nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2019‒04‒01
twenty papers chosen by

  1. Economic and regulatory aspects of crypto-assets By Andrea Caponera; Carlo Gola
  2. The blockchain, plums, and lemons: Information asymmetries & transparency in decentralized markets By Notheisen, Benedikt; Weinhardt, Christof
  3. Understanding What Drives Consumers to Use Gourmet Apps: Applying a Relationship Quality Perspective By Pei-Chu, Hung
  4. Trading stocks on blocks: The quality of decentralized markets By Notheisen, Benedikt; Marino, Vincenzo; Englert, Daniel; Weinhardt, Christof
  5. The European framework for regulating telecommunications: a 25-year appraisal By Cave, Martin; Genakos, Christos; Valletti, Tommaso
  6. The Economics of Social Data By Dirk Bergemann; Alessandro Bonatti
  7. Digitalization of manufacturing process and open innovation: Survey results of small and medium sized firms in Japan By MOTOHASHI Kazuyuki
  8. Determinants for consumer food choice with the New Retail e-commerce mode By Wang, Ou; Somogyi, Simon
  9. Does Price Regulation Affect Competition? Evidence from Credit Card Solicitations By Yiwei Dou; Geng Li; Joshua Ronen
  10. Externalities in knowledge production: Evidence from a randomized field experiment By Hinnosaar, Marit; Hinnosaar, Toomas; Kummer, Michael; Slivko, Olga
  11. Use and sharing of big data, firm networks and their performance By KIM YoungGak; MOTOHASHI Kazuyuki
  12. Corporate Capture of Blockchain Governance By Daniel Ferreira; Jin Li; Radoslawa Nikolowa
  13. Welcome remarks at First New York Fed Fintech Conference, Federal Reserve Bank of New York, New York City By Stiroh, Kevin J.
  14. Technology and the promise of decentralization: Origins, development, patterns of arguments By Schrape, Jan-Felix
  15. The Wrong Kind of AI? Artificial Intelligence and the Future of Labor Demand By Daron Acemoglu; Pascual Restrepo
  16. Migration and the Value of Social Networks By Blumenstock, Joshua; Chi, Guanghua; Tan, Xu
  17. The Role of Islamic Crowdfunding Mechanisms in Business and Business Development By Achsania Hendratmi
  18. Does credit-card information reporting improve small-business tax compliance? By Slemrod, Joel; Collins, Brett; Hoopes, Jeffrey L.; Reck, Daniel; Sebastiani, Michael
  19. Herausforderungen und Förderstrategien für die Blockchain-Technologie By Reetz, Fabian
  20. Machine Learning Methods Economists Should Know About By Susan Athey; Guido Imbens

  1. By: Andrea Caponera (Bank of Italy); Carlo Gola (Bank of Italy)
    Abstract: TIn this study, we investigate the economic characteristics of bitcoin and similar crypto-assets. Following an introduction to the blockchain protocol, the role of exchanges and of digital wallet providers, we consider the regulatory measures adopted in various jurisdictions. Lastly, we examine the accounting and prudential aspects related to crypto-assets, of which significant uncertainties still remain. The paper provides a taxonomy of crypto-assets, and describes the basic features of the initial coin offerings (ICOs) and related aspects. The literature shows that bitcoin, and similar crypto-assets, do not fully fall within the category of money and financial instruments. This class of digital tokens, based on a permissionless distributed ledger technology (DLT), is highly volatile and absent of intrinsic value. The instability of their price, which is often undetermined, must be considered when evaluating these instruments from an accounting and prudential standpoint.
    Keywords: bitcoin, crypto-assets, blockchain, digital tokens, initial coin offerings, exchanges
    JEL: E40 E42 E51 G21 G28 K20 M40
    Date: 2019–03
  2. By: Notheisen, Benedikt; Weinhardt, Christof
    Abstract: Despite a growing interest, researchers and practitioners still struggle to transfer the blockchain concept introduced by Bitcoin to market-oriented application scenarios. To shed light on the technology's usage in markets with asymmetric information, this study analyzes the effect of the blockchain's public transparency paradigm on behavioral patterns and market outcomes. In line with prior research, our findings indicate that the blockchain's shared record mitigates adverse selection effects and reduces moral hazard of good market participants (plums). In addition, we identify an incentive for bad market participants (lemons) to behave opportunistically in the presence of perfect quality information. More specifically, the disclosed information allows them to learn about quality differences between plums and lemons, deceive their counterparties, and move to a new equilibrium with increased utility. As a result, the market collapses despite a welfare gain and future generations are denied market access. In addition, plums and lemons are committed to inefficient equilibria following irrational behavior. In total, this study aims to provide initial guidance for blockchain adoption in the context of markets with information asymmetries and highlights risks that arise from competition, the exposure to irrational behavior, and the implementation of services on the infrastructure level.
    Keywords: Blockchain,Transparency,Market for Lemons,FinTech,Moral Hazard,Information Sharing,Credit Markets
    JEL: D53 D82 G21 L86
    Date: 2019
  3. By: Pei-Chu, Hung (Chaoyang University of Technology, Taiwan Author-2-Name: Wen-Kuo Chen Author-2-Workplace-Name: Associate Professor, Department of Marketing and Logistics Management, Chaoyang University of Technology, Jifeng E. Rd., Wufeng District, 41349, Taichung, Taiwan Author-3-Name: Hsuan Lin Author-3-Workplace-Name: Department of Marketing and Logistics Management, Chaoyang University of Technology 168, Jifeng E. Rd., Wufeng District, 41349, Taichung, Taiwan Author-4-Name: Yen-Hsi Lee Author-4-Workplace-Name: Assistant Professor, Department of Applied English, Chaoyang University of Technology 168, Jifeng E. Rd., Wufeng District, 41349, Taichung, Taiwan Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective – In modern society, technology has become an important part of our daily lives and the growth of the technology sector has grown exponentially. This rapid growth has seen the expansion of several industries, in particular, the mobile app industry. This study explores customer satisfaction toward gourmet mobile applications, based on the quality of the app (download delay, visual, navigability and security) and customer reviews (consumer review, providing image and star rating). Moreover, this study attempts to identify the common characteristics of users of gourmet apps. Methodology/Technique –325 questionnaires were returned to the researchers following distribution and 276 of those were valid. In total, 164 questionnaires were analysed. Findings – The results reveal that trust, commitment, and satisfaction have a positive influence on the number of purchases from an App. Novelty – This study makes several suggestions for marketing practices of mobile apps and future research. Type of Paper: Empirical
    Keywords: Relationship Quality; Mobile Apps Quality; Review Depth; Continuous Intention; Commitment
    JEL: M30 M31 M39
    Date: 2019–03–06
  4. By: Notheisen, Benedikt; Marino, Vincenzo; Englert, Daniel; Weinhardt, Christof
    Abstract: The trust-free nature of blockchain-based systems challenges the role of traditional platform providers and enables the creation of new, intermediary-free markets. Despite the growing number of such markets, the impact of the blockchain's configuration on market outcomes remains unclear. In this study, we utilize order-level data from realworld financial markets to explore the impact of the blockchain parameters block size and block creation time on the quality of decentralized markets. More specifically, we find that increasing the blocks' capacity improves market activity, while higher block frequencies impose a trade-off between higher turnovers and lower trade sizes. In addition, we identify the block creation time and block size as core drivers of daily and intraday liquidity, respectively. In consequence, improving liquidity goes hand in hand with a higher activity. However, the reciprocal relationship between blockchain parameters and the increasing price impact of a block also indicate that faster and bigger blocks are no silver bullet to scale decentralized markets and may facilitate volatility. In total, we contribute an initial, technology-agnostic assessment of the quality of decentralized markets that aims to guide interdisciplinary researchers and innovative practitioners.
    Keywords: Decentralized markets,Blockchain,Market quality,Market design,Market engineering,FinTech
    JEL: G14 L86 N2 O16
    Date: 2019
  5. By: Cave, Martin; Genakos, Christos; Valletti, Tommaso
    Abstract: The European telecommunications sector has been radically transformed in the past 25 years: from a group of state monopolies to a set of increasingly competitive markets. In this paper we summarize how this process has unfolded—for both fixed and mobile telecommunications—by focusing on the evolution of the regulatory framework and by drawing some parallels with the evolution of the sector in the US. Given the major strategic importance of the sector, we highlight some of the challenges that lie ahead.
    Keywords: European Union; Fixed and mobile telecommunication networks; Institutional design; Telecommunications regulation
    JEL: L43 L50 L96 O52
    Date: 2019–02–26
  6. By: Dirk Bergemann (Cowles Foundation, Yale University); Alessandro Bonatti (MIT)
    Abstract: Large internet platforms collect data from individual users in almost every interaction on the internet. Whenever an individual browses a news website, searches for a medical term or for a travel recommendation, or simply checks the weather forecast on an app, that individual generates data. A central feature of the data collected from the individuals is its social aspect. Namely, the data captured from an individual user is not only informative about this speci?c individual, but also about users in some metric similar to the individual. Thus, the individual data is really social data. The social nature of the data generates an informational externality that we investigate in this note.
    Keywords: Individual Data, Social Data, Informational Externality, Internet Platforms, Data Collection, Data Markup
    JEL: D80 D82 D83
    Date: 2019–03
  7. By: MOTOHASHI Kazuyuki
    Abstract: Digitalization has a transformative impact on innovation in firms and industry. In this paper, the results of the Survey on the Changing Nature of Manufacturing Processes and New Product Development are presented to show how the nature of Japanese SMEs in manufacturing industry is changing in the new IT era (AI, big data and IoT). It is found that a firm applying new IT, such as data analytics by machine learning, is likely to be involved in delivering digital services as well as new products (servitalization) and innovation ecosystem, interacting with multiple firms. Such firms address wider customer needs, instead of just meeting existing customer requirements, meaning that its product innovation is likely to happen in new business fields. In addition, a firm which extensively uses its customer data gains more sales and profit contributions from its new product.
    Date: 2019–03
  8. By: Wang, Ou; Somogyi, Simon
    Abstract: Due to the quick development of e-commerce, more and more consumers have accepted food consumption with different e-commerce modes as a part of their daily lives. In recent years, a new e-commerce mode- New Retail is starting to appear across the world. This study examined the impacts of food choice motives and socio-demographic characteristics on consumer food choice with the New Retail e-commerce mode. It also explored consumer preferences of specific food categories for the New Retail food consumption. An online survey was administered with 435 participants from three Chinese cities: Beijing, Shanghai and Shenzhen. Results of linear regression analyses indicated that the New Retail food consumption was significantly associated with the following food choice motives and socio-demographic characteristics: Taste appeal, Quality concern, Others’ reviews, Discount, Gender, Household size, Age, Income, Occupation and Marital status. Meanwhile Live aquatic product and Fresh fruit were the most frequently consumed food categories with the New Retail mode by consumers. The findings can help food producers and policy-makers to develop effective marketing strategies and promotion policies for their products to meet the consumer needs in e-commerce age.
    Keywords: Consumer/Household Economics
    Date: 2019–02
  9. By: Yiwei Dou; Geng Li; Joshua Ronen
    Abstract: We study the unintended consequences of consumer financial regulations, focusing on the CARD Act, which restricts consumer credit card issuers’ ability to raise interest rates. We estimate the competitive responsiveness-the degree to which a credit card issuer changes offered interest rates in response to changes in interest rates offered by its competitors-as a measure of competition in the credit card market. Using small business card offers, which are not subject to the Act, as a control group, we find a significant decline in the competitive responsiveness after the Act. The decline in responsiveness is more pronounced for competitors’ reductions, as opposed to increases, in interest rates, and is more pronounced in areas with more subprime borrowers. The reduced competition underscores the potential unintended consequence of regulating the consumer credit market and contributes toward a more comprehensive and balanced evaluation of the costs and benefits of consumer financial regulations.
    Keywords: CARD Act ; Competitive responsiveness ; Credit card market ; Regulations
    JEL: L51 G21 E51
    Date: 2019–03–25
  10. By: Hinnosaar, Marit; Hinnosaar, Toomas; Kummer, Michael; Slivko, Olga
    Abstract: Do contributions to online content platforms induce a feedback loop of ever more user-generated content or will they discourage future contributions? To assess this, we use a randomized field experiment which added content to some pages in Wikipedia while leaving similar pages unchanged. We find that adding content has a negligible impact on the subsequent long-run growth of content. Our results have implications for information seeding and incentivizing contributions, implying that additional content does not generate sizable externalities, neither by inspiring nor by discouraging future contributions.
    Keywords: knowledge accumulation,user-generated content,Wikipedia
    JEL: C93 L17 L86
    Date: 2019
  11. By: KIM YoungGak; MOTOHASHI Kazuyuki
    Abstract: RIETI conducted the Survey of Big Data Use and Innovation in Japanese Manufacturing Firms in 2015. This paper uses this survey data, linked with TSR data of inter-firm transactions, to examine the relationship between supplier and customer (business partner) network structures and the data sharing with these business partners. It is found that, in general, the number of suppliers is positively correlated with the likelihood of internal use of data and data sharing with suppliers, customers, and other third-party firms. On the contrary, the number of customers is negatively correlated with data use and sharing, especially with customers. The analysis results also show that long-term relationships with suppliers contribute negatively to data sharing, but contribute positively to data sharing with customers. Interestingly, the more customers a firm's suppliers have, or the more suppliers a firm's customers have in their transaction networks, the less likely it is that the firm shares big data with other third-party firms. We find that data sharing has a positive and significant impact on firm productivity. However, we find no positive contribution of data sharing to attracting new customers or suppliers. We do not find any significant effect of data sharing on the extensive margin of transactions.
    Date: 2019–03
  12. By: Daniel Ferreira (London School of Economics, CEPR and ECGI); Jin Li (Hong Kong University, CEP); Radoslawa Nikolowa (Queen Mary University of London)
    Abstract: We develop a theory of blockchain governance. In our model, the proof-of-work system, which is the most common set of rules for validating transactions in blockchains, creates an industrial ecosystem with specialized suppliers of goods and services. We analyze the two-way interactions between blockchain governance and the market structure of the industries in the blockchain ecosystem. Our main result is that the proof-of-work system leads to a situation where the governance of the blockchain is captured by a large firm.
    Keywords: Governance, Blockchain, Proof-of-Work, Industrial Ecosystem
    JEL: G30 L13 M20
    Date: 2019–01–22
  13. By: Stiroh, Kevin J. (Federal Reserve Bank of New York)
    Abstract: Remarks at the First New York Fed Fintech Conference, Federal Reserve Bank of New York, New York City.
    Keywords: technological progress; technological change; fintech innovation; operational risk; Fintech Advisory Group
    Date: 2019–03–22
  14. By: Schrape, Jan-Felix
    Abstract: Digitalization has long been associated with the promise of a technology-enabled decentralization of social conditions. Although such expectations have regularly fallen short, their underlying generic vision has proven to be astonishingly stable. This paper strives to trace the origin of the notion of decentralizing socio-economic forms of coordination through technological means - from the do-it-yourself scene of the late 1960s, the computer counterculture of the 1970s and the 1980s, and the debates on cyberspace and Web 2.0 in the 1990s and 2000s to present day ideas of decentralized and distributed forms of production and economic systems. An elaboration of the basic patterns of arguments behind technology-based promises of decentralization and their communicative functions then follows.
    Date: 2019
  15. By: Daron Acemoglu; Pascual Restrepo
    Abstract: Artificial Intelligence is set to influence every aspect of our lives, not least the way production is organized. AI, as a technology platform, can automate tasks previously performed by labor or create new tasks and activities in which humans can be productively employed. Recent technological change has been biased towards automation, with insufficient focus on creating new tasks where labor can be productively employed. The consequences of this choice have been stagnating labor demand, declining labor share in national income, rising inequality and lower productivity growth. The current tendency is to develop AI in the direction of further automation, but this might mean missing out on the promise of the "right" kind of AI with better economic and social outcomes.
    JEL: J23 J24
    Date: 2019–03
  16. By: Blumenstock, Joshua; Chi, Guanghua; Tan, Xu
    Abstract: What is the value of a social network? Prior work suggests two distinct mechanisms that have historically been difficult to differentiate: as a conduit of information, and as a source of social and economic support. We use a rich 'digital trace' dataset to link the migration decisions of millions of individuals to the topological structure of their social networks. We find that migrants systematically prefer 'interconnected' networks (where friends have common friends) to 'expansive' networks (where friends are well connected). A micro-founded model of network-based social capital helps explain this preference: migrants derive more utility from networks that are structured to facilitate social support than from networks that efficiently transmit information.
    Keywords: Big Data; Development; migration; networks; social capital; Social Networks
    JEL: D85 O12 O15 R23 Z13
    Date: 2019–03
  17. By: Achsania Hendratmi (Faculty of Economics and Business, Universitas Airlangga, Indonesia. Author-2-Name: Puji Sucia Sukmaningrum Author-2-Workplace-Name: Faculty of Economics and Business, Universitas Airlangga, Jl. Airlangga No.4, 60286, Surabaya, Indonesia Author-3-Name: Muhamad Nafik Hadi Ryandono Author-3-Workplace-Name: Faculty of Economics and Business, Universitas Airlangga, Jl. Airlangga No.4, 60286, Surabaya, Indonesia Author-4-Name: Ririn Tri Ratnasari Author-4-Workplace-Name: Faculty of Economics and Business, Universitas Airlangga, Jl. Airlangga No.4, 60286, Surabaya, Indonesia Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective – This study aims to determine the role of Islamic crowdfunding towards business development of start-up businesses financed in Singapore, Malaysia and Indonesia. Methodology/Technique – This study uses a qualitative approach with an exploratory case study strategy. The data collection was carried out by conducting in-depth interviews with CEOs and COOs of Kapital Boost and CEO Investee (funded SMEs) informants. Findings – The results show that there is an increase in assets, sales turnover, and the capacity of Micro, Small and Medium Enterprises (MSMEs) and Startup businesses that received funding through campaigns on the Kapital Boost platform. In addition, pioneering business people can get easier access to financing compared to financing through bank-provided credit. Novelty – The findings of this paper can be used to develop crowdfunding platform will be implemented in Muslim countries or countries with a majority Muslim population. Type of Paper: Empirical.
    Keywords: Crowdfunding Platforms; Islamic Crowdfunding; Business Development; MSMEs; Start-up Companies.
    JEL: E44 M21 M29
    Date: 2019–03–19
  18. By: Slemrod, Joel; Collins, Brett; Hoopes, Jeffrey L.; Reck, Daniel; Sebastiani, Michael
    Abstract: We investigate the response of small businesses operating as sole proprietorships to Form 1099-K, an information report introduced in 2011 which provides the Internal Revenue Service with information about electronic sales (e.g., credit card sales). The overall impact of the policy appears to be relatively small. However, theory and distributional analysis isolates a subset of taxpayers expected to be especially sensitive to reporting, who report receipts equal to or slightly exceeding the receipts reported on 1099-K. Among this set of taxpayers, information reporting induced more complete tax reporting–30% of sensitive taxpayers filed a return declaring business income for the first time, and among those that were already filing, we estimate an increase in reported receipts by up to 24%. These taxpayers largely offset increased reported receipts with increased reported expenses, which do not face information reporting, diminishing the impact on reported net taxable income.
    Keywords: Tax evasion; Information reporting; Small businesses; Tax enforcement; Administrative data
    JEL: H20 H23 H25 H26
    Date: 2017–05–01
  19. By: Reetz, Fabian
    Date: 2019
  20. By: Susan Athey; Guido Imbens
    Abstract: We discuss the relevance of the recent Machine Learning (ML) literature for economics and econometrics. First we discuss the differences in goals, methods and settings between the ML literature and the traditional econometrics and statistics literatures. Then we discuss some specific methods from the machine learning literature that we view as important for empirical researchers in economics. These include supervised learning methods for regression and classification, unsupervised learning methods, as well as matrix completion methods. Finally, we highlight newly developed methods at the intersection of ML and econometrics, methods that typically perform better than either off-the-shelf ML or more traditional econometric methods when applied to particular classes of problems, problems that include causal inference for average treatment effects, optimal policy estimation, and estimation of the counterfactual effect of price changes in consumer choice models.
    Date: 2019–03

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.