nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2016‒09‒18
ten papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. How do people pay rent? By Zhang, David Hao
  2. Bank Concentration, Competition, and Financial Inclusion By Owen, Ann L.; Pereira, Javier
  3. An Alternative to State-Market Dualism: The Sharing Economy. Practical and Epistemological Questions By David Vallat
  4. Seeding the S-Curve? The Role of Early Adopters in Diffusion By Christian Catalini; Catherine Tucker
  5. How Do Venture Capitalists Make Decisions? By Paul Gompers; William Gornall; Steven N. Kaplan; Ilya A. Strebulaev
  6. Using Big Data to Estimate Consumer Surplus: The Case of Uber By Peter Cohen; Robert Hahn; Jonathan Hall; Steven Levitt; Robert Metcalfe
  7. Bitcoin Mission Statement. Or What does it mean Sharing Economy and Distributed Trust? By Kosten, Dmitri
  8. “No more credit score”: employer credit check bans and signal substitution By Clifford, Robert; Shoag, Daniel
  9. Being Central and Productive? Evidence from Slovenian Visual Artists in the 19th and 20th Century By Andrej Srakar; Petja Grafenauer; Marilena Vecco
  10. Network economics and the environment: insights and perspectives By Sergio Currarini; Carmen Marchiori; Alessandro Tavoni

  1. By: Zhang, David Hao (Harvard University)
    Abstract: Using data from the 2014 Boston Fed Bill Payment Experiment and the 2014 Survey of Consumer Payment Choice (SCPC), we investigate how households pay their rent. We find that the dominant methods for paying rent are cash (22 percent), check (42 percent), and money order (16 percent). Electronic methods are still rarely used, at 8 percent for bank account number payment and 7 percent for online banking bill payment, and less than 2 percent for debit and credit cards. Compared with other large bill payments of more than $200, rental payments are much more likely to be made with paper-based methods than with electronic methods and are much less likely to be automatic, despite the recent attempts by start-ups to make it easier for landlords to accept electronic payments. Check and electronic methods are more frequently used for higher-valued transactions and by those with higher income and education.
    Keywords: payment instrument choice; rental payment; rent
    JEL: D10 D19
    Date: 2016–06–13
  2. By: Owen, Ann L.; Pereira, Javier
    Abstract: Expanding access to financial services holds the promise to help reduce poverty and foster economic development. However, little is still known about the determinants of the outreach of financial systems across countries. Our study is the first attempt to employ a large panel of countries, several indicators of financial inclusion and a comprehensive set of bank competition measures to study the role of banking system structure as a determinant of cross-country variability in financial outreach for households. We use panel data from 83 countries over a 10-year period to estimate models with both country and time fixed effects. We find that greater banking industry concentration is associated with more access to deposit accounts and loans, provided that the market power of banks is limited. We find evidence that countries in which regulations allow banks to engage in a broader scope of activities are also characterized by greater financial inclusion. Our results are robust to changes in sample, data, and estimation strategy and suggest that the degree of competition is an important aspect of inclusive financial sectors.
    Keywords: financial inclusion, bank concentration, market power
    JEL: G21 L11 O16
    Date: 2016–09–08
  3. By: David Vallat (TRIANGLE - Triangle : action, discours, pensée politique et économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - Université Jean Monnet - Saint-Etienne - Institut d'Études Politiques [IEP] - Lyon - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The Sharing Economy is much more than collaborative consumption (Botsman and Rogers, 2011) even if this appears as the most visible achievement of this sector. Production, consumption, finance, exchanges are disrupted by the sharing economy revolution. But what are the common points between Airbnb, Uber, Wikipedia, Ulule, Blablacar, Kickstarter, the FabLabs/hackespaces, the Local exchange trading systems (LETS), Linux, etc.? Most of these achievements rely upon digital platforms (Kenney and Zysman, 2015) enabling peer-to-peer exchanges. These digital platforms act as « weapon of mass collaboration » (Tapscott & Williams - 2007), flattening relationships between Internet users and inside organizations (Castells, 1996 ; 2002). Specifying what the sharing economy is isn’t an easy task. For-profit, non-profit, reciprocity, competition can be observed at a stage or another in the sharing economy galaxy. A bright constellation in this galaxy is the think tank Ouishare created in France in 2012. It’s s a « global community that connects people, organizations and ideas around fairness, openness and trust » ( For them collaborative economy deals with five phenomena: collaborative consumption, crowdfunding, open knowledge (open data, open education, open governance), the maker movement (open design and manufacturing, do it yourself), open and horizontal governance (participatory budgeting, open government initiatives, co-operatives, open value networks, do-ocracries, holacracies). Internet seems to enable peer-to-peer exchanges between consumers (Bauwens, 2005) who are also sometimes producers (Tapscot and William - 2007 speak about “prosumers” to stress how the lines have been blurring). Of course Uber and Airbnb’s algorithms are working like digital auctioneers: tiny invisible hands enabling peer-to-peer exchanges. Could this be the return of Smith or Hayek? Why am I asking this question? Because Jimmy Wales, Wikipedia’s founder, pointed out “Hayek’s work on price theory is central to my own thinking about how to manage the Wikipedia project” (Mangu-Ward, 2007). In order to figure out how to understand the complexity of the sharing economy we propose to explore three paths to characterize it. In the first one we’ll distinguish, with Karl Polanyi, two kinds of economy. Then we will try to figure out where to position the sharing economy (1). In the second one we’ll see if all the sharing economy organizations really share everything and how (2). The last way to characterize the sharing economy is around its global political project (3). 1) The economic anthropologist Karl Polanyi is known for his opposition to traditional economic thought. He distinguishes two ways to understand economy: formal and substantive (Polanyi, 1944). The formal meaning refers to an economy interested only in minimizing means and maximizing results (in neoclassical words: utility maximization under conditions of scarcity). The substantive meaning refers to how humans make a living interacting within their social and natural environments. In this case the economy is embedded in society. Karl Polanyi identifies four principles (or forms of integration) of economic behavior, three in a substantive meaning (reciprocity, redistribution, domestic administration) and the last in the formal sense (market exchange). These principles will be used to classify sharing economies. 2) The sharing economy seems to offer a third way between state and market, the collaborative commons (Rifkin, 2014), which are aimed to produce, innovate, manage, all in common (Ostrom, 1990; Hess & Ostrom, 2007). Some projects or organizations of the sharing economy are managed as common pool resources (Wikipedia, Linux). These projects/organizations have been deeply influenced by the free culture movement (Lessig, 2004 ; Suber, 2012 ; Stallman, 1985) very present in Internet culture (Castells, 1996 ; Benkler 2002) and are close to a an economy in its substantive meaning. The principles of common pool resource management (Ostrom, 1990) are, according to us, useful tools to characterize sharing economy projects. 3) Proponents of the sharing economy advocate action. This is to participate in the creation of a new world by being an agent of change. Acting is a way to test ideas and overcome the internal contradictions of the movement. 3D printers, laser cutters, digital milling machine found in all FabLabs provide access to a new form of bricolage, an interconnected DIY (Anderson, 2012 ; Lallement, 2015). More than a political project, a way of being: to not be a passive consumer and join the ranks of the makers (Anderson, 2012). The concept of bricolage (Levi-Strauss, 1962 ; Duymedian et Rüling, 2010 ; Gundry et al., 2003 ; Garud et Karnøe, 2003) could help us in identifying the real spirit of the sharing economy. On the one hand the culture of open access (Suber, 2012) where peers gather behind a socially useful project and produce in common; on the other huge corporations that take advantage of the opportunities opened up by the internet to establish a " netarchical capitalism” (Bauwens and Kostakis, 2014). The sharing economy concentrates contradictions. We hope to give, in this paper, some guidelines to identify sharing economies.
    Keywords: collaborative economy , sharing economy , Uber , Polanyi , Wikipedia , Ostrom , Commons , Rifkin , Levi-Strauss ,économie collaborative , bricolage
    Date: 2016–06–24
  4. By: Christian Catalini; Catherine Tucker
    Abstract: In October 2014, all 4,494 undergraduates at the Massachusetts Institute of Technology were given access to Bitcoin, a decentralized digital currency. As a unique feature of the experiment, students who would generally adopt first were placed in a situation where many of their peers received access to the technology before them, and they then had to decide whether to continue to invest in this digital currency or exit. Our results suggest that when natural early adopters are delayed relative to their peers, they are more likely to reject the technology. We present further evidence that this appears to be driven by identity, in that the effect occurs in situations where natural early adopters' delay relative to others is most visible, and in settings where the natural early adopters would have been somewhat unique in their tech-savvy status. We then show not only that natural early adopters are more likely to reject the technology if they are delayed, but that this rejection generates spillovers on adoption by their peers who are not natural early adopters. This suggests that small changes in the initial availability of a technology have a lasting effect on its potential: Seeding a technology while ignoring early adopters' needs for distinctiveness is counterproductive.
    JEL: D83 G29 L14 M13 M3 O31 O32 O33
    Date: 2016–09
  5. By: Paul Gompers; William Gornall; Steven N. Kaplan; Ilya A. Strebulaev
    Abstract: We survey 885 institutional venture capitalists (VCs) at 681 firms to learn how they make decisions across eight areas: deal sourcing; investment selection; valuation; deal structure; post-investment value-added; exits; internal firm organization; and relationships with limited partners. In selecting investments, VCs see the management team as more important than business related characteristics such as product or technology. They also attribute more of the likelihood of ultimate investment success or failure to the team than to the business. While deal sourcing, deal selection, and post-investment value-added all contribute to value creation, the VCs rate deal selection as the most important of the three. We also explore (and find) differences in practices across industry, stage, geography and past success. We compare our results to those for CFOs (Graham and Harvey 2001) and private equity investors (Gompers, Kaplan and Mukharlyamov forthcoming).
    JEL: G24 G3 L26
    Date: 2016–09
  6. By: Peter Cohen; Robert Hahn; Jonathan Hall; Steven Levitt; Robert Metcalfe
    Abstract: Estimating consumer surplus is challenging because it requires identification of the entire demand curve. We rely on Uber’s “surge” pricing algorithm and the richness of its individual level data to first estimate demand elasticities at several points along the demand curve. We then use these elasticity estimates to estimate consumer surplus. Using almost 50 million individual-level observations and a regression discontinuity design, we estimate that in 2015 the UberX service generated about $2.9 billion in consumer surplus in the four U.S. cities included in our analysis. For each dollar spent by consumers, about $1.60 of consumer surplus is generated. Back-of-the-envelope calculations suggest that the overall consumer surplus generated by the UberX service in the United States in 2015 was $6.8 billion.
    JEL: H0 J0 L0
    Date: 2016–09
  7. By: Kosten, Dmitri
    Abstract: Technological advancements in the means of production are the driving force behind the changes in the prevailing system of socio-economic relations. Feudalism was transformed into capitalism as a result of such advancements. While man obtained physical freedom, the financial freedom remained under the control of the centralized authority. A deep level of collaboration is required to attain the next level of productivity provided by new technological advancements. However, the present system with a centralized control of governance and finance appears to constrain and restrain the value producing economy. This constriction becomes especially evident when the business environment requires collaboration to create, as it underlines the inherent conflict of centralized control. The most recent tech sector innovations, such as smart contracts and cryptocurrencies, are poised to disrupt the system of centralized control. The removal of a centralized authority from the position of control will change the fabric of the society to reflect the mesh network of shared resources. The society will transform to the new form of socio-economic relations – the era of Crypto-Socialism.
    Keywords: Bitcoin, Blockchain, Crypto-Socialism, socio-economic transformation, socio-economic framework, smart contract, sharing economy, distributed trust, function of money, financial decentralization, financial desintermediation
    JEL: B50 B53 E00 E02 E40 E41 E42 E43 E44 E49 E5 E50 E51 E52 E58 E59 K00 K20 P00 P20 P40
    Date: 2015–11–15
  8. By: Clifford, Robert (Federal Reserve Bank of Boston); Shoag, Daniel (Harvard University)
    Abstract: In the past decade, most states have banned or considered banning the use of credit checks in hiring decisions, a screening tool that is widely used by employers. Using new Equifax data on employer credit checks, the Federal Reserve Bank of New York Consumer Credit Panel/Equifax data, and the LEHD Origin-Destination Employment data, we show that these bans increased employment of residents in the lowest-credit score census tracts. The largest gains occurred in higher-paying jobs and in the government sector. At the same time, using a large database of job postings, we show that employers increased their demand for other signals of applicants’ job performance, like education and experience. On net, the changes induced by these bans generate relatively worse outcomes for those with mid-to-low credit scores, for those under 22 years of age, and for blacks, groups commonly thought to benefit from such legislation.
    JEL: J78 M50
    Date: 2016–03–01
  9. By: Andrej Srakar (Institute for Economic Research, Faculty of Economics, University of Ljubljana, Slovenia); Petja Grafenauer (School of Arts, University of Nova Gorica, Nova Gorica, Slovenia); Marilena Vecco (Erasmus University Rotterdam, The Netherlands)
    Abstract: Slovenian art history has received very little (if any) attention from the viewpoint of network theory although there were several examples of artists co-working or working in groups, collectives or even loosely organized clusters (groups from the impressionist Sava in 1904 to postmodern Irwin in 1984). This may be interpreted as a way to acquire better positions in the national and international art circles and on the art market. In our article we use web-based dataset of Slovenska biografija (operated by the Slovenian Academy of Sciences and Arts), which contains data on numerous notable persons throughout Slovenian history to analyze the centrality of individual artistic figures and movements throughout Slovenian art history. We also study the influence of network centrality on cultural production controlling for endogeneity following the instrumental variable approach, proposed in the literature while using a new instrumental variable to solve the problem. Finally, we present results which show that women visual artists used their network positions more intensively than men and provide some first explanations for this observed relationship. In conclusion, we provide some reflections on the importance of these findings for further research work in the area.
    Keywords: Slovenian art history, social network analysis, network centrality, artist productivity, instrumental variables, women visual artists
    JEL: D85 J49 N70 Z11 C36 C38 C45
    Date: 2016–09
  10. By: Sergio Currarini; Carmen Marchiori; Alessandro Tavoni
    Abstract: Local interactions and network structures appear to be a prominent feature of many environmental problems. This paper discusses a wide range of issues and potential areas of application, including the role of relational networks in the pattern of adoption of green technologies, common pool resource problems characterized by a multiplicity of sources, the role of social networks in multi-level environmental governance, infrastructural networks in the access to and use of natural resources such as oil and natural gas, the use of networks to describe the internal structure of inter-country relations in international agreements, and the formation of bilateral “links” in the process of building up an environmental coalition. For each of these areas, we examine why and how network economics would be an effective conceptual and analytical tool, and discuss the main insights that we can foresee.
    Keywords: networks; environmental externalities; technological diffusion; gas pipelines; common-pool-resources; multi-level governance; coalitions
    JEL: N0
    Date: 2015–09

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