nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2020‒09‒28
thirty-two papers chosen by

  1. Understanding the greater diffusion of mobile money innovations in Africa By Simplice A. Asongu; Nicholas Biekpe; Danny Cassimon
  3. Equilibrium Bitcoin Pricing By Bruno Biais; Christophe Bisière; Matthieu Bouvard; Catherine Casamatta; Albert J. Menkveld
  4. A great disturbance in the crypto: Understanding cryptocurrency returns under attacks By Simona Ramos; Fabio Pianese; Ester Oliveras
  5. Technology, Education, Life and Non-life Insurance in Africa By Asongu, Simplice
  6. The Effects of Mobile Phone Technology, Knowledge Creation and Diffusion on Inclusive Human Development in Sub-Saharan Africa By Simplice A. Asongu
  7. Enhancing Information Technology for Value Added Across Economic Sectors in Sub-Saharan Africa By Simplice A. Asongu; Mushfiqur Rahman; Joseph Nnanna; Mohamed Haffar
  8. Global Software Piracy, Technology and Property Rights Institutions By Simplice A. Asongu
  9. Creating platforms by hosting rivals By Andrei Hagiu; Bruno Jullien; Julian Wright
  10. Using Crowdsourced Data to Study Crime and Place By Buil-Gil, David; Solymosi, Reka
  11. Does Increasing Access to Formal Credit Reduce Payday Borrowing? By Sarah Miller; Cindy K. Soo
  12. Voting over a Distributed Ledger: An interdisciplinary perspective By Dhillon, Amrita; Kotsialou, Grammateia; McBurney, Peter; Riley, Luke
  13. Further from the truth: The impact of inperson, online, and mTurk on dishonest behavior By David L. Dickinson; David M. McEvoy
  14. Two-Sided Platforms and Biases in Technology Adoption By Choi, Jay Pil; Jeon, Doh-Shin
  15. The influence of the CDO on the company?s performance with special consideration of (former) CIOs By Markus Matschi
  16. Competing for Time: A Study of Mobile Applications By Han Yuan
  17. Social Media and Inclusive Human Development in Africa By Simplice A. Asongu; Nicholas M. Odhiambo
  18. Homicide and Social Media: Global Empirical Evidence By Asongu, Simplice; Uduji, Joseph; Okolo-Obasi, Elda
  19. Immaculate Deception: How (and Why) Bankers Still Enjoy a Global Rescue Network By Edward J. Kane
  20. Big Data and Happiness By Rossouw, Stephanie; Greyling, Talita
  21. Learning from Data and Network Effects: The Example of Internet Search By Maximilian Schäfer; Geza Sapi
  22. Liquidity Usage and Payment Delay Estimates of the New Canadian High Value Payments System By Francisco Rivadeneyra; Nellie Zhang
  23. Are female skins sold for a lower price? Evidence from the Fortnite game By Stadtmann, Georg; Tosun, Aynur Dilan; Pierdzioch, Christian
  24. Cash Thresholds, Cash Expenditure and Tax Evasion By Francesco Flaviano Russo
  25. How Does Household Spending Respond to an Epidemic? Consumption During the 2020 COVID-19 Pandemic By Scott R. Baker; R.A. Farrokhnia; Steffen Meyer; Michaela Pagel; Constantine Yannelis
  26. Spatial Distribution of Supply and the Role of Market Thickness: Theory and Evidence from Ride Sharing By Soheil Ghili; Vineet Kumar
  27. The Geography of New Technologies By Nicholas Bloom; Tarek A. Hassan; Aakash Kalyani; Josh Lerner; Ahmed Tahoun
  28. Drugs on the Web, Crime in the Streets. The impact of Dark Web marketplaces on street crime By Diego Zambiasi
  29. Impact of Internet use on Health outcomes of Rural Residents: Evidence from China By Li, LiLi; Zeng, Yiwu; Zhang, Zhonggen
  30. Interbank Networks in the Shadows of the Federal Reserve Act By Haelim Anderson; Selman Erol; Guillermo Ordoñez
  31. Payments Crises and Consequences By Qian Chen; Christoffer Koch; Gary Richardson; Padma Sharma
  32. How Did U.S. Consumers Use Their Stimulus Payments? By Coibion, Olivier; Gorodnichenko, Yuriy; Weber, Michael

  1. By: Simplice A. Asongu (Yaounde, Cameroon); Nicholas Biekpe (Cape Town, South Africa); Danny Cassimon (University of Antwerp, Belgium)
    Abstract: The present research extends Lashitew, van Tulder and Liasse (2019, RP) in order to understand the greater diffusion of mobile money innovations in Africa. To make this assessment, a comparative analysis is engaged between sampled African countries and the corresponding sampled developing countries. Three main types of predictor groups are used for the study, namely: demand, supply and macro-level factors. The empirical evidence is based on Tobit regressions. The tested hypothesis is confirmed because from a comparative analysis between African-specific estimates and those of the sampled countries, not all factors driving mobile money innovations in Africa are apparent in the findings of Lashitew et al. (2019). An extended analysis is also performed to take on board the concern of multicollinearity from which, the best estimators from the study are derived. Comparative findings from correlation analysis show that an African specificity is largely traceable to the ‘unique mobile subscription rate’ variable. An in-depth empirical analysis further confirms an African specificity in the outcome variables (especially in the mobile used to send/receive money) which, may be traceable to informal sector variables not documented in Lashitew et al. (2019). Scholarly and policy implications are discussed.
    Keywords: Mobile money; technology diffusion; financial inclusion; inclusive innovation
    JEL: D10 D14 D31 D60 O30
    Date: 2020–01
  2. By: Audrey Hanan (CRET-LOG - Centre de Recherche sur le Transport et la Logistique - AMU - Aix Marseille Université); Jean-Louis Moulins (CRET-LOG - Centre de Recherche sur le Transport et la Logistique - AMU - Aix Marseille Université); Audrey Portes (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon)
    Abstract: his research examines the influences of a transgressive advertising for a taboo product category (feminine hygiene products) on brand relationships in the age of social networking. With a digital point of view, this research studies a form of transgression that aims to generate adhesion rather than shock. A netnography on the recent Nana brand campaign "Viva la Vulva" is carried out. The results underline that social networks provide a powerful resonance framework for transgression. It can be a means of promoting positive digital WOM and adhesion. While transgression can be an interesting marketing lever, it needs to be carefully thought out. The beneficial effects of transgression are altered when the consumer perceives a manipulation.
    Abstract: Cette recherche étudie les influences, sur la relation à la marque, d'une publicité transgressive pour une catégorie de produit taboue (les produits d'hygiène féminine), à l'heure des réseaux sociaux. En plus de ce caractère digital, cette recherche étudie également une forme de transgression qui vise à générer de l'adhésion plutôt qu'à choquer. Une netnographie sur la récente campagne de la marque Nana « Viva la Vulva » est étudiée. Les résultats soulignent que les réseaux sociaux donnent un cadre de résonance puissant à la transgression. Elle peut être un moyen de favoriser du BAO digital positif et l'adhésion à la marque. Si la transgression peut être un levier marketing intéressant, elle doit toutefois être minutieusement pensée. En effet, il existe une altération des effets bénéfiques de la transgression lorsque le consommateur perçoit une manipulation. Abstract : This research examines the influences of a transgressive advertising for a taboo product category (feminine hygiene products) on brand relationships in the age of social networking. With a digital point of view, this research studies a form of transgression that aims to generate adhesion rather than shock. A netnography on the recent Nana brand campaign "Viva la Vulva" is carried out. The results underline that social networks provide a powerful resonance framework for transgression. It can be a means of promoting positive digital WOM and adhesion. While transgression can be an interesting marketing lever, it needs to be carefully thought out. The beneficial effects of transgression are altered when the consumer perceives a manipulation.
    Keywords: BAO,digital,relation client,transgression
    Date: 2020–09–03
  3. By: Bruno Biais; Christophe Bisière; Matthieu Bouvard; Catherine Casamatta; Albert J. Menkveld
    Abstract: We offer an equilibrium model of cryptocurrency pricing and confront it to new data on bitcoin transactional benefits and costs. The model emphasises that the fundamental value of the cryptocurrency is the stream of net transactional benefits it will provide, which depend on its future prices. The link between future and present prices implies that returns can exhibit large volatility, unrelated to fundamentals. We construct an index measuring the ease with which bitcoins can be used to purchase goods and services, and we also measure costs incurred by bitcoin owners. Consistent with the model, estimated transactional net benefits explain a statistically signicant fraction of bitcoin returns.
    Date: 2020
  4. By: Simona Ramos; Fabio Pianese; Ester Oliveras
    Abstract: A non-traditional type of financial asset, cryptocurrencies based on public blockchains are still little understood in their real-world behavior. Exogenous events such as cyber-attacks and their media coverage can strongly affect their supply and demand, adoption and usage, efficiency, and infrastructural development, thus influencing their price stability and market valuation. Given the great technical complexity of blockchains, we believe that a pure economic analysis of risks associated with cryptocurrencies is simply not sufficient to convey the relationships between attacks and the disruptive effects that these can bring on the operation of cryptocurrencies. In this paper we survey the most common types of attacks for PoW cryptocurrencies and evaluate their impact on the returns of a number of real-world cryptocurrencies for which market data are available. Our event study focuses on instances of 51% attacks, hard forks, and wallet attacks that were observed in the recent years. The main goal of our analysis is to understand the relationship between technical events (cyber-attacks and coordinated user/miner behavior) and the economic impacts surrounding them. We aim to develop a deeper understanding of these systems that are object of great research interest in separate disciplines, supporting policy makers in their regulatory decisions concerning asset classification and financial risk.
    Date: 2020–09
  5. By: Asongu, Simplice
    Abstract: This article examines the relevance of information and communication technology (ICT) in modulating the effect of education on life insurance and non-life insurance consumption in 48 African countries for the period 2004-2014. Education is measured with primary school, secondary school and tertiary school enrollments. ICT is measured with mobile phone, internet and broadband subscriptions. The empirical evidence is based on generalized method of moments. The following main findings are established. First, from the nexuses between education, ICT and life insurance, there are positive conditional effects from the interaction between: (i) broadband subscriptions and primary school enrollment; (ii) broadband subscriptions and secondary school enrollment and (iii) internet penetration and tertiary school enrollment. Second, from the nexuses between education, ICT and non-life insurance: (i) there is a negative net effect from the interactions between mobile phone penetration and primary education while positive net effects are apparent from the interactions between: mobile phone penetration and secondary school enrollment; secondary school enrollment and broadband subscriptions and; tertiary school enrollment and broadband subscriptions.
    Keywords: Education; Technology; Insurance
    JEL: I20 I28 I30 O16 O55
    Date: 2019–01
  6. By: Simplice A. Asongu (Yaounde, Cameroon)
    Abstract: This paper examines the joint effects of mobile phone technology, knowledge creation and diffusion on inclusive human development in 49 sub-Saharan African (SSA) countries. The empirical evidence is based on Tobit regressions for the period 2000-2012. The net effects of interactions between the mobile phone, knowledge creation and diffusion variables are positive indicating that the combined effects of these variables improve inclusive human development in SSA countries. Further analysis dividing the dataset into a number of fundamental characteristics based on economic, legal, religion and political stability associated with African economies show that mobile phone penetration and associated innovation in SSA improve inclusive human development irrespective of the country’s level of income, legal origins, religious orientation and the state of the nation. The pupil-teacher ratio exerts a negative influence on the outcome variable which is favourable for inclusive human development because higher ratios denote lower education quality since more pupils are accommodated by fewer teachers. The study contributes to innovation diffusion theory and economic development literature.
    Keywords: Mobile phones; Innovation, Knowledge diffusion; Inclusive human development; Africa
    JEL: G20 I10 I32 O40 O55
    Date: 2020–01
  7. By: Simplice A. Asongu (Yaounde, Cameroon); Mushfiqur Rahman (London, UK); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria); Mohamed Haffar (University of Bradford, Bradford, UK)
    Abstract: This study investigates how enhancing information and communication technology (ICT) affects value added across sectors in 25 countries in Sub-Saharan Africa using data for the period 1980-2014. The empirical evidence is based on the Generalised Method of Moments. The following findings are established. First, the enhancement of mobile phone and internet penetrations respectively have net negative effects on value added to the agricultural and manufacturing sectors.Second, enhancing ICT (i.e. mobile phone penetration and internet penetration) overwhelmingly has positive net effects on value added to the service sector. From an extended analysis, enhancing ICT in the agricultural and manufacturing sectors should exceed certain thresholds for value added, notably: 114.375 of mobile phone penetration per 100 people for added value in the agricultural sector and 22.625 of internet penetration per 100 people for added value in the manufacturing sector.
    Keywords: Economic Output; Information Technology; Sub-Saharan Africa
    JEL: E23 F21 F30 L96 O55
    Date: 2020–01
  8. By: Simplice A. Asongu (Yaounde, Cameroon)
    Abstract: This study extends the literature on fighting software piracy by investigating how Intellectual Property Rights (IPRs) regimes interact with technology to mitigate software piracy when existing levels of piracy are considered. Two technology metrics (internet penetration rate and number of PC users) and six IPRs mechanisms (constitution, IPR law, main IP laws, WIPO Treaties, bilateral treaties and multilateral treaties) are used in the empirical analysis. The statistical evidence is based on: (i) a panel of 99 countries for the period 1994-2010 and (ii) interactive contemporary and non-contemporary Quantile regressions.The findings show that the relevance of IPR channels in the fight against software piracy is noticeably contingent on the existing levels of technology embodied in the pirated software. There is a twofold policy interest for involving modern estimation techniques such as interactive Quantile regressions. First, it uncovers that the impact of IPR systems on software piracy may differ depending on the nature of technologies used. Second, the success of initiatives to combat software piracy is contingent on existing levels of the piracy problem. Therefore, policies should be designed differently across nations with high-, intermediate- and low-levels of software piracy.
    Keywords: Piracy; Business Software; Software piracy; Intellectual Property Rights
    JEL: F42 K42 O34 O38 O57
    Date: 2020–01
  9. By: Andrei Hagiu (BU - Boston University [Boston]); Bruno Jullien (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - 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); Julian Wright (NUS - National University of Singapore)
    Abstract: We explore conditions under which a multiproduct firm can profitably turn itself into a platform by "hosting rivals," i.e. by inviting rivals to sell products or services on top of its core product. Hosting eliminates the additional shopping costs to consumers of buying a specialist rival's competing version of the multiproduct firm's non-core product. On the one hand, this makes it easier for the rival to compete on the non-core product. On the other hand, hosting turns the rival from a pure competitor into a complementor: the value added by its product now helps raise consumer demand for the multi-product firm's core product. As a result, hosting can be both unilaterally profitable for the multi-product firm and jointly profitable for both firms.
    Keywords: multi-sided platforms,shopping costs,bundling,competition,complementarity.
    Date: 2020–07
  10. By: Buil-Gil, David (University of Manchester); Solymosi, Reka
    Abstract: Crowdsourcing refers to the practise of enlisting the knowledge, experience or skills of a large number of people (the crowd) through some digital platform to collect data towards a collaborative project. Crowdsourcing can generate large volumes of data in relatively little time at a very small cost, and can be useful for research, strategic police management and many other purposes. To make effective use of crowdsourced data, it is important to understand its key strengths to emphasize, and limitations to mitigate. In this chapter we highlight the main strengths and weaknesses of crowdsourcing, and illustrate how to acquire, make sense of, and critically evaluate crowdsourced data to study crime and place. We present a step-by-step exemplar study using crowdsourced data from a platform called Place Pulse, where people rate their feelings of safety between different areas. Taking the case study of Atlanta, Georgia, we work through analyzing and interpreting these data while highlighting how to emphasize and evaluate the strengths and limitations of crowdsourcing. Exercises are presented using R software.
    Date: 2020–08–29
  11. By: Sarah Miller; Cindy K. Soo
    Abstract: The use of high cost “payday loans” among subprime borrowers has generated substantial concern among policymakers. This paper provides the first evidence of substitution between “alternative” and “traditional” credit by exploiting an unexpected positive shock to traditional credit access among payday loan borrowers: the removal of a Chapter 7 bankruptcy flag. We find that the removal of a bankruptcy flag on a credit report results in a sharp increase in access to traditional credit and raises credit scores, credit card limits, and approval rates. However, despite meaningful increases in access to traditional credit, we find no evidence that borrowers reduce their use of payday loans, and our confidence intervals allow us to rule out even very small reductions in payday borrowing. Furthermore, we find evidence that flag removals increase the use of other alternative credit products such as online subprime installment loans. These results indicate that marginally improving access to less expensive formal credit is insufficient to meaningfully shift borrowers away from high cost subprime products. We discuss likely explanations for this including increased marketing of subprime products associated with the flag removal, the imperfect substitutability between cash and credit for low income borrowers, and an insufficiency in the size of the increase in credit access associated with the flag removal.
    Date: 2020–09
  12. By: Dhillon, Amrita; Kotsialou, Grammateia; McBurney, Peter; Riley, Luke
    Abstract: This work discusses the potential of a blockchain based infrastructure for a decentralised online voting platform. When compared to paper based voting, online voting can vastly increase the speed that votes can be counted, expand the overall accessibility of the election system and decrease the cost of turnout. Yet despite these advantages, online voting for political office is subject to fraud at various levels due to its centralised nature. In this paper, we describe a general architecture of a centralised online voting system and detail which areas of such a system are vulnerable to electoral fraud. We then proceed to introduce the key ideas underlying blockchain technology as a decentralised mechanism that can address these problems. We discuss the advantages and weaknesses of the blockchain technology, the protocols the technology uses and what criteria a good blockchain protocol should satisfy (depending on the voting application). We argue that the decentralisation inherent in the blockchain technology could increase the public's trust in national elections, as well as eliminate voter impersonation and double voting. We conclude with a discussion regarding how economists and social scientists can collaborate with the blockchain community in a research agenda on the design of efficient blockchain protocols and new voting systems such as liquid democracy.
    Date: 2020–08–29
  13. By: David L. Dickinson; David M. McEvoy
    Abstract: Recent policies require some interactions previously conducted in close social proximity (e.g., school, workplace) to take place remotely, which motivates our investigation of how in-person versus online environments impact honesty. We modify a well-known coin-flip task and examine the influence of going from the physical laboratory environment, to online with identifiable participants (same lab subject pool), to online with anonymous participants using mTurk. Surprisingly, while a simple move from in-lab to online (using the same subject pool) appears to increase “fake effort” – those who likely never flip the coin - it does not predict more dishonest behavior when there is a monetary incentive to cheat. The most socially distant and anonymous participants (mTurk) are more likely to be deemed cheaters in our analysis—these individuals report coin flip outcomes consistent with cheating for monetary gain. Implications of our findings indicate the greatest risk of potentially costly dishonest behavior results when anonymity, not just social distance, is high. Key Words: Social distance, cheating, coin flip, anonymity, behavioral economics, experiment
    JEL: C91 D90
    Date: 2020
  14. By: Choi, Jay Pil; Jeon, Doh-Shin
    Abstract: We investigate the relationship between market structure and platforms'incentives to adopt technological innovations in two-sided markets, where platforms may find it optimal to charge zero price on the consumer side and to extract surplus on the ad- vertising side. We consider innovations that a¤ect the two sides in an opposite way. We compare private incentives with social incentives and find that the bias in tech- nology adoption depends crucially on whether the non-negative pricing constraint binds or not. Our results provide a rationale for a tougher competition policy to curb concentration if competition authorities put more weight on consumer surplus in welfare calculations.
    Keywords: Technology Adoption, Two-Sided Platforms, Non-Negative Pricing Constraint, Pass-through
    JEL: D4 L1 L5
    Date: 2020–09
  15. By: Markus Matschi (University of Salzburg Business School)
    Abstract: Digitalization has affected all commercial enterprises. New technologies and approaches are enabling further business development, but also the creation of new business models that are forcing established companies to move forward. Most large companies have now responded to this challenge by creating a new top management position: The Chief Digital Officer (CDO). Currently, more than 2/3 of the 30 largest German listed companies have created a corresponding position. The central task of this position is to implement the digital change in the companies. However, the concrete structure of this position to achieve this task is very heterogeneous. In the literature this fact is taken into account by classifying CDO types such as Accelerator, Marketer, Harmonizer. With regard to the requirements for this position, the scientific community agrees that a strong knowledge of the business model and business processes in particular is necessary - coupled with an understanding of technology. For this reason, a Chief Information Officer (CIO) is not suitable for this position, according to my many scientists, because although there is an understanding of technology, no deep knowledge of the business model is assumed. However, extensive empirical studies have not yet been conducted. In practice, however, the CDO position is currently held by former or active CIOs. Using a cause-effect model and a mixed methods approach, this study aims to clarify the unanswered question of what requirements and conditions a CDO needs in order to be successful, resulting in measurable, positive influence on the company's performance. Hence, this study should close the research gap and resolve the contradiction between existing CIO/CDO theory and CIO/CDO practice.
    Keywords: Chief Digital Officer (CDO), Chief Information Officer (CIO), Digital Leadership, Executive Roles and Responsibilities
    JEL: L25 O32 M15
  16. By: Han Yuan
    Abstract: A smartphone user allocates her time to multiple mobile applications. To study the competitive relationship among apps, I develop a discrete-continuous model of time allocation with a binding time constraint and estimate it with a weekly panel of app usage in China. If two apps are often used together, it is because either they are complements or the preferences of the two apps are positively correlated. To disentangle complementarity (substitutability) from correlation in preferences, I use the exclusion restriction that updates of an app should affect the utility of this app but not those of other apps. I estimate the model on three pairs of apps (substitutes, complements, and independent apps). I recover a reasonable competition pattern and simulate mergers of the three pairs of apps. I find that a seemingly innocuous merger of independent apps can hurt consumers due to the binding time constraint. My results confirm that users and firms can both benefit from a merger of complements. I also find that usage-based pricing leads to higher profits and total surplus compared with subscription pricing because it enables price discrimination based on usage.
    JEL: L11 L40 M31
    Date: 2020–09–18
  17. By: Simplice A. Asongu (Yaounde, Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: This study investigates the relationship between social media and inclusive human development in 49 African countries for the year 2012. Social media is measured with Facebook penetration whereas inclusive human development is proxied by the inequality- adjusted human development index. The empirical evidence is based on Ordinary Least Squares, Tobit and Quantile regressions. Ordinary Least Squares provided baseline results, Tobit regressions account for the limited range in the outcome variable while Quantile regressions are engaged to control for initial levels of inequality-adjusted human development. From Ordinary Least Squares and Tobit results, Facebook penetration is positively associated with inclusive human development. Quantile regressions confirm this positive nexus and further establish that the positive association is slightly higher in magnitude in the above-median sub-sample. From a comparative assessment, it is apparent that with the exception of the resource-wealth sub-samples, higher levels of Facebook penetration are associated with comparatively higher levels of inclusive human development. Accordingly, the positive association between Facebook penetration and inclusive human development is: (i) a positive function of income levels and (ii) more apparent in Middle East and North African countries (compared to Sub-Saharan African countries), English common law countries (compared to their French civil law counterparts), and coastal countries (in relation to landlocked countries).
    Keywords: Social Media; Inclusive development; Income levels; Regions
    JEL: D83 O30 D74 D83
    Date: 2020–01
  18. By: Asongu, Simplice; Uduji, Joseph; Okolo-Obasi, Elda
    Abstract: This study investigates the relationship between social media and homicide in a cross section of 148 countries for the year 2012. The empirical evidence is based on Ordinary Least Squares, Tobit and Quantile regressions. The findings from Ordinary Least Squares and Tobit regressions show a negative relationship between Facebook penetration and the homicide rate. The negative relationship is driven by the 75th quantile of the conditional distribution of the homicide rate. The negative nexus is also driven by upper middle income countries and “Europe and Central Asia”. Three main implications are apparent when the findings are compared and contrasted. First, established findings from OLS and Tobit regressions are driven by countries with above-median levels of homicide. Second, such above-median countries are largely associated with upper middle income countries and nations in “Europe and Central Asia”. Third, modelling the relationship between Facebook penetration and homicide at the conditional mean of homicide may be misleading unless it is contingent on initial levels of homicide and tailored differently across income levels and regions of the world.
    Keywords: Homicide; Social media
    JEL: D74 D83 K42 O30
    Date: 2019–01
  19. By: Edward J. Kane (Boston College)
    Abstract: Dodd-Frank is an example of counterfeit reform. It is designed principally to benefit very big banks and it has helped these banks to increase their market share greatly during the last 10 years. The Act provides lesser and contradictory forms of costs and comfort to smaller US bankers and taxpayers, foreign bankers (especially the managers of Deutsche Bank), and foreign governments. Small bankers and taxpayers are encouraged to believe that the 2007-2009 US rescue of the world’s biggest banks was a one-time maneuver. But an opposite message is sent through the press as (with great fanfare) the industry absolves and congratulates ex-officeholders: (1) for having transferred massive amounts of subsidized support not just to stakeholders in US megabanks, but also to European bankers and governments, and (2) for keeping the subsidies flowing long past the panic’s expiry date. Genuine reform will require changes in fraud laws and an effort to post on a continuing basis the value of the safety-net subsidies individual megabanks enjoy.
    Keywords: Too big to fail, financial safety, financial reform, financial crises, implicit subsidies, political economy
    JEL: E02 E32 E42 E52 E58
    Date: 2020–07–18
  20. By: Rossouw, Stephanie; Greyling, Talita
    Abstract: The pursuit of happiness. What does that mean? Perhaps a more prominent question to ask is, 'how does one know whether people have succeeded in their pursuit'? Survey data, thus far, has served us well in determining where people see themselves on their journey. However, in an everchanging world, one needs high-frequency data instead of data released with significant time-lags. High-frequency data, which stems from Big Data, allows policymakers access to virtually real-time information that can assist in effective decision-making to increase the quality of life for all. Additionally, Big Data collected from, for example, social media platforms give researchers unprecedented insight into human behaviour, allowing significant future predictive powers.
    Keywords: Happiness,Big Data,Sentiment analysis
    JEL: C88 I31 I39 J18
    Date: 2020
  21. By: Maximilian Schäfer; Geza Sapi
    Abstract: The rise of dominant firms in data driven industries is often credited to their alleged data advantage. Empirical evidence lending support to this conjecture is surprisingly scarce. In this paper we document that data as an input into machine learning tasks display features that support the claim of data being a source of market power. We study how data on keywords improve the search result quality on Yahoo!. Search result quality increases when more users search a keyword. In addition to this direct network effect caused by more users, we observe a novel externality that is caused by the amount of data that the search engine collects on the particular users. More data on the personal search histories of the users reinforce the direct network effect stemming from the number of users searching the same keyword. Our findings imply that a search engine with access to longer user histories may improve the quality of its search results faster than an otherwise equally efficient rival with the same size of user base but access to shorter user histories.
    Keywords: Competition, network effects, search engines, Big Data
    JEL: L12 L41 L81 L86
    Date: 2020
  22. By: Francisco Rivadeneyra; Nellie Zhang
    Abstract: This paper presents simulation results for Canada's new large-value payments system: Lynx. We simulate the settlement process of Lynx using a large sample of payments observed in the current system (LVTS), taking the initial level of liquidity as given. We calculate the resulting liquidity usage, the payment delay and the shares of payments settled on a gross or net basis. The behaviour of participants (timing of payment submission) is assumed to remain the same as in LVTS. With an initial liquidity comparable to the collateral amount currently pledged in LVTS ($14.6 billion), Lynx FIFO Bypass would result in 28 minutes of average weighted delay and $17.3 billion of liquidity usage (the sum of intraday maximum net debit positions). Given this configuration, on average, $1.9 billion would be needed to clear non-urgent payments delayed until the end of the day, equivalent to 4.1 percent of payment value and 0.06 percent of volume. Doubling the amount of initial liquidity (to $29.3 billion) would result in 12 minutes of weighted delay. This basic configuration of Lynx requires a higher level of liquidity than LVTS and a plain-vanilla RTGS with pooled liquidity.
    Keywords: Financial services; Financial system regulation and policies; Payment clearing and settlement systems
    JEL: C5 E4 E42 E5 E58
    Date: 2020–09
  23. By: Stadtmann, Georg; Tosun, Aynur Dilan; Pierdzioch, Christian
    Abstract: Much significant research has been done to shed light on discrimination of females in, for example, labor markets. Less is known, in contrast, about the amount of discrimination in the virtual world of online gaming. In an early study, Castronova (2004) finds that female avatars receive about 10% lower prices in online auctions. In this research note, we re-examine the pricing of avatars sold in the Fortnite game. We cannot reject the null hypothesis that female and male avatars are sold at the same prices. We also account for the impact of a Fortnite sex scandal on the price differential between female and male avatars.
    Keywords: gender discrimination,Fortnite,gaming,Freemium,product differentiation,market segmentation
    JEL: J16 L11 M31
    Date: 2020
  24. By: Francesco Flaviano Russo (Università di Napoli Federico II and CSEF)
    Abstract: I investigate whether cash thresholds that forbid cash payments on big transactions are effective at reducing tax evasion. I find that the 1000 euros threshold implemented in Italy in 2011 induced a bigger cash expenditure reduction for the households with self employed members, and the more so in case they work in cash intensive sectors. With the help of a simple model, I show that this empirical evidence suggests a tax evasion reduction, and I compute the tax revenue increase implied by the empirical estimates. Calibrating the model, I also perform a counterfactual exercise to quantify the potential effects of lower thresholds.
    Keywords: Self-employed, Transactions, Payments
    JEL: H26 E42
    Date: 2020–09–18
  25. By: Scott R. Baker (Northwestern University, Kellogg and NBER); R.A. Farrokhnia (Columbia Business School, Columbia Engineering School); Steffen Meyer (University of Southern Denmark and Danish Finance Institute); Michaela Pagel (Columbia Business School, NBER, and CPER); Constantine Yannelis (University of Chicago - Booth School of Business and NBER)
    Abstract: We explore how household consumption responds to epidemics, utilizing transaction-level household financial data to investigate the impact of the COVID-19 virus. As the number of cases grew, households began to radically alter their typical spending across a number of major categories. Initially spending increased sharply, particularly in retail, credit card spending and food items. This was followed by a sharp decrease in overall spending. Households responded most strongly in states with shelter-in-place orders in place by March 29th. We explore heterogeneity across partisan affiliation, demographics and income. Greater levels of social distancing are associated with drops in spending, particularly in restaurants and retail.
    Keywords: Consumption, Coronavirus, COVID-19, Household Finance, Transaction Data
    JEL: D14 E21
    Date: 2020
  26. By: Soheil Ghili (Cowles Foundation & School of Management, Yale University); Vineet Kumar (School of Management, Yale University)
    Abstract: This paper studies the e ects of economies of density in transportation markets, focusing on ridesharing. Our theoretical model predicts that (i) economies of density skew the supply of drivers away from less dense regions, (ii) the skew will be more pronounced for smaller platforms, and (iii) rideshare platforms do not nd this skew ecient and thus use prices and wages to mitigate (but not eliminate) it. We then develop a general empirical strategy with simple implementation and limited data requirements to test for spatial skew of supply from demand. Applying our method to ride-level, multi-platform data from New York City (NYC), we indeed nd evidence for a skew of supply toward busier areas, especially for smaller platforms. We discuss the implications of our analysis for business strategy (e.g., surge pricing) and public policy (e.g., consequences of breaking up or downsizing a rideshare platform).
    Keywords: Spatial Markets, Transportation, Economies of Density, Market Thickness, Ridesharing
    JEL: L13 R41 D62
    Date: 2020–01
  27. By: Nicholas Bloom (Stanford University); Tarek A. Hassan (Boston University); Aakash Kalyani (Boston University); Josh Lerner (London Business School); Ahmed Tahoun (Harvard University)
    Abstract: We identify novel technologies using textual analysis of earnings conference calls, newspapers, announcements, and patents. Our approach enables us to document the rollout of 20 new technologies across firms and labor markets in the U.S. Four stylized facts emerge from our data. First, as technologies develop, the number of new positions related to them grows, but the average education requirements and wage levels of the positions drop. Second, as technologies develop, their employment impact diffuses across the country: initially, technologies are concentrated in local hubs, but over time, their adoption diffuses geographically. Third, despite this diffusion, the initial hubs retain a disproportionate share of employment in the technology, particularly at the high-skill end of the spectrum. Finally, technology hubs are more likely to arise in areas with universities and high skilled labor pools.
    Keywords: Technology, Geography, Employment, Innovation, R and D
    JEL: O31 O32
    Date: 2020–06–15
  28. By: Diego Zambiasi (University College Dublin)
    Abstract: The Dark Web has changed the way drugs are traded globally by shifting trade away from the streets and onto the web. In this paper, I study whether the Dark Web has an impact on street crime, a common side effect of traditional drug trade. To identify a causal effect, I use daily data from the US and exploit unexpected shutdowns of large online drug trading platforms. In a regression discontinuity design, I compare crime rates in days after the shutdowns to those immediately preceding them. I find that shutting down Dark Web markets leads to a significant increase in drug trade in the streets. However, the effect is short-lived. In the days immediately following shutdowns, drug-related crimes increase by five to almost ten percent but revert to pre-shutdown levels within ten days. I find no impact of shutdowns of Dark Web marketplaces on thefts, assaults, homicides and prostitution.
    JEL: K42 L13
    Date: 2020–07–10
  29. By: Li, LiLi; Zeng, Yiwu; Zhang, Zhonggen
    Keywords: Agribusiness, Labor and Human Capital, Community/Rural/Urban Development
    Date: 2020–07
  30. By: Haelim Anderson; Selman Erol; Guillermo Ordoñez
    Abstract: Central banks provide public liquidity to traditional (regulated) banks with the intention of stabilizing the financial system. Shadow banks are not regulated, yet they indirectly access such liquidity through the interbank system. We build a model that shows how public liquidity provision may change the linkages between traditional and shadow banks, increasing systemic risk through three channels: reducing aggregate liquidity, expanding fragile short-term borrowing, and crowding out of private cross-bank insurance. We show that the creation of the Federal Reserve System and the provision of public liquidity changed the structure and nature of the U.S. interbank network in ways that are consistent with the model and its implications. We provide empirical evidence by constructing unique data on balance sheets and detailed disaggregated information on payments and funding connections in Virginia.
    JEL: D53 D85 E02 E44 G11 G21 G23 N21
    Date: 2020–08
  31. By: Qian Chen; Christoffer Koch; Gary Richardson; Padma Sharma
    Abstract: Banking-system shutdowns during contractions scar economies. Four times in the last forty years, governors suspended payments from state-insured depository institutions. Suspensions of payments in Nebraska (1983), Ohio (1985), and Maryland (1985), which were short and occurred during expansions, had little measurable impact on macroeconomic aggregates. Rhode Island’s payments crisis (1991), which was prolonged and occurred during a recession, lengthened and deepened the downturn. Unemployment increased. Output declined, possibly permanently relative to what might have been. We document these effects using a novel Bayesian method for synthetic control that characterizes the principal types of uncertainty in this form of analysis. Our findings suggest policies that ensure banks continue to process payments during contractions – including the bailouts of financial institutions in 2008 and the unprecedented support of the financial system during the COVID crisis – have substantial value.
    Keywords: Payments crisis; Money and banking; Depository institutions; Bank suspension; Synthetic control; Bayesian inference
    JEL: E51 E52 E58 G18 G21
    Date: 2020–08–18
  32. By: Coibion, Olivier (University of Texas at Austin); Gorodnichenko, Yuriy (University of California, Berkeley); Weber, Michael (University of Chicago)
    Abstract: Using a large-scale survey of U.S. consumers, we study how the large one-time transfers to individuals from the CARES Act affected their consumption, saving and labor supply decisions. Most respondents report that they primarily saved or paid down debts with their transfers, with only about 15 percent reporting that they mostly spent it. When providing a detailed breakdown of how they used their checks, individuals report having spent or planning to spend only around 40 percent of the total transfer on average. This relatively low rate of spending out of a one-time transfer is higher for those facing liquidity constraints, who are out of the labor force, who live in larger households, who are less educated and those who received smaller amounts. We find no meaningful effect on labor supply decisions from these transfer payments, except for twenty percent of the unemployed who report that the stimulus payment made them search harder for a job.
    Keywords: expectations, surveys, marginal propensity to consume, labor supply, fiscal policy, COVID-19
    JEL: E3 E4 E5
    Date: 2020–08

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.