rule out the BGP with lower growth. This means that if the share of public debt held by domestic households is high enough, global indeterminacy does not occur. |
| Keywords: | Small open economy,Public debt,Credit constraint,Indeterminacy |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03262961&r= |
| By: | Songyan Hou; Thomas Krabichler; Marcus Wunsch |
| Abstract: | Using techniques from deep learning (cf. [B\"uh+19]), we show that neural networks can be trained successfully to replicate the modified payoff functions that were first derived in the context of partial hedging by [FL00]. Not only does this approach better accommodate the realistic setting of hedging in discrete time, it also allows for the inclusion of transaction costs as well as general market dynamics. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.07335&r= |
| By: | Richhild Moessner |
| Abstract: | We study the effects of professionals’ survey-based inflation expectations on inflation for a large number of 36 OECD economies, using dynamic cross-country panel estimation of New-Keynesian Phillips curves. We find that inflation expectations have a significantly positive effect on inflation. We also find that the effect of inflation expectations on inflation is larger when inflation is higher. This suggests that second-round effects via the effects of higher inflation expectations on inflation are more relevant in a high-inflation environment. |
| Keywords: | inflation, inflation expectations, Phillips curve |
| JEL: | E52 E58 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9467&r= |
| By: | Hsu, Wen-Tai; Lu, Lin; Picard, Pierre M. (Université catholique de Louvain, LIDAM/CORE, Belgium) |
| Abstract: | This paper discusses the effect of income inequality on selection and aggregate productivity in a general equilibrium model with non-homothetic preferences. It shows the existence of a negative relationship between the number and quantity of products consumed by an income group and the earnings of other income groups. It also highlights the negative effect of mean-preserving spread of income on aggregate productivity through the softening of firms’ selection. This effect is however mitigated in the presence of international trade. In a quantitative analysis, it is shown that a too large mean-preserving spread of income may harm the rich as it raises firms’ markups on her purchases. This is contrary to the general belief that income inequality benefits the rich. |
| Date: | 2021–11–18 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2021029&r= |
| By: | Stuetzer, Michael (Technische Universität Ilmenau); Brodeur, Abel (University of Ottawa); Obschonka, Martin (Queensland University of Technology); Audretsch, David (Indiana University); Rentfrow, Peter J. (University of Cambridge); Potter, Jeff (Atof Inc., Cambridge); Gosling, Samuel D. (University of Texas at Austin) |
| Abstract: | We study the origins of entrepreneurship (culture) in the United States. For the analysis we make use of a quasi-natural experiment – the gold rush in the second part of the 19th century. We argue that the presence of gold attracted individuals with entrepreneurial personality traits. Due to a genetic founder effect and the formation of an entrepreneurship culture, we expect gold rush counties to have higher entrepreneurship rates. The analysis shows that gold rush counties indeed have higher entrepreneurship rates from 1910, when records began, until the present as well as a higher prevalence of entrepreneurial traits in the populace. |
| Keywords: | gold rush, entrepreneurship, culture |
| JEL: | L26 R12 N5 N9 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14894&r= |
| By: | Ozili, Peterson K |
| Abstract: | This paper highlights the globally-important determinants of financial inclusion. The determinants identified in this paper are formal account ownership; demand for formal savings; demand for formal borrowings; financial literacy and education; debit and credit cards usage; the need to receive remittances from family and friends; size of the financial system; number of automated teller machines (ATMs); number of bank branch; closeness to a bank; availability and access to mobile phones; availability of digital financial products and services; technology infrastructure; government policy; culture and traditional belief systems; national financial inclusion strategy and implementation; and direct legislation. |
| Keywords: | financial inclusion; determinants; unbanked adults; access to finance; digital finance; financial literacy |
| JEL: | G20 G21 I31 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111342&r= |
| By: | Hiroyuki Kubota (The University of Tokyo); Mototsugu Shintani (The University of Tokyo) |
| Abstract: | We identify monetary policy shocks in Japan during the unconventional monetary policy period using high-frequency data for interest rate futures. Following the empirical strategy of Gürkaynak, Sack, and Swanson (2005), we conduct an event study analysis to estimate the effects of the monetary policy surprises on asset prices around the timing of policy announcements made by the Bank of Japan between 1999 and 2020. We find that a monetary policy shock can be described by two factors that have statistically significant effects on the financial market. A surprise monetary tightening has negative effects on stock returns and positive effects on government bond yields, even in the low-interest environment. We also find that the responses of the longer term yields tend to be larger than those of the shorter term yields. The response is the largest for the 10-year government bond yield, which has, in the last two decades, been effectively targeted by the Bank of Japan. This finding contrasts with those of previous studies of the conventional monetary policy period, in which responses are larger for the shorter term yields. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:cfi:fseres:cf530&r= |
| By: | Sushant Acharya; Keshav Dogra; Sanjay Singh |
| Abstract: | We formalize the idea that the financial sector can be a source of non-fundamental risk. Households’ desire to hedge against price volatility can generate price volatility in equilibrium, even absent fundamental risk. Fearing that asset prices may fall, risk-averse households demand safe assets from leveraged intermediaries, whose issuance of safe assets exposes the economy to self-fulfilling fire sales. Policy can eliminate non-fundamental risk by (i) increasing the supply of publicly backed safe assets, through issuing government debt or bailing out intermediaries, or (ii) reducing the demand for safe assets, through social insurance or by acting as a market maker of last resort. |
| Keywords: | Business fluctuations and cycles; Inflation and prices; Monetary policy |
| JEL: | D52 D84 E62 G12 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:22-4&r= |
| By: | Nicholas Bloom; Takafumi Kawakubo; Charlotte Meng; Paul Mizen; Rebecca Riley; Tatsuro Senga; John Van Reenen |
| Abstract: | We link a new UK management survey covering 8,000 firms to panel data on productivity in manufacturing and services. There is a large variation in management practices, which are highly correlated with productivity, profitability and size. Uniquely, the survey collects firms’ micro forecasts of their own sales and also macro forecasts of GDP. We find that better managed firms make more accurate micro and macro forecasts, even after controlling for their size, age, industry and many other factors. We also show better managed firms appear aware that their forecasts are more accurate, with lower subjective uncertainty around central values. These stylized facts suggest that one reason for the superior performance of better managed firms is that they knowingly make more accurate forecasts, enabling them to make superior operational and strategic choices. |
| JEL: | J0 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29591&r= |
| By: | David Anderson (University of Zurich); Urban Ulrych (University of Zurich - Department of Banking and Finance; Swiss Finance Institute) |
| Abstract: | Given the competitiveness of a market-making environment, the ability to speedily quote option prices consistent with an ever-changing market environment is essential. Thus, the smallest acceleration or improvement over traditional pricing methods is crucial to avoid arbitrage. We propose a novel method for accelerating the pricing of American options to near-instantaneous using a feed-forward neural network. This neural network is trained over the chosen (e.g., Heston) stochastic volatility specification. Such an approach facilitates parameter interpretability, as generally required by the regulators, and establishes our method in the area of eXplainable Artificial Intelligence (XAI) for finance. We show that the proposed deep explainable pricer induces a speed accuracy trade-off compared to the typical Monte Carlo or Partial Differential Equation-based pricing methods. Moreover, the proposed approach allows for pricing derivatives with path dependent and more complex payoffs and is, given the sufficient accuracy of computation and its tractable nature, applicable in a market-making environment. |
| Keywords: | American Option Pricing, Deep Neural Networks, Explainable Artificial Intelligence, Speed-Accuracy Trade-Off, Market Making, Heston Model, Computational Finance. |
| JEL: | C45 C63 G13 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2203&r= |
| By: | S{\o}ren Fiig Jarner; Michael Preisel |
| Abstract: | In this paper we analyse the five-factor capital market model of Munk et al.(2004). The model features a Vasicek interest rate model, an equity index with mean-reverting excess return and an index for realized inflation with mean-reverting expectation. The primary aim of the analysis is to facilitate so-called exact simulation from the model on a set of discrete time points. It turns out that this can be achieved by sampling from a (degenerate) seven-dimensional normal distribution. We derive the distributional results necessary and describe how to overcome the rank deficiency of the variance-covariance matrix in practice. The tradeable assets in the original model consist of cash, nominal bonds and stocks. We extend the investment universe to also include inflation bonds by deriving the arbitrage free break-even inflation (BEI) curve for a three-parameter specification of the two market prices of inflation risk. Finally, we provide a number of auxiliary results regarding the dynamics of constant-maturity nominal and inflation bond indices, the distribution of the stock index in nominal and real terms, and the distribution of the Sharpe ratio for individual assets and portfolios with an application to factor investing. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2201.05103&r= |
| By: | Sharma, Palak (Monash University) |
| Abstract: | This paper studies the determinants of access to finance in small and medium enterprises (SMEs) in three South Asian economies, Bangladesh, Pakistan, and Sri Lanka. The data for this study is from the World Enterprise Survey data set for each country collected by the World bank. The paper uses logistic regression for empirical analysis. Findings of this paper confirm that access to formal and informal finance is significantly determined by the size, age, and formalization of firms. The gender of the owner-manager, sales performance, location, and legal status of the firm are insignificant predictors of a firm’s ability to raise finance. Results from this paper can help governments shape policy and develop programs that can augment a firm’s ability to raise financing from formal sources. |
| Keywords: | Economic growth ; informal finance ; SMEs ; World Enterprise survey JEL Classification: O11; O53 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:wrkesp:10&r= |
| By: | Kelly Bishop; Nicolai V. Kuminoff; Sophie Mathes; Alvin Murphy |
| Abstract: | We provide the first evidence that spatial variation in all-cause mortality risk is capitalized into US housing prices. Using a hedonic framework, we recover the annual implicit cost of a 0.1 percentage-point reduction in mortality risk among older Americans and find that this figure is both relatively low and decreasing in age, from $1,346 for a 67 year old to $246 for an 87 year old. These estimates are one-fifth of the size of comparable estimates found in the labor market, suggesting that the housing market provides an alternative, substantially cheaper channel to reducing mortality risk. |
| JEL: | H0 I0 Q0 R0 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29622&r= |
| By: | Christis Katsouris |
| Abstract: | We propose a novel risk matrix to characterize the optimal portfolio choice of an investor with tail concerns. The diagonal of the matrix contains the Value-at-Risk of each asset in the portfolio and the off-diagonal the pairwise Delta-CoVaR measures reflecting tail connections between assets. First, we derive the conditions under which the associated quadratic risk function has a closed-form solution. Second, we examine the relationship between portfolio risk and eigenvector centrality. Third, we show that portfolio risk is not necessarily increasing with respect to stock centrality. Forth, we demonstrate under certain conditions that asset centrality increases the optimal weight allocation of the asset to the portfolio. Overall, our empirical study indicates that a network topology which exhibits low connectivity is outperformed by high connectivity based on a Sharpe ratio test. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.12031&r= |
| By: | Jean-Gabriel Lauzier |
| Abstract: | We design the insurance contract when the insurer faces arson-type risks. The optimal contract must be manipulation-proof. It is therefore continuous, it has a bounded slope, and it satisfies the no-sabotage condition when arson-type actions are free. Any contract that mixes a deductible, coinsurance and an upper limit is manipulation-proof. We also show that the ability to perform arson-type actions reduces the insured's welfare as less coverage is offered in equilibrium. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.06817&r= |
| By: | Wang, Xiaolei (Monash University) |
| Abstract: | We study a two-period duopoly model where firms gather consumer data from first period customers then use them for second-period personalized pricing, with a focus on active consumers who can bypass price discrimination with identity management (IM). As a result, IM weakens competition and allows firms to adopt perfect price discrimination which gives massive profit for firms in the personalized-pricing stage. Anticipating this, firms engage in below-cost pricing in the first stage to compete for consumer data. This strategy is similar to predatory pricing not only because of below-cost pricing but firms can also recoup losses later, however, we show that in this case below-cost pricing is driven by competition and beneficial to consumers. |
| Keywords: | Personalized pricing ; behavior-based price discrimination ; identity management JEL Classification: D43 ; L13 ; L5 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:wrkesp:08&r= |
| By: | Stéphane Zuber (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, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Marc Fleurbaey (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) |
| Abstract: | We highlight a new paradox for the social evaluation of risk that bears on the evaluation of individual well-being rather than social welfare, but has serious implications for social evaluation. The paradox consists in a tension between rationality, respect for individual preferences, and a principle of informational parsimony that excludes individual risk attitudes from the assessment of riskless situations. No evaluation criterion can satisfy these three principles. This impossibility result has implications for the evaluation of social welfare under risk, especially when the preferences of some individuals are not known. It generalizes existing impossibility results, while relying on very weak principles of social rationality and respect for individual preferences. We explore the possibilities opened by weakening each of our three principles and discuss the advantages and drawbacks of these different routes. |
| Keywords: | social welfare,risk,social rationality,Pareto,fairness |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-03454854&r= |
| By: | Liuchun Deng; Pravin Krishna; Mine Zeynep Senses; Jens Stegmaier |
| Abstract: | In this paper, we empirically assess the causal links between trade and individual income risk and study the role that human capital plays in this relationship using a rich, worker-level, longitudinal data set from Germany spanning 1976 to 2012. Our estimates suggest substantial heterogeneity in labor income risk across workers in different entry cohorts and across workers with different levels of industry- and occupation-specific human capital. Our findings suggest that within-industry changes in imports and exports are causally related to income risk: Imports increase risk and exports decrease risk, and they do so in an economically significant manner. Importantly, we find there to be a complex interplay between human capital and the linkage between trade and risk: While, on average, individuals with higher levels of industry- or occupation-specific human capital experience lower income risk, a given increase in net-imports exposure in an industry increases risk for workers with higher levels of industry tenure more than it does for workers with lower levels of industry tenure. High levels of industry-specific human capital can be costly for workers in highly trade-exposed industries. By contrast, we find no evidence of any interaction between risk, industry trade exposure, and occupation-specific human capital. |
| JEL: | F1 F11 F16 F6 J24 J63 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29612&r= |
| By: | Sunny Yangguang Huang (Assistant Professor, Department of Economics and IEMS Faculty Associate; The Hong Kong University of Science and Technology) |
| Abstract: | From 2007 to 2020, China's Peer-to-peer lending market experienced a drastic boom and bust, and ended up with zero surviving platforms. The key reason for the collapse of China's P2P sector was that almost all P2P platforms deviate from the role of information intermediary and became shadow banks offering principal guarantee. As the number of P2P platforms increases, each platform has a greater incentive to offer principal guarantee in responses to fierce competition and the lure of financial fraud under limited regulatory capacity. This hurts the investors' and social welfare. The existence of naive investors makes offering principal guarantee more attractive to platforms. Promoting information disclosure may not solve the problem. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:hku:briefs:202261&r= |
| By: | Nahmadova, Firuza |
| Abstract: | Much of the research on income inequality, and livelihood rely on government labor and wages statistics. In emerging economies, the lack of reliable data and the prevalence of informal employment is often mentioned as the main limitation to the credibility of these studies’ results. Azerbaijan is one such case where it is quasi-impossible to estimate an actual average income as informal employment is over half of the entire economy due to, among others, undeclared revenue, low-level bribery, and low formal income. This paper investigates whether informal employment and the undeclared (informal) income that citizens perceive from the related activities improve their livelihoods in the long-term. The relationship between income inequality and informal employment will be discussed based on a comparative analysis of three developing countries from three different regions, namely Africa, Central America, and South-East Asia. Evidence from these developing economies suggests that informal income does not positively impact their livelihoods. The paper ends with a discussion of the impact of informal employment in Azerbaijan using household income per capita statistics for 2020. The discussion suggests that the prevalence of informal employment does not improve the livelihood of the average household. |
| Keywords: | informal employment, Azerbaijan, poverty, income inequality, wages |
| JEL: | E2 E26 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111039&r= |
| By: | Menyhert, Balint (European Commission - JRC); Cseres-Gergely, Zsombor (European Commission - JRC); Kvedaras, Virmantas (European Commission - JRC); Mina, Benedetta (University of Rome, Tor Vergata); Pericoli, Filippo (European Commission - JRC); Zec, Slavica (European Commission - JRC) |
| Abstract: | This report is the third and final deliverable of the project “Measuring and monitoring absolute poverty (ABSPO)”, a joint initiative of DG Employment, Social Affairs and Inclusion and the Joint Research Centre of the European Commission launched in December 2018. The main objective of this pilot project is to take stock of the existing EU framework for poverty measurement, and explore the development of a new cross-country comparable absolute poverty measure for potential EU-wide use. This Report contains a comprehensive analysis of all relevant measurement aspects, and presents three innovative methodologies based on reference budgets and survey-based statistical methods to calculate new absolute monetary poverty thresholds in a harmonised manner across the EU. The resulting ABSPO poverty estimates are broadly robust to different modelling choices, aligned with most European citizens’ subjective views on poverty, and consistent with the observed patterns of material and social deprivation. They yield a series of new and policy-relevant insights about the extent, distribution and dynamics of poverty between and within Member States. The Report also considers how ABSPO methodologies may be scaled up for regular EU-wide regular measurement, and makes important contributions to a number of different thematic domains of poverty measurement and broader social policy analysis. |
| Keywords: | Poverty, Absolute poverty, Poverty thresholds, Reference budgets |
| JEL: | D31 D63 H53 I32 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc127444&r= |
| By: | Bariz, Historei |
| Abstract: | This dissertation is dedicated to analysing the shift of the primacy of shareholder value to a focus on stakeholder value and the use of information disclosure, ownership structure, and board composition as instruments or levers for value generation in light of this shift. Environmental, social and governance (ESG) topics are becoming omnipresent in capital markets and various stakeholders put management under pressure to act sustainably and to incorporate environmental and social impact goals. Therefore, we first analyse the disclosure of ESG-related information in annual reports and how various measures of impression management (IM) with regard to ESG-related content affect the stakeholders’ assessment of a firm’s credit risk. We show that credit default swap (CDS) markets incorporate ESG-related information in their assessment of a firm's risk. This is significant because we make management aware of IM measures that could be used as proxies for credit risk by various stakeholders and thus help executives mitigate information asymmetry and enhance transparency. Further, we find evidence that firms might engage in strategic IM to positively influence public perception of their credit risk. Therefore, we provide important implications for rating agencies who need to monitor IM biases when interpreting qualitative ESG-related disclosures. We continue to analyse the extension of top management orientation from a shareholder value perspective to a broader stakeholder perspective with a focus on ownership structure. Accordingly, we examine market reactions caused by open letters published by the activist investor Petrus Advisers - who is a minority shareholder - on the target companies' share prices with a regional focus on Continental Europe. Positive capital market reactions are only triggered by initial disclosures directly addressed to the board of the target companies. We therefore suggest that open letters may not be the most favourable single instrument for activist investors in Europe to raise pressure on the executive board. Additionally, we examine how a new position within an organization's leadership ranks affects stakeholder value and implicitly the governance structure of a company. As digital innovation is increasing, more and more companies appoint a Chief Digital Officer (CDO). We analyse market reactions to announcements of newly created CDO positions between 2012 and 2020 and how reactions differ across time periods, sectors and geographical regions. Our results imply that investors perceive that significant value arises when a CDO role associated with the management of the business’s growth and digital transformation strategy is created. The perceived value by stakeholders is even higher the earlier a company takes on the challenges of digital transformation. This cumulative dissertation comprises three stand-alone papers, of which two papers have already been published. |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:dar:wpaper:130087&r= |