nep-inv New Economics Papers
on Investment
Issue of 2023‒05‒29
thirteen papers chosen by
Daniela Cialfi
Università degli Studi di Teramo

  1. Why Do Labor Unions Advocate for Minimum Wage Increases? By Clemens, Jeffrey; Strain, Michael R.
  2. The employment effects of raising negotiated minimum wages for apprentices By Carolin Linckh; Caroline Neuber-Pohl; Harald Pfeifer
  3. Moving Policies T olicies Toward Racial and Ethnic E d Racial and Ethnic Equality: The Case of quality: The Case of the Supplemental Nutrition Assistance Program By Alfonso Flores-Lagunes; Hugo Jales; Judith Liu; Norbert L. Wilson
  4. Stock Market Volatility and Multi-Scale Positive and Negative Bubbles By Rangan Gupta; Jacobus Nel; Joshua Nielsen; Christian Pierdzioch
  5. Minimum Wages and Poverty: New Evidence from Dynamic Difference-in-Differences Estimates By Richard V. Burkhauser; Drew McNichols; Joseph J. Sabia
  6. Social and institutional determinants of digital financial inclusion in Africa: A system GMM Approach By Evans, Olaniyi
  7. Learning, Sophistication, and the Returns to Advertising: Implications for Differences in Firm Performance By Steven Tadelis; Christopher Hooton; Utsav Manjeer; Daniel Deisenroth; Nils Wernerfelt; Nick Dadson; Lindsay Greenbaum
  8. Patience Is Power: Bargaining and Payoff Delay By Jeongbin Kim; Wooyoung Lim; Sebastian Schweighofer-Kodritsch
  9. The Productivity Slowdown in Advanced Economies: Common Shocks or Common Trends? By John G. Fernald; Robert Inklaar; Dimitrije Ruzic
  10. Demographic Transition, Industrial Policies, and Chinese Economic Growth By Michael Dotsey; Wenli Li; Fang Yang
  11. Determinants of Functional Specialisation in EU Countries By Aleksandra Kordalska; Magdalena Olczyk
  12. Foreign-owned firms and occupational gender pay inequality By Dinara Alpysbayeva; Galiya Sagyndykova; Aigerim Yergabulova
  13. Data issues in analyzing agri-food trade in BIMSTEC: Challenges and recommendations By Saroj, Sunil; Roy, Devesh; Kamar, Abul; Pradhan, Mamata

  1. By: Clemens, Jeffrey (University of California, San Diego); Strain, Michael R. (American Enterprise Institute for Public Policy Research)
    Abstract: Over the past decade, organized labor has played a significant role in advocating for minimum wage increases. Why might this be, given that the minimum wage may act as a substitute for the bargaining power offered by labor unions? In this paper, we study the interplay between minimum wages and union membership. We estimate that each dollar in minimum wage increase predicts a 5 percent increase (0.3 pp) in the union membership rate among individuals ages 16–40. Consistent with a classic "free-riding" hypothesis, however, we find that minimum wage increases predict declines in union membership among the minimum wage's most direct beneficiaries. Instead, increases in union membership occur among much broader groups that are not directly affected by the minimum wage.
    Keywords: political economy, social choice, minimum wage, unionization
    JEL: D71 D78 P16
    Date: 2023–04
  2. By: Carolin Linckh; Caroline Neuber-Pohl; Harald Pfeifer
    Abstract: This study examines the employment effects of raising the minimum wages for underage apprentices in Germany. To estimate our effects, we exploit age-, sector-, and state-level variations of negotiated minimum wage increases within a triple difference framework. Using a full sample of apprenticeship contracts, we find negative employment effects, as the number of training contracts for underage apprentices decreases significantly due to the minimum wage adjustments. Furthermore, we find that the negative employment effect increases with the size of the minimum wage adjustments. The effects are mainly driven by a reduction in contracts for low-qualified training applicants and for sectors where firms mainly follow a substitution- rather than an investment-oriented training strategy.
    Keywords: Minimum wage, Apprenticeship market, Collective bargaining
    JEL: J31 J23 J38 J51 J2
    Date: 2023–05
  3. By: Alfonso Flores-Lagunes (Center for Policy Research, Maxwell School, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244); Hugo Jales (Center for Policy Research, Maxwell School, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244); Judith Liu (Department of Economics, University of Oklahoma, 308 Cate Center Dr, Norman, OK 73072); Norbert L. Wilson (Divinity School and Sanford School of Public Policy, Duke University, 407 Chapel Drive, Durham, NC 27708)
    Abstract: We analyze the role played by the Supplemental Nutrition Assistance Program (SNAP) in alleviating or exacerbating inequality across racial and ethnic groups in food expenditures and in the resources needed to meet basic food needs (the “food resource gap”). To do this, we propose a simple framework that decomposes differences across groups in SNAP benefit transfer levels into three components: eligibility, participation, and generosity. This decomposition is then linked to differences in food expenditures and the food resource gap. Our results reveal that among the three components, differences in eligibility contribute the most to SNAP benefits differentials for Black and Hispanic households relative to White households. Given that SNAP is often a target of policy changes, we employ the framework to provide counterfactual analyses of how selected SNAP policy changes can impact group differences in benefits and, ultimately, disparities in food expenditures and the food resource gap. The proposed framework can be applied to analyze other safety net programs.
    Keywords: Mundlak Regression, Panel Data, Fixed and Random Effects, Two-way error components model, Hausman test
    JEL: D12 D63 I38 J15
    Date: 2023–05
  4. By: Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa); Jacobus Nel (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa); Joshua Nielsen (Boulder Investment Technologies, LLC, 1942 Broadway Suite 314C, Boulder, CO, 80302, USA); Christian Pierdzioch (Department of Economics, Helmut Schmidt University, Holstenhofweg 85, P.O.B. 700822, 22008 Hamburg, Germany)
    Abstract: We study whether booms and busts in the stock market of the United States (US) drives its volatility. Given this, first, we employ the Multi-Scale Log-Periodic Power Law Singularity Confidence Indicator (MS-LPPLS-CI) approach to identify both positive and negative bubbles in the short-, medium, and long-term. We successfully detect major crashes and rallies during the weekly period from January 1973 to December 2020. Second, we utilize a nonparametric causality-in-quantiles approach to analyze the predictive impact of our bubble indicators on daily data-based weekly realized volatility (RV). This econometric framework allows us to circumvent potential misspecification due to nonlinearity and instability, rendering the results of weak causal influence derived from a linear framework invalid. The MS-LPPLS-CIs reveal strong evidence of predictability for RV over its entire conditional distribution. We observe relatively stronger impacts for the positive bubbles indicators, with our findings being robust to an alternative metric of volatility, namely squared returns, and weekly realized volatilities derived from 5 (RV5)- and 10 (RV10)-minutes interval intraday data. Furthermore, we detect evidence of predictability for RV5 and RV10 of nine other developed and emerging stock markets. Finally, we also find strong evidence of causal feedbacks from RV5 and RV10 on to the MS-LPPLS-CIs of the 10 countries considered. Our findings have significant implications for investors and policymakers.
    Keywords: Multi-Scale Positive and Negative Bubbles, Realized Volatility, Nonparametric Causality-in-Quantiles Test, International Stock Markets
    JEL: C22 G15
    Date: 2023–05
  5. By: Richard V. Burkhauser; Drew McNichols; Joseph J. Sabia
    Abstract: Advocates of minimum wage increases have long touted their potential to reduce poverty. This study assesses this claim. Using data spanning nearly four decades from the March Current Population Survey, and a dynamic difference-in-differences approach, we find that a 10 percent increase in the minimum wage is associated with a (statistically insignificant) 0.17 percent increase in the probability of longer-run poverty among all persons. With 95% confidence, we can rule out long-run poverty elasticities with respect to the minimum wage of less than -0.129, which includes central poverty elasticities reported by Dube (2019). Prior evidence suggesting large poverty-reducing effects of the minimum wage are (i) highly sensitive to researcher’s choice of macroeconomic controls, and (ii) driven by specifications that limit counterfactuals to geographically proximate states (“close controls”), which poorly match treatment states’ pre-treatment poverty trends. Moreover, an examination of the post-Great Recession era — which saw frequent, large increases in state minimum wages — failed to uncover poverty-reducing effects of the minimum wage across a wide set of specifications. Finally, we find that less than 10 percent of workers who would be affected by a newly proposed $15 federal minimum wage live in poor families.
    JEL: J23 J38
    Date: 2023–04
  6. By: Evans, Olaniyi
    Abstract: African nations have shown remarkable promise in digital financial services in recent years. However, much more remains to be done. Given this background, this study empirically investigates the social and institutional determinants of digital financial inclusion for a panel of 42 African countries using system GMM for the period 1995-2018. The empirical results show that social factors such as literacy, infrastructure, unemployment rate and standard of living have significant influence on digital financial inclusion. These results suggest that social realities matter for digital financial services. Equally, institutional factors such as political stability and absence of violence, control of corruption, regulatory quality, government effectiveness and rule of law have statistically significant and positive effects. These results suggest that better governance and better institutions correlate with faster digital financial inclusion. The estimates are robust to changes in estimation methods.
    Keywords: digital financial services, social and institutional determinants
    JEL: O3 O33 O35
    Date: 2022
  7. By: Steven Tadelis; Christopher Hooton; Utsav Manjeer; Daniel Deisenroth; Nils Wernerfelt; Nick Dadson; Lindsay Greenbaum
    Abstract: Why do establishments exhibit wide variation in their productivity and profitability? Can variation in returns to advertising help answer this question? We present results from a large field experiment on Facebook and Instagram that documents variance in advertisers’ ability to generate returns to advertising. We focus on campaigns aimed at boosting sales and tie advertising expenses to revenues for each advertiser. We find that spending on advertising led to significant increases in revenues, number of purchases, number of purchasers, and number of conversions. The heterogeneity in these results by expenditure, age, and engagement documents patterns consistent with learning by doing and variance in how sophisticated advertisers are. Advertisers who engage in more learning activities and more sophisticated data collection exhibit the highest returns and are more likely to continue their activities over time, suggesting that differences in advertising effectiveness may account for some of the variance in productivity across firms.
    JEL: D24 E22 L25 M37
    Date: 2023–04
  8. By: Jeongbin Kim; Wooyoung Lim; Sebastian Schweighofer-Kodritsch
    Abstract: We provide causal evidence that patience is a significant source of bargaining power. Generalizing the Rubinstein (1982) bargaining model to arbitrarily non-stationary discounting, we first show that dynamic consistency across bargaining rounds is sufficient for a unique equilibrium, which we characterize. We then experimentally implement a version of this game where bargaining delay is negligible (frequent offers, so dynamic consistency holds by design), while payoff delay is significant (a week or month per round of disagreement, with or without front-end delay). Our treatments induce different time preferences between subjects by randomly assigning individuals different public payoff delay profiles. The leading treatment allows to test for a general patience advantage, predicted independent of the shape of discounting, and it receives strong behavioral support. Additional treatments show that this advantage hinges on the availability of immediate payoffs and reject exponential discounting in favor of present-biased discounting.
    Keywords: Alternating-Offers Bargaining, Time Preferences, Present Bias, Laboratory Experiments
    JEL: C78 C91 D03
    Date: 2023–05–09
  9. By: John G. Fernald; Robert Inklaar; Dimitrije Ruzic
    Abstract: This paper reviews advanced-economy productivity developments in recent decades. We focus primarily on the facts about, and explanations for, the mid-2000s labor-productivity slowdown in large European countries and the United States. Slower total factor productivity growth was the proximate cause of the slowdown. This conclusion is robust to measurement challenges including the role of intangible assets, rankings of productivity levels, and data revisions. We contrast two main narratives for the stagnating productivity frontier: The shock of the Global Financial Crisis; and a common slowdown in productivity trends. Distinguishing these two empirically is hard, but the pre-recession timing of the U.S. slowdown suggests an important role for the common-trend explanation. We also discuss the unusual pattern of productivity growth since the start of the Covid-19 pandemic. Although it is early, there is little evidence so far that the large pandemic shock has changed the slow pre-pandemic trajectory of productivity growth.
    Keywords: productivity growth; Great Recession; convergence
    JEL: D24 E23 E44 F45 O47
    Date: 2023–02–26
  10. By: Michael Dotsey; Wenli Li; Fang Yang
    Abstract: We build a unified framework to quantitatively examine the demographic transition and industrial policies in contributing to China’s economic growth between 1976 and 2015. We find that the demographic transition and industrial policy changes by themselves account for a large fraction of the rise in household and corporate savings relative to total output and the rise in the country’s per capita output growth. Importantly, their interactions also lead to a sizable fraction of the increases in savings since the late 1980s and reduce growth after 2010. A novel and important factor that drives these dynamics is endogenous human capital accumulation, which depresses household savings between 1985 and 2010 but leads to substantial gains in per capita output growth after 2005.
    Keywords: Aging; Credit policy; Household saving; Output growth; China
    JEL: E21 J11 J13 L52
    Date: 2022–06–27
  11. By: Aleksandra Kordalska; Magdalena Olczyk
    Abstract: This paper aims to identify factors that determine functional specialisation (FS) in global value chains (GVCs) in European Union countries. We focus on fabrication and R&D as two opposite business functions in terms of their character and their potential of creating value-added. To make our results robust two different approaches to measuring functional specialisation are used – an FDI-based approach and a trade-based approach. To assemble a relative functional specialisation index, for each approach we use the same metric – a revealed comparative advantages index. Our results suggest a positive effect of wages on specialisation in an R&D function, and a negative impact on FS in fabrication. Increasing labour productivity boosts both specialisation in fabrication and in R&D. The results are robust to different model specifications and different time intervals. The instrumental variables method allows us to interpret the results as causal relationships. Additionally, human capital and labour skills foster FS in R&D (only in FDI data), and growing employment makes FS in fabrication increase. The growth of GDP per capita positively affects functional specialisation in R&D activities. Among GVC participation measures, we confirm the importance of increasing backward linkages to explain the boost in fabrication activities. Dividing a full sample into a group of EU15 countries and a group of Central Eastern European countries we observe that patterns for the EU15 are similar to those for the full sample, while for CEE countries wages are insignificant and labour productivity affects FS in fabrication only.
    Keywords: functional specialisation, global value chains, smile curve, factory economy, headquarters economy
    JEL: F15 F21 F23 F63 L23
    Date: 2023–05
  12. By: Dinara Alpysbayeva (Norwegian University of Life Sciences, School of Economics and Business); Galiya Sagyndykova (Nazarbayev University, School of Sciences and Humanities); Aigerim Yergabulova (Nazarbayev University, Graduate School of Business)
    Abstract: Despite significant progress in gender equality over the past decades, women's access to equal pay is still a persistent and complex issue. Recent research on the gender pay gap in foreign-owned companies has illuminated the possible effects of foreign ownership on the gender wage gap, emphasizing the significance of addressing this problem for advancing gender equality in the context of global trade and economic growth. This paper examines the gender pay gap in Kazakhstan, with a focus on the impact of foreign ownership and the gender-occupational composition of firms. The study aims to identify the underlying sources of the gender pay gap and whether it can be attributed to either wage discrimination or productivity differences, and how the institutional background of Kazakhstan may influence this issue. Our primary estimation technique throughout the analysis is the reduced-form linear probability model. We show that the gender pay gap is higher in foreign-owned firms, especially for managerial positions. Interestingly, our findings align with distinct sources of the disparity in foreign-owned firms and domestic firms. For foreign-owned firms, we find a gender wage gap only in management positions, consistent with a wage gap driven by work requirements that disproportionately impact women in career advancement. For domestic-owned firms, we find a rural versus urban difference in the gender wage gap which indicates discrimination based on traditional gender stereotypes. We do not find any evidence to suggest that the wage disparity is due to productivity differences. Based on our findings, policy measures should include flexible work arrangements that enhance temporal flexibility to reduce the gender pay gap and improve outcomes for female employees.
    Keywords: gender pay inequality, occupations, foreign ownership, Kazakhstan
    Date: 2023–08
  13. By: Saroj, Sunil; Roy, Devesh; Kamar, Abul; Pradhan, Mamata
    Abstract: The focus of research on international trade has recently shifted from industries and countries to firms. Firm heterogeneity is shown to be a determinant of trade at both the intensive margin (increase exports per firm/product) and extensive margins (the number of firms exporting – new products, new partners, new varieties, and new prices). It is now widely accepted that exporting firms are larger, comparatively productive, more skilled, and capital-intensive, and pay higher wages than non-exporting firms. The innovations in international trade literature that explains both the emergence as well as levels and the nature of trade flows through value chain integration necessitates examining trade-based exchanges at the highest possible levels of product disaggregation. Developments in trade theory emphasize that it is individual firms not countries that trade and analysis needs to incorporate firm characteristics in decisions and ability for exporting and importing. Firms are the appropriate unit of analysis for trade flows. It helps several paradoxes once the import of firm heterogeneity is understood. Despite the substantive importance of granular level data and the significant level of disaggregated product-level bilateral trade flow data and enhanced computing power that are becoming available, most studies have tended to rely on analysis with high level of aggregation. Recent research on firm heterogeneity in international trade highlights the importance of extensive margins i.e., new products, new partners, new varieties, and cumulative of these i.e., new prices in trade patterns and firms' responses to trade liberalization and other policy changes. However, the high dimensionality of the data and the large number of responses to changes can easily overwhelm researchers. Additionally, bigger data sets may contain more noise, which can mask important systematic patterns. In analysis of trade flows, notwithstanding the rising incidence of differentiated products (varieties) and value chains that transcend national boundaries, methods in agri-food trade analysis in particular have not kept pace in terms of empirical methods and suitable data.
    Keywords: BANGLADESH; BHUTAN; NEPAL; INDIA; SOUTH ASIA; MYANMAR; BURMA; SRI LANKA; THAILAND; SOUTH EAST ASIA; ASIA; international trade; firms; exports; productivity; wages; value chain; innovations; data; agri-food system; policies
    Date: 2023

This nep-inv issue is ©2023 by Daniela Cialfi. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.