nep-inv New Economics Papers
on Investment
Issue of 2023‒06‒26
nineteen papers chosen by
Daniela Cialfi
Università degli Studi di Teramo

  1. News or Animal Spirits? Consumer Confidence and Economic Activity: Redux By Sangyyup Choi; Jaehun Jeong; Dohyeon Park; Donghoon Yoo
  2. Employment and Reallocation Effects of Higher Minimum Wages By Moritz Drechsel-Grau
  3. Labor Market Frictions and Spillover Effects from Publicly Announced Sectoral Minimum Wages By Demir, Gökay
  4. The Employment Effects of a Wage Subsidy for the Young during an Economic Recovery By Kunze, Astrid; Palczyńska, Marta; Magda, Iga
  5. Gated Deeper Models are Effective Factor Learners By Jingjing Guo
  6. Trajectory of covid-19 impacts on food security in Ethiopia: A panel data approach. By Debalke, Negash Mulatu
  7. Housing values in New Jersey and the Prospects for Municipal Consolidation By Douglas Coate
  10. ON THE DEVELOPMENT OF THE ISLAMIC BENCHMARK RATE: AN INDONESIAN CASE By Jardine A. Husman; Ali Sakti; Dahnila Dahlan; Imam Wahyudi Indrawan; Zaäfri A. Husodo; Nur Dhani Hendranastiti; Muhammad Budi Prasetyo; Wahyu Jatmiko
  11. Valuing the avoidance of IQ losses in children: A large scale multi-country stated preference approach By Susana Mourato; Giles Atkinson; Damien Dussaux; Chiara Sotis; Stavros Georgiou; Davide Contu
  12. Getting ahead of the game: Experiential learning for groundwater governance in Ethiopia By ElDidi, Hagar; Zhang, Wei; Gelaw, Fekadu; De Petris, Caterina; Blackmore, Ivy; Teka, Natnael; Yimam, Seid; Mekonnen, Dawit Kelemework; Ringler, Claudia; Meinzen-Dick, Ruth Suseela
  13. Have Cycling-Friendly Cities Achieved Cycling Equity? Analyses of the Educational Gradient in Cycling in Dutch and German Cities By Hudde, Ansgar
  14. Big Tech, the platform economy and the European digital markets By Brühl, Volker
  15. Foreign Direct Investment and Structural Transformation in Africa By Bernard Hoekman; Marco Sanfilippo; Margherita Tambussi
  16. Debt crises, fast and slow Giancarlo By Giancarlo Corsetti
  17. Intergenerational Scars: The Impact of Parental Unemployment on Individual Health Later in Life By Ubaldi, Michele; Picchio, Matteo
  18. Taxpayer response to greater progressivity: Evidence from personal income tax reform in Uganda By Maria Jouste; Tina Barugahara; Joseph Ayo; Jukka Pirttilä; Pia Rattenhuber
  19. Exchange Rate Misalignment and External Imbalances: What is the Optimal Monetary Policy Response? By Giancarlo Corsetti; Luca Dedola; Sylvain Leduc

  1. By: Sangyyup Choi (Yonsei University); Jaehun Jeong (Duke University); Dohyeon Park (Sogang University); Donghoon Yoo (Academia Sinica)
    Abstract: Barsky and Sims (2012, AER) demonstrated, via indirect inference, that confidence innovations can be viewed as noisy signals about medium-term economic growth. They highlighted that the connection between confidence and subsequent activity, such as consumption and output, is primarily driven by news shocks about the future. We expand upon their research in two significant ways. First, we incorporate the Great Recession and ZLB episodes, and second, we employ unique state-level data to offer insights into how to interpret the relationship between consumer confidence and economic activity. Our results confirm the main finding of Barsky and Sims (2012) that this relationship is predominantly driven by news about the future.
    Keywords: Consumer confidence, news, animal spirits, Great Recession, state-level analysis.
    JEL: E12 E21 E31 E32 E71
    Date: 2023–04
  2. By: Moritz Drechsel-Grau
    Abstract: This paper studies the employment and reallocation effects of minimum wages in Germany in a search-and-matching model with endogenous job search effort and vacancy posting, multiple employment levels, a progressive tax-transfer system, and worker and firm heterogeneity. I find that minimum wages up to 70% of the median wage significantly increase productivity, hours worked and output without reducing employment. In frictional labor markets, however, reallocation takes time whenever the minimum wage cuts deep into the wage distribution. I show that gradually implementing a high minimum wage is necessary to avoid elevated unemployment rates during the transition.
    Keywords: minimum wage, reallocation, employment, job search, worker and firm heterogeneity, hours worked, equilibrium search-and-matching model, transition dynamics
    JEL: E24 E25 E64 J20 J31 J38
    Date: 2023
  3. By: Demir, Gökay (RWI – Leibniz Institute for Economic Research)
    Abstract: This paper analyzes the spillover effects of the first sectoral minimum wage in Germany. Using a triple differences estimation, the study examines the impact of public discussion and announcement of the minimum wage on workers and industries outside the minimum wage sector. The results show that the public discussion and announcement led to an increase in wages, job-to-job transitions and reallocation from low-paying to high-paying establishments among sub-minimum wage workers in similar jobs outside the minimum wage sector. The main mechanism for these effects appears to be the reduction of information frictions, rather than strategic interaction of employers.
    Keywords: spillover, labor market frictions, minimum wages, information frictions
    JEL: J31 J38 J42 J62
    Date: 2023–06
  4. By: Kunze, Astrid (Norwegian School of Economics); Palczyńska, Marta (Institute for Structural Research (IBS)); Magda, Iga (Warsaw School of Economics)
    Abstract: This study investigates the employment effects of a large-scale wage subsidy programme for the young unemployed that was introduced in 2016, during a period of recovery in the Polish economy. The focus is on the question of whether the effects differed between men and women. The study employs a large population administrative data set from the unemployment register, and exploits for identification the fact that firms were only eligible to participate in the wage subsidy programme if the newly recruited worker was below age 30 and was previously unemployed. A challenge in this research is that before 2016, standard packages of active labour market programmes for all unemployed and specific programmes for unemployed below age 30 had been in place. Exploiting the long period and broad data coverage, we estimate the differential impact of the new programme using a difference-in-discontinuities design. The main finding is that over the medium term, the new wage subsidy programme was effective for low- and middle-skilled eligible young women, but not for men. We discuss the policy implications of such programmes targeting young unemployed people.
    Keywords: wage subsidy, youth unemployment, gender differences, difference-in-discontinuities, register data
    JEL: J08 J64 J68
    Date: 2023–05
  5. By: Jingjing Guo
    Abstract: Precisely forecasting the excess returns of an asset (e.g., Tesla stock) is beneficial to all investors. However, the unpredictability of market dynamics, influenced by human behaviors, makes this a challenging task. In prior research, researcher have manually crafted among of factors as signals to guide their investing process. In contrast, this paper view this problem in a different perspective that we align deep learning model to combine those human designed factors to predict the trend of excess returns. To this end, we present a 5-layer deep neural network that generates more meaningful factors in a 2048-dimensional space. Modern network design techniques are utilized to enhance robustness training and reduce overfitting. Additionally, we propose a gated network that dynamically filters out noise-learned features, resulting in improved performance. We evaluate our model over 2, 000 stocks from the China market with their recent three years records. The experimental results show that the proposed gated activation layer and the deep neural network could effectively overcome the problem. Specifically, the proposed gated activation layer and deep neural network contribute to the superior performance of our model. In summary, the proposed model exhibits promising results and could potentially benefit investors seeking to optimize their investment strategies.
    Date: 2023–05
  6. By: Debalke, Negash Mulatu
    Abstract: Covid-19 affects food security of households through different pathways. Studies from developing countries show that the pandemic had heterogeneous impacts on food security across various groups of households. This study aims to examine the trajectory of and differential impacts of the early days of the pandemic on food security in Ethiopia along households’ location, ownership of assets and varying livelihoods and income sources. Using the World Bank’s harmonized panel data on households drawn from the high frequency phone survey, the study undertakes fixed effects regressions. The results indicated that Covid-19 pandemic had a statistically significant impact, but a declining trend, on overall food insecurity in Ethiopia. Households in urban areas have faced a higher chance of being severely food insecure than those in rural, while those households that rely more on the agriculture have a lower odds of being food insecure. Ownership of livestock decreases probability of being severely food insecure. Besides, households whose income source was rental and wage employment were significantly exposed to food insecurity due to the pandemic. Moreover, the results identified significant heterogeneity of the impacts between households with and without receiving remittance and assistance. This suggests the important role of social protection in guarding households from food insecurity during the pandemic in the short term. Overall, the paper determined that living in rural/urban, ownership of land and livestock, rental income, remittance, assistance and wage employment are statistically significant indicators of heterogeneity in the pandemic’s impacts on food insecurity.
    Keywords: Covid-19; Pandemic; Impacts; Food insecurity; Heterogeneity; Trajectory
    JEL: O55
    Date: 2023–05–31
  7. By: Douglas Coate
    Abstract: New Jersey has the highest property taxes in the US and the largest number of municipalities per square mile. Two hundred ninety seven of the 565 municipalities are smaller than 5 square miles and 172 of these are smaller than two square miles. Yet there has been only one significant merger of New Jersey municipalities in the past half century despite a number of state programs to subsidize or otherwise encourage consolidations. Either residents of smaller municipalities question the potential for cost savings and property tax reductions from consolidations and/or value close-to-home rule over any efficiencies that might be realized. In this research I have found that there is a premium in residential real estate as exemplified by three bedroom home values in smaller New Jersey municipalities as measured by population. These findings are from regression models that explain three bedroom home sales values in the spring of 2022 in New Jersey places, taken from Zillow public use data files I conclude from these results that sentiment towards consolidation among New Jersey residents of smaller municipalities is not likely to emerge anytime soon.
    Keywords: municipal consolidation, New Jersey, home values
    JEL: R50 R21 H70 H73
    Date: 2022–02
  8. By: Mpinganzima Sonia; Sikubwabo Cyprien
    Abstract: In Rwanda, ministry of education is putting more effort to develop education system so that the citizens can be competent at the market that the reason why there was the introduction of competence based curriculum from knowledge based curriculum but to achieve this teaching and administrative staff should do their tasks as are the implementers of policies. The study intended to investigate the effect of teacher’s time management, preparation, and program completion on learner’s academic achievement in Rwandan primary schools and it had the following specific objectives: To examine the effect of teacher preparation on learners’ academic performance in Nyakibanda sector, to analyze the effect of teacher time management on learners’ academic performance in the Nyakabanda sector. It basically used the descriptive research design in carrying out the study and in selecting the respondents, random sampling were undertaken to 70 teachers and for selecting 5 administrative staff, the researcher use census method as their number was sufficient to be in sample. Data were analyzed using statistical tools such as frequencies, percentages, weighted mean, standard deviation, regression and correlation. Findings of the study revealed that there is significant relationship between teacher’s time management, preparation on learner’s academic achievement in Rwandan primary schools. This results was reached after using regression analysis using soft called SPSS. Therefore, it was revealed that all variables have significant effect on leaners academic performance which are preparation of pedagogical documents, time management. And finally, the researcher confirmed that there is significant relationship between teacher’s time management, preparation on learner’s academic achievement in Rwandan primary schools Key words: teachers’ preparation, teachers’ time management, and learners’ academic performance.
    Date: 2022–09
    Abstract: Countries that have imbibed the culture of effective governance, especially economic governance developed more rapidly than those that failed given the key components that made economic governance. The North Central zone of Nigeria (comprising the states of Benue, Kogi, Kwara, Niger, Nasarawa and Plateau and the territory of Federal Capital-Abuja ) is an integral part of Nigeria that over the years had suffered from the mirage of bad economic governance. This situation is reflected in several policy inconsistencies, policy somersaults, failure to effectively implement plans/policies/programmes of the government, institutional weaknesses, corruption, mismanagement and the lack of political will to address corruption and mismanagement of resources (human, financial and material) which have led to underdevelopment, increase in the rate of poverty, increase in unemployment, increase in inequality, increase in insecurity and infrastructure decay among other challenges of the zone. For instance, as indicated in Table 1, given the failure of plans/policies and programmes of governments over time due mostly to corruption and mismanagement, the North Central zone of Nigeria recorded an increase in the prevalence of bribery than any of the zones in the country from 28.1 per cent in 2016 to 32.1 per cent in 2019. Briberies are taken and given in this zone just like any other zone to speed up procedures and avoid levies from government services and fines for offences committed by some of their citizens.
    Date: 2023–05–22
  10. By: Jardine A. Husman (Bank Indonesia); Ali Sakti (Bank Indonesia); Dahnila Dahlan (Bank Indonesia); Imam Wahyudi Indrawan (Bank Indonesia); Zaäfri A. Husodo (University of Indonesia); Nur Dhani Hendranastiti (University of Indonesia); Muhammad Budi Prasetyo (University of Indonesia); Wahyu Jatmiko (University of Indonesia)
    Abstract: Purpose — Central to the long-standing issue of Islamic finance is the lack of an established reference rate. This study proposes an alternative to the Islamic benchmark rate by linking it with the performance of underlying businesses. Design/methodology/approach — First, we derive the very definition of how a particular rate can be considered Islamic employing a thorough literature review. Second, this study then calculates the Cash Recovery Rate (CRR) and the Return on Invested Capital (ROIC) for each country listed on the Indonesia Stock Exchange. Third, we then analyse the statistical descriptive, correlation in terms of its value and graphical plot at both the univariate and multivariate levels. Findings — Our thorough literature review suggests that the classic CRR and the ROIC are theoretically consistent with the principles of pricing in Islamic finance. This is also empirically confirmed by employing the Indonesian data, where we observe a high correlation between CRR (ROIC) and short-term (long-term) economic macroeconomic indicators. Originality — To the best of our knowledge, this is the first study exploring the possibility of CRR and ROIC as Islamic benchmark pricing. Research limitations/implications — The spatial focus of this study is Indonesia. While the robustness check has incorporated the case of the US. Other countries may have different structures and institutions of the financial markets. Practical implications — The classic measures of firm performance CRR and ROIC prove useful to be alternatives to Islamic benchmarking both theoretically and empirically.
    Keywords: Asset Pricing, Cash Recovery Rate, Islamic Benchmark Rate, Real Business Return, Return on Invested Capital
    JEL: F11
    Date: 2022
  11. By: Susana Mourato; Giles Atkinson; Damien Dussaux; Chiara Sotis; Stavros Georgiou; Davide Contu
    Abstract: Exposure to chemicals has been shown to reduce IQ in children. In turn, a person’s IQ is likely to affect their educational achievements, which may then affect lifetime earnings, more generally, a person’s quality of life. At the same time, authorities face challenges in regulating chemical substances through actions such as bans and prohibitions, because of the difficulty in explicitly considering the economic benefits and costs of such regulations. Moreover, economic studies that show the value of reducing IQ loss caused by chemical exposure are not yet available.This paper is part of the series of large scale willingness to pay (WTP) studies resulting from the Surveys to elicit Willingness to pay to Avoid Chemicals related negative Health Effects (SWACHE) project that intends to improve the basis for doing cost benefit analyses of chemicals management options and environmental policies in general. The present paper details a stated preference survey estimating WTP to avoid IQ loss, filling an important gap in the valuation literature and addressing a need for applied benefits analysis for chemicals regulation. The SWACHE IQ loss survey was fielded in 11 countries: Australia, Canada, Denmark, Korea, Netherlands, Poland, Portugal, South Africa, Sweden, the United Kingdom and the United States.
    Keywords: chemicals regulation, economic valuation, health risk, health valuation, IQ, monetised benefits, morbidity valuation, non-market valuation, stated preferences, surveys, value of a statistical case, willingness-to-pay
    JEL: D61 I18 J17 K32 Q51 Q53 Q58
    Date: 2023–06–05
  12. By: ElDidi, Hagar; Zhang, Wei; Gelaw, Fekadu; De Petris, Caterina; Blackmore, Ivy; Teka, Natnael; Yimam, Seid; Mekonnen, Dawit Kelemework; Ringler, Claudia; Meinzen-Dick, Ruth Suseela
    Abstract: The goal of this study is to assess the potential of game-based experiential learning in raising awareness and stimulating discussions about groundwater resource systems, the social dilemma in groundwater management, and the need for institutional arrangements (rules) governing this shared resource, as well as whether such awareness and community discussions lead to actual change in groundwater governance in Ethiopia. Groundwater management is highly complex, with many users sharing the same resource often without realizing their interconnectedness. Behavioral experiments (games) that simulate real-life common-pool resource use have shown promise as an experiential learning tool for improving resource governance. This study pilots an experiential learning intervention in Ethiopia using a groundwater gameto help raise awareness of groundwater over-extraction and improve understanding of the importance of collective action in governance. The Meki River catchment in rural Ethiopia is a unique context where small-scale irrigation is expanding, but overextraction and competition over groundwater have not yet reached alarming levels. The groundwater game, adapted from Meinzen-Dick et al. (2016 and 2018), was played in 15 villages, accompanied by community-wide debriefing discussions in each village after the game to reflect on the process and lessons learned, and to stimulate discussions around groundwater governance. We carried out participant surveys to capture individual mental models regarding groundwater use and management, as well as any immediate learning effects. Focus group discussions were held in each village prior to the intervention to establish a baseline and again six months after the intervention to assess possible lasting effects. The findings indicate cognitive, normative and relational learning, including increased understanding of groundwater dynamics (such as the joint effect of diverse water uses and users), the importance of collective action in resource management, and the benefits of communication. We find gendered differences in decision-making about resource extraction in the game and evolvement of group-level resource management across no-communication, communication, and rule-making rounds of the game. We discuss community-wide learning and institutions-building, and considerations for future intervention designs. We recommend embedding experiential learning, facilitated by local extension officers or other community engagement practitioners, in intervention packages that include both technical assistance on water-conserving technologies and management approaches and support in building communities’ institutional capacity.
    Keywords: ETHIOPIA; EAST AFRICA; AFRICA SOUTH OF SAHARA; AFRICA; governance; groundwater; irrigation; resources; experiential learning; resource management; collective action; decision making; gender; communication; extension; games; common-pool resource; Meki River
    Date: 2023
  13. By: Hudde, Ansgar
    Abstract: In German cities, higher levels of education increase people’s propensity to cycle. However, it remains unknown whether this effect is restricted to certain contexts, such as cities with low or medium cycling rates, or whether it is a more universal occurrence. This paper develops and tests competing hypotheses on how the effect of education on cycling might depend on the overall cycling level: (a) educational inequalities in cycling could increase proportionally with the overall cycling level or (b) such inequalities might diminish in high-cycling cities because their advanced pro-cycling mobility cultures encourage cycling among all social groups. I analyse about 150, 000 trips made by about 50, 000 residents from 143 cities in the Netherlands and Germany using multilevel regression models. Results fall in between the competing hypotheses, meaning that the effect of education is similarly large in cities with low, medium, or high overall levels of cycling. Hence, there is no automatism in the sense that higher cycling shares in general will also imply greater cycling equity.
    Date: 2023–02–04
  14. By: Brühl, Volker
    Abstract: Digital platforms have become an important part of the digital economy by facilitating transactions between large numbers of users and by fostering innovation on collaborative platforms. In combination with technical platform services, some platform operators have managed to create powerful ecosystems that create network externalities and benefit from economies of scale and economies of scope. It is striking that, due to the specific economic drivers of the digital infrastructure, platform-based or platform-related services are dominated by a select number of global players. Most of the global platform operators are headquartered in the US, including Alphabet, Amazon, Apple, Meta and Microsoft, also known as the "Big 5". Some are located in Asia (e.g. Alibaba, Tencent). In Europe there are only a limited number of platform operators with a small market share. [...]
    JEL: L14 L22 L25
    Date: 2023
  15. By: Bernard Hoekman; Marco Sanfilippo; Margherita Tambussi
    Abstract: This paper analyzes the relationship between inward FDI and structural transformation of local labour markets in Africa. We combine geolocalized information on the distribution of FDI with a noveldatabase that provides information from 40, 665, 627 individuals in 2, 570 subnational units over the period 1987-2019. Results are suggestive of a positive effect of FDI on structural transformation.FDI contributes to an increase in employment, and shifts of workers towards modern industries and higher-skilled occupations. No effects are found on self-employment. Results are heterogeneous, reflecting the characteristics of the foreign investor and of the business activity undertaken by foreign firms in the local market. Geospatial analysis of changes in performance of domestic firms exposed to nearby FDI projects provides evidence of horizontal spillovers and inter-industry linkages, suggesting a complementary mechanism through which FDI drives structural change.
    Keywords: FDI, Jobs, Structural Transformation, Africa
    Date: 2023–01
  16. By: Giancarlo Corsetti
    Abstract: We build a dynamic model where the economy is vulnerable to belief-driven slowmoving debt crisesat intermediate debt level, and rollover crises at both low and high debt levels. Vis-à-vis the threatof slow-moving crises, countercyclical deficits generally welfare-dominate debt reduction policies.In a recession, optimizing governments only deleverage if debt is close to the threshold below whichbelief-driven slow-moving crises can no longer occur. The welfare benefits from deleveraging insteaddominate if governments are concerned with losing market access even at low debt levels. Longbond maturities may fully eliminate belief-driven rollover crises but not slow-moving ones.
    Keywords: Sovereign default, Self-fulfilling crises, Expectations, Debt sustainability
    Date: 2023–02
  17. By: Ubaldi, Michele (Marche Polytechnic University); Picchio, Matteo (Università Politecnica delle Marche, Ancona)
    Abstract: This paper studies whether individuals that experienced parental unemployment during their childhood/early adolescence have poorer health once they reach the adulthood. We used data from the German Socio-Economic Panel from 2002 until 2018. Our identification strategy of the causal effect of parental unemployment relied on plant closures as exogenous variation of the individual labor market condition. We combined matching methods and parametric estimation to strengthen the causal interpretation of the estimates. On the one hand, we found a nil effect for parental unemployment on mental health. On the other hand, we detected a negative effect on physical health. The latter is stronger if parental unemployment occurred in early periods of the childhood, and it is heterogeneous across gender. The negative effect of parental unemployment on physical health may be explained by a higher alcohol and tobacco consumption later in life.
    Keywords: parental unemployment, plant closure, mental health, physical health, health behaviors
    JEL: I14 J13 J62 J65
    Date: 2023–04
  18. By: Maria Jouste; Tina Barugahara; Joseph Ayo; Jukka Pirttilä; Pia Rattenhuber
    Abstract: We evaluate a major personal income tax reform in Uganda that came into effect in 2012-13, contributing to the scarce literature on the effects of personal income tax reform on employees' income in a low-income country in Africa. The reform increased the tax-free lower threshold, increased tax rates for higher incomes, and introduced an additional highest tax band for top 1% of income earners. Using the universe of pay-as-you-earn (PAYE) administrative data from the Uganda Tax Authority, we analyse the impact of the reform on reported labour incomes.
    Keywords: Personal income tax, Uganda, Administrative data, Tax reform
    Date: 2023
  19. By: Giancarlo Corsetti; Luca Dedola; Sylvain Leduc
    Abstract: How should monetary policy respond to excessive capital inflows that appreciate the currency, widen the external deficit and cause overheating? Using the workhorse open-macro model, we derive a quadratic approximation of the utility-based global loss function in incomplete market economies, and solve for the optimal targeting rules under cooperation. The optimal monetary stance is expansionary if the exchange rate pass-through (ERPT) on import prices is complete, contractionary if nominal rigidities reduce the ERPT. Excessive capital inflows, however, may lead to currency undervaluation instead of overvaluation for some parameter values. The optimal stance is then invariably expansionary to support domestic demand.
    Keywords: Currency misalignments, trade imbalances, asset markets and risk sharing, optimal targeting rules, international policy cooperation, exchange rate pass-through
    Date: 2022–11

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