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on Investment |
| By: | Erik Hurst; Patrick J. Kehoe; Elena Pastorino; Thomas Winberry |
| Abstract: | We develop a dynamic macroeconomic framework with worker heterogeneity, putty-clay adjustment frictions, and firm monopsony power to study the distributional impact of labor market policies over time. Our framework reconciles the well-known tension between low short-run and high long-run elasticities of substitution across inputs of production, especially among workers with different skills within a same education group. We use this framework to evaluate the effects of redistributive policies such as the minimum wage and the Earned Income Tax Credit. We argue that since these policies generate slow transition dynamics that can differ greatly in the short and long run, a serious assessment of their overall impact must take account of the entire time path of the responses they induce. |
| JEL: | E22 E24 J08 J42 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33614 |
| By: | Michael Cuna; Lenka Fiala; Min Sok Lee; John A. List; Sutanuka Roy |
| Abstract: | Understanding the role of preferences, beliefs, and constraints on social and wealth inequities is a key unlock for economic growth. This study focuses on the inter-relationship between risk and ambiguity preferences of mothers, their early childhood investments, and their children’s outcomes. To do so, we elicit ambiguity attitude and risk aversion preference parameters from more than 6000 randomly sampled mothers from nearly 500 villages in Rajasthan, India. Across several measures of mothers’ investment in nutrition of their children between the ages of 0-6, we find a robust and stable positive correlation of estimated ambiguity attitude and risk aversion parameters with maternal investments: the more risk and ambiguity averse the mother, the greater her investments. Such investments are correlated with better children’s cognitive and non-cognitive skills, as mothers with greater risk and ambiguity aversion have children with superior skills, even after accounting for socio-economic differences. Importantly, the positive effect of ambiguity and risk aversion on early-life outcomes can attenuate the negative impact of proxies of socio-economic disadvantage, such as illiteracy of the mothers, belonging to historically discriminated social groups, no exposure to radio, television, or zero access to mobile phones for all measures of cognitive and non-cognitive early-life skills. |
| JEL: | D91 I14 I15 I24 J13 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33610 |
| By: | Benoît Chevalier-Roignant (EM - EMLyon Business School); Stéphane Villeneuve (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Fabien Delpech (INSA Toulouse - Institut National des Sciences Appliquées - Toulouse - INSA - Institut National des Sciences Appliquées - UT - Université de Toulouse); May-Line Grapotte (INSA Toulouse - Institut National des Sciences Appliquées - Toulouse - INSA - Institut National des Sciences Appliquées - UT - Université de Toulouse) |
| Abstract: | There are many business situations in which investments by a supplier and a producer ("coinvest-ments") are both necessary for either of them to grasp a business opportunity. For instance, better quality tanks are needed to manufacture reliable hydrogen-powered vehicles. One of these two firms, typically the one facing a lower cost, may be more willing to invest, but the cautionary attitude of the other delays the coinvestment. We model supply-chain interactions in a classical tractable way to derive the firms' net present values (NPVs) upon coinvestment and determine their Nash equilibrium investment (timing) strategies. Firms coinvest when the real options of the weaker firm is ‘deep in the money.' These business situations are likely to be affected by evolving market circumstances, in particular due to changes in the demand dynamics or endogenous decision (by, say, the supplier) to conduct research and development (R&D). We investigate related model extensions, which confirm the robustness of our key result. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05033712 |
| By: | Quick, Reiner; Yalçin, Neriman |
| Abstract: | There is an increasing pressure on companies to provide nonfinancial information. An important element of related nonfinancial reports is information on combating bribery and corruption. This study examines the impact of voluntary assurance on such reports on financial analyst perceptions and decisions. Moreover, it investigates whether the type of assurance provider (financial statement auditor vs. another audit firm) and the assurance level (limited vs. reasonable assurance) exert an influence. For this purpose, we conducted an experiment with a 2 × 2 + 1 between‐subject design and financial analysts from Turkey as participants. The extent of financial analyst reliance on the combating bribery and corruption report of a fictitious company, their likelihood to recommend the purchase of shares of the fictitious company, their related credit risk assessment and the likelihood that they purchase shares in the fictitious company served as dependent variables. The analyses are based on 116 responses after the elimination of manipulation check failures. Our findings indicate that assurance on combating bribery and corruption reports results in perceptions and decisions which are more favourable to the fictitious company. Moreover, they do not indicate a significant impact of the type of assurance provider. However, our participants' perceptions are more positive in the case of reasonable assurance. |
| Date: | 2025–04–17 |
| URL: | https://d.repec.org/n?u=RePEc:dar:wpaper:154418 |
| By: | Peter Hinrichs (W.E. Upjohn Institute for Employment Research) |
| Abstract: | This paper studies families’ capacity to pay for college in the United States, focusing on changes over time and differences by race and socioeconomic status. I use data from the National Postsecondary Student Aid Study (NPSAS) to document changes over time in the Expected Family Contribution (EFC) from the Free Application for Federal Student Aid (FAFSA). The results suggest that the EFC has been rising over time, and that this has been driven primarily by families in the upper quartile of the income distribution. I then use data from the Panel Study of Income Dynamics (PSID) to calculate alternative measures of the ability to pay for college. I find that it is possible to alter the distribution of who pays what amount by changing details of the EFC calculation, but the extent of this depends on details of the implementation. |
| Keywords: | higher education, affordability, college savings |
| JEL: | I22 I23 G51 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:upj:weupjo:25-416 |
| By: | Pablo Andrés Neumeyer; Martín González-Rozada; Can Soylu |
| Abstract: | This paper documents that monetary financing of unfunded fiscal deficits drives inflation in Ethiopia, a country with moderate but persistent inflation, which averaged 14% for the period 2002-2021. We make the case for the fiscal-monetary origin of inflation in two steps. First, we estimate a long-run money demand function for the monetary aggregate M1, which supports the quantity theory of money. Second, we show that over 2002-2021, 98% of the increase in M1 is explained by the growth of the monetary base, which, in turn, is explained by the growth of central bank transfers to the treasury and state-owned enterprises. These transfers account for 91% of the growth of M1 over the period 2002-2021. |
| Keywords: | Inflation, Money Demand, Fiscal Dominance, Ethiopia |
| JEL: | E31 E50 E62 E65 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:udt:wpecon:2025_05 |
| By: | Jakub Growiec (SGH Warsaw School of Economics); Klaus Prettner (Department of Economics, Vienna University of Economics and Business) |
| Abstract: | Recent advances in artificial intelligence (AI) have led to a diverse set of predictions about its long-term impact on humanity. A central Focus is the potential emergence of transformative AI (TAI), eventually capable of outperforming humans in all economically valuable tasks and fully automating labor. Discussed scenarios range from human extinction after a misaligned TAI takes over ("AI doom") to unprecedented economic growth and abundance ("post-scarcity"). However, the probabilities and implications of these scenarios remain highly uncertain. Here, we organize the various scenarios and evaluate their associated existential risks and economic outcomes in terms of aggregate welfare. Our analysis shows that even low-probability catastrophic outcomes justify large investments in AI safety and alignment research. We find that the optimizing representative individual would rationally allocate substantial resources to mitigate extinction risk; in some cases, she would prefer not to develop TAI at all. This result highlights that current global efforts in AI safety and alignment research are vastly insufficient relative to the scale and urgency of existential risks posed by TAI. Our findings therefore underscore the need for stronger safeguards to balance the potential economic benefits of TAI with the prevention of irreversible harm. Addressing these risks is crucial for steering technological progress toward sustainable human prosperity. |
| Keywords: | Transformative Artificial Intelligence (TAI), Economic Growth, Technological Singularity, Growth Explosion, AI Takeover, AI Alignment, AI Doom |
| JEL: | I30 O11 O33 Q01 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp378 |
| By: | Apró, William Zoltán |
| Abstract: | Abstract Traditional IT project forecasting methods rely on siloed, retrospective data (e.g., Jira ticket histories), leaving teams unprepared for evolving risks such as shifting customer demands, accumulating technical debt, or new regulatory mandates. Studies show that 60% of IT projects exceed budgets due to unplanned scope changes, exposing the limitations of reactive approaches. We introduce Agentic AI for Proactive IT Forecasting (AAPIF), a novel framework that integrates intelligence-grade premise valuation with multi-source data fusion to proactively forecast project outcomes across technical, business, and market contexts. Unlike static models, AAPIF dynamically weights input data—such as customer requirements, organizational context, and compliance signals—based on reliability (freshness, credibility) and relevance (contribution weights C_i). It continuously refines predictions using reinforcement learning. Key Contributions: A mathematical model computing confidence-weighted success probabilities, achieving 89% accuracy—a 32% improvement over Random Forest baselines. Actionable intelligence protocols that reduce data collection errors by 45%, utilizing premise valuation (e.g., stakeholder alignment scoring) and automated risk alerts. In a fintech case study, AAPIF reduced unplanned scope changes by 37% through risk prediction (e.g., "72% likelihood of API scalability issues in Q3") and strategic recommendations (e.g., "Reassign three developers to refactor modules"). By transforming raw data into strategic foresight, AAPIF empowers project managers to become proactive architects of success, rather than reactive trouble-shooters. Keywords: Agentic AI, IT project forecasting, premise valuation, Agile project management, predictive analytics, risk mitigation |
| Date: | 2025–04–21 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:jtvqu_v1 |
| By: | Timothy Besley; Dan Bogart; Jonathan Chapman; Nuno Palma |
| Abstract: | We show that state legal capacity contributed to economic development during the Industrial Revolution. The British parliament relied on local magistrates, known as Justices of the Peace (JPs), to enforce property rights, resolve disputes, and administer public services. Areas with greater legal capacity—more JPs—in 1700 experienced greater population growth and structural change over 140 years. More legal capacity also led to more human capital, fiscal capacity, and infrastructure development. Plausibly exogenous variation in the location of JPs supports a causal interpretation of the findings. These results illustrate the importance of street-level legal institutions for economic outcomes. |
| Keywords: | Legal Capacity, State Capacity, Industrial Revolution, Justices of the Peace, Historical Political Economy, Law and Economics, Britain |
| JEL: | H80 K40 N13 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:man:allwps:0011 |
| By: | Jetson Leder-Luis; Anup Malani |
| Abstract: | Healthcare fraud imposes a sizable cost on U.S. public healthcare budgets and distorts health care provision. We examine the economics of health care fraud and enforcement using theory and data and connect to a growing literature on the topic. We first offer a new economic definition of health care fraud that captures and connects the wide range of activities prosecuted as fraud. We define fraud as any divergence between the care an insurer says a patient qualifies for, the care a provider provides, and the care a provider bills for. Our definition clarifies the economic consequences of different categories of fraud and provides a framework for understanding the slate of existing studies. Next, we examine the incentives for committing and for prosecuting fraud. We show how fraud is driven by a combination of inadequate (expected) penalties for fraud and imperfect reimbursement rates. Public anti-fraud litigation is driven by the relative monetary, political or career returns to prosecuting fraud and by prosecutorial budgets. Finally, we examine the prevalence of health care fraud prosecutions across types of fraud and types of care, and across the US, by machine learning on text data from Department of Justice press releases. |
| JEL: | I13 K40 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33592 |
| By: | Matthew Smith; Francisco Alvarez |
| Abstract: | Machine learning (ML) is becoming an essential tool in economics, offering powerful methods for prediction, classification, and decision-making. This paper provides an intuitive introduction to two widely used families of ML models: tree-based methods (decision trees, Random Forests, boosting techniques) and neural networks. The goal is to equip practitioners with a clear understanding of how these models work, their strengths and limitations, and their applications in economics. Additionally, we briefly discuss some other methods, as support vector machines (SVMs) and Shapley values, highlighting their relevance in economic research. Rather than providing an exhaustive survey, this paper focuses on practical insights to help economists effectively apply ML in their work. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:fda:fdaddt:2025-03 |
| By: | Becker, Max; Bendiek, Annegret; Kempin, Ronja |
| Abstract: | Seit der russischen Vollinvasion der Ukraine am 24. Februar 2022 lässt sich eine Versicherheitlichung des auswärtigen Handelns der Europäischen Union (EU) beobachten. Institutionell betrachtet wird die Gemeinsame Außen- und Sicherheitspolitik (GASP) zunehmend von der Gemeinsamen Sicherheits- und Verteidigungspolitik (GSVP) überlagert. Damit wird aber nicht das Problem der defizitären außen- und sicherheitspolitischen Handlungsfähigkeit gelöst. Im Gegenteil: Der Trend zur Versicherheitlichung der EU-Außenpolitik lenkt von der längst überfälligen Reform zur Stärkung ebendieser außen- und sicherheitspolitischen Handlungsfähigkeit Europas ab. Um diese endlich zu verbessern, bieten sich zwei Optionen an: a) eine Europäisierung des europäischen Pfeilers in der Nato und b) eine Vergemeinschaftung der GASP und der GSVP. |
| Keywords: | European Peace Facility (EPF), Gemeinsame Außen- und Sicherheitspolitik, GASP, Gemeinsame Sicherheits- und Verteidigungspolitik, GSVP, Green Deal Industrial Plan, ReArm Europe, qualifizierte Mehrheitsentscheidung, Versicherheitlichung, securitization, Europäische Friedensfazilität, EFF, Migrationsabkommen, Drittstaatsabkommen, De-Risking, Friend-Shoring, Global Gateway, GGS, European Defence Agency, EDA, European Defence Fund, EDF, Preparatory Action on Defence Research, PADR, European Defence Industrial Development Programme, EDIDP, Act in Support of Ammunition Production, ASAP, European Defence Industry Reinforcement through common Procurement Act, EDIRPA, EUMAM |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:swpakt:315515 |
| By: | Yibing Wang (King's College London); Steven Ongena (University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)); Duc Duy Nguyen (Durham University); Tarik Driouchi (King’s College London) |
| Abstract: | Using the staggered adoption of paid sick leave (PSL) mandates across US states, we document a 20% increase in the average household stock market participation following the enactment of a PSL policy. The effects are more pronounced among households facing greater health concerns, higher employment risks, and deeper financial vulnerabilities. Several mechanisms can explain our findings. PSL mandates offer households insurance-like protection, increase their income and wealth, and improve households' future outlook. Our findings demonstrate that PSL laws create positive economic externalities by motivating households to invest in risky assets, a key factor toward building wealth. |
| Keywords: | Paid sick leave, Household finance, Stock market participation, Social insurance, Financial health |
| JEL: | G51 I18 J22 J32 M5 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:chf:rpseri:rp2521 |
| By: | Högn, Celina (affiliation not available); Mayer, Lea (affiliation not available); Rincke, Johannes (University of Erlangen-Nuremberg); Winkler, Erwin (University of Erlangen-Nuremberg) |
| Abstract: | This paper examines preferences for gender diversity among co-workers. Using stated-choice experiments with 5, 400 PhD students and university students in Germany, we uncover a substantial willingness to pay (WTP) for gender diversity of up to 5% of earnings on average. Importantly, we find that women have a much higher WTP for gender diversity than men. While the WTP differs by career ambition, competitiveness, and family preferences, we find that gender differences in traits and preferences cannot explain gender differences in the WTP for diversity. Our findings provide an explanation for differential sorting of men and women into high-profile jobs based on the share of female co-workers. |
| Keywords: | gender differences, preferences, willingness to pay, stated choice experiment, gender diversity |
| JEL: | J16 J24 J31 J33 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17750 |
| By: | Marty Haoyuan Chen; Ginger Zhe Jin |
| Abstract: | The past few years have seen a shift in many universities' admission policies from test-required to either test-optional or test-blind. This paper uses laboratory experiments to examine students' reporting behavior given their application package and the school's interpretation of non-reported standardized test scores. We find that voluntary disclosure is incomplete and selective, supporting the incentives of both partial unraveling and reverse unraveling. Subjects exhibit some ability to learn about the hidden school interpretation, though their learning is imperfect. Using a structural model of student reporting behavior, we simulate the potential tradeoff between academic preparedness and diversity in a school's admission cohort. We find that, if students have perfect information about the school's interpretation of non-reporting, test-blind is the worst and test-required is the best in both dimensions, while test-optional lies between the two extremes. When students do not have perfect information, some test-optional policies can generate more diversity than test-required, because some students with better observable attributes may underestimate the penalty on their non-reporting. This allows the school to admit more students that have worse observable attributes but report. We test the results’ robustness to a variety of extensions. |
| JEL: | D61 D63 D8 I23 I24 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33660 |