nep-inv New Economics Papers
on Investment
Issue of 2024‒05‒20
eleven papers chosen by

  1. Can minimum wages effectively reduce poverty under low compliance? A case study from the agricultural sector in South Africa By Bassier, Ihsaan; Ranchhod, Vimal
  2. Minimum wages and insurance within the firm By Adamopoulou, Effrosyni; Manaresi, Francesco; Rachedi, Omar; Yurdagul, Emircan
  3. Robots and firms’ labour search: The role of temporary work agencies By Pilar Beneito; Maria Garcia-Vega; Oscar Vicente-Chirivella; Guillaume Wilemme
  4. Regional inequalities in access to STEM-oriented secondary education in Latvia By Hazans, Mihails; Holmen, Rasmus Bøgh; Upenieks, Jānis; Žabko, Oksana
  5. Where Do Banks End and NBFIs Begin? By Viral V. Acharya; Nicola Cetorelli; Bruce Tuckman
  6. Trust in Vertical Relations By Giacomo Calzolari; Leonardo Felli; Johannes Koenen; Giancarlo Spagnolo; Konrad Stahl
  7. Social Preferences and the Variability of Conditional Cooperation By Malte Baader; Simon Gächter; Kyeongtae Lee; Martin Sefton
  8. The term structure of firms' inflation expectations By Miguel Mello; Jorge Ponce; Juan Pablo Medina
  9. Trade impacts of economic coercion By OECD
  10. Using the financial system to enforce export controls By Benjamin Hilgenstock; Elina Ribakova; Guntram B. Wolff; Anna Vlasyuk
  11. Income of Black Working-Age Veterans By Congressional Budget Office

  1. By: Bassier, Ihsaan; Ranchhod, Vimal
    Abstract: What were the effects of a 52 per cent increase in the minimum wage in the agricultural sector in South Africa in 2013? We estimate the short run effects of this policy change on the income, employment, and poverty rate of farmworkers, using individual-level panel data from the Quarterly Labour Force Surveys (QLFS). Before the implementation date, 90 per cent of farmworkers were paid below the new minimum wage level. We find that the wage gain of farmworkers is strongly quadratically related to pre-implementation wages, suggesting lower compliance as the gap between the minimum and the pre-implementation wage increases. We estimate that farmworkers received a median wage increase of 9 per cent as a result of the policy, and we find no evidence of job losses. Overall, farmworkers were 7 per cent less likely to have household income per person below the poverty line. One possible explanation for these outcomes is that endogenous compliance may mitigate against unemployment effects. While the minimum wage literature is large, our paper adds to the small subset of this literature on large increases, partial compliance, and poverty effects.
    Keywords: minimum wages; South Africa; poverty
    JEL: I32 J08 J38
    Date: 2024–04–04
  2. By: Adamopoulou, Effrosyni; Manaresi, Francesco; Rachedi, Omar; Yurdagul, Emircan
    Abstract: Minimum wages generate an asymmetric pass-through of rm shocks across workers. We establish this result leveraging employer-employee data on Italian metalmanufacturing rms, which face dierent wage oors that vary within occupations. In response to negative rm productivity shocks, workers close to the wage oors experience higher job separations but no wage loss. However, the wage of high-paid workers decreases, and more so in rms with higher incidence of minimum wages. A neoclassical model with complementarities across workers with dierent skills rationalizes these ndings. Our results uncover a novel channel that tilts the welfare gains of minimum wages toward low-paid workers.
    Keywords: Firm productivity shocks, pass-through, employer-employee data, skill complementarities, incomplete-market model
    JEL: E24 E25 E64 J31 J38 J52
    Date: 2024
  3. By: Pilar Beneito; Maria Garcia-Vega; Oscar Vicente-Chirivella; Guillaume Wilemme
    Abstract: We study the impact of industrial robots on the use of labor intermediaries or temporary work agencies (TWAs) and firm productivity. We develop a theoretical framework where new technologies increase the need for quality match workers. TWAs help firms to search for workers who better match their technologies. The model predicts that using robots increases TWA use, which increases robots’ productivity. We test the model implications with panel data of Spanish firms from 1997 to 2016 with information on robot adoption and TWA use. Using staggered difference-in-difference (DiD) estimations, we estimate the causal effects of robot adoption on TWAs. We find robot adopters increase the probability of TWA use compared to non-adopters. We also find that firms that combine robots with TWAs achieve higher productivity than those who adopt robots without TWAs.
    Keywords: Robots, job-worker matching, temporary work agencies, firm productivity.
    Date: 2024
  4. By: Hazans, Mihails; Holmen, Rasmus Bøgh; Upenieks, Jānis; Žabko, Oksana
    Abstract: Education scholars and human geographers have extensively studied spatial disparities in access to secondary education, both in developing countries and in advanced economies. However, very few studies have analysed access to specific types of secondary education, particularly programs oriented toward Science, Technology, Engineering, and Mathematics (STEM-oriented programs). This paper aims to fill this gap using rich geodata and administrative data on Latvia. An overview of the supply of STEM-related skills in the Nordic-Baltic region suggests that in this regard Latvia performs the worst in terms of both recent university graduates and working-age population in general. We show that 43 percent of youth aged 15 to 18 cannot reach a STEM program within 30 minutes by walking. Furthermore, estimates of earnings differentials by access time, between program types, and between two modes of travel suggest that children from wealthier families have better access to STEM programs. More densely populated settlements feature better access to STEM programs, as well as better exam results in STEM disciplines, while language exam results do not show such a pattern.
    Keywords: Access to secondary education, STEM-oriented programs, regional disparities, geographic information system
    JEL: I24 I28 R53
    Date: 2024
  5. By: Viral V. Acharya; Nicola Cetorelli; Bruce Tuckman
    Abstract: In recent years, assets of non-bank financial intermediaries (NBFIs) have grown significantly relative to those of banks. These two sectors are commonly viewed either as operating in parallel, performing different activities, or as substitutes, performing substantially similar activities, with banks inside and NBFIs outside the perimeter of banking regulation. We argue instead that NBFI and bank businesses and risks are so interwoven that they are better described as having transformed over time rather than as having migrated from banks to NBFIs. These transformations are at least in part a response to regulation and are such that banks remain special as both routine and emergency liquidity providers to NBFIs. We support this perspective as follows: (i) The new and enhanced financial accounts data for the United States (“From Whom to Whom”) show that banks and NBFIs finance each other, with NBFIs especially dependent on banks; (ii) Case studies and regulatory data show that banks remain exposed to credit and funding risks, which at first glance seem to have moved to NBFIs, and also to contingent liquidity risk from the provision of credit lines to NBFIs; and (iii) Empirical work confirms bank-NBFI linkages through the correlation of their abnormal equity returns and market-based measures of systemic risk. We discuss some potential regulatory responses, including treating the two sectors holistically; recognizing the implications for risk propagation and amplification; and exploring new ways to internalize the costs of systemic risk.
    JEL: G01 G20 G21 G22 G23 G24 G28 G29
    Date: 2024–04
  6. By: Giacomo Calzolari; Leonardo Felli; Johannes Koenen; Giancarlo Spagnolo; Konrad Stahl
    Abstract: Using data from a unique survey on all buyers and crtical suppliers in German automotive production, we explore the role of trust in long-term procurement relationships. Higher trust leads to higher quality of the automotive parts, and to more competition among suppliers. These effects are significant for low-tech parts only, and not for high tech ones, even when the buyer procures parts from the same supplier. We rationalize these unexpected findings within a relational contracting model, where technology-specific differences in the cost of switching suppliers determine the bargaining power in part-specific procurement relationships.
    Keywords: Relational Contracts, Hold-up, Buyer-Supplier Contracts, Bargaining Power
    JEL: D86 L14 L62 O34
    Date: 2024–04
  7. By: Malte Baader (University of Zurich); Simon Gächter (University of Nottingham); Kyeongtae Lee (Bank of Korea); Martin Sefton (University of Nottingham)
    Abstract: We experimentally examine how incentives affect conditional cooperation (i.e., cooperating in response to cooperation and defecting in response to defection) in social dilemmas. In our first study, subjects play eight Sequential Prisoner’s Dilemma games with varying payoffs. We elicit second mover strategies and find that most second movers conditionally cooperate in some games and free ride in others. The rate of conditional cooperation is higher when the own gain from defecting is lower and when the loss imposed on the first mover by defecting is higher. This pattern is consistent with both social preference models and stochastic choice models. In a second study subjects play 64 social dilemma games, and we jointly estimate noise and social preference parameters at the individual level. Most of our subjects place significantly positive weight on others’ payoffs, supporting the underlying role of social preferences in conditional cooperation. Our results suggest that conditional cooperation is not a fixed trait but rather a symptom of the interaction between game incentives and underlying social preferences.
    Keywords: sequential prisoner’s dilemma; conditional cooperation; social preferences
    Date: 2024–04
  8. By: Miguel Mello (Banco Central del Uruguay); Jorge Ponce (Banco Central del Uruguay; dECON-FCS-Udelar); Juan Pablo Medina (Universidad Adolfo Ibañez)
    Abstract: The share of firms that differentiate their inflation expectations between one-year and two-year horizons is a relevant statistic for changes in inflation expectations. Furthermore, firms that obtain information from the central bank are more likely to distinguish between horizons and forecast convergence of inflation expectations toward the inflation target. Decision-makers tend not to differentiate between horizons, but when they do, they are more likely to predict convergence. External advisors tend to differentiate between horizons and are more likely to predict divergence. The results highlight the importance of analyzing inflation expectations formation by firms for understanding inflation dynamics and conducting effective monetary policy.
    Keywords: Inflation expectations, Inflation dynamics, Monetary Policy
    JEL: D83 D84 E31 E52 E58
    Date: 2023
  9. By: OECD
    Abstract: In recent years, concerns have increased about the use of, or threatened use of, acts of economic coercion, often in the form of trade and investment-related measures. While economic coercion has been the subject of growing attention in fora such as the G7, limited information has been developed on the impacts on affected economies and other trading partners. This work provides an initial, objective economic analysis of economic coercion with a view to helping generate greater awareness and a basis for further discussions on this issue.
    Keywords: Economic analysis, Economy, Investment
    Date: 2024–05–03
  10. By: Benjamin Hilgenstock; Elina Ribakova; Guntram B. Wolff; Anna Vlasyuk
    Abstract: Russian imports of battlefield goods that are subject to export controls, including from Western producers, have surged since mid-2022
    Date: 2024–04
  11. By: Congressional Budget Office
    Abstract: CBO compared economic outcomes from 2017 to 2019 of veterans who are Black, male, and working age (ages 22 to 54) with outcomes of two groups of working-age men: Black nonveterans and White veterans. The agency found that, on average, Black veterans had more earnings, higher rates of marriage and homeownership, and greater educational attainment than Black nonveterans did. But the average earnings of Black veterans and Black nonveterans did not differ among men with similar demographic characteristics (age, marital status, level of education, and region of residence).
    JEL: D31 H31 H51 H55 H56 I18 I24 J15 J26 J32 J33 J38 J45 M52 N32 N42
    Date: 2024–05–01

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